Untitled ABN AMRO Bank N.V. Integrated Annual Report 2021 A personal bank in the digital age About this report The purpose of this report is to explain how, over time, we create value for our stakeholders – not only as a provider of banking and other financial services, butalsoas a responsible employer and an active contributor to society as a whole. We do this by explaining our business, strategy and financials and non-financial performance during the year, but also by providing information in the areas of riskandcapital management and our governance structure – all in compliance withregulatory requirements. Our annual reporting suite Every year we publish our reporting suite, combining relevant annual disclosures on our performance for the year and other topics. Our Integrated Annual Report is our primary statutory and regulatory reporting disclosure. Inaddition, we publish other reports, including the bank’s Impact Report, Pillar 3 Report, and Social Impact and Human Rights Update 2021. Though published as part of our annual reporting suite, all reports have their own individual purpose and should be read stand-alone. Anticipating upcoming regulations, we have chosen for our 2021 report, to merge our previously separate Integrated Report with our statutory Annual Report – starting the journey towards publishing asingle truly Integrated Annual Report for ABN AMRO. Note on basis of preparation The Integrated Annual Report consists of the Executive Board report (chapters: Introduction, Strategy, value creation & performance, Risk, funding & capital and Leadership & governance), the Report of the Supervisory Board, the Annual Financial Statements and Other. Thefinancial information in this Integrated Annual Report has been prepared in accordance with International Financial Reporting Standards (IFRS), as endorsed by the European Union (EU). It also complies with the financial reporting requirements included in Title 9 of Book 2 of the Dutch Civil Code, where applicable. In addition, ABN AMRO applies the Integrated Reporting Framework to guide content. Annual data relates tothe bank’s financial year, which runs from 1January to31December. See page 370 for more information about our reporting approach, basis ofpreparation and other legalnotices; scope and boundaries for metrics are also included in the main bodyofthe Report, where applicable. To download this report or obtain more information, pleasevisit us at abnamro.com/annualreport or contact usat [email protected]. The definitions andabbreviations used in this report can be found on theABN AMRO website via abnamro.com/annualreport. European single electronic reporting format This document is the PDF version of the Integrated AnnualReport 2021 in the European single electronic reporting format (ESEF) and has been prepared for easeofuse. Todownload the ESEF reporting package, please visit us atabnamro.com/ir or contact us at[email protected]. In any case ofdiscrepancies between this PDF version and theESEFreporting package, the latter prevails. Covid-19 The effects of Covid-19 in 2021 on the bank and our clients are described throughout this report, mainly in the chapters ‘Introduction’, ‘Strategy, value creation & performance’ and‘Risk, funding & capital’. ABN AMRO Bank N.V. Integrated Annual Report 2021 ABN AMRO Bank N.V. Pillar 3 Report 2021 Accelerating social sustainability Social Impact & Human Rights Update 2021 ABN AMRO Bank N.V. ABN AMRO Bank N.V. Non-financial data &Engagement 2021 Other ABN AMRO reports Impact Report 2021 ABN AMRO Bank N.V. Creating value together 1 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021 OtherIntroduction 4 Introduction Interview with our ChiefExecutive Officer 6 Our bank 10 Our operating environment 18 Year in Review 26 28 Strategy, value creation &performance Our strategy 30 Value creation 38 Performance 44 82 Risk, funding & capital Interview with ourChiefRisk Officer 84 Introduction 86 Risk management 92 Management Control Statement 180 Additional risk, funding & capitaldisclosures 186 204 Leadership & governance Leadership & governance structure 206 Supervisory Board 220 General Meeting and shareholderstructure 232 Remuneration report 236 Other governance information 252 260 Annual Financial Statements 2021 Consolidated Annual Financial Statements 2021 262 Notes to the Consolidated AnnualFinancial Statements 268 Company Annual FinancialStatements ofABNAMROBankN.V. 348 Notes to the Company AnnualFinancialStatements ofABNAMROBankN.V. 353 368 Other Our approach to reporting 370 Independent auditor’s report 381 Assurance report of the independentauditor 389 Other information 392 Cautionary statements 394 Enquiries 395 Table of contents 2 Introduction, which includes an overview of our business, purpose and core values. We also look at recent changes to ouroperating environment, the latest regulatory developments and hear from our CEO on progress with the bank’s strategy. Strategy, value creation & performance, which examines our strategy to be a personal bank in the digital age. We also look at how we create value for our stakeholders and how we performed in2021, along the lines of our three strategic pillars: customer experience, sustainability and future-proof bank. This chapter includes aninterview with our CFO on our financial performance. Risk, funding & capital, which examines what riskswe face as abank – and how we manageour risk andcapital requirements, includingsustainability risk. We also hear from ourCRO on the bank’s riskperformance. Leadership & governance, which describes howweapproach decision-making, our executives and Supervisory Board, and therules and regulations that we adhere to. This chapter also contains our Supervisory Board Report, including an interview withour Supervisory Board Chair. Annual Financial Statements, which includes our primary statements and all accompanying Notes, definitions and otherinformation for reference. Other, which includes our approach to reporting, the Independent auditor’s report, Assurance report of the independent auditor, Cautionary statements, etc. Introduction Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements Other 3 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021 OtherIntroduction Guide for readers This chapter provides an introduction to ABNAMRO. It describes the bank, its business lines, purpose and core values; it also covers our share listing andperformance – and gives an overview of recent changes to the bank’s economic, social and regulatory environment. There is also a summary of key events that took place in 2021. 4 Introduction Introduction Robert Swaak, ChiefExecutive Officer “When the pandemic hit, we switched to remote working overnight, accelerating the trend in which clients are increasingly using digital to conduct their banking affairs. For instance, 96% of client meetings are now held through video banking, much to our clients’ satisfaction. But two years of working almost solely from home is a long time and it will be good to see eachother again atsome point.” Read more Interview with our ChiefExecutive Officer 6 Our bank 10 Our operating environment 18 Year in Review 26 5 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021 OtherIntroduction Interview with our ChiefExecutive Officer How do you look back on 2021, a year again dominated by the Covid-19 pandemic? It has indeed been another year dominated by Covid-19, forall of us. But it was also a year in which the world demonstrated resilience. Although Covid-19 is still here, itseems we have reached calmer waters. For the Netherlands, 2021 was a year of economic recovery andwewent back to profit although we continue to experience pressure of low interest rates. Thegovernment continued to give businesses tailored support and the number of bankruptcies remained very low, but some sectors, such as the hospitality business, non-food retail and the travel industry, are going through a rough patch. We have been engaging with our clients since the start ofthe pandemic, working together to look for solutions. Iadmire how many of our clients have embraced change with creativity, innovation and vigour, while dealing with asituation none of us has ever experienced before. I am proud of my colleagues, who have shown a great ability to adjust to change. When the pandemic hit, we switched to remote working overnight, accelerating the trend in which clients are increasingly using digital to conduct their banking affairs. For instance, 96% of client meetings are now held through video banking, much to our clients’ satisfaction. But two years of working almost solely from home is a long time and it will be good to see each other again at some point. 6 ABN AMRO Integrated Annual Report 2021 Interview with our ChiefExecutive Officer In April, ABN AMRO reached a 480 million euro settlement with the Netherlands Public Prosecution Service in connection to the anti-money laundering investigation. How do you look back on this, and what will be done about money laundering in the future? Without any reservation, I acknowledge that in the past wewere not sufficiently successful in properly fulfilling our important role as a gatekeeper. This is unacceptable and we have taken full responsibility for this. As a bank we do not merely have a legal, but also a moral duty to do our utmost to protect the financial system against abuse by criminals. In 2018, we decided to centralise all AML activities and toremediate all identified shortcomings under a bank-wide programme, which we are working very hard to complete. We are making progress in the execution of our AML remediation programme, but the remediation is requiring more effort and we expect that the remediation will continue in2023. We remain focused on the fight against money laundering, also by enhancing the bank’s culture, one ofmypriorities, providing us with our licence to grow. Wealsocarry out assessments of our speak-up principles and risk culture and raise awareness of financial crime risks. The settlement marked the end of a painful and disappointing episode for our bank. A lot was said and written about us, understandably. I was impressed by the dedication of all mycolleagues who – despite everything – continued to focus on our clients throughout this time. In 2021, ABN AMRO pressed ahead with theexecution of the strategy announced in November2020. How are you progressing? We are well on track. At the investor update in November 2020, we set the bank’s course and made some important choices. We are focusing on Northwest Europe in client segments where we have scale and where we can grow. The wind-down of the CIB non-core portfolio has been largely completed, well ahead of schedule, improving our risk profile. Last year, to strengthen the execution of our strategy, we announced that we will simplify our organisational structure. As part of this, the Executive Committee ceased to exist in favour of an extended composition of the Executive Board, simplifying the banks’ top management structure. Our four business lines have been replaced by three client units. Thisset-up will boost efficiency and enable us to better serve our clients by working together as one bank. A good example is our Entrepreneur & Enterprise (E&E), under which we serve entrepreneurs and their businesses as one team. This is a unique concept: we are the only bank in Northwest Europe that combines banking know-how and expertise for affluent clients and businesses in this way. Bythe end of 2021, our E&E concept was already in place in France and is currently being rolled out in the Netherlands, Germany and Belgium. “ I admire how many of our clients have embraced changewith creativity, innovation and vigour, while dealing with a situation none of ushas ever experienced before.” Customer experience Future-proof bank Sustainability Strategic pillars 7 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021 OtherIntroduction Interview with our ChiefExecutive Officer / Introduction What was the most difficult dilemma you faced in 2021? What are you least proud of? Obviously, we deeply regret the fact that ABN AMRO did not sufficiently fulfil its duties as a gatekeeper. The lessons we have learned drive our continued efforts to achieve a safer society and a financial system that meets the highest standards of integrity. A dilemma or tough choice for me personally is the decision to let go of colleagues. I strongly believe in the rationale behind the wind-down of our CIB non-core portfolio. It’s the right decision, but saying goodbye to colleagues who have dedicated themselves to the bank for many years is always difficult, and I can only thank them for their contribution. 2021 was the year in which the bank laid the foundation to become a personal bank in the digital age. Where are you now? We are making good progress, but we still have a lot of work to do. You’ll never hear me say I’m satisfied – I’m always looking to see where we can improve. Being a personal bank in the digital age should result in more satisfied clients, but I realise that while we’re in the process of transforming this won’t always be the case. We are working hard to improve the accessibility of our Customer Care team, for instance. In the course of 2022, clients will be able to conduct all their banking business digitally. On the other hand, we need to keep an eye on our vulnerable clients. We have doubled the number of financial coaches for clients who feel challenged by digital banking and will even increase the number of coaches to 150 during 2022. And we are looking for solutions to prevent vulnerable people and groups from being excluded from basic financial services. ABN AMRO is known for its commitment to sustainability. Was this pushed to the background in2021? No, not at all. Sustainability is core to our purpose ‘Banking for better, for generations to come’ and is part of the regular dialogue we have with our clients. ABN AMRO firmly supports the goal of limiting global warming to 1.5 degrees Celsius. Our biggest impact is through our lending and investment services, and we aim to increase the volume ofour sustainability (acceleration) assets to more than athird of the total in 2024. Sustainability is also an asset when it comes to attracting talent. Young people want to work for companies that take sustainability seriously and take action. At ABN AMRO, we are intrinsically committed to sustainability. And we have seen that for many years now, society has increasingly been focusing on how companies are dealing with ESG. What progress is ABN AMRO making in the area of diversity and inclusion in terms of gender andcultural background? To live up to our purpose, I believe we have to foster aninclusive climate for both our people and our clients – anenvironment in which the diversity of our society is reflected. Not just because it’s the right thing to do, but also because it’s the smart thing to do. Diversity and inclusion can benefit our organisation and society as a whole. Long before I joined the bank as its CEO in 2020, Iwas personally and professionally committed to promotingdiversity and inclusion. We have a very ambitious diversity agenda in terms of culture and gender. We want to play an important role in thepublic debate and at the same time produce tangible results. Our commitment to building a diverse workforce inthe Netherlands and abroad means creating a broad base and the opportunity for those who want to reach the top. We’ve doubled down on our efforts to achieve this lately, but we’re not there yet. I personally coach people in this area and receive very valuable reverse coaching. In February 2022, you announced a share buyback programme. Why have you decided to return the available capital to shareholders instead of using itfor other purposes? The choices we made in 2020 already worked out well in2021 from a financial perspective, though the pressure ondeposit margins due to the low interest environment remains a concern. Our fee income has shown strong growth, supporting the top line, and will grow further as ourgrowth initiatives gain momentum. We remained disciplined about costs while investing in the foundation ofour data and digital capabilities. As a public company, wewant to remain attractive to all stakeholders, including our shareholders. As the ECB lifted the dividend ban, we immediately paidoutthe 2019 final dividend in October. The share buyback programme allows us to gradually start releasing capital. We intend to use share buy backs on a regular basistooptimise our capital position, which is important toour shareholders. 8 ABN AMRO Integrated Annual Report 2021 What do you expect 2022 to bring? As we further improve our digital services, clients will benefit from our greater availability and a more integrated service offering. For instance, small businesses and Wealth Management clients are increasingly using our mobile app as we continue to add new functionalities. Current events in Ukraine are developing very fast. I’m extremely concerned about this conflict, which represents adirect assault on the principles of democracy and freedom at a scale we have not experienced in Europe since the end of the Second World War. I’m also saddened by the loss of so many innocent lives. The situation also brings economic uncertainty. We are focused on managing the implications for our clients and the bank, as well as accompanying risks. As for Covid-19, we are seeing society moving to a post- pandemic new normal. It’s early days yet, and the economic outlook remains uncertain, but I expect economies to continue to open up and businesses to benefit from further easing of lockdowns. At the same time, major challenges such as climate change and social inequality have intensified. Governments, NGOs and businesses need to keep working together to address these issues. I welcome the fact that all financial institutions are now engaging on ESG. It’simportant for us to work with each other for the future of the earth. A valuable insight gained during the pandemic is that working from home has huge benefits for many colleagues, as it has the potential to improve their work-life balance. That said, all of us on the Executive Board recognise the downside for other people, who are missing a sense of connection, for colleagues who live alone and for colleagues with children, who have to juggle home schooling and work. An important job for us now is to make sure we keep our people close to the bank in whatever way possible. This is why we have regular digital updates with staff. Personally, Iwould value going into the office a bit more often because of the feeling of community it creates. Hopefully, there will be more scope for this in 2022. Robert Swaak CEO of ABN AMRO Bank N.V. “ You’ll never hear mesay I’m satisfied – I’malways looking tosee where wecanimprove.” 9 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021 OtherIntroduction Interview with our ChiefExecutive Officer / Introduction “ ABN AMRO has a clear purpose: Banking for better, for generations to come.” Guide for readers This section provides an overview of our business activities, our purpose and core values – and our share listing and performance in 2021. 10 ABN AMRO Integrated Annual Report 2021 Our bank Our bank ABN AMRO is one of the leading banks in the Netherlands. We provide banking services to retail, private and business clients. We have nearly 20,000 employees. Weserve clients where we have scale in the Netherlands and Northwest Europe, providing a range ofproducts and services including loans, mortgages, payments, financial advice andasset management. Our purpose andcore values ABN AMRO has a clear purpose: Banking for better, forgenerations to come. As a bank, we work together withour clientsto tackle the challenges of our times and toshapethe future. We take our role in society seriously. Ouraim isto be a trusted partner and to create long-term value for ourstakeholders. 1 Our purpose is our compass ineverything we do. Our core values serve as an anchor forour purpose. Our core values are care, courage andcollaboration, expressing our sense of responsibility towards all stakeholders and our ambition to support our clients as one bank. 1 We have four main stakeholder groups: clients, investors, employees and society. For more information, see page 39. Core values C o u r a g e C a r e C o l l a b o r a t i o n Care means… We care for our clients and want to do what’s best for them. That’s why we put them front and centre in everything we do. By understanding their needs we can advance their long-term interests. We see that as our responsibility. But care also applies to our sustainability ambitions. We care about our planet and about people – whether our clients, colleagues or groups in society that are less privileged and have had fewer opportunities in life. Everyone counts – including future generations. Courage means… It takes courage to commit to bringing about positive change, to deliver on our promises and ambitions. We have the courage to take a stand in the social debate, to act on our principles and to speak up against wrongdoing. We are working to create positive change and we’re not afraid to say ‘no’ if it’s is in the client’s best interests. We engage with our clients about making their business practices more sustainable and if necessary, we require them to change. Collaboration means… It is only through collaboration that we are able to achieve ourambitions, and if we want to meet the challenges we face, we must pull together. No one has all the answers. That’s why we set great store by collaborating across the organisation and why we partner with a host of other parties outside ABN AMRO to address social and environmental issues and to look after our clients’ interests. We team up with the government and other banks to keep the financial system secure, and we forge relationships with fintechs and other companies to improve our services going forward. 11 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021 OtherIntroduction Our bank / Introduction During 2021, we had four main business lines:Retail Banking, Commercial Banking, PrivateBanking and Corporate & Institutional Banking. To serve clients better, from January2022, these four business lines werereplaced by three client units: Personal&Business Banking, Wealth Management and Corporate Banking. Residential mortgages (57%) xx Consumer loans (4%) Corporate loans (30%) Professional loans and other (9%) Breakdown of client loans by type, 2021 Retail Banking (58%) Commercial Banking (16%) Private Banking (6%) Corporate & Institutional Banking (20%) Breakdown of client loans by business line, 2021 Our businessess Our Retail Banking business serves more than five million clients. ABN AMRO is the first-choice bank for around 20%of the Dutch population. In addition, we are the second-largest mortgage lender and provider of savings accounts in the Netherlands. Corporate & Institutional Banking services large and mid-size corporates in sectors such as digital and energy transition, mobility, shipping, financial services and real estate in the Netherlands andNorthwest Europe. The loans and advances toclients amounted EUR 50.6 billion; Clearing remains a global leader. Other products include structured finance, markets, corporate finance andcorporate investments. As part of ourstrategy, we arecurrently winding down ourCorporate & Institutional Banking non-core activities outsideEurope (seepage 26 ). 5,000,000 50.6 bln 12 ABN AMRO Integrated Annual Report 2021 Focus on Northwest Europe The Netherlands: Retail Banking, Commercial Banking, Private Banking and Corporate & Institutional Banking Belgium: Commercial Banking, Private Banking andCorporate & Institutional Banking France: Commercial Banking, PrivateBanking andCorporate & InstitutionalBanking Germany: Retail Banking, Commercial Banking, Private Banking and Corporate & Institutional Banking UK: Commercial Banking andCorporate & Institutional Banking Additional ABN AMRO offices: Europe: Athens (Greece), Oslo (Norway) Outside Europe: Australia, Brazil, China 1 , HongKong,Japan, Singapore and the US. 1 Please note: we started the formal closure process of our China office in the third quarter of 2021; we expect this process to be finalised in 2022. Net interest income (69%) Fees and commissions (22%) Other sources (9%) Source of income, 2021 Commercial Banking has over 365,000 clients, many of which are small and medium-sized businesses (SMEs), with annual turnover of uptoEUR 250 million. We also provide leasing and factoring services across Northwest Europe. 200 bln 365,000 To support our businesses, we have several GroupFunctions: Finance; Risk Management (includingCompliance); Innovation & Technology (includingDetectingFinancial Crime); Human Resources; Group Audit; Legal & Corporate Office; Brand, Marketing&Communications and Strategy &Innovation. We have Private Banking operations in the Netherlands, Germany, France and Belgium. ABNAMRO is the largest private bank in the Netherlands. Our Private Banking business manages a total of over EUR 200 billion in client assets. Retail Banking Commercial Banking Private Banking Corporate & Institutional Banking 13 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021 OtherIntroduction Our bank / Introduction Our purpose Banking for better, for generations to come Our strategy A personal bank in the digital age Pillars: Customer experience Sustainability Future-proof bank We provide banking services toindividualsand businesses. Mostofourrevenue comes fromnetinterestincome – thedifferencebetween interest charged toclients onloansand the bank’s ownfundingcosts. Wealso receive fees andcommissions in returnforour services. We fund our loans through deposits, savings and capital markets – and actively manage the risks associated with them. From our income, we meet ouroperating costs, reinvest inourbusiness and pay out returnsto our investors. Funding and riskmanagement Banking services Re-investing and sharing returns Our business activities At the centre of our business model are our business activities – what we do as abank. Our purpose, strategy and strategic pillars drive these business activities. Wefund our loans through savings and capital markets, and actively manage therisksassociated with them. In return for our services, we receive interest, feesandcommissions. We use our income to pay for our operating costs, reinvest inour business and pay out returns to our investors. For further information on our strategy and business activities, see page 31. 14 ABN AMRO Integrated Annual Report 2021 1 With normalised interest rates our ambition is 10%. 2 Excluding AML settlement and restructuring costs. Key figures 16.3% CET1 ratio (Basel III) 2020: 17.7 5.9% Leverage ratio 2020: 5.8% Relational Net Promotor Score: -1 = -33 Mortgages 2020: -1 (target 2024: >0) SMEs (incl. self-employed) 2020: -21 (target 2024: >0) Market share growth in focus segments: 16% 18% = New production mortgages 2020: 14% (target 2024: 20%) SMEs 2020: 18% (target 2024: 20%) 16% CET1 ratio (Basel IV) 2020: 15% (target 2024: 13%) 30% Percentage of women at subtop 2020: 28% (target 2024: 34%) 27% Percentage sustainability (acceleration) asset volume 2020: 20% (target 2024: 36%) 1.21 Earnings per share (in EUR) 2020: -0.17 127 Net interest margin (in bps) 2020: 143 1,234 Net profit/(loss) (in millions) 2020: -45 76.4% Cost/income ratio 2020: 66.4% 6% Return on equity 2020: -0.8% (target 2024: 8%) 1 -7 Cost of risk (in bps) 2020: 78 (target 2024: 20) 5.3 Absolute cost base (in EUR billions) 1 2020: 5.1 (target 2024 <4.7) 15 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021 OtherIntroduction Our bank / Introduction ABN AMRO shares During 2021, ABN AMRO’s share price (depositary receipts) increased by 61%. Over the same period, the STOXX Europe 600 Bank index – our principal benchmark – gained 34%. In March 2021, our shares (depositary receipts) were transferred to the AMX (mid-cap index); they had previously been part of the AEX (the main index, which lists the Exchange’s most actively traded stocks). In February 2022, ABN AMRO announced a EUR 500 million share buyback programme, to be completed by 2022. For more details, see page 347 Dividends ABN AMRO has resumed dividend payments in line with itsdividend policy. As no interim dividend waspaid in 2021 due to the European Central Bank’s recommendation on bank dividends, ABN AMRO is now proposing a final dividend of EUR 0.61 per share, equivalent to 50% of the bank’s full-year profit attributable to shareholders. This dividend proposal will be submitted forapproval to the2022 General Meeting of Shareholders. For 2022, ABNAMRO intends to re-introduce payment of an interim dividend following release of the bank’s half-year 2022 results. In October 2021, ABN AMRO paid out the final dividend to shareholders for 2019 (EUR 0.68/share), following a decision by the European Central Bank not to extend its recommendation on bank dividends. For more information, see Risk, funding & capital on page 83 Listing information and substantial holdings A total of 470.9 million shares, or 50.1% of the total, are held by the STAK AAB (Stichting Administratiekantoor Continuïteit ABN AMRO Bank). STAK AAB has issued depositary receipts representing such shares, which are listed on Euronext Amsterdam. Netherlands Financial Investments (NLFI), on behalf of the Dutch government, holds 59.7 million (6.4%) of these depositary receipts and has waived, in its capacity as holder of depositary receipts only, any meeting or voting rights attached to the depositary receipts other than the right to vote at the ABN AMRO shareholders’ meeting. The remaining 469.1 million shares (49.9%) are held directly by NLFI. In 2022, NLFI will take part in the EUR 500 million share buyback as announced on9February 2022 to ensure the Dutch government’s totalstake in ABN AMRO remains unchanged at 56.3%. Otherthan STAK AAB or NLFI, ABN AMRO is aware of onlyone other current or potential shareholder or owner ofdepositary receipts with an interest of 3% or more asat31December 2021: EuroPacific Growth Fund. For more information on our shareholder structure, listing information and substantial holdings, see Leadership & governance (page 205) or visit our website at abnamro.com. Depositary receipts trade under ISIN code NL0011540547, Reuters ticker ‘ABNd.AS’ and Bloomberg ticker ‘ABN:NA’. 16 ABN AMRO Integrated Annual Report 2021 (in millions) 31 December 2021 31 December 2020 Share count Total shares outstanding/issued and paid-up shares 940 940 - of which held by NLFI (shares and depositary receipts) 529 529 - of which held by other investors (depositary receipts) 411 4 11 - as a percentage of total outstanding shares 44% 44% Average number of shares 940 940 Average diluted number of shares 940 940 Key indicators per share (EUR) Earnings per share 1 1.21 -0.17 Shareholder’s equity per share 21.28 20.22 Tangible shareholder's equity per share 21.15 20.08 Dividend per share 2 0.61 - Share price development (EUR) Closing price (end of period) 12.92 8.02 High (during the period) 13.26 16.98 Low (during the period) 7.66 5.68 Market capitalisation (end of period, in billions) 12.14 7.54 Valuation indicators (end of period) Price/Earnings 10.68x - Price/Tangible book value 0.61x 0.40x Dividend payout ratio 1, 2 50% - 1 Earnings per share: Profit for the period excluding reserved coupons for AT1 capital securities (net of tax) and results attributable to other non-controlling interests divided by the average outstanding and paid-up ordinary shares. 2 Dividend per share and payout ratio subject to approval of the annual general meeting in April 2022. ABN AMRO Amsterdam Exchange Index STOXX Europe 600 Banks Index 180% 160% 140% 120% 100% Jan 2021 Dec 2021 Source:S&P Global Market Intelligence. Share price development (in %) 17 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021 OtherIntroduction Our bank / Introduction Our operating environment In 2021, the Dutch economy began to recover from the effects of Covid-19. During the year, GDP grew by 4.8%. In2020, the economy had contracted by3.8%. In many sectors, economic activity was able to resume thanks tothe roll-out of the Dutch government’s vaccination programme. 1 By the end of 2021, more than 85%of the adult Dutch population had been vaccinated. Generally, the Dutch economy has suffered less during thepandemic than other similar economies thanks largely to the structure of the economy – the Netherlands is more digitalised and less reliant on tourism – and continued government support. At the same time, the global economy also continued its rebound from the pandemic. The International Monetary Fund (IMF) estimated global GDP growth in 2021 at 5.9%, helped by rising industrial output and an increase in international trade as countries began to lift the most severe lockdown measures. The economic recovery stillfaces significant risks globally and in the Netherlands these risks relate mainly to rising energy costs, supply chainpressures and labour shortages in certain areas. Aresurgence in Covid-19 infection rates – particularly if these lead to new lockdown measures – could also slow economic recovery. 1 Source: Dutch government Coronavirus Dashboard (figures correct as at 10 February 2022) 2 Dutch government support included the Temporary Emergency Bridging Measure for Work Retention (known in Dutch as NOW), Reimbursement of Fixed Costs (TVL) and the Self-Employed IncomeSupport (TOZO). Government economic support and bank lending Throughout the Covid-19 crisis, the European Central Bank has issued new money to support the eurozone economy; banks continued lending to businesses. Government financial support was also available to companies affected by the pandemic. Support measures – including wage subsidy schemes, bridging loans, tax payment deferrals andassistance with fixed costs 2 – were withdrawn at theend of September but were reinstated in November following the new restrictions. Availability of financing continued to protect businesses in 2021. In August, bankruptcies in the Netherlands reached their lowest level for twenty years, though they are likely to increase again, going into 2022, asthe economy adjusts following the withdrawal of Dutch government support. Consumer spending Consumers saved a lot during the Covid-19 pandemic – both precautionarily, as they may have feared job losses, and involuntarily, as restrictions constrained the ability to spend. After each Covid-19 wave, when measures were phased out, we saw considerable catch up of private consumption. For 2021 as a whole, consumer spending was up 3.5%. Unemployment continued to decline in 2021 and the labour market became very tight. In the fourth quarter, for instance, 105 vacancies were available for every100 unemployed people. When government support is phased out in 2022, we expect unemployment to increase only very slightly, as most of the additional labour supplywill be directly absorbed by the historically tight labourmarket. Interest rates Interest rates remained at historically low levels, putting continued pressure on deposit margins for banks like ABNAMRO. This was despite signs of inflation in the economy, driven mainly by higher energy prices and supply chain disruptions, which led to shortages in certain goods. Consumer prices in the Netherlands rose by 2.7% in 2021. Our operating environment underwent rapid change in 2021. Economies continued to recover following the impact caused by Covid-19. At the same time, social and environmental issues gained in importance. Across the financial sector, there was a further increase intheuse of data and digital technologies, accelerated by the pandemic. Furthermore, Dutchhouse prices rose sharply, driven by record low interest rates and tight housing supply. Guide for readers In this section, we will examine how our operating environment is changing, the impact of the Covid-19 pandemic – and the latest regulatory developments affecting the banking sector. Economic and business 18 ABN AMRO Integrated Annual Report 2021 Our operating environment -5 -10 0 15 10 5 2019 2020 2021 Source: Statistics Netherlands (CBS). Netherlands, GDP growth (year-on-year change) -15.0 -22.5 -7.5 15.0 7.5 0 2019 2020 2021 Source: Statistics Netherlands (CBS). Dutch household consumption (% change, year on year) 2 4 10 8 6 2019 2020 2021 Source: Statistics Netherlands (CBS). Consumer prices (% change, year on year) Source:Refinitiv. 25 20 15 10 5 2019 2020 2021 House prices in Netherlands (% change, year on year) 20 40 100 80 60 2020 2021 Source: Statistics Netherlands (CBS). Energy price inflation (% change, vs. base year 2015) Source: DNB. 1.0 2.0 5.0 4.0 3.0 2019 2020 2021 Average interest rates on outstanding mortgages from Dutch banks to households (% change, year on year) Housing market Low interest rates, meanwhile, have helped to fuel a boom in the Dutch housing market. ABN AMRO is one of the Netherlands’ leading mortgage lenders. House prices rose by 15% in 2021, despite continued economic uncertainty caused by Covid-19. Tight housing supply also added to upward price pressure, as to the country’s transfer tax exemptions for first-time buyers. The housing market boomhas not extended into other real estate. Industrial realestate is performing relatively well; however, increased working from home and the significant growth in online shopping is taking its toll on commercial real estate, in particular offices and retail. 19 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021 OtherIntroduction Our operating environment / Introduction Society and climate change Covid-19 has brought immense change to society. Inmanycases, it has accelerated trends that were already evident before the pandemic – and that are shaping the business environment for companies like ABN AMRO. Forexample, we are moving to new, more flexible ways ofworking. Issues of diversity and inclusion remain important. Meanwhile, the climate crisis has risen again tothe top of the political agenda; during the year, the Intergovernmental Panel on Climate Change (IPCC) released its latest assessment, calling climate change “widespread, rapid and intensifying”. Climate change In 2021, we saw further evidence of the worsening climate crisis. There were wildfires across Europe, Asia and the USSevere flooding hit western Europe, while Hurricane Ida caused an estimated USD 95 billion in economic damage along the US Atlantic coast. Increasingly, governments are adopting climate change strategies. Both the EU and the US have promised ‘green recoveries’, post-Covid. New regulations have also been brought forward to encourage more sustainable economic investment. For ABN AMRO, climate change remains a priority. We see opportunities in using our expertise to support clients in thetransition to more sustainable business models. New ways of working Covid-19 has also changed attitudes to the workplace – bothfor ABN AMRO and our clients. The pandemic forced many people to work from home; that, in turn, increased the use of digital technologies. Coming out of the crisis, many employees want a more flexible approach to work. Atthe same time, Covid-19 brought renewed emphasis onemployee health and well-being, both physical and mental. Equality issues also became more prominent, fuelled by social movements such as MeToo and Black Lives Matter. Increasingly, employees expect open, inclusive and diverse working environments. Data and digital technology Use of data and digital continued to expand. Increasingly, banks like ABN AMRO are deploying new technologies using artificial intelligence (AI). We are also examining new opportunities in areas like blockchain technology. Across Europe, digital banking has become the norm. Online transactions rose sharply during the pandemic. Digital allows banks to work more efficiently, reduce operating costs and shorten time to market. Across the banking sector, digital and data analysis skills are now in high demand. At the same time, open banking has brought risk of disintermediation. 1 Cyber attacks, meanwhile, are on the increase, particularly through ransomware. According to the Dutch central bank, 2 cyber risks pose a major threat to financial stability. In 2021, more than half of all financial institutions worldwide reported at least one cyber attack. 3 1 Open banking refers to the sharing of financial data between banks and authorised thirdparties via the use of Application Programming Interfaces, or APIs; Open banking gained ground following the introduction of the EU’s Payment Services Directive (PSD 2). Use of APIs, we believe, will enhance customer experience. 2 Dutch Central Bank Financial Stability Report, Autumn 2021. 3 Source: Hiscox Cyber Readiness Report 2021. 100 80 60 40 20 81 74 57 Source: UN Global Compact – Accenture CEO Study on Sustainability, October 2021 (1,230 CEOs worldwide took part in the survey). Percentage of CEOs saying they are working towards a +1.5˚C temperate rise Percentage of CEOs saying they are already developing new sustainability products and services Percentage of CEOs saying they have begun developing new and circular business models CEO views on growing importance of climate as business opportunity (in %) 20 ABN AMRO Integrated Annual Report 2021 Manufacturing Agriculture Transport Buildings & construction Electricity 34 17 17 12 20 Source: CBS Statistics Netherlands. Netherlands – contributions to greenhouse gas emissions by sector (based on Q2 2021 figures) (in %) A traditional work environment Mostly face to face with some remote working A mix of face to face and remote working Mostly virtual working with some face to face A wholly virtual place where employees can contribute from any location 21 11 8 42 18 Source: PWC, Hopes and Fears 2021 (the views of employees on the future of work) – results shown for the Netherlands only. Hopes for new work environment, post-Covid (in %) 100 80 60 40 20 66 39 31 23 30 27 21 9 4 Cyber security Social issues Public health Fiscal policy Tax policy Climate change US-China relations Immigration policy Crypto- currencies Source: Fortune/Deloitte CEO survey (winter 2021 results). Relevance to CEO agenda (% saying issue is ‘highly relevant’) 10 8 6 4 2 202020192018 2021 76.5 61.9 50.0 6.9 107.4 Please note these figures cover iDEAL and credit card payments only. Together, these cover approximately 80% of online e-commerce payments. Other payment methods are not shown because 2021 figures for these methods are not currently available. Source: Dutch Payments Association. Online payments (in EUR billions) Phishing Spoofing Trojan Others 73 7 7 13 Source: DNB, Financial Stability Report (Autumn 2021). Cyber attacks by type (in %) 21 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021 OtherIntroduction Our operating environment / Introduction Regulatory developments Impact of Covid-19 In response to Covid-19, new regulations were adopted and existing regulations were amended, mainly to support lending while maintaining the bank’s liquidity and solvency requirements. ECB Targeted Longer Term Refinancing Operations (TLTRO) TLTRO is an ECB programme under which banks canborrow atarate as low as -1%, provided they usethe money tolend to non-financial corporations inabid to stimulate the real economy. Toqualify, banks need to achieve a lending target. For ABN AMRO’s performance against the TLTRO target, see page 70. ECB recommendation: dividend distributions, share buybacks and variable remuneration With an eye on Covid-19, the ECB recommended temporary suspension of all cash dividends and sharebuybacks in March 2020. The revised ECB recommendation of December 2020 expected banks toexercise extreme prudence with regard to dividends and share buybacks until 30 September 2021. Inaddition, the ECB extended its expectation to banks to adopt extreme moderation with regard to variable remuneration until 30 September 2021. A similar position was taken by the EBA, EIOPA and ESRB in order to safeguard banks’ capacity to absorb losses andlend to support the economy. ABN AMRO’s actions to reflect the supervisors’ recommendations on this topic are set out in Capital in the Risk, funding& capital chapter and Remuneration report. EBA requires continued application of Covid-19- related reporting and disclosure requirements until further notice In 2021, the EBA stated that uncertainty of the Covid-19 situation persists, as does the need to monitor exposures and the credit quality of loans with public support measures in Member States where these measures are still relevant. The EBA therefore continued to require application of Covid-19-related reporting and disclosure requirements, until further notice. 22 ABN AMRO Integrated Annual Report 2021 Update on previous years EU banking rules (Basel III/IV) The European Commission proposed a review of EU banking rules – the Capital Requirements Regulation and the Capital Requirements Directive. These new rules are to ensure that while EU banks become more resilient to potential future economic shocks, they also continue to support Europe’s post-Covid recovery and the transition to climate neutrality. The package finalises implementation of Basel III (including finalisation ofBasel III, also known as Basel IV) taking into account the specific features of the EU banking sector. These proposed changes are expected to be implemented from 2025, after being further refined in the next two years. Particularly, the implementation of Basel III will limit banks’ ability to calculate capital requirements by using internal models to ensure banks do not underestimate risks and thus are sufficiently capitalised to cover those risks. The European Commission has said the new regulations should not lead to any significant overall increase in capital requirements for EU banks. Anti-money laundering and countering thefinance of terrorism The European Commission presented an ambitious package of legislative proposals to strengthen the EU’santi-money laundering and countering the financingof terrorism rules. The proposals aim, among other things, at future introduction of new rules in the areas of customer due diligence, beneficial ownership, national supervisors’ powers and Financial Intelligence Units within Member States, as well as transfers of crypto assets and the establishment of a new EU supervisory authority. Schrems II ABN AMRO is implementing Schrems II. In July 2020, the European Union Court of Justice ruled that certain legal grounds for the transfer of personal data outside Europe are invalid or require supplementary measures. As a result of this ruling, ABN AMRO needs to assess the risks and monitor more actively its data transfers outside Europe. Furthermore, ABN AMRO may need totake extra measures regarding non-EU vendors, orinsome cases stop the data transfer. Targeted Review of Internal Models (TRIM) The ECB’s Targeted Review of Internal Models (TRIM)ended in 2021. The review aimed at ensuring consistency in capital requirements across the eurozone. For more information, see Capital in theRisk,funding & capital chapter. EBA Guidelines on internal governance and Guidelines on sound remuneration policies The European Banking Authority published its revised Guidelines on internal governance and Guidelines onsound remuneration policies along with the ECBfitand proper guidance. The revised Guidelines depictthe amendments introduced by the fifth CapitalRequirements Directive (CRD V) and the Investment Firms Directive (IFD) in relation to creditinstitutions’ sound and effective governance, suitability and remuneration arrangements, in particular with regardtogender diversity, money laundering andthemanagement of conflicts of interest. 23 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021 OtherIntroduction Our operating environment / Introduction EU taxonomy of sustainable activities The EC has released the EU Taxonomy Regulation whichentails a classification system establishing a list of activities that can be considered environmentally sustainable for use by companies, investors and policymakers in sustainability reporting. Such reporting aims to prevent greenwashing and help companies tobecome more climate-friendly. The EU Taxonomy Regulation covers six environmental objectives. Two ofthem have already been published (climate change mitigation and adaptation); the remaining four are expected in 2022. Recently, the EC drafted delegated acts on the inclusion of Nuclear energy and Gas in theEU’s taxonomy. The documents are subject to a scrutiny period (4-6 months) during which the European Parliament and the Council can either approve or object. If both parties will approve, the acts will enter into force on the 1st of January 2023. EU Sustainable Finance Disclosure Regulation The SFDR came into effect in March 2021 and applies directly to ABN AMRO’s investment business. SFDR lays down harmonised rules for financial market participants and financial advisors on transparency withregard to the integration of sustainability risks andthe consideration of adverse sustainability impacts in their processes and the provision of sustainability- related information with respect to financial products. The European Commission is expected to supplement the SFDR with Regulatory Technical Standards (RTS) tospecify the details of the content and presentation ofthe information to be disclosed. The application oftheRTS has been delayed until January 2023. MiFID II ESG Following publication of the Commission’s Action Plan, the MiFID II Delegated Regulation was updated in 2021 to integrate sustainability factors, risk and preferences into certain organisational requirements and operating conditions for investment firms. Furthermore, the Commission introduced amendments to the MiFIDII Delegated Directive to integrate sustainability factors into the product governance obligations. The Regulation is expected to come into force in the course of 2022. EU Corporate Sustainability Reporting Directive The EU is introducing a new Corporate Sustainability Reporting Directive (CSRD), that extends mandatory sustainability reporting to all large companies and listed SMEs. It also requires companies to obtain independent assurance of their sustainability disclosures. ABN AMRO already reports under the current Non-Financial Reporting Directive and aims to fully comply with the CSRD when it enters into force. Many of our corporate clients will need to comply with the CSRD as well. ECB guide on climate risks The ECB released a guide on climate-related and environmental risks (CER) that outlines the ECB’s understanding of the safe and prudent management ofthese risks under the current prudential regulatory framework. The guide describes how the ECB expects institutions to consider CER in their business strategy and governance and risk management frameworks and serves as a basis for a supervisory dialogue between the ECB and institutions such as ABN AMRO. Sustainable finance 24 ABN AMRO Integrated Annual Report 2021 Other Introduction DNB mortgage floor In response to what DNB refers to as the overheated housing market, it was decided that a new floor for the risk weighting of mortgages will be introduced in the Netherlands. This floor requires that a certain minimum regulatory capital is held by mortgage lenders to ensure the ability to absorb losses from any future correction in the housing market. The mortgage floor will come into force at the beginning of 2022 and will be applicable to institutions that use the advanced models to calculate their regulatory capital for mortgages. EU Digital Finance Package In 2021, a new EU Digital Finance Package was adopted, including separate digital finance and retail payment strategies. Further proposals were made on legislation covering crypto assets and digital resilience. The purpose of the package is to boost innovation in the financial sectors and expand consumer choice. Aspart of its Digital Finance Strategy, the EU is introducing a Digital Operational Resilience Act (DORA), which isdesigned to strengthen banks’ management ofcybersecurity risks and is expected to come into force in 2022. In addition, the EU will also put forward proposals in 2022 for a new Open Finance Directive, building on its previous Payment Services Directive (PSD2) 25 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021 OtherIntroduction Our operating environment / Introduction Year in Review As the European Central Bank did not extend itsrecommendation on dividend payments beyond September 2021, ABN AMRO decided to pay itsfinal 2019 dividend. A final dividend ofEUR 0.68 per share was paid in October, anddid not affect the bank’s capital ratios. ABN AMRO launched a EUR 425 million fund to invest in sustainable impact. Thefund – part of the bank’s focus on sustainability – invests in companies thathave a proven sustainable business model andareready for a new phase of growth andinyoung companies with a proven concept.Investments willbe made primarily in the Netherlands and Northwest Europe. Dividend payments resumed ABN AMRO announced it would simplify its internal organisation to better serve clients – at the beginning of 2022, the bank’s four business lines were replaced by three client units: Personal & Business Banking, Wealth Management and Corporate Banking. The existing Executive Committee (ExCo) was replaced by an extended Executive Board (ExBo), simplifying the bank’s top management structure. Following the Extraordinary General Meeting (EGM) on24 November 2021 we welcomed Choy van der Hooft-Cheong as Chief Commercial Officer (CCO) Wealth Management and Dan Dorner as CCO Corporate Banking. Gerard Penning remains our ChiefHuman Resources Officer. 1 During the year, however, we have also said goodbye to several Executive Committee and Executive Board members– Clifford Abrahams, Daphne de Kluis, Rutger van Nouhuijs and Pieter van Mierlo decided topursue their careers outside ABNAMRO. From24November 2021, Frans van der Horst led theclient segment Personal & Business Banking untilthe appointment of Annerie Vreugdenhil as CCOPersonal & Business Banking. Following the EGM of 17 February 2022, Annerie Vreugdenhil started as the new CCO of Personal & Business Banking, on 1 March 2022. Simplified organisational structure and top management Guide for readers This section provides a summary of the main eventsof 2021 – from the continued wind-down ofour Corporate & Institutional Banking activities outside Europe to the launch of our new Sustainable Impact Fund. ABN AMRO continued to wind down its Corporate & Institutional Banking (CIB) business outside Europe. As part of this, the bank sold loan portfolios in energy, transportation, trade & commodity finance andshipping. The CIB non-core activities wind-down has been largely completed, with loans andadvances to customers approximately 90% ofthese activities have been wound since 30June 2020. Corporate & Institutional Banking wind-down -90% Sustainable Impact Fund 1 Gerard Penning was already part of the Executive Committee as Chief Human Resources Officer, but is now on the Executive Board. 26 ABN AMRO Integrated Annual Report 2021 Year in Review During the year, ABN AMRO continued to invest in digital banking. We saw continued growth in video banking. In partnership with Bishopsfield Capital Partners, we launched Aymz, a new digital lending platform for Dutch mid-sized companies. We also addedGoogle Pay to the ABN AMRO app and created anew payment tool for gig economy workers. Ourbanking app now hasapproximately three million active users. ABN AMRO reached an agreement with the DutchConsumers’ Association on compensation forclients whose floating rate on their consumer credit did not sufficiently follow the market rate. Thebank has provisioned a total of EUR 340 million to cover the costs of the agreement. Thefirst clients received their compensation before the end of 2021. Expanding our digital banking Revolving consumer credits Inclusive banking ABN AMRO created an Inclusive Banking team toimprove the inclusiveness of products and services and remove barriers experienced by certain groups of clients, such as women entrepreneurs. During the year, ABN AMRO also became the first Dutch bank to join the Financial Alliance for Women; members of the Alliance include more than 65financial institutions around the world. ABN AMRO accepted a settlement in connection with the Netherlands Public Prosecution Service investigation into the bank’s anti-money laundering activities. As part of the settlement, ABN AMRO paid EUR 480 million. The bank cooperated fully with public prosecutor during the investigation. Settlement in anti-money laundering investigation 27 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021 OtherIntroduction Year in Review / Introduction Guide for readers In this chapter, we will be examining our strategy inmore detail, looking at how wecreate value for stakeholders and ourperformance in 2021 against our threestrategicpillars: customer experience, sustainability and a future-proof bank. 28 ABN AMRO Integrated Annual Report 2021 Strategy, value creation &performance Strategy, value creation &performance Lars Kramer, ChiefFinancialOfficer “What convinced me to join ABN AMRO was the sense of direction. Thestrategy is very well thought-through. Nearly a year later, nothing has happened to change my mind. In fact, what we’ve been able to achieve has only reinforced that view. We’ve made real progress this past year. The wind- down of the non-core activities of Corporate & Institutional Banking has gone much more quickly than expected.” Read more Our strategy 30 Our value-creating topics 34 Our strategic targets 35 Operational sustainability targets 35 Opportunities & risks 36 Value creation 38 Our value creation model 40 Performance 44 Customer experience 45 Sustainability 49 Future-proof bank 58 Interview with our ChiefFinancialOfficer 66 Financial performance 68 Outlook 80 29 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction OtherStrategy, value creation & performance “ Our strategy has three strategic pillars that guide us in acting on our purpose.” Guide for readers This section describes our strategy: to be apersonalbank in the digital age; it also provides ourstrategic targets for 2024 and setsout our strategic differentiators – areas where we believe we can create most value forour stakeholders. 30 ABN AMRO Integrated Annual Report 2021 Our strategy Our strategy Our purpose – Banking for better, for generations to come – guides us throughchange, is the basis for how we shape and deliver on our strategy, andencourages high performance and engagement from our employees. Ourstrategy has three strategic pillars: customer experience, sustainability and future-proof bank. These are our guiding principles in acting on our purpose. Who we are We are a leading Dutch bank with attractive market positions in the Netherlands and Northwest Europe. Wehave long-term client relationships built on trust andsupported by sector and sustainability expertise. Ourtrusted relationships with clients, together with our capabilities across all client segments, enable us to support them at all important financial steps in their lives. Our strategy In framing our strategy, we have made clear choices, resulting in a distinct profile and focus. We are becoming apersonal bank in the digital age, serving clients where wehave scale in the Netherlands and Northwest Europe. We target an ROE of around 8% by 2024 when the cost ofrisk is expected to have normalised, cost-saving programmes will have been completed and growth initiatives will be delivering results. Weare fully committed to our moderate risk profile and roleas a gatekeeper of the financial system. Our culture andlicence to operate remain clear priorities. We continued to execute on our agenda in 2021. Thewind-down of the Corporate & Institutional Banking non-core portfolio has been largely completed, improving the bank’s risk profile. To further strengthen the execution of our strategy we launched newinitiatives for our clients, simplified our organisational structure and strengthened thefoundation of our digital anddata capabilities to support our new client service model. In April, we accepted a settlement from the Netherlands Public Prosecution Service for shortcomings inthe bank’s anti-money laundering activities and we are making progress with our remediation programmes. Weremain focused on the fight against money laundering, providing uswith our licence to grow asit is the bank’s responsibility to ensure compliance with all regulations to protect our clients. We have resumed dividend payments and announced a share buyback programme. Thebank operates from a position of strength, with a distinct profile, clear strategic focus and a very strong capital position. Asavalue-driven organisation, our decisions and behaviour need to be in line with our purpose and strategy. Taking ownership, setting clear targets and being accountable arekey to strategy execution and our license to operate. Asa value-driven organisation, our decisions and behaviour need to be in line with our purpose and strategy. Taking ownership, setting clear targets and being accountable are key to strategy execution and our license to operate. Details of our strategy execution may be found in the Performance section of this report on pages 45-81 Customer experience Future-proof bank Sustainability Strategic pillars 31 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction OtherStrategy, value creation & performance Our strategy / Strategy, value creation &performance Our three strategic pillars Our trusted relationships with clients enable us to support them at all important financial moments. Weoffer both convenience and expertise. We deliver a convenient daily banking experience increasingly digitally. Atmoments that matter we support our clients with sector and sustainability expertise. We are focusing on attractive segments in the Netherlands and Northwest Europe where we can grow profitably. IntheNetherlands, we will further develop our leading positions in mortgages and among SMEs with new propositions and are growing in: wealthy clients, affluent andhigh-income clients and mid-to-large corporates, where we can leverage our expertise. We aim to achieve positive Net Promoter Scores (NPS) and to increase our market share to above 20% of new production in both segments. InNorthwest Europe, we are building onour expertise in theNetherlands and will focus on the energy, mobility and digital transitions, aiming for a top-three position in selected niches. We remain open to acquisitions that accelerate ourstrategy execution. As part of our strategy, we are broadening our intermediary offering in mortgages by repositioning our online label Moneyou and are currently rolling out our E&Econcept in the Netherlands, Germany and Belgium. Wehave also launched Aymz, a new lendingplatform for Dutch SMEs, and we are developing new business models in areas such as sustainability and digital banking. For details of progress made against our customer experience pillar, pages 45 Customer experience 32 ABN AMRO Integrated Annual Report 2021 Sustainability has been a core element of our strategy since 2018, and is core to our purpose. Ourgoal is to helpclients transition to more sustainable business models. In doing so, we are focused on the wider sustainability shift: our efforts are designed to help mitigate climate change, accelerate circular business practices and create positive social impact. Across the Netherlands and Northwest Europe, we are working with clients to align our activities with the 2015 Paris Climate Agreement. As part of this, we are looking tobring our portfolios into line with at least a +1.5°C scenario and to support the transition to a net zero economy by 2050. We also strive to lead by example, reducing our carbon emissions, strengthening our approach to human rights, increasing our positive social impact We are building a future-proof bank by rigorously simplifying and centralising our operating model, delivering a better experience for our clients, while at thesame time delivering on cost-saving programmes. Thismeans further digitalising our business processes, streamlining our product offering, and introducing a newclient engagement model. By 2024, we aim to have approximately 90% of high-volume processes digitised end-to-end, and to have reduced the size of our product portfolio by around 60%. At the same time, we place great Sustainability Future-proof bank andalso improving gender diversity – particularly among those at the ‘subtop’ immediately below the most senior management levels. ABN AMRO aims to integrate sustainability across its businesses. To accelerate this, we decided to establish a Sustainability Centre of Excellence, headed by our new Chief Sustainability Officer. We have set clear ‘sustainability acceleration’ targets (see table on page 35). In 2021, we raised up these targets to reflect significant demand for sustainable financing and investments. By 2024, our aim is to have more than one-third of loans and client investments go to sustainable businesses, projects or assets. For details of progress made against our sustainability pillar, seepage 49 value on fostering a culture within the bank in which everyone feels respected and valued. We support our people as part of our drive to develop and transform ourworkforce – our employees are the foundation of the bank of the future. In our offices, we are introducing hybrid working to promote an efficient and healthy balance between working from home and at the office. For details of progress made against our future-proof bank pillar, see page 58 33 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction OtherStrategy, value creation & performance Our strategy / Strategy, value creation &performance We carry out a regular assessment of our operating environment. This assessment helps us identify strategic differentiators – the value-creating topics where we believe our strategy can create most value for our stakeholders 1 . Currently, we have nine strategic differentiators, each linked directly to a strategic pillar. Each of these strategic differentiators are of strategic importance to ABN AMRO and directly linked to our strategy and strategic KPIs. In addition to our nine strategic differentiators, we have 27 fundamental value creators 1 – which we deem of vital importance to protect our license tooperate. These 27 fundamentals are not directly linked toour strategic KPIs. The ‘Strategy, value creation & performance’ chapter istherefore focused on the progress of the strategic differentiators, whereas the fundamentals are discussed throughout the report. Please note that we do not have strategic KPIs in place forall strategic differentiators. In such cases, we use non-strategic KPIs, or other metrics, some of which are available only internally. Our last full assessment took placein November 2020; in 2021, we conducted an interimpulse survey to review the results. For more details, see page 371 Our value-creating topics Customer experience Digitalisation Clear and appropriate advice Responsible investment and financing Circular economy Diversity and equal opportunity Viable business model Risk profile/management Financial performance 45-47 45-47 & 58-63 45-47 49-53 53 54-56 58-63 58-63 & 83-202 66-79 & 261-367 Strategic differentiators Page Strategic pillars Customer experience A personal bank in the digital age for the resourceful and ambitious Future-proof bank Enhance customer service, compliance and efficiency Sustainability Distinctive expertise in supporting clients’ transition to sustainability 1 For full results of this assessment, please see page 372. 34 ABN AMRO Integrated Annual Report 2021 To support our strategy, we have set clear targets for 2024, relating to our three strategic pillars: Targets Results 2024 2023 2022 2021 2021 2020 Percentage sustainability (acceleration) asset volume 1,2 - ESG + impact investments 3 42% 40% 38% 26% 38% 22% - Mortgages 34% 31% 28% 22% 25% 23% - CIB (core) loans 27% 21% 16% 12% 13% 9% - CB loans 27% 21% 16% 11% 15% 13% Total 36% 32% 29% 21% 27% 20% External rating S&P Global ESG Dow Jones Sustainability Index top 5% top 5% top 5% top 5% top 15% top 10% Our strategic targets Operational sustainability targets Strategic pillars Metric 2024 targets 2021 results 2020 results Customer experience Relational NPS Mortgages > 0 -1 -1 SMEs (incl. self-employed) > 0 -33 -21 Market share growth in focus segments 1 New production mortgages 20% 16% 14% SMEs 20% 18% 18% Sustainability Supporting clients’ transition to sustainability Percentage sustainability (acceleration) asset volume 2 36% 27% 20% Diversity & Inclusion Percentage of women at subtop 34% 30% 28% Future-proof bank Digitalisation Straight-through-processing rate ofhigh volume processes 90% n/a n/a Financial targets Absolute cost base (in EUR billions) 3 <4.7 5.3 5.1 Through-the-cycle cost of risk (in bps) 20 -7 78 Return on equity (ambition with normalised interest rates) 8% (10%) 6% -0.8% CET1 ratio (Basel IV) 4 13% 16% 15% 1 KPIs for focus segments are limited to mortgages and SMEs in 2021. KPIs for other focus segments are under investigation to be aligned with the organisational changes and will be published during the year. 2 For definition of sustainability (acceleration) asset volume, see Operational sustainability targets table. 3 Excluding AML settlement and restructuring costs. 4 CET1 ratio (Basel IV) is rounded to the nearest whole percent. For more information about CET1 ratio Basel IV, please refer to the Capital section in the Risk, funding & capital chapter. Definitions for above indicators and its methodological and scope changes (where applicable) can be found on page 376-378. 1 The definition of sustainability (acceleration) asset volume is based on ABN AMRO’s Sustainability Acceleration Standards. These standards contain clear definitions with regard to clients’ sustainability policies, practice and governance. The overall target for sustainability (acceleration) asset volume is calculated as the sum of sustainability (acceleration) asset volume (mortgages and corporate loans) and sustainability (acceleration) client asset volume, divided by the sum of the outstanding mortgage loan book, corporate loan book and relevant client asset volume. 2 The intensified focus on ESG, including regulation, resulted in an increase of our sustainability targets towards 2024. 3 We have aligned our definition of sustainable client assets with the definitions set in the EU SFDR regulation and therefore have changed the terminology used to ESG and Impactinvestments. 2020 figures have not been retrospectively adjusted for this change. For more information, see page 49. 35 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction OtherStrategy, value creation & performance Our strategy / Strategy, value creation &performance Key: Short-term 0-2 years Medium-term 2-5 years Long-term More than 5 years Please note that these are indicative only. In many cases, there is an effect over the short, medium and long terms. In the table, we have shown the principal effects only. Our strategy brings definite opportunities: toposition ABNAMRO asapersonal bank in the digital age, to create askilled, motivated workforce, a leader in sustainability andtoensure quicker, morepersonalised customer service. Wearealso aware thatthereareriskstoour strategy – someassociated with our operating environment, others withourability tomanage significant change risk. The table below shows our strategic differentiators. Against each, we’vemapped out our principal strategic business opportunities and -risksover the short, medium and long term. Information onour other risktypes based on our regulatory requirements, including risk strategies, measurement approaches and risk governance framework can be found in the Risk, funding & capital chapter of this Report, see page 83 Opportunities & risks Strategic differentiators Opportunities Risks Customer experience Å Enhance our sales and service model to drive rNPSof clients leading to increased use of ABNAMRO’s products Å Target financial advice where most needed topromote financial inclusion Å Innovate our products and services Å Clients having difficulty adapting to our new client service model Å Loss of face-to-face contact with clients negatively impacting client engagement Å Increasing regulatory pressure could influence thecustomer journey and experience Digitalisation Å Make customer service better, quicker and morereliable Å More targeted personalised digital approach Å Full digital self-service offering convenient client journeys with frictionless interaction Å Possible losses (incl. client data) because of increased cyber attacks Å Lower cross-selling rates because we interact viadigital channels Å Delays in delivering and high investments in ourdigital & data infrastructure required due totheneed for digitalisation Clear and appropriate advice Å Help clients solve problems with beyond banking propositions with (financial) expertise Å Ensure compliance with all regulations to protect ourclients Å Leverage digital solution for our front-office employees to have more time to focus on client interaction Å Shortage of necessary skills to provide advice, particularly in niche markets Å Incorrect advice leading to claims from clients Customer experience Customer experience Future-proof bank Sustainability Strategic pillars 36 ABN AMRO Integrated Annual Report 2021 Strategic differentiators Opportunities Risks Responsible investment andfinancing Å Position ABN AMRO as a leader in sustainable finance Å Develop new fee-based sustainability advice business Å Increase insight into client needs to support them on their sustainability shift and leading to new financing opportunities Å Additional requirements associated with new environmental, climate or social regulation Å Emerging climate and environmental risks with potential impact on risk profile Å Reputation risk if bank fails to deliver on sustainability commitments Circular economy Å Help clients adapt and improve existing business activities and models to become more circular Å As a leader, set new industry standards for circular financing Å Use frontrunners as inspiration for current and new clients Å Shortage of viable projects to finance Å Reduced focus on circular financing because ofpandemic Diversity and equal opportunities Å Bring in new, divers talent to create more inclusive working environment Å Strengthen reputation by better reflecting our diverse client base through our workforce Å Increase creativity and improve decision-making through diversity of mind Å Reputational risk when failing to meet publicly-stated targets Å Delays in implementing diversity measures duetoatight labour market Future-proof bank Strategic differentiators Opportunities Risks Viable businessmodel Å Diversify income from higher fee income and growth in focus segments Å Simplify and rationalise current range of products and services Å Adapt business model to evolution of the financial services market and implement new products/ services Å Increase efficiency through digitalisation and refocusing costs Å Lower profitability as a result of low interest rates Å Long-term risk of disintermediation in banking sector Å Big tech competitors Å Not deliver on our financial targets due to continued pressure on deposit margins, increasing competition and lack of growth in focus segments Risk profile/ management Å Further enhance risk profile and strengthen confidence in bank’s risk management Å Limit potential losses from increased impairments orrising credit risk Å Improve public confidence by strengthening performance on compliance and AML Å Increased compliance risk or loss of reputation if bank fails to deliver strong risk management Å High risk costs impacting the bank’s profitability Å Continued regulatory pressure expanding our role as gatekeeper, leading to continued high costs Å Inability to (efficiently) prevent crime due to rapidtechnological developments used by (cyber) criminals Financial performance Å Improve financial performance through growth intarget markets, cost discipline and improved riskprofile Å Capital allocation geared to returns, using capital to grow where we see future returns and build oncurrent market positions Å Free up resources for investment in new growth opportunities Å Persistently low rates reducing the bank’s net interestincome Å Underinvestment in innovation, skills and product development due to tight cost discipline Å Not delivering on our cost targets and as a result notdeliver on our financial targets Sustainability 37 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction OtherStrategy, value creation & performance Our strategy / Strategy, value creation &performance “ Value creation - Chapter page quote asperspiet quamquatem quibus voloris quiipsaerum odi.” “ We regularly consult stakeholders – and incorporate their views, where possible, into our decisions, strategy and reporting.” Guide for readers This section is devoted to value creation – itprovides an overview of our approach. Ourvalue creation model will examine howthevalue we create is distributed acrossour capitals. 38 ABN AMRO Integrated Annual Report 2021 Value creation Value creation Our goal is to create long-term value for all our stakeholders: it is central to ABNAMRO’s strategy. We can create value in various ways – by lending to companies, forexample, wesupport economic growth and job creation. We also provide mortgages so that clients can experience the benefits of home ownership. For our employees, we offer salaries and benefits, career opportunities and a safe working environment. At the same time, we are aware that, like any business, our activities may also cause harm. By financing growth, we are also indirectly damaging theenvironment through carbon emissions, pollution orconsumption of scarce natural resources. We work tominimise these negative effects – by applying strict rules for lending and investment activities, and increasing funding for sustainable business. Defining our stakeholders Our stakeholders are defined as: ‘any group or individual the bank affects through its activities or products and services or who, in turn, may affect the bank’s ability toachieve its goals’. Using this definition, we recognise fourmain stakeholder groups: clients, employees, investors and society. We regularly consult stakeholders – and incorporate their views, where possible, into our decisions, strategy and reporting. Examples of stakeholders Clients Retail Banking clients (including individuals and SMEs); Commercial Banking clients; Corporate & Institutional Banking clients; Private Banking clients; public sector clients; brokers, intermediaries andother distributors. Employees Full-time and part-time employees, subcontractors Investors Shareholders, bondholders Society Suppliers and external consultants; other business partners; local communities; governments and regulators; NGOs Our value creation model Our value creation model summarises ABN AMRO’s valuecreation process; the model uses the Integrated Reporting Framework’s six capitals. During the valuecreation process, these capitals may either increase or decrease asa consequence of the bank’s activities. Much of the value we create is financial in nature, butitmay also be social or environmental. The six capitals – manufactured, financial, intellectual, human, social and natural – reflect these different types of value. 1 Our model comprises four sections, and should be read from left to right: Å Inputs: These are the resources (or capitals) weneed to operate our business, ranging from the time, skills and know-how of our employees to the equity provided by investors. Å Business activities: This is our ‘engine room’; itshows, in effect, what we do with inputs tocreate value for stakeholders. Å Outputs: These show the immediate results of our activities – the salaries we pay our employees, for example, or mortgages granted to clients. Å Outcomes: These refer to the results of our outputs – our products, for example, help clients save and invest; mortgages, meanwhile, provide greater social security. 1 For more information, see page 375. 39 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction OtherStrategy, value creation & performance Value creation / Strategy, value creation &performance Financial Intellectual Manufactured Social Human Natural Inputs and output metrics areincluded for illustrative purposes only. All figures are for2021, unless otherwise stated. Please note that, forthis report, we havedecided not toinclude impact estimates, as in 2020. Our purpose Banking for better, for generations to come Our strategy A personal bank in the digital age Our business activities Pillars: Customer experience Sustainability Future-proof bank Our value creation model Inputs EUR 5.2 billion in net interest income EUR 1.7 billion in fees and commissions EUR 22 billion in shareholders’ equity EUR 258 billion in loans to clients EUR 251 billion due to customers 77 bank branches Å Our payment systems Å Internal policies, controls and guidelines Å ABN AMRO’s brand and reputation Å Innovation and investment in new business models, products and services 73% of household clients and95%of SME clients digitally onboarded EUR 980 million spent on general IT Å Employees’ time, skillsand expertise Å Inclusive working environment Just under 20,000 employees (FTEs) EUR 33 million spent on externaltraining and development Å Relationships with clients, employees, business partners andother stakeholders Å Industry networks andcooperation Over 5 million clients 845 investment clients and 14 lending clients formally engaged on ESG issues EUR 0.9 million in community investment made through ABN AMRO Foundation Å ABN AMRO’s consumption of energy, water and other naturalresources 88 GwH in energy use, excluding transport EUR 3.8 billion in outstanding green bonds at year-end Å Net interest income forthe bank Å Fees and commissions Å Financial capital frominvestors Å Loans, investment services and other financial products Å Deposits and savings Å Our offices, property and equipment, including IT We provide banking services toindividualsand businesses. Mostofourrevenue comes fromnetinterestincome – thedifferencebetween interest charged toclients onloansand the bank’s ownfundingcosts. Wealso receive fees andcommissions in returnforour services. We fund our loans through deposits, savings and capital markets – and actively manage the risks associated with them. From our income, we meet ouroperating costs, reinvest inourbusiness and pay out returnsto our investors. Funding and riskmanagement Banking services Re-investing and sharing returns Our value creation model 40 ABN AMRO Integrated Annual Report 2021 Financial Intellectual Manufactured Social Human Natural OutcomesOutputs In exchange for our services – our manufactured capital – clients and counterparties transferred considerable financial capital to ABN AMRO by paying interest on loans or mortgages and paying transaction fees. Value created for investors rose sharply, mainly driven by an increase inABN AMRO’s share price and a rebound in the bank’s net profit for the year. Å EUR 1.21 earnings per share Å 6% return on equity Å 16% CET 1 ratio (Basel IV) Å EUR 5.3 billion absolute cost base 2 Å -7bps cost of risk During the year, we created manufactured value for clients by providing services leading to valuable products and advice. For example through mortgage lending, which gives clients access to home ownership. In the case of the Dutch housing market, this is an asset that increases in value for clients. We also create value through our extended loans and advances to support businesses and job creation. We measure our value for specific focus segments through our Net Promoter Score. Net Promoter Score Å -1 NPS Mortgages Å -33 NPS SMEs We created intellectual value for clients by providing advice, by investing in innovation & technology andby maintaining the stability and reliability of the our banking payment system. Wealso received intellectual capital from others, including suppliers and business partners. Atthe same time, there wereadverse effects, for instance resulting from cybercrime incidents. Å 125 client complaints relating to data privacy breaches (1 substantiated) Å 83 total client complaints relating to breaches of other regulatory or voluntary codes intheNetherlands (4 substantiated) Throughout the year, Covid-19 continued to deplete value, affecting our employees’ occupational health andsafety. At the same time, we created value by providing desks and other equipment toimprove home working. In 2021 our workforce grew, creating more value through contributed time, skills and knowledge. In return, we created value for our employees through salaries andbenefits. In addition to skill development, we also focused on attracting and retaining talent by offering our employees reskilling and upskilling. Å 82% employee engagement score Å 4,214 new hires in 2021, of which 2,412 were internal hires Our social capital is impacted significantly by our relationships. We have reduced our value creation as reflected in a lower NPS for Retail Banking and a decrease in ABN AMRO’s brand value. We created value in 2021 by further reducing financial distress due to difficulties in repaying loans. However, we depleted social value through discrimination, underpayment and child labour in ABN AMRO’s value chains. We are aware that, like any business, our activities may also cause harm. By financing growth and through our own operations, we are also indirectly damaging the environment. In 2021 we continued toreduce our impact on the environment and use of natural resources, largely as a result of further winding down our C&IB non-core activities. In addition to offsetting our own operations emissions, we worked tofurther minimise our negative impact through, among other things, circular transactions and sustainable products. This impact is measured through our sustainability (acceleration) asset volume KPI. Å 53 kTon of carbon emissions from own operations 1 Å 26.2 million tonnes of carbon emitted as a result of the bank’s lending and investment activities 1 99.90% availability of internet and mobile banking 96% of retail client meetings held via video banking Doubled the amount of financial coaches to 60 in 2021 59 cases with specific human rights link in the sustainability risk assessment EUR 2.3 billion paid to employees in salaries and benefits 40 employees hired through our reskilling programme 27% sustainability (acceleration) asset volume Increased our renewable energy commitments to 30% of our energy loan book Over EUR 376 million committed to circular economy deals in 2021 in more than 35 deals EUR 1.4 billion in interest paid to clients and counterparties (incl ECB) EUR 1.14 billion in payments to investors EUR 604 million paid in corporate tax EUR 146.4 billion in mortgages EUR 78 billion in loans and advances to corporates Market share Å 16% new mortgages Å 18% SMEs Å 30% D&I at subtop Å Net Promoter Score (NPS) 2021 Å -18 Retail Banking Å +14 Private Banking Å +1 Commercial Banking Å +37 Corporate & Institutional Banking 1 For more details, see page 50. 2 Excluding AML settlement and restructuring costs. 41 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction OtherStrategy, value creation & performance Value creation / Strategy, value creation &performance Sustainable Development Goals 42 ABN AMRO Integrated Annual Report 2021 SDG 8 Decent work and economic growth Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all SDG 12 Responsible consumption and production Ensure sustainable consumption andproduction patterns SDG 13 Climate action Take urgent action to combat climate change and its impacts ABN AMRO’s contribution Å Minimum labour standards built into our Sustainability RiskManagement Framework (see page 167) Å Loans to businesses, including SMEs, to support economic growth and job creation (see page 45-47) Å Financial support for social entrepreneurs and disadvantaged groups looking to join the labour market (see page 54-56) ABN AMRO’s contribution Å Circular economy financing to reduce waste and consumption ofscarce raw materials (see page 53) Å Significant financing to support businesses switching tomoresustainable operating models (see page 49-53) ABN AMRO’s contribution Å Bringing the bank’s lending and investment operations intolinewith the Paris Climate Agreement (see page 51-52) Å Continued investment in renewables through our SustainableImpact Fund (see page 50) Å Improving energy efficiency in our portfolio of residential andcommercial real estate (see page 52) Å Encouraging clients to invest more in sustainable assets (seepage 51) Supporting the UN Sustainable Development Goals (SDGs) In creating value for our stakeholders, we are also contributing to the SDGs. We have identified three SDGs asmost relevant for the bank – this is where we believe wecontribute most to the goals: by helping protect basic human and labour rights, and by supporting the transition toamore sustainable global economy: 43 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction OtherStrategy, value creation & performance Value creation / Strategy, value creation &performance “ We continued to execute our strategic agenda in 2021 across our three strategic pillars.” Guide for readers This section describes our performance in 2021, along the lines of our three strategic pillars: customer experience, sustainability anda future-proof bank, including our own purpose-driven activities. 44 ABN AMRO Integrated Annual Report 2021 Performance Strategy, value creation &performance Performance Customer experience In our drive to delivering customer experience, we bring convenience into the daily lives ofour clients andexpertise when it matters. Over the past year, ABN AMRO has continued its move towards more digital banking and extended video banking. At the same time, werecognise that more work is needed to improve our NPS, our main measure of customer experience, particularly for our two target areas: SMEs and mortgages. Convenience & expertise We offer both convenience and expertise: fully digital self- service through end-to-end digitalisation for a convenient daily banking experience, and tailored solutions, based on sector-specific, financial and sustainability expertise. Over the past year, we have continued to expand digital banking. We added Google Pay to the ABN AMRO banking app. Wecompleted our repositioning of Moneyou as a provider of online, price-competitive mortgages. Meanwhile, we arealso extending video banking, which has increased in popularity during the pandemic. In recent years, Tikkie – ourpayments app – has become a regular feature of daily life for many of our clients. More than 100million transactions were made through Tikkie in 2021, worth more than EUR4.2 billion. 1 Over the past five years, we have closed 144 – or 60% – of our bank branches intheNetherlands. We also introduced Aymz, a new digital lending platform forSMEs, and extended our automatic bookkeeping service. In 2021, we launched Snel Betaald – or ‘Quick Payment’, which allows small businesses to be credited foramounts just 24hours after they are invoiced. As the use of digital services has become the preferred channel for many clients and more services become available digitally, our clients are no longer visiting our branches as often as they used to. Following client behaviour, we continued to rightsize our branch network. We closed a further 35 branches in 2021 1 , leaving 77 branches across the country. At the same time we are making sure clients are still able to access the services they need. Currently, we are working to expand the use of digital signatures – providing handwritten signatures is one ofthemain reasons clients still visit ourbranches. Chatbot Anna By the end of 2021, Chatbot Anna – our digital helper – was handling around half of all live chat requests we receive. The chatbot is powered by AI, so it learns as it responds to requests. In 2021, we also made Chatbot Anna available on our mobile app. First launched in 2018, the chatbot speeds up processes for clients, and saves us time and resources, enabling our advisors to focus onexpertise. Among clients, Chatbot Anna is one ofourhighest-rating services. Guide for readers In this section we will examine the progress we are making with the first of our strategic pillars: customer experience. Our text looks atboth howwe’re improving our offering to clients andtheinternal factors driving these changes. Wewill be covering three of our strategic differentiators: customer experience, digitalisation, and clear and appropriate advice. 45 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction OtherStrategy, value creation & performance Performance / Strategy, value creation &performance Alongside convenience, we realise clients also need expertise – clear and appropriate advice – particularly at important moments in their lives. We provide advice through our financial coaches, tailored solutions, our sector specialists, or personal interaction using video banking. Bythe end of 2021, 96% of our retail clients meetings were already held using video banking, a highly rated service by our clients and resulting in more client contact – while increasing efficiency. For our SME clients, this was 75%. Video banking allows clients to speak to their bankers, even outside usual working hours and it is a highly rated service to provide advice and expertise. In 2021, the large majority of our mortgages were arranged through video banking. Our market share in mortgages expanded during the year to 16%, up from 14% in 2020; we are making good progress towards our 20% target in 2024. Our market share for SME clients remained at 18% in2021, in line with our expectation towards our 20% target in 2024. For corporate clients, we have a full service offering in all sectors in the Netherlands. In Northwest Europe we focus on chosen sectors where we already have established expertise, including real estate, shipping, energy, financial institutions. Sustainability is an important cornerstone in ouroffering (see our feature on page 48). We are also rolling out our Entrepreneur & Enterprise (E&E) concept, under which we serve entrepreneurs and their businesses as one team and seamlessly combining services for clients with both commercial and private banking needs. By the end of 2021, our E&E concept was already in place in France and is currently being rolled out inthe Netherlands, Germany and Belgium. Partners and intermediaries In 2021, we continued to work with outside partners. In many cases, this allowed us to develop new ‘Beyond Banking’ services for clients. In partnership with PayDay, for example, we launched a new, instant payment service for workers inthe gig economy. We are working with BRIX to help first- time house buyers – and with MySafe, which offers secure data storage. Through partnerships with HomeQgo and deEnergie bespaarders (‘the energy savers’), we advise to clients on how to make their homes more sustainable and save on energy bills. Partnerships are important to increasing ourmarket share, particularly in our two strategic focus areas: mortgages and SMEs. In 2021, we were chosen byDutchintermediaries as the best mortgage provider in theNetherlands in terms of improving home sustainability, combining expert advice with fast and convenient service. In addition, through our partnerships, we are strengthening our position in the growing platform economy (see page 58). We also work with others in areas where banking services are becoming more commoditised – our cash machines, forexample, have been replaced byGeldmaat ATMs as part of a joint venture with ING andRabobank. Also for our SME clients we are continuously looking to expand our (advisory) services. We are accelerating with Impact Nation – a partnership enabling us to link clients with specific sustainability issues with other businesses which know exactly how to handle these issues. We are also keen on further developing existing propositions, releasing new features. For example in our bookkeeping proposition, where we have introduced a new feature in the ABN AMRO’s bookkeeping connector – connecting an external bookkeeping program with the client’s banking apps. Customer loyalty To measure progress with customer experience, ABNAMRO uses the Net Promoter Score, or NPS. In 2021, our aim wasto maintain NPS scores at their 2020 levels. Closing ofbranches and negative interest affected client relations, while businesses could apply for financial support from thegovernment, and relied less on their banks for financing. Overall, we are working to improve NPS across the bank – by continuing to provide convenience and expertise. We measure NPS by business line, market and client profile. As part of our strategy, we have set targets for relational NPS (rNPS) for both mortgages and SMEs. Across our businesses, we take a ‘first-time-right’ approach to client relations – ensuring quick, flawless service. We realise that NPS, particularly for business banking, is driven by regular, personal contact between clients and our bankers. NPS performance Å Retail Banking: Despite declining for the full year, theNPS for Retail Banking improved in the second halfof the year. Surveys showed clients appreciated theconvenience of digital banking. However,scores were affected by clients being charged negative interest rates, increasing costs for payment packages, and adecreased availability viabranches, ATMs or by telephone. We are working onmaking it easier for clients to contact their advisors. Relational NPS for mortgages – one of ourstrategic focus areas – remained unchanged, year-on-year, and close to our 2024 target despite the wider decrease inour Retail Banking NPS. 50 40 30 20 10 2024 (targets) 2020 2021 20 20 18 16 18 14 SMEs Mortgages Marketshare growth in focus segments (in %) 46 ABN AMRO Integrated Annual Report 2021 Å Private Banking: NPS for Private Banking remained strong in 2021; scores remained stable for France, increased for our German and Belgian operations, offset by a slight decline in NPS for ABN AMRO MeesPierson in the Netherlands. In Private Banking, NPS is driven primarily by personal contact and interaction. Å Commercial Banking: NPS for Commercial Banking remained around 0 in 2021. Our survey suggests, however, that there is more work to do, particularly among SMEs, the second of our strategic target areas. Almost half of SME clients currently feel ‘undervalued’ and are influenced by thegeneral sentiment around closing of branches, feeincreases and operational changes related to the ‘Know Your Client’ activities. Thedecrease from -21 in2020 to -33 in 2021 sets usfurther back on our pathtowards our 2024 target, butweare aware thatoperational improvements take some time before they affect NPS scores. Å Corporate & Institutional Banking (core activities): NPS for Corporate & Institutional Banking remained broadly unchanged, year-on-year. Our NPS survey showed clients appreciated new digital features and increased online access, as well as continued input onclients’ strategic and sustainability issues. 0 -10 -20 -30 -40 -50 20212020 2024 (targets) -1 -21 -33 -1 ≥0 ≥0 rNPS (mortgages) rNPS (SMEs) NPS for targeted growth markets Definitions may be found on page xx. Please note that the business lines shown below – Retail Banking, Private Banking, Commercial Banking and Corporate & Institutional Banking – ceased to exist at the end of 2021. See page xx for details. 2017 2018 2019 2020 2021 45 30 15 0 -15 -30 NPS by business line Retail Banking Private Banking Commercial Banking Corporate & Institutional Banking (core activities only) Negative interest rates In recent years, because of negative rates, banks have paid interest on deposits held at the European Central Bank. Like other banks, ABN AMRO has felt obliged to pass on these rates to clients. In doing so, we have done our best to protect as many clients aspossible. From the beginning of 2022, negative rates will be charged on accounts with a combined balance of EUR 100,000 or more. This threshold, previously set at EUR 150,000, applies to both retail and business clients. At this amount, only around 5% of our clients will have to pay negative interest. Revolving consumer credits During the year, ABN AMRO reached an agreement with the Dutch Consumers’ Association for clients whose floating rate on their consumer credit did notsufficiently follow the market rate. Under the deal, ABNAMRO agreed to compensate all clients affected from 2008onwards. Subsequently, the bank has decided proactively to compensate clients affected prior tothat date (from 2001 onwards), where there issufficient information to do so. Asaresult, ABNAMRO has increased its provision tocover thecost of theagreement to EUR 340 million (up fromEUR250 million previously). The first clients received their compensation before the end of 2021. Over 15% of all clients with a revolving credit facility in scope are eligible for compensation. “ NPS for Commercial Banking remained around 0 in 2021. Oursurvey suggests, however, thatthere is more work to do, particularly among SMEs.” Definitions may be found on page 376. Please note that the business lines shown below – Retail Banking, Private Banking, Commercial Banking and Corporate & Institutional Banking – ceased to exist at the end of 2021. See page 26 for details. 47 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction OtherStrategy, value creation & performance Performance / Strategy, value creation &performance “Two years ago, we made the decision to reduce our carbon emissions. Energy consumption was our biggest issue, with our factory using around 1.5 million kilowatt hours of energy per year. That’s enough to power 600 homes. So we set up a team to examine our environmental impact and find remedies. ABN AMRO helped finance this with a transition loan. It was a pilot scheme and a steep learning curve. The basic terms were straightforward enough – that our interest rate would be lowered if we cut carbon emissions by 10% in three years and that we would pay more if we didn’t.” “Finding a way of comparing year-on-year emissions accurately was tough. The formula we used had to factor in business growth. The carbon footprint of a business that is expanding will naturally increase, and we wanted our targets to take that into account. In the end, together with ABN AMRO, we agreed that measuring carbon intensity against annual turnover was the fairest way.” “The financing from ABN AMRO gave us a real incentive – we started by attacking some obvious issues, from making sure coffee machines are turned off to timing the air- conditioning to shut down when the factory alarms are switched on. But we also focused on larger impacts. Wehave an air compressor, for example, that generates excess heat, so we doubled up by moving it to a part of thebuilding that needed to be kept warm. Or optimising theuse of machines that dry material over the weekend inpreparation for work on Mondays. One dryer consumes thesame amount of energy each day as two households do.” “At the same time, we’re talking to our own clients about what they can do to help. Aircraft manufacturers insist we make components with new raw materials when, for non- structural parts, we could use recycled materials instead. We are trying to set up a project with customers to see ifwe can do that. Aerospace businesses also use highly engineered plastics that take a lot of energy to produce. Webelieve about 30% of those products could be made with lower grade materials needing half as much energy to make.” “ABN AMRO also invited me to one of their workshops andthat really helped open my eyes. A couple of our new initiatives came out of that. It’s great to know that the bank is really thinking and working with you on these issues.” Egmond Plastic manufactures components mainly for the aerospace industry. ManagingDirector Richard Brandwijk tells us how financing from ABN AMRO issupporting his company’s drive to sustainability. Richard Brandwijk from Egmond Plastic “ The financing from ABNAMRO gave us a real incentive.” 48 Sustainability In 2021, we provided more financing to businesses and individuals making the shift to sustainability. We continued to align the bank with the objectives set out in the Paris Climate Agreement while also encouraging social entrepreneurship, greater diversity in our workforce and equal access to financing. Our approach to sustainability We see sustainability as a business opportunity and a way ofsupporting the broader transition to a low-carbon economy. To support this transition, we are expanding financing for sustainability, and increasingly incorporating sustainability risk – including climate risk – into our approach to lending and investment services. Within sustainability, we have three main focus areas: climate change, circular economy and social impact. This section isorganised in line with these areas. In2021 we saw the focus on ESG intensifying, including regulation; in response, we have revised our targets on Sustainability (acceleration) asset volumes, see page 35 Sustainability (acceleration) asset volumes 2021 target 2021 results 2020 results ESG + impact investments 26% 38% 22% Mortgages 22% 25% 23% CIB (core) loans 12% 13% 9% CB loans 11% 15% 13% Total sustainability (acceleration) asset target volume 21% 27% 20% In 2021 the sustainable (acceleration) volume increased compared to 2020. The increase in ESG +impact investments is partly caused by the change of definitions due to the SFDR, which came into effect in March 2021. Also positive market performance of ESG + impact securities and an increase in new contracts explain part of the increase. The mortgage volume increase is due to a relatively higher inflow and lower outflow of energy labels A or higher compared to the lower label categories. The increase in corporate loans at CB and CIB core is due to strong lending performance during the year and an increased interest in sustainability-linked loans from clients. More details can be found on page 51-52 and definitions can be found on page 376. We have aligned our definition of sustainable client assets with the definitions set in the EU SFDR regulation and therefore have changed the terminology used to ESG and Impact investments. 2020 figures have not been retrospectively adjusted for this change given the SFDR came into effect in March 2021. Guide for readers This section looks at our progress in sustainability – the second of our strategic strategic pillars. Itaddresses both howwe’re helping clients make thetransition tosustainability, and the changes we’re making internally to lead by example in thisarea. We will be covering three strategic differentiators: responsible investment & financing, circular economy and diversity & equal opportunities. Note on Green Asset Ratio The EU Taxonomy’s objective is to provide users of the bank’s financial statements with a common basis for identifying business activities as environmentally sustainable. To qualify as ‘environmentally sustainable’, andtotherefore be included in the Green Asset Ratio (GAR), economic activities must significantly contribute toataxonomy objective, meet the ‘do no significant harm’ (DNSH) criteria and meet minimum safeguards criteria. We plan to disclose the GAR in our 2023 Annual Report. Weare only permitted to include the taxonomy-aligned exposures relating to corporates bound by the EU’s current Non-Financial Reporting Directive (NFRD), certainhousehold exposures and specific local government financing in the ratio. This means that asignificant part ofour portfolio (such as lending to, andinvestments in, non-NFRD corporates and financial institutions amounting to 30.1% of our total assets) cannot be considered for taxonomy alignment and will subsequently be excluded from the GAR in our 2023 Annual Report. In future, we will align our definitions forsustainable acceleration loans as far as possible withthe EU Taxonomy definitions. However, we also see aneed for additional sustainability-related metrics to cover clients and exposures – notably our SME portfolio – that cannot be directly included in the GAR from a regulatory point of view. 49 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction OtherStrategy, value creation & performance Performance / Strategy, value creation &performance Climate We are currently developing a Climate Strategy to increase ABN AMRO’s efforts related to the objectives set out in the 2015 Paris Climate Agreement. As part of this strategy, we intend to steer the bank towards a maximum +1.5˚C global warming target. We expect this Climate Strategy to be finalised during 2022. To achieve our goals, we are reducing our exposure to fossil fuels, encouraging clients to invest more sustainably and offering sustainability and transition loans to businesses, our mortgage clients and other consumers. We want to become net-zero by 2050; we’re supporting our corporate clients in that same transition. TheDutch government’s policies will help support ABNAMRO’s approach in this area. The Netherlands’ target is to reduce the country’s greenhouse gas emissions by 2030 to less than half of their 1990 levels, and to eliminate emissions altogether by mid-century. Over the past year, ABN AMRO has again been active in international efforts totackle climate change; the bank is a founding member ofboth PCAF and the Poseidon Principles, which seek toreduce emissions from global shipping. We have also committed to implementing recommendations from the Task Force on Climate-related Financial Disclosures (TCFD). 1 In 2021, our combined emissions from our own operations amounted to 53 kTon, an increase compared to 2020 following a methodology change. 2 Scope 3 emissions – those from our lending and investment activities – totalled 26.2 million tonnes, down 36% from 2020, also impacted by the wind-down of our non-core Corporate & Institutional Banking operations. 3 In 2021, our rating from the CDP – formerly the Carbon Disclosure Project – declined from A- to B. In addition to our leading by example activities on climate, we are also helping clients make the transition to sustainability. We have described this on the following two pages. “ As part of this strategy, we intend to steer the bank towards a maximum +1.5˚C global warming target. Weexpect thisClimate Strategy to be finalised during 2022.” Our international commitments To support our approach in this area, we are signatories toaseries of international initiatives, allowing us towork together with other stakeholders to tackle important social and environmental challenges. These initiatives include the Equator Principles on responsible project finance, and the Principles for both Responsible Banking and Responsible Investment. We have been amember of the UN Global Compact for 17 years. In2021, we joined Banking for Impact to help develop global standards for social and environmental impact reporting. We also signed up to the Partnership for Biodiversity Accounting Financials (PBAF), modelled onPartnership for Carbon Accounting Financials (PCAF) – biodiversity, we believe, is an issue of growing importance for the financial sector. 4 Moreover, biodiversity has become an increasingly important topic for ABN AMRO, as many of our clients depend on the natural world. We realise that, through our lending and investment services, we are having an impact on biodiversity. Later this year we will publish aspecial publication on biodiversity. Inaddition, we also closely monitor our rating in the S&P Dow Jones Sustainability Index (DJSI), widely regarded as the most reliable external assessment of performance in this area. In2021, five points were deducted from our DJSIscore to reflect the recent anti-money laundering investigation; as aresult, we fell short of our target toappear in the top 5% of DJSI-rated companies. Sustainable Impact Fund To support our clients in the energy transition, we have created a new Sustainable Impact Fund (SIF); this fund will make investments of up to EUR 30 million in companies with a proven sustainable business model or concept. The fund will concentrate on three main themes: the circular economy, energy transition and social impact (in line with our sustainability strategic pillar). The first investments have already been made: in Envision (which makes smart glasses for the visually impaired), Foodlogica (which provides logistics for refrigerated food), and Innax (a Dutch company that advises clients and offers solutions for improving the sustainability/energy efficiency of buildings). ABNAMRO has committed a total of EUR 425 million to thefund, of which we have invested EUR175million todate; the SIF incorporates the bank’s previous Energy Transition and Social Impact Funds. 1 We report annually against the TCFD recommendations; which are incorporated throughout this report. 2 ABN AMRO’s carbon emissions cover both scopes 1 and 2, and scope 3 emissions relating to home workplace, air travel, international business rail travel, hotel visits, mobility, public transport and IT. In 2020 we only included air travel, leading to an expanded scope and increase in emissions in 2021. We compensate all of our Tank-to-Wheel carbon emissions resulting from business travel, mobility, office and home locations and IT, by investing in VCS verified carbon emission reduction projects. 3 During 2021, we have changed the methodology for the calculation of scope 3 emissions of our lending activities. As a result, our 2020 scope 3 emissions have been restated from 32.4 million tonnes to 41.2 million tonnes. More information on this and the impact by the wind-down of our non-core operations, see section GHG measuring and steering on page 175. 4 In addition to those mentioned here, we also support other sustainability initiatives, including: Accounting for Sustainability (A4S), Dutch Climate Accord (for the financial services sector), the Getting to Zero Coalition, the Poseidon Principles, the Science-Based Targets initiative, the Spitsbergen ambition, and the UN Principles for both Responsible Banking and Responsible Investment. 50 ABN AMRO Integrated Annual Report 2021 Corporate loan portfolio Å Increase the portion of the corporate loan book that is aligned with the bank’s Sustainability Acceleration Standards. Å Increase the proportion of renewables in our energy loan portfolio to at least 45% by 2024 by investing more in renewable sources, such as solar or wind power and supporting the energy transition. In 2021 this was 30%. Å Continue to assess all corporate loans for environmental risk, and screen out activities harmful to the climate (for example arctic drilling, shale gas, tar sands, new coal-fired power plants). Å We offer sustainability-linked loans to incentivise clients to improve their sustainability performance bylinking the interest rate to sustainability KPIs. We are engaging with our shipping clients to make their vessels more sustainable compared with the IMO emission reduction trajectory through the Poseidon Principles. On 31 December 2021, 33% of the shipping portfolio had a GHG label of A or B and we aim to increase this to 40% by 2024. ABN AMRO has structurally embedded the dialogue with clients on sustainability-related topics, supported by the Client Assessment on Sustainability (CASY) tool.We are in regular dialogue with clients on their sustainability performance and how our dedicated sustainability advisory team and sustainable finance desk can support them. For our SME clients, for example, ourinternal network of 80 or so relationship managers specifically trained on climate-related topics assist clients in their sustainability transition. And so does ourSubsidy expertise desk – helping our clients identify relevant sustainability subsidies for their business. In 2021 we set up a new proposition ‘Sustainability client advisory’ for our corporate clients in which we share our knowledge with clients with regard to disclosure and upcoming regulations that are applicable to them (NFRD, TCFD, EU Taxonomy, etc). Our front- office colleagues have received further sustainability training for relationship managers to support clients in their transition to more sustainable business models. Investment services Increase clients’ investments in ESG and sustainable funds and strategies by: Å Offering ESG investing as the ‘default option’ forclients across all Private Banking operations. Å Increasing our ESG and sustainable offering, also insmaller asset classes like structured products. Å Reporting the impact of investments to clients in Advisory and DPM mandates on carbon emissions and other ESG factors to track alignment with theParis objectives and the UN Sustainable Development Goals (SDGs). As part of our investment process in the Advice and DPM mandates, we regularly discuss sustainability. Forexecution-only clients this is still difficult as they arenot in touch with one of our advisors and therefore need to look into the sustainability of their investments themselves. Improving our service in the execution-only segment in matters relating to sustainability will be one of our focus areas for the future. Since 2020, we have been working with EOS at Federated Hermes in a proxy engagement programme allowing us to engage with more companies, on a larger scale, and in a more proactive way. This engagement programme provides an effective foundation for our increased focus on ESG Due Diligence. It enables engagement with listed companies about ESG issues, focusing on twelve themes ranging from the environment and circular enterprise to risk management and working conditions. An extensive reporting suite that includes regular case studies is then made available, giving ABN AMRO moreclarity about the progress companies are making. In 2021, EOS at Federated Hermes engaged on ESG issues with 845 companies that we are invested in onbehalf of our clients. How we embed climate considerations in our business building towards the Paris objective 51 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction OtherStrategy, value creation & performance Performance / Strategy, value creation &performance Residential and commercial real estate (‘Mission 2030’) Our Mission 2030 programme contributes significantly to the Netherlands’ climate targets. At the same time, we continued to make progress on it – for both residential and commercial real estate. In time, we expect to replace our 2030 objectives with targets based on carbon emissions (per m 2 ), more in line with the Paris Climate Agreement and the EU’s new sustainable finance standards. Commercial real estate We support our clients through renovations, increased use of glazing, solar, LED lighting etc. and by applying stricter environmental standards to the properties wefinance. Residential real estate We help improve the energy efficiency of the homes we finance by promoting sustainability measures such as insulation and solar panels. We have also introduced an online Energy Savings Check to help homeowners identify and carry out energy-saving measures. Meanwhile, wehave increased our sustainability discount. 1 Our Advice Policy states that in their meetings with clients, our advisors must always discuss additional financing options for making their homes more sustainable. To this end, we have added two standard questions on sustainability in the onboarding procedure for clients applying for a new mortgage and have by default included sustainability considerations in the advice report. 1 ABN AMRO expanded the sustainability discount to 0.10% for properties with energy label B and to 0.15% for an energy label A; discounts apply to new contracts or when interest rates are reset. Clients may also qualify if they make efficiency improvements and acquire an A or B label within 24 months of the date at which interest rates have been reset. 2 Scope 3 emissions from our own operations relate to home workplace, air travel, international business rail travel, hotel visits, mobility, public transport and IT. Please note that, to meet these targets, we are also dependent on external factors (such as the continued availability of electric vehicles and the production of sufficient renewable energy). Our own business activities Reduce our scopes 1, 2 and 3 2 greenhouse emissions by80% by 2025 (vs 2015); this can be done by: Å ‘Paris-proofing’ all ABN AMRO offices by 2030; Å Using more electric vehicles and limiting air travel tocertain international destinations. For more progress on our Mission 2030 programme, see our sustainability (acceleration) asset volume on page 49. For more detailed information on our residential mortgage energy labels see page 135, and page 137 for our commercial mortgage energy labels. 52 ABN AMRO Integrated Annual Report 2021 Green bonds, allocation of use of proceeds (year-end 2021) 6.9 4.5 87.5 1.1 Residential mortgages Commercial mortgages Solar power Wind power Total green bonds outstanding is 3.8billion. For more information, seepage 152. Circular economy Supporting our approach to climate, we are also contributing to the circular economy through the advice andfinancing we provide to businesses. We support circular business initiatives, such as the Saltrex auction platform, which finds new ways of using rejected or damaged goods, or Schijvens Corporate Fashion, which uses fully recycled materials to produce sustainable corporate clothing. Other examples include Homie, a start-up that provides washing machines and dryers to customers, who only pay to use them, andCircular IT Resources, specialising in refurbishing usedIT products for data centres and business users. Since early 2019, we have committed over EUR 1,225 million in more than 140 circular economy deals. In 2021 alone, we committed over EUR 376 million in more than 35 deals. As a leader in this field, we now have two dedicated teams working on these deals – the first responsible for Energy & Recycling, the second for Platform-as-a-Service (PaaS) financing. Green bonds ABN AMRO supported its clients with green,social and sustainability (-linked) bonds. A total of over EUR 20 billion of these bonds were structured, issued and distributed onbehalf of our clients in 2021. This total includes EUR 1.9 billion in green bonds issuedby ABN AMRO itself in 2021, bringing the bank’s total outstanding green bonds toEUR 3.8 billion. Proceeds from these bondshave been allocated to the financing ofsustainable mortgages and renewable energy, saving more than 180,000 tonnes ofcarbon emissions. 53 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction OtherStrategy, value creation & performance Performance / Strategy, value creation &performance Social impact Social issues gained in prominence during the pandemic. For ABN AMRO, it is important that everyone has access tothe financial system, including those who have financial worries, disabilities, or experience face discrimination. Todothis, we play our part in supporting the most vulnerable in society. In our approach to social impact, we have three main priorities – equal opportunities, financial resilience and financial inclusion. Below are a few examples from the wide range of initiatives ABN AMRO undertakes to support the most vulnerable in society: Å We provide financial coaches to senior citizens and clients with disabilities to ensure they continue to have access to banking services, particularly with the growth in digitalisation. As part of this, we work closely with Dutch national senior citizens’ associations. In December 2021, we announced that we would be doubling the number of financial coaches – from 30 to 60 and aim toincrease this to 150 in 2022. Å We are also working to tackle issues such as fair pay andpoor working conditions among vulnerable migrant workers in the Netherlands. Since March 2021, we expect labour agencies that want to become a client to be certified by at least the Stichting Normering Arbeid (SNA), and by the Stichting Normering Flexwonen (SNF) if they provide housing to migrant workers. Despite SNAand SNF being proper certificates, we are also strengthening other elements of our client and credit acceptance due diligence procedures to cover the entire spectrum of issues that are relevant to this matter. 1 Å Under equal opportunities, we have our ‘Banking through the gender lens’ programme – backed up by an Inclusive Banking team – to help break down current, often unconscious barriers to financing faced by various client groups, such as women entrepreneurs and young entrepreneurs. In 2021, we also became the first Dutch bank to join the Financial Alliance for Women. 1 In line with the recommendations of the Geen tweederangsburgers report bytheAanjaagteam bescherming arbeidsmigranten, which is available online. Å We promote financial resilience through awareness, education and coaching programmes as well as online tools for people to check their vulnerability, and we offer follow-up support through 150 fulltime budget coaches. Preventing financial difficulties is key in this approach. Special attention is also given to young clients (see our feature on page 57 ). Through ABN AMRO Foundation, we promote volunteering among our employees, and fund charities and good causes, including the Young Education Fund and the Krajicek Foundation, which helps disadvantaged children take up sports. During 2021, we made a community investment ofnearly EUR 1 million through this foundation. And with our Time to Catch Up programme (De Inhaalslag), we aim to create more equal opportunities for men andwomen in field hockey. One of the elements of this programme is that we require the 50 or so hockey clubs wesponsor to use at least 30% of our sponsorship money for sustainability, including diversity. Another element is levelling the international playing field for men and women in hockey. 54 ABN AMRO Integrated Annual Report 2021 Human rights Respect for human rights is the foundation on which our social responsibility is built. As a bank, we may impact a wide range of people, from individuals and families, to the employees, communities and consumers of the companies we lend to or our clients invest in. In 2020, we identified our salient human rights issues – those issues most at riskfrom our business operations; these are the areas we focus on when allocating resources. For more information, see page 167 ABN AMRO’s salient human rights issues What are the salient human rights issues? Which stakeholders may be affected? Role as an employer Å Workplace discrimination Å Workplace harassment ABN AMRO employees Role as a financial servicesprovider Å Impact on living standards and health causedby financial distress due toinadequate client protection Å Breaches of personal privacy Å Discrimination in banking services Retail Banking clients and non-profit organisations Å Violation of labour rights Workers of companies in the bank’s supply chain Role as a lender and provider ofinvestment services Å Violation of labour rights or land-related rights Å Violation of right to life and health Å Violation of right to privacy Å Violation of right to freedom of opinion andexpression 1 Workers, local communities and consumers 1 Right to privacy and freedom of opinion & expression relate to ABN AMRO’s role as a provider of investment services only. Role as a purchaser of goods andservices 55 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction OtherStrategy, value creation & performance Performance / Strategy, value creation &performance Gender and cultural diversity ABN AMRO is committed to creating a diverse workforce – this is important for employee engagement and a pleasant working environment. Greater diversity, we believe, makesfor better decision-making, and brings us closer toour clients. We are working to improve diversity and inclusion within ABN AMRO – we want our people to be ‘free to be who they are’ and feel confident in the workplace. To back this up, various initiatives were taken, such as launching an integrated and innovative Diversity & Inclusion strategy, anumber of external and internal mentoring programmes for women and for employees with a bicultural background and in March 2021 we launched a bank-wide ‘unconscious bias’ training for all our managers. We also support a rangeof initiatives, including the B-Able programme (programme for employees with disabilities) and Young Talent Leadership. And in October, over 6,000 employees participated in 50 workshops during the Diversity & Inclusion Week. As part of our strategy, we have set very clear targets for gender diversity – overall, we want our workforce to be more representative of society, for example by bringing greater cultural diversity and more people with disabilities into the bank’s workforce. In 2021, 30% of our subtop management are now women – up from 28% in 2020, right on track towards our 2024 target. For the top management level, we fell short of our target of 30%. In addition to these targets, ABN AMRO monitors its gender pay gap, which narrowed in 2021 to 14.7% (compared with 13.7% in the Netherlands 1 ); the gap reflects the fact that, proportionally, more men than women occupy high-paid positions within the bank. ABN AMRO’s goal is ultimately toreduce its gender pay gap to zero. Thegender pay gap inthe Netherlands corrected per salary scale is 0.27% infavour of male employees. At the same time, we want to provide more job opportunities to people with disabilities, who often find it hard to remain in the labour market. Our aim is to employ at least 225 people with disabilities by 2025 – as our contribution toaDutch government scheme to increase employment forthose with disabilities. Going into 2022, we will continue to work to improve our diversity performance and further intensify our efforts to improve on these targets, continuing our inclusively voiced job descriptions and 50/50 gender balanced inflow. 1 Source: institute-genderequality.org/. 50 40 30 20 10 2024 (target) 2020 2021 30 34 29 30 30 28 Top Subtop Gender diversity (in %) 10 8 6 4 2 2020 2021 6.2 3.9 4.2 7.7 Top Subtop Cultural diversity (in %) 250 200 150 100 50 For definitions of ‘subtop’, see page xx. Cultural diversity measures the percentage of managers with a non-western background. 2020 2021 2024 (target) 111 116 225 Employees with disabilities (headcount) For definitions of ‘subtop’, see page 376. Cultural diversity measures the percentage of managers with a non-western background. 56 ABN AMRO Integrated Annual Report 2021 “I’d been out of work for some time, when my father became seriously ill. I wanted to take care of him. I started to rack up debts – then, I made a mistake filling in my tax return, and I found I owed the tax authorities a lot of money.” “At first, my friends and family knew nothing about my money problems. I didn’t want to burden my father with it during his illness, and it wasn’t something I was proud of. My sister also had financial worries and I wanted to prove that I could look after myself.” “In the end, my mother really helped me. It was her idea to take a personal loan, and use that to pay off my other debts. Sadly, my father passed way. I didn’t take time to grieve properly, and I started experiencing depression and panic attacks – so much so that I didn’t want to go out of the house any more. It was really tough.” “Previously, I’d always worked in bars and restaurants. With Covid-19, there were no more jobs. That’s when Igot in touch with ABN AMRO. And the bank referred me to a budget coach. She was really sweet and understanding, and immediately put me at ease. I wasn’t just a number to her – she really wanted to help. She arranged a deferment for me, so I could put my affairs in order. I already had a good overview of my income and expenses. All I needed was a bit of breathing space – and the deferment gave me that.” “I wish I’d called sooner. Getting things sorted was a huge relief. And it’s great to know my coach is still there if I have any questions about money matters.” Did you know that one in every five people between theages of 18 and 26 cannot pay their bills? 1 In a world that is becoming more digitalised by the day, young people increasingly struggle to keep their spending in check. Ifyou are concerned about money, remember that you are not alone. Are you also experiencing financial difficulties? People aged under 30, whether or not they are ABN AMRO clients, can also request a free meeting with a budget coach. Visit us at abnamro.nl and make an appointment. ABN AMRO offers special budget coaches to clients in financial difficulty. Researchsuggests nearly a quarter of young people in the Netherlands find it hard to keep track of their finances. We spoke to Sara – not her real name – about how her ABNAMRO budget coach helped her get her finances back in order. ‘Sara’ “ I wish I’d called sooner. Getting things sorted was a huge relief.” 1 Nibud Studentenonderzoek 2021, p. 49. Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction OtherStrategy, value creation & performance 57 Simple, future-proof bank We are turning ABN AMRO into a bank that is digital by design. To do this, we are digitalising more of our client and product processes and internal processes. By 2024, we want at least 90% of our high-volume processes to be automated. As an example of our client and product processes, in September, we became the first Dutch bank to offer ‘cardless’ cash withdrawals from ATMs – with this, clients can simply withdraw cash using their mobile phones. Meanwhile, we are further streamlining our product portfolio, based on client needs – and extending our full DevOps teams, where IT Development and IT Operations professionals work in integrated teams, using cloud technology. By year-end, 232 teams had made the switch toDevOps, up from 136 in 2020. We are building a future- proof bank by rigorously simplifying – the aim being to strengthen client service, improve efficiency and reduce operational risks. We continue to streamline our product 1 The new, expanded Executive Board will consist of ABN AMRO’s Chief Executive Officer, Chief Financial Officer, Chief Risk Officer, Chief Human Resources Officer, Chief Innovation & Technology Officer, andtheChief Commercial Officers, respectively, of Personal & Business Banking, Wealth Management and Corporate Banking. Christian Bornfeld, ABN AMRO’s current Chief Innovation & Technology Officer, has announced he will stand down in May 2022. A new Chief Innovation & Technology Officer will be appointed in due course. For more details, see page 207. portfolio around theneeds of clients and are aiming for a 60% reduction by2024, supporting further rationalisation, harmonisation and digitalisation of our product offering. Simplifying our organisation and reducing risk We are not only simplifying our processes; we are also simplifying our internal organisation. For us, this is about creating a viable, long-term business model, strengthening strategy execution and improving service to clients. Westarted work on a new client service model – and, fromthe start of 2022, we have replaced our current business lines. Instead, we now have three new units, organised around client segments: Personal & Business Banking, Wealth Management and Corporate Banking. Alongside this, wehave moved to a single eight-member Executive Board 1 , replacing our previous Executive Board and Executive Committee. At the same time we are continuing to winddown most ofour Corporate & Institutional Banking activities outside Europe (except our global Clearing activities); the wind- down is an important part of our strategy review, announced in 2020. The CIB non-core wind-down has been largely completed, with loans and advances to customers totallingEUR 1.5 billion, down by approximately 90% since30 June 2020 – improving the bank’s risk profile. Innovation and new technologies In recent years, banks’ traditional business models have come under increasing pressure. In response to this, we have put in place an innovation strategy. This strategy looks at how we can use recent developments to create new products – and new, more convenient ways of banking for clients. To do this, we are focusing on three main areas: Future-proof bank During the year, we digitalised more of our systems and processes. We continued tostreamline our product portfolio, and began the move to a hybrid way of working, post-Covid. At the same time, we invested in skills, promoted greater diversity in our workforce, and pursued innovation in the use of data and new digital technologies – allto ensure a viable business model for the future. Guide for readers This section looks at the third strategic pillar: a future-proof bank. We look at the progress we’ve made over the past year streamlining our internal processes and systems to further improve service toclients. In this section, we will be covering viable business model – one of our strategic differentiators; the remaining two differentiators related to this pillar can be found in Financial and business performance and Risk, funding & capital. 58 ABN AMRO Integrated Annual Report 2021 Å Platforms – providing value-added services to our existing or co-branded platforms, an important area given the move to open banking Å Digital assets – developing new opportunities in digital assets, such as tokenised securities or digital currencies – or finding ways to digitise existing assets Å Sustainability – developing new products and services relating to the circular economy, social impact and climate change. Supporting our work in these areas, we have three enabling technologies: Artificial Intelligence, Cloud, and Distributed Ledger Technology (DLT), more commonly known as blockchain. We are also increasing our use of data – this helps us gain insight into client needs, and supports product development. Our data strategy focuses on three areas: making sure our data is fit for purpose; distributing authorised data quickly and securely within the bank; and unlocking the value of data by using it to create new business opportunities. Where appropriate, we also work with external partners – this allows us to experiment, learn and innovate together. We have a partnership with Techstars, giving us access to a global network of entrepreneurs and partners. Over the past year, we have also piloted a series of new initiatives including: Å GreenDesk, a solution for corporate employees tobook flexible workspaces close to their homes. 1 Å PayDay, providing flex workers with instant access totheir earnings. Å Personal Communication Channel (PCC), anin-house system that allows highly secure and private communication between employees. 1 Å Cyber Learning, offering a learning solution for organisations to help employees recognise cyber risks. 1 At the same time, ABN AMRO is investing in fintech, so we can learn and partner with up-and-coming companies. In2021, our Future of Finance Accelerator – in partnership with Techstars – worked with ten early-stage companies in sustainability and digital assets. We also increased the size ofABN AMRO Ventures – our venture capital fund – to EUR 150 million in capital. ABN AMRO Ventures makes fintech investments across Europe, the US and Israel; these include data privacy specialist Privitar and Solarisbank, one of a new breed of companies offering banking-as-a-service. In 2021, ABN AMRO Ventures invested in Upvest, Bux and Penta, and also increased its shareholding in Quantexa – a data analytics firm supporting our anti-money laundering programme. 1 For more information, see: abnamro.com/nl/nieuws/green-desk-biedt-werkplek-in-de-buurt, doorpakken.abnamro.nl/hulpmiddelen-en-diensten/personal-communication-channel, doorpakken.abnamro.nl/hulpmiddelen-en-diensten/cyber-learning. Responsible tax ABN AMRO sees tax as more than a cost to the company, rather as a means for social cohesion and contribution, sustainable growth and long-term prosperity. As such, we see tax as a key part of corporate social responsibility and governance. We are committed to comply with the letter, intent and spirit of tax legislation in the countries in which we operate; this means paying the right amount of tax atthe right time. We have a number of basic principles that govern our responsible tax approach which is aligned with the VNO-NCW Tax Governance Code (publication in 2022): Å We use legal structures that result from commercial considerations, are aligned with our business activities and have genuine commercial substance. Å Our relationships with tax authorities and other external stakeholders are characterised by mutual respect, transparency and trust. Å We provide regular information to stakeholders (including investors, policymakers, employees, civil society and the general public) on our approach to tax issues and taxes paid. This transparency is embedded in our wider values and standards. Governance & transparency Governance of tax issues is overseen by ABN AMRO’s Executive Board. Tax is regularly discussed in the Supervisory Board’s Audit Committee. For more details please refer to our Leadership & governance chapter on pages 205-257. Our tax principles are published online. These principles guide our actions and responsible tax behaviour, with respect to our own tax affairs and our dealings with clients. Our tax policy has been approved byour Executive Board. To adhere to our tax policy and principles, we take into account measures introduced into national law to increase tax transparency and reporting. We report our taxable income and income taxes paid for each country we operate in (see Note 11 to the Consolidated Annual Financial Statements on page 287, showing our revenue, tax expenses and income taxes paid for each country). We also file a country-by-country report to the Dutch tax authorities. We also comply with transparency rules with respect to our clients – these include the European Common Reporting Standard (CRS) and the US Foreign Account Tax Compliance Act (FATCA). As part of these rules, we regularly exchange information on clients with the tax authorities. From the start of 2021, we also report information under the new EUDirective on Mandatory Disclosure Rules, known as DAC6, intended to prevent tax avoidance. 59 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction OtherStrategy, value creation & performance Performance / Strategy, value creation &performance Risk management and digitalisation We have a Tax Control Framework in place, subject to constant improvement to reflect changes in regulation or stakeholders’ interests. In addition, tax risk is identified as aseparate risk and integrated into the bank’s overall risk management cycle. Tax integrity is part of our strategic integrity risk assessment, which supports our risk-based approach to tax integrity risks. Consideration of tax risk ismandatory when preparing a risk assessment for a newproduct or business activity. We regularly monitor compliance with our tax policy and have process controls toensure the bank files tax returns in good time in all jurisdictions where it is required to do so, and that tax risksand positions are promptly identified and reported. Weengage pro-actively with tax authorities to ensure wehave a complete understanding of our tax obligations. With the rise in new technologies, we are increasingly required to exchange information with tax authorities, based on domestic and international regulations. In the coming years, we expect these rules to be extended with increased requirements for automated tax filing via full data lineage (including an automated audit trail from source to tax return – similar, for example, to the Making Tax Digital legislation inthe UK). Client tax integrity In recent years, client tax integrity has grown in importance, with the issue of the so-called Panama and Pandora papers. Our standards in this area are based on ABN AMRO’s core values and tax risk appetite. We adhere to a moderate risk appetite in line with the bank’s wider risk profile. The Dutch central bank has a strong focus on client tax integrity, which resulted in the publication in 2019 of the Good Practices onClient Tax Integrity, providing guidance on structuring internal processes to identify and manage risk with respectto client tax integrity. In 2021, we finalised the implementation of these Good Practices. We support tax awareness sessions for client-facing staff to make sure they remain aware of integrity risks, particularly given rapidly changing international tax rules. With clients, we wish to steer clear of aggressive tax planning and tax avoidance; our intention is to offer products that comply with both theletter and the spirit of tax legislation, and that are commercially sound rather than tax-driven. This approach is included in our tax policy, tax principles and in our product approval process. Crime and integrity We have an important ‘gatekeeper role’ to help protect the financial system against crime and fraud. As part of this, we are constantly looking to improve our policies, processes and controls to meet regulatory obligations and minimise risk. Due diligence In all our business relationships, we carry out extensive due diligence on clients and third parties, including agents, intermediaries and suppliers with a view to minimising risk of the bank being involved in financial wrongdoing (money laundering, terrorism financing, corruption, tax evasion, etc.). We systematically monitor clients’ activities and report any suspicious or unusual transactions to the relevant authorities. Clients in high-risk situations (both existing and prospective clients) undergo additional due diligence; this includes politically exposed clients, those subject to adverse media coverage or living and working in countries or sectors with an inherently higher risk of financial crime. When assessing risk in this area, we also take into account geopolitical factors; unacceptable risks may lead to the rejection of theprospective client or third party or – in the case of an existing client – to an ‘exit’ from the bank. In 2021, we continued with our aim of being a frontrunner in Northwest Europe in managing financial crime risks. Part of this is delivering on our current remediation programme to address shortcomings in our approach to anti-money laundering (see page 61 ). To support our efforts, all ABN AMRO staff undergo pre- employment screening; additional screening is carried out for those working in at-risk areas. In addition, employees “ We have invested in skills, promoted greater diversity in ourworkforce, and pursued innovation in the use of data andnew digital technologies.” 60 ABN AMRO Integrated Annual Report 2021 Settlement with Netherlands Public Prosecution Service In April 2021, ABN AMRO accepted a settlement with the Netherlands Public Prosecution Service (NPPS) forshortcomings in the bank’s anti-money laundering activities. During the investigation, the NPPS found serious shortcomings in ABN AMRO processes tocombat money laundering, such as the client acceptance, transaction monitoring and client exit processes, in the Netherlands in the period from 2014-2020. As a result, in certain instances, clients were able to abuse ABN AMRO accounts. As part of the AML settlement, the bank agreed to pay EUR 480 million. ABN AMRO was informed that an individual filed a complaint against the AML settlement between the NPPS and ABN AMRO and that the complaint has been denied by the court of appeals. To address shortcomings in its AML programme the bankhas prioritised remediation and enhancement programmes in each of the business lines of the bank over the years, as well as bank-wide with respect to transaction monitoring. ABN AMRO has invested heavily in these remediation and enhancement programmes over several years, including investments in its systems and the growth of its staff. Unfortunately, ABN AMRO has torecognise that, despite all of its efforts and intentions, its improvement programmes have not always had the desired effect, and that several shortcomings, some of which serious, have been identified. In response to the shortcomings and in order toaddress increasingly strict regulations and continuously evolving forms of financial crime, ABN AMRO decided tocentralise the execution of all AML activities in October of 2018, bolstering AML capabilities and enabling further specialisation and knowledge sharing across the bank. ABN AMRO set up a bank-wide AML programme and made substantial additional (financial) resources available for investments in staff, systems and processes. With the AML programme and the establishment of theAML unit ABN AMRO has implemented structural, organisational changes that are to lead to sustainable remediation. Theremediation programmes have been coordinated with the Dutch central bank, which isclosely monitoring progress. By the end of 2021, thetotal number of full- time employees involved in AML had increased to over 5,000 FTE. ABN AMRO is making progress in the execution of its AML remediation programme, but the remediation is requiring more effort and ABN AMRO expects that the remediation will continue in 2023. ABN AMRO is also actively involved in various public- private partnerships aimed at of contributing to safer society. Networks and partnerships are needed to combat the criminal networks. ABNAMRO continuously seeks new collaborations to design and adopt smarter solutions. We participate in a number of public and private partnerships, including the Terrorism Financing Taskforce, the Serious Crime Taskforce and inthe area ofhuman trafficking / corruption. Also we continue towork on public- and private cooperation, such as Transactie Monitoring NL, policy alignment, data taxonomy, taskforces and work groups. The AML settlement marks the end of a painful and disappointing episode for ABN AMRO. The lessons wehave learned from this experience drive us in our continued effort as gatekeepers to achieve a safer society and a financial system that meets the highest standards of integrity. take part in mandatory training to recognise warning signs of financial crime (including ‘red flags’ for money laundering, corruption, fraud and conflicts of interest). Employees are required to immediately report actual and suspected incidents, irregularities or breaches relating tobribery or corruption. We also encourage employees tospeak up if they know of risks or behaviour not in linewith our principles or standards. Where possible, employees should discuss suspicions with their manager. Ifnot, they should report their suspicions via the bank’s whistleblower process, also open to external parties. Combating bribery, corruption and fraud Corruption undermines fair business, restricts international trade, reduces investor confidence and may affect economic growth and stability. In accordance with regulatory requirements, we constantly monitor risks associated with money laundering, terrorism financing, bribery and corruption – we also maintain a strong framework of internal controls. These risks are included in our Systematic Integrity Risk Analysis (SIRA). SIRA is based on both internal and external qualitative and quantitative information; it provides insight into the inherent and residual risks, and enables us to fulfil our gatekeeper’s role. We believe it is our corporate social responsibility to conduct business free of bribery and corruption. At the same time, we work hard to prevent fraud by taking down fake websites and emails, using two-factor authentication, andclosing down accounts to known fraudsters. A copy ofour anti-bribery and corruption policy is available online. 61 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction OtherStrategy, value creation & performance Performance / Strategy, value creation &performance Resilience to security threats ABN AMRO’s IT infrastructure connects directly to public networks; consequently, our processes and systems are inherently exposed to cyber attack. We have a responsibility to protect our clients’ data, privacy and money. To do so, wehave a well-established information security framework; this ensures the confidentiality, integrity and availability ofinformation (and associated assets) at all times. Theframework sets out roles and responsibilities within thebank, organisational structure and security directives that apply to the bank, its vendors and other third parties. Inaddition, we have a Corporate Information Security Office(CISO), responsible for detecting fraud. Our Security & Integrity Management department, meanwhile, monitors trends relating to fraud, information security and compliance breaches, and reports incidents and any losses suffered bythe bank and/or its clients. Other departments also workclosely together to help manage and prevent risk of financial crime – fraud and other forms of financial crime are included in our bank-wide Emerging Risk Scanner. At the same time, we are keen to raise awareness among both clients and employees. We publish security advice online and work with the police, financial authorities and other external partners to prevent financial crime. To support this framework, we are investing more in cybersecurity. In 2021, ABN AMRO bought new, self-healing cybersecurity software, which repairs itself when under attack. Since the pandemic, we have seen an increase in cyber threats, particularly fromransomware, tech support scamming and malware. We have put blocks in place – invisible to clients – to prevent spoofing (where criminals attempt to pass themselves off as bank employees). Future of work Post-Covid, we are bringing in new ways of working. In2021, we started moving to a hybrid model, where employees can split their time between working from homeand at the office. This, we believe, will help improve their work-life balance and enhance well-being – a vital issue for employees following the pandemic. During the pandemic, we provided desks and other equipment to employees working from home – which again proved important during the December-January lockdown in the Netherlands. Over the past year, we have prioritised well- being; we have continued to provide regular advice and support to those working remotely. We have also expanded our range of ‘MyWellBeing’ programmes since the pandemic to address loneliness and working at home with children. Hybrid working also means a change to our physical surroundings. Currently, we are refitting our Foppingadreef office in Amsterdam, creating more open spaces and meeting rooms. From 2025, Foppingadreef will become theprincipal hub for ABN AMRO employees in Amsterdam. During the year, we agreed the sale and leaseback of ourhead office at Gustav Mahlerlaan in Amsterdam. In 2021, we also signed a new six-month collective labour agreement with the Dutch trade unions. The agreement includes new provisions on a home working allowance andan extension of parental leave. At the same time, we are investing in new skills. AcrosstheNetherlands, data and digital skills in particular are in demand. To implement our strategy, we need these skills – we also need expertise in other areas, such as project management and advisory. Generally, we prefer to‘reskill’ or ‘upskill’ rather than recruit from outside (seeour feature on page 65). Our spending on external training and development totalled EUR 33 million in 2021. We have extensive education programmes, including the Compliance Academy, the DFC – or Detecting Financial Crime – Academy and the Circl Academy, responsible forallsustainability training. Our approach emphasises self-learning – we are not only creating a future workforce for ABN AMRO, we are also making it easier for employees leaving the bank to find other jobs. This is important at a time when many traditional banking jobs are being lost through automation. At ABN AMRO, we expect to reduce staffing levels by around 15% by 2024, though most of this will be accomplished by natural attrition. Our working culture Along with new ways of working, we realise ABN AMRO is also going through a culture change. Culture is an important part of our approach to human resources. Our Leading for Better programme helps managers adjust, giving them the opportunity to discuss issues such as personal leadership styles and how to balance short and long-term considerations. We have also rolled out an updated version of our Code ofConduct – and a new Behavioural Risk Policy – as part ofour efforts to increase employees’ awareness of the importance of integrity, our core values and the bank’s impact on society. Our goal is to ensure the bank is ahead of regulatory developments in this area – to strengthen trust in the bank and maintain a strong licence to operate. 62 ABN AMRO Integrated Annual Report 2021 Employee engagement An important part of our working culture is an engaged, motivated workforce; this is also important to ensure that we retain talent. In 2021, our annual survey showed a slight decline to 82% in overall employee engagement after a significant increase the previous year. We are still ahead, however, of the Global Financial Services Benchmark – andour own target of 80%. Our survey measures a range of categories (see table below). We scored strongly in inclusive environment, talent & development and efficiency. Senior management and vision & direction remain below the industry benchmark, however, motivating the Executive Board to give priority to connecting with all colleagues, at all times. Employee NPS – which measures whether employees would recommend ABN AMRO as an employer to friends and family – was alsolower. Overall, engagement rates remain high, though we believe rates have been affected by continued frustration over Covid-19 restrictions and the anti-money laundering investigation in the Netherlands. To pinpoint specific, on-the- ground issues, we will again be working in 2022 to improve our performance in this area by continuing to invest in new skills, promoting diversity and introducing hybrid working in our offices. Results are regularly discussed by the Executive Board, broken down into each client unit to determine points for action by senior management. 85 83 81 79 77 2017 2018 2019 2020 2021 Employee engagement score (in %) Client focus Collaboration Efficiency Engagement Inclusive environment Integrity climate Rules & procedures Senior management Sustainability Talent & development Vision & direction 81 88 69 80 72 69 81 82 77 91 NA NA NA 85 81 67 50 76 74 85 77 80 Scores are based on ABN AMRO’s annual Employee Engagement Survey. The latest survey was conducted in October 2021; 19,039 employees responded. During the year, we also carried out a separate ‘pulse survey’ (covering 25% of employees). NA – not available; these categories are not part of the Global Financial Services Benchmark. ABN AMRO GFS Benchmark Selected categories (ABN AMRO performance vs. Global Financial Services Benchmark) 63 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction OtherStrategy, value creation & performance Performance / Strategy, value creation &performance 64 ABN AMRO Integrated Annual Report 2021 “We’ve really expanded over the past several years. We started with a few hundred colleagues, we’re now at 3,800. At the start, it was relatively easy to find the right people – now it’s become really hard. We’re seeing similar skills shortages across the economy. We have so many talented people at the bank – we need to make full use of that talent. Otherwise, you’re always having to bring in talent from outside.” “That’s where our reskilling programme comes in. In the past year, ABN AMRO has developed different learning tracks to enable colleagues to apply to new roles where they obtain new skills. At DFC, for example, we’ve been looking to hire people with client experience. They may not have all the required due diligence research knowledge or experience , but they know the bank well. They know the products inside-out, and they know how to deal with clients. So they’re bringing in a new valuable skill-set. That kind of combination of skills – if we can give them that technical, analytical knowledge as well – is really hard to find. And for DFC, it’s invaluable. A lot of times we have to reach out to clients – if we see something unusual in their transactions, for example. Also, internally, we’re working with a lot of different stakeholders – and it comes in handy there, too.” “Our reskilling programme lasts four to six months. Candidates attend the DFC Academy, and they’re given acoach – a buddy – to learn from. So they acquire both thesoft and hard skills they need. We’ve got 14 ‘reskillers’ currently going through the programme. In 2022, we want to increase that to 30. It’s all part of broader workforce planning, so it operates alongside ‘upskilling’ – extending current skills, instead of learning new skills. We still recruit from outside, of course – that way, we get a balance anddiversity within our teams.” “When choosing candidates for reskilling, the most important test by far is motivation –that ‘want-to-learn’ mind-set. It’snot always an easy process. We need managers to bepatient with ‘reskillers’ coming into their teams, who won’t deliver perfect results immediately. It’s also a cultural change – in the way the bank views employees and the wayemployees view themselves. And we need these skills not just in customer experience, but in data and digital andproject management – all areas that will be vital to thebank in the years ahead. For those colleagues involved in reskilling, it opens up fantastic new perspectives and newopportunities to develop their careers.” For the past eighteen months, Ellen Blomberg-Löwenthal has been working intheDetecting Financial Crime (DFC) unit as Lead of the People Attraction andStrategic Workforce Management team. She talks here about how ABNAMRO’s reskilling programme has brought new skills and perspectives to thebank’s efforts to combat money laundering, fraud and other financial crime. Ellen Blomberg-Löwenthal from ABN AMRO “ We have so many talented people at the bank – we need to make full use of that talent.” Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction OtherStrategy, value creation & performance 65 Interview with our ChiefFinancialOfficer Lars, how was your first year as ABN AMRO’s ChiefFinancial Officer? What convinced me to join ABN AMRO was the sense ofdirection. The strategy is very well thought-through. Nearly a year later, nothing has happened to change my mind. In fact, what we’ve been able to achieve has only reinforced that view. We’ve made real progress this pastyear. The wind-down of the non-core activities of Corporate & Institutional Banking has gone much more quickly than expected. We are rolling out new initiatives forclients suchas the Entrepreneur & Enterprise concept inthe Netherlands, Germany and Belgium. And we’ve justannounced a new organisational set-up that truly alignsuswith our clients, giving us a real client focus. How easy was it to make these changes in an economy still overshadowed by Covid-19? Covid-19 has undoubtedly had an impact. For the Netherlands, 2021 got off to a rough start, then things improved in the second and third quarters with the introduction of vaccines – before we were all hit by Omicron. We continued to see government support measures, and those proved very effective. But that, ofcourse, had an impact on demand for corporate loans, particularly among SMEs and mid-sized corporates becausethese companies were able to get Covid-19 financing from the government. In the last quarter, demandpicked up following the economic rebound. Ontheconsumer side, we had a good year in mortgages. There was a lot of transaction volume – and a good part ofthat was refinancing. The competition is tough, but we’relooking togrow our market share in mortgages. Repositioning Moneyou will help in that respect – it means we can pick up more of thatrefinancing. In terms of our overall top line, there is still considerable pressure, also because we’re very dependent on net interest income. How can you combat that topline pressure? Bankslike ABN AMRO have had to live with lowinterest rates for a very long time now. We’re pulling all the levers we can. Hopefully, as we come out of the pandemic, we’ll see some return to normality. Through the TLTRO programme, we were able to offer lower rates to clients. That’s really helped with loan volumes – but more importantly it’s put us in the room when clients start to talk about their financing needs, post-pandemic. We’ve taken other measures, too. At the beginning of 2022 the threshold for charging negative rates has been further lowered to EUR 100,000 per client. And we’re looking to increase income from fees – by growing advisory and introducing new payment packages. Interest rates have started to rise in recent months, which will benefit the bank’s net interest income. However, the positive impact for 2022 is quite limited as these higher rates only slowly 66 ABN AMRO Integrated Annual Report 2021 Interview with our ChiefFinancialOfficer “ We’ve made a lot of progress, but the hard part starts now – mobilising the whole bank to deliver on our strategy and become a performance led organisation.” improve deposit margins. This positive impact will build intime and likely bring forward the moment our quarterly net interest income bottoms out, which we currently expect in the second half of 2023. We are also dependent on howquickly the ECB starts raising its policy rates which would raise short term interest rates. At the same time, the bank is cutting costs. Are you still on course to meet your cost target? We said EUR 5.3 billion in costs for 2021 (excluding settlements and reorganisation charges), and that’s what we’ve achieved. For 2024, our commitment is to bring that down below EUR 4.7 billion. We’re determined to meet that, too. It won’t be easy – a lot of initiatives will have to come together. The wind-down of the non-core activities ofCorporate & Institutional Banking will help, but it’s also about rationalising our product suite, automating more ofour processes, taking out old, inefficient legacy systems and moving onto the cloud – as well as centralising and offshoring where it makes sense to do so. At the same time, we are seeing some inflationary pressures, largely through rising energy prices and supply chain bottlenecks as the economy emerges from Covid-19 but we don’t think these pressures are permanent. In the area of anti-money laundering which accounts for more than 20% of our workforce and around 10% of our cost base, we expect these costs to peak in 2021, and then to start to come down as we finalise remediation and make better use ofAIand new technology. How do you assess ABN AMRO’s capital position? You’ve just announced the Inaugural share buyback. If you look at our capital ratios, we’re in a strong position. TRIM – the European Central Bank’s review of capital models – is pretty much behind us and we’re very well positioned for Basel IV. Last month we announced our first EUR 500 million share buyback programme. We have opted for a gradual release of capital, potentially resulting in multiple buybacks over a period of time rather than a large buyback without follow-up. Going forward, share buybacks will be an integral part of our capital management practice and a tool to optimise our capital position. Over time I expect the amount of capital we hold over and above our target to gradually decrease as we work through regulatory changes and uncertainties are resolved. I trust this framework will lead to more predictable capital distributions. What are the priorities now, for you and the bank, going into 2022? First, 2022 should be a better year for us all than 2021 was-- which, in turn, was a better year than 2020 because we’re learning how to live with Covid-19, certainly in terms of avoiding the kind of lockdowns we’ve seen over the past two years. The economy, though, should start returning tonormal, with interest rates rising. We’ve made a lot ofprogress, but the hard part starts now – mobilising thewhole bank to deliver on our strategy and become aperformance-led organisation. I have to say, from what I’ve seen ABN AMRO definitely has the ability and the people to do that. Over the next few years we’ll have to show how we’re improving service for our clients, how we’re cutting costs, how we’re rationalising our product portfolio. As the CFO, what interests me is whether we’re delivering on our financial targets, particularly whether we’re hitting that 8 to 10 percent return on equity figure. But we won’t be able to achieve that if we don’t deliver onthe strategy. Lars Kramer CFO of ABN AMRO Bank N.V. 67 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction OtherStrategy, value creation & performance Performance / Strategy, value creation &performance Guide for readers This section describes in more detail the financial performance of the Bank and the business lines during the past year, including different breakdown of results and operational highlights. For a complete overview of the financial performance and financial condition of ABN AMRO, see our Annual Financial Statements on pages 261 “ The financial results for 2021 weremarked by the low interest rate environment andlowimpairments.” 68 ABN AMRO Integrated Annual Report 2021 Financial performance Strategy, value creation & performance Performance Financial performance Income statement Financial highlights H ABN AMRO recorded a profit of EUR1,234million in2021 (2020: loss of EUR45million), largely due tolower impairment. H The CIB non-core wind-down is largely completed, withloans down by around 90% since 30 June 2020. H Net interest income decreased to EUR5,210million (2020: EUR5,863million), including the negative impact of incidentals, along with continued pressure on deposit margins and the CIB non-core wind-down. H Net fee and commission income totalled EUR1,664million (2020: EUR1,558million), mainly inPrivate Banking (higher asset management fee income) and CIB core (higher market volatility and capitalmarketfees). H Operating expenses rose to EUR5,806million (2020:EUR5,256million), mainly impacted by theAMLsettlement and the increase in total FTEs tosupport our AML activities. H Impairment charges decreased significantly, with a netrelease of EUR46million (2020: EUR2,303million), mainly reflecting the improved macroeconomic environment. H Very strong capital position, with the CET1 ratio at 16.3% under Basel III and around 16% under Basel IV. H Final 2021 dividend of 0.61 per share proposed and a EUR500million share buyback programme announced in reflection of our commitment to return excess capital to our shareholders. (inmillions) 2021 2020 Change Net interest income 5,210 5,863 -11% Net fee and commission income 1,664 1,558 7% Other operating income 724 494 46% Operating income 7,597 7,916 -4% Personnel expenses 2,324 2,280 2% Other expenses 3,482 2,976 17% Operating expenses 5,806 5,256 10% Operating result 1,791 2,660 -33% Impairment charges on financial instruments -46 2,303 Profit/(loss) before taxation 1,838 356 Income tax expense 604 401 50% Profit/(loss) for the period 1,234 -45 Attributable to: Owners of the parent company 1,231 -45 Non-controlling interests 3 Other indicators Net interest margin (NIM) (in bps) 127 143 Cost/income ratio 76.4% 66.4% Cost of risk (in bps) 1 -7 78 Return on average Equity 2 5.8% -0.8% Dividend per share (in EUR) 3 0.61 Earnings per share (in EUR) 4 1.21 -0.17 Client assets (inbillions) 313.6 289.3 Risk-weighted assets (inbillions) 11 7. 7 110.5 Number of employees (in FTEs) 19,957 19,234 Number of non-employees (in FTEs) 6,524 5,621 1 Annualised impairment charges on loans and advances customers divided by the average loans and advances customers (excluding at fair value through P&L) on the basis of gross carrying amount and excluding fair value adjustments from hedge accounting. 2 Annualised profit for the period excluding coupons attributable to AT1 capital securities and results attributable to non-controlling interests divided by the average equity attributable to the owners of the company excluding AT1 capital securities. 3 Interim/final dividend per share for the relevant period as declared/proposed by the company, subject to approval at the annual general meeting (AGM). For more information, please refer to Capital in the Risk, funding & capital section. 4 Profit for the period excluding coupons attributable to AT1 capital securities and results attributable to non-controlling interests divided by the average outstanding and paid-up ordinary shares. 69 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction OtherStrategy, value creation & performance Performance / Strategy, value creation & performance Large incidentals Additional TLTRO discount The figures for 2021 includeEUR93million for the additional TLTRO discount recorded in net interest income at Group Functions. Now that we have met the benchmark, it can be reasonably expected that an additional discount of 50bps on the borrowing rate will beguaranteed for the period from June 2021 to June 2022. Inaccordance with the day countconvention, thetotal expected discount of EUR177million is split into EUR93million for 2021 and EUR85million for 2022.This benefit is being entirely passed on to our clients Sale and leaseback of head office in Amsterdam In 2021, ABN AMRO completed the sale and leaseback of its head office at the Gustav Mahlerlaan in Amsterdam for a total consideration of EUR765million. Thetransaction resulted in a gain of EUR327million (EUR245million net of tax) inother operating income at Group Functions. Provision for revolving consumer credit with floating interestrates The provision forthe compensation scheme regarding revolving consumer credit withfloating interest rates was recorded in 2021. This relates to the compensation ofclients who paid too much interest on their revolving consumer credit in the past and ABN AMRO’s decision (where possible) to proactively recalculate variable interest charged from 1 January 2001. In Q3 and Q4 2021, a cumulative provision ofEUR 306 million was booked in Retail Banking, consisting of EUR 265 million foran NII provision, EUR50million for handling costs, and a EUR 9 million release oncredit impairments. AML settlement In 2021, ABN AMRO accepted a settlement offer from the Netherlands Public Prosecution Service following the latter’s investigation into the bank’s anti-money laundering (AML) activities in the Netherlands. As part of the settlement, ABN AMRO agreed to pay a fine of EUR300million and a disgorgement of EUR180million. Thetotal amount of EUR480million (not tax deductible) is recorded in other expenses at Group Functions. Provision for repayment The figures for 2021 include a EUR79million net negative impact, of which EUR30million was recorded in net interest income and EUR49million in other operating income, both at Group Functions. This mainly relates to a repayment of German dividend withholding tax credits and accrued interest. The amounts have been repaid in anticipation of a decision by the German tax authorities. Positive revaluation of DSB claim The figures for 2021 include a positive revaluation of EUR26million for the claim onthe DSB bankruptcy estate, which related to the sale of the underlying mortgage portfolio toNIBCand is recorded in net interest income at Group Functions. Thefigures for 2020 included a positive revaluation ofEUR23millionfor the claim, recorded in net interest income at Group Functions. Revaluation of equity stake in Tink The figures for 2021 include a EUR 41 million revaluation gain on ABN AMRO’s equity stake in Tink (via ABN AMRO Ventures), recorded in other operating income atRetail Banking. CIB non-core wind-down The figures for 2021 include a EUR 121 million discount to book value on a loan disposal as part of the wind-down of the CIB non-core portfolio, recorded in other operating income. This related to the sale of a portfolio of energy loans that effectively ended ABNAMRO’s exposure to the oil & gas industry in the USA. The figures for 2020 included a total of EUR160million for one-off costs relating tothewind-down ofthe CIB non-core portfolio, of which EUR103million wasrecorded in personnel expenses and EUR57million in other expenses. Furthermore,aEUR120million write-off for deferred tax assets was recorded inincome tax expense. Adjusted accounting estimates for amortisation of penalty interest on mortgages In 2020, ABNAMRO adjusted its accounting estimate for amortisation of penalty interest on mortgages to reflect client behaviour over the past years. This resulted ina one-off charge of EUR80million, recorded in net interest income at ALM in Group Functions. Sale and leaseback of Paris office In 2020, ABNAMRO completed the sale and leaseback of the Neuflize OBC officebuilding in Paris. The book gain before tax amounted to EUR263million (EUR181million net of tax) and was recognised in other operating income at PrivateBanking. Provision for SME derivatives-related issues The figures for 2020 include a EUR15million release from the provision for client compensation for SME derivatives-related issues, recorded in other operating income (at CIB). Restructuring provisions The figures for 2020 include EUR 11 million net in restructuring provisions, excluding CIB non-core, recorded in personnel expenses, of which EUR 9 million was recorded at Private Banking. Release for discretionary variable remuneration Personnel expenses in 2020 included a EUR22million release for discretionary variable remuneration at CIB. Provision for AML programme Other expenses in 2020 included an addition of EUR44million to the provision forthe AML remediation programme (largely recorded at Group Functions). Goodwill impairment at Private Banking Belgium Other expenses in 2020 included a EUR34million goodwill and intangible impairment atPrivate Banking Belgium. Release relating to tax deductibility of AT1 coupon payments In 2020, following a Dutch court ruling regarding the tax deductibility of AT1 coupon payments, a release of EUR55million was recorded in tax to reflect the relief on AT1coupon payments in 2019 and 2020. 70 ABN AMRO Integrated Annual Report 2021 Analysis ABN AMRO’s full-year profit for 2021 amounted to EUR1,234million, compared with a loss ofEUR45million in 2020. Profits were supported by a net release of impairments, combined with strong net fee and commission income and significantly higher equity participation results, partly offset by the AML settlement (EUR480million). Return on equity in 2021 was 5.8%, compared with anegative 0.8% in 2020. Return on assetsin 2021 was 0.28% (2020: 0.04% negative), mainly due to the higher return in 2021. Net interest incomedecreased by EUR653million to EUR5,210million, compared to EUR5,863million in 2020. Excluding large incidentals, net interest income decreased by EUR534million, mainly due to continued pressure ondeposit margins in a low interest rate environment andto lower average corporate loan volumes following thewind-down of the CIB non-core portfolio. In order torelieve the pressure on deposit margins, ABN AMRO started charging negative rates of interest on client deposits and lowered the negative rate threshold in phases (deposit threshold Q1 2021: EUR500,000; Q3 2021: EUR150,000; Q1 2022: EUR100,000). Net fee and commission incomeincreased to EUR1,664million, which was EUR106million higher thanin 2020. This increase was mainly attributable to higherasset management fee income in Private Banking and the strong performance at Clearing and Global Markets inCIB core. The increase was partly offset by a decrease inCIB non-core in relation to the wind-down. Other operating income amounted to EUR724million in 2021 (2020: EUR494million). The figures for 2021 include again of EUR327million on the sale and leaseback of our head office in Amsterdam, while our 2020 results included a EUR263million book gain on the sale of our office building in Paris. In addition, volatile items (consisting ofequity participation results, CVA/DVA/FVA and hedge accounting-related results) were significantly higher in 2021 (gain of EUR178million versus a loss of EUR4million in 2020). This was partly offset by a EUR121million discount to book value on a loan disposal in the CIB non-core portfolio recorded in 2021. Personnel expenses increased by EUR44million, totalling EUR2,324million in 2021 (2020: EUR2,280million). Excluding large incidentals, personnel expenses rose, mainly due to an increase in FTEs at the bank’s AML activities, combined with overall wage inflation. Other expenses rose by EUR506million to EUR3,482million in 2021 (2020: EUR2,976million), mainly due to the AMLsettlement (EUR480million in Q1 2021) and higher regulatory levies (EUR435million versus EUR368million in2020). Excluding incidentals and regulatory levies, other expenses increased by around EUR50million, largely due to higher non-employee FTEs (2021: 6,524 versus 2020: 5,621), partly to support our AML activities. Impairment releases in 2021 amounted to EUR46million (2020: EUR2,303million addition). Releases were attributable to a more favourableeconomic scenario during the year, partly offset by additions from management overlays. Thecost of risk amounted to -7bps in 2021 (2020: 78bps). Income tax expenses amounted to EUR604million in 2021 (2020: EUR401million). The increase was attributable to higher taxable profit recorded in 2021 compared to the previous year, mainly driven by a significantly lower level of impairment charges and the sale and leaseback of our head office. The effective tax rate in 2021 was 33%, compared with the standard Dutch rate of 25%. This was mainly driven by the AML settlement in Q1 2021, which is not tax deductible. 71 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction OtherStrategy, value creation & performance Performance / Strategy, value creation & performance Balance sheet (in millions) 31 December 2021 31 December 2020 Cash and balances at central banks 66,865 60,190 Financial assets held for trading 1,155 1,315 Derivatives 3,785 6,381 Financial investments 43,165 47,455 Securities financing 16,138 16,725 Loans and advances banks 2,801 3,394 Loans and advances customers 258,251 252,159 Other 6,955 8,005 Total assets 399,113 395,623 Financial liabilities held for trading 687 563 Derivatives 4,344 7,391 Securities financing 9,494 11,363 Due to banks 38,076 36,719 Due to customers 251,218 238,570 Issued debt 59,688 66,949 Subordinated liabilities 7,549 8,069 Other 6,059 5,010 Total liabilities 377,114 374,634 Equity attributable to the owners of the parent company 21,994 20,989 Equity attributable to non-controlling interests 5 Total equity 21,999 20,989 Total liabilities and equity 399,113 395,623 Committed credit facilities 54,642 55,207 Guarantees and other commitments 7,598 8,981 Main developments in assets compared with 31 December 2020 Total assetsincreased by EUR3.5billion, totalling EUR399.1billion at 31 December 2021, mainly driven byhigher cash and balances at central banks, as well asloans and advances customers (mainly at CIB core andCommercial Banking). Cash and balances at central banks rose by EUR6.7billion to EUR66.9billion at 31 December 2021, mainly due to higher outstanding balances at central banks. Loans and advances customersincreased by EUR6.1billion, totalling EUR258.3billion at 31 December 2021. This was largely attributable to an increase in loans to professional counterparties (up EUR7.3billion, mainly at Clearing), partlyoffset by a slight decrease in client loans (down EUR0.4billion). Å Client loans declined by EUR 0.4 billion to EUR235.1billion at 31 December 2021. Corporate loans showed a slight decline owing to the ongoing wind-down of our CIB non-core portfolio (down EUR 8.8 billion), largely offset by an increase at our CIB core business (upEUR 5.8 billion) and Commercial Banking (up EUR2.1billion). Residential mortgages and consumer loans remained broadly stable. (inmillions) 31 December 2021 31 December 2020 Residential mortgages 146,351 145,672 Consumer loans 10,794 11,232 Corporate loans to clients 1 77,965 78,587 - of which Commercial Banking 41,967 39,838 - of which Corporate & Institutional Banking 28,529 31,560 Total client loans 2 235,110 235,491 Loans to professional counterparties and other loans 3 23,605 16,297 Total loans and advances customers 3 258,715 251,788 Fair value adjustments from hedge accounting 1,951 3,838 Less: loan impairment allowance 2,416 3,467 Total loans and advances customers 258,251 252,159 1 Corporate loans excluding loans to professional counterparties. 2 Excluding fair value adjustment from hedge accounting. 3 Loans to professional counterparties and other loans includes loans and advances to governments, official institutions and financial markets parties. 72 ABN AMRO Integrated Annual Report 2021 Main developments in liabilities compared with 31December 2020 Total liabilities increased by EUR 2.5 billion, totalling EUR377.1 billion at 31 December 2021 (2020: EUR374.6billion). The increase was recorded mainly induetocustomers, which was partly offset by lower issued debtsecurities. Due to customersincreased by EUR12.7 billion, totallingEUR251.2 billion at 31 December 2021 (2020: EUR238.6billion). The increase occured in client deposits (mainly at Commercial Banking and CIB core) following excess liquidity in the market, and in professional deposits (largely at Clearing). Issued debt securities decreased by EUR 7.3 billion toEUR59.7 billion at 31 December 2021, mainly due tomatured long-term and short-term funding and lower amounts of newly issued debt (due to our participation inTLTRO III). Issued debt at 31 December 1 Dutch Land Registry (Kadaster) has updated its methodology for determining the market shares as of 2021. Previously published data has been updated. 2021 comprised EUR31.3billion in covered bonds, EUR13.2 billion in senior preferred funding, EUR 6.0 billion in senior non-preferred funding and EUR 9.2 billion in commercial paper and certificates of deposit. A total of EUR6.9 billion in outstanding long-term funding and EUR9.2 billion in outstanding short-term funding will mature within 12 months. Total equitystood at EUR 22.0 billion at31 December 2021 (2020: EUR 21.0 billion). This increase resulted from theinclusion of profit for the period and an increase in accumulated other comprehensive income. In addition, ourfinal 2019 dividend was paid in October 2021. Equity attributable to owners of the parent company, excludingAT1 securities, increased by EUR 1.0 billion toEUR 20.0 billion at 31 December 2021, equivalent to a book value of EUR 21.28 per share based on940,000,001 outstanding shares. (inmillions) 31 December 2021 31 December 2020 Retail Banking 87,284 89,038 Commercial Banking 56,331 52,537 Private Banking 63,333 61,513 Corporate & Institutional Banking 38,088 28,680 Group Functions 6,182 6,802 Total due to customers 251,218 238,570 Financial business performance Retail Banking Financial highlights H Net interest income declined owing to provisioning forthe settlement relating to revolving consumer credit with floating interest rates, and continued pressure on deposit margins. H The market share of new production 1 in residential mortgages improved to 16% in 2021 (2020: 14%). H Net fee and commission income rose to EUR312million (2020: EUR 303 million), reflecting recovery in credit card usage (ICS) and payment service fee income. H Operating expenses were higher than in 2020, totalling EUR2,163million (2020: EUR2,015million), mainly due to higher regulatory levies and costs related to AML activities. The figure for 2021 also includes provisions related to the costs of handling the compensation scheme for revolving consumer credit. H Impairments showed a net release of EUR41million in2021, mainly in stages 1 and 2. 73 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction OtherStrategy, value creation & performance Performance / Strategy, value creation & performance (inmillions) 2021 2020 Change Net interest income 2,032 2,638 -23% Net fee and commission income 312 303 3% Other operating income 128 68 88% Operating income 2,471 3,009 -18% Personnel expenses 416 408 2% Other expenses 1,747 1,606 9% Operating expenses 2,163 2,015 7% Operating result 309 994 -69% Impairment charges on financial instruments -41 77 Profit/(loss) before taxation 350 917 -62% Income tax expense 85 229 -63% Profit/(loss) for the period 265 687 -61% Cost/income ratio 87.5% 67.0% Cost of risk (in bps) 1 -3 4 Other indicators Loans and advances customers (inbillions) 147.7 148.5 - of which Client loans (inbillions) 2) 148.0 148.8 Due to customers (inbillions) 87.3 89.0 Risk-weighted assets (inbillions) 34.2 26.7 Number of employees (in FTEs) 4,518 4,525 Total client assets (inbillions) 99.7 99.7 - of which Cash 87.3 89.0 - of which Securities 12.4 10.6 1 Annualised impairment charges on loans and advances customers divided by the average loans and advances customers (excluding at fair value through P&L) on the basis of gross carrying amount and excluding fair value adjustments from hedge accounting. 2 Gross carrying amount excluding fair value adjustment from hedge accounting. Net interest income declined to EUR2,032million in 2021 (2020: EUR2,638million), mainly due to provisioning for revolving consumer credit, totalling EUR265million in 2021, and continued pressure on deposit margins. Interest income on residential mortgages also decreased. This was driven by lower volumes and margins, resulting from fierce market competition, and by high redemption of mortgages with relatively high margins. Net fee and commission income rose to EUR312million (2020: EUR303million), reflecting recovery in credit card usage (ICS) and payment service fee income. Other operating incometotalled EUR128million in 2021 (2020: EUR68million), reflecting a positive revaluation result on our ventures portfolio, including a EUR41million gain on Tink. Personnel expenses amounted to EUR416million in 2021 (2020: EUR408million), mainly due to the continued expansion of our AML activities. Other expenses increased by EUR141million in 2021 to EUR1,747million. This increase was mainly attributable to the upscaling of AML activities, as well as to higher regulatory levies (EUR224million versus EUR192million in 2020). The figure for 2021 also includes a charge for the cost of handling the compensation scheme for revolving consumer credit (EUR50million). Impairment charges recorded a release of EUR41million in 2021 (2020: EUR77million addition), mainly in stages 1 and 2. Other indicators Loans and advances customers decreased byEUR0.8billion to EUR147.7billion (2020: EUR148.5billion), mainly driven by lower consumer loans in 2021. Total client assets iremained stable at EUR99.7billion in2021. 74 ABN AMRO Integrated Annual Report 2021 Commercial Banking Financial highlights H Net interest income declined 2% to EUR1,442million in 2021, mainly as a result of continued pressure on deposit margins and lower average client loan volumes. Towards the end of the year, however, corporate lending volumes increased notably. H Net fee and commission income was flat; payment service fee income, however, recovered during the second half of the year. H Operating expenses increased, mainly due to costs related to AML activities and higher regulatory levies. H Impairment charges were EUR41million in 2021, compared with EUR542million in 2020. The figure for 2020 included higher individual and model-based impairments, reflecting the impact of Covid-19. H During the year we launched multiple digital initiatives, differentiating our offering and personalising our user experience, including a new set of payment packages (basic to premium) and launching a new digital lending platform (Aymz) to connect Dutch mid-sized companies to institutional investors. (inmillions) 2021 2020 Change Net interest income 1,442 1,471 -2% Net fee and commission income 256 256 0% Other operating income 33 26 24% Operating income 1,730 1,753 -1% Personnel expenses 257 243 6% Other expenses 877 796 10% Operating expenses 1,134 1,039 9% Operating result 596 714 -17% Impairment charges on financial instruments 41 542 -92% Profit/(loss) before taxation 555 173 Income tax expense 150 49 Profit/(loss) for the period 406 124 Cost/income ratio 65.6% 59.3% Cost of risk (in bps) 1 3 128 Other indicators Loans and advances customers (inbillions) 41.4 39.2 - of which Client loans (inbillions) 2 42.6 40.4 Due to customers (inbillions) 56.3 52.5 Risk-weighted assets (inbillions) 29.5 29.2 Number of employees (in FTEs) 2,331 2,197 1 Annualised impairment charges on loans and advances customers divided by the average loans and advances customers (excluding at fair value through P&L) on the basis of gross carrying amount and excluding fair value adjustments from hedge accounting. 2 Gross carrying amount excluding fair value adjustment from hedge accounting. Net interest incomedecreased to EUR1,442million in 2021 (2020: EUR1,471million), mainly as a result of continued pressure on deposit margins and lower average corporate loan volumes. Net fee and commission income remained flat at EUR256million in 2021, with the economic recovery lagging due to Covid-19. Payment service fee income partly recovered during the second half of the year, however. Other operating income was broadly stable at EUR33million in 2021 (2020: EUR26million) and included a few positive one-off items. Personnel expensescame out EUR14million higher, totalling EUR257million in 2021. The increase related mainly to FTEs for regulatory projects and strategic initiatives and, to a lesser extent, to wage inflation. Other expenses increased to EUR877million in 2021 (2020: EUR796million), mainly due to the expansion of AML activities and higher regulatory levies (EUR69million versus EUR56million in 2020). Impairment chargesdecreased significantly to EUR41million in 2021 (down from EUR542million in 2020), mainly due to model-based releases and limited individual additions during the year. In 2020, high individual stage 3 impairments (attributable mainly to the food, shipping, and industrial goods & services sectors) were recorded. 75 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction OtherStrategy, value creation & performance Performance / Strategy, value creation & performance Private Banking Financial highlights H Net interest income remained stable. This was despite continued pressure on deposit margins, which was mitigated by negative interest rates being charged on client deposits. H Net fee and commission income increased to EUR602million, up 20% from 2020. The increase was attributable mainly to favourable stock market developments resulting in an increase in asset management fee income and a higher client asset base. H Other operating income was lower at EUR39million, compared with EUR286million in 2020. Operating income in 2020 included aEUR263million book gain on the sale of the Neuflize OBC office building in Paris thatyear. H Operating expenses were slightly higher in 2021, mainly due to costs related to strategic initiatives and AML activities, which were partly offset by lower large incidentals. ESG client asset increased toEUR43.1billion, from EUR26.2billion in 2020. (inmillions) 2021 2020 Change Net interest income 634 637 0% Net fee and commission income 602 502 20% Other operating income 39 286 -86% Operating income 1,275 1,425 -11% Personnel expenses 391 371 5% Other expenses 562 574 -2% Operating expenses 953 945 1% Operating result 322 480 -33% Impairment charges on financial instruments -6 26 Profit/(loss) before taxation 328 454 -28% Income tax expense 94 151 -38% Profit/(loss) for the period 234 303 -23% Cost/income ratio 74.8% 66.3% Cost of risk (in bps) 1 -5 19 Gross margin on client assets (in bps) 63 79 Other indicators Loans and advances customers (inbillions) 15.9 14.6 - of which Client loans (inbillions) 2 16.0 14.7 Due to customers (inbillions) 63.3 61.5 Risk-weighted assets (inbillions) 10.6 10.3 Number of employees (in FTEs) 2,886 2,848 Total client assets (inbillions) 213.9 189.6 - of which Cash 63.3 61.7 - of which Securities 150.6 127.9 1 Annualised impairment charges on loans and advances customers divided by the average loans and advances customers (excluding at fair value through P&L) on the basis of gross carrying amount and excluding fair value adjustments from hedge accounting. 2 Gross carrying amount excluding fair value adjustment from hedge accounting. Net interest incomewas broadly stable at EUR634million in 2021 (2020: EUR637million), despite continued pressure on deposit margins, which was mitigated to a large extent by negative rates being charged on client deposits. We also lowered the threshold at which negative rates apply from EUR500,000 in Q1 2021 to EUR150,000 in Q3 2021, andthen to EUR100,000 in Q1 2022. Net fee and commission income increased significantly toEUR602million (2020: EUR502million), attributable mainly to higher asset management fee income resulting from a higher client asset base and favourable stock market developments. Other operating incomeamounted to EUR39million in2021 (2020: EUR286million), largely because 2020 included a EUR263million book gain on the sale of theNeuflize OBC office building in Paris. Other indicators Loans and advances customers increased by EUR2.2billion to EUR41.4billion in 2021 (2020: EUR39.2billion), mainly reflecting a growth in client loans in the real estate sector. 76 ABN AMRO Integrated Annual Report 2021 Personnel expenses increased to EUR391million in 2021 (2020: EUR371million), mainly due to an increase in FTEs for strategic initiatives. Other expenses decreased to EUR562million in 2021 (2020: EUR574million). Expenses in 2020 included a one-off impairment charge of EUR34million. Excluding incidentals, other expenses increased due to the upscaling of AML activities. Impairment showed a net release of EUR6million in 2021 (compared with a charge of EUR26million in 2020), mainly as a result of model-based provision releases. 1 Credit Valuation Adjustment/Debt Valuation Adjustment/Funding Valuation Adjustment(CVA/DVA/FVA). Due to customersincreased by EUR1.8billion to EUR63.3billion in 2021 (2020: EUR61.5billion), mainly inthe Netherlands. (inbillions) 31 December 2021 31 December 2020 Opening balance client assets 189.6 195.2 Net new assets 1.5 -8.6 Market performance 16.9 -3.0 Divestments/acquisitions 6.0 6.0 Closing balance client assets 213.9 189.6 Breakdown by type Cash 63.3 61.7 Securities 150.6 127.9 - of which Custody 37.2 28.1 Breakdown by geography The Netherlands 58% 58% Rest of Europe 42% 42% Corporate & Institutional Banking Financial highlights H Net interest income was lower than in 2020, driven mainly by progress with the non-core wind-down andpartly offset by a rise in activity at Clearing. H Net fee and commission income decreased by 3%, reflecting a solid performance at CIB core, mainly in Clearing and Global Markets, largely offsetting a decline at CIB non-core due to the wind-down. H Other operating income in 2021 included significantly higher results from our private equity participations and CVA/DVA/FVA 1 than in 2020, partly offset by a discount to book value on loan disp osals as part of the wind-down. H Operating expenses declined by EUR88million to EUR1,123million; expenses in 2020 included a EUR160million provision for the wind-down of non-core. H Impairment showed a net release of EUR37million in2021. This represented a turnaround compared to thecharge of EUR1,659million recorded in 2020 andwhich primarily comprised stage 3 additions for (non-core) TCF clients. H An inaugural senior social bond issued for a UK building society, as well as an inaugural sustainability-linked derivative coupled to a sustainability-linked loan. Other indicators Client assets rose by EUR24.3billion to EUR213.9billion in2021 (2020: EUR189.6billion), largely due to a positive stock market performance andan inflow of net new assets. Å Net new assetstotalled EUR1.5billion (compared with a net outflow in 2020 of EUR 8.6 billion), mainly driven by a significant cash inflow throughout the year. 77 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction OtherStrategy, value creation & performance Performance / Strategy, value creation & performance (inmillions) 2021 2020 Change Net interest income 903 1,123 -20% Net fee and commission income 515 529 -3% Other operating income 163 32 Operating income 1,581 1,683 -6% Personnel expenses 430 484 -11% Other expenses 693 727 -5% Operating expenses 1,123 1,211 -7% Operating result 458 472 -3% Impairment charges on financial instruments -37 1,659 Profit/(loss) before taxation 495 -1,187 Income tax expense 117 5 Profit/(loss) for the period 378 -1,192 Cost/income ratio 71.0% 71.9% Cost of risk (in bps) 1 -27 250 Other indicators Loans and advances customers (inbillions) 50.6 45.3 - of which Client loans (inbillions) 2 28.6 31.6 Due to customers (inbillions) 38.1 28.7 Risk-weighted assets (inbillions) 39.5 39.5 Number of employees (in FTEs) 2,298 2,480 1 Annualised impairment charges on loans and advances customers divided by the average loans and advances customers (excluding at fair value through P&L) on the basis of gross carrying amount and excluding fair value adjustments from hedge accounting. 2 Gross carrying amount excluding fair value adjustment from hedge accounting. Net interest income declined to EUR903million in 2021 (2020: EUR1,123million) due to lower income at CIB non-core as a result of lower corporate loan volumes following the wind-down (since 30 June 2020, we have reduced our loan book by around 90%). Meanwhile net interest income at CIB core increased. Net fee and commission incomedecreased to EUR515million in 2021 (2020: EUR529million). At CIB core, net fee and commission income increased by EUR42million, driven mainly by Clearing (due to higher market volatility) and Global Markets (stronger capital market fees). This increase was offset by a decline at CIBnon-core due to the wind-down. Other operating income increased by EUR131million to EUR163million in 2021 (2020: EUR32million). The increase was mainly due to a favourable result from private equity participations (EUR92million versus EUR55million negative in 2020) and higher CVA/DVA/FVA (EUR46million versus EUR8million negative in 2020). This was partly offset by the discount on the book value of loan disposals as part of the wind-down. Personnel expenses declinedby EUR54million to EUR430million in 2021 (2020: EUR484million). Expenses in 2020 included a one-off provision for the CIB non-core wind-down and discretionary variable remuneration. Thiswas partly offset by higher expenses at CIB core due to an increase in FTEs and overall wage inflation. Other expenses decreased by EUR34million to EUR693million in 2021, compared with EUR727million in2020. The latter included a one-off provision relating to the CIB non-core wind-down. The decrease in 2021 was partly offset by higher costs related to AML activities and strategic initiatives, as well as higher levies (EUR109million versus EUR89million in 2020). Impairment charges recorded a net release of EUR37million in 2021 (2020: EUR1,659million addition). The charge for 2020 primarily comprised stage 3 additions for (non-core) TCF clients, mainly in the energy sector. Other indicators Loans and advances customers increased by EUR5.3billion to EUR50.6billion in 2021 (2020: EUR45.3billion), mainly at Clearing. This more than offsetthe decrease in client loans. Å Client loans decreased by EUR3.0billion to EUR28.6billion in 2021 (2020: EUR31.6billion), largely because of lower loan volumes at CIB non- core. At the same time, our core business reported an increase in client loans during the year to EUR26.6billion. Due to customers increased by EUR9.4billion to EUR38.1billion (2020: EUR28.7billion) due to higher client deposits resulting from excess liquidity as an effect of Covid-19, and to higher professional deposits. 78 ABN AMRO Integrated Annual Report 2021 Group Functions Financial highlights H Net interest income increased significantly, mainly as a result of the additional TLTRO discount of EUR93million and higher mortgage prepayment penalties. In addition, 2020 included a one-off charge of EUR80million for adjusted accounting estimates relating to mortgage penalty interest amortisation. H Other operating income rose to EUR362million, largelydue to the sale and leaseback of our head office in Amsterdam, partly offset by lower hedge accounting- related results. H Operating expenses were higher in 2021, largely because of the AML settlement of EUR480million. H ABN AMRO continued to make progress on its remediation programmes. By the end of 2021, around 5,100 FTEs (approximately 20% of total FTEs) had been committed toAML activities and centralised in Group Functions. (inmillions) 2021 2020 Change Net interest income 198 -6 Net fee and commission income -21 -31 32% Other operating income 362 82 Operating income 539 45 Personnel expenses 831 774 7% Other expenses -398 -727 45% Operating expenses 433 47 Operating result 106 -1 Impairment charges on financial instruments -3 -1 Profit/(loss) before taxation 109 -1 Income tax expense 158 -33 Profit/(loss) for the period -49 33 Other indicators Securities financing - assets (inbillions) 10.5 11. 4 Loans and advances customers (inbillions) 2.7 4.7 Securities financing - liabilities (inbillions) 9.5 11. 0 Due to customers (inbillions) 6.2 6.8 Risk-weighted assets (inbillions) 4.0 4.7 Number of employees (in FTEs) 7,922 7,184 Net interest incomeincreased to EUR198million in 2021 (compared with a loss of EUR6millionin 2020), excluding large incidentals. This increase was due mainlyto an additional TLTRO discount (EUR93million) and higher mortgage prepayment penalties. Net fee and commission income showed a loss ofEUR21million in 2021 (2020: EUR31million negative), resulting from lower fees paid to securities financing. Other operating income amounted to EUR362million in2021 (2020: EUR82million), including a gain of EUR327millionon the sale and leaseback of the Amsterdam head office. This was partly offset by lower hedging accounting-related income (EUR40million in 2021, compared with EUR59million in 2020) and a charge ofEUR49million regarding the repayment of German dividend withholding tax credits and accrued interest. Theamounts repaid to the German tax authorities have been repaid in anticipation of a decision. Personnel expenses increased by EUR57million to EUR831million in 2021, mainly due to the upscaling of AML activities and the resultant increase in FTEs and, toalesser extent, to wage inflation. Other expensesincreased to EUR398million negative in2021 (2020: EUR727million negative), including the AMLsettlement of EUR480million. 79 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction OtherStrategy, value creation & performance Performance / Strategy, value creation & performance Another year dominated by Covid-19 has made it abundantly clear that we need to collaborate. Going into 2022, the world is now better prepared and has demonstrated resilience. The economic outlook remains uncertain despite society moving to a post- pandemic situation, but we expect economies to grow. At the same time, challenges such as climate change and social inequality have intensified. Economic and business environment We expect the Dutch economy to continue its post- Covid-19 recovery in 2022. ABN AMRO Group Economics expects the economy to grow by 3.0%, slower than in 2021, butwell above the economy’s long-term growth trend. Theeurozone economy shows a similar trend, with growth expected to slow to 3.7% in 2022. The economic recovery, in both the Netherlands and the eurozone, remains vulnerable, not least because of supply chain pressures. New lockdowns or a further tightening of restrictions, similar to those imposed in the Netherlands in December and January, may slow the recovery going forward. The labour market is currently very tight. Unemployment stood at 3.8% in December. Given that there is little to no slack in the Dutch labour market and in combination with unfavourable demographics, the withdrawal of government support measures in 2022 will only lead to a small increase in unemployment in 2022. Further restructuring may be seen in sectors affected by the pandemic, including hospitality, retail, and transport. Strong worldwide demand, coupled with rising energy prices (particularly natural gas), has caused inflation to rise in the Netherlands. These temporary factors will also drive inflation in the first half of 2022. Group Economics expects the inflationary pressures to ease mid-2022, as energy price inflation will run out of steam and supply side issues will fade since the impact of the pandemic and corresponding restrictions is expected to wane. There is no immediate prospect of an increase in short-term interest rates. Long-term rates are set to rise slightly due tospillover effects from rising treasuries resulting from anormalisation of monetary policy in the United States. For ABN AMRO, low interest rates will continue to put pressure on deposit margins. As the government will withdraw its support schemes in the course of 2022, bank lending to the corporate sector should steadily improve. Theeconomy, however, still has abundant liquidity after several years of central bank intervention. We expect house prices in the Netherlands to continue rising. Market fundamentals remain broadly unchanged, with tight housing supply and low interest rates driving demand for mortgages. Our forecast is for a further price rise of 12.5% in 2022, following a 15% increase in 2021. The housing market shows signs of overheating, but as thedrop in mortgage rates has ended the market is set toease off. Society and climate change Climate change is likely to remain centre stage, following theCOP26 conference in Glasgow in November 2021. Governments are under pressure to take further action to limit global warming to 1.5 degrees Celsius. Across Europe, governments are stressing the importance of a green recovery. We expect continued strong demand for sustainability financing in 2022. New regulations will help support this demand. During the year, the EU will continue the roll-out of its taxonomy for sustainable activities. It is also expected to issue further guidance to accompany SFDR. Society’s expectations of ABN AMRO will remain high. Post-Covid, there is increased scrutiny of the bank’s approach to social issues like diversity and equality. In the labour market, we are seeing continued skills shortages across Europe. These shortages are most noticeable in areas such as data analytics and digital marketing. Even after the pandemic, we do not expect a return to former working practices. Hybrid working will require continued adjustment – from both an operational and a cultural point of view. Outlook 80 ABN AMRO Integrated Annual Report 2021 Note on availability of resources and inputs Our business relies on certain resources being available: access to adequate financial capital, forexample, or to skilled labour. Changes in our operating environment may affect the availability of these resources. We see the main risks asfollows: Å Shortages of key skills in data and digital technologies (human capital); Å Change risk associated with the bank’s neworganisational structure and wind-down of Corporate & Institutional Banking core activities (intellectual capital); Å Slowdown in the economic recovery as aresult ofworsening supply chain issues orre-imposition of Covid-19 restrictions (financial capital); Å Continued pressure on deposit margins, resultingfrom low interest rates (financial capital); Å Risk of significant data loss from cyber attacks, particularly given the increase inonline banking during the pandemic (intellectual capital). Bank performance As we begin to emerge from the pandemic going into 2022, the economy has proven flexible. We will continue toexecute on our strategy in becoming a personal bank in the digital age. We will continue to invest in digital banking, improve customer experience, reduce costs and simplify our operating model. We will also continue the shift to digital banking for our clients and scale up sustainable financing. By the end of 2024, we want to increase thepercentage of sustainable acceleration asset volume toatleast 36%. Based on the interest rates current economic outlook attheend of 2021 we expect pressure on net interest income, mainly from continued low interest rates and margin pressure across all business lines, to bottom out bythe second half of 2023. To address this, we are looking to increase income from fees and commissions and continuing to grow in our strategic focus areas. We remain focused on cost discipline and continue to execute on our well-substantiated cost saving plans, mostlyfrom further product and process optimisation. Weexpect our cost base to start declining during 2022, also as AML costs have peaked in 2021. Our strategic costsavings programmes will broadly offset cost increases from inflation and other cost increases. We remain firmlyontrack to drive our cost below EUR4.7 billion by 2024. We have adjusted our through-the-cycle cost-of-risk guidance to around 20bps, mainly driven by the de-risking of our balance sheet from the wind-down of CIB non-core andthetightened riskappetite. We announced a EUR 500 million share buy-back in February 2022, which we plan to complete by June 2022. Our intention is to use similar share buy-backs in future tooptimise our capital position. Overall, our capital position remains strong. Outlook 81 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction OtherStrategy, value creation & performance Performance / Strategy, value creation & performance Guide for readers This chapter provides an oversight of bank’srisk management and performance andexamines what risks we face as abank–andhow we manage our risk andcapitalrequirements. 82 ABN AMRO Integrated Annual Report 2021 Risk, funding & capital Risk, funding & capital This chapter provides an oversight of bank’s risk management andperformanceandexamines what risks we face as a bank – and how wemanageourrisk and capital requirements. Tanja Cuppen, ChiefRiskOfficer “Less and less energy will now go into de-risking and more into building and growing the bank in the areas we’ve identified as part of the strategy – in Northwest Europe, among SMEs, and in the mortgage business. To say we’re de-risking doesn’t mean we’re not taking any risks. A bank is all about taking risks to support the economy and help clients develop their businesses.” Read more Interview with ourChiefRisk Officer 84 Introduction 86 About risk, funding & capital 87 Key risk developments 88 Risk management 92 Risk framework 93 Credit risk management 100 Credit risk review 109 Market risk in the trading book 138 Market risk in the banking book 141 Operational (non-financial) risk 144 Funding & liquidity 148 Capital 155 Business risk 163 Sustainability risk 165 Management Control Statement 180 Additional risk, funding & capitaldisclosures 186 83 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Interview with ourChiefRisk Officer Over the past year, ABN AMRO has addressed some important risk areas, not least at Corporate & Institutional Banking. How successful has the bank been in that? I’d say it’s been a very good year in terms of de-risking. The wind-down of non-core activities in Corporate & Institutional Banking has taken some of the volatility out of our risk costs. At the same time, we completed the anti-money laundering (AML) investigation. We also reached agreement with the Dutch Consumers’ Association on compensation for revolving consumer credit. These files had a long history. The AML settlement, in particular, was an important moment. We’ve made progress on the execution of our remediation programme, but the remediation is requiring more effort andweexpect that the remediation will continue in 2023. Theactivities, however, are here to stay. It’s part of our day- to-day business, and needs to be if we’re to retain trust and our long-term licence to operate. Unfortunately, criminals will continue to try using the banking system for fraud, financial crime and drugs money. So we have to be vigilant and to play that vital role of gatekeeper. Has the wind-down at Corporate & Institutional Banking gone much faster than originally expected? It has – the team there has done a great job. We had a lot ofinterest in the assets we were selling, partly because there’s so much liquidity around in the markets, and so theprocess has actually been more capital-accretive than we had anticipated. Most of the wind-down has now been completed. What we have left – maybe 10% – we’re comfortable with. Any non-performing loans there may beare very well provisioned. Is this phase of de-risking for the bank now over? We’re certainly approaching the end of it. So, less and less energy will now go into de-risking and more into building and growing the bank in the areas we’ve identified as part of the strategy – in Northwest Europe, among SMEs, and inthe mortgage business. To say we’re de-risking doesn’t mean we’re not taking any risks. A bank is all about taking risks to support the economy and help clients develop their businesses. But I feel that our risk profile is now pretty much where we’d like it to be. That’s why we’ve recently been able to lower our cost-of-risk outlook. At the same time, a lot of the uncertainty on capital requirements has gone. The Targeted Review of Internal Models (TRIM) is complete and, you’ll notice, our main capital ratios mean we’ve been able to bring the bank largely into line with thenew rules under Basel IV. 84 ABN AMRO Integrated Annual Report 2021 Interview with ourChiefRisk Officer “ I feel that our risk profile is now pretty much where we’d like it to be. That’s why we’ve recently been able to lower our cost-of-risk outlook” What about the outlook for the corporate sector, particularly when the government withdraws thefinancial support it’s been providing during thepandemic? Certainly, Covid-19 has been with us throughout 2021, and for much longer than we’d hoped. Some sectors have been hit very hard, but others have been able to cope well with the pandemic. We see the same trend among our own clients. The government has also stepped in with support for those sectors worst affected. Of course, these are real people and real businesses who’ve suffered during the pandemic. Even so, they represent only a small part of the overall economy. Most of our clients are not at all dependent on government support. So we’re not expecting any kind ofcliff-edge when that support is withdrawn. If you look at our credit risk profile, we’ve had to make a few additional provisions, but we’ve also had provision releases, and these have more or less offset each other. This strong credit quality means,for 2021, that our cost of risk was just below zero. Overall, the economy has actually proved fairly resilient despite Covid-19. Going into next year, in terms of risk, we’ve got higher inflation, which could mean higher interest rates at the longer end. Inevitably, higher rates will impact on companies and their ability to invest. How do you view the current boom in house prices in the Netherlands. Is the market becoming overheated? House prices have been continuing to rise, but the outlook is still positive. One of the factors behind this is really the shortage of houses in the Netherlands. That’s putting upward pressure on prices. It’s always possible there will be a correction. It is not the most likely scenario, although we obviously consider that possibility, and what it would mean for our mortgage portfolio. It’s our job to look at all scenarios and to be prepared for them, even those we think aren’t most likely. What about climate risk? How well integrated is thisinto your risk management and modelling? It’s still a work in progress. In terms of our models, we have to think through the effects of climate change, sector by sector, company by company, and look at where a transition to achieve carbon neutrality or a lower carbon footprint is needed. We also have to consider how we can work with clients to finance that transition. And that brings us back tocredit risk. There will be an EU-wide climate stress test in2022, which will be very useful in helping banks like ABNAMRO to think through the implications. In many respects, this begins with data from companies we’re lending to. And getting data that is reliable and consistent, which is not always the case right now. In credit risk management, we have a common language, and this is a language we’ve had for years. But in sustainability, that common language is still indevelopment. What helps, however, is that sustainability isa key part of our purpose and strategy, and we have appropriate policies in place. In the case of higher-risk clients we already carry out additional assessments. What we need to do now is to take that approach up a notch and start looking at risk across our portfolios, and not just at thehigher-risk areas. This is going to be a gradual process; it’snot going to happen overnight. We have decided to set up an Executive Board Sustainability Committee to oversee our approach, both to risks and opportunities, and so are focusing strongly on this at the highest level in the bank. As Chief Risk Officer, one of your prioritiesgoing into2022 is climate change. But presumably that won’t be the only one? Of course we have to prepare for climate change; the climate won’t wait for us. That’s why we’re focusing on transition sectors as part of our growth strategy, and specifically on energy, mobility and digital. AML also remains an important topic: we’re committing a lot of resources to that. Cyber security, too, is very important. We appreciate the growing risk that cyber attacks and data loss represent for our clients, whether they’re corporations or individuals, and we need tohelp these clients to become more resilient and so less vulnerable. Neither of these topics – AML or cyber security – are going to disappear any time soon. At the same time, it’s important to keep focusing on our risk culture; in other words, on ensuring a continuous focus on risks within the bank. That’s something we pay a lot of attention to because risks change and evolve over time, and new risks emerge – and we have to be ready for that. Tanja Cuppen CRO of ABN AMRO Bank N.V. 85 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Interview with ourChiefRisk Officer / Risk, funding & capital Interview with ourChiefRisk Officer Introduction 86 ABN AMRO Integrated Annual Report 2021 This section provides an introduction to the Risk, funding & capital chapter. Asthischapter of the Integrated Annual Report contains information based on EUIFRS as well as CRD V/CRR2, this section provides more information ondifferences in scope and consolidation. Regulatory requirements The Risk, funding & capital chapter presents the disclosures required under the Dutch Financial Supervision Act (Wet opfinancieel toezicht – Wft), title 9 book 2 of the Dutch CivilCode and EU IFRS. ABNAMRO also embraces the Enhanced Disclosure Task Force (EDTF) principles and recommendations. For non-financial disclosures required under the Dutch Decree on non-financial disclosures, ABNAMRO follows the guidance of the Task Force on Climate-related Financial disclosures (TCFD) and the Non-Financial Reporting Directive (NFRD), including its guidelines. Certain disclosures in the Risk, funding & capital chapter are an integral part of the Consolidated Annual Financial Statements (AFS) and contain audited information. The audited parts concern risk disclosures of financial instruments (IFRS 7) and capital disclosures (IAS 1). Auditedinformation in these sections is labelled as ‘Audited’ in the respective headings. Risk exposure measurement and scope differences Risk measures vary according to the purpose for which theexposure is calculated: EU IFRS or the determination ofregulatory or economic capital (CRD V/CRR2). EU IFRS reporting scope The objective of the financial statements is to provide financial information about the bank that is useful to theprimary users of the financial statements in making decisions. Financial information is useful when it is relevantand reliably represents what it purports to represent. Financial statements provide information aboutthe financial position of the bank and the effects oftransactions and other events that change the bank’s financial position. The consolidation scope of ABNAMRO isdetermined in accordance with IFRS 10 Consolidated Financial Statements. More information can be found inNote 1 Accounting policies in the Consolidated Annual Financial Statements. Regulatory reporting scope The objective of regulatory reporting is to take a credit risk view on the bank’s portfolio and to ensure that the bank maintains sufficient capital buffers for unexpected losses and sufficient liquidity buffers. The scope of consolidation for the purpose of calculating regulatory and economic capital (based on the CRD V and CRR2) is generally the same as the consolidation scope under EU IFRS and includes subsidiaries that are directly or indirectly controlled by ABNAMRO and active in the banking and financial sectors. Subsidiaries consolidated under EU IFRS but activein sectors other than banking and finance are excluded from the regulatory scope of consolidation. About risk, funding & capital 87 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital About risk, funding & capital / Introduction / Risk, funding & capital Key risk developments Key figures (inmillions) 31 December 2021 31 December 2020 Total loans and advances, gross excluding fair value adjustments 1 261,421 254,781 - of which Banks 2,811 3,399 - of which Residential mortgages 146,351 145,672 - of which Consumer loans 10,794 11,232 - of which Corporate loans 1 86,458 86,745 - of which Other loans and advances customers 1 15,007 7,733 On-balance sheet maximum exposure to credit risk 396,077 392,038 Total Exposure at Default (EAD) 417,214 407,354 - of which Retail Banking 163,222 163,948 - of which Commercial Banking 50,910 48,029 - of which Private Banking 20,521 18,942 - of which Corporate & Institutional Banking 74,262 63,984 - of which Group Functions 108,298 112,450 Credit quality indicators 1 Forbearance ratio 4.3% 5.1% Past due ratio 0.8% 1.0% Stage 3 ratio 2.6% 3.4% Stage 3 coverage ratio 28.3% 32.7% Cost of risk (in bps) 2 -7 78 Regulatory capital Total RWA 117,693 110,481 - of which Credit risk 3) 99,976 92,462 - of which Operational risk 16,049 16,685 - of which Market risk 1,668 1,334 Total RWA/total EAD 28.2% 27.1% Liquidity and funding indicators Loan-to-Deposit ratio 103% 106% LCR 4 168% 149% NSFR >100% >100% Capital ratios Fully-loaded CET1 ratio 16.3% 17.7% MREL 27.9% 27.4% Fully-loaded leverage ratio (incl. central bank exposure) 5.0% 5.0% 1 Excluding loans and advances measured at fair value through P&L. 2 Annualised impairment charges on loans and advances customers for the period divided by the average loans and advances customers on the basis of gross carrying amount and excluding fairvalue adjustment from hedge accounting. 3 RWA for credit value adjustment (CVA) is included in credit risk. CVA per 31 December 2021 is EUR0.2billion (31 December 2020 EUR0.2billion). 4 Consolidated LCR based on a 12-month rolling average. 88 ABN AMRO Integrated Annual Report 2021 Key risk figures per business segment 31 December 2021 (inmillions) Retail Banking Commercial Banking Private Banking Corporate & Institutional Banking Group Functions Total Total assets 149,466 43,807 18,392 69,282 118,165 399,113 Total Exposure at Default 163,222 50,910 20,521 74,262 108,298 417,214 RWA Credit risk 1 26,584 26,908 8,611 35,198 2,676 99,976 Operational risk 7,591 2,548 1,939 2,615 1,356 16,049 Market risk 2 1,666 1,668 Total RWA 34,175 29,456 10,552 39,479 4,031 117,693 Total RWA/Total Exposure at Default 20.9% 57.9% 51.4% 53.2% 3.7% 28.2% Economic capital Credit risk 2,487 3,226 1,027 3,753 690 11,182 Operational risk 995 335 255 344 177 2,105 Market risk 108 3,259 3,367 Business risk 241 204 254 333 1,032 Other risk types 2 217 46 183 56 849 1,352 Economic capital 3,939 3,811 1,719 4,595 4,975 19,039 2021 Average risk exposure amount 27,946 28,580 10,085 39,479 4,263 110,354 Cost of risk (in bps) 3 -3 3 -5 -27 -7 1 RWA for credit value adjustment (CVA) is included in credit risk. CVA per 31 December 2021 is EUR0.2billion (31 December 2020 EUR0.2billion). 2 Other risk types include own funding spread risk, equity risk and property risk. 3 Annualised impairment charges on loans and advances customers for the period divided by the average loans and advances customers on the basis of gross carrying amount and excluding fair value adjustment from hedge accounting. 31 December 2020 (inmillions) Retail Banking Commercial Banking Private Banking Corporate & Institutional Banking Group Functions Total Total assets 150,477 41,477 17,199 62,525 123,946 395,623 Total Exposure at Default 163,948 48,029 18,942 63,984 112,450 407,354 RWA Credit risk 1 21,109 25,606 7,771 34,523 3,453 92,462 Operational risk 5,591 3,622 2,529 3,688 1,254 16,685 Market risk 1,334 1,334 Total RWA 26,700 29,228 10,300 39,545 4,707 110,481 Total RWA/Total Exposure at Default 16.3% 60.9% 54.4% 61.8% 4.2% 27.1% Economic capital Credit risk 1,908 2,554 722 3,492 1,031 9,707 Operational risk 643 422 296 430 157 1,947 Market risk 58 3,462 3,520 Business risk 321 452 260 300 1,333 Other risk types 2 238 53 176 55 2,003 2,525 Economic capital 3,109 3,482 1,454 4,334 6,652 19,031 2020 Average risk exposure amount 27,617 30,223 10,285 39,587 4,368 112,081 Cost of risk (in bps) 3 4 128 19 250 78 1 RWA for credit value adjustment (CVA) is included in credit risk. CVA per 31 December 2021 is EUR0.2billion (31 December 2020 EUR0.2billion). 2 Other risk types include own funding spread risk, equity risk and property risk. 3 Annualised impairment charges on loans and advances customers for the period divided by the average loans and advances customers on the basis of gross carrying amount and excluding fair value adjustment from hedge accounting. 89 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Key risk developments / Introduction / Risk, funding & capital Loans and advances In 2021, total loans and advances rose to EUR261.4billion at 31 December 2021 (31 December 2020: 254.8billion), predominantly because of other loans and advances and, to a lesser extent, residential mortgages. This increase was partly offset by modest declines in loans and advances to banks, consumer loans and corporate loans. Higher collateral and default fund contributions for Clearing clients were the main contributor to the increase in other loans and advances. The CIB non-core portfolio was reduced to EUR2.0billion at 31 December 2021 (31 December 2020: EUR11.0billion) and consisted mainly of clients in the oil and gas, industrial goods and services, and basic resources sectors in the Netherlands, USA and Asia. Exposure at Default Exposure at Default (EAD) increased to EUR417.2billion (31December 2020: EUR407.4billion), mainly due to business developments in Clearing, as well as in Commercial Banking, due to new client lending in the context of TLTRO. In addition, EAD increased as a result of an update in the EAD model for corporate loans and the implementation of the standardised approach for counterparty credit risk in Global Markets. This increase was partly offset by a decline in cash and balances at central banks. Credit quality indicators The credit quality indicators improved modestly in 2021. During the year, the forbearance ratiogradually improved to 4.3% at 31 December 2021 (31 December 2020: 5.1%). This was mainly related to the CIB non-core wind-down and was reflected in lower forborne corporate loans for clients in the USA, Asia and the Rest of the world, and in the oil and gas and industrial goods and servicessectors. The amount of total forborne assets is still considerable, especially in the case of residential mortgages and corporate loans, as a result of the high inflow in 2020 due to Covid-19 and developments in the oil price. Compared to December 2020, the past due ratio for loans and advances improved from 1.0% to 0.8%. Total arrears declined by EUR0.5billion to EUR2.1billion, particularly on the back of benign economic conditions such as low unemployment and relatively stable household earnings. The stage 3 ratio also improved in 2021, predominantly as a result of the further reduction in the CIB non-core loan book, including the sale of the Trade & Commodity Finance portfolio and the North American oil and gas portfolio in the first six months of 2021. Risk-weighted assets Total RWA rose to EUR 117.7 billion (31 December 2020: EUR 110.5 billion), predominantly driven by credit risk RWA. The increase in credit risk RWA was mainly caused by model changes (including regulatory add-ons) and by newmethodology and policy, predominantly in relation tothe impact of the DNB mortgage floor. This increase waspartlyoffset by lower business volumes as a result of the CIB non-core wind-down. Operational risk RWA slightly decreased, mainly due to the removal of a regulatory capital add-on relating to an ECB finding on the model validation process. Market risk RWA increased due to increases in SVaR and IRC, partly offset by a decrease in VaR resulting from position changes. 110,000 100,000 90,000 80,000 70,000 31 December 2020 Business volume Model changes Methodology and policy Asset quality Other 31 December 2021 -5,309 -1,653 -4,097 99,976 9,489 9,084 92,462 RWA flow statement credit risk (in millions) Economic capital Economic capital (EC) slightly increased to EUR19.1billion (31 December 2020: EUR19.0billion), mainly reflecting a decrease in own funding spread risk (EUR1.2billion) and business risk EC (EUR0.3billion) and higher credit risk EC (EUR1.5billion). The decrease in own funding spread risk EC was driven by model changes related to the size of the assumed shock to funding spread and the loss horizon. The decrease in business risk EC was mainly attributable to model changes and the removal of model risk add-ons. Credit risk EC increased, mainly due to credit model changes and add-ons mirrored by regulatory capital, partly offset by the CIB non-core wind-down. Operational risk EC increased slightly owing to re-assessed scenarios. 90 ABN AMRO Integrated Annual Report 2021 Liquidity and funding indicators The Loan-to- Deposit (LtD) ratio decreased to 103% at 31December 2021 (31 December 2020: 106%) as due tocustomers increased by more than loans and advances customers. The increase in due to customers reflected increased client savings in response to the Covid-19 pandemic and the related lockdowns. The liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR) both remained above 100% throughout 2021. Capital ratios At 31 December 2021, the Basel III Common Equity Tier 1 (CET1) decreased to 16.3% (31 December 2020: 17.7%) due to an increase in RWA and a decrease in CET1 capital. The latter was driven by the settlement payment of EUR480million following the investigation into ABNAMRO’s compliance with its obligations under the Dutch Anti-Money Laundering (AML) and Counter Terrorism Financing Act, by deductions for the announced share buyback programme and by a further increase in capital deductions fornon-performing exposures (NPE), which were only partly offset by the net profit for 2021. The leverage ratio (excluding the impact of the temporary exemption of central bank reserves) remained stable at 5.0% (31 December 2020: 5.0%), while MREL improved to 27.9% (31 December 2020: 27.4%), mainly due to issuances of senior non-preferred instruments. 91 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Key risk developments / Introduction / Risk, funding & capital Risk management 92 ABN AMRO Integrated Annual Report 2021 Risk framework ABNAMRO is committed to being a well-capitalised andsufficiently liquid bank that focuses on delivering sustainable value to all of its stakeholders. We maintain asound balance between risk and reward and pursue a bank-wide moderate risk profile as part of our long-term strategy. We thoroughly evaluate the long-term risk andreturn implications of our operations on an ongoing basis. Covid-19-related challenges continue to keep the management focus on the risk framework. For more information on the impact of Covid-19 on the bank’s riskprofile, please refer to Update on Covid-19 in the Creditrisk review section. Risk taxonomy b Our risk taxonomy classifies the bank’s risks into risk types to which the bank is or could be exposed to. The risk taxonomy ensures that all identified material risks are defined and are taken into account in the risk governance framework. It creates a common risk vocabulary, provides achecklist of risk types that are used in risk assessments, and helps to ensure that all material risks are managed andthat roles and responsibilities are identified and defined. Risk taxonomy describes how materiality assessment is performed both in terms of financial and non-financial impact. Financial impact is assessed based on capital or net profit impact. Non-financial impact is determined in line with our value creation model and along the lines of the Net Promoter Score (NPS) and the Dow Jones Sustainability Index. Risk taxonomy is reviewed and updated on an annual basis, or sooner if any new material risk types emerge and require an update. The main risk types we recognise are credit risk, market risk in the banking book, market risk in the trading book, liquidity risk, business risk and operational non-financial risk, each of which includes various sub-risk types. Risk appetite statements are set for both the main and sub-risk types. The main risk types cover all possible events that would have a direct impact on the value of the bank. This includes its financial value, but also its ‘goodwill’, i.e. the value of thebank’s reputation. Risk taxonomy b External causal factors Politics, (macro)economy, society, technology, environmental, social and governance (ESG), legislation, regulation Enterprise risk Credit risk Default risk Migration risk Collateral quality risk Country risk Sovereign risk Counterparty credit risk Settlement risk Pre-settlement risk Concentration risk Funding liquidity risk Own funding spread risk Market liquidity risk Liquidity risk Strategic equity investments risk Sustainability risk Business risk HR risk Information risk Change risk Legal risk Compliance risk Tax risk Model risk Behavioural risk Fraud risk Data & processing risk Operational (non-financial) risk Value of the bank Internal causal factors People, processes, systems, balance sheet, products, clients, reputation and behaviour Market risk trading book Interest rate risk FX risk Equity risk Credit spread risk Market risk banking book Interest rate risk Credit spread risk Foreign exchange risk Reputational Financial Topics described in this section: H Risk taxonomy H Risk appetite H Risk profile assessment H Risk culture H Risk governance H Risk measurement 93 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Risk framework / Risk management / Risk, funding & capital Risk appetite b The risk appetite determines the level of risk that the bank is willing to take in order to pursue its strategy. As such, the bank-wide risk appetite, which safeguards a moderate risk profile, is an integral part of our corporate strategy. It is regularly evaluated and updated to ensure continuous alignment with the strategy. Risk appetite framework b Risk Strategy Strategic Risk Appetite Statement Risk Indicator Framework (Containing BRAS, BLRAS, LRAS, ERAS, linked to the risk taxonomy) The Strategic Risk Appetite Statement expresses ABNAMRO’s strategy of pursuing a moderate risk profile and cascades into the risk indicator framework at various levels of the organisation, allowing the bank to manage risks at every appropriate level: bank-wide (BRAS), business line (BLRAS), local (LRAS) and entity level (ERAS). The Strategic Risk Appetite Statement is approved by the Supervisory Board. Senior management monitors the bank’s activities, based on the risk appetite. The status of adherence to the risk appetite and the outlook are discussed monthly by the Executive Board and quarterly by the Supervisory Board, based on the Enterprise Risk Management report. The elements of our Strategic Risk Appetite Statement ensure a coherent balance between return and value creation, supported by our client-centric business model, capital, and liquidity and funding management, while being underlined by our conduct, governance and control framework as shown in the following figure. Strategic Risk Appetite Statement b Business model Sustainable return & value creation Liquidity & Funding Capital C o n d u c t , g o v e r n a n c e & c o n t r o l f r a m e w o r k The risk indicator framework consists of statements set for each main and sub-risk type presented in the risk taxonomy. Each statement consists of one or more quantitative and/ or qualitative indicators, referred to as key risk indicators (KRIs). For every KRI, a limit and checkpoint is set, against which the actual risk profile is monitored. If a KRI limit is breached, action is required to bring our risk profile back within the limit. Early warning checkpoints are in place to allow for timely action to prevent breaches and/or to have astrategic discussion. Examples of KRIs in our risk appetite include: H Regulatory and internal capital ratios; H Risk-adjusted return measures; H Concentration limits for single counterparties, sectors and countries; H Economic capital and risk-weighted asset limits for various risk types; H Liquidity ratios (LtD, LCR, NSFR); H Market risk parameters (NII-at-Risk); H Operational/non-financial risk parameters (effectiveness of internal control environment); H Reputational parameters (NPS, employee engagement score). When setting the statements in the Strategic Risk Appetite Statement and the statements for each risk type in the risk indicator framework, the following aspects are considered: the corporate strategy, market standards (such as peer analyses), the economic environment, regulations, the views of our stakeholders and the actual risk profile, aswell as internal insights and risk management tools. Inaddition to incorporating these views, balancing these aspects provides 94 ABN AMRO Integrated Annual Report 2021 us with the means to substantiate risk statements for each risk type. Risk profile assessment ABNAMRO periodically assesses its risk profile in conjunction with the bank’s risk appetite. The main conclusions of this assessment are summarised below and relate to business model, capital position, non-financial risks and balance sheet composition. Client-centric business model and sustainable return and value creation ABNAMRO targets growth, with a focus on clients and sustainability, within the boundaries of our moderate risk profile in order to achieve a healthy long-term, risk-adjusted return. At the 2021 year-end, the bank’s risk profile improved, as reflected in a lower cost of risk and a considerably smaller non-core book compared to the previous year. A number of external factors have the potential to affect the bank’s current business model. The Executive Board has identified these external factors in the Management Control Statement (MCS). Capital, liquidity & funding Comfortable buffers are in place to meet capital and liquidity requirements from a regulatory and internal (i.e. economic capital) perspective. In addition, stress testing indicates that sufficient buffers are in place for times of stress. Conduct, governance and control framework Capital buffers are also in place to cover non-financial risks. In managing these risks, we face challenges regarding our ability to fully comply with all regulatory requirements. Specific areas where the risk of non-compliance with regulations requires an ongoing and substantial effort are identified and described in the MCS at the end of this chapter. Remediation programmes – related to Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF), Duty of Care and Credit Risk Management and aimed at improving ABNAMRO’s performance – were well underway in 2021. These programmes have reduced shortcomings and aim to ensure full compliance with legislation. Balance sheet composition ABNAMRO is mainly active in the Dutch market and in international operations with a focus on Northwest Europe, where we have specific expertise and hold leading positions in selected activities. Liabilities & equity Assets Demand deposits Other due to customers Due to banks Securities financing Derivatives Long-term & subordinated debt Short-term debt Equity Other liabilities Residential mortgages Other loans and advances customers Loans and advances banks Securities financing Derivatives Financial investments Other assets 37 28 1 4 1 11 18 25 2 10 1 15 38 2 6 1 Balance sheet composition at 31 December 2021 (in %) The balance sheet composition reflects the bank’s moderate risk profile. The characteristics that limit risk in the balance sheet include: H Loan portfolio matched by deposits, long-term debt and equity; H Strong focus on collateralised lending; H Reducing concentration on single client exposure; H Limited market risk and trading portfolios; H CET1 ratio well above the regulatory requirements soasto achieve Basel IV compliance early in the phase- in period; H Stable and diversified funding structure reflecting the composition of our loan book; H Sufficient liquidity buffers to survive six months of severe stress. Risk culture Strengthening our culture in the areas of risk, compliance and integrity was an important objective of ABNAMRO’s strategy review. We place strong emphasis on sound riskcontrol in our remuneration policies, which are in line with our risk profile. More details are provided in the Remuneration report section in the Leadership & governance chapter. ABN AMRO expects its employees to understand the needfor and to be able and willing to have a continuous focus on risk, compliance and integrity as an integral part ofthe bank-wide culture. Pursuing a moderate risk profile isembedded in our culture by means of continuous communication, awareness, education and training, and isguided by performance management and management KPIs that help underpin our belief that mitigating risks is everybody’s responsibility. 95 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Risk framework / Risk management / Risk, funding & capital Code of Conduct Employees are expected to adhere to ABNAMRO’s cultureprinciples and to act in accordance with the bank’s Code of Conduct, which sets out standards of behaviour. These principles are fundamental to everything we do and describe how we act as a bank, how we make decisions and how we deal with various dilemmas and, as such, are a permanent part of our education tool. The Code of Conduct is published on our website and we are intensifying our monitoring of compliance with it. In addition, our employees are required to confirm their adherence to the Code of Conduct annually. Risk governance b The Executive Board and Supervisory Board of ABNAMRO define the governance arrangements designed to ensure effective and prudent management of the bank and oversee their implementation. They are accountable for setting, approving and overseeing the implementation of the bank’s risk management framework, including: H An adequate and effective internal governance and control framework. This includes a clear organisational structure and well-functioning independent internal control functions (Risk Management, Compliance andGroup Audit) that have sufficient authority, stature and resources to perform their functions; H The three lines of defence model at all levels of the bank; H A risk culture that addresses risk awareness and risk- taking behaviour in the bank; H Key policies of the bank within the applicable legal and regulatory framework; H The bank’s overall strategy, risk strategy and risk appetite; H The amounts, types and distribution of internal capital and regulatory capital that are required to ensure that the risks the Bank is exposed to are adequately covered; H Targets for the bank’s liquidity and funding management. The Risk Management organisation operates under the direct responsibility of the Chief Risk Officer, who is a member of the Executive Board. To further strengthen its strategy execution and serve clients as a personal bank in the digital age, ABNAMROBank N.V. simplified its top management structure as at24 November 2021 by discontinuing theExecutive Committee (ExCo) and extending the composition of the Executive Board (ExBo). This change will give clients representation at the level of the bank’s highest management body. Executive risk committees The Executive Board is responsible for setting, monitoring and reviewing the Bank’s purpose, strategy, risk appetite and risk framework. The Executive Board makes a balanced assessment of the bank’s commercial interests and the risks to be taken within the boundaries of the risk appetite. In the risk decision-making framework, the Executive Board is supported by three executive risk committees: the Group Risk Committee, the Group Central Credit Committee and the Group Regulatory Committee, each of which is chaired by the Chief Risk Officer. The mandates of the executive risk committees are summarised below. Group Risk Committee The Group Risk Committee (GRC) is mandated by the Executive Board to monitor, assess and manage the bank’s risk profile within the approved risk appetite. The GRC monitors and approves all material risks as defined in the bank’s risk taxonomy. The GRC has delegated specific approval powers to sub-committees, including Business Risk Committees for the bank’s main business lines, the Financial Crime Risk Committee, the Methodology Acceptance Group, the Scenario and Stress Testing Committee, and the Impairment and Provisioning Committee. Group Central Credit Committee The Group Central Credit Committee (CCC) is mandated by the Executive Board to make decisions on the acceptance of credit and counterparty risk in respect of individual persons, legal persons and public administrative bodies relating to credit proposals falling within the scope of the risk appetite and limits determined by the Executive Board. In addition, the CCC is also responsible for approving and monitoring large intercompany credit facilities. Group Regulatory Committee The Group Regulatory Committee is mandated by the Executive Board to ensure a good understanding and adequate overview, making choices and taking decisions on matters relating to timely regulatory compliance to new and changing national and international legislation and regulations affecting the bank. For further information on governance, please refer to the Leadership and governance chapter. Three lines of defence The three lines of defence model aims to clarify the relationship between risk takers and the different internal control functions, and provides clarity for all employees within the bank with regard to their risk management responsibilities. The three lines of defence model must be applied across all risk types and covers the whole organisation, including the client-facing business lines, functions, the Risk Management organisation, outsourced activities and distribution channels. H The first line of defence consists of management within each business or function who must own and is responsible for managing the risks they incur in conducting their activities and for the design and execution of effective and efficient controls. 96 ABN AMRO Integrated Annual Report 2021 H The second line of defence consists of dedicated departments in the Risk Management organisation who are responsible for setting the risk management framework within which the first line must operate. These dedicated departments are headed by risk typeowners. H The third line of defence consists of Group Audit, which evaluates the effectiveness of the governance, risk management and control processes, in order to strengthen management’s solution focus and accountability. Group Audit has a coordinating role towards the external auditor and the supervisor. Three lines of defence b Risk Ownership Risk Control & Oversight Risk Assurance Responsible for Setting the risk management framework and policies Monitoring, reporting and escalating Providing expertise and challenge to 1st line Ensuring 1st line takes risk ownership Responsible for Evaluating the design and effectiveness of governance, risk management and control processes Discussing with management on remediation and monitoring follow-up 1st Line of Defence Business lines and functions 2nd Line of Defence Risk Management 3rd Line of Defence Group Audit 1 2 3 Responsible for Delivering value-added services to clients Identifying and assessing, measuring, mitigating, monitoring and reporting the risks that it incurs Operating within risk appetite Acting in accordance with policies Risk measurement 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 to measure 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 will occur and the loss the bank may suffer as a consequence of that event. This information serves as the basis for ABNAMRO’s internal measures of risk (economic capital) and as key input for calculating the minimum regulatory capital requirements according to the Basel framework (regulatory capital). New models require approval before being implemented and used. Internal approval for the use (or continued use) of a model is obtained from the Methodology Acceptance Group (MAG), a sub-committee of the Group Risk Committee. If required, external approval is obtained from the supervisor. Supervisory approval is always required for new models andmodels that change materially due to redevelopment. The modelling departments develop models in close cooperation with the relevant business and risk experts. Forimportant models, model review takes place every 3years, or earlier if there is a marked deterioration in performance of the model or a marked change in the risk profile of the portfolio that the model relates to. A model review includes back-testing against historical data and, where relevant, benchmarking the calibration of the models with external studies or data. The independent model risk management department validates internal models. The model risk management framework, which includes model validation standards and procedures, ensures that models are validated independently. Model data, methodology, performance and implementation are checked according to these standards and reviewed against internal and regulatory requirements. 97 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Risk framework / Risk management / Risk, funding & capital Capital measurement Regulatory capital (CRD V/CRR2) b Under the Basel framework as implemented in European legislation (CRD V and CRR2), banks are required to hold capital to cover for financial risks. As an intermediate step in determining the minimum level of capital, banks need to calculate risk-weighted assets (RWA) for three major risk types (credit, operational and market risk). The outcome of the internal models serve as input for this calculation. The capital requirements are stated as a percentage of RWA. Under Pillar 1, banks are required to hold a regulatory fixed percentage of RWA in capital. Under Pillar 2, supervisors impose a bank-specific percentage of RWA in addition to the Pillar 1 requirement. Economic capital For Pillar 2, we calculate economic capital (EC) in addition to regulatory required capital. Economic capital covers all risk types in our risk taxonomy for which capital is deemed to be the mitigating instrument to cover unexpected losses, and is used as the key metric for internal risk measurement and management. It 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. Internal models are used to calculate EC at 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 inonly 0.05% of all possible cases. The confidence level isaligned with the definition of total available financial resources (total AFR). In addition, the ratio of core AFR versus EC is monitored. Core AFR is the amount of capital that is available to cover losses on a continuity-based approach (i.e. excluding AT1, Tier 2 and senior non-preferred instruments). EC is aggregated for all risk types (without applying inter-risk diversification) to determine the total EC at a bank level and to support capital adequacy assessment, capital allocation, ex-post performance measurement and risk appetite setting, such as industry concentration risk limits. EC quality assessment The EC models described above form the core of the Internal Capital Adequacy Assessment Process (ICAAP). Inorder to monitor and secure the quality of the EC framework and its outcome in terms of capital adequacy, anEC Quality Assessment (ECQA) is performed annually aspart of the ICAAP. For each main risk type, the calculated EC figure is evaluated in terms of risk coverage and responsiveness to internal and external developments such as in the areas of regulation and data quality. If considered necessary, an additional capital buffer (‘EC add-on’) is taken to cover any identified shortfalls in the EC. Capital performance RWA and EC are also used to evaluate capital performance at a business level, as well as 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. Both ex-ante and ex-post performance are evaluated in terms of risk-adjusted return on equity (RAROE) with a risk-adjusted return on risk-adjusted capital (RARORAC) limit to safeguard sufficient risk-sensitivity. ECis used as an ingredient in RARORAC, whereas RWA isused in RAROE. Stress testing and scenario analysis b ABNAMRO uses stress testing and scenario analysis asanimportant risk management instrument, looking atprofitability, capital and liquidity from a bank-wide perspective in various scenarios on a regular basis. The stress testing framework covers both internal as well as external stress test requirements. In addition, sub-portfolio and risk type specific stress testing and scenario analysis are performed. Stress testing purposes ABNAMRO applies stress testing and scenario analyses forseveral purposes, including: H Business planning: various macroeconomic scenarios forbudget purposes; H Capital planning: stress testing is used to gain insight into the resilience of our capital under adverse changes in the economic environment and ABNAMRO specific circumstances; H Risk appetite setting and monitoring: the outcome of stress testing is used for setting and monitoring risk appetite limits and targets, including limits under stress; H Contingency planning: stress testing is used to assess and strengthen the triggers and measures in the liquidity and capital contingency and recovery plans. Reverse stress testing is performed to gain deeper insight into plausible events that could put the continuity of ABNAMRO under pressure; H Risk type specific and business line stress testing, such as market risk trading and banking book and mortgage stress testing; H Supervisory stress testing, based on prescribed scenarios and assumptions. This includes the EBA’s stress test programme designed to assess banks’ resilience to adverse economic or financial developments, and ECB economy-wide climate stress test aimed at evaluating the impact of alternative climate scenarios on the resilience of the bank over a time horizon of 30 years inthe future. 98 ABN AMRO Integrated Annual Report 2021 The figure below shows the stress testing and scenario analysis cycle. The stress testing and scenario analysis cycle starts with the identification of material risks for ABNAMRO and individual business lines. Both systemic risks (e.g. macroeconomic risks) and ABNAMRO specific risks (e.g. cyber attacks or adverse outcomes of legal proceedings) are considered. Scenario projections are based on quantitative models, as well as expert opinion procedures. In general, results are presented excluding and including potential mitigating actions, taking into account contingency plans. The stress testing framework also comprises the sensitivity scenarios that address various severe events on specific portfolios, countries and/or sectors, as well as the annual reverse stress test in line with regulatory requirements. Moreover, climate related risks are also covered through theinclusion of events related both to transition and physical risks. In 2021, we developed a process and governance approach to incorporate climate risk scenario analysis into the bank-wide stress testing and scenario framework. This was applied in the execution of the scenario analysis in four priority portfolios: residential real estate, commercial real estate, energy and shipping. ABNAMRO aims to use the outcomes of these scenario analyses as input for strategic decision-making at a bank and business line level and forrisk management purposes (e.g. risk appetite setting). Thefour analyses in the priority sectors are therefore beingused as pilots to evaluate how to structurally integrate this approach into the bank-wide and business linestrategy and risk management processes. Given the importance of stress testing in terms of sound risk management, the Executive Board (previously the Executive Committee) is involved throughout the process and its governance. The Executive Board, together with the Scenario & Stress Test Committee (SSC, a sub-committee of the Group Risk Committee), discusses and decides on the scenario selection, the results and the implications. Risk identification Management action Stress testing & scenario analysis Scenario & scope selection Data sourcing, models and methodologies Simulation & impact analysis on ABN AMRO C o n d u c t , g o v e r n a n c e & c o n t r o l f r a m e w o r k Stress test & scenario analysis cycle Audited 99 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Risk framework / Risk management / Risk, funding & capital Credit risk management Credit risk is the risk that the value and/or the earnings ofthe bank decline due to uncertainty in a counterparty’s ability or willingness to repay a loan or meet the terms ofacontractual obligation. Credit risk management within the bank is governed by thebank-wide central credit risk policy and further detailed in underlying specific credit risk policies and standards, which are aligned with the bank’s strategy. Credit risk management is the responsibility of the first and second lines of defence. The primary responsibility for intake, managing and monitoring credit risk lies with the business as the first line of defence. The second line of defence has a permanent and ongoing responsibility to define the boundaries and monitor whether the type and level of credit risk exposures are within the limits of the bank’s and business lines’ risk appetite. The first and second lines of defence are subject to review by Group Audit (third line of defence). Credit risk management approach b ABNAMRO employs two separate approaches to managing credit risk, which reflect the bank’s way of doing business. Standardised products and processes are managed on a pooled basis (programme lending), to which uniform risk criteria are assigned. For customised lending to counterparties (non-programme lending), risks are assessed on an individual basis. The following figure presents a simplified overview of the credit risk management process. Credit risk management process b Non-programme lending Customised loans, mostly Private Banking, Commercial Banking and Corporate & Institutional Banking Credit decision based on credit score and policy rules Account maintenance Loan disbursement Default prevention Risk assessment by business line Credit risk monitoring Business and risk control functions jointly responsible Analysis and credit decision by credit risk function Restructuring and Recovery High-risk monitoring Loan disbursement Regular monitoring 1 Intensive monitoring (‘Watch’) 2 Restructuring Restructuring Recovery Recovery Increased risk Programme lending Standardised loans, mostly Retail Banking Continual update of risk governance, management and policies Processes reflect guidelines for credit risk management For programme lending, Product-specific standards are established Credit acceptance Loan approval and disbursement 1 Daily monitoring or (semi-) annual credit review. 2 ‘Watch’: status assigned to counterparties with an increased risk. For more insight on our credit portfolio, please refer to the Credit risk review section. This section contains information on: H Credit risk management approach H Counterparty credit risk H Credit concentration risk H Credit risk quality and impairment H Credit risk measurement H Credit risk mitigation 100 ABN AMRO Integrated Annual Report 2021 Planning Within programme lending, the credit cycle starts with a product planning phase, during which the product is designed and/or reviewed. The goal is to optimise the key drivers of risk and return within the context of ABNAMRO’s strategy, risk appetite, the client’s best interests and sustainability. For non-programme lending, the lending product is customised and not subject to a product planning phase. Credit acceptance For a credit approval decision within programme lending, client-specific aspects and internal and external data are taken into consideration to calculate a credit score (scorecard). The credit decision is based on the outcome ofthe scorecard and policy rules. Within non-programme lending, the credit acceptance phase of a credit proposal starts with an assessment of the proposal by the relevant business line. The qualitative and quantitative details of the credit risk associated with the loan are assessed prior to approval. Information must be provided on matters such as the purpose, details and structure of the proposed credit facility, the borrower and other counterparties, the industry and geography, management and owners, and financial and non-financial analyses. Compliance with internal policies is checked. Afterthe assessment, an analysis is performed by Risk Management. The credit decision is based on independent assessments by both the commercial and the credit riskfunctions. Environmental, social and governance factors Within both programme and non-programme lending, ABNAMRO is taking steps to incorporate ESG factors and associated risks into its credit acceptance process for both programme lending and non-programme lending. In 2021, we performed various activities to gain deeper insight into how climate risk influences our customers. This included defining transmission channels for four strategically important portfolios. Transmission channels are the causal chains through which climate factors represent financial risks to ABNAMRO by directly influencing our counterparties and the assets they hold. The insights gained from defining these transmission channels will be used to adjust the credit lifecycle elements and thus integrate climate risk intothe credit acceptance. In addition, an implementation plan was developed to comply with regulatory expectations for climate risk management. This plan includes establishing a process for climate scenario analysis consistent with the bank’s stress testing and scenario analysis framework and repeating and improving scenario analyses for the four priority portfoliosidentified. The results of these scenario analyses can be found in the Sustainability risk section. Credit risk monitoring Consistent and regular monitoring of counterparties, exposures, risk mitigants and ongoing compliance with internal policies helps to safeguard the bank’s position in relation to all risks associated with the counterparty, credit type or portfolio. Monitoring starts when the credit facility is granted and continues throughout the lifecycle of the credit facility and the relationship with the counterparty untilthe exposure is repaid and/or the limit is cancelled. If a situation arises in which an individual counterparty shows signs of credit risk deterioration, which requires action to avoid that the credit risk evolves to a default classification, a ‘watch’ status is assigned. A ‘watch’ status indicates that a counterparty is subject to increased monitoring and appropriate follow-up measures in order toprevent further deterioration or a default. Indicators for this status are changes in risk profile, liquidity problems, management issues, the market outlook, a potential breach of a credit agreement, solvency issues and uncertain continuity. Restructuring & Recovery Credit facilities that are subject to a default event are mandatorily transferred to the Financial Restructuring & Recovery department (FR&R). Credit facilities identified ashaving a significantly high risk can be transferred to FR&R ifspecialised restructuring knowledge is required. Ifa‘going concern’ approach is applicable and return to aperforming status is considered likely, the credit facility istransferred to the Restructuring team, which will devise aplan aimed either at rehabilitation or at enhancing thelikelihood of full repayment. In all other cases, thecreditfacility is transferred to the Recovery team. Programme lending contracts are transferred to the Restructuring team if a default status is assigned because payments have been past due for more than 90 days or because another default trigger applies. If restructuring isultimately ineffective, the client is transferred to other internal departments or external parties (such as Flanderijn) for debt collection. Once a client is considered able to meet its future payment obligations and the involvement of FR&R is no longer required, the client is transferred back to the business line. FR&R plays a significant role in the execution of the bank’s non-performing exposure (NPE) strategy. Policies on the management of NPE include valuation of collateral, monitoring of the non-performing loan (NPL) ratio and ensuring this ratio remains well below the threshold of 5%. We have set NPE targets for each business segment andspecific strategies for sectors with increased levels ofnon-performing loans. 101 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Credit risk management / Risk management / Risk, funding & capital Counterparty credit risk Counterparty credit risk (CCR) refers to the risk that thecounterparty to a transaction defaults before final settlement of the transaction’s cash flows. In line with theregulatory definition of CCR, ABNAMRO incurs counterparty credit risk in two business activities, firstly through over-the-counter (OTC) derivatives and securities financing transactions with other financial institutions (including positions taken to manage our interest rate hedging and liquidity position) and secondly in the business of ABNAMRO Clearing. These two main sources of CCR are managed separately and are subject to various different features of risk management. Credit concentration risk b Credit concentration risk is the risk of loss arising from large exposures, relative to the bank’s total risk exposure, to a single counterparty or to counterparties that are positively and highly correlated. As limiting excessive concentrations is fundamental to our credit risk strategy, we aim to keep the credit risk portfolio sufficiently granular and diversified.To avoid excessive credit risk concentrations,Risk Management sets maximum levels forsubgroupsin the following categories: H Single counterparty and groups of related counterparties (counterparty concentration); H Countries (geographic concentration); H Industries (industry concentration); H Products (product 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 One Obligor Exposure (OOE) is the exposure to a risk group and includes all drawn and undrawn credit facilities granted, plus all indirect exposure to the risk group, including guarantees and any other recourse claims. A risk group is an interrelated group of counterparties witha high degree of dependency on each other due toacontrol relationship. This control relationship may bedue to direct or indirect majority interests being held bythesame shareholder or group of shareholders. Counterparty credit concentration risk is measured by theOOE and the Economic Capital (EC) per counterparty. The bank limits its counterparty credit risk by setting OOE and EC limits. Additionally, all credit applications with an OOE and/or EC above a certain threshold are reviewed bythe Executive Board. Geographic concentration ABNAMRO has branches and subsidiaries located outsidethe Netherlands, as well as clients who operate internationally. Consequently the bank is exposed to country risk, which is the risk of credit losses arising fromcountry-specific events or circumstances. Under the new strategy for CIB announced in Q2 2020, geographical concentration continues to be relevant because we maintain a presence in multiple countries. Management of country risk focuses on cross-border risk, which includes the risk that funds, goods or services cannot be transferred out of a country as a result of actions by local authorities in that country or other events. These risks are managed by setting country credit limits, based on individual country analyses by economic, compliance and country riskexperts. Country limits are reviewed at least once a year. Each country also has an internal credit rating, which is reviewed and approved twice a year and is an important factor in managing country concentration risks. As the Netherlands is our home country, it is not included in any concentration risk appetite statement or setting of credit limits. Industry concentration Industry concentration risk is the risk of loss arising from arelatively large credit exposure to counterparties active ina single industry. Industry concentration risk arises when deterioration in a specific industry has an effect on all credit exposures relating to that industry. ABNAMRO manages its industry concentrations by setting limits on economic capital (EC) for credit risk for each industry as a percentage of total EC for credit risk. In addition to the EC limits, EC concentration checkpoints are set to facilitate timely and sufficient management interventions so as to avoid limits being breached. Product concentration Product concentration risk is the risk of loss arising from relatively large credit exposures in a specific asset or product class. This asset or product class concentration occurs e.g. in bridge loans, leveraged loans, project finance, subordinated debt. In line with our risk appetite, ceilings are defined per product type and breaches of these concentration ceilings are managed through credit risk insurance. Credit risk quality and impairment b We continuously monitor the credit portfolio for signs indicating that the counterparty may become credit impaired in the future. Loans at risk are classified into different risk categories for individual counterparties andinto days-in-arrears buckets for groups of aggregated counterparties in order to optimise the monitoring and review of these loans. 102 ABN AMRO Integrated Annual Report 2021 Forbearance Forbearance is the process of making concessions to clients who are or will soon be experiencing financial difficulty (such as Covid-19-impacted clients), with the intention of bringing them back within their payment capacity. A forborne asset is any contract that has been entered into with a counterparty who is in or about to face financial difficulty, and that has been refinanced or modified on terms and conditions that we would not have accepted if the counterparty had been financially healthy. Performing Cure ≥ 1 year Probation period ≥ 2 year Cease to be forborne Defaulted forbearance clients remain defaulted for at least a year Forbearance measure End cure period End forbearance period Non-forborne Performing Forborne Non-forborne PerformingNon-performing Forbearance measures can be applied to contracts on which the counterparty has already defaulted, as well as to contracts that are still performing. If the contract is considered performing at the time the forbearance measure is taken, an assessment is made to determine whether the measure is likely to end in default. A forborne contract will cease to qualify as forborne only when all the following conditions are met: H The contract is considered performing; H A minimum probation period of at least two years has passed since the last forbearance measure and/or the date the forborne contract was considered performing (whichever is later); H Regular and timely payments of more than an insignificant amount of principal or interest have been made during at least half of the probation period; H The counterparty does not have any contract, within thecredit agreement, that is more than 30 days past dueat the end of the probation period. If the forborne contract is or has become non-performing atthe time of the forbearance measure, a mandatory cureperiod of at least one year applies to the contract before it is returned to performing status. The cure period starts when the contract becomes non-performing or, ifthecontract was already non-performing, when the lastforbearance measure was taken. In 2021, the definitions of non-performing and default werealigned. Contracts that are forborne non-performing are classified as default. Past due credit exposures A financial asset is past due if a counterparty fails to make a payment on the contractual due date or if the counterparty has exceeded an agreed credit limit. ABNAMRO starts counting days past due from the first day that a counterparty is past due on any financial obligation. Accounting policy for measuring allowances forcredit losses The IFRS 9 impairment requirements are applicable to financial assets measured at amortised cost or fair value through other comprehensive income (FVOCI), loan commitments and financial guarantee contracts. At each reporting date, these financial instruments are classified into four risk stages, depending on current credit quality. ABNAMRO recognises loss allowances based on the Expected Credit Loss model (ECL) of IFRS 9, which is designed to be forward-looking. Where necessary, management judgement is applied via a management overlay to reflect the credit risk dynamics not captured byour models. A management overlay is a temporary adjustment in a loss allowance until a long-term solution (e.g. model adjustment) is effective, and must be an amount commensurate to the model limitation. All overlays require a decision of the Impairment and Provision Committee (IPC). The main types of management overlays that ABNAMRO distinguishes are: in-model adjustments (adjustments to model parameters), post-model adjustments (adjustments to model outcomes), input data adjustments, adjustments in the weightings of macroeconomic scenarios and stage overrides. 103 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Credit risk management / Risk management / Risk, funding & capital Purchased or originated credit-impaired (POCI) assets, which are credit-impaired at initial recognition, are accounted for at fair value (i.e. net of the initial lifetime ECLs) and do not carry an impairment allowance. Instead,acredit-adjusted effective interest rate (EIR), whichis calculated using expected cash flows including initial lifetime ECLs, is applied to the amortised cost. Subsequently, the cumulative changes in lifetime ECLs since initial recognition, which are discounted at the credit-adjusted effective interest rate, are recognised intheprofit or loss statement as an impairment gain orloss, and presented under Impairment charges on financial instruments. Once a financial asset is classified as POCI, itretains that classification until it is derecognised (in the event that a substantial modification loss larger than 10% isapplicable). For this reason, POCIstage is not included inthe following figure. Classification in stage 2 We use quantitative and qualitative stage triggers to determine whether a financial instrument should be classified as stage 1 or stage 2. Quantitative stage triggers The key quantitative metric that determines when a financial instrument is transferred from stage 1 to stage 2 is the deterioration in the lifetime probability of default (LPD) from the date of origination to the reporting date, based on internal data. The LPD represents the likelihood that a counterparty will default during the lifetime of the financial instrument and depends on credit risk drivers such as: H Product characteristics (e.g. repayment and interest terms, term of the product); H The financial condition of the borrower; H The number of days past due; H Expected developments in the economy. The lifetime PD deterioration (LPDD) measures the relative difference between the remaining lifetime PD atreporting (LPDR) and the remaining lifetime PD at origination (LPDO) as LPDD = LPDR/LPDO. If the LPD deterioration of an exposure is above a predefined threshold, the LPD is considered to be significantly deteriorated. The exposure isthen transferred to stage 2 and impairment allowances equal to the lifetime expected credit loss are recognised. Ifthe LPD deterioration subsequently reduces and falls below the threshold, the client is transferred back to stage1. When determining the thresholds, ABNAMRO distinguishes between various portfolios within consumer lending, residential mortgages and corporate loans. Aspecific threshold is calculated for each portfolio, basedona statistical method. Due to limitations in the availability of historical data, ABN AMRO currently uses the 12-month PD as proxy for LPD for corporate loans and part of consumer lending. We consider deterioration in the 12-month PD to be appropriately representative of LPD deterioration for the portfolios where the LPD is not available. The following table shows LPD deterioration thresholds that trigger transfers to stage 2 as at 31 December 2021. The table provides ranges, as each product class uses multiple ECL models and thresholds are determined for each ECLmodel. Recognition of ECL Interest income Effective interest on gross carrying amount Effective interest on gross carrying amount Effective interest on amortised cost (gross carrying amount less loss allowance) 12 month ECL Lifetime ECL Lifetime ECL Performing (Initial recognition) Credit quality deteriorated (Assets with significant increase in credit risk since initial recognition) Default = Impaired (Credit impaired assets) Stage 1 Stage 2 Stage 3 Change in credit quality since initial recognition 104 ABN AMRO Integrated Annual Report 2021 Range of lifetime PD deterioration thresholds b Product class Range Consumer lending 1.6x-5.2x Residential mortgages 1.7x-2.0x Corporate loans 1.6x-5.0x Qualitative stage triggers The bank transfers a financial instrument from stage 1 to stage 2 if the instrument meets any one of the following qualitative triggers: H Forborne status of a borrower; H Watch status of a borrower. ABNAMRO assigns the watch status to counterparties with an increased creditrisk. This process allows for intensive monitoring, early detection of deterioration in the credit portfolio andappropriate follow-up measures; H A delinquency-based regulatory backstop is in place, such that the credit risk of financial assets that are more than 30 days past due will be assumed to have significantly increased. Reclassification to stage 1 As a general rule, favourable changes in credit risk are recognised consistently with unfavourable changes, anda financial instrument is transferred back to stage 1 ifquantitative or qualitative triggers are no longer met. Insome cases, a probation period applies: H Forborne financial instruments are transferred back from stage 2 to stage 1 only after a probation period of at least two years has ended, in line with the ABNAMRO forbearance policy. Stage 3 forborne instruments transfer back to stage 2 after a cure period of at least one year; H For financial instruments that are 30 days past due, a three-month probation period is applied for transfers from stage 2 to stage 1. Classification in stage 3 A transfer to stage 3 will always be the result of the default of a financial instrument. Our definitions of default and impaired are aligned and comply with theEBA guidelines on the application of the definition ofdefault. All models use a consistent definition of default, which has been specified in line with regulations. A default isdeemed to have occurred when: H the counterparty is past due by more than 90 days on any material financial credit obligation to the bank; or H the bank considers the borrower to be unlikely tomeet its contractual obligations (unlikely-to-pay orUTP). The materiality of a financial obligation past due is assessed against an absolute and a relative threshold, in line with regulatory standards. To determine unlikeliness to pay, the bank has specified both mandatory default triggers (always resulting in the assignment of a default status, whereby noadditional expert judgment is allowed) and judgmental triggers (requiring an assessment by credit risk managers todetermine whether the UTP indications should result inadefault classification). In 2021, a distressed debt restructuring (forbearance) of thecredit facility, which is likely to result in a diminished financial obligation, was added as a mandatory trigger. Asaresult, the definitions of non-performing and default are now aligned. Reclassification to stage 2 The default classification for non-forborne exposures ends when the default triggers no longer apply and a (probation) cure period of at least three months has passed since the default trigger was last applied. Forforborne exposures, a twelve-month cure period starts from the moment the last forbearance measure ordefault trigger was applied. After the cure period, anassessment is performed to establish whether theimprovement in the credit quality is factual andpermanent (including, for example, no remaining past due amounts). 105 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Credit risk management / Risk management / Risk, funding & capital Stage 1 Stage 2 Stage 3 Stage POCI Default trigger hit? Lifetime PD significantly deteriorated? Watch list Forbearance (but not impaired) Days past due Purchased or originated credit impaired (POCI)? Asset in scope? YES YES >30 0-30 YES YESNO YES YES NO NO NO Calculation method The amount of expected credit loss allowances is based on the probability-weighted present value of all expected cash shortfalls over the remaining life of the financial instrument for both on- and off-balance sheet exposures. ABNAMRO distinguishes between two types of calculation methods forcredit loss allowances: H Individual Lifetime ECL (LECL) for credit-impaired (stage3) financial instruments with exposures above EUR3million; H Collective 12-month ECL (stage 1) and LECL (stage 2 and3) for financial instruments that have similar creditrisk characteristics (e.g. residential mortgages, consumer loans and SME loans) are clustered in portfolios and collectively assessed for impairment losses. A collective impairment calculation approach based on individual parameters is also applied to stage 3 exposures below EUR3million. ABNAMRO has models to quantify the Probability of Loss (PL), Loss Given Loss (LGL) and Exposure at Loss (EAL) forthe purpose of calculating thecollective 12-month ECL and LECL for these financialinstruments. Lifetime expected credit loss ABNAMRO defines the lifetime of credit as the maximum contractual period during which the bank is exposed to credit risk; we do not apply a longer period, even if that longer period is consistent with business practice. For some contracts, such as overdraft facilities or credit cards, no end date is specified or amounts can be contractually withdrawn by the lender at short notice. In these cases, ABNAMRO uses behavioural maturity models that rely on historical client behaviour to determine future expected exposures. Forward-looking information For expected credit loss calculations, ABNAMRO usesthree different scenarios of future economic developments: a baseline (or most likely) scenario, anegative scenario and a positive scenario. The three scenarios are incorporated into the expected credit loss calculation and risk stage determination in a probability-weighted manner. In order to incorporate the latest economic outlook (including the macroeconomic repercussions of the Covid-19 pandemic), the scenarios and their weights are reviewed each quarter and adjusted if necessary. Details of the scenarios and their weights used in the reporting period can be found in Credit risk in the Risk, funding & capital review section. The baseline scenario is based on Group Economics’ regular macroeconomic forecasts and is reviewed at each reporting date. The Group Economics analysts consider a range of external sources in order to develop the forecasts for the different macroeconomic variables (MEVs) required, including GDP, the unemployment rate, the housing price index, oil prices and3-month EURIBOR. They check their views and assumptions against external views and assumptions. The preliminary forecasts for the different countries undergo a challenge process to ensure they are reasonable and consistent. Toreduce the risk of biased forecasts, the final MEVs areagain checked against external forecasts and then submitted to the Scenario and Stress Testing Committee for approval. Both alternative scenarios reflect the lower and upper levels for the different macroeconomic variables, 106 ABN AMRO Integrated Annual Report 2021 whereby the whole range is meant to cover roughly 85%of the possible economic future. For most MEVs, GroupEconomics uses its standard deviations. These arecalculated on the basis offigures realised in the past few decades. The extent to which MEVs actually deviate from their historical means over time reflects the past materialisation of negative and positive risks in the economy. A probability of about 85% roughly corresponds to a standard deviation of plus and minus one and a half. For the purpose of scenario analysis, the forecast period is five years. It is assumed that MEVs gradually move to their potential or equilibrium values after the forecasting period. For each specific portfolio, a selection of variables is made for calculating the expected credit loss, based on statistical relevance and expert judgement. Cured financial assets When a credit impaired financial asset cures, the interest that was previously unrecognised is reported as an impairment release in the impairment charge rather thanasa credit to the interest income calculated using theeffective interest method. Write-off H For non-programme lending, a write-off must be taken if all possible means of recovery have been exhausted and it has become clear that there is a low probability ofrecovering the debt, either in part or full. H Most of the programme lending facilities are automatically written-off after 1,080 days in default. Such loans are written off after all the necessary procedures have been completed and the amount oftheloss has been determined. Subsequent recoveries of amounts previously written off are credited to impairment charges on financial instruments in the income statement. Credit risk measurement b The models used for the measurement and management ofcredit risk vary from purely statistical to expert-based models and employ both quantitative and qualitative risk drivers. All models are subject to the bank’s model risk management framework. They undergo initial validation bythe independent model validation function before their first use, and annually thereafter. Independent validation is also required when a model undergoes a material change. Probability of default The Probability of Default (PD) indicates the likelihood thatacounterparty or exposure defaults within a one-year time horizon. For the non-programme lending portfolio, themodel score is mapped to and expressed as an internal uniform counterparty rating (UCR). The UCR rating scale consists of 14 performing ratings, each representing a fixed PD range. The indicative mapping of the internal UCR rating scale to external rating agency ratings is shown in the following table. Internal rating scale mapped to external ratings b Grade Category UCR (internal rating) Low PD% Mid PD% High PD% Standard & Poor’s equivalent Moody’s equivalent Fitch equivalent Investment grade UCR 1 0.000 0.03 0.035 AAA to A+ Aaa to Aa3 AAA to AA- UCR 2+ 0.035 0.04 0.045 A+ A1 AA- UCR 2 0.045 0.05 0.070 A A1 A+ UCR 2- 0.070 0.10 0.130 A- A3 A- UCR 3+ 0.130 0.16 0.200 BBB+ Baa1 BBB+ UCR 3 0.200 0.25 0.300 BBB Baa2 BBB UCR 3- 0.300 0.36 0.470 BBB- Baa3 BBB- Sub-investment grade UCR 4+ 0.470 0.60 0.780 BB+ Ba1 BB+ UCR 4 0.780 1.0 0 1.290 BB Ba2 BB UCR 4- 1.290 1.65 2.230 BB- B1 BB- UCR 5+ 2.230 3.00 4.240 B+ B2 B UCR 5 4.240 6.00 8.490 B- Caa1 B- UCR 5- 8.490 12.00 16.970 CCC/C Caa2 CCC/C UCR 6+ 16.970 24.00 100.00 CCC/C Caa-C CCC/C Default UCR 6-8 D D D Rating assignment For non-programme lending, the ratings are individually assigned to each counterparty (PD) and facility (LGD) by the business account manager (first line) and approved by credit risk (second line). For programme lending, exposures ratings are not assigned individually but assigned to pools with similar characteristics. For all exposures, the EAD 107 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Credit risk management / Risk management / Risk, funding & capital estimation is assigned automatically based on the facility type and the undrawn part of the facility. Loss given default Loss Given Default (LGD) models estimate the amount thebank would lose if the counterparty were to default. LGD is expressed as a percentage of the outstanding amount at default. For credit facilities that are not in default, LGD estimates are influenced by the risk mitigating techniques used by the bank (such as collateral coverage and/or third party protection), the credit facility’s seniority and structure, and the bank’s view of the creditor- friendliness of the relevant country’s legal framework. Exposure at default Exposure at Default (EAD) models estimate the expected exposure at the time a counterparty defaults. If all or a partof a facility is undrawn (i.e. the outstanding amount isless than the approved limit) at the time of the EAD calculation, a portion of the undrawn amount is added tothe exposure to reflect the tendency of counterparties toutilise larger portions of their approved credit facilities when nearing default. Capital for credit risk Regulatory capital For the purpose of determining capital requirements for credit risk, ABNAMRO applies the Advanced Internal Rating Based (A-IRB) approach to the vast majority of its portfolio. Under this approach, the previously described internal estimates for PD, EAD and LGD are used to calculate Credit Risk RWA. For a number of smaller portfolios, RWA is determined according to the Standardised Approach (SA). This approach prescribes the risk weights to be applied to the exposure value in order to calculate RWA. Economic capital The EC 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 to ensure that loss estimates can bebased not only on defaulting borrowers, but also on possible credit migrations and changes associated with themarket values of loans. Credit risk mitigation Credit risk mitigation techniques are used by the bank to reduce the credit risk associated with its credit exposures. Such techniques relate mainly to collateral management and guarantees, offsetting financial assets and liabilities, and enforcing master netting agreements or similar instruments. Credit risk mitigation techniques themselves entail risks and, as such, have to meet certain requirements so they can be used effectively and in line with the bank’s risk appetite. For this reason, ABNAMRO has established mandatory, bank-wide policies governing the use and management of credit risk mitigation techniques. These are in line with regulatory requirements, as well as the needs of the bank and its clients. These bank-wide policies provide the overarching rules to be met by business-specific procedures and processes related to credit risk mitigation. Collateral management and guarantees Collateral and guarantees represent assets with material value that have been received by (or pledged to) the bank to secure obligations under a credit facility or other exposure. To be effective, such security must give the bank the right to appropriate and liquidate collateral on time and without impediment so that losses on the exposure at default areminimised. In addition to minimising exposure risk, eligible collateral and guarantees can also reduce the regulatory and economic capital the bank is required to hold as a buffer for unexpected losses. The Capital Requirements Regulation prescribes thecriteria that collateral must meet to become eligible forcapital reduction. These criteria, which provide for legaleffectiveness and for the enforceability, valuation andmonitoring of collateral, are aimed at the effective andtimely realisation of collateral. Accounting policy for offsetting financial assets andliabilities b Financial assets and liabilities are offset, and the net amount is reported on the EU IFRS balance sheet, if there is a legally enforceable right to set off the recognised amounts and there is an intention either to settle on a net basis or torealise the asset and settle the liability simultaneously. The bank applies netting to debtor and creditor balances, such as current accounts, where offsetting is justified by formal agreement with the client, provided they meet the applicable criteria. Accounting policy for enforceable master netting agreements or similar instruments b Enforceable master netting arrangements take into account all agreements containing conditions that allow offsetting in the event of default. In addition, agreements are enforceable if the bank has a legally enforceable right to offset and noability and/or intention to realise the asset and settle theliability simultaneously. These arrangements include derivative clearing agreements, global master repurchase agreements and global master securities lending agreements. 108 ABN AMRO Integrated Annual Report 2021 Credit risk review Update on Covid-19 This section provides more details on the measures offered to ABNAMRO clients to provide them with liquidity. The two primary relief measures offered have been deferral of interest and principal payments, and Covid-19-related credit facilities supported by public guarantee schemes. ABNAMRO continuously monitors sectors vulnerable to Covid-19 and offers tailored support to clients with a viable business or financial case. Payment moratoria and other Covid-19-related forbearance measures b By 31 December 2021, approximately 68,500 clients hadreceived a Covid-19-related deferral or forbearance measure, accounting for total exposure of EUR 19.2 billion (31 December 2020: EUR 22.6 billion). The reduction in the number of clients is significant since a large portion of loans were due for repayment on 31 December 2021. Moreover, the larger part of the deferral or forbearance measures had expired by 31 December 2021. An amount of EUR 953 million was subject to measures that were still active.The active measures relate to loans where the deferral is still applicable (has not yet expired), such as loans with Covid-19-related forbearance measures. Loans that previously received a payment moratoria or other Covid-19-related forbearance measure where the moratorium/deferral has ended are reported as expired. Credit quality remained broadly stable due to the large-scale government support schemes and the improved economic outlook. The decrease in stage 2 and 3 exposure was limited, leaving the total share of exposure with increased risk relatively unchanged at 46% of the total exposure subject to Covid-19-related measures (31 December 2020: 47%). By 31 December 2021, 75% of the originally deferred payments within Commercial Banking had been repaid (31December 2020: 47%). The remaining deferrals amounted to EUR0.4billion. The reduction was in line withour expectations regarding contractual repayments due on 31December 2021 for current account and overdraft facilities and due on the contractual maturity date for term loans. The remaining deferred payments are expected to be repaid within five years. Gross carrying amount inmillions Number of clients Active measure Expired measure Total - of which stage 2 - of which stage 3 31 December 2021 Retail Banking 30,386 4 2,853 2,857 1,744 243 Commercial Banking 37,704 479 14,020 14,498 4,223 1,662 Private Banking 363 6 661 667 174 44 Corporate & Institutional Banking 33 464 703 1,167 682 110 Total 68,486 953 18,236 19,189 6,823 2,058 31 December 2020 1 Retail Banking 41,420 17 3,485 3,503 2,356 233 Commercial Banking 43,392 729 15,611 16,340 4,418 1,739 Private Banking 490 57 733 790 159 58 Corporate & Institutional Banking 60 1,607 409 2,016 1,509 96 Total 85,362 2,410 20,239 22,649 8,443 2,125 1 As of Q1 2021, the scope of the table was extended. Revised 31 December 2020 figures have not been audited. Compared to the figures reported in the 2020 Annual Report, the scope of the table above has been extended to cover all Covid-19-related forbearance measures, including measures not related to payment deferrals. The comparative figures for 31 December 2020 have been adjusted accordingly. Loans and advances supported by public guaranteeschemes b New loan applications continued in 2021, mainly under the Klein Krediet Corona (KKC) and Borgstelling MKB-kredieten (BMKB-C) programmes. While the number of clients rose This section provides information on: H Covid-19 measures H Credit risk exposure H Credit risk concentration H Forborne, past due and credit-impaired loans H Credit risk mitigation H Developments in specific portfolios 109 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Credit risk review / Risk management / Risk, funding & capital considerably, the total amount of loans and advances benefiting from public guarantee schemes decreased significantly as a result of partial repayments. The average state guarantee coverage for these loans increased markedly to 87% (31 December 2020: 79%), due to the higher coverage of the BMKB-C and KKC programmes. Although the issuance of new public guarantees came toanend on 31 December 2021, the Dutch government announced on 14 December 2021 that it intended to reopen the public guarantee schemes during thefirst quarter of 2022 and to keep them available until the second quarter ofthe year. We therefore expect some applications in the coming period. Gross carrying amount inmillions Number of clients ≤6 months >6 months & ≤ 12 months >1 year & ≤ 2 years >2 years Total Maximum amount in millions of the guarantee that can be considered 31 December 2021 Retail Banking 1 Commercial Banking 1,237 3 13 27 82 125 108 Private Banking 282 17 10 1 139 166 149 Corporate & Institutional Banking 4 51 51 41 Total 1,524 20 23 78 221 342 298 31 December 2020 Commercial Banking 941 44 82 126 94 Private Banking 258 74 96 170 153 Corporate & Institutional Banking 11 19 14 73 105 69 Total 1,210 74 115 58 155 402 316 Credit risk exposure Credit risk overview b (inmillions) 31 December 2021 31 December 2020 Cash and balances at central banks 66,865 60,190 Financial assets held for trading 1,155 1,315 Derivatives 3,785 6,381 Financial investments 1 43,165 47,455 Securities financing 16,138 16,725 Loans and advances banks 2,801 3,394 Loans and advances customers 258,251 252,159 Other assets 4,263 4,925 Less: Other 1 345 505 Other assets 3,919 4,420 On-balance sheet maximum exposure to credit risk 396,077 392,038 Off-balance sheet Committed credit facilities 54,642 55,207 Guarantees and other commitments 7,598 8,981 Revocable credit facilities 31,737 36,000 Off-balance sheet credit facilities and guarantees 93,977 100,188 Maximum exposure to credit risk 2 490,055 492,226 Adjustments on assets 2,3 167 -806 Valuation adjustments 4 12,550 14,202 Offsetting and netting -20,970 -24,626 Off-balance sheet credit facilities and guarantees -93,977 -100,188 Off-balance sheet exposure fraction expected to be drawn prior to default (credit conversion factors) 29,389 26,546 Total Exposure at Default 417,214 407,354 Credit risk RWA / Total Exposure at Default 24.0% 22.7% 1 This contains non-credit obligation assets and assets on accounts which are out of scope for credit risk. 2 Adjustment on assets includes equity positions. 3 Main adjustments on assets relate to selected financial assets held for trading and fair value adjustments from hedge accounting. 4 Adjustments on valuation include loan impairment allowances. The above table shows the maximum exposure to credit risk and reconciliation with the total exposure at default. 110 ABN AMRO Integrated Annual Report 2021 Overall credit risk EAD and RWA b 31 December 2021 Original EAD Less: Netting/EAD mitigation 3 EAD - of which: RWA RWA/EAD (inmillions) Derivatives Securities financing transactions Credit risk IRB Central governments and central banks 100,874 -2,278 103,152 272 70 840 0.8% Institutions 1 8,606 1,572 7,034 547 1,828 1,589 22.6% Corporates 136,174 32,920 103,254 2,857 1,530 52,211 50.6% Retail 175,948 6,404 169,544 16,574 9.8% - of which secured by immovable property 164,659 1,324 163,334 14,847 9.1% - of which qualifying revolving exposures 5,359 4,038 1,321 140 10.6% - of which other retail 5,930 1,041 4,888 1,588 32.5% Securitisation positions 1,016 1,016 11 6 11.4% Subtotal 422,618 38,619 384,000 3,676 3,429 71,331 18.6% Equities not held for trading 841 841 3,364 399.8% Other 2 1,778 1,778 15,336 862.3% Total IRB 425,238 38,619 386,619 3,676 3,429 90,030 23.3% Credit risk SA Central governments and central banks 6,437 -10 6,447 2 0.0% Institutions 1 25,831 12,032 13,799 2,091 4,313 1,248 9.0% Corporates 19,567 13,260 6,307 1,200 1,010 5,636 89.4% Retail 7,562 4,142 3,421 2,495 72.9% Secured by mortgages on immovable property 414 12 403 145 36.1% Exposures in default 531 398 133 173 129.6% Credit valuation adjustment 202 Subtotal 60,343 29,833 30,510 3,290 5,323 9,900 32.4% Other 2 84 84 46 54.0% Total SA 60,428 29,833 30,595 3,290 5,323 9,946 32.5% Total 485,666 68,452 417,214 6,966 8,751 99,976 24.0% 1 Institutions include exposures to banks and investment undertakings, regional governments and local authorities, and pension funds. 2 Other includes default fund contribution under the IRB approach and non-credit obligation assets under the IRB and Standardised Approach. 3 Consists mainly of netting, secured funding trades, guarantees, credit conversion factors and impairments under the Standardised Approach. 111 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Credit risk review / Risk management / Risk, funding & capital 31 December 2020 Original EAD Less: Netting/EAD mitigation 3 EAD - of which: RWA RWA/EAD (inmillions) Derivatives Securities financing transactions Credit risk IRB Central governments and central banks 97,011 -1,889 98,900 197 24 1,033 1.0% Institutions 1 12,464 1,681 10,783 1,059 2,075 1,905 17.7% Corporates 139,224 42,867 96,357 2,350 1,251 50,985 52.9% Retail 181,370 8,273 173,097 15,508 9.0% - of which secured by immovable property 164,871 1,779 163,092 12,080 7.4% - of which qualifying revolving exposures 9,313 5,551 3,762 1,240 33.0% - of which other retail 7,186 944 6,243 2,188 35.0% Securitisation positions 764 764 70 9.2% Subtotal 430,832 50,932 379,900 3,606 3,350 69,501 18.3% Equities not held for trading 898 898 3,397 378.5% Other 2 1,114 1,114 10,432 936.7% Total IRB 432,843 50,932 381,911 3,606 3,350 83,330 21.8% Credit risk SA Central governments and central banks 6,738 - 11 6,749 38 12 0.2% Institutions 1 21,533 12,765 8,767 3,221 3,035 846 9.7% Corporates 16,744 10,861 5,883 941 1,271 5,309 90.2% Retail 5,455 3,387 2,068 1,550 75.0% Secured by mortgages on immovable property 801 137 664 233 35.0% Exposures in default 387 276 111 146 131.9% Credit valuation adjustment 175 Subtotal 51,657 27,415 24,242 4,199 4,306 8,272 34.1% Other 2 1,200 1,200 859 71.6% Total SA 52,858 27,415 25,443 4,199 4,306 9,131 35.9% Total 485,701 78,347 407,354 7,805 7,656 92,462 22.7% 1 Institutions include exposures to banks and investment undertakings, regional governments and local authorities, and pension funds. 2 Other includes default fund contribution under the IRB approach and non-credit obligation assets under the IRB and Standardised Approach. 3 Consists mainly of netting, secured funding trades, guarantees, credit conversion factors and impairments under the Standardised Approach. 112 ABN AMRO Integrated Annual Report 2021 Credit quality by exposure class b 31 December 2021 (inmillions, Exposure at Default) Investment grade Sub-investment grade Impaired Total Central governments and central banks 103,059 88 5 103,152 Institutions 1 6,697 328 9 7,034 Corporates 49,127 49,309 4,818 103,254 Retail 138,073 29,772 1,699 169,544 - of which secured by immovable property 134,658 27,252 1,423 163,334 - of which qualifying revolving exposures 1,149 144 28 1,321 - of which other retail 2,265 2,376 247 4,888 Securitisation positions 1,016 1,016 Total IRB 2 297,972 79,497 6,531 384,000 Total SA 3 30,510 Total 414,510 31 December 2020 Investment grade Sub-investment grade Impaired Total Central governments and central banks 98,800 91 9 98,900 Institutions 1 10,326 457 10,783 Corporates 37,652 51,824 6,881 96,357 Retail 152,993 18,322 1,782 173,097 - of which secured by immovable property 147,521 14,323 1,248 163,092 - of which qualifying revolving exposures 2,232 1,308 221 3,762 - of which other retail 3,240 2,691 312 6,243 Securitisation positions 764 764 Total IRB 2 300,536 70,693 8,672 379,900 Total SA 3 24,242 Total 404,142 1 Institutions include exposures to banks and investment undertakings, regional governments and local authorities, and pension funds. 2 Does not include other non-credit obligations and equities not held for trading, because these items are not subject to credit risk grading. 3 Does not include other non-credit obligations because these items are not subject to credit risk grading. The increase in EAD in the sub-investment portfolio was solely attributable to retail and to the implementation of new credit risk models based on the new definition of default (DoD). The decline in EAD in the investment grade portfolio is visible in the exposure classes of retail and institutions and was partly offset by increases in corporates, driven by higher business activity in CIB core and Commercial Banking, and in central governments and central banks. The impaired portfolio decreased in corporates, primarily due to the reduction in the CIB non-core loan book.In 2021, EAD under the Standardised Approach increased, predominantly due to business developments in Clearing and as a result of the implementation of the Standardised Approach for counterparty credit risk in Global Markets. Credit quality by internal rating scale mapped to stages b The following table presents the gross carrying amount ofloans and the contractual amount of undrawn loan commitments, classified by internal rating and risk stage. Inorder to classify a client as stage 2, several qualitative triggers are needed, which are not necessarily dependent on internal ratings. Reference is made to the Credit risk management section for more information on internal ratings and stage determination. 113 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Credit risk review / Risk management / Risk, funding & capital 31 December 2021 31 December 2020 (inmillions) PD scale UCR range Stage 1 Stage 2 Stage 3 3 Total Stage 1 Stage 2 Stage 3 3 Total Residential mortgages 0.000 - < 0.035 1 107 108 10,074 176 10,250 0.035 - < 0.130 2 59,392 1,194 60,586 68,222 1,628 69,851 0.130 - < 0.470 3 55,040 1,861 56,900 48,509 2,567 51,076 0.470 - < 2.230 4 21,376 2,172 23,548 7,613 2,085 9,697 2.230 - < 16.970 5 1,119 2,294 3,413 970 2,538 3,508 16.970 - < 100 6+ 28 504 532 20 147 166 100 6-8 1,264 1,264 1,124 1,124 Total residential mortgages 137,063 8,025 1,264 146,351 135,407 9,141 1,124 145,672 Consumer loans 0.000 - < 0.035 1 630 3 634 976 3 978 0.035 - < 0.130 2 1,459 9 1,468 1,286 18 1,305 0.130 - < 0.470 3 2,717 165 2,882 2,842 128 2,970 0.470 - < 2.230 4 3,708 291 3,999 3,776 263 4,039 2.230 - < 16.970 5 326 415 741 572 554 1,126 16.970 - < 100 6+ 508 154 662 255 102 357 100 6-8 409 409 456 456 Total consumer loans 9,348 1,037 409 10,794 9,707 1,068 456 11,232 Corporate loans 0.000 - < 0.035 1 9,221 83 9,304 9,237 261 9,499 0.035 - < 0.130 2 9,839 343 10,182 7,669 447 8,115 0.130 - < 0.470 3 15,722 978 16,701 12,003 1,495 13,497 0.470 - < 2.230 4 28,393 5,433 33,826 30,031 6,923 36,954 2.230 - < 16.970 5 3,345 4,484 7,830 3,244 5,179 8,423 16.970 - < 100 6+ 2,843 753 3,597 2,333 1,050 3,384 100 6-8 5,019 5,019 6,873 6,873 Total corporate loans 69,364 12,075 5,019 86,458 64,517 15,356 6,873 86,745 Other loans 1 0.000 - < 0.035 1 21,289 21,289 15,983 15,983 0.035 - < 0.130 2 9,012 1 9,012 7,538 7,538 0.130 - < 0.470 3 2,539 2,539 3,394 4 3,398 0.470 - < 2.230 4 883 883 650 650 2.230 - < 16.970 5 66 26 92 23 33 55 16.970 - < 100 6+ 11 2 20 132 2 11 211 100 6-8 9 9 21 21 Total other loans 1 33,900 47 9 33,956 27,798 37 21 27,856 Loan commitments and financial guarantee contracts 0.000 - < 0.035 1 5,256 6 5,262 7,885 13 7,898 0.035 - < 0.130 2 12,188 175 12,363 12,967 275 13,242 0.130 - < 0.470 3 16,688 885 17,573 13,679 809 14,488 0.470 - < 2.230 4 11,025 3,750 14,775 12,383 3,514 15,897 2.230 - < 16.970 5 1,197 1,043 2,240 1,328 1,259 2,587 16.970 - < 100 6+ 3,843 161 4,004 2,952 313 3,265 100 6-8 1,271 1,271 1,275 1,275 Total loan commitments and financial guarantee contracts 2 50,199 6,019 1,271 57,488 51,194 6,183 1,275 58,653 Total 0.000 - < 0.035 1 36,504 92 36,596 44,155 453 44,608 0.035 - < 0.130 2 91,891 1,721 93,612 97,682 2,369 100,051 0.130 - < 0.470 3 92,706 3,889 96,595 80,426 5,004 85,430 0.470 - < 2.230 4 65,385 11,646 77,031 54,453 12,785 67,238 2.230 - < 16.970 5 6,054 8,263 14,317 6,137 9,563 15,700 16.970 - < 100 6+ 7,335 1,592 8,926 5,771 1,612 7,383 100 6-8 7,971 7,971 9,749 9,749 Total 299,874 27,202 7,971 335,048 288,624 31,785 9,749 330,158 1 Includes Banks, Securities Financing and Government and official institutions. 2 Total loan commitments and financial guarantee contracts exclude performance letters of credit as these facilities are not in scope of IFRS 9. 3 Including POCI. 114 ABN AMRO Integrated Annual Report 2021 The largest part of ABNAMRO’s portfolio in stage 1 is classified in the highest and medium internal rating classes. Stage 2 clients are primarily in the medium internal UCRs, primarily visible in corporate and off-balance sheet loans. Compared to 2020, the share of the portfolio with an investment grade rating (UCR 1 to UCR 3) decreased marginally, mainly due to a higher amount of sub- investment grade mortgage loans, resulting from implementation of credit risk models based on the new definition of default (DoD). Approximately 3% of the bank’s portfolio is reported in UCR 6+, which is the highest risk class for performing loans, but also the default value if the rating has expired anda new rating is not yet available. Credit risk concentration b Geographic concentration The exposures in the following table have been classified on the basis of the geographical regions where clients are domiciled. The bank monitors and manages country risk based on the country at risk. The country at risk may be different from the country of domicile, for example if the bank finances a project in a country other than the country in which the borrower is domiciled. The bank actively manages and monitors the development of its country riskexposures. Geographic concentration by EAD b 31 December 2021 (inmillions, Exposure at Default) The Netherlands Rest of Europe USA Asia Rest of the world Total Central governments and central banks 70,875 22,219 6,659 2,156 1,243 103,152 Institutions 1 1,077 4,514 675 198 570 7,034 Corporates 69,464 26,236 2,457 792 4,304 103,254 Retail 168,956 453 37 57 41 169,544 - of which secured by immovable property 162,809 396 37 53 39 163,334 - of which qualifying revolving exposures 1,321 1,321 - of which other retail 4,825 57 4 2 4,888 Securitisation positions 1,016 1,016 Total IRB 2 311,388 53,423 9,828 3,203 6,158 384,000 Total SA 3 9,996 16,161 2,979 820 555 30,510 Total 321,384 69,583 12,807 4,023 6,713 414,510 Percentage of total 77.5% 16.8% 3.1% 1.0% 1.6% 100.0% 31 December 2020 The Netherlands Rest of Europe USA Asia Rest of the world Total Central governments and central banks 64,973 21,685 6,501 4,526 1,215 98,900 Institutions 1 2,729 6,448 862 364 380 10,783 Corporates 56,406 25,201 6,460 2,301 5,988 96,357 Retail 172,418 523 45 70 41 173,097 - of which secured by immovable property 162,555 396 42 64 34 163,092 - of which qualifying revolving exposures 3,722 34 1 1 4 3,762 - of which other retail 6,142 92 1 5 4 6,243 Securitisation positions 764 764 Total IRB 2 297,290 53,856 13,868 7,262 7,624 379,900 Total SA 3 6,385 14,105 1,841 844 1,067 24,242 Total 303,674 67,961 15,709 8,106 8,692 404,142 Percentage of total 75.1% 16.8% 3.9% 2.0% 2.2% 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. 115 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Credit risk review / Risk management / Risk, funding & capital Exposure at default (EAD) concentrated in the Netherlands increased to 77.5% of the bank’s portfolio in 2021 (2020: 75.1%). EAD in the Netherlands increased to EUR321.4billion at 31 December 2021 (31 December 2020: EUR303.7billion), mainly due to business developments in Global Markets, CIB core and Commercial Banking. The non-European regions showed declines in EAD, largely attributable to the wind-down of the CIB non-core portfolio. Businesses outside the Netherlands areprimarily located in neighbouring countries in Europe. Clearing and Securities financing are also located outside Europe. The remainder of the CIB non-core portfolio is partlylocated outside Europe. Industry concentration ABNAMRO applies industry concentration limits in linewith the Industry Classification Benchmark (ICB). Intheexposure table, non-material industry clusters areaggregated under Other. Industry concentration limits are established within the bank’s risk appetite, with the thresholds for concentrations being based on relative risk, the importance of the industry to the Dutch economy and expert opinion. The table shows the industry in which the original obligor, i.e. the counterparty with whom ABNAMRO has the contractual relationship, has its main activity. Industry concentration b 31 December 2021 31 December 2020 (inmillions) Gross carrying amount 3,5 Percentage of total Gross carrying amount 3,5 Percentage of total Loans and advances by industry sector Loans and advances banks 2,811 1.1% 3,399 1.3% Financial services 1 30,145 11.5% 20,785 8.2% Industrial goods and services 16,918 6.5% 17,342 6.8% Real estate 15,309 5.9% 12,070 4.7% Oil and gas 3,162 1.2% 6,167 2.4% Food and beverage 10,804 4.1% 12,452 4.9% Retail 4,477 1.7% 4,677 1.8% Healthcare 3,616 1.4% 3,651 1.4% Construction and materials 3,041 1.2% 2,760 1.1% Travel and leisure 3,452 1.3% 2,938 1.2% Utilities 2,788 1.1% 2,113 0.8% Automobiles and parts 1,545 0.6% 1,301 0.5% Technology 1,112 0.4% 732 0.3% Other 2 7,213 2.8% 8,717 3.4% Total industry classification benchmark 103,581 39.6% 95,706 37.6% Private individuals (non-industry classification benchmark) 154,593 59.1% 154,651 60.7% Public administration (non-industry classification benchmark) 436 0.2% 1,025 0.4% Total non-industry classification benchmark 155,029 59.3% 155,676 61.1% Total loans and advances customers 258,611 98.9% 251,381 98.7% Total loans and advances 3,4 261,421 100.0% 254,781 100.0% 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, basic resources, media, chemicals, telecommunication and insurance, in addition to unclassified. 3 Excluding loans at fair value through P&L. 4 ABNAMRO changed its presentation compared to previous reports. The table now shows total loans and advances to be more consistent with other risk disclosures in this report. 5 Excluding fair value adjustments from hedge accounting. 116 ABN AMRO Integrated Annual Report 2021 The total increase in loans and advances by industry was largely explained by increases in financial services and real estate and partly offset by declines in oil and gas, food and beverage, and basic resources. These declines were predominantly achieved through the sales of the Trade & Commodity Finance portfolio in the first quarter and the North American oil and gas portfolio in the second quarter of 2021. Financial services was higher due to business developments in Clearing, while real estate rose as a result of higher business activity in Commercial Banking and CIB core. Management of forborne, past due and credit-impaired loans b Reporting scope credit risk Although all financial assets on our balance sheet are subject to some form of credit risk, by far the largest part is in loans and advances. To provide a meaningful view of the credit risk in our lending book, the figures presented in this section therefore relate to loans and advances. Anycredit risk outside the reported scope will be mentioned below the table. All figures are furthermore reported gross of loan impairment allowances and exclude fair value adjustments. The following table provides a comparison with the consolidated balance sheet, in which the same items are shown net of allowances and include fair value adjustments. 31 December 2021 31 December 2020 (inmillions) Gross carrying amount 2 Fair value adjustment from hedge accounting Less: loan impairment allowance Carrying amount Gross carrying amount 2 Fair value adjustment from hedge accounting Less: loan impairment allowance Carrying amount Loans and advances banks 2,811 10 2,801 3,399 6 3,394 Residential mortgages 146,351 1,442 82 147,711 145,672 3,186 11 6 148,741 Consumer loans 10,794 276 10,518 11,232 294 10,937 Corporate loans 1 86,458 509 2,053 84,915 86,745 652 3,053 84,344 Other loans and advances customers 1 15,007 4 15,003 7,733 1 3 7,730 Total loans and advances customers 1 258,611 1,951 2,416 258,146 251,381 3,838 3,467 251,753 Total loans and advances 1 261,421 1,951 2,426 260,947 254,781 3,838 3,472 255,146 Other 138,178 12 138,166 140,489 13 140,477 Total assets 399,599 1,951 2,437 399,113 395,270 3,838 3,485 395,623 Loans and advances customers 1 258,611 1,951 2,416 258,146 251,381 3,838 3,467 251,753 Corporate loans at fair value through P&L 99 99 400 400 Other loans at fair value through P&L 5 5 6 6 Total loans and advances customers 258,715 1,951 2,416 258,251 251,788 3,838 3,467 252,159 1 Excluding loans at fair value through P&L. 2 Excluding fair value adjustments from hedge accounting. 117 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Credit risk review / Risk management / Risk, funding & capital Forborne exposures b Clients in (or potentially in) financial difficulty and whose contracts have been amended in ways that are regarded as concessions on the part of the bank are accounted for as forborne assets. The following table provides an overview offorborne assets, broken down into performing and non-performing assets, and classified by the type of forbearance measure. Overview of forborne assets b 31 December 2021 Gross carrying amount 2 Performing assets Total performing forborne assets Non-performing assets Total non- performing forborne assets Total forborne assets Forbear- ance ratio (inmillions) Tem- porary modifi- cation Perma- nent modifi- cation Refi- nanc- ing Tem- porary modifi- cation Perma- nent modifi- cation Refi- nanc- ing Loans and advances banks 2,811 0.0% Residential mortgages 146,351 2,445 18 1 2,464 590 24 2 616 3,080 2.1% Consumer loans 10,794 60 47 4 111 86 26 12 124 235 2.2% Corporate loans 1 86,458 1,173 2,937 484 4,594 380 2,237 659 3,276 7,870 9.1% Other loans and advances customers 1 15,007 0.0% Total loans and advances customers 1 258,611 3,678 3,002 490 7,170 1,057 2,287 673 4,016 11,186 4.3% Total loans and advances 1 261,421 3,678 3,002 490 7,170 1,057 2,287 673 4,016 11,186 4.3% 1 Excluding loans at fair value through P&L. 2 Gross carrying amount excludes fair value adjustments from hedge accounting. 31 December 2020 Gross carrying amount 3 Performing assets Total performing forborne assets Non-performing assets Total non- performing forborne assets Total forborne assets Forbear- ance ratio (inmillions) Tem- porary modifi- cation Perma- nent modifi- cation Refi- nanc- ing Tem- porary modifi- cation Perma- nent modifi- cation Refi- nanc- ing Loans and advances banks 3,399 0.0% Residential mortgages 145,672 2,723 11 1 2,735 581 14 4 599 3,334 2.3% Consumer loans 11,232 47 52 32 131 25 23 81 129 260 2.3% Corporate loans 1 86,745 1,789 2,924 525 5,238 689 2,461 911 4,060 9,298 10.7% Other loans and advances customers 1 7,733 5 5 5 0.1% Totalloans and advancescustomers 1,2 251,381 4,559 2,991 558 8,108 1,294 2,499 996 4,788 12,896 5.1% Total loans and advances 1,2 254,781 4,559 2,991 558 8,108 1,294 2,499 996 4,788 12,896 5.1% 1 Excluding loans at fair value through P&L. 2 ABNAMRO changed its presentation compared to previous reports. The table now shows total loans and advances to be more consistent with other risk disclosures in this report. 3 Gross carrying amount excludes fair value adjustments from hedge accounting. Forborne exposures decreased to EUR11.2billion at 31 December 2021 (31 December 2020: EUR12.9billion). This movement related mainly to the CIB non-core wind-down and was reflected in lower forborne corporate loans. The amount of total forborne assets is still substantial, especially in the case of residential mortgages and corporate loans, due to the high inflow in 2020 caused by the Covid-19 pandemic and developments in the oil price. The forborne portfolio of residential mortgages decreased in 2021 by EUR0.3billion to EUR3.1billion. As the main part of this portfolio consists of loans to which a collective payment deferral was applied in 2020, these loans are expected to cease to be forborne during the coming year. Forborne exposure of corporate loans decreased by EUR1.4billion to EUR7.9billion, mainly owing to repayments and to the sale of assets as part of the CIB non-core wind-down. 118 ABN AMRO Integrated Annual Report 2021 Past due exposures b When a counterparty is past due or exceeds its credit limit, all loans and advances (total gross carrying amount) in the related credit arrangement are considered to be past due. The absolute and relative materiality thresholds used for determining a defaulted status do not apply for the purposes of classification as past due. Below these thresholds, arrears of more than 90 days are reported as past due. Past due not classified as stage 3 b 31 December 2021 Days past due (inmillions) Gross carrying amount 2 Assets not classified as stage 3 or POCI ≤30 days >30 days & ≤ 90 days > 90 days Total past due but not stage 3 or POCI Past due ratio Loans and advancesbanks 2,811 2,811 0.0% Residential mortgages 146,351 145,087 759 49 12 820 0.6% Consumerloans 10,794 10,385 133 29 26 188 1.7% Corporate loans 1 86,458 81,439 874 178 23 1,075 1.2% Other loans and advances customers 1 15,007 14,998 24 24 0.2% Totalloans and advances customers 1 258,611 251,910 1,789 256 61 2,106 0.8% Totalloans and advances 1 261,421 254,720 1,789 256 61 2,106 0.8% 1 Excluding loans at fair value through P&L. 2 Gross carrying amount excludes fair value adjustments from hedge accounting. 31 December 2020 Days past due (inmillions) Gross carrying amount 3 Assets not classified as stage 3 or POCI ≤30 days >30 days & ≤ 90 days > 90 days Total past due but not stage 3 or POCI Past due ratio Loans and advancesbanks 3,399 3,399 0.0% Residential mortgages 145,672 144,548 858 69 9 936 0.6% Consumerloans 11,232 10,775 206 64 59 329 2.9% Corporate loans 1 86,745 79,872 756 348 243 1,348 1.6% Other loans and advances customers 1 7,733 7,712 0.0% Totalloans and advances customers 1,2 251,381 242,907 1,821 482 311 2,614 1.0% Totalloans and advances 1,2 254,781 246,307 1,821 482 311 2,614 1.0% 1 Excluding loans at fair value through P&L. 2 ABNAMRO changed its presentation compared to previous reports. The table now shows total loans and advances to be more consistent with other risk disclosures in this report. 3 Gross carrying amount excludes fair value adjustments from hedge accounting. Compared to 31 December 2020, total arrears declined by EUR0.5billion to EUR2.1billion, mainly due to reductions in the corporate loans, consumer loans and residential mortgages segments. While the past due ratio for residentialmortgages remained stable at 0.6%, the past due ratios for corporate loans and consumer loans went down from 1.6% to 1.2% and from 2.9% to 1.7%, respectively. The overall declining trend in arrears on residential mortgages and consumer loans continued ontheback of benign economic conditions such as low unemployment and relatively stable household earnings. Inthe corporate loans segment, declines in arrears of Asset-Based Finance clients more than offsett the rise in arrears of Commercial Banking and Corporate & Institutional Banking clients, particularly in the short-term bucket. Furthermore, a significant part of the rise in short-term corporate loan arrears was short-lived, given that the relevant clients returned to current status in January 2022. 119 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Credit risk review / Risk management / Risk, funding & capital Coverage and stage ratios b 31 December 2021 31 December 2020 (inmillions) Gross carrying amount 3 Allowances for credit losses 4 Coverage ratio Stage ratio Gross carrying amount 3 Allowances for credit losses 4 Coverage ratio Stage ratio Stage 1 Loans and advances banks 2,808 10 0.4% 99.9% 3,399 6 0.2% 100.0% Residential mortgages 137,063 8 0.0% 93.7% 135,407 14 0.0% 93.0% Consumer loans 9,348 23 0.2% 86.6% 9,707 38 0.4% 86.4% Corporate loans 1 69,364 130 0.2% 80.2% 64,517 243 0.4% 74.4% Other loans and advances customers 1 14,954 0.0% 99.6% 7,675 0.0% 99.3% Total loans and advances customers 1 230,729 162 0.1% 89.2% 217,305 296 0.1% 86.4% Stage 2 Loans and advances banks 3 0.5% 0.1% Residential mortgages 8,025 22 0.3% 5.5% 9,141 44 0.5% 6.3% Consumer loans 1,037 45 4.4% 9.6% 1,068 41 3.8% 9.5% Corporate loans 1 12,075 291 2.4% 14.0% 15,356 316 2.1% 17.7% Other loans and advances customers 1 44 1 3.2% 0.3% 37 0.3% 0.5% Total loans and advances customers 1 21,181 360 1.7% 8.2% 25,602 400 1.6% 10.2% Stage 3 and POCI Loans and advances banks Residential mortgages 1,264 52 4.1% 0.9% 1,124 58 5.2% 0.8% Consumer loans 409 208 50.8% 3.8% 456 215 47.2% 4.1% Corporate loans 1 5,019 1,632 32.5% 5.8% 6,873 2,494 36.3% 7.9% Other loans and advances customers 1 9 3 32.0% 0.1% 21 3 14.6% 0.3% Total loans and advances customers 1 6,701 1,894 28.3% 2.6% 8,474 2,771 32.7% 3.4% Total of stages 1, 2, 3 and POCI Total loans and advances banks 2,811 10 0.4% 3,399 6 0.2% Residential mortgages 146,351 82 0.1% 145,672 116 0.1% Consumer loans 10,794 276 2.6% 11,232 294 2.6% Corporate loans 1 86,458 2,053 2.4% 86,745 3,053 3.5% Other loans and advances customers 1 15,007 4 0.0% 7,733 3 0.0% Total loans and advances customers 1 258,611 2,416 0.9% 251,381 3,467 1.4% Total loans and advances 1,2 261,421 2,426 0.9% 254,781 3,472 1.4% 1 Excluding loans at fair value through P&L. 2 ABNAMRO changed its presentation compared to previous reports. The table now shows total loans and advances to be more consistent with other risk disclosures in this report. 3 Gross carrying amount excludes fair value adjustments from hedge accounting. 4 The allowances for credit losses excludes allowances for financial investments held at FVOCI (31 December 2021: EUR1million; 31 December 2020: EUR1million). 120 ABN AMRO Integrated Annual Report 2021 In 2021, the stage 3 ratio improved to 2.6% (31 December 2020: 3.4%), predominantly as a result of the CIB non-core wind-down, including the sale of the Trade & Commodity Finance portfolio and the North American oil and gas portfolio, and, to a lesser extent, the decline in corporate loans to Commercial Banking clients, which was mostly due to repayments. The stage 3 coverage ratio declined to 28.3% (31 December 2020: 32.7%) owing to write-offs and, followingthe CIB non-core wind-down, releases for CIB clientsfor whichrelatively high provisions had been made. The stage 2 ratio declined to 8.2% (31 December 2020: 10.2%), mainly due to a reduction in stage 2 exposures in the CIB non-core loan book and a decline in residential mortgages resulting from improved risk parameters. As a result, the stage 2 coverage ratio increased slightly to 1.7% (31 December 2020: 1.6%). Purchased or Originated Credit Impaired (POCI) On 31 December 2021, loans classified as POCI amounted to EUR16million, including impairments of EUR3 millon. Due to the immateriality of the amount, this is included in the amount shown for stage 3 throughout this report. Exposure and impairment flows b This section provides more details on the exposure and impairment flows underlying the change in coverage and stage ratios shown in the previous section. Total loans and advances b 2021 2020 (inmillions) Stage 1 Stage 2 Stage 3 3 Total Stage 1 Stage 2 Stage 3 3 Total Balance at 1 January 220,705 25,602 8,474 254,781 246,631 17,066 6,740 270,437 Transfer to stage 1 5,607 -5,517 -90 5,250 -5,202 -48 Transfer to stage 2 -7,863 8,412 -549 -18,455 19,122 -667 Transfer to stage 3 -890 -1,432 2,322 -2,451 -2,140 4,591 Additional drawdowns and partial repayments -20,683 1,029 11 -19,643 -11,199 1,110 797 -9,292 Originated or purchased 71,356 71,356 35,887 35,887 Matured or repaid -36,312 -7,148 -2,538 -45,998 -32,568 -4,035 -1,521 -38,123 Write-offs - 11 -19 -1,087 -1,117 -1,194 -1,194 Foreign exchange 1,774 281 159 2,214 -2,385 -289 -209 -2,883 Other movements -145 -24 -1 -171 -6 -29 -15 -51 Balance at 31 December 233,537 21,183 6,701 261,421 220,705 25,602 8,474 254,781 1 Excluding loans at fair value through P&L. 2 Gross carrying amount excludes fair value adjustments from hedge accounting. 3 Including POCI. Total loans and advances increased compared to 31December 2020, mainly due to an increase in other loans as a result of increased margin contributions to Eurex and European Commodity Clearing (ECC) for Clearing clients (EUR9.1billion) and to Commercial Banking (EUR1.8billion) as a result of new client lending relating toTLTRO, which was drawn largely in November and December. The increase was off-set by a decrease in CIB(EUR-2.7billion) and Markets (EUR-1.3billion), which was visible mostly in corporate loans and is explained by the strategy review to wind down CIB activities outside Northwest Europe and by a net decrease in derivatives asaresult of fair value changes, respectively. New client lending in the context of TLTRO also impacted on the observed increase in originated or purchased loans(EUR35.5billion) and additional drawdowns (EUR-10.4billion), mainly visible in corporate loans. Theremainder of the increase in originated or purchased loans is explained by new mortgage production. Exposure flows per product class are presented in the section Additional risk, funding & capital disclosures. 121 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Credit risk review / Risk management / Risk, funding & capital Loan impairment charges and allowances b 31 December 2021 (inmillions) Banks Residential mortgages Consumer loans Corporate loans Other loans Total loans and advances Off-balance Balance at 1 January 2021 6 116 294 3,053 3 3,472 48 Transfer to stage 1 -6 -7 -21 -33 -1 Transfer to stage 2 -3 31 27 7 Transfer to stage 3 21 51 107 179 Remeasurements 1 10 5 39 425 1 480 101 Changes in models -2 -1 1 -15 -17 Changes in risk parameters -4 -31 -12 -54 -101 Originated or purchased 4 5 46 55 6 Matured or repaid -19 -27 -563 -610 -18 Impairment charges (releases) on loans and advances 5 -28 47 -44 1 -20 94 Write-offs -6 -69 -1,042 -1,117 -3 Unwind discount / unearned interest accrued 1 4 16 22 Foreign exchange and other movements -1 69 69 14 Balance at 31 December 2021 10 82 276 2,053 4 2,426 153 2021 Impairment charges (releases) on loans and advances 5 -28 47 -44 1 -20 94 Recoveries and other charges (releases) -18 -44 -79 -141 22 Total impairment charges for the period 5 -46 3 -124 1 -161 116 1 Remeasurements represents the current year change of expected credit loss allowances mainly attributable to changes in volumes such as partial repayments and changes in the credit quality ofexisting loans remaining in their stage. 31 December 2020 (inmillions) Banks Residential mortgages Consumer loans Corporate loans Other loans Total loans and advances Off-balance Balance at 1 January 2020 5 140 298 1,982 6 2,431 16 Transfer to stage 1 -7 -4 -12 -23 1 Transfer to stage 2 4 5 110 119 6 Transfer to stage 3 27 91 518 636 179 Remeasurements 1 -2 -49 42 1,922 -3 1,910 5 Changes in models 6 6 Changes in risk parameters 2 28 3 132 165 11 Originated or purchased 4 4 31 40 20 Matured or repaid -1 -13 - 11 -668 -692 -9 Impairment charges (releases) on loans and advances -1 1 130 2,033 -3 2,161 214 Write-offs -16 -143 -1,035 -1,194 Unwind discount / unearned interest accrued 2 -1 31 31 Foreign exchange and other movements 1 -10 11 42 43 -182 Balance at 31 December 2020 6 116 294 3,053 3 3,472 48 2020 Impairment charges (releases) on loans and advances -1 1 130 2,033 -3 2,161 214 Credit-related modifications 36 36 Recoveries and other charges (releases) -19 -38 -33 -90 -17 Total impairment charges for the period -1 -18 92 2,035 -3 2,106 197 1 Remeasurements represents the current year change of expected credit loss allowances mainly attributable to changes in volumes such as partial repayments and changes in the credit quality ofexisting loans remaining in their stage. 122 ABN AMRO Integrated Annual Report 2021 Loan impairment charges and allowances per stage b 2021 2020 (inmillions) Stage 1 Stage 2 Stage 3 2 Total Stage 1 Stage 2 Stage 3 2 Total Balance at 1 January 301 400 2,771 3,472 180 258 1,993 2,431 Transfer to stage 1 40 -62 - 11 -33 39 -53 -9 -23 Transfer to stage 2 -35 11 2 -50 27 -45 200 -36 119 Transfer to stage 3 -12 -38 228 179 -13 -76 725 636 Remeasurements 1 -108 41 547 480 472 50 1,388 1,910 Changes in models -3 - 11 -3 -17 1 2 4 6 Changes in risk parameters -34 -35 -32 -101 100 46 19 165 Originated or purchased 55 55 40 40 Matured or repaid -19 -18 -573 -610 -479 -19 -195 -692 Impairment charges (releases) on loans and advances -117 -10 107 -20 11 5 149 1,896 2,161 Write-offs - 11 -19 -1,087 -1,117 -1,194 -1,194 Unwind discount / unearned interest accrued 22 22 31 31 Foreign exchange and other movements -2 - 11 82 69 7 -8 44 43 Balance at 31 December 172 360 1,894 2,426 301 400 2,771 3,472 Impairment charges (releases) on loans and advances - 11 7 -10 107 -20 11 5 149 1,896 2,161 Credit-related modifications 29 7 36 Recoveries and other charges (releases) -141 -141 -90 -90 Total impairment charges for the period -117 -10 -34 -161 115 179 1,813 2,106 1 Remeasurements represents the current year change of expected credit loss allowances mainly attributable to changes in volumes such as partial repayments and changes in the credit quality of existing loans remaining in their stage. 2 Including POCI. A release of EUR46million in impairments was recorded for 2021(2020: addition of EUR2,303million), resulting in acost of risk of -7bps in 2021, compared to 78bps in 2020. Releases were attributable to a more favourable economic scenario during the year, partly offset by additions from management overlays. Additions for individual files classified in stage 3 during 2021 were limited. Additions for existing stage 3 files were attributable to the oil and gas and energy-offshore sectors in CIB. A release of EUR37million was recorded for CIB in 2021, while an increase in impairment charges of EUR1,659million was recorded in 2020. In 2020, three exceptional client files contributed EUR629million, while the other impairment charges were attributable to additions from individual files in the oil and gas and energy-offshore sectors. The CIB wind-down continued in 2021, resulting in a large outflow of exposure and the release of associated impairments in our CIB non-core portfolio. In addition, a more favourable economic scenario compared to the insights in Q4 2020 led to releases in impairments. Inflows from individual files were limited in 2021, but additions on existing files were recorded in the oil and gas and energy-offshore sectors. Additions for Commercial Banking amounted to EUR41million in 2021 (2020: EUR542million) and were attributable to management overlays, including one for stage 3 collateralised loans and one for vulnerable sectors. The net impact on individual files resulted in a small release, mainly contributed to by the food sector and offset by additions for several sectors. For residential mortgages, a release of EUR46million was recorded in 2021, compared to a release of EUR18million in 2020. The main contributor was the improvement in the economic outlook during the year as the Dutch economy recovered more quickly than had been expected at the end of 2020. This, together with an improved risk perception and decreasing volumes in our mortgages portfolio, resulted in a release of impairments in 2021. Based on an expected loss analysis of the current and projected portfolio, including the wind-down of CIBnon- core, we revised our long-term expectations of the cost ofrisk from 25-30bps to around 20bps. 123 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Credit risk review / Risk management / Risk, funding & capital Individual and collective loan impairment allowances and management overlays b 31 December 2021 (inmillions) Banks Residential mortgages Consumer loans Corporate loans Other loans Total loans and advances Off-balance Individual impairments Stage 3 1 46 1,389 3 1,438 116 Total individual impairments 46 1,389 3 1,438 116 Collective impairments Stage 1 10 8 23 130 172 17 Stage 2 22 45 291 1 360 20 Stage 3 1 52 162 243 456 Total collective impairments 10 82 230 664 1 988 37 - of which management overlay 24 46 354 424 Total impairments 10 82 276 2,053 4 2,426 153 Carrying amount of loans, determined to be impaired, before deducting any assessed impairment allowance 1,264 409 5,019 9 6,701 1 Including POCI. 31 December 2020 (inmillions) Banks Residential mortgages Consumer loans Corporate loans Other loans Total loans and advances Off-balance Individual impairments Stage 3 1 2 58 2,296 3 2,359 19 Total individual impairments 2 58 2,296 3 2,359 19 Collective impairments Stage 1 6 14 38 243 301 16 Stage 2 44 41 316 400 10 Stage 3 1 56 158 198 412 2 Total collective impairments 6 114 237 757 1,113 29 - of which management overlay 15 33 242 290 Total impairments 6 116 294 3,053 3 3,472 48 Carrying amount of loans, determined to be impaired, before deducting any assessed impairment allowance 1,124 456 6,873 21 8,474 1 Including POCI. Total collective impairments amounted to EUR988million at 31 December 2021. These impairments included expected credit losses (ECL) as calculated by our IFRS 9 models and the management overlays we recorded. The ECL is calculated taking into account a probability- weighted average of three economic scenarios. As the ECL model outcomes do not always reflect the current economic environment and circumstances, additional management overlays are applied to incorporate potential risks not fully captured by the model outcomes. During 2021, management overlays increased by EUR134million, rising to a total of EUR424million at the year-end (EUR290million at 31 December 2020). These were mainly recorded for risks in the corporate loans portfolios, which increased by EUR110million to EUR354million and comprised the following: H In the first half of 2021, an overlay was recorded for clients in vulnerable sectors within Commercial Banking to reflect the risk of loans in these sectors until borrowers’ updated financial information has been reviewed. H Government support had a positive effect on clients’ payment behaviour and led to an all-time low number of bankruptcies. An overlay taken in 2020 for Commercial Banking clients, to capture any credit risk deterioration that can be expected after government support measures end, was maintained and extended to ourCIBportfolio in H1 2021. H The existing overlay for the CIB non-core portfolio, whichcovers anticipated additional risk costs relating tothe wind-down, decreased over the year, in line with the decreasing exposure of this portfolio. H In H2 2021, an overlay for collateralised loansin stage 3 was recorded for Commercial Banking. 124 ABN AMRO Integrated Annual Report 2021 Compared to 31 December 2020, management overlays forour mortgage portfolio increased by EUR9million owing to an overlay for the impact of excessive increases in property prices on the outcome of the IFRS 9 models. Amanagement overlay to cover the refinancing risk of interest-only mortgages was maintained. The management overlays within consumer lending portfolios increased by EUR14million owing to the overlay taken for tail risk in the wind-down of a retail banking portfolio. All management overlays represent best estimates of therisks involved. Underlying reasoning and calculations aredocumented and discussed and approved by the Impairments and Provisioning Committee (IPC). Relevant experience related to the impact of Covid-19 on the model outcomes will be used to improve the models over time and reduce the management overlays. Macroeconomic scenarios and ECL sensitivity The tables below show the scenarios used for calculating the expected credit loss (ECL) at 31 December 2021 and31December 2020. At the end of 2021, ABNAMRO economists increased their 2021 eurozone and Dutch growth forecasts upwards, based on the stronger economic recovery and supported by a quicker than expected rebound in global trade, continued fiscal and monetary support from governments, low unemployment and the continued rise in residential real estate prices in the Netherlands. Inflationary pressures linked to energy prices and supply disruptions areexpected to be limited to the first half of 2022. The resilience of the Dutch economy to successive lockdowns is positively noted as a risk-mitigating factor for the year ahead. On the back of these favourable economic conditions, the weight of the negative scenario was reduced from 40% to 30%. Macroeconomic scenarios in 2021 b (inmillions) Weight Macroeconomic variable 2022 2023 2024 2025 Unweighted ECL 4 Weighted ECL 4 Real GDP Netherlands 1 4.5% 2.9% 2.5% 1.6% Positive 10% Unemployment 2 2.7% 2.3% 2.3% 2.2% 495 House price index 3 12.5% 5.0% 3.5% 3.0% Real GDP Netherlands 3.8% 2.4% 2.0% 1.4% Baseline 60% Unemployment 3.1% 2.8% 2.8% 2.8% 510 533 House price index 10.0% 4.0% 3.0% 3.0% Real GDP Netherlands 2.7% 0.7% 2.3% 1.6% Negative 30% Unemployment 4.0% 4.2% 3.4% 3.2% 591 House price index 0.0% -7.5% -10.0% -2.5% 1 Real GDP Netherlands, % change year-on-year. 2 Unemployment Netherlands, % of labour force. 3 House price index Netherlands - average % change year-on-year. 4 Excluding ECL for stage 3 and POCI. Macroeconomic scenarios in 2020 b (inmillions) Weight Macroeconomic variable 2021 2022 2023 2024 Unweighted ECL 4 Weighted ECL 4 Real GDP Netherlands 1 4.4% 4.3% 2.0% 1.7% Positive 10% Unemployment 2 6.2% 6.2% 5.6% 4.8% 653 House price index 3 5.0% 3.0% 2.0% 3.0% Real GDP Netherlands 3.0% 3.6% 2.3% 1.8% Baseline 50% Unemployment 6.4% 7.9% 6.9% 6.1% 688 703 House price index 0.0% 0.0% 2.0% 3.0% Real GDP Netherlands 0.7% 3.0% 1.0% 1.4% Negative 40% Unemployment 6.8% 8.4% 7.8% 6.8% 734 House price index -3.0% -5.0% 0.0% 3.0% 1 Real GDP Netherlands, % change year-on-year. 2 Unemployment Netherlands, % of labour force. 3 House price index Netherlands - average % change year-on-year. 4 Excluding ECL for stage 3 and POCI. 125 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Credit risk review / Risk management / Risk, funding & capital Forborne, past due and credit-impaired loans by geography and industry Forborne, past due and credit-impaired loans by geography 31 December 2021 (inmillions) Forborne exposure Exposures past due, but not stage 3 or POCI Stage 3 exposures 1 Allowances for stage 3 1 Stage 3 charges for the period 1 The Netherlands 9,473 1,645 5,220 1,190 -157 Rest of Europe 1,293 367 930 349 101 USA 106 70 107 18 -30 Asia 3 220 190 -1 Rest of the world 3 11 24 223 147 52 Total loans and advances 11,186 2,106 6,701 1,894 -35 31 December 2020 Forborne exposure Exposures past due, but not stage 3 or POCI Stage 3 exposures 1 Allowances for stage 3 1 Stage 3 charges for the period 1 The Netherlands 9,631 1,811 5,706 1,429 565 Rest of Europe 1,622 764 1,126 428 369 USA 781 4 491 157 397 Asia 197 4 662 489 307 Rest of the world 666 32 489 268 175 Total loans and advances 12,896 2,614 8,474 2,771 1,812 1 Including POCI. The ongoing reduction in the CIB non-core loan book led to a decline in forborne loans and stage 3 exposures and allowances in all geographies outside the Netherlands. The decline in forborne exposures in the Netherlands also reflects residential mortgages that were repaid or ceased to be forborne. Stage 3 exposures and allowances in the Netherlands decreased due to a decline in Commercial Banking, mostly as a result of repayments. Contrary to the general declining trend, arrears in the USA rose by EUR64million owing to a single client. The respective client returned to current status in January 2022. 126 ABN AMRO Integrated Annual Report 2021 Forborne, past due and credit-impaired loans by industry 31 December 2021 (inmillions) Gross carrying amount 3,4 Forborne exposures Forborne ratio Exposures past due, but not stage 3 or POCI Past due ratio Stage 3 exposures 5 Stage 3 ratio 5 Allowances for impairments for identified credit risk Stage 3 impairment charges for the period 5 Loans and advances by industry sector Loans and advances banks 2,811 Financial services 1 30,145 121 0.4% 208 0.7% 170 0.6% 94 5 Industrial goods and services 16,918 2,201 13.0% 398 2.4% 1,382 8.2% 457 -41 Real estate 15,309 506 3.3% 229 1.5% 325 2.1% 68 2 Oil and gas 3,162 126 4.0% 0.0% 428 13.5% 315 11 3 Food and beverage 10,804 1,328 12.3% 103 1.0% 854 7.9% 160 -65 Retail 4,477 742 16.6% 21 0.5% 519 11.6% 182 13 Healthcare 3,616 370 10.2% 13 0.4% 206 5.7% 36 -9 Construction and materials 3,041 250 8.2% 16 0.5% 299 9.8% 136 -12 Travel and leisure 3,452 1,416 41.0% 6 0.2% 480 13.9% 84 -2 Utilities 2,788 147 5.3% 1 0.0% 58 2.1% 9 -5 Automobiles and parts 1,545 151 9.8% 13 0.9% 5 0.3% 2 Technology 1,112 56 5.0% 24 2.2% 36 3.3% 18 4 Other 2 7,213 442 6.1% 54 0.8% 330 4.6% 94 -9 Subtotal industry classification benchmark 103,581 7,857 7.6% 1,086 1.0% 5,091 4.9% 1,654 -5 Private individuals (non-industry classification benchmark) 154,593 3,296 2.1% 996 0.6% 1,599 1.0% 238 -31 Public administration (non-industry classification benchmark) 436 33 7.7% 24 5.5% 10 2.4% 2 1 Total non-industry classification benchmark 155,029 3,330 2.1% 1,020 0.7% 1,610 1.0% 240 -30 Total loans and advances customers 258,611 11,186 4.3% 2,106 0.8% 6,701 2.6% 1,894 -35 Total loans and advances 261,421 11,186 4.3% 2,106 0.8% 6,701 2.6% 1,894 -35 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, basic resources, media, chemicals, telecommunication and insurance, in addition to unclassified. 3 Excluding loans at fair value through P&L. 4 Excluding fair value adjustments from hedge accounting. 5 Including POCI. 127 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Credit risk review / Risk management / Risk, funding & capital 31 December 2020 (inmillions) Gross carrying amount 3,5 Forborne exposures Forborne ratio Exposures past due, butnot stage 3 or POCI Past due ratio Stage 3 exposures 6 Stage 3 ratio 6 Allowances for impairments for identified credit risk Stage 3 impairment charges for the period 5 Loans and advances by industry sector Loans and advances banks 3,399 Financial services 1 20,785 263 1.3% 104 0.5% 209 1.0% 96 219 Industrial goods and services 17,342 2,684 15.5% 444 2.6% 1,764 10.2% 516 262 Real estate 12,070 425 3.5% 182 1.5% 381 3.2% 67 27 Oil and gas 6,167 1,204 19.5% 0.0% 1,120 18.2% 637 521 Food and beverage 12,452 1,299 10.4% 95 0.8% 1,283 10.3% 399 155 Retail 4,677 741 15.8% 172 3.7% 400 8.6% 185 110 Healthcare 3,651 432 11.8% 20 0.6% 293 8.0% 44 -9 Construction and materials 2,760 338 12.2% 78 2.8% 268 9.7% 154 43 Travel and leisure 2,938 1,112 37.8% 26 0.9% 393 13.4% 84 66 Utilities 2,113 139 6.6% 18 0.8% 65 3.1% 21 6 Automobiles and parts 1,301 152 11.7% 63 4.8% 6 0.4% 1 Technology 732 47 6.4% 10 1.4% 36 4.9% 5 159 Other 2 8,717 472 5.4% 135 1.6% 747 8.6% 312 149 Subtotal industry classification benchmark 95,706 9,307 9.7% 1,347 1.4% 6,966 7.3% 2,522 1,710 Private individuals (non-industry classification benchmark) 154,651 3,576 2.3% 1,248 0.8% 1,482 1.0% 248 100 Public administration (non-industry classification benchmark) 1,025 13 1.3% 18 1.8% 26 2.5% 1 3 Total non-industry classification benchmark 155,676 3,589 2.3% 1,266 0.8% 1,508 1.0% 249 103 Total loans and advances customers 251,381 12,896 5.1% 2,614 1.0% 8,474 3.4% 2,771 1,812 Total loans and advances 3,4 254,781 12,896 5.1% 2,614 1.0% 8,474 3.3% 2,771 1,812 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, basic resources, media, chemicals, telecommunication and insurance, in addition to unclassified. 3 Excluding loans at fair value through P&L. 4 ABNAMRO changed its presentation compared to previous reports. The table now shows total loans and advances to be more consistent with other risk disclosures in this report. 5 Excluding fair value adjustments from hedge accounting. 6 Including POCI. The continued reduction in the non-core loan book was reflected in the decrease in forborne and stage 3 exposures in the industrial goods and services, food and beverage, basic resources, and oil and gas sectors. The decrease in stage 3 exposures in industrial goods and services, food and beverage, healthcare and real estate was also related, albeitto a lesser extent, to the decrease in corporate loansin Commercial Banking, mostly due to repayments. Compared to the previous year, the largest declines in arrears were in the private individuals and retail sectors, offset by an increase in arrears in financial services. Credit risk mitigation b Collateral reporting is based on the net collateral value (NCV). The NCV represents the amount expected to be recovered from the collateral pledged to the bank if the client defaults. Where necessary, certain discounts are applied. The NCV is approached by an average recovery rate observed for the specific type of collateral and, where applicable, by applying haircuts, for example in the event ofcurrency mismatches. Surplus collateral is the amount ofover-collateralisation, calculated on an individual basis. Asurplus is not included for guarantees as the debtor cannot be held liable for more than the maximum debt. 128 ABN AMRO Integrated Annual Report 2021 Financial assets: offsetting, netting, collateral and guarantees b 31 December 2021 Offset in the statement of financial position Not offset in the statement of financial position Net exposure 5 (inmillions) Carrying amount before balance-sheet netting Less: balance sheet netting with gross liabilities Carrying amount 2 Master netting agree- ment 3 Financial instru- ments collateral Property & equip- ment Other collateral and guar- antees Total risk mitigation - of which surplus collateral 4 Financial assets held for trading 1,155 1,155 1,155 Derivatives 3,785 3,785 2,312 85 2,397 1,388 Financial investments 43,165 43,165 43,165 Securities financing 19,659 3,521 16,138 85 18,808 18,893 2,915 160 Interest-bearing deposits 1,538 349 1,189 36 1 282 318 871 Loans and advances 1,355 1,355 967 927 1,893 923 385 Other 257 257 257 Total loans and advances banks 3,150 349 2,801 1,002 927 282 2,211 923 1,513 Residential mortgages 146,269 146,269 2,779 262,635 355 265,768 123,226 3,727 Consumer loans 10,519 1 10,518 3,856 6,465 28 10,349 4,107 4,276 Corporate loans 88,038 3,632 84,405 2,943 26,669 50,828 3,693 84,132 28,148 28,421 Other loans and advances customers 15,003 15,003 163 75 28 267 44 14,779 Fair value adjustment from hedge accounting 1,951 1,951 1,951 Total loans and advances customers 1 261,779 3,633 258,146 3,105 33,304 320,003 4,103 360,516 155,525 53,155 Loans at fair value through P&L 104 104 104 Total loans and advances customers 261,884 3,633 258,251 3,105 33,304 320,003 4,103 360,516 155,525 53,259 Other assets 3,330 1 3,330 2 370 69 441 330 3,218 Totalon-balance sheet subject to netting and pledged agreements 336,127 7,504 328,624 6,508 53,494 320,003 4,454 384,459 159,693 103,858 Assets not subject to netting and pledged agreements 70,490 70,490 70,490 Total assets 406,617 7,504 399,113 6,508 53,494 320,003 4,454 384,459 159,693 174,347 Totaloff-balance sheet 93,977 93,977 4,683 8,130 1,961 14,774 5,022 84,225 Total on- and off-balance sheet 500,594 7,504 493,091 6,508 58,178 328,133 6,415 399,233 164,714 258,572 1 Excluding loans at fair value through P&L. 2 Carrying amount includes loan impairment allowances where applicable. 3 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 the column Financial instruments. 4 Surplus collateral is the amount of over-collateralisation, calculated on an individual basis. 5 Net exposure represents the portfolio corrected for the surplus amount and gives a view on the potential shortfall in collateral on the total portfolio. 129 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Credit risk review / Risk management / Risk, funding & capital 31 December 2020 Offset in the statement of financial position Not offset in the statement of financial position Net exposure 5 (inmillions) Carrying amount before balance-sheet netting Less: balance sheet netting with gross liabilities Carrying amount 2 Master netting agree- ment 3 Financial instru- ments collateral Property & equip- ment Other collateral and guar- antees Total risk mitigation - of which surplus collateral 4 Financial assets held for trading 1,315 1,315 1,315 Derivatives 6,381 6,381 4,209 4,209 2,172 Financial investments 47,455 47,455 47,455 Securities financing 18,423 1,699 16,725 144 22,255 22,399 5,899 225 Interest-bearing deposits 2,056 316 1,739 20 244 264 1,475 Loans and advances 1,339 1,339 890 87 98 1,075 129 394 Other 315 315 315 Total loans and advances banks 3,710 316 3,394 910 331 98 1,339 129 2,184 Residential mortgages 145,555 145,555 2,799 228,790 826 232,415 90,618 3,759 Consumer loans 10,938 10,937 6,504 7,010 55 13,570 7,523 4,891 Corporate loans 84,956 1,264 83,692 3,534 24,951 53,992 6,768 89,244 28,069 22,517 Other loans and advances - customers 7,729 7,729 709 95 13 817 43 6,954 Fair value adjustment from hedge accounting 3,838 3,838 3,838 Total loans and advances customers 1 253,017 1,264 251,753 4,243 34,255 289,887 7,662 336,046 126,252 41,959 Loans at fair value through P&L 406 406 347 347 1 60 Total loans and advances customers 253,423 1,264 252,159 4,243 34,255 289,887 8,008 336,393 126,253 42,019 Other assets 3,813 3,813 2 64 66 3,747 Totalon-balance sheet subject to netting and pledged agreements 334,521 3,279 331,242 9,508 56,840 289,985 8,072 364,405 132,281 99,118 Assets not subject to netting and pledged agreements 64,381 64,381 64,381 Total assets 398,902 3,279 395,623 9,508 56,840 289,985 8,072 364,405 132,281 163,499 Totaloff-balance sheet 100,188 100,188 6,901 9,071 4,499 20,470 6,476 86,194 Total on- and off-balance sheet 499,091 3,279 495,811 9,508 63,741 299,056 12,571 384,876 138,758 249,693 1 Excluding loans at fair value through P&L. 2 Carrying amount includes loan impairment allowances where applicable. 3 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 the column Financial instruments. 4 Surplus collateral is the amount of over-collateralisation, calculated on an individual basis. 5 Net exposure represents the portfolio corrected for the surplus amount and gives a view on the potential shortfall in collateral on the total portfolio. Except for residential mortgages, total risk mitigation decreased. The main reason for the increase in property andequipment for residential mortgages was indexation attributable to the tight housing market. As a result, surplus collateral also increased. For consumer loans, the decrease in total risk mitigation was mainly the result of a more conservative collateral reporting approach in Germany. Thisdid not affect net exposure, which decreased in line with the portfolio. The decline in total risk mitigation for corporate loans was evidenced by a decline in property and equipment, as well as in other collateral and guarantees. This was mainly driven by the exit of clients in line with thewind-down of CIB non-core. The total net exposure of loans and advances customers increased to EUR53.2billion in 2021 (31 December 2020: EUR42.0billion). This was primarily driven by other loans and advances and related to Clearing activities (i.e. posting cash collateral and default fund contributions). The increase in net exposure of corporate loans was related to new client lending in the context of TLTRO. 130 ABN AMRO Integrated Annual Report 2021 Financial assets: offsetting, netting, collateral andguarantees for credit-impaired assets b Collateral and guarantees for credit-impaired assets (stage 3 and POCI) represent credit risk mitigation based on the NCV for clients in default. The carrying amount includes expected credit loss allowances, based on the probability- weighted present value of all expected cash shortfalls over the remaining life of the financial instrument for both on- and off-balance sheet exposures. The Financial Restructuring & Recovery department identifies the most likely scenarios for non-programme lending defaulted clients (going concern or gone concern) and estimates theamounts and timing ofexpected future cash flows. Thisexplains why a net exposure remains after collateral pledged to the bank istaken into account. 31 December 2021 Offset in the statement of financial position Not offset in the statement of financial position Net exposure 4 (inmillions) Carrying amount before balance-sheet netting Less: balance sheet netting with gross liabilities Carrying amount 1 Master netting agree- ment 2 Financial instru- ments collateral Property & equip- ment Other collateral and guar- antees Total risk mitigation - of which surplus collateral 3 Loans and advances banks Residential mortgages 1,212 1,212 12 1,821 1 1,834 632 11 Consumer loans 201 201 12 103 3 11 8 33 11 7 Corporate loans 3,387 3,387 5 648 2,504 333 3,491 708 603 Other loans and advances customers 6 6 2 2 4 Totalloans and advancescustomers 4,806 4,806 5 672 4,428 340 5,445 1,373 735 Total loans and advances 4,806 4,806 5 672 4,428 340 5,445 1,373 735 31 December 2020 Loans and advances banks Residential mortgages 1,066 1,066 10 1,379 5 1,394 338 10 Consumer loans 241 241 49 126 8 182 68 127 Corporate loans 4,379 4,379 756 3,152 644 4,552 863 690 Other loans and advances customers 18 18 9 9 9 Totalloans and advancescustomers 5,703 5,703 815 4,656 666 6,137 1,269 835 Total loans and advances 5,703 5,703 815 4,656 666 6,137 1,269 835 1 Carrying amount includes loan impairment allowances where applicable. 2 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. Cashcollateral not part of master netting agreements has been reported under the column Financial instruments. 3 Surplus collateral is the amount of over-collateralisation, calculated on an individual basis. 4 Net exposure represents the portfolio corrected for the surplus amount and gives a view on the potential shortfall in collateral on the total portfolio. In line with the decrease in the stage 3 carrying amount toEUR4.8billion (31 December 2020: EUR5.7billion), total risk mitigation decreased to EUR5.4billion in 2021 (31December 2020: EUR6.1billion). This decrease was mainly observed in property and equipment and, to a lesser extent, in financial instruments and other collateral and guarantees. The decline in property and equipment for corporate loans was partly offset by an increase for residential mortgages due to indexation. The main reason why other collateral and guarantees decreased was lower intangibles and other non-financial collateral from CIB clients in the United States. Financial instruments in corporate loans recorded lower collateral in the form ofreceivables from Commercial Banking and CIB clients. Asthe decrease in the stage 3 portfolio (including POCI) exceeded the decline in total risk mitigation, net exposure decreased by EUR100million to EUR735million at 31December 2021. During 2021 ABNAMRO obtained property and equipment by taking possession of collateral held as security for loans and advances. The total amount of such assets held on 31December 2021 amounted to EUR4million (2020: EUR3million). ABNAMRO does not intend to use these assets in its operations and will pursue timely and orderly realisation of the collateral. 131 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Credit risk review / Risk management / Risk, funding & capital Financial liabilities: offsetting, netting, collateral and guarantees b 31 December 2021 Offset in the statement of financial position Not offset in the statement of financial position Net exposure 3 (inmillions) Carrying amount before balance-sheet netting Less: balance sheet netting with gross assets Carrying amount Master netting agreement 1 Financial instruments collateral Total risk mitigation - of which surplus collateral 2 Financial liabilities held for trading 687 687 687 Derivatives 4,344 4,344 3,706 3,706 638 Securities financing 13,015 3,521 9,494 78 11,042 11,120 3,306 1,680 Deposits 38,133 67 38,066 507 507 37,558 Other 10 10 10 Due to banks 38,143 67 38,076 507 507 37,568 Deposits 254,468 3,915 250,553 1,732 1,732 248,821 Other borrowings 665 665 484 484 181 Due to customers 255,133 3,915 251,218 2,216 2,216 249,002 Other liabilities 4,758 1 4,757 4,757 Totalliabilities subject to netting arrangements 316,079 7,504 308,575 6,508 11,042 17,550 3,306 294,332 Remaining liabilities not subject to netting 68,538 68,538 68,538 Total liabilities 384,617 7,504 377,114 6,508 11,042 17,550 3,306 362,870 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 the column Financial instruments. 2 Surplus collateral is the amount of over-collateralisation, calculated on an individual basis. 3 Net exposure represents the portfolio corrected for the surplus amount and gives a view on the potential shortfall in collateral on the total portfolio. 31 December 2020 Offset in the statement of financial position Not offset in the statement of financial position Net exposure 3 (inmillions) Carrying amount before balance-sheet netting Less: balance sheet netting with gross assets Carrying amount Master netting agreement 1 Financial instruments collateral Total risk mitigation - of which surplus collateral 2 Financial liabilities held for trading 563 563 563 Derivatives 7,391 7,391 6,653 6,653 738 Securities financing 13,061 1,699 11,363 144 12,344 12,488 3,801 2,676 Deposits 36,782 73 36,709 731 731 35,978 Other 10 10 10 Due to banks 36,792 73 36,719 731 731 35,988 Deposits 239,112 1,508 237,604 1,221 1,221 236,383 Other borrowings 966 966 758 758 208 Due to customers 240,078 1,508 238,570 1,979 1,979 236,591 Other liabilities 4,054 4,053 4,053 Totalliabilities subject to netting arrangements 301,938 3,279 298,659 9,508 12,344 21,851 3,801 280,609 Remaining liabilities not subject to netting 75,975 75,975 75,975 Total liabilities 377,913 3,279 374,634 9,508 12,344 21,851 3,801 356,583 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 the column Financial instruments. 2 Surplus collateral is the amount of over-collateralisation, calculated on an individual basis. 3 Net exposure represents the portfolio corrected for the surplus amount and gives a view on the potential shortfall in collateral on the total portfolio. 132 ABN AMRO Integrated Annual Report 2021 Developments in specific portfolios The following section provides a more detailed overview of developments in specific portfolios andproducts. Residential mortgages The Dutch housing market is very tight, with only 1.3 houses available for sale for every potential buyer at the end of 2021 (2020: 1.9 houses). Property prices reached a record high during the year, mainly due to low interest rates. Despite these low interest rates, cost levels for home buyers were pushed up by the high property prices. The housing price index published by Statistics Netherlands (CBS) at the end of 2021 was 20.3% higher than at the end of 2020. According to the Dutch Land Registry (Kadaster), the number of transactions in the Dutch housing market in 2021 was 4.0% lower than in 2020, and 6.5% lower than the peak in 2017. Residential mortgage indicators (inmillions) 31 December 2021 31 December 2020 Gross carrying amount excluding fair value adjustment from hedge accounting 146,351 145,672 - of which Nationale Hypotheek Garantie (NHG) 31,557 33,367 Fair value adjustment from hedge accounting 1,442 3,186 Carrying amount excluding fair value adjustment from hedge accounting 146,269 145,555 Exposure at Default 1 163,737 163,756 RWA 1 24,099 16,459 RWA/Exposure at Default 14.7% 10.1% Forbearance ratio 2.1% 2.3% Past due ratio 0.6% 0.6% Stage 3 ratio 0.9% 0.8% Stage 3 coverage ratio 4.1% 5.2% Cost of risk (in bps) 2 -3 -1 Average LtMV (indexed) 3 56% 61% Average LtMV - excluding NHG loans (indexed) 3 56% 59% Total risk mitigation 265,768 232,415 Total risk mitigation/carrying amount excluding fair value adjustment from hedge accounting 181.7% 159.7% 1 The RWA and Exposure at Default amounts are based on the exposure class Secured by immovable property. This scope is slightly broader than the residential mortgage portfolio. 2 Annualised impairment charges on loans and advances customers for the period divided by the average loans and advances customers on the basis of gross carrying amount and excluding fairvalue adjustment from hedge accounting. 3 As of Q4 2021, the indexation of collateral values is based on Calcasa information instead of the CBS index. This is applied prospectively in our mortgage portfolio indicators, previously published data are not updated. The residential mortgage portfolio increased by 0.5% toEUR146.4billion in 2021 (31 December 2020: EUR145.7billion). ABNAMRO’s market share in newmortgage production in 2021 came out at 16% (2020:14%), reflecting strong operational capabilities andwell-balanced pricing strategy in a competitive market. The proportion of amortising mortgages continued to increase, totalling 41% at 31 December 2021 (31 December 2020: 37%). Total redemptions were 7% higher than in 2020. Contractual redemptions gradually increased in line with changes in the portfolio composition. Extra repayments in 2021 amounted to EUR2.4billion, an increase of 9% compared to 2020. The share of mortgages covered by the National Mortgage Guarantee (NHG) scheme decreased slightly compared to 31 December 2020, from 23% to 22%. Credit quality indicators In general, the credit quality indicators for residential mortgages improved in line with the performance of theDutch housing market. The implementation of the newdefinition of default (DoD) and associated credit risk models follows from EBA guidelines aimed at improving consistency in the measurement of credit risk across institutions and jurisdictions in the EU. The past due ratio remained stable. Affordability of mortgages remained good this year, due to the government’s prolonged Covid-19 support measures, combined with lower consumer spending. Stage 3 exposure increased as a result of the implementation of the new DoD. The coverage ratio for stage 3 decreased as a result of improved credit quality and higher collateral values. 133 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Credit risk review / Risk management / Risk, funding & capital Risk-weighted assets The RWA for the residential mortgage portfolio increased to EUR24.1billion (2020: EUR16.5billion). The increase in the 1 Calcasa is the leading automated valuation model provider in the Netherlands and provides estimation of the current open market and foreclosure value of residential property based on comparable sales and hedonic regression techniques. RWA was mainly caused by the impact of the DNB mortgage floor. Exposure at default was stable at EUR163.7billion (31 December 2020: EUR163.8billion). Residential mortgages to indexed market value 31 December 2021 31 December 2020 Gross carrying amount Percentage of total Gross carrying amount Percentage of total (inmillions) - of which guaranteed 2 - of which unguaranteed - of which guaranteed 2 - of which unguaranteed LtMV category 1 <50% 55,593 38.0% 7.3% 30.7% 42,205 29.0% 3.6% 25.3% 50% - 80% 69,993 47.8% 11.8% 36.1% 73,972 50.8% 13.9% 36.9% 80% - 90% 11,803 8.1% 1.6% 6.4% 17,859 12.3% 3.4% 8.8% 90% - 100% 6,932 4.7% 0.8% 3.9% 9,983 6.9% 1.8% 5.0% >100% 1,953 1.3% 0.1% 1.3% 1,347 0.9% 0.2% 0.8% Unclassified 77 0.1% 306 0.2% Total 146,351 100% 145,672 100% 1 As of Q4 2021, the indexation of collateral values is based on Calcasa information instead of the CBS index. This is applied prospectively in our mortgage portfolio indicators, previously published data are not updated. 2 NHG guarantees. With effect from Q4 2021 the indexation of collateral values has been based on Calcasa 1 information instead of on the CBS index. This is reflected in the mortgage portfolio indicators. The long-term loan-to-market value (LtMV) of the bank’s portfolio is expected to decrease further as a combined result of rising housing prices, contractual and extra redemptions, and the gradual reduction in mortgage interest tax relief. The gross carrying amount of mortgages with an LtMV in excess of 100% increased due to the changed indexation method in Q4 2021 and totalled EUR2.0billion at year-end 2021 (31 December 2020: EUR1.3billion). It should be noted that LtMVs in excess of 100% do not necessarily indicate clients in financial difficulties. ABNAMRO actively approaches clients with an interest-only mortgage in combination with a high LtMV level to discuss changing their mortgage product. Mortgages with an LtMV >100% account for 1.3% of total mortgages, while approximately 2% of the extra repayments relate to this category. Breakdown of residential mortgage portfolio by loan type 31 December 2021 31 December 2020 (inmillions) Gross carrying amount Percentage of total Gross carrying amount Percentage of total Interest only (partially) 41,953 29% 43,174 30% Interest only (100%) 21,995 15% 22,847 16% Redeeming mortgages (annuity/linear) 60,183 41% 54,084 37% Savings 10,788 7% 12,240 8% Life (investment) 7,223 5% 8,571 6% Other 1 4,208 3% 4,756 3% Total 146,351 100% 145,672 100% 1 Other includes hybrid and unclassified mortgage types. The hybrid portfolio consists of a combination of savings and investment mortgages. Fully interest-only mortgages decreased from 16% to 15% of the total mortgage portfolio in 2021, while approximately 20% of the extra repayments related to this type of loan. We have almost no fully interest-only mortgages with an LtMV >100%. The only category that increased in volume during the year was redeeming mortgages. 134 ABN AMRO Integrated Annual Report 2021 Residential mortgages to indexed market value for 100% interest-only 31 December 2021 31 December 2020 Percentage of total Percentage of total Loan-to-Market Value category 1 <50% 12% 11 % 50% - 70% 2% 4% 70% - 100% 1% 1% >100% 0% 0% Total 2 15% 16% 1 As of Q4 2021, the indexation of collateral values is based on Calcasa information instead of the CBS index. This is applied prospectively in our mortgage portfolio indicators, previously published data are not updated. 2 Percentages of the total mortgage portfolio. Residential mortgages - energy labels Energy labels provide information about properties’ energy consumption. The most energy-efficient category is ‘higher than A’ and the least energy-efficient category is label G. 31 December 2021 31 December 2020 (inmillions) Gross carrying amount 1 Percentage of total Gross carrying amount 1 Percentage of total Higher than A 3,313 2% 0% A 32,940 23% 31,959 22% B 21,274 15% 22,180 15% C 31,716 22% 32,766 22% D 11,630 8% 11,607 8% E 8,795 6% 8,881 6% F 13,044 9% 13,550 9% G 15,327 10% 15,954 11 % No label 3,166 2% 3,131 2% Unknown label 5,145 4% 5,643 4% Total 146,351 100% 145,672 100% 1 Including both energy labels based on the applicable regulation before and after 1 January 2021. The proportion of residential mortgages with energy label A increased compared to 2020 and a new category (‘higher than A’)was introduced. This new category derives from a new nationwide energy label methodology introduced at the start of 2021. This new methodology includes energy labels A+ to A++++. The increase in A and higher-than-A labels was mainly due to a relatively higher inflow and relatively lower outflow in these categories, with opposite movements in the inflows and outflows of lower energy labels (i.e. labels B to G ). These movements are consistent with ABNAMRO’s ambition to expand the proportion of A and higher-than-A labels in the portfolio. Commercial Real Estate (CRE) The size of the Dutch commercial real estate investment market decreased in 2021 as a result of the economic uncertainty caused by Covid-19 and newly introduced policies limiting investors’ options for investing in residential real estate. A total of EUR17.1billion was invested in 2021, a decrease of 9.4 per cent compared to 2020, marking a decline for the second year in a row. Although rents decreased in 2021, the value of offices increased as a result of economic growth, the low unemployment rate and low interest rates. Owing to Covid-19, the work-from-home trend continued; the market expectation is that this will result in office space being used differently in future, with more space for collaborations and fewer work spaces. However, this will not necessarily reduce demand for office space in the long run. The residential market saw a small decline in value in the first quarter of 2021, but increased again in the following quarters. The highest growth is currently outside the major cities. The residential market will benefit from the low unemployment rate. Demand for private rental properties remains high due to rising housing prices, stricter mortgage rules, lack of new-builds and the more limited access to social housing rentals. The industrial market benefited in 2021 from the continued strong rise in e-commerce. This trend had already been visible in the past few years, especially in 2020, but gained 135 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Credit risk review / Risk management / Risk, funding & capital even more traction in 2021 as retail premises were again closed for longer periods in response to the need to get Covid-19 under control. At the same time, the continuing rise of e-commerce is putting pressure on the retail market, which is struggling. Both rents and values of retail real estate have fallen and will continue to do so. CRE portfolio Exposure in the CRE portfolio is reported in line with the EBA guidelines on loan origination and monitoring and includes all loans aimed at acquiring CRE property or secured by CRE property, whereby CRE means any income- producing real estate, either existing or under development or renovation. It excludes social housing, property owned by end-users, buy-to-let housing below a market value ofEUR2million and unsecured general purpose lending. Thecredit exposure relating to the above definition is monitored on a quarterly basis and subject to an EAD limit. Compared to 2020, the gross carrying amount in2021 increased markedly by 9% to EUR13.6billion (31December 2020: EUR 12.4billion) as a result of new client lending in the context of TLTRO. This also had a positive effect on the credit quality indicators. The stage 3 impaired ratio decreased marginally to 2.6% (31 December 2020: 3.5%). The impairment rate was mainly seen in clients with retail properties. This was expected, given the impact of Covid-19. The CRE loan portfolio is largely collateralised by Dutch properties and consists primarily of investment loans that are well diversified across different asset types. To maintain a well-balanced portfolio and manage the total exposure to CRE within our risk appetite, we have limits and sub-limits in place in terms of EAD. The overview below per asset type is therefore expressed in EAD. Compared to 2020, and in line with the gross carrying amount, the EAD increased markedly by 12% in 2021 to EUR14.4billion (31 December 2020: EAD 12.9billion). During 2021, the asset type ‘other’ was refined (it previously included mixed asset types), resulting in a redistribution between existing asset types, and mostly to residential and retail properties. Residential Retail Industrial Office Other 1 1 Other asset types include mixed real estate and properties in the hospitality and parking industries. 2 Excluding Private Banking International. 3 Excluding collateral not defined as commercial real estate collateral, such as currency and deposits, financial guarantees and life insurance policies pledged. 2021 2,3 EAD EUR 14.4 billion 2020 2,3 EAD EUR 12.9 billion 33.2 18.812.2 11.9 23.8 43.8 21.3 13.7 13.0 8.2 Breakdown of CRE portfolio by asset type (in %) CRE energy labels With more focus on ESG and sustainability, ABN AMRO’s mission is to have an average A label in the CRE portfolio (Mission 2030). In the coming years, ABN AMRO will be working towards this goal by seeking to increase the A andhigher than A labels in the CRE portfolio and lowering the exposure to E-G energy labels. In line with this mission, the distribution of energy labels hasslightlyimproved,compared to 2020, with an increase in higher than A labels, and 64% of the CRE portfolio now having an energy label of D or higher (31 December 2020: 61%). Moreover, more than 90% of assets inthe CRE portfolio have an energy label (31 December 2020: 87%). Assets that are out of scope (e.g. land and parking spaces) are assigned to ‘No label’. Most labels reported are based on energy labels from EP-Online and are the officially registered labels of the properties. A small portion of the labels are calculated labels, and approximately 10% is unknown owing to the property being under development or not yet registered. 136 ABN AMRO Integrated Annual Report 2021 31 December 2021 31 December 2020 (inmillions) Gross carrying amount 3 Percentage of total Gross carrying amount 3 Percentage of total Higher than A 641 5% 131 1% A 4,110 32% 3,619 31% B 962 7% 1,029 9% C 1,658 13% 1,329 11 % D 910 7% 1,029 9% E 720 6% 616 5% F 493 4% 426 4% G 1,973 15% 1,615 14% No label 1 201 2% 335 3% Unknown label 2 1,257 10% 1,517 13% Total 3 12,924 100% 11,646 100% 1 No label relates to Parking and Land for which no energy labels are applicable. 2 Unknown label relates to property types which are expected to have an energy label. 3 Excluding Private Banking International. 4 Including both energy labels based on the applicable regulation before and after 1 January 2021. 137 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Credit risk review / Risk management / Risk, funding & capital Market risk in the trading book Total market risk exposure Market risk exposure traded and non-traded risk ABNAMRO is exposed to market risk in its trading book and banking book. The following table presents the market risk factors to which the assets and liabilities in the balance sheet are sensitive. 31 December 2021 31 December 2020 Carrying amount Market risk measure Carrying amount Market risk measure (inmillions) Traded risk Non-traded risk Traded risk Non-traded risk Assets subject to market risk Cash and balances at central banks 66,865 66,865 60,190 60,190 Financial assets held for trading 1,155 1,155 1,315 1,315 Derivatives 3,785 2,975 810 6,381 5,040 1,341 Financial investments 43,165 43,165 47,455 47,455 Securities financing 16,138 16,138 16,725 16,725 Loans and advances banks 2,801 2,801 3,394 3,394 Loans and advances customers 258,251 258,251 252,159 252,159 Other assets 6,955 6,955 8,005 8,005 Total assets 399,113 4,130 394,983 395,623 6,355 389,268 Liabilities subject to market risk Financial liabilities held for trading 687 687 563 563 Derivatives 4,344 3,545 799 7,391 6,159 1,233 Securities financing 9,494 9,494 11,363 11,363 Due to banks 38,076 38,076 36,719 36,719 Due to customers 251,218 251,218 238,570 238,570 Issued debt 59,688 59,688 66,949 66,949 Subordinated liabilities 7,549 7,549 8,069 8,069 Other liabilities 6,059 6,059 5,010 5,010 Total liabilities 377,114 4,231 372,882 374,634 6,722 367,912 Equity 21,999 21,999 20,989 20,989 Total liabilities and equity 399,113 4,231 394,882 395,623 6,722 388,901 Market risk management for the trading book b Positions held with trading intent and hedges for positions held with trading intent must be included in the bank’s trading book. The Central Trading Risk policy describes the positions included in the trading book and the criteria for transferring risk and positions between the trading and banking books. As part of its business strategy, ABNAMRO facilitates client orders, acts as a market maker in key markets and provides liquidity to clients, including institutional investors and private clients. Market risk in the trading book is the risk of losses in market value due to adverse market movements. The following market risks are inherent in the trading book: H Interest rate risk, arising from adverse changes in interest rate risk curves and/or interest rate volatilities; H Credit spread risk, arising from adverse changes in the term structure of credit spreads and/or from changes in the credit quality of debt securities or CDS reference entities, with an impact on default probabilities; This section provides information on themarket risk in traded assets and covers the following topics: H Total market risk exposure H Market risk management for the trading book H Market risk measurement for the trading book H Valuation adjustments H Review of 2021 results H Market risk banking book metrics 138 ABN AMRO Integrated Annual Report 2021 H Equity risk, arising from adverse changes in equity prices, dividends and volatilities; H Foreign exchange risk, arising from adverse changes in FX spot and forward rates and/or FX volatility. ABNAMRO has a detailed risk management framework in place to identify, measure and control market risk in the trading book. This risk management framework is in line with the three LoD model and provides assurance that the bank’s trading activities are consistent with its client- focused business strategy and moderate risk profile. In accordance with the strategy, the Business Risk Committee Trading annually approves trading mandates and limits, which define the nature and amount of the permitted transactions and risks, as well as the associated constraints. The limit utilisation is monitored and discussed by first and second LoD on a daily basis. The Business Risk Committee Trading is a subsidiary committee of the Group Risk Committee. Market risk measurement for the trading book b ABNAMRO 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 on a daily basis. Appropriate limits are set at bank level in the Risk Appetite Statement and at bank and business-line levels in the limit framework, in line with the general risk principles in the Central Trading Risk policy. Metrics and models are managed, reviewed, assessed and, if required, adjusted in a similar way as in the banking book. Other important tools to ensure the adequacy of the models, alongside the formal validation and review of models, are the daily explanation of risk reporting figures, periodic portfolio reviews and regular back-testing. Validation procedure For all models, including market risk models, we have a model risk policy in place. This policy requires that model assumptions and limitations are documented and independently validated by Model Validation. For material changes, the regulator performs an onsite investigation before such a model change is applied in production. Economic capital The 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. Stress testing and scenarioanalysis Stress testing and scenario analysis are designed to focus specifically on the impact of tail events that are outside the VaR confidence interval. We perform daily stress tests for large movements in risk factors. Scenario analyses 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 be based on historical or hypothetical events, or on a combination of the two. For each risk type, sensitivities are monitored against limits. This includes all risk types mentioned above and the base risks in the trading portfolio. In addition, the holding period is monitored as a measure of the liquidity of the positions. Valuation adjustments For the trading book, we take into account adjustments for counterparty risk on our clients (Credit Valuation Adjustment), ABNAMRO funding costs (Funding Valuation Adjustment) and ABNAMRO credit risk (Debt Valuation Adjustment). Trading book positions are subject to prudent valuation standards in accordance with regulatory requirements. The prudent value is derived from IFRS fair value accounting and includes additional value adjustments. Review of 2021 results Internal aggregated diversified and undiversified VaR for all trading positions b 31 December 2021 (inmillions) Commodities Equity Foreign exchange Interest rate Total undiversified VaR Diversified VaR VaR at last trading day of the period 0.1 1.0 1.1 0.9 Highest VaR 0.3 0.4 0.8 4.9 5.3 4.3 Lowest VaR 0.1 0.7 0.9 0.7 Average VaR 0.1 0.1 2.0 2.3 1. 8 31 December 2020 VaR at last trading day of the period 0.1 0.1 0.2 1.4 1.8 1.2 Highest VaR 0.5 0.3 0.8 5.7 6.1 3.9 Lowest VaR 0.1 0.1 0.6 0.9 0.7 Average VaR 0.2 0.1 0.2 2.4 2.8 2.2 139 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Market risk in the trading book / Risk management / Risk, funding & capital ABNAMRO applies a diversified portfolio VaR approach that 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 these returns are not perfectly correlated to one another, VaR figures based on a diversified portfolio approach will be lower than if the figures are calculated 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. The following graph shows the total one-day VaR at a 99% confidence level (‘VaR diversified’) and aggregation of the stand-alone risk factors (‘VaR undiversified’). The average 1-day VaR at a 99% confidence level moved from EUR 2.2 million to EUR 1.8 million, comparing 2020 to 2021. The decrease was mainly due to the volatile scenarios in the first six months of 2020 falling out of the 250-day VaRwindow. The volatility in the first half of 2020 was related to the Covid-19 outbreak. The average 1-day undiversified VaR at a 99% confidence level moved from EUR 2.8 million to EUR 2.3 million, comparing 2020 to 2021. The cause was the same as the one explaining the move in diversified VaR. In 2021 and 2020, interest rates were the largest VaR component. Theinterest rate component includes both specific risk (i.e.credit spread risk) and generic risk. Regulatory capital Market risk regulatory capital increased to EUR133million (31 December 2020: EUR106million) as risk-weighted assets increased to EUR1.3billion (31 December 2020: EUR1.7billion). The increase was due to increases in the SVaR and IRC, partly offset by a decrease in the VaR. Thestrongest effect was for the SVaR, due to position changes. The 1-day SVaR increased from EUR4million toEUR6million, which resulted in an increase in the SVaR RWA from EUR0.5billion to EUR0.8billion. IBOR reform In 2014, at the request of the G20, the Financial Stability Board issued a report on ‘Reforming Major Interest Rate Benchmarks’. This report set out several recommendations for strengthening existing benchmarks for key interbank offered rates (IBOR) in unsecured lending markets, and for promoting the development and adoption of alternative nearly risk-free reference rates, where appropriate. These recommendations led to a fundamental review of the key interest rate benchmarks used in global financial markets. In2021, public authorities in various jurisdictions continued to make progress on reforming or replacing the existing benchmarks in order to ensure a smooth transition. ABNAMRO introduced a bank-wide project, under the responsibility of the CFO and led by ALM and Treasury, to prepare the bank for the forthcoming changes in IBOR. Whereas the switch in the discounting regime for centrally cleared swaps was completed in 2020, work on the change in the discounting regime for bilateral counterparties continued throughout 2021. The changes required to move away from benchmark rates that will cease to exist were executed successfully during the year. Centrally cleared swaps denominated in CHF, JPY and GBP were migrated inDecember 2021. Financial instruments referencing benchmark interest rates that have been reformed, such as EURIBOR, will not need to transition. VaR diversified VaR undiversified 7.5 6.0 4.5 3.0 1.5 Jan 2021 Apr 2021 Jul 2021 Oct 2021 Dec 2021 VaR diversified and undiversified (in millions) 140 ABN AMRO Integrated Annual Report 2021 Market risk in the banking book Market risk in the banking book is the risk that the economic value of equity or the income of the bank declines because of unfavourable market movements. Market risk in the banking book consists predominantly of interest rate risk and credit spread risk in the liquidity portfolio. Funding spread risk and foreign exchange risk are also recognised as market risks in the banking book. However, these are relatively immaterial. Market risk management for the banking book b ABNAMRO has a detailed risk management framework in place to identify, measure and control market risk in the banking book. This framework provides assurance that the banking book activities remain consistent with the bank’s strategy to pursue a moderate risk profile. The day-to-day management is delegated from the Asset & Liability Committee to Asset and Liability Management, while Treasury is responsible for the execution of hedge transactions. These departments form the first line of defence. Market & ALM/T Risk Management acts as the second line of defence. The risk appetite is articulated in terms of net interest income, the economic value of equity and the economic capital for market risk in the banking book, and expresses the maximum loss the bank is willing to accept. The risk appetite is cascaded into a limit framework. Interest rate risk in the banking book Interest rate risk is the risk of losses in the economic value of equity or the bank’s net interest income (NII) due to yield curve developments. In order to measure interest rate risk, models are used and assumptions on client behaviour are made, most importantly with respect to the maturity of savings and the prepayment of mortgages. These assumptions influence the anticipated interest cash flow pattern. Interest rate risk is continuously managed in line with the risk appetite as the profile of assets and liabilities on the balance sheet can change if client behaviour changes. The main sources of interest rate risk are: H The maturity mismatch between assets and liabilities. ABNAMRO provides mortgages and commercial loans with fixed interest terms. These assets are funded by non-maturing deposits and wholesale funding with a shorter average interest maturity than the assets; H Client behaviour, which determines the maturity profile of some of our products. As we use models to predict this behaviour, we are exposed to model risk. To manage the interest rate sensitivity in the banking book and keep in line with the bank’s strategy and risk appetite, ABN AMRO uses a combination of portfolio (macro) hedges and specific asset or liability (micro) hedges. Micro hedges are used to swap fixed funding transactions and fixed investments in the liquidity buffer for floating interest rate positions. In addition, macro hedging is applied in order to align with the bank’s strategy to contribute to a stable NII while protecting the economic value of equity. Key assumptions for modellingclient behaviour From an interest rate risk perspective, the following aspects of client behaviour are the most important: H Client behaviour with respect to early redemption of residential mortgages. This has a significant impact on the average interest maturity of the mortgage portfolio. Clients have the option to fully or partially prepay mortgages before maturity. Prepayments may be triggered by, for example, relocation, redemption or curtailment. An important driver of prepayments is the interest rate incentive, i.e. the difference between a client’s current mortgage rate and prevailing mortgage rates. Future mortgage rates are simulated using a Monte Carlo approach. In addition to the interest rate incentive, other drivers such as loan age, seasonality and house price developments are also taken into account; H Client acceptance of the volume offered and the deviation between the offered rate and the actual coupon on an offered residential mortgage; H Client behaviour with respect to non-maturing deposits that are callable on demand. Future client rates for savings and current accounts are modelled using a replicating portfolio model. Modelled client rates depend on current or lagged yield curves and funding costs. A maximum maturity of 10 years is assumed. The resulting duration depends on product type and client behaviour. This section provides information on: H Market risk management H Interest rate risk H Credit spread risk H Funding spread risk H Foreign exchange risk H Market risk banking book metrics 141 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Market risk in the banking book / Risk management / Risk, funding & capital The metrics used for market risk in the banking book are dependent upon the assumptions made in the behavioural models. Models must therefore be based on extensive research, including historical data regarding observed client behaviour. Models must be independently validated and approved by the mandated risk committees. Models are periodically assessed to determine whether they behave appropriately and are statistically sound; if required, they are adjusted. Risk measurement for interest rate risk Interest rate risk is measured by NII at risk, the present value of one basis point (PV01), and the economic value of equity (EVE) at risk. To ensure a comprehensive approach to risk management and identify potential weaknesses, the metrics are complemented by stress testing and scenario analysis. Stress testing and scenario analyses go beyond determining the impact of alternative developments of interest rates. Assumptions with respect to modelling and client behaviour are also tested. A combination of market and product floors is applied. These floors are reviewed periodically. For management purposes, the interest rate risk position is monitored by the Asset & Liability Committee (ALCO) on a monthly basis. The above metrics are also regularly reported to the Executive Board. Credit spread risk in the banking book Credit spread risk is the risk of losses due to adverse movements in the credit spread of assets. The main source is from bonds held for liquidity purposes. It is measured as the impact on economic value of a 1bp change in spreads to a swap rate. The sensitivity is measured for individual term points, as well as for a parallel shift of the curve. Funding spread risk Funding spread risk is the risk of losses due to adverse movements in the term structure of rates at which ABNAMRO can fund itself – expressed as a spread to a benchmark such as EURIBOR. Funding spread movements can arise due to changes in, for example, the perceived credit quality of ABNAMRO, changes in the competitive environment or changes in liquidity premiums. They may be entity-specific or systemic by nature. If funding spreads widen, it costs more to fund assets on the balance sheet. Unless this increased spread is passed on to clients by increasing client rates, the projected net interest income will decrease. The funding spread risk is measured using an NII-at-risk approach whereby the funding spread increases. Foreign exchange risk b Foreign exchange (FX) risk is the risk arising from adverse movements in FX spot and forward rates and/or FX volatility. It is managed within the bank by ALM and Treasury. As a general rule, foreign exchange risk is hedged by using cross-currency swaps to swap the exposure in foreign currency to EUR. If, for operational reasons, it is inefficient to hedge exposures in foreign currencies, an open currency position (OCP) remains. This is measured by the aggregated net position per currency, except for EUR. Economic capital Economic capital for market risk in the banking book is calculated using a parametric Monte Carlo simulation model that determines the economic capital needed to absorb losses resulting from adverse movements in interest rates, client behaviour for mortgages and non-maturing deposits, volatility, credit spreads and foreign exchange rates. Market risk in the banking book metrics Interest rate risk (inmillions) 31 December 2021 31 December 2020 NII impact from an instantaneous increase in interest rates of 100bps 98 61 NII impact from an instantaneous decrease in interest rates of 100bps -218 -39 NII impact from a gradual increase in interest rates of 200bps 268 234 NII impact from a gradual decrease in interest rates of 200bps -251 -81 PV01 -5.9 -3.9 NII-at-Risk is the difference in NII between a base scenario and an alternative scenario observed over a 1-year horizon. In addition to the regulatory prescribed scenarios, the internal metric is defined as the worst outcome of the following scenarios: a gradual increase or decrease in interest rates by 200bps, measured over a one-year period, and an instantaneous increase or decrease of 100bps. NII-at-Risk includes all expected cash flows, including commercial margins and other spread components, from all interest rate-sensitive assets, liabilities and off-balance sheet items in the banking book. The NII-at-Risk calculation contains assumptions about the future balance sheet, including the reinvestment of maturing positions. 142 ABN AMRO Integrated Annual Report 2021 The NII-at-Risk in absolute terms in 31 December 2021 increased to EUR251million (31 December 2020: EUR81million), reflecting a reduction of NII in the scenario of a gradual decrease of 200bpsin interest rates. The most positive NII occurs in the scenario where interest rates rise gradually by 200bps, in which case the NII would be EUR268million higher than the base scenario. The increase in NII-at-Risk is attributable to market movements, business developments and alignment of mortgage prepayment compensation fees with the accounting treatment. The PV01 measures the average value changes resulting from a 1bp parallel upward and downward shift of the yield curve. We also measure the value sensitivity to changes in individual term points on the yield curve. The PV01 exposure in absolute terms increased by EUR2million to EUR6million in 2021. This increase was the aggregate result of various developments in markets and the balance sheet, such as an increase in interest rates, the longer average maturity of the mortgage portfolio and volume increases in saving deposits. ABNAMRO actively manages interest rate risk to keep it within the risk appetite. Open currency position The OCP is monitored regularly, and limits apply at a local and aggregate level. USD is the largest non-EURexposure for assets as well as liabilities. 31 December 2021 31 December 2020 Total OCP (long, in EURmillion) 428 95 OCP as % total capital 1.6% 0.4% The OCP position showed a moderate increase throughout 2021, but remained well within limits. 143 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Market risk in the banking book / Risk management / Risk, funding & capital Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This definition is in line with the definition applied by the Basel Committee on Banking Supervision (BCBS). Operational risk covers multiple non-financial risks, such as HR risk, information risk, compliance risk, legal risk and model risk. Operational risk management ABNAMRO has a holistic approach to operational risk management, providing the business with a clear and fair view on the operational risks that the bank faces and the way these should be managed. For this purpose, ABNAMRO has in place a framework that enables operational risks to be managed within its moderate risk profile. The Information and Operational Risk Management (I&ORM) department sets this framework for the bank in line with the requirements of the BCBS and the Advanced Measurement Approach (AMA). This framework evolves and is kept current as experience gained is incorporated. The main components of the framework are shown in the following diagram. Framework for operational risk Management Control Statement Business-as-usual (including scenarios) Changes Operational risk events Effectiveness of controls Key Risk Indicators Operational risk assessments Strategic risk assessment Operational risk management overview Monitoring Operational risk responses Non-financial (operational) risk Risk appetite reporting Operational risk capital Mitigation Avoidance Transfer Risk acceptance ABNAMRO’s operational risk management framework is supported by the three lines of defence (3LoD) model.The division and clarity in roles and responsibilities across the three lines of defence reflect the bank’s view that managing operational risk requires a concerted effort from all. Operational risk views are provided in risk reports at various levels within the bank, up to the Executive Board and Supervisory Board. Framework for operational risk management Risk identification, assessments, response and monitoring activities are at the heart of our operational risk management framework. Despite preventive measures being in place, incidents and operational losses are inherent to our business. ABNAMRO systematically tracks and analyses such events in order to learn from them and use them as early warnings. We scan external developments and identify emerging risks for further assessment. Key Risk Indicators (KRIs) are monitored to signal adverse risk developments. Managers in the first line perform assessments to identify and assess risks, including scenarios for rare events. Assessments are executed for business-as-usual activities and for new initiatives. Assessments also enhance risk awareness throughout the organisation. If a risk exceeds or is predicted to be outside the risk appetite, the manager in the first line takes appropriate actions. At least once a year, managers in the first line monitor the effectiveness of the controls in their areas of responsibility and update them as necessary. Management may also decide to avoid risks by terminating certain operations, consciously tolerate a certain risk or transfer a risk to insurance companies or within the group. With respect to the latter option, the bank has in place a global insurance programme which is reviewed annually by the Group Risk Committee. Once a year, senior management also reviews the strategic business objectives and the measures taken from a risk perspective. At the end of each year, based on the effectiveness of the control environment and the strategic risk outlook, senior management signs a Management Control Statement (MCS), which is published in this Report directly after the Sustainability risk section. Specific operational risk areas The bank has in place a dedicated organisation for operational risk areas that require specific knowledge, such as compliance risk, information security, business continuity management and model risk management. Operational (non-financial) risk This section provides information on: H Operational risk management H Specific operational risk areas H Operational risk measurement H Review of 2021 results 144 ABN AMRO Integrated Annual Report 2021 Compliance risk Compliance risk is defined as the risk of failure to comply with legislation and regulations, self-regulatory organisational standards, values and business principles, and codes of conduct or generally accepted market standards applicable to the bank’s services and activities. It can result in security risks and incidents and in financial and reputational damage arising from financial or other types of crime and misconduct or illegal conduct on the part of clients, the bank or its employees. ABNAMRO must continuously live up to regulatory expectations. It is expected to act as a gatekeeper in detecting financial and economic crime, and to fulfil obligations arising under its duty of care to clients and society.An effective compliance culture, programme and function are essential for ABNAMRO’s licence to operate and for protecting our integrity and reputation. In 2021, ABNAMRO focused on further enhancing the maturity of the Compliance function and its operating practices, as part of the priorities of Risk Management. The objectives of the Compliance function, which acts as a servant leader with countervailing power, are synchronised with the strategic objectives of ABNAMRO. Information security Information is one of the bank’s most valuable assets. Our clients rely increasingly on digitalisation and online banking, even more so since the Covid-19 outbreak. This means proper functioning of the bank’s IT systems is crucial. These systems run in complex information infrastructures, connecting the bank’s networks to public networks. Banking processes and their supporting information systems are therefore inherently vulnerable to threats to the security of client data and services. Examples of such threats include social engineering and phishing, computer- assisted fraud, unauthorised disclosure of confidential information, virus infections and ransomware, and distributed denial of service attacks (DDoS). In recognition of the vital importance of protecting its information, systems and infrastructure at all times, ABNAMRO has established a structured IT risk management approach to ensure the confidentiality, integrity and availability of information. This approach defines the organisational framework, management and staff responsibilities, and the information security directives that apply to ABNAMRO, its vendors and third parties with whom the bank exchanges information. The Covid-19 pandemicmeant thatremote working remained the norm in 2021. We consequently continued to secure and expand remote capabilities for clients, vendors and employees, including digital signing and execution of our digital workplace strategy. As part of being a personal bank in a digital age, we increasingly embedded video conferencing into our daily business to enable ABNAMRO to continue offering a seamless service to clients. In line with the bank’s strategy, the IT transformation continued through the adoption of Cloud services and DevOps ways of working. These were accompanied by improvements to safeguard ABNAMRO’s overall security position and to foster security by design. We also increased our efforts to keep pace with evolving cyber threats such as phishing and ransomware, while ensuring regulatory compliance. Our improved defences against Distributed Denial of Service (DDoS) proved to be effective, thus helping to mitigate attacks and limit disruption for our customers. We are continuing to invest in the overall stability of our digital payment services and maintain the operating effectiveness of our risk and control framework. The availability of the bank’s internet banking services during prime time was an average of 99.90% in 2021. Availability was impacted by a few operational incidents during the year, but these incidents were fully resolved and the results of the root-cause analyses served as input for continuous improvement. Overall, information risk management remains a prominent area of attention for senior management and our supervisor. The robustness of the control environment, the stability and availability of systems, and the underlying infrastructure and architecture are focus points for strengthening our cyber posture and for future-proofing our organisation. Fraud risk Fraud risk is the risk of financial loss or reputational damage resulting from internal or external fraud incidents committed by - or with the involvement of - an employee, agent, broker, intermediary, external party or the bank’s clients. In 2021, our clients and the bank faced a rise in payment frauds and losses, in particular related to impersonation scams. In these types of scams, fraudsters impersonate someone the client trusts. Social media scams, where a fraudster poses as a family member, were another frequently seen type of fraud. Multiple explanations for this risehave been identified:accelerated digitisation due to the pandemic has created chances for fraudsters by enabling them to reach more potential victims online, while data leaks have also increased the opportunities for deception and crime tools are often easily accessible. Meanwhile, fraudsters have proved continually able to devise new scams. The vulnerabilities of digitisation require the bank to continuously improve the efficacy of its efforts to prevent fraud and improve its detection and response. The bank is also pursuing an integrated approach with public and private partners by, for example, strengthening its cooperation with 145 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Operational (non-financial) risk / Risk management / Risk, funding & capital law enforcement agencies through the Electronic Crimes Taskforce and the Landelijk Meldpunt Internet Oplichting (National Reporting Line for Internet Fraud). Collaboration is crucial if we are to continue being able to adapt to the rapidly-changing fraud landscape, to protect our clients and the bank itself against fraud and to enhance digital resilience among our clients and, by extension, in society in general. Business continuity management Business continuity management (BCM) ensures organisational resilience at all levels within ABNAMRO. It focuses on setting up and maintaining ABNAMRO’s crisis management capability (i.e. framework, process, tooling, people) to enable the organisation to remain well-prepared and able to respond by way of a controlled and effective crisis mode in the face of severe threats and calamities such as the ongoing Covid-19 pandemic. Our key tasks include the following: H Scanning the operating environment for threats that could trigger a calamity and/or crisis; H Analysing threats and the business impact of a (potential) calamity and/or crisis; H Determining the strategies and solutions to be applied in the event of a calamity and/or crisis – such as emergency management, business recovery, crisis management and IT disaster recovery planning – to ensure the safety of our employees, clients and visitors and enable continuity of business operations; H Documenting, periodically assessing and testing these strategies and solutions. Mitigations such as business continuity plans, crisis management, business relocation plans and IT disaster recovery plans are in place to prepare for and deal with incidents and crises threatening the continuity of critical business processes. Evaluations and root cause analyses are also performed to analyse incidents and implement lessons learned. Physical security ABNAMRO’s Physical Security Policy (PSP) enables a fit-for-purpose framework that safeguards people, information, buildings and company assets against damages and disruptions. We operate a multidisciplinary approach by combining insights from key areas such as Business Continuity Management, Security & Integrity Management, HR/Workplace Management, Corporate Information Security and business lines. The PSP includes governance procedures that distribute roles and responsibilities across various internal departments, branches, (critical) corporate buildings and foreign offices with the aim of coordinating (complex) physical security issues such as events associated with chronic or acute climate changes. Evaluations such as physical security risk assessments are regularly executed on data centers, (critical) corporate buildings and sites in the Netherlands and abroad. ABNAMRO did not experience any material financial loss due to extreme weather linked to climate change in 2021. Change risk Change is fundamental to the bank’s strategy. And a key factor in our desire to succeed as a personal bank in a digital age. Being agile and adaptable is crucial for our customer-centric approach. Responding to change is what makes us commercial, progressive and entrepreneurial. Implementing the bank’s strategy requires multiple change initiatives. We currently have multiple programmes in operation. These are instrumental in resolving identified weaknesses within the bank. In 2021, we therefore continued our efforts to further mature our change management framework by providing ongoing second-line opinions on all strategic programmes. Data management Data is increasingly important for a ‘personal bank in a digital age’. ABNAMRO fully recognises that inadequate data management poses significant risks to innovation, risk management and decision-making, as well as to regulatory compliance. We are continuing the various bank-wide initiatives that have been started in order to address these risks in a sustainable manner and remain within focus of senior management and stakeholders. Model risk management Models are developed and applied to quantify the risk for most of the risk types listed in the risk taxonomy. We define model risk as the potential for adverse consequences from decisions based substantially or partly on incorrect output of models, due to errors in the development, implementation or use of such models. This definition is in line with the definition in the EU Capital Requirements Directive (CRD). To monitor and mitigate risks arising from the use of these models, the model risk management department acts as the second line of defence. As an independent department, it sets the framework for the bank in line with regulatory requirements for model risk and independently validates models before they can be used. For this purpose,ABNAMRO has in place independent model validation standards and procedures as part of its model risk management framework. 146 ABN AMRO Integrated Annual Report 2021 Operational risk measurement In line with the Advanced Measurement Approach (AMA), the bank has in place an internally developed model to define the own funds required in relation tooperational risk (i.e. operational risk capital). The AMA model estimates potential operational risk losses (annually aggregated) by combining forward-looking and backward-looking views on operational risk events. Risk self-assessments and scenario analyses provide a forward-looking view. Experts use these tools to build scenarios to evaluate future risks and estimate the severity of potential losses that could occur. The resulting estimates are used as data input for the model. In these scenarios, experts take into consideration the quality of the bank’s control environment, its processes, systems and people, as well as external circumstances and changes that may have an influence. The ongoing relevance of the estimations (and hence of the capital) is safeguarded by reviewing the scenarios at regular intervals as well as when major changes occur in the risk profile. Alongside these expert-based estimations, the model also uses historical loss data from ABNAMRO and the banking industry. Historical loss data are included as these are assumed to provide some level of predictive information about future losses. Capital for operational risk The level of AMA capital is derived from the results of the model calculations. The bank applies a 99.95% confidence level to the annually aggregated losses when calculating the operational risk economic capital, whereas a 99.9% confidence level is applied to calculate regulatory operational risk capital. The adequacy of the capital levels is monitored on a quarterly basis; if issues occur – for example, regarding the reliability of data – add-ons can be applied. Operational risk Risk Weighted Assets (RWA), calculated using the Advanced Measurement Approach (AMA), slightly decreased in 2021 to EUR16.0billion (2020: EUR16.7billion). The decrease was mainly attributable to the removal of a regulatory capital add-on. As the ECB’s finding on the model validation process was resolved by ABNAMRO, the associated capital add-on could be removed. During 2021, some drivers of capital decrease (e.g. exclusion from capital of the estimated AML fine) were also offset by drivers of capital increase (legacy cases, claim risk). ABNAMRO’s current operational risk capital level (measured against the bank’s gross income) is in line with that of peer banks with a moderate risk profile (based on updated ORX benchmark data). Operational risk by event category Operational losses include direct losses, as well as provisions for legal claims. The net operational loss may be negative, meaning provisions formed in the past have been released because no payments to claimants were ultimately made. Losses are reported according to event categories such as External Fraud; Internal Fraud; Clients, Products & Business Practices; Execution, Delivery & Process Management; Employee Practices & Workplace Safety; Disaster & Public Safety, and Technology & Infrastructure Failures. A high total net operational loss was recorded in 2021. This was mainly attributable to the event category of Clients, Products & Business Practices, and predominantly caused by two large operational losses, accounting for approximately 92% of the total net operational loss: H The settlement of EUR480million agreed with the Netherlands Public Prosecution Service in connection with the AML investigation; H The provision that was formed for a compensation scheme for clients who in the past paid too much interest on their revolving consumer credits. The second largest event category, which accounts for nearly 3% of the total net operational loss, was Execution, Delivery & Process Management. Risk awareness, continued strengthening of controls and attention to learning from events are helping to limit these losses. External Fraud caused nearly 2% of the total net operationalloss. More than 50% of this loss was caused bycompensation that was paid, following an agreement with the Dutch Ministry of Finance,to victims of spoofing. 147 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Operational (non-financial) risk / Risk management / Risk, funding & capital 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: H Funding liquidity risk is the risk of not being able to accommodate both expected and unexpected current and future cash outflows and collateral needs because insufficient cash is available. Eventually, this can affect the bank’s daily operations or its financial condition; H 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 liquidate assets in periods of stress. Framework Liquidity risk management We have a liquidity risk management framework in place that helps us maintain a moderate risk profile and safeguards the bank’s reputation from a liquidity perspective. This framework enables us to meet regulatory requirements and payment obligations at a reasonable cost, even under severely adverse conditions. A set of liquidity risk metrics and limits help manage the liquidity position. By maintaining a smooth long-term maturity profile, managing dependence on wholesale funding and holding a solid liquidity buffer in our main currencies, we maintain a prudent liquidity profile. The liquidity position is monitored on a daily basis. Funding strategy Our main source of funding is our strong client deposit base. The remainder of our funding is raised largely through various types of long-term and short-term wholesale funding instruments. Our wholesale funding strategy targets a moderate risk profile with a stable and diversified funding mix that reflects the composition of our loan book. This strategy aims to optimise the bank’s funding sources in order to maintain market access and the targeted funding position with a diverse, stable and cost-efficient funding base. The maturity profile of wholesale funding is optimised to avoid a concentration of outflows and to control repricing risks. The funding strategy takes the following guidelines into account: H Maintain market access by diversifying funding sources in different funding markets (Europe, the US and the Asia-Pacific region); H Continually monitor attractive funding opportunities and maintain strong relationships with the investor base through active marketing; H Optimise the balance betweenpublic benchmark dealsand private placements; H Optimise funding costs within the targets set for volumes and maturities and manage credit curves in different funding programmes and currencies; H Optimise the planning and execution of funding in different market windows and currencies. Risk management approach b The natural maturity mismatch between our loan book and funding portfolio requires liquidity risk management. We consider maturity transformation to be an integral part of the business model, which is why we closely monitor our liquidity position and the resulting risks. We hold a portfolio of highly liquid assets that can be converted into cash in theevent of unforeseen market disruptions, thus allowing us to meet payment and collateral obligations at all times. Funding and liquidity risk are managed centrally. We incorporate liquidity costs into the pricing of our day-to-day business activities. In managing these risks, a clear distinction is made between going-concern and contingency risk management. Going-concern management The most important metrics for going-concern risk management and the management of the day-to-day liquidity position within specified limits are: H Stress testing: in monthly and ad hoc stress tests we evaluate the impact of cash inflows and outflows under plausible stress scenarios. Market-wide as well as bank- specific stress scenarios are defined and analysed. The goal of stress testing is twofold. Firstly, it helps us to review our risk framework, i.e. the liquidity buffer size, risk appetite and risk limits. Secondly, it allows us to identify ways to reduce outflows in times of crisis; H Liquidity Coverage Ratio (LCR): The objective of theLCR is to assess the short-term resilience of the liquidity position by ensuring sufficient high-quality liquidassets to survive a significant stress scenario lasting 30 calendar days; H Survival period: this is the period the liquidity position is expected to remain positive in an internal stress scenario in which wholesale funding markets deteriorate and clients withdraw a material proportion of their deposits; Funding & liquidity 148 ABN AMRO Integrated Annual Report 2021 H Net Stable Funding Ratio (NSFR): The objective of this ratio is to assess resilience over a longer time horizon. The NSFR requires banks to hold sufficient stable funding to cover the duration of their long-term assets on an ongoing basis; H Loan-to-Deposit ratio (LtD): The LtD ratio measures the relationship between the loan book (loans and advances customers) and deposits from clients (due to customers), and includes all client-related loans and deposits. The ratio gives an indication of our dependence on wholesale funding for financing client loans. Contingency ris k management Contingency 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. Contingency risk management entails: H Contingency Funding Plan: this plan sets out the guidelines and responsibilities for addressing possible liquidity shortfalls in emergency situations. This only comes into effect if the liquidity position is threatened or if there are strong indications that liquidity stress is imminent. The Contingency Funding Plan is aligned with the Recovery Plan, as required by the regulators. It enables us to manage our liquidity without unnecessarily jeopardising commercial activities, while limiting excessive funding costs in severe market circumstances; H Collateral posting in the event of a rating downgrade: if our credit rating is downgraded, collateral requirements may increase. We monitor these potential additional collateral postings in the liquidity risk management framework; H Liquidity buffer: Group Treasury manages our liquidity buffer, of which the liquidity portfolio comprises a substantial part. At all times, this portfolio should be highly liquid to accommodate liquidity outflows during stress. The buffer consists of unencumbered, high- quality liquid assets, including government bonds, retained securities (RMBS and covered bonds) and cash. Liquidity risk The objective of liquidity management is to manage our liquidity position and to comply at all times with internal, regulatory and other relevant liquidity requirements. Various indicators are used to measure the liquidity objectives. Liquidity risk management Liquidity risk indicators 31 December 2021 31 December 2020 Available liquidity buffer (inbillions) 1 101.5 106.3 Survival period (moderate stress) > 12 months > 12 months LCR 2 168% 149% NSFR 3 >100% >100% Loan-to-Deposit ratio 103% 106% 1 The mandatory cash reserve with the central bank has been deducted from the cash and central bank deposits in the liquidity buffer. 2 Consolidated LCR based on a 12-month rolling average. 3 The NSFR is based on the CRR2 regulation since June 2021. The survival period reflects the period that the liquidity position is expected to remain positive in an internally developed (moderate) stress scenario. This scenario assumes wholesale funding markets deteriorate and retail, private and corporate clients withdraw part of their deposits. The survival period was consistently above 12months in 2021. The liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR) both remained above 100% throughout 2021. Loan-to-Deposit ratio b Loans and advances customers increased to EUR258.3billion at 31 December 2021 (31 December 2020: EUR 252.2 billion) due to an increase in the CIB loan book. Due to customers increased to EUR 251.2 billion at 31December 2021 (31 December 2020: EUR 238.6 billion), reflecting a continued increased trend in client savings in response to the Covid-19 pandemic and its related lockdowns. The Loan-to-Deposit (LtD) ratio decreased to 103% at 31December 2021 (31 December 2020: 106%) as due to customers increased more than loans and advances customers. 149 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Funding & liquidity / Risk management / Risk, funding & capital Liquidity buffer composition b 31 December 2021 31 December 2020 Liquidity buffer LCR eligible Liquidity buffer LCR eligible (inbillions) Level 1 Level 2 Level 1 Level 2 Cash & central bank deposits 1 64.3 64.3 58.0 58.0 Government bonds 27.5 31.9 1.1 35.8 33.6 2.5 - of which green bonds 0.9 0.9 0.8 0.8 Covered bonds 2.8 2.6 3.1 2.8 0.2 - of which green bonds 0.2 0.1 0.2 0.1 Retained issuances 2.9 Other 6.9 7. 4 0.1 6.5 6.5 0.1 Total liquidity buffer 101.5 106.3 1.2 106.3 100.9 2.8 - of which in EUR 89.6% 88.2% - of which in other currencies 10.4% 11.8% 1 The mandatory cash reserve with the central bank has been deducted from the cash and central bank deposits in the liquidity buffer. 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 retained RMBS and retained covered bonds, qualify for the LCR. The liquidity buffer faces haircuts based on the market value. These haircuts are used to determine the liquidity value. Haircuts may vary between the liquidity buffer and the LCR eligible buffer as the internal assessment of the liquidity buffer may deviate from the LCR definition. The liquidity buffer decreased by EUR4.8billion to EUR101.5billion at 31 December 2021 (31 December 2020: EUR106.3billion). Total green bonds in our liquidity buffer remained stable at EUR1.0billion at 31 December 2021, which is 1% of the total liquidity buffer (31 December 2020: EUR1.0billion). In March 2020, a commitment was made to target investments in green bonds within the liquidity portfolio of up to EUR2.5billion by the end of 2022. This commitment underpins our strategy to support the transition to sustainability. Targetedinvestments are bonds with use of proceeds aligned with the Green Bond Principles. Eligible green bonds are also inline with the EBA’s Delegated Act HQLA criteria and so preserve the high quality and liquidity of the portfolio. Theamounts of green bonds held in the liquidity portfolio are reported semi-annually. Liquidity buffer currency diversification b (inbillions, liquidity value) 31 December 2021 31 December 2020 EUR 91.0 93.7 USD 8.5 8.0 JPY 1.0 2.5 GBP 0.3 0.3 Other 0.8 1. 7 Total 101.5 106.3 The above table shows the breakdown per currency in theliquidity buffer. The currency composition reflects the composition of the balance sheet, which mainly consists ofEURand USD exposures. The monthly averages of theliquidity buffer are shown in the following table. 150 ABN AMRO Integrated Annual Report 2021 Liquidity buffer composition – monthly average b (inbillions, liquidity value) 2021 2020 Cash & central bank deposits 1 64.6 43.3 Government bonds 29.1 36.6 Covered bonds 3.0 3.2 Retained issuances 0.7 7. 6 Other 7. 1 7. 6 Total 104.5 98.3 1 The mandatory cash reserve with the central bank has been deducted from the cash and central bank deposits in the liquidity buffer. Funding Liability and equity breakdown b Client deposits are our main source of funding, complemented by a well-diversified book of wholesale funding. The graph below shows the liability and equity breakdown for the full balance sheet. The increase in clientdeposits reflects the continued increased trend inclient savings in response to the Covid-19 pandemic andits related lockdowns. This increase, in combination with theincreased TLTRO III participation, resulted in alower wholesale funding need, as reflected in the decrease inIssued debt & Subordinated liabilities. 31 December 2021 31 December 2020 250 200 150 100 50 238.6 251.2 67.2 38.1 9.5 22.0 11.1 75.0 36.7 11.4 21.0 13.0 Client deposits Issued debt & Subordinated liabilities Due to banks Securities financing Equity Other Audited Liability and equity breakdown (in billions) The graph below shows the breakdown of client deposits by segment. Retail Banking deposits Private Banking deposits Commercial Banking deposits Corporate & Institutional Banking deposits Group Functions deposits 125 100 75 50 25 Audited 31 December 2021 31 December 2020 Breakdown of client deposits (in billions) 89.0 61.5 52.5 28.7 6.8 87.3 63.3 56.3 38.1 6.2 Available funding instruments b A key goal of the funding strategy is to diversify funding sources. Our funding programmes allow us to issue various instruments in different currencies and markets, enabling us to diversify our investor base. The following table shows a breakdown of total funding instruments. 151 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Funding & liquidity / Risk management / Risk, funding & capital Overview of funding types b (inmillions) 31 December 2021 31 December 2020 Total Commercial Paper/Certificates of Deposit 9,177 9,283 Covered bonds 31,338 34,443 Secured funding (long term) 31,338 34,443 Senior preferred (medium-term notes) 13,209 20,679 - of which green bonds 1,995 2,047 Senior non-preferred 5,964 2,544 - of which green bonds 1,853 Unsecured funding (long term) 19,172 23,223 Total issued debt 59,688 66,949 Subordinated liabilities 7,549 8,069 Wholesale funding 67,236 75,018 Other long-term funding 1 35,221 32,755 Total funding instruments 2 102,457 107,773 - of which matures within one year 18,419 21,213 1 Includes TLTRO funding (recorded in due to banks) and funding with the Dutch State as counterparty (recorded in due to customers). 2 Includes FX effects, fair value adjustments and interest movements. Total funding instruments decreased to EUR102.5billion at 31 December 2021 (31 December 2020: EUR107.8billion) due to the lower funding need. Total issued debt decreased to EUR59.7billion at 31 December 2021 (31 December 2020: EUR66.9billion). The decrease reflects a decline incovered bonds and senior preferred funding. This was partly offset by an increase in senior non-preferred funding. Subordinated liabilities decreased to EUR7.5billion at 31December 2021 dueto redemptions at call date (31December 2020: EUR8.1billion). Senior non-preferred funding and subordinated liabilities were issued for MRELrequirements. Other long-term funding increased toEUR35.2billion at 31 December 2021 due to a EUR3.0billion increase in the TLTRO III participation (31December 2020: EUR32.8billion). Total green bonds outstanding increased to EUR3.8billion at 31 December 2021, which is 6% of total issued debt (31December 2020: EUR2.0billion). Our Green Bonds Framework determines a set of criteria applicable to issuing green bonds, including how we allocate the issue proceeds from green bonds to eligible assets, the evaluation and selection of eligible assets, the independent assurance on the allocation of proceeds to eligible green assets, as well as the external reporting requirements, in order to keep investors updated. Green bonds have been issued since 2015, with a focus on sustainable real estate and renewable energy. These green bonds enable investors to invest in,forexample, energy efficiency through residential mortgages, loans for solar panels on existing homes, sustainable commercial real estate and wind energy. Thefollowing graph shows the allocation of green proceeds at 31 December 2021. Residential mortgages Commercial mortgages Solar power Wind power 87.5 4.5 1.1 6.9 Green bonds, allocation of use of proceeds (year-end 2021) (in %) 152 ABN AMRO Integrated Annual Report 2021 The following graph shows the development of the total funding instruments relative to the balance sheet totals at 31 December 2021 and 31 December 2020. 31 December 2021 31 December 2020 10 8 6 4 2 Audited 2.3 2.0 8.7 5.2 2.3 3.3 1.5 7.9 1.9 8.8 0.6 8.3 CP/CD Covered bonds Subordinated liabilities Senior preferred Senior non-preferred Other long-term funding Funding vs balance sheet total (as % of total assets) Funding issuance in 2021 b Total long-term funding raised in 2021 amounted to EUR9.0billion. This included EUR1.5billion of covered bonds, EUR0.9billion of subordinated liabilities, EUR3.5billion of senior non-preferred funding, EUR0.9billion of subordinated liability funding and EUR3.0billion of increased TLTRO III participation. The total TLTRO III participation at 31 December 2021 was EUR35.0billion. The subordinated liabilities and senior non-preferred funding replaced the redemption of EUR1.5billion of subordinated liabilities. Capital instruments are excluded in the long-term funding overview and included in the capital section, which provides a complete overview of all outstanding capital instruments. Audited 1 The issuance of the EUR 1.0 billion of additional Tier 1 capital instrument is excluded from the graph above. An overview of the Capital instruments is provided in the Capital section. Covered bonds Senior preferred Senior non-preferred Subordinated liabilities Other long-term funding 1 50 40 30 20 10 0 20202021 37.2 9.0 1.5 3.5 3.1 0.9 Long-term funding raised in 2021 and 2020 (notional amounts at issuance, in billions) 2.0 0.6 2.5 32.1 Long-term wholesale funding in non-euro currencies declined to 18.3% of total outstanding long-term wholesale funding, compared with 19.7% at 31 December 2020. In 2021, the bank raised its long-term wholesale funding in euros and dollars. The diversification of the outstanding long-term funding in non-euro currencies is shown in the following graph. Audited USD CHF GBP Other 25 20 15 10 5 20202021 11.9 10.2 7.7 0.8 1.3 0.5 Non-euro currency diversification of total outstanding long-term funding (in billions) 8.2 1.0 1.6 1.2 Maturity calendar b We target a maturity profile where redemptions of funding instruments are well spread over time. The average remaining maturity of newly issued wholesale funding increased to 11.2 years at year-end 2021 (8.6 years at year-end 2020), not taking into account other long-term funding. The average remaining maturity of outstanding long-term funding decreased to 4.2 years at year-end 2021 (down from 4.6 years at year-end 2020). The maturity calendar assumes redemption on the earliest possible call date or the legal maturity date, which does not mean that the instruments will be called at the earliest possible call date. Early redemption of subordinated instruments is subject to approval by the regulator. 153 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Funding & liquidity / Risk management / Risk, funding & capital Maturity calendar b 31 December 2021 (notional amounts, inbillions) 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 ≥ 2032 Total Covered bonds 2.7 1.9 1. 8 0.5 1.6 0.6 0.7 0.4 1. 9 3.0 14.0 29.2 Senior preferred 4.6 2.4 1. 8 3.0 0.8 0.2 0.1 0.1 0.2 0.1 13.2 Senior non-preferred 1.3 0.7 1.3 0.9 1.0 1. 0 6.0 Subordinated liabilities 1. 5 2.4 1. 3 0.9 1.1 7. 3 Other long-term funding 1,2 0.1 32.0 3.0 0.3 0.2 35.6 Total long-term funding 8.9 38.8 6.6 6.1 4.3 2.2 1.6 1.4 2.0 4.4 15.1 91.4 31 December 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 ≥ 2031 Total Total long-term funding 11. 7 8.6 38.7 3.6 5.9 3.5 2.2 0.7 0.4 2.0 16.1 93.5 1 Other long-term funding includes Targeted Long-Term Refinancing Operations (TLTRO) III and funding with the Dutch State as counterparty. 2 The TLTRO III of EUR35.0billion is reported at the legal maturity of three years, although there is a voluntary repayment option after one year. 154 ABN AMRO Integrated Annual Report 2021 Capital Capital management strategy The primary objective of the capital management strategy is to ensure that capital adequacy requirements are met at all times and that 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 to optimise 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 when managing the capital position are expectations andrequirements of external stakeholders (such as supervisors, 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 ABNAMRO 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. ABNAMRO’s banking activities are carried outby legal entities that are part of the bank’s fiscal unity. Apart from prevailing statutory and regulatory legislation, there are no specific material impediments forprompt transfer of the bank’s regulatory capital. Dividend policy The dividend policy takes into accountmatters including current and pending regulatory capitalrequirements, our risk profile, growth in commercialactivities and market factors. The dividend payout ratio is set in light of the bank’s moderate risk profile and regulatorychanges, and to ensure that dividend payments can bemaintained in the future. From 2021 onwards, the dividend payout has been set at 50% of reported net profit, after deduction of AT1 coupon payments and minority interests. Interim dividends will be considered at 40% of the reported H1 net profit, provided profit is expected to be sustainable throughout the year, atthe discretion of the Board. Our CET1 capital target ratio is 13% under Basel IV. When our Basel IV CET1 ratio is above thethreshold of 15%, we will consider share buybacks, subject to conditions and regulatory approval. Our threshold of 15% reflects current uncertainties, as well asa buffer forpotential M&A. We intend to review thethreshold whencurrent uncertainties have reduced. Any distribution of dividend remains discretionary, and ABNAMRO may propose deviations from the above policy. Capital measurement and allocation Capital adequacy is measured and monitored on anongoing basis against target capital ratios, which arederived from the bank’s overall risk appetite and strategy.Capital projections and stress test scenarios, both market-wideand bank-specific, are used to ensure that actualand future capital levels remain above the targets.Capital is allocated to businesses in a way that optimisesthe long-term value ofthe bank while serving the bank’sstrategic objectives. Inthe capital allocation process,both risk-based and non- risk-based return parameters areconsidered, taking into account economic and regulatorycapital requirements. Thisprocess ensures that the bankmeets its return targets while maintaining a moderate riskprofile in line with its riskappetite. Contingency capital management Contingency plans are in place to address any capital issues. The Contingency Capital Plan provides a framework to detect capital adequacy stress by setting out various early warning indicators. The plan also sets out a range ofactions that can be undertaken, based on the level ofseverity and urgency of the issues. Recovery and resolution planning The Bank Recovery and Resolution Directive requires arecovery plan and a resolution plan to be in place. ABNAMRO submitted a reviewed andupdated version ofits bank recovery plan to the ECBin December2021. TheSingle Resolution Board (SRB)has prepared a resolution plan, in which itconcluded that the preferred resolution strategyis a Single-Point-of-Entry strategy, withABNAMROBank N.V. as the resolution entity, andbail-in is the preferred resolution tool. 155 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Capital / Risk management / Risk, funding & capital Capital structure Regulatory capital structure b (fully-loaded, inmillions) 31 December 2021 31 December 2020 Total equity (EU IFRS) 21,999 20,989 Cash flow hedge reserve 1,540 1,854 Dividend reserve -573 -639 AT1 capital securities (EU IFRS) -1,987 -1,987 Share buyback reserve -500 Regulatory and other adjustments -1,273 -669 Common Equity Tier 1 19,206 19,548 AT1 capital securities (EU IFRS) 1,987 1,987 Regulatory and other adjustments -5 -5 Tier 1 capital 21,188 21,530 Subordinated liabilities (EU IFRS) 7,549 8,069 Regulatory and other adjustments -2,413 -3,405 Tier 2 capital 5,136 4,664 Total regulatory capital 26,324 26,195 Regulatory capital flow statement b (fully-loaded, inmillions) 2021 2020 Common Equity Tier 1 capital Balance at 1 January 19,548 19,913 Addition of net profit attributable to owners of the parent company 1,231 -45 Reserved dividend -573 Interim dividend paid Other, including regulatory adjustments -999 -320 Balance at 31 December 19,206 19,548 Additional Tier 1 capital Balance at 1 January 1,982 1,982 Newly issued Tier 1 eligible capital instruments 992 Redeemed Tier 1 eligible capital instruments -994 Other, including regulatory adjustments 1 Balance at 31 December 1,982 1,982 Tier 1 capital 21,188 21,530 Tier 2 capital Balance at 1 January 4,664 6,536 New issued Tier 2 eligible capital instruments 879 Redeemed Tier 2 ineligible capital instruments -278 -1,493 Other, including regulatory adjustments -129 -379 Balance at 31 December 5,136 4,664 Total regulatory capital 26,324 26,195 MREL (fully-loaded, inmillions) 31 December 2021 31 December 2020 Regulatory capital 26,324 26,195 Other MREL eligible liabilities 1 6,568 4,127 Total MREL eligible liabilities 32,893 30,322 Total risk-weighted assets 117,693 110,481 MREL 2 27.9% 27.4% 1 Other MREL eligible liabilities consists of subordinated liabilities that are not included in regulatory capital. 2 MREL is calculated as total regulatory capital plus other MREL eligible subordinated liabilities divided by total risk-weighted assets. 156 ABN AMRO Integrated Annual Report 2021 RWA b (inmillions) 31 December 2021 31 December 2020 Credit risk 99,976 92,462 - of which standardised 9,946 9,131 - of which advanced 90,030 83,330 Operational risk 16,049 16,685 - of which standardised 604 678 - of which advanced 15,444 16,007 Market risk 1,668 1,334 - of which standardised 6 8 - of which advanced 1,662 1,327 Total RWA 117,693 110,481 Main developments in capital position At 31 December 2021, the Basel III Common Equity Tier 1 (CET1), Tier 1 and total capital ratios were 16.3%, 18.0% and 22.4%, respectively (December 2020: 17.7%, 19.5% and 23.7%, respectively). The CET1 capital ratio decreased compared to 31 December 2020, due to an increase in RWA and a decrease in CET1 capital. The RWA increase was mainly driven by model updates, regulatory add-ons and the impact of the DNB mortgage floor, which were only partly offset by the CIB non-core wind-down. The CET1 capital position decreased, mainly due to deductions for the share buyback programme and a further increase in the non-performing exposures (NPE) capital deductions. These deductions were only partly offset by the net profit for 2021 (after dividend and AT1 coupon payments). All capital ratios were in line with the bank’s risk appetite and were comfortably above regulatory requirements. The following chart shows the primary drivers of the BaselIII capital ratios in 2021. Common Equity Tier 1 ratio Tier 1 ratio Total capital ratio 37.5 30 22.5 15 7.5 31 December 2020 Reported net profit RWA changes Dividend reserve Share buyback Tier 2 instruments Other changes 31 December 2021 0.4 -0.4-0.4 -0.5 -1.5 16.3 18.0 22.4 1.0 17.7 19.5 23.7 Developments impacting capital ratios in 2021 (in %) The maximum distributable amount (MDA) trigger level remained at 9.6% (excluding the AT1 shortfall), including the reconfirmed Pillar 2 requirement as part of the SREP requirements for 2022. The AT1 shortfall was 0.2% on 31 December 2021. As the economy improves, the Dutch central bank is expected to gradually raise the countercyclical capital buffer requirement from 0% to 2% of risk-weighted exposures in the Netherlands. The MDA trigger level will then increase. The reported CET1 ratio of 16.3% under Basel III is well above the MDA trigger level. The bank remains committed to maintaining a significant buffer in excess of the regulatory requirements at all times. Although Basel III is the applicable regulatory framework, our primary metric for capital management purposes is a Basel IV CET1 target of 13%. This includes a management buffer on top of the capital requirements for SREP and Pillar 2 guidance. The European Commission’s draft Basel IV proposal, published in October 2021, expects Basel IV implementation in the EU by January 2025, with temporary measures mainly aimed at gradually phasing in the impact of the output floor. Reflecting our latest views on this proposal, the bank’s fully-loaded Basel IV CET1 ratio was estimated comfortably above target, at around 16%, on 31December 2021. The Basel IV CET1 ratio at implementation remains subject, however, to other 157 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Capital / Risk management / Risk, funding & capital uncertainties, including data limitations, management actions and other portfolio developments. The wind-down of the non-core portfolio in CIB is contributing to our current strong capital ratios under Basel III and Basel IV and strengthening our future outlook. The finalisation of TRIM and the settlement agreement reached with the Netherlands Public Prosecution Service have provided greater clarity on our capital and RWA outlook. However, several other capital headwinds and uncertainties remain, including ongoing model reviews and the impact of NPE capital deductions. MREL Our intermediate MREL target is set at 27.1% of Basel III RWA, of which 26.6% must be met by own funds, subordinated instruments and senior non-preferred (SNP) notes. This includes the currently applicable combined buffer requirement (CBR) of 4% and applies with effect from 1 January 2022. ABNAMRO aims to continue operating with a prudent buffer above the fully-loaded MREL requirements. If ABNAMRO fails to meet CBR as part of its MREL requirements, the Single Resolution Board (SRB) has thepower to prohibit or limit distributions of more than theMaximum Distributable Amount related to the minimum requirement for own funds and eligible liabilities (M-MDA). Based on own funds, subordinated instruments and SNP notes, MREL was 27.9% at 31 December 2021 (31 December 2020: 27.4%). The increase in MREL compared to 31 December 2020 was mainly due to issuances of senior non-preferred instruments, partly offset by RWA increases and CET1 deductions. Developments impacting capital ratios in 2021 Common Equity Tier 1 capital CET1 capital decreased in 2021, mainly reflecting the deductions for the EUR0.5billion share buyback programme and a further increase in the non-performing exposures (NPE) capital deductions of EUR0.2billion. Those deductions were only partly offset by the net profit for 2021. The reported CET1 ratio of 16.3% under Basel III is considerably above the MDA trigger level of 9.6%. The bank remains committed to maintaining a significant buffer in excess of the regulatory requirements at all times. Additional Tier 1 A total of EUR2.0billion of AT1 instruments is currently outstanding. The AT1 instruments have triggers at the bank consolidated level (7.0% CET1) and solo level (5.125% CET1). If the CET1 ratio drops below the trigger level, the AT1 is temporarily written down. ABNAMRO is comfortably above the trigger levels,with a bank consolidated CET1 ratio of 16.3% and a bank solo CET1 ratio of 15.9%. Available distributable items at 31 December 2021 amounted to EUR18.7billion (December 2020: EUR17.9billion). Tier 2 capital The fully-loaded total capital ratio (22.4%) decreased by 1.3percentage points compared to 31 December 2020 (23.7%). This was mainly due to the RWA increases and CET1 capital developments and, to a lesser extent, to the redemption of a Tier 2 instrument on 1 April 2021. A USD 1.0 billion T2 instrument was issued in December 2021. TheT2 layer is rebalanced to 4.4% in favour of SNP. Going forward, the focus is on maintaining the T2 layer above 2.5%. Senior non-preferred instruments A total of EUR 6.0 billion of senior non-preferred instruments is currently outstanding. The bank issued multiple senior non-preferred notes during the year under review: EUR 1.0 billion in February 2021, USD 0.8 billion inJune 2021, EUR 1.0 billion in September 2021 and USD1.0 billion in December 2021. ABN AMRO issued itsfirst green SNPs this year, both in EUR and in USD. Risk-weighted assets Total RWA rose to EUR117.7billion (31 December 2020: EUR110.5billion), predominantly driven by credit risk RWA. The increase in credit risk RWA was mainly caused by model updates, regulatory add-ons and the impact of the DNB mortgage floor, partly offset by the acceleration of the CIB non-core wind-down in the first six months of 2021. Operational risk RWA slightly decreased, mainly owing to the removal of a regulatory capital add-on relating to an ECB finding on the model validation process. Market risk RWA increased as a result of increases in SVaR and IRC, partly offset by adecrease in the VaR resulting from position changes. Further information on share capital, dividend and capital instruments Share capital The share capital remained unchanged in 2021. At31December 2021, the authorised share capital amounted to EUR2,400million, distributed as 2,200million class A ordinary shares and 200million class B ordinary shares. Class A and B ordinary shares have a nominal value of EUR1.00 each. At 31 December 2021, issued and paid-up capital amounted to EUR940million and consisted of 940million classA ordinary shares. Further information is provided in Note33 Equity attributable to owners of the parent company in the Consolidated Annual Financial Statements. 158 ABN AMRO Integrated Annual Report 2021 Dividend No interim dividend was paid in 2021, in line with the ECB recommendation to refrain from distributing interim dividends until 30 September 2021. On 23 July 2021, theECB supervisory board decided not to extend its recommendation beyond September 2021. As a result, ABNAMRO paid the final 2019 dividend of EUR639million in October 2021. Based on the dividend policy, a net profit of EUR1,138million (after deduction of AT1 payments and minority interests) for 2021 and the absence of an interim dividend over 2021, a final cash dividend of EUR0.61 pershare is proposed for 2021. This will be equivalent to EUR573million, based on the number of outstanding shares at year-end 2021. The ex-dividend date is 22April2022, while the record date is 25 April 2022 and the dividend payment will be executed on 18 May 2022. Nodividend was paid for 2020. Our capital position remains very strong, with a fully-loaded Basel III CET1 ratio of 16.3% and a Basel IV CET1 ratio of around 16%. In line with our capital framework we have announced an inaugural share buyback programme of EUR0.5billion. This programme commenced on 10 February and is expected to end no later than June 2022. Through this programme we have added share buybacks as an instrument to manage our capital position. The Basel IV threshold for share buybacks remains unchanged for the time being as our capital buffer is sufficient to consider future share buybacks. Over time, we are aiming for a gradual reduction, in constructive dialogue with ourregulator. Capital instruments b 31 December 2021 31 December 2020 (inmillions) ISIN/CUSIP Maturity date First possible call date Nominal amount Carrying amount Nominal amount Carrying amount Tier 1 1 EUR1,000million 4.375% per annum XS2131567138 Perpetual September 2025 1,000 993 1,000 993 EUR1,000million 4.75% per annum XS1693822634 Perpetual September 2027 1,000 994 1,000 994 Total Tier 1 capital instruments 2,000 1,987 2,000 1,987 Tier 2 USD 595million 6.250% per annum XS0619547838 April 2022 525 537 484 508 EUR1,000million 7.125% per annum XS0802995166 July 2022 1,000 1,045 1,000 1,061 USD 113million 7.75% per annum US00080QAD79 / USN0028HAP03 May 2023 100 101 92 96 USD 1,500million 4.75% per annum US00080QAF28 / XS1264600310 July 2025 1,324 1,402 1,221 1,354 USD 1,000million 4.8% per annum US0008DAL47 / XS1392917784 April 2026 883 901 814 869 EUR1,000million 2.875% per annum XS1346254573 January 2028 January 2023 1,000 1,035 1,000 1,045 USD 1,500million 4.4% per annum XS1586330604 March 2028 March 2023 1,324 1,358 1,221 1,284 USD 300million 5.6% per annum XS1385037558 April 2031 265 279 244 274 USD 1,000million 3.324% per annum XS2415308761 / US00084DAV29 March 2037 December 2031 883 876 EURvarious smaller instruments 2023 -2025 14 15 15 16 EUR1,228million 6.375% per annum XS0619548216 April 2021 1,228 1,280 SGD 450million 4.7% per annum XS1341466487 April 2026 April 2021 277 281 Total Tier 2 capital instruments 7,317 7,549 7,595 8,069 - of which eligible for regulatorycapital: Basel III, Tier 1 (fully-loaded) 2,000 2,000 Basel III, Tier 2 (fully-loaded) 5,136 4,664 1 AT1 capital securities. For both AT1 instruments, the CET1 Trigger levels are 7.0% for ABNAMROBank level, and 5.125% for ABNAMROBank solo level. The amount of available distributable items for ABNAMROBank N.V. per 31 December 2021 totals EUR18.7billion (31 December 2020: EUR17.9billion). 159 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Capital / Risk management / Risk, funding & capital Movements in subordinated liabilities b 2021 2020 (inmillions) Carrying amount Carrying amount Balance as at 1 January 8,069 10,041 Cash flows Issuance 910 35 Redemption -1,514 -1,669 Non-cash changes Foreign exchange differences 367 -445 Other -283 108 Balance as at 31 December 7,549 8,069 Minimum capital requirements b The Pillar 1 capital requirement is the absolute minimum amount of capital required to cover the three major types of risk a bank faces: credit risk, operational risk and market risk, as determined in the Capital Requirements Directive (CRD) IV Pillar 1 framework. The following table provides an overview of RWA and minimum capital requirements per risk type, category of exposure and regulatory approach. 31 December 2021 31 December 2020 (inmillions) Capital requirement RWA Capital requirement RWA Credit risk IRB Central governments and central banks 67 840 83 1,033 Institutions 1 127 1,589 152 1,905 Corporates 4,177 52,211 4,079 50,985 Retail 1,326 16,574 1,241 15,508 - of which secured by immovable property 1,188 14,847 966 12,080 - of which qualifying revolving exposures 11 140 99 1,240 - of which other retail 127 1,588 175 2,188 Equities not held for trading 269 3,364 272 3,397 Securitisation positions 9 11 6 6 70 Credit valuation adjustment Other 2 1,227 15,336 835 10,432 Total credit risk IRB 7,202 90,030 6,666 83,330 Credit risk SA Central governments and central banks 2 1 12 Institutions 1 100 1,248 68 846 Corporates 451 5,636 425 5,309 Retail 200 2,495 124 1,550 Secured by mortgages on immovable property 12 145 19 233 Exposures in default 14 173 12 146 Credit valuation adjustment 16 202 14 175 Other 2 4 46 69 859 Total credit risk SA 796 9,946 730 9,131 Other risks Market risk 133 1,668 107 1,334 - of which Standardised Approach 1 6 1 8 - of which Internal Model Approach 133 1,662 106 1,327 Operational risk 1,284 16,049 1,335 16,685 - of which Standardised Approach 3) 48 604 54 678 - of which Advanced Measurement Approach 1,236 15,444 1,281 16,007 Total other risks 1,417 17,717 1,442 18,019 Total 9,415 117,693 8,838 110,481 1 Institutions include exposures to banks and investment companies, regional and local governments and pension funds. 2 Other includes non-credit obligations. 3 Including Basic Indicator Approach. 160 ABN AMRO Integrated Annual Report 2021 Main regulatory developments The European Commission’s draft Basel IV proposal, published in October 2021, expects Basel IV implementation in the EU by January 2025, with temporary measures mainly aimed at gradually phasing in the impact of the output floor. The CRR fully-loaded CET1 ratio at 31 December 2021 was 16.3%, which was equal to the CRR phase-in CET1 ratio. Under the CRD IV/CRR fully-loaded rules, the amount of CET1 capital and RWA are equivalent to those under the phase-in rules. Due to the grandfathering of some T2 capital instruments, the fully-loaded total capital ratio was slightly lower than the phase-in ratio, but both ended up at 22.4%. The fully-loaded total capital ratio was lower than the phase- in ratio because the non-CRR-compliant Tier 2 capital (‘grandfathered’) instruments were excluded from the fully- loaded ratio. The grandfathering provisions were introduced in the CRR to ensure that institutions had sufficient time to meet the requirements set by the new definition of ‘own funds’, which relates to the total regulatory capital. Certain capital instruments that did not comply with the new definition were grandfathered for a transitional period, with the objective of phasing them out from the total regulatory capital. The transitional period expired on 1 January 2022. Impact of CRD V/CRR2 fully-loaded rules on capital ratios Fully-loaded 31 December 2021 Common Equity Tier 1 capital 19,206 Common Equity Tier 1 ratio 16.3% Common Equity Tier 1 ratio (Basel IV) 1 16% Tier 1 capital 21,188 Tier 1 ratio 18.0% Total regulatory capital 2 26,324 Total capital ratio 2 22.4% RWA 117,693 Leverage ratio (SA-CRR) 5.9% 1 Basel IV results are based on fully-loaded figures, rounded to the nearest whole percent and subject to the implementation of Basel IV standards into EU legislation. 2 Under the current CRD IV/CRR phased-in rules the total regulatory capital is EUR26,386million and the total capital ratio is 22.4% per 31 December 2021 as reported in the prudential returnstoDNB. Leverage ratio 31 December 2021 31 December 2020 (inmillions) Fully-loaded Fully-loaded Tier 1 capital 21,188 21,530 Exposure measure (CRR2) On-balance sheet exposures 399,113 395,623 Off-balance sheet exposures 30,637 32,781 On-balance sheet netting 1 8,186 5,419 Derivative exposures 1 3,582 2,462 Securities financing exposures 2,502 3,115 Other regulatory measures -83,240 -65,801 Exposure measure 360,779 373,599 Central bank exposure 66,922 56,133 Exposure measure (incl. central bank exposure) 427,702 429,732 Leverage ratio 5.9% 5.8% Leverage ratio (incl. central bank exposure) 5.0% 5.0% 1 As from 28 June 2021, the exposure measure includes CRR2. Comparative figures have been adjusted accordingly. 161 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Capital / Risk management / Risk, funding & capital The Capital Requirements Regulation (CRR) includes anon- risk-based leverage ratio. The leverage ratio requirements were amended by CRR2, which introduced abinding leverage ratio requirement of at least 3% and amended the requirements for calculating the exposure measure. The amendment includes the application of SA-CCR to clearing guarantees on derivative exposures. Theleverage ratio remained stable at 5.0% at 31 December 2021 (31 December 2020: 5.0%). The temporary capital relief measure that exempts central bank reserves from the exposure measure, which was originally expected to end on 27 September 2021, has been extended until 31 March 2022. This currently has a positive impact of 0.9 percentage points, resulting in a leverage ratio of 5.9%. The exposure measure is reported to the Asset and Liability Committee (ALCO) at the business line level and monitored closely in order to ensure the leverage ratio remains within the bank’s risk appetite. The leverage ratio outlook takes account of business-specific plans, as well as macroeconomic conditions, regulatory developments and capital-related uncertainties. In the event of risk appetite breaches of the leverage ratio, the bank-wide escalation paths for capital and funding are followed. 162 ABN AMRO Integrated Annual Report 2021 Business risk Volatility of earnings Business risk is the risk that business earnings and franchise value declines and/or deviates from expectations because of uncertainty in business income or in expenses incurred to generate business income. ABNAMRO strives to preserve its business earnings, independent of (external) developments. Business risk therefore needs to be managed in order to limit the actual and forecasted volatility in business earnings. ABNAMRO manages business risk by seeking to minimise the effect of unexpected internal and/or external developments. The key criteria for classifying a risk as a business risk are: Å An unexpected event that leads to uncertainty in present or future business earnings and/or franchise value; H Changes in the drivers of future business earnings such as uncertainty in volumes, margins, fee and commission rates and/or business expenses. Drivers of earnings volatility Earnings are affected by various internal and external factors, such as changes in client preferences, competition and regulation. In addition, earnings are affected by technical, societal, geopolitical and economic developments, such as the outbreak of Covid-19 and subsequent lockdowns. Our risk assessments are based on the long-term uncertainty in expected business earnings and take into account internal and external developments, scenarios and market movements. When assessing the pressure from external factors contributing to an increase or decrease in the business risk, at least the following elements are considered: Å The key macroeconomic variables within which the bank operates or will operate based on its main geographies. Examples of key variables include gross domestic product (GDP), unemployment rates, interest rates and house price indices; Å The competitive landscape and how it is likely to evolve, considering the activities of the bank’s peers; Å Expected growth in target markets, and the activities and plans of key competitors in these target markets; Å Overall trends in the market that may have an impact on performance and profitability. This should include, as a minimum, regulatory trends, technological trends and societal/demographic trends; H The contamination effects that risks may have on other risk types, and risks downstream or upstream in client supply chains that may have knock-on effects (this includes the impact of Covid-19). Business risk appetite The thresholds are set at the expected one-year profit horizon and form the basis for a quantitative Red, Amber, Green (RAG) status. The qualitative RAG status is based on expert judgements, taking into account elements such as pressure from external factors and strategic objectives. Monitoring of earnings drivers ABNAMRO continually monitors and responds to the key external and internal factors and elements within these factors. The disclosure and monitoring of the business risk drivers is based, among other things, on the ERM report. ABNAMRO’s business risk management framework is supported by the three lines of defence (3LoD) model. The bank mitigates sensitivity to business risk drivers through discussions at senior management and board level that address developments in these drivers in an effective and timely manner. Business risk is also included in the capital buffer that is meant to safeguard our position in the case of extreme events. The bank’s strategy and business risk are related. The strategy incorporates mitigation of unexpected events and changes in business risk drivers. Regular review of the strategy ensures alignment with developments in business risk. To ensure that the bank’s strategy is pursued and the long-term strategic goals (financial and non-financial) are met, our business plans and budgets take these strategic goals into account. Strategic equity investment risk As part of business risk, strategic equity investment risk is the risk of deviation in the value of strategic equity investments. These investments are not fully consolidated in the bank’s financial accounts, but are represented as an equity investment on the balance sheet. Investments related to clients and involving unlisted private equity or held for trading purposes are not considered to be strategic equity investments. 163 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Business risk / Risk management / Risk, funding & capital Economic capital as a buffer for business risk Economic capital is used to mitigate the negative effects of unexpected business risk events. The economic capital for business risk reflects the maximum downward deviation of actual versus expected net operating profit in one year, excluding any impact already covered by other risk types (e.g. impairments for credit risk). To determine the economic capital for business risk, a combination of historical and forward-looking scenarios is collected from experts in each business line and from Group Economics. These scenarios determine the sensitivity of the business lines’ incometomacroeconomic variables or industry performance indicators. This sensitivity is used to determine the volatility of income for each business line, as well as any correlation between business lines. Based on the individual volatilities, we use simulation to calculate bank-wide volatility. Further to this, economic capital as a buffer for strategic equity investment risk is also considered. This is the maximum downward deviation of a strategic equity investment’seconomic valuefrom the current book value, with 99.95% certainty. 164 ABN AMRO Integrated Annual Report 2021 Sustainability risk management Sustainability risk is defined as the risk that Environmental, Social or Governance-related (ESG) factors will have afinancial and/or non-financial impact on ABNAMRO. Sustainability risk management is a fundamental part of safeguarding a moderate risk profile and supporting ABNAMRO’s strategic objectives. ESG factors relate to(but are not limited to) the following: Å Environmental: climate change, biodiversity loss, natural resources depletion and pollution. The climate-related and environmental risks (CER) can refer to so-called inside-out risks or outside-in risks: Å Social: substandard working conditions, forced labour and child labour, human trafficking, indigenous peoples’ rights, privacy, animal welfare and public health. Å Governance: corporate governance (e.g.remuneration, diversity and balancing the interests of stakeholders), corporate behaviour (e.g. corruption and bribery) and ethical business conduct. Although ESG risks – predominantly inside-out – have been on the agenda of ABNAMRO since the 1990s, attention from regulators and society and from within the bank has increased significantly in recent years, especially in relation to outside-in environmental risks. ESG risks and our sustainable strategy are also clearly understood to go hand in hand, given that the bank is faced with developments such as strengthened government commitments to phasing out fossil fuel investments, increasing societal expectations and changing investor preferences, resulting in both risks and opportunities for our clients and the bank. In the bank’s risk taxonomy, ESG risks are recognised as ‘external causal factors’. Causal factors may be a driver of risk types, in particular those identified below. The expected impact of these external causal factors is continuously assessed and monitored, and mitigating actions are considered as part of the management of these risk types: H Business risk, e.g. unexpected fluctuations in volumes/ margins due to lower market volumes in a specific business segment affected by transition risk.The changes in government policies, societal expectations and investor preferences mentioned above are expected to present the bank with a potentially material business risk in, for example, carbon-intensive sectors in the medium and long term. We expect the transition to alow-carbon economy also to present opportunities thatcould potentially mitigate business risk. H Reputational and legal risk, e.g. damage to the bank’s reputation due to perceived ‘greenwashing’ or not meeting our sustainability commitments, orthe risk that the bank may be subject to legal action or litigation because of a contribution (alleged or otherwise) to adverse sustainability impacts.Climate-related reputational and litigation risk in the short term is therefore monitored continuously so that we can take appropriate mitigating actions (see sections on risk response and client assessmentbelow). H Credit risk, e.g. deterioration in a client’s creditworthiness or collateral resulting from physical or transition risk. The potential impact is assessed by means of scenario analysis and analysis of transmission channels. See also the section below on scenario analysis and the Credit risk review section for more information on transmission channels relating to creditrisk. Sustainability risk can occur in all the bank’s capacities, i.e.as a lender, investor, asset manager, service provider, purchaser, operator and employer. Sustainability risk can also be amplified if the bank’s performance does not match with its sustainable strategy and commitments, with regulatory requirements or with investor, rating agency orsocietal expectations. H Inside-out risks refer to the financial and non- financial (or pre-financial) risks that may occur when clients of the bank impact people or planet. H Outside-in risks refer to the financial and non-financial risks that may occur when climate- related or environmental factors impact the bank’s clients or portfolios. Outside-in risks are divided into transition and physical risks. H Transition risks are the financial and non-financial risks that result, directly or indirectly, from the process of adjustment towards a lower-carbon andmore environmentally sustainable economy (e.g. changes in regulation, consumer preferences and technology). H Physical risk refers to the financial risk of a changing climateand environmental degradation. Physical risk can be acute, for example when itrelates to extreme weather events, or chronic, relating to progressive shifts such as rising temperatures and biodiversity loss. Sustainability risk 165 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Sustainability risk / Risk management / Risk, funding & capital Sustainability risk policy framework ABNAMRO applies its sustainability risk policy framework, which is an integral part of the Enterprise Risk Management Framework. It defines the conditions under which the bank does business with its clients, suppliers and investors, ensuring sustainability risk is properly identified, measured, managed, mitigated, monitored and reported in line with the bank’s risk appetite. The sustainability risk policy framework is subject to an annual review to incorporate new insights, practices, internal and external developments, and views of stakeholders, and to align with the latest regulatory guidance, including ECB and EBA requirements and definitions. To support the general principles defined in the sustainability risk policy framework, exclusions, statements and standards underpin the way the bank executes its sustainability risk management. S ustainability risk policy framework Bank-wide documents Sector documents Sustainability Risk Policy Exclusion list Controversial weapons list Exclusions Human rights Climate change Animal welfare Statements Sustainability Risk Standard for Lending and Project Finance Sustainability Risk Standard for Investment Sustainability Risk Standard for Defence Sustainability Acceleration Standard Standards Agri-commodities Animal protein Energy Metals & minerals Manufacturing Chemicals & pharma Real estate Transportation Financial institutions Sustainability risk standard with sector requirements Our Exclusion List specifies the activities we exclude from our financial services because of their adverse ESG impact. The Controversial Weapons List (CWL), in turn, specifies the companies that we exclude because of their involvement in these types of activities. The CWL is in line with the ban on investments in cluster munition, as specified in the Dutch Financial Supervision Act, supplemented with the exclusion of companies involved in other controversial weapons, including white phosphorus. By regularly reviewing and updating the Exclusion List and the CWL, ABNAMRO ensures that it operates in line with its purpose, values and risk appetite. New developments and scientific insights within and outside the bank are taken into consideration. Our statements set out ABNAMRO’s commitment, responsibilities and expectations for ourselves and for our business associates including our clients, investee companies and suppliers on three important themes: climate, human rights and animal welfare. The statements also describe the key activities we undertake to meet our responsibilities. Our standards include requirements for managing sustainability risk in different processes (including investment, lending and classifying sustainability acceleration finance). We also have standards specifying the minimum ESG requirements (such as the management of risk associated with climate change, biodiversity loss and human rights) for our corporate lending clients operating in specific sectors and our corporate clients with links to defence activities. The bank also maintains a sustainability risk classification for all sectors and countries. These lists classify sectors and countries as low, medium or high risk from a sustainability perspective and include climate-related, environmental (ecosystem dependencies), social and governance-related aspects.The sector and country risk classifications are updated annually. 166 ABN AMRO Integrated Annual Report 2021 Sustainability risk management framework Governance The Executive Board, under the supervision of the Supervisory Board, is accountable for the establishment of an effective sustainability risk management framework in the bank and for setting, approving and overseeing the bank’s sustainable strategy. It has delegated responsibility for the management of sustainability risk, including CER, to the Group Risk Committee. The Chief Risk Officer is the ExBo member responsible for the management of sustainability risk. A dedicated Sustainability Risk team has been appointed within the Central Risk Management department and is responsible for setting up and maintaining the sustainability risk management framework. In line with the Enterprise Risk Management Framework, the “three lines of defence” principle is applied to sustainability risk management. The following committees are involved in internal control and strategic decision-making: Å Group Risk Committee (GRC) for oversight on sustainability risk through the Enterprise Risk Management Report (containing the status of the BankRisk Appetite Statement) and approval on sustainability risk issues; Å Business Risk Committees (BRC) for oversight on sustainability risk within the specific business lines and approval on business line-specific sustainability risk issues (e.g. scenario analysis); Å Engagement Advisory Committee (EAC) for oversight on client engagement; Å Sustainability Advisory Committee (SAC) for internal advice on sustainability matters affecting the bank and the business environment; H Scenario Analysis and Stress-test Committee (SSC) for oversight on climate-related and environmental risks scenario analyses and stress testing. Risk appetite In line with the moderate risk profile of the bank, the sustainability risk appetite is set using indicators that address all ESG aspects of sustainability and both the inside-out and outside-in perspectives of sustainability risk at bank and business line levels. The risk indicators have both quantitative (e.g. sustainable and acceleration volumes and GHG emission intensity) and qualitative (e.g. whether human rights are adequately managed) elements. The latter reflects the fact that not enough data are yet available in this relatively new risk category.Our Strategic Risk Appetite (SRA) references the alignment of our portfolio with the Paris Agreement. Risk identification & measurement The risk identification process for sustainability risk is doneat different levels: through the categorisation or classification of exposures across asset classes, sectors, geographies and counterparties, and/or on the basis of their length of maturity and/or the position in the lifecycle of the asset. The process includes climate risk heatmapping, sector risk classifications (including ecosystem dependency, climate and human rights risks), country risk classifications and transmission channels. These tools feed into the bank-wide risk identification processes. By also performing due diligence at client level and (scenario) analysis at portfolio level, and through stress testing, we measure themateriality of risks, and assess and develop appropriate mitigating measures, based on the outcomes. A Risk Register has been developed for human rights risks. Thisincludes all kinds of human rights risks we can be connected to, in any capacity, and helps us record and aggregate our observations on these risks over time. TheRisk Register feeds into our Enterprise Risk Management process and results in more robust governance and more involvement from senior management. Human rights risks are managed across arange of departments within thebank. Risk response To ensure sustainability risk is in line with the bank’s risk appetite and strategy, mitigating actions are defined at both portfolio and counterparty level. This includes concentration limits at sector level on certain high-risk and/or sensitive economic sectors and subsectors, and exclusion of some specific sectors and subsectors from credit-granting in line with our Exclusion List and Controversial Weapons List. In accordance with the sustainability risk standard with sector requirements, minimum conditions are set for clients in certain sectors with a higher risk from a sustainability perspective. Those conditions include climate, biodiversity loss and human rights. More information on client assessment can be found below. Risk monitoring and reporting To ensure that identified sustainability risk remains within the approved risk appetite limits and checkpoints, we monitor sustainability risk, including environmental and climate-related risks, at bank-wide and business line level.Sustainability risk at bank level is monitored and reported to the GRC and to the Executive Board in the Enterprise Risk Management (ERM) report. At business line level, sustainability risk is monitored and reported through the business line risk reports, which are discussed regularly in the respective Business Risk Committees. Sustainability riskand client assessment Each credit proposal with an OOE of more than EUR 1 million needs to be assessed by the first line of defence against the bank’s Sustainability Risk Policies. This is done using theGlobal Sustainable Index (GSRI) tool, and increasingly inthe new CASY tool. These tools consist of questionnaires that are based on the bank’s ESG criteria and hence help 167 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Sustainability risk / Risk management / Risk, funding & capital the first line in the Sustainability Risk assessment. The tools also include a classification mechanism that leads to a low, medium or high sustainability risk profile of the client. The latter category is additionally assessed by the second line, being the sustainability risk experts in the Credit Risk department. Certain industries face more sustainability risks than others, while the nature of these risks also varies considerably. During 2021, the sustainability risk analysts inCredit Risk provided advice on clients operating in industries with a higher sustainability risk profile on 288 occasions (2020: 376). Approvals Approved with conditions Rejections Withdrawn 500 400 300 200 100 20202021 178 186 149 122 16 1 12 376 288 Conclusion of advice The cases for which advice was given in 2021 comprised 16rejected cases, 149 approved cases and 122 cases in which approval was subject to conditions. The conditions imposed include requesting additional information, monitoring sustainability performance and engagement aimed at substantially improving sustainability performance. In 2021, second-line sustainability advice included 74 information conditions, 39 monitoring conditions and 106 engagement conditions. Approximately 5% of the requests for advice in2021 received a negative response. Advice on sustainability risk is provided either in the context of the client relationship as a whole or in the context of a lending relationship. The Client Acceptance, or Know Your Client (KYC), process takes place at the moment of onboarding new clients and is repeated in periodic and sometimes event- driven client reviews. These assessments are usually done for non-lending clients, given that a more extensive sustainability assessment is performed for lending relationships. Here, too, assessments are performed at the time of loan origination and repeated in periodic (usually annual) monitoring. ABN AMRO applies specific policy requirements for its lending clients in nine high-risk sectors. Each sector is divided into multiple subsectors and activities at different places in the supply chain and matched with specific requirements. The first line assesses the level of clients’ compliance with these policies, and the second line in Sustainability Risk validates these assessments. If a client does not fully meet our sustainability risk policy framework, the second line will either advise negatively on the relationship/credit or accept it subject to conditions. In most cases, conditions are set. This is in line with the bank’s inclusive strategy. Conditions are set in order to become or remain comfortable that the client is moving towards full compliance and usually consist of monitoring or client engagement, ora combination of the two. In the absence of sufficient comfort, for example due to a major policy gap or incident, a high-intensity engagement trajectory for a maximum of three years can be started or the second line will issue a negative advice. Climate risk management In managing climate-related and environmental risks (CER),ABN AMRO is building on our sustainability risk management framework. ABN AMRO is also working on incorporating regulatory and supervisory guidance,such astheTaskforce on Climate-related Financial Disclosures (TCFD)framework of theFinancial Stability Board and theECB Guide on climate-related and environmental risks. The guidance mentioned above supports the acceleration ofthe internal review and implementation of climate risk management in the bank’s governance, policies and processes. Continuous improvement is being made, basedon new knowledge, tools and data that become available in the market. Improvements in relation to sustainability risk management in general and CER in particular are built on a structured, multi-year implementation plan. This structured approach initially focuses on several pilot portfolios, enabling the bank to build knowledge and skills that can be further leveraged throughout the organisation, in addition to leveraging on other ESG-related projects currently underway. Climate-related and environmental risk is managed in line with the bank’s defined Enterprise Risk Management cycle and forms an integrated part of our sustainability risk management, as described above. The following section describes in more detail how climate risk is integrated into sustainability risk management, particularly in relation to business strategy, risk appetite, risk identification and risk measurement. Business strategy In defining its strategy and the structured approach for effectivelyincluding CER, ABNAMRO uses a combination of qualitative and increasingly quantitative assessments of climate-related and environmental risks and opportunities. CER areincluded, for example,in risk opinions for all strategic decisions. By incorporating the outcomes of the climate scenario analysis performed for the priority portfolios, the bank also ensures that strategic decision- making at bank and business line levels considers the impact of CER on the business environment in which the bank operates. 168 ABN AMRO Integrated Annual Report 2021 ABNAMRO is committed to aligning its business with theParis Agreement on Climate Change. By aligning CER-related Key Risk Indicators (described below) with KeyPerformance Indicators we also ensure that CER management supports this commitment. Risk appetite As part of the structured multi-year implementation plan, the inclusion of CER in the Risk Appetite Framework is based on new insights and knowledge gained. An analysis of the impact of CER on the Strategic Risk Appetite Statement (SRAS) combined with an assessment on CERas a driver in existing key risk indicators (KRIs) and/or whether new CER-related KRIs are needed, is ongoing. Theanalysis is initially being undertaken for sustainability and credit risk types (in line with the EBA loan origination requirements). Analysis for other existing risk types will follow.On CER, the risk appetite includes both quantitative and qualitative KRIs. Quantitative elements include a carbon footprint metric that measures the change in carbon intensity of the lending and investment portfolios. Qualitative elements include progress on climate-related KPIs of the business lines and progress on science-based target setting per sector. Risk identification: heatmap To identify climate risk, we follow the enterprise risk (ERM) framework, as described in the Sustainability Risk framework section.In 2021, the bank’s approach focused on updating the existing risk identification processes and policies to expand the scope with CER. For climate risk identification, a climate risk heatmap is used to scan ABNAMRO’s lending portfolio on sector sensitivity and vulnerability to physical and transition risks in order, among other things, to determine priority sectors for performing portfolio scenario analyses so as to assess the magnitude of the impact on selected risk types. As a formal risk identification tool, the climate risk heatmap contributes to: H other risk identification processes (e.g. the Risk Event Register, which incorporates green policy and the transition to sustainability, extreme weather events, andpublic attention to matters involving ESG issues andrelating to our clients); H directing the assessment of whether certain climate- related factors should be included in the credit risk ESGtransmission channel framework; H strategic decision-making by enhancing the understanding of sensitivities to climate risk in ourportfolios. The 2021 climate risk heatmap analyses the sensitivity ofsub-sectors in ABNAMRO’s corporate lending and residential mortgages portfolios to transition and physical climate risks. Improvements to the climate risk heatmap were introduced based on an internal update to the indicators in the previously used UNEP FI methodology, targeting ABNAMRO’s portfolio instead of generic sectors and so measuring the characteristics of the sub-sectors andtheir value chains better. The heatmap is based on quantitative and qualitative data. Around 40% of the total score is now measured via externally available and quantitative data. The quantitative data covers greenhouse gas (GHG) emission intensity and data from the ENCORE database on ecosystem services and natural capital. Aquestionnaire is used to collect the qualitative data on the corporate lending and residential mortgages portfolios from sector experts within the bank. A specific set of sectors is in scope of the analysis. As the aim is to align with EU Sustainable Finance Regulation as much as possible, NACE classification is used as a starting point. The scope of the heatmap includes sectors that were included in the 2020 heatmap, as well as carbon-intensive sectors (NACE A-H and L). Within that scope, sub-sectors with significant exposures or a moderate to high sensitivity score in the 2020 heatmap are assessed on a more granular NACE level. The following table shows the aggregated sensitivity score of the sub-sectors for NACE level 1. Theinfographic shows the sub-sectors with moderate to high sensitivity scores in this year’s heatmap on a more granular level. The results in the high-level climate risk heatmap show thatthe highest sectoral sensitivities to climate-related risk are in the agriculture, mining and transportation sectors. Thespecification of sub-sectors shows that the largest partof the moderate to highly sensitive sectors (~10%) isrepresented by two sectors (‘Raising of cattle’ and ‘Seacoastal freight transport’). However, other sensitive sub-sectors with smaller EAD (including ‘Extraction of crudepetroleum and natural gas’ and ‘Fossil electricity production’) can still pose significant reputational and financial risks. The ‘Not specified’ box consists of corporate loans out of scope of the heatmap exercise, including exposure to financial corporations. Residential mortgages were also included in the analysis aspart of the real estate portfolio, but are not included inthe figures. This sub-sector has a low sensitivity score totransition risk and a moderately low sensitivity score tophysical risk. 169 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Sustainability risk / Risk management / Risk, funding & capital High sensitivity (H) Moderately high (MH) Moderate (M) Moderately low (ML) Low sensitivity (L) Not specifi ed High-level climate risk heatmap for corporate loans, showing aggregated sensitivity scores Sub-sector Gross carrying amount 3 (in EUR million) Aggregated sensitivity totransition risk Aggregated sensitivity tophysical risk A Agriculture, forestry and fishing 5,556 MH MH B Mining and quarrying 2,919 MH ML C Manufacturing 7,464 ML M D Electricity, gas, steam and airconditioning supply 2,126 L ML E Water supply; sewerage, waste management andremediation activities 630 M M F Construction 4,029 ML ML G Wholesale and retail trade; repair of motor vehicles and motorcycles 8,951 L ML H Transport and storage 9,444 MH ML L Real estate activities 10,282 L ML Exposure to other sectors andcounterparties 1 35,057 Total corporate loans 2 86,458 1 Exposures to other sectors includes exposures to the NACE sectors not listed here, and corporate loans to counterparties where NACE does not directly apply to, for example governments. 2 Excluding loans at fair value through P&L. 3 Gross carrying amount excludes fair value adjustments from hedge accounting. High sensitivity Moderately high Moderate Moderately low Low sensitivity Not specifi ed High sensitivity to transition risk Fossil electricity production (D) 1 0.1% 0.1% Moderately high sensitivity to transition risk Sea and coastal freight water transport (H) 6.6% Raising of cattle (A) 1 3.7% Support activities for petroleum and natural gas extraction (B) 2.0% Extraction of crude petroleum and natural gas (B) 1.2% Inland freight water transport (H) 0.6% Manufacture of basic metals (C) 0.2% Air transport (H) 0.2% 14.5% Moderate sensitivity to transition risk Indoor growing of crops (A) 1 1.4% Raising of poultry and swine/pigs (A) 1 0.9% Manufacture of fabricated metal products. exceptmachinery and equipment (C) 0.9% Freight transport by road (H) 0.8% Manufacture of chemicals and chemical products (C) 0.8% Water supply; sewerage. waste management andremediation activities (E) 0.7% Manufacture of animal protein food products (C) 1 0.5% Manufacture of construction materials (C) 1 0.4% 6.4% Moderately high sensitivity to physical risk Raising of cattle (A) 1 3.7% Indoor growing of crops (A) 1 1.4% Raising of poultry and swine/pigs (A) 1 0.9% Manufacture of construction materials (C) 1 0.4% Air transport (H) 0.2% 6.6% Moderate sensitivity to physical risk Construction (F) 1 2.1% Manufacture of other food products andbeverages (C) 1 1.6% Support activities for transportation (H) 1.1% Manufacture of fabricated metal products, exceptmachinery and equipment (C) 0.9% Arable farming (A) 1 0.8% Warehousing and storage (H) 0.8% Manufacture of machinery and equipment (C) 0.8% Manufacture of chemicals and chemical products (C) 0.8% Water supply; sewerage, waste management and remediation activities (E) 0.7% Inland freight water transport (H) 0.6% Manufacture of animal protein food products (C) 1 0.5% Wholesale of agricultural raw materials andlive animals (G) 0.4% Manufacture of rubber and plastic products (C) 0.3% Manufacture of basic metals (C) 0.2% Fossil electricity production (D) 1 0.1% 11.7% Sub-sector (incl. NACE sector letter) % of total corporate loans Sub-sector (incl. NACE sector letter) % of total corporate loans Transition risk sensitivity Physical risk sensitivity 6.6% 11.7% 28.0% 2.8% 51.0% 0.1% 14.5% 6.4% 15.3% 12.8% 51.0% 6.6% 11.7% 28.0% 2.8% 51.0% 0.1% 14.5% 6.4% 15.3% 12.8% 51.0% Specifi cation of sub-sectors in the corporate loan portfolio sensitive to transition risk and physical risk 1 Some sub-sectors deviate from NACE. This is due to the fact that for some sub-sectors NACE classification was not useful for sector experts to provide relevant input about the sub-sector characteristics. 170 ABN AMRO Integrated Annual Report 2021 The sensitivity scores in the heatmap inform the scope of portfolio scenario analysis, which will be used for further analysis of the climate risk in the portfolios. The scope of this analysis will be based on sub-sectors’ sensitivity scores and the extent of the bank’s exposure in these sub-sectors. ABNAMRO will continuously improve the methodology to consider other elements such as time horizons, geography, and sensitivity to non-climate environmental risks, such asbiodiversity. Risk measurement: scenario analysis ABN AMRO uses climate risk scenario analysis as one of the tools for understanding the CER impact on traditional risk types (e.g. credit risk and business risk) in specific sectors, using various climate scenarios. Priority sectors identified as part of the climate risk heatmap exercise arefurther assessed, using scenario analysis. In 2021, byapplying a combination of qualitative and quantitative assessments, the materiality of the climate risk impact under specific scenarios materialising in the medium term (within ten years) and the long term (up to 30 years) was established for the credit risk of the portfolios in these priority sectors. For other relevant risk types (e.g. operational risk, market/liquidity risk and business risk), aqualitative assessment was conducted. In 2021,a process and governance approach was developed in line with the bank-wide stress testing and scenario framework. This approach was applied to perform the scenario analysis in four priority portfolios selected on the basis of the 2020 climate risk heatmap– residential real estate, commercial real estate, energy and shipping –covering approximately 60% of the bank’s loans to clients. Climate scenarios issued in June 2021 by the Network for Greening the Financial System (NGFS) have been selected for performing the climate scenario analysis on the four priority portfolios. These scenarios are fit for use in the tools applied in these scenario analyses and are widely recognised in the sector. The aim is to provide a common starting point for analysing climate risks under different future temperature pathways. For the energy and shipping portfolios, the focus is on two transition risk scenarios: (a) NGFS Net Zero 2050 (orderly) and (b) NGFS Divergent Net Zero (Disorderly). For the physical risk scenario in the real estate sectors, the NGFS’s Current Policies scenario has been chosen. It is acknowledged, however, that there is a dependency on the availability of data relevant for the Dutch market, where the bank’s portfolio is concentrated. Information from external parties is used for this purpose. This includes climate scenarios built on the IPCC (Intergovernmental Panel on Climate Change) assumptions, as well as data from the Royal Netherlands Meteorological Institute (KNMI), Climate Adaptation Services (CAS) and KCAF (the Dutch expertise centre on foundation issues). Analyses will be updated when new data from these external sources become available. ABNAMRO aims to use the outcomes of the scenario analyses as input for strategic decision-making at bank andbusiness line levels and for risk management purposes (e.g. risk appetite setting). The analyses performed in the four priority sectors are therefore being used as pilots toevaluate how to structurally integrate climate scenario analysis into the bank-wide and business line strategy andrisk management processes. When performing the internal stress-testing exercise for budgeting and capital planning, we also include climate- andenvironment-related events in the stress scenario assumptions. These events include the Dutch government’s adopting of nitrogen measures and substantially increased financing of climate change mitigation investments. ABN AMRO is currently participating in the ECB’s climate stress test 2022 exercise covering the three modules, namely the questionnaire, data collection and the bottom-up stress test. The ECB considers the stress test to be a learning exercise for banks and supervisors alike, with an aim to identify vulnerabilities, best practices and the challenges banks are facing in relation to climate-related risk management. Simultaneously, ABN AMRO has developed a new climate stress test methodology, which will be embedded in internal processes to strengthen our internal climate stress test framework. The initial results of the climate stress test will be submitted to the ECB in March 2022. The ECB has communicated that the output of the climate stress test exercise will be integrated into the Supervisory Review and Evaluation Process (SREP), using a qualitative approach. Scenario analysis – physical risk Residential real estate The 2021 scenario analysis for residential real estate assessed the materiality of credit risk driven by physical risk (i.e. flood risk and drought risk causing foundation problems due to lower ground water levels) in the Netherlands in the long term. ABN AMRO has improved the methodology used in 2020. The probability of flooding and drought problems, and the associated damage, was examined for each house in the bank’s mortgage portfolio in the Netherlands (see graphs below). The bank has assessed climate risk at a loan level, with a distinction being made between direct potential repair costs (decreasing collateral value) and perception effects (negative impact on market prices). The flooding probabilities originate from the Climate Effect Atlas (CEA), where national climate data is available at amore granular level, while the calculations of damage are based on the standard method provided by Deltares. TheCEA data is based on the KNMI’s WH-scenario to 2050, which is the worst-case scenario for most effects and closest to the NGFS Current Policies scenario. The 171 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Sustainability risk / Risk management / Risk, funding & capital probabilities forfoundation issues originate from KCAF, where 30-year probabilities are used to calculate the expected damage per house in the portfolio. This same source is used to determine the repair costs associated with foundation problems. Data on the expected damage enabled the bank to test the portfolio’sresilience to the identified climate risks. The analysis identified certain vulnerable properties that,due to their energy label and low market value, arepotentially not worth repairing if damage occurs. Twogroups of clients who may be of particular concern were also identified: clients who may not be able to cover the costs of climate-related damage, and clients with vulnerable collateral (i.e. collateral that is not worth repairingif climate-related damage occurs). The flooding in the province of Limburg inJuly 2021provided further data and insights on flooding risks with a limited impact for the bank, given the government’s decision to declare this area a disaster zone and the financial support provided to the impacted households. In 2021, the bank applied the initial insights toits risk reportsfor monitoring purposes. Particular focus was given, and will continue to be given, to determining mitigating actions, ranging from prudential measures such as provisioning and capitalisation to further securing consistent availability of high-quality data, ensuring appropriate forms of engagement with new and existing clients and mortgage advisors and assessing the underwriting criteria. We are also assessing potential mitigation measures, with the aim of creating a positive impact for the above-mentioned vulnerable clients as well as for new clients. As a significant part of the RRE portfolio (mortgage loans) isused as collateral for the bank’s liquidity management, the potential impact of climate risk is considered to be relevant from a liquidity perspective. For that reason, further evaluations in the context of liquidity risk management will be conducted. As the availability and quality of data are continually improving, the 2021 analysis provides an updated overview of our portfolio. Most notably, the effect of foundation issues ataportfolio level requires further research. InQ42021, therefore, we initiated a new cycle of climate scenario analysis for the mortgage portfolio, which will benefit from updated data and more insights. The scope ofthe 2022 analysis will also cover additional physical riskhazards (suchas wildfires and heat stress) and transitionrisks. Flooding The map shows all the properties in our RRE portfolio in theNetherlands and their risk of flooding within the next 30years. Flooding probabilities in 2050 – RRE No risk Low Medium High In the scenario analysis, the probabilities of flooding are grouped into 4 buckets: no risk, low risk, medium risk and high risk. Areas around rivers have the highest risk of flooding, with an estimated probability of 1/30 per year until2050. Drought, subsidence and pole rot This map shows all the properties in our RRE portfolio in the Netherlands and the risk of pole rot and subsidence occurring within the next 30 years. Foundation problems probabilities – RRE No risk Low Medium High 172 ABN AMRO Integrated Annual Report 2021 In the scenario analysis, the probabilities of foundation problems are grouped into 4 buckets: no risk, low risk, medium risk and high risk. Most properties with foundation problems are built on peat soil and were built before 1970. High-risk properties have an estimated 30% probability of foundation problems until 2050 and, in exceptional cases, a higher probability.As foundation risk is a slowly progressing risk, the deterioration caused by foundation problems could translate into lower market value and thus impact on LGD and RWA. Commercial real estate The 2021 scenario analysis for commercial real estate assessed the materiality of credit risk driven by physical risk(i.e. flood risk and foundation problems, caused by decreasing ground water levels) in the corporate banking, private banking and retail portfolios. As in the case of RRE, ABNAMRO also improved the methodology used for CRE in 2020. Once again, the bank assessed the impact on thecollateral value of the properties in our portfolio, but thistime extended the analysis to include an assessment ofthe revenue loss of real estate clients impacted by actual or potential damage from flooding or drought. The data on the probabilities of flooding and foundation issues was the same as used in the RRE analysis: flooding data from Climate Effect Atlas (CEA), data on foundation issues from KCAF and calculations ofdamage based on the Deltares method. To calculate the decline in revenue, we took a decline in rental income due to business interruption. For this we chose to assume an average of six months, based on: 1. the flooding risk data from CEA, showing a flood duration of up to six months for a large part of the Netherlands, and 2. the maximum interruption duration estimate of one year, according to Deltares. The analysis estimates that the CRE portfolio will be impacted in the chosen scenario by a value reduction in the properties in our portfolio, increasing the average LtV of the portfolio by a few percentage points. The impact on a small part of our client base will be more significant, with calculated damage of around 28% (flooding) and 20% (foundation problems) of the market value. The analysis of clients’ revenue loss predicted that around half of our CRE portfolio will be impacted to some extent by a decline in rental income. This is due to our portfolio being concentrated in the most populous region of the Netherlands (‘the Randstad’), which is relatively highly exposed to flooding risks and foundation problems. Further in-depth analysis of the impact on business activities, macroeconomic effects and transition risk is therefore needed. The impact on credit risk at a portfolio and bank level may seem relatively low due to the relatively low occurrence probabilities and long-time horizons. In the event, however, of actual flooding in the area where ABNAMRO’s portfolio is concentrated, the potential impact can be considered material. This risk is therefore being monitored by performing periodic scenario analysis. Flooding The following figure shows the flood risk for the building units in our portfolio (no risk is shown in green, low risk in yellow, medium risk in amber and high risk in red). Flooding probabilities in 2050 – CRE No risk Low Medium High The estimated maximum probability of flooding occurring before 2050 is 0.13% for low risk, 13.75% for medium risk, and higher than 30% for high risk. Only 0.2% of the building units in our portfolio are located in a high-risk area. 173 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Sustainability risk / Risk management / Risk, funding & capital Drought, subsidence and pole rot The following figure shows the building units and their associated risk of foundation issues (no risk is shown in green, low risk in yellow, medium risk in amber and high risk in red). Foundation problems probabilities – CRE No risk Low Medium High Our analysis predicts that approximately 20.53% of the properties in the CRE portfolio have a medium or high risk of climate change-related foundation problems up to 2050. As foundation risk is a slowly progressing, rather than directly occurring risk, the deterioration caused by foundation problems can translate into lower market value and thus impact on LGD and RWA. Scenario analysis – transition risk Shipping The 2021 shipping analysis focused on the short-, medium- and long-term credit risk driven by transition risks (resulting from such things as carbon taxation, technological innovation and the decreasing demand for fossil fuel transportation) forseagoing vessels in the Corporate Banking portfolio. Theanalysis assessed how these risks would impact on thefinancial performance of clients in different shipping segments (i.e. gas tankers, oil tankers, product tankers, drybulk ships, container ships and multipurpose (MPP) vessels) by applying the Transition Risk Tool developed bythe UNEP FI. The Transition Risk Tool calculates expected losses and probability to default based on: a) the respective vessel segments’sensitivities to risk factors, and b) the transition readiness of individual clients, translated into an individual probability of default calibration. The risk factors are direct and indirect emission costs, low carbon capital expenditure and change in revenue. These were qualitatively assessed based on expert opinion, the climate risk heatmap and theESG Transmission Channel Framework. The transition readiness was based on company-specific information oninvestments in new technologies, ESG reporting and strategy, and the average greenhouse gas (GHG) emissions rating of a client’s fleet. The tool did not assess the impact on loss given default (LGD), which is key in credit risk assessments in this sector. LGD-focused tools are not yet available in the market, but we will continue to monitor developments in this respect. In both scenarios, the increase in expected losses for all shipping segments was considered acceptable. The tanker segments would be impacted most because the current world fleet would be larger than projected demand for fossilfuel transportation in the chosen scenario. Exposure in this segment needs to be particularly closely monitored to ensure the potential losses remain acceptable.The medium-term impacts (within 10 years) were greater, but still limited relative to our total exposure to the sector in the NGFS Divergent Net Zero scenario. This scenario projects accelerated decarbonisation in Europe and the transportation sector, thus exposing our portfolio to higher risk than intheorderly NGFS Net Zero scenario. The results will be used as input for multiple processes. Trends in alternative fuels and emission-reducing ship design will be part of our intensified engagement with clients. In addition, climate transition risks and identified criteria for adaptive capacity will be integrated into thecredit analysis and decisioning process. The main outcomes will also be translated into the sector’s climate transition strategy. Energy In 2020, the energy climate scenario analysis focused on the upstream oil and gas portfolio. In 2021, we extended the scope of this scenario analysis to include the off-shore services and power generation portfolios. The purpose of the analysis was to assess the materiality of credit and business risk driven by transition risk in these portfolios forthe short, medium and long term. The Net Zero 2050 and Divergent Net Zero scenarios of the NGFS that were chosen for this analysis allowed us to assess the impact ofa more ‘extreme’ decarbonisation scenario than the IEASustainable Development Scenario used in the 2020analysis. The scenario analysis consists of both a quantitative and aqualitative analysis. For the quantitative analysis we usedthe same Transition Risk Tool as used in the shipping analysis to assess the impact on creditworthiness (PD) andexpected loss (EL) of the portfolio. The purpose of 174 ABN AMRO Integrated Annual Report 2021 thequalitative analysis was to assess our clients’ adaptability tothe energy transition, based on criteria suchas diversification in renewables and energy transition technologies, the CO 2 intensity of activities and committed energy transition plans. The output of this qualitative analysis served as borrower-level input for the Transition Risk Tool calculations. The analysis of the three energy sectors predicted a limited impact of transition risk on credit risk in our energy portfolio. This is mainly explained by the geographical characteristics of the client portfolio, which translate into a portfolio with low operational costs, low CO 2 intensities and limited exposure to exploration, all of which seem to mitigate transition risk factors. The analysis also showed that a number of our clients are already diversifying or are due to start activities in renewable energy technologies, suggesting that they are well-positioned for the energy transition. As ABNAMRO has strategic ambitions to grow its renewable energy project finance portfolio in solar, wind and biomass, an assessment was performed on the renewable energy portfolio to identify potential risks (merchant and technology risks) and the potential impact onthe business model associated with portfolio growth onthe pathway to becoming Paris-aligned. The analysis alsoprovided insights into the conditions and choices needed (in terms of growth, risks and policy framework) tosupport further growth in the renewable energy portfolio. The scenario analysis results will be considered in strategic decision-making on our energy business and its impact on our business model. Considering the pace of market developments and the ever- changing scenario assumptions, we will perform a follow-up scenario analysis on the oil and gas upstream, midstream and offshore portfolio in order to monitor exposure to transition risk. We will further refine the criteria defined for client level adaptability (based on materiality) and consider including these criteria in our client sustainability due diligence andour credit-decisioning process. In conclusion Based on the chosen scenarios, climate risk drivers and time horizons (2030 and 2050), the outcome of the climate scenario analyses of the four priority portfolios indicates that it is unlikely that climate risk will have a material impact on credit risk in the priority portfolios. GHG measuring and steering In line with the bank’s climate objectives and strategic risk appetite on the alignment of our portfolio with the Paris Agreement, we measure the greenhouse gas (GHG) emissions of our activities. This includes the direct (scope 1 and 2 and partly scope 3) emissions of our own operations and the indirect emissions in our lending and asset management portfolios. In doing so, we focus on GHG/ carbon-intensive sectors in particular, and assess the alignment of certain GHG-intensive portfolios with Paris andnet zero emissions scenarios. The lending portfolio’s emissions are calculated in accordance with the principles set by the Platform Carbon Accounting Financials (PCAF). These combine various sources of information, including company-level emissions data (for stock exchange-listed corporate clients) and average carbon intensities by energy label (for residential mortgages and commercial real estate) and by sector (forother corporates). We updated our methodology anddata sources in 2021. Among other changes, we nowuse emission estimates on NACE level 4 for some carbon-intensive sectors and apply an attribution factor for residential mortgages. This resulted in an overall increase inestimated GHG emissions. Thecomparative figures onGHG emissions have been adjusted accordingly. GHG emissions summary (in ktons) 2021 2020 Delta Total scope 1 1 3 6 -2 Total scope 2 2 3 3 Total scope 3 - own operations 3 47 1 45 Total scope 3 - emissions of lending portfolio 4 19,743 34,536 -14,793 Total scope 3 - emissions of client assets 5 6,498 6,633 -135 Total GHG emissions 26,294 41,180 -14,886 1 Natural gas/biogas, solar energy (the Netherlands and rest of world) and mobility lease cars (Netherlands). 2 Electricity (excluding solar energy) and heating & cooling, location based figures provided by energy suppliers (the Netherlands and rest of world). 3 Compared to 2020, there is an increase as scope 3 GHG emissions now include GHG emissions for home workplace, air travel, international business rail travel, hotel visits, mobility, public transport and IT. Scoping is based on GHG Protocol. Reported 2020 emissions relate to air travel only. 4 Based on PCAF methodology, using total assets as the denominator and gross carrying amount as attribution metric. 5 Calculation based on PCAF methodology listed companies, using Enterprise value including cash as the denominator. The scope of the calculation includes equities and corporate bonds, bothdirect and indirect in funds. 175 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Sustainability risk / Risk management / Risk, funding & capital Scope 3 emissions in the lending portfolio 31 December 2021 31 December 2020 (inmillions) GHG emissions (ktCO 2 e) Data quality indicator 5 Gross carrying amount 6 Carbon intensity (tons of GHG permillion EUR) GHG emissions (ktCO 2 e) Data quality indicator 5 Gross carrying amount 6 Carbon intensity (tons of GHG permillion EUR) Scope 3 emissions lending portfolio 1 19,743 n.a. 261,421 76 34,536 n.a. 254,781 136 - of which residential mortgage 2 1,366 5 146,351 9 1,586 5 145,672 11 - of which corporate loans 3,4 18,377 5 86,458 213 32,950 5 86,745 380 - of which commercial real estate 386 4 12,924 30 389 4 11,646 33 1 Estimates of green house emissions exclude loans to banks, consumer loans and other loans to financial counterparties. 2 In 2021, ABNAMRO changed the attribution method for residential mortgages. Emissions are now attributed to ABNAMRO according to the loan-to-market value (previously full attribution). Figures for 2020 were adjusted accordingly. 3 In 2021, ABNAMRO changed the estimation of GHG emission for carbon intensive sectors. For sectors mining and quarrying, manufacturing and electricity, gas, steam and air conditioning supply, emissions are now estimated on level 4 of the NACE classification. 2020 figures have been changed retrospectively. 4 Excluding loans at fair value through P&L. 5 Based on criteria of the Partnership for Carbon Accounting Financials (PCAF). 6 Excluding fair value adjustments from hedge accounting. Carbon-intensive sectors 31 December 2021 31 December 2020 (inmillions) GHG emissions (in kton) Gross carrying amount 4 - of which carbon- related GHG emissions (in kton) Gross carrying amount 4 - of which carbon- related Corporate loans to non-financial corporations Agriculture 4,446 5,556 4,628 5,775 Mining and quarrying 3,622 2,919 2,661 15,937 4,514 3,937 Manufacturing 831 7,464 507 2,074 7,848 957 Electricity, gas, steam and air conditioning supply 2,768 2,126 89 3,676 1,492 508 Water supply 342 630 350 577 Construction 11 5 4,029 97 2,815 Wholesale and retail trade 247 8,951 645 11,376 Transport and storage 2,320 9,444 2,663 10,182 Real estate activities 558 10,282 400 8,233 Corporate loans in carbon-intensive sectors 15,249 51,401 3,256 30,470 52,810 5,402 Other sectors 1 3,127 15,458 2,480 15,659 Total corporate loans to non-financial corporations 18,377 66,859 3,256 32,950 68,470 5,402 Corporate loans to other counterparties 2,3 19,599 18,276 Corporate loans 3 18,377 86,458 3,256 32,950 86,745 5,402 1 Includes exposures to all other NACE sectors. 2 Includes households, governments, credit institutions and other financial corporations. 3 Excluding loans at fair value through P&L. 4 Gross carrying amount excludes fair value adjustments from hedge accounting. Compared to the previous year, the bank’s exposure to carbon-related sectors and associated scope 3-emissions reduced significantly, primarily due to the wind-down of the CIB non-core loan book. The largest decline was in the mining and quarrying sector (EUR1.3billion), mainly because of sales of oil and gas assets in the USA, followed by a decline of EUR0.8billion and EUR0.4billion in the manufacturing and electricity sectors. The year-on-year change in the total corporate loan book was much smaller, at EUR0.3billion. This was due to growth in the commercial real estate (EUR2billion), construction (EUR1.2billion) and renewable energy (EUR0.6billion) loanbooks, which exceeded the decline in the trade and commodity finance (EUR2.4billion) and shipping (EUR0.7billion) non-core loan portfolios. 176 ABN AMRO Integrated Annual Report 2021 Carbon-intensive client assets 31 December 2021 (inmillions) Amount Percentage of total Carbon-intensive client assets 1 54,571 60% Non-carbon-intensive client assets 35,865 39% Subtotal 90,436 100% No data available 392 0% Total 90,828 100% 1 Please refer to the definitions on page 378 for the definition of carbon-intensive assets. Carbon-related client assets 31 December 2021 (inmillions) Amount Percentage of total Carbon-related client assets 1 6,396 7% Non-carbon-related client assets 79,752 88% Subtotal 86,148 95% No data available 4,680 5% Total 90,828 100% 1 Please refer to the definitions on page 378 for the definition of carbon-related assets. Taxonomy eligible and non-eligible assets The objectiveof theEU taxonomy is to provide users of financial statements with a common basis for identifying business activities as environmentally sustainable. As a first step in this process, we disclose our eligible assets as required by Article 8 of the Delegated Act in the tablebelow. Eligibility indicates whether the activities that ABNAMRO finances are in scope of the EU taxonomy, but does not take account of the different technical criteria required to qualify as environmentally sustainable (‘taxonomy aligned’). 31 December 2021 Proportion (%) of total assets Eligible economic activities 1 37% Non-eligible economic activities 38% - of which non-NFRD counterparties 28% - of which derivatives (on-balance) 1% - of which assets held for trading 0% - of which on-demand interbank loans 0% Central governments, central banks and supra-national issuers 25% Total 100% 1 Includes only eligible household activities, as official information on the eligibility of the activities of our corporate clients was not available when preparing this report and ABN AMRO does not have eligible local government exposures The eligibility figure in the table above includes only exposures to households that are eligible on our balance sheet. In the case of corporate clients, ABNAMRO is only allowed to use actual information that has been disclosed by clients reporting under the Non-Financial Reporting Directive (NFRD). These clients have not yet reported on eligibility or will do so around the same time as ABNAMRO has to issue this report. Due to the above data limitations, exposures to corporate counterparties have been assessed as zero in our mandatory EU taxonomy disclosure. The following voluntary disclosure below shows the portion of our portfolio that is potentially eligible, with eligibility estimated in order to provide better insight into our portfolio breakdown in anticipation of the EU Taxonomy evolution.The NACE code of the client was used as a guide to indicate the principal economic activity of our corporate counterparties. We distinguish between NFRD and non- NFRD corporates, as the former will provide actual eligibility information on which to base our mandatory disclosures next year, while the latter will not as they do not yet have aregulatory obligation to do so. We have included our non-NFRD corporates in the following figure to indicate the nature of our exposures to these counterparties, given that financing provided to this population will remain crucial in transitioning to a lower-carbon economy. 177 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Sustainability risk / Risk management / Risk, funding & capital 31 December 2021 (inmillions) Gross carrying amount - of which eligible Potentially eligible assets 1 Non-financial corporations subject to the NFRD 4,263 1,358 - of which loans and advances 2 4,260 1,358 - of which debt securities - of which equity instruments 3 2 Non-financial corporations not subject to the NFRD 4 65,413 32,741 - of which loans and advances 2 64,895 32,294 - of which debt securities 1 - of which equity instruments 3 517 447 Exposures to households 149,114 149,114 - of which loans collateralised by residential immovable property 148,236 148,236 - of which building renovation loans 606 606 - of which motor vehicle loans 272 272 Exposures to local governments - of which collateralised loans by (residential) real estate - of which specific purpose (project finance) where available Collateral by taking possession to residential and commercial immovable property Total 218,789 183,212 Non-eligible assets Financial corporations subject to the NFRD 5 10,439 - of which loans and advances 2 5,423 - of which debt securities 5,008 - of which equity instruments 3 8 Financial corporations not subject to the NFRD 45,560 - of which loans and advances 2 43,817 - of which debt securities 1,149 - of which equity instruments 3 594 Other non-eligible assets 29,338 - of which on-balance derivatives 6 3,785 - of which assets held for trading 1,155 - of which on-demand interbank loans 7 1,174 - of which other 8 23,224 Total 85,337 Exposures to governments and central banks and supra-national issuers 98,957 - of which loans and advances 2 67,577 - of which debt securities 31,380 Total assets 403,083 183,212 1 Eligibility for corporate clients is estimated based on the principal economic activity of the counterparty. 2 Including securities financing. 3 Including equity-accounted investments. 4 Corporates not subject to the NFRD may only be included in the GAR from the 2025 annual report, subject to positive assessment of this by the European Commission. 5 In this year’s disclosure financial corporations are in the non-eligible category as ABNAMRO base our eligibility on the principal NACE code of the counterparty. Next year, these clients and their exposures will be included in the eligibility percentage based on their actual reported information. 6 Including derivatives held for trading. 7 Defined as overdrafts and current accounts with other credit institutions. 8 Including loans and advances to households and other assets that are not eligible for the EU taxonomy. 178 ABN AMRO Integrated Annual Report 2021 Looking ahead: Green Asset Ratio In order to qualify as ‘environmentally sustainable’, and therefore be included in the numerator of the Green Asset Ratio (GAR), economic activities must be aligned with thetaxonomy criteria. This means that these activities significantly contribute to a taxonomy objective, meet the‘do no significant harm’ (DNSH) criteria and meet theminimum safeguards criteria. To assess whether theactivities that we finance are aligned we are highly dependent on the information that our clients disclose, asrequired by the NFRD, and in the future as required bythe CSRD when it comes into force. Based on the information that our clients disclose, and inline with current regulatory requirements, we aim to disclose the GAR in our 2023 Annual Report. We are only allowed to include the taxonomy-aligned exposures to NFRD corporates, certain household exposures and specific local government financing in the numerator. This means that a significant amount of our portfolio (such as lending toand ABNAMRO’s investments in non-NFRD corporates and financial institutions, amounting to 30.1% of our total assets) cannot be considered for taxonomy alignment and will subsequently be excluded from the GAR numerator in the 2023 Annual Report. Non-NFRD corporates may only beincluded in the numerator from the 2024 Annual Report, subject to positive assessment of this by the European Commission. The denominator of the GAR is based on the concept ofcovered assets, which includestotal on-balance sheet assets less exposures to central governments, central banks and supranational issuers and assets held for trading. This amounted to EUR 302.9 billion at 31 December 2021. In future, we will aim to align our definitions for sustainable acceleration loans as much as possible with the EU taxonomy definitions. However, we also see the need for additional sustainability-related metrics to cover the clients and exposures, such as our SME portfolio that cannot beincluded in the GAR from a regulatory point of view. Client asset portfolio (inmillions) 31 December 2021 Potential eligible assets 1 90,828 - of which NFRD clients 36,702 - of which eligible 2 13,340 - of which non-eligible 23,362 1 Scope consists of corporate debt and equity securities, including lookthrough of funds. 2 Eligibility is based on the principal economic activity of the counterparty. Given the materiality and strategic importance of our client asset portfolio, ABN AMRO has chosen to also disclose thepotential eligibility for this portfolio and the share of client assets invested in NFRD clients, ahead of the future KPI from the Taxonomy Delegated Act with regard to assets under management. 179 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Sustainability risk / Risk management / Risk, funding & capital Management Control Statement 180 ABN AMRO Integrated Annual Report 2021 Risk, funding & capital ABN AMRO publishes this Management Control Statement to demonstrate its accountability for Risk Management andCulture, as stipulated in Principles 1.4 and 2.5 of the Dutch Corporate Governance Code. H By virtue of Principle 1.4 (Risk management accountability) of the Dutch Corporate Governance Code, ABN AMRO’s Executive Board is required to account for the effectiveness of the design and operation of the bank’s internal risk management and control systems. H By virtue of Principle 2.5 (Culture) of the Code, the Executive Board is responsible for promoting a culture aimed at creating long-term value for the company and its affiliated enterprises. H By virtue of Principle 2.5.4 (Accountability regarding culture), the Executive Board is required to explain the bank’s values and how these values are incorporated into the activities of the company and its affiliated enterprises, and to account for the effectiveness of andthe bank’s compliance with the Code of Conduct. The Management Control Statement consists of foursections: A. Insights into our Risk management governance processes and control systems for 2021. B. External factors that potentially impact ABN AMRO’s current business model. C. Areas at risk of non-compliance with regulations andheightened regulatory scrutiny. D. Areas of attention for ABN AMRO identified by seniormanagement. Section A: Risk Management Governance ABN AMRO’s internal risk management and control process is designed to provide reasonable assurance regarding the achievement of objectives in the following categories: H Strategic and business objectives; H Compliance with laws, regulations and internal policies; H Reliability of financial and non-financial information; H Effectiveness and efficiency of operations; and H Safeguarding of assets, and identification and management of liabilities. ABN AMRO’s first and second lines of defence perform a variety of tests and controls – risk assessments, stresstests, evaluations on effectiveness of controls, andreporting – on risk management and control systems. Theresults are reported in formal risk reports and discussed at senior management level. Group Audit, as the third line of defence, evaluates the design and effectiveness of ABN AMRO’s governance, as well as its Risk Management and Control Systems. In 2021, the Audit reports were discussed with relevant Executive Committee members. Group Audit attended the Executive Board and/or Executive Committee meetings every quarter to discuss the Quarterly Audit Opinions. Last year, the evaluation of the adequacy of ABN AMRO’s internal risk management and control systems was regularly discussed with the Audit Committee, the Risk & Capital Committee and the full Supervisory Board. On an annual basis the Executive Board makes the following Statements and provides clear substantiation regarding the internal risk management and control systems. This is always done in accordance with ABN AMRO’s moderate risk profile (in compliance with best practice provision 1.4.3 of the Corporate Governance Code and based on ABN AMRO’s risk management processes): H An integral part of the Integrated Annual Report 2021 is the Executive Board’s Report, which provides insight into any failings in the effectiveness of the Internal Risk Management and Control Systems (best practice 1.4.3.i); H The internal risk management and control systems provide reasonable assurance that the financial reporting for 2021 does not contain any material inaccuracies (bestpractice 1.4.3.ii); H Based on the current state of affairs, preparation of the financial reporting for 2021 on a going-concern basis is justified (best practice 1.4.3.iii). For further information, please refer to Note 1 Accounting policies in the Consolidated Annual Financial Statements; H The Executive Board’s report states those material risks and uncertainties that may affect ABN AMRO’s continuity for the 12-month period following the preparation of this report (best practice 1.4.3.iv); H The Executive Board’s report outlines the bank’s values, and how they are incorporated into the activities of the bank and its affiliated enterprises. It discusses the bank’s compliance with the Code of Conduct (best practice 2.5.4). For more information, please refer to the Risk framework section. 181 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Management Control Statement / Risk, funding & capital Section B: Potential external factors External factors have the potential to affect the bank’s current business model. In addition to the impact of Covid-19, the Executive Board has identified the following external factors as potential risks: H Covid-19 update: H The economic growth that took place in 2021 was higher than expected. However, at the end of 2021 the bank was again confronted with new (economic) uncertainties. H The bank’s strong digital backbone, combined with the dedication and flexibility of its staff, ensured services to clients remained consistent. H The bank strengthened its risk management activities and reporting during this period, partly in response to increased regulatory requirements. Additionally, the bank’s models are being recalibrated in response to these exceptional circumstances. H The bank’s business continuity measures with respect to Covid-19 were effective in 2021. H In December 2021, the rising number of infections due to the Omicron variant pushed the Netherlands and other countries where the bank operates, back into partial lockdowns. Due to the new variant, economic uncertainty has increased, and complete recovery will take longer. The bank remains concerned about the long-term impact on society. H However, on a positive note, high vaccination rates in the eurozone/US have weakened the link between cases and hospitalisations. H Adverse macroeconomic and monetary conditions could hinder the bank in achieving its planned growth strategies. Developments include: H Persistently low or negative interest rates. H Reformed fiscal policies. H Geopolitical uncertainty (such as the Russia-Ukraine war and trade tensions between the US and China). H Competition (for instance pressure on the bank’s market share in mortgages). H A degree of economic recovery has taken place since the beginning of the pandemic. But to date, supply cannot keep up with growing demand, resulting in increasing inflation. H A number of new laws and regulations could have animpact on the bank’s strategy, revenues, costs andcapital adequacy. Examples include: H GDPR and more specifically clarity provided bytheSchrems II verdict. H Sustainable finance regulations. Å Given that sustainability is an important pillar of ABNAMRO’s purpose and strategy, it was encouraging to see an increase in sustainable developments. These developments are closely monitored as regulators continue to challenge banks to comply with all emerging legislation. Similarly, all stakeholders are increasingly expecting companies to transition to sustainability. The bank welcomes the first part of the EU Taxonomy guidance to assess the relevant asset categories against the new green standards. The EU Taxonomy is expected to provide a common methodology and language in the market to define whichactivities from the bank are sustainable. When calculating the Green Asset Ratio (in line with the definitions included in the EU Taxonomy Regulation) ABNAMRO may be perceived as less sustainable compared to previous disclosures, which are based onthe current internal definitions used for determining sustainable (acceleration) assets. It is expected that thisdevelopment will be industry-wide, as these stricter sustainability criteria will apply to all banks. In addition, the bank needs time to adapt, validate and audit its processes and systems to facilitate the sourcing of data to determine the extent to which the bank and our clients’ activities are sustainable. Finally, developments in the field of sustainability could impact several risk types in the short to long term. Formore information, please refer to the Sustainability risk section. The Executive Board took a strategic decision to define client segments and develop value propositions to compensate and minimise the impact of these external factors. For example: Å A more client centric fee-based business model; Å Simplifying and centralising the operating model. Not being compliant with laws and regulations may lead toreputational damage, fines and changes in ABN AMRO’s income, costs or capital basis, all of which could endanger its long-term goals. Ensuring demonstrable compliance requires robust risk governance, enhanced data management and a substantial share of the bank’s resources. 182 ABN AMRO Integrated Annual Report 2021 Section C: Areas with a risk of non-compliance with regulations and heightened regulatory scrutiny H Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) including Customer Due Diligence/ Know Your Client. In 2021, ABN AMRO Bank accepted the settlement offer from the Netherlands Public Prosecution Service (NPPS) in connection with their investigation into ABN AMRO’s shortcomings in Anti-Money Laundering activities from 2014 to 2020. In 2021, the bank made progress in addressing compliance issues and strengthening its compliance function. NPPS also acknowledged that in 2018 ABNAMRO created the AML programme to remediate all identified shortcomings. ABN AMRO will continue tomake every effort to fulfil its role as gatekeeper. For more information, please refer to the Performance section in the Strategy, value creation & performance chapter. H Duty of care towards the bank’s clients. In regard to the bank’s duty of care, the goals of ABN AMRO and expectations of external stakeholders - including clients, politicians and media - are increasingly high. The bank is working hard to meet these expectations, and has responded by implementing a bank-wide Duty of Care Programme and bank-wide Client Centricity Principles. Variable interest rates. The bank is seeing an increased risk of claims and liability regarding loan products with variable interest rates. This has resulted in client compensation arrangements for certain revolving consumer credits. Residual claim and liability risks remain, both in relation to revolving credits and other types of loan products with variable interest rates. Thebank continues to monitor these risks and the useofvariable interest rates going forward. For more information, please refer to Customer experience in the Strategy, value creation & performance chapter. H Credit Risk Management. Collateral management, credit risk monitoring, credit modelling and reporting allrequire remediation. More information on this is provided in the Credit risk management section. Remediation programmes - related to Anti-money laundering (AML) and Counter-Terrorism Financing (CTF), Duty of Care and Credit Risk Management - aimed at improving ABN AMRO’s performance were well underway in 2021. These programmes have reduced shortcomings and aim to ensure full compliance with legislation. In 2019, the bank has amongst others: 1. Established a centralised AML Department. 2. Set up programmes to address potential issues involving products sold in the past (such as consumer credit andmortgages). 3. Improved the monitoring of regulatory changes andimplementation. The remediation requires a substantial, ongoing effort, especially the regulatory areas mentioned above. In addition to its remediation programmes, the bank continues to improve compliance in all operational processes. In the past, ABN AMRO’s legal predecessor, Fortis Bank (Nederland) N.V., ABN AMRO and several (former) subsidiaries were directly or indirectly involved in transactions relating to equity trading extending over dividend record dates, including several forms of tainted dividend arbitrage, i.e. dividend stripping. It cannot be excluded that ABN AMRO or subsidiaries may face financial consequences as a result of their involvement in these transactions. This could include penalties and other measures under both criminal and civil law claims. The bank has been implementing measures to prevent any future involvement in tainted dividend arbitrage. For more information, please refer to Note 35 Commitments and contingent liabilities in the Consolidated Annual Financial Statements. Section D: Areas of attention identified by senior management The Executive Board has identified and agreed on the following 6 areas of improvement, which are being actively managed by senior management: 1. Increased cyber risks: Cyber-attacks are an increasing external threat. They have the potential to lock or destroy our systems, steal data or (temporarily) put us out of service for clients and third parties. To reduce this risk, the bank is focusing on 3 key issues: H Making sure ABN AMRO has the correct controls toprotect the bank’s systems. For example identity and access management; H Making sure ABN AMRO can detect and respond toan attack; H Making sure ABN AMRO can recover quickly if an attack happens. 183 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Management Control Statement / Risk, funding & capital Achieving this will make our systems much more robust. However, substantial efforts are still required to improve the IT infrastructure, which is complex due to the existing number of legacy systems and multiple third party applications. 2. Data management and privacy: The financial services industry is becoming increasingly data driven. In order to meet the Principles for Effective Risk Data Aggregation and Risk Reporting, the bank urgently needs to improve its data quality and availability. Additionally the quality of (historical) data, data ownership, data knowledge and a complex IT infrastructure all need to be addressed. Otherwise, these data issues may result in poor decision-making and poor business process execution, as well as elevated model risk causing capital add-ons. Data management and data leakage play an important role in addressing privacy risk and will require sustained, ongoing efforts. 3. Change accumulation: The complexity, and inter- dependencies of the bank’s transformation programmes – including improvement of Risk Management capabilities – are leading to an accumulation of change risk. The recent changes in the bank’s top structure and the announced changes in the Client Unit organisation (for instance implementation of Clients Units, Product Engines) should simplify and enhance change execution in the future. However, these changes could have a negative impact on the people side in the short term. Forexample: role changes, key knowledge gaps, job uncertainty, lack of focus on execution, etc. This may potentially cause delays, increase operational costs and time-to-market issues - all of which would put ABN AMRO at a competitive disadvantage. To mitigate this, the new Leadership Team needs to: H Prioritise key change requests to deliver on time; H Improve Change Portfolio management capabilities. To finish on a positive note, the wind-down of the Corporate & Institutional Banking non-core client portfolio to pursue the bank’s moderate risk profile is progressing ahead of plan. 4. External fraud: The bank as well as its clients were confronted with payment and loan/credit frauds and losses in 2021, in particular related to impersonation scams. ABN AMRO collaborates with public and private partners in order to adapt to the rapidly-changing fraud landscape and protect our clients and the bank itself against fraud. This should improve the digital resilience of our clients. For more information, please refer to the Operational (non-financial) risk section. In early 2021, the banking sector agreed to compensate consumers who are victims of certain types of payment fraud, even when banks are formally not liable. An extended and voluntary compensation scheme was agreed by the sector, following appeals by various stakeholders such as members of parliament, media and consumer organisations. The exact scope and application of the compensation scheme has differed between banks throughout 2021, leading to increased attention for banks (including ABNAMRO) that allegedly were less generous than others. ABN AMRO decided in late 2021 to extend its offer to affected consumers, and compensate certain additional fraud victims despite these victims having breached the security clauses in their contracts. Extensive additional awareness campaigns have beenlaunched by ABNAMRO and by the sector. However, the course of public debate around payment fraud remains uncertain. To strengthen our fraud risk management framework forinternal and external fraud we issued a new Fraud riskpolicy and will continue to improve our fraud controls and fraud risk reporting. 5. People and culture: The difficulties of attracting, developing and retaining qualified and diverse staff remain a challenge, especially in areas of IT and data. This is especially true in the current context of strategic change and pandemic fatigue. This combination, plus the ongoing urgencies of safeguarding our license to operate and working remotely, demands huge efforts to ensure staff resilience, motivation and wellbeing. Efforts are being made to mitigate these risks through carefully managed HR programmes which focus on strategic workforce management, reskilling and well- being. HR also works closely with the business lines to: H Enhance performance management practices; H Ensure strategy execution also focuses on leadership and supporting people during change; H Strengthen client-centric ways of working; H Define the new departments following the new topstructure; H Improve hybrid ways of working. 184 ABN AMRO Integrated Annual Report 2021 6. Risk Control Framework: The effectiveness of theRiskControl Framework is under continuous improvement via the Risk Management Foundation Plan. More attention is also being paid to the underlying conduct drivers, such as clarity, achievability and engagement. In the meantime, measures have been taken to minimise and mitigate the risks with regard to all areas of improvement. It should be noted that ABN AMRO’s internal risk management and control systems do not provide complete assurance on the realisation of business objectives, nor do they prevent or detect inaccuracies, fraudand non-compliance with rules and regulations atalltimes. 185 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Management Control Statement / Risk, funding & capital Additional risk, funding & capitaldisclosures 186 ABN AMRO Integrated Annual Report 2021 Credit quality by exposure class under the Internal Ratings-Based (IRB) approach The following tables provide an overview of the EAD, RWA and LGD buckets by exposure class and grade category. IRB approach: credit quality by exposure class 31 December 2021 Total LGD 0-20% LGD 20-50% LGD >50% (inmillions) EAD RWA RWA/EAD EAD (%) EAD (%) EAD (%) Exposure class Grade category Central governments and central banks Investment grade 103,059 663 1% 95% 4% 1% Sub-investment grade 88 124 141% 21% 79% Impaired 5 53 1003% 100% Total 103,152 840 1% 94% 4% 1% Institutions 1 Investment grade 6,697 1,078 16% 47% 53% 0% Sub-investment grade 328 501 153% 4% 93% 3% Impaired 9 10 110 % 100% Total 7,034 1,589 23% 45% 55% 1% Corporates Investment grade 49,127 18,024 37% 32% 63% 5% Sub-investment grade 49,309 29,385 60% 25% 73% 2% Impaired 4,818 4,802 100% 42% 43% 15% Total 103,254 52,211 51% 29% 67% 4% Retail Investment grade 138,073 7,802 6% 98% 2% 1% Sub-investment grade 29,772 7,197 24% 92% 6% 2% Impaired 1,699 1,575 93% 80% 18% 2% Total 169,544 16,574 10% 97% 2% 1% Securitisation positions Investment grade 1,016 11 6 11 % 77% 21% 2% Sub-investment grade Impaired Total 1,016 116 11 % 77% 21% 2% Total Investment grade 297,972 27,684 9% 85% 14% 1% Sub-investment grade 79,497 37,207 47% 50% 48% 2% Impaired 6,531 6,439 99% 52% 36% 12% Total 2 384,000 71,331 19% 77% 21% 2% 1 Institutions include exposures to banks and investment undertakings, regional governments and local authorities, and pension funds. 2 Exposure at Default does not include other non-credit obligations and equities not held for trading, because these items are not subject to credit risk grading. 187 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Additional risk, funding & capitaldisclosures / Risk, funding & capital IRB approach: credit quality by exposure class 31 December 2020 Total LGD 0-20% LGD 20-50% LGD >50% (inmillions) EAD RWA RWA/EAD EAD (%) EAD (%) EAD (%) Exposure class Grade category Central governments and central banks Investment grade 98,800 803 1% 92% 7% 0% Sub-investment grade 91 123 136% 20% 44% 36% Impaired 9 107 1187% 100% Total 98,900 1,033 1% 92% 7% 0% Institutions 1 Investment grade 10,326 1,568 15% 46% 53% 1% Sub-investment grade 457 337 74% 4% 94% 1% Impaired Total 10,783 1,905 18% 44% 55% 1% Corporates Investment grade 37,652 21,242 56% 36% 63% 1% Sub-investment grade 51,824 22,752 44% 59% 41% 0% Impaired 6,881 6,991 102% 29% 53% 18% Total 96,357 50,985 53% 48% 50% 2% Retail Investment grade 152,993 7,471 5% 96% 3% 1% Sub-investment grade 18,322 6,682 36% 77% 15% 8% Impaired 1,782 1,355 76% 61% 31% 8% Total 173,097 15,508 9% 94% 4% 2% Securitisation positions Investment grade 764 70 9% 10 0% Sub-investment grade Impaired Total 764 70 9% 100% 0% 0% Total Investment grade 300,536 31,155 10% 86% 14% 1% Sub-investment grade 70,693 29,894 42% 63% 34% 2% Impaired 8,672 8,452 97% 36% 48% 16% Total 2 379,900 69,501 18% 80% 18% 1% 1 Institutions include exposures to banks and investment undertakings, regional governments and local authorities, and pension funds. 2 Exposure at Default does not include other non-credit obligations and equities not held for trading, because these items are not subject to credit risk grading. Additional information on exposure flows Gross carrying amount of residential mortgages b 2021 2020 (inmillions) Stage 1 Stage 2 Stage 3 3 Total Stage 1 Stage 2 Stage 3 3 Total Balance at 1 January 135,407 9,141 1,124 145,672 140,244 6,943 1,038 148,225 Transfer to stage 1 3,383 -3,362 -20 3,223 -3,205 -18 Transfer to stage 2 -4,285 4,639 -355 -7,002 7,402 -400 Transfer to stage 3 -293 -492 785 -280 -460 740 Additional drawdowns and partial repayments -6,011 1 1 -6,010 -5,228 50 17 -5,161 Originated or purchased 22,178 22,178 14,325 14,325 Matured or repaid -13,317 -1,903 -265 -15,484 -9,875 -1,589 -226 -11,691 Write-offs -6 -6 -16 -16 Foreign exchange 1 Other movements -10 -10 Balance at 31 December 137,063 8,025 1,264 146,351 135,407 9,141 1,124 145,672 1 Excluding loans at fair value through P&L. 2 Gross carrying amount excludes fair value adjustments from hedge accounting. 3 Including POCI. 188 ABN AMRO Integrated Annual Report 2021 Gross carrying amount of consumer loans b 2021 2020 (inmillions) Stage 1 Stage 2 Stage 3 1 Total Stage 1 Stage 2 Stage 3 1 Total Balance at 1 January 9,707 1,068 456 11,232 10,999 928 368 12,294 Transfer to stage 1 219 -205 -15 253 -249 -3 Transfer to stage 2 -455 458 -3 -731 740 -9 Transfer to stage 3 -53 -28 80 - 11 6 -88 204 Additional drawdowns and partial repayments -1,203 -16 19 -1,201 -623 -27 107 -543 Originated or purchased 2,538 2,538 1,690 1,690 Matured or repaid -1,403 -250 -57 -1,710 -1,761 -234 -67 -2,063 Write-offs -69 -69 -143 -143 Foreign exchange 4 1 5 -4 -5 Other movements -7 9 -2 Balance at 31 December 9,348 1,037 409 10,794 9,707 1,068 456 11,232 1 Including POCI. Gross carrying amount of corporate loans b 2021 2020 (inmillions) Stage 1 Stage 2 Stage 3 3 Total Stage 1 Stage 2 Stage 3 3 Total Balance at 1 January 3 64,517 15,356 6,873 86,745 84,155 9,125 5,331 98,610 Transfer to stage 1 2,002 -1,947 -55 1,773 -1,747 -27 Transfer to stage 2 -3,102 3,293 -191 -10,721 10,980 -258 Transfer to stage 3 -540 -909 1,449 -2,055 -1,575 3,630 Additional drawdowns and partial repayments -19,948 1,047 11 -18,889 -7,344 1,096 675 -5,573 Originated or purchased 46,463 46,463 19,699 19,699 Matured or repaid -21,258 -4,992 -2,216 -28,466 -19,003 -2,206 -1,227 -22,437 Write-offs - 11 -19 -1,012 -1,042 -1,035 -1,035 Foreign exchange 1,357 280 159 1,795 -1,975 -289 -209 -2,473 Other movements - 116 -33 1 -149 - 11 -29 -5 -45 Balance at 31 December 69,364 12,075 5,019 86,458 64,517 15,356 6,873 86,745 1 Excluding loans at fair value through P&L. 2 Gross carrying amount excludes fair value adjustments from hedge accounting. 3 Including POCI. Gross carrying amount of off-balance b 2021 2020 (inmillions) Stage 1 Stage 2 Stage 3 1 Total Stage 1 Stage 2 Stage 3 1 Total Balance at 1 January 51,194 6,183 1,275 58,653 61,172 2,918 1,329 65,419 Transfer to stage 1 995 -968 -27 975 -965 -10 Transfer to stage 2 -1,352 1,430 -79 -3,585 3,644 -59 Transfer to stage 3 -26 -261 287 -169 -246 415 Additional drawdowns and partial repayments -6,593 -248 - 111 -6,952 -6,763 1,054 -369 -6,078 Originated or purchased 8,251 8,251 5,593 5,593 Matured or repaid -3,122 -182 -99 -3,403 -4,577 -151 -4,728 Write-offs Foreign exchange 854 65 23 942 -1,450 -71 -31 -1,552 Other movements -3 -3 -1 -1 Balance at 31 December 50,199 6,019 1,271 57,488 51,194 6,183 1,275 58,653 1 Including POCI. 189 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Additional risk, funding & capitaldisclosures / Risk, funding & capital Additional information on impairment charges Loan impairment charges and allowances – residential mortgages b 2021 2020 (inmillions) Stage 1 Stage 2 Stage 3 2 Total Stage 1 Stage 2 Stage 3 2 Total Balance at 1 January 14 44 58 116 7 68 65 140 Transfer to stage 1 12 -15 -3 -6 6 -10 -3 -7 Transfer to stage 2 -1 15 -14 -2 20 -14 4 Transfer to stage 3 -1 -5 27 21 -1 -21 49 27 Remeasurements 1 -10 15 5 -10 -22 -17 -49 Changes in models -1 -1 1 2 4 6 Changes in risk parameters -8 - 11 -12 -31 10 13 5 28 Originated or purchased 4 4 4 4 Matured or repaid -1 -6 -13 -19 -1 -7 -5 -13 Impairment charges (releases) onloans and advances -6 -21 -1 -28 7 -25 19 1 Write-offs -6 -6 -16 -16 Unwind discount / unearned interest accrued 1 1 2 2 Foreign exchange and other movements -1 - 11 -10 Balance at 31 December 8 22 52 82 14 44 58 116 Impairment charges (releases) on loans andadvances -6 -21 -1 -28 7 -25 19 1 Credit-related modifications Recoveries and other charges (releases) -18 -18 -19 -19 Total impairment charges for the period -6 -21 -19 -46 7 -25 -18 1 Remeasurements represents the current year change of expected credit loss allowances mainly attributable to changes in volumes such as partial repayments and changes in the credit quality ofexisting loans remaining in their stage. 2 Including POCI. Loan impairment charges and allowances – consumer loans b 2021 2020 (inmillions) Stage 1 Stage 2 Stage 3 2 Total Stage 1 Stage 2 Stage 3 2 Total Balance at 1 January 38 41 215 294 30 70 198 298 Transfer to stage 1 9 -12 -3 -7 16 -18 -1 -4 Transfer to stage 2 -8 25 -19 -3 -4 17 -8 5 Transfer to stage 3 -2 -8 61 51 -1 - 11 103 91 Remeasurements 1 -7 13 33 39 -9 - 11 62 42 Changes in models -4 5 1 Changes in risk parameters -3 -2 -6 -12 1 1 1 3 Originated or purchased 5 5 4 4 Matured or repaid -4 -2 -21 -27 -3 -3 -5 - 11 Impairment charges (releases) onloans and advances -11 8 50 47 4 -25 151 130 Write-offs -69 -69 -143 -143 Unwind discount / unearned interest accrued 4 4 -1 -1 Foreign exchange and other movements -4 -3 8 4 -4 11 11 Balance at 31 December 23 45 208 276 38 41 215 294 Impairment charges (releases) on loans andadvances - 11 8 50 47 4 -25 151 130 Credit-related modifications Recoveries and other charges (releases) -44 -44 -38 -38 Total impairment charges for the period -11 8 6 3 4 -25 113 92 1 Remeasurements represents the current year change of expected credit loss allowances mainly attributable to changes in volumes such as partial repayments and changes in the credit quality ofexisting loans remaining in their stage. 2 Including POCI. 190 ABN AMRO Integrated Annual Report 2021 Loan impairment charges and allowances – corporate loans b 2021 2020 (inmillions) Stage 1 Stage 2 Stage 3 2 Total Stage 1 Stage 2 Stage 3 2 Total Balance at 1 January 243 316 2,494 3,053 137 119 1,727 1,982 Transfer to stage 1 19 -36 -5 -21 17 -25 -4 -12 Transfer to stage 2 -26 73 -16 31 -39 163 -14 110 Transfer to stage 3 -9 -24 140 107 -10 -45 573 518 Remeasurements 1 -101 27 500 425 492 84 1,345 1,922 Changes in models -1 -6 -8 -15 Changes in risk parameters -19 -22 -13 -54 87 32 14 132 Originated or purchased 46 46 31 31 Matured or repaid -14 -10 -539 -563 -474 -8 -185 -668 Impairment charges (releases) on loans and advances -104 2 59 -44 104 200 1,728 2,033 Write-offs - 11 -19 -1,012 -1,042 -1,035 -1,035 Unwind discount / unearned interest accrued 16 16 31 31 Foreign exchange and other movements 2 -7 74 69 2 -4 43 42 Balance at 31 December 130 291 1,632 2,053 243 316 2,494 3,053 Impairment charges (releases) on loans and advances -104 2 59 -44 104 200 1,728 2,033 Credit-related modifications 29 7 36 Recoveries and other charges (releases) -79 -79 -33 -33 Total impairment charges for the period -104 2 -21 -124 104 229 1,702 2,035 1 Remeasurements represents the current year change of expected credit loss allowances mainly attributable to changes in volumes such as partial repayments and changes in the credit quality of existing loans remaining in their stage. 2 Including POCI. Loan impairment charges and allowances – off-balance b 2021 2020 (inmillions) Stage 1 Stage 2 Stage 3 3 Total Stage 1 Stage 2 Stage 3 3 Total Balance at 1 January 16 10 21 48 8 4 5 16 Transfer to stage 1 1 -3 -1 1 1 Transfer to stage 2 -2 9 7 -5 11 6 Transfer to stage 3 -1 -1 180 179 Remeasurements 1 7 94 101 -10 -4 19 5 Changes in risk parameters 9 2 11 Originated or purchased 6 6 20 20 Matured or repaid -5 -3 - 11 -18 -6 -2 -9 Impairment charges (releases) 1 10 83 94 9 6 198 214 Write-offs -1 -2 -3 Foreign exchange and other movements 14 14 -182 -182 Balance at 31 December 17 20 116 153 16 10 21 48 Impairment charges (releases) on off-balance 1 10 83 94 9 6 198 214 Other charges (releases) 2 22 22 -17 -17 Total impairment charges for the period 1 10 105 116 9 6 181 197 1 Remeasurements represents the current year change of expected credit loss allowances mainly attributable to changes in volumes such as partial repayments and changes in the credit quality of existing loans remaining in their stage. 2 These charges (releases) relate to the off-balance sheet items that do not fall within the scope of IFRS 9 and for which stage information is not applicable. 3 Including POCI. 191 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Additional risk, funding & capitaldisclosures / Risk, funding & capital Additional information on forborne, past due and impaired (stage 3) loans Forbearance credit quality b 31 December 2021 (inmillions) Total forborne assets Forborne assets not past due and not stage 3 or POCI Forborne assets past due, but not stage 3 or POCI Impaired forborne assets Specific allowance Collective allowance Total allowance Loans and advances banks Residential mortgages 3,080 2,524 93 464 29 29 Consumer loans 235 109 8 118 4 80 85 Corporate loans 1 7,870 4,582 13 3,276 724 186 910 Other loans and advances customers 1 Totalloans and advancescustomers 1 11,186 7,215 114 3,857 729 295 1,024 Total loans and advances 1 11,186 7,215 114 3,857 729 295 1,024 1 Excluding loans at fair value through P&L. 31 December 2020 (inmillions) Total forborne assets Forborne assets not past due and not stage 3 or POCI Forborne as- sets past due, but not stage 3 or POCI Impaired forborne assets Specific allowance Collective allowance Total allowance Loans and advances banks Residential mortgages 3,334 2,738 194 401 33 33 Consumer loans 260 134 11 11 5 3 70 73 Corporate loans 1 9,298 5,222 141 3,935 1,176 144 1,320 Other loans and advances customers 1 5 5 Totalloans and advancescustomers 1 12,896 8,099 346 4,452 1,179 247 1,426 Total loans and advances 1 12,896 8,099 346 4,452 1,179 247 1,426 1 Excluding loans at fair value through P&L. Forborne assets by geography b 31 December 2021 (inmillions) The Netherlands Rest of Europe USA Asia Rest of the world Total Loans and advances banks Residential mortgages 3,073 7 1 3,080 Consumer loans 213 21 1 235 Corporate loans 1 6,186 1,265 106 3 310 7,870 Other loans and advances customers 1 Totalloans and advancescustomers 1 9,473 1,293 106 3 311 11,186 Total loans and advances 1 9,473 1,293 106 3 311 11,186 1 Excluding loans at fair value through P&L. 31 December 2020 (inmillions) The Netherlands Rest of Europe USA Asia Rest of the world Total Loans and advances banks Residential mortgages 3,308 20 3 3 1 3,334 Consumer loans 199 60 1 260 Corporate loans 1 6,124 1,542 779 188 664 9,298 Other loans and advances customers 1 5 5 Totalloans and advancescustomers 1 9,631 1,622 781 197 666 12,896 Total loans and advances 1 9,631 1,622 781 197 666 12,896 1 Excluding loans at fair value through P&L. 192 ABN AMRO Integrated Annual Report 2021 Forborne assets by business segment b (inmillions) 31 December 2021 31 December 2020 Retail Banking 3,259 3,547 Commercial Banking 5,413 4,929 Private Banking 229 355 Corporate & Institutional Banking 2,285 4,065 Total forborne assets 11,186 12,896 Maturity overview of assets and liabilities b The following table shows financial assets and liabilities arranged by the earliest possible contractual maturity. Contractual maturity of assets and liabilities b 31 December 2021 (inmillions) On demand Trading deriva- tives 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 maturity Total Assets Cash and balances at central banks 66,865 66,865 Financial assets held for trading 7 12 81 69 315 50 238 381 1,155 Derivatives 2,975 9 12 22 64 703 3,785 Financial investments 1,353 975 1,989 1,185 5,066 6,083 14,131 11,801 580 43,165 Securities financing 716 13,142 2,192 88 16,138 Loans and advances banks 912 334 375 258 124 72 726 2,801 Loans and advances customers 26,837 6,483 5,732 2,630 8,360 14,282 32,176 161,750 258,251 Other assets 4,772 1,699 353 11 3 16 1 6,955 Total assets 101,462 2,975 22,647 10,348 4,471 14,028 20,561 46,681 175,362 580 399,113 Liabilities Financial liabilities held for trading 24 1 13 61 178 409 687 Derivatives 6 3,545 9 36 8 29 73 168 470 4,344 Securities financing 498 8,394 603 9,494 Due to banks 1,049 1,403 107 312 14 31,889 2,910 392 38,076 Due to customers 232,973 8,594 1,562 503 253 3 11 1,300 5,723 251,218 Issued debt 51 6,081 5,410 2,187 2,550 4,420 11,684 27,306 59,688 - of which senior secured 54 1,045 105 1,633 1,963 4,126 22,413 31,338 - of which senior unsecured -3 25 1,985 1,433 826 2,456 7,557 4,893 19,172 - of which other 5,011 3,320 753 92 9,177 Subordinated liabilities 537 1,045 11 2 2,308 3,547 7,549 Other liabilities 2,730 2,462 386 92 20 334 21 14 6,059 Total liabilities 237,306 3,545 26,943 8,128 3,638 3,925 37,199 18,568 37,862 377,114 Total equity 21,999 21,999 Total liabilities and equity 237,306 3,545 26,943 8,128 3,638 3,925 37,199 18,568 37,862 21,999 399,113 Off-balance sheet liabilities Committed credit facilities 54,642 54,642 Guarantees and other commitments 7,598 7,598 Total off-balance sheet liabilities 62,240 62,240 193 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Additional risk, funding & capitaldisclosures / Risk, funding & capital 31 December 2020 (inmillions) On demand Trading deriva- tives 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 maturity Total Assets Cash and balances at central banks 60,190 60,190 Financial assets held for trading 5 8 37 254 308 73 264 367 1,315 Derivatives 7 5,040 94 8 69 12 8 82 1,060 6,381 Financial investments 1,936 1,361 2,933 3,308 1,997 5,054 15,561 14,451 855 47,455 Securities financing 1,212 12,173 2,985 354 16,725 Loans and advances banks 1,462 72 74 379 5 237 7 1,158 3,394 Loans and advances customers 20,400 7,260 5,394 3,291 6,568 13,197 33,679 162,369 252,159 Other assets 4,375 2,321 409 450 23 73 273 80 8,005 Total assets 89,588 5,040 23,290 11,840 8,105 8,913 18,641 49,865 179,486 855 395,623 Liabilities Financial liabilities held for trading 4 24 1 1 26 153 355 563 Derivatives 23 6,159 36 29 48 67 86 245 698 7,391 Securities financing 829 9,164 1,370 11,363 Due to banks 1,364 1,876 338 225 67 317 32,101 432 36,719 Due to customers 212,421 15,887 1,142 468 6 11 808 1,124 6,109 238,570 Issued debt 7,124 3,862 4,145 4,147 7,246 13,317 27,108 66,949 - of which senior secured 32 168 2,295 11 5 2,858 4,666 24,309 34,443 - of which senior unsecured 2,778 333 255 4,020 4,388 8,651 2,798 23,223 - of which other 4,314 3,361 1,595 12 9,283 Subordinated liabilities 1,561 1,570 3,796 1,143 8,069 Other liabilities 2,654 1,135 418 92 14 569 21 107 5,010 Total liabilities 217,290 6,159 35,226 7,182 6,541 4,908 10,622 50,756 35,951 374,634 Total equity 20,989 20,989 Total liabilities and equity 217,290 6,159 35,226 7,182 6,541 4,908 10,622 50,756 35,951 20,989 395,623 Off-balance sheet liabilities Committed credit facilities 55,207 55,207 Guarantees and other commitments 8,981 8,981 Total off-balance sheet liabilities 64,188 64,188 194 ABN AMRO Integrated Annual Report 2021 Maturity based on contractual undiscounted cash flows b The following tables show financial assets and liabilities arranged by the earliest possible contractual maturity. 31 December 2021 (inmillions) On demand Trading deriva- tives 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 maturity Total Assets: Cash and balances at central banks 66,865 66,865 Financial assets held for trading 7 13 83 72 320 57 249 391 1,191 Derivatives 2,975 64 258 649 1,207 2,221 4,825 5,376 17,575 Financial investments 1,353 995 2,066 1,367 5,370 6,540 14,706 12,288 580 45,266 Securities financing 716 13,145 2,193 88 16,142 Loans and advances banks 912 330 -13 347 220 63 -57 595 2,397 Loans and advances customers 26,837 6,726 6,670 4,915 12,542 21,631 46,892 176,333 302,544 Other assets 4,772 1,700 353 11 3 16 1 6,955 Total undiscounted assets 101,462 2,975 22,972 11,610 7,552 19,675 30,513 66,614 194,984 580 458,936 Of which: Gross settled derivatives notheld for trading: Contractual amounts receivable 11 3 36 7 2 2 6 6 172 Contractual amounts payable 45 5 6 9 8 9 13 95 Total undiscounted gross settled derivatives not held for trading 68 31 2 -8 -6 -3 -7 77 Net settled derivatives not held for trading 201 4 53 69 202 384 1,088 2,002 Liabilities: Financial liabilities held for trading 1 25 3 18 69 192 422 731 Derivatives 6 3,545 50 200 401 750 1,297 2,382 2,607 11,238 Securities financing 498 8,394 603 9,494 Due to banks 1,049 1,395 76 236 -130 31,850 2,894 385 37,754 Due to customers 232,973 8,595 1,563 506 260 322 1,323 5,746 251,288 Issued debt 51 6,116 5,535 2,469 3,051 5,267 13,157 28,704 64,350 Subordinated liabilities 16 64 692 1,295 561 3,011 4,188 9,827 Other liabilities 2,730 2,459 384 89 15 333 20 13 6,042 Total liabilities 237,306 3,545 27,027 8,451 4,396 5,259 39,698 22,977 42,066 390,725 - of which: Gross settled derivatives not held for trading: Contractual amounts receivable 45 13 10 20 37 96 11 6 339 Contractual amounts payable 14 5 18 39 35 42 50 203 Total undiscounted gross settled derivatives not held for trading -32 -8 8 19 -2 -54 -66 -135 Net settled derivatives not held for trading 55 131 151 321 601 1,474 1,998 4,732 Net liquidity gap -135,844 -569 -4,055 3,159 3,156 14,416 -9,186 43,637 152,918 580 68,211 Off-balance sheet liabilities Committed credit facilities 54,642 54,642 Guarantees and other commitments 7,598 7,598 Total off-balance sheet liabilities 62,240 62,240 195 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Additional risk, funding & capitaldisclosures / Risk, funding & capital 31 December 2020 (inmillions) On demand Trading deriva- tives 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 maturity Total Assets Cash and balances at central banks 60,190 60,190 Financial assets held for trading 5 8 39 77 314 262 276 378 1,358 Derivatives 7 5,040 163 264 688 1,147 2,140 4,758 5,671 19,879 Financial investments 1,936 1,385 3,023 5,255 2,339 3,889 16,341 15,129 855 50,151 Securities financing 1,212 12,177 2,987 1 2 354 16,734 Loans and advances banks 1,462 71 71 228 -10 357 -44 1,107 3,241 Loans and advances customers 20,639 7,521 6,398 15,586 10,855 11,232 49,537 177,823 299,592 Other assets 4,375 2,322 410 75 27 453 276 81 8,020 Total undiscounted assets 89,827 5,040 23,647 13,191 21,910 14,674 18,688 71,144 200,190 855 459,165 Of which: Gross settled derivatives not held for trading: Contractual amounts receivable 3 5 11 8 13 20 6 66 Contractual amounts payable 54 11 36 55 80 59 14 308 Total undiscounted gross settled derivatives not held for trading -51 -6 -25 -47 -67 -38 -8 -242 Net settled derivatives not held for trading 212 22 221 85 376 726 2,208 3,850 Liabilities Financial liabilities held for trading 4 25 28 5 7 164 365 598 Derivatives 23 6,159 100 276 668 1,077 1,848 3,525 3,865 17,541 Securities financing 829 9,165 1,370 11,364 Due to banks 1,364 1,874 331 300 34 165 32,076 430 36,573 Due to customers 212,421 15,888 1,144 812 617 479 1,146 6,130 238,637 Issued debt 7,142 4,022 7,601 4,734 5,140 14,991 28,708 72,339 Subordinated liabilities 15 62 1,708 235 1,905 4,078 1,328 9,332 Other liabilities 2,654 1,136 419 571 15 93 23 109 5,019 Total liabilities 217,290 6,159 35,324 7,647 11,687 6,718 9,638 56,004 40,936 391,403 - of which: Gross settled derivatives not held for trading: Contractual amounts receivable 186 8 4 5 5 6 214 Contractual amounts payable 1 2 2 5 3 3 15 Total undiscounted gross settled derivatives not held for trading -185 -6 -1 -1 -2 -4 -199 Net settled derivatives not held for trading 69 131 164 336 645 1,591 2,544 5,480 Net liquidity gap -127,463 -1,119 -11,677 5,544 10,223 7,956 9,050 15,140 159,253 855 67,762 Off-balance sheet liabilities Committed credit facilities 55,207 55,207 Guarantees and other commitments 8,981 8,981 Total off-balance sheet liabilities 64,188 64,188 196 ABN AMRO Integrated Annual Report 2021 Expected maturity based on behavioural models b The following table provides an overview of the amounts expected to be settled within twelve months and after twelve months, based on the behavioural maturity profile. 31 December 2021 31 December 2020 (inmillions) Up to one year More than one year Total Up to one year More than one year Total Assets Cash and balances at central banks 66,865 66,865 60,190 60,190 Financial assets held for trading 1,155 1,155 1,315 1,315 Derivatives 2,975 810 3,785 5,040 1,341 6,381 Financial investments 10,596 32,568 43,165 11,422 36,034 47,455 Securities financing 15,827 3 11 16,138 15,784 940 16,725 Loans and advances banks 1,766 1,034 2,801 2,470 924 3,394 Residential mortgages 14,385 133,326 147,711 27,202 121,539 148,741 Consumer loans 3,279 7,240 10,518 2,641 8,297 10,937 Corporate loans at amortised cost 36,117 48,797 84,915 28,906 55,438 84,344 Corporate loans at fair value through P&L 42 57 99 400 400 Other loans and advances customers 13,331 1,677 15,008 5,736 2,000 7,736 Equity-accounted investments 564 564 593 593 Property and equipment 545 627 1,172 516 739 1,255 Goodwill and other intangible assets 25 102 127 26 102 128 Assets held for sale 89 89 254 254 Tax assets 739 739 851 851 Other assets 1,306 2,957 4,263 1,625 3,299 4,925 Total assets 169,044 230,069 399,113 164,378 231,245 395,623 Liabilities Financial liabilities held for trading 687 687 563 563 Derivatives 3,545 799 4,344 6,159 1,233 7,391 Securities financing 8,397 1,097 9,494 9,742 1,621 11,363 Due to banks 2,033 36,043 38,076 2,879 33,840 36,719 Current accounts 47,577 85,406 132,983 39,046 71,987 111,033 Demand deposits 18,208 80,582 98,790 17,730 89,804 107,534 Time deposits 11,174 7,606 18,780 11,358 7,680 19,037 Other due to customers 89 576 665 251 715 966 Issued debt 16,530 43,158 59,688 19,261 47,688 66,949 Subordinated liabilities 1,563 5,985 7,549 1,537 6,532 8,069 Provisions 1,201 1,201 926 926 Tax liabilities 101 101 30 30 Other liabilities 1,644 3,113 4,757 1,588 2,465 4,053 Total liabilities 112,749 264,365 377,114 111,069 263,564 374,634 The behavioural maturity profile is based on internally developed liquidity risk models. These models cover residential mortgages, consumer and corporate loans, non-maturing assets (mainly current accounts), credit cards,non-maturing liabilities (demand deposits and currentaccounts) and term deposits. The liquidity risk modelspredict the behavioural cash flows, which can differfromthe contractual cash flows as a result of, for example,prepayments or because some products do nothave adefined contractual maturity date. The models are basedon historically observed client behaviour and usea combination of internal and external risk drivers. Themodels are used for monitoring the bank’s liquidity mismatch position. The liquidity risk models are included in the bank’s model risk management framework. This means that the models have to follow a regular monitoring and validation schedule. Approval of the models is given by the Methodology Acceptance Group (MAG) ALM/T, based on independent advice from Model Validation. 197 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Additional risk, funding & capitaldisclosures / Risk, funding & capital Total assets overview This table provides a detailed overview of the ABNAMRO portfolio by EAD, based on the Industry Classification Benchmark (ICB) and the bank’s internal industry classifications. (inmillions) 31 December 2021 31 December 2020 Industry classification benchmark (ICB) ABNAMRO global industry classification (AGIC) Original Resultant Original Resultant Automobiles and parts Leasing motor verhicles 856 856 915 915 Manufactoring automotive components 75 62 81 81 Manufactoring motor vehicles 214 214 3 3 Manufactoring tires 3 3 1 1 Banks Commercial banks 16,273 16,237 15,277 15,429 Basic resources Forestry 5 5 6 6 Manufacturing and wholesale diamonds 1 1 2 2 Manufacturing other non-ferrous metals 159 158 477 445 Manufacturing pulp and paper 60 58 52 52 Manufacturing steel 185 184 184 184 Mining and manufacturing gold 20 20 Mining and manufacturing other basic materials 281 281 290 290 Mining and manufacturing other precious metals 17 1 11 1 Mining bauxite and manufacturing aluminium 63 63 144 144 Wholesale other basic materials 439 437 568 521 Wholesale other non-ferrous metals 175 103 336 331 Wholesale raw lumber, pulp and paper 9 9 25 25 Wholesale steel 185 180 219 216 Chemicals Manufacturing basic chemicals 434 433 448 447 Manufacturing industrial gasses 31 31 30 30 Manufacturing specialty chemicals 479 433 485 435 Wholesale chemicals 248 245 242 222 Construction and materials Construction of residential and non-residential buildings 934 917 847 826 Heavy construction 858 852 552 514 Manufacturing non-metallic mineral products 251 249 257 257 Manufacturing other building materials 438 432 396 385 Manufacturing wood products 167 166 135 133 Sub-contractors 1,238 1,161 1,221 1,193 Wholesale building materials 700 688 658 601 Financial services Asset managers 580 582 1,502 1,541 Commercial finance 370 370 859 867 Consumer finance 606 606 679 678 Exchanges and clearing 8 11 8 11 3,145 3,145 Hedge funds 93 93 1 1 Investment bank 42 42 10 10 Leveraged funds - non-hedge funds 36 36 21 21 Mortgage finance 1,511 1,511 1,445 1,445 Other funds 258 258 253 253 Pension funds 800 1,698 272 585 Private equity investment and venture capital 1,615 1,615 1,248 1,251 Securities brokers and dealers 9,766 8,928 3,660 2,793 Specialty finance 1,970 2,262 1,841 2,028 Unleveraged funds 5,662 5,675 3,886 3,831 continued> 198 ABN AMRO Integrated Annual Report 2021 (inmillions) 31 December 2021 31 December 2020 Industry classification benchmark (ICB) ABNAMRO global industry classification (AGIC) Original Resultant Original Resultant Food and beverage Arable farming 1,813 1,809 Auctions for agriculture and fish products 64 64 63 63 Agriculture 1,803 1,801 Farming cattle 3,014 3,011 Farming other animals 774 765 Fishery 402 402 443 443 Floriculture 664 656 709 699 Horticulture (primary food products, fruit and vegetables) 779 771 864 854 Manufacturing beer 133 135 11 8 11 8 Manufacturing meat 287 284 282 281 Manufacturing other food products 1,663 1,654 1,658 1,633 Manufacturing soft drinks 94 93 150 149 Manufacturing sugar 59 59 354 329 Manufacturing wine and spirits 68 66 89 82 Other agriculture 11 3 11 2 121 120 Processing of live animal feed and commodity trading 481 467 Raising of calves/live cattle 165 165 164 164 Raising of dairy cattle/diary 3,187 3,185 Raising of poultry/eggs 234 230 237 234 Raising of swine/lean hogs 1,076 1,066 Support activities for agriculture 46 46 51 51 Wholesale agriculture 1,475 1,447 Wholesale food 1,578 1,520 2,253 2,202 Wholesale of live cattle 1 1 1 1 Healthcare Biotechnology drugs 38 38 32 32 General health services 1,573 1,471 1,653 1,549 Manufacturing and wholesale medical and surgical equipment 164 161 154 152 Manufacturing drugs 165 143 139 138 Medical practices 1,215 1,214 1,193 1,192 Nursing and personal care services 950 931 942 913 Retail drugs 175 175 178 175 Wholesale drugs 141 136 137 132 Industrial goods and services Dealers commercial vehicles 70 70 75 75 Delivery services 75 74 75 75 Employment services and management training 789 699 683 672 Financial administration 28 28 21 20 Freight transport inland water 588 588 614 610 Freight transport rail 63 63 79 79 Freight transport road 1,107 1,065 1,372 1,360 Freight transport sea 6,377 5,932 6,958 6,246 Leasing aircraft 98 98 77 77 Leasing commercial vehicles 1,404 1,363 1,391 1,351 Leasing machinery and metal products 306 305 566 547 Legal and accounting activities 719 718 597 592 Management consultancy 1,059 1,049 849 840 Manufacturing and wholesale aircraft 14 13 8 7 Manufacturing and wholesale packaging materials 821 749 933 866 Manufacturing appliance components 168 139 158 11 6 Manufacturing commercial vehicles 134 134 84 84 continued> 199 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Additional risk, funding & capitaldisclosures / Risk, funding & capital (inmillions) 31 December 2021 31 December 2020 Industry classification benchmark (ICB) ABNAMRO global industry classification (AGIC) Original Resultant Original Resultant Industrial goods and services Manufacturing defense equipment 1 1 1 1 Manufacturing electrical machinery 225 213 204 204 Manufacturing electronic equipment 6 6 6 6 Manufacturing general machinery 424 406 459 452 Manufacturing lifting and handling equipment 69 68 48 47 Manufacturing measuring and control machinery 82 78 80 75 Manufacturing metal products 215 170 198 198 Manufacturing optical instruments 9 8 9 8 Manufacturing other transportation equipment 62 56 99 99 Manufacturing plastic products 155 150 174 172 Manufacturing rubber products 18 17 18 18 Manufacturing ships 352 316 536 534 Manufacturing special industrial machinery 276 275 297 295 Metal working 367 354 352 347 Other commercial services 977 925 1,168 1,127 Research and engineering 71 70 88 86 Transport services air 467 467 153 153 Transport services land 1,824 1,739 1,954 1,863 Transport services water 347 310 412 363 Wholesale commercial vehicles 298 300 273 272 Wholesale machinery and metal products 524 521 433 431 Insurance Insurance brokers 63 89 105 148 Insurance composite 160 160 190 194 Life insurance 610 706 555 594 Non-life insurance 439 1,310 621 1,485 Reinsurance 10 220 22 339 Media Marketing communications 112 106 178 166 Motion picture production and distribution 797 797 642 594 Printing 152 146 195 190 Publishing 373 373 356 354 Publishing sound recordings 20 20 34 34 Radio, TV and cable 184 148 159 154 Oil and gas Fuel pipelines 1 1 3 3 Non-integrated oil and gas 1,382 1,177 3,373 3,157 Oil and gas services 2,479 2,233 2,798 2,505 Wholesale fuels 336 335 2,578 2,482 Personal and household goods Manufacturing accessories 23 23 42 37 Manufacturing apparel and sportswear 13 12 50 48 Manufacturing consumer electronics 64 64 55 55 Manufacturing domestic appliances 27 27 15 15 Manufacturing footwear 2 2 2 2 Manufacturing furniture 53 47 56 56 Manufacturing leather 2 2 Manufacturing non-durable household products 57 53 118 11 8 Manufacturing other durable household products 111 105 11 6 115 Manufacturing other furnishings 109 109 108 108 Manufacturing other recreational products 159 159 135 135 Manufacturing personal care 37 37 26 26 Manufacturing photographic equipment 2 2 3 3 continued> 200 ABN AMRO Integrated Annual Report 2021 (inmillions) 31 December 2021 31 December 2020 Industry classification benchmark (ICB) ABNAMRO global industry classification (AGIC) Original Resultant Original Resultant Personal and household goods Manufacturing textiles 124 86 146 135 Manufacturing tobacco Manufacturing toys and games 10 10 17 17 Renting recreational products 4 4 7 7 Wholesale hides, skins and leather 18 18 21 21 Private individuals Private individuals 174,197 174,197 174,979 174,979 Public administration (non-icb) Central administration and public services 30,971 32,198 28,388 30,211 Central bank 69,992 69,992 68,019 68,017 Educational services 168 168 165 165 Export credit agency/insurance 15 359 13 268 International and supranational organisations 3,235 3,235 2,822 2,822 Multilateral finance institutions 188 188 132 132 Regional administration and public services 8 8 27 27 Real estate Buying and selling of own real estate 3,223 3,211 2,726 2,721 Housing associations and corporations 1,233 846 983 773 Management of real estate on a fee or contract basis 1,881 1,866 1,482 1,472 Real estate agencies 613 612 442 440 Real estate developments (project development) 2,941 2,935 1,813 1,805 Real estate investment entities 4,033 4,025 3,657 3,656 Renting of non-residential buildings 3,103 3,095 2,009 2,010 Renting of other residential buildings 810 810 656 656 Retail Automotive service 111 110 97 95 Independent fuel stations 54 54 44 44 Personal services 196 196 194 194 Renting of personal and household goods 64 63 70 69 Retail accessories 90 90 150 150 Retail apparel, footwear and sports goods 293 287 333 324 Retail broadline 110 89 108 82 Retail car parts and accessories 28 28 14 14 Retail consumer appliances 76 75 78 78 Retail food 1,862 1,858 1,495 1,490 Retail home decoration 350 346 352 327 Retail motor vehicles 468 467 514 512 Retail other household goods 367 365 303 301 Wholesale accessories 124 124 242 238 Wholesale apparel, footwear and sports goods 381 350 428 408 Wholesale broadline 224 220 182 179 Wholesale car parts and accessories 139 124 184 184 Wholesale consumer appliances 153 135 128 106 Wholesale home decoration 153 132 151 147 Wholesale motor vehicles 37 37 52 52 Wholesale other household goods 305 281 352 348 Technology Internet services 434 422 302 282 IT services 887 854 582 563 Leasing technology goods 14 13 15 14 Manufacturing computer hardware 125 122 125 125 Manufacturing telecom equipment 51 51 44 44 Publishers computer software 12 12 13 12 Wholesale technology goods 387 307 294 238 continued> 201 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Additional risk, funding & capitaldisclosures / Risk, funding & capital (inmillions) 31 December 2021 31 December 2020 Industry classification benchmark (ICB) ABNAMRO global industry classification (AGIC) Original Resultant Original Resultant Telecommunications Fixed line telecom 1,055 1,021 649 649 Mobile telecom 324 324 161 160 Travel and leisure Commercial sports and facilities 265 246 312 286 Cultural activities 132 127 152 145 Gambling and casino facilities 85 85 95 95 Hotels and resorts 1,527 1,518 1,336 1,304 Passenger transport air 296 222 267 194 Passenger transport rail, road and water 1,972 1,970 245 244 Recreational services 427 423 421 416 Restaurants and bars 542 537 436 432 Travel & tourism related services 201 186 163 162 Unclassified Unclassified 2,556 2,556 4,966 4,960 Utilities Activities of head office 43 43 160 160 Financial holdings 11 5 11 5 299 294 Gas distribution 69 69 Integrated power 175 175 132 132 Power distribution and transportation 2,507 2,493 589 589 Power generation 1,491 1,465 1,788 1,758 Waste and disposal services 570 559 510 509 Water collection, treatment and distribution 355 355 248 248 Total 413,494 413,494 404,142 404,142 202 ABN AMRO Integrated Annual Report 2021 This page has been intentionally left blank. 203 Strategy, value creation & performance Leadership & governance Annual Financial Statements 2021Introduction OtherRisk, funding & capital Additional risk, funding & capitaldisclosures / Risk, funding & capital Guide for readers This section presents ABN AMRO’s leadership and corporate governance framework. Itprovides information on ABNAMRO’s Executive Board and Supervisory Board, as well as on its legal structure and remuneration policy. This section also presents the Report of the Supervisory Board for 2021. 204 ABN AMRO Integrated Annual Report 2021 Leadership & governance Leadership & governance Tom de Swaan, Supervisory BoardChair I cannot emphasise enough how exemplary the bank’s employees are in their flexibility. Some employees - for instance young people - are finding it difficult to continuously work from home, though. Management is alert to these signals and the bank has programmes in place that devote attention to the wellbeing of our staff. In line with the bank’s values a lot of attention is being paid to open communication and being able to speak your mind. Read more Leadership & governance structure 206 Executive Board and Executive Committeecomposition 207 Supervisory Board composition 214 Supervisory Board 220 Interview with our Supervisory BoardChair 221 Report of the Supervisory Board 224 General Meeting and shareholderstructure 232 Remuneration report 236 Other governance information 252 Codes and regulations 253 Legal structure 257 Responsibility statement 258 205 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance Leadership & governance structure 206 ABN AMRO Integrated Annual Report 2021 Executive Board and Executive Committeecomposition Changes to the corporate governance structure On 11 October 2021, ABNAMRO announced its intention to further strengthen its strategy execution and serve its clients as a personal bank in the digital age by simplifying its organisational setup and appointing new Executive Board members. ABNAMRO transformed its former four business lines (Retail Banking, Private Banking, Commercial Banking and Corporate & Institutional Banking) into three client units, each headed by a Chief Commercial Officer(CCO). As part of the new simplified organisational setup, the former Executive Committee ceased to exist as of the Extraordinary General Meeting of 24 November 2021 in favour of an extended composition of the Executive Board, simplifying the top management structure of the bank. Untilthe Extraordinary General Meeting of 24 November 2021, ABNAMRO’s management structure included an Executive Board and an Executive Committee. The former CEOs of Private Banking and Retail Banking, Pieter van Mierlo and Frans van der Horst respectively, left the Executive Committee concurrent with the discontinuation of the Executive Committee. On 9 June 2021, Daphne de Kluis, the CEO of Commercial Banking and a member of ABNAMRO’s Executive Committee at that time, announced her intention to pursue her career outside ABNAMRO as of 1 September 2021. Patrick Pfaff was subsequently appointed as interim CEO ofCommercial Banking and member of the Executive Committee as of 1 September. On 11 October 2021, the CEO of Corporate & Institutional Banking and a member of ABNAMRO’s Executive Committee at that time, Rutger van Nouhuijs, announced that he would pursue his career outside ABNAMRO and handed over his responsibilities on an interim basis to Dan Dorner, the intended CCO of Corporate Banking, to ensure a smooth transition. On 24 November 2021, the Supervisory Board made the following appointments as of the close of the Extraordinary General Meeting on that day: H Choy van der Hooft-Cheong as the new CCO of Wealth Management and member of the Executive Board of ABNAMRO; H Dan Dorner as CCO of Corporate Banking and member of the Executive Board of ABNAMRO; and H Gerard Penning (already Chief Human Resources Manager at the time) as member of the Executive Board of ABNAMRO. The Employee Council and NLFI issued a positive advice on the aforementioned appointments. In 2021, a search process for a new CCO of Personal & Business Banking and member of the Executive Board was initiated and resulted in the appointment of Annerie Vreugdenhil as of 1 March 2022. Interim arrangements were put in place for the period until the appointment (andstart) of Annerie Vreugdenhil as the new CCO of Personal & Business Banking and member of the Executive Board to ensure continuity of decision-making. In addition, on 7 January 2022, ABNAMRO announced thatChristian Bornfeld, CI&TO of ABNAMRO and Vice- Chair of the Executive Board, will leave ABNAMRO with effect from 1 May 2022. He will pursue a new opportunity that will allow him to work closer to his family in Denmark. TheSupervisory Board has initiated the process of finding anew CI&TO. Role and responsibilities of the Executive Board The Executive Board is the statutory managing board of ABNAMRO within the meaning of Section 2:129 of the Dutch Civil Code. It is responsible for (i) the general course of business of ABNAMRO, ensuring compliance with laws and regulations and the adequate financing of its activities; (ii) the continuity of ABNAMRO and its business, aimed at long-term value creation for ABNAMRO and taking into account interests of stakeholders, and (iii) setting ABNAMRO’s mission, vision, strategy, risk appetite, corporate standards and values, risk framework, main policies, budgets, financial and non-financial targets, and forthe realisation thereof. 207 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance Executive Board and Executive Committeecomposition / Leadership & governance structure / Leadership & governance Until the discontinuation of the Executive Committee, inrespect of these duties, and to the extent they related toABNAMRO and its subsidiaries, the Executive Board consulted the Executive Committee, without prejudice tothe Executive Board’s statutory collective management responsibilities. The Executive Board was also required to consult the Executive Committee regarding the strategic direction of the bank. The Executive Board ensures close cooperation with the Supervisory Board in the discharge of its responsibilities and seeks the approval of the Supervisory Board for the bank-wide strategy (in line with the pursued culture aimed at long-term value creation) and targets. The Executive Board is accountable to the Supervisory Board and to the General Meeting for the performance of its duties. In performing its duties, the Executive Board develops a view on long-term value creation for ABNAMRO and its business and considers relevant stakeholder interests. Role and responsibilities of the former ExecutiveCommittee With the simplification of our top structure, the former Executive Committee ceased to exist as of the Extraordinary General Meeting of 24 November 2021. The Executive Board has taken over the duties and responsibilities oftheExecutive Committee. Until, however, the discontinuation of the Executive Committee, the Executive Committee was part of ABNAMRO’s ‘management body’ (together with the Executive Board and Supervisory Board), as defined in CRD, and had duties and responsibilities that had been delegated to it by the Executive Board. The Executive Committee was entrusted with the effective direction of ABNAMRO and its subsidiaries. The Executive Committee was specifically mandated to ensure that ABNAMRO’s mission, vision, strategy, policies, annual budget, risk appetite, standards and values, and financial and non-financial targets were translated into specific group-aligned strategies, policies, budgets, risk appetites, standards and performance targets for each business line, with the aim of contributing to long- term value creation by ABNAMRO, and building and maintaining the culture required for that purpose. Therespective members of the Executive Committee were also responsible for the daily management of their own business lines. In addition, the Executive Committee helped define the strategic direction of the bank: the Executive Board was required to consult the Executive Committee in respect ofdecisions regarding the bank’s (i) mission, vision and strategy, and (ii) risk policies, risk appetite framework and statement. The Executive Committee ensured an open dialogue with the Supervisory Board, both on specific issues and in general, in order to inform the Supervisory Board adequately. The Executive Committee provided theSupervisory Board and its committees with all the information they needed for the proper performance of their supervisory duties and as requested by the Supervisory Board through the Chair of the Executive Committee. Composition and diversity As of 24 November 2021, the Executive Board consists ofthe Chief Executive Officer (CEO), the Chief Financial Officer (CFO), the Chief Risk Officer (CRO), the Chief Innovation & Technology Officer (CI&TO), the Client Unit representatives (CCO of Personal & Business Banking, CCOof Corporate Banking and CCO of Wealth Management) and a Chief Human Resources Officer (CHRO). The Executive Board’s composition is based on ABNAMRO’s guiding principle that diversity of thought, expertise, background, competences and interpersonal styles is a prerequisite for effective management and, by extension, for long-term value creation. The vision set by ABNAMRO is for it to become a company that mirrors, atall levels, the diversity of the communities in which it operates. This means fostering a variety of views and experiences and facilitating independent opinions and sound decision-making within the Executive Board. To that effect, the following diversity aspects have been identified as relevant for the composition of the Executive Board: gender, age, educational and professional background and geographical provenance.These aspects were also taken into consideration for appointments and reappointments in2021. In line with ABN AMRO’s diversity policy, ABN AMRO strives to meet the applicable gender target. In 2021, this target was at least 30% for the Executive Board. As of 1January 2022, the Act on Gender Balance in Management and Supervisory Boards (Wet evenwichtiger verhouding tussen mannen en vrouwen in bestuur en raad van commissarissen) came into force. The Act imposes an ingrowth quota of at least one-third male and one-third female members on the supervisory boards of Dutch companies listed in the Netherlands. In addition, ABN AMRO has to have drawn up appropriate and ambitious targets to promote gender diversity across the organisation and is required to report on the above targets and plans, and the progress made in this regard. ABN AMRO is in the process of implementing the new targets in its diversity policy.Gender diversity within the Executive Board at 8March 2022 is 37.5%. When vacancies arise and in succession planning, ABN AMRO gives due consideration to any applicable diversity requirements in its search for suitable new members who meet the fit and proper requirements stipulated in the Dutch Financial Markets Supervision Act. 208 ABN AMRO Integrated Annual Report 2021 The Rules of Procedure of the Executive Board are available on abnamro.com. Due to the changes in the corporate governance structure, the Executive Board amended these rules in 2021 to reflect the new organisational structure. Appointment, suspension and dismissal Members of the Executive Board are appointed and reappointed by the Supervisory Board for a term of up to four years, provided that the term of office continues up to and including the first General Meeting to be held after expiry of the term. When preparing the appointment and reappointment of the members of the Executive Board, the Selection and Nomination Committee and the Supervisory Board consider the diversity objectives laid down in ABNAMRO’s internal policies. Only candidates who meet the fit and proper test under the Dutch Financial Markets Supervision Act are eligible for appointment. The Employee Council provides advice on the appointment of members of the Executive Board. The Supervisory Board notifies the General Meeting of the intended appointment or reappointment of a member of the Executive Board, accompanied by a short résumé of the candidate, including the candidate’s age, gender, educational and professional background and geographical provenance. The Supervisory Board may appoint one of the members ofthe Executive Board as Chair (to be awarded the title ofChief Executive Officer). Pursuant to the relationship agreement with NLFI, the Supervisory Board will give NLFI the opportunity to advise on the decision to appoint or reappoint a member of the Executive Board and on the decision to appoint the Chair of the Executive Board, as long as NLFI directly or indirectly holds at least 10% of the issued share capital of the bank. The Supervisory Board may at all times suspend or dismiss a member of theExecutive Board. Further information on the suspension and dismissal procedure of the Executive Board is provided in ABNAMRO’s Articles of Association and the Executive Board Rules of Procedure as published on the ABNAMROwebsite. 209 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance Executive Board and Executive Committeecomposition / Leadership & governance structure / Leadership & governance Personal details of the members of the ExecutiveBoard The information below refers to the members of the Executive Board as at 8 March 2022. Dutch, male, 1960 Chief Executive Officer and Chair of the ExecutiveBoard Robert Swaak was appointed as CEO and Chair of the Executive Board of ABNAMRO on 22 April 2020. As CEO, Robert Swaak is also responsible for Group Audit, Legal & Corporate Office, Strategy & Innovation, and Brand, Marketing & Communications. His current term ends at the close of ABNAMRO’s Annual General Meeting in 2024. Relevant positions pursuant to CRD V: Chief Executive Officer and Chair of the Executive Board of ABNAMROBank N.V. Other relevant ancillary positions: Chairman ad interim of the Supervisory Council of Stichting Nationale Opera & Ballet, member of the Supervisory Council of Stichting Paleis Het Loo, member of the Board of Stichting Amerika- Europese Gemeenschap (Nederland) of Stichting American European Community Association (Netherlands), member of the Management Board of the Nederlandse Vereniging van Banken (NVB), non-executive director of the Value Reporting Foundation. Robert Swaak CEO 210 ABN AMRO Integrated Annual Report 2021 Christian Bornfeld CI&TO and Vice-Chair Choy van der Hooft-Cheong CCO Wealth Management Gerard Penning CHRO Tanja Cuppen CRO Dan Dorner CCO Corporate Banking Lars Kramer CFO Annerie Vreugdenhil CCO Personal & Business Banking 211 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance Executive Board and Executive Committeecomposition / Leadership & governance structure / Leadership & governance Danish, male, 1976 Christian Bornfeld Chief Innovation & Technology Officer and Vice-Chair ofthe Executive Board Christian Bornfeld was appointed to the Executive Board ofABNAMRO as CI&TO on 1 March 2018. As CI&TO, heisresponsible for Innovation and Technology including IT, Platforms & Technology, Data Management, the Corporate Information Security Office, the Execution Office, Procurement, Customer Care & Operations, Detecting Financial Crime, and Change Management & Consultancy. As his term was due to expire at the close of the Annual General Meeting in 2021, the Supervisory Board reappointed Christian Bornfeld with effect from the AnnualGeneral Meeting in April 2021 for a period of four years. Christian Bornfeld was appointed as Vice-Chair ofthe Executive Board with effect from 1 March 2021. Hiscurrent term ends at the close of ABNAMRO’s Annual General Meeting in 2025. Relevant positions pursuant to CRD V: Chief Innovation & Technology Officer and Vice-Chair of the Executive Board ofABNAMRO Bank N.V. Dutch, female, 1969 Tanja Cuppen Chief Risk Officer of the Executive Board Tanja Cuppen was appointed to the Executive Board of ABNAMRO on 1 October 2017 and was appointed CRO with effect from 1 November 2017. As CRO, she is responsible for Risk including Risk Management, Financial Restructuring & Recovery, Compliance, Security & Intelligence Management and Regulatory Execution Oversight. As her term was due to expire at the close of the Annual General Meeting in 2021, the Supervisory Board reappointed Tanja Cuppen as with effect from the Annual General Meeting in April 2021 for a period of three years. Her current term ends at the close of ABNAMRO’s Annual General Meeting in 2024. Relevant positions pursuant to CRD V: Chief Risk Officer of the Executive Board of ABNAMRO Bank N.V.,Member of the Supervisory Board Coöperatie Menzis U.A. Other relevant ancillary positions: Commissioner of the Financial Sector Commission on Modern Slavery and Human Trafficking. Dutch, male, 1967 Lars Kramer Chief Financial Officer of the Executive Board Lars Kramer was appointed as CFO of the Executive Board of ABNAMRO on 1 June 2021. As CFO, Lars Kramer is responsible for Finance, including Asset & Liability Management, Controlling, Financial Accounting, Tax, Treasury and investor Relations. His current term ends at the close of ABNAMRO’s Annual General Meeting in 2025. Relevant positions pursuant to CRD V: Chief Financial Officer of the Executive Board of ABNAMRO Bank N.V. Dutch, female, 1971 Choy van der Hooft-Cheong Chief Commercial Officer Wealth Management and member of the Executive Board Choy van der Hooft-Cheong was appointed to the Executive Board of ABNAMRO as CCO Wealth Management on 24November 2021. As CCO Wealth Management, she is responsible for the client unit Wealth Management. Her current term ends at the close of ABNAMRO’s Annual General Meeting in 2026. Relevant positions pursuant to CRD V: Chief Commercial Officer Wealth Management and member of the Executive Board of ABNAMRO Bank N.V. Other relevant ancillary positions: Founder and board member of Stichting Children’s Khazana Foundation. Dutch, male, 1976 Dan Dorner Chief Commercial Officer Corporate Banking and member of the Executive Board Dan Dorner was appointed to the Executive Board ofABNAMRO as CCO Corporate Banking on 24November2021. As CCO Corporate Banking, heisresponsible for the client unit Corporate Banking. Hiscurrent term ends at the close of ABNAMRO’s AnnualGeneral Meeting in 2026. Relevant positions pursuant to CRD V: Chief Commercial Officer Corporate Banking and member of the Executive Board of ABNAMRO Bank N.V. Other relevant ancillary positions: member of the Advisory Board of Euronext, member of the Executive Board of Vereniging VNO-NCW (Confederation of Netherlands Industry and Employers). 212 ABN AMRO Integrated Annual Report 2021 Dutch, female, 1963 Annerie Vreugdenhil Chief Commercial Officer Personal & Business Banking and member of the Executive Board Annerie Vreugdenhil was appointed to the Executive Board of ABN AMRO as CCO Personal & Business Banking on 1March 2022. As CCO Personal & Business Banking, she is responsible for the Personal & Business Banking client unit. Her term ends at the close of ABN AMRO’s Annual General Meeting in 2026. Relevant positions pursuant to CRD V: Chief Commercial Officer Personal & Business Banking and member of the Executive Board of ABNAMRO Bank N.V. Dutch, male, 1963 Gerard Penning Chief Human Resources Officer and member of the Executive Board Gerard Penning was appointed as CHRO with effect from 1August 2020. He was appointed to the Executive Board of ABNAMRO as CHRO on 24 November 2021. His current term ends at the close of ABNAMRO’s Annual General Meeting in 2025. Relevant positions pursuant to CRD V: Chief Human Resources Officer and member of the Executive Board of ABNAMRO Bank N.V., member of the Supervisory Board of Alliander N.V. Other relevant ancillary positions: Member of theSupervisory Board of Sustainable Energy for All. Committees The Executive Board has established a number of committees that are responsible for preparing the decision- making on certain subjects, taking certain delegated decisions and advising the Executive Board on certain matters. The committees include three risk-related committees: H the Group Risk Committee; H the Group Regulatory Committee; H the Group Central Credit Committee. More information on the delegated authority of these committees is provided in the Risk, funding & capital management section. In addition, the Executive Board has installed a Group Disclosure Committee and a Group Asset & Liability Committee. The Group Disclosure Committee’s responsibilities include advising and supporting the Executive Board in relation to (i) supervision of the accuracy, effectiveness and timeliness of public disclosures by the group, and (ii) integrity with regard to the financial statements and other public disclosures as required by Dutch and European legislation, in particular (but not limited to) financial and non-financial disclosures, changes to group target ratios, prospectus disclosures, stress tests, public corporate governance statements, changes in key capital requirements (SREP), changes in dividend policy, changes in ratings and disclosures about environmental, social and governance (ESG) performance, social and employee matters, human rights performance and anti-corruption and anti-bribery matters. The Group Asset & Liability Committee has been mandated by the Executive Board to decide on matters relating to the interest rate and liquidity risk profile, as well as the solvency of the group, within the parameters set by the ExecutiveBoard. 213 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance Executive Board and Executive Committeecomposition / Leadership & governance structure / Leadership & governance Supervisory Board composition Role and responsibilities of the Supervisory Board The Supervisory Board supervises, advises, challenges and supports the Executive Board (and until its discontinuation also did so with respect to the Executive Committee) in theexercise of its powers and duties. Together with the Executive Board, the Supervisory Board is responsible for ABNAMRO’s long-term value creation, requiring members to execute their duties in a sustainable manner with due observance of the long-term viability of the strategy being pursued. In discharging its task, the Supervisory Board takes into account the dynamics and the relationship between the Executive Board (and until its discontinuation also the Executive Committee) and its members. The Supervisory Board’s early and close involvement with the Executive Board is required when formulating the bank- wide strategy and targets in line with the pursued culture aimed at long-term value creation. In performing their duties, the members of the Supervisory Board are guided by the interests of ABNAMRO and its businesses, taking due consideration of the legitimate interests of all of ABNAMRO’s stakeholders (such as its clients, savers and deposit holders, shareholders, holders ofdepositary receipts, employees and the society in whichABNAMRO operates). Certain decisions taken bythe Executive Board are subject to the approval oftheSupervisory Board. Changes in 2021 On 15 November 2021, ABNAMRO announced that Jurgen Stegmann had decided for personal reasons to resign as amember of the Supervisory Board with immediate effect. Appointment, suspension and dismissal Members of the Supervisory Board are appointed by the General Meeting, following nomination by the Supervisory Board itself. Only candidates who have passed the fit and proper test under the Dutch Financial Markets Supervision Act are eligible for appointment. The General Meeting and the Employee Council may recommend candidates to the Supervisory Board to be nominated as members of the Supervisory Board. The diversity objectives laid down in ABNAMRO’s internal policies are taken into consideration when preparing the appointment and reappointment of the members of the Supervisory Board. The Supervisory Board notifies the General Meeting of the intended appointment or reappointment of a member of the Supervisory Board, accompanied by a short resume of the candidate, including the candidate’s age, gender, educational and professional background and geographical provenance. In accordance with the best practice provisions of the Dutch Corporate Governance Code, Supervisory Board members are appointed for a period ending at the close of the first Annual General Meeting held after four years have passed since their last appointment, unless a shorter period was set at the time of the appointment. The Supervisory Board is required to nominate a candidate recommended bythe Employee Council in respect of one third of the members of the Supervisory Board (the ‘enhanced recommendation right’). The Supervisory Board must accept the recommendation of the Employee Council unless it believes that the candidate recommended is unsuitable to fulfil the duties of a member of the Supervisory Board or if the Supervisory Board would notbeproperly composed if the appointment was made asrecommended. The Supervisory Board may suspend any of its members atany time. The General Meeting may dismiss the Supervisory Board in its entirety in the event of lack of confidence in the Supervisory Board. This requires an absolute majority of the votes cast, representing a quorum of at least one third of the issued share capital. If this quorum is not met, there is no possibility to hold a second General Meeting at which no quorum applies. Further information on the suspension and dismissal procedure isprovided in ABNAMRO’s Articles of Association and theSupervisory Board Rules of Procedure as published onthe ABNAMRO website. Committees The Supervisory Board has established four committees to prepare its decision-making and to advise the Supervisory Board on specific matters. These committees are composed exclusively of Supervisory Board members. These committees are the: H Audit Committee; H Risk & Capital Committee; H Remuneration Committee; H Selection & Nomination Committee. Composition and diversity The Supervisory Board’s composition is based on the guiding principle that diversity of thought, expertise, background, competences and interpersonal styles is a prerequisite for effective supervision and, by extension, forlong-term value creation. To that effect, the following diversity aspects have been identified as relevant for thecomposition of the Supervisory Board: gender, age, educational and professional background and geographical provenance. 214 ABN AMRO Integrated Annual Report 2021 In line with ABN AMRO’s diversity policy, ABN AMRO strives to meet the applicable gender target. In 2021, this target was at least 30% for the Supervisory Board. As of 1January 2022, the Act on Gender Balance in Management and Supervisory Boards (Wet evenwichtiger verhouding tussen mannen en vrouwen in bestuur en raad van commissarissen) came into force. The Act imposes an ingrowth quota of at least one-third male and one-third female members on the supervisory boards of Dutch companies listed in the Netherlands. For every appointment to its Supervisory Board, therefore,ABN AMRO must assess whether the above ingrowth quota is maintained. Gender diversity within ABN AMRO’s Supervisory Board was 43% at 31 December 2021. When vacancies arise, the Supervisory Board gives due consideration to any applicable gender requirements in its search for suitable new members meeting the fit and proper requirements stipulated in the Dutch Financial Markets Supervision Act Collectively, the members have expertise in retail and private banking, commercial banking, corporate & institutional banking, investment banking, risk management, financial management, strategy formulation and execution, cultural and other change management, IT, digitalisation, innovation, economics, remuneration and human resources management, sustainability and corporate social responsibility, legal and compliance matters and the development of products and services, and experience inthe key markets in which the bank is active. TheSupervisory Board has one financial expert (CPA/RA), inaccordance with the formal definition and requirements, and four highly experienced bankers combined representing extensive broad and deep banking experience across all key areas of domestic and international banking. 2021 Executive experience Banking, finance, audit, risk experience IT, digitalisation, transformation, innovation experience Legal, corporate governance experience T. de Swaan (Chair) ** ** * ** A.C. Dorland ** * ** * L.J. Griffith * * * ** M.P. Lap ** ** * * A.M. Storåkers ** ** * * M.L. Tannemaat ** ** ** * J.S.T. Tiemstra ** ** * ** * = has good understanding of the subject but is not expert. ** = can make a balanced independent judgement on the subject (expert). All members of the Supervisory Board have passed the fitand proper test required under the Dutch Financial Supervision Act. The Supervisory Board confirms that allmembers of the Supervisory Board are independent within the meaning of best practice provision 2.1.10 oftheDutchCorporate Governance Code. 215 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance Supervisory Board composition / Leadership & governance structure / Leadership & governance Personal details of the members of the Supervisory Board The information below refers to the members of the Supervisory Board as at 8 March 2022. Dutch, male, 1946 Chair of the Supervisory Board Tom de Swaan was appointed to the Supervisory Board ofABNAMRO on 12 July 2018. His current term expires atthe close of the Annual General Meeting in 2022. Last executive position held: CFO, ABNAMRO Bank N.V. Relevant positions pursuant to CRD V: Chair of theSupervisory Board of ABNAMRO Bank N.V. Other relevant ancillary positions: Chairman of the Board of Foundation National Opera & Ballet Fund, the Netherlands, member of the Board of Foundation Premium Erasmianum, member of the International Advisory Board of Akbank, Chairman of the Management Board of Foundation Funds Netherlands Cancer Institute, member of the Supervisory Board of Foundation Holland Festival, the Netherlands, member of the Advisory Board of Stichting tot Instandhouding van de Diergaarde van het Koninklijk Zoölogisch Genootschap Natura Artis Magistra, member of the Board of Stichting Liszt Concours, Member of the Board of Directors of The International Centre for Missing & Exploited Children. Tom de Swaan Chair of the Supervisory Board 216 ABN AMRO Integrated Annual Report 2021 Arjen Dorland Vice-Chair of the Supervisory Board Anna Storåkers Member Laetitia Griffith Member Mariken Tannemaat Member Michiel Lap Member Tjalling Tiemstra Member 217 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance Supervisory Board composition / Leadership & governance structure / Leadership & governance Dutch, male, 1955 Arjen Dorland Vice-Chair of the Supervisory Board Arjen Dorland was appointed to the Supervisory Board ofABNAMRO on 18 May 2016. His current term expires atthe close of the Annual General Meeting in 2024. Last executive position held: Executive Vice-President ofTechnical and Competitive IT, Royal Dutch Shell. Relevant positions pursuant to CRD V: Vice-Chair oftheSupervisory Board of ABNAMRO Bank N.V., Vice-Chairman of the Supervisory Board of Essent N.V., Chairman of the Supervisory Board of Bovemij N.V. andN.V.Schadeverzekering-Maatschappij Bovemij. Other relevant ancillary positions: Chairman of the combined Supervisory Council of Stichting Naturalis Biodiversity Center and Stichting Japanmuseum Sieboldhuis, Chairman of the Supervisory Council of Haaglanden Medisch Centrum. Dutch, female, 1965 Laetitia Griffith Member Laetitia Griffith was appointed to the Supervisory Board ofABNAMRO on 17 December 2019. Her current term expires at the close of the Annual General Meeting in 2024. Last executive position held: Member of Parliament onbehalf of the VVD (portfolio: Home Affairs), HouseofRepresentatives of the Netherlands. Relevant positions pursuant to CRD V: Member of theSupervisory Board of ABNAMRO Bank N.V., member of the Supervisory Board of Tennet TSO GmbH, member ofthe Supervisory Board of Tennet Holding B.V., member ofthe Supervisory Board of Benno Leeser Holding B.V. Other relevant ancillary positions: Chairman of the Supervisory Board of the Dutch Film Fund, Chairman of the Board of Stichting Nederlandse Vioolconcoursen, member of the Advisory Council of Stichting Impact Economy Foundation, Chairman of the Supervisory Board of StichtingMetropole Orkest. Dutch, male, 1962 Michiel Lap Member Michiel Lap was appointed to the Supervisory Board ofABNAMRO on 24 April 2019. His current term expires atthe close of the Annual General Meeting in 2023. Last executive position held: Partner and Head of Northwest Europe, Goldman Sachs. Relevant positions pursuant to CRD V: Member of the Supervisory Board of ABNAMRO Bank N.V., Vice-Chairman andmember of the Supervisory Board of Arcadis N.V., non-executive board member of Rijn Capital B.V. Other relevant ancillary positions: Member of the Supervisory Board of Stichting Het Nederlands Kanker Instituut – Antoni van Leeuwenhoek Ziekenhuis. Swedish, female, 1974 Anna Storåkers Member Anna Storåkers was appointed to the Supervisory Board ofABNAMRO on 24 April 2019. Her current term expires at the close of the Annual General Meeting in 2023. Last executive position held: Head of Personal Banking Sweden, Nordea Bank AB. Relevant positions pursuant to CRD V: Member of the Supervisory Board of ABNAMRO Bank N.V., non-executive director of NDX Holding AB, non-executive director of Nordax Bank AB, non-executive director (and chairman) ofKreditz AB, non-executive director of MM Holding AB, non-executive director of Ludvig & Co Group AB. 218 ABN AMRO Integrated Annual Report 2021 Dutch, female, 1971 Mariken Tannemaat Member Mariken Tannemaat was appointed to the Supervisory Board of ABNAMRO on 15 December 2020. Her current term expires at the close of the Annual General Meeting in 2025. Last executive position held: Chief Innovation Officer atRobeco N.V. Relevant positions pursuant to CRD V: Member of the Supervisory Board of ABNAMRO Bank N.V., member of the Supervisory Board of CM.com N.V. and member of the Supervisory Board of CM Payments B.V., member of the Supervisory Board of VLC & Partners B.V., non-executive director of Prudential Assurance Company Limited. Other relevant ancillary positions:Advisor to the Executive Board of Erasmus Enterprise B.V., Chairman ofthe Women in Leadership working group of EGNNederland B.V. Dutch, male, 1952 Tjalling Tiemstra Member Tjalling Tiemstra was appointed to the Supervisory Board ofABNAMRO on 18 May 2016. His current term expires atthe close of the Annual General Meeting in 2022. Current position: Drs J.S.T. Tiemstra Management Services B.V. Relevant positions pursuant to CRD V: Member of the Supervisory Board of ABNAMRO Bank N.V., member of the Supervisory Board of Royal Haskoning DHV B.V., member of the Supervisory Board of Stichting Shell Pensioenfonds. Other relevant ancillary positions: Board member of Stichting Continuïteit KBW N.V. (Continuity Foundation Koninklijke Boskalis Westminster), board member of Stichting Preferente Aandelen Wolters Kluwer (Preference Shares), board member of Stichting Administratie Kantoor van Aandelen N.V. Twentsche Kabel Holding (Administration Office for Shares), deputy expert member of the Enterprise Court at the Amsterdam Court of Appeal, member of the Stakeholdersforum of NBA (Dutch Institute of Chartered Accountants), Chairman of the European Leadership Platform’s Advisory Board, member of the Advisory Board of Van der Heijden Instituut. 219 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance Supervisory Board composition / Leadership & governance structure / Leadership & governance Supervisory Board 220 ABN AMRO Integrated Annual Report 2021 Covid-19 will be with us for some time. How do you think the bank is dealing with this crisis, both at Executive Board level and in terms of serving clients? The essence of being a bank is that you are there for your clients, and that your clients have access to your products and services at all times, without any hitches. ABN AMRO was able to provide that service during the Covid-19 pandemic, and is navigating through the crisis well. Just like in other sectors, clients are increasingly doing their business with banks digitally, a trend which was already clear before the start of the pandemic, and which has increased since. For a bank, it’s of the utmost importance never to forget there’s an actual person behind every click. Iam pleased that ABN AMRO is investing in its digital offering, but also in making sure our less digitally savvy clients are included in this development. What has been the impact of the pandemic on thebank’s employees, and on the culture within theorganisation? I cannot emphasise enough how exemplary the bank’s employees are in their flexibility. Some employees - for instance young people - are finding it difficult to continuously work from home, though. Management is alert to these signals and the bank has programmes in place that devote attention to the wellbeing of our staff. In line with the bank’s values – care, courage and collaboration – a lot of attention is being paid to open communication and being able to speak your mind. Thishas become even more important in a time when colleagues are working from home and there is less in-person contact. We need to keep an eye out for everyone. ABN AMRO accepted a EUR 480 million settlement with the Netherlands Public Prosecution Service for being insufficiently successful in fulfilling its role as a gatekeeper aimed at combating money laundering. How do you view this from your perspective as a supervisory director? This was obviously very upsetting. Before the settlement, ABN AMRO had decided to centralise and invest in its anti- money laundering activities. We have to recognise thatthe bank’s efforts were unfortunately insufficient. Now,twenty percent of the workforce is devoted to getting files in order and making sure the bank fulfils its gatekeeper role. The bank made clear agreements with the supervisory authority and is doing everything in its power to live up to these agreements. Nonetheless, such a settlement with the public prosecutor is a very emotional and upsetting experience. It’sbeen an important topic in the conversations between management and the Supervisory Board. Interview with our Supervisory BoardChair 221 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance Interview with our Supervisory BoardChair / Supervisory Board / Leadership & governance Interview with our Supervisory BoardChair “ I value the energy with which the bank’s senior managers – andtheentire bank – are working hardtoexecute the strategy.” How do you think ABN AMRO is progressing with the execution of its strategy? ABN AMRO announced its strategy review in 2020, but that’s not something that can be implemented in one year. For now, the horizon is 2024. But the plans that were scheduled for 2021 were either completed or are being carried out now. Management fully succeeded in making 2021 the year of our licence to operate by resolving issues with the supervisory authorities and the public prosecutor. And while we are operating in a difficult environment due toCovid-19 and low interest rates, and there were several changes in senior management, ABN AMRO stayed up andrunning and focused on its clients. In that respect, wemay be satisfied with 2021. I value the energy with which the bank’s senior managers – and the entire bank – are working hard to execute the strategy. ABN AMRO introduced a new organisational structure in 2021 and incorporated the Executive Committee into the Executive Board. Why was that necessary? Robert Swaak and I both share the view that having an Executive Board and an Executive Committee is no longer necessary. Given the current size of the bank and in light ofthe strategy review of focusing on Northwest Europe, we no longer need this structure. So this change is a logical consequence of the strategy review. Having a single Executive Board will enable the bank to better serve its clients, and also keep senior management from creating silos of separate business lines, with their own CEOs and their own organisational structures. In addition, all senior executives will have the same statutory responsibility and,in line with the rest of the organisation, will operate more as a single unit. How is the relationship between the Supervisory Board and the Executive Board? What do you think of the current composition of and collaboration within the Supervisory Board? What about the balance ofgender, cultural backgrounds and competences ofthemembers? Despite all the changes that have taken place in the past two years, the Executive Board and the Supervisory Board have worked together very well. But however you look at it, in all that time we’ve met in person only once or twice. That’s bound to have an impact on teambuilding. Non-verbal communication is really important and it’s easy to miss certain signals when you’re meeting online. But under thecircumstances, I must say that we have maintained anexcellent relationship. With respect to diversity, the Supervisory Board is now made up of three women and four men. As for cultural andgeographical backgrounds, we have two supervisory directors from outside the Netherlands. I believe a company’s top management structure should reflect the makeup of its clients, and of society. And since ABN AMRO’s clients are very diverse, this should be mirrored in our leadership. We’re always looking for ways to improve inthisarea. Your name was mentioned in connection with the Pandora Papers, due to an investment you made in a friend’s project that went through a tax paradise, the British Virgin Islands. How do you look back on this? The day this was announced I wrote a letter to the bank’s employees expressing my regret and I donated the entire investment sum, which I had considered a gift, to the founder of the project. At the time, I made the investment with sincere intentions. I certainly understand that currently the structure of the investment raises questions. I’d like to emphasise that I fully underscore ABN AMRO’s position on discouraging the use of undesirable tax structures. And it’s upsetting to me that the bank received negative publicity around this matter. 222 ABN AMRO Integrated Annual Report 2021 What were the main topics that the Supervisory Board dealt with in 2021? That would be executing the strategy and, of course, thediscussions with the Netherlands Public Prosecution Service early in the year, further improving and future- proofing the bank’s risk management, and the changes to senior management and the Supervisory Board. The role ofbanks in environmental, social and governance (ESG) was extensively discussed, also addressing the development ofuniform sustainability standards. ABN AMRO has clear targets when it comes to sustainability – it is also part ofour assessment of the Executive Board – and as theSupervisory Board, it is our role to challenge senior management to implement the agreed policies and strategies. I believe the bank’s role in the transition from fossil fuels to sustainable energy is very important. What did the Supervisory Board do well in 2021, and what could be improved? The things I’ve already mentioned – overseeing the execution of the strategy, collaborating with the Executive Board, fighting money laundering. What we could improve is that we could serve more as a sounding board for theExecutive Board. That’s why it’s important for the supervisory directors to have a broad societal vision and very diverse backgrounds. Digitalisation and ESG are also subjects in which supervisors should be well versed inorder to be a good sounding board. I am very committed to continuously developing in these important areas. In conclusion, what do you see as the biggest challenges in 2022? The Supervisory Board’s biggest job is to closely monitor everything that has to be implemented between now and 2024. In addition, the sustainability portfolio is of huge importance to me. If you talk about sustainability, the market, our supervisors and society expect you to walk thetalk, even in transitional periods. Businesses have to bevery flexible in order to be able to live up to society’s expectations relating to the sustainability transition. Thissubject is high on the Supervisory Board’s agenda, asfarasI’m concerned. I also believe it’s very important for ABN AMRO to make good on its intention to focus on Northwest Europe. We’re well represented in the Netherlands, but Northwest Europe is more than just the Netherlands – we also have operations in Germany, France and Belgium. How do we view ramping up our activities in these countries? And last but not least, we’re still acting on all the agreements we made to fight money laundering. Here, too, the Supervisory Board needs to keep a close eye on things. And finally, ABN AMRO’s employee engagement score is high, even despite Covid-19, but we’d like it to be higher. Raising this score is an important job for senior management, and the Supervisory Board will monitor this as well. Onarelated note, how do you recruit, retain and develop talented employees? We’ve hired people in the past two years who’ve never been inside the bank. What’s their connection with the company that has given them their laptops and office chairs? The bank needs to devote alot ofattention to this. So there’s plenty of work ahead! Tom de Swaan Supervisory BoardChair of ABN AMRO Bank N.V. “ ABN AMRO has clear targets when it comes to sustainability – itisalso part of our assessment of the Executive Board.” 223 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance Interview with our Supervisory BoardChair / Supervisory Board / Leadership & governance Meetings of the Supervisory Board During 2021, the Supervisory Board held six regular meetings according to the pre-set schedule and nineteen additional meetings. In addition, the Supervisory Board andthe Executive Committee jointly had three strategy meetings. Due to the Covid-19 restrictions the meetings were partly held online. Regular Supervisory Board meetings take place following the meetings of the Remuneration Committee, Selection & Nomination Committee, Risk & Capital Committee and theAudit Committee. These committees report to the Supervisory Board on their deliberations and findings aftertheir meeting, and the Supervisory Board takes into account their outcomes and recommendations. The Company Secretary (or deputy Company Secretary) attends all meetings and is the secretary to the Supervisory Board and its committees. The Executive Board attends the regular meetings of the Supervisory Board and prepares detailed supporting documents. The regular meetings take five hours on average. Other bank staff and the internal and external auditor are frequently invited to give presentations on specific topics such as performance highlights, the capital & funding plan, strategy, investor relations updates, the risk appetite, legal cases, quarterly audit reports and the quarterly report of the interaction with the supervisors ECB, DNB and AFM. In addition to the regular meetings of the Supervisory Board additional meetings were held to discuss the investigation by the Netherlands Public Prosecution Service (NPPS) andto discuss the settlement dialogue with the NPPS. Further the Supervisory Board had additional meetings todiscuss the Risk Management Foundation Plan. After several iterations the Supervisory Board approved the RiskManagement Foundation Plan in its meeting on 28April 2021. Another important item that was discussed during the meetings of the Supervisory Board was the compensation framework as a response to the Kifid ruling in March 2021. On 2 September 2021 the Supervisory Board discussed the compensation framework regarding the revolving consumer credit products with a variable interest rate. On 4 September 2021 the negotiations with the Consumentenbond were finalised and the Supervisory Board approved the agreed compensation framework. Following the strategy review the Supervisory Board hadthree joint meetings with the Executive Board and Executive Committee on the Future of Banking in order toexplore the future value creation for ABN AMRO in thelonger run. Among others macro-economic shifts, sustainability, EU regulation harmonisation and digital assets were discussed during these sessions. In addition the meetings focused on specific subjects such as the Executive Committee’s succession planning, particularly the succession of the CFO and the interim position of the CEO Commercial Banking. The new organisational structure including the new set up of the statutory Management Board were extensively debated. Other topics on the agenda were the financial plan for 2022-2026, the sale and leaseback of the Gustav Mahlerlaan 10, performance management, innovation and technology, the culture change plan and ancillary positions of Supervisory Board members and members of the Executive Committee. Anna Storåkers and Tjalling Tiemstra were mandated by the Supervisory Board to discuss the Recovery Plan with Risk and the mandated members subsequently approved the Recovery Plan. Details of the composition of the Supervisory Board throughout 2021 can be found in the Composition and diversity paragraph in the Supervisory Board section. The personal details of the members of the Supervisory Board are considered to be incorporated, by reference, in this Report of the Supervisory Board. On 14 November 2021 Jurgen Stegmann has decided for personal reasons to resign as a member of the Supervisory Board with immediate effect. Jurgen Stegmann contributed substantially to the work of the Supervisory Board in the past five years especially inthe field of risk management as Chair ofthe Risk and Capital Committee. Report of the Supervisory Board 224 ABN AMRO Integrated Annual Report 2021 Attendance of the Supervisory Board members at the Board’s meetings in 2021 was as follows: 2021 Formal meetings (6) Additional meetings (19) Total meetings (25) Attendance (%) T. de Swaan (Chair) 6 17 23 92% A.C. Dorland 6 18 24 96% L.J. Griffith 5 16 21 84% M.P. Lap 6 18 24 96% J.B.J. Stegmann 1 5 11 16 84% A.M. Storåkers 6 17 23 92% M.L. Tannemaat 6 16 22 88% J.S.T. Tiemstra 6 16 22 88% 1 Resigned on 14 November 2021 after which 6 meetings were held. Focus areas and activities of the Supervisory Board The Supervisory Board’s key areas of focus included the bank’s compliance with legislation, codes and regulations. Regarding the regulatory environment, ABN AMRO continued to work on retaining trust and only making proper use of client data. On 25 September 2019, the NPPS informed ABN AMRO that the bank was the subject of an investigation relating to requirements under the Act on the prevention of money laundering and financing of terrorism (Wwft). In the beginning of the year ABN AMRO started the settlement dialogue with the NPPS and in the meeting of 25 March 2021 the Supervisory Board validated the results of the settlement dialogue with the NPPS. In its meeting on 18 April 2021 the Supervisory Board accepted a settlement offer from the NPPS in connection with the investigation by the NPPS into ABN AMRO’s AML activities in the Netherlands over the period 2014-2020. As part of this settlement it was agreed that ABN AMRO would pay EUR 480 million. The joint temporary committee established by the Supervisory Board and Executive Board, to coordinate, advise on and supervise the main activities following the investigation initiated by the NPPS was discontinued and terminated in June 2021.The Supervisory Board continued to monitor the progress on the remediation plan. The Supervisory Board was also regularly updated on ABNAMRO’s key financial and non-financial risks and the design of the internal risk management and control systems. During these updates the Executive Board’s assessment of the adequacy and effectiveness of the risk management and control systems was monitored and discussed. The Risk Management Foundation Plan was an important topic and the Supervisory Board approved the Risk Management Foundation Plan in its meeting on 28 April 2021. Each quarter the Supervisory Board receives a progress update on the execution of the Risk Management Foundation Plan. The bank’s risk appetite and ICAAP/ILAAP were also discussed and approved. In addition, the Supervisory Board had in-depth discussions on material legal, credit, tax and compliance files. The DNB-ECB & AFM activities report, ERM report and policy approval report were also discussed each quarter. Following the updated strategy as communicated in November 2020 the Supervisory Board received an update on the strategy execution each quarter. The outcome of the strategy review was translated into themes, which together shape the overall change portfolio of ABNAMRO in the coming years. For 2021 the overall focus has been defined as “strengthening the foundation”. Therefore the primary focus was on key deliveries related to: Detecting Financial Crime, duty-of-care, credit model landscape, Risk & Finance reporting, Data foundation, and the managed wind-down of CIB non-core. While at the same time creating the foundation for delivering market leading customer value propositions for the ABNAMRO’s target segments, by upgrading key digital and data capabilities, digitalising specific processes, and building out the NWE bankingplatform. Further to the updated strategy the organisational and management structure were reviewed. The Supervisory Board discussed in February 2021 that a new set up of the organisational structure, including the business lines, is needed to support the change to successfully execute the updated strategy. The Supervisory Board discussed and approved the rationale for the proposed changes in the business line set-up and the envisaged organisational chart. Following the Extraordinary General Meeting held on 24November 2021, the Supervisory Board approved to abolish the Executive Committee and approved the new setup of the Executive Board including appointments of Gerard Penning as the Chief Human Resources Officer, Choy van der Hooft-Cheong as Chief Commercial Officer Wealth Management and Dan Dorner as the Chief Commercial Officer Corporate Banking. The Supervisory Board worked on the selection process for the Chief Commercial Officer Personal & Business Banking. Part of the execution of the strategy review was the intended sale and leaseback of the bank’s head office at 225 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance Report of the Supervisory Board / Supervisory Board / Leadership & governance Gustav Mahlerlaan. The Supervisory Board received updates on the sale process and attended a presentation ofthe two selected bidders. On 7 December 2021 the Supervisory Board approved the agreement that was reached with real estate firm Victory Group regarding the sale and leaseback of the bank’s head office at Gustav Mahlerlaan in Amsterdam. Victory Group will pay EUR765million for the Gustav Mahler building, taking into account the favourable lease conditions for the coming years when ABNAMRO will lease back the entire building during the redevelopment of the Foppingadreef Offices. From 26 September until 29 September 2021 the annual joint study trip of the Supervisory Board, the Executive Board and the Executive committee took place in Frankfurt. Two topics had a prominent place on the agenda in Frankfurt: fintechs and sustainability. The role of banks inEnvironmental, Social and Governance (ESG) was extensively discussed, also addressing the development ofuniform sustainability standards. In addition, several fintechs operating in a variety of segments, from lending to payments, gave presentations on the pace of developments and what they are working on. The Supervisory Board continued to actively engage with its key stakeholders in 2021, mainly by way of digital meetings but also physical meetings. The two members appointed pursuant to the enhanced recommendation right of the Employee Council, Laetitia Griffith and Arjen Dorland, met regularly with the Employee Council throughout theyear to maintain an active dialogue and obtain the Employee Council’s thoughts and input on various matters, including diversity, work satisfaction, the strategy execution and the new organisational structure. The Chair and other members of the Supervisory Board also met with the Employee Council on several formal and informal occasions during the year. The Supervisory Board appreciates the constructive relationship it has with the Employee Council, and highly values the input, engagement, suggestions andconsiderations provided by the Employee Council in theinterests of the bank. Active engagement was also maintained throughout the year with the Dutch Central Bank (DNB), the European Central Bank (ECB), the AFM, STAK AAB and NLFI.The Supervisory Board’s aim continued to be to ensure that the bank is well positioned to create long-term value for its shareholders and for society, while focusing firmly on clients’ interests and balancing the interests of all stakeholders. A description of the duties, responsibilities and current composition of the Supervisory Board, including its committees and other positions held by members of the Supervisory Board, is provided in the Supervisory Board section of this chapter. More information on remuneration is provided in the Remuneration report section of this chapter. These subjects are considered to be incorporated, by reference, in this Report of the Supervisory Board. Supervisory Board Committees Audit Committee The Audit Committee is tasked with the direct supervision of all subjects relating to financial reporting and controlling. In doing so, it is responsible for supervising and advising the complete Supervisory Board on, matters as (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) regulatory compliance in relation to financial reporting, (vi) mediation between internal or external auditors and/or management where needed, and (vii) reporting to the Supervisory Board. As of 19 January 2021, the Audit Committee consisted of Tjalling Tiemstra (Chair), Michiel Lap, Jurgen Stegmann and Anna Storåkers. Since this date, Anna Storåkers replaced Tom de Swaan as a member of the Audit Committee. Nomeetings were held between 1 January 2021 and 19January 2021. On 14 November 2021 Jurgen Stegmann resigned as Supervisory Board member and therefore asmember of the Audit Committee. No replacement has been appointed during the remainder of 2021. The Audit Committee held six regular plenary meetings in 2021. The attendance rate of the Committee’s members is shown in the following table. 2021 Regular meetings (6) Additional meetings (0) Total meetings (6) Attendance (%) J.S.T. Tiemstra (Chair) 6 6 10 0% M.P. Lap 6 6 100% J.B.J. Stegmann 1 6 6 100% A.M. Storåkers 6 6 100% 1 Resigned on 14 November 2021 after which no meetings were held. 226 ABN AMRO Integrated Annual Report 2021 In addition, Tom de Swaan and Mariken Tannemaat, in their capacity as Supervisory Board member, attended all plenary meetings of the Audit Committee in 2021, Arjen Dorland attended five plenary meetings in 2021 and Laetitia Griffith attended four plenary meetings in 2021 in order to keep abreast of the most important developments relating to theCommittee’s tasks. All regular plenary meetings of theAudit Committee were also attended by the CEO, the CFO (and CFO a.i.) and the CRO. The Director Group Audit, theDirector Financial Accounting, the Director Corporate Controlling, the external auditor and the deputy Company Secretary also attended the full plenary meetings. In March 2021 the Audit Committee took a decision, without holding a meeting, on evaluating the external auditor’s performance for the purpose of the Annual General Meeting. In addition to the plenary meetings, the Chair and other members of the Audit Committee regularly held separate meetings in 2021 with the Director Group Audit, the CFO, the CRO, the Director Financial Accounting and the Director Corporate Controlling, and others. The Chair of the Audit Committee met the external auditor bilaterally on several occasions in 2021, focusing on the progress of theexternal audit and other subjects relevant to the Committee’s responsibilities. The Chair also met with the European Central Bank and the Dutch Central Bank on one occasion during the year. In addition, the Committee’s members met managers of various departments so as to remain well informed on topics subject to the Committee’s supervision. Directly after the first meeting in March 2021, at which the draft annual accounts were discussed, the Audit Committee met the external auditor bilaterally to seek confirmation that all relevant matters emerging from the audit had been brought to the Committee’s attention. In addition, the level of cooperation between Ernst & Young Accountants LLPand management, the Audit Committee, the Supervisory Board and Group Audit was discussed. The Audit Committee’s discussions in the plenary meetings covered topics including the quarterly reports, the interim and annual accounts, the quarterly press releases, the 2020 Integrated Report and 2020 Annual Report of ABN AMRO and key audit matters reported by internal and external audit. In relation to the latter, the Audit Committee discussed all control observations and key audit matters ofthe internal and external auditors, including progress onimprovements. Please refer to the Management Control Statement in the Risk, funding & capital chapter and the Audit Opinion of Ernst & Young Accountants LLP(see Other) for further details. The Audit Committee also discussed financial reporting, the overall internal control environment, the governance and internal controls of financial reporting, adherence to laws and regulations governing financial and regulatory reporting, regular reports on any signals from clients or employees suggesting possible internal control issues and updates ontax and tax-related issues. The Audit Committee extensively discussed the financial performance, with an increased focus on the impairments taken as a result of, among other things, the Covid-19 pandemic. In addition, the Audit Committee focussed on cost control also in the light of the continuous pressure on NII, mainly driven by lower margins and lower loan volumes. The lower loan volumes affected the gap to the TLTRO benchmark, which was touched upon on several occasions. The Audit Committee also monitored the effects of the measures taken by ABN AMRO to limit the negative impact of the pandemic on its clients. The Audit Committee continually paid attention to current and future operational results, also in view of the low interest rate environment. Inaddition, the Committee discussed the audit ratings of the bank’s first and second line departments every quarter. During each meeting the Committee devoted attention tothe procedures for financial reporting, including the procedure for establishing loan impairments, the timelines for establishing impairments, and the robustness and development of the financial results and ratios, including the level of loan impairments. The Committee also took note of financial reports issued to supervisory authorities, such as the COREP and FINREP reports. In addition, the Audit Committee considered the role, performance and reports from Group Audit, reports from the external auditor, management letters and the auditor’s independence and fees. The Committee was also informed of, and discussed if needed, all relevant letters from the European Central Bank and the Dutch Central Bank. The Audit Committee closely monitored the financial and regulatory reporting improvement programmes in 2021 and was regularly updated on the progress of these programmes by the Executive Board, Group Audit and the external auditor. In February 2021, in addition to the regular topics noted above, the Audit Committee advised the Supervisory Board to approve the annually updated auditor independence policy Moreover, the Committee received the 2020 overview of whistleblowing cases and exchanged views onthe letter from the VEB to audit firms focusing on the contribution expected of auditors at annual generalmeetings. In March 2021, the Audit Committee reviewed and discussed the Integrated Report 2020, the Annual Report 2020, the related press release, the external auditor’s report on the 2020 consolidated financial statements, the external auditor’s report 2020 and the Management Control Statement. The Audit Committee requested management to revise the display of the remuneration tables in the Remuneration report of the Integrated Annual Report 2021. Moreover, management was asked to review the coherence of a number of reports for the Annual Report 227 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance Report of the Supervisory Board / Supervisory Board / Leadership & governance 2021, also in light of new regulations on ESG in 2021 and NFRD. In May 2021, in addition to the regular agenda items, the Audit Committee discussed the 2021 Audit Plan of the external auditor as well as the Audit Plan of Group Audit for the second half of 2021. In August 2021, the Audit Committee discussed and subsequently advised the Supervisory Board to approve the proposal to pay out the dividend of the financial year 2019 in light of the ECB’s decision to not extend its recommendation that all banks limit dividends beyond September 2021. In November 2021, apart from the recurrent agenda items, the Audit Committee advised the Supervisory Board to approve the Group Audit Plan 2022 and the annual review of the Group Audit Charter. The Committee was also informed of the most important developments in tax matters and related risks for ABN AMRO. Lastly, a presentation was provided to the Audit Committee on the risks of cyber security, and more general on information risks the bank runs. Risk & Capital Committee The Risk & Capital Committee (R&CC) is responsible for supervising, and advising the Supervisory Board on, such things as (i) risk management and risk control, (ii) the strategies for capital and liquidity management, (iii) the bank’s risk appetite and risk strategy and reviewing the business activities in relation to these matters, (iv) compliance with applicable laws and regulations (including codes of conduct and internal procedures), (v) risk and compliance awareness within the bank, (vi) sound remuneration policies and practices in the light of risk, capital, liquidity and expected earnings, (vii) proposing corrective and/or disciplinary measures against members of the Executive Board in the event of a breach of applicable laws and regulations, and (viii) periodic review of the bank’s actual risk profile. On 19 January 2021 Arjen Dorland and Tom de Swaan resigned as members of the R&CC as a result of thechanged composition of the Supervisory Board Committees. No meetings were held between 1 January 2021 and 19 January 2021. Mariken Tannemaat was appointed as member of the R&CC as per 19 January 2021. As per this date the R&CC consisted of Jurgen Stegmann (Chair), Anna Storåkers, Mariken Tannemaat and Tjalling Tiemstra. On 14 November 2021 Jurgen Stegmann resigned as Chair and member of the R&CC. On 17 November Anna Storåkers was appointed as ad interim Chair of the R&CC. In addition Arjen Dorland, Laetitia Griffith, Michiel Lap and Tom de Swaan, in their capacity asSupervisory Board members, attended most of the meetings of the R&CC in 2021 in order to keep abreast ofthe most important developments relating to the Committee’s tasks. All regular plenary meetings of the R&CC were also attended by the CEO, the CFO and theCRO of ABN AMRO. The Head Group Audit and the Head Compliance, the external auditor and the Company Secretary (or deputy Company Secretary) also attended thefull plenary meetings. In addition, when deemed relevant and useful, individual staff members and responsible management were invited to present their case, respond toquestions and participate in discussions. The R&CC held eight plenary meetings in 2021, four ofwhich were regular meetings and four of which were additional meetings. All matters discussed in the R&CC’s plenary meeting that were relevant for the Supervisory Board were reported on orally at the subsequent meetings of the full Supervisory Board. The full Supervisory Board also received minutes of the R&CC meetings. Attendance of the R&CC members at the Committee’s meetings in 2021 was as follows: 2021 Regular meetings (4) Additional meetings (4) Total meetings (8) Attendance (%) J.B.J. Stegmann (Chair) 1 4 4 8 10 0% A.M. Storåkers 2 4 4 8 10 0% M.L. Tannemaat 4 4 8 10 0% J.S.T. Tiemstra 4 3 7 88% 1 Resigned on 14 November 2021 after which no meetings were held. 2 Ad interim Chair as from 17 November 2021. Recurring items on the R&CC’s agenda in 2021 were the Enterprise Risk Management (ERM) Report, including Covid-19 related progress reporting, the Capital & Funding Plan, the Credit Risk Report, Compliance and Legal Updates, regulatory correspondence with the ECB, DNB and AFM and the Risk Policy Approval Report, in which aquarterly overview is provided of changes to relevant risk policies.Additionally, the CRO and CFO provided quarterly updates at the regular R&CC meetings on relevant developments in their respective areas of control. The ERM Report provides a concise overview of ABN AMRO’s position on all risk types identified in the risk taxonomy. It also aims to identify cross-risk type issues 228 ABN AMRO Integrated Annual Report 2021 andeffects and to provide a single integrated view on the bank’s risk profile, benchmarked against the bank’s strategy and risk appetite. The ERM Report and all other regular andone-off reports were used by the R&CC to maintain oversight and advise the Executive Board on the operation and efficiency of the bank’s operations versus its risk appetite, including the functioning of its internal Risk Management function. Amongst others, based on the ERM Report the R&CC extensively discussed Covid-19 related risks, interest rate risk, change risks, credit risks, operational risks, compliance risks, IT & security risks and there was increased attention for sustainability and climate risk, a trend of which it is expected to carry on in 2022. Thequarterly update on Credit Risk led to a request from the R&CC for a deep dive on the CRE portfolio and the NPEpercentage within Commercial Banking. Every quarter the R&CC assessed the updated Capital & Funding Plans and was informed about the bank’s current capital and funding positions. The R&CC discussed the bank’s management of its capital and liquidity ratios, including the issuance plans for capital and funding and options for RWA steering. In all instances, the R&CC advised the Supervisory Board to approve the proposed Capital & Funding Plan. Additionally, the R&CC held an extra meeting to discuss the Capital Adequacy Statement and the Liquidity Adequacy Statement. Also, the TLTRO threshold as introduced by the ECB was discussed and monitored bythe R&CC. Based on the quarterly Compliance and Legal Reports, the R&CC discussed individual Legal, Tax and Compliance files, the performance of the Compliance function, Compliance policies & procedures and the impact of national and international laws and regulations. Examples of matters thatwere discussed related to the Duty of Care, SIRA, developments on spoofing and fraud, cum/cum-related legacy issues, the AML settlement and the agreement on acollective compensation agreement regarding variable interest. The R&CC had a continued focus on compliance related matters, and particularly on the duty of care, client due diligence, anti-money laundering and the countering of terrorism financing. The R&CC was updated on a quarterly basis on the activities of the Detecting Financial Crime unit. Besides, the R&CC zoomed in the progress of the remediation programs, the concept for ‘ongoing due diligence’ and the New Client Take On (NCTO) process. The R&CC was informed of the bank’s correspondence anddevelopment of the relationship with the Dutch Central Bank, the European Central Bank, the AFM and other relevant supervisory authorities in quarterly oversight reports prepared by Legal and Compliance. The R&CC paid specific attention to the main impact of Covid-19 on the risk profile of the bank. Moreover, extra meetings were held to discuss the bank wide Risk Management Foundation Plan, which focuses on enhancement of the i) risk culture and the three lines ofdefence, ii) Credit Risk, iii) non-financial risks and iv)systems, data & analytics of the bank as a whole. Furthermore, the R&CC was updated on the progress ofthe C&IB non-core wind down and the implementation ofthe risk enhancement program of ABN AMRO Clearing Bank every quarter. Also, the impact of Covid-19 on the activities of ICS, the risk assessment on the remuneration incentives and the risk review of the pricing methodology were discussed. More information on the risk, capital, liquidity and funding- related topics discussed in the R&CC is provided in the Risk, funding & capital chapter. Remuneration Committee The Remuneration Committee is responsible for supervising and advising the Supervisory Board on, among other things, (i) remuneration policies and their execution for members ofthe Executive Board, the Supervisory Board and selected members of senior management, and (ii) reporting on theexecution of the bank’s remuneration policies in a remuneration report. On 19 January 2021 Anna Storåkers resigned as member ofthe Remuneration committee. Mariken Tannemaat was appointed as member of the Remuneration Committee asper 19 January 2021. No meetings were held between 1January 2021 and 19 January 2021. In 2021, the Remuneration Committee held five (5) regular meetings and three (3) additional meetings. Four (4) decisions were made without a meeting being held. TheCompany Secretary (or deputy Company Secretary) attended the meetings. In accordance with legislation, theSupervisory Board will continue in 2022 to ratify all decisions made by the Remuneration Committee either atameeting or in writing without a meeting being held. 229 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance Report of the Supervisory Board / Supervisory Board / Leadership & governance Attendance of the Remuneration Committee members at the Committee’s meetings was as follows: 2021 Formal meetings (5) Additional meetings (3) Total meetings (8) Attendance (%) A.C. Dorland (Chair) 5 3 8 100% L.J. Griffith 5 2 7 88% T. de Swaan 5 3 8 100% M.L. Tannemaat 5 3 8 10 0% To accelerate the strategy and delivering the full potential of the bank to our clients in a simple and efficient manner, the organisational and management structure were reviewed. At its meetings, the Remuneration Committee discussed and provided advice to the Supervisory Board on the remuneration packages for the Chief Human Resources Officer, Chief Commercial Officer Wealth Management, Chief Commercial Officer Corporate Banking and Chief Commercial Officer Personal & Business Banking in view of the dissolvement of the Executive Committee and adjusted set-up of the Executive Board as per 24 November 2021. Prior to the above and in connection with the bank’s strategy, the Remuneration Committee discussed the enhanced Diversity & Inclusion strategy comprising of, amongst others, bank-wide targets for gender and cultural diversity to create an inclusive work environment. Another important topic the Remuneration Committee discussed was a futureproof and sustainable implementation of equal pay that impacts several elements such as recruitment, succession planning, remuneration and promotion. TheRemuneration Committee positively advised the Supervisory Board to approve the implementation of a new remuneration methodology that contributes to equal pay. Other items on the Remuneration Committee’s agenda included: strategic workforce management & reskilling to ensure that people are adaptable and stay fit for the future, the bank-wide Global Reward Policy 2022 which was adjusted due to changes in remuneration legislation, progress on negotiations with the trade unions regarding the collective labour agreement and social plan that were due to expire on 1 January 2022 and the regular end-of-year topics being the 2020 performance management review and KPI setting for 2021. Selection & Nomination Committee The Selection & Nomination Committee is responsible forsupervising, and advising the Supervisory Board on, among other things (i) the selection, appointments and reappointments regarding the Supervisory Board and the Executive Board, (ii) succession plans of the Supervisory Board and the Executive Board, (iii) the knowledge, skills, experience, performance, size, composition and profile of these boards, and (iv) the performance of the members of these boards. In 2021, the Selection & Nomination Committee held five(5) regular meetings and seventeen (17) additional meetings. Three (3) decisions were made in writing without a meeting being held. The Company Secretary (or deputy Company Secretary) attended the meetings. In accordance with legislation, the Supervisory Board will continue in 2022 to ratify all decisions made by the Selection & Nomination Committee either at a meeting or in writing without a meeting being held. Attendance of the Selection & Nomination Committee members at the Committee’s meetings was as follows: 2021 Formal meetings (5) Additional meetings (17) Total meetings (22) Attendance (%) T. de Swaan (Chair) 5 16 21 95% A.C. Dorland 5 16 21 95% L.J. Griffith 5 17 22 100% M.P. Lap 5 17 22 100% A.M. Storåkers 1 1 1 100% 1 Committee member untill 19 Januari 2021, before which 1 meeting was held. The main topics that the Selection & Nomination Committee discussed and provided advice on to the Supervisory Board related to the successor for the ChiefFinancial Officer including the appointment of a ChiefFinancial Officer ad interim, the simplification of ABNAMRO‘s organisational and management structure including the dissolution of the Executive Committee and the related appointments of four Executive Board members, being the Chief Human Resources Officer, the Chief Commercial Officer Wealth Management, the Chief Commercial Officer Corporate Banking and lastly the ChiefCommercial Officer Personal & Business Banking. 230 ABN AMRO Integrated Annual Report 2021 The Selection & Nomination Committee also discussed and provided advice to the Supervisory Board on the envisaged reappointment of the Chair of the Supervisory Board, whose term of office is due to end in April 2022, the ad interim position of the Chief Commercial Officer Personal & Business Banking and on the temporary replacement for Rutger van Nouhuijs as CEO Corporate & Institutional Banking after his unexpected departure. Other subjects were ABN AMRO’s Management Development Programme and Talent and Leadership. Also, the Selection & Nomination Committee discussed the nomination for the appointment of a Supervisory Board member with the profile of Financial Expert as successor of Tjalling Tiemstra, whose term of office is due to end in April 2022, taking into account the diversity policy for management bodies and the rotation scheme and positively advised the Supervisory Board. The Selection & Nomination Committee furthermore positively advised the Supervisory Board on the appointment of the Vice-Chair of the Executive Board, on the appointment of the ad interim Chair of the Risk & Capital Committee following Jurgen Stegmann’s departure for personal reasons, on the assessments of (members of) the Executive Board, Executive Committee and the Supervisory Board, and on the assessment of various ancillary positions of members of the Supervisory Board, Executive Board and Executive Committee. Performance evaluation The annual assessment of the Executive Board, the Executive Committee, the Supervisory Board and the Supervisory Board Committees regarding performance year 2020 was carried out in H12021. The functioning ofthe Executive Board and Executive Committee and itsmembers and committees was assessed based on results assembled from questionnaires of all members ofthe Executive Board and Executive Committee and discussions during their meetings, which were evaluated by the Supervisory Board. The assessment of the Supervisory Board, and its individual members and committees was based on results assembled from questionnaires of all members of the Supervisory Board and discussions within the Supervisory Board. These assessments and evaluations were then used to identify areas of improvement to define an action plan. The permanent education program could be improved with more focus more on client centricity, digital capabilities, ESG and the fast moving landscape of legal, compliance and regulatory frameworks. Other areas of improvement included quality of meeting documents and prioritisation of topics in meetings, communication with regulators and the composition of the Executive Committee. These areas are currently being addressed. The assessments of the Supervisory Board and Executive Board for the 2021 performance year will be carried out in 2022, with due observance of succession planning. Induction Programme and Lifelong Learning Programme Induction Programme Following their appointment, all new members of the Supervisory Board, Executive Board and until 24 November 2021 the Executive Committee complete an extensive induction programme designed to ensure they have the relevant knowledge needed to fulfil their role, including thorough knowledge of ABN AMRO and its business activities, financial reporting of the group ABN AMRO belongs to and general financial, social, risk, compliance and legal matters. In view of the different knowledge, background and experience of newly appointed members of these boards, each induction programme has a tailor-made curriculum. Lifelong Learning Programme A lifelong learning programme is in place for members of the Supervisory Board, Executive Board and Executive Committee. This is designed to keep their expertise up-to- date and to broaden and deepen their knowledge, where necessary. The objective is for members of the Supervisory Board, Executive Board and Executive Committee to participate in the same training sessions so as to foster knowledge-sharing. The curriculum is developed and updated continually to ensure the programme is of high quality, covers developments related to regulatory requirements and takes into account current developments in the global financial industry. Topics covered in 2021 and attended by the Supervisory Board, together with the Executive Board and Executive Committee, included Financial Accounting - Sustainable Finance, Innovation, Responsible Investment & Financing combined with Corporate Governance and Environmental, Social & Governance (ESG) criteria, Regulatory Compliance and current developments in Legal & Compliance, Client integrity and Deepdive Policy Outsourcing. Together with members of the senior management, the members of the Supervisory Board, Executive Board and Executive Committee participated as well in the Permanent Education programme of 2021 with the following topics: Diversity & Inclusion: Unconscious Bias and your role asaleader, Cybersecurity & operational resilience, The ABNAMRO Equity Story, Change: opportunity or risk – aninside perspective, Our core values and culture – our compass to successful execution of our bank wide strategy, Sustainable innovation in a world in transition, Economic and customer trends, Customer experience in combination with customer centric proposition, Good governance & prudent risk taking and Financial Crime – an integrated approach to our gatekeeper role. All sessions of the Lifelong Learning Programme and Permanent Education Programme were offered online in accordance with the measures taken in relation to Covid-19. 231 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance Report of the Supervisory Board / Supervisory Board / Leadership & governance General Meeting and shareholderstructure 232 ABN AMRO Integrated Annual Report 2021 General meeting The Annual General Meeting is held each year by 30 June at the latest. The agenda for the Annual General Meeting must contain certain subjects specified in ABNAMRO’s Articles of Association and under Dutch law, for example the adoption of the annual financial statements. Shareholders or holders of depositary receipts who alone or jointly represent at least 3% of the issued share capital of ABNAMRO are allowed to add items to the agenda of the General Meeting, provided they submit a request for this (including reasons) to ABNAMRO at least 60 days prior to the General Meeting. The Supervisory Board and the Executive Board are both entitled to convene a General Meeting. Shareholders or holders of depositary receipts issued with the cooperation of ABNAMRO may also convene a General Meeting, provided they represent at least 10% of the issued share capital. NLFI may also request the Executive Board or Supervisory Board to convene a General Meeting, as stated in the Relationship Agreement. Extraordinary General Meetings may be convened if deemed necessary, for instance to resolve important decisions, such as major acquisitions and divestments or appointments of Executive Board or Supervisory Board members that cannot be deferred until the next Annual General Meeting. ABNAMRO held two General Meetings in 2021: the Annual General Meeting on 21 April and an Extraordinary General Meeting on 24 November. Owing to the Covid-19 pandemic, both meetings were held fully virtually (in accordance with the temporary law regarding Covid-19), rather than allowing holders of shares and depositary receipts to attend in person. Shareholders and depositary receipt holders were able to ask questions about items on the agenda before and during each meeting. The agenda of the Annual General Meeting on 21 April 2021 included: H the adoption of the 2020 annual financial statements; H the remuneration report; H the reservationand dividend policy; H the report on the functioning of the external auditor and the reappointment of Ernst & Young Accountants LLP as external auditor for the financial years 2022 and 2023; H the re-appointment of Tanja Cuppen (CRO) and Christian Bornfeld (CI&TO) as members of the Executive Board; H the introduction of Lars Kramer as a proposed member of the Executive Board (CFO); H the authorisation for the Executive Board to (a) issue shares and/or grant rights to subscribe for shares, (b) limit or exclude pre-emptive rights, and (c) acquire shares or depositary receipts for shares in ABNAMRO’s own capitalfor a period of 18 months from the date of the General Meeting, subject to the approval of the Supervisory Board and provided the total number of shares or depositary receipts held by ABNAMRO is limited to 10% of the issued share capital of ABNAMRO; and H the cancellation of shares and depositary receipts forshares in ABNAMRO’s own capital held by ABNAMRO, and the related reduction of the authorised capital (excluding, for the avoidance of doubt, ordinaryshares B). On 19 April 2021, ABNAMRO announced that it had accepted a settlement offer from the Netherlands Public Prosecution Service relating to the previously announced AML investigation. Due to the short timeframe between the announcement of the settlement and the Annual General Meeting, this matter could not be taken into account by all shareholders and depositary receipt holders when voting at the Annual General Meeting as most of them had already issued their voting instructions ahead of the meeting. ABNAMRO therefore decided to withdraw the agenda item relating to the discharge of the Executive Board members and Supervisory Board members for 2020 at the Annual General Meeting of 2021. The agenda of the Extraordinary General Meeting on 24November 2021 included: H changes to the corporate governance structure; H the introduction of Dan Dorner as a proposed member of the Executive Board (CCO Corporate Banking); H the introduction of Choy van der Hooft-Cheong as a proposed member of the Executive Board (CCO Wealth Management); H the introduction of Gerard Penning as a proposed member of the Executive Board (CHRO). Shareholder structure At 31 December 2021, all shares in the capital of ABNAMRO were held by two foundations: Stichting Administratiekantoor beheer financiele instellingen (NLFI) and Stichting Administratiekantoor Continuïteit ABNAMRO Bank (STAK AAB). On that date, NLFI held 56.3% in the share capital of ABNAMRO, of which 49.9% was directly held via ordinary shares and 6.4% was indirectly held via depositary receipts for shares in the capital of ABNAMRO. On that date, STAK AAB held 50.1% of the shares in the issued capital of ABNAMRO. Only STAK AAB’s depositary receipts have been issued with the cooperation of ABNAMRO and are traded on Euronext Amsterdam. 233 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance General Meeting and shareholderstructure / Leadership & governance NLFI The Dutch State holds an interest in ABNAMRO through NLFI. NLFI was set up to avoid potential conflicting responsibilities that the Dutch Minister of Finance might otherwise face and to avoid undesired political influence being exerted. NLFI holds 56.3% in ABNAMRO, of which 49.9% is directly held via ordinary shares and 6.4% is indirectly held via depositary receipts for shares in ABNAMRO issued by STAK AAB. NLFI is responsible for managing these shares and depositary receipts and for exercising all rights associated with these shares under Dutch law, including voting rights. NLFI acts as a stand-alone shareholder that is independent of the Dutch State, including the Dutch Ministry of Finance. However, important decisions taken by NLFI require prior approval by 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 ABNAMRO without the authorisation of the Dutch Minister of Finance. NLFI entered into a Relationship Agreement with ABNAMRO governing their relationship after the initial public offering (IPO). The full text of the Relationship Agreement is available on abnamro.com. The Relationship Agreement will terminate if and when NLFI (directly or indirectly) holds less than 10% of ABNAMRO’s issued share capital. A limited number of clauses will not terminate under any circumstances. The Relationship Agreement includes the following provisions, subject to certain conditions stated in the agreement: H NLFI’s right to be consulted by (a) the Supervisory Board on the appointment or reappointment of (i) members ofthe Executive Board and (ii) the Chair of the Executive Board or the Supervisory Board, and (b) the Executive Board on a proposal for the appointment of the externalauditor; H NLFI’s right of prior approval of any issuance of (or granting of rights to acquire) shares in ABNAMRO foraslong as NLFI holds at least 33 1/3% of the sharesin ABNAMRO; H NLFI’s right of prior approval of (a) for as long as NLFI holds more than 50% of the shares in ABNAMRO: any investments or divestments by ABNAMRO or any of its subsidiaries with a value of more than 5% of the equity of ABNAMRO and (b) for as long as NLFI holds 50% orless but 33 1/3% or more of the shares in ABNAMRO: any investment or divestments by ABNAMRO or any of its subsidiaries with a value ofmore than 10% of theequity of ABNAMRO; H NLFI’s obligation to effect sell-downs of ABNAMRO shares through STAK AAB; H certain orderly market arrangements; and H certain information rights for NLFI as long as it holds at least 33 1/3% of the shares in ABNAMRO. STAK AAB STAK AAB is a trust office independent of ABNAMRO and the holder of a majority of the shares in ABNAMRO’s issued share capital. STAK AAB 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 AAB’s role in this is set out in this section under Anti-takeover measures. In addition to serving as a defence measure, STAK AAB aims to promote the exchange of information between ABNAMRO on the one hand and holders of depositary receipts and shareholders on the other hand. It also promotes the acquisition of voting instructions from depositary receipt holders, for example by organising a meeting of depositary receipt holders prior to ABNAMRO’s General Meetings. STAK AAB reports on its activities at least once a year in its annual report. In addition, further sell-downs of NLFI’s shareholding in ABNAMRO will take place through STAK AAB (and in the form of depositary receipts) only. By virtue of its trust conditions, STAK AAB must ensure that, no later than two weeks before a General Meeting of ABNAMRO is held, a meeting of depositary receipt holders is held at which the agenda items of that General Meeting are discussed. Accordingly, STAK AAB held meetings of depositary receipt holders before the Annual and Extraordinary General Meetings of ABNAMRO on 6 April 2021 and 9 November 2021 respectively. The STAK AAB website (stakaab.org) provides more information on the activities of STAK AAB, STAK AAB’s objectives, as well as its annual report, articles of association, trust conditions and any information relating tomeetings of depositary receipt holders. ABNAMRO and STAK AAB held two periodic meetings in 2021. The items discussed included the published financial results, the long-term strategy of ABNAMRO and the intended governance in the event of hostile bids and shareholder activism. Anti-takeover measures The Netherlands has traditionally embraced the use of defence measures to ensure long-term value creation for stakeholders. In large part, these measures involve the use of a Dutch foundation (stichting) that is granted special rights intended to prevent an unsolicited takeover or other hostile activity. This also applies to ABNAMRO. ABNAMRO has implemented a structure whereby the Dutch foundation 234 ABN AMRO Integrated Annual Report 2021 (stichting) STAK AAB is holder of shares in ABNAMRO’s issued share capital and has issued depositary receipts representing such shares with the cooperation of ABNAMRO. The purpose of having a structure under which depositary receipts are created and STAK AAB is the legal owner of the underlying shares is to create a defence measure and ensure long-term value creation for stakeholders. STAK AAB will do everything in its power to deter any action that could affect the independence, continuity or identity of ABNAMRO. In a non-hostile situation, STAK AAB will act primarily in the interests of depositary receipt holders. In a hostile situation, STAK AAB will act primarily in the interests of ABNAMRO and its business enterprises. Under all circumstances, STAK AAB will also take into account the legitimate interests of all other stakeholders: clients, debt investors, shareholders, depositary receipt holders, employees, and the society in which ABNAMRO operates. In a non-hostile situation, STAK AAB will grant a power of attorney to the depositary receipt holders to exercise the voting rights attached to the underlying shares. STAK AAB will not exercise voting rights on the shares, unless holders of depositary receipts have requested it to do so. This may be different under hostile circumstances as described in Section 2:118a of the Dutch Civil Code. In this case, STAK AAB may refuse or revoke powers of attorney for up to two years (whereby NLFI must pre-approve this decision by STAK AAB as long as NLFI holds at least 33 1/3% of the shares in ABNAMRO) and STAK AAB itself will exercise the voting rights. In doing so, it should, pursuant to the trust conditions and the articles of association of STAK AAB, focus primarily on ABNAMRO’s interests, taking into account the legitimate interests of the stakeholders mentioned above. Employee Council ABNAMRO’s employees are represented by works councils (ondernemingsraden) at all levels of its group in which specifically appointed delegates are centralised in the overarching Employee Council (Raad van Medewerkers). Under Dutch law, the managing board of any company running an enterprise in which 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 Executive Board and Supervisory Board on various other occasions throughout the year, including an annual joint meeting of the Executive Committee, the Supervisory Board and the Employee Council. The Employee Council and ABNAMRO have entered into an agreement under which the Employee Council has been granted certain additional rights (the Works Council Covenant). Under the Works Council Covenant, the Employee Council has the right of inquiry (enquêterecht) within the meaning of Section 2:346 of the Dutch Civil Code in the event of a hostile situation. The Works Council Covenant defines the following situations as hostile: (i) a public offer has been announced or is made in respect of shares in the capital of ABNAMRO (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 ABNAMRO, (ii) the exercise of the voting rights by a depositary receipt holder or shareholder would effectively be in conflict with the interests of ABNAMRO and its business, or (iii) any other situation in which the independence, continuity or identity of ABNAMRO and the enterprises associated with ABNAMRO could be harmed. Other situations can be qualified as hostile in an agreement between the Employee Council and ABNAMRO. Furthermore, if NLFI requests the consent, cooperation and/or a position statement of ABNAMRO in the event of a subsequent placement or a private sale of shares or depositary receipts, ABNAMRO will request advice from the Employee Council within the meaning of Articles 25 and 26 of the Works Councils Act (Wet op de ondernemingsraden). 235 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance General Meeting and shareholderstructure / Leadership & governance Remuneration report 236 ABN AMRO Integrated Annual Report 2021 Letter from the Chair of the Remuneration Committee Dear shareholder, We hereby present our remuneration report for the year 2021. In this letter, I would like to reflect briefly on some key topics and considerations for the Remuneration Committee in the past year. In 2021, we made progress in executing our strategy to be a personal bank in the digital age, serving clients where we have scale in the Netherlands and Northwest Europe. ABNAMRO aims to pursue a responsible remuneration policy within the regulatory boundaries and considering the interests of our stakeholders. As a value-driven organisation, our decisions and behaviour need to be in line with our purpose and strategy. Our remuneration policy should enable us to attract and retain the right talent and ensure that we meet our responsibilities to clients and other stakeholders, both now and in the future. We need well-trained, engaged and entrepreneurial employees with the right expertise, as well as flawless processes and technologies. We need to enable our employees to develop new skills by investing in employee development. We also need to be able to continue to create value for our stakeholders and society at large. We strive to embed new remuneration regulations effectively and efficiently in our reward policies and principles. Strategy execution As part of the simplification of our organisational structure, and to better serve our clients, the Executive Committee was changed into an extended Executive Board. We welcomed Choy van der Hooft-Cheong (CCO Wealth Management), Dan Dorner (CCO Corporate Banking) and Gerard Penning (Chief Human Resources Officer) as members of the Executive Board from 24 November 2021. We also announced Annerie Vreugdenhil as a candidate forthe position of CCO Personal & Business Banking, for which regulatory approval has been obtained. The Executive Committee ceased to exist from the same date. The former Executive Committee members Daphne de Kluis and Rutger van Nouhuijs resigned in 2021, and the employment contracts of Pieter van Mierlo and Frans van der Horst are due to end during 2022. In early 2022, Christian Bornfeld resigned as at 1 May 2022. In Q4 2021, as part of the implementation of the new structure, a reorganisation wasconducted at the level of the Extended Leadership Team (i.e. all direct reports to the Executive Board with managerial responsibility). All members of the Extended Leadership Team were appointed with effect from 1January 2022. Executive Board Remuneration Policy In 2022, with the new Executive Board members and the Extended Leadership Team having been installed, the focus will continue to be on strategy execution, also in the organisational layers below the Extended Leadership Team. In 2022, we will initiate internal and external stakeholder engagements on a proposal for adjusting our Executive Board Remuneration Policy, and more specifically the performance KPIs for Executive Board members, in order toachieve more alignment with our strategy and expected legislation. Negotiations of Collective Labour Agreement (‘CLA’) In the Netherlands, our Collective Labour Agreements (comprising the CLA employment conditions and the Social Plan) are applicable to the vast majority of the employees. The CLA employment conditions and the Social Plan both reached the end of their term on 1 January 2022. Following extensive negotiations with the unions, agreement was reached on CLA employment conditions for the period from 1 January 2022 to 1 July 2022, with a specific focus on arrangements for hybrid working, wellbeing and employability. The transportation arrangements were also updated to take into account hybrid working and our sustainability strategy. The Social Plan, which is a separate CLA, has been extended for a period of three years Settlement agreed with the Netherlands Public Prosecution Service (NPPS) April 2021 On 19 April 2021, it was announced that ABN AMRO had accepted a settlement offer from the NPPS relating to the previously announced investigation into the bank’s AML activities in the Netherlands over the period 2014-2020. Aspart of this settlement, we paid a fine of EUR 300 million and EUR 180 million as a disgorgement. ABN AMRO deeply regrets the situation and recognises the seriousness of thematter, in which we fell short in fulfilling our role asagatekeeper seeking to combat money laundering. Thesettlement was taken into account when deciding on the award of variable remuneration for 2021, as described inthe report below. Diversity & equal pay We aim to provide a working environment where everyone can be themselves and feel safe, regardless of their race, ethnicity, gender, religion, age, disability, sexual orientation, gender identity or gender expression. In 2021, we were given the first ever Diamond Award for cultural diversity by the ‘Talent to the Top Foundation’. This award recognises our broad-ranging efforts to promote diversity, including our programmes that support employees with different cultural backgrounds and offer jobs to refugees with residence permits. In 2022 we will introduce a pilot in which employees can swap two public holidays for two days off that are of significance to their religious or philosophical beliefs. 237 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance Remuneration report / Leadership & governance Equal pay for equal work is an important principle within ABN AMRO and progress in equal pay is continuously monitored. During the past few years, ABN AMRO has achieved good results on equal pay within the CLA population in the Netherlands. In 2021, preparations were made to adjust the remuneration methodology for the Dutch CLA+ employees (i.e. employees appointed at a joblevel that exceeds the CLA job levels) and to improve arrangements ensuring equal pay for equal work or work ofequal value. These changes were implemented with effect from 1 January 2022. Aside from paying equally for equal work or work of equal value, good progress has been achieved on diversity in appointments within our Dutch CLA+ population. The gender diversity of the Extended Leadership Team increased from 44% to 47% female employees as at 1 January 2022 as a result of the reorganisation at the level of the Extended Leadership Team. The Executive Board consisted of 33.33% female members until 24 November 2021. From that date, the Executive Board consisted of 28% female members and will increase to 37.5% female members upon appointment of Annerie Vreugdenhil. For most of 2021, the Supervisory Board consisted of 43% female members. The current composition of the Supervisory Board complies with the Act on Gender Balance in Management and Supervisory Boards (Wet Evenwichtiger verhouding tussen mannen en vrouwen inbestuur en raden van commissarissen), which came intoforce on 1 January 2022. As Covid-19 continues to affect the way we live and work, Iwould like to thank our staff for their ceaseless dedication to our clients. I am pleased to report that our employee engagement remains high at 82%. This was after another challenging year, in which our employees were once again challenged to combine their work and private lives. Iappreciate how challenging it can be to keep doing your job well in these circumstances. Although we continuously strive to support our colleagues in these difficult circumstances, we also realise that this period has demanded a lot from our employees. I would therefore like to thank all our employees most sincerely for their continuous efforts. Please allow me to emphasise how important it is to continue taking good care of yourselves and each other. On behalf of the Remuneration Committee of theSupervisory Board, Arjen Dorland Chair of the Remuneration Committee 238 ABN AMRO Integrated Annual Report 2021 Remuneration principles and policies General The only way to successfully execute our strategy is to create conditions in which all our employees can use their talents to contribute to our goals and to develop or acquire the right skills. We strive to achieve a future-proof workforce, with an excellent employee experience and leadership that inspires, alongside efficient organisational structures, processes and IT systems that help our employees work more effectively. ABNAMRO aims to be a bank at the heart of society that is relevant and responsible, now and in the future. Our purpose is clearly defined as ‘Banking for better, for generations to come’. Our strategy is based on our purpose and the three strategic pillars: H Customer experience; H Sustainability; H Future-proof bank. We want to create value for society, not only as a provider of financial services to our clients but also as an employer. Since ABN AMRO also publishes this Remuneration report separately from the IntegratedAnnual Report, we refer to theStrategy, value creation & performance chapter of the IntegratedAnnual Report for further context. Remuneration principles Customer experience Sustainability Future-proof bank NL and NW-EU market leader in our target client segments thatvalue expertise and relationships Our strategic pillars Our business model Banking for better, for generations to come Purpose & Strategy Reward philosophy Remuneration principles Compliant & Responsible Å Compliant with the boundaries of all applicable remuneration legislation andguidelines Å Respectful of our societal role and impact, our client’s interests and other stakeholders Fair & Transparent Å Clear remuneration policies and processes Å Principle of equal pay for equal work orworkof equal value Å Balanced total remuneration package inlinewith the relevant market Align Employee with ABN AMRO interests Å Clarity in how (individual) performance andremuneration are connected Å Balanced risk taking in line with ourmoderaterisk appetite Å Encourages personal development andvalues-led behaviour as integral partofperformance Our reward framework enables ABNAMRO to attract, motivate, develop and retain the right talent in a sustainable manner torealise ourbusiness strategy and purpose ABNAMRO has embedded its long-term corporate strategy in its remuneration policy and principles. Our remuneration principles are set out in ABNAMRO’s Global Reward Policy, which is designed to support the bank’s business and risk strategy, objectives, values and long-term interests. ABNAMRO’s Global Reward Policy and remuneration principles apply to all of our employees at all levels and in all countries of ABNAMRO’s international network (including branch offices) and underscore our goal of nurturing a culture of engaged, well-trained, knowledgeable and high- performing people and processes. The Supervisory Board approves the general remuneration principles laid down in the Global Reward Policy. The policy is reviewed regularly, taking into consideration the company’s strategy and culture (and any changes in these), as well as factors such as risk awareness, targets, corporate values and any updates due to laws and regulations. Composition of remuneration packages A typical remuneration package for ABNAMRO employees consists of an annual base salary, annual variable remuneration (if the relevant market practice so requires, mainly outside the Netherlands) and fringe benefits. Different ranges apply to the various salary scales in each country, but we always position our remuneration levels around the median of the relevant labour market, while keeping labour costs under control. ABNAMRO’s collective labour agreement (CLA) governs the remuneration packages for employees based in the Netherlands (including Identified Staff), unless they have been appointed to a CLA+ position. 239 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance Remuneration report / Leadership & governance Limitations on variable remuneration As a financial institution, ABNAMRO is subject to many guidelines and restrictions with respect to remuneration. Since 2015, additional limitations with respect to remuneration and particularly variable remuneration have applied to the Dutch financial sector, impacting all staff of ABNAMRO, with even more restrictions applying to financial institutions of which shares are held by the Dutch State. In alignment with the Act on the Remuneration Policy for Financial Undertakings (Wbfo), the variable compensation is capped at (an average of) 20% of base salary for those employed in the Netherlands. The maximum variable compensation percentage for employees working outside the Netherlands in another European Economic Area (‘EEA’) state is 100%; for employees working outside the EEA, more than 100% is allowed, with a maximum of 200% and subject to shareholder approval. As ABNAMRO has not requested shareholder approval to increase the maximum variable compensation percentage to 200%, a cap of 100% applies outside the Netherlands. Bonus prohibition As long as the Dutch State holds any interest in ABNAMRO, ABNAMRO is required to apply the bonus prohibition to a specific group of senior employees, as defined in the Wbfo. Senior employees in scope of the bonus prohibition are not allowed to be granted any variable remuneration or individual salary increases until the Dutch State no longer holds an interest in ABNAMRO (‘Bonus Prohibition’). Remuneration details of Identified Staff Staff whose professional activities could have a material impact on the bank’s risk profile are defined as Identified Staff. Within ABNAMRO, the group of Identified Staff consists of: H Members of the Executive Board or Supervisory Board; H Members of the Executive Committee, not being a member of the Executive Board (until 24 November 2021); H Members who hold a position at CLA+ level (including staff responsible for independent control functions); H Other risk takers. The definition of the group of other risk takers follows from their impact on the economic capital of ABNAMRO (EC threshold), membership of certain risk committees, having credit authority above a certain threshold or fulfilling specific roles; H Other employees whose total remuneration exceeds specific thresholds. All variable remuneration awards for Identified Staff are subject to and structured in accordance with the applicable Variable Compensation Plan. Before any variable remuneration is granted to Identified Staff, ABNAMRO applies an ex-ante risk assessment consisting of collective quantitative risk adjustment mechanisms (such as the solvency check) and a qualitative individual check (the gatekeeper). The gatekeeper procedure is 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 an advice to the Executive Board, which ultimately decides on whether variable compensation can indeed be granted to the Identified Staff member concerned. The Executive Board’s decision must be formally approved by the Supervisory Board, based on the advice of the Remuneration Committee. The variable remuneration is awarded over time and split between an up-front portion (60%) and a deferred portion (40%), with all portions divided equally between a cash and a non-cash instrument. Up-front variable remuneration is awarded in the first quarter of the year following the relevant performance year, while deferred variable remuneration vests in equal instalments in the years following the first payment. This remuneration vests only after an explicit ex-post risk assessment: the ‘malus assessment’. This assessment is performed by the Control functions and also results in an advice to the Executive Board, which decides whether a malus is applicable. The Executive Board’s decision must be formally approved by the Supervisory Board, based on the advice of the Remuneration Committee. Equal pay ABNAMRO aims to create an environment where staff can express their identity and where equal work or work of equal value is rewarded equally. Through its diversity and inclusion policy, ABNAMRO aims to be an organisation where people feel safe and welcome. Rewarding equal work equally is of fundamental importance and has ABNAMRO’s full attention. Internal research shows that, for several years in a row, and within the CLA population in the Netherlands, men and women in the same salary scale have – on average – been paid equally and have had the same opportunities for promotion. In the case of the CLA+ positions, however, salary differences between men and women have been identified. In 2021, therefore, a new equal pay methodology was prepared, and then implemented with effect from 1 January 2022. As preparation for this new methodology, the job grades in the CLA+ positions have been (or will shortly be) regraded and the midpoints of the salary scales have been benchmarked against the market. Going forward, discretionary salary increases are being replaced by pre-set salary increases linked to the position in the salary scale in 240 ABN AMRO Integrated Annual Report 2021 combination with the individual performance score, in line with market practice for these job grades. Performance management and KPI-setting General In line with the general trend toward less hierarchy and more teamwork, ABNAMRO wants to subject employees to fewer controls, empower them more, and offer them tools that will keep them well-equipped for their job and help them deal with the ever-changing environment. We are striving to make our staff’s work more meaningful, while at the same time ensuring their duties are aligned with all the bank’s current and future priorities. Our performance management aims to support our employees’ ambitions, to build expertise and knowledge and to seek alignment with our goals (including reskilling and upskilling), thus creating long-term value for all our stakeholders. We aim to use Performance Management as a driving force for a culture of performance and accountability, characterised by clear expectations, single-point accountability, honest and courageous dialogues and recognition for outstanding performance. Our performance management aims to create a clear link between performance (realistic, sustainable results) and reward in such a way that reward is aligned with both the employee’s and the bank’s performance. KPIs used are financial and non-financial, as well as qualitative and quantitative. Identified Staff For Identified Staff (CLA and CLA+) a specific KPI framework applies, linked to the strategy of ABN AMRO and approved by the Executive Board and Supervisory Board. For 2021, the group non-financial KPIs consisted of sustainability assets, while the group financial KPI was the CET1 ratio. The business line non-financial KPIs were gender diversity in the sub-top, net growth in strategic segments and rNPS, while the business line financial KPIs were cost level and segment ROE. At an individual level, objectives were set for results, behaviour and development. In the final performance scores, conveying the desired compliance and risk culture is taken into account at a business line and individual level. Executive Board The annual KPI framework is approved by the Supervisory Board. The performance criteria for Executive Board members are based on financial and non-financial measures at an organisation, business line and individual level, assetout in the Executive Board Remuneration Policy. Theperformance criteria and targets set reflect and contribute to key elements of the strategy of ABNAMRO and long-term value creation, especially Sustainability and House in Order. Annual targets are set for all KPIs. Theperformance of Executive Board members against these KPIs is continually monitored by the Supervisory Board. In consultation with all relevant departments within ABN AMRO, the Supervisory Board assesses Executive Board members’ performance against the KPIs and targets set. Regulatorydevelopmentsandbusiness events2021 Collective Labour Agreements ABNAMRO’s Dutch collective labour agreement applied until 1 January 2022. Negotiations on the collective labour agreement to apply from 1 January 2022 started during 2021. On 26 November 2021, a new CLA was agreed upon for the period from 1 January to 1 July 2022. Retention related to wind-down of non-European Corporate & Institutional Banking activities As announced on 12 August 2020, all non-European CIB client activities (except for Clearing) are currently being wound down. To mitigate the risk of staff leaving, and to ensure a compliant, controlled and client-focused wind- down, retention packages were awarded in 2020 to non- European CIB employees. The first payment of these retention awards was included in the remuneration report of 2020. The second payment of the retention awards, if applicable, was made in 2021 and is included in the remuneration report for the year. Settlement agreed with the Netherlands Public Prosecution Service April 2021 On 19 April 2021, ABNAMRO published details of its settlement with the NPPS. The fine and disgorgement pertaining to this settlement were explicitly considered when the award of variable remuneration for 2021 was being determined. Relevant regulatory developments The EBA Guidelines on Sound Remuneration Policies, applying from 31 December 2021, were published on 2 July 2021. The revised guidelines require institutions, inter alia, to apply sound and gender-neutral remuneration policies toall staff and to incorporate changes introduced by CRDV (which entered into force on 28 December 2020). On 21 April 2021, the European Commission also published its Implementing Regulation (EU) 2021/637. This requires institutions, from 28 June 2021, to disclose the information regarding their remuneration policy and practices required by Article 450 of Regulation (EU) No 575/2013 (i.e. Pillar 3 disclosure). On 19 October 2021, the Restrained Remuneration Policy Decree (Financial Supervision Act) 2021 (Regeling beheerst beloningsbeleid Wft 2021) replaced the Restrained Remuneration Policy Decree (Financial Supervision Act) 2017 (Regeling beheerst beloningsbeleid Wft 2017). This followed the entry into force of EU Directive 2019/2034 241 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance Remuneration report / Leadership & governance ofthe European Parliament and of the Council of 27November 2019 on the prudential supervision of investment firms, which applies solely to investment firms. On 27 October 2021, the European Commission adopted a review of EU banking rules. The new rules – comprising the Banking Package 2021, including proposed changes to the Capital Requirements Regulation (CRR) and the Capital Requirements Directive (CRD) –will ensure that EU banks become more resilient to potential future economic shocks, while also contributing to Europe’s recovery from the Covid-19 pandemic and the transition to climate neutrality. The proposed amendments in the CRD relate, inter alia, togender-neutral remuneration policies and the responsibilities of the Remuneration Committee in relation to senior staff in internal control functions. The Dutch Corporate Governance Code Monitoring Committee has provided further guidance on how to include information regarding the pay ratio in the remuneration report, starting from the financial year beginning on or after 1 January 2021. On 14 June 2021, the Regulatory Technical Standards for Identified Staff 2021 replaced the Regulatory Technical Standards for Identified Staff 2014, supplementing Directive 2013/36/EU of the European Parliament and of the Council, with regard to regulatory technical standards. These standards set out the criteria for defining managerial responsibility, control functions, material business units and a significant impact on a material business unit’s risk profile, and set out criteria for identifying staff members or categories of staff whose professional activities have an impact on the institution’s risk profile that is comparably as material as that of staff members or categories of staff referred to in Article 92(3) of that Directive. In the ex ante risk assessment in 2021, the impact of the award of variable remuneration on the total capital position of ABN AMRO was taken into account, as requested by theECB in its letter dated 15 December 2020. The Sustainable Finance Disclosure Regulation (SFDR) came into force on 10 March 2021. This focuses on the need for the remuneration policy applicable to staff, especially those involved in ABN AMRO’s investment products and services, to be consistent with the integration of sustainability risks. ABN AMRO is currently implementing this by taking a sustainability KPI into account when awarding variable remuneration. Forecast 2022 Legislation expected in2022 Environmental, social and governance (ESG) issues remain highly important for credit institutions. The ESG-related regulations, guidelines and other publications (such as the Taxonomy Regulation, SFDR, NFRD, CRD V, CRR II, EBA guidelines and reports, ECB guidance and reports and the European Commission’s proposals and delegated acts) include ESG disclosure requirements applying, inter alia, to remuneration policies. Some of those requirements entered into force in 2020 and during 2021, while others apply from 2022 onwards or even later. Proposals on new legislation in the Netherlands are also pending, but it is still unclear whether and when any amendments will take effect (Nadere beloningsregels financiële sector). On 21 January 2022, the EBA launched two consultations for updating (i) its Guidelines on the remuneration benchmarking exercise, and (ii) its Guidelines for collecting data on high earners. The above list of legislation and regulations is a non- exhaustive summary. Reference is also made to the Regulatory developments section in the Introduction chapter of the Integrated Annual Report 2021. If needed, ABN AMRO will adjust its remuneration policies to ensure compliance with applicable legislation and regulations. Shareholders’ approval will also be requested, when required. Executive Board Remuneration Policy In 2022, we will initiate internal and external stakeholder engagements on a proposal for adjusting our Executive Board Remuneration Policy, and more specifically the performance KPIs for Executive Board members, in order toachieve more alignment with our strategy and expected legislation on sustainability. Remuneration for allstaffandIdentifiedStaff Remuneration forall staff In general, the remuneration packages for all staff are structured in accordance with regulations and restrictions applying to the financial sector. A remuneration package for all staff may consist of the following components (depending on local market practice): H Fixedsalary; H Variableremuneration; H Pension contribution; H Benefits and other entitlements. For all staff based outside the Netherlands, ABNAMRO takes into account relevant business dynamics (e.g. market conditions, and local labour and tax legislation) when deciding on the composition of remuneration packages. Gender pay gap The gender pay gap is the difference in average gross salaries between men and women. ABN AMRO calculates the overall gender pay gap, as well as the gender pay gap corrected per salary scale, for its employees in the Netherlands. The gender pay gap corrected per salary scale 242 ABN AMRO Integrated Annual Report 2021 represents the average gross salary differences between men and women in the same salary scale. For ABN AMRO employees in the Netherlands, the gender pay gap corrected per salary scale amounts to 0.27% in favour of men. The overall gender pay gap (uncorrected per salary scale) in 2021 amounted to 14.7%. The overall gender pay gap is mainly caused by more men than women holding positions in the higher job grades. ABN AMRO will continue focusing on increasing gender diversity in the higher job levels so as to reduce the overall gender pay gap. The increased diversity in the appointments at ELT level is an example of this. Remuneration details of Identified Staff Variable remuneration awarded to Identified Staff is awarded in line with the terms and conditions of the Variable Compensation Plan, which imposes restrictions on variable remuneration. The variable remuneration is split into an upfront award of 60% and a deferred award of 40%. Deferred variable remuneration in the current Variable Remuneration Plan (applicable from December 2020) vests in equal instalments in the four years after the first payment. The instrument underlying the non-cash award consists of performance certificates. The value of the performance certificates depends on the share price of ABNAMRO and hence fluctuates in line with the market. The value of the performance certificates will be paid out in cash. A one-year retention period applies to the non-cash award. Variable remuneration awards related to the performance years 2016 to November 2020 (inclusive) vest in equal instalments in the three years after the first payment. The instrument underlying the non-cash award consists of Depositary Receipts (DRs). The value of the DRs depends on the development of the share price of ABNAMRO and can be paid out in cash or by releasing the original number of DRs to the employee. A two-year retention period applies to the non-cash award. Variable remuneration awards with respect to the performance years up to and including 2015 consisted of performance certificates as a non-cash instrument. The value of these performance certificates fluctuated in line with the net asset value of ABNAMRO. The final deferred pay-out of the value of performance certificates was made in March 2021. Malus assessment in 2021 The malus assessment is conducted by the Executive Board and Supervisory Board upon analysis and advice of the control functions Risk, Compliance and Audit, and also based on input from all other relevant ABNAMRO departments, including HR and Finance. The malus assessment includes determining whether any new information is available that prevents the vesting of deferred variable remuneration, such as: H evidence of misconduct or serious error by the staff member (e.g. breach of a code of conduct or other internal rules, especially concerning risks); H a significant downturn in the financial performance of the institution or business unit (based on specific indicators); H a significant failure of risk management in the institution or business unit in which the Identified Staff member works; H significant changes in the institution’s economic or regulatory capital base. In addition, the Supervisory Board has the discretionary power to reduce any variable remuneration to a suitable amount if, in its opinion, payment of such remuneration would be unacceptable under the principle of reasonableness and fairness. The Supervisory Board is also authorised to reclaim any variable remuneration for any performance period if the award, calculation or payment was based on incorrect data or if, in hindsight, the performance conditions were not achieved. The recipient will then be required to repay the relevant amount to the bank. Lastly, personal hedging or insurance linked to remuneration and liability and designed to circumvent the effects of the risk controls that have been embedded in thebank’s Variable Compensation Plan is not permitted. For the performance period 2021, the Supervisory Board decided that, based on the reassessment performed by the control functions, there was no reason to apply a collective malus with respect to the vesting of: H The first tranche of deferred variable compensation for the 2020 performance period; H The second tranche of deferred variable compensation for the 2019 performance period; H The third tranche of deferred variable compensation for the 2018 performance period. For performance period 2021, the Supervisory Board decided in three individual cases to apply a malus with respect to the vesting of any remaining deferred variable compensation for the 2018, 2019 and 2020 performance periods. As the staff members have left the bank and any entitlements to receive deferred variable remuneration havebeen forfeited, the malus has no further financial consequences. The other deferred variable compensation awards with respect to the above three performance periods will be granted to the relevant Identified Staff members in line with the terms and conditions of the Variable Compensation Plan. 243 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance Remuneration report / Leadership & governance Remuneration details of Identified Staff The following tables contain remuneration details of Identified Staff. The first table is the segregated overview of the number of Identified Staff and their aggregated remuneration (in thousands) per business line. 2021 2020 Number of FTEs (Identified Staff) 2 Aggregated remuneration (in thousands) Number of FTEs (Identified Staff) 2 Aggregated remuneration (in thousands) Retail Banking 33 8,516 28 8,673 Commercial Banking 38 9,395 39 9,339 Private Banking 30 9,414 34 12,570 Corporate & Institutional Banking 81 33,708 91 33,852 Group Functions 1 168 44,454 158 43,846 Total 350 105,487 350 108,280 1 Executive and Supervisory Board members are reported under Group Functions. 2 The number of FTEs includes all employees that were Identified Staff during the year (including leavers). The following two tables contain an overview of the number of employees with annual remuneration exceeding EUR 1 million per business line and organisational level (i.e.ExBo/ExCo, Executive Committee -1 and -2, and Other Identified Staff). The three employees mentioned in each table are the same three employees. Remuneration inmillions 2 (in FTE) 1-1.5 1.5-2 2-2.5 2.5-3 3-3.5 3.5-4 4-4.5 >4.5 Retail Banking Commercial Banking Private Banking Corporate & Institutional Banking 3 Group Functions 1 1 Executive and Supervisory Board members are reported under Group Functions. 2 Remuneration reflects the amounts paid in the financial year, in accordance with the EBA requirement, as opposed to the remuneration disclosures in the tables Remuneration of Executive Board and Supervisory Board, which represent the remuneration allocated to the financial year in accordance with EU IFRS. Remuneration inmillions 2 (in FTE) 1 1-1.5 1.5-2 2-2.5 2.5-3 3-3.5 3.5-4 4-4.5 >4.5 Executive Board / Executive Committee Executive Committee -1 and -2 above CLA Other Identified Staff 3 1 Identified staff only. 2 Remuneration reflects the amounts paid in the financial year, in accordance with the EBA requirement, as opposed to the remuneration disclosures in the tables Remuneration of Executive Board and Supervisory Board, which represent the remuneration allocated to the financial year in accordance with EU IFRS. Number of FTEs (identified staff) Aggregated remuneration (in thousands) SB, ExBo, ExCo, ExCo1 and ExCo2 Other identified staff Fixed remuneration over 2021 131 219 95,293 Variable remuneration over 2021 1 84 80 10,194 - of which in cash 5,097 - of which in non-cash instruments 5,097 - of which unconditional (up-front payment) 6,116 - of which conditional (deferred payment) 4,078 Retention payments over 2021 2 13 3,865 Sign-on payments over 2021 1 10 Severance payments over 2021 3 5 3 3,049 1 Due to their specific nature, certain variable compensation elements are paid out in cash and are not or only partially subject to deferral. 2 The highest severance pay amounted to EUR 903 thousand. 244 ABN AMRO Integrated Annual Report 2021 As at the end of 2021 the following non-cash awards were in place, reflecting the variable remuneration awards from 1January 2016 until 31 December 2021, and every depositary receipt representing its fair value in alignment with the Variable Compensation Plan. (In thousands of DRs) 2021 2020 Outstanding at 1 January 859 751 Granted during the year 313 361 Forfeited during the year 12 18 Paid out during the year cash 279 2 11 Paid out during the year DRs 27 24 Less: total paid out/forfeited -318 -253 Outstanding at 31 December 854 859 The award of performance-related variable remuneration is linked to the performance of the bank and the underlying business lines. As ABN AMRO’s financial results in 2021 improved significantly in comparison to its financial results in 2020, the overall award of performance-related variable remuneration increased. This increase was subsequently corrected for the settlement agreed with the NPPS. As the settlement was specifically related to our activities in the Netherlands, it was decided to apply a reduction of 25% to the award of variable remuneration for CLA+ employees on a Dutch employment contract and to the bonus pool for eligible employees in the Netherlands. As a result, the performance-related variable remuneration of all staff, including Identified Staff, increased from EUR 16 million in2020 to EUR 45 million in 2021. Total retention payments increased from EUR14million in 2020 to EUR33million in 2021, mainly due to the retention payments made in respect of the wind-down of certain non-European CIB activities. 2021 Performance indicators for Identified Staff Weighting Executive Board 5 Weighting Executive Committee Weighting above CLA identified staff Weighting CLA identified staff Organisation level KPIs 30-65% 30-45% 10-20% 10-15% Businessline level KPIs 0-35% 20-40% 35-50% 25-30% Individual KPI 1 35% 30-35% 40-45% 60% Total 100% 100% 100% 100% - of which financial 2, 4 20-30% 20-30% 15-30% 12-23% - of which non-financial 3, 4 70-80% 70-80% 70-85% 77-88% 1 Individual KPI: For employees above CLA, the individual KPI refers to the score on individually determined KPIs. 2 Financial KPIs include a selection of Return on Equity, CET1 ratio, Cost/income ratio, Cost ceiling, Cost level and Segment ROE. 3 Non-financial KPIs include a selection of Sustainability DJSI, Employee engagement, House in Order, NPS, Sustainability assets, Gender diversity sub-top and Net growth in strategic segments. 4 The mix and weighting of KPIs are tailored to specific function of the identified staff member. 5 The CEO only has KPIs on an individual and organisation level. Executive Board Executive Board Remuneration Policy The Supervisory Board is responsible for the execution of the Executive Board Remuneration Policy. In line with the policy, an increase of 1.4%inthe fixed salary was applied with effect from 1 July 2021 following the CLA for the banking sector. Executive Board Remuneration Policy -scenarioanalyses Scenario analyses are the analyses conducted by the Supervisory Board at the time the remuneration policy wasformulated and before determining the remuneration of individual Executive Board members. They show thepossible outcomes of the variable remuneration components and the way in which these affect the remuneration of the Executive Board members. TheSupervisory Board establishes whether the scenario analyses result in appropriate levels of remuneration, and whether measures are required to limit the remuneration. 245 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance Remuneration report / Leadership & governance As a matter of principle, the total target remuneration of the Executive Board members is below the median in the relevant benchmarking population. It was decided to continue of the previous remuneration policy with only some refinements to safeguard alignment with the new Shareholders Rights Directive. Moreover, considering that no variable remuneration is awarded and the remuneration restrictions that apply to ABNAMRO, the Supervisory Board is of the opinion that scenario analyses have resulted in the appropriate levels of remuneration and that further scenario analyses are less relevant. Contractual elements All members of the Executive Board have a services agreement (overeenkomst van opdracht) with ABNAMRO for an unlimited period of time which constitutes the contractual relationship between ABN AMRO and the Executive Board member. The Executive Board member may terminate the agreement subject to a notice period of three months, whereas ABN AMRO must observe a notice period of six months. Fixed remuneration ABNAMRO strives to position the overall level of direct compensation for Executive Committee members and positions at above-CLA level around the market median levels. In line with the Executive Board Remuneration policy, a 1.4% increase, following the CLA for the banking sector, was applied to the fixed remuneration with effect from 1 July 2021. From 1 January 2021 until 1 July 2021: H Membership of the Executive Board: EUR645,163 (EUR759,978 for the CEO) From 1 July 2021 until 1 January 2022: H Membership of the Executive Board: EUR654,195 (EUR770,618 for the CEO) Variable remuneration As long as the Dutch State holds shares in ABNAMRO, theExecutive Board members are not entitled to variable remuneration. As this continued to be the case in the 2021 performance year, the Executive Board did not receive any variable remuneration. Benefits The Chair and members of the Executive Board participate in ABNAMRO’s pension schemes applicable to all employees in the Netherlands. For pensionable salary up to the applicable threshold, which for 2021 amounted to EUR112,189, a collective defined contribution (CDC) pension scheme applies. The pension contribution is 37%, of which 5.5% is an employee contribution. In the event ofdeath or when the Executive Board member becomes eligible for the state old-age pension (AOW), the services agreement automatically terminates by operation of law. The intended pension accrual is 1.875%, based on a pension age of 68. In 2021, the pension accrual was 1.76%. For pensionable salary in excess of EUR112,189, employees receive an allowance that can be used to build up a net pension in a group defined contribution (DC) plan. The allowance amounted to 30% in 2021. In addition to pension benefits, Executive Board members are eligible for benefits such as a company car and a chauffeur. Severance The remuneration policy for Executive Board members provides for a severance payment up to a maximum of oneyear’s gross salary if their contract is terminated atABNAMRO’s initiative. The current Executive Board members all have the same contractual right to a severance payment equal to three months’ gross fixed salary. Noseverance was paid to Executive Board members in 2021. 246 ABN AMRO Integrated Annual Report 2021 2021 Remuneration for the individual Executive Boardmembers In 2021, other short-term benefits andthe compensation for lease car expenseswere included in the table Remuneration for the individual Executive Board members. The comparative figures have been adjusted accordingly. 2021 Base salary Compensation for lease car expenses Benefits from mortgage interest rate Variable remuneration 12 Total pension-related contributions 13 Severance payments Other short-term benefits Total (In thousands) Post- employment pension (a) Short-term allowances (b) R.A.J. Swaak 1,2 765 31 196 992 C.M. Bornfeld 1,3 650 31 161 162 1,004 C.J. Abrahams 1,4 108 5 27 20 159 T.J.A.M. Cuppen 1,5 650 34 31 161 876 D. Dorner 1,6 67 1 3 17 3 90 C. van der Hooft - Cheong 1,7 67 2 1 3 17 89 L. Kramer 1,8 381 6 18 95 59 558 G.R. Penning 1,9 67 3 17 87 A. Roest 1,10 161 5 6 8 40 220 Total 2,915 47 7 133 730 244 4,075 2020 R.A.J. Swaak 1,2 527 21 153 701 C. van Dijkhuizen 1,11 633 25 184 190 1,032 C.J. Abrahams 1,4 645 30 182 99 956 C.M. Bornfeld 1,3 645 30 182 156 1,013 T.J.A.M. Cuppen 1,5 645 34 30 182 891 Total 3,095 34 136 883 190 255 4,593 1 The total short-term benefits consist of base salary, compensation for lease car expenses, mortgage interest rate benefit, variable remuneration and other short-term benefits. Other short-term benefits consists of flight tickets, a housing allowance and international schooling costs for ExBo members’ children when applicable. 2 Total short-term benefits for R.A.J. Swaak amounted to EUR 765 thousand in 2021 (2020: EUR 527 thousand). R.A.J. Swaak was appointed with effect from 22 April 2020. 3 Total short-term benefits for C.M. Bornfeld amounted to EUR 812 thousand in 2021 (2020: EUR 801 thousand). 4 Total short-term benefits for C.J. Abrahams amounted to EUR 128 thousand in 2021 (2020: EUR 744 thousand). C.J. Abrahams left ABN AMRO on 1 March 2021. 5 Total short-term benefits for T.J.A.M. Cuppen amounted to EUR 684 thousand in 2021 (2020: EUR 679 thousand). 6 Total short-term benefits for D. Dorner amounted to EUR 70 thousand in 2021. D. Dorner was appointed with effect from 24 November 2021. 7 Total short-term benefits for C. van der Hooft-Cheong amounted to EUR 69 thousand in 2021. C. van der Hooft-Cheong was appointed with effect from 24 November 2021. 8 Total short-term benefits for L. Kramer amounted to EUR 446 thousand in 2021. L. Kramer was appointed with effect from 1 June 2021. 9 Total short-term benefits for G. Penning amounted to EUR 67 thousand in 2021. G. Penning was appointed with effect from 24 November 2021. 10 Total short-term benefits for A. Roest amounted to EUR 172 thousand in 2021. The components for A. Roest relate to her interim ExBo appointment from 1 March 2021 until 1 June 2021. 11 The Executive Board membership of C. van Dijkhuizen ended on 22 April 2020. The services agreement of C. van Dijkhuizen ended on 31 October 2020. 12 Owing to the Bonus Prohibition Act, the Executive Board members are not entitled to receive variable compensation. This prohibition has applied since the 2011 performance. 13 The Executive Board members participate in ABN AMRO Bank’s pension plans for employees in the Netherlands. Total pension-related contributions refer to (a) the employer contribution to thepension fund (for the CDC pension scheme for pensionable income up to EUR 112,189 (2020: EUR 110,111) and (b) the arrangement in accordance with the ABN AMRO Collective Labour Agreement (‘ABN AMRO CAO’). 2021 Loans from ABNAMRO to Executive Board members 2021 2020 (In thousands) Outstanding 31 December Redemptions Interest rate Outstanding 31 December Redemptions Interest rate D. Dorner 1 484 1.4% C. van der Hooft - Cheong 2 1,591 1.5% G.R. Penning 3 265 0.7% A. Roest 4 3,158 1.8% 1 D. Dorner was appointed with effect from 24 November 2021. 2 C. van der Hooft-Cheong was appointed with effect from 24 November 2021. 3 G. Penning was appointed with effect from 24 November 2021. 4 A. Roest was an interim ExBo member from 1 March 2021 until 1 June 2021. 247 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance Remuneration report / Leadership & governance Development of annual remuneration of ExecutiveBoardmembers The following table shows the annual development in the remuneration of Executive Board members. The table shows how changes in annual remuneration relate to the previous year, to the bank’s performance and to developments in the average employee remuneration (excluding social security charges). For a like-for-like comparison, the average employee remuneration is excluding social security charges. The column ‘Absolute change’ shows the difference in the indicator over two periods in time, while the column ‘Relative’ shows the increase or decrease as a percentage. In 2021, other short-term benefits were included in thedisclosure of total Executive Board remuneration. Thecomparative figures have been adjusted accordingly. 2016 - 2017 2017 - 2018 2018 - 2019 2019 - 2020 2020 - 2021 Reporting year (in thousands) Function Absolute Relative Absolute Relative Absolute Relative Absolute Relative Absolute Relative 2021 ExBo R.A.J. Swaak 1 CEO 701 n/a 291 n/a 992 C.M. Bornfeld 2,3 CI&TO 825 n/a 218 n/a -30 -3% -9 -1% 1,004 C.J. Abrahams 3,4 CFO 316 n/a 630 n/a 11 1% -1 0% -797 n.a. 159 T.J.A.M. Cuppen 3,5 CRO 216 n/a 643 n/a 26 3% 7 1% -15 -2% 876 D. Dorner 6 CCO 90 n/a 90 C. van der Hooft - Cheong 7 CCO 89 n/a 89 L. Kramer 8 CFO 558 n/a 558 G. Penning 9 CHRO 87 n/a 87 A. Roest 10 CFO 220 n/a 220 Company performance Profit 715 34% -441 -16% -304 -13% -2,091 -102% 1,279 n.a. 1,234 Cost/Income ratio -5.8% -9% -1.3% -2% 2.4% 4% 5.2% 8% 10.0% 15% 76.4% Return on Equity 2.7% 23% -3.1% -21% -1.4% -12% -108.0% -108% 6.7% n.a. 5.8% Average employee remuneration 3 3% 3 3% 3 3% -5 -5% 4 4% 103 1 R.A.J. Swaak joined the Executive Board on 22 April 2020. 2 C.M. Bornfeld joined the Executive Board on 1 March 2018. 3 In 2021, other short-term benefits were included in the disclosure of total remuneration of ExBo. The comparative figures have been adjusted accordingly. 4 C.J. Abrahams joined the Executive Board on 1 September 2017 and left ABN AMRO on 1 March 2021. 5 T.J.A.M. Cuppen joined the Executive Board on 1 October 2017. 6 D. Dorner joined the Executive Board on 24 November 2021. 7 C. van der Hooft-Cheong joined the Executive Board on 24 November 2021. 8 L. Kramer joined the Executive Board on 1 June 2021. 9 G. Penning joined the Executive Board on 24 November 2021. 10 A. Roest was appointed as an interim CFO in the Executive Board from 1 March 2021 until 1 June 2021. The 5-year development in the annualised base salary of the CEO and other board positions is visualised below. Due to the bonus prohibition, the salary of the Executive Board has only been increased by the collective salary increase in the CLA for the banking sector. 2017 2018 2019 2020 2021 1,000 800 600 400 200 5-year annualised average base salary – Executive Board (in thousands) CEO Other board members Pay ratio The pay ratio is the comparison between the total annual remuneration of the CEO and the average salary of all employees. In line with our overall remuneration philosophy, we strive for a moderate pay ratio. The salary of our CEO does not fluctuate as it has been set in line with the Executive Board Remuneration Policy and does not contain any variable elements. The ratio of the mean annual employee remuneration and the total annual remuneration of the CEO has been calculated in line with the guidance from the Corporate Governance Code Monitoring Committee, whereby temporary agency workers and external contractors have been excluded. The ratio was 8.78 in 2021. The ratio represents the CEO’s total remuneration, including pension costs and social security charges, divided by the mean employee remuneration including pension costs and social 248 ABN AMRO Integrated Annual Report 2021 security charges during 2021. This ratio is considered to be a fair reflection of ABN AMRO’s current position. The ratios published in 2016, 2017, 2018, 2019 and 2020 were 11.4, 10, 9.6, 9.6 and 10.2 respectively. In line with the Guidance from the Corporate Governance Code Monitoring Committee for 2021, the social security charges have been taken into consideration, whereas these charges were not taken into consideration in previous years. Without social security charges, the pay ratio in 2021 would have been 9.62. The pay ratio within ABN AMRO is substantially lower than in other AEX and AMX companies. 2021Performance of the Executive Board The performance targets for 2021 were set by the Executive Board and approved by the Supervisory Board. The non-financial KPIs Sustainability and House in Order arespecifically focused on the long-term strategy of ABNAMRO. The KPI Sustainability, its targets and measures are linked to the Dow Jones Sustainability Index (DJSI). The KPI House in Order means actively conveying the desired compliance and risk culture, effective risk management and solution management. The KPI Employee Engagement, its targets and measures are linked to the results obtained in the respective annual employee engagement survey and focused on both the short- and long-term achievements. Allfinancial KPIs are focused on long-term profitable growth, a healthy balance of capital andthe need to control our costs in order to be sustainable. The Supervisory Board has assessed the performance of each Executive Board member, based on the performance targets, and has concluded that all members of the Executive Board had a good overall performance in 2021. The scores are within a 1-5 bandwidth, whereby a 3 score is defined as ‘meets requirements’. The 2-score for sustainability is related to our target to reach the top 10% of the Dow Jones Sustainability Index, which target was not achieved. Other scores were equal to ‘meets requirements’ or ‘exceeds requirements’.The performance outcome is based on a set of financial and non-financial performance indicators, at organisation, business line and individual levels, as set out in the following table and as also described above. The score in the following table represents the score on the respective KPI. Different weights per KPI apply for each Executive Board member, depending on their role. Score 1-5 Type KPI Score 2021 2 Organisation Financial ROE 5 CET1 ratio 4 Cost/income ratio 3 Non-financial Sustainability 2 Employee engagement 3 House in order 3 Business line Financial Cost ceiling 4 Cost/income ratio 3 Non-financial Employee engagement 3 House in order 4 NPS 3 Individual Financial n/a Non-financial 1 4 1 The score is the average of the absolute scores for all four KPIs for all ExBo members. 2 The scores are the average of the absolute scores of all ExBo members. SupervisoryBoard Supervisory Board Remuneration Policy The remuneration of the Supervisory Board is set in line with the Supervisory Board Remuneration Policy. In line with this policy, a 1.5% indexation of the annual fees was applied as at 1 January 2021, as well as an increase of 1.4% with effect from 1 July 2021, following the CLA for the banking sector. Fixed remuneration The annual fees for 2021 were as follows: From 1 January 2021 until 1 July 2021: H Membership of the Supervisory Board: EUR52,780(EUR68,614for the Chair) H Membership of a Committee: EUR13,195(EUR15,834for the Chair) From 1 July 2021 until 1 January 2022: H Membership of the Supervisory Board:EUR53,519(EUR69,575for the Chair) H Membership of a Committee: EUR13,380(EUR16,056for the Chair) The remuneration for Supervisory Board committee membership is limited to two committee memberships. ABNAMRO does not grant any variable remuneration or equity to Supervisory Board members. Supervisory Board members are appointed by the General Meeting upon nomination by the Supervisory Board. The initial appointment period is four years unless a shorter period isset at the time of appointment. Supervisory Board members can be reappointed. Details of the remuneration of the individual members of the Supervisory Board are provided in Note 36 and Note 38 to the Consolidated Annual Financial Statements. 249 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance Remuneration report / Leadership & governance 2021Remuneration for the individual Supervisory Board members (In thousands) 2021 3 2020 3 T. de Swaan 98 96 A.C. Dorland 82 81 L.J. Griffith 80 78 M.P. Lap 80 78 J.B.J. Stegmann 1 72 81 A.M. Storåkers 80 78 M.L. Tannemaat 2 80 4 J.S.T. Tiemstra 82 81 Total 654 577 1 J.B.J. Stegmann stepped down as a member of the Supervisory Board with effect from 14 November 2021. 2 M.L. Tannemaat was appointed as a member of the Supervisory Board with effect from 15 December 2020. 3 Remuneration amounts excluding VAT. 2017 2018 2019 2020 2021 75 60 45 30 15 5-year annualised average base salary – Supervisory Board (in thousands) Chair SB Member SB Audit/Risk & Capital Committee Remuneration Committee/Nomination Committee 2021Loans from ABNAMRO to Supervisory Board members 2021 2020 (In thousands) Outstanding 31 December Redemptions Interest rate Outstanding 31 December Redemptions Interest rate T. de Swaan 1,591 6 1.0% 1,597 1.0% L.J. Griffith 339 89 1.8% 428 94 1.8% M.L. Tannemaat 1 772 1.7% J.B.J. Stegmann 2 500 0.1% 1 M.L. Tannemaat was appointed as a member of the Supervisory Board with effect from 15 December 2020. 2 J.B.J. Stegmann stepped down as a member of the Supervisory Board with effect from 14 November 2021. 250 ABN AMRO Integrated Annual Report 2021 Stakeholder views Annual General Meeting 2020 The Annual General Meeting in 2020 was an opportunity for all shareholders and depositary receipt holders to express their views on our remuneration policy for the Executive Board and Supervisory Board. The remuneration policies for the Executive Board and Supervisory Board were adopted, with 99.56% and 99.51%, respectively, of the votes cast. These new remuneration policies apply as of 1 January 2020 for a period of four years. The Remuneration Committee may ask the general meeting to adopt an amendment at an earlier date if this is considered appropriate. During the Annual General Meeting of 21 April 2021, the 2020 remuneration report was put to an advisory vote, with 99.59% of the votes cast being in favour of a positive advice. ABNAMRO was pleased to note the positive advisory vote. Works Council meetings in 2021 In 2021, several requests for advice were submitted to the Works Council, including requests on the reorganisation of the Extended Leadership Team, the equal pay requirements for CLA+ employees and various other topics. The adjusted remuneration methodology for Dutch CLA+ employees – to improve on equal pay for equal work or work of equal value – was discussed with the Works Council, which issued a positive advice on implementation. The Works Council has given consent for equal pay requirements to be implemented in the CLA+ employmentconditions. 251 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance Remuneration report / Leadership & governance Other governance information 252 ABN AMRO Integrated Annual Report 2021 ABNAMRO is required to comply with a wide variety of governance codes and regulations, including the Dutch Corporate Governance Code, the Banking Code and CRD V. This section explains how ABNAMRO complies with these codes and regulations. More comprehensive overviews of ABNAMRO’s compliance with such codes and regulations are published under the Governance Codes and regulations section onabnamro.com. Dutch Corporate Governance Code We believe that when corporate governance meets high international standards, it significantly boosts the confidence of a company’s stakeholders. Since depositary receipts for shares in ABNAMRO are listed on Euronext Amsterdam, ABNAMRO adheres to the Dutch Corporate Governance Code. General compliance and explanations ABNAMRO complies with all principles and best practices of the Dutch Corporate Governance Code, except for the deviations and nuances described below. Under the Dutch Corporate Governance section on its website, ABNAMRO also publishes a detailed comply orexplain list with regard to the adherence to the Dutch Corporate Governance Code. Best practice provision 1.3.6 (Absence of an internal audit department) does not apply since there is a separate department for the internal audit function within ABNAMRO. ABNAMRO applies best practice provision 2.1.9 (Independence of the Chair of the Supervisory Board), which states that the Chair of the Supervisory Board should not be a former member of the management board of the company. Although Mr Tom de Swaan was a member of the management board of the former ABNAMRO, the current ABNAMRO is the result of various legal and operational separations and combinations, a merger and a legal demerger that took place after the acquisition of the former ABNAMRO Holding N.V. (the former ABNAMRO Group) bya consortium of banks inOctober2007. Theconsortium consisted of the Royal Bank of Scotland Group, Fortis and Banco Santander S.A (the Consortium). InOctober2008, when the Fortis group experienced financial difficulties, the Dutch State acquired certain operations of the Fortis group, as well as Fortis’ interest in the vehicle that had acquired the former ABNAMRO group. ABNAMRO Group N.V. (ABNAMRO Group) was newly incorporated on 18December2009 to hold the operations, assets and liabilities of parts of the former ABNAMRO group and the part of the Fortis group acquired by the Dutch State. On 6 February 2010, the new and current ABNAMRO demerged from the former ABNAMRO Bank N.V. into a newly incorporated entity. The former ABNAMRO Bank N.V. wassubsequently renamed Royal Bank of Scotland N.V. On1July2010, the new ABNAMRO Bank and Fortis Bank (Nederland) N.V. merged pursuant to a legal merger, following which the current ABNAMRO was the surviving entity and Fortis Bank (Nederland) N.V. was the disappearing entity. ABNAMRO Group was merged into ABNAMRO on 29June2019. The former ABNAMRO Group and ABNAMRO are different entities than the former ABNAMRO Holding N.V. or former ABNAMRO Bank N.V. ABNAMRO applies best practice provision 4.1.3 (Agenda), which states, among other things, that (a) each substantial change in the corporate governance structure of ABNAMRO and in the compliance with the Dutch Corporate Governance Code and (b)material changes in the Articles of Association should be presented to the General Meeting as a separate discussion item or voting item, as applicable. The only exception to thisbest practice provision is that the Executive Board and the Supervisory Board may decide toplace certain topics on the agenda under one agenda item if these topics are justifiably related. ABNAMRO considers this to be a furthersubstantiation of this best practice provision, which may benecessary when proposals to amend the Articles ofAssociation or the corporate governance structure of ABNAMRO are interrelated in sucha way that separate votes on each of these proposals could result in an imbalanced voting result and, in turn, animbalance in thecorporate governance structure. Best practice provision 4.3.3 (Cancelling the binding natureof a nomination or dismissal) is not applicable toABNAMRO since it applies the rules applicable toalargecompany regime (structuurregime). Best practice provision 4.3.4 (Voting right on financing preference shares) is not applicable to ABNAMRO since ABNAMRO has not issued financing preference shares. ABNAMRO does not apply principle 4.4 (Issuing depositary receipts for shares). In contradiction to this principle and provision, the issuing of depositary receipts by STAK AAB isprimarily used as a defence measure and not to prevent shareholder absenteeism from enabling a minority of shareholders to control the decision-making process at aGeneral Meeting. Regulatory considerations have been decisive in choosing a structure with depositary receipts asa protective measure. Declarations of No Objection are required in connection with the direct or indirect acquisition of a qualified holding in regulated entities in which Codes and regulations 253 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance Codes and regulations / Other governance information / Leadership & governance ABNAMRO holds an interest. Therefore, this structure provides ABNAMRO with the greatest possible certainty of adequate protection against a hostile takeover. Although the issuing of depositary receipts has been set up primarily as a defence measure and not to prevent absenteeism, STAK AAB aims to promote the exchange of information between ABNAMRO on the one hand and holders of depositary receipts and shareholders on the other by, for example, organising a meeting of depositary receipt holders before every General Meeting. More information on the purpose and functioning of the depositary receipts and STAK AAB, including information onsituations in which STAK AAB may decide to limit, refuse or revoke powers of attorney (and to not observe any voting instructions received), can be found on the STAK AAB website (stakaab.org). Compliance with best practice provisions 4.4.1 - 4.4.5 and 4.4.7 - 4.4.8 is a responsibility of the board of STAK AAB. With respect to best practice provisions 4.4.5 and 4.4.8, the following applies. In a non-hostile situation, STAK AAB will act primarily in the interests of depositary receipt holders. In a hostile situation, STAK AAB will act primarily in the interests of ABNAMRO and its business enterprises. Under all circumstances, STAK AAB will also take into account the legitimate interests of all other stakeholders: clients, savers and deposit holders, shareholders, depositary receipt holders, employees, and the society in which ABNAMRO operates. Furthermore, STAK AAB in principle 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 ABNAMRO (unless depositary receipt holders have requested STAK AAB to do so). The foregoing could be different in the hostile situations described in Article 2:118a of the Dutch Civil Code. STAK AAB may then decide to (a) limit, exclude or revoke powers of attorney, and (b) not observe voting instructions received for a period of up to two years. Furthermore, under the depositary receipt terms, when exercising the voting rights in a hostile situation, STAK AAB should focus primarily on the interests of ABNAMRO and its business enterprises as set out above. Principle 5.1 and best practice provisions 5.1.1 - 5.1.5 are not applicable since ABNAMRO has a two-tier board instead of a one-tier board that these best practice provisions relate to. How ABNAMRO complies with the best practice provisions for long-term value creation, culture anddiversity In this section we explain how ABNAMRO complies with the best practice provisions for long-term value creation (best practice provisions 1.1.3 and 1.1.4), diversity (best practice provisions 2.1.1 and 2.1.6) and culture (best practice provision 2.5.4). Long-term value creation Strategy to achieve short- and long-term value creation Please refer to the chapter Strategy, value creation & performance in this report for a detailed explanation of the Executive Board’s view on long-term value creation and the strategy for achieving it, as well as for a description of the contributions made to long-term value creation during 2021. Reference is also made to the appendix in this report for a detailed overview of the value-creating topics. In line with best practice provision 1.1.3 of the Dutch Corporate Governance Code, ABNAMRO’s Supervisory Board (i) supervises the manner in which the Executive Board implements the long-term value creation strategy, and (ii) regularly discusses the strategy, its implementation and the principles associated with it. This role of the Supervisory Board is incorporated in the Supervisory Board Rules of Procedure: H The Supervisory Board discusses, monitors and constructively challenges the Executive Board with respect to the group’s strategy, including the long-term value creation strategy, and the values that contribute to a culture focused on long-term value creation. H At least once every calendar year, the Supervisory Board discusses the long-term value creation strategy and its implementation. The Supervisory Board also assesses the actual outcome of the strategy and objectives formulated in the preceding period(s). H The Executive Board discusses the progress and realisation of the long-term strategy with the Supervisory Board on a quarterly basis. H The exercise of all powers and duties by the Executive Board and the cooperation with the Supervisory Board focus on ensuring long-term value creation by the group and on building and maintaining the culture required for that purpose, taking into account stakeholder interests and applicable legislation and regulations. Please refer to the Supervisory Board report for more information on theSupervisory Board’s involvement in establishing the strategy and the way in which it monitors its implementation. Diversity Supervisory Board profile In line with best practice provision 2.1.1 of the Dutch Corporate Governance Code, the Supervisory Board has drawn up a profile of its scope and composition, taking into account the nature and activities of ABNAMRO. The current collective profile is set out in Annex 3 of the Rules of Procedure of the Supervisory Board, which are published on ABNAMRO’s website. For more information we refer to the Supervisory Board composition chapter in this report. 254 ABN AMRO Integrated Annual Report 2021 In line with best practice provision 2.1.5 of the Dutch Corporate Governance Code, ABNAMRO has drawn up adiversity policy for the composition of the Supervisory Board and Executive Board. This is part of the ABNAMRO Suitability Policy. Please refer to the Leadership and governance structure chapter in this report for details on gender diversity within ABNAMRO’s management bodies. Diversity & Inclusion Policy ABNAMRO is committed to diversity and inclusion, including promoting equal treatment of and equal opportunities for employees, preventing harassment, ensuring non-discrimination and ensuring compliance with national and local labour and employment laws. A summary of ABNAMRO’s Diversity & Inclusion Policy is published on ABNAMRO’s website. The objective of ABNAMRO’s Diversity & Inclusion Policy is to create a diverse and inclusive workforce and to recognise the human rights and equal opportunities of all the bank’s employees. To achieve this objective, all ABNAMRO employees, regardless of their position, must adhere to the following principles: H displaying respect for every individual; H drawing strength from equal opportunities and a diverse and inclusive workforce, while supporting personal growth and development; H recognising the value and benefiting from the uniqueness of every individual; H displaying respect for the human rights of ABNAMRO’s employees. Diversity targets,initiatives and achievements Please refer to the Strategy, value creation & performance chapter of this report for detailed information on diversity targets,initiatives and achievements. ABNAMRO’s results are monitored internally and externally by, for example, the SER (Talent to the Top) and Equileap. This year, ABNAMRO received a Diamond Award from Talent to the Top for its achievements in cultural diversity. We also came third in Equileap’s annual ranking of the 100 best-performing Dutch companies in terms of gender equality, making ABNAMRO the top financial institution in this respect in the Netherlands. Internally, our efforts were rewarded with a higher overall score in our Employee Engagement Survey. Culture Our culture and core values Please refer to the chapter Introduction - Our bank for a description of our culture and core values. Bringing our values to life Please refer to the Strategy, value creation & performance chapter for details on how ABNAMRO brings our values to life. Culture and long-term value creation As a value-driven organisation, our decisions and behaviour need to be in line with our purpose and strategy. At ABNAMRO, we are fully committed to our moderate risk profile and our role as a gatekeeper of the financial system, which is why culture and our licence to operate are clear priorities for us. We place great value on fostering a culture within ABNAMRO in which everyone feels respected and valued. Taking ownership, setting clear targets and being accountable are key to strategy execution and our licence to operate. Our culture reflects our purpose. Over the last couple of years, we have started to work on various projects, including projects that define value-creating topics (as described under long-term value creation above), our group of stakeholders and our value creation strategy so as to increase awareness, and to foster and embed the integrated thinking culture in the organisation and the leadership teams. In our decision-making process, the ‘value-creating topic ambassadors’ are those who close the loop by embedding, monitoring and reporting on the progress of that specific value-creating topic. Leadership and culture are inextricably connected. The Executive Board – our most senior leadership body – and the Extended Leadership Team set the tone, the example and the standards that we expect of everyone. Dilemma reconciliation is a module in our executive leadership programme and aims to build the competency of reconciling seemingly conflicting interests of stakeholders or of timing (longer-term versus shorter-term imperatives). Where norms, rules or standards are insufficiently clear or pose a dilemma, ABNAMRO invests in moral learning and moral decision-making. Our Ethics Committee, chaired by the CEO, discusses ethical dilemmas on a strategic level todetermine ABNAMRO’s moral position in areas where regulations or policies do not provide clear guidance. Throughout the organisation, moral position sessions, dilemma dialogues and speak-up cafes are being used to help improve ethical decision-making skills and help determine what is right, taking into account the rights and interests of all stakeholders. ABNAMRO has strengthened the approachability and awareness of the various speak-up channels, ranging from speak-up ambassadors in the workplace to trusted persons and the whistleblowing hotline, in order to lower the threshold for speaking up, giving voice to values and signalling risks or possible issues. 255 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance Codes and regulations / Other governance information / Leadership & governance Dutch Banking Code The Dutch Banking Code sets out principles that banks with a corporate seat in the Netherlands (i.e. with a Dutch banking licence) should observe in terms of corporate governance, risk management, audit and remuneration. The Dutch Banking Code applies to ABNAMRO as the main entity within a group that holds a Dutch banking licence. ABNAMRO is therefore committed to complying with the Dutch Banking Code and devotes a great deal of effort to ensuring that the spirit of the code is reflected in the behaviour of its employees and the culture of the bank. As such, we are pleased to confirm that ABNAMRO complies with the principles of the Dutch Banking Code. A principle- by-principle overview of the manner in which ABNAMRO complied with the Dutch Banking Code during 2021 is published on abnamro.com. Throughout 2021, 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. In particular, the bank devoted a great deal of attention to certain strategic differentiators, such as Responsible investment and financing, Diversity & equal opportunity and Customer experience, in order to achieve the goals of the Banking Code’sSocial Charter. Increased efforts were also put into implementing the strategic pillars, including implementing the new organisational structure, which is aimed at simplifying the organisation and improving our efficiency. During 2021, further improvements were made to the process of succession planning, permanent education and self-assessments performed at board level. All members of the Supervisory Board and Executive Board of ABNAMRO have taken the Banker’s Oath, as required by Dutch law. The oath is a confirmation of ABNAMRO’s existing policies, which are fully in line with the bank’s cultural principles and core values. As well as introducing a Social Charter and the Banking Code, the Dutch banking industry has taken the initiative to have all employees take the Banker’s Oath. Employees take the oath to affirm their commitment to upholding high standards of ethical behaviour. They are personally responsible for complying with the Code of Conduct and may be held accountable for non-compliance. Subsidiaries of ABNAMRO and the Dutch BankingCode On 31 December 2020, ABNAMRO had four Dutch subsidiaries with a banking licence: ABNAMRO Clearing Bank N.V., ABNAMRO Groenbank B.V., ABNAMRO Hypotheken Groep B.V. and International Card Services B.V. ABNAMRO applies the principles of the Dutch Banking Code to all these Dutch subsidiaries on a consolidated basis by developing group-wide policies and standards that promote compliance with internal and external rules and best-practice provisions. In view, however, of the differences in the activities, organisation and risk management of the subsidiaries, the application of group- wide policies and standards may vary from one subsidiary to another. An explanation of the manner in which these subsidiaries comply with the Dutch Banking Code is published on abnamro.com. CRD V Article 96 of CRD V requires financial institutions to explain on their website how they comply with the requirements of Articles 88 - 95 of CRD V. These articles set out governance, disclosure, remuneration, nomination and management body 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). ABNAMRO has published an overview of how the bank complies with Article 134b of the Prudential Measures Decree and Article 96 of CRD V on abnamro.com. 256 ABN AMRO Integrated Annual Report 2021 Global structure The complete list of subsidiaries and participating interests as at 31 December 2021 referred to in Article 414, Book 2, of the Dutch Civil Code has been filed with the Trade Register. Retail Banking The Retail Banking business of ABNAMRO is supported by the following subsidiaries (this list is not exhaustive): ABNAMRO Hypotheken Groep B.V. offers all ABNAMRO’s labelled residential mortgage products, including the Florius brands. ALFAM Holding N.V. provides consumer loans under various labels, including Alpha Credit Nederland, Credivance, Defam, Moneyou and ABNAMRO. International Card Services B.V. (ICS) stands for secure payment services and issues, promotes, manages and processes more than 25 different credit cards in partnership with other companies. ICS is market leader in the Netherlands, with around 3million issued credit cards, and serves both retail clients and clients in the business market. ABNAMRO Bank holds a minority interest of 49% in Nationale-Nederlanden ABNAMRO Verzekeringen Holding B.V. (ABNAMRO Verzekeringen), in which Nationale- Nederlanden N.V. holds the majority 51% interest. ABNAMRO Verzekeringen offers life and non-life insurance products under the ABNAMRO brand. ABNAMRO Pensioeninstelling N.V. is a premium pension institution (‘PPI’) that offers pension schemes, without insurance, based on longevity or death. Commercial Banking The Commercial Banking business of ABNAMRO is supported by the following subsidiaries (this list is not exhaustive): ABNAMRO Asset Based Finance N.V. provides asset-based solutions (working capital solutions, equipment leases, equipment loans and vendor lease services) to its clients in the Netherlands, France, Germany and the United Kingdom. New10 B.V. provides SMEs in the Netherlands with standard loans through a fully digital product offering. ABNAMRO Groenbank B.V. provides financing for sustainable and green investments based on the Green Scheme, a facility through which the Dutch government encourages sustainable investments. Private Banking The Private Banking business of ABNAMRO is supported inFrance 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 toprivate and commercial wealth, articulated around dedicated advisory and product offers in France. Bethmann Bank AG offers all private banking and private wealth management-related services and covers all major regions in Germany. It is a private bank that benefits from a strong local heritage and brand recognition in the German market. Neuflize Vie S.A. is a joint venture between Banque Neuflize OBC (60%) and AXA (40%) and offers life insurance products to high net worth and ultra-high net worth individuals and has developed customised solutions. Corporate & Institutional Banking The Corporate & Institutional Banking business of ABNAMRO is supported by the following subsidiaries (this list is not exhaustive): ABNAMRO Clearing Bank N.V. is a global leader in derivatives and equity clearing. It is one of the few players currently offering global market access and clearing services on more than 85 of the world’s leading exchanges, and operates from several locations across theglobe. Banco ABNAMRO SA, the Brazilian subsidiary ofABNAMRO Bank N.V., has its own local bank licence. FranxB.V. offers a unique digital banking platform where currencies can be converted, and international & euro payments can be executed. The joint venture ABNAMRO – ODDO BHF B.V., provides equity brokerage services and has a Benelux focus. Both ABNAMRO and ODDO BHF have an equal share in the joint venture. Group Functions The Group Functions of ABNAMRO are supported by thefollowing subsidiaries (this list is not exhaustive): ABNAMRO Captive N.V. is a captive reinsurance company. Transactie Monitoring Nederland B.V. is a participating interest of ABNAMRO Bank N.V. (30%). Other major Dutch banks hold the remaining shares. ABNAMRO Funding USA LLC is active in the US market, issuing ABNAMRO’s US dollar commercial paper funding for clients operating in the US and for clients with US dollar loans. Legal structure 257 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance Legal structure / Other governance information / Leadership & governance Pursuant to section 5:25c sub 2 part c of the DutchFinancial Supervision Act, the members of the ExecutiveBoard state that to the best of their knowledge: H the Annual Financial Statements give a true and fairview of the assets, liabilities, financial position and profitor loss of ABNAMRO Bank N.V. and the companiesincluded in its consolidation; H the Executive Board report gives a true and fair viewofthe state of affairs on the balance sheet date andthe course of business during the 2021 financial yearof ABNAMRO Bank N.V. and the affiliated companies included in its Annual Financial Statements; H the Executive Board report describes the material riskswith which ABNAMRO Bank N.V. is faced. Responsibility statement Amsterdam, 8 March 2022 Executive Board Robert Swaak, Chief Executive Officer and Chair Christian Bornfeld, ChiefInnovation & Technology Officerand Vice-Chair Tanja Cuppen, Chief Risk Officer Lars Kramer, ChiefFinancial Officer Annerie Vreugdenhil, Chief Commercial Officer - Personal & Business Banking (from 1 March 2022) Choy van der Hooft-Cheong, Chief Commercial Officer -Wealth Management Dan Dorner,Chief Commercial Officer - Corporate Banking Gerard Penning,Chief Human Resources Officer 258 ABN AMRO Integrated Annual Report 2021 This page has been intentionally left blank. 259 Strategy, value creation & performance Risk, funding & capital Annual Financial Statements 2021Introduction OtherLeadership & governance Responsibility statement / Other governance information / Leadership & governance Guide for readers This chapter provides an overview of our Consolidated Annual Financial Statements, ouraccounting policies and all accompanying notes. They have been prepared in accordance with International Financial Reporting Standards (IFRS), asendorsed by the EuropeanUnion (EU). 260 ABN AMRO Integrated Annual Report 2021 Annual Financial Statements 2021 Annual Financial Statements 2021 Certain IFRS disclosures in the Risk, funding & capital chapter are labelled as ‘Audited’ in the respective headings. These disclosures are an integral part of these Consolidated Annual Financial Statements and are covered by the Audit opinion. Consolidated income statement 262 Consolidated statement ofcomprehensive income 263 Consolidated statement offinancialposition 264 Consolidated statement ofchangesinequity 265 Consolidated statement of cash flows 266 Notes to the Consolidated AnnualFinancial Statements 268 1 Accounting policies 268 2 Segment reporting 273 3 Overview of financial assets and liabilities by measurement base 280 4 Net interest income 281 5 Net fee and commission income 282 6 Net income from other operating activities 284 7 Net trading income 284 8 Net gains/(losses) on derecognition of financial assets measured at amortised cost 285 9 Personnel expenses 285 10 General and administrative expenses 286 11 Income tax expense, tax assets and tax liabilities 287 12 Earnings per share 291 13 Cash and balances at central banks 291 14 Financial assets and liabilities held for trading 292 15 Derivatives 292 16 Hedge accounting 294 17 Financial investments 300 18 Securities financing 302 19 Fair value of financial instruments carried at fair value 303 20 Loans and advances banks 308 21 Loans and advances customers 309 22 Fair value of financial instruments not carried at fair value 309 23 Bank structure 311 24 Property and equipment, leases, goodwill and other intangible assets 317 25 Non-current assets and disposal groups held for sale 323 26 Other assets 324 27 Due to banks 324 28 Due to customers 325 29 Issued debt and subordinated liabilities 325 30 Provisions 327 31 Pension and other employee benefits 329 32 Other liabilities 332 33 Equity attributable of the parent company 332 34 Transferred, pledged encumbered and restricted assets 334 35 Commitments and contingent liabilities 337 36 Remuneration of Executive Board and Supervisory Board 341 37 Share-based payment 342 38 Related parties 343 39 Post balance sheet events 347 Authorisation of the Consolidated Annual Financial Statements 347 Company Annual FinancialStatements ofABNAMROBankN.V. 348 261 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated income statement (inmillions) Note 2021 2020 Income Interest income calculated using the effective interest method 6,760 7,525 Other interest and similar income 258 290 Interest expense calculated using the effective interest method 1,397 1,834 Other interest and similar expense 411 118 Net interest income 4 5,210 5,863 Fee and commission income 2,213 2,253 Fee and commission expense 550 695 Net fee and commission income 5 1,664 1,558 Income from other operating activities 805 462 Expenses from other operating activities 142 148 Net income from other operating activities 6 663 314 Net trading income 7 145 163 Share of result in equity-accounted investments 23 29 Net gains/(losses) on derecognition of financial assets measured at amortised cost 8 -108 - 11 Operating income 7,597 7,916 Expenses Personnel expenses 9 2,324 2,280 General and administrative expenses 10 3,287 2,677 Depreciation, amortisation and impairment losses of tangible and intangible assets 24 194 299 Operating expenses 5,806 5,256 Impairment charges on financial instruments -46 2,303 Total expenses 5,759 7,559 Profit/(loss) before taxation 1,838 356 Income tax expense 11 604 401 Profit/(loss) for the period 1,234 -45 Attributable to: Owners of the parent company 1,231 -45 Non-controlling interests 3 Earnings per share (in EUR) Basic earnings per ordinary share (in EUR) 1 12 1.21 -0.17 1 Earnings per share consist of profit for the period, excluding results attributable to non-controlling interests and payments to holders of AT1 instruments, divided by the average outstanding andpaid-up ordinary shares. 262 ABN AMRO Integrated Annual Report 2021 Consolidated Annual Financial Statements 2021 Consolidated statement ofcomprehensive income (inmillions) Note 2021 2020 Profit/(loss) for the period 1,234 -45 Other comprehensive income: Items that will not be reclassified to the income statement Remeasurement gains/(losses) on defined benefit plans 31 24 -4 (Un)realised gains/(losses) on liability own credit risk 29 20 20 Items that will not be reclassified to the income statement before taxation 43 17 Income tax relating to items that will not be reclassified to the income statement 11 3 Items that will not be reclassified to the income statement after taxation 33 14 Items that may be reclassified to the income statement (Un)realised gains/(losses) currency translation 66 -109 (Un)realised gains/(losses) fair value through OCI 108 -12 (Un)realised gains/(losses) cash flow hedge 396 -371 Share of other comprehensive income of associates 16 4 Items that may be reclassified to the income statement before taxation 586 -489 Income tax relating to items that may be reclassified to the income statement 112 -161 Items that may be reclassified to the income statement after taxation 474 -328 Total comprehensive income/(expense) for the period after taxation 1,740 -359 Attributable to: Owners of the parent company 1,737 -359 Non-controlling interests 3 263 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Annual Financial Statements 2021 Consolidated statement offinancialposition (inmillions) Note 31 December 2021 31 December 2020 Assets Cash and balances at central banks 13 66,865 60,190 Financial assets held for trading 14 1,155 1,315 Derivatives 15 3,785 6,381 Financial investments 17 43,165 47,455 Securities financing 18 16,138 16,725 Loans and advances banks 20 2,801 3,394 Residential mortgages 21 147,711 148,741 Consumer loans 21 10,518 10,937 Corporate loans at amortised cost 21 84,915 84,344 Corporate loans at fair value through P&L 21 99 400 Other loans and advances customers 21 15,008 7,736 Equity-accounted investments 23 564 593 Property and equipment 24 1,172 1,255 Goodwill and other intangible assets 24 127 128 Assets held for sale 25 89 254 Tax assets 11 739 851 Other assets 26 4,263 4,925 Total assets 399,113 395,623 Liabilities Financial liabilities held for trading 14 687 563 Derivatives 15 4,344 7,391 Securities financing 18 9,494 11,363 Due to banks 27 38,076 36,719 Current accounts 28 132,983 111,033 Demand deposits 28 98,790 107,534 Time deposits 28 18,780 19,037 Other due to customers 28 665 966 Issued debt 29 59,688 66,949 Subordinated liabilities 29 7,549 8,069 Provisions 30 1,201 926 Tax liabilities 11 101 30 Other liabilities 32 4,757 4,053 Total liabilities 377,114 374,634 Equity Share capital 940 940 Share premium 12,970 12,970 Other reserves (incl. retained earnings/profit for the period) 7,324 6,826 Accumulated other comprehensive income -1,227 -1,733 AT1 capital securities 1,987 1,987 Equity attributable to owners of the parent company 21,994 20,989 Equity attributable to non-controlling interests 5 Total equity 33 21,999 20,989 Total liabilities and equity 399,113 395,623 Committed credit facilities 35 54,642 55,207 Guarantees and other commitments 35 7,598 8,981 264 ABN AMRO Integrated Annual Report 2021 Consolidated statement ofchangesinequity (inmillions) Share capital Share premium Other reserves including retained earnings Accumulated other comprehensive income Net profit/(loss) attributable to owners of the parent company AT1 capital securities Equity attributable to the owners of the parent company Non-con- trolling interests Total equity Balance at 1 January 2020 940 12,970 4,947 -1,419 2,046 1,987 21,471 21,471 Total comprehensive income -314 -45 -359 -359 Transfer 2,046 -2,046 Increase of capital 994 994 994 Decrease of capital -1,000 -1,000 -1,000 Paid interest on AT1 capital securities -117 -117 -117 Other changes in equity -6 6 1 1 Balance at 31 December 2020 940 12,970 6,870 -1,733 -45 1,987 20,989 20,989 Total comprehensive income 506 1,231 1,737 3 1,740 Transfer -45 45 Dividend -639 -639 -639 Paid interest on AT1 capital securities -91 -91 -91 Other changes in equity -2 -2 3 1 Balance at 31 December 2021 940 12,970 6,093 -1,227 1,231 1,987 21,994 5 21,999 Accumulated other comprehensive income is specified in the following table. (inmillions) Remeasurements on post-retire- ment benefit plans Currency translation reserve Fair value reserve Cash flow hedge reserve Accumulated share of OCI of associates and joint ventures Liability own credit risk reserve Total Balance at 1 January 2020 -20 81 177 -1,648 32 -41 -1,419 Net gains/(losses) arising during the period -4 -109 -3 -281 4 20 -372 Less: Net realised gains/(losses) included in income statement 9 91 100 Net gains/(losses) in equity -4 -109 -12 -371 4 20 -472 Related income tax -1 1 3 -165 3 -158 Balance at 31 December 2020 -24 -29 162 -1,854 36 -24 -1,733 Net gains/(losses) arising during the period 24 66 107 451 16 20 684 Less: Net realised gains/(losses) included in income statement 54 55 Net gains/(losses) in equity 24 66 108 396 16 20 629 Related income tax 6 30 82 5 123 Balance at 31 December 2021 -6 38 239 -1,540 51 -9 -1,227 265 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Annual Financial Statements 2021 Consolidated statement of cash flows continued> (inmillions) Note 2021 2020 Profit/(loss) for the period 1,234 -45 Adjustments on non-cash items included in profit/(loss) (Un)realised gains/(losses) -1,622 516 Share of result in equity-accounted investments -20 -41 Depreciation, amortisation and impairment losses of tangible and intangible assets 24 194 299 Impairment charges on financial instruments -46 2,303 Income tax expense 10 604 401 Tax movements other than taxes paid & income taxes -13 -35 Other non-cash adjustments 1,010 505 Operating activities Changes in: - Assets held for trading 153 -171 - Derivatives - assets 2,399 -827 - Securities financing - assets 1,601 -3,018 - Loans and advances banks 126 1,944 - Residential mortgages 1,059 1,755 - Consumer loans 356 919 - Corporate loans 187 11,057 - Other loans and advances customers -7,073 -1,618 - Other assets 734 -430 - Liabilities held for trading 124 -113 - Derivatives - liabilities -2,773 796 - Securities financing - liabilities -2,553 3,892 - Due to banks 1,614 23,957 - Due to customers 12,422 3,923 Net changes in all other operational assets and liabilities 355 -304 Dividend received from associates and private equity investments 64 18 Income tax paid -534 -373 Cash flow from operating activities 9,602 45,311 266 ABN AMRO Integrated Annual Report 2021 (inmillions) Note 2021 2020 Investing activities Purchases of financial investments -10,136 -14,594 Proceeds from sales and redemptions of financial investments 13,345 11,946 Acquisition of subsidiaries (net of cash acquired), associates and joint ventures 22 -14 -24 Divestments of subsidiaries (net of cash sold), associates and joint ventures 22 194 10 Purchases of property and equipment -182 -217 Proceeds from sales of property and equipment 674 412 Purchases of intangible assets -20 -8 Other changes -1 Cash flow from investing activities 3,862 -2,475 Financing activities Proceeds from the issuance of debt 28 30,226 28,203 Repayment of issued debt 28 -36,180 -36,165 Proceeds from subordinated liabilities issued 28 910 35 Repayment of subordinated liabilities issued 28 -1,514 -1,669 Proceeds from other borrowing -6 Dividends paid to the owners of the parent company 32 -639 Interest paid AT1 capital securities -91 -117 Payment of lease liabilities -94 -114 Cash flow from financing activities -7,383 -9,835 Net increase/(decrease) of cash and cash equivalents 6,082 33,001 Cash and cash equivalents as at 1 January 61,887 28,943 Effect of exchange rate differences on cash and cash equivalents 58 -57 Cash and cash equivalents as at 31 December 68,027 61,887 Supplementary disclosure of operating cash flow information Interest paid 1,397 1,834 Interest received 7,017 7,815 Dividend received excluding associates 10 12 (inmillions) 31 December 2021 31 December 2020 Cash and balances at central banks 66,865 60,190 Loans and advances banks (less than 3 months) 1 1,162 1,697 Total cash and cash equivalents 1 68,027 61,887 1 Loans and advances banks with an original maturity of 3 months or more is included in loans and advances banks. 267 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Annual Financial Statements 2021 Notes to the Consolidated AnnualFinancial Statements 1 Accounting policies The Notes to the Consolidated Annual Financial Statements, including the audited information in the Risk, funding & capitalchapter, 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. Ifan accounting policy or a critical accounting estimate relates to a specific note, it is included in the relevant note. Corporate information ABN AMRO Bank N.V. (referred to as ABN AMRO Bank, ABN AMRO, the bank or the parent company) and its consolidated entities provide financial services in the Netherlands and abroad (together referred to as the group). ABN AMRO Bank is a public limited liability company, incorporated under Dutch law on 9 April 2009 in the Netherlands, and registered at Gustav Mahlerlaan 10, 1082 PP Amsterdam, the Netherlands (Chamber of Commerce number 34334259). As at 31 December 2021, all shares in the capital of ABN AMRO Bank N.V. are held by two foundations: NLFI and STAK AAB. NLFI holds 56.3% in ABN AMRO Bank N.V., of which 49.9% is held directly via ordinary shares and 6.4% is held indirectly via depositary receipts for shares in ABN AMRO Bank N.V. STAK AAB holds 50.1% of the shares in the issued capital of ABN AMRO Bank N.V. Both foundations have issued depositary receipts for shares in ABN AMRO Bank N.V. Only STAK AAB’s depositary receipts are issued with the cooperation of ABN AMRO Bank N.V. 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 Bank for the year ended 31 December 2021 incorporate financial information of ABN AMRO Bank N.V., its controlled entities, interests in associates and joint ventures. The Annual Financial Statements were prepared by the Executive Board and authorised for issue by the Supervisory Board and Executive Board on 8 March 2022. 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 set out in Title 9 of Book 2 of the Dutch Civil Code, where applicable. Basis of preparation The Consolidated Annual Financial Statements have been prepared on a historical cost basis, except for derivative financial instruments, financial assets and liabilities held for trading or designated as measured at fair value through profit or loss, financial instruments not held in a ‘hold to collect’ business model, debt instruments that do not meet the solely payments of principal and interest (SPPI) test, and equity investments in associates or joint ventures for which the venture capital exemption is applied, all of which are measured at fair value through profit or loss. The carrying values of recognised assets and liabilities that are hedged items in fair value hedges, and otherwise carried at amortised cost, are adjusted to record changes in fair value attributable to the risks that are being hedged. Associates and joint ventures are accounted for using the equity method. Management has considered the consequences of Covid-19 and other events and conditions, and has determined that theydo not create a material uncertainty that casts significant doubt on the bank’s ability to continue as a going concern. Theimpact of Covid-19 on future performance and therefore on the measurement of assets, mainly loans and advances, issignificant and therefore requires disclosure in the financial statements, but management has determined that these events and conditions do not create a material uncertainty that casts significant doubt on the entity’s ability to continue asagoing concern. The Annual Financial Statements have therefore been prepared on the going-concern basis. The Annual Financial Statements are presented in euros, which is the presentation currency of ABN AMRO, rounded to the nearest million (unless otherwise stated). 268 ABN AMRO Integrated Annual Report 2021 Presentation of net gains/(losses) on derecognition of financial assets measured at amortised cost Due to rise in sales of financial assets at amortised cost during 2021, the net gains/(losses) on derecognition of financial assets measured at amortised cost are presented as a separate line item in the income statement. Previously, the net gains/ (losses) were part of other operating income. Changes in accounting policies The following new standards were endorsed by the EU and became effective for the reporting period beginning 1 January 2021. H Amendments to IFRS 16 Leases: Covid-19-Related Rent Concessions beyond 30 June 2021 H Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2 H Amendments to IFRS 4 Insurance Contracts – deferral of IFRS 9 Only the amendments related to the Interest Rate Benchmark Reform have resulted in a change in ABN AMRO’s accountingpolicies. Interest Rate Benchmark Reform In response to the IBOR reform, the IASB has issued two sets of amendments to IFRS Standards. The amendments provide practical relief for companies from certain requirements when changes are made to contractual cash flows or hedging relationships because of IBOR reforms, and provide additional disclosure requirements. With effect from 1 January 2020, ABN AMRO applies the first set of amendments made to IFRS 9, IAS 39 and IFRS 7 that address the pre-replacement phase or phase 1 issues introduced by the IBOR reform. The phase 1 amendments allow a company to apply temporary reliefs to all hedging relationships that are directly affected by the IBOR reform. Applying the relief prevents the disruption of hedging relationships as a result of uncertainty caused by the IBOR reform. The adoption of the amendments has not resulted in anyimpact on profit or loss or on the statement of financial position. In August 2020, the IASB issued the second set of amendments to address the issues caused by the replacement phase of the IBOR reform. Amendments have been made toIFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16. The phase 2 amendments took effect on 1 January 2021 and are applied by ABN AMRO as of that date. These amendments focus on replacement issues, i.e. when an interest rate benchmark is replaced with an alternative, and comprise reliefs regarding to accounting for changes and hedge accounting. While ABN AMRO operates in global financial markets, the majority of its financial instruments are linked to the euro area key interest rate benchmarks EONIA and EURIBOR. EONIA is being replaced by €STR and was discontinued on 3 January 2022. Since October 2019, EONIA has been calculated as €STR plus a fixed spread of 8.5 basis points. EURIBOR has been calculated using a hybrid methodology since 2019 and will not be reformed in the short-term. The IBOR reform in the euro area did not affect the basis of contractual cash flows or hedging relationships in 2021. Other key financial benchmarks are also being reformed, most notably the London InterBank Offered Rates (LIBOR) in the five LIBOR currencies: USD, GBP, EUR, JPY and CHF. In March 2021, it was announced by the administrator of LIBOR and the FCA that LIBOR would not be published after 31 December 2021. This applies with the exception of USD LIBOR, which is expected to be phased out after 30 June 2023. During 2021, ABN AMRO amended existing loan and derivative contracts to prepare for the discontinuation of the LIBOR rates. In December 2021, all centrally cleared swaps referring to CHF, JPY and GBP LIBOR were migrated to risk-free rates. The remaining exposures at the year-end consist solely of bilateral contracts referencing GBP LIBOR that still have to transition. For these trades, the temporary use of a synthetic LIBOR is in place. USD LIBOR rates are still published and contracts referring to this index are expected to be repapered in the next 18 months. New standards, amendments and interpretations not yet effective (endorsed) IFRS 17 – Insurance Contracts IFRS 17 sets out requirements for the accounting, measurement and recognition of insurance contracts. IFRS 17 is expected to be effective for reporting periods beginning on or after 1 January 2023. ABN AMRO offers only limited insurance products. ABN AMRO has two equity accounted investments that have insurance products. IFRS 17 may have a significant impact on these equity accounted investments, but ABN AMRO does not anticipate that the impact will be material to its consolidated financial statements. 269 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 New standards, amendments and interpretations not yet endorsed In February and May 2021, the International Accounting Standards Board issued a number of amendments to existing standards, which are to to take effect on 1 January 2023. The standards amended are IAS 1 Presentation of Financial Statements, IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, and IAS 12 Income Taxes. The amendments have not yet been endorsed by the EU and are therefore not open to early adoption. The expected impact of these changes on the consolidated financial statements is insignificant. Critical accounting estimates and judgements In preparing the financial statements, management needs to exercise its judgement in the process of applying ABN AMRO’s accounting policies and make estimates and assumptions concerning the future. Actual results may differ from those estimates and assumptions. Accounting policies for the most significant areas that require management to make judgements and estimates affecting reported amounts and disclosures are made in the following sections: H Impairment losses on financial assets measured at AC - Risk, funding & capital management section; H Income tax expense, tax assets and tax liabilities - Note 11; H Impairment of instruments measured at FVOCI - Note 17; H Fair value of financial instruments - Note 19; H Impairment of ROU assets and goodwill - Note 24; H Provisions - Note 30. Assessment of risks, rewards and control Whenever ABN AMRO is required to assess risks, rewards and control, as well as when considering the recognition and derecognition of assets or liabilities and the consolidation or deconsolidation of subsidiaries, it may sometimes be required to use judgement. Although management uses its best knowledge of current events and actions in making such assessments, the actual risks, rewards and control may ultimately differ. Significant accounting policies Basis of consolidation The Consolidated Annual Financial Statements of ABN AMRO Bank N.V. include the financial statements of the parent company and its controlled entities, thus incorporating the assets, liabilities, revenues and expenses of ABN AMRO Bank N.V. and its subsidiaries. Non-controlling interests (held by third parties) in the equity and results of group companies are presented separately in the Consolidated Annual Financial Statements. Subsidiaries are included using the same reporting period and consistent accounting policies. Intercompany balances andtransactions, as well as any related unrealised gains and losses, are eliminated in preparing the Consolidated FinancialStatements. 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 ABN AMRO applies IAS 21 The Effects of Changes in Foreign Exchange Rates. Transactions in foreign currencies aretranslated into euros at the rate prevailing on the transaction date. Foreign currency balances of monetary items aretranslated into euros at period-end exchange rates. Exchange gains and losses on such balances are recognised intheincome statement. The Consolidated Annual Financial Statements are stated in euros, which is the presentation and functional currency of ABN AMRO. The bank’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 into euros at the closing rate, and items in the income statement and other comprehensive income are translated 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 bank loses control, joint control or significant influence over the foreign operation. 270 ABN AMRO Integrated Annual Report 2021 Financial assets and liabilities Classification and measurement of financial assets ABN AMRO classifies financial assets based on the business model in which they are held in accordance with IFRS 9. The business model is determined at portfolio level. Portfolios are based on how ABN AMRO manages financial assets in order to achieve a particular business objective. The business model assessment is based on the level of sales, risk management, performance evaluation and management compensation. Derecognition is used as a condition to determine whether a transaction results in a sale. Three business models are distinguished: H ‘Hold to collect’ business model, in which cash flows are primarily generated by collecting contractual cash flows until maturity of the financial instrument. Sales can occur, as long as they are incidental, infrequent and insignificant. The assessment of the frequency and significance of sales is determined for each underlying portfolio. Sales that result from increases in the credit risk of the counterparty or take place close to maturity do not contradict the ‘hold to collect’ business model; H ‘Hold to collect and sell’ business model, in which the selling of financial assets is integral to achieving the business objective. In this business model, sales take place more frequently and have a greater value than in a hold-to-collect business model; H Other business models not meeting the criteria of the business models mentioned above, for example business models in which financial assets are managed with the objective of generating cash flows from sales (trading book), are measured at FVTPL. After the business model has been determined, the contractual cash flows of financial assets are assessed. Debt instruments can be classified at amortised cost or FVOCI only when the contractual cash flows are solely payments ofprincipal and interest (SPPI). Contractual cash flows that are SPPI are consistent with a basic lending arrangement inwhich consideration for the time value of money and credit risk are typically the most significant interest elements. Debtinstruments that do not meet the SPPI requirements are mandatorily measured at FVTPL. Financial assets are assessed in their entirety, including any embedded derivatives that are not separated from the host contract. Based on the business model determined and the SPPI assessment, the following measurement categories are identified under IFRS 9: H Amortised cost – Financial instruments measured at amortised cost are debt instruments within a ‘hold to collect’ business model with fixed or determinable payments which meet the SPPI criteria. These instruments are initially measured at fair value (including transaction costs) and subsequently measured at amortised cost using the effective interest rate method. Financial instruments measured at amortised cost are presented net of credit loss allowances in the statement of financial position; H FVTPL – Financial instruments measured at FVTPL include instruments held for trading, derivatives, equity instruments for which the FVOCI option has not been elected and instruments whose cash flows do not meet the SPPI requirements. Changes in the fair value of these instruments are directly recognised in the income statement; H FVOCI – Financial instruments measured at FVOCI are debt instruments which are held in a ‘hold to collect and sell’ business model and which meet the SPPI criteria. They are initially measured at fair value, with subsequent unrealised changes recognised in other comprehensive income. Equity instruments for which the fair value option is elected are alsomeasured at FVOCI. Reclassifications of financial assets are expected to be very infrequent and occur only when ABN AMRO changes its business model for a certain portfolio of financial assets. Please refer to the Risk, funding & capital management section for our accounting policies on the measurement of expected credit losses on financial instruments measured at amortised cost and FVOCI. Classification of assets and liabilities held for trading A financial asset or financial liability is classified as held for trading if it is: H Acquired or incurred principally for the purpose of selling or repurchasing it in the near term; H 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; or H A trading derivative (except for a derivative that is a designated and effective hedging instrument). 271 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 Classification and measurement of financial liabilities Financial liabilities are initially recognised at their fair value. Under IFRS 9, financial liabilities are classified as subsequently measured at amortised cost, except for the following instruments: H Financial liabilities held for trading are measured at fair value through profit or loss; H Financial liabilities that ABN AMRO has irrevocably designated at initial recognition as held at fair value through profit orloss when the instruments are held to reduce an accounting mismatch are managed on the basis of their fair value orinclude terms that have derivative characteristicsby nature. Under IFRS 9, the changes in fair value attributable to changes in the credit risk of financial liabilities designated at FVTPL arepresented in other comprehensive income. The cumulative amount of changes in fair value attributable to credit risk ofsuch liabilities is presented as liability own credit risk reserve in equity. Financial liabilities are never reclassified after initial recognition. Recognition and derecognition Traded instruments are recognised on the trade date, which is defined as the date on which ABN AMRO commits to purchase or sell the underlying instrument. If the settlement terms are non-standard, the commitment is accounted forasaderivative between the trade and settlement dates. Loans and advances are recognised when they are acquired orfunded 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, arerecognised when ABN AMRO becomes a party to the contractual provisions of the asset or liability. Financial assets are derecognised when ABN AMRO loses control and the ability to obtain benefits from the contractual rights that comprise that asset. This occurs when the rights are realised or expire, or when substantially all risks and rewards are transferred. Financial assets are also derecognised if the bank has neither transferred nor retained substantially all risks and rewards of ownership, but control has passed to the transferee. Financial assets 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, rewards and control associated with the financial instruments, that have been transferred, in which case that proportion of the asset is derecognised. When the terms and conditions of a financial asset have been renegotiated or otherwise modified to the extent that, substantially, it becomes a new financial asset, ABN AMRO derecognises the financial asset, with the difference recognised in the income statement, to the extent that an impairment loss has not already been recorded. The newly recognised financial asset is classified as stage 1 for ECL measurement purposes. ABN AMRO assesses, in both qualitative and quantitative terms, whether such modifications are substantial. Generally, a 10% change in the net present value of thecashflows between the initial and new contract results in a derecognition. With regard to substantial modifications, e.g.dueto forbearance measures, the derecognition gains or losses are recognised in net gains/(losses) on derecognition offinancial assets measured at amortised cost and disclosed separately, if material. If the modification of the financial asset does not result in derecognition, the gross carrying amount of the financial asset isrecalculated, based on the net present value of the new contractual cash flows, and discounted at the financial asset’s original effective interest rate. The effect is recognised and disclosed as a modification loss in the income statement. Creditrelated modification gains or losses (i.e. due to forbearance measures) are recognised in the income statement andpresented under impairment charges on financial instruments. Non-credit related modification gains or losses are recognised in the income statement and presented under interest income calculated using the effective interest method. 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, qualitatively and quantitatively (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 amortised cost 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 for, among other things, exchange-traded derivatives. 272 ABN AMRO Integrated Annual Report 2021 In its capacity as a clearing member, ABN AMRO guarantees the fulfilment of obligations towards central counterparty clearing houses (CCPs) of clients’ transactions. ABN AMRO is not liable to clients for the non-performance of the CCP. Intheevent of a client defaulting, ABN AMRO has the legal obligation to settle all the client’s positions with the relevant CCPs, possibly at a loss. Possible losses arising from this guarantee might relate not only to a client’s current positions, butalso to the client’s future trades. ABN AMRO receives and collects (cash) margins from clients, and remits these marginsto 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. 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. Any loss recognised in the event of non-performance of a client is in line with our contingent liabilities policy. Offsetting The bank offsets financial assets and liabilities and the net amount reported in the statement of financial position if it is legally entitled to set off the recognised amounts and intends to settle on a net basis, or to realise the asset and settle theliability simultaneously. Statement of cash flows For the purposes of the statement of cash flows, cash and cash equivalents comprise cash on hand, freely available balances with central banks and other banks, and net balances on current accounts with other banks with a maturity of less than three months 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 ofthese 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 advances 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 arising from foreign currency transactions are translated into euros using the exchange rates at the date of the cash flows. Government grants Government grants are recognised in the income statement on a systematic basis over the periods that the related expenses, which the grants are intended to compensate, are recognised. In the case of an income-related grant, the grant is deducted from the related expense. Levies and other regulatory charges ABN AMRO recognises a liability arising from levies and similar charges when it becomes legally enforceable (i.e. when the obligating event arises). 2 Segment reporting Accounting policy for segment reporting The segment reportingis in accordance with IFRS 8 Operating Segments. The segments are reported in a manner consistent with internal reporting provided to the Executive Board, which is responsible for allocating resources and assessing performance and has been identified as the chief operating decision-maker. All transactions between segments are eliminated as intersegment revenues and expenses in Group Functions. Geographical data are presented according to the management view. Segment assets, liabilities, income and results are measured based on our accounting policies and include items directly attributable to a segment, as well as those that can be allocated on a reasonable basis. Transactions between segments areconducted on an arm’s length basis. Interest income is reported as net interest income because 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 2021 or 2020. 273 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 Retail Banking Retail Banking provides a full range of transparent banking products and high-quality services to individuals with investable assets up to EUR500,000. We offer our products and services under the ABNAMRO brand, and specific products and services under other labels. Our clients have access to a seamless omni-channel distribution network providing a top-class digital and remote offering, and supported by a balanced network of branches and our Contact Centre. Commercial Banking Commercial Banking is an established business partner of the Dutch SME and corporate sector, offering asset-based finance in the Netherlands, Germany, France and the UK. We serve over 365,000 clients with annual turnover of up to EUR250million in a variety of sectors. Commercial Banking offers a broad range of products and services, based on in-depth client and sector knowledge combined with innovative value propositions and offerings, and a digital approach to convenience banking products. Private Banking Private Banking is a leading eurozone private bank in terms of client assets, with dedicated professionals who have in-depth knowledge of their clients. Our international expertise, local knowledge and over 350 years of experience in private banking form the basis of our long-standing client relationships. We bring personal service, digital convenience and a proactive mentality to a full range of banking and wealth management products and services for high net worth clientsin the Netherlands with more than EUR 500,000 in investable assets, or more than EUR 1 million outside the Netherlands, andforultra-high net worth clients with more than EUR 25 million in investable assets. Private Banking is present in theNetherlands, France, Germany and Belgium. Corporate & Institutional Banking Corporate & Institutional Banking (CIB) has a large client base. We have a strong market position in the Netherlands, serving clients with revenues in excess of EUR250million. CIB has been leveraging on the strong domestic franchise in selected Northwest European countries, where it serves clients in a variety of sectors. CIB is sector-led and offers a wide range of services and products in global markets and lending. We have specialised activities in Clearing. Group Functions Group Functions consists of the following main departments: Innovation & Technology, Finance, Risk Management, HR & Transformation, Group Audit, Strategy & Sustainability, Legal, Corporate Office and Brand, Marketing & Communications. Themajority of Group Functions’ costs are allocated to the business lines. 274 ABN AMRO Integrated Annual Report 2021 Segment income statement for the year 2021 2021 (inmillions) Retail Banking Commercial Banking Private Banking Corporate & Institutional Banking Group Functions Total Income Net interest income 2,032 1,442 634 903 198 5,210 Net fee and commission income 312 256 602 515 -21 1,664 Net income from other operating activities 108 42 25 75 413 663 Net trading income -1 197 -50 145 Share of result in equity-accounted investments 20 -8 14 -3 23 Net gains/(losses) on derecognition of financial assets measured atamortised cost -106 -2 -108 Operating income 2,471 1,730 1,275 1,581 539 7,597 Expenses Personnel expenses 416 257 391 430 831 2,324 General and administrative expenses 760 166 190 302 1,870 3,287 Depreciation, amortisation and impairment losses of tangible andintangible assets 4 10 28 10 142 194 Intersegment revenues/expenses 982 701 344 382 -2,410 Operating expenses 2,163 1,134 953 1,123 433 5,806 Impairment charges on financial instruments -41 41 -6 -37 -3 -46 Total expenses 2,121 1,175 947 1,086 430 5,759 Profit/(loss) before taxation 350 555 328 495 109 1,838 Income tax expense 85 150 94 11 7 158 604 Profit/(loss) for the period 265 406 234 378 -49 1,234 Attributable to: Owners of the parent company 265 406 234 378 -52 1,231 Non-controlling interests 3 3 Segment income statement for the year 2020 2020 (inmillions) Retail Banking Commercial Banking Private Banking Corporate & Institutional Banking Group Functions Total Income Net interest income 2,638 1,471 637 1,123 -6 5,863 Net fee and commission income 303 256 502 529 -31 1,558 Net income from other operating activities 37 25 283 - 111 80 314 Net trading income -1 165 163 Share of result in equity-accounted investments 31 3 5 -13 4 29 Net gains/ (losses) on derecognition of financial assets measured at amortised cost -1 -9 -2 - 11 Operating income 3,009 1,753 1,425 1,683 45 7,916 Expenses Personnel expenses 408 243 371 484 774 2,280 General and administrative expenses 656 138 187 284 1,412 2,677 Depreciation, amortisation and impairment losses of tangible and intangible assets 7 10 57 71 154 299 Intersegment revenues/expenses 943 648 330 372 -2,293 Operating expenses 2,015 1,039 945 1,211 47 5,256 Impairment charges on financial instruments 77 542 26 1,659 -1 2,303 Total expenses 2,092 1,580 971 2,870 46 7,559 Profit/(loss) before taxation 917 173 454 -1,187 -1 356 Income tax expense 229 49 151 5 -33 401 Profit/(loss) for the period 687 124 303 -1,192 33 -45 Attributable to: Owners of the parent company 687 124 303 -1,192 33 -45 275 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 Retail Banking Net interest income declined to EUR2,032million in 2021 (2020: EUR2,638million), largely impacted by provisioning for revolving consumer credit and continued deposit margin pressure. Interest income on residential mortgages also decreased, driven by lower volumes and margins due to severe market competition and high redemption of mortgages with relatively high margins. Net fee and commission income rose to EUR312million (2020: EUR303million), showing recovery in credit card usage (ICS) and payment service fee income. Net income from other operating activities was EUR108million in 2021 (2020: EUR37million), reflecting positive revaluation results on the ventures portfolio, including EUR41million on Tink. Personnel expenses amounted to EUR416million in 2021 (2020: EUR408million), mainly due to the upscaling of AMLactivities. General and administrative expenses increased by EUR104million, totalling EUR760million in 2021. The increase was mainly attributable to cumulative handling costs for revolving consumer credit, as well as higher regulatory levies. Impairment charges recorded a release of EUR41million in 2021 (2020: EUR77million addition), mainly in stages 1 and 2. Commercial Banking Net interest income came down to EUR1,442million in 2021 (2020: EUR1,471million), mainly as a result of continued pressure on deposit margins and lower average corporate loan volumes. Net fee and commission income remained flat at EUR256million in 2021 because of the lagging economic recovery following Covid-19. However, payment service fee income partly recovered during the second half of the year. Net income from other operating activities increased to EUR42million in 2021 (2020: EUR25million). Personnel expenses were EUR14million higher, totalling EUR257million in 2021, mainly related to the increase inFTEs forregulatory projects and strategic initiatives and, to a lesser extent, to wage inflation. General and administrative expenses increased to EUR166million in 2021 (2020: EUR138million), mainly due to the upscaling of AML activities and higher regulatory levies. Impairment charges decreased significantly to EUR41million in 2021 (2020: EUR542million), mainly due to model-based releases and limited individual additions in 2021. In 2020, high individual stage 3 impairments (mainly attributable to the food, shipping, and industrial goods and services sectors) were recorded. Private Banking Net interest income was broadly stable at EUR634million in 2021 (2020: EUR637million), despite continued pressureondeposit margins.To mitigate much of the pressure on deposit margins, ABNAMRO started charging negative rates ofinterest on client deposits and also lowered the charging threshold in phases (deposit threshold: Q1 2021: EUR500thousand; Q32021: EUR150 thousand; and Q1 2022: EUR100 thousand). Net fee and commission income increased significantly to EUR602million (2020: EUR502million), mainly attributable to higher asset management fee income resulting from a higher client asset base and favourable stock market developments. Net income from other operating activities totalled EUR25million in 2021 (2020: EUR283million), largely because thefigures for 2020 included the EUR263million book gain on the sale of the Neuflize OBC office building in Paris. Personnel expenses increased to EUR391million in 2021 (2020: EUR371million), mainly due to the increase inFTEs forstrategic initiatives. General and administrative expenses were broadly stable at EUR190million in 2021 (2020: EUR187million). 276 ABN AMRO Integrated Annual Report 2021 Impairment charges recorded a net release of EUR6million in 2021 (2020: EUR26million addition), mainly reflecting model-based provision releases. Corporate & Institutional Banking Net interest income declined to EUR903million in 2021 (2020: EUR1,123million), primarily impacted by lower income atCIB non-core as a result of lower corporate loan volumes following the wind-down (loan book down around 90% since 30June 2020), whereas net interest income at CIB core increased. Net fee and commission income decreased to EUR515million in 2021 (2020: EUR529million). Net fee and commission at CIB core increased by EUR42million in 2021, mainly in Clearing (higher market volatility) and Global Markets (stronger capital market fees). This was offset by a decline in CIB non-core because of the reduction in activities as a result of the wind-down. Net income from other operating activities was EUR75million (2020: EUR111million negative), mainly reflecting afavourable result from private equity investments. Net trading income totalled EUR197million in 2021 (2020: EUR165million), largely driven by more favourable CVA/DVA/FVA results. Net losses on derecognition of financial assets amounted to EUR106million negative in 2021 (2020: EUR9million negative). The decrease was largely attributable to a discount to book value on a loan disposal as part of the wind-down ofthe CIB non-core portfolio, booked in Q2 2021. Personnel expenseswere down EUR54million at EUR430million in 2021, impacted by a one-off provision for the CIBnon-core wind-down and discretionary variable remuneration, both in 2020. The decrease was partly offset by higher expenses at CIB core due to the increase inFTEs and overall wage inflation. General and administrative expenses increased by EUR18million to EUR302million in 2021, mainly due to higher expenses relating to regulatory projects and strategic initiatives, as well as higher levies. Impairment charges recorded a net release of EUR37million in 2021 (2020: EUR1,659million addition). The figure for 2020 primarily comprised stage 3 additions for (non-core) TCF clients, mainly in the energy sector. Group Functions Net interest income improved to EUR198million in 2021 (2020: EUR6million negative). Excluding large incidentals, the main reason for the increase in net interest income was the additional TLTRO discount (EUR93million) and higher mortgage prepayment penalties. The discount is being entirely passed on to our clients. Net fee and commission income was EUR21million negative in 2021 (2020: EUR31million negative), largely owing to lower fees paid to securities financing. Net income from other operating activities amounted to EUR413million in 2021 (2020: EUR80million), largely owing tothe gain on the sale and leaseback of the Amsterdam head office (EUR327million). This was partly offset by lower hedging accounting-related income (2021: EUR40million versus 2020: EUR59million). Net trading income totalled EUR50million negative in 2021 and included a net negative impact of EUR49million due to the repayment of German dividend withholding tax credits and accrued interest relating to transactions that might be considered as cum/cum transactions. The amounts have been repaid in anticipation of a decision by the German tax authorities. Personnel expenses increased by EUR57million to EUR831million in 2021, mainly due to the upscaling of AML activities reflected in the increase inFTEs and, to a lesser extent, to wage inflation. General and administrative expenses rose to EUR1,870million in 2021 (2020: EUR1,412million), including AML settlement (EUR480million). Excluding large incidentals, general and administrative expenses increased in 2021, mainly due to the upscaling of AML activities. 277 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 Selected assets and liabilities per segment 31 December 2021 (inmillions) Retail Banking Commercial Banking Private Banking Corporate & Institutional Banking Group Functions Total Assets Financial assets held for trading 1,155 1,155 Derivatives 15 3,002 768 3,785 Securities financing 5,624 10,514 16,138 Residential mortgages 141,097 1 5,171 1,442 147,711 Consumer loans 4,918 633 4,937 30 10,518 Corporate loans 1,634 40,700 5,739 35,758 1,183 85,014 Other loans and advances customers 28 55 6 14,805 11 3 15,008 Other 1,789 2,418 2,525 8,908 104,145 119,784 Total assets 149,466 43,807 18,392 69,282 118,165 399,113 Liabilities Financial liabilities held for trading 687 687 Derivatives 4 3,542 798 4,344 Securities financing 2 9,493 9,494 Current accounts 24,459 44,477 29,457 33,837 753 132,983 Demand deposits 56,655 11,500 30,428 207 98,790 Time deposits 6,004 354 3,449 3,566 5,408 18,780 Other due to customers 166 478 21 665 Other 62,182 -12,524 -44,945 26,964 79,694 111,371 Total liabilities 149,466 43,807 18,392 69,282 96,166 377,114 31 December 2020 (inmillions) Retail Banking Commercial Banking Private Banking Corporate & Institutional Banking Group Functions Total Assets Financial assets held for trading 1,315 1,315 Derivatives 30 5,084 1,267 6,381 Securities financing 5,349 11,376 16,725 Residential mortgages 141,082 1 4,473 3,186 148,741 Consumer loans 5,690 556 4,684 8 10,937 Corporate loans 1,675 38,495 5,406 37,817 1,351 84,744 Other loans and advances customers 20 161 5 7,437 114 7,736 Other 2,010 2,264 2,601 5,515 106,653 119,044 Total assets 150,477 41,477 17,199 62,525 123,946 395,623 Liabilities Financial liabilities held for trading 563 563 Derivatives 14 6,159 1,219 7,391 Securities financing 368 10,995 11,363 Current accounts 21,732 39,799 24,275 24,424 804 111,033 Demand deposits 60,830 12,495 33,841 368 107,534 Time deposits 6,302 242 3,396 3,150 5,947 19,037 Other due to customers 175 1 738 51 966 Other 61,438 -11,060 -44,328 26,756 83,940 116,747 Total liabilities 150,477 41,477 17,199 62,525 102,956 374,634 278 ABN AMRO Integrated Annual Report 2021 Geographical segments 2021 (inmillions) The Netherlands Rest of Europe USA Asia Rest of the world Total Income Net interest income 4,796 259 93 47 14 5,210 Net fee and commission income 1,137 346 92 80 9 1,664 Net income from other operating activities 629 35 5 4 -9 663 Net trading income 227 -90 -1 9 145 Share of result in equity-accounted investments 9 14 23 Net gains/ (losses) on derecognition of financial assets measured at amortised cost 7 -12 - 119 7 8 -108 Operating income 6,806 552 70 138 31 7,597 Expenses Personnel expenses 1,827 320 99 59 20 2,324 General and administrative expenses 3,043 182 34 19 9 3,287 Depreciation and amortisation of tangible and intangible assets 160 31 3 194 Intersegment revenues/expenses 6 1 5 -12 Operating expenses 5,030 540 134 85 17 5,806 Impairment charges on financial instruments -107 17 45 -3 2 -46 Total expenses 4,923 557 179 82 18 5,759 Profit/(loss) before taxation 1,884 -6 -109 55 13 1,838 Income tax expense 566 11 16 12 -2 604 Profit/(loss) for the period 1,317 -17 -125 43 15 1,234 Attributable to: Owners of the parent company 1,315 -17 -125 43 15 1,231 Non-controlling interests 3 3 2020 (inmillions) The Netherlands Rest of Europe USA Asia Rest of the world Total Income Net interest income 5,165 357 215 108 19 5,863 Net fee and commission income 1,043 306 108 92 10 1,558 Net income from other operating activities 69 281 -8 4 -32 314 Net trading income 113 17 33 163 Share of result in equity-accounted investments 24 5 29 Net gains/ (losses) on derecognition of financial assets measured at amortised cost -9 -3 - 11 Operating income 6,405 948 331 201 30 7,916 Expenses Personnel expenses 1,744 292 131 89 24 2,280 General and administrative expenses 2,406 188 43 28 11 2,677 Depreciation and amortisation of tangible and intangible assets 171 65 32 26 6 299 Intersegment revenues/expenses -48 21 18 20 - 11 Operating expenses 4,273 566 225 163 30 5,256 Impairment charges on financial instruments 1,080 268 451 500 3 2,303 Total expenses 5,353 835 675 663 34 7,559 Profit/(loss) before taxation 1,052 113 -344 -462 -3 356 Income tax expense 271 106 -7 24 7 401 Profit/(loss) for the period 781 7 -337 -485 -11 -45 Attributable to: Owners of the parent company 781 7 -337 -485 - 11 -45 279 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 3 Overview of financial assets and liabilities by measurement base 31 December 2021 (inmillions) Amortised cost Fair value through profit or loss - trading Fair value through profit or loss - other Fair value through other comprehensive income Total Financial assets Cash and balances at central banks 66,865 66,865 Financial assets held for trading 1,155 1,155 Derivatives 2,975 810 3,785 Financial investments 580 42,585 43,165 Securities financing 16,138 16,138 Loans and advances banks 2,801 2,801 Loans and advances customers 258,146 104 258,251 Assets held for sale 86 86 Other financial assets 3,257 3,257 Total financial assets 347,207 4,130 1,581 42,585 395,502 Financial liabilities Financial liabilities held for trading 687 687 Derivatives 3,545 799 4,344 Securities financing 9,494 9,494 Due to banks 38,076 38,076 Due to customers 251,218 251,218 Issued debt 58,796 892 59,688 Subordinated liabilities 7,549 7,549 Other financial liabilities 2,844 2,844 Total financial liabilities 367,977 4,231 1,691 373,899 31 December 2020 (inmillions) Amortised cost Fair value through profit or loss - trading Fair value through profit or loss - other Fair value through other comprehensive income Total Financial assets Cash and balances at central banks 60,190 60,190 Financial assets held for trading 1,315 1,315 Derivatives 5,436 945 6,381 Financial investments 855 46,600 47,455 Securities financing 16,725 16,725 Loans and advances banks 3,394 3,394 Loans and advances customers 251,753 406 252,159 Other financial assets 3,796 3,796 Total financial assets 335,856 6,751 2,206 46,600 391,414 Financial liabilities Financial liabilities held for trading 563 563 Derivatives 6,585 807 7,391 Securities financing 11,363 11,363 Due to banks 36,719 36,719 Due to customers 238,570 238,570 Issued debt 66,000 949 66,949 Subordinated liabilities 8,069 8,069 Other financial liabilities 2,161 2,161 Total financial liabilities 362,881 7,148 1,756 371,785 280 ABN AMRO Integrated Annual Report 2021 4 Net interest income Accounting policy for net interest income Interest income and expense on financial instruments is recognised in the income statement on an accrual basis using theeffective interest rate method, except for those financial instruments measured at fair value through profit or loss. Theeffective 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 rate is the rate that exactly discounts estimated future cash flows to the net carrying amount of the asset. As a result, this method requires ABN AMRO to estimate future cash flows, in some cases based on its experience of client behaviour, considering all contractual terms of the financial instrument, as well as the expected lives of the assets and liabilities. Interest on loans and advances measured at fair value through profit or loss is also included in net interest incomeand recognised using the contractual interest rate. Interest income and expense on trading balances is included in net trading income. Interest paid on assets with a negative interest yield is classified as interest expense. Interest received from liabilities with a negative interest yield is classified as interest income. (inmillions) 2021 2020 Interest income calculated using the effective interest method 6,760 7,525 Other interest and similar income 258 290 Interest income 7, 0 1 7 7,815 Interest expense calculated using the effective interest method 1,397 1,834 Other interest and similar expense 4 11 11 8 Interest expense 1,808 1,952 Net interest income 5,210 5,863 Net interest income Net interest income decreased by EUR653million at 31 December 2021. The main drivers of the decrease were the loweraverage volume of corporate loans related to the ongoing wind-down of the CIB non-core portfolio and the continued pressure on deposit margins in a low interest rate environment. This was partly offset by charging negative interest rates onclient deposits. Interest income (inmillions) 2021 2020 Interest income from: Financial investments at fair value through other comprehensive income 515 598 Securities financing 145 198 Loans and advances banks 58 82 Loans and advances customers 6,238 7,061 Non-trading derivatives - hedge accounting - Cash flow hedges 375 427 Non-trading derivatives - hedge accounting - Fair value hedges -1,291 -1,183 Other 720 342 Interest income calculated using the effective interest method 6,760 7,525 Financial assets at fair value through profit or loss 4 16 Non-trading derivatives - no hedge accounting 53 50 Other 201 224 Other interest and similar income 258 290 Total interest income 7, 0 1 7 7,815 Interest income decreased by EUR798million at 31 December 2021, mainly due to the lower interest income from loans and advances customers related to the low interest rate environment and the decrease in corporate loans related to the wind-down of the CIB non-core portfolio. This was partly mitigated by charging negative interest rates on client deposits andthe TLTRO discount of EUR93million. 281 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 Interest expense (inmillions) 2021 2020 Interest expenses from: Securities financing 69 101 Due to banks 67 91 Due to customers 320 380 Issued debt 864 1,171 Subordinated liabilities 352 416 Non-trading derivatives - hedge accounting - Cash flow hedges 4 11 422 Non-trading derivatives - hedge accounting - Fair value hedges -909 -1,012 Other 223 265 Interest expense calculated using the effective interest method 1,397 1,834 Financial liabilities at fair value through profit or loss 35 36 Non-trading derivatives - no hedge accounting 43 57 Other 333 24 Other interest and similar expense 411 118 Total interest expense 1,808 1,952 Interest expense decreased by EUR144million at 31 December 2021. This was mainly due to lower interest expense from issued debt and subordinated liabilities as maturing debt was replaced at lower interest rates/coupons, as well as lower funding needs. The decrease was partly offset by the interest component in the provision for variable interest rates for consumer loans. 5 Net fee and commission income Accounting policy for net fee and commission income ABNAMRO applies IFRS 15 when recognising revenue from contracts with clients, all of which is included in net fee and commission income. After identifying contracts and their performance obligations, revenue is recognised as an amount that reflects the consideration to which the bank expects to be entitled in exchange for transferring promised services to clients. The transaction price is allocated to each performance obligation. Revenue is measured at the fair value of the consideration received, taking into account discounts and rebates. The amount of revenue recognised is discounted to the present value of consideration due, if payment extends beyond normal credit terms. Revenue is recognised when a promised service is transferred to the client. Fees and commissions are recognised either: Å At a point in time: the fee is a reward for a service provided at a moment in time; or Å Over time (amortised): the fee relates to services on an ongoing basis. ABNAMRO engages in transactions where more than one party is involved in providing services to a client. In the caseof these transactions, ABNAMRO assesses whether it is a principal or an agent in the transaction by evaluating the natureof its promise to the client. The bank is a principal if it controls the promised goods or services before they are transferred to a client. The bank is acting as an agent, of another party, if it provides a service of arranging for another party to transfer goods or services to a client and, as a result, does not control the specified goods or services. Control of goods and services refers to the ability to direct the use of, and obtain substantially all the remaining benefits from, the goods and services. If the bank is assessed to be a principal in the transaction, it recognises revenue in the gross amount of the consideration towhich it expects to be entitled in exchange for the specified goods or services transferred. If, however, the bank acts asanagent, it recognises revenue in the amount of the fee or commission to which it expects to be entitled in exchange forarranging for the specified goods or services to be provided by the other party. The fee or commission may be the netamount of consideration that the bank retains after paying the other party the consideration received in exchange forthegoods or services to be provided by that party. 282 ABN AMRO Integrated Annual Report 2021 (inmillions) 2021 2020 Fee and commission income 2,213 2,253 Fee and commission expense 550 695 Net fee and commission income 1,664 1,558 Net fee and commission income increased by EUR106million at 31 December 2021, mainly due to a strong performance related to higher net asset management fees income at Private Banking. This was partly offset by the decrease in CIB non-core wind-down and by higher payment service expense at Retail Banking. Fee and commission income 2021 (inmillions) Retail Banking Commercial Banking Private Banking Corporate & Institutional Banking Group Functions Total Fee and commission income from: Securities and custodian services 19 1 62 570 2 653 Payment services 321 201 29 81 632 Portfolio management and trust fees 49 1 548 4 603 Guarantees and commitment fees 31 31 6 46 11 4 Insurance and investment fees 48 39 87 Other service fees 17 64 15 28 123 Total fee and commission income 485 298 699 728 3 2,213 Timing fee and commission income Recognised at a point in time 210 216 369 699 2 1,497 Recognised over time 275 82 330 30 717 Total fee and commission income 485 298 699 728 3 2,213 2020 (inmillions) Retail Banking Commercial Banking Private Banking Corporate & Institutional Banking Group Functions Total Fee and commission income from: Securities and custodian services 24 1 67 736 2 830 Payment services 286 204 25 80 595 Portfolio management and trust fees 40 1 436 477 Guarantees and commitment fees 29 28 5 80 143 Insurance and investment fees 43 1 33 77 Other service fees 19 61 17 33 131 Total fee and commission income 442 295 583 930 2 2,253 Timing fee and commision income Recognised at a point in time 187 222 321 874 2 1,606 Recognised over time 254 74 262 56 647 Total fee and commission income 442 295 583 930 2 2,253 Fee and commission expense (inmillions) 2021 2020 Fee and commission expenses from: Securities and custodian services 210 392 Payment services 191 143 Portfolio management and trust fees 73 58 Guarantees and commitment fees 28 30 Insurance and investment fees 31 34 Other service fees 16 39 Total fee and commission expense 550 695 283 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 6 Net income from other operating activities Accounting policy for other operating income Other operating income includes all other banking activities such as operating lease activities as lessor and results on the disposal of assets. It also includes the change in fair value of derivatives used for risk management purposes that do not meet the requirements for hedge accounting, ineffectiveness of hedging programmes, fair value changes relating to assets and liabilities measured at fair value through profit or loss, and changes in the value of derivatives related to such instruments. Dividend income from non-trading equity investments is recognised when entitlement is established. Income from operating lease activities is presented separately from the depreciation expense of the related assets. Prior to 2021, income from operating lease activities was measured net of depreciation of the underlying assets. In 2021, the lease income from operating lease activities became material. Therefore, income from operating lease activities is presented separately from the depreciation expenses of the underlying assets so as to better reflect the substance of the transactions. (inmillions) 2021 2020 Income from lease activities 163 171 Disposal of operating activities and equity-accounted investments 3 12 Result from financial transactions 245 -15 Other 395 293 Income from other operating activities 805 462 (inmillions) 2021 2020 Expenses from from lease activities 142 148 Expenses from other operating activities 142 148 Total income from other operating activities increased by EUR343million to EUR805million at 31 December 2021. The increase was mainly due to an increase in the result from financial transactions and, to a lesser extent, to other income. The result from financial transactions increased by EUR260million to EUR245million at 31 December 2021. This was due to revaluation gains relating to equityinterests in other entities, including the investment in Tink and Capital A funds. Other income increased by EUR101million to EUR395million at 31 December 2021. This increase relatedmainly to the sale and leaseback of ABNAMRO’s head office at Gustav Mahlerlaan in 2021, which resulted in a pre-tax gain of EUR327million (EUR245million net of tax) in other operating income as part of Group Functions. Please refer to Note 24 ‘Property and equipment, leases, goodwill and other intangible assets’ for more information on the sale and leaseback transaction. 7 Net trading income Accounting policy for net trading income In accordance with IFRS 9, trading positions are held at fair value, and net trading income includes gains and losses arising from changes in the fair value of such financial assets and liabilities. The lattercomprise gains and losses from trading financial assets and liabilities, interest income and expenses related to trading financial assets and liabilities, and dividends received from trading instruments. Dividend income and dividends from trading instruments are recognised at the dividend announcement date. Net trading income also includes changes in fair value arising from changes in counterparty credit spreads (CVA) and changes in own credit spreads (DVA) where these impact on the value of our trading assets and liabilities. The funding valuation adjustment (FVA) incorporates the incremental cost of funding into the valuation of uncollateralised andpartly collateralised derivatives. 284 ABN AMRO Integrated Annual Report 2021 (inmillions) 2021 2020 Interest instruments trading 28 68 Equity and commodity trading 7 18 Foreign exchange transaction results 110 77 Total net trading income 145 163 Net trading income decreased by EUR 18 million at 31 December 2021, totalling EUR 145 million. The decrease was drivenby the negative impact of the repayment of German dividend withholding tax relating to transactions that might beconsidered as cum/cum transactions. The amounts have been repaid in anticipation of a decision by the German tax authorities. This was partially offset by the positive impact of the higher FX-volumes and improved CVA/DVA/FVA results. Commodity trading income decreased due to lower volumes in the USA. The XVA result was mainly impacted by the decrease in the CVA reserve. The CVA reserve decreased due to an increase in interest rates and changes in counterparty credit spreads. The FVA reserve decreased due to lower funding spreads. 8 Net gains/(losses) on derecognition of financial assets measured at amortised cost Accounting policy derecognition of financial assets The net gains/(losses) on derecognition of financial assets measured at amortised cost includes gains and losses recognisedon the sale or derecognition of these financial assets, calculated as the difference between the carrying amount(which is the amortised cost adjusted for the loss allowance) and the proceeds received. The net losses on derecognition of financial assets measured at amortised cost increased by EUR96million to EUR108million at 31 December 2021. The net losses on derecognition of financial assets measured at amortised cost comprise EUR59million of gains and EUR166million of losses on derecognition of financial instruments at amortised cost and were mainly due to loan disposals as part of the non-core wind-down. 9 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 theemployees provide the services to which the payments relate. The accounting policies for pensions and other post-employment benefits are included in Note 31 Pension and other employee benefits. (inmillions) 2021 2020 Salaries and wages 1,726 1,540 Social security charges 220 216 Expenses relating to Defined post employment benefit plans 3 1 Defined contribution plan expenses 291 306 Other 84 217 Total personnel expenses 2,324 2,280 Total personnel expenses increased by EUR44million in 2021 compared to 2020. The increase of EUR186million in salaries and wages was mainly driven by an increase in FTE levels following the AML remediation programmes and a 2.75% increase in salaries under the Collective Labour Agreement. The wind-down at CIB was the main driver for the increase in retention payments. The decrease in defined contribution plan expenses of EUR15million was due to a release as a result of a favourable court ruling.This was partly offset by the increase in FTEs, resulting in higher pension costs. Other personnel expenses decreased by EUR133million, mainly due to higher restructuring provisions related to staff expenses in 2020. The decrease is also related to lower dismissal payments and short-term employee benefit expenses than in 2020, due to Covid-19 restrictions. 285 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 10 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. (inmillions) 2021 2020 Agency staff, contractors and consultancy costs 875 776 Staff-related costs 38 42 Information technology costs 980 973 Housing 88 108 Post, telephone and transport 32 34 Marketing and public relations costs 84 80 Regulatory charges 463 397 Other 728 267 Total general and administrative expenses 3,287 2,677 Total general and administrative expenses for 2021 increased by EUR610million. Agency staff, contractors and consultancy costs increased by EUR99million, mainly related to an increase of EUR114million in contractors costs due to the upscaling of AML activities. Other expenses increased by EUR461million, mainly due to the AML settlement of EUR480million with the Netherlands Public Prosecution Service regarding shortcomings in AML activities and additions to legal provisions.This was partly offset by the release of AML provisions. (inmillions) 2021 2020 Bank tax 150 95 Deposit Guarantee Scheme 127 128 Single Resolution Fund 159 145 Other regulatory levies 27 29 Total regulatory charges 463 397 Regulatory charges increased by EUR66million, mainly due to increases in banking tax expenses and resolution fund expenses. Auditor’s fees to EY are included under agency staff, contractors and consultancy costs. The fees stated for the audit of the financial statements are based on the total fees for the audit of the financial statements, regardless of whether the procedures were performed before the year-end. These are specified in the following table. (inmillions) 2021 2020 Financial statements audit fees 15 14 Audit-related fees 2 2 Total auditor's fee 17 16 Financial statement audit fees relating to the audit of activities in the Netherlands amounted to EUR13million in 2021 (2020: EUR12million). Audit-related fees for activities in the Netherlands amounted to EUR2million in 2021 (2020: EUR2million). Audit-related fees comprise services for regulatory reporting purposes, comfort letters and consent letters, assurance engagements on segregation of assets, assurance on service organisation reports and procedures agreed for supervisory purposes. 286 ABN AMRO Integrated Annual Report 2021 11 Income tax expense, tax assets and tax liabilities Accounting policy for income tax expense, tax assets and tax liabilities Income tax expense consists of current and deferred tax. Income tax is recognised in the income statement and in the statement of other comprehensive income in the period in which profits arise. Withholding taxes are included in income tax when these taxes become payable by a subsidiary, associate or joint arrangement on distributions to ABNAMRO. 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. 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 offset only when there is both a legal right to offset and an intention to settle on a netbasis. (inmillions) 2021 2020 Recognised in income statement: Current tax expenses for the current period 675 417 Adjustments recognised in the period for current tax of prior periods 1 -68 Total current tax expense 676 349 Deferred tax arising from the current period -41 -10 0 Impact of changes in tax rates on deferred taxes -1 -12 Deferred tax arising from the write-down or reversal of a write-down of a deferred tax asset -24 139 Deferred tax prior period -9 27 Previously unrecognised tax losses, tax credits and temporary differences reducing deferred tax expense 3 Tax expense (income) relating to changes in accounting policies and errors included in profit and loss -1 Total deferred tax expense -72 52 Total income tax expense 604 401 The EUR139million write-down in 2020 includes the write-down of deferred tax assets related to the wind-down of the CIBnon-core portfolio. Reconciliation of the total tax charge The effective rate based on the consolidated income statement differs from the theoretical rate that would arise using the statutory tax rate of the Netherlands. This difference is explained in the following table. 287 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 (inmillions) 2021 Effective tax rate 2020 Effective tax rate Profit/(loss) before taxation 1,838 356 Applicable tax rate 25.0% 25.0% Expected income tax expense 459 89 International tax rate difference -5 -0.3% 70 19.6% Adjustment previous years -8 -0.4% -41 -11.4% Change in tax rates -1 -0.1% -12 -3.4% Banking tax 36 2.0% 22 6.3% Non-taxable income -1 -0.1% -2 -0.5% Non-deductible expenses 152 8.3% 29 8.2% Tax exempt (participation exemption) -45 -2.4% 7 1.9% Losses not benefited 40 2.2% 95 26.7% Change recognition of deferred tax assets -24 -1.3% 138 38.7% Other tax effects 0.0% 6 1.6% Actual income tax expense 604 32.9% 401 112.6% The effective tax rate in 2021 (32.9%) is significantly lower than in 2020 (112.6%). This decrease is mainly the result of an exceptionally high effective tax rate in 2020. In 2020 no full tax benefit was recognised on the provision for the CIB non-core wind-down since no deferred tax asset could be recognised on the losses in specific tax jurisdictions. The relatively high rateof 32.9% in 2021, compared to the standard Dutch rate of 25%, was mainly driven by the AML settlement recorded inQ1 2021 and the bank tax recorded in Q4 2021, which are not tax deductible. 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 and investments. The following table summarises the tax position. 31 December 2021 31 December 2020 (inmillions) Assets Liabilities Assets Liabilities Current tax 119 101 176 27 Deferred tax 620 674 4 Total tax assets and liabilities 739 101 851 30 The significant components and annual movements in deferred tax assets and deferred tax liabilities are shown in the following tables. (inmillions) As at 31 December 2020 Income statement OCI Equity Other As at 31 December 2021 Of which: deferred tax asset Of which: deferred tax liability Assets and liabilities held for trading, derivatives and financial investments 560 1 - 11 3 448 538 90 Property and equipment (excluding leases) andintangible assets 15 3 18 22 4 Loans 6 1 7 7 1 Equity-accounted investments 3 -3 Leases 5 32 37 110 72 Pensions and other (post-)employment benefits 20 -6 -3 11 11 Provisions 17 9 -2 24 24 Tax losses carried forward 25 25 51 51 Other 19 9 -5 24 47 23 Deferred tax assets (+) and liabilities (-) 671 72 -123 1 620 811 191 Offsetting deferred tax assets and liabilities 191 191 Net deferred tax assets (+) and liabilities (-) 620 288 ABN AMRO Integrated Annual Report 2021 (inmillions) As at 31 December 2019 Income statement OCI Equity Other As at 31 December 2020 Of which: deferred tax asset Of which: deferred tax liability Assets and liabilities held for trading, derivatives and financial investments 400 -2 161 2 560 620 60 Property and equipment (excluding leases) andintangible assets 5 9 1 15 21 7 Loans 38 -30 -2 6 7 1 Equity-accounted investments 2 3 3 Leases 5 5 58 53 Pensions and other (post-)employment benefits 17 1 1 20 20 Provisions 20 -1 -2 17 18 1 Tax losses carried forward 31 -1 1 -5 25 25 Other 50 -27 -2 -2 1 19 35 15 Deferred tax assets (+) and liabilities (-) 569 -52 158 2 -6 671 808 137 Offsetting deferred tax assets and liabilities 134 134 Net deferred tax assets (+) and liabilities (-) 674 4 Deferred tax assets The overall decrease in deferred tax assets through other comprehensive income includes an offsetting impact of EUR14million due to the decision to increase the corporate income tax rate in the Netherlands from 25% to 25.8% for2022 onwards. 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. Recognition is based on estimates of sufficient taxable income by jurisdiction in which ABNAMRO operates and the period over which deferred tax assets are recoverable. In the event that actual results differ from these estimates in future periods, changes to the recognition of deferred tax assets could be required and these could impact on our financial position and net profit. No deferred income taxes have been recognised on undistributed earnings of ABNAMRO’s subsidiaries, branches and interests in joint ventures. Tax losses The total accumulated losses available for carry-forward at 31 December 2021 amounted to EUR2,550million (31December2020: EUR2,058million), of which EUR202million (31 December 2020: EUR101million) is recognised forfuture tax benefits. The recorded deferred tax asset for tax losses carried forward amounted to EUR51million (31December 2020: EUR25million). Unrecognised tax assets Certain amounts of deferred tax assets are not recognised because future taxable profits are not considered probable. Deferred tax assets for an amount of EUR83million (31 December 2020: EUR126million) have not been recognised in respect of gross deductible temporary differences of EUR342million (31 December 2020: EUR513million). In addition, deferred tax assets for an amount of EUR429million (31 December 2020: EUR349million) have not been recognised in respect of gross tax losses of EUR2,348million (31 December 2020: EUR1,957million). In 2022, we expect an amount of EUR1,131million of the unrecognised gross tax losses to be finally written off unutilised, due to liquidation of the company holding these losses. No use for these losses could be identified. Tax credits and unrecognised tax credits ABNAMRO did not have any carry-forward tax credits at 31 December 2021. 289 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 The following table shows when the operating losses as at 31 December 2021 expire. (inmillions) 2021 2022 2023 2024 2025 2026 After 5years No expiration Total 2021 Loss carry-forward recognised 24 177 202 Loss carry-forward not recognised 11 2 3 39 3 2,290 2,348 Total tax losses carry-forward (gross) 11 2 3 39 3 24 2,468 2,550 2020 Loss carry-forward recognised 1 1 2 97 101 Loss carry-forward not recognised 4 6 2 3 36 1 1,906 1,957 Total tax losses carry-forward (gross) 4 6 2 4 37 2 2,003 2,058 Of the total amount of recognised net deferred tax assets, EUR57million (31 December 2020: EUR31million) was related to entities that suffered a loss in either the current or preceding year. The recognition of these deferred tax assets is based on a projection of future taxable income. Tax related to equity 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 the Consolidated statement of changes in equity. Income tax consequences of dividend Dividends are, in principle, subject to a 15% withholding tax in the Netherlands. In 2021 ABNAMROBank NV withheld EUR96million of dividend withholding tax on dividends paid to its shareholders. Country-by-country reporting The following table provides an overview of total assets, total operating income, average number of FTE, operating profit/ (loss) before taxation and income tax expense, as well as 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. 31 December 2021 Principal subsidiary Main activity Total assets Total operating income (inmillions) Average number of FTEs Operating profit/(loss) before taxation (inmillions) Income tax expense (inmillions) Income tax paid (inmillions) Netherlands ABNAMROBank N.V. Retail Banking 364,653 6,806 16,491 1,884 566 421 France Banque Neuflize OBC S.A. Private Banking 5,061 310 822 85 25 54 Germany Bethmann Bank AG Private Banking 3,711 63 689 - 11 8 2 8 Belgium ABNAMROBank N.V. Branch Belgium Private Banking 1,268 87 381 10 5 United Kingdom ABNAMRO Asset based Finance N.V., UK branche Commercial Banking 2,169 58 318 -18 -3 3 Norway ABNAMROBank N.V. Oslo Branch Corporate & Institutional Banking 2,011 31 17 33 -18 Denmark ABNAMRO Securities Holdings (Denmark) ApS Corporate & Institutional Banking United States ABNAMRO Clearing Chicago LLC Corporate & Institutional Banking 16,131 70 395 -109 16 32 Brazil Banco ABNAMRO S.A. Corporate & Institutional Banking 224 11 55 7 -4 2 Singapore ABNAMROBank N.V. Branch Singapore Corporate & Institutional Banking 3,037 83 214 35 5 6 Hong Kong ABNAMROBank N.V. Branch Hong Kong Private Banking 553 35 88 15 4 6 Japan ABNAMRO Clearing Tokyo Co. Ltd. Corporate & Institutional Banking 57 20 18 9 3 3 United Arab Emirates ABNAMROBank N.V. Branch UAE/DIFC Private Banking 2 Australia ABNAMRO Clearing Sydney Pty Ltd. Corporate & Institutional Banking 380 20 68 5 3 Other -143 5 25 -1 Total 399,113 7,597 19,583 1,838 604 534 290 ABN AMRO Integrated Annual Report 2021 31 December 2020 Principal subsidiary Main activity Total assets Total operating income (inmillions) Average number of FTEs Operating profit/(loss) before taxation (inmillions) Income tax expense (inmillions) Income tax paid (inmillions) Netherlands ABNAMROBank N.V. Retail Banking 355,587 6,405 15,430 1,052 271 227 France Banque Neuflize OBC S.A. Private Banking 4,982 523 806 305 102 97 Germany Bethmann Bank AG Private Banking 3,529 226 677 40 10 14 Belgium ABNAMROBank N.V. Branch Belgium Private Banking 1,348 90 379 -49 United Kingdom ABNAMRO Commercial Finance Plc Commercial Banking 2,076 61 316 -8 6 Norway ABNAMROBank N.V. Oslo Branch Corporate & Institutional Banking 2,018 46 20 -175 -7 -7 Denmark ABNAMRO Securities Holdings (Denmark) ApS Corporate & Institutional Banking - 119 United States ABNAMRO Clearing Chicago LLC Corporate & Institutional Banking 18,968 331 440 -344 -7 25 Brazil Banco ABNAMRO S.A. Corporate & Institutional Banking 374 13 76 -3 7 1 Singapore ABNAMROBank N.V. Branch Singapore Corporate & Institutional Banking 5,025 108 268 -327 3 7 Hong Kong ABNAMROBank N.V. Branch Hong Kong Private Banking 1,159 72 111 -101 15 3 Japan ABNAMRO Clearing Tokyo Co. Ltd. Corporate & Institutional Banking 229 18 18 9 3 United Arab Emirates ABNAMROBank N.V. Branch UAE/DIFC Private Banking 3 Australia ABNAMRO Clearing Sydney Pty Ltd. Corporate & Institutional Banking 523 17 65 1 Other -75 5 32 -42 3 Total 395,623 7,916 18,642 356 401 373 ABNAMRO received government grants for its participation in the TLTRO III programme in 2021 and the TLTRO II programme in 2021 and 2020. For more information, please refer to Note 27 Due to banks. 12 Earnings per share The following table shows the composition of basic earnings per share at 31 December. 2021 2020 (inmillions) Profit/(loss) for the period 1 Number of shares Earnings per share (in EUR) Profit/(loss) for the period 1 Number of shares Earnings per share (in EUR) Basic earnings 1,140 940 1.21 -158 940 -0.17 1 Earnings consist of profit excluding results attributable to non-controlling interests and payments to holders of AT1 instruments. ABNAMROBank N.V. does not have any dilutive potential ordinary shares. Therefore only basic earnings per ordinary share is disclosed. Basic earnings per ordinary share is calculated by dividing the profit attributable to the owners of the parent company by the weighted average number of ordinary shares outstanding. In 2021, a final dividend of EUR0.68 per share was distributed for 2019 in a total amount of EUR639million. For the year 2021 a final dividend has been proposed of EUR 0.61 per share. 13 Cash and balances at central banks Accounting policy for cash and balances at central banks Cash and balances at central banks are held at amortised cost. This item includes cash on hand and available demand deposits with central banks in countries in which the bank has a presence. Mandatory reserve deposits are disclosed inNote20 Loans and advances banks. 291 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 (inmillions) 31 December 2021 31 December 2020 Assets Cash on hand and other cash equivalents 12 96 Balances with central banks readily convertible in cash other than mandatory reserve deposits 66,853 60,094 Total cash and balances at central banks 66,865 60,190 Cash and balances at central banks increased by EUR 6.7 billion, mainly due to the increase in collateral related to more clearing activities (EUR 4.2 billion) and to the issuance of senior non-preferred bonds in issued debt (EUR 2.6 billion). 14 Financial assets and liabilities held for trading Accounting policy for financial assets and liabilities held for trading In accordance with IFRS 9, all assets and liabilities held for trading are measured at fair value through profit or loss, withgains and losses in the changes of the fair value taken to net trading income in the income statement. Financial assets held for trading (inmillions) 31 December 2021 31 December 2020 Trading securities Government bonds 480 639 Corporate debt securities 670 674 Equity securities 3 1 Total trading securities 1,153 1,314 Trading book loans 2 2 Total financial assets held for trading 1,155 1,315 The decrease of EUR0.2billion in financial assets held for trading was mainly related to changes in Dutch, German andFrench government bond positions. These portfolios consist of primary dealership positions of ABNAMROBank N.V. inthe respective countries and positions for the purpose of client facilitation. Financial liabilities held for trading (inmillions) 31 December 2021 31 December 2020 Bonds 654 469 Other liabilities held for trading 33 94 Total financial liabilities held for trading 687 563 The increase of EUR0.1billion in financial liabilities held for trading was the result of higher short positions in bonds, primarily Dutch, German and French sovereign debt. This was partially offset by the decrease in other liablities held for trading, which was mainly attributable to the regular maturity of trades. 15 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. ABNAMRO also offers products that are traded on the financial markets to institutional and individual clients and governments. Derivatives held for risk management purposes include derivatives qualifying for hedge accounting and those used for 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. 292 ABN AMRO Integrated Annual Report 2021 Derivative assets and liabilities subject to master netting arrangements are presented net only when they satisfy the eligibility requirements for netting under IAS 32. ABNAMRO did not have any netted derivative positions in the statement of financial position in either 2021 or 2020. As derivative transactions and the related cash collateral held at a CCP are settled on a daily basis, the carrying amount of these positions in the statement of financial position is nil. From a risk perspective, the gross amount of trading assets must be associated with the gross amount of trading liabilities, which are presented separately in the statement of financial position. 31 December 2021 Derivatives held for trading Economic hedges Hedge accounting Total derivatives (inmillions) Interest rate Currency Other Interest rate Currency Other Interest rate Exchange traded Fair value assets 4 4 Fair value liabilities 3 3 Notionals 4,217 9 1 4,226 Over-the-counter Central counterparties Fair value assets Fair value liabilities Notionals 1,026,420 1,195 106,305 1,133,920 Other bilateral Fair value assets 2,385 509 78 68 177 13 552 3,781 Fair value liabilities 2,865 563 113 143 11 8 3 535 4,341 Notionals 148,764 48,213 1,498 1,048 10,621 74 59,651 269,869 Total Fair value assets 2,388 509 78 68 177 13 552 3,785 Fair value liabilities 2,866 567 113 143 11 8 3 535 4,344 Notionals 1,179,401 48,222 1,499 2,243 10,621 74 165,956 1,408,016 31 December 2020 Derivatives held for trading Economic hedges Hedge accounting Total derivatives (inmillions) Interest rate Currency Other Interest rate Currency Other Interest rate Exchange traded Fair value assets 1 1 9 2 12 Fair value liabilities 1 1 16 18 Notionals 9,466 239 10 97 9,812 Over-the-counter Central counterparties Fair value assets Fair value liabilities Notionals 1,059,416 1,031 104,203 1,164,650 Other bilateral Fair value assets 3,573 1,164 293 83 285 25 945 6,369 Fair value liabilities 5,062 781 298 164 257 5 807 7,373 Notionals 147,007 60,000 3,588 782 20,005 369 34,636 266,387 Total Fair value assets 3,573 1,164 303 83 285 27 945 6,381 Fair value liabilities 5,063 782 314 164 257 5 807 7,391 Notionals 1,215,889 60,239 3,598 1,813 20,005 467 138,839 1,440,850 293 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 The EUR36.5billion decrease in the notional amount of interest rate derivatives held for trading was mainly due to a decrease in volume and number of trades. The notional amount of currency derivatives held for trading decreased by EUR12.0billion, mainly due to lower client activity. The notional amount on currency derivatives used for economic hedges decreased by EUR9.4billion due to the maturity of various cross-currency swaps. The notional amount of interest rate derivatives used for hedge accounting increased by EUR27.6billion. The portfolio of interest rate swaps increased as a result of interest rate risk management activities. 16 Hedge accounting Accounting policy for hedge accounting ABNAMRO enters into various derivative and non-derivative instrument transactions with external parties to hedge risks on assets, liabilities 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 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, or net investment in a foreign operation that (a) exposes the entity to the risk of changes in fair value or future cash flows, and (b) is designated as being hedged. The hedged risks are typically changes in interest rates or foreign currency rates. ABNAMRO’s market risk management strategy, which includes interest rate risk and foreign currency risk in the banking book, is described in more detail in the Risk, funding & capital management section. Both at the inception of the hedge and on an ongoing basis, ABNAMRO assesses whether the derivatives designated in each hedging relationship are expected to be and have been highly effective in offsetting changes in the fair value or cash flows of the hedged item. These prospective and retrospective effectiveness tests are performed by using a regression analysis. ABNAMRO applies the following criteria to assess whether the hedging relationship is effective: Å A regression co-efficient (R squared), which measures the correlation between the variables in the regression; and Å A slope of the regression line is within a range of 0.80-1.25. Hedge ineffectiveness and gains and losses on components of a derivative that are excluded from the assessment of hedge effectiveness are recorded directly in the result from financial transactions as part of other operating income. ABNAMRO 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. Application of IAS 39 as endorsed by the European Union As permitted by IFRS 9 paragraph 7.2.21, ABNAMRO has elected to continue applying the requirements of IAS 39 as endorsed by the European Union instead of applying the hedge accounting requirements of IFRS 9. The EU-endorsed version of IAS 39 provides relief from certain hedge accounting requirements when compared to the full hedge accounting text of IAS 39. One of these reliefs is that negative credit spreads can be excluded from hedge relationships. ABNAMRO applies this to several micro fair value hedge relationships. Another relief is that the impact of changes in the estimates of the repricing dates is considered ineffective only if it leads to over-hedging. This relief is applied in the macro fair value hedge. Fair value hedges ABNAMRO 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). 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 remeasurement of both the hedging instrument and the hedged item are recognised in the income statement as result from financial transactions, which is part of the line item Other operating income. 294 ABN AMRO Integrated Annual Report 2021 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 the 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. 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. The main sources of hedge ineffectiveness in micro fair value hedges are: Å The effect of the counterparty and the bank’s own credit risk on the fair value of the interest rate swap that is not reflected in the fair value of the hedged item, which is only attributable to the change in the interest rate; Å The difference in discounting between the hedged item and the hedging instrument; and Å Potential differences in maturities of the interest rate swap and the loans or notes. Macro fair value hedge accounting Å ABNAMRO manages the interest rate risk arising from fixed-rate mortgages by entering into interest rate swaps. The exposure from this portfolio frequently changes due to new loans originated, contractual repayments and prepayments made by clients in each period. More than one group (or portfolio) of mortgages can be identified as the hedged item within the fixed-rate mortgage portfolio. To ensure an effective matching of hedged items and hedging instruments, ABNAMRO applies a dynamic strategy in which hedged items are de-designated and re-designated on a monthly basis. The hedge accounting relationship is reviewed and re-designated on a monthly basis. Hedged mortgages are fixed-rate mortgages with the following features: Å denominated in local currency (euros); 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. At each designation, the mortgage cash flows are allocated to monthly time buckets, based on the expected maturity dates. ABNAMRO models the maturity dates of mortgages, taking into account the modelled prepayments applied to the contractual cash flows and the maturity dates of the mortgage portfolio. If the interest rate swap notional exceeds the expected mortgage notional in any given month, taking into account the uncertainty of the expected mortgage notional by applying a haircut, mortgages that mature in adjacent buckets are designated to the interest rate swaps. Changes in the fair value of the mortgages that are attributable to the hedged interest rate risk are recognised as fair value adjustments from hedge accounting in the income statement and adjust the carrying amount of the mortgages. The recognised fair value changes in the mortgages partially offset the changes in fair value of the interest rate swaps and therefore reduce the profit or loss volatility that would otherwise arise from changes in the fair value of the interest rate swaps alone. At the start of the hedge relationships and at each monthly de-designation, the difference between the fair value attributable to the hedged interest rate risk and the carrying amount of the hedged mortgages is amortised over the remaining life of the hedged item. In addition to the sources of ineffectiveness described for micro fair value hedges, the sources of ineffectiveness specifically for macro hedges are: 295 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 Å The difference between the expected and actual volume of prepayments for the mortgage portfolio to the extent the difference would lead to over-hedging; and Å The difference in payment frequency between the fixed leg of the hedging instrument and the payment frequency of the hedged item (mortgages). Cash flow hedges ABNAMRO applies cash flow hedge accounting to a portfolio of future cash flows on banking book assets and liabilities – the hedged items – and a portfolio of interest rate swaps – the hedging instruments. The hedge 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. 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 remeasurement of the hedging instrument is recognised directly in other comprehensive income. Hedge effectiveness for the macro cash flow hedge is measured as the amount by which the changes in the fair value of the interest rate swaps are in excess of changes in the fair value of the expected cash flows in the hedge relationship. Any ineffective part of the cash flow hedge is recognised in other operating income immediately. When a cash flow hedging instrument or hedge relationship is terminated but the hedged transaction is still expected to occur, the accumulated gains or losses continue to be recognised in other comprehensive income and are transferred to the income statement when the hedged transaction affects profit or loss. The gains or losses are 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 accumulated gains or losses recognised in other comprehensive income are recognised in the income statement immediately. The main sources of hedge ineffectiveness for cash flow hedges are: Å The effect of the counterparty and the bank’s own credit risk on the fair value of the interest rate swap that is not reflected in the fair value of the hedged item, which is only attributable to the change in the interest rate; and Å Potential differences in maturities of the interest rate swap and the loans or notes. The hedged items in the macro cash flow hedge are future cash flows, which are derived from the projected balance sheet. This projected balance sheet takes the contractual terms and conditions of financial assets and liabilities and combines these with estimated prepayments, volume growth rates and interest scenarios. Within the projected balance sheet, assets and liabilities are grouped on the basis of the specific interest rate index on which they reprice (e.g. one month, three months, six months, twelve months). For each repricing index, all assets and liabilities are allocated on a gross basis to monthly buckets in which they reprice up until their maturity. The notional amounts of the interest rate swaps, which can be either pay or receive floating interest, are also grouped per interest rate index and allocated to monthly repricing buckets until their maturity. The hedge relationship is established by designating the interest rate swap cash flows per bucket to the corresponding bucket of projected cash flows of the hedged items. The hedged risk identified is the benchmark rate that applies to the buckets. If there are no projected cash flows available in the corresponding bucket for the applicable benchmark rate, the interest rate swap cash flows are designated to projected cash flows in a bucket with a different benchmark. The availability of projected cash flows in the buckets is not constant over time and is therefore evaluated on a monthly basis. Changes in cash flow projections may lead to a revision of the designation. Back-testing is performed on the interest rate risk models. Historical data are used to review the assumptions applied. Hedges of net investments in foreign operations ABNAMRO 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 other comprehensive income, insofar as they are effective. The accumulated gains or losses recognised in other comprehensive income are transferred to the income statement on the disposal of the foreign operation. 296 ABN AMRO Integrated Annual Report 2021 In previous years, ABNAMRO hedged its currency exposure to certain investments in foreign operations by hedging its net investment in these foreign operations with forward contracts. ABNAMRO currently still holds some currency translation reserve for these respective positions, but no longer applies net investment hedge accounting. 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 in profit or loss. Effect on financial position and performance - hedging instruments Notional amount Carrying amount Line item in the statement of financial position Changes in fair value used for calculation hedge ineffectiveness for the year (inmillions) Assets Liabilities 31 December 2021 Cash flow hedges - macro Interest rate 25,269 Derivatives 443 Fair value hedges - macro Interest rate 46,278 Derivatives 1,610 Fair value hedges - micro Interest rate 94,409 552 535 Derivatives -1,063 Economic hedges Total economic hedges 12,938 258 264 Derivatives n/a 31 December 2020 Cash flow hedges - macro Interest rate 6,826 Derivatives -268 Fair value hedges - macro Interest rate 38,061 Derivatives -523 Fair value hedges - micro Interest rate 93,952 945 807 Derivatives 456 Economic hedges Total economic hedges 22,285 395 426 Derivatives n/a The deltas in the hedge accounting numbers are largely attributable to interest rate developments in 2021. 297 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 Effect on financial position and performance - hedged item Carrying amount of the hedged item Accumulated amount of fair value hedge adjustments on the hedged item Line item in the statement of financial position Change in value used for cal- culating hedge ineffectiveness for the year Cash flow hedge reserve/ Foreign currency translation reserve Assets Liabilities Assets Liabilities Continuing hedges Discontinued hedges (inmillions) active and discontinued active and discontinued active and discontinued active and discontinued 31 December 2021 Cash flow hedges - macro Interest rate -449 -690 -1,386 Fair value hedges - macro Interest rate - Financial assets at AC 46,278 1,442 Residential mortgages -1,603 Fair value hedges - micro Interest rate - Financial assets atFVOCI 37,547 1,636 Financial investments -1,389 Interest rate - Financial assets at AC 1,088 509 Corporate & Other loans -142 Interest rate - Financial liabilities at AC 59,336 2,230 Issued debt & Subordinated liabilities 2,548 Net investment hedges Currency -42 31 December 2020 Cash flow hedges - macro Interest rate 262 -1,206 -1,266 Fair value hedges - macro Interest rate - Financial assets at AC 38,061 3,186 Residential mortgages 536 Fair value hedges - micro Interest rate - Financial assets at FVOCI 40,028 2,997 Financial investments 443 Interest rate - Financial assets at AC 1,318 652 Corporate & Other loans 104 Interest rate - Financial liabilities at AC 60,631 4,798 Issued debt & Subordinated liabilities -1,015 Net investment hedges Currency -42 The accumulated amount of fair value hedge adjustments remaining in the statement of financial position for hedged items that have ceased to be adjusted for hedging gains and losses amounted to EUR0.2billion at 31 December 2021 (2020: EUR0.5billion). 298 ABN AMRO Integrated Annual Report 2021 Effect on financial position and performance - hedge ineffectiveness and hedging gains or losses (inmillions) Changes in fair value used for calculation hedge ineffectiveness for the year - hedged item Change in value used for calculating hedge ineffec- tiveness for the year - hedging instrument Hedge ineffectivenes recognised in profit or loss Line item in profit or loss (that includes hedge ineffectiveness) Change in the value of the hedging instrument recognised in OCI 1 Amount re- classified from the cash flow hedge reserve to profit or loss - hedges item affected profit or loss 2 Amount reclassified from the foreign currency translation reserve to profit or loss Line item affected in profit or loss because of the reclassifi- cation 31 December 2021 Cash flow hedges - macro Interest rate -449 443 -6 Other operating income 451 -54 Net interest income Fair value hedges - macro Interest rate -1,603 1,610 7 Other operating income Fair value hedges - micro Interest rate 1,018 -1,063 -45 Other operating income Net investment hedges Currency Other operating income 31 December 2020 Cash flow hedges - macro Interest rate 262 -268 -6 Other operating income -280 -91 Net interest income Fair value hedges - macro Interest rate 536 -523 13 Other operating income Fair value hedges - micro Interest rate -468 456 - 11 Other operating income Net investment hedges Currency Other operating income 1 The amount reconciles to ‘Net gains/(losses) arising during the period’ in the specification of ‘Accumulated other comprehensive income’ in the consolidated statement of equity. 2 The amount reconciles to ‘Less: Net realised gains/(losses) included in income statement’ in the specification of ‘Accumulated other comprehensive income’ in the consolidated Amount, timing and uncertainty of future cash flows - hedging instruments (inmillions, nominal amounts) 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 Total 31 December 2021 Fair value hedges - micro Payers - Interest rate 1,195 4,508 19,213 7,372 4,399 36,687 Receivers - Interest rate 4,818 5,508 20,114 10,945 16,337 57,721 31 December 2020 Fair value hedges - micro Payers - Interest rate 1,290 2,883 16,265 8,460 2,938 31,836 Receivers - Interest rate 2,349 5,898 26,272 9,665 17,931 62,115 The weighted average fixed rate of the interest rate swaps included in micro hedge relationships varied between 1.4% and 2.1% as at 31 December 2021 (1.3% and 2.4% as at 31 December 2020), depending on the origination date, currency, product type and original maturity. 299 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 Interest rate benchmark reform ABNAMRO has analysed its significant hedging relationships directly affected by the benchmark reform. Most of ABNAMRO’s financial instruments are linked to euro area benchmarks and, as a result, so are its hedging relationships. Neither EONIA, which is published alongside its replacement €STR, nor EURIBOR cause uncertainties to arise with respect to hedged risk and/or the timing and amount of cash flows in hedging relationships. In the case of EONIA, this is because itsreplacement is already known and because ABNAMRO has not designated EONIA in any of its hedging relationships. Inthe case of EURIBOR, this is because it has already been revised in order to be BMR-compliant and no reform is anticipated in the short term. ABNAMRO’s hedging relationships affected by the IBOR reform consequentlycomprise onlyasmall percentage of its total hedging relationships. A total of EUR 163.5 billion of notional derivatives were part of hedging relationships at 31 December 2021, of which EUR146.5 billion was linked to EURIBOR and EUR 17.1 billion to other benchmarks. Of the derivative contracts linked to a non-EURIBOR benchmark, a notional amount of EUR 11.4 billion will mature before the cessation of the reference benchmark. These contracts are therefore not affected by the IBOR reform. A remaining total of EUR 5.6 billion notional is exposed to benchmarks under reform. The contracts exposed to benchmarks under reform have an average maturity of 4.1 years and areall referencing 3 months USD LIBOR. At year-end, the only IBOR reform exposures remaining were contracts that reference an IBOR rate that has yet to transition. Contracts that reference a USD LIBOR rate, but will mature before cessation are excluded from the overview. For non-derivative asset contracts referring to a LIBOR rate that ceased to exist at year-end 2021, a notional amount ofEUR22 million remained. All other contracts were repapered. Contracts referring to USD LIBOR amounted to EUR9.8billion. For non-derivative liability contracts, there were no contracts referring to a LIBOR rate that ceased to exist at year-end 2021. For derivative contracts referencing GBP LIBOR, a notional amount of EUR 313 million was outstanding. Derivative contracts referring to USD LIBOR amounted to EUR 81.9 billion notional (gross value, hence no offsetting effects shown), of which the majority has a maturity before the USD LIBOR cessation date. The exposure after cessation date is EUR 33.7 billion, of which EUR 10.1 billion relates to bilateral contracts. 17 Financial investments Accounting policy for financial investments Financial investments include financial instruments measured at fair value through other comprehensive income (FVOCI) and financial instruments measured at fair value through profit or loss (FVTPL). Accounting policy for financial instruments measured at fair value through other comprehensive income Unrealised gains and losses on FVOCI assets are recognised directly in other comprehensive income, net of applicable taxes. Interest earned, premiums, discounts and qualifying transaction costs of interest-earning FVOCI assets are amortised to income on an effective interest rate basis. When FVOCI debt instruments are sold, the cumulative gain or loss recognised in other comprehensive income is transferred to other operating income in the income statement. The impairment loss resulting from the ECL on FVOCI debt instruments is recognised in the impairment charges on financial instruments in the income statement. The related loss allowance is recognised in other comprehensive income and does not reduce the carrying amount of the FVOCI debt instruments. ABNAMRO’s impairment assessment and measurement approach for FVOCI debt instruments is set out in Credit risk management in the Risk, funding & capital management chapter. Fair value changes in equity instruments that are irrevocably designated as FVOCI upon initial recognition are recognised in other comprehensive income and not subsequently reclassified to the income statement. Accounting policy for financial instruments measured at fair value through profit and loss Financial investments can be designated at FVTPL if doing so eliminates or significantly reduces a measurement or recognition inconsistency (an accounting mismatch). ABNAMRO also has financial instruments that are mandatorily measured at fair value because they do not meet the SPPI test. 300 ABN AMRO Integrated Annual Report 2021 (inmillions) 31 December 2021 31 December 2020 Financial investments Debt securities held at fair value through other comprehensive income 42,585 46,600 Held at fair value through profit or loss 580 855 Total financial investments 43,165 47,455 The decrease of EUR4.3billion in financial investments was mainly attributable to the decreases in Japanese, German and Dutch government and European Stability Mechanism bonds held. Financial investments measured at fair value through other comprehensive income (inmillions) 31 December 2021 31 December 2020 Interest-earning securities Dutch government 4,028 4,510 US Treasury and US government 6,628 6,383 Other OECD government 20,550 22,729 Non-OECD government 996 1,366 International bonds issued by the European Union 2,262 1,725 European Stability Mechanism 1,964 2,637 Mortgage- and other asset-backed securities 3,168 3,529 Financial institutions 2,989 3,166 Non-financial institutions 1 555 Total investments held at fair value through other comprehensive income 42,585 46,600 Most of these instruments are part of the liquidity buffer and are held for liquidity contingency purposes. More information on the composition of the liquidity buffer is provided in the Liquidity risk section of the Risk, funding & capital review chapter. Government bonds by country of origin 31 December 2021 31 December 2020 (inmillions) Accumulated unrealised gains/(losses) andfairvalue hedges gains/(losses) Impairments Fair value Accumulated unrealised gains/(losses) and fair value hedges gains/(losses) Impairments Fair value Dutch national government 402 4,028 652 4,510 USA national government 109 6,628 228 6,383 German national government 444 6,589 632 7,304 French national government 63 3,097 144 3,000 Belgian national government 11 2 -1 2,953 202 -1 2,749 Austrian national government 176 1,873 253 1,870 Finnish national government 66 1,414 107 1,768 Luxembourg national government 40 1,256 76 1,227 Canadian national government 27 1,164 50 1,106 Japanese national government 959 -1 2,512 Polish national government 145 439 180 473 Spanish national government 300 181 United Kingdom national government 110 290 130 297 Danish national government 1 211 5 215 Swedish national government 4 4 Australian national government 23 Hong Kong 170 292 Brazilian national government 61 1 40 Singapore national government 765 1,034 European Union bonds (excl. European Stability Mechanism) 42 2,262 122 1,725 Total government bonds 1,737 -1 34,463 2,780 -1 36,713 301 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 More information on the country risk positions is provided in Credit Risk in the Risk, funding & capital review section. Critical accounting estimates and judgements Interest-bearing debt securities classified as FVOCI investments are assessed at each reporting date to establish whether there are any expected credit losses. ABNAMRO has developed models to determine such credit losses. These are explained in more detail in the Risk, funding & capital management section. Impairment charges on FVOCI instruments are recorded in (un)realised gains/(losses) fair value through OCI in the statement of comprehensive income. Financial investments measured at fair value through profit or loss (inmillions) 31 December 2021 31 December 2020 Private equities and venture capital 369 521 Equity securities 2 11 334 Total investments held at fair value through profit or loss 580 855 The decrease in financial investments measured at fair value through profit or loss mainly related to the sale of the Maas Capital Shipping portfolio as part of the CIB non-core wind-down. There was also a decrease in funds held as money market funds under client segregation requirements. 18 Securities financing Accounting policy for securities financing Securities financing is measured at amortised cost. 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 advances) 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 rate 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 advances 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. 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 rate 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 2021 31 December 2020 (inmillions) Banks Customers Total Banks Customers Total Assets Reverse repurchase agreements 3,181 6,733 9,914 3,209 7,801 11,010 Securities borrowing transactions 2,973 3,251 6,225 3,266 2,448 5,715 Total 6,154 9,984 16,138 6,475 10,249 16,725 Liabilities Repurchase agreements 11 5 8,372 8,488 222 9,264 9,486 Securities lending transactions 4 1,003 1,007 398 1,479 1,877 Total 119 9,375 9,494 620 10,743 11,363 302 ABN AMRO Integrated Annual Report 2021 Securities financing transactions include balances relating to reverse repurchase activities and cash collateral on securitiesborrowed. ABNAMRO controls credit risk associated with these activities by monitoring counterparty credit exposureand collateral values on a daily basis and requiring additional collateral to be deposited with ABNAMRO when deemednecessary. The total reverse repurchase agreements and total repurchase agreements decreased at the year-end by EUR1.1billion and EUR1.0billion, respectively, due to agreements with several large clients. Items of securities financing transactions thatABNAMRO can repledge or resell are included in Note 34 Transferred, pledged, encumbered and restricted assets. 19 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, the fair value is determined in a highly objective manner. 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 techniques such as discounted cash flow models or option pricing models (e.g. Black Scholes). When portfolios of financial assets and liabilities are measured on the basis of the net exposure to the credit risk of a particular counterparty, 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 ofoffsetting transactions. Where inputs to the valuation of a new transaction cannot be reliably determined, 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. 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 Credit and debit valuation adjustments. In addition to credit valuation for loans measured 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 how counterparties consider ABNAMRO’s creditworthiness respectively; Å Funding valuation adjustment. The funding valuation adjustment incorporates the incremental cost of funding into the valuation of uncollateralised and partially collateralised derivatives; Å Own credit adjustment. An own credit risk adjustment is applied to financial liabilities where it is believed that counterparties will consider ABNAMRO’s creditworthiness when pricing such instruments; 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 valuationto 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. 303 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 Valuation control framework ABNAMRO has designated controls and processes in place 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 of 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, both for trading positions and 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 are 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 valuation techniques are used, 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. Interest rate derivatives This category includes interest rate swaps, cross-currency swaps, options and forward rate agreements. These products are valued by estimating future cash flows and discounting those cash flows, using appropriate interest rate curves. The exception is interest option contracts, which are valued using market standard option pricing models. The inputs for the discounting cash flow models are principally observable benchmark interest rates in active markets such as the interbank rates and quoted interest rates in the swap, bond and futures markets. The inputs for credit spreads – where available – are derived from prices of credit default swaps or other credit-based instruments, such as debt securities. In other cases, credit spreads are obtained from pricing services. The additional inputs for the option pricing models are price volatilities and correlations, which are obtained from broker quotations or pricing services or derived from option prices. Because of the observability of the inputs used in the valuation models, the majority of the interest rate derivative contracts are classified as level 2. If adjustments to interest rate curves, credit spreads, correlations or volatilities are based on significant unobservable inputs, the contracts are classified as level 3. Exchange traded options and futures are valued using quoted market prices and are hence classified as level 1. Foreign exchange contracts Foreign exchange contracts include foreign exchange forward contracts, foreign exchange options and foreign exchange swaps. The majority of the foreign exchange contracts at ABNAMRO are traded as over-the-counter derivatives. These instruments are valued using foreign currency exchange rates. There are observable markets both for spot and forward contracts and for futures in the world’s major currencies. The over-the-counter foreign exchange contracts are therefore classified as level 2. Government debt securities Government debt securities consist of government bonds and bills with fixed or floating rate interest payments issued by sovereign governments. These instruments are generally traded in active markets and prices can be derived directly from those markets. Therefore the instruments are classified as level 1. Highly liquid bonds are valued using exchange traded prices. Less liquid bonds are valued using observable market prices, which are sourced from broker quotes, inter-dealer prices or other reliable pricing services. For a minority of the government debt securities, active market prices are not available. In these cases ABNAMRO uses discounted cash flow valuation techniques that incorporate observable market data for similar government instruments. The main inputs are interest rate curves, liquidity spreads and credit spreads. The 304 ABN AMRO Integrated Annual Report 2021 instruments for which this method applies are classified as level 2. If adjustments to any of the main inputs are made based on significant unobservable inputs, the instrument is classified as level 3. Corporate debt securities Corporate debt securities primarily consist of corporate bonds and other debt securities issued by corporate entities. Most of these instruments are standard fixed or floating rate securities. Corporate debt securities are generally valued using observable market prices, which are sourced from broker quotes, inter-dealer prices or other reliable pricing services. These instruments are classified as level 1. If observable market prices are not available, ABNAMRO uses discounted cash flow valuation techniques, based on inputs derived from comparable instruments and credit default swap data of the issuer, to estimate credit spreads. These instruments are classified as level 2. Equity instruments Equity instruments that are actively traded on public stock exchanges are valued using the readily available quoted prices and are therefore classified as level 1. Investments in private equity funds are initially recognised at their transaction price and remeasured to the extent reliable information is available on a case-by-case basis and are classified as level 3. Loans and advances at fair value through profit or loss Loans and advances at fair value through profit or loss primarily consist of contracts with corporate clients where the contractual cash flows do not meet the SPPI requirements. The return on these contracts with embedded derivatives is based on the price of underlying commodity contracts or loans with a floating interest rate. Discounted cash flow modelsare used to value these contracts. The main inputs are interest rate curves, quoted commodity prices, liquidity spreads and credit spreads. The instruments are classified as level 2. If adjustments to interest rate curves, liquidity spreads and credit spreads are based on significant unobservable inputs, the instruments are classified as level 3. Issued debt Issued debt securities are valued using discounted cash flow models, based on current interest rate curves that incorporate observable inputs. These instruments are classified as level 2. When there are no, or only limited, publicly quoted prices available for these instruments and unobservable inputs have a significant effect on the fair value calculation, these instruments are classified as level 3. ABNAMRO 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 ABNAMRO believes its valuation techniques are appropriate and consistent with other market participants, the use of different methodologies or assumptions could result in differentestimates of the fair value at the reporting date. Fair value hierarchy ABNAMRO analyses financial instruments held at fair value in the three categories 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 that are not considered to be active, or using 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 with a significant effect on the instrument’s valuation is not based on observable market data. The effect of fair value adjustments on the instrument’s valuation is included in the assessment. ABNAMRO recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change occurred. 305 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 The following table presents the valuation methods used in determining the fair values of financial instruments carried at fairvalue. 31 December 2021 31 December 2020 (inmillions) Quoted market prices in active markets Valuation techniques - observ- able inputs Valuation techniques - significant unobserv- able inputs Total fair value Quoted market prices in active markets Valuation techniques - observ- able inputs Valuation techniques - significant unobserv- able inputs Total fair value Assets Government debt securities 480 480 639 639 Corporate debt securities 472 198 670 537 137 674 Equity securities 3 3 1 1 Other financial assets held for trading 2 2 2 2 Financial assets held for trading 955 199 1,155 1,177 139 1,315 Interest rate derivatives 4 2,927 78 3,009 1 4,471 130 4,602 Foreign exchange contracts 676 10 686 1 1,439 10 1,450 Other derivatives 90 90 11 318 329 Derivatives 4 3,694 88 3,785 12 6,228 140 6,381 Equity instruments 90 57 433 580 221 65 569 855 Other Financial investments at fair value through profit or loss 90 57 433 580 221 65 569 855 Government debt securities 35,988 439 36,427 38,876 473 39,350 Corporate debt securities 2,947 1 42 2,990 3,123 555 43 3,722 Other debt securities 3,168 3,168 3,529 3,529 Financial assets held at fair value through other comprehensive income 42,102 1 481 42,585 45,528 555 517 46,600 Loans and advances at fair value through profit or loss 104 104 406 406 Total financial assets 43,151 4,056 1,002 48,209 46,938 7,393 1,226 55,558 Liabilities Short positions in government debt securities 255 255 151 151 Corporate debt securities 320 79 399 236 82 318 Other financial liabilities held for trading 33 33 94 94 Financial liabilities held for trading 575 112 687 387 176 563 Interest rate derivatives 3,543 3,544 1 6,032 6,033 Foreign exchange contracts 3 681 684 1 1,038 1,039 Other derivatives 11 6 11 6 16 303 319 Derivatives 3 4,341 4,344 18 7,373 7,391 Issued debt 892 892 949 949 Total financial liabilities 578 5,344 5,922 405 8,498 8,904 Transfers between levels 1 and 2 There were no material transfers between levels 1 and 2. Transfers from levels 1 and 2 to 3 There were no material transfers from levels 1 or 2 to 3. Other transfers There were no other material transfers between the fair value hierarchies. 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 recorded at fair value. 306 ABN AMRO Integrated Annual Report 2021 Assets Liabilities (inmillions) Derivatives Financial investments at fair value through profit or loss Financial assets held at fair value through other com- prehensive income Loans and advances at fair value through profit or loss Issued debt Balance at 1 January 2020 125 514 517 13 Purchases 96 Sales -37 -12 -13 Redemptions -2 Gains/(losses) recorded in profit and loss 1 2 1 Unrealised gains/(losses) 2 40 -19 11 Transfer between levels -24 Other movements 15 Balance at 31 December 2020 140 569 517 Purchases 44 Sales -189 Redemptions -68 Gains/(losses) recorded in profit and loss 1 1 1 Unrealised gains/(losses) 2 -67 151 -36 Transfer between levels 14 Other movements -75 Balance at 31 December 2021 88 433 481 1 Included in other operating income. 2 Unrealised gains/(losses) on derivatives held for trading are included in net trading income, on instruments measured at FVTPL in other operating income and on instruments measured at FVOCI in other comprehensive income. Level 3 sensitivity information Interest-earning securities - government bonds ABNAMRO has a position in a Polish bond, denominated in euros (in Note 17 Financial investments, and part of Other OECD governments), for which the market is relatively illiquid. This 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 using a range of reasonable valuation spreads. Interest-earning securities - other Preferrence shares are shares for which the dividend is fixed for a period of ten 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 preferrence shares is determined by using a range of reasonable spreads and by considering the call option that is held by the issuer. Equity shares - Preferred shares Equities measured at fair value through profit and loss and classified as level 3 mainly comprise private equity investments. Private equity shares are measured at fair value, with two calculation techniques being applied: H 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 equity markets; H 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, publicly or otherwise. As a consequence, the net asset value calculation of an investment is strongly linked to movements in the quarterly performance of the company and can be used as an indicator of fair value. New investments are initially valued at fair value. Subsequently, the fair value technique, either EVCA technique or NAV calculation, is 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. 307 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 Derivatives ABNAMRO applies a credit valuation adjustment (CVA) that 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, ABNAMRO applies a proxied credit spread extracted from counterparties of comparable credit quality that do have an observable credit spread. ABNAMRO 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 following table of level 3 sensitivity information, is internally generated and is therefore an unobservable input. Valuation technique Unobservable data Carrying value Possible alternative assumptions Unobservable data range Unobservable data base (inmillions) Applying minimum Applying maximum Applying minimum Applying maximum 31 December 2021 Equity shares Private equity valuation EBITDA multiples 159 -16 16 Equity shares Private equity valuation Net asset value 274 -27 27 Interest-earning securities - government bonds Discounted cash flow Liquidity and credit spread 439 -8 13 19 74 53 Interest-earning securities - other Discounted cash flow Liquidity and credit spread 42 -2 90 381 118 Derivatives held for trading Discounted cash flow Probability of default 88 -5 8 0.4% 100.0% 33.7% 31 December 2020 Equity shares Private equity valuation EBITDA multiples 73 -7 7 5.0 6.0 5.5 Equity shares Private equity valuation Net asset value 496 -45 40 Interest-earning securities - government bonds Discounted cash flow Liquidity and credit spread 473 -19 11 31 10 0 56 Interest-earning securities - other Discounted cash flow Liquidity and credit spread 43 -3 1 114 430 159 Derivatives held for trading Discounted cash flow Probability of default 140 -8 9 1.7% 100.0% 15.2% 20 Loans and advances banks Accounting policy for loans and advances banks and customers Loans and advances banks, and loans and advances customers, are held in a ‘hold to collect’ business model. Loans and advances for which the contractual cash flows are solely payments of principal and interest (SPPI) are measured 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. Loans and advances that do not pass the SPPI test are measured at fair value through profit or loss. Please refer to Note 1 Accounting policies in the Consolidated Annual Financial Statements and to Credit risk management in the Risk, funding & capital chapter (Accounting policy for measuring allowances for credit losses). (inmillions) 31 December 2021 31 December 2020 Interest-bearing deposits 1,189 1,739 Loans and advances 1,355 1,339 Mandatory reserve deposits with central banks 199 220 Other loans and advances banks 68 101 Subtotal 2,811 3,399 Less: loan impairment allowances 10 6 Total loans and advances banks 2,801 3,394 Loans and advances banks decreased by EUR0.6billion to EUR2.8billion at 31 December 2021, mainly due to a decrease in interest-bearing deposits. 308 ABN AMRO Integrated Annual Report 2021 Mandatory reserve deposits are held with local central banks in accordance with statutory requirements. These deposits are not available to finance ABNAMRO’s day-to-day operations. 21 Loans and advances customers Accounting policy for loans and advancescustomers The accounting policy for loans and advances customers is included in Note 20 Loans and advances banks. Please refer toNote 1 Accounting policies in the Consolidated Annual Financial Statements and to the Credit risk management section ofthe Risk, funding & capital chapter (Accounting policy for measuring allowances for credit losses). (inmillions) 31 December 2021 31 December 2020 Residential mortgages (excluding fair value adjustment) 146,351 145,672 Fair value adjustment from hedge accounting on residential mortgages 1,442 3,186 Residential mortgages, gross 147,793 148,857 Less: loan impairment allowances - residential mortgage loans 82 11 6 Residential mortgages 147,711 148,741 Consumer loans, gross 10,794 11,232 Less: loan impairment allowances - consumer loans 276 294 Consumer loans 10,518 10,937 Corporate loans (excluding fair value adjustment) 78,173 78,463 Fair value adjustment from hedge accounting on corporate loans 509 652 Financial lease receivables 4,972 5,734 Factoring 3,312 2,548 Corporate loans, gross 1 86,968 87,397 Less: loan impairment allowances - corporate loans 2,053 3,053 Corporate loans at amortised cost 84,915 84,344 Corporate loans at fair value through P&L 99 400 Government and official institutions 401 1,060 Other loans 1 14,606 6,673 Fair value adjustment from hedge accounting on other loans 1 Other loans and advances customers, gross 1 15,007 7,734 Less: loan impairment allowances - other 4 3 Other loans at amortised cost 15,003 7,730 Other loans at fair value through P&L 5 6 Other loans and advances customers 15,008 7,736 Total loans and advances customers 258,251 252,159 1 Excluding loans at fair value through P&L. Loans and advances customers increased by EUR 6.1 billion to EUR 258.3 billion at 31 December 2021. This was largely attributable to an increase in other loans, mainly at Clearing, and to a lesser extent to residential mortgages. This was partly offset by modest declines in consumer loans and corporate loans. Higher collateral and default fund contributions for Clearing clients were the main contributor to the increase in other loans and advances. For information on loan impairment allowances, please refer to the Credit risk review section in the Risk, funding & capital chapter. 22 Fair value of financial instruments not carried at fair value Accounting policy for fair value of financial instruments not carried at fair value The categorisation and valuation of financial instruments not carried at fair value is determined in accordance withthe accounting policies set out in Note 19 Fair value of financial instruments carried at fair value. 309 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 Valuation methodologies The methods and assumptions described below have been applied to estimate the fair value of financial instruments not carried at fair value. These fair values were calculated for disclosure purposes only. Note that the fair value can be significantly impacted by the choice of valuation model and underlying assumptions concerning factors such as the amount and timing of cash flows, discount rates, credit risk and liquidity risk. Short-term financial instruments The carrying amounts (net of impairment allowances) of financial instruments maturing within a period of less than three months or that have no contractual maturity are assumed to be a reasonable approximation of their fair value. For certain instruments, behavioural maturities are applied. Short-term financial instruments are classified as level 2 because unobservable inputs (such as inputs to determine credit risk, prepayment risk and liquidity risk) do not have a significant influence in determining the fair value. Cash and balances at central banks Cash and balances at central banks are classified as level 1 because these instruments have a short-term nature, prices from an active market are available and no fair value adjustments are made to the carrying amounts. Securities financing Securities financing includes repurchase and reverse repurchase agreements and securities borrowing and lending transactions. Due to the short-term characteristics of these instruments and the value and liquidity of available collateral, the carrying amounts (net of impairment allowances) are considered to approximate the fair value. Securities financing amounts are classified as level 2. Loans and advancesbanks and customers The fair value of loans and advances banks and customers is estimated by a discounted cash flow model based on contractual cash flows, using actual yields and discounting by risk-free interest rates. Adjustments to reflect changes in liquidity spreads are applied and prepayment options are included in the estimated fair value. The calculations are adjusted for credit risk by incorporating the expected credit losses over the estimated lifetime of the loan, based on parameters including probability of default, loss given default and exposure at default. The loans and advances are classified as level 3 on the basis that unobservable inputs significantly influence the approximated fair values. The loans and advances for which unobservable inputs do not significantly influence the approximated fair values are classified as level 2. Behavioural maturities instead of contractual maturities are used to determine the level classification of a small part of the portfolio. Cash collateral paid to counterparties in relation to Credit Support Annexes (CSA) is included in loans and advances banks and customers. Due to the short-term characteristics of these instruments, fair value is considered to approximate the carrying amounts. The related amounts are classified as level 2. Due to banks and customers The fair value of instruments such as deposits and borrowings included in due to banks and customers is estimated by a discounted cash flow model based on risk-free interest rates. Adjustments to reflect changes in liquidity spreads are applied. Amounts due to banks and customers are classified as level 3 on the basis that unobservable inputs significantly influence the approximated fair values. The financial instruments for which unobservable inputs do not significantly influence the approximated fair values are classified as level 2. For the majority of the portfolio, behavioural maturities are used to determine the level classification. Cash collateral liabilities in relation to Credit Support Annexes (CSA) are included in due to banks and customers. Due to the short-term characteristics of these instruments, fair value is considered to approximate the carrying amounts. The related amounts are classified as level 2. Issued debt and subordinated liabilities 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 a market approach in which independent quotes from market participants are used for the debt issuance spreads above the average interbank offered rates (over a range of tenors) that the market would demand when purchasing new senior or subordinated debt from ABNAMRO. Where necessary, these quotes are interpolated, using a curve shape derived from CDS prices. 310 ABN AMRO Integrated Annual Report 2021 31 December 2021 Carrying value Total fair value Difference (inmillions) Quoted market prices in active markets Valuation techniques -observable inputs Valuation techniques -significant unobservable inputs Assets Cash and balances at central banks 66,865 66,865 66,865 Securities financing 16,138 16,138 16,138 Loans and advances banks 2,801 2,461 336 2,797 -3 Loans and advances customers 258,146 30,175 240,273 270,448 12,302 Total 343,950 66,865 48,775 240,609 356,249 12,299 Liabilities Securities financing 9,494 9,494 9,494 Due to banks 38,076 4,309 33,773 38,082 6 Due to customers 251,218 85,654 163,021 248,676 -2,542 Issued debt 58,796 43,608 18,914 62,522 3,726 Subordinated liabilities 7,549 5,959 1,979 7,938 389 Total 365,132 49,567 120,350 196,794 366,712 1,579 31 December 2020 Carrying value Total fair value Difference (inmillions) Quoted market prices in active markets Valuation techniques -observable inputs Valuation techniques -significant unobservable inputs Assets Cash and balances at central banks 60,190 60,190 60,190 Securities financing 16,725 16,725 16,725 Loans and advances banks 3,394 3,015 380 3,395 1 Loans and advances customers 251,753 44,633 219,993 264,627 12,874 Total 332,061 60,190 64,373 220,373 344,936 12,876 Liabilities Securities financing 11,363 11,363 11,363 Due to banks 36,719 7,141 29,837 36,978 259 Due to customers 238,570 75,868 162,525 238,393 -177 Issued debt 66,000 53,491 18,125 71,616 5,616 Subordinated liabilities 8,069 7,036 1,731 8,767 699 Total 360,720 60,527 114,228 192,362 367,117 6,397 23 Bank structure Accounting policy for business combinations ABNAMRO accounts for business combinations using the acquisition method when control is transferred to the bank. All items of consideration, including contingent consideration, transferred by ABNAMRO are measured and recognised at fair value at the acquisition date. Transaction costs incurred by ABNAMRO 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 ABNAMRO’s share of the fair value of the identifiable net assets acquired (including certain contingent liabilities) is recorded as goodwill. ABNAMRO measures the identifiable assets acquired and the liabilities assumed at the fair value at the acquisition date. 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 as the difference between the fair value of the previously held equity interest in the acquiree and 311 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 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. Accounting policy for subsidiaries ABNAMRO’s subsidiaries are those entities which it directly or indirectly controls. Control over an entity is evidenced by ABNAMRO’s ability to exercise its power in order to affect the variable returns that it is exposed to through its involvement in 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 consideration of all facts and circumstances. The bank 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). ABNAMRO 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 ABNAMRO companies. Some of these entities hold assets that are not available to meet the claims of creditors of ABNAMRO or its subsidiaries. These entities are consolidated in ABNAMRO’s financial statements when the substance of the relationship between ABNAMRO and the entity indicates that control is held by ABNAMRO. ABNAMRO 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. ABNAMRO’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 interests. 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 ABNAMRO has significant influence on, but no control or joint control over, the operating and financial policies. Significant influence is generally presumed when ABNAMRO holds between 20% and 50% of the voting rights. Potential voting rights that are currently exercisable are considered in assessing whether ABNAMRO has significant influence. Among other factors, representation on the board of directors, participation in the policy- makingprocess and material transactions between the entity and the investee are considered to determine significant influence. A joint venture is an investment in which two or more parties have contractually agreed to share control over the investment. Joint control exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The activities conducted through joint ventures include cash transfers, 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 on the equity of the investee and any adjustments required for impairment. ABNAMRO’s share of the profit or loss of the investee is recognised in Share of result in equity accounted investements. If ABNAMRO’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 ABNAMRO has incurred obligations or made payments on behalf of the investee. Assets and liabilities of acquisitions and divestments The following table provides details of the assets and liabilities resulting from the acquisition or disposal of subsidiaries and equity accounted investments at the date of acquisition or disposal. 312 ABN AMRO Integrated Annual Report 2021 31 December 2021 31 December 2020 (inmillions) Acquisitions Divestments Acquisitions Divestments Assets and liabilities of acquisitions and divestments Equity-accounted investments 14 -1 24 -10 Other assets -193 Other non-controlling interests Net assets acquired/Net assets divested 14 -194 24 -10 Result on divestments, gross 12 Less: non cash items 12 Net disposal result Cash used for acquisitions/received from divestments Total purchase consideration/Proceeds from sale -14 194 -24 10 Cash and cash equivalents acquired/divested Cash used for acquisitions/received from divestments -14 194 -24 10 Acquisitions and divestments In 2021, a significant portion of the Maas Capital Shipping portfolio was sold as part of the CIB non-core wind-down. MaasCapital Shipping includes participations in the shipping, intermodal and offshore services sectors for a total amount ofEUR227million. The transaction price, including direct transaction costs, was equal to the carrying amount. At year-end 2021, a total amount of EUR11million of the remaining portfolio was classified as held for sale and is expected to be sold in 2022. No significant divestments were made in 2020 and no significant acquisitions were made in 2021 or 2020. Equity-accounted investments The following table provides an overview of the most significant investments in associates and joint ventures at equity method. 31 December 2021 31 December 2020 (inmillions) Principal place of business Business line Carrying amount Equity interest (in %) Carrying amount Equity interest (in %) Joint ventures Neuflize Vie S.A. France Private Banking 240 60% 230 60% Other joint ventures 25 25 Associates Nationale-Nederlanden ABNAMRO Verzekeringen Holding B.V. The Netherlands Retail Banking 128 49% 127 49% Other equity associates 170 212 Total equity associates and joint ventures 564 593 Neuflize Vie is a joint venture where the power to govern the financial and operating policies of the economic activity is subject to joint control. Other investments in equity associates and joint ventures at equity method, which comprise a large number of equity associates and joint ventures with carrying amounts that are not individually material (less than EUR75million), are disclosed under an aggregated line item. The joint venture Richmond (2021: EUR25million; 2020: EUR25million), previously disclosed individually, is currently disclosed under Other joint ventures. The associates Stater N.V. (2021: EUR51million; 2020: EUR52million), European Merchant Services B.V. (2021: EUR18million; 2020: EUR27million) and Geldmaat B.V. (2021: EUR27million; 2020: EUR27million), previously disclosed individually, are currently disclosed under Other equity associates. 313 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 The following tables provide an overview of the summarised financial information of the most significant investments in associates and joint ventures at equity method. 31 December 2021 31 December 2020 Joint venture Associate Joint venture Associate (inmillions) Neuflize Vie S.A. Nationale-Nederlanden ABNAMRO Verzekeringen Holding B.V. Neuflize Vie S.A. Nationale-Nederlanden ABNAMRO Verzekeringen Holding B.V. Assets Financial assets held for trading 1,899 2,052 Financial investments 13,378 493 11,762 420 Loans and advances banks and customers 262 2,074 258 2,061 Property and equipment 350 5 343 6 Accrued income and prepaid expenses 36 33 40 Other assets 37 105 34 187 Total assets 14,062 4,609 12,436 4,726 Liabilities Due to banks and customers 47 44 Provisions 6,122 4,180 5,750 4,349 Other liabilities 7,492 164 6,245 146 Total liabilities 13,662 4,345 12,038 4,495 Equity Total equity 401 264 397 231 Total liabilities and equity 14,062 4,609 12,436 4,726 Bank's share of equity 240 128 230 127 Carrying amount 240 128 230 127 2021 2020 Joint venture Associate Joint venture Associate (inmillions) Neuflize Vie S.A. Nationale-Nederlanden ABNAMRO Verzekeringen Holding B.V. Neuflize Vie S.A. Nationale-Nederlanden ABNAMRO Verzekeringen Holding B.V. Other income 73 610 83 612 Operating income 73 610 83 612 Other operating expenses 47 544 47 571 Operating expenses 47 544 47 571 Profit/(loss) before taxation 26 66 36 41 Income tax expense 7 12 10 12 Profit/(loss) for the period 19 55 26 29 Other comprehensive income 43 36 Total comprehensive income 62 55 61 29 Neuflize Vie holds the majority of assets under joint ventures (EUR14.1billion at 31 December 2021, compared withEUR12.4billion at 31 December 2020). Assets related to equity associates are mainly held by Nationale-Nederlanden ABNAMRO Verzekeringen Holding B.V. (EUR4.6billion at 31 December 2021, compared with EUR4.7billion at 31 December 2020). The following table provides an overview of the summarised financial information of individually immaterial investments inand joint ventures at equity method. 314 ABN AMRO Integrated Annual Report 2021 2021 2020 (inmillions) Joint ventures Associates: Joint ventures Associates: Operating income 73 1,145 83 1,134 Operating expenses 47 939 48 948 Profit/(loss) before taxation 26 206 35 186 Income tax expense 7 19 10 10 Profit/(loss) for the period 19 187 25 176 The joint ventures and associates had no contingent liabilities or capital commitments other than the minimum capital requirements under the Solvency Regulation as at 31 December 2021 and 2020. Impairments on equity-accounted investments The following table shows the changes in impairments on equity accounted investments. (inmillions) 2021 2020 Balance as at 1 January 17 5 Increase in impairments 6 12 Release of impairments -8 Other -14 Balance as at 31 December 17 Structured entities Structured entities are entities that have been designed so that voting or similar rights are not the dominant factor in decidingwho controls the entity, such as when voting rights relate to administrative tasks only and the relevant activities aredirectedby means of contractual arrangements. A structured entity has some or all of the following features or attributes: H Restricted activities; H Narrow and well-defined objectives; H Insufficient equity to permit the structured entity to finance its activities without subordinated financial support; H Financing byinvestors, in the form of multiple contractually linked instruments, that creates concentrations of credit orother risks; H Relevant activities are directed by contractual arrangements. Consolidated structured entities There were no notes sold to external parties at 31 December 2021 (31 December 2020: no notes sold). Retained notesare used for repo transactions and TLTRO, for example. The securitisation transactions were primarily used for funding and liquidity purposes. There was no RWA (REA) reliefat 31 December 2021 (31 December 2020: no relief). In 2021, ABNAMRO had only traditional securitisation transactions outstanding. In such transactions, a foundation(stichting) incorporates a bankruptcy-remote, structured entity, to which the legal title of a portfolio of receivables issold. As ABNAMRO continues to recognise the assets after the legal title has been sold, no derecognition takes place. The structured entity issues notes to fund the purchase. ABNAMRO performs key ancillary roles in all its securitisationtransactions, including 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. ABNAMRO retains part of the credit risk by retainingnotes and other securitisation positions such as liquidity facilities, swaps and first loss tranches. Regulatory capital is heldfor all retained securitisation positions in accordance with the applicable regulation. 315 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 Liquidity risk Liquidity risk relates to the risk that ABNAMRO may 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 that form part of certain securitisation transactions, most of which relate to transactions where ABNAMRO is the originator ofthe underlying assets. Approaches to calculating risk exposure amount ABNAMRO does not achieve significant risk transfers for any of the mortgage securitisations. Monitoring process ABN AMRO periodically monitors changes in credit risk relating to securitisation exposures. The significance of theamount of credit risk transferred to third parties by securitisation of own originated assets is assessed on a monthly basisin accordance with the regulatory significant risk transfer test. For investments in third-party securitisations, the risk ismonitored by reviewing the investor reports of these transactions. Additionally, third-party securitisation positions areincluded in the firm-wide comprehensive stress tests in which the downgrade and default risks under stressed marketconditions are assessed. Overview of securitisation positions and securitised assets The total amount of assets securitised in securitisations decreased to EUR 10.5 billion at 31 December 2021 (31 December 2020: EUR 14.3 billion). No securitisation transactions for the purpose of capital relief were originated in 2021. Details of total notes outstanding per structured entity The following table provides details of the outstanding notes issued by consolidated structured entities established by ABNAMRO for securitisation purposes and exceeding 0.1% of the bank’s total assets. 31 December 2021 31 December 2020 (inmillions) Total notes issued % of total assets Total notes issued % of total assets Category Dolphin Master Issuer B.V. 9,533 2.4% 13,533 3.4% Total 9,533 13,533 Support to consolidated structured entities ABNAMRO did not provide support, financial or otherwise, to a consolidated structured entity, including when ABNAMRO was not contractually obliged to do so, and nor does ABNAMRO intend to do so in the future. Unconsolidated structured entities Unconsolidated structured entities are entities over which ABN AMRO has no control or significant influence. ABN AMRO is involved with structured entities through securitisation of financial assets and investments in structured entities. Structured entities generally finance the purchase of assets by issuing debt and equity securities that are collateralisedby the assets held by the structured entities. The debt and equity securities issued by the structured entities may includetranches withvarying levels of subordination.The interest in unconsolidated structured entities decreased by EUR 65 million to EUR4.2billion at year-end 2021 (31 december 2020: EUR 4.3 billion). The interests consist mainly of debt securities in corporate loans ofEUR 677 million (31 december 2020: EUR 414 million) and mortgage- and other asset-backed securities recognised under financial investments of EUR 3.2 billion (31 december 2020: EUR 3.5 billion). The maximum exposure to losses from these interests is equal to thetotal carrying amount. 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 that is the purpose of the entity could occur. No sponsoring occurred during 2021. 316 ABN AMRO Integrated Annual Report 2021 24 Property and equipment, leases, goodwill and other intangible assets Accounting policy for property and equipment Property and equipment is stated at cost less accumulated depreciation and any impairment amount. 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. ABNAMRO generally uses the following useful lives in calculating depreciation: Å Land: not depreciated; Å Buildings: 30 years; Å Leasehold improvements: 5 years; Å Equipment: 5 years; Å Installations (durable): 10 years; Å Computer installations: 2 to 5 years. At each reporting date, ABNAMRO reviews the carrying amounts of its non-financial assets (i.e. ROU assets, equipment, goodwill and other intangible assets) to determine whether there is any indication of impairment. If any such indicationexists, the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that is largely independent of the cash inflows of other assets or cash-generating units. Goodwill arising from a business combination is allocated to cash-generating units or groups of cash-generating units that are expected to benefit from the synergies of the combination. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit. An impairment loss is recognised if the carrying amount of an asset or cash-generating unit exceeds its recoverable amount. In general, ABNAMRO’s corporate assets do not generate separate cash inflows and are used by more than one cashgenerating unit. Corporate assets are allocated to cash-generating units on a reasonable and consistent basis and tested for impairment as part of the testing of the cash-generating unit to which the corporate assets are allocated. Impairment losses are recognised in profit or loss under depreciation and amortisation expenses. They are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit, and then to reduce the carrying amounts of the other assets in the cash-generating unit on a pro rata basis. An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. 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 ofthe related lease. Assets for which the bank acts as a lessor in an operational lease contract are included in property and equipment. Theassetis depreciated on a straight-line basis, over its useful life, to its estimated residual value. 317 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 Accounting policy for leases Lessor accounting Where ABNAMRO acts as lessor, a distinction is made between operating and finance leases. Leases where the bank transfers substantially all risks and rewards incidental to ownership of the asset to the lessee are classified as finance leases. Leases that do not transfer these risks and rewards are classified as operating leases. Finance leases are recognised as a receivable in loans and advances at an amount equal to the net investment in the lease, less credit loss allowances. Assets subject to operating leases are recognised at cost in property and equipment. Operating income from finance leases is recognised in a pattern reflecting a constant periodic rate of return on the net investment in the lease. Lessee accounting All leases, except for low-value leases and leases with a duration of less than one year, are recognised on the balance sheet as a right of use (ROU) asset and lease liability. As a lessee, ABNAMRO enters into various lease contracts, mainly for office buildings and cars that the bank leases for its own use. When accounting for the contracts as a lessee, ABNAMRO separates non-lease components from lease components. Payments such as variable lease payments and non-lease components are not included in the lease liability. The ROU asset is initially measured at cost, which reflects the initial lease liability, adjusted for upfront lease payments, received incentives and initial direct costs. The initial lease liability is equal to the sum of the fixed lease payments, discounted by the incremental borrowing rate The ROU asset is depreciated over the period of the lease, using the straight-line method. Adjustments to the ROU asset and corresponding lease liability result from remeasurement and/or modification. Remeasurement occurs when there is a change in the lease term or discount rate, or when ABNAMRO changes its assessment regarding purchase, extension or termination options. A lease modification is a change in the scope of the lease, or the consideration of a part of a lease that was not in the original terms and conditions of the lease. A lease modification results in either a separate additional lease or a change in the accounting for the existing lease. In the case of a lease modification not resulting in an additional lease, the lease liability is remeasured by adjusting the carrying amount of the ROU asset and, to reflect the partial or full termination of the lease, recognising any gain or loss in the statement of profit and loss. Expenses related to short-term leases with a term of less than 12 months and leases of low-value are recognised in the income statement. ROU assets are included in the line item Property and equipment, while the lease liabilities are included in Other liabilities. Depreciation of the ROU assets is included in the line item for depreciation and amortisation of tangible and intangible assets in the income statement, and interest expense on lease liabilities is included in the line item Other interest and similar expense. Sale and leaseback transactions In a sale and leaseback transaction, the seller-lessee transfers an underlying asset to the buyer-lessor and leases that asset back from the buyer-lessor. Seller-lessee accounting If the bank is involved in a sale and leaseback transaction as a seller-lessee, the accounting policy described below is from the perspective of a seller-lessee. To determine how to account for a sale and leaseback transaction, the bank first considers whether the initial transfer of the underlying asset from the seller-lessee to the buyer-lessor is a sale in accordance with IFRS15. If a sale and leaseback transaction results in a sale in accordance with IFRS 15, the underlying asset is derecognised and the lessee accounting model is applied to the leaseback.The ROU asset arising from the leaseback is measured based on the proportion of the previous carrying amount of the asset that relates to the rights of use retained by the seller-lessee. Accordingly, any gain or loss that relates to the rights transferred to the buyer-lessor is recognised. The proportion of the rights of use retained is the ratio between the present value of lease payments at market rates (excluding any future index changes) and the fair value of the consideration for the sale proceeds. The residual proportion is the proportion of the rights transferred. The fair value of the consideration for the sale proceeds is equal to the fair value of the underlying asset in the sale-and- leaseback transaction. If this does not equal the fair value of the underlying asset, or if the payments for theleaseare not at market rates, the bank makes adjustments to recognise the sale proceeds at the fair value. Any below-market terms are recognised as a prepayment oflease payments and any above-market terms are recognised as additional financing provided by the buyer-lessorto the seller-lessee. 318 ABN AMRO Integrated Annual Report 2021 Accounting policy for intangible assets Goodwill 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 acquisition date, 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 isreviewed 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 higher of the fair value less costs to sell and the value in use, being the present value of the cash 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 it is classified as core application software, which is depreciated over its estimated useful life, 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 acquisitions 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. (inmillions) 31 December 2021 31 December 2020 Land and buildings held for own use 2 11 242 Leasehold improvements 43 48 Plant & equipment under operating lease 533 602 Equipment 84 11 6 Right of use assets 299 246 Total property and equipment 1,172 1,255 Total property and equipment decreased by EUR0.1billion to EUR1.2billion at 31 December 2021. The decrease was mainly due to a decline in plant and equipment under operating leases as a result of fewer contracts in the operating lease portfolio. The right of use assets consist primarily of real estate. (inmillions) 31 December 2021 31 December 2020 Goodwill 79 78 Purchased software 20 14 Internally developed software 9 10 Other 19 25 Total goodwill and other intangible assets 127 128 319 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 2021 (inmillions) Land and buildings held for own use Leasehold improve- ments Plant & equipment under oper. lease Equip- ment Right of use assets Total prop- erty and equipment Goodwill Other intangible assets Total goodwill and other intangible assets Acquisition costs as at 1January 842 242 978 863 436 3,360 146 880 1,027 Additions 23 10 11 8 31 255 437 21 21 Reversal of cost due to disposals -724 - 11 -184 -97 -13 -1,029 -18 -18 Foreign exchange differences 2 19 3 7 31 1 1 Other 675 1 -4 -138 533 1 -1 Acquisition costs as at 31December 815 244 931 795 547 3,333 147 884 1,031 Accumulated depreciation/ amortisation as at 1 January -591 -189 -369 -743 -134 -2,026 -816 -816 Depreciation/amortisation -33 -15 -55 -72 -175 -20 -20 Depreciation of assets subject to operating lease -138 -138 Reversal of depreciation/amortisation due to disposals 455 11 125 88 9 687 12 12 Foreign exchange differences -2 -8 -3 -2 -13 -1 -1 Other -426 5 8 -413 1 1 Accumulated depreciation/ amortisation as at 31December -596 -195 -389 -707 -190 -2,078 -825 -825 Impairments as at 1 January -8 -5 -7 -3 -55 -79 -68 -15 -82 Increase of impairments charged tothe income statement -1 -2 -3 -1 -1 Impairments on assets subject to operating lease -4 -4 Reversal of impairments credited tothe income statement 5 5 Reversal of impairments due to disposals 1 4 5 6 6 Foreign exchange differences -1 -3 -4 Other -3 -3 Impairments as at 31 December -8 -6 -8 -4 -57 -83 -68 -10 -78 Total as at 31 December 211 43 533 84 299 1,172 79 48 127 The fair value of land and buildings held for own use at 31 December 2021is estimated at EUR283million (31 december 2020: EUR845million). Of this fair value, 100% is based on external valuations performed in 2017 to 2021. Some properties have alower 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 ABNAMROBank is sufficient to cover the total value of all these assets. 320 ABN AMRO Integrated Annual Report 2021 2020 (inmillions) Land and buildings held for own use Leasehold improve- ments Plant & equipment under oper. lease Equip- ment Right of use assets Total property and equipment Goodwill Other intangible assets Total goodwill and other intangible assets Acquisition costs as at 1January 1,505 248 1,035 885 324 3,997 148 877 1,025 Additions 27 17 140 32 141 356 10 10 Reversal of cost due to disposals -201 -20 -180 -48 -21 -474 -4 -4 Foreign exchange differences -3 -16 -5 -9 -33 -1 -2 -3 Other -488 -1 2 -485 Acquisition costs as at 31December 842 242 978 863 436 3,360 146 880 1,027 Accumulated depreciation/ amortisation as at 1 January -926 -194 -334 -732 -70 -2,256 -798 -798 Depreciation/amortisation -41 -16 -64 -75 -196 -24 -24 Depreciation of assets subject to operating lease -146 -146 Reversal of depreciation/amortisation due to disposals 132 18 106 48 10 315 4 4 Foreign exchange differences 2 5 4 2 14 2 2 Other 243 1 -2 242 Accumulated depreciation/ amortisation as at 31 December -591 -189 -369 -743 -134 -2,026 -816 -816 Impairments as at 1 January -6 -6 -23 -34 -38 - 11 -49 Increase of impairments charged totheincome statement -6 -4 -37 -46 -30 -8 -38 Impairments on assets subject to operating lease -2 -2 Reversal of impairments credited totheincome statement 4 4 Reversal of impairments due to disposals 4 1 5 Foreign exchange differences 3 4 Other -6 -6 Impairments as at 31 December -8 -5 -7 -3 -55 -79 -68 -15 -82 Total as at 31 December 242 48 602 116 246 1,255 78 49 128 Leases ABNAMRO enters into leases both as lessor and as lessee. In its capacity as lessee, ABNAMRO leases various assets, mainly office properties, cars and equipment that serve to support the bank’s operations. The leases have various terms and termination and renewal options. The majority of termination and renewal options are exercisable only by the bank and not bythe respective lessor. There are no variable lease payments in lease contracts where ABNAMRO acts as lessee. Nocovenants are present in the lease agreements and ABNAMRO is not allowed to use leased assets as security for financing purposes. The total cash outflow relating to leases in 2021 amounted to EUR91million (31 december 2020: EUR105million). Sale and leaseback of head office at Gustav Mahlerlaan In 2021, ABNAMRO completed the sale and leaseback of its head office at Gustav Mahlerlaan in Amsterdam. ABNAMRO is the seller-lessee in this transaction. The buyer-lessor of the office paid a total consideration of EUR765million. As part of the sale, ABNAMRO recognised a pre-tax gain of EUR327million (EUR245million net of tax) in other operating income (Note 6 Net income from other operating activities). As part of the lease, ABNAMRO recognised a RoU asset of EUR78million and a corresponding lease liability of EUR203million (Note 32 Other liabilities). ABNAMRO will lease back the Gustav Mahlerlaan office for a period of four years before moving to the redeveloped office building at Foppingadreef in Amsterdam Zuidoost. ABNAMRO has an option, which is only exercisable by ABNAMRO, toextend the lease by a further period of one year. 321 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 In addition, ABNAMRO has an option, which is only exercisable by ABNAMRO, to terminate the lease for a small part oftheGustav Mahlerlaan office before June 2023. Exercising this option will result in an additional gain of approximately EUR15million. In the first four years, the lease is based on ‘triple net’ conditions, which means that the share of the owner’s maintenance costs normally incurred by the lessor will be paid by the lessee. The contractual lease amounts are paid quarterly in advance. The office building at Foppingadreef is currently beingredeveloped and work is expected to be completed in mid-2025. After2025, ABNAMRO will continue to lease a small part of the Gustav Mahlerlaan office, which will remain the bank’s head office for an additional fifteen years, with the option to extend this period by five years. ABNAMRO is also financing part ofthe sale and leaseback transaction for the next four years. The following table shows the maturity of lease liabilities for leases in which the bank acts as lessee, as well as the future undiscounted minimum lease receipts under operating and financial leases where the bank acts as lessor. It also reconciles the total future minimum lease receipts under financial leases and the net investment in the leases. 31 December 2021 (inmillions) Within 3months More than 3months but within 1 year More than 1year but within 5 years More than 5 years Total Unearned finance income Net investment in the lease Lease liabilities 15 44 174 88 320 n/a n/a Future minimum lease receipts under financial leases 771 1,124 2,882 446 5,222 -250 4,972 Future minimum lease receipts under operating leases 42 135 369 37 583 n/a n/a 31 December 2020 Lease liabilities 17 49 179 111 355 n/a n/a Future minimum lease receipts under financial leases 1,220 1,237 3,042 535 6,034 -300 5,734 Future minimum lease receipts under operating leases 54 138 421 46 660 n/a n/a In its capacity as lessor, ABNAMRO leases out various assets. Operating leases in which the bank acts as lessor are included in Property and equipment – equipment. Financial leases in which the bank acts as lessor are included in corporate loans under loans and advances customers. Income from leases in which ABNAMRO acts as lessor is presented in thefollowing table. (inmillions) 2021 2020 Income from financial leases 147 164 Income from operating leases 163 171 Total income from leases 309 334 Income related to variable lease payments on financial leases amounted to EUR4million. There is no income relating tovariable lease payments on operating leases. ABNAMRO also acts as an intermediate lessor in subleases where it subleases ROU assets to a third party. During 2021 thetotal income from subleasing ROU assets amounted to EUR3million. 322 ABN AMRO Integrated Annual Report 2021 Valuation of goodwill 31 December 2021 31 December 2020 (inmillions) Segment Method used for recoverable amount Discount rate Long-term growth rate Impairment charges Goodwill Goodwill Entity Bethmann Bank A.G. Private Banking Value in use 10.0% 0.0% 63 63 ABNAMRO Asset Based Finance N.V., (UK) Branch Commercial Banking Value in use 10.0% 0.0% 10 9 Banque Neuflize OBC S.A. Private Banking Value in use 10.0% 0.0% 6 6 Total goodwill and impairment charges 79 78 The outcome of several impairment tests entails an impairment of nil. Total goodwill and impairment charges increased byEUR1 million as a result of foreign currency translation differences. (inmillions) 2021 2021 Depreciation on tangible assets Land and buildings held for own use 33 41 Leasehold improvements 15 16 Equipment 55 64 Right of use assets 72 75 Amortisation on intangible assets Purchased software 11 15 Internally developed software 3 3 Other intangible assets 6 7 Impairment losses on tangible assets Land and buildings held for own use (incl. held for sale) 1 Leasehold improvements 6 Equipment 4 Right of use assets -3 36 Impairment losses on intangible assets Goodwill 30 Purchased software 1 -4 Internally developed software 2 Other intangible assets 6 Total depreciation, amortisation and impairment losses 194 299 25 Non-current assets and disposal groups held for sale Accounting policy for non-current assets and disposal groups held for sale Non-current assets and/or businesses are classified as held for sale if their carrying amount is to be recovered principally by selling them within 12 months, rather than through ongoing use. Assets held for sale (other than financial instruments) 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 in the consolidated statement of financial position. (inmillions) 31 December 2021 31 December 2020 Assets Financial investments 86 Property and equipment 3 254 Assets of businesses held for sale 89 254 Liabilities Other liabilities Liabilities of businesses held for sale 323 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 The 2021 held for sale position of EUR89million consists mainly of financial investments and is attributable to the equity stake in Tink and a few other small investments. During the year the head office building was sold. The sale is part of a sale and leaseback transaction with the buyer-lessor of the building. The property was measured at the carrying amount, which was significantly lower than the fair value (less cost to sell). 26 Other assets (inmillions) 31 December 2021 31 December 2020 Accrued other income 564 575 Prepaid expenses 25 31 Unsettled securities transactions 1,046 1,521 Trade and other receivables 2,284 2,292 Other 345 505 Total other assets 4,263 4,925 The decrease of EUR0.7billion in other assets was mainly driven by a EUR0.5billion decrease in unsettled securities transactions and EUR0.2billion in other. Unsettled securities transactions are related to reversed repurchase and securities borrowing transactions that are delivered but not settled. The decrease was mainly related to the clearing business that is fully based on the nature of the business to supply in the needs of their clients’ financing strategies and related transactions to be settled. At 31 December 2021, other assets included a net receivable of EUR0.1billion related to the bankruptcy of DSB Bank (31 December 2020: EUR0.2billion). 27 Due to banks Accounting policy for due to banks and due to customers Amounts due to banks and customers are held at amortised cost. That is, at fair value upon initial recognition, adjusted for repayment and amortisation of coupon, fees and expenses to represent the effective interest rate of the instrument. (inmillions) 31 December 2021 31 December 2020 Current accounts 1,525 1,903 Demand deposits 3 3 Time deposits 36,070 34,100 Cash collateral on securities lent 467 703 Other 10 10 Total due to banks 38,076 36,719 The increase of EUR1.4billion in due to banks is mainly due to the TLTRO participation, which resulted in an increase of EUR3.0billion. This increase was partly offset by matured interbank deposits of EUR1.0billion and periodic current account balances with credit institutions of EUR0.4billion. ABN AMRO participates in the targeted longer-term refinancing operations III (TLTRO III) for an amount of EUR 35.0 billion, of which EUR 32.0 billion was drawn in June 2020 and EUR 3.0 billion in June 2021. The funding has a quarterly repayment option. TLTRO III offers ABN AMRO funding at attractive conditions. A guaranteed interest rate discount of 50bps applies to the interest rate period from 24 June 2020 to 23 June 2022. An additional interest rate discount of 50bps over the remaining interest period can be achieved if specific targets linked to the issuance of new loans to non-financial corporations and households are met. The TLTRO III funding is accounted for at amortised cost, with an effective interest rate equal to the Main Refinancing Operations rate. The discounts, both conditional and unconditional, are accounted for as government grants and recognised in interest income. As at the year-end, there was a reasonable expectation that the conditionsapplicable for the additional discount were met.As a result, a catch-up adjustment was made to recognise the additional 50 basis points discount in interest income. 324 ABN AMRO Integrated Annual Report 2021 28 Due to customers Accounting policy for due to customers The accounting policy for amounts due to customers is included in Note 27 Due to banks. (inmillions) 31 December 2021 31 December 2020 Current accounts 132,983 111,033 Demand deposits 98,790 107,534 Time deposits 18,780 19,037 Other 665 966 Total due to customers 251,218 238,570 Total due to customers increased by EUR12.7billion, mainly due to an increase in current accounts, partly offset by decreases in demand deposits. Current accounts increased by EUR22.0billion, mainly owing to commercial and private clients retaining their cash position to maintain liquidity and to an increase in savings from retail clients due to a change in spending patterns as a result of Covid-19 measures. Demand deposits decreased by EUR8.7billion, mainly due to high outflows as a result of the lower threshold for charging negative interest rates on client savings, and the further wind-down of Moneyou. Time deposits decreased by EUR0.2billion, mainly due to the maturing of deposits of several large corporates and non-corporates and to the lowering of the threshold for charging negative interest rates. Other deposits decreased by EUR0.3billion, mainly due to the lower amount of derivative collateral received from external parties. 29 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. Hybrid or structured financial liabilities are irrevocably designated upon initial recognition to be measured 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 their fair value or include terms that qualify as an embedded derivative that cannot be separated. ABNAMRO applies IAS 32 Financial Instruments: Presentation to determine whether funding is 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 ABNAMRO 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. Issued liabilities qualify as subordinated debt if claims by the holders are subordinated to all other current and future liabilities of ABNAMRO and its subsidiaries. The valuation of liabilities measured at fair value includes the effect of changes in the bank’s own credit spreads. The change in fair value applies to those financial liabilities designated at fair value where own value credit risk would be considered by market participants. The cumulative amount of changes in fair value attributable to credit risk of issued debt is presented as liability own credit risk reserve in equity. Exchange-traded own debt measured at fair value through profit or loss is valued at market prices. Fair value changes are calculated based on a yield curve generated from observed external pricing for funding and quoted CDS spreads 325 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 The following table shows the types of debt certificates issued by ABNAMRO and the amounts outstanding at 31December 2021. Movements in these debt instruments involve a continual process of redemption and issuance oflong-term and short-term funding. Issued debt (inmillions) 31 December 2021 31 December 2020 Bonds and notes issued 49,619 56,716 Certificates of deposit and commercial paper 9,177 9,283 Total at amortised cost 58,796 66,000 Designated at fair value through profit or loss 892 949 Total issued debt 59,688 66,949 - of which matures within one year 16,734 19,279 2021 2020 (inmillions) Carrying amount Carrying amount Balance as at 1 January 66,949 75,275 Cash flows Issuance 30,226 28,203 Redemption -36,180 -36,165 Non-cash changes Foreign exchange differences 1,130 -1,262 Fair value changes own credit risk -20 -20 Unrealised gains/(losses) -2,335 919 Other -83 -1 Balance as at 31 December 59,688 66,949 Total issued debt decreased by EUR7.3billion to EUR59.7billion at 31 December 2021, mainly due to matured long-term funding. The lower funding need was driven by an increase in deposits and the TLTRO III participation. The amounts of debt issued and redeemed during the period are shown in the Consolidated statement of cash flows. Non-cash changes consist mainly of unrealised gains and losses and foreign exchange differences. Further details of the funding programmes are provided in Funding in the Risk, funding & capital chapter. Financial liabilities designated at fair value through profit or loss (inmillions) 31 December 2021 31 December 2020 Cumulative change in fair value of the structured notes attributable to changes in credit risk 12 32 Change during the year in fair value of the structured notes attributable to changes in credit risk -20 -20 Difference between amount contractually required to pay at maturity and the carrying amount -63 -19 The change in fair value of the structured notes attributable to changes in credit risk is determined using the credit spread implicit in the fair value of similar bonds traded in active markets and issued by ABNAMRO. Subordinated liabilities The following table shows the types of debt certificates issued by ABNAMRO and the amounts outstanding at 31 December. Movements in these debt instruments involve a continual process of redemption and issuance of long-term andshort-term funding. (inmillions) 31 December 2021 31 December 2020 Subordinated liabilities 7,549 8,069 326 ABN AMRO Integrated Annual Report 2021 2021 2020 (inmillions) Carrying amount Carrying amount Balance as at 1 January 8,069 10,041 Cash flows Issuance 910 35 Redemption -1,514 -1,669 Non-cash changes Foreign exchange differences 367 -445 Other -283 108 Balance as at 31 December 7,549 8,069 Subordinated liabilities decreased by EUR0.5billion, mainly due to the maturity of subordinated loans, which was partly offset by the issuance of a new instrument. No perpetual loans were recorded at the reporting date. The issued and outstanding loans qualifying as subordinated liabilities are subordinated to all other current and future liabilities. 30 Provisions Accounting policy for provisions A provision is recognised in the balance sheet when ABNAMRO 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 ABNAMRO 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 cost expectations. Provisions are established for certain guarantee contracts for which ABNAMRO is liable to pay upon default of payment. Expected credit loss allowances of loan commitments and financial guarantees are recognised as provisions under IFRS 9. (inmillions) 31 December 2021 31 December 2020 Insurance fund liabilities 5 11 Provision for pension commitments 79 106 Restructuring provision 178 226 Other staff provision 137 136 Legal provisions 398 98 Credit commitments provisions 222 92 Other provisions 181 258 Total provisions 1,201 926 Insurance fund liabilities Insurance fund liabilities include the insurance companies’ actuarial reserves, premium and claims reserves. The expected cash outflow for 2022 is EUR18 thousand, and approximately EUR9million for the 2023-2026 period. Provision for pension commitments Provision for pension commitments includes early retirement benefits payable to non-active employees. Further details are provided in Note 31 Pension and other employee benefits. Restructuring Restructuring provisions cover the costs of the restructuring plans for which implementation has been formally announced. The decrease relates to the use of the provision. 327 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 Other staff provisions The slight increase in Other staff provisions mainly relates to an increase in the provision for untaken holidays. Legal provisions Legal provions increase with EUR301million mainly attributable to the an increase on the provision “Variabele Interest” with EUR334million of which already used EUR9million.The provisions related to interest rate derivatives sold to SME clients and EURIBOR-based mortgages declined due to outflows and a release. Interest rate derivatives for SME clients In 2015, ABNAMRO started a review, at the request of the Netherlands Authority for the Financial Markets (AFM) and theDutch Ministry of Finance, to determine whether the bank had acted in accordance with its duty of care obligations in respect of the sale of interest rate derivatives to SME clients. In the second quarter of 2015, ABNAMRO first recognised aprovision for compensating clients who had been disadvantaged in this respect and suffered loss or damage. ABNAMRO has set up its own client reassessment process and the related checks and balances with respect to the Uniform Recovery Framework devised by a committee of independent experts (‘the Committee’) appointed by the Dutch Minister of Finance. In the first quarter of 2020, ABNAMRO finalised the process of sending all clients a letter containing the outcome of the reassessment. At various points in the process, the reassessments were checked by an independent external file reviewer (in ABNAMRO’s case, by the audit firm PwC), supervised by the AFM. Except for a limited number ofproceedings relating to the Uniform Recovery Framework before the local courts, ABNAMRO has completed the execution of the Uniform Recovery Framework. The total provision for SME derivatives-related issues amounted to EUR6million at 31December 2021. This comprised the total amount of client compensation (EUR0.6billion) and project costs (EUR0.3billion), after payments already made for both elements (EUR0.8billion). EURIBOR-based mortgages ABNAMRO has sold mortgage loans with floating, often EURIBOR-based, interest rates to consumers. These rates include amargin charge. Under the applicable terms and conditions, ABNAMRO has the right to unilaterally adjust the margin charge. ABNAMRO’s decision to increase the margin charge in 2012 resulted in two class actions, on top of multiple individual cases, being instigated. The central question in these cases is whether ABNAMRO’s right in the terms and conditions to unilaterally adjust the margin charge is an unfair contractual clause. On 22 November 2019, the Supreme Court quashed the ruling of the Amsterdam Court of Appeal in the EURIBOR collective cases. The case has been referred to another Court of Appeal (The Hague) whereby the Court will need to take all relevant aspects into account to judge if the clauses are unfair. The hearing in this matter took place on 9 November 2021 and the Court of Appeal expects to give its verdict on 15 March 2022. On 13 February 2020, ABNAMRO and the foundation Stichting Euribar reached an agreement on a settlement for clients withEURIBOR-Woninghypotheek mortgages. Key points of the agreement are compensation for the past and certainty for the future EURIBOR margin charge. By June 2021, ABNAMRO sent out the settlement offers to all known eligible clients, ofwhich 81% have accepted as per 31 December 2021. The other foundation, Stichting Stop de Banken, broke off the negotiations aimed at reaching an agreement and announced it will proceed with the class action as mentioned above. ABNAMRO has recognised a provision for the EURIBOR-based mortgage cases. Variable interest rates for consumer loans On 3 March 2021, the Kifid Appeals Committee confirmed a ruling of the Kifid Disputes Committee about the recalculation ofthe variable interest charged to a specific client on a revolving credit. In short, Kifid ruled that ABNAMRO should have followed the market rate while establishing the variable interest rate for certain revolving consumer credits. In light of the Kifid ruling, ABNAMRO reached agreementwith the Dutch Consumers’ Association (Consumentenbond Claimservice) on 5 September 2021 regarding a compensation scheme for affected clients. Thecompensation scheme entailed a proactive recalculation of variable interest charged as from 1 January 2008 on various revolving consumer credits offered by ABNAMRO, ALFAM and ICS. In Q4 of 2021, ABNAMRO has decided to (where possible and applicable) proactively recalculate variable interest charged as from 1 January 2001. ABNAMRO has provisioned around EUR348million for the interest to be compensated andthe costs incurred incarrying out the scheme.During the year EUR9million of this provision has been used. The remaining provision as per 31 December 2021 is EUR338million. 328 ABN AMRO Integrated Annual Report 2021 It is unclear what the exact scope and application of the Kifid ruling is and whether the ruling will have a certain knock-on effect on other products with variable interest rates, beyond the range of products covered by the compensation scheme. Recent rulings from Kifid regarding other credit providers (in relation to mortgage loans) suggest that Kifid envisages a broad scope. ABN AMRO cannot give a reliable estimate of the (potentially substantial) financial risk of these contingent liabilities not provided for. Credit commitments provisions Credit commitment provisions increased mainly due to a FR&R case. Other provisions Other provisions decreased mainly due to the usage of “Know Your Client” provision. AML remediation programme To address shortcomings, as wellas increasingly strict regulations and continuously evolving forms of financial crime, ABNAMRO had already started anextensive bank-wide AML remediation programme. In 2021, the remediation of client files has progressed. The total provision regarding the AML programme amounted to EUR66million at 31 December 2021. AML settlement In April 2021, ABNAMRO accepted a settlement offer from the Netherlands Public Prosecution Service in connection with its investigation of the bank’s AML activities in the Netherlands over the period 2014-2020. ABNAMRO agreed to pay a fine of EUR300million and a disgorgement of EUR180million. The total amount of EUR480million has been recorded in other expenses at Group Functions in Q1 2021 and has therefore no further impact on past or present provisions. ABN AMRO wasinformed that an individual filed a complaint against the AML settlement between the Netherlands Public Prosecution Service and ABN AMRO under section 12 of the Dutch Code of Criminal Procedure with the Court of Appeal in The Hague. ABN AMRO was also informed that the complaint has been denied by the court of appeals. (inmillions) Insurance fund liabilities Provision for pension commitments Restructuring provision Other staff provision Legal provisions Credit- commitments Other Total At 1 January 2020 4 74 172 119 234 79 301 983 Increase of provisions 145 8 85 99 336 Reversal of unused provisions -15 -80 -97 -24 -217 Utilised during the year -55 -64 -92 -212 Accretion of interest 2 -1 -1 -1 Transfer between stages 186 186 Foreign exchange differences -7 -2 -1 -9 Other 7 32 -13 17 -1 -158 -23 -139 At 31 December 2020 11 106 226 136 98 92 258 926 Increase of provisions 35 340 173 49 597 Reversal of unused provisions -22 -23 -51 -61 -157 Utilised during the year -67 -16 -3 -66 -152 Accretion of interest Transfer between stages 6 6 Foreign exchange differences 6 6 1 12 Other -6 -27 -1 2 -1 1 -32 At 31 December 2021 5 79 178 137 398 222 181 1,201 31 Pension and other employee benefits Accounting policy for pension and other employee benefits ABNAMRO sponsors a number of pension schemes in the Netherlands and abroad. These schemes are mainly defined contribution plans. The majority of the beneficiaries of the plans are located in the Netherlands. Defined contribution plans For defined contribution plans, ABNAMRO pays annual 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. 329 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 Defined benefit plans For defined benefit plans, the net obligation of each plan is the difference between the present value of the defined benefit obligations and the fair value of the plan’s assets. The actuarial assumptions used for calculating the present value of the defined benefit obligations include discount rates based on high-quality corporate bonds, the 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 balance sheet date and are netted against the defined benefit obligations. 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 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 pension costs and pension 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). They are recognised inother comprehensive income and are not recycled to profit or loss in later periods. The actual return on the pension plan’s assets is determined after deduction of the costs of managing the assets and any tax payable by the pension plan itself. Other employee 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. Pension and other employeebenefits Amounts recognised in the income statement for pensions and otheremployee benefits 2021 2020 (inmillions) Defined post employment benefit Other employee benefits Total Defined post employment benefit Other employee benefits Total Current service cost 7 11 18 6 21 27 Interest cost 1 2 2 2 Interest income -1 -1 -1 -1 Other -3 -3 -1 2 1 Total defined benefit expenses in actuarial report 7 8 15 6 23 29 Other expenses -4 -4 -5 -5 Total defined benefit expenses 3 8 11 1 23 24 Defined contribution plans 291 291 306 306 Total pension expenses and other post retirement employee benefits 294 8 302 307 23 330 Total pension and other employee benefits expenses decreased by EUR28million. The decrease in defined contribution plan expenses of EUR15million was attributable to a release following a favourable court ruling. This was partly offset by higher numbers of FTEs, resulting in higher pension costs. 330 ABN AMRO Integrated Annual Report 2021 Pension expenses for defined contribution plans consist mainly of the cash contributions to the Dutch collective defined contribution plan. Dutch defined contribution plan The Dutch defined contribution plan is a collective defined contribution plan, based on an average salary plan. The target retirement age is set at 68 years. The contribution payable by pension fund participants is 5.5% (2020: 5.5%). Participants’ contributions to the defined benefit plan in 2021 amounted to EUR47million (2020: EUR42million) and are included in the pension expenses. Reconciliation to the statement of financial position and other comprehensive income 2021 2020 (inmillions) Defined post employment benefit Other employee benefits Total Defined post employment benefit Other employee benefits Total Present value of defined benefit obligations - funded with plan assets 242 3 246 267 3 270 Fair value of plan assets 189 189 194 194 54 3 57 73 3 76 Present value of defined benefit obligations - unfunded 24 134 158 33 132 166 Net liabilities/(assets) balance sheet at 31 December 78 137 215 106 136 242 - of which assets 1 1 - of which liabilities 79 137 216 106 136 242 Experience adjustments 14 13 3 -2 1 Remeasurements arising from changes in demographic assumptions DBO 1 1 -1 -1 Remeasurements arising from changes in financial assumptions DBO 6 1 7 -7 -7 Remeasurements arising from changes in financial assumptions plan assets 3 3 3 3 Remeasurements in other comprehensive income 23 24 -2 -2 -4 Change in defined benefit obligation (DBO) 2021 2020 (inmillions) Defined post employment benefit Other employee benefits Total Defined post employment benefit Other employee benefits Total Defined benefit obligation as at 1 January 300 136 435 250 156 405 Current service cost 7 11 18 6 21 27 Interest cost 1 2 2 2 Benefits paid Benefits paid in from employer -9 -3 -12 -11 -8 -19 Remeasurements arising from changes in demographic assumptions -1 -1 1 1 Experience adjustments -14 -13 -3 2 -1 Remeasurements arising from changes in financial assumptions -6 -1 -7 7 7 Other -12 -6 -18 48 -35 14 Defined benefit obligation as at 31 December 266 137 404 300 136 435 The net defined benefit liabilities/(assets) balance as at 31 December 2021 consisted of pensioners with a profit share, theindexation of benefits insured with an insurance company and several small defined benefit plans outside the Netherlands. 331 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 Change in fair value of plan assets 2021 2020 (inmillions) Defined post employment benefit Other employee benefits Total Defined post employment benefit Other employee benefits Total Fair value of plan assets as at 1 January 194 194 176 176 Interest income 1 1 1 1 Return on plan assets excluding interest 3 3 3 3 Employer's contributions 1 1 Benefits paid Other -10 -10 14 14 Fair value of plan assets as at 31 December 189 189 194 194 Principal actuarial assumptions 2021 2020 Discount rate 0.8% 0.5% Indexation rate 1.7% 1.6% Future salary increases 2.2% 1.9% The above assumptions are weighted by defined benefit obligations. The discount rate consists of a risk-free rate and a creditspread on AA-rated corporate bonds. 32 Other liabilities The following table shows the components of accrued expenses and other liabilities. (inmillions) 31 December 2021 31 December 2020 Accrued other expenses 876 928 Lease liabilities 485 320 Unsettled securities transactions 1,575 844 Sundry liabilities and other payables 1,821 1,962 Total other liabilities 4,757 4,053 Other liabilities increased by EUR0.7billion to EUR4.8billion at 31 December 2021, mainly due to an increase in unsettled securities transactions at ABNAMRO Clearing Bank and increased lease liabilities. The increase in lease liabilities mainly relates to the sale and leaseback of ABNAMRO’s head office at Gustav Mahlerlaan in 2021, which resulted in a lease liability of EUR203million at the commencement date. Please refer to Note 24 Property and equipment, leases, goodwill and other intangible assets for further information regarding the sale and leaseback transaction. 33 Equity attributable of the parent company Share capital and other components of equity Ordinary shares As at 31 December 2021, all shares in the capital of ABNAMROBank were held by two foundations: NLFI and STAK AAB. For more information about STAK AAB and the depositary receipts, please refer to the Leadership & governance chapter of this report. Compound financial instruments Components of compound financial instruments (liability and equity parts) are classified in their respective areas of the statement of financial position. 332 ABN AMRO Integrated Annual Report 2021 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. Fair value reserve Under IFRS 9, the fair value reserve includes the gains and losses, net of tax, resulting from a change in the fair value of debt instruments measured at FVOCI. When the instruments 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 comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments, net of taxes, that are recycled to the income statement if the hedged transactions have an impact on profit or loss. Net investment hedging reserve The net investment hedging reserve comprises the currency translation differences arising when the currencies of these instruments are translated to euros, to the extent they are effective. Liability own credit risk reserve Under IFRS 9, the changes in fair value attributable to changes in the own credit risk of financial liabilities designated at FVTPL are presented in other comprehensive income. The cumulative amount of changes in fair value attributable to credit risk of such liabilities is presented as liability own credit risk reserve in equity. Other reserves Other reserves mainly comprise retained earnings and profit for the period. Dividends Dividends on ordinary shares classified as equity are recognised as a distribution of equity in the period in which they are approved by shareholders. Capital securities Undated, deeply subordinated, resettable, callable capital securities are classified as additional tier 1 (AT1) capital, under total equity. ABNAMROBank has the European Central Bank’s permission to carry out limited repurchases from investors and to sell back in the market The following table shows the equity of ABNAMROBank N.V. and the outstanding and issued share capital. (inmillions) 31 December 2021 31 December 2020 Share capital 940 940 Share premium 12,970 12,970 Other reserves (incl. retained earnings/profit for the period) 7,324 6,826 Other components of equity -1,227 -1,733 AT1 capital securities 1,987 1,987 Equity attributable to owners of the parent company 21,994 20,989 Equity attributable to non-controlling interests 5 Total equity 21,999 20,989 At 31 December 2021, the authorised share capital of ABNAMROBank N.V. amounted to 2,400,000,000 shares, consisting of 2,200,000,000 ordinary A-shares with a nominal value of EUR1.00 and 200,000,000 ordinary B-shares with a nominal value of EUR1.00. Every share is entitled to one vote during the General Meeting. There were no changes in the authorised share capital in 2021. The total amount of issued shares at 31 December 2021 was 940,000,001. In 2021, the final dividend ofEUR0.68 per share for the year 2019 was paid out for a total of EUR639million. For the year 2021 a final dividend has been proposed of EUR 0.61 per share. For more information, please refer to Capital in the Risk, funding & capital section. 333 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 The following table shows the equity of ABNAMROBank N.V. and the outstanding and issued share capital. 31 December 2021 31 December 2020 Class A ordinary shares Class B ordinary shares Class A ordinary shares Class B ordinary shares Number of shares Authorised share capital 2,200,000,000 200,000,000 2,200,000,000 200,000,000 Unissued share capital 1,259,999,999 200,000,000 1,259,999,999 200,000,000 Issued share capital 940,000,001 940,000,001 Amount of shares (in EUR) Authorised share capital 2,200,000,000 200,000,000 2,200,000,000 200,000,000 Unissued share capital 1,259,999,999 200,000,000 1,259,999,999 200,000,000 Issued share capital 940,000,001 940,000,001 Par value 1.0 0 1. 0 0 1.0 0 1. 0 0 34 Transferred, pledged encumbered and restricted assets Accounting policy for transferred, pledged, encumbered and restricted assets Transferred financial assets are arrangements/transactions for which ABNAMRO 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 has assumed a contractual obligation to pay the cash flows to a third party; or Å Transferred a financial asset when the counterparty has the right to repledge or to resell the asset. Depending on the circumstances, these transfers may result in financial assets that either are or are not derecognised in their entirety. Please refer to Note 1 Accounting policies. Pledged assets are assets pledged as collateral for liabilities or contingent liabilities and the terms and conditions relating tothe pledge. Encumbered assets are those that are pledged or other assets that we believe to be restricted in order to secure, credit-enhance or collateralise a transaction. In principle, pledged assets are encumbered assets. The following differences apply to ABNAMRO: Å Encumbered assets include mandatory reserve requirements with central banks; Å Encumbered assets exclude assets pledged for unused credit facilities with central banks at the statement offinancialposition 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 other non-controlling interests that may restrict the ability of the bank to access and transfer assets freely to or from other entities within the group and to settle liabilities of the bank. Transferred financial assets This disclosure provides insight into the relationship between these transferred financial assets and associated financial liabilities in order to show the risks the bank is exposed to when the assets are transferred. If transferred financial assets continue to be recognised in the balance sheet, ABNAMRO is still exposed to changes in the fair value of the assets. Transferred financial assets not derecognised in their entirety The following table shows transferred financial assets that are not derecognised in their entirety. 334 ABN AMRO Integrated Annual Report 2021 31 December 2021 31 December 2020 (inmillions) Financial investments (at fair value through OCI) Financial assets held for trading (at fair value through profit and loss) Total Financial investments (at fair value through OCI) Financial assets held for trading (at fair value through profit and loss) Total Securities financing Carrying amount Transferred assets 7,911 122 8,033 2,821 2,821 Carrying amount Associated liabilities 8,069 125 8,194 2,821 2,821 Fair value of assets 7,911 122 8,033 2,821 2,821 Fair value of associated liabilities 8,069 125 8,194 2,821 2,821 Net position -158 -2 -161 Securitisations The bank uses securitisations as a source of funding, whereby the Special Purpose Entity (SPE) issues debt securities. Inasecuritisation transaction utilising true sale mechanics, the bank transfers the title of the assets to SPEs. When the cashflows are transferred to investors in the notes issued by consolidated securitisation vehicles, the assets (mainly residential mortgage loans) are considered to be transferred. The bank had no transferred and associated securitisations at31December 2021. Securities financing Securities financing transactions are entered into on a collateralised basis for mitigating the bank’s credit risk exposure. Inrepurchase agreements and securities lending transactions, ABNAMRO gets the securities returned at maturity. Thecounterparty in the transactions holds the securities as collateral, but has no recourse to other assets of ABNAMRO. Continuing involvement in transferred financial assets derecognised in their entirety The bank has no material transferred assets that are derecognised in their entirety but where ABNAMRO has continuing involvement. Pledged and encumbered assets Pledged and encumbered assets are no longer readily available to ABNAMRO to secure funding, to satisfy collateral needs or to be sold to reduce the funding requirement. The following activities conducted by ABNAMRO give rise to pledged assets: H cash and securities provided as collateral to secure trading and other liabilities, mainly derivatives; H mortgages and SME loans pledged to secure funding transactions such as covered bonds and securitisations; H securities lent as part of repurchase and securities lending transactions. 335 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 The following table provides an overview of assets pledged as security and encumbered assets. (inmillions) 31 December 2021 31 December 2020 Assets pledged Cash and balances at central banks 431 212 Financial assets held for trading 253 418 Financial investments FVOCI 2,926 3,009 Loans and advances banks: - Interest bearing deposits 1,341 1,040 Loans and advances customers: - Residential mortgages 93,805 102,970 - Commercial loans 16,088 9,868 Total assets pledged as security 114,845 117,518 Differences between pledged and encumbered assets Loans and advances banks 1 199 220 Loans and advances customers 2 -10,088 -17,568 Total differences between pledged and encumbered assets -9,888 -17,348 Total encumbered assets 104,957 100,170 Total assets 399,113 395,623 Total encumbered assets as percentage of total assets 26.3% 25.3% 1 Includes mandatory reserve deposits. 2 Excludes mainly mortgage-backed securities. Total encumbered assets increased by EUR4.8billion at 31 December 2021. This was mainly due to increased usage of TLTRO funding, which resulted in more collateral pledged at DNB. Off-balance sheet collateral held as security for assets Mainly as part of professional securities transactions, ABNAMRO obtains securities on terms that permit it to repledge or resell the securities to others. These transactions are conducted under terms that are usual and customary in standard professional securities transactions. ABNAMRO controls the credit risk associated with these activities by monitoring counterparty credit exposure and collateral value on a daily basis and, when necessary, requiring additional collateral to be deposited with or returned to the group. (inmillions) 31 December 2021 31 December 2020 Fair value of securities received which can be sold or repledged 71,372 57,436 - of which: fair value of securities repledged/sold to others 52,417 41,454 ABNAMRO has the obligation to return securities accepted as collateral to its counterparties. Significant restrictions on the ability to access or use the bank’s assets Restricted financial assets consist of assets pledged as collateral against an existing or contingent liability and encumbered assets. Other restrictions impacting on the bank’s ability to use assets include: H Assets as a result of collateralising repurchase and borrowing agreements (31 December 2021: EUR16.1billion; 31December 2020: EUR16.7billion); H Assets held in certain jurisdictions to comply with local liquidity requirements and that are subject to restrictions in terms of their transferability within the group (31 December 2021: EUR0.8billion; 31 December 2020: EUR0.9billion); H ABNAMROBank N.V. is in general not subject to any significant restrictions that would prevent the transfer of dividends and capital within the group, except for regulated subsidiaries that are required to maintain capital in order to comply with local regulations (31 December 2021: EUR0.6billion; 31 December 2020: EUR1.1billion). 336 ABN AMRO Integrated Annual Report 2021 35 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 ABNAMRO to pay bills of exchange drawn on clients. ABNAMRO expects most acceptances to be settled simultaneously with the reimbursement from clients. 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 at the higher of the amount of the expected credit loss and the amount initially recognised, less – when appropriate – the cumulative amount of income recognised in the income statement. Contingent liabilities 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 in the balance sheet, but disclosed if the likelihood of an outflow of economic resources is not more likely than not or if the likelihood of an outflow of economic resources is more likely than not, however cannot be reliably estimated. Committed credit facilities Commitments to provide credit take the form of approved but undrawn loans, 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 ABNAMRO 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. ABNAMRO also provides guarantees by acting as a settlement agent in securities borrowing and lending transactions. Many of the contingent liabilities and commitments are expected to expire without being paid out 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. Furthermore, statements of liability within the meaning of Article 403, Book 2 of the Dutch Civil Code have been issued for a number of ABNAMRO’s affiliated companies (see also the chapter on Other information). The committed credit facilities, guarantees and other commitments are summarised in the following table. The amounts stated in the table for commitments assume that amounts are fully paid out. The amounts shown in the table for guarantees and letters of credit represent the maximum amount ABNAMRO is exposed to if the contract parties completely fail to perform as contracted. 337 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 Payments due by period (inmillions) Less than one year Between one and three years Between three and five years After five years Total 31 December 2021 Committed credit facilities 35,134 10,395 5,965 3,147 54,642 Guarantees and other commitments Guarantees granted 142 83 96 1,222 1,544 Irrevocable letters of credit 3,084 1 , 111 336 221 4,752 Recourse risks arising from discounted bills 1,159 11 3 31 1 1,303 Total guarantees and other commitments 4,385 1,307 463 1,443 7,598 Total 39,520 11,702 6,428 4,590 62,240 31 December 2020 Committed credit facilities 35,221 7,792 8,835 3,360 55,207 Guarantees and other commitments Guarantees granted 1,674 124 11 82 1,890 Irrevocable letters of credit 3,422 867 968 278 5,535 Recourse risks arising from discounted bills 1,295 80 145 37 1,556 Total guarantees and other commitments 6,390 1,071 1,123 397 8,981 Total 41,611 8,863 9,958 3,757 64,188 Total committed credit facilities, guarantees and other commitments decreased by EUR2.0billion, mainly related to the wind-down of the CIB non-core portfolio. Equity trading German authorities are conducting investigations into the involvement of individuals from various banks and other parties in equity trading extending over dividend record dates in Germany, including several forms of tainted dividend arbitrage (i.e. dividend stripping, including cum/ex and cum/cum) for the purpose of obtaining German tax credits or refunds in relation to withholding tax levied on dividend payments including, in particular, transaction structures that have resulted in more than one market participant claiming such credit or refund with respect to the same dividend payment. ABNAMRO’s legal predecessor, Fortis Bank (Nederland) N.V., ABNAMRO and several (former) subsidiaries were directly or indirectly involved in these transactions in the past in various roles. Certain criminal investigation proceedings relate to the activities of these entities and individuals involved at the time. This also resulted in search warrants being issued against ABNAMRO. ABNAMRO cooperates with these investigations. ABNAMRO has no knowledge of the results of any such investigation. Furthermore, ABNAMRO frequently receives information requests from German authorities in relation to other (criminal) investigations. ABNAMRO cooperates and provides the requested information to the extent possible. Although a number of subsidiaries associated with these transactions have been sold by means of a management buy-out, legal risks remain for ABNAMRO, in particular relating to criminal and civil law. All material tax issues with respect to ABNAMRO’s reclaims for cum/ex transactions have been settled with the German tax authorities. With respect to cum/cum transactions, the German Federal Ministry of Finance released 2 circular rulings dated 9 July 2021 (published 15 July 2021) in which there is a change in interpretation of tax legislation compared to previous circular rulings. These new circular rulings require the German local tax authorities to recollect dividend withholding tax credited to taxpayers where such credits relate to cum/cum strategies. ABNAMRO has collected dividend withholding tax related to transactions that might be considered as cum/cum transactions under the new circular rulings. In anticipation of a decision of the German tax authorities, ABNAMRO has paid the relevant dividend withholding tax amounts.However, ABNAMRO has retained its rights to contest any such decision. With respect to cum/cum securities lending transactions with German counterparties as borrowers, ABNAMRO is exposed to civil law compensation claims from these counterparties resulting from crediting entitlements that have been denied or will be reclaimed by the relevant German tax authorities. Based on the analyses performed, ABNAMRO considers it rather unlikely that such claims will be successful. However, it cannot be ruled out. It cannot be excluded that ABNAMRO or subsidiaries will be faced with financial consequences as a result of their involvement in dividend stripping transactions, including penalties and other measures under criminal law and civil law claims. It is currently unclear, however, how the German prosecution authorities’ investigations will impact ABNAMRO and its subsidiaries and if and to what extent penalties or forfeiture orders will be imposed. It is also uncertain whether tax authorities or third parties will successfully claim amounts from ABNAMRO in (secondary) liability or other civil cases. Therefore, the financial impact cannot be reliably estimated at this time and no provision has been made in this respect. 338 ABN AMRO Integrated Annual Report 2021 Netherlands Public Prosecution Service investigation into Dutch tax matter The Netherlands Public Prosecution Service (“NPPS”) is conducting an investigation regarding transactions which ultimately led to a set-off by a third party of dividend withholding tax credits against its corporate tax liabilities in the Netherlands during the period 2009-2013. The investigation of the NPPS is related to ongoing tax proceedings before the Dutch courts between the third party and the Dutch tax authority regarding the set-off by the third party of dividend withholding tax credits against its corporate tax liabilities. The District Court ruled in favour of this third party in 2018. The Court of Appeal annulled the ruling of the District Court and ruled in favour of the Netherlands tax authority in 2020. An appeal with the Supreme Court has been filed against the ruling of the Court of Appeal and is currently pending. The NPPS informed ABNAMRO that it is a suspect in the investigation due to its involvement in certain of these transactions. The NPPS is gathering information in connection The NPPS sought various documents in connection with its investigation and ABNAMRO is cooperating with the investigation. The timing of the completion of the investigation and the outcome are uncertain. It cannot be excluded that ABNAMRO willbe faced with financial consequences as a result of the investigation. The potential financial impact of the investigation cannot be reliably estimated at this time and no provision has been made. Duty of care matters A number of proceedings have been initiated against ABNAMRO for alleged breach of its duty of care in transparency related standards. Where applicable, provisions for these matters have been made. There can be no assurance that additional proceedings will not be brought or that amounts demanded in claims brought todate 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. Although the consequences could be substantial for ABNAMRO and potentially affect its reputation, results of operations, financial condition and prospects, it is not possible to reliably estimate or quantify ABNAMRO’s exposure at this time. These uncertainties are likely to continue for some time. Cross-liability On 6 February 2010, the former ABN AMRO Bank N.V. demerged into two entities: NatWest Markets N.V. (formerly known as RBS N.V.) and ABN AMRO Bank N.V. On the division of an entity by demerger, Dutch law establishes a cross-liability between surviving entities for the benefit of the creditors at the time of the demerger. ABN AMRO’s cross-liability amounts to EUR 1.2 billion (31 December 2020: EUR 1.4 billion), for which NatWestMarkets N.V. has posted collateral of EUR 0.4 billion (31 December 2020: EUR 0.7 billion). Other contingent liabilities ABNAMRO is involved in a number of legal proceedings in the ordinary course of business in various jurisdictions. In presenting the Consolidated Financial Statements, management estimates 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 an expected cash outflow cannot be reasonably estimated or that are notmore likely than not to lead to a cash outflow. Some of these matters may be regarded as a contingency. In particular, the following matters are regarded as contingencies: H ABNAMRO, 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. The provision of custodial services resulted in several legal claims, including by the Bernard L. Madoff Investment Securities trustee in bankruptcy (Irving Picard) and the liquidators of certain funds, who are pursuing legal action in an attempt to recover payments made as a result of the fraud and/or to compensate their alleged losses. ABNAMRO and certain ABNAMRO subsidiaries are defendants in these proceedings. Even though these proceedings have been ongoing for several years, they are still in a preliminary stage. Hence, it is not possible to estimate the total amount of ABNAMRO’s potential liability, if any. H The Imtech Group was declared bankrupt in August 2015. ABNAMRO was one of the banks that extended financing to this group and participated in the second rights offering of October 2014. By letter of 20 January 2018, Stichting Imtechclaim and Imtech Shareholders Action Group B.V. held ING, Rabobank, Commerzbank and ABNAMRO liable for alleged misstatements in the prospectuses and for alleged actio pauliana (fraudulent preference). By letter of 28 March 2018 the VEB held parties including ABNAMRO liable for damage allegedly suffered by the Imtech investors. On 10 August 2018, ABNAMRO received formal notification from Imtech’s trustees that they were seeking to nullify a large number of transactions and claim various damages. The letter aimed to interrupt limitation periods in view of the possible claims against Imtech’s lenders, bondholders and underwriting banks. It appears likely that litigation will be started by the 339 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 trustees in view of this letter and subsequent communications, although the exact timing thereof, the quantum of a claim and the parties to be summoned are unclear. Two execution-only clients of ABNAMRO have commenced proceedings against ABNAMRO and are claiming an amount in excess of EUR600,000. Their claim is based on alleged prospectus liability, together with an alleged breach of the duty of care. The District Court of Amsterdam dismissed the claims of the two-execution only clients in March 2020. An appeal was lodged in 2020 at the Court of Appeal of Amsterdam. The Court of Appeal rendered judgement at the end of 2021 and confirmed the earlier ruling of the District Court of Amsterdam and dismissed the claims of the two execution-only clients. H On 18 October 2018, Eurostar Diamond Traders N.V. (EDT) filed civil law proceedings against ABNAMROBank N.V. in the Antwerp District Court, claiming a total amount of USD 720 mio. This amount includes an unsubstantiated claim for damages of USD 600 mio on the ground that ABNAMRO and Standard Chartered Bank (SCB) allegedly deliberately caused EDT’s demise. EDT and Eurostar Diamond Traders International N.V., EDT’s parent company, were both declared bankrupt in a final decision in 2020. In August 2020, the EDT appointed trustees indicated that they did not want to continue this claim. On 11 December 2020, ABNAMRO, SCB and the EDT trustees reached an amicable settlement. This settlement will be final when approved by the supervisory judge and the Bankruptcy Court of Antwerp. The approvals from the supervisory judge and the Bankruptcy Court of Antwerp are still pending. H In February 2018, ABNAMRO sold its Luxembourg subsidiary to BGL BNP Paribas (BGL). BGL is now being sued by a Luxembourg fund, LFP I SICAV SIF (LFP), which alleges that the Luxembourg subsidiary, in its capacity as custodian of a sub-fund of LFP (Columna), should have prevented an investment of USD 10million from being made. LFP is claiming restitution of this amount from BGL in procedures before the District Court of Luxembourg. BGL notified ABNAMRO of this claim in January 2020 and, in June 2020, summoned it to appear in these proceedings in an intervention procedure. In July 2020, LFP and its Hong Kong subsidiary issued an additional claim against BGL. This claim amounts to USD 38million. This claims, in addition to the previously claimed USD 10million, also relates to Columna . Since August 2020, this additional claim has also been part of the intervention procedure between BGL and ABNAMRO. In q3 2021, LFP reduced its additional claim from USD 38million to USD 23million (EUR20million). Both claims are still pending before the Luxembourg court. In August 2020 and thereafter, BGL sent notices under the SPA alleging (and/or reserved its (alleged) rights to file) possible further claims against ABNAMRO, also in relation to LFP. ABNAMRO has responded with - in short - a formal challenge of liability under the purchase agreement or otherwise. As a result, it has to be awaited whether BGL will institute any further additional claims in this matter. H First Data Holding (FDH) and some of its group companies have indicated that they believe that one of FDH’s subsidiaries, European Merchant Services B.V (EMS), has a claim against International Card Services B.V. (ICS). In spring 2016, FDH claimed for the first time that EMS was entitled to 51% of the proceeds of the sale of Visa Europe in 2015. The alleged claim amounted to approximately EUR37million plus interest. In August 2016, ICS refuted this claim. In September 2020, FDH repeated its alleged claim. In October 2020, EMS and FDH (now Fiserv) interrupted the limitation periods relating to EMS’s alleged claim. In December 2020, ICS responded by rejecting this alleged claim again. As per 31 December 2021 EMS itselfhas not filed any claim against ICS. As a result, it has to be awaited whether and when EMS files such claim. H Other contingencies include EUR131million related to an irrevocable payment commitment (IPC) to the Single Resolution Board (SRB) in Brussels. In April 2016, the SRB provided credit institutions with the option to fulfil part of their obligation to pay the annual ex-ante contributions to the Single Resolution Fund (SRF) through IPCs. To secure full and punctual payment, when called by the SRB, credit institutions needed to constitute cash collateral and fully transfer legal ownership to the SRB. 340 ABN AMRO Integrated Annual Report 2021 36 Remuneration of Executive Board and Supervisory Board Remuneration of Executive Board ABNAMRO’s remuneration policy has been formally approved by shareholders and adopted by the Supervisory Board. The following statement summarises the income components for the individual Executive Board members.In 2021, other short-term benefits andthe compensation for lease car expenseswere included in the table Remuneration for the individual Executive Board members. The comparative figures have been adjusted accordingly. 2021 Base salary Compensation for lease car expenses Benefits from mortgage interest rate Variable remuneration 12 Total pension-related contributions 13 Severance payments Other short-term benefits Total (In thousands) Post- employment pension (a) Short-term allowances (b) R.A.J. Swaak 1,2 765 31 196 992 C.M. Bornfeld 1,3 650 31 161 162 1,004 C.J. Abrahams 1,4 108 5 27 20 159 T.J.A.M. Cuppen 1,5 650 34 31 161 876 D. Dorner 1,6 67 1 3 17 3 90 C. van der Hooft - Cheong 1,7 67 2 1 3 17 89 L. Kramer 1,8 381 6 18 95 59 558 G.R. Penning 1,9 67 3 17 87 A. Roest 1,10 161 5 6 8 40 220 Total 2,915 47 7 133 730 244 4,075 2020 R.A.J. Swaak 1,2 527 21 153 701 C. van Dijkhuizen 1,11 633 25 184 190 1,032 C.J. Abrahams 1,4 645 30 182 99 956 C.M. Bornfeld 1,3 645 30 182 156 1,013 T.J.A.M. Cuppen 1,5 645 34 30 182 891 Total 3,095 34 136 883 190 255 4,593 1 The total short-term benefits consist of base salary, compensation for lease car expenses, mortgage interest rate benefit, variable remuneration and other short-term benefits. Other short-term benefits consists of flight tickets, a housing allowance and international schooling costs for ExBo members’ children when applicable. 2 Total short-term benefits for R.A.J. Swaak amounted to EUR 765 thousand in 2021 (2020: EUR 527 thousand). R.A.J. Swaak was appointed with effect from 22 April 2020. 3 Total short-term benefits for C.M. Bornfeld amounted to EUR 812 thousand in 2021 (2020: EUR 801 thousand). 4 Total short-term benefits for C.J. Abrahams amounted to EUR 128 thousand in 2021 (2020: EUR 744 thousand). C.J. Abrahams left ABN AMRO on 1 March 2021. 5 Total short-term benefits for T.J.A.M. Cuppen amounted to EUR 684 thousand in 2021 (2020: EUR 679 thousand). 6 Total short-term benefits for D. Dorner amounted to EUR 70 thousand in 2021. D. Dorner was appointed with effect from 24 November 2021. 7 Total short-term benefits for C. van der Hooft-Cheong amounted to EUR 69 thousand in 2021. C. van der Hooft-Cheong was appointed with effect from 24 November 2021. 8 Total short-term benefits for L. Kramer amounted to EUR 446 thousand in 2021. L. Kramer was appointed with effect from 1 June 2021. 9 Total short-term benefits for G. Penning amounted to EUR 67 thousand in 2021. G. Penning was appointed with effect from 24 November 2021. 10 Total short-term benefits for A. Roest amounted to EUR 172 thousand in 2021. The components for A. Roest relate to her interim ExBo appointment from 1 March 2021 until 1 June 2021. 11 The Executive Board membership of C. van Dijkhuizen ended on 22 April 2020. The services agreement of C. van Dijkhuizen ended on 31 October 2020. 12 Owing to the Bonus Prohibition Act, the Executive Board members are not entitled to receive variable compensation. This prohibition has applied since the 2011 performance. 13 The Executive Board members participate in ABN AMRO Bank’s pension plans for employees in the Netherlands. Total pension-related contributions refer to (a) the employer contribution to the pension fund (for the CDC pension scheme for pensionable income up to EUR 112,189 (2020: EUR 110,111) and (b) the arrangement in accordance with the ABN AMRO Collective Labour Agreement (‘ABN AMRO CAO’). Loans from ABNAMRO to Executive Board members The following table summarises the outstanding loans to members of the Executive Board. 2021 2020 (In thousands) Outstanding 31 December Redemptions Interest rate Outstanding 31 December Redemptions Interest rate D. Dorner 1 484 1.4% C. van der Hooft - Cheong 2 1,591 1.5% G.R. Penning 3 265 0.7% A. Roest 4 3,158 1.8% 1 D. Dorner was appointed with effect from 24 November 2021. 2 C. van der Hooft-Cheong was appointed with effect from 24 November 2021. 3 G. Penning was appointed with effect from 24 November 2021. 4 A. Roest was an interim ExBo member from 1 March 2021 until 1 June 2021. 341 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 Remuneration of the Supervisory Board The following statement summarises the income components for the individual Supervisory Board members. (In thousands) 2021 3 2020 3 T. de Swaan 98 96 A.C. Dorland 82 81 L.J. Griffith 80 78 M.P. Lap 80 78 J.B.J. Stegmann 1 72 81 A.M. Storåkers 80 78 M.L. Tannemaat 2 80 4 J.S.T. Tiemstra 82 81 Total 654 577 1 J.B.J. Stegmann stepped down as a member of the Supervisory Board with effect from 14 November 2021. 2 M.L. Tannemaat was appointed as a member of the Supervisory Board with effect from 15 December 2020. 3 Remuneration amounts excluding VAT. Loans from ABNAMRO to Supervisory Board members The following table summarises the outstanding loans to members of the Supervisory Board. 2021 2020 (In thousands) Outstanding 31 December Redemptions Interest rate Outstanding 31 December Redemptions Interest rate T. de Swaan 1,591 6 1.0% 1,597 1.0% L.J. Griffith 339 89 1.8% 428 94 1.8% M.L. Tannemaat 1 772 1.7% J.B.J. Stegmann 2 500 0.1% 1 M.L. Tannemaat was appointed as a member of the Supervisory Board with effect from 15 December 2020. 2 J.B.J. Stegmann stepped down as a member of the Supervisory Board with effect from 14 November 2021. 37 Share-based payment Accounting policy for share-based payment Identified staff as defined by CRD V are entitled to receive variable compensation. The variable compensation consists of a cash element and a share-based element settled in cash. The cash element in the variable compensation plan is recognised in accordance with IAS 19 and the other element qualifies as a cash-settled share-based payment in accordance with IFRS 2. The compensation is granted for a certain performance year for 50% in cash and for 50% in share-based compensation settled in cash. The vesting conditions include bad leaver conditions and consist of a deferral period and a retention period until the share-based compensation is settled in cash. Up to and including the performance year 2019, the share-based compensation settled in cash(depositary receipt) vests for 30% two years after the performance year. The remaining 20% vests in three equal tranches in the third, fourth and fifth year following the performance year. At the end of the vesting period, participants receive the cash value of the five-day average of an ABN AMRO listed depositary receipt (DR). The share-based compensation settled in cashgranted for 2019 and the years before gives the option to request DRs rather than cash. This choice can be made during the quarter in which settlement takes place and is subject to Supervisory Board approval. This equity component in the plan is valued at nil until the request is approved. Participants receive the same amount of fair value, regardless of whether they choose cash or DRs. If participants choose DRs, the value of the DRs is transferred in its entirety from the liability to an equity account. The actual delivery to the participant is expected to take place in the same quarter as the choice is made. ABN AMRO will not issue additional shares for the compensation granted for 2019 and before, but will buy shares in the market when needed. As the purchase of shares is expected to take place in the quarter during which the DRs are delivered, there is no impact on (diluted) earnings per share. As from performance year 2020, the DRs were replaced by performance certificates (PCs) as share-based compensation settled in cash. The share-based compensation settled in cash vests for 30% in the first year. The remaining 20% vests in four 342 ABN AMRO Integrated Annual Report 2021 equal tranches in the second, third, fourth and fifth year following the performance year. At the end of the vesting period, participants receive the cash value of the five-day average of ABN AMRO’s share price. Share-based compensation settled in cashgranted from performance year 2020 onwards does not include the option to request DRs. A liability is recognised for the fair value of cash-settled transactions. The fair value is measured initially and at each reporting date up to and including the settlement date, with changes in fair value recognised in employee benefits expense. The fair value is determined using an internally developed model based on the share price and market expectations of future dividends. The carrying amount of the liability relating to theshare-based compensation settled in cashat 31 December 2021 was EUR9 million (2020: EUR 4 million). The expense recognised for the DRs and PCs awards during 2021 was EUR6million, including retention bonus, while in 2020 a net gain of EUR3million was recognised as a result of the cancellation of DRs of several Identified Staff and a decrease in the share price of ABNAMRO. The following table shows the total number of DRs and PCs that have been awarded, forfeited and paid out. (In thousands of DRs) 2021 2020 Outstanding at 1 January 859 751 Granted during the year 313 361 Forfeited during the year 12 18 Paid out during the year cash 279 2 11 Paid out during the year DRs 27 24 Less: total paid out/forfeited -318 -253 Outstanding at 31 December 854 859 The following table shows the total number of DRs and PCs granted, segmented by the respective vesting period after which the award will be paid out. (In thousands of DRs) Up to one year Between one and two years Between two and three years Between three and four years Between four and five years Total 31 December 2021 Number of granted DRs by vesting period 382 231 11 6 79 47 854 31 December 2020 Number of granted DRs by vesting period 257 343 125 86 48 859 38 Related parties Parties related to ABNAMROBank include NLFI with control, the Dutch State with significant influence, associates, pension funds, joint ventures, the Executive 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. ABNAMRO has applied the partial exemption for government-related entities as described in IAS 24 paragraphs 25-27. As part of its business operations, ABNAMRO 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. Loans and advances to the Executive Board members and close family members, where applicable, consist mainly of residential mortgages granted under standard personnel conditions. For further information, please refer to Note 36 Remuneration of Executive Board and Supervisory Board in the Consolidated Annual Financial Statements 2021. 343 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 Balances with joint ventures, associates and other (inmillions) Joint ventures Associates Other Total 31 December 2021 Assets 15 180 195 Liabilities 88 359 447 Guarantees given 15 15 Irrevocable facilities 21 21 2021 Income received 39 3 42 Expenses paid 8 80 317 405 31 December 2020 Assets 14 204 218 Liabilities 79 426 504 Guarantees given 15 15 Irrevocable facilities 17 17 2020 Income received 32 4 36 Expenses paid 4 110 284 399 The EUR25million decrease in assets with associates was mainly due to lower loans and receivables customers held by non-financial corporations. The EUR67million decrease in liabilities with associates was mainly due to lower customer balances held with other financial corporations and non-financial corporations. The EUR30million decrease in expenses paid with associates was mainly due to lower expenses in non-financial corporations and other financial corporations. Expenses paid in the column Other reflect pension contributions paid to the ABNAMRO pension fund. Balances with the Dutch State (inmillions) 31 December 2021 31 December 2020 Assets Financial assets held for trading 195 414 Derivatives 18 171 Financial investments 4,028 4,510 Loans and advances customers 168 714 Liabilities Financial liabilities held for trading 192 79 Derivatives 125 807 Due to customers 466 731 Other liabilities 1 1 2021 2020 Income statement Interest income 64 80 Interest expense 27 40 Net trading income 110 -209 Net fee and commission income 2 344 ABN AMRO Integrated Annual Report 2021 On 1 April 2010, ABNAMRO signed an indemnity agreement with the Dutch State (currently represented by NLFI) for a shortfall in capital above a certain amount related to specific assets and liabilities of RFS Holdings B.V. In 2019, Royal Bank of Scotland (RBS) acquired all the shares in RFS Holding. However, NLFI has given certain warranties related to its previously owned shares in RFS Holdings and the indemnity agreement continues to exist. RFS Holdings is sufficiently capitalised. Consequently, ABNAMRO has assessed the risk for any shortfall as remote. Transactions conducted with the Dutch State are limited to normal banking transactions, taxation and other administrative relationships. Normal banking transactions relate to loans and deposits, financial assets held for trading and financial investments and are entered into under the same commercial and market terms that apply to non-related parties. Transactions and balances related to taxation, levies and fines in the Netherlands are excluded from the table above. The EUR0.2billion decrease in financial assets held for trading was mainly due to lower positions in Dutch government bonds as a result of the primary dealership in the Netherlands and client facilitation. Most of these contracts are hedged with short positions in government bonds. The EUR0.2billion decrease in derivatives related to assets was mainly due to lower lending positions with the Dutch State. Derivatives transactions with the Dutch State are related to the normal course of business. The EUR0.5billion decrease in financial investments was mainly due to lower Dutch government bonds held. This is part of the liquidity buffer and is held for liquidity contingency purposes. The EUR0.6billion decrease in loans and advances to customers was due to higher cash collateral pledged. The EUR0.1billion increase in financial liabilities held for trading mainly related to higher amounts of Dutch government bonds as a result of the primary dealership in the Netherlands and client facilitation. Most of these contracts are hedged with short positions in government bonds. The EUR0.7billion decrease in derivatives related to liabilities was mainly due to lower lending positions with the Dutch State. Derivatives transactions with the Dutch State are related to the normal course of business. The EUR0.3billion decrease in due to customers is attributable to the redemption of part of the loan (including accrued interest) acquired from the Dutch State and relating to Ageas. Net trading income increased by EUR319million to a profit of EUR110million, mainly due to the sale of Dutch government bonds. 345 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 Key management personnel compensation In 2021, other short-term benefits were included in the table for key management personnel compensation. The comparative figures have been adjusted accordingly. Base salary Compensation for lease car expenses Benefits from mortgage interest rate Variable remuneration 10 Total pension-related contributions 11 Severance payments Other short-term benefits Total (In thousands) Post- employment pension (a) Short-term allowances (b) 2021 Members ExBo 2,915 47 7 133 730 244 4,075 D. Dorner 1,2 77 3 1 4 19 3 107 F.M.R. van der Horst 1,3 1,054 55 12 52 260 558 1,991 D.C. de Kluis 1,4 401 22 10 21 98 552 P.H. van Mierlo 1,5 1,002 56 7 53 244 598 1,960 R.F. van Nouhuijs 1,6 693 36 34 171 934 G.R. Penning 1,7 574 30 28 142 774 P. Pfaff 1,8 139 5 3 7 34 188 Total 6,855 254 40 332 1,698 1,156 247 10,581 2020 Members ExBo 3,095 34 136 883 190 255 4,593 F.M.R. van der Horst 1,3 623 34 20 30 174 881 D.C. de Kluis 1,4 585 28 16 30 162 821 G.J. Meppelink 1,9 244 244 P.H. van Mierlo 1,5 585 4 4 30 162 785 R.F. van Nouhuijs 1,6 623 34 1 30 174 862 G.R. Penning 1,7 259 14 13 73 359 Total 5,770 148 41 269 1,628 434 255 8,545 1 The total short-term benefits consist of base salary, compensation for lease car expenses, mortgage interest rate benefit, variable remuneration and other short-term benefits. Other short-term benefits consists of flight tickets, a housing allowance and international schooling costs for ExBo members’ children when applicable. 2 Total short-term benefits for D. Dorner amounted to EUR 84 thousand in 2021. D. Dorner was appointed as an interim ExCo member from 12 October 2021 until 24 November 2021. On24November 2021, D. Dorner was appointed as an ExBo member. 3 Total short-term benefits for F.M.R. van der Horst amounted to EUR 1,121 thousand in 2021 (2020: EUR 677 thousand). All components for F.M.R. van der Horst are included for the period until the end of his employment contract on 1 December 2022, excluding the period from 24 November 2021 until 1 March 2022, during which he will continue to perform activities. The severance payment was awarded in 2021 and will be paid out in 2022. 4 Total short-term benefits for D.C. de Kluis amounted to EUR 433 thousand in 2021 (2020: EUR 629 thousand). D.C. de Kluis left ABN AMRO on 1 September 2021. 5 Total short-term benefits for P.H. van Mierlo amounted to EUR 1,065 thousand in 2021 (2020: EUR 593 thousand). All remuneration components for P.H. van Mierlo are included for the period until the end of his employment contract on 1 September 2022. The severance payment was awarded in 2021 and will be paid out in 2022. 6 Total short-term benefits for R.F. van Nouhuijs amounted to EUR 729 thousand in 2021 (2020: EUR 658 thousand). All remuneration components for R.F. van Nouhuijs are included for the period until the end of his employment contract on 1 February 2022. 7 Total short-term benefits for G.R. Penning amounted to EUR 604 thousand in 2021 (2020: EUR 273 thousand). G.R. Penning was appointed CHRO with effect from 1 August 2020. His 2021 remuneration is included for the period up to 24 November 2021. With effect from 24 November 2021, G.R. Penning was appointed as an ExBo member. 8 Total short-term benefits for P. Pfaff amounted to EUR 147 thousand in 2021. P. Pfaff was appointed as an interim ExCo member from 1 September 2021 until 24 November 2021. 9 G.J. Meppelink stepped down from the ExCo on 1 August 2019 and worked on several assignments until 31 December 2019. The in 2020 paid severance payment related to his ExCo contract amounted to EUR 243,958 gross. 10 Due to ABN AMRO restrictions, no variable remuneration will be paid. Therefore the fixed remuneration is 100% of total remuneration. 11 The Executive Committee members participate in ABN AMRO Bank’s pension plans as applicable to the employees in the Netherlands. Total pension-related contributions as of 2021 refer to (a) the employer contribution to the pension fund (for the CDC pension scheme for pensionable income up to EUR 112,189 (2020: EUR 110,111) and (b) the arrangement in accordance with the ABNAMRO Collective Labour Agreement (‘ABN AMRO CAO’). Key managementloans and advances 2021 2020 (In thousands) Outstanding 31December Redemptions Average interest rate Outstanding 31December Redemptions Average interest rate Executive Board 5,498 1.6% Other ExCo members 2,539 1,174 2.5% 3,331 925 2.2% 346 ABN AMRO Integrated Annual Report 2021 39 Post balance sheet events ABNAMRO EUR500million share buyback programme In line with ABNAMRO’scapital framework, the bank’s managementhasannounced an inaugural share buyback programme of EUR500million. The programmecommencedon10 February 2022 and is expected to end nolater thanJune2022. Through this programme ABNAMRO has added share buybacksas an instrument for managing itscapital position. TheBaselIV threshold for share buybacks remains unchanged for the time being asthe bank’scapital buffer issufficient toconsider future share buybacks.ABNAMRO is aiming foragradual reduction over time, in a constructive dialogue withthe regulator. Sale of ABNAMRO Levensverzekering N.V. On 15 February 2022, ABNAMRO announced that it had reached agreement on the sale of ABNAMRO Levensverzekering N.V., the life insurance subsidiary of ABNAMRO Verzekeringen Holding B.V., to NN Group N.V. After this transaction, ABNAMRO Verzekeringen Holding B.V. will continue as a non-life insurer and intermediary. The sale of ABNAMRO Levensverzekering N.V. is subject to regulatory approval. ABNAMRO estimates that it will recognise a gain from the sale, which is expected to close in the second half of 2022. Russia-Ukraine war In light of the recent developments in respect of the conflict between Russia and Ukraine, ABN AMRO has assessed the direct and indirect impact of this political event on the bank and its customers. The bank’s direct exposure to Russia is approximately EUR 50 million. This exposure has largely been mitigated because it relates partly to assets of Russian clients outside Russia and to short-term trade transactions. The bank has no direct exposure in respect of Ukraine or Belarus. Further escalation of the conflict could also have indirect consequences for the bank’s customers in the form, for example, ofhigher gas prices, sanctions on trade with Russia and increased cybersecurity concerns as a result of a probable increase in criminal activities. These indirect consequences are difficult to quantify, but the bank’s management is paying appropriate attention to the developments. Authorisation of the Consolidated Annual Financial Statements 8 March 2022 Supervisory Board T. (Tom) de Swaan, Chair A.C. (Arjen) Dorland, Vice-Chair L.J. (Laetitia) Griffith M.P. (Michiel) Lap A.M. (Anna) Storåkers M.L. (Mariken) Tannemaat J.S.T. (Tjalling) Tiemstra Executive Board Robert Swaak, Chief Executive Officer and Chair Christian Bornfeld, Chief Innovation & Technology Officer and Vice-Chair Tanja Cuppen, Chief Risk Officer Lars Kramer, ChiefFinancial Officer Annerie Vreugdenhil,Chief Commercial Officer - Personal & Business Banking (as of 1 March 2022) Choy van der Hooft-Cheong, Chief Commercial Officer - Wealth Management Dan Dorner, Chief Commercial Officer - Corporate Banking Gerard Penning, Chief Human Resources Officer 347 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Consolidated Annual Financial Statements 2021 / Annual Financial Statements 2021 Guide for readers This section provides an overview of the Company Annual Financial Statements of ABNAMRO Bank N.V. and all accompanying notes. They have been prepared in accordance with the requirements inTitle 9 of Book 2 ofthe Dutch Civil Code. 348 ABN AMRO Integrated Annual Report 2021 Company Annual FinancialStatements ofABNAMROBankN.V. Annual Financial Statements 2021 Company Annual Financial Statements of ABN AMRO Bank N.V. Company income statement 350 Company statement offinancialposition 351 Company statement ofchangesinequity 352 Notes to the Company AnnualFinancialStatements ofABNAMROBankN.V. 353 1 Accounting policies 353 2 Net interest income 353 3 Results from financial transactions 353 4 Income from securities and participating interests 354 5 Other operating income 354 6 Personnel expenses 354 7 Cash and balances at central banks 354 8 Short-term government paper 354 9 Loans and advancesbanks 355 10 Loans and advancescustomers 356 11 Debt securities 356 12 Equity securities 357 13 Participating interests in group companies 357 14 Equity-accounted investments 357 15 Property, equipment and intangible assets 358 16 Other assets 358 17 Due to banks 359 18 Due to customers 359 19 Issued debt 360 20 Subordinated liabilities 360 21 Provisions 361 22 Other liabilities 363 23 Equity 363 24 Maturity of assets and liabilities 364 25 Contingent liabilities 365 26 Assets pledged 366 27 Segment information 366 28 Remuneration 366 29 Related parties 366 30 Post balance sheet events 367 Authorisation of the Company Annual Financial Statements 367 349 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Company income statement (inmillions) Note 2021 2020 Income Interest income 12,145 12,769 Interest expense 9,058 9,415 Net interest income 2 3,087 3,354 Fee and commission income 1,235 1,278 Fee and commission expense 277 378 Net fee and commission income 958 899 Results from financial transactions 3 11 2 324 Income from securities and participating interests 4 1,046 824 Other operating income 5 361 25 Operating income 5,563 5,426 Expenses Personnel expenses 6 1,764 1,720 General and administrative expenses 2,293 1,803 Depreciation, amortisation and impairment losses of tangible and intangible assets 165 227 Operating expenses 4,222 3,750 Impairment charges on financial instruments -123 1,761 Total expenses 4,099 5,511 Profit/(loss) before taxation 1,465 -84 Income tax expense 234 -40 Profit/(loss) for the year 1,231 -45 350 ABN AMRO Integrated Annual Report 2021 Company statement offinancialposition (inmillions) Note 31 December 2021 31 December 2020 Assets Cash and balances at central banks 7 60,489 57,936 Short-term government paper 8 36,414 39,366 Loans and advances banks 9 166,629 166,418 Loans and advances customers 10 103,236 109,182 Debt securities 11 11,817 7,523 Equity securities 12 35 35 Participating interests in group companies 13 6,329 7,819 Equity-accounted investments 14 262 261 Intangible assets 15 25 19 Property and equipment 15 573 833 Other assets 16 5,369 8,341 Total assets 391,178 397,733 Liabilities Due to banks 17 62,405 65,976 Due to customers 18 235,008 229,297 Issued debt 19 56,919 63,253 Subordinated liabilities 20 7,549 8,069 Provisions 21 852 662 Other liabilities 22 6,450 9,485 Total liabilities 369,184 376,743 Equity Share capital 940 940 Share premium 12,970 12,970 Revaluation reserves -609 -1,178 Currency translation reserves -43 -75 Other legal reserves 178 185 Other reserves 1 5,340 6,205 AT1 Capital securities 1,987 1,987 Profit/(loss) for the period 1,231 -45 Total equity 23 21,994 20,989 Total liabilities and equity 391,178 397,733 Committed credit facilities 25 62,860 64,948 Guarantees and other commitments 25 35,663 29,815 1 Consists of actuarial gains/(losses) on post-employment benefit plans and retained earnings. 351 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Annual Financial Statements 2021 Company statement ofchangesinequity (inmillions) Share capital Share premium Revaluation reserves Currency translation reserves 1 Other legal reserves Other reserves 2 Capital securities Profit/(loss) for the period Total Balance at 1 January 2020 940 12,970 -952 -15 147 4,348 1,987 2,046 21,471 Total comprehensive income -225 -60 37 -65 -45 -358 Transfer 2,046 -2,046 Interest AT1 capital securities - 11 7 - 11 7 Increase of capital 994 994 Decrease of capital -1,000 -1,000 Other changes in equity -6 6 Balance at 31 December 2020 940 12,970 -1,178 -75 185 6,205 1,987 -45 20,989 Total comprehensive income 568 32 -7 -88 1,231 1,737 Transfer -45 45 Dividend -639 -639 Interest AT1 capital securities -91 -91 Other changes in equity -2 -2 Balance at 31 December 2021 940 12,970 -609 -43 178 5,340 1,987 1,231 21,994 1 As of 2020, the currency translation reserves have been split from the revaluation reserves. This has no further impact on equity. 2 Consists of actuarial gains/(losses) on post-employment benefit plans and retained earnings. 352 ABN AMRO Integrated Annual Report 2021 Notes to the Company AnnualFinancialStatements ofABNAMROBankN.V. 1 Accounting policies The Company Annual Financial Statements of ABNAMROBank N.V. have been prepared in accordance with the requirements in Title 9 of Book 2 of the Dutch Civil Code. ABNAMROBank N.V. applies the option as included in Section2:362 paragraph 8. ABNAMROBank N.V. prepares its Consolidated Annual Financial Statements in accordance withInternational Financial Reporting Standards as adopted by the European Union (EU IFRS). Reference is made totheaccounting policies section in the Consolidated Annual Financial Statements and the respective notes. Corporate information ABNAMROBank N.V. is registered at Gustav Mahlerlaan 10, 1082 PP Amsterdam, the Netherlands (Chamber of Commerce number 34334259). Basis of preparation The impairment requirements of IFRS 9 are applicable to financial instruments measured at amortised cost and FVOCI. Theserequirements also apply to intercompany transactions, which are eliminated upon consolidation. In ABNAMROBank’s Company Annual Financial Statements, the elimination of expected credit losses on intercompany transactions with subsidiaries is recognised in the carrying amount of the loans and advances and participating interests in group companies. Participating interests in group companies are measured at net asset value, determined on the basis of EU IFRS. The share inthe results of participating interests in group companies is reported in accordance with the principles of valuation and profit determination that apply to the Consolidated Annual Financial Statements. The financial statements are presented in euros, which is the functional and presentation currency of the company, roundedto the nearestmillion (unless otherwise stated). 2 Net interest income Net interest income for 2021 amounted to EUR3,087million, a decrease of EUR267million compared to EUR3,354million in 2020. Net interest income comprises interest income from loans, investments and other lending, interest expense on borrowingsby ABNAMRO and client accounts, and the results from interest rate and foreign exchange contracts enteredinto for hedging purposes. Interest income from loans and advances customers amounted to EUR1,794million (2020: EUR2,228million). 3 Results from financial transactions (inmillions) 2021 2020 Securities trading and derivatives transactions 82 208 Foreign exchange transaction results -29 104 Other 59 12 Total results from financial transactions 112 324 Results from financial transactions decreased by EUR212million in 2021 to EUR112million. This was mainly due to adecrease in results from foreign exchange transactions and interest rate derivatives. 353 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Annual Financial Statements 2021Notes to the Company AnnualFinancialStatements ofABNAMROBankN.V. / Annual Financial Statements 2021 4 Income from securities and participating interests (inmillions) 2021 2020 Shares and equity-accounted investments 39 35 Participating interests 1,007 789 Total income from securities and participating interests 1,046 824 Income from securities and participating interests increased by EUR222million, mainly due to higher results from participating interests in 2021. 5 Other operating income (inmillions) 2021 2020 Disposal of operating activities and equity-accounted investments 3 9 Other 358 16 Total other operating income 361 25 Total other operating income increased by EUR336million, mainly due to the sale and leaseback of ABNAMRO’s head office at Gustav Mahlerlaan in 2021. This resulted in a pre-tax gain of EUR327million. Please refer to Note 15 Property, equipment and intangible assets in the Company Annual Financial Statements and Note 24 Property and equipment, leases, goodwill and other intangible assets in the Consolidated Annual Financial Statements for more details of the sale and leaseback transaction. 6 Personnel expenses (inmillions) 2021 2020 Salaries and wages 1,303 1,180 Social security charges 151 146 Defined contribution plan expenses 244 256 Other 65 139 Total personnel expenses 1,764 1,720 Total personnel expenses increased by EUR44million in 2021 compared to 2020. The increase of EUR123millionin salaries and wages was mainly driven by an increase in FTE levels following the AML remediation programmes and a 2.75% increase in salaries under the Collective Labour Agreement. To a lesser extent, thewind-down of the CIB non-core portfolio resulted in an increase in retention payments. The decrease in defined contribution plan expenses of EUR12million was due to a release following a favourable court ruling. Other personnel expenses decreased by EUR73million due to higher restructuring provisions related to staff expenses in 2020. The decrease is also related to fewer dismissal payments and lower short-term employee benefit expenses than in 2020, due to Covid-19 restrictions. 7 Cash and balances at central banks Cash and balances at central banks increased by EUR2.6billion, mainly due to issuance of senior non-preferred bonds in issued debt (EUR2.6billion). 8 Short-term government paper (inmillions) 31 December 2021 31 December 2020 Short-term government paper held at fair value through other comprehensive income 35,934 38,727 Short-term government paper held for trading 480 639 Short-term government paper 36,414 39,366 354 ABN AMRO Integrated Annual Report 2021 Short-term government paper decreased by EUR3.0billion. Most of these instruments are part of the liquidity buffer and areheld for liquidity contingency purposes. Changes in short-term government paper held at fair value through other comprehensive income (inmillions) 2021 2020 Balance at 1 January 38,727 37,018 Purchases 9,454 11,947 Proceeds from sales and redemptions -11,400 -9,770 Gains/(losses) recorded in profit and loss -1,543 378 Unrealised gains/(losses) 107 - 11 Foreign exchange differences 589 -837 Other 1 Balance at 31 December 35,934 38,727 The gains and losses are mainly caused by the increased interest yields during 2021.Foreign exchange differences are mainly due to the appreciation of the USD. 9 Loans and advancesbanks (inmillions) 31 December 2021 31 December 2020 Group companies 164,142 162,789 Third parties 2,487 3,629 Loans and advances banks 166,629 166,418 (inmillions) 31 December 2021 31 December 2020 Interest-bearing deposits 160,398 163,717 Loans and advances 1,322 1,325 Mandatory reserve deposits with central banks 47 95 Securities financing 4,794 1,180 Other 68 101 Loans and advances banks 166,629 166,418 Loans and advances banks mainly consists of transactions with group companies. Loans and advances banks increased by EUR210million to EUR166.6billion at 31 December 2021,mainly due to an increase in securities financing and largely offset by a decrease in interest-bearing deposits. None of the items within loans and advances banks were subordinated at 31 December 2021. Mandatory reserve deposits are held with local central banks in accordance with statutory requirements. These deposits are not available to finance ABNAMRO’s day-to-day operations. (inmillions) 31 December 2021 31 December 2020 The Netherlands 165,961 165,460 Rest of Europe 147 238 USA 401 486 Asia 11 3 229 Rest of the world 7 5 Loans and advances banks 166,629 166,418 355 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Annual Financial Statements 2021Notes to the Company AnnualFinancialStatements ofABNAMROBankN.V. / Annual Financial Statements 2021 10 Loans and advancescustomers (inmillions) 31 December 2021 31 December 2020 Group companies 28,093 34,968 Third parties 75,143 74,213 Loans and advances customers 103,236 109,182 Loans and advances customers decreased by EUR5.9billion to EUR103.2billion at 31 December 2021, mainly due to Groupcompanies. (inmillions) 31 December 2021 31 December 2020 Residential mortgages 689 786 Consumer loans 4,920 6,117 Corporate loans 88,849 92,183 Securities financing 7,103 7,214 Other loans and advances customers 1,675 2,882 Loans and advances customers 103,236 109,182 Consumer loans decreased by EUR1.2billion to EUR4.9billion at 31 December 2021, mainly due to personal loans. Corporate loans decreased by EUR3.3billion to EUR88.8billion at 31 December 2021, mainly due to matured corporate loans and the wind-down of CIB non-core business. Other loans and advances customers decreased by EUR1.2billion to EUR1.7billion at 31 December 2021, mainly due totheCIB non-core wind-down. Loans and advances customers includes subordinated loans. Subordinated loans,recorded in corporate loans,decreased toEUR0 at 31 December 2021 (31 December 2020: EUR30million). (inmillions) 31 December 2021 31 December 2020 The Netherlands 91,818 95,540 Rest of Europe 3,012 3,078 USA 8,201 8,464 Asia 205 1,848 Rest of the world 251 Loans and advances customers 103,236 109,182 11 Debt securities (inmillions) 31 December 2021 31 December 2020 Group companies 5,300 Third parties 6,517 7,523 Debt securities 11,817 7,523 (inmillions) 31 December 2021 31 December 2020 Debt securities held at fair value through other comprehensive income 11,148 6,849 Debt securities held for trading 670 674 Debt securities 11,817 7,523 Debt securities increased by EUR4.3billion at 31 December 2021, mainly due to several purchases. Most of these instruments are part of the liquidity buffer and are held for liquidity contingency purposes. At 31 December 2021, EUR42million of the debt securities were subordinated (31 December 2020: EUR43million). 356 ABN AMRO Integrated Annual Report 2021 Changes in debt securities held at fair value through other comprehensive income (inmillions) 2021 2020 Balance at 1 January 6,849 6,079 Purchases 5,655 2,413 Proceeds from sales and redemptions -1,218 -1,691 Gains/(losses) recorded in profit and loss -143 55 Unrealised gains/(losses) 8 2 Foreign exchange differences -3 -9 Balance at 31 December 11,148 6,849 12 Equity securities (inmillions) 31 December 2021 31 December 2020 Equity securities held for trading 2 1 Equity securities held at fair value through profit or loss 33 35 Equity securities 35 35 Equity securities remained stable. 13 Participating interests in group companies (inmillions) 2021 2020 Balance at 1 January 7,819 8,180 Increase/(decrease) of capital 7 190 Proceeds from sales and redemptions 79 -60 Result from participating interests 1,007 789 Dividends -934 -1,143 Unrealised gains/(losses) 2 -2 Foreign exchange differences 89 -151 Other -1,740 15 Balance at 31 December 6,329 7,819 Participating interests in group companies decreased by EUR1.5billion to EUR6.3billion at 31 December 2021. This was mainly impacted by the other movements related to the hedged risk of residential mortgages, which are accounted for as part of ABNAMRO Hypotheken Groep B.V. 14 Equity-accounted investments 31 December 2021 31 December 2020 (inmillions) Principle place of business Business line Carrying amount Equity interest Carrying amount Equity interest Nationale-Nederlanden ABNAMRO Verzekeringen Holding B.V. The Netherlands Retail Banking 128 49% 127 49% Other 134 134 Total equity associates and jointventures 262 261 Other equity-accounted investments, which comprise a large number of investments with carrying amounts that are not individually material (less than EUR75million), are disclosed under an aggregated line item. The investments in Stater N.V. (2021: EUR51million; 2020: EUR52million), European Merchant Services B.V. (2021: EUR35million; 2020: EUR44million) and Geldmaat B.V. (2021: EUR27million; 2020: EUR27million), previously disclosed individually, are currently disclosed under Other equity-accounted investments. 357 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Annual Financial Statements 2021Notes to the Company AnnualFinancialStatements ofABNAMROBankN.V. / Annual Financial Statements 2021 (inmillions) 2021 2020 Balance at 1 January 261 224 Purchases 10 2 Proceeds from sales and redemptions -1 Gains/(losses) recorded in profit and loss 12 38 Dividends -33 -5 Unrealised gains/(losses) 11 2 Balance at 31 December 262 261 15 Property, equipment and intangible assets The following table shows the book value of property, equipment and intangible assets. 2021 2020 (inmillions) Total property and equipment Intangible assets Total property and equipment Intangible assets Acquisition costs at 1 January 2,634 731 2,564 728 Additions 304 16 173 3 Reversal of cost due to disposals -824 -28 -97 Foreign exchange differences 4 -5 Other 31 Acquisition costs at 31 December 2,149 720 2,634 731 Accumulated depreciation/amortisation at 1 January -1,770 -674 -1,679 -662 Depreciation/amortisation -152 -10 -168 -13 Reversal of depreciation/amortisation due to disposals 544 74 Foreign exchange differences -2 2 Other -163 Accumulated depreciation at 31 December -1,543 -685 -1,770 -674 Impairments at 1 January -32 -38 -22 -8 Increase of impairments charged to the income statement -3 -19 -34 Reversal of impairments due to disposals 1 28 7 Foreign exchange differences -1 1 Other 2 2 4 Impairments at 31 December -33 -10 -32 -38 Total at 31 December 573 25 833 19 In 2021, ABNAMRO completed the sale and leaseback of its head office at Gustav Mahlerlaan in Amsterdam. ABNAMRO is the seller-lessee in the transaction. The buyer-lessor of the Gustav Mahlerlaan paid total consideration of EUR765million. Aspart of the sale, ABNAMRO recognised a pre-tax gain of EUR327million (EUR245million net of tax) in other operating income (please refer to Note 5 Other operating income). As part of the lease, ABNAMRO recognised a ROU asset of EUR78million and a corresponding lease liability of EUR203million (please refer to Note 22 Other liabilities). More details on the background of the sale and leaseback transaction can be found inNote 24 Property and equipment, leases, goodwill and other intangible assets in the Consolidated Annual Financial Statements. A total amount of EUR89million was classified as held for sale at 31 December 2021 (31 December 2020: EUR254million). 16 Other assets (inmillions) 31 December 2021 31 December 2020 Derivatives 3,779 6,364 Tax assets 822 1,065 Other 767 912 Other assets 5,369 8,341 Other assets decreased by EUR3.0billion, mainly as a result of a decrease of EUR2.6billion in derivatives. 358 ABN AMRO Integrated Annual Report 2021 Derivatives decreased mainly due to a decrease of EUR2.1billion intrading over-the-counter derivatives and a decreaseof EUR0.5billion innon-trading derivatives, which were mainly over-the counter contracts. Derivatives include EUR3.0billion of derivatives held for trading (2020: EUR5.1billion). 17 Due to banks (inmillions) 31 December 2021 31 December 2020 Group companies 24,714 29,712 Third parties 37,691 36,264 Due to banks 62,405 65,976 (inmillions) 31 December 2021 31 December 2020 Current accounts 13,055 13,563 Demand deposits 18 3 Time deposits 48,080 50,021 Securities financing 786 1,687 Other 467 703 Due to banks 62,405 65,976 Due to banks decreased by EUR3.6billion, mainly due to the settlement of transactions with group companies in an amount of EUR5.0billion. This was offset by the movement in transactions with third parties relating to the net impact of an increase of EUR1.4billion pertaining to the TLTRO participation. ABN AMRO participates in the targeted longer-term refinancing operations III (TLTRO III) for an amount of EUR 35.0 billion, of which EUR 32.0 billion was drawn in June 2020 and EUR 3.0 billion in June 2021. The funding has a quarterly repayment option. TLTRO III offers ABN AMRO funding at attractive conditions. A guaranteed interest rate discount of 50bps applies to the interest rate period from 24 June 2020 to 23 June 2022. An additional interest rate discount of 50bps over the remaining interest period can be achieved if specific targets linked to the issuance of new loans to non-financial corporations and households are met. The TLTRO III funding is accounted for at amortised cost, with an effective interest rate equal to the Main Refinancing Operations rate. The discounts, both conditional and unconditional, are accounted for as government grants and recognised in interest income. At the year-end, there was a reasonable expectation that the conditionsapplicable for the additional discount were met.As a result, a catch-up adjustment was made to recognise the additional 50bps discount in interest income. 18 Due to customers (inmillions) 31 December 2021 31 December 2020 Group companies 5,773 6,128 Third parties 229,235 223,169 Due to customers 235,008 229,297 (inmillions) 31 December 2021 31 December 2020 Current accounts 117,631 100,855 Demand deposits 92,895 102,036 Time deposits 13,293 13,025 Total deposits 223,819 215,916 Securities financing 7,944 8,926 Other due to customers 3,245 4,455 Due to customers 235,008 229,297 Due to customers increased by EUR5.7billion, mainly due to an increase in current accounts. This was partly offset by adecrease in demand deposits. 359 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Annual Financial Statements 2021Notes to the Company AnnualFinancialStatements ofABNAMROBankN.V. / Annual Financial Statements 2021 Current accounts increased by EUR16.8billion, mainly because of commercial and private clients retaining their cash positions to maintain liquidity and because of an increase in savings from retail clients due to a change in spending patterns as a result of Covid-19 measures. Demand deposits decreased by EUR9.1billion, mainly due to a reduction in the negative interest rate threshold and the wind-down of Moneyou. Time deposits increased by EUR0.3billion, mainly due to an increase in deposits, which was offset by the reduction in thenegative interest rate threshold. Securities Financing decreased by EUR1.0billion due to agreements with several large clients on items of securities financing transactions thatABNAMRO can repledge or resell. Other decreased by EUR1.2billion as a result of lower collateral received. 19 Issued debt The following table shows the debt issued by ABNAMROBank. (inmillions) 31 December 2021 31 December 2020 Group companies Third parties 56,919 63,253 Issued debt 56,919 63,253 The following table shows the types of debt issued by ABNAMROBank. (inmillions) 31 December 2021 31 December 2020 Bonds and notes issued 49,597 56,686 Certificates of deposit and commercial paper 6,431 5,618 Total at amortised cost 56,027 62,304 Designated at fair value through profit or loss 892 949 Issued debt 56,919 63,253 Total issued debt decreased by EUR6.3billion, mainly due to matured long-term funding. The lower funding need was driven by an increase in deposits and the TLTRO III participation. 20 Subordinated liabilities The following table specifies the outstanding subordinated liabilities. The issued and outstanding loans qualifying as subordinated liabilities are subordinated to all other current and future liabilities. (inmillions) 31 December 2021 31 December 2020 Group companies Third parties 7,549 8,069 Subordinated liabilities 7,549 8,069 360 ABN AMRO Integrated Annual Report 2021 The following table shows the main types of subordinated liabilities issued by ABNAMROBank. (inmillions) ISIN/CUSIP 31 December 2021 31 December 2020 Subordinated liabilities 7,549 8,069 - of which USD 595million (6.250% per annum) XS0619547838 537 508 - of which EUR1,000million (7.125% per annum) XS0802995166 1,045 1,061 - of which USD 113million 7.75% per annum US00080QAD79 / USN0028HAP03 101 96 - of which USD 1,500million (4.75% per annum) US00080QAF28 / XS1264600310 1,402 1,354 - of which USD 1,000million (4.8% per annum) US0008DAL47 / XS1392917784 901 869 - of which EUR1,000million (2.875% per annum) XS1346254573 1,035 1,045 - of which USD 1,500million (4.4% per annum) XS1586330604 1,358 1,284 - of which USD 300million (5.6% per annum) XS1385037558 279 274 - of which USD 1,000million 3.324% per annum XS2415308761 / US00084DAV29 876 - of which EUR1,228million (6.375% per annum) XS0619548216 1,280 - of which SGD 450million (4.7% per annum) XS1341466487 281 Subordinated liabilities decreased by EUR0.5billion. This was mainly due to the maturing of subordinated loans, which was partially offset by the issuance of a new instrument. Interest expenses on subordinated liabilities remained stable at EUR0.4billion in 2021 (2020: EUR0.4billion). 21 Provisions The following table shows a breakdown of provisions at 31 December 2021 and 31 December 2020. (inmillions) 31 December 2021 31 December 2020 Provision for pension commitments 50 69 Restructuring provision 130 158 Other staff provision 130 127 Legal provisions 305 47 Other 237 261 Provisions 852 662 (inmillions) Provision for pension commitments Restructuring provision Other staff provision Legal provisions Deferred tax liabilities Other Total At 1 January 2020 42 140 111 101 19 323 736 Increase of provisions 85 6 133 223 Reversal of unused provisions -12 -6 - 119 -137 Utilised during the year -38 -54 -74 -166 Accretion of interest 2 -3 -1 Transfer between stages 186 186 Foreign exchange differences -3 -4 Other 27 -13 16 -19 -185 -175 At 31 December 2020 69 158 127 47 261 662 Increase of provisions 33 273 104 410 Reversal of unused provisions -17 -4 -94 - 11 5 Utilised during the year -56 - 11 -43 -109 Transfer between stages 6 6 Foreign exchange differences 3 3 Other -19 10 4 2 -4 At 31 December 2021 50 130 130 305 237 852 361 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Annual Financial Statements 2021Notes to the Company AnnualFinancialStatements ofABNAMROBankN.V. / Annual Financial Statements 2021 Restructuring Restructuring provisions cover the costs of the restructuring plans for which implementation has been formally announced. The decrease relates to the use of the provision. Legal provisions Legal provisions are based on best estimates available at the 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 required to conclude litigation. Any provision recognised does not constitute an admission of wrongdoing or legal liability. Legal provisions increased mainly because of the increase in the provision for variable interest. Variable interest rates for consumer loans On 3 March 2021, the Kifid Appeals Committee confirmed a ruling of the Kifid Disputes Committee about the recalculation ofthe variable interest charged to a specific client on a revolving credit. In short, Kifid ruled that ABN AMRO should have followed the market rate while establishing the variable interest rate for certain revolving consumer credits. In light of the Kifid ruling, ABN AMRO reached agreement with the Dutch Consumers’ Association (Consumentenbond Claimservice) on 5 September 2021 regarding a compensation scheme for affected clients. The compensation scheme entailed a proactive recalculation of variable interest charged as from 1 January 2008 on various revolving consumer credits offered by ABN AMRO. In Q4 of 2021, ABN AMRO has decided to (where possible and applicable) proactively recalculate variable interest charged as from 1 January 2001. It is unclear what the exact scope and application of the Kifid ruling is and whether the ruling will have a certain knock-on effect on other products with variable interest rates, beyond the range of products covered by the compensation scheme. Recent rulings from Kifid regarding other credit providers (in relation to mortgage loans) suggest that Kifid envisages a broad scope. ABN AMRO cannot give a reliable estimate of the (potentially substantial) financial risk of these contingent liabilities not provided for. Other provisions Other provisions decreased mainly due to the usage of “Know Your Client” provision. AML remediation programme To address shortcomings, as well as increasingly strict regulations and continuously evolving forms of financial crime, ABN AMRO had already started an extensive bank-wide AML remediation programme. In 2021, the remediation of client files has progressed. The total provision regarding the AML programme amounted to EUR 66 million at 31 December 2021. AML settlement In April 2021, ABN AMRO accepted a settlement offer from the Netherlands Public Prosecution Service in connectionwith its investigation of the bank’s AML activities in the Netherlands over the period 2014-2020. ABN AMRO agreedto pay a fine of EUR 300 million and a disgorgement of EUR 180 million. The total amount of EUR 480 million has beenrecorded in other expenses at Group Functions in Q1 2021 and has therefore no further impact on past or presentprovisions. ABN AMRO wasinformed that an individual filed a complaint against the AML settlement between the Netherlands Public Prosecution Service and ABN AMRO under section 12 of the Dutch Code of Criminal Procedure with the Court of Appeal in The Hague. ABN AMRO was also informed that the complaint has been denied by the court of appeals. 362 ABN AMRO Integrated Annual Report 2021 22 Other liabilities (inmillions) 31 December 2021 31 December 2020 Financial liabilities held for trading 687 563 Derivatives 4,336 7,386 Current tax liabilities 3 5 Other 1,424 1,531 Other liabilities 6,450 9,485 Other liabilities decreased by EUR3.0billion, mainly due to lower derivatives. The decrease in derivatives was mainly due to lower IR swaps as a result of increased interest rates and, to a lesser extent, lower volumes. Other includes the lease liability relating to the sale and leaseback of ABNAMRO’s head office at Gustav Mahlerlaan in Amsterdam. Please refer to Note 15 Property, equipment and intangible assets in the Company Annual Financial Statements and Note 24 Property and equipment, leases, goodwill and other intangible assets in the Consolidated Annual Financial Statements for more details of the transaction. 23 Equity Issued capital and reserves At 31 December 2021, the authorised share capital of ABNAMROBank N.V. amounted to 2,400,000,000 shares. Theauthorised share capital consists of 2,200,000,000 ordinary A-shares with a nominal value of EUR1.00 and 200,000,000 ordinary B-shares with a nominal value of EUR1.00. Every share is entitled to one vote during the General Meeting. The total amount of issued shares at 31 December 2021 was 940,000,001 (2020: 940,000,001). For further information, please refer to the Capital section in the Risk, funding & capital. Revaluation reserves (inmillions) 31 December 2021 31 December 2020 Fair value reserve 238 155 Cash flow hedge reserve -1,540 -1,854 Accumulated share of OCI of associates and joint ventures 133 88 Unrealised gains on FVTPL items 560 433 Revaluation reserves -609 -1,178 Legal reserves (inmillions) 31 December 2021 31 December 2020 Internally developed software 10 Accumulated share of result in equity-accounted investments (net of dividends) 76 85 Accumulated share of result in participating interests (net of dividends) 3 Statutory reserves 100 90 Other legal reserves 178 185 Distribution of the dividends The final dividend for 2019 of EUR0.68 per share was paid on 25 October 2021 for a total of EUR639million. For the year 2021 a final dividend has been proposed of EUR 0.61 per share. Capital securities Securities classified as Additional Tier 1 (AT1) capital are perpetual, junior, resettable securities that are callable and are considered part of equity. The payment of interest on the AT1 capital securities had an impact on equity of EUR91million. 363 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Annual Financial Statements 2021Notes to the Company AnnualFinancialStatements ofABNAMROBankN.V. / Annual Financial Statements 2021 24 Maturity of assets and liabilities 31 December 2021 (inmillions) On demand 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 maturity Total Assets Cash and balances at central banks 60,489 60,489 Short-term government paper 803 400 1,928 1,018 5,020 5,200 11,253 10,792 36,414 Loans and advances banks 3,142 5,035 142,909 816 4,323 8,707 700 996 166,629 Loans and advances customers 6,598 13,468 6,518 2,474 13,389 15,039 27,967 17,783 103,236 Debt securities 388 42 216 167 792 8,241 1,970 11,817 Equity securities 35 35 Participating interests ingroupcompanies 6,329 6,329 Equity-accounted investments 262 262 Intangible assets 25 25 Property and equipment 573 573 Other assets 943 537 293 239 110 240 468 2,538 5,369 Total assets 79,552 19,440 151,690 4,763 23,009 29,978 48,629 34,080 35 391,178 Liabilities Due to banks 7,463 1,260 6,837 407 5,960 33,667 3,367 3,444 62,405 Due to customers 212,630 12,795 3,359 1,011 288 293 1,213 3,420 235,008 Issued debt 51 5,251 4,338 1,433 2,459 4,420 11,684 27,283 56,919 Subordinated liabilities 537 1,045 112 2,308 3,547 7,549 Provisions 782 49 5 1 7 9 852 Other liabilities 14 799 495 123 368 1,122 556 2,974 6,450 Total liabilities 220,939 20,155 15,029 3,515 10,120 39,615 19,134 40,676 369,184 Total equity 21,994 21,994 Total liabilities and equity 220,939 20,155 15,029 3,515 10,120 39,615 19,134 40,676 21,994 391,178 364 ABN AMRO Integrated Annual Report 2021 31 December 2020 (inmillions) On demand 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 maturity Total Assets Cash and balances at central banks 57,936 57,936 Short-term government paper 1,078 875 2,379 3,335 1,959 4,001 12,937 12,802 39,366 Loans and advances banks 4,125 4,243 149,932 2,994 2,177 1,594 203 1,151 166,418 Loans and advances customers 9,659 13,063 6,580 3,657 10,945 17,790 29,240 18,247 109,182 Debt securities 481 17 217 223 140 771 2,805 2,870 7,523 Equity securities 35 35 Participating interests ingroupcompanies 4,633 3,186 7,819 Equity-accounted investments 261 261 Intangible assets 19 19 Property and equipment 833 833 Other assets 582 964 494 732 314 643 1,198 3,415 8,341 Total assets 79,605 19,163 159,602 10,940 15,535 24,798 46,382 41,672 35 397,733 Liabilities Due to banks 7,861 1,624 7,923 405 4,367 6,325 34,148 3,322 65,976 Due to customers 205,149 1 3 , 111 3,163 1,817 502 717 1,065 3,772 229,297 Issued debt 11 8 6,075 2,713 2,618 4,112 7,247 13,320 27,051 63,253 Subordinated liabilities 1,561 1,570 3,796 1,143 8,069 Provisions 596 48 5 1 1 8 3 662 Other liabilities 55 780 665 239 275 1,101 900 5,470 9,485 Total liabilities 213,779 21,638 14,464 6,645 9,258 16,962 53,237 40,761 376,743 Total equity 20,989 20,989 Total liabilities and equity 213,779 21,638 14,464 6,645 9,258 16,962 53,237 40,761 20,989 397,733 25 Contingent liabilities (inmillions) 31 December 2021 31 December 2020 Committed credit facilities 62,860 64,948 Guarantees and other commitments Guarantees granted 30,163 23,749 Irrevocable letters of credit 4,109 4,612 Recourse risks arising from discounted bills 1,392 1,454 Total guarantees and other commitments 35,663 29,815 Total 98,523 94,763 (inmillions) 31 December 2021 31 December 2020 Group companies 19,956 22,902 Third parties 42,904 42,046 Committed credit facilities 62,860 64,948 (inmillions) 31 December 2021 31 December 2020 Group companies 33,668 26,763 Third parties 1,995 3,052 Guarantees and other commitments 35,663 29,815 365 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Annual Financial Statements 2021Notes to the Company AnnualFinancialStatements ofABNAMROBankN.V. / Annual Financial Statements 2021 Commitments and contingent liabilities increased by EUR3.7billion, mainly related to an increase in guarantees granted to group companies by Markets and was partly offset by lower committed credit facilities. The increase was mainly due to an increase of EUR6.4billion in guarantees granted to group companies. This was partly offset by a decrease of EUR0.5billion in irrevocable letters of credit and a decrease of EUR2.1billionin the volume of committed credit facilities to group companies. More information regarding the disclosed legal and compliance cases is provided in Note 35 Commitments and contingent liabilitiesin the Consolidated Annual Financial Statements. 26 Assets pledged (inmillions) 31 December 2021 31 December 2020 Cash and balances at central banks 425 208 Financial assets held for trading 252 418 Financial investments FVOCI 2,778 2,896 Loans and advances banks 1,110 891 Loans and advances customers 8,508 11,621 - of which Corporate loans 8,345 10,912 Assets pledged as security 13,073 16,034 The total of assets pledged decreased by EUR3.0billion at 31 December 2021, mainly due to a decrease in the SingleResolution Fund (SFR) position. More information regarding transferred, pledged, encumbered and restricted assets is provided in Note 34 in theConsolidated Annual Financial Statements. 27 Segment information The total number of FTEs at 31 December 2021 was 15,757 (31 December 2020: 15,126). This increase was mainly due to additional resources for the upscaling of AML activities. The total number of FTEs in Retail Banking was 3,076 (2020: 3,130), in Commercial Banking 1,604 (2020: 1,503), in PrivateBanking 1,659 (2020: 1,671), in Corporate & Institutional Banking 1,542 (2020: 1,686) and in Group Functions 7,875 (2020: 7,135). More financial information on the segments is provided in Note 2 Segment reporting in the Consolidated Annual Financial Statements. The average number of FTEs per country is disclosed in the Consolidated Annual Financial Statements in Note 11 Income tax expense, tax assets and tax liabilities. 28 Remuneration For more information, please refer to Note 36 Remuneration of Executive Board and Supervisory Board in the Consolidated Annual Financial Statements. 29 Related parties As part of its business operations, ABNAMRO 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 the Consolidated Annual Financial Statements. 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 assets with related parties amounted to EUR4.4billion at 31 December 2021, compared with EUR5.9billion at 31 December 2020. Total liabilities amounted to EUR1.1billion at 31 December 2021, compared with EUR2.1billion at 31 December 2020. For more information, please refer to Note 36 and Note 38 in the Consolidated Annual Financial Statements. 366 ABN AMRO Integrated Annual Report 2021 30 Post balance sheet events ABNAMRO EUR500million share buyback programme In line with ABNAMRO’scapital framework, the bank’s managementhasannounced an inaugural share buyback programme of EUR500million. The programmecommencedon10 February 2022 and is expected to end nolater thanJune2022. Through this programmeABNAMRO has added share buybacksas an instrument to manageitscapital position. The BaselIV threshold for share buybacks remains unchanged for the time being asthe bank’scapital buffer is sufficient to consider future share buybacks.ABNAMRO is aiming foragradual reduction over time, in constructive dialogue withthe regulator. Sale of ABNAMRO Levensverzekering N.V. On 15 February 2022, ABNAMRO announced that it had reached agreement on the sale of ABNAMRO Levensverzekering N.V., the life insurance subsidiary of ABNAMRO Verzekeringen Holding B.V., to NN Group N.V. After this transaction, ABNAMRO Verzekeringen Holding B.V. will continue as a non-life insurer and intermediary. The sale of ABNAMRO Levensverzekering N.V. is subject to regulatory approval. ABNAMRO estimates that it will recognise a gain from the sale, which is expected to close in the second half of 2022. Russia-Ukraine war In light of the recent developments in respect of the conflict between Russia and Ukraine, ABN AMRO has assessed thedirect and indirect impact of this political event on the bank and its customers. The bank’s direct exposure to Russia isapproximately EUR 50 million and this has largely been mitigated because it relates partly to assets of Russian clients outside Russia and to short-term trade transactions. The bank has no direct exposure in respect of Ukraine or Belarus. Further escalation of the conflict could also have indirect consequences for the bank’s customers in the form, for example, ofhigher gas prices, sanctions on trade with Russia and increased cybersecurity concerns as a result of a probable increase in criminal activities. These indirect consequences are difficult to quantify, but the bank’s management is paying appropriate attention to the developments. Authorisation of the Company Annual Financial Statements 8 March 2022 Supervisory Board T. (Tom) de Swaan, Chair A.C. (Arjen) Dorland, Vice-Chair L.J. (Laetitia) Griffith M.P. (Michiel) Lap A.M. (Anna) Storåkers M.L. (Mariken) Tannemaat J.S.T. (Tjalling) Tiemstra Executive Board Robert Swaak, Chief Executive Officer and Chair Christian Bornfeld, ChiefInnovation & Technology Officerand Vice-Chair Tanja Cuppen, Chief Risk Officer Lars Kramer, ChiefFinancial Officer Annerie Vreugdenhil,Chief Commercial Officer - Personal & Business Banking (from 1 March 2022) Choy van der Hooft-Cheong, Chief Commercial Officer - Wealth Management Dan Dorner, Chief Commercial Officer - Corporate Banking Gerard Penning,Chief Human Resources Officer 367 Strategy, value creation & performance Risk, funding & capital Leadership & governanceIntroduction OtherAnnual Financial Statements 2021 Annual Financial Statements 2021Notes to the Company AnnualFinancialStatements ofABNAMROBankN.V. / Annual Financial Statements 2021 Guide for readers In this chapter, we describe our approach toreporting and included the Independent auditor’s report and its assurance report. Thischapter alsoprovides other relevant information, includingcautionary statements. 368 ABN AMRO Integrated Annual Report 2021 Other Other The definitions and abbreviations used in this report can be found on the ABN AMRO website via abnamro.com/annualreport. Our approach to reporting 370 Independent auditor’s report 381 Assurance report of the independentauditor 389 Other information 392 Cautionary statements 394 Enquiries 395 369 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction Other Purpose of our Integrated Annual Report The purpose of our Integrated Annual Report is to explain how, over time, we create value for our stakeholders – not only as a provider of banking and other financial services, but also as a responsible employer and an active contributor to society as a whole. We do this by explaining our business, strategy and financials and non-financial performance during the year, but also by providing information in the areas of risk and capital management and our governance structure – all in compliance with regulatory requirements. This report has been written for all stakeholders, including providers of financial capital. Basis of preparation Content in this report is based on extensive internal reporting. Where external sources are used, this is clearly indicated in the text. To decide content, ABN AMRO applies a materiality test; only content that is sufficiently material tothe bank’s strategy, performance, reputation or value creation is included. Content is reviewed by ABN AMRO’s Group Disclosure Committee, and approved by the bank’s Executive Board and Supervisory Board prior to publication. Ultimately, the Executive Board is responsible for the content, accuracy and integrity of the report. In addition to adherence to all regulatory requirements, the Executive Board also confirms that this report has been prepared and assured in accordance with the International Integrated Reporting Framework. Production of this report is overseen by ABN AMRO’s Finance and Brand, Marketing & Communications departments. General reporting guidance Å Our Integrated Annual Report is our primary statutory and regulatory reporting disclosure. In addition, we publish other reports, including the bank’s Impact Report, Pillar 3 Report, Social Impact and Human Rights Update 2021. Though published as part of our annual reporting suite, all reports have their own individual purpose and should be read stand-alone. Å Unless stated otherwise, this report covers ABN AMRO Bank N.V. (including all business and consolidated entities). Annual data relates to the bank’s financial year (1 January - 31 December). Å The financial information contained in this Integrated Annual Report has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU IFRS). Certain sections of the Risk, funding & capital chapter of this Integrated Annual Report contain audited information and are part of the Consolidated Annual Financial Statements. Audited information in these sections islabelled as ‘Audited’ in the respective headings. Allcapital metrics and risk exposures in this chapter are reported under the Basel III (CRD IV/CRR) framework (unless otherwise stated). All capital figures and ratios, including comparatives, are shown on a fully-loaded basis (unless otherwise stated). Å The Company Annual Financial Statements comply withTitle 9, Book 2 of the Dutch Civil Code, and apply the EU IFRS valuation principles which are also applied inthe Consolidated Annual Financial Statements. Formore general reporting guidance on the Company Annual Financial Statements, please also see Note 1 onpage 268. Å This report is presented in euros (EUR), which is ABNAMRO’s functional and presentation currency, rounded to the nearest million, and sets out the results for the entire ABN AMRO organisation worldwide (unless otherwise stated). Å All financial year-end averages in this report are based onmonth-end figures. Management does not believe 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 nottally exactly due to rounding. In addition, certain percentages in this document have been calculated using rounded figures. Å Non-financial data is collected centrally; this includes data relating to environmental performance, customer loyalty and employee engagement. Å Please be aware that information provided in this reportdoes not constitute an offer, investment advice ora financial service. Its purpose is not to encourage anyperson to buy or sell any ABN AMRO product orservice. Nor should it be used as a basis for any investment decision. Any such decision can – and should– bebasedon the contents of this report, a definite prospectus and other key investor information (if,and tothe extent, required). Targets on our strategic KPIs At ABN AMRO, we want to inform our stakeholders in a clear and consistent matter. This also applies to our targets – if and how we achieved our strategic objectives for the year. Due to the volatile and rapidly changing environment we operate in and recent changes to our organisational Our approach to reporting General 370 ABN AMRO Integrated Annual Report 2021 structure and client service model, however, we deem that our 2024 targets provide the most reliable information. As such, we have chosen not to include intermediate (short- term) targets for our strategic KPIs, but only disclose clear targets for 2024. Performance of our strategic KPIs is nevertheless monitored carefully and we have initiated internal procedures to update our KPI set where needed and define clear short-term targets. We aim to announce our updated strategic KPIs and targets when we publish ourQ2 results in August 2022. In addition to our strategic KPIs, we also have different operational KPIs on product level. Asour operational sustainability KPIs play a vital rolein our climate strategy, which we also expect to finalise during 2022, we have chosen to disclose these with intermediate targets towards 2024. We have also decided to increase these operational KPIs for the coming years toreflect the significant demand for sustainable financing and investments. In line with 2020, we have not set targets beyond 2024. Wewill assess these targets periodically and update themaccordingly for the period beyond 2024 at the appropriate time. Forward-looking statements Some sections of this report contain statements that may be construed as forward-looking. These statements are not historical facts, and represent ABN AMRO’s beliefs regarding future events, many of which are inherently uncertain and beyond the bank’s control. The statements apply only at publication date. ABNAMRO does not intend to publicly update or revise these statements after publication, and assumes no responsibility to do so. Readers should, however, take intoaccount disclosures made in future interim reports. External assurance External assurance for this report was provided by EY (seeAssurance Reports on pages 381-391). ABN AMRO believes that external assurance strengthens the credibility of its reporting, and helps improve internal information- gathering systems and processes. For this report, EY audited the Financial Statements (comprising the Consolidated and Company Annual Financial Statements, pages 261-367). EY has reviewed (limited assurance) the non-financial information included in the report (pages 5-65) and audited (reasonable assurance) the section “Our Value-creating topics” (page 371). Value creation Value-creating topics Every two years, we conduct an extensive assessment ofour operating environment; this allows us to identify ourvalue-creating topics (VCTs) – where we believe ABNAMRO has potential to create the most value for itsstakeholders. From these VCTs, we select ‘strategic differentiators’; these form the basis of the bank’s strategy, key performance metrics, targets and approach to reporting. We also identify ‘fundamental value creators’ – topics webelieve are crucial in maintaining the bank’s licence tooperate. Our assessment comprises four distinct steps: 1. We define an initial long list of topics, based on a comprehensive review of media and trend reports, peerdisclosures, current reporting requirements andthebank’s Risk Event register. 2. The long list is reduced to a short list, which is then submitted for prioritisation to stakeholders, the bank’s Executive Committee 1 and other senior management. Topics are rated according to their ‘magnitude’ (i.e., potential impact on value creation) and ‘likelihood’ (i.e., how likely a topic is to bring about this impact) – seemateriality matrix. 1 At the end of 2021, the Executive Committee ceased to exist in favour of an extended composition of the Executive Board. 3. From the results, we identify our strategic differentiators (see page 34) and fundamental value creators. 4. Based on the materiality matrix results, an assessment was conducted by Strategy & Sustainability and our Strategy Execution Team to define which topics were strategically differentiating to ABN AMRO based on ourcorporate strategy, strategic pillars and KPIs. Themateriality matrix including the classification of strategic differentiators and the KPIs was subsequently validated by the Executive Committee 1 . The assessment is overseen by Project and Steering Groups. Members are drawn from our Strategy & Sustainability, Operational Risk, Investor Relations, Brand,Marketing & Communications and Customer Experience departments. Results are presented to the bank’s Executive Committee 1 for discussion and approval. The assessment covers all ABN AMRO businesses andconsolidated entities worldwide. Our last assessment was conducted in 2020. To analyse this assessment, we carried out a ‘pulse check’ in 2021 (including a full media and peer analysis, a survey of regulatory developments and input from our Risk Event 371 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction Other Our approach to reporting / Other Significance for stakeholders Impact on ABN AMRO’s value creation 1.50 0 2 3 2.5 3.5 2 2.5 3 3.5 4 24 25 26 29 31 34 27 15 14 11 12 8 4 21 28 10 13 9 5 3 6 2 7 1 18 19 16 17 20 22 23 30 33 36 32 35 Materiality matrix Strategic Differentiators These are topics, vital to our strategy, where we believe we can create most value forourstakeho lders: 4 Risk profile/management 8 Viable business model 11 Responsible investment &financing 12 Customer experience 14 Clear and appropriate advice 15 Financial performance 21 Digitalisation 27 Circular economy 31 Diversity & equal opportunity Fundamental Value C reators These are topics that play a vital role in implementing our str ategy: 1 Ethics & integrity 2 Secure banking 3 System stability 5 Client data protection 6 Strong balance sheet 7 Vision & leadership 9 Anti-corruption 10 Corporate governance 13 Regulatory compliance 16 Human rights 17 Financial inclusion 18 Stakeholder engagement 19 Adaptability 20 Employee health & safety 22 Non-financial performance 23 Environmental impact 24 Talent attraction 25 Employee empowerment 26 Co-creation and innovation 28 Community investment 29 Employee training and education 30 Responsible procurement 32 Fair taxes 33 Geopolitical instability 34 Platforms and eco-systems 35 Remuneration policy 36 Policy influence 1 Results based on last assessment, conducted in November 2020. Register and Scenario Booklet). This pulse check identified several emerging topics from among our fundamental value-creators which are gaining in importance for the bank: corporate governance, geopolitical instability, employee health & safety and a new topic: biodiversity. We will monitor these topics closely ahead of our next assessment, scheduled for 2022. For 2021, our strategic differentiators and prioritisation of the topics in the matrix remain unchanged. 372 ABN AMRO Integrated Annual Report 2021 This page has been intentionally left blank. 373 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction Other Our approach to reporting / Other Definitions used for value-creating topics Topic Definition Categorisation Adaptability Keeping pace with, and constantly adapting to, developments within the bank and in the outside world Fundamental Value Creator Anti-corruption Detecting and preventing corruption and other illegal financial activities (particularly money laundering and terrorist financing) Fundamental Value Creator Circular economy Promoting the responsible use of resources by financing circular business activities Strategic Differentiator Clear and appropriate advice Giving advice that is relevant, in the client’s interest, and understandable Strategic Differentiator Client data protection Ensuring that clients’ data is protected by ABN AMRO’s policies and systems in compliance with relevant regulatory requirements Fundamental Value Creator Co-creation and innovation Collaborating and innovating to meet clients’ needs, and creating more efficient services and operations Fundamental Value Creator Community investment Supporting community projects and initiatives, contributing to society and benefiting future generations Fundamental Value Creator Corporate governance Adhering to policies and practices that ensure accountability, fairness and transparency Fundamental Value Creator Customer experience Ensuring all interactions meet clients’ expectations by putting clients at the centre of everything the bank does Strategic Differentiator Digitalisation Harnessing advances in digital technology to improve service to clients Strategic Differentiator Diversity & equal opportunity Reflecting the diversity of society in ABN AMRO’s employee population, andtaking diversity into account in the bank’s products and services Strategic Differentiator Employee empowerment Creating an open culture where employees are empowered to perform to the best of their ability Fundamental Value Creator Employee health & safety Advocating best practice in vitality, health and safety for ABN AMRO employees Fundamental Value Creator Employee training & education Providing employees with training and education to increase their knowledge and stimulate personal and professional development Fundamental Value Creator Environmental impact Monitoring the environmental impact of ABN AMRO’s own operations Fundamental Value Creator Ethics & integrity Complying with laws and regulations, and acting in a morally correct manner by considering the rights and interests of all legitimate stakeholders Fundamental Value Creator Fair taxes Adhering to and advocating transparent tax policies to promote tax integrity Fundamental Value Creator Financial inclusion Ensuring equal access to affordable and clear financial services in understandable language Fundamental Value Creator Financial performance Delivering stable, healthy results that meet the bank’s financial targets Strategic Differentiator Geopolitical instability Responding to political, social, economic, demographic and geographical developments and trends Fundamental Value Creator Human rights Respecting human rights in ABN AMRO’s operations and in business relationships through the bank’s value chain Fundamental Value Creator Non-financial performance Delivering stable and healthy non-financial results in areas such as customer satisfaction and diversity Fundamental Value Creator Platforms and eco-systems Facilitating clients’ access to products and services by working with innovative companies across different distribution channels Fundamental Value Creator Policy influence Fostering constructive dialogue with politicians, policymakers and others toexert influence and encourage positive change Fundamental Value Creator Regulatory compliance Complying with internal /external rules and regulations, both existing andupcoming Fundamental Value Creator Remuneration policy Having a responsible and transparent remuneration policy for boardmembers, senior managers and other employees Fundamental Value Creator Responsible investment andfinancing Selling and/or investing in products, companies or initiatives that endeavour to make a positive environmental and/or social impact Strategic Differentiator Responsible procurement Respecting social and environmental standards throughout the bank’s procurement chain and in related business relations Fundamental Value Creator Risk profile /management Ensuring that the bank’s risk profile, systems and procedures enable the bank to manage risk effectively Strategic Differentiator 374 ABN AMRO Integrated Annual Report 2021 Topic Definition Categorisation Secure banking Protecting data belonging to ABN AMRO and the bank’s clients against potential security breaches and attacks Fundamental Value Creator Stakeholder engagement Involving stakeholders in the bank’s decision-making and activities Fundamental Value Creator System stability Ensuring that ABN AMRO’s banking systems and services are reliable, stable and accessible for clients Fundamental Value Creator Strong balance sheet Ensuring that ABN AMRO has sufficient financial resources to withstand possible stress Fundamental Value Creator Talent attraction Attracting and retaining qualified, motivated and future-fit professionals Fundamental Value Creator Viable business model Maintaining a business model that delivers positive financial and non-financial results in both the medium and long term Strategic Differentiator Vision & leadership Clearly defining, communicating and implementing a vision, purpose andstrategy for the bank Fundamental Value Creator Results based on last assessment, conducted in November 2020. How to read our value creation model Our value creation model (VCM) is based on the Integrated Reporting Framework. The model comprises inputs, business activities, outputs and outcomes. Inputs relate tothe resources we use to operate our business; outputs and outcomes to the results of our business activities andtheconsequences of these activities for stakeholders andcapitals. For our model, we use six types of capital, based on the Framework: Capital Definition Manufactured Fixed assets, including the value of houses and the value of banking and investment services provided by ABN AMRO Financial Money and financial assets, including fees, commissions and other income for the bank; payments to suppliers, employees and investors; earnings and cost of capital Intellectual Systems, processes and other intellectual property, including asset management, other fee-based services and data protection Human Employees’ time, skills and productivity, including the effects of employment and workplace health & safety on well-being Social Social ties, norms, networks and stakeholder relations, including brand and customer loyalty and the bank’s impact on social issues (such as child labour, gender discrimination, low pay, and financial distress among clients unable to repay loans) Natural Use of natural resources, including the bank’s contribution to climate change and impact on the environment, such as pollution The VCM can be found on pages 40-41. In addition, the VCM also shows our business activities – ineffect, the bank’s ‘engine room’, where value may be created or depleted through our lending, investment services, procurement, employment practices etc. Pleasenote that our VCM provides an overview only. Ouractivities are complex; they comprise different value chains (by market or business line) and also connect directly to other value chains through relationships with clients, suppliers and employees. 375 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction Other Our approach to reporting / Other Definitions Strategic Key Performance Indicators Indicator 2021 2020 Definition used Absolute cost base 5.3 5.1 Operating expenses excluding AML settlement and restructuring costs. Cost of risk (basis points) -7 78 Annualised impairment charges on loans and advances made to clients, divided by the average total loans and advances for the year (on the basis of gross carrying amount and excluding fair value adjustments resulting from hedge accounting). Return on average equity 6% -0.8% Annual profits (excluding coupons attributable to Additional Tier 1 capital securities and results from non-controlling interests) as a percentage of average equity attributable to the bank’s owners (excluding Additional Tier 1 capital securities). CET1 ratio (fully-loaded) 16% 15% Common Equity Tier 1 as a percentage of total risk-weighted assets under Basel III regulations (where the CET1 ratio refers to Basel IV, this is stated in the text). Relational Net Promoter Score To calculate NPS, clients are asked if they would recommend ABN AMRO to friends or colleagues on a scale of 0-10. Those scoring 9 or 10 are ‘promoters’; those scoring below 7 are ‘detractors’. NPS is then calculated by subtracting the percentage of detractors from the percentage of promoters. ABN AMRO also measures employee NPS (or eNPS). Like the client NPS, the eNPS survey asks employees if they would recommend ABN AMRO as an employer to friends or family. Mortgages -1 -1 The score is based on a weighted average (on exposure) between the ABN AMRO label and Florius. Scores based on quarterly online survey carried out by Kantar TNS (sample size for 2021: 9,217 clients) for ABN AMRO and by MWM2 (sample size for 2021: 4.758) for Florius. SME -33 -21 The SME segment is defined as all business clients with annual turnover below EUR10million. Based on biannual online /telephone survey carried out by Ipsos (sample size for 2021: 1,288 clients). Marketshare Mortgages 16% 14% Market share of new residential mortgages in the Netherlands, based on monthly market scan by the Dutch Land Registry (Kadaster). Market share is calculated asnewmortgages of ABN AMRO labels divided by all new passed mortgages that areregistered by the Dutch Land Registry. The Dutch Land Registry has updated itsmethodology for determining market shares as of 2021. Previously published data (15%) has been updated. SME 18% 18% This score is based on an annual online survey performed by Ipsos (sample size of 4,200 companies). The comparative figure is based on a survey performed by McKinsey in 2019. Sustainability (acceleration) asset volume 27% 20% Loans or investments that adhere to the sustainability acceleration standards. Thesestandards contain clear definitions with regard to clients’ sustainability policies, practice and governance and include both environmental and social criteria for labelling a loan or investment as sustainable. Definitions are often based on current market practice or improving the sustainability performance of clients. Inthecourse of 2021, consistency between the financial figures on the balance sheetand the sustainability (acceleration) asset volume was further aligned and improved. Comparative figures for 31 December 2020 have not been adjusted retrospectively. We have aligned our definition of sustainable client assets with the definitions set inthe EU SFDR regulation and therefore have changed the terminology used to ESG and Impact investments. 2020 figures have not been retrospectively adjusted for thischange. The overall target for sustainability (acceleration) asset volume is calculated as thesum of sustainability (acceleration) asset volume (mortgages and corporate loans) and sustainability (acceleration) client asset volume, divided by the sum oftheoutstanding mortgage loan book, corporate loan book and relevant client assetvolume. 1 Excluding Corporate & Institutional Banking’s non-core activities, return on equity for 2020 was 5.4%. 376 ABN AMRO Integrated Annual Report 2021 Other sustainability definitions EU Taxonomy EU Taxonomy The EU Taxonomy is a classification system that defines what economic activities are sustainable as set out in Article 8 of the Taxonomy Regulation (Regulation (EU) 2020/852). The obligation to disclose according to the EU Taxonomy is limited to corporates that are required to report under the Non-Financial Reporting Directive (NFRD). For credit institutions, the regulation distinguishes between exposures to NFRD and non-NFRD companies, households, local governments, central governments, central banks and supranational issuers. Non-Financial Reporting Directive scope The NFRD (Directive2014/95/EU) requires all large undertakings which are public-interest entities and that employ on average more than 500 employees during their respective financial years to report on their non-financial information. EU Taxonomy eligibility An economic activity that is included in the list of activities that can potentially be environmentally sustainable. Currently, only two of the six environmental objectives of the EU Taxonomy have been implemented in the Delegated Acts. Our eligibility percentage therefore only reflects these two objectives in our 2021 disclosure. EU Taxonomy mandatory eligibility The reporting requirements under the EU Taxonomy are limited to specific counterparties. The mandatory eligibility percentage should be limited to all exposures eligible for the EU Taxonomy to households, local governments and NFRD exposures. Eligibility for NFRD exposures may only be based on actual eligibility percentages of our NFRD counterparties. Because this information is not yet publicly available, we have included estimates on NFRD eligibility voluntarily. EU Taxonomy voluntary eligibility We have elected to voluntarily estimate and disclose eligibility of our corporate exposures based on their main economic activity using the respective NACE codes of our corporate counterparties. This voluntary disclosure is in addition to our mandatory eligibility disclosure and may not be comparable between issuers given that the method applied by ABN AMRO is based on NACE and not the actual eligibility percentages of our NFRD corporate counterparties. For non-NFRD corporate counterparties, we have also used NACE to determine eligibility; however, non-NFRD corporates are not included in the scope of the numerator for both eligibility and alignment under the regulation. EU Taxonomy Alignment An economic activity that meets all requirements for a sustainable activity. These requirements are: 1) the activity significantly contributes to an environmental objective, 2) the activity does no significant harm to any other environmental objective, and 3) the activity meets a set of minimum social safeguards. Covered assets This term is defined as the total on-balance sheet assets minus exposures to central governments, central banks and supranational issuers and assets held for trading. Green Asset Ratio This ratio is calculated by dividing our EU Taxonomy-aligned exposures by our total covered assets. Indicator 2021 2020 Definition used Gender diversity (subtop) 30% 28% Bank-wide percentage of women in subtop (Hay scales 12 or 13) within the bank’s workforce (in the Netherlands only). Dow Jones Sustainability Index (DJSI) Top 15% Top 10% Published by S&P Global, the DJSI tracks the sustainability performance of leading companies. Scores are not directly comparable year-on-year because of regular recalibrations and changes to methodology Straigth-through- processing rate of high volume processess N/a N/a Percentage of digitalised high volume product & service processes within the bank. Due to the organisational changes the KPI will be disclosed as of Q2 2022. 377 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction Other Our approach to reporting / Other Energy labels Energy labels Energy labels are governed at European level and described in the Directive (2010/31/EU) on the energy performance on buildings. The directive was updated on 1 January 2021, which resulted in a new methodology for calculating the energy performance. The energy label figures in this report consist of a combination of energy labels under the old methodology (prior to 1 January 2021) and the new methodology. Buildings from 2016 onwards without a definite energy label are classified under the old methodology and estimated at energy label A. Buildings built after the 1st of January 2021 are classified under the new methodology and estimated at energy label A+++. Both estimates are based on the Dutch Building Decree. The category ‘no label’ consists of properties that are not required to have a label in the Regulation, while ‘unknown’ means ABN AMRO does not have the label of the property. We use both preliminary labels (based on official government sources) and definitive labels in our energy label disclosure. In the event multiple real estate objects are related to one loan, the amount of the loan has been allocated to energy labels based on the floor area in square metres of the real estate objects. In line with the European Banking Authority’s requirements for reporting on financial information, the energy labels are assigned to any immovable property collateral, regardless of the loan/collateral ratio (commonly referred as the loan-to value ratio). Greenhouse gas (GHG) emissions Greenhouse gas emissions Å Scope 1: Direct GHG emissions that occur from owned or controlled sources Å Scope 2: Indirect GHG emissions from the generation of purchased or acquired electricity, steam, heating or cooling Å Scope 3: All indirect GHG emissions (not included in Scope 2) occurring in the value chain, including air travel and financed emissions The financed GHG emissions have been calculated according to the PCAF Global GHG Accounting and Reporting Standard for the Financial Industry (2020) for the corporate loan book, mortgage portfolio and client asset portfolio. Scope 1, scope 2 and scope 3 related to air travel have been calculated in accordance with the guidelines from the Greenhouse Gas Protocol. GHG emissions for corporates The ISS ESG database has been used for listed companies, while for unlisted companies the CBS and the PCAF databases have been used, which provide country and sector-specific carbon intensity information. GHG emissions for client assets For the client assets portfolio, the calculations have been made using the ISS ESG database. GHG emissions for mortgages For mortgages the CBS database was used, which provides country-specific energy information per building unit. Toconvert the energy data into carbon emission data, the emission factors provided by www.co2emissiefactoren.nl have been used. An attribution factor on portfolio level has been applied, using the average loan to market value. As of Q4 2021, the indexation of collateral values is based on Calcasa information instead of the CBS index. Historic figures have not been adjusted. GHG emissions for commercial real estate For the residential commercial real estate portfolio, the data sources and the calculations are aligned with the mortgage portfolio. For the non-residential share of the commercial real estate portfolio, the calculations are based on floor area, energy labels and asset types, and the emission factors provided by the CBS database have been used. An attribution factor at portfolio level for residential and non-residential commercial real estate has been applied, using the loan-to-market value based on the most recent property value. Sectors that highly contribute to climate change Sectors highly contributing to climate change These sectors are identified by NACE codes A to H and L, which are Agriculture, Mining, Manufacturing, Energy, Water Supply, Construction, Wholesale and Retail Trade, Transport and Real Estate/Built Environment, as specified in Recital 6 ofthe Commission Delegates Regulation (EU) 2020/1818. Carbon-related assets A carbon-related organisation is an organisation that directly takes part in exploration, mining, extraction, distribution orrefining of fossil fuels. These organisations can be identified as the companies excluded from EU-Paris Aligned Benchmarks (under Article 12(1) (d)-(g) Commission Delegated Regulation (EU) 2020/1818). Identification of such an organisation should be done based on revenue split. However, in this Integrated Annual Report thiswas done only for the client asset portfolio, while for the banking book portfolio these exposures were identified based on the NACE code of the counterparty’s principal activity, due to data constraint. The NACE codes used to identify such organisations were: B05.10, B05.20, B06.10, B06.20, B09.10, C19.20, C20.11, D35.11, D35.21, D35.22 and D35.23. Since NACE code D35.11 does not distinguish between renewable and non-renewable energy, but renewable energy should not be labelled as carbon-related, we have excluded all exposures to clients where the principal activity is renewable energy orthe loan specifically finances a renewable energy project. 378 ABN AMRO Integrated Annual Report 2021 Compliance with the Integrated Reporting Framework This report has been written in accordance with the International Integrated Reporting Framework, overseen by the Value Reporting Foundation. 1 The Framework comprises Guiding Principles and Content Elements 2 and focuses, in particular, on an organisation’s ability of to create value. This report presents ABN AMRO’s ability to create 1 For further information, see www.valuereportingfoundation.org. The VRF was formed in June 2021 by the merger of the International Integrated Reporting Council (IIRC) and the Sustainable Accounting Standards Board (SASB). According to plans announced by the IFRS Foundation, the VRF will be incorporated into the new International Sustainability Standards Board (ISSB) by June 2022. 2 For decisions made regarding targets, we refer to “Our approach to reporting”. value mainly in the Introduction and Strategy, value creation & performance – while also taking into account regulatory requirements and specific stakeholder needs in the chapters Risk, funding & capital, Leadership & governance, Annual Financial Statements and Other. Guiding principles Our Approach Page references (A) Strategic focus and future orientation Our Strategy, value creation & performance chapter provides detailed insight into our strategy; through ambitions and KPIs we show our ability to create value. In our value creation model this is further presented, including the use of and effects on our capitals. Our performance chapters describe in detail the execution of our strategy, our outlook, and future availability of resources. Å Our strategy (pages 31-37) Å Our value creation model (pages 40-41) Å Performance (pages 45-81) Å Outlook (pages 80-81) (B) Connectivity ofinformation The report has a clear structure, providing a holistic view of ABN AMRO – aswell as relevant risks and opportunities for the business and how the company is governed, safeguarding the creation of value. In addition, readerguides and references – including the more regulatory driven chapters – add to an understanding of the interrelatedness of factors affecting our abilityto create value. Å Our operating environment (pages 18-25) Å Our strategy (pages 31-37) Å Opportunities & risks (pages 36-37) Å Performance (pages 45-81) Å Outlook (pages 80-81) Å Risk, Funding & Capital (pages 83-202) Å Leadership & governance (pages 205-257) (C) Stakeholder relationships Our main stakeholder groups are identified and clearly presented in this report. To respond to their needs and interests, we describe the progress made on our value-creating topics – chosen by our stakeholders through extensive engagement. It also addresses the nature of relationships between stakeholders and the bank, and the value created (or depleted) for separate stakeholder groups – based both on our value-creating topics and on regulatory requirements. Å Our value creation model (pages 40-41) Å Opportunities & risks (pages 36-37) Å Performance (pages 45-81) Å Risk, Funding & Capital (pages 83-202) Å Leadership & governance (pages 205-257) Å Value-creating topics (page 371) (D) Materiality The report focuses on areas that have most impact on ABN AMRO and its stakeholders: our value-creating topics (material matters). We also describe our strategic differentiators – areas where we believe we can create most value for our stakeholders. Å Our value creation model (pages 40-41) Å Performance (pages 45-81) Å Risk, Funding & Capital (pages 83-202) Å Leadership & governance (pages 205-257) Å Value-creating topics (page 371) (E) Conciseness ABN AMRO applies the materiality principle to ensure focused content. Thisreport acts as a standalone document, providing sufficient information for stakeholders to form an opinion or take decisions with regard to their relationship with the bank. We need to remain compliant, as described in the introduction of this section, with different regulations possibly increasing the amount of text ortopics beyond the conciseness principle. Å Our approach to reporting (pages 370-380) (F) Reliability and completeness The report includes all material matters, properly balanced both positivelyand negatively and without material error. To achieve this, thereport is subject to a robust review and approval process on accuracyand completeness, ultimately approved by the Executive Board. We also request our external auditor EY to provide assurance on this Report adding to the reliability of information presented. Å Our approach to reporting (pages 370-380) (G) Consistency and comparability All data, where possible and relevant is shown in context and compared withprevious years’ performance /data. In case of deviations, this is clearly stated in the report. Å Our approach to reporting (pages 370-380) 379 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction Other Our approach to reporting / Other Content Element Our Approach Page references (H) Organisational overview andexternal environment The sections ‘Our bank’ and ‘Operating Environment’ provide a clear view onwho we are as a company and under which circumstances we operate. Å Our bank (pages 11-17) Å Our operating environment (pages 18-25) (I) Governance We describe our governance structure in the chapter ‘Governance & leadership’, including how it supports the process of long-term value creation and remuneration. In addition, our CEO, CFO, CRO and Supervisory Board Chair gave interviews providing their views on the company’s performance in the reporting year and beyond. Å Interview with our Chief Executive Officer (pages 6-9) Å Interview with our Chief Financial Officer (pages 66-67) Å Interview with our Chief Risk Officer (pages 84-85) Å Interview with our Supervisory Board Chair (pages 221-223) Å Leadership & governance (pages 205-257) (J) Business model Our business model is clearly stated in the sections ‘Our bank’ and ‘Our value creation model’. Å Our bank (pages 11-17) Å Our value creation model (pages 40-41) (K) Risks and opportunities Our strategy and operating environment bring clear opportunities and risks potentially affecting our ability to create value. The section ‘Opportunities & risks’ presents our principal strategic business opportunities and risks, whilethe ‘Performance’ section provides insight into actions during the year for different elements. Information on our other risk types and measurement approaches based onour regulatory requirements can be found in the ‘Risk, funding & capital’ chapter of this report. Å Our operating environment (pages 18-25) Å Opportunities & risks (pages 36-37) Å Performance (pages 45-81) Å Risk, funding & capital (pages 83-202) (L) Strategy and resource allocation Following our company profile and operating environment in the Introduction, the section ‘Our strategy’ provides insight into ABN AMRO’s strategic direction and how we intend to get there. In addition, the ‘Outlook’ section looks beyond the reporting year, including the availability of resources. Å Our strategy (pages 31-37) Å Outlook (pages 80-81) (M) Performance The section Strategy, value creation & performance describes our performance along the lines of our strategic pillars, providing context on our strategic KPIs. In ‘Our value creation model’ we explain the outcomes of the year in terms of the effects on our capitals. The Annual Financial Statements 2021 detail our financial performance. We disclose our strategic KPI objectives only for 2024, and provide insight into our years’ performance towards that goal. The section ‘Our approach toreporting’ includes ‘Targets on our strategic KPIs’, explaining why we didnot include short and long-term targets – in line with requirement 1.18 ofthe Framework. Å Our value creation model (pages 40-41) Å Performance (pages 45-81) Å Annual Financial Statements (pages 261-367) Å Our approach to reporting (pages 370-380) Å Targets on our strategic KPIs (page 35) (N) Outlook The ‘Outlook’ section provides clear forward-looking information, includingthe availability of resources. In addition, our CEO, CFO, CRO and Supervisory Board Chair, gaveinterviews including a brief outlook. Å Interview with our Chief Executive Officer (pages 6-9) Å Interview with our Chief Financial Officer (pages 66-67) Å Outlook (pages 80-81) Å Interview with our Chief Risk Officer (pages 84-85) Å Interview with our Supervisory Board Chair (pages 221-223) (O) Basis of preparation and presentation The basis of our preparation and presentation is included in ‘Our approach toreporting’. We decide which matters to include in our report based onthemateriality principle and in compliance with relevant regulations. Å Our approach to reporting (pages 370-380) 380 ABN AMRO Integrated Annual Report 2021 Independent auditor’s report To: the Executive Board and Supervisory Board of ABN AMRO Bank N.V. Report on the audit of the financial statements 2021 included in the integrated annual report Our opinion We have audited the financial statements 2021 of ABN AMRO Bank N.V. (hereinafter: ABN AMRO or the bank), based in Amsterdam. The financial statements comprise the consolidated and company annual financial statements. In our opinion: Å the accompanying consolidated annual financial statements give a true and fair view of the financial position of ABN AMRO as at 31 December 2021 and of its result and its cash flows for 2021 in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book2 of the Dutch Civil Code Å the accompanying company annual financial statements give a true and fair view of the financial position of ABNAMRO as at 31 December 2021 and of its result for2021 in accordance with Part 9 of Book 2 of the Dutch Civil Code. The consolidated annual financial statements comprise: Å the consolidated statement of financial position as at31December 2021 Å the following statements for 2021: the consolidated income statement, the consolidated statements of comprehensive income, changes in equity and cash flows Å the notes comprising a summary of the significant accounting policies and other explanatory information. The company annual financial statements comprise: Å the company statement of financial position as at 31December 2021 Å the company income statement for 2021 Å the notes comprising a summary of the 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 in accordance with the EU Regulation on specific requirements regarding statutory audit of public-interest entities, the “Wet toezicht accountantsorganisaties” (Wta, Audit firms supervision act), the “Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten” (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations in the Netherlands. Furthermore we have complied with the “Verordening gedrags- en beroepsregels accountants” (VGBA, Dutch Code of Ethics). We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Information in support of our opinion We designed our audit procedures in the context of our audit of the financial statements as a whole and in forming our opinion thereon. The following information in support of our opinion and any findings were addressed in this context, and we do not provide a separate opinion or conclusion on these matters. Our understanding of the business ABN AMRO provides a broad range of financial services to retail, private and corporate banking clients. These activities are conducted primarily in the Netherlands, with foreign operations mainly related to private banking activities in Germany and France and clearing operations in the United States. The bank is at the head of a group of entities and we tailored our group audit approach accordingly. Materiality We start by determining materiality and identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error in order to design audit procedures responsive to those risks and to obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Materiality EUR 160 million (2020: EUR 145 million) Benchmark applied 0.7% of total equity (2020: 0.7% of total equity) Explanation Based on our professional judgment, a benchmark of 0.7% of total equity is an appropriate quantitative indicator of materiality as it best reflects the financial position of ABN AMRO. We determined materiality consistently with the previous financial year. 381 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction Other Independent auditor’s report / Other We have also taken into account misstatements and/or possible misstatements that in our opinion are material for the users of the financial statements for qualitative reasons. We agreed with the supervisory board that misstatements in excess of EUR 8 million, which are identified during theaudit, would be reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds. Scope of the group audit ABN AMRO is at the head of a group of components. Thefinancial information of this group is included in theconsolidated annual financial statements. 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. Decisive were the size and/or the risk profile of the group components. On this basis, we selected group entities for which an audit or review had to be carried out on the complete set of financial information or on specific items. Our group audit mainly focused on significant group components of ABN AMRO in the Netherlands, France, Germany and the United States. We have: Å performed ourselves audit procedures at the central group level and at the components in the Netherlands; Å used the work of other component auditors within our EY network when auditing the group entities in France, Germany and the United States; Å performed review procedures or specific audit procedures at other group components. We sent instructions to component auditors, covering the significant areas and the information required to be reported to us. Based on our risk assessment, we determined the level of involvement in component audits. Because of the continuing travel restrictions and social distancing due to the Covid-19 pandemic, our site visits of the component teams in France, Germany and the United States were virtual and encompassed some, or all, of the following activities: reviewing key local working papers and conclusions, meeting with local management teams and obtaining an understanding of key processes. We interacted regularly with the component teams during various stages of the audit, using videoconferencing facilities. Where deemed appropriate, we attended component closing meetings with management, also using video conferencing facilities. We reviewed key working papers of component auditors using the EY electronic audit file platform, screen sharing or by the provision of copies of work papers submitted to the group audit team. Through these procedures we covered in total 95% of the group’s total assets and 88% of operating income. By performing the procedures mentioned above at components of the group, together with additional procedures at group level, we have been able to obtain sufficient and appropriate audit evidence about the group’s financial information to provide an opinion about the consolidated financial statements. Teaming and use of specialists We ensured that the audit teams both at group level and at component level included the appropriate skills and competences which are needed for an audit of a listed bank. We included team members with specialised knowledge in the areas of IT audit, forensics, treasury, income tax and sustainability and have made use of our own specialists in the areas of valuation of derivatives, financial investments, real estate and goodwill, credit risk modelling, macro-economic forecasting, regulatory reporting compliance and legal, and actuarial calculations. Our focus on climate risks and the energy transition Climate change and energy transition are emerging topics and lead to significant change for many businesses and society. The executive board of ABN AMRO (hereinafter ‘management’) has reported in the section climate risk Total assets (in %) Full scope Specific scope Review scope Other 4 8 5 83 Operating income (in %) Full scope Specific scope Review scope Other 2 5 12 81 382 ABN AMRO Integrated Annual Report 2021 management of the integrated annual report how the bank is addressing climate-related and environmental risk and taking into account related regulatory and supervisory guidance and recommendations. Furthermore, we refer to the introduction and strategy sections of the integrated annual report where ABN AMRO discloses its assessment and implementation plans in connection to climate related risks and the effects of energy transition. As part of our audit of the financial statements, we evaluated the extent to which climate-related and environmental risks and the effects of the energy transition are taken into account in estimates and significant assumptions underlying the valuation of certain account balances of ABN AMRO, including those related to the estimation of expected credit losses. Furthermore, we read the specific non-financial information on climate risks, eligible assets in the energy transition and carbon reduction and considered whether there is any material inconsistency with the financial statements. We describe in our key audit matter relating to the estimation of impairment allowances for loans and advances to customers the audit procedures responsive to the assessed risk related to climate and environmental risk and energy transition. Based on the audit procedures performed, we do not deem climate-related risks to have amaterial impact on the financial reporting judgements, estimates or significant assumptions per 31December 2021. Our focus on fraud and non-compliance with laws and regulations Our responsibility Although we are not responsible for preventing fraud or non-compliance and we cannot be expected to detect non- compliance with all laws and regulations, it is our responsibility to obtain reasonable assurance that the financial statements, taken as a whole, are free from material misstatement, whether caused by fraud or error. Our audit response related to fraud risks We identified and assessed the risks of material misstatements of the financial statements due to fraud. During our audit we obtained an understanding of the bank and its environment and the components of the system of internal control, including the risk assessment process and management’s process for responding to the risks of fraud and monitoring the system of internal control and how thesupervisory board exercises oversight, as well as the outcomes. We refer to the section Risk, funding & capital as included in the integrated annual report of ABNAMRO for management’s fraud risk assessment. We evaluated the design and relevant aspects of the system of internal control and in particular the fraud risk assessment, as well as the code of conduct, whistle blower procedures and incident registration. We evaluated the design and implementation, and where appropriate, tested the operating effectiveness of certain of the internal controls designed to mitigate fraud risks. As part of our process of identifying fraud risks, we evaluated fraud risk factors with respect to financial reporting fraud, misappropriation of assets and bribery and corruption in close co-operation with our forensic specialists. We evaluated whether these factors indicate that a risk of material misstatement due to fraud is present. We also considered whether the Covid-19 pandemic gives rise to specific fraud risk factors with remote working, office closures or illness possibly diluting the effectiveness of internal controls. We incorporated elements of unpredictability in our audit and we also considered the outcome of our other audit procedures and evaluated whether any findings were indicative of fraud or non-compliance. As in all of our audits, we addressed the risks related to management override of controls. We performed procedures among others to evaluate key accounting estimates for management bias that may represent a risk of material misstatement due to fraud, in particular relating to important judgment areas and significant accounting estimates as disclosed in the ‘critical accounting estimates and judgements’ section of the accounting policies in the notes to the financial statements. We also used data analysis procedures to identify and address high-risk journal entries. As described in our key audit matter related to impairment allowances for loans and advances to customers, we specifically considered whether the judgments and assumptions in the determination of this allowance indicate a management bias that may represent a risk of material misstatement due to fraud. We considered available information and made enquiries of relevant executives (including internal audit, legal, security affairs, compliance, risk management and human resources), business line management and the supervisory board. The fraud risks we identified, enquiries and other available information did not lead to specific indications of fraud or suspected fraud potentially materially impacting the view of the financial statements. Our audit response related to risks of non-compliance withlaws and regulations We assessed factors related to the risks of non-compliance with laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general industry experience, enquiries of relevant executives (including internal audit, legal, compliance, risk management and human resources), business line management and the supervisory board, reading minutes, inspection of internal audit and compliance reports and performing substantive tests of details of classes of transactions, account balances and disclosures. 383 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction Other Independent auditor’s report / Other ABN AMRO is subject to laws and regulations that directly affect the financial statements, including financial reporting standards, corporate tax law and various banking supervisory regulations. Also, ABN AMRO is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or instructions. We inspected lawyers’ letters and correspondence with regulatory authorities and remained alert to any indication of (suspected) non-compliance throughout the audit. Specific attention was paid the status of the remediation of non-compliance with AML regulations. In case of potential non-compliance with laws and regulations that may have a material effect on the financial statements, we assessed whether ABN AMRO has an adequate process in place to evaluate the impact of non-compliance for its activities and financial reporting and, where relevant, whether ABN AMRO implemented remediation plans. Finally, we obtained written representations that all known instances of non- compliance with laws and regulations have been disclosed to us. Specifically with regard to the progress on the AML remediation activities, we make reference to the key audit matter on provisions and contingent liabilities for legal claims and compliance matters. Our audit response related to going concern As disclosed in the ‘basis of preparation’ of the notes to the financial statements, management assessed ABN AMRO’s ability to continue as a going concern and to continue its operations for at least the next 12 months. We discussed and evaluated this specific assessment and the level of professional judgment, the risk of management bias, and applied professional scepticism in doing so. We considered whether management’s going concern assessment, based on our knowledge and understanding obtained through our audit of the financial statements or otherwise, contains all events or conditions that may cast significant doubt on the bank’s ability to continue as a going concern. Furthermore, we assessed the impact that such events and conditions may have on the bank’s operations and forecasted cash flows, with a focus on whether the bank meets the regulatory solvency and liquidity requirements. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Based on our procedures performed, we did not identify serious doubts on the bank’s ability to continue as a going concern for the next 12 months. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause a bank to cease to continue as a going concern. Our key audit matters Key audit matters are those matters that, in our professional judgment, 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. The following key audit matters that were included in our last year’s auditor’s report are not considered a separate matter for this year: Å The impact of the Covid-19 pandemic – while the pandemic continues to impact normal operations and we continued to pay attention to this in our audit, we do no longer consider this as a key audit matter as uncertainties around this topic have decreased. Å Investigation on compliance with the Dutch Act on the prevention of money laundering and financing of terrorism – in 2021 ABN AMRO entered into a settlement with the Netherlands Public Prosecution Service in connection with its investigation of the bank’s anti-money laundering activities in the Netherlands over the period 2014 up to 2020. As such, this is no longer considered a separate key audit matter in 2021. 384 ABN AMRO Integrated Annual Report 2021 Estimation of impairment allowances for loans and advances to customers Risk Loans and advances to customers are measured at amortized cost, less an allowance for impairment. Impairment allowances represent the company’s best estimate of expected credit losses. At 31 December 2021, the gross loan portfolio of ABN AMRO amounts to EUR 260.7 billion. The allowances for expected credit losses of EUR 2.4 billion are deducted from the gross loan balance and disclosed in Note 21 to the financial statements and in the sections credit risk management and credit risk review in the integrated annual report. The expected credit losses are calculated based on risk staging of loans and using assumptions such as the probability of default, the loss given default, macro-economic scenarios and other forward-looking information. Following the granting of Covid-19 relief measures to certain customers, changes to the stage allocation have been made. Further, in response to the higher estimation uncertainties under the current economic circumstances a number of expert overlays have been recorded. The determination of impairment allowances is a key area of judgment for management. The determination of the individual or collective recoverability of loans and advances to customers is subject to inherent estimation uncertainty. This also involves setting assumptions and determining scenarios for macro-economic developments, geopolitical trends, climate and other environmental related factors. Given the materiality of the loans and advances to customers of ABN AMRO, the complex accounting requirements with respect to calculating allowances for expected credit losses and the subjectivity involved in the judgments made and the inherent risk for management override, we considered this to be a key audit matter. Our audit approach Our audit procedures included, amongst others, evaluating the appropriateness of ABN AMRO’s accounting policies related to expected credit losses according to IFRS 9 “Financial Instruments”. We also obtained an understanding of the impairment allowance process, evaluated the design and tested operating effectiveness of internal controls relevant to the expected credit loss calculations. We performed substantive procedures, including the reconciliation of the data used in the allowance calculations and disclosures to source systems. Further, with the support of our internal modelling specialists, we assessed the appropriateness of the models used by ABN AMRO for collectively determined impairment allowances and verified whether the models were adequately designed, implemented and periodically validated. We performed an overall assessment of the provision levels by risk stage to determine if they were reasonable considering the risk profile of the loan and advances portfolios, arrears management and credit risk management practices. We challenged the criteria used to allocate loans to risk stage 1, 2 or 3 in accordance with IFRS 9 and tested a sample of loans on appropriate stage allocation. Finally, we assessed the retrospective review procedures performed by management which compare modelled predictions to actual results and expert overlays. To assess the estimation uncertainty inherent in the calculations, we developed for a sample of models our independent range of estimates. For individually assessed loan impairment allowances, we selected individual loans files on a risk-based basis across all stages and performed detailed credit file reviews to assess whether the bank correctly applied its credit risk and staging policy. We challenged the recovery scenarios applied and the applied weighting of these scenarios. With the support of our valuation specialists, we assessed the assumptions underlying the loan impairment calculation, such as estimated future cash flows and collateral valuations. Furthermore, we tested the data used by agreeing the data to source systems and underlying documentation and we reperformed the impairment calculations. Regarding the application of macro-economic scenarios and forward-looking information, we assessed with the support of our internal economic specialists the base case and alternative economic scenarios including the impact of Covid-19. This included challenging probability weights and the severity and magnitude of modelled downside scenarios, as well as assessing the sensitivity of changes in the assumptions in the calculations. We tested the appropriateness and the associated considerations of expert overlays and post model adjustments and recalculated a sample of these amounts. We also assessed the expert overlays and post model adjustments based on findings from specific regulatory inspections, industry sector trends, product wind-down decisions and considered the ongoing model redevelopments at ABN AMRO, as well as geopolitical, climate and other environmental related factors. Finally, we evaluated the adequacy of the related disclosures, as included in Note 21 to the financial statements and in the risk management section of the integrated annual report. In particular we evaluated that disclosures adequately convey the degree of estimation uncertainty and the range of possible outcomes under the different economic scenarios. Key observations Based on our procedures performed we consider the estimation of and disclosures on the impairment allowances for loans and advances to customers to be reasonable and in compliance with EU-IFRS. 385 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction Other Independent auditor’s report / Other Estimation of other provisions and contingent liabilities and related disclosures Risk In accordance with IAS 37 “Provisions, contingent liabilities and contingent assets”, ABN AMRO provides for liabilities related to, among others, legal claims, restructuring, and compliance remediation matters. As disclosed in Note 30 of the financial statements, ABN AMRO recognized at 31 December 2021 legal provisions, including the provision for compensation of variable interest, reorganization and other provisions, of EUR 398 million, EUR 178 million and EUR 181 million respectively. In Note 35 the commitments and contingent liabilities are disclosed. This includes contingent liabilities in respect of legal proceedings related to arbitrage and a number of duty of care proceedings. Furthermore, in the integrated annual report developments with regard tolegal and compliance risk are disclosed. Developments at ABN AMRO with regard to the internal organization, services to customers and the range of products, as well as heightened regulatory scrutiny, give rise to increased attention from management when estimating the provisions, specifically in the determination of whether outflows in respect of identified matters are probable and can be estimated reliably and the appropriateness of assumptions and judgments used in the estimation of the provisions and disclosure of contingent liabilities. Therefore, we considered this to be a key audit matter. Our audit approach We evaluated ABN AMRO’s accounting policies related to provisions and contingent liabilities in accordance with IAS 37, and whether assumptions and the methods for making estimates are appropriate and have been applied consistently. We also obtained an understanding of the organizational controls and the legal and regulatory framework of the company. Further, we evaluated the design and implementation of controls by ABN AMRO to identify, monitor and disclose provisions for obligations and contingent liabilities, and to assess the completeness and accuracy of data used to estimate provisions. For significant provisions we challenged the provisioning methodology and tested the underlying data and assumptions used. Specifically, for the provision related to the variable interest client compensation scheme we performed test of details to underlying contract data and assessed the assumptions and judgments made by the bank, including the expected number ofclient responses to compensation offerings. We also performed test of details on the anti-money laundering remediation provision and assessed the progress of the number of files considered remediated and the use of external resources in the remediation. For the various restructuring programs following the new strategy of ABN AMRO we tested the calculations and assessed whether the IAS 37 criteria are met to record provisions per 31 December 2021. Lastly, for cases that were settled during 2021, such as the EUR 448 million payment in April 2021 to the Netherlands Public Prosecution Service in connection withits inspection of anti-money laundering activities at ABN AMRO, we verified the actual outflows. We examined the relevant internal reports, minutes of management and supervisory board meetings, as well as regulatory and legal correspondence to assess developments and we performed follow-up procedures to examine the company’s assessment of the impact on the financial statements and the adequacy of risk management disclosures. We obtained legal letters from external counsel and, where appropriate, involved legal and compliance specialists. Furthermore, we evaluated whether the disclosures provided on the other provisions and contingent liabilities with regard to restructuring, legal and compliance matters are in compliance with the EU-IFRS requirements, and in particular whether they adequately convey the degree of estimation uncertainty and the range of possible outcomes. Finally, we evaluated the appropriateness of the compliance and legal risk disclosures in the integrated annual report. Key observations Based on our procedures performed we consider the provisions and the disclosures on provisions and contingent liabilities to be reasonable and in compliance with EU-IFRS. Reliability and continuity of IT environment Risk The activities and financial reporting of ABN AMRO are highly dependent on the reliability and continuity of the IT environment. Effective general IT controls with respect to change management, logical access, infrastructure and operations, support the integrity and continuity of the IT systems as well as the operating effectiveness of the automated controls. As described in the risk management section operational (non-financial) risk in the integrated annual report, the IT environment and the IT organization of ABN AMRO continues to be strengthened. There is a risk that the general IT control measures may not always operate as intended and, as a result, internal controls are ineffective. Therefore, we identified the reliability and continuity of the IT environment to be a key audit matter. Our audit approach IT audit specialists are an integral part of the engagement team and assess the reliability and continuity of the IT environment tothe extent necessary for the scope of our audit of the financial statements. In this context, we evaluated the design of the ITprocesses and tested the operating effectiveness of general IT controls, as well as application controls over data processing, data feeds and interfaces where relevant for the financial reporting. In certain areas we performed additional substantive procedures on access management, cyber security, security event monitoring and segregation of duties for the related systems. We also assessed the possible impact of changes in IT during the year resulting from the internal transformation activities and remedial measures on the operating effectiveness of general IT controls and the automated controls. Where applicable, we tested internal controls related to cloud computing and third-party service providers. Key observations Our testing of the general IT controls and the substantive tests performed, provided sufficient evidence to enable us to rely on the adequate and continued operation of the IT systems relevant for our audit of the financial statements. 386 ABN AMRO Integrated Annual Report 2021 Report on other information included in the integrated annual report The integrated annual report contains other information inaddition to the financial statements and our auditor’s report thereon. Based on the following procedures performed, we conclude that the other information: Å Is consistent with the financial statements and does not contain material misstatements Å Contains the information as required by Part 9 of Book 2 for the management report and the other information as required by Part 9 of Book 2 of the Dutch Civil Code and as required by Sections 2:135b and 2:145 sub section 2 of the Dutch Civil Code for the remuneration report. We have read the other information. Based on our knowledge and understanding obtained through our auditofthe financial statements or otherwise, we have considered whether the other information contains material misstatements. By performing these procedures, we comply with the requirements of Part 9 of Book 2 and Section 2:135b sub-Section 7 of the Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed is substantially less than the scope of those performed in our audit of the financial statements. Management is responsible for the preparation of the otherinformation, including the management report in accordance with Part 9 of Book 2 of the Dutch Civil Code and other information required by Part 9 of Book 2 of the Dutch Civil Code. Management and the supervisory board are responsible for ensuring that the remuneration report isdrawn up and published in accordance with Sections 2:135b and 2:145 sub section 2 of the Dutch Civil Code. Report on other legal and regulatory requirements and ESEF Engagement We were engaged by the supervisory board as auditor of ABN AMRO on 11 September 2015, as of the audit for the year 2016 and have operated as statutory auditor since that date. No prohibited non-audit services We have not provided prohibited non-audit services as referred to in Article 5(1) of the EU Regulation on specific requirements regarding statutory audit of public-interest entities. European Single Electronic Reporting Format (ESEF) ABN AMRO has prepared the integrated annual report in ESEF. The requirements for this are set out in the Delegated Regulation (EU) 2019/815 with regard to regulatory technical standards on the specification of a single electronic reporting format (hereinafter: the RTS on ESEF). In our opinion, the integrated annual report, prepared in theXHTML format, including the partially marked-up consolidated annual financial statements, as included in the reporting package by ABN AMRO, complies in all material respects with the RTS on ESEF. Management is responsible for preparing the integrated annual report, including the financial statements, in accordance with the RTS on ESEF, whereby management combines the various components into a single reporting package. Our responsibility is to obtain reasonable assurance for ouropinion whether the integrated annual report in this reporting package complies with the RTS on ESEF. Our procedures, taking into account Alert 43 of the Netherlands Institute of Chartered Accountants, included amongst others: Å obtaining an understanding of the bank’s financial reporting process, including the preparation of the reporting package Å obtaining the reporting package and performing validations to determine whether the reporting package containing the Inline XBRL instance document and the XBRL extension taxonomy files, has been prepared in accordance with the technical specifications as included in the RTS on ESEF Å examining the information related to the consolidated annual financial statements in the reporting package todetermine whether all required mark-ups have been applied and whether these are in accordance with the RTS on ESEF. Description of responsibilities regarding the financial statements Responsibilities of management and the supervisory board for the financial statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code. Furthermore, management is responsible for such internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. As part of the preparation of the financial statements, management is responsible for assessing the bank’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 management either intends to liquidate the bank or to cease operations, or has no realistic alternative but to do so. Management should disclose events and circumstances that may cast significant doubt 387 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction Other Independent auditor’s report / Other on the bank’s ability to continue as a going concern in the financial statements. The supervisory board is responsible for overseeing the bank’s financial reporting process. Our responsibilities for the audit of the financial statements Our objective is to plan and perform the audit engagement in a manner that allows us to obtain sufficient and appropriate audit evidence for our opinion. Our audit has been performed with a high, but not absolute, level of assurance, which means we may not detect all material errors and fraud during our audit. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion. We have exercised professional judgment and have maintained professional scepticism throughout the audit, in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. The ‘Information in support of our opinion’ section above includes an informative summary of our responsibilities and the work performed as the basis for our opinion. Our audit further included among others: Å Performing audit procedures responsive to the risks identified, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion Å Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the bank’s internal control Å Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management Å Evaluating the overall presentation, structure and content of the financial statements, including the disclosures Å Evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation Communication We communicate with the supervisory board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant findings in internal control that we identify during our audit. In this respect we also submit an additional report to the audit committee of the supervisory board in accordance with Article 11 of the EU Regulation on specific requirements regarding statutory audit of public-interest entities. The information included in this additional report is consistent with our audit opinion in this auditor’s report. We provide the supervisory board with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the supervisory board, we determine the key audit matters: those matters that were of most significance in the audit of the financial statements. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest. Amsterdam, 8 March 2022 Ernst & Young Accountants LLP signed by A.B. Roeders 388 ABN AMRO Integrated Annual Report 2021 Assurance report of the independentauditor To: the Executive Board and Supervisory Board of ABN AMRO Bank N.V. Our conclusions We have reviewed the non-financial information in the Integrated Annual Report for the year 2021 of ABN AMRO Bank N.V. based in Amsterdam (hereinafter: the Integrated Annual Report). Furthermore we have audited the section “Our Value-creating topics” as included in the non-financial information on page 34 of the Integrated Annual Report. A review is aimed at obtaining a limited level of assurance. An audit is aimed at obtaining a reasonable level of assurance. The non-financial information in scope is included in the chapters “Introduction” and “Strategy, value creation & performance” (up to and including page 65) (hereafter: thenon-financial information). Based on our review nothing has come to our attention thatcauses us to believe that the non-financial information is not prepared, in all material respects, in accordance withthe reporting criteria as explained in the section “Reporting criteria” of our report. In our opinion the section “Our value-creating topics” isprepared, in all material respects, in accordance withthereporting criteria explained in the section “Reporting criteria” of our report. Basis for our conclusions We have conducted our review of the non-financial information and our audit of the section “Our value-creating topics” in accordance with Dutch law, including Dutch Standard 3810N, “Assurance-opdrachten inzake maatschappelijke verslagen” (Assurance engagements relating to sustainability reports), which is a specified DutchStandard that is based on the International Standard on Assurance Engagements (ISAE) 3000, “Assurance Engagements other than Audits or Reviews of Historical Financial Information”. Our responsibilities under this standard are further described in the section “Our responsibilities” of our report. We are independent of ABN AMRO Bank N.V. in accordance with the “Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten” (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations in the Netherlands. This includes that we do not perform any activities that could result in a conflict of interest with our independent assurance engagement. Furthermore, wehave complied with the “Verordening gedrags- en beroepsregels accountants” (VGBA, Dutch Code of Ethics). We believe that the assurance evidence we have obtained is sufficient and appropriate to provide a basis for our conclusions. Reporting criteria The non-financial information, including the section “Our value-creating topics”, needs to be read and understood together with the reporting criteria. ABN AMRO Bank N.V. is solely responsible for selecting and applying these reporting criteria, taking into account applicable law andregulations related to reporting. The reporting criteria used for the preparation of the non-financial information are the International Framework of the Value Reporting Foundation and thesupplemental reporting criteria applied as disclosed inthe appendix “Our approach to reporting” in the Integrated Annual Report. The reporting criteria used for the preparation of the section “Our value-creating topics” are disclosed in the section “Value-creating topics” on page 371 of the Integrated Annual Report. The absence of an established practice on which to draw, toevaluate and measure non-financial information allows fordifferent, but acceptable, measurement techniques and can affect comparability between entities and over time. Limitations to the scope of our review and ouraudit The non-financial information includes prospective information such as ambitions, strategy, plans, expectations, estimates and risk assessments. Inherent to prospective information, the actual future results are uncertain. We do not provide any assurance on the assumptions and achievability of prospective information in the non-financial information. The references to external sources or websites in the Integrated Annual Report are not part of the non-financial information as assured by us. We therefore do not provide assurance on this information. 389 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction Other Assurance report of the independentauditor / Other Our conclusions are not modified in respect to these matters. Responsibilities of the Executive Board and the Supervisory Board for the non-financial information The Executive Board is responsible for the preparation of reliable and adequate non-financial information, including the section “Our value-creating topics”, in accordance with the reporting criteria as included in the section “Reporting criteria” of our report, including the identification of stakeholders and the definition of material matters. The choices made by the Executive Board regarding the scope of the non-financial information and the reporting policy are summarized in the appendix “Our approach to reporting” of the Integrated Annual Report. Furthermore, the Executive Board is responsible for such internal control as it determines is necessary to enable the preparation of the non-financial information, including the section “Our value-creating topics”, that is free from material misstatement, whether due to errors or fraud. The Supervisory Board is responsible for overseeing the reporting process of ABN AMRO Bank N.V. Our responsibilities Our responsibility is to plan and perform the assurance engagement in a manner that allows us to obtain sufficient and appropriate assurance evidence for our conclusions. Our procedures performed to obtain a limited level of assurance on the non-financial information are aimed to determine the plausibility of information and vary in nature and timing from, and are less in extent, than for a reasonable assurance engagement. The level of assurance obtained in a review is therefore substantially less than the assurance obtained in an audit. Our audit on the section “Our value-creating topics” has been performed with a high, but not absolute, level of assurance, which means we may not have detected all material errors and fraud. We apply the “Nadere voorschriften kwaliteitssystemen” (NVKS, Regulations for Quality management systems) and accordingly maintain a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and other relevant legal and regulatory requirements. We have exercised professional judgement and have maintained professional skepticism throughout our review and our audit, in accordance with the Dutch assurance standards, ethical requirements and independence requirements. Our review and our audit included amongst others: Å Performing an analysis of the external environment and obtaining an understanding of relevant social themes andissues in the sector, the characteristics of the company and the themes that are most relevant to achieving thecompany’s strategy and value creation Å Evaluating the appropriateness of the reporting criteria used, their consistent application and related disclosures intheIntegrated Annual Report. This includes the evaluation of the results of the stakeholders’ dialogue and the reasonableness of estimates made by the Executive Board Å Obtaining an understanding of the value creation model of ABN AMRO Bank N.V. Å Evaluating the consistency of the non-financial information and the section “Our value-creating topics” with theinformation in the Integrated Annual Report which is not included in the scope of our review and our audit Å Evaluating the overall presentation, structure and content of the non-financial information and the section “Ourvalue-creating topics” Å Considering whether the non-financial information as a whole, including the disclosures, reflects the purpose ofthereporting criteria used Our review of the non-financial information included amongst others: Å Obtaining an understanding of the reporting processes for the non-financial information, including obtaining ageneralunderstanding of internal control relevant to our review Å Obtaining an understanding of the procedures performed by the external subject matter experts of ABN AMRO Bank N.V. Å Identifying areas of the non-financial information with a higher risk of misleading or unbalanced information or materialmisstatements, whether due to fraud or error. Designing and performing further review procedures aimed atdetermining the plausibility of the non-financial information responsive to this risk analysis. These further review procedures consisted amongst others of: 390 ABN AMRO Integrated Annual Report 2021 Å Interviewing management and relevant staff responsible for the strategy, policy and results related to the non-financial information Å Interviewing management and relevant staff responsible for the strategy, policy and results related to the non- financial information Å Interviewing relevant staff responsible for providing the information for, carrying out internal control procedures on, and consolidating the data in the non-financial information Å Obtaining assurance information that the non-financial information reconciles with underlying records of the company Å Reviewing, on a limited test basis, relevant internal and external documentation Å Evaluating ABN AMRO’s approach to reporting in accordance with the Framework as disclosed in the section “Compliance with the Integrated Reporting Framework” on pages 379 and 380 of the Integrated Annual Report. Å Performing an analytical review of the data and trends in the information submitted for consolidation at corporate level Our audit of the section “Our value-creating topics” included amongst others: Å Obtaining an understanding of the systems and processes for collecting and reporting the data in the section “Ourvalue-creating topics”, including obtaining an understanding of internal control relevant to our audit, butnotforthe purpose of expressing an opinion on the effectiveness of the company’s internal control Å Identifying and assessing the risks that the section “Our value-creating topics” is misleading or unbalanced, or contains material misstatements, whether due to fraud or errors. Designing and performing further audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk that the section “Value-creating topics” is misleading or unbalanced, or the risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from errors. Fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. These further audit procedures consisted amongst others of: Å Interviewing relevant staff responsible for providing the information and carrying out internal control procedures onthe data in the section “Our value-creating topics” Å Obtaining assurance information that the section “Our value-creating topics” reconciles with underlying records ofthe company Å Evaluating relevant internal and external documentation, on a test basis, to determine the reliability of the section “Our value-creating topics” We communicate with the Supervisory Board regarding, among other matters, the planned scope and timing ofthereview and the audit and significant findings that weidentify during our review and our audit. We also communicate any significant findings in internal control that we identify during our audit. Amsterdam, 8 March 2022 Ernst & Young Accountants LLP signed by J. Niewold 391 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction Other Assurance report of the independentauditor / Other Other information Major subsidiaries and participating interestsas at 31 December 2021 Retail Banking ABNAMRO Assuradeuren B.V. 49% Zwolle, The Netherlands ABNAMRO Ventures B.V. Amsterdam, The Netherlands ABNAMRO Hypotheken Groep B.V. 1 Amersfoort, The Netherlands ABNAMRO Kredieten B.V. 1 Bunnik, The Netherlands ABNAMRO Levensverzekering N.V. 49% Zwolle, The Netherlands ABNAMRO Pensioeninstelling N.V. Amsterdam, The Netherlands ABNAMRO Schadeverzekering N.V. 49% Zwolle, The Netherlands ABNAMRO Verzekeringen B.V. 49% Zwolle, The Netherlands ALFAM Holding N.V. 1 Bunnik, The Netherlands Alpha Credit Nederland B.V. 1 Bunnik, The Netherlands Credivance N.V. 1 Bunnik, The Netherlands Currence Holding B.V. 36% Amsterdam, The Netherlands DEFAM B.V. 1 Bunnik, The Netherlands International Card Services B.V. 1 Diemen, The Netherlands Moneyou B.V. 1 Amsterdam, The Netherlands Moneyou Kredieten B.V. 1 Amsterdam, The Netherlands Nationale-Nederlanden ABNAMRO Verzekeringen Holding B.V. 49% Zwolle, The Netherlands Stater N.V. 25% Amersfoort, The Netherlands Commercial Banking ABNAMRO Asset Based Finance N.V. 1 Utrecht, The Netherlands ABNAMRO Groenbank B.V. 1 Amsterdam, The Netherlands ABNAMRO Strategic Partnership Fund B.V. Amsterdam, The Netherlands European Merchant Services B.V. 49% Amsterdam, The Netherlands New10 B.V. 1 Amsterdam, The Netherlands Private Banking ABNAMRO Investment Solutions S.A. 99.9% Paris, France ABNAMRO Social Impact Fund B.V. Amsterdam, The Netherlands Banque Neuflize OBC S.A. 99.9% Paris, France Bethmann Bank A.G. Frankfurt am Main, Germany Bethmann Liegenschafts K.G. 50% Frankfurt am Main, Germany Cofiloisirs S.A. 46% Paris, France IFCIC S.A. 16% Paris, France Neuflize Vie S.A. 60% Paris, France Corporate & Institutional Banking ABNAMRO Acquisition Finance Holding B.V. Amsterdam, The Netherlands ABNAMRO Capital USA LLC New York, USA ABNAMRO Clearing Bank N.V. 1 Amsterdam, The Netherlands ABNAMRO Clearing Chicago LLC Chicago, USA ABNAMRO Clearing Hong Kong Ltd Hong Kong, China ABNAMRO Clearing Investments B.V. Amsterdam, The Netherlands ABNAMRO Clearing London Ltd London, United Kingdom ABNAMRO Clearing Singapore Pte Ltd Singapore, Singapore ABNAMRO Clearing Sydney Nominees Pty Ltd Sydney, Australia ABNAMRO Clearing Sydney Pty Ltd Sydney, Australia ABNAMRO Clearing Tokyo Co Ltd Tokyo, Japan ABNAMRO Effecten Compagnie B.V. 1 Amsterdam, The Netherlands ABNAMRO Sustainable Impact Fund PE B.V. Amsterdam, The Netherlands continued> 392 ABN AMRO Integrated Annual Report 2021 ABNAMRO Holdings USA LLC New York, USA ABNAMRO Investment Holding B.V. 1 Amsterdam, The Netherlands ABNAMRO Jonge Bedrijven Fonds B.V. Amsterdam, The Netherlands ABNAMRO Participaties NPE Fund B.V. Amsterdam, The Netherlands ABNAMRO Securities (USA) LLC New York, USA Banco ABNAMRO S.A. São Paulo, Brazil ABNAMRO Corretora de Títulos e Valores Mobiliários Ltda São Paulo, Brazil Franx B.V. Amsterdam, The Netherlands Maas Capital Investments B.V. Amsterdam, The Netherlands Maas Capital Offshore B.V. Amsterdam, The Netherlands Principal Finance Investments Holding B.V. Amsterdam, The Netherlands Group Functions ABNAMRO Arbo Services B.V. 1 Amsterdam, The Netherlands ABNAMRO Captive N.V. Amsterdam, The Netherlands ABNAMRO Funding USA LLC New York, USA Geldmaat B.V. 33% Weesp, The Netherlands Nederlandse Financieringsmaatschappij voor Ontwikkelingslanden N.V. 20% Den Haag, The Netherlands Branches/Representative Offices ABNAMRO Asset Based Finance N.V. (United Kingdom) Branch 1 London, United Kingdom ABNAMRO Asset Based Finance N.V. (Deutschland) Branch 1 Frankfurt am Main, Germany ABNAMRO Asset Based Finance N.V. (France) Branch 1 Levallois-Perret, France ABNAMROBank N.V. (Belgium) Branch Berchem, Belgium ABNAMROBank N.V., Frankfurt Branch Frankfurt am Main, Germany ABNAMROBank N.V. (Greece) Branch Athens, Greece ABNAMROBank N.V. Hong Kong Branch Hong Kong, China ABNAMROBank N.V. Oslo Branch Oslo, Norway ABNAMROBank N.V. Shanghai Branch Shanghai, China ABNAMROBank N.V. (Singapore) Branch Singapore, Singapore ABNAMROBank N.V., Sydney Branch Sydney, Australia ABNAMROBank N.V. (United Kingdom) Branch London, United Kingdom ABNAMROBank N.V., Paris Branch Paris, France ABNAMROBank N.V. Representative Office (Dubai Multi Commodities Centre) Dubai, United Arabic Emirates ABNAMROBank N.V. Representative Office New York New York, USA ABNAMRO Clearing Bank N.V., London Branch 1 London, United Kingdom ABNAMRO Clearing Bank N.V., Singapore Branch 1 Singapore, Singapore International Card Services B.V. (Deutschland) Branch 1 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. Provisions of the Articles of Association concerning profit appropriation The provisions regarding the reservation and distribution ofprofits are set out in Article 10 of the Articles of Association.In accordance with the reserve and dividend policy andsubject to approval by the Supervisory Board, the ExecutiveBoard submits a proposal to the General Meeting ofShareholders specifying which part of the profit is to bereserved. The remainder of the profit is at the free disposalof the General Meeting of Shareholders, pursuant toa proposal to this end by the Executive Board and subjectto approval by the Supervisory Board. Fiscal unity ABNAMROBank N.V. constitutes a fiscal unity with severalDutch subsidiaries for corporate income tax purposes.All members of the fiscal unity are jointly and severallyliable for the corporate income tax liabilities of the fiscal unity. 393 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction Other Other information / Other Cautionary statements The Bank has included in this Annual Report and may from time to time 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 ABNAMRO’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 ABNAMRO’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 notlimited to: H 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 ABNAMRO in particular; H The effect on ABNAMRO’s capital of write-downs inrespect of credit and other risk exposures; H Risks relating to ABNAMRO’s stock exchange listing; H Risks related to ABNAMRO’s corporate transactions (e.g. merger, separationand integration process); H General economic, social and political conditions in the Netherlands and in other countries in which ABNAMRO has significant business activities, investments or other exposures, including the impact of recessionary economic conditions on ABN AMRO’s performance, liquidity and financial position; H Macroeconomic and geopolitical risks; H Reductions in ABNAMRO’s credit ratings; H Actions taken by the European Commission, governments and their agencies to support individual banks and the banking system; H Monetary and interest rate policies of the ECB and G20central banks; H Inflation or deflation; H Unanticipated turbulence in interest rates, foreign currency exchange rates, commodity prices and equityprices; H Liquidity risks and related market risk losses; H 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; H Changes in Dutch and foreign laws, regulations, policies and taxes, or the interpretation and monitoring thereof; H Changes in competition and pricing environments; H Inability to hedge certain risks economically; H Adequacy of loss reserves and impairment allowances; H Technological changes; H Changes in consumer spending, investment and savinghabits; H Effective capital and liquidity management; H ABNAMRO’s success in managing the risks involved inthe foregoing; H Public health crises, epidemics and pandemics such as the Covid-19 pandemic, including government orders and restrictions associated therewith, and the impact thereof on economic conditions in countries in which ABN AMRO operates and the effects thereof on ABNAMRO’s business, operations, employees, clients and counterparties. The forward-looking statements made in this Integrated Annual Report are only applicable as from the date of publication of this document. ABNAMRO does not intendto publicly update or revise these forward-looking statements to reflect events or circumstances after the date of this report, and ABNAMRO does not assume anyresponsibility to do so. The reader should, however, take into account any further disclosures of a forward- looking nature that ABNAMRO may make in ABNAMRO’s interim reports. 394 ABN AMRO Integrated Annual Report 2021 Enquiries ABNAMRO Investor Relations [email protected] +31 20 6282 282 ABNAMRO Press Office [email protected] +31 20 6288 900 ABNAMROBank 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 abnamro.com/annualreport Information published on our websites does not constitute part of this Integrated Annual Report, unless expressly statedotherwise. Acknowledgements General coordination ABNAMRO Finance department Concepting and lay-out DartGroup, Amsterdam Photography Jeroen Dietz, Amsterdam Production and lithography Altavia Unite, Amstelveen 395 Strategy, value creation & performance Risk, funding & capital Leadership & governance Annual Financial Statements 2021Introduction Other Enquiries / Other abnamro.com ABN 0131 Integrated Annual Report 2021 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