ING Groep N.V. - Annual Report 2019

20-F 1 form20f2019landscapeh.htm FORM 20-F Documents rendered in EDGAR html format prepared by Certent CDM HD Version: 19.11.1 Document

UNITED STATESErwin Olijslager

SECURITIES AND EXCHANGE COMMISSIONTelephone: +31 20 564 7705

WASHINGTON, D.C. 20549E-mail: [email protected]

Bijlmerdreef 106

FORM 20-F1102 CT Amsterdam

(Mark One)The Netherlands
☐REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

1934

Securities registered or to be registered pursuant to Section 12(b) of the Act.

OR ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Title of each classTrading symbolsName of each exchange on which registered

For the fiscal year ended 31 December 2019

American Depositary SharesINGNew York Stock Exchange

OR Ordinary sharesNew York Stock Exchange(i)
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 6.125% ING Perpetual Debt SecuritiesISGNew York Stock Exchange
3.150% Fixed Rate Senior Notes due 2022ING22New York Stock Exchange

OR 3.950% Fixed Rate Senior Notes due 2027ING27New York Stock Exchange ☐SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Floating Rate Senior Notes due 2022ING22ANew York Stock Exchange

Commission File Number: 001-14642 Floating Rate Senior Notes due 2023ING23ANew York Stock Exchange
ING GROEP N.V.4.100% Fixed Rate Senior Notes due 2023ING23New York Stock Exchange
(Exact name of Registrant as specified in its charter)4.550% Fixed Rate Senior Notes due 2028ING28New York Stock Exchange 3.550% Fixed Rate Senior Notes due 2024ING24New York Stock Exchange
4.050% Fixed Rate Senior Notes due 2029ING29New York Stock Exchange 4.05% Fixed Rate Senior Notes due 2029

ING GROUP

(Translation of Registrant’s name into English)4.05% Fixed Rate Senior Notes due 2029

(i)Not for trading, but only in connection with the registration of American Depositary Shares

The Netherlandsrepresenting such ordinary shares, pursuant to the requirements of the Securities and

(Jurisdiction of incorporation or organization)Exchange Commission.

ING Groep N.V. Bijlmerdreef 106

1102 CT Amsterdam

P.O. Box 1800, 1000 BV Amsterdam

The Netherlands

(Address of principal executive offices)

2019 ING Group Annual Report on Form 20-F1

Securities registered or to be registered pursuant to Section 12(g) of the Act. NoneIf an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. Noneregistrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Ordinary Shares, nominal value EUR 0.01 per Ordinary Share3.896.734.271Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP☐International Financial Reporting Standards as issuedOther☐ Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.by the International Accounting Standards Board☒ ☐Yes☒No If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13has elected to follow.☐Item 17☐Item 18 or 15(d) of the Securities Exchange Act of 1934.
☐Yes☒NoIf this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).☐Yes☒No Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒Yes☐No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).☒Yes☐No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐Non-accelerated filer☐Emerging growth company☐

2019 ING Group Annual Report on Form 20-F2

ING Group

Annual Report 2019 on Form 20-F

Filed with the United States Securities and Exchange Commission for the year ended December 31st, 2019

2019 ING Group Annual Report on Form 20-F3

Contents

PART IPART II| | | 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES | 144 |
| --- | --- | --- | --- | --- |
| PRESENTATION OF INFORMATION | 5 | 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF | |
| CAUTIONARY STATEME NT WITH RESPECT TO FORWARD -LOOKING STATEMENTS | 7 | | PROCEEDS | |
| 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS | 9 | 15. | CONTROLS AND PROCEDURES | 144 |
| 2.OFFER STATISTICS AND EXPECTED TIMETABLE | 9 | 16A. | AUDIT COMMITTEE FINANCIAL EXPERT | 146 |
| 3.KEY INFORMATION | 9 | 16B. | CODE OF ETHICS | 146 |
| 4.INFORMATION ON THE COMPANY | 33 | 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES | 147 |
| 4A.UNRESOLVED STAFF COMMENTS | 66 | 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES | 148 |
| 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS | 66 | 16E. | PURCHASES OF REGISTERED EQUITY SERVICES BY THE ISSUER AND AFFILIATED | |
| 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES | 91 | | PURCHASERS | |
| 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS | 130 | 16F. | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT | 149 |
| 8.FINANCIAL INFORMATION | 132 | 16G. | CORPORATE GOVERNANCE | 149 |
| 9.THE OFFER AND LISTING | 133 | 16H. | MINE SAFETY DISCLOSURE | 151 |
| 10.ADDITIONAL INFORMAT ION | 136 | | | |
| | | | PART III | |
| 11.QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK | 140 | | | |
| 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES | 141 | 17. | FINANCIAL STATEMENTS | 152 |
| | | 18. | FINANCIAL STATEMENT S | 152 |
| | | 19 | EXHIBITS | 153 |

ADDITIONAL INFORMATION

RISK MANAGEMENT156
SELECTED STATISTICAL INFORMATION ON BANKING OPERATIONS239

2019 ING Group Annual Report on Form 20-F4

PRESENTATION OF INFORMATION

In this Annual Report, and unless otherwise stated or the context otherwise dictates, references toThe published 2019 Annual Accounts of ING Group, however, are prepared in accordance with IFRS- "ING Groep N.V.", "ING Groep" and "ING Group" refer to ING Groep N.V. and references to "ING", theEU. IFRS-EU refers to International Financial Reporting Standards (“IFRS”) as adopted by the "Company", the "Group", "we" and "us" refer to ING Groep N.V. and its consolidated subsidiaries.European Union (“EU”), including the decisions ING Group made with regard to the options available ING Groep N.V.'s primary banking subsidiary is ING Bank N.V. (together with its consolidatedunder IFRS as adopted by the EU (IFRS-EU).

subsidiaries, "ING Bank"). References to "Executive Board" and "Supervisory Board" refer to the Executive Board or Supervisory Board of ING Groep N.V., respectively.IFRS-EU differs from IFRS-IASB, in respect of certain paragraphs in IAS 39 ‘Financial Instruments:
Recognition and Measurement’ regarding hedge accounting for portfolio hedges of interest rate ING presents its consolidated financial statements in euros, the currency of the European Economicrisk. Under IFRS-EU, ING Group applies fair value hedge accounting for portfolio hedges of interest and Monetary Union. Unless otherwise specified or the context otherwise requires, references torate risk (fair value macro hedges) in accordance with the EU “carve-out” version of IAS 39. Under “$”, “US$” and “Dollars” are to the United States dollars and references to “EUR” are to euros.the EU “IAS 39 carve-out”, hedge accounting may be applied, in respect of fair value macro hedges, to core deposits and hedge ineffectiveness is only recognised when the revised estimate of the Solely for the convenience of the reader, this Annual Report contains translations of certain euroamount of cash flows in scheduled time buckets falls below the original designated amount of that amounts into U.S. dollars at specified rates. These translations should not be construed asbucket, and is not recognised when the revised amount of cash flows in scheduled time buckets is representations that the translated amounts actually represent such dollar or euro amounts, asmore than the original designated amount. Under IFRS-IASB, hedge accounting for fair value macro the case may be, or could be converted into U.S. dollars or euros, as the case may be, at the rateshedges cannot be applied to core deposits and hedge ineffectiveness arises whenever the revised indicated or at any other rate. Therefore, unless otherwise stated, the translations of euros into U.S.estimate of the amount of cash flows in scheduled time buckets is either more or less than the dollars have been made at the rate of EUR 1.00 = U.S. $ 1.0855, the noon buying rate in New Yorkoriginal designated amount of that bucket. IFRS-IASB financial information is prepared by reversing City for cable transfers in euros as certified for customs purposes by the Federal Reserve Bank ofthe hedge accounting impacts that are applied under the EU “carve-out”’ version of IAS 39.
New York (the “Noon Buying Rate”) on 21 February 2020.Financial information under IFRS-IASB accordingly does not take account of the possibility that, had ING Group applied IFRS-IASB as its primary accounting framework, it might have applied alternative ING prepares financial information in accordance with International Financial Reporting Standardshedge strategies where those alternative hedge strategies could have qualified for IFRS-IASB as issued by the International Accounting Standards Board (“IFRS-IASB”) for purposes of reportingcompliant hedge accounting. These decisions could have resulted in different shareholders’ equity with the U.S. Securities and Exchange Commission (“SEC”), including financial informationand net result amounts compared to those indicated in this Annual Report on Form 20-F.
contained in this Annual Report on Form 20-F. ING Group’s accounting policies and its use of various options under IFRS-IASB are described under ‘Principles of valuation and determination of results’ inOther than for the purpose of SEC reporting, ING Group intends to continue to prepare its Annual the consolidated financial statements. In this document the term “IFRS-IASB” is used to refer toAccounts under IFRS-EU. A reconciliation between IFRS-EU and IFRS-IASB for shareholders’ equity IFRS-IASB as applied by ING Group.and net result is included in Note 1 ‘accounting policies’ to the consolidated financial statements.

2019 ING Group Annual Report on Form 20-F5

In addition to the consolidated financial statements, which are prepared in accordance with IFRS- IASB, this Annual Report on Form 20-F contains certain measures that are not defined by generally accepted accounting principles (GAAP) such as IFRS. Our management uses these financial measures, along with the most directly comparable GAAP financial measures, in evaluating segment performance and allocating resources. We believe that presentation of this information, along with comparable GAAP measures, is useful to investors because it allows investors to understand the primary method used by management to evaluate performance on a meaningful basis. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, including the consolidated financial statements. Non-GAAP financial measures as defined by us may not be comparable with similarly titled measures used by other companies.

Certain amounts set forth herein, such as percentages, may not sum due to rounding.

This Annual Report on Form 20-F contains inactive textual addresses to Internet websites operated by us and third parties. Reference to such websites is made for information purposes only, and information found at such websites is not incorporated by reference into this Annual Report on Form 20-F.

2019 ING Group Annual Report on Form 20-F6

CAUTIONARY STATEMENT WITH RESPECT TO FORWARD -LOOKING STATEMENTS

Certain of the statements contained herein are not historical facts, including, without limitation,●ING’s ability to meet minimum capital and other prudential regulatory requirements;
certain statements made of future expectations and other forward-looking statements that are
●the outcome of current and future legal and regulatory proceedings;
based on management’s current views and assumptions and involve known and unknown risks and
uncertainties that could cause actual results, performance or events to differ materially from those●changes in tax laws;
expressed or implied in such statements. Actual results, performance or events may differ materially
●operational risks, such as system disruptions or failures, breaches of security, cyber-attacks, from those in such statements due to a number of factors, including, without limitation, human error, changes in operational practices, inadequate controls including in respect of

●changes in general economic conditions, in particular economic conditions in ING’s corethird parties with which we do business, natural disasters or outbreaks of communicable
markets;diseases;

●changes affecting interest rate levels;●risks and changes related to cybercrime including the effects of cyber-attacks and changes
in legislation and regulation related to cybersecurity and data privacy;
changes in performance of financial markets, including developing markets;

●
●changes in general competitive factors;
●changes in the fiscal position and the future economic performance of the US including
potential consequences of a downgrade of the sovereign credit rating of the US government;●the inability to protect our intellectual property and infringement claims by third parties;

●consequences of the United Kingdom’s withdrawal from the European Union;●changes in credit ratings;

●introduction of, changes in or discontinuation of ‘benchmark’ indices;●business, operational, regulatory, reputation and other risks and challenges in connection
with climate change;
●inflation and deflation in our principal markets; changes in conditions in the credit and
capital markets generally, including changes in borrower and counterparty●the inability to attract and retain key personnel;
creditworthiness;
●conclusions with regard to purchase accounting assumptions and methodologies, and other
●changes in laws and regulations, including those governing financial services or financialchanges in accounting assumptions and methodologies including changes in valuation of
institutions, and the interpretation and application thereof;issued securities and credit market exposure;

●changes in compliance obligations;●changes in investor and customer behavior;

●geopolitical risks, political instability and policies and actions of governmental and●changes in the availability of, and costs associated with, sources of liquidity such as
regulatory authorities;interbank funding;

2019 ING Group Annual Report on Form 20-F7

●changes affecting currency exchange rate;

●changes in ownership that could affect the future availability to us of net operating loss, net
capital and built-in loss carry forwards;

●ING’s ability to achieve its strategy, including projected operational synergies and change
programmes, and

●the other risks and uncertainties detailed in the most recent annual report of ING Groep N.V.
(including the Risk Factors contained therein) and ING’s more recent disclosures, including press releases, which are available on www.ING.com.

This annual report contains inactive textual addresses to internet websites operated by us and third parties. Reference to such websites is made for information purposes only, and information found at such websites is not incorporated by reference into this annual report. ING does not make any representation or warranty with respect to the accuracy or completeness of, or take any responsibility for, any information found at any websites operated by third parties. ING specifically disclaims any liability with respect to any information found at websites operated by third parties.
ING cannot guarantee that websites operated by third parties remain available following the filing of this annual report or that any information found at such websites will not change following the filing of this annual report. Many of those factors are beyond ING’s control.

Any forward looking statements made by or on behalf of ING speak only as of the date they are made, and ING assumes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or for any other reason.

This document does not constitute an offer to sell, or a solicitation of an offer to purchase, any securities in the United States or any other jurisdiction.

2019 ING Group Annual Report on Form 20-F8

PART I| | | Data | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Item 1. | Identity of Directors, Senior Management And Advisors | for the years ended 31 December | 2019 | 2019 | 2018 | 2017 | 2016 | 2015 |
| | | In millions except amounts per share | US$ | EUR | EUR | EUR | EUR | EUR |
| Not Applicable. | | Continuing operations | | | | | | |
| | | Interest income | 30,571 | 28,163 | 28,129 | 43,890 | 44,182 | 46,321 |
| | | Interest expense | 15,580 | 14,353 | 14,169 | 30,243 | 30,941 | 33,760 |
| | | Net interest result | 14,992 | 13,811 | 13,960 | 13,647 | 13,241 | 12,561 |
| Item 2. | Offer Statistics and Expected Timetable | Net fee and commission income | 3,113 | 2,868 | 2,798 | 2,710 | 2,433 | 2,318 |
| | | Other income | 485 | 446 | 1,566 | 2,233 | 2,228 | 3,128 |
| Not Applicable. | | Total income | 18,589 | 17,125 | 18,324 | 18,590 | 17,902 | 18,007 |
| | | Addition to loan loss provision | 1,215 | 1,120 | 656 | 676 | 974 | 1,347 |
| | | Operating expenses | 11,238 | 10,353 | 10,682 | 9,829 | 10,614 | 9,326 |
| | | Total expenses | 12,453 | 11,472 | 11,338 | 10,505 | 11,588 | 10,673 |
| | | Result before tax from continuing operations | 6,136 | 5,653 | 6,986 | 8,085 | 6,314 | 7,334 |
| Item 3. | Key Information | Taxation | 1,793 | 1,652 | 2,116 | 2,539 | 1,705 | 1,924 |
| | | Net result from continuing operations | 4,344 | 4,001 | 4,869 | 5,546 | 4,609 | 5,410 |
| A. Selected financial data | | Net result from discontinued operations | 0 | 0 | 0 | 0 | 441 | –76 |

	Net result attributable to Non-controlling
The selected consolidated financial information data is derived from the IFRS-IASB consolidated	interests	107	99	108	82	75	408
financial statements of ING Group.	Net result ING Group IFRS-IASB attributable to
	Equityholders of the parent	4,236	3,903	4,761	5,464	4,975	4,926

The following information should be read in conjunction with, and is qualified by reference to the	Addition to shareholders’ equity	1,318	1,214	2,115	2,861	2,415	2,411
Group’s consolidated financial statements and other financial information included elsewhere	Dividend	2,919	2,689	2,646	2,603	2,560	2,515
herein.	Basic earnings per Ordinary Share	1.09	1.00	1.22	1.41	1.28	1.27
	Diluted earnings per Ordinary Share	1.09	1.00	1.22	1.41	1.28	1.27
	Dividend per Ordinary Share	0.75	0.69	0.68	0.67	0.66	0.65
	Number of Ordinary Shares outstanding in the
	market (in millions)	3,896.7	3,896.7	3,891.7	3,884.8	3,877.9	3,868.7

Euro amounts have been translated into U.S. dollars at the exchange rate of $ 1.0855 to EUR 1.00,

the Noon Buying Rate in New York City on 21 February 2020 for cable transfers in euros as certified

for customs purposes by the Federal Reserve Bank of New York.

2019 ING Group Annual Report on Form 20-F9

ING has changed its accounting policy for the netting of cash pooling arrangements in the second
Reference is made to Note 1 'Accounting policies' for information on Changes in accountingquarter of 2016. Loans and advances to customers and Customer deposits, as at 31 December
principles, estimates and presentation of the consolidated financial statements and related notes.
2015, are adjusted as a result.

The amounts for the period ended 31 December 2019 and 31 December 2018 have been prepared Dividend reported is the amount declared over the year.
in accordance with IFRS 9. ING Group has applied the classification, measurement, and impairment

requirements of IFRS 9 retrospectively as of 1 January 2018 by adjusting the opening balance sheet Basic earnings per share amounts have been calculated based on the weighted average number of
and opening equity at 1 January 2018. ING Group decided not to restate comparative periods as ordinary shares of ING Groep N.V. (“Ordinary Shares”) outstanding during the relevant period. For
permitted by IFRS 9. Reference is made to Note 1 'Accounting policies' for information on Changes purposes of this calculation, Ordinary Shares held by Group companies are deducted from the total
in accounting principles, estimates and presentation of the consolidated financial statements and number of Ordinary Shares in issue. The effect of dilutive securities is also adjusted.
related notes.

IFRS-IASB Consolidated Balance Sheet Data

Shareholders’ equity per ordinary share amounts have been calculated based on the number of

as at 31 December201920192018201720162015 Ordinary Shares outstanding at the end of the respective periods.

In billions except amounts per share or otherwise

US$EUREUREUREUREUR| indicated | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Total assets | 964.5 | 888.5 | 884.6 | 843.9 | 842.2 | 1,002.3 | B. Capitalization and indebtedness |
| Financial assets at fair value through profit or | | | | | | | |
| loss | 104.4 | 96.2 | 120.5 | 123.2 | 122.1 | 138.0 | This item does not apply to annual reports on Form 20-F. |
| Loans and advances to customers | 660.0 | 608.0 | 589.7 | 571.9 | 560.2 | 696.9 | |
| Savings accounts | 354.6 | 326.7 | 322.7 | 319.7 | 315.7 | 305.9 | |
| Other deposits and funds | 268.8 | 247.7 | 233.0 | 220.1 | 207.2 | 358.3 | C. Reasons for the offer and use of proceeds |
| Customer deposits | 623.5 | 574.4 | 555.7 | 539.8 | 522.9 | 664.2 | This item does not apply to annual reports on Form 20-F. |
| Deposits from banks | 37.8 | 34.8 | 37.3 | 36.8 | 32.0 | 33.8 | |
| Shareholders' equity | 55.4 | 51.0 | 49.0 | 48.4 | 47.3 | 45.0 | |
| Non-voting equity securities | | | | | | | D. Risk Factors |
| Shareholders' equity per Ordinary Share oustanding | 14.21 | 13.09 | 12.61 | 12.47 | 12.19 | 11.62 | |
| Number of Ordinary shares outstanding (in millions) | 3,895.8 | 3,895.8 | 3,890.6 | 3,885.8 | 3,878.5 | 3,870.2 | Any of the risks described below could have a material adverse effect on the business activities, |
| | | | | | | | financial condition, results and prospects of ING. ING may face a number of the risks described |

Euro amounts have been translated into U.S. dollars at the exchange rate of $ 1.0855 to EUR 1.00,below simultaneously and some risks described below may be interdependent. While the risk
the Noon Buying Rate in New York City on 21 February 2020 for cable transfers in euros as certifiedfactors below have been divided into categories, some risk factors could belong in more than one
for customs purposes by the Federal Reserve Bank of New York.category and investors should carefully consider all of the risk factors set out in this section.
Additional risks of which the Company is not presently aware, or that are currently viewed as

immaterial, could also affect the business operations of ING and have a material adverse effect on

2019 ING Group Annual Report on Form 20-F10

ING’s business activities, financial condition, results and prospects. The market price of ING sharesenvironment and, ultimately, our solvency, liquidity and the amount and profitability of business

or other securities could decline due to any of those risks including the risks described below, andwe conduct in a specific geographic region. Certain of these risks are often experienced globally as

investors could lose all or part of their investments.well as in specific geographic regions and are described in greater detail below under the headings

“–Interest rate volatility and other interest rate changes may adversely affect our business, results

Risks related to financial conditions, market environment and general economicand financial condition”, “–Inflation and deflation may negatively affect our business, results and

financial condition”, “–Market conditions, including those observed over the past few years and the

trends

application of IFRS 9 may increase the risk of loans being impaired and have a negative effect on

our results and financial condition” and “–Continued risk of political instability and fiscal uncertainty Because we are a financial services company conducting business on a global basis,
in Europe and the United States, as well as ongoing volatility in the financial markets and the our revenues and earnings are affected by the volatility and strength of the
economic, business, liquidity, funding and capital markets environments of theeconomy generally have adversely affected, and may continue to adversely affect, our business,

various geographic regions in which we conduct business, and an adverse change inresults and financial condition”.

any one region could have an impact on our business, results and financial condition.

In case one or more of the factors mentioned above adversely affects the profitability of our

business, this might also result, among other things, in the following:
Because ING is a multinational banking and financial services corporation, with a global presence
reserve and provisions inadequacies, which could ultimately be realised through profit and loss and serving around 38.4 million customers, corporate clients and financial institutions in over 40◾
and shareholders’ equity;
countries, ING’s business, results and financial condition may be significantly impacted by turmoil
the write-down of tax assets impacting net results and/or equity;
and volatility in the worldwide financial markets or in the particular geographic areas in which we◾
impairment expenses related to goodwill and other intangible assets, impacting net result;
operate. In Retail Banking, our products include savings, payments, investments, loans and◾
and/or mortgages in most of our retail markets. In Wholesale Banking, we provide specialised lending,
movements in risk weighted assets for the determination of required capital.
tailored corporate finance, debt and equity market solutions, payments & cash management and◾

trade and treasury services. As a result, negative developments in financial markets and/or regions In particular, we are exposed to financial, economic, market and political conditions in the Benelux in which we operate have in the past had and may in the future have a material adverse impact on countries and Germany, from which we derive a significant portion of our revenues in both Retail our business, results and financial condition, including as a result of the potential consequences Banking and Wholesale Banking, and which present risks of economic downturn. Though less listed below.
material, we also derive substantial revenues in the following geographic regions: Turkey, Eastern

Europe (primarily Poland among others), Southern Europe (primarily Spain among others), East Factors such as interest rates, securities prices, credit spreads, liquidity spreads, exchange rates,
Asia (primarily Singapore among others) and Australia which also present risks of economic consumer spending, changes in client behaviour, business investment, real estate values and
downturn. In an economic downturn, we expect that higher unemployment, lower family income, private equity valuations, government spending, inflation or deflation, the volatility and strength of
lower corporate earnings, higher corporate and private debt defaults, lower business investments the capital markets, political events and trends, terrorism, pandemics and epidemics (such as
and lower consumer spending would adversely affect the demand for banking products, and that COVID-19) or other widespread health emergencies all impact the business and economic

2019 ING Group Annual Report on Form 20-F11

ING may need to increase its reserves and provisions, each of which may result in overall lowerlower profitability as the result of a decrease in the spread between client rates earned on assets ◾ earnings. Securities prices, real estate values and private equity valuations may also be adverselyand client rates paid on savings, current account and other liabilities;
impacted, and any such losses would be realised through profit and loss and shareholders’ equity.higher costs for certain derivative instruments that may be used to hedge certain of our product ◾ We also offer a number of financial products that expose us to risks associated with fluctuations inrisks;
interest rates, securities prices, corporate and private default rates, the value of real estate assets,lower profitability since we may not be able to fully track the decline in interest rates in our ◾ exchange rates and credit spreads.savings rates;
lower profitability since we may not always be entitled to impose surcharges to customers to ◾ For further information on ING’s exposure to particular geographic areas, see Note 35 ‘Informationcompensate for the decline in interest rates;
on geographic areas’ to the consolidated financial statements.lower profitability since we may have to pay a higher premium for the defined contribution ◾ scheme in the Netherlands for which the premium paid is dependent on interest rate Interest rate volatility and other interest rate changes may adversely affect ourdevelopments and DNB’s methodology for determining the ultimate forward rate;
business, results and financial condition.lower interest rates may cause asset margins to decrease thereby lowering our results. This may ◾ for example be the consequence of increased competition for investments as result of the low
Changes in prevailing interest rates may negatively affect our business, including the level of netrates, thereby driving margins down; and/or interest revenue we earn, and the levels of deposits and the demand for loans. A sustained◾(depending on the position) a significant collateral posting requirement associated with our increase in the inflation rate in our principal markets may also negatively affect our business,interest rate hedge programs, which could materially and adversely affect liquidity and our results and financial condition. For example, a sustained increase in the inflation rate may result inprofitability.
an increase in nominal market interest rates. A failure to accurately anticipate higher inflation and factor it into our product pricing assumptions may result in mispricing of our products, which couldThe foregoing impacts have been and may be further amplified in a negative interest rate materially and adversely impact our results. On the other hand, recent concerns regardingenvironment, since we may not be able earn interest on our assets (including reserves), or may be negative interest rates and the low level of interest rates generally may negatively impact our netforced to pay negative interest on our assets, while still paying a positive interest or no interest to interest income, which may have an adverse impact on our profitability.others to hold our liabilities, resulting in an adverse impact on our credit spread and lowering of our net interest income. Furthermore, in the event that a negative interest rate environment results in
A prolonged period of low interest rates has resulted in, and may continue to result in:ING’s depositors being forced to pay a premium to ING to hold cash deposits, some depositors may lower earnings over time on investments, as reinvestments will earn lower rates;choose to withdraw their deposits in lieu of making such payments to ING, which would have an ◾ increased prepayment or redemption of mortgages and fixed maturity securities in ouradverse effect on our reputation, business, results and financial condition.
◾ investment portfolios, as well as increased prepayments of corporate loans. This as borrowers seek to borrow at lower interest rates potentially combined with lower credit spreads.Alternatively, any period of rapidly increasing interest rates may result in:
Consequently, we may be required to reinvest the proceeds into assets at lower interest rates;◾a decrease in the demand for loans;

2019 ING Group Annual Report on Form 20-F12

◾higher interest rates to be paid on debt securities that we have issued or may issue on thewhich ING and its lending customers depend to fund their operations and/or leading to a write
financial markets from time to time to finance our operations and on savings, which woulddown of loans or securities held by ING. Systemic risk could have a material adverse effect on our
increase our interest expenses and reduce our results;ability to raise new funding and on our business, results and financial condition. In addition, such
higher interest rates can lead to lower investments prices reduce the revaluation reserves,distress or failure could impact future product sales as a potential result of reduced confidence in ◾ thereby lowering IFRS equity and the capital ratios. Also the lower securities value leads to a lossthe financial services industry.
of liquidity generating capacity which needs to be compensated by attracting new liquidity
generating capacity which reduces our results;Continued risk of political instability and fiscal uncertainty in Europe and the United
prepayment losses if prepayment rates are lower than expected or if interest rates increase tooStates, as well as ongoing volatility in the financial markets and the economy ◾ rapidly to adjust the accompanying hedges; and/orgenerally have adversely affected, and may continue to adversely affect, our
(depending on the position) a significant collateral posting requirement associated with ourbusiness, results and financial condition. ◾

interest rate hedge program.
Our global business and results are materially affected by conditions in the global capital markets The default of a major market participant could disrupt the markets and may haveand the economy generally. In Europe, there are continuing concerns over weaker economic an adverse effect on our business, resu lts and financial condition.conditions, as well as concerns in relation to European sovereign debt, the uncertain outcome of the negotiations between the UK and the EU following the Brexit decisions in UK parliament, Within the financial services industry, the severe distress or default of any one institution (includingincreasing political instability, levels of unemployment, the availability and cost of credit, credit sovereigns and central counterparties (CCPs)) could lead to defaults by, or the severe distress of,spreads, and the impact of continued quantitative easing within the Eurozone through bond other market participants. While prudential regulation may reduce the probability of a default by arepurchases and the ECB’s targeted longer-term refinancing operation (‘TLTRO’). In the United major financial institution, the actual occurrence of such a default could have a material adverseStates, political uncertainty, US national debt levels and changes in US trade and foreign impact on ING. Such distress of, or default by, a major financial institution could disrupt markets orinvestment policies (including tensions with China and Eurozone) may result in adverse economic clearance and settlement systems and lead to a chain of defaults by other financial institutions,developments. In addition, geopolitical issues, including with respect to the Middle East, since the commercial and financial soundness of many financial institutions may be closely relatedRussia/Ukraine and North Korea may all contribute to adverse developments in the global capital as a result of credit, trading, clearing or other relationships. Even the perceived lack ofmarkets and the economy generally.
creditworthiness of a sovereign or a major financial institution (or a default by any such entity)
may lead to market-wide liquidity problems and losses or defaults by us or by other institutions.Adverse developments in the market have included, for example, decreased liquidity, increased This risk is sometimes referred to as ‘systemic risk’ and may adversely affect financialprice volatility, credit downgrade events, and increased probability of default for fixed income intermediaries, such as clearing agencies, clearing houses, banks, securities firms and exchangessecurities. Moreover, there is a risk that an adverse credit event at one or more European sovereign with whom we interact on a daily basis and financial instruments of sovereigns in which we invest.debtors (including a credit rating downgrade or a default) could trigger a broader economic Systemic risk could impact ING directly, by exposing it to material credit losses on transactions withdownturn in Europe and elsewhere. In addition, the confluence of these and other factors has defaulting counterparties or indirectly by significantly reducing the available market liquidity onresulted in volatile foreign exchange markets. Securities that are less liquid are more difficult to

2019 ING Group Annual Report on Form 20-F13

value and may be hard to dispose of. International equity markets have also continued toAny of these general developments in global financial and political conditions could negatively experience heightened volatility and turmoil, with issuers, including ourselves, that have exposureimpact to our business, results and financial condition in future periods.
to the real estate, mortgage, private equity and credit markets particularly affected. These events, market upheavals and continuing risks, including high levels of volatility, have had and mayThe uncertainty surrounding the United Kingdom’s withdrawal from the European continue to have an adverse effect on our results, in part because we have a large investmentUnion may have adverse effects on our business, results and financial condition. portfolio.

Although the UK is not a member state of the Eurozone, the departure of the UK from the EU There is also continued uncertainty over the long-term outlook for the tax, spending and borrowing(commonly referred to as ‘Brexit’) remains a major political and economic event whose policies of the US, the future economic performance of the US within the global economy and anyconsequences are not fully known or understood and may further destabilize the Eurozone. The UK potential future budgetary restrictions in the US, with a potential impact on a future sovereignwithdrew from the EU on January 31, 2020, though the relationship between the UK and the EU credit ratings downgrade of the US government, including the rating of US Treasury securities. Aremains uncertain during the ongoing transition period, which largely maintains current downgrade of US Treasury securities could also impact the ratings and perceived creditworthinessarrangements and provides time for the UK and the EU to negotiate the details of their future of instruments issued, insured or guaranteed by institutions, agencies or instrumentalities directlyrelationship. The transition period is currently expected to end on December 31, 2020, and, if no linked to the US government. US Treasury securities and other US government-linked securities areagreement is reached, the default scenario would be a non-negotiated Brexit. In the event of a key assets on the balance sheets of many financial institutions and are widely used as collateral bynon-negotiated Brexit, the UK will depart the EU with no agreements in place beyond any financial institutions to meet their day-to-day cash flows in the short-term debt market. Thetemporary arrangements which have been or may be put in place by the EU or individual EU impact of any further downgrades to the sovereign credit rating of the US government or a defaultMember States, and the UK as part of no-deal contingency efforts and those conferred by mutual by the US government on its debt obligations would create broader financial turmoil andmembership of the World Trade Organization. Accordingly, there continues to be uncertainty with uncertainty, which would weigh heavily on the global financial system and could consequentlyrespect to the process surrounding Brexit and the outcome of the ongoing Brexit negotiations, result in a significant adverse impact to the Group’s business and operations.including any related regulatory changes, and over the future economic relationship between the UK and the rest of the world (including the EU). Any of these developments could have an adverse In many cases, the markets for investments and instruments have been and remain illiquid, andeffect on economic and financial conditions in the UK, the EU or globally. Although ING has issues relating to counterparty credit ratings and other factors have exacerbated pricing andcontinued to take further steps throughout 2019 to prepare for known risks related to Brexit, such valuation uncertainties. Valuation of such investments and instruments is a complex processas substantially progressing applications for a Third Country Branch banking licence in the UK, involving the consideration of market transactions, pricing models, management judgment andtaking actions for contract continuity and working to establish alternatives in the EU for those euro other factors, and is also impacted by external factors, such as underlying mortgage default rates,clearing activities that may be expected to move from London following Brexit, the possible interest rates, rating agency actions and property valuations. Historically these factors haveeconomic and operational impacts of Brexit on the Group and its counterparties remain uncertain.
resulted in, among other things, valuation and impairment issues in connection with our exposuresGiven ING’s significant pre-existing EU-licensed banking network and the various scenario analyses to European sovereign debt and other investments.performed by ING on its Brexit sensitive clients and sectors, ING believes that it is positioned to largely avoid, or has taken significant steps to mitigate, potential direct adverse effects of Brexit.

2019 ING Group Annual Report on Form 20-F14

However, the regulatory impact of Brexit continues to present material risks and uncertainties,Secured Overnight Financing Rate (commonly referred to as ‘SOFR’) as an alternative to US dollar particularly as to how regulations may diverge between the EU and the UK, which could materiallyLIBOR.

increase ING’s compliance costs and have a material adverse effect on ING’s business, results and financial condition.The potential discontinuation of the LIBOR and EONIA benchmarks or any other benchmark, or changes in the methodology or manner of administration of any benchmark, could result in a Discontinuation of or changes to ‘benchmark’ indices may negatively affect ournumber of risks for the Group, its clients, and the financial services industry more widely. These business, results and financial condition.risks include legal risks in relation to changes required to documentation for new and existing transactions may be required. Financial risks may also arise from any changes in the valuation of The London Interbank Offered Rate (‘LIBOR’), the Euro OverNight Index Average (‘EONIA’), the Eurofinancial instruments linked to benchmark rates, and changes to benchmark indices could impact Interbank Offered Rate (‘EURIBOR’) and other interest rates or other types of rates and indicespricing mechanisms on some instruments. Changes in valuation, methodology or documentation which are deemed to be ‘benchmarks’ are the subject of ongoing national and internationalmay also result into complaints or litigation. The Group may also be exposed to operational risks or regulatory reform. Following the implementation of any such potential reforms, the manner ofincur additional costs due to the potential requirement to adapt IT systems, trade reporting administration of benchmarks may change, with the result that they may perform or be calculatedinfrastructure and operational processes, or in relation to communications with clients or other differently than in the past, or benchmarks could cease to exist entirely, or there could be otherparties and engagement during the transition period.
consequences which cannot be predicted. Although the UK Financial Conduct Authority (‘FCA’) has authorized ICE Benchmark Administration as administrator of LIBOR, on 27 July 2017 the FCAExcept for EONIA, the replacement of benchmarks together with the timetable and mechanisms for announced that it will no longer persuade or compel banks to submit rates for the calculation ofimplementation have not yet been confirmed by central banks. Accordingly, it is not currently the LIBOR benchmark after 2021. The announcement indicates that the continuation of the LIBORpossible to determine whether, or to what extent, any such changes would affect the Group.
on the current basis cannot and will not be guaranteed after 2021. In addition, as of October 2019,However, the implementation of alternative benchmark rates may have a material adverse effect the new euro risk-free rate euro short-term rate (€STR) is being published and the EONIAon our business, results and financial condition.
benchmark was reformed, making it dependant to the €STR benchmark. The reformed EONIA benchmark will cease to exist by 1 January 2022 and therefore the European Money MarketsInflation and deflation may negatively affect our business, results and financial

condition. Institute (EONIA’s administrator) has indicated that EONIA cannot be used in any contracts that will be outstanding as of 1 January 2022. Public authorities have initiated industry working groups in various jurisdictions to search for and recommend alternative risk-free rates that could serveA sustained increase in the inflation rate in our principal markets would have multiple impacts on alternatives if current benchmarks like LIBOR and EONIA cease to exist or materially change. Theus and may negatively affect our business, results and financial condition. For example, a sustained work of these working groups is still ongoing, though certain such organizations have advancedincrease in the inflation rate may result in an increase in market interest rates, which may:
proposals for benchmark replacements. For example, the US Federal Reserve’s Alternativedecrease the estimated fair value of certain fixed income securities that we hold in our ◾ Reference Rates Committee (commonly referred to as ‘ARRC’) has recommended adoption of theinvestment portfolios, resulting in:

2019 ING Group Annual Report on Form 20-F15

reduced levels of unrealised capital gains available to us, which could negatively impact ourMarket conditions, including those observed over the past few years, and the ◾ solvency position and net income, and/orapplication of IFRS 9 may increase the risk of loans being impaired and have a

negative effect on our results and financial condition. a decrease in collateral values, ◾ result in increased withdrawal of certain savings products, particularly those with fixed rates ◾ below market rates,We are exposed to the risk that our borrowers (including sovereigns) may not repay their loans require us, as an issuer of securities, to pay higher interest rates on debt securities that we issueaccording to their contractual terms and that the collateral securing the payment of these loans ◾ in the financial markets from time to time to finance our operations, which would increase ourmay be insufficient. We may see adverse changes in the credit quality of our borrowers and interest expenses and reduce our results.counterparties, for example, as a result of their inability to refinance their indebtedness, with increasing delinquencies, defaults and insolvencies across a range of sectors. This may lead to A significant and sustained increase in inflation has historically also been associated withimpairment charges on loans and other assets, higher costs and additions to loan loss provisions. A decreased prices for equity securities and sluggish performance of equity markets generally. Asignificant increase in the size of our provision for loan losses could have a material adverse effect sustained decline in equity markets may:on our business, results and financial condition.
result in impairment charges to equity securities that we hold in our investment portfolios and ◾ reduced levels of unrealised capital gains available to us which would reduce our net income, andIFRS 9 ‘Financial Instruments’ became effective as per 1 January 2018 and results in loan loss lower the value of our equity investments impacting our capital position.provisions that may be recognized earlier, on a more forward looking basis and on a broader scope ◾ of financial instruments than was previously the case under IAS 39. ING has applied the In addition, a failure to accurately anticipate higher inflation and factor it into our product pricingclassification, measurement, and impairment requirements retrospectively by adjusting the may result in a systemic mispricing of our products, which would negatively impact our results.opening balance sheet and opening equity as at 1 January 2018. As a result of applying IFRS 9 going forward, a shift in the forward looking consensus view of economic conditions may materially On the other hand, deflation experienced in our principal markets may also adversely affect ourimpact the models used to calculate loan loss provisions under IFRS 9 and cause more volatility in, financial performance. In recent years, the risk of low inflation and even deflation (i.e., a continuedor higher levels of, loan loss provisions, any of which could adversely affect the Group’s results, period with negative rates of inflation) in the Eurozone has materialized. Deflation may erodefinancial condition or regulatory capital position.

collateral values and diminish the quality of loans and cause a decrease in borrowing levels, which would negatively affect our business and results.Economic and other factors could lead to contraction in the residential mortgage and commercial lending market and to decreases in residential and commercial property prices, which could generate substantial increases in impairment losses. Additionally, continuing low oil prices could have an influence on the repayment capacity of certain corporate borrowers active in the oil and oil related services industries.

2019 ING Group Annual Report on Form 20-F16

We may incur losses due to failures of banks falling under the scope of stateRisks related to the regul ation and supervision of the Group

compensation schemes.

Non-compliance with laws and/or regulations concerning financial services or While prudential regulation is intended to minimize the risk of bank failures, in the event such afinancial institutions could result in fines and other liabilities, penalties or failure occurs, given our size, we may incur significant compensation payments to be made underconsequences for us, which could materially affect our business and reduce our the Dutch Deposit Guarantee Scheme (DGS), which we may be unable to recover from the bankruptprofitability. estate, and therefore the consequences of any future failure of such a bank could be significant to ING. Such costs and the associated costs to be borne by us may have a material adverse effect onDespite our efforts to maintain effective compliance procedures and to comply with applicable laws our results and financial condition. On the basis of the EU Directive on deposit guarantee schemes,and regulations, we have faced, and in the future may continue to face, the risk of consequences in ING pays quarterly risk-weighted contributions into a DGS-fund. The DGS-fund is to grow to aconnection with non-compliance with applicable laws and regulations. For additional information target size of 0.8% of all deposits guaranteed under the DGS, which is expected to be reached inon legal proceedings, see Note 46 ‘Legal proceedings’ to the consolidated financial statements.
July 2024. In case of failure of a Dutch bank, depositor compensation is paid from the DGS-fund. IfThere are a number of risks in areas where applicable regulations may be unclear, subject to the available financial means of the fund are insufficient, Dutch banks, including ING, may bemultiple interpretations or under development, or where regulations may conflict with one required pay to extraordinary ex-post contributions not exceeding 0.5% of their covered depositsanother, or where regulators revise their previous guidance or courts overturn previous rulings, per calendar year. In exceptional circumstances and with the consent of the competent authority,which could result in our failure to meet applicable standards. Regulators and other authorities higher contributions may be required. However, extraordinary ex-post contributions may behave the power to bring administrative or judicial proceedings against us, which could result, temporarily deferred if, and for so long as, they would jeopardise the solvency or liquidity of a bank.among other things, in suspension or revocation of our licenses, cease and desist orders, fines, civil Depending on the size of the failed bank, the available financial means in the fund, and the requiredpenalties, criminal penalties or other disciplinary action, which could materially harm our results additional financial means, the impact of the extraordinary ex-post contributions on ING may beand financial condition. If we fail to address, or appear to fail to address, any of these matters material.appropriately, our reputation could be harmed and we could be subject to additional legal risk,

which could, in turn, increase the size and number of claims and damages brought against us or Since 2015, the EU has been discussing the introduction of a pan-European deposit guaranteesubject us to enforcement actions, fines and penalties.
scheme (‘EDIS’), (partly) replacing or complementing national compensation schemes in two or three phases. Proposals contain elements of (re)insurance, mutual lending and mutualisation ofChanges in laws and/or regulations governing financial services or financial funds. The new model is intended to be ‘overall cost-neutral’. Discussions have continued in 2019,institutions or the application of such laws and/or regulations may increase our but it remains uncertain when EDIS will be introduced and, if introduced, what impact EDIS wouldoperating costs and limit our activities. have on ING’s business and operations.

We are subject to detailed banking laws and government regulation in the jurisdictions in which we conduct business. Regulation of the industries in which we operate is becoming increasingly more extensive and complex, while also attracting scrutiny from regulators. Compliance with applicable

2019 ING Group Annual Report on Form 20-F17

and new laws and regulations is resources -intensive, and may materially increase our operatingWe are subject to the regulatory supervision of the ECB and other regulators with
costs. Moreover, these regulations can limit our activities, among others, through stricter netextensive supervisory and investigatory powers.

capital, customer protection and market conduct requirements and restrictions on the businesses in which we can operate or invest.In its capacity as principal bank supervisor in the EU, the ECB has extensive supervisory and investigatory powers, including the ability to issue requests for information, to conduct regulatory Our revenues and profitability and those of our competitors have been and will continue to beinvestigations and on-site inspections, and to impose monetary and other sanctions. For example, impacted by requirements relating to capital, additional loss-absorbing capacity, leverage,under the SSM, the regulators with jurisdiction over the Group, including the ECB, may conduct minimum liquidity and long-term funding levels, requirements related to resolution and recoverystress tests and have discretion to impose capital surcharges on financial institutions for risks that planning, derivatives clearing and margin rules and levels of regulatory oversight, as well asare not otherwise recognised in risk-weighted assets or other surcharges depending on the limitations on which and, if permitted, how certain business activities may be carried out byindividual situation of the bank and take or require other measures, such as restrictions on or financial institutions.changes to the Group’s business. Competent regulators may also, if the Group fails to comply with regulatory requirements, in particular with minimum capital requirements (including buffer We are subject to additional legal and regulatory risk in certain countries where werequirements) or with liquidity requirements, or if there are shortcomings in its governance and risk operate with less developed or predictable legal and regulatory frameworks.management processes, prohibit the Group from making dividend payments to shareholders or distributions to holders of its regulatory capital instruments. Generally, a failure to comply with the In certain countries in which we operate, judiciary and dispute resolution systems may be lessnew quantitative and qualitative regulatory requirements could have a material adverse effect on developed. As a result, in case of a breach of contract, we may have difficulties in making andthe Group’s business, results and financial condition.
enforcing claims against contractual counterparties and, if claims are made against us, we might encounter difficulties in mounting a defence against such allegations. If we become party to legalFailure to meet minimum capital and other prudential regulatory requir ements as proceedings in a market with an insufficiently developed judicial system, it could have an adverseapplicable to us from time to time may have a material adverse effect on our business, results and financial condition and on our ability to make payments on effect on our operations and net results.

certain of our securities.

In addition, as a result of our operations in certain countries, we are subject to risks of possible nationalisation, expropriation, price controls, exchange controls and other restrictive governmentWe are subject to regulations that require us to comply with minimum requirements for capital actions, as well as the outbreak of hostilities and or war, in these markets. Furthermore, the current(own funds) and additional loss absorbing capacity, as well as for liquidity, and to comply with economic environment in certain countries in which we operate may increase the likelihood forleverage restrictions. These are developed or enacted by various organisations such as the Basel regulatory initiatives to enhance consumer protection or to protect homeowners from foreclosures.Committee on Banking Supervision (‘BCBS’), the Financial Stability Board (‘FSB’) and the European Any such regulatory initiative could have an adverse impact on our ability to protect our economicUnion (‘EU’). The main pieces of legislation in this field that apply to us are the EU’s Capital interest, for instance in the event of defaults on residential mortgages.Requirements Directive (‘CRD’) and Capital Requirements Regulation (‘CRR’), and the Bank Recovery

2019 ING Group Annual Report on Form 20-F18

and Resolution Directive, all as amended from time to time and as implemented in national lawOur US commodities and derivatives business is subject to CFTC and SEC regulation
where required.under the Dodd-Frank Act.

The capital and liquidity requirements and leverage restrictions that apply to us result in variousTitle VII of Dodd-Frank created a new framework for regulation of the over-the-counter derivatives minimum capital ratios (of capital to risk-weighted assets) and liquidity ratios that we mustmarkets and certain market participants which has affected and could continue to affect various maintain, and in a minimum leverage ratio (based on unweighted assets). A key capital ratio is theactivities of the Group and its subsidiaries. ING Capital Markets LLC, a wholly-owned indirect Common Equity Tier 1 ratio or CET1 ratio, which is the ratio of common equity tier 1 capital to thesubsidiary of ING Bank N.V., has registered with the US Commodity Futures Trading Commission total risk exposure amount (‘TREA’, often referred to as risk-weighted assets or ‘RWA’). In addition(‘CFTC’) as a swap dealer and intends to register with the SEC as a securities-based swap dealer. The to the capital requirements, we must maintain at all times a sufficient aggregate amount of ownSEC has adopted regulations, among others, establishing registration, reporting, risk management, funds and ‘eligible liabilities’ (that is, liabilities that may be bailed in using the bail-in tool), known asbusiness conduct, and margin and capital requirements for security-based swaps. Such regulations the minimum requirements for own funds and eligible liabilities (‘MREL’).are expected to be effective on or around September 1, 2021.Additionally, the CFTC recently reproposed, and is expected to adopt, capital requirements for swap dealers, although the specific Capital, liquidity and leverage requirements and their application and interpretation may change.requirements, and any available exemptions, have not been finalized. If these requirements are Any changes may require us to maintain more capital or to raise a different type of capital byapplicable to ING, and no exemptions are available, it is possible that these requirements will be disqualifying existing capital instruments from continued inclusion in regulatory capital, requiringdifficult for ING to comply with and may, as a result, materially and adversely impact ING’s ability replacement with new capital instruments that meet the new criteria. Sometimes changes areto operate as a swap dealer in the US. Other CFTC regulatory requirements, already implemented, introduced subject to a transitional period during which the new requirements are being phased in,include registration of swap dealers, business conduct rules imposed on swap dealers, gradually progressing to a fully phased-in, or fully-loaded, application of the requirements.requirements that some categories of swaps be centrally executed on regulated trading facilities and cleared through regulated clearing houses, and initial and variation margin requirements for Any failure to comply with these requirements may have a material adverse effect on our business,uncleared swaps. In addition, new position limits requirements for market participants that have results and financial condition, and may require us to seek additional capital. It may also prohibit usbeen proposed and may be contained in final regulations to be adopted by the CFTC could limit from making payments on certain of our securities. Our business, results and financial conditionING’s position sizes in swaps referencing specified physical commodities and similarly limit the may also be adversely affected if these requirements change, which may also require us to seekability of counterparties to utilize certain of our products by narrowing the scope of hedging additional capital or a different type of capital. Because implementation phases and transpositionexemptions from position limits for commercial end users and the trading activity of speculators.
into EU or national regulation where required may often involve a lengthy period, the impact ofAll of the foregoing areas of regulation of the derivative markets and market participants will likely changes in capital, liquidity and leverage regulations on our business, results and financialresult in increased cost of hedging and other trading activities, both for ING and its customers, condition, and on our ability to make payments on certain of our securities, is often unclear.which could expose our business to greater risk and could reduce the size and profitability of our

customer business. In addition, the imposition of these regulatory restrictions and requirements, could result in reduced market liquidity, which could in turn increase market volatility and the risks and costs of hedging and other trading activities.

2019 ING Group Annual Report on Form 20-F19

We are subject to the ‘Bank Recovery and Resolution Directive’ (‘BRRD’) amongIn addition, among the broader powers granted to the resolution authority, the BRRD provides
several other bank recovery and resolution regimes that include statutory writepowers to the resolution authority to amend the maturity date and/or any interest payment date
down and conversion as well as other powers, which remains subject to significant of, or the interest amount payable under, debt instruments or other bail-inable liabilities, including

uncertainties as to scope and impact on us. by suspending payment for a temporary period.

We are subject to several recovery and resolution regimes, including the Single ResolutionThe Intervention Act confers wide-ranging powers to the Dutch Minister of Finance, including, Mechanism (‘SRM’), the BRRD as implemented in national legislation, and the Dutch ‘Interventionamong other things, in relation to shares and other securities issued by us or with our cooperation Act’ (Wet bijzondere maatregelen financiële ondernemingen. as implemented in the Dutchor other claims on us (including, without limitation, expropriation thereof) if there is a grave and Financial Supervision Act). The aim of the BRRD is to provide supervisory authorities and resolutionimmediate threat to the stability of the financial system.

authorities with common tools and powers to address banking crises pre-emptively in order to safeguard financial stability and minimise taxpayers’ exposure to losses.None of these actions would be expected to constitute an event of default under our securities entitling holders to seek repayment. If these powers were to be exercised in respect of us, there The powers granted to authorities include, among others, a statutory ‘write-down and conversioncould be a material adverse effect on us and on holders of our securities, including through a power’ and a ‘bail-in’ power, which gives the resolution authority the power to, as a resolutionmaterial adverse effect on credit ratings and/or the price of our securities. Investors in our securities action or when the resolution authority determines that otherwise we would no longer be viable,may lose their investment if resolution measures are taken under current or future regimes.
inter alia, (i) reduce or cancel existing shares, (ii) convert relevant capital instruments or eligible liabilities or bail-inable liabilities into shares or other instruments of ownership of the relevant entityFor further discussion of the impact of bank recovery and resolution regimes on ING, see “Item 4.
and/or (iii) write down relevant capital instruments or eligible liabilities or reduce or cancel theInformation on the Company—Regulation and Supervision—Regulatory Developments—Bank principal amount of, or interest on, certain unsecured liabilities (which could include certainrecovery and resolution directive.” securities that have been or will be issued by us), whether in whole or in part and whether or not on a permanent basis.Risks related to changes in laws of general application, litigation, enforcement

proceedings and investigations
In addition to the ‘write-down and conversion power’ and the ‘bail-in’ power, the powers granted to
the resolution authority include the power to (i) sell and transfer a banking group or all or part of its We may be subject to litigation, enforcement proceedings, investigations or other business on commercial terms without requiring the consent of the shareholders or complying with

regulatory actions, and adverse publicity. the procedural requirements that would otherwise apply, (ii) transfer a banking group or all or part
of its business to a ‘bridge institution’ (a publicly controlled entity) and (iii) separate and transfer all We are involved in governmental, regulatory, arbitration and legal proceedings and investigations or part of a banking group’s business to an asset management vehicle (a publicly controlled entity)
involving claims by and against us which arise in the ordinary course of our businesses, including in to allow them to be managed over time.
connection with our activities as financial services provider, employer, investor and taxpayer. As a
financial institution, we are subject to specific laws and regulations governing financial services or

2019 ING Group Annual Report on Form 20-F20

financial institutions. See “– Changes in laws and/or regulations governing financial services orWe are subject to different tax regulations in each of the jurisdictions where we financial institutions or the application of such laws and/or regulations may increase our operatingconduct business, and are exposed to changes in tax laws, and risks of non-

compliance with or proceedings or investigations with respect to, tax laws. costs and limit our activities” above. Financial reporting irregularities involving other large and wellknown companies, possible findings of government authorities in various jurisdictions which are investigating several rate -setting processes, notifications made by whistleblowers, increasingChanges in tax laws (including case law) could increase our taxes and our effective tax rates and regulatory and law enforcement scrutiny of ‘know your customer’ anti-money laundering, taxcould materially impact our tax receivables and liabilities as well as deferred tax assets and evasion, prohibited transactions with countries or persons subject to sanctions, and bribery or otherdeferred tax liabilities, which could have a material adverse effect on our business, results and anti-corruption measures and anti-terrorist-financing procedures and their effectiveness,financial condition. Changes in tax laws could also make certain ING products less attractive, which regulatory investigations of the banking industry, and litigation that arises from the failure orcould have adverse consequences for our businesses and results. Because of the geographic spread perceived failure by us to comply with legal, regulatory, tax and compliance requirements couldof its business, ING may be subject to tax audits, investigations and procedures in numerous result in adverse publicity and reputational harm, lead to increased regulatory supervision, affectjurisdictions at any point in time. Although we believe that we have adequately provided for all our our ability to attract and retain customers and maintain access to the capital markets, result intax positions, the ultimate resolution of these audits, investigations and procedures may result in cease and desist orders, claims, enforcement actions, fines and civil and criminal penalties, otherliabilities which are different from the amounts recognized.
disciplinary action or have other material adverse effects on us in ways that are not predictable.
Some claims and allegations may be brought by or on behalf of a class and claimants may seekIncreased bank taxes in countries where the Group is active result in increased taxes on ING’s large or indeterminate amounts of damages, including compensatory, liquidated, treble andbanking operations, which could negatively impact our operations, financial condition and liquidity.
punitive damages. Our reserves for litigation liabilities may prove to be inadequate. Claims and allegations, should they become public, need not be well founded, true or successful to have aWe may be subject to withholding tax if we fail to comply with the Foreign Account negative impact on our reputation. In addition, press reports and other public statements thatTax Compliance Act and other US withholding tax regulations assert some form of wrongdoing could result in inquiries or investigations by regulators, legislators and law enforcement officials, and responding to these inquiries and investigations, regardless ofUnder provisions of US tax law commonly referred to as FATCA, non-US financial institutions are their ultimate outcome, is time consuming and expensive. Adverse publicity, claims andrequired to provide to the US Internal Revenue Service (‘IRS’) certain information about financial allegations, litigation and regulatory investigations and sanctions may have a material adverseaccounts held by US taxpayers or by foreign entities in which US taxpayers hold a substantial effect on our business, results, financial condition and/or prospects in any given period.ownership interest. Every three years, certain ING branches and subsidiaries are required to certify

their compliance with FATCA requirements to the IRS. If the IRS determines that any such branches and/or subsidiaries are not in compliance with the FATCA requirements, then the FATCA regulations would impose a 30 percent penalty tax on all US-source payments (e.g., interest and dividends)
made to the branch/subsidiary, regardless of whether the branch/subsidiary is the beneficial owner of such payment or is acting as an intermediary for customers/payees.

2019 ING Group Annual Report on Form 20-F21

Under provisions of other US tax law concerning withholding tax, non-US financial institutionsProducts distributed through person-to-person sales forces have a higher exposure to such claims acting as intermediaries are required to withhold tax on US-source payments to payees and remitas the sales forces provide face-to-face financial planning and advisory services. Complaints may the tax to the IRS. Every three years, certain ING branches and subsidiaries are required to certifyalso arise if customers feel that they have not been treated reasonably or fairly, or that the duty of their compliance with such Qualified Intermediary (‘QI’) requirements to the IRS. If the IRScare has not been complied with. While a considerable amount of time and resources have been determines that any such branches and/or subsidiaries are not in compliance with the QIinvested in reviewing and assessing historical sales practices and products that were sold in the requirements, then it would not be commercially feasible for ING to offer certain products topast, and in the maintenance of risk management, legal and compliance procedures to monitor customers.current sales practices, there can be no assurance that all of the issues associated with current and

historical sales practices have been or will be identified, nor that any issues already identified will Failure to comply with FATCA and/or QI requirements and regulations could also harm ournot be more widespread than presently estimated.
reputation and could subject the Group to enforcement actions, fines and penalties, which could have a material adverse effect on our business, reputation, revenues, results, financial conditionThe negative publicity associated with any sales practices, any compensation payable in respect of and prospects. For additional information with respect to specific proceedings, see Note 46 ‘Legalany such issues and regulatory changes resulting from such issues, has had and could have a proceedings’ to the consolidated financial statements.material adverse effect on our reputation, business, results, financial condition and prospects. For additional information regarding legal proceedings or claims, see Note 46 ‘Legal proceedings’ to the ING is exposed to the risk of claims from customers who feel misled or treatedconsolidated financial statements.

unfairly because of advice or information received.

Risks related to the Group’s business and operations Our banking products and advice services for third-party products are exposed to claims from customers who might allege that they have received misleading advice or other information fromOperational risks, such as systems disruptions or failures, breaches of security, advisers (both internal and external) as to which products were most appropriate for them, or thatcyber attacks, human error, changes in operational practices, inadequate controls the terms and conditions of the products, the nature of the products or the circumstances underincluding in respect of third parties with which we do business, natural disasters or which the products were sold, were misrepresented to them. When new financial products areoutbreaks of communicable diseases may adversely impact our reputation, business brought to the market, ING engages in a multidisciplinary product approval process in connectionand results. with the development of such products, including production of appropriate marketing and communication materials. Notwithstanding these processes, customers may make claims againstWe face the risk that the design and operating effectiveness of our controls and procedures may ING if the products do not meet their expectations. Customer protection regulations, as well asprove to be inadequate. Operational risks are inherent to our business. Our businesses depend on changes in interpretation and perception by both the public at large and governmental authoritiesthe ability to process a large number of transactions efficiently and accurately. In addition, we of acceptable market practices, influence customer expectations.routinely transmit, receive and store personal, confidential and proprietary information by email and other electronic means. Although we endeavour to safeguard our systems and processes, losses can result from inadequately trained or skilled personnel, IT failures (including due to a

2019 ING Group Annual Report on Form 20-F22

computer virus or a failure to anticipate or prevent cyber attacks or other attempts to gainbusiness continuity plans are not able to be implemented, are not effective or do not sufficiently unauthorised access to digital systems for purposes of misappropriating assets or sensitivetake such events into account, losses may increase further.
information, corrupting data, or impairing operational performance, or security breaches by third parties), inadequate or failed internal control processes and systems, regulatory breaches, humanWe are subject to increasing risks related to cybercrime and compliance with errors, employee misconduct, including fraud, or from natural disasters or other external eventscybersecurity regulation. that interrupt normal business operations. Such losses may adversely affect our reputation, business and results. We depend on the secure processing, storage and transmission ofLike other financial institutions and global companies, we are regularly the target of cyber attacks.
confidential and other information in our computer systems and networks. The equipment andIn particular, threats from Distributed Denial of Service (‘DDoS’), targeted attacks (also called software used in our computer systems and networks may not always be capable of processing,Advanced Persistent Threats) and Ransomware intensify worldwide, and attempts to gain storing or transmitting information as expected. Despite our business continuity plans andunauthorised access and the techniques used for such attacks are increasingly sophisticated. We procedures, certain of our computer systems and networks may have insufficient recoveryhave faced, and expect to continue to face, an increasing number of cyber attacks (both successful capabilities in the event of a malfunction or loss of data. As part of our Accelerated Think Forwardand unsuccessful) as we have further digitalized. This includes the continuing expansion of our strategy, we are consistently managing and monitoring our IT risk profile globally. ING is subject tomobile- and other internet-based products and services, as well as our usage and reliance on cloud increasing regulatory requirements including EU General Data Protection Regulation (‘GDPR’) andtechnology. In 2019 we experienced continuous DDoS attacks, of which one DDoS attack breached EU Payment Services Directive (‘PSD2’). Failure to appropriately manage and monitor our IT riskour DDoS defences (compared to two attacks in 2018). This DDoS attack caused an outage of profile could affect our ability to comply with these regulatory requirements, to securely andapproximately four-hours, which affected customers of ING in Romania. In addition, ING Philippines efficiently serve our clients or to timely, completely or accurately process, store and transmitexperienced one virus infection on a vendor-supplied server for two hours, which had no customer information, and may adversely impact our reputation, business and results. For further descriptionimpact. Furthermore, due to our reliance on national critical infrastructure and interconnectivity of the particular risks associated with cybercrime, see “–We are subject to increasing risks relatedwith third-party vendors, exchanges, clearing houses, financial institutions and other third parties, to cybercrime and compliance with cybersecurity regulation” below.we could be adversely impacted if any of them is subject to a successful cyber attack or other

information security event.
Widespread outbreaks of communicable diseases may impact the health of our employees, increasing absenteeism, or may cause a significant increase in the utilisation of health benefitsCybersecurity, customer data and data privacy have become the subject of increasing legislative offered to our employees, either or both of which could adversely impact our business. We alsoand regulatory focus. The EU’s second Payment Services Directive (‘PSD2’), implemented in 2019, face physical risks, including as a direct result of climate change, such as extreme weather eventsand GDPR are examples of such regulations. In certain locations where ING is active, there are or rising water levels, which could have a material adverse effect on our operations, particularlyadditional local regulatory requirements and legislation on top of EU regulations that must be where our headquarters may be impacted. In addition, other events including unforeseeablefollowed for business conducted in that jurisdiction. Some of these legislations and regulations may and/or catastrophic events can lead to an abrupt interruption of activities, and our operations maybe conflicting due to local regulatory interpretations. We may become subject to new EU and local be subject to losses resulting from such disruptions. Losses can result from destruction orlegislation or regulation concerning cybersecurity, security of customer data in general or the impairment of property, financial assets, trading positions, and the loss of key personnel. If ourprivacy of information we may store or maintain. Compliance with such new legislation or

2019 ING Group Annual Report on Form 20-F23

regulation could increase the Group’s compliance cost. Failure to comply with new and existingdeveloped countries have sought to establish themselves in markets which are perceived to offer legislation or regulation could harm our reputation and could subject the Group to enforcementhigher growth potential, and as local institutions have become more sophisticated and competitive actions, fines and penalties.and proceeded to form alliances, mergers or strategic relationships with our competitors. The

Netherlands is our largest market. Our main competitors in the banking sector in the Netherlands ING may be exposed to the risks of misappropriation, unauthorised access, computer viruses orare ABN AMRO Bank and Rabobank.
other malicious code, cyber attacks and other external attacks or internal breaches that could have a security impact. These events could also jeopardise our confidential information or that of ourCompetition could also increase due to new entrants (including non-bank and financial technology clients or our counterparties and this could be exacerbated by the increase in data protectioncompetitors) in the markets that may have new operating models that are not burdened by requirements as a result of GDPR. These events can potentially result in financial loss and harm topotentially costly legacy operations and that are subject to reduced regulation. New entrants may our reputation, hinder our operational effectiveness, result in regulatory censure, compensationrely on new technologies, advanced data and analytic tools, lower cost to serve, reduced costs or fines resulting from regulatory investigations and could have a material adverse effect onregulatory burden and/or faster processes in order to challenge traditional banks. Developments in our business, reputation, revenues, results, financial condition and prospects. Even when we aretechnology has also accelerated the use of new business models, and ING may not be successful in successful in defending against cyber attacks, such defence may consume significant resources oradapting to this pace of change or may incur significant costs in adapting its business and impose significant additional costs on ING.operations to meet such changes. For example, new business models have been observed in retail payments, consumer and commercial lending (such as peer-to-peer lending), foreign exchange Because we operate in highly competitive markets, including our home market, weand low-cost investment advisory services. In particular, the emergence of disintermediation in the may not be able to increase or maintain our market share, which may have anfinancial sector resulting from new banking, lending and payment solutions offered by rapidly adverse effect on our results.evolving incumbents, challengers and new entrants, in particular with respect to payment services and products, and the introduction of disruptive technology may impede our ability to grow or There is substantial competition in the Netherlands and the other countries in which we doretain our market share and impact our revenues and profitability.
business for the types of wholesale banking, retail banking, investment banking and other products and services we provide. Customer loyalty and retention can be influenced by a number of factors,Increasing competition in the markets in which we operate (including from non-banks and financial including brand recognition, reputation, relative service levels, the prices and attributes of productstechnology competitors) may significantly impact our results if we are unable to match the and services, scope of distribution, credit ratings and actions taken by existing or new competitorsproducts and services offered by our competitors. Future economic turmoil may accelerate (including non-bank or financial technology competitors). A decline in our competitive position asadditional consolidation activity. Over time, certain sectors of the financial services industry have to one or more of these factors could adversely impact our ability to maintain or further increasebecome more concentrated, as institutions involved in a broad range of financial services have our market share, which would adversely affect our results. Such competition is most pronouncedbeen acquired by or merged into other firms or have declared bankruptcy. These developments in our more mature markets of the Netherlands, Belgium, the rest of Western Europe and Australia.could result in our competitors gaining greater access to capital and liquidity, expanding their In recent years, however, competition in emerging markets, such as Latin America, Asia andranges of products and services, or gaining geographic diversity. We may experience pricing Central and Eastern Europe, has also increased as large financial services companies from more

2019 ING Group Annual Report on Form 20-F24

pressures as a result of these factors in the event that some of our competitors seek to increaseThe inability of counterparties to meet their financial obligations or our inability to
market share by reducing prices.fully enforce our rights against counterparties could have a material adverse effect

on our results.

We may not always be able to protect our intellectual property developed in our products and services and may be subject to infringement claims, which couldThird parties that owe us money, securities or other assets may not pay or perform under their adversely impact our core business, inhibit efforts to monetize our internalobligations. These parties include the issuers and guarantors (including sovereigns) of securities we

innovations and restrict our ability to capitalize on future opportunities. hold, borrowers under loans originated, reinsurers, customers, trading counterparties, securities lending and repurchase counterparties, counterparties under swaps, credit default and other In the conduct of our business, we rely on a combination of contractual rights with third parties andderivative contracts, clearing agents, exchanges, clearing houses and other financial copyright, trademark, trade name, patent and trade secret laws to establish and protect ourintermediaries. Defaults by one or more of these parties on their obligations to us due to intellectual property, which we develop in connection with our products and services. Third partiesbankruptcy, lack of liquidity, downturns in the economy or real estate values, continuing low oil or may infringe or misappropriate our intellectual property. We may have to litigate to enforce andother commodity prices, operational failure or other factors, or even rumours about potential protect our copyrights, trademarks, trade names, patents, trade secrets and know-how or todefaults by one or more of these parties or regarding a severe distress of the financial services determine their scope, validity or enforceability. In that event, we may be required to incurindustry generally, could have a material adverse effect on our results, financial condition and significant costs, and our efforts may not prove successful. The inability to secure or protect ourliquidity. Given the high level of interdependence between financial institutions, we are and will intellectual property assets could have an adverse effect on our core business and our ability tocontinue to be subject to the risk of deterioration of the commercial and financial soundness, or compete, including through the monetization of our internal innovations.perceived soundness, of sovereigns and other financial services institutions. This is particularly

relevant to our franchise as an important and large counterparty in equity, fixed income and We may also be subject to claims made by third parties for (1) patent, trademark or copyrightforeign exchange markets, including related derivatives.
infringement, (2) breach of copyright, trademark or licence usage rights, or (3) misappropriation of trade secrets. Any such claims and any resulting litigation could result in significant expense andWe routinely execute a high volume of transactions, such as unsecured debt instruments, liability for damages. If we were found to have infringed or misappropriated a third -party patent orderivative transactions and equity investments with counterparties and customers in the financial other intellectual property right, we could in some circumstances be enjoined from providingservices industry, including brokers and dealers, commercial and investment banks, mutual and certain products or services to our customers or from utilizing and benefiting from certain methods,hedge funds, insurance companies, institutional clients, futures clearing merchants, swap dealers, processes, copyrights, trademarks, trade secrets or licences. Alternatively, we could be required toand other institutions, resulting in large periodic settlement amounts, which may result in our enter into costly licensing arrangements with third parties or to implement a costly workaround.having significant credit exposure to one or more of such counterparties or customers. As a result, Any of these scenarios could have a material adverse effect on our business and results and couldwe could face concentration risk with respect to liabilities or amounts we expect to collect from restrict our ability to pursue future business opportunities.specific counterparties and customers. We are exposed to increased counterparty risk as a result of recent financial institution failures and weakness and will continue to be exposed to the risk of loss if counterparty financial institutions fail or are otherwise unable to meet their obligations. A default

2019 ING Group Annual Report on Form 20-F25

by, or even concerns about the creditworthiness of, one or more of these counterparties ormarket stress and illiquidity. Any of these developments or losses could materially and adversely customers or other financial services institutions could therefore have an adverse effect on ouraffect our business, results, financial condition, and/or prospects.

results or liquidity.
Ratings are important to our business for a number of reasons, and a downgrade or With respect to secured transactions, our credit risk may be exacerbated when the collateral helda potential downgrade in our credit ratings could have an adverse impact on our by us cannot be or is liquidated at prices not sufficient to recover the full amount of the loan orresults and net results. derivative exposure due to us. We also have exposure to a number of financial institutions in the form of unsecured debt instruments, derivative transactions and equity investments. For example,Credit ratings represent the opinions of rating agencies regarding an entity’s ability to repay its we hold certain hybrid regulatory capital instruments issued by financial institutions which permitindebtedness. Our credit ratings are important to our ability to raise capital and funding through the issuer to cancel coupon payments on the occurrence of certain events or at their option. The ECthe issuance of debt and to the cost of such financing. In the event of a downgrade, the cost of has indicated that, in certain circumstances, it may require these financial institutions to cancelissuing debt will increase, having an adverse effect on our net results. Certain institutional investors payment. If this were to happen, we expect that such instruments may experience ratingsmay also be obliged to withdraw their deposits from ING following a downgrade, which could have downgrades and/or a drop in value and we may have to treat them as impaired, which could resultan adverse effect on our liquidity. We have credit ratings from S&P, Moody’s Investor Service and in significant losses. There is no assurance that losses on, or impairments to the carrying value of,Fitch Ratings. Each of the rating agencies reviews its ratings and rating methodologies on a these assets would not materially and adversely affect our business, results or financial condition.recurring basis and may decide on a downgrade at any time.

In addition, we are subject to the risk that our rights against third parties may not be enforceable inFurthermore, ING Bank’s assets are risk-weighted. Downgrades of these assets could result in a all circumstances. The deterioration or perceived deterioration in the credit quality of third partieshigher risk-weighting, which may result in higher capital requirements. This may impact net whose securities or obligations we hold could result in losses and/ or adversely affect our ability toearnings and the return on capital, and may have an adverse impact on our competitive position.
rehypothecate or otherwise use those securities or obligations for liquidity purposes. A significant downgrade in the credit ratings of our counterparties could also have a negative impact on ourAs rating agencies continue to evaluate the financial services industry, it is possible that rating income and risk weighting, leading to increased capital requirements. While in many cases we areagencies will heighten the level of scrutiny that they apply to financial institutions, increase the permitted to require additional collateral from counterparties that experience financial difficulty,frequency and scope of their credit reviews, request additional information from the companies disputes may arise as to the amount of collateral we are entitled to receive and the value ofthat they rate and potentially adjust upward the capital and other requirements employed in the pledged assets. Also in this case, our credit risk may also be exacerbated when the collateral werating agency models for maintenance of certain ratings levels. It is possible that the outcome of hold cannot be liquidated at prices sufficient to recover the full amount of the loan or derivativeany such review of us would have additional adverse ratings consequences, which could have a exposure due to us, which is most likely to occur during periods of illiquidity and depressed assetmaterial adverse effect on our results and financial condition. We may need to take actions in valuations, such as those experienced during the financial crisis of 2008. The termination ofresponse to changing standards or capital requirements set by any of the rating agencies, which contracts and the foreclosure on collateral may subject us to claims. Bankruptcies, downgradescould cause our business and operations to suffer. We cannot predict what additional actions and disputes with counterparties as to the valuation of collateral tend to increase in times of

2019 ING Group Annual Report on Form 20-F26

rating agencies may take, or what actions we may take in response to the actions of ratingparties with which we do business, natural disasters or outbreaks of communicable diseases may agencies.adversely impact our reputation, business and results” above.

We may be exposed to business, operational, regulatory, reputational and otherAn inability to retain or attract key personnel may affect our business and results.

risks in connection with climate change.

ING Group relies to a considerable extent on the quality of its senior management, such as Climate change is an area of significant focus for governments and regulators, investors and ING’smembers of the executive committee, and management in the jurisdictions which are material to customers, and developments with respect to climate change topics may expose ING to significantING’s business and operations. The success of ING Group’s operations is dependent, among other risks. The perception of climate change as a risk by civil society, shareholders, governments andthings, on its ability to attract and retain highly qualified personnel. Competition for key personnel other stakeholders continues to increase, including in relation to the financial sector’s operationsin most countries in which ING Group operates, and globally for senior management, is intense. ING and strategy, and international actions regulating or restricting CO2 emissions, such as the ParisGroup’s ability to attract and retain key personnel, in senior management and in particular areas agreement, may also result in financial institutions coming under increased pressure from suchsuch as technology and operational management, client relationship management, finance, risk stakeholders regarding the management and disclosure of their climate risks and related lendingand product development, is dependent on a number of factors, including prevailing market and investment activities. For further information regarding the alignment of ING’s lending portfolioconditions and compensation packages offered by companies competing for the same talent.
with its climate-related goals, see “Item 4. – Information on the Company – Business Overview – Responsible finance” below. Additionally, rising climate change concerns may lead to additionalThe (increasing) restrictions on remuneration, plus the public and political scrutiny especially in the regulation that could increase our operating costs or negatively impact the profitability of ourNetherlands, will continue to have an impact on existing ING Group remuneration policies and investments and lending activities, including those involving the natural resources sector. ING mayindividual remuneration packages for personnel. For example, under the EU’s amended incur substantial costs in complying with current or future laws and regulations relating to climateShareholder Rights Directive, known as ‘SRD II’, which came into effect on June 10, 2019, ING is change, including with respect to international actions regulating or restricting CO2 emissions orrequired to hold a shareholder advisory vote on ING’s remuneration policy for directors (including changes in capital requirements regulations in response to climate change. In addition, ING ismembers of the executive board and the supervisory board) and on the annual remuneration exposed to transition risks related to climate change, which result from changes in the behaviour ofreport for such directors. This may restrict our ability to offer competitive compensation compared economic and financial actors in response to the implementation of energy policies orwith companies (financial and/or non-financial) that are not subject to such restrictions and it could technological changes. Any of these risks may result in changes in our business activities or otheradversely affect ING Group’s ability to retain or attract key personnel, which, in turn, may affect our liabilities or costs, including exposure to reputational risks, any of which may have a material andbusiness and results.
adverse impact on our business, results or financial condition.

For a description of the physical risks to our business resulting from climate change, see “– Operational risks, such as systems disruptions or failures, breaches of security, cyber attacks, human error, changes in operational practices, inadequate controls including in respect of third

2019 ING Group Annual Report on Form 20-F27

We may incur further liabilities in respect of our defined benefit retirement plans ifoutputs, which may adversely impact our reputation and results. In addition, we use assumptions the value of plan assets is not sufficient to cover potential obligations, including as ain order to model client behaviour for the risk calculations in our banking books. Assumptions are result of differences between results and underlying actuarial assumptions and used to determine the interest rate risk profile of savings and current accounts and to estimate the

models. embedded option risk in the mortgage and investment portfolios. Assumptions based on past client behaviour may not always be a reliable indicator of future behaviour. The realisation or use of ING Group companies operate various defined benefit retirement plans covering a number of ourdifferent assumptions to determine client behaviour could have a material adverse effect on the employees. The liability recognised in our consolidated balance sheet in respect of our definedcalculated risk figures and, ultimately, our future results or reputation. Furthermore, we may be benefit plans is the present value of the defined benefit obligations at the balance sheet date, lesssubject to risks related to changes in the laws and regulations governing the risk management the fair value of each plan’s assets, together with adjustments for unrecognised actuarial gains andpractices of financial institutions. For further information, see “Risks related to the regulation and losses and unrecognised past service costs. We determine our defined benefit plan obligationssupervision of the Group – Changes in laws and/or regulations governing financial services or based on internal and external actuarial models and calculations using the projected unit creditfinancial institutions or the application of such laws and/or regulations may increase our operating method. Inherent in these actuarial models are assumptions, including discount rates, rates ofcosts and limit our activities” above.

increase in future salary and benefit levels, mortality rates, trend rates in health care costs, consumer price index, and the expected return on plan assets. These assumptions are based onWe may be unable to manage our risks successfully through derivatives. available market data and the historical performance of plan assets, and are updated annually.
Nevertheless, the actuarial assumptions may differ significantly from actual results due to changesWe employ various economic hedging strategies with the objective of mitigating the market risks in market conditions, economic and mortality trends and other assumptions. Any changes in thesethat are inherent in our business and operations. These risks include currency fluctuations, changes assumptions could have a significant impact on our present and future liabilities to and costsin the fair value of our investments, the impact of interest rates, equity markets and credit spread associated with our defined benefit retirement plans.changes, the occurrence of credit defaults and changes in client behaviour. We seek to control these risks by, among other things, entering into a number of derivative instruments, such as Risks related to the Group’s risk management practicesswaps, options, futures and forward contracts, including, from time to time, macro hedges for parts of our business, either directly as a counterparty or as a credit support provider to affiliate Risks relating to our use of quantitative models or assumptions to model clientcounterparties. Developing an effective strategy for dealing with these risks is complex, and no behaviour for the purposes of our market calculations may adversely impact ourstrategy can completely insulate us from risks associated with those fluctuations. Our hedging reputation or results.strategies also rely on assumptions and projections regarding our assets, liabilities, general market factors and the creditworthiness of our counterparties that may prove to be incorrect or prove to We use quantitative methods, systems or approaches that apply statistical, economic financial, orbe inadequate. Accordingly, our hedging activities may not have the desired beneficial impact on mathematical theories, techniques and assumptions to process input data into quantitativeour results or financial condition. Poorly designed strategies or improperly executed transactions estimates. Errors in the development, implementation, use or interpretation of such models, orcould actually increase our risks and losses. Hedging strategies involve transaction costs and other from incomplete or incorrect data, can lead to inaccurate, noncompliant or misinterpreted modelcosts, and if we terminate a hedging arrangement, we may also be required to pay additional

2019 ING Group Annual Report on Form 20-F28

costs, such as transaction fees or breakage costs. There have been periods in the past, and it iswhich may be different than suggested by historical experience. For instance, these methods may likely that there will be periods in the future, during which we have incurred or may incur losses onnot predict the losses seen in the stressed conditions in recent periods, and may also not transactions, possibly significant, after taking into account our hedging strategies. Further, theadequately allow prediction of circumstances arising due to government interventions and nature and timing of our hedging transactions could actually increase our risk and losses. Hedgingstimulus packages, which increase the difficulty of evaluating risks. Other methods for risk instruments we use to manage product and other risks might not perform as intended or expected,management are based on evaluation of information regarding markets, customers, catastrophic which could result in higher (un)realised losses, such as credit value adjustment risks or unexpectedoccurrence or other information that is publicly known or otherwise available to us. Such P&L effects, and unanticipated cash needs to collateralise or settle such transactions. Adverseinformation may not always be accurate, complete, updated or properly evaluated. Management market conditions can limit the availability and increase the costs of hedging instruments, andof operational, compliance, legal and regulatory risks requires, among other things, policies and such costs may not be recovered in the pricing of the underlying products being hedged. Inprocedures to record and verify large numbers of transactions and events. These policies and addition, hedging counterparties may fail to perform their obligations, resulting in unhedgedprocedures may not be fully effective, resulting in a material and adverse impact on our exposures and losses on positions that are not collateralised. As such, our hedging strategies andcompetitive position, reputation, business, results and financial condition.
the derivatives that we use or may use may not adequately mitigate or offset the risks they intend to cover, and our hedging transactions may result in losses.Risks related to the Group’s liquidity and financing activities

Our hedging strategy additionally relies on the assumption that hedging counterparties remainWe depend on the capital and credit markets, as well as customer deposits, to
able and willing to provide the hedges required by our strategy. Increased regulation, marketprovide the liquidity and capital required to fund our operations, and adverse
shocks, worsening market conditions (whether due to the ongoing euro crisis or otherwise), and/orconditions in the capital and credit markets, or significant withdrawals of customer
other factors that affect or are perceived to affect the financial condition, liquidity anddeposits, may impact our liquidity, borrowing and capital positions, as well as the

cost of liquidity, borrowings and capital. creditworthiness of ING may reduce the ability and/or willingness of such counterparties to engage

in hedging contracts with us and/or other parties, affecting our overall ability to hedge our risks and adversely affecting our business, results and financial condition.Adverse capital market conditions have in the past affected, and may in the future affect, our cost of borrowed funds and our ability to borrow on a secured and unsecured basis, thereby impacting Our risk management policies and guidelines may prove inadequate for the risks weour ability to support and/or grow our businesses. Furthermore, although interest rates are at or face.near historically low levels, since the recent financial crisis, we have experienced increased funding costs due in part to the withdrawal of perceived government support of such institutions in the [We have developed risk management policies and procedures and will continue to review andevent of future financial crises. In addition, liquidity in the financial markets has also been develop these in the future. Nonetheless, our policies and procedures to identify, monitor andnegatively impacted as market participants and market practices and structures adjust to new manage risks may not be fully effective, particularly during extremely turbulent times. Theregulations.
methods we use to manage, estimate and measure risk are partly based on historic market behaviour. The methods may, therefore, prove to be inadequate for predicting future risk exposure,

2019 ING Group Annual Report on Form 20-F29

We need liquidity to pay our operating expenses, interest on our debt and dividends on our capitalsupport business growth, or to counterbalance the consequences of losses or increased regulatory stock, maintain our securities lending activities and replace certain maturing liabilities. Withoutcapital and rating agency capital requirements. This could force us to (i) delay raising capital, (ii)
sufficient liquidity, we will be forced to curtail our operations and our business will suffer. Thereduce, cancel or postpone payment of dividends on our shares, (iii) reduce, cancel or postpone principal sources of our funding include a variety of short-and long-term instruments, includinginterest payments on our other securities, (iv) issue capital of different types or under different deposit fund, repurchase agreements, commercial paper, medium- and long-term debt,terms than we would otherwise, or (v) incur a higher cost of capital than in a more stable market subordinated debt securities, capital securities and shareholders’ equity.environment. This would have the potential to decrease both our profitability and our financial

flexibility. Our results, financial condition, cash flows, regulatory capital and rating agency capital In addition, because we rely on customer deposits to fund our business and operations, theposition could be materially adversely affected by disruptions in the financial markets.
confidence of customers in financial institutions may be tested in a manner that may adversely impact our liquidity and capital position. Consumer confidence in financial institutions may, forFurthermore, regulatory liquidity requirements in certain jurisdictions in which we operate are example, decrease due to our or our competitors’ failure to communicate to customers the termsbecoming more stringent, undermining our efforts to maintain centralised management of our of, and the benefits to customers of, complex or high-fee financial products. Reduced confidenceliquidity. These developments may cause trapped pools of liquidity and capital, resulting in could have an adverse effect on our liquidity and capital position through withdrawal of deposits, ininefficiencies in the cost of managing our liquidity and solvency, and hinder our efforts to integrate addition to our revenues and results. Because a significant percentage of our customer depositour balance sheet. An example of such trapped liquidity includes our operations in Germany where base is originated via Internet banking, a loss of customer confidence may result in a rapidGerman regulations impose separate liquidity requirements that restrict ING’s ability to move a withdrawal of deposits over the Internet.liquidity surplus out of the German subsidiary.

In the event that our current resources do not satisfy our needs, we may need to seek additionalAs a holding company, ING Groep N.V. is dependent for liquidity on payments from
financing. The availability of additional financing will depend on a variety of factors, such as marketits subsidiaries, many of which are subject to regulatory and other restrictions on
conditions, the general availability of credit, the volume of trading activities, the overall availabilitytheir ability to transact with affiliates.
of credit to the financial services industry, our credit ratings and credit capacity, as well as the
possibility that customers or lenders could develop a negative perception of our long- or short-termING Groep N.V. is a holding company and, therefore, depends on dividends, distributions and other
financial prospects. Similarly, our access to funds may be limited if regulatory authorities or ratingpayments from its subsidiaries to fund dividend payments and to fund all payments on its
agencies take negative actions against us. If our internal sources of liquidity prove to be insufficient,obligations, including debt obligations. Many of our subsidiaries, including our bank subsidiaries, are
there is a risk that we may not be able to successfully obtain additional financing on favourablesubject to laws that restrict dividend payments or authorize regulatory bodies to block or reduce
terms, or at all. Any actions we might take to access financing may, in turn, cause rating agenciesthe flow of funds from those subsidiaries to ING Groep N.V.

to re-evaluate our ratings.
In addition, our bank subsidiaries are subject to restrictions on their ability to lend or transact with Disruptions, uncertainty or volatility in the capital and credit markets may also limit our access toaffiliates and to minimum regulatory capital and other requirements, as well as restrictions on their capital. Such market conditions may in the future limit our ability to raise additional capital toability to use client funds deposited with them to fund their businesses. Additional restrictions on

2019 ING Group Annual Report on Form 20-F30

related-party transactions, increased capital and liquidity requirements and additional limitationsentities, and may reduce our ability to provide ING Groep N.V. guarantees for the obligations of our on the use of funds in client accounts, as well as lower earnings, can reduce the amount of fundssubsidiaries or raise debt at ING Groep N.V. Resolution planning may also impair our ability to available to meet the obligations of ING Groep N.V., and even require ING Groep N.V. to providestructure our intercompany and external activities in a manner that we may otherwise deem most additional funding to such subsidiaries. Restrictions or regulatory action of that kind could impedeoperationally efficient. Furthermore, arrangements to facilitate our resolution planning may cause access to funds that ING Groep N.V. needs to make payments on its obligations, including debtus to be subject to additional costs such as resolution planning related taxes and funds. Any such obligations, or dividend payments. In addition ING Groep N.V.’s right to participate in a distributionlimitations or requirements would be in addition to the legal and regulatory restrictions described of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of theabove on our ability to engage in capital actions or make intercompany dividends or payments.
subsidiary’s creditors.

Additional risks relating to ownership of ING shares

There is a trend towards increased regulation and supervision of our subsidiaries by the governments and regulators in the countries in which those subsidiaries are located or do business.Holders of ING shares may experience dilution of their holdings. Concerns about protecting clients and creditors of financial institutions that are controlled by persons or entities located outside of the country in which such entities are located or do businessING’s AT1 Securities may, under certain circumstances, convert into equity securities, and such have caused or may cause a number of governments and regulators to take additional steps toconversion would dilute the ownership interests of existing holders of ING shares and such dilution “ring fence” or maintain internal total loss-absorbing capacity at such entities in order to protectcould be substantial. Additionally, any conversion, or the anticipation of the possibility of a clients and creditors of such entities in the event of financial difficulties involving such entities. Theconversion, could depress the market price of ING shares. Furthermore, we may undertake future result has been and may continue to be additional limitations on our ability to efficiently moveequity offerings with or without subscription rights. In case of equity offerings with subscription capital and liquidity among our affiliated entities, thereby increasing the overall level of capital andrights, holders of ING shares in certain jurisdictions, however, may not be entitled to exercise such liquidity required by ING on a consolidated basis.rights unless the rights and the related shares are registered or qualified for sale under the relevant legislation or regulatory framework. Holders of ING shares in these jurisdictions may suffer dilution Furthermore, ING Groep N.V. has in the past and may in the future guarantee the paymentof their shareholding should they not be permitted to, or otherwise chose not to, participate in obligations of certain of its subsidiaries, including ING Bank N.V., subject to certain exceptions. Anyfuture equity offerings with subscription rights.
such guarantee may require ING Groep N.V. to provide substantial funds or assets to its subsidiaries or their creditors or counterparties at a time when ING Groep N.V. or its subsidiaries are in need ofBecause we are incorporated under the laws of the Netherlands and many of the liquidity to fund their own obligations.members of our Supervisory and Executive Board and our officers reside outside of

the United States, it may be difficult to enforce judgments against ING or the The requirements for ING Groep N.V. to develop and submit recovery and resolution plans tomembers of our Supervisory and Executive Boards or our officers. regulators, and the incorporation of feedback received from regulators, may require us to increase capital or liquidity levels or issue additional long-term debt at ING Groep N.V. or particularMost of our Supervisory Board members, our Executive Board members and some of the experts subsidiaries or otherwise incur additional or duplicative operational or other costs at multiplenamed in this Annual Report, as well as many of our officers are persons who are not residents of

2019 ING Group Annual Report on Form 20-F31

the United States, and most of our and their assets are located outside the United States. As aresidents of the Netherlands or countries other than the United States any judgments obtained in result, investors may not be able to serve process on those persons within the United States or toU.S. courts in civil and commercial matters, including judgments under the U.S. federal securities enforce in the United States judgments obtained in US courts against us or those persons based onlaws.

the civil liability provisions of the US securities laws.
In addition, there is doubt as to whether a Dutch court would impose civil liability on us, the Investors also may not be able to enforce judgments of US courts under the US federal securitiesmembers of our board of directors, our officers or certain experts named herein in an original laws in courts outside the United States, including the Netherlands. The United States and theaction predicated solely upon the U.S. federal securities laws brought in a court of competent Netherlands do not currently have a treaty providing for the reciprocal recognition andjurisdiction in the Netherlands against us or such members, officers or experts, respectively.
enforcement of judgments (other than arbitration awards) in civil and commercial matters.
Therefore, we may not be able to enforce in the Netherlands a final judgment for the payment of money rendered by any US federal or state court based on civil liability, even if the judgment is not based only on the US federal securities laws, unless a competent court in the Netherlands gives binding effect to the judgment.

Therefore, a final judgment for the payment of money rendered by any federal or state court in the United States based on civil liability, whether or not predicated solely upon the U.S. federal securities laws, would not be enforceable in the Netherlands unless the underlying claim is relitigated before a Dutch court. However, under current practice, the courts of the Netherlands may be expected to render a judgment in accordance with the judgment of the relevant U.S. court, provided that such judgment (i) is a final judgment and has been rendered by a court which has established its jurisdiction on the basis of internationally accepted grounds of jurisdictions, (ii) has not been rendered in violation of elementary principles of fair trial, (iii) is not contrary to the public policy of the Netherlands, and (iv) is not incompatible with (a) a prior judgment of a Netherlands court rendered in a dispute between the same parties, or (b) a prior judgment of a foreign court rendered in a dispute between the same parties, concerning the same subject matter and based on the same cause of action, provided that such prior judgment is not capable of being recognized in the Netherlands. It is uncertain whether this practice extends to default judgments as well.

Based on the foregoing, there can be no assurance that U.S. investors will be able to enforce against us or members of our board of directors, officers or certain experts named herein who are

2019 ING Group Annual Report on Form 20-F32

Item 4.Information on the CompanyThe official address of ING Group is:The name and address of ING

Group’s agent for service of process in the United States in connection

A.History and development of the company with ING’s registration statement on GeneralForm F-3 is:
ING Groep N.V. was established as a Naamloze Vennootschap (a Dutch public limited liability company) on March 4, 1991. ING Groep N.V. is incorporated under the laws of the Netherlands.ING Groep N.V.ING Financial Holdings Corporation The corporate site of ING, www.ing.com, provides news, investor relations and general informationBijlmerdreef 1061133 Avenue of the Americas about the company.1102 CT AmsterdamNew York, NY 10036 P.O. Box 1800,United States of America ING is required to file certain documents and information with the United States Securities and1000 BV Amsterdam Exchange Commission (SEC). These filings relate primarily to periodic reporting requirementsThe Netherlands applicable to issuers of securities, as well as to beneficial ownership reporting requirements as aTelephone +31 20 563 9111Telephone +1 646 424 6000 holder of securities. The most common filings we submit to the SEC are Forms 6-K and 20-F (periodic reporting requirements) and Schedules 13D and 13G (beneficial ownership requirements).Changes in the composition of the Group The SEC maintains an internet site that contains reports, proxy and information statements, andFor information on changes in the composition of the Group, reference is made to Note 47 other information regarding issuers that file electronically with the SEC at http://www.sec.gov. ING’s‘Consolidated companies and businesses acquired and divested’.
electronic filings are available on the SEC’s internet site under CIK ID 0001039765 (ING Groep N.V.).

2019 ING Group Annual Report on Form 20-F33

Our strategy and how we create value

ING’s Think Forward strategy continued to guide us during 2019. ItThe strategic priorities that are the focus of the Think Forward strategy aim to create a

differentiated customer experience. They do that by deepening the relationship with the customer, was a year of rapid transformation in the competitive landscape, by providing us with tools to know our customers better and to anticipate their evolving needs, and regu lation, customer preferences and the economic context. It by fostering an innovation culture that will ensure we are able to continuously adapt our offerings

was marked as well by the growing threat of climate change.and business model to anticipate and meet those needs in future. And the Customer Promise –

clear and easy, anytime anywhere, empower, and keep getting better – forms the basis of the These developments present both challenges and opportunities .
customer experience we aim for.

There were numerous developments in 2019 with important implications for financial services In concrete terms, this translates into a focus on primary relationships. These are relationships
providers and their future strategic direction. Digitalisation increased, with a growing percentage of where we serve multiple banking or other needs of retail customers and wholesale banking clients
customers doing their banking with mobile devices. Big Tech platforms continued to leverage their and which allow us to know these customers and their needs better so we can add value for them
expertise in the digital customer experience to encroach on banks’ market share by targeting and grow the relationship. To do this, we aim to master data management and analytics skills,
lucrative parts of their traditional value chains, such as payments.
including artificial intelligence. To provide for future needs, we promote a culture of innovation

within ING and partner with fintechs and other innovative partners to develop interesting Competition was further spurred by implementation in 2019 of the EU’s PSD2 directive opening the propositions, both in financial services and beyond banking that can add value for our customers payments market to non-bank competitors. Persistently low interest rates in Europe edged still and others.
lower, pressuring banks’ interest income and profits. And the growing threat of climate change

intensified the debate about the role business can and should play to promote a sustainable future.

Platform approach

Think ForwardThe competitive landscape that banks face is increasingly being shaped by Big Tech companies.

They offer customers a superior digital experience through an open platform approach that delivers Our Think Forward strategy – with its purpose to empower people to stay a step ahead in life and in a range of their primary needs in a go-to digital ecosystem. This ability to provide for primary business – continued to guide our strategic response to the challenges and opportunities these needs, with both proprietary and third-party offerings that are easily accessed through mobile developments present. Chief among these is how banks can master the digital customer devices, defines their success. Banking, by contrast, is a facilitator and not a primary need. The experience and tap into its opportunities.
choice for banks is to challenge their existing business models, to disrupt themselves, or risk being

disintermediated and relegated to a status of white label facilitators of others’ platforms.

2019 ING Group Annual Report on Form 20-F34

ING chooses to pursue its own platform approach. It aims to create a go-to financial servicesbusinesses, academics and innovators workspaces designed to co-create, learn, research and platform offering one customer experience wherever we operate and one that’s mobile-first ininspire in a collaborative atmosphere around the themes of urbanisation and digital identity.
keeping with ING’s clear and easy, anytime anywhere Customer Promise. To support this ambition, we’re evolving to a single global modular technological foundation that can be easily scaled up toAnd through ING Labs in Amsterdam, Brussels, London and Singapore we’re also collaborating with accommodate growth, and one that’s open so it’s ready to connect to other platforms and offersfintechs and others on disruptive innovations in value spaces that best match the expertise and users relevant third -party products and services.ecosystems in those locations.

Examples of collaborative innovations include beyond banking initiatives for retail customers. In
2019 we launched the first protection products as part of the global insurance partnership with

Innovation and transformation AXA, distributed primarily through our mobile app. Examples in Wholesale Banking include Cobase,
a platform that enables companies to manage accounts at multiple banks through one interface, To pursue this aim, we are converging businesses with similar customer propositions. The Unite and blockchain solutions in areas like trade finance that drastically reduce the time and complexity be+nl initiative is combining the Netherlands and Belgium. The Maggie (formerly Model Bank)
of trades.
transformation programme is standardising our approach in four European markets - Czech
Republic, France, Italy and Spain - similar to our successful digital approach in Germany based on a In 2019, resources were devoted to improving our capabilities in the areas of know your customer standardised omnichannel customer experience across mobile devices and web. We pursue a plugand fighting financial economic crime, causing some reprioritisation related to the pace of and-play approach to product development to ensure we can share innovations quickly across our implementation of innovation and transformation goals. However, our strategy and priorities in businesses. Examples of this in practice include the One App now active in Belgium, Germany and these areas remains unchanged.
the Netherlands, offering one mobile customer experience in those markets. And we’re evolving
toward a uniform approach to data and its management, to processes and to one way of working
to support this transformation and accelerate innovation.Promoting a sustainable society

Increasing the pace of innovation is a strategic priority and core to ensuring we remain relevant toING’s empowerment purpose is not limited to our own customers. In striving to help people to stay our customers and can live up to our purpose to empower people to stay a step ahead in life and ina step ahead in life and in business, we see a key role for ING in promoting a sustainable society, as business. And it is a prerequisite for realising our platform ambitions. We do this by fostering anwell as important opportunities both for us and our customers.
internal culture of innovation through customised methodologies and by providing resources to ourTo promote people’s financial health, we focus on giving them the knowledge and tools to make business through the ING Innovation Fund. And we collaborate with a wide range of fintechs andinformed decisions, and we support initiatives that are developing awareness about the drivers other external parties to accelerate the development of innovative solutions for customers.behind how people arrive at financial decisions so better methods and tools can be developed in the future. And through our financing we seek to positively influence society’s transition to a more To spur this collaboration, ING in 2019 opened the Cumulus Park innovation district in Amsterdamsustainable, low-carbon economy. One of the important ways we do that is through our Terra Zuidoost, an initiative together with local government and educational institutions offeringapproach to steer the impact of our lending portfolio to support the Paris Climate Agreement’s goal to limit the rise of global temperatures to well below two degrees Celsius.

2019 ING Group Annual Report on Form 20-F35

Strategic priorities

Elements of our strategy

To deliver on our Customer Promise and create a differentiating customer experience, we have Our Think Forward strategy was launched in 2014 and guides everything we do. It was visionary identified four strategic priorities:

then and today is ever more relevant to our success. This section describes the strategy and includes references to examples and additional information on how our strategy links to the

1. Earn the primary relationship material topics identified by our stakeholders.
Earning the primary relationship is a strategic priority for ING as it leads to deeper relationships, greater customer satisfaction and, ultimately, customers choosing us for more of their financial needs. In Retail Banking we define primary customers as those with multiple active ING products, at least one of which is a current account where they deposit a regular income such as a salary. For Wholesale Banking these are active clients with lending and daily banking products and at least one extra product generating recurring revenues over the last 12 months.

2. Develop data analytics

With the further digitalisation of banking, data is an important asset that helps us improve the customer experience and earn the strategically important primary relationship. We rely on data to understand what customers want and need. We use these insights to personalise our interactions with customers and empower them to make their own financial decisions. Data skills are also essential to know our customers from a regulatory and risk perspective, to prevent fraud, improve operational processes and generate services that go beyond traditional banking. At ING, we recognise that excelling at data management is a core competency if we are to realise our ambition to create a personal digital experience for customers. We are on course to implement one global approach to data management to ensure we maximise the potential of this key resource.
Discussions in society about data privacy and the tightening of data privacy legislation and regulations, as embodied in the EU’s General Data Protection Regulation (GDPR), are raising awareness of this important issue. At ING, we are committed to handling customer data safely and being open about how we use it.

2019 ING Group Annual Report on Form 20-F36

3. Increase the pace of innovatio n to serve changing customer needsacross many areas of ING to speed up the pace of innovation and bring new customer solutions to market faster, as well as to enable global collaboration and knowledge sharing.
Evolving customer expectations, new technologies and new competitors are transforming banking.
Innovation is at the heart of the Think Forward strategy and essential to develop the beyond

2. Operational excellence banking and disruptive products, services and experiences that support our platform ambitions. We promote innovation internally through ING's own PACE innovation methodology and byOperational excellence requires continuous focus. We need to ensure that ING’s operations provide earmarking funds to support businesses with innovative initiatives. To speed up the pace ofa seamless and flawless customer experience and that our operations remain safe and secure so innovation, we also partner with outside parties, including fintechs.we can play our important role as gatekeepers to the financial system. We invest to provide stable IT systems and platforms so we are there for our customers when they need us and to provide 4. Think beyond traditional banking to develop new services and business modelsthem with the highest standards of data security. As part of our know your customer (KYC)
enhancement programme we are developing a global approach to how we deal with customer due Persistent low interest rates and disruption from the rise of new non-bank entrants in the financial diligence and transaction monitoring, supported by standardised tools, a uniform approach to data services sector are challenging banks’ traditional business models. Thinking beyond traditional and clear governance.
banking is crucial if we are to find new ways to be relevant to our customers. Here, open banking offers opportunities. By partnering with others or developing our own digital platforms, we can offer

3. Performance culture customers new and complementary services that go beyond banking – and create new revenue streams for ING.We believe there are strong links between employee engagement, customer engagement and

business performance. We aim to continually improve our performance culture by creating a differentiating employee experience and enhancing the capabilities of our leaders. By focusing on

Enablers delivering a great employee experience and by stepping up our leadership capabilities we develop Four strategic enablers support the implementation of our strategy: simplifying and streamlining our employees’ engagement and ability to deliver on our purpose and strategy.
our organisation, operational excellence, enhancing our performance culture and diversifying our lending capabilities.
ING’s Think Forward Leadership Programme (TFLP) aims to develop greater leaders and better managers who can engage staff and enhance team performance. Introduced for senior leaders in 1. Simplify and streamline2017, it was extended later that year to people managers globally as the TFL Experience (TFLE), a
Simplify and streamline refers to ING’s aim to become a more effective, cost-efficient and agilefour-day programme with follow-up learning activities. The first phase of the programmes focused organisation with the flexibility to respond to fast-changing customer needs and low-coston the Orange Code, individual purpose and the Think Forward strategy. Phase 2, launched for TFLP competitors. To support our ambition to evolve into one, scalable, mobile-first digital platform thatin 2018, focused on high sustainable performance, talent management and performance offers a uniform and superior customer experience we are building a global foundation with thetransparency. It will be extended to the TFLE in 2020.
same approach to data, IT infrastructure, and processes. This will feature simplified and standardised products and systems and by modular architecture, integrated and scalable ITWe expect every ING employee to ensure we are a bank people can trust and that we can be proud systems and shared services. We also apply one Way of Working (WoW), based on agile principles,of. This starts at the top as leaders should create the right conditions for our employees to 2019 ING Group Annual Report on Form 20-F37

safeguard the bank and society from financial economic crime. In 2019, we developed a new globalB.Business overview

e-learning module that will be rolled out in early 2020 to all employees to enhance their KYC

Corporate Organisation awareness. And a global code of conduct was rolled out in the first quarter of 2020 that builds on ING Group’s segments are based on the internal reporting structure by lines of business. For more the Orange Code and gives employees worldwide concrete examples of how to put the ING values information see ‘Item 5 Operating and Financial Review and Prospects”.
into practice.

We promote a more diverse and inclusive workforce by aiming for ‘mixed teams’. We have adoptedOur business

the 70 percent principle, which gives managers a basis for building mixed teams around

appropriate dimensions of diversity (with a focus on gender, nationality and age group) and strivesWe achieved good results in 2019 with solid profitability and

for a minimum 30 percent difference in team make-up. In 2019, we worked to further this aim by healthy growth in both lending and deposits. Net core lending deep-diving into diversity dimensions ING-wide and setting up dashboards to help different areas of grew by €17.2 billion over the year, with net inflow of customer the business monitor their progress. Like many other financial organisations, getting the right mix

of people remains a challenge in parts of the business and there is more to be done to redressdeposit s growing by €23.4 billion. We added more than 830,000

imbalances that still exist.
primary customers, which shows that our customer experience

continues to be differentiating and drives growth. With digital

4. Lending capabilities
disruption changing customer expectations we’re looking for new Broadening and diversifying our lending capabilities to continue to grow client franchises is our

fourth strategic enabler. To do so, we are seeking opportunities in Retail, SME and Consumerways to stand out from the crowd.

Lending segments, as well as focusing on Wholesale Banking lending growth in our businesses in

Challengers & Growth (C&G) markets and in our sector lending franchises. ING is also considered

one of the pioneers in sustainable finance, having introduced the first sustainability ESG-linkedOur markets

loan and a made-to-measure sustainability improvement loan. In 2019, ING continued to shape ING’s retail business serves 38.8 million customers. In most of our retail markets we offer a full this sector and open up new markets by developing sustainability improvement concepts and range of banking products and services, covering payments, savings, insurance, investments and financial products. In 2019, we continued to grow at resilient interest margins, with net core lending secured and unsecured lending. Our wholesale banking business offers clients advisory value growth of €17.2 billion, or 2.9 percent, mainly realised in our Retail markets. Our ambition is to propositions such as specialised lending, tailored corporate finance and debt and equity-market continue to grow profitably within our risk appetite, but given market dynamics we expect growth solutions. Our clients range from large companies to multinational corporations and financial at Wholesale Banking to be slightly lower than in Retail Banking.
institutions.

2019 ING Group Annual Report on Form 20-F38

OurMarket Leadersare Belgium, the Netherlands and Luxembourg. These are mature businesses◾Australia and Spain achieved #1 NPS rankings, demonstrating the value of our Think Forward where we have strong positions in retail and wholesale banking. We’re investing in digitalstrategy leadership to deliver a uniform customer experience with one customer interaction platform and aOurGrowth Marketsare universal banks with a full range of retail and wholesale banking services harmonised business model.in countries whose economies have high growth potential. These include Poland, Romania and

Turkey. In these markets we’re investing to achieve sustainable franchises and will focus on digital In 2019 the Market leader highlights were the following:leadership by converging to a mobile-first model and prioritising innovation. Our newest Growth Market is ING in the Philippines, where we launched an all-digital retail bank in November 2018.
◾Launched Payconiq in the Netherlands: customers can pay with their smartphone in stores and onlineIn 2019 the highlights for the Growth market were the following:
◾Apple Pay introduced for customers in the Netherlands ◾Customers in Belgium can now use voice activated Google assistant to look up information on◾Apple Pay introduced for customers in Romania ING◾In Poland, customers can add their Visa debit card to their Apple Wallet using the Moje ING app ◾In Belgium, customers can now start the mortgage process online◾ING customers in Poland can now use voice-activated Google assistant - without logging in - to ◾We offer large mid-corporates in the Netherlands a scalable self-service digital marketplacecheck their balances or to make transfers between accounts called Invoice Trader where they can trade their receivables to external investors◾To help customers In Poland better manage their money we now offer features notifying them of upcoming payments OurChallengersmarkets are Australia, Austria, Czech Republic, France, Germany, Italy and Spain.◾In a first for ING countries business customers in Poland can use Garmin Pay and Apple Pay, Here we’re aiming for a full retail and wholesale relationship, digitally distributed through low-costcontributing to a further increase in mobile contactless payments there retail platforms. We also aim to use our direct-banking experience to grow consumer and SME◾In Turkey, we can see in real time when customers have a problem at our ATMs and proactively lending, and our strong savings franchises to fund the expansion of wholesale banking in thesecall them to try and solve it markets.
Wholesale Bankingis an important and integral contributor to ING's commercial performance.
In 2019 the highlights for the Challenger Markets were the following:With a local presence in more than 40 countries, ours is a sector-focused client business providing corporate clients and financial institutions with advisory value propositions, such as specialised ◾In Austria, we expanded our product range to include mortgages in cooperation with ING ownedlending, tailored corporate finance and debt and equity market solutions. We also serve their daily mortgage broker Interhypbanking needs with payments and cash management, trade and treasury services.
◾We help customers in Germany to better manage their money by notifying them of upcoming paymentsIn 2019 the following highlights were achieved within Wholesale Banking:
◾Introduced Apple Pay for customers in Spain. The use of mobile contactless payments in Germany rose after the launch of Google and Apple Pay in Germany◾Supported 62 green, social and sustainability bonds and 61 sustainable improvement loans

2019 ING Group Annual Report on Form 20-F39

◾We issued the largest green Schuldschein to date with PorscheEarning the primary relationship
◾Blockchain-based trade finance platform Contour, co-founded by ING Ventures, launched into
the $18 trillion global trade finance marketEarning the primary relationship is a strategic priority for ING as it leads to deeper relationships,
◾We introduced the first sustainable improvement derivative to marketgreater customer satisfaction and ultimately customers choosing us for more of their banking
◾We provided a centralized digital vault for corporate customers to store their KYC docs andneeds.

enhanced transaction monitoring tooling for our KYC purposes
◾PSD2 APIs live on the open banking Developer portalWe don’t only want our customers to do some of their banking with us, we want to be their first partner, where they deposit their salary, handle their payments and do most of their other banking
Achieving our business goalsbusiness. At the moment, ING has 13.3 million primary relationships, and the target is to grow this
to over 16.5 million by 2022.
Banks are operating in a fast-changing environment marked by new competitors, new customer
expectations, increased regulation and higher capital requirements. At the same time, persistently In Retail Banking, we define primary customers as those with multiple active ING products, of which low interest rates put pressure on our savings business model. We are finding new ways to be one is a current account where they deposit a regular income such as a salary. For Wholesale relevant to our customers.
Banking, a primary client is an active client with lending and daily banking products, and at least
one extra product generating recurring revenues over the last 12 months.
To achieve our business goal of creating a superior customer experience, we focus on four strategic
priorities: earning the primary relationship; thinking beyond traditional banking to develop new Customer numbers continued to grow in 2019. Primary customer growth across Retail segments in services and business models; using our advanced data capabilities to understand our customers 2019 included 63,000 for the Benelux, 526,000 for the Challenger markets, and 242,000 for Growth better and meet their changing needs, and innovating faster.
Markets. In Wholesale Banking, the number of primary customers grew by three percent as we
deepened our relationships, particularly in the daily banking space with existing lending-only
clients in the US and EMEA.

Customer promise

Banking doesn’t have to be difficult and time consuming. Clear products, plain language, fair prices and simple processes save customers time and money. ING promises to make banking clear and easy, to provide services anytime anywhere, and to keep getting better.

We are driven by our purpose to empower people to stay a step ahead in life and in business. We do this by constantly innovating to deliver a differentiating customer experience that aims to be smart, personal and easy.

2019 ING Group Annual Report on Form 20-F40

We added a further five countries to the NPS programme in 2019, which is now running in 26 Across ING, digital channels are accounting for an increased number of contacts with RetailWholesale Banking markets. In 2019, NPS played an even more prominent role in gauging client customers. For example, a growing share of retail customers only interacts with ING on their mobilesatisfaction in Wholesale Banking, with clearly defined KPIs applied across all parts of the business device, up from 12 percent in 2016 to 37 percent in 2019. The number of interactions grew by 80and a more active feedback process.
percent since 2016, reaching 4.5 bln interactions in 2019, with mobile interactions increasing to 82 percent in 2019, versus 52 percent in 2016.

Unleashing sector potential

Given the rise of digitalisation, and growing competition from disruptive newcomers to our sector,In 2019, we remained focused on servicing our corporate clients with relevant advice, data-driven
we want to do more than just live up to our Customer Promise. We want to surpass people’sinsights and customised, integrated solutions that make their day-to-day banking more efficient
expectations.and support their business ambitions.

We want to use the insights from our 4.5 billion customer interactions to offer a personalised andThis is in line with the revised Wholesale Banking strategy we introduced in 2018 to enable us to
empowering experience, giving them even more reasons to interact with us. This is how we canadapt to and overcome a challenging and complex market environment, as well as increased
differentiate ING from other banks and become an essential part of people’s digital lives.regulatory requirements, evolving technology, greater competition and our clients’ changing
needs.

One of the ways we measure our progress is the Net Promoter Score (NPS), which measures
customer satisfaction and loyalty (whether they would recommend ING to others). The score isWe developed our sector strategy over the year, pairing local and global insight with sector
calculated as the difference between the percentage of promoters (who rate ING as 9 or 10 out ofknowledge and financial expertise. ‘Commercial passports’ give us insight into what services we
10) and detractors (those scoring ING below a 6). Our aim is to achieve a number one NPS rankingprovide to each client and the regions where we serve them, while our uniform client segmentation
in all our retail markets, with a 10-point lead over our main competitors. Based on a rolling averageframework helps us tailor our daily banking and advisory value propositions to their specific needs.

of our NPS scores in 2019, ING ranked number one in seven out of our 14 Retail markets.
Several deals in 2019 reflect this sector focus. In the telecom, media and technology space, ING In Wholesale Banking, the overall NPS score improved by 11 percent year on year to 49.6 (on aacted as financial advisor for global asset management company DWS in the merger of leading scale of -100 to +100), outperforming the industry benchmark. This suggests clients appreciate ourDutch data centres NLDC (DWS's infrastructure business acquired NLDC from Dutch telco KPN in new approach (see ‘Unleashing sector potential’ below). The number of surveys sent increased by2019), and The Datacenter Group (TDCG) group. By advising DWS, ING enabled it to make its 28 percent year on year, and the response rate increased from 46.6 percent to 50.6 percent. Themaiden investment in the telecom infrastructure sector and created the largest player in the Dutch NPS growth for Platinum clients decreased year on year but the NPS of all the other segmentsmarket. In the food and agribusiness sector, ING coordinated the largest-ever sustainability increased. Overall level of satisfaction went up from 8.4 to 8.5. We now have NPS scores from WBimprovement loan in commodity trading for China’s multinational leading food and agri company, clients generating 42 percent of our revenues.COFCO International. The $2.1 billion loan links COFCO International’s interest rate to its sustainability performance and rating. And in the sustainable finance space, ING added another

2019 ING Group Annual Report on Form 20-F41

first to its growing sustainable finance deal portfolio in Asia/Pacific. We provided a subsidiary of Sunseap Group, a Singapore-based renewable energy company, with $37 million to build rooftopING has different faces in different markets and different banking interfaces, each with its own look solar projects in Singapore.and feel. By uniting our platforms, processes and products we can provide a consistent customer

experience in every country. This is driven by a growing desire for similar online experiences in an In Transaction Services, we optimised our client-facing model, streamlining our products andincreasingly digital world.
services and increasing efficiency in sales support. We also brought together various client trading activities scattered across Financial Markets into one team and further embedded the FM businessWe are making progress in achieving this in a number of ways, including by working internally to into our client organisation with a new sales model that is fully aligned with the rest of Wholesaleestablish a truly cross-border banking platform that aims to provide one unique, uniform customer Banking. This will help to maximise cross-buy opportunities and improve our client-service deliveryexperience that is best in class and leverages scale, and by pursuing strategic platform initiatives.
with consistent products and a one-client approach everywhere.
This was the year that Unite be+nl became a reality for our customers in the Netherlands and Belgium, with the introduction of common digital channels in these countries. Unite be+nl is one of

Platform thinking several programmes we are rolling out to build ‘one ING’ and is an important step towards a global platform. Maggie (formerly Model Bank) is our transformation programme uniting our retail ING’s purpose is to empower people to stay a step ahead in life and in business. To continue doing strategy and capabilities in Spain, Italy, France and the Czech Republic. Its emphasis is on this in a world that is changing quicker than ever before, we need to be where our customers are – increasing our digital interaction with customers, improving customer satisfaction and boosting on digital platforms.
sales.

Thinking beyond traditional banking is crucial to find new ways to be relevant to customers. Here,

Platform initiatives open banking offers opportunities. By partnering with others or developing our own digital
platforms, we can offer customers new and complementary services that go beyond banking – andOur Yolt aggregator app was named Personal Finance App of the Year at the 7th Annual Payments
create new revenue streams for ING.Awards in the UK. We extended the app with Yolt Pay, a new feature that enables users to move

money between their accounts and make payments to friends and family from supported banks.
Platforms empower customers by providing them with a range of primary needs in one place.
Through frequent user interactions, platforms also generate large amounts of data. By masteringIn 2019, we increased our stake in international payments platform Payvision to make it a wholly data skills, platforms get to know their customers and their needs increasingly well, enhancing theowned subsidiary. This is an important step towards becoming the preferred platform for business platform’s value, and that of its users.customers and strengthens ING’s digital payments business, especially in e-commerce. Payvision facilitates more than 80 payment methods in 150 currencies. In 2019, Payvision and ING The other advantage with platforms is that they are scalable, open and borderless, offering theirintroduced the omnichannel (eCom + in-store) proposition for corporate clients. The ING and users the same experience everywhere. With little to differentiate one bank’s products fromPayvision combined commerce solutions proposition helps merchants offer our clients’ shoppers a another, we believe it is customer experience that will set ING apart.seamless checkout experience across all channels.

2019 ING Group Annual Report on Form 20-F42

more than 1,000 new customers a week now covered following its launch in May 2019. And in Through ING Ventures, we are continuing to invest in fintechs, focusing on collaborations thatGermany, ING customers can now secure the repayment of their mortgage in the event of death.
support our strategy of creating a differentiating customer experience. In 2019, we made a further multi-million euro investment in Spanish-based fintech Fintonic. Fintonic is the leading finance appWe built on our beyond banking proposition with third -party offerings such as ING+Deals in Belgium in Spain. It provides financing and savings solutions that help users manage their personal financesand ING Punten in the Netherlands. ING+Deals, launched in 4Q 2018, is a cashback platform for more effectively.customers, made possible by exclusive deals ING has negotiated with various A-brands (40+ brands offering over 45 deals a month). It has 150,000 users who to date have received more than We’ve invested in Flowcast, a tool we hope to use to benefit Wholesale Banking clients The fintech€400,000 cash back, generating €2 million for the participating brands. In addition, participating start-up uses machine learning algorithms to improve the credit decision process. Its predictivecustomers increased their interactions with ING’s online channels by more than 20 percent. ING models reduce risk and unlock credit to businesses. The investment is a boost to ING’s AIPunten, a shopping platform for customers in the Netherlands to increase loyalty and drive digital capabilities.interactions, is also partnering with trusted A-brands. In 2019, 1.1 million products were sold,

delivering a turnover of €31 million.
We also invested in multibank platform Cobase, which makes it easier and more efficient for
international corporate clients to work with multiple banks. As a cloud solution, Cobase minimisesFollowing our 2018 acquisition of a 90 percent stake in Dutch digital real -estate platform
the IT effort for clients and does not require investments or long-term contracts for licences orMakelaarsland, which allows people to buy or sell homes online independently or with support of a
hardware.local Makelaarsland agent, we achieved a number of milestones in 2019. These include successfully
launching a home buying proposition, expanding the agent network to 20 agents – now covering
Beyond banking platformshalf of the Netherlands – and creating strong links between ING’s mortgage advisors and
Makelaarsland’s agents.
In 2019, we introduced the first products resulting from our collaboration with insurer AXA, offering
customers personalised insurance services in a clear and easy way via the ING mobile app.
In the fourth quarter, ING launched real-estate marketplace Scoperty across Germany, a joint Targeting six of our Challengers markets, the partnership aims to provide insurance products and venture with Pricehubble and Sprengnetter, which aims to bring transparency to the German related services through a central digital insurance platform. We launched seven products in four housing market. Based on high-quality data and machine learning, the Munich-based proptech countries: Italy, Australia, Germany and France, and grew the team in our central Paris office, company aims to show all 40 million properties in Germany and to connect potential buyers and working closely with all our markets. The first product, instant travel insurance through a mobile sellers. Scoperty was initially piloted in Nuremberg with more than 100,000 properties, before phone, was launched in Italy. Geo-localised travel insurance can be activated with just a few clicks expanding nationwide by the end of 2019. More transparency in the German residential housing on a smartphone from the airport or country of destination.
market can mean a broader offering of properties for consumers. The team is working on prequalifying potential homeowners by aligning with Interhyp’s mortgage process. Interhyp is ING’s In Australia, we widened our digital insurance portfolio by adding motor and travel insurance to our independent mortgage brokerage platform in Germany and Austria. For sellers and real-estate existing home insurance offer. The motor insurance coverage has been particularly successful with brokers this pre-qualification has important value in their choice of accepting offers from buyers. As

2019 ING Group Annual Report on Form 20-F43

part of the network effect, pre-qualified buyers may even benefit from three days access to newtheir banking, the device they use and the services they prefer. We test these insights with

home listings. Interhyp, which offers access to 500 mortgage lenders, had a record year in 2019,feedback from customers to continuously improve our services.

with €24.5 billion in new residential mortgages, and 9.0 percent market share in Germany.

One of the ways we’re working to enhance the customer experience is through our transformation

to a customer-focused organisation. The benefits of introducing one Way of Working (WoW) across

Differentiating customer experience ING include transparency, wider alignment, increased speed and predictability in product delivery

and, most importantly, putting the customer first.
Understanding our customers better and meeting their changing needs is core to what we do. In

2019, we continued to innovate to improve the banking experience for our customers, while helping More examples of how we’re providing a differentiating customer experience come from Poland, them transition to a more efficient and more sustainable economy. ING’s ambition is to be a leader where Wholesale Banking clients can now sign credit documentation electronically, and Belgium, in terms of the digital banking experience, offering our customers everywhere the same where customers are able to begin the mortgage process online.
empowering and differentiating experience and making banking frictionless. In addition to uniting

several of our Retail businesses on digital platforms that will provide the same customer experience In November 2019, we held our first global customer experience (CX) day. The focus was on making everywhere, for the first time we also have a shared brand direction and our first global tagline. The banking frictionless through many small improvements that make it more personal, easy and ‘do your thing’ tagline articulates ING’s purpose and our customer promise. It encourages people to smart, and by working to eliminate or minimise any compromises to the experience resulting from do more of the things that move them or their business. It’s not about irresponsible behaviour, but backlogs or other priorities.
about people being free to live the life they want to live, knowing they are making their world a

little better for it.
For example, in Poland one result of CX day was an improvement to Moje ING that improves the

communication process for entrepreneurs applying for a loan, making it clearer and more timely.
Launched in the Netherlands in January 2020, the new brand direction and tagline will be rolled out ING in Romania introduced biometrics to authorise customers to do payments. Colleagues in Spain across ING during the year and used in all our business units to bring our customer experience to found a better way to track their customers' experience and also developed functionality on their life.
banking app to allow them to easily schedule branch appointments. In the Netherlands and

Belgium, 2,000 participants made 565 improvements for our clients.
Our advanced data capabilities are an important asset in helping us improve the customer

experience and earn the strategically important primary relationship. We rely on data to We’re on the right track. Among other achievements, ING topped Forbes’ inaugural World’s Best understand what customers want and need. We use these insights to personalise our interactions Banks list in 2019. The survey asked 40,000 customers in almost 24 countries about their opinions with customers and empower them to make their own financial decisions.
on the banks they use. ING was placed among the best-performing banks for customer-centricity in

Australia, Austria, Belgium, France, Germany, Italy, Poland, and Spain. And we topped the rankings Our customer-facing platforms offer multiple touch points to interact with customers and collect on both trust and digital services.
data that we use to define customer journeys; for example when and where they choose to do

2019 ING Group Annual Report on Form 20-F44

Continuing to innovate In Australia, new research in 2019 found ING had the highest customer satisfaction among retail

banks, scoring well above the industry average. The 2019 Australia Retail Banking SatisfactionIn 2019, we continued to innovate to improve the banking experience for our customers,

study by JD Power measured the satisfaction of nearly 5,000 banking customers.introducing several innovations that make banking faster and more secure for our clients.

Know your customerOur cutting-edge AI tool Katana – named as an Innovator 2019 by Global Finance magazine – helps

to improve decision-making in bond trading. In 4Q, Katana was spun out into an independent Just as we need to know our customers better to deliver better products and services, we also need
London-based company called Katana Labs, with backing from ING Ventures and other investors.
this knowledge to ensure we do not accept people or institutions who misuse the financial system.
This is in line with ING’s strategy to create innovative fintech solutions and then support them in We are making ongoing progress strengthening our global KYC organisation and activities
becoming independent companies.
throughout ING. We are using technology and our innovation skills to make improvements and

rolling out global KYC solutions that all countries can connect to.
The advanced analytics platform can aggregate vast amounts of data from multiple sources to

predict the price and identify the most promising trades. The results show traders using Katana win ING continues to work on the global KYC enhancement programme, which emphasises regulatory
20 percent more trades and their prices are 20 percent sharper. At the same time, it helps compliance as the key priority. This is a sizeable operation as we have activities in over 40 countries
investment managers to make faster, better informed, data-driven investment decisions.
and have more than 38 million customers. The programme encompasses all client segments in all

ING business units.
We participated in the launch of instant payments in the Netherlands and Belgium by the Dutch

Payments Association and the Belgian Banking Federation. Funds now get credited to the We are also working with local authorities, law enforcement agencies and other financial
beneficiary account within five seconds, giving customers immediate access to their funds and institutions to fight financial and economic crime. In 2019, ING was one of five banks in the
helping them optimise cash flows. We will extend this to the rest of Europe from 2020.
Netherlands to join forces in the fight against money laundering. The ambition is to investigate the

set-up of a cross-bank organisation that will monitor payment transactions: Transaction Monitoring Wholesale Banking clients were able to initiate and receive instant payments in Hungary as of July Netherlands (TMNL). Together with the Dutch Banking Association (NVB), we are involved in a 2019. Instant payments are now processed within five seconds, with a maximum amount of HUF feasibility study into the technical and legal challenges involved. In the proposed new plans, we are 10 million. Instant payments make it possible to make payments 24/7, 365 days a year. There is no collectively looking for cooperation with Dutch authorities, including the Financial Intelligence Unit difference between ‘working days’ and ‘non-working days’.
(FIU), the Public Prosecution Service, Fiscal Information and Investigation Service (FIOD) and relevant

ministries.

2019 ING Group Annual Report on Form 20-F45

In another exciting payments innovation, ING is collaborating with Dutch retailer Albert Heijn, whichBlockchain and distributed ledger technology (DLT) is piloting a fully digital supermarket. This physical store is packed with convenience-boosting andING is considered an industry leader in the distributed ledger technology (DLT) space. In 2019, time-saving technological innovations. ING helped to develop these in our FABlab (fabricationForbes ranked us fifth among global listed companies with high blockchain potential, recognising laboratory), which focuses on cross-industry collaborative innovation. Shoppers use their bankthe pioneering work we’ve done in this area to improve our product offering and make banking cards to gain entry to the store. The items they select from the shelves are registeredeven easier for our clients.
automatically. Payment, processed by ING, happens automatically when they leave.This includes breakthroughs in improving data privacy within distributed or shared ledgers using We aim to ‘wow’ our customers with improvements to their service experience. In Turkey, we canour open-source zero-knowledge range proofcodes. Bulletproofs builds on these earlier codes, now immediately identify when customers are having a problem at one of our ATMs; we call themmaking them even faster, safer and easier to use, while our zero-knowledge proof notary service at that moment to try and solve it. We also use our app to help customers in Turkey who are moreimproves the privacy and security of transactions on the Corda blockchain platform. It evaluates than one kilometre away from an ING ATM by granting them the right to use other banks’ ATMsthe validity of a blockchain transaction without revealing anything about it, except that it’s valid – free of charge.like a notary whose job is to witness the signing of documents to validate them.

Together with UniCredit, we invested in Axyon AI, an Italian company that helps banks offer betterBlockchain is reinventing commodity trading, making it quicker, easier and more efficient. ING’s and faster advice to their clients by using artificial intelligence to, for example, identify investorsEasy Trading Connect platform was one of the first to digitalise commodity trade financing.
most likely to participate in a syndicated loan.Building on its success, we’ve tested a number of successful experiments on the platform. These include Vakt, announced in 2017, which manages physical energy transactions from trade entry to Our open-source software ‘FINN – Banking of Things’ was created within ING Labs and enablesfinal settlement and Komgo, the blockchain-based platform that transmits commodity smart devices to pay for their own usage, such as allowing a car to pay for the car wash. We offertransactions in a secure environment. In August, we successfully executed our first oil trade on this software to our business clients, who can use it to ‘wow’ their own customers.Komgo, which has evolved into a venture with 15 corporates and financial institutions. The deal

was executed by the Commodity Trade Finance branch in Geneva with a letter of credit issued on In Wholesale Banking, highlights in innovation in the digitalisation space include two KYC initiatives:behalf of Mercuria Energy Trading S.A.
Domino and CoorpID. Using advanced algorithms, Domino collects and connects payments, lending and financing data to provide insights that would not normally be readily available. The platform isWe also teamed up with commodity companies and financial institutions to launch Forcefield, a live in several departments and used by approximately 800 retail and WB colleagues, of which 50blockchain-based inventory management system that makes post-trade commodity transaction serve around 20 percent of ING’s Dutch corporate clients. CoorpID provides a centralised digitalprocessing cheaper, safer, and more efficient. It manages commodities throughout their entire vault for corporate customers to store and share all their KYC documentation in a secure way. Itsupply chain life cycle and reduces the risks and costs of handling physical inventory.
enables clients to manage their own KYC data and easily share it with other banks, insurance companies, or auditors.

2019 ING Group Annual Report on Form 20-F46

Open Banking is a key enabler for new open business propositions and strategic platform strategies And we joined forces with other global banks to create a digital coin that can be used to settleacross all client segments. Since September 2019, all banks in Europe must implement PSD2. We international money transfers instantly. This is a new step in the development of the Utilityhave three PSD2 APIs available to external parties on our developer portal. These give customers Settlement Coin (USC) project, set up in 2015 by Swiss bank UBS to develop a blockchain-poweredthe choice to use third-party apps to manage their money or make online payments. For business payment mechanism to make transactions more efficient. A digital version of existing currencies,clients in the Netherlands we launched a payment request API that enables them to enhance their USC will cut out intermediaries, reduce exchange-rate risks, making the payments and settlementsend-consumer experience by adding a convenient, simple payment functionality into their own process faster and lowering transaction costs.app.
Partnerships are becoming more and more important to the delivery of optimal client experiences.
In Q4, blockchain-based trade finance platform Contour, co-founded by ING Ventures, launched inAPIs are essential for enabling digital businesses, as they are the de facto standard for integration Singapore into the USD 18 trillion global trade finance market. Contour was co-created by ING andand co-creation with our partners. With open banking, we are laying the foundation for the bank of seven other banks in 2018 to simplify letters of credit, reducing the amount of time needed tothe future. We provide the key capabilities that allow ING to open up by establishing secure, process them from five to 10 days to under 24 hours. The launch follows a series of live pilots in 14scalable, compliant and uniform connectivity with external parties via APIs.

countries and a global trial with more than 50 banks and corporates. Ninety-six percent of participants said Contour would accelerate their letters of credit process, improve efficiencies and reduce costs.

Open banking

We strive at all times to protect customer data and privacy in line with the new European regulations. Customers’ needs and expectations are changing rapidly and companies have no option but to embrace this shift and adapt. At the same time, open banking requires banks to rethink traditional products and services, and go beyond traditional banking territory in creating new customer experiences.

We’ve chosen a strategic approach towards the revised Payments Services Directive (PSD2) and open banking. We invest in building one global platform serving all of our 38 million Retail customers, and corporate and institutional clients, in more than 15 countries. This helps us to become a global platform bank, scalable, open and borderless, with one user experience, one API (application programming interface) solution and one developer portal to efficiently and seamlessly connect and interact with customers and partners.

2019 ING Group Annual Report on Form 20-F47

launch, there have been around one million app installations, we have signed up more than

Our digitalisation journey

100,000 customers and the app scores an average 4.2 rating.
Digital banking, innovation and transformation are in our DNA. ING’s aim is to be the next generation digital bank, offering a single digital platform or ‘ecosystem’ where customers can findIn the Netherlands and Germany, Wholesale Banking clients can now easily open an account solutions to all of their financial and finance-related needs.digitally and directly from their ERP via e-Bank Account Management, using a SWIFT standard. In developing this, we enable clients to standardise the process for account openings and later Digitalisation guides our investments and transformation efforts. Our ambition is to offer customersmandate changes to be able to create the basis for digital lifecycle management.
everywhere the same empowering and differentiating experience. We are going about this in several ways.In 2019, we saw increased uptake of ourVirtual Cash Managementsolution, enabling treasurers to manage their cash position via a single master account, while keeping local accounts across Europe In 2019, we continued to innovate to improve the digital customer experience and to strengthenfor local operations without the burden of managing all those accounts individually.
our mobile-first approach. The number of mobile card transactions increased six-fold in 2019 from 2018, boosted by the integration of third-party services like Apple Pay and Google Pay. The overallOur digital portal,InsideBusiness, is a key enabler of our ‘digital first’ philosophy in Wholesale share of customers who only interact with us on their mobile device increased to 37 percent inBanking. Our main interactive channel for business clients, it offers a single point of access to a 2019 from 26 percent in 2018. The adoption of mobile payments will grow exponentially in cominggrowing range of corporate banking services, online and through a mobile app. It provides all the years, which is expected to boost mobile even further.touch points that business clients need, through a single sign-on, giving them real-time insights and a single source to manage all their financial transactions at any time, and on any device. We We are digitalising more processes to make them convenient and time-saving for customers. Forlaunched InsideBusiness in 2015 and it now has around 18,000 companies using it, with 57,000 example, in 2019, with Apple Pay, we enhanced the experience of our mobile app users in theactive users, 6,000 of whom use the mobile app. Large corporates make up 32 percent of users, Netherlands, Germany, Romania and Spain. In Germany and Poland, we now offer features thatwith the rest being mid-corporates. Our goal is to have all our corporate clients using it – and we’re help customers to better manage their money by notifying them of upcoming payments, similar togradually closing in on that target.
the ‘Kijk Vooruit’ feature in the Netherlands. We also made Google Pay available in Germany and Poland.A recent improvement was the launch of Corporate Administrator. This allows clients to decide for themselves which employees can do certain things in their account. Clients can appoint one or two Another highlight was the launch of our mobile-only bank offering in the Philippines. ING has beenof their own corporate administrators who can grant access rights. Already, around 40 percent of operating in the Philippines for nearly 30 years, but only moved into retail banking with the officialour corporate clients are using Corporate Administrator, which is ahead of our targets.
launch of our first all-digital savings product in November 2018. It is the first bank savings product that allows transactions to be conducted solely on ING’s mobile app. creating an account is free.Another enhancement is the addition of a breakthrough feature calledM-Token. This addresses the Users only have to download the ING app and make sure they meet a number of requirements,priority we place on security combined with convenience. It replaces the previous card-and-reader including being at least 18 years old and having one of three government-issued IDs. Since theaccess, which became increasingly inconvenient for our customers. M-Token, via the InsideBusiness

2019 ING Group Annual Report on Form 20-F48

app, makes access a lot easier. Now, to gain access, clients can simply launch the mobile app andIn Poland, ING’s online banking platform for business customers was named by Global Finance

scan a QR code on the login page.Magazine as the world’s best Integrated Corporate Banking site for 2019. It currently provides

around 65,000 SME and mid-corporate clients with a single access point for all their banking

New-look branchesproducts and services and handles more than 70 million transfer orders a year. In Romania, the

business platform processed its first one million payments in 3Q 2019.
While banking is becoming increasingly digital, our branches still have an important role to play in

providing more complex, personal advice to customers.
Also in Poland, ING is the first bank to launch its own payment gateway – imoje – that provides

merchants with a unique ‘buy now, pay within 21 days’ payment option. Co-created with Czech This is driving ING to change its branches, making them even more personal, while equipping them
fintech Twisto, 1,500 shops are now using the payment gateway and 580,000 transactions have to meet today’s digital needs. The idea is to make customers feel at home. Some branches have a
been carried out on imoje since April 2018.
big table, where customers can settle down, have a cup of coffee or do some work. There are

separate booths to get personal advice. There’s also a kid’s corner and a fully equipped ‘digi-corner’

for online banking or learn-how activities.

Responsible finance

In time, all of ING’s branches will adopt this new, home-like concept. Some have already opened inING is committed to contributing to a low-carbon and financially healthy society, both through our

Turkey, Poland, Spain, Romania, Belgium, the Netherlands, Italy, Austria and Luxembourg.own efforts and by helping our clients to be more sustainable. As a bank, we make the most impact

through our financing, via the loans we provide to clients. This is why we announced in September

SME & Mid-Corplast year that we would steer our €600 billion lending portfolio towards meeting the well-below

two-degree goal of the Paris Climate Agreement. Our strategy to get there is called theTerra The SME & Mid-Corp segment aims to empower people to manage and accelerate their business.
approach.
No matter how big or small, businesses everywhere are increasingly digitalised and expect their

bank to be connected and integrated into their world. They want digital solutions that are smart, One year later, we published our first progress report on Terra, providing a status update on the personal and easy. To meet these needs and deliver an exceptional experience for these alignment of our lending portfolio with the pathway to the goal. The report presented our climate customers, we’re transforming our current service model and building digital capabilities to offer alignment performance, targets, challenges and next steps for five of the nine sectors with the compelling end-to-end digital customer journeys supported by a common infrastructure.
biggest influence on greenhouse gas emissions: power generation, automotive, commercial real

estate, residential real estate and cement.
This includes enabling merchants in Turkey to accept payments more easily via their smartphones

rather than expensive point-of-sale terminals; an online banking platform that gives businesses a For the remaining four in scope, fossil fuels, shipping, aviation and steel, we provided an update on single access point to all their financial products and services; and instant loans for entrepreneurs progress to date, initiatives and next steps. Quantitative results for these four sectors are expected in Germany through our acquisition of fintech Lendico. In November 2019, new loan utilisation to be disclosed in 2020.
increased from €1 million to €14.4 million.

2019 ING Group Annual Report on Form 20-F49

The report’s centrepiece, the Climate Alignment Dashboard (CAD), discloses quantitative results onIn December 2018, the global banks BBVA, BNP Paribas, Société Générale, and Standard Chartered the climate alignment of our lending portfolio. It shows the CO2e intensity per sector of ourjoined ING in making the Katowice Commitment to align their loan portfolios with global climate portfolio compared to the market and the relevant below two -degrees climate scenario. It alsogoals using a similar approach. We have also personally and individually engaged with more than displays the climate alignment target per sector and ING’s intended decarbonisation pathway per40 banks interested in the work ING is doing and the positive results are visible.

sector to converge towards the target.
Since its launch at ING’s offices in London in February 2019, more than 17 systemically important While Terra is supporting our responsible finance business and will guide ING towards newbanks, including ING, have joined the 2˚ii PACTA pilot for banks. ING was also among the first opportunities to support our clients, Terra will also help us to build a more climate-resilient portfoliosignatories of the UNEP-FI Principles for Responsible Banking (PRB). In addition, ING co-chaired the as it guides our strategies towards two -degree alignment. Terra, therefore, forms part of oursub-group that developed the PRB Collective Commitment on Climate Action which took ING’s alignment with the Taskforce for Climate-related Financial Disclosures (TCFD) recommendations.Katowice Commitment initiative as its foundation.

As each sector requires a custom approach, Terra draws upon more than one methodology forThe Terra approach is complemented by the other ways we work to drive sustainable business. We target-setting. Currently, we focus on the Paris Alignment Capital Transition Assessment (PACTA)have committed to reducing ourthermal coal exposureto close to zero by 2025 and support our for corporate lending, and the Science Based Targets Initiative’s Sectoral Decarbonisation Approachclients globally to transition to a low-carbon and self-reliant society. We do this through various (SBTi SDA).financial instruments, including green loans, sustainable improvement loans, bonds and advisory

services.
PACTA was co-developed with the 2˚ Investing Initiative (2˚ii), a global think-tank developing climate metrics in financial markets. It looks at the technology shift that’s needed across certainWe were well on track in 2019. Climate finance increased 13 percent to €18.7 billion, and lending to sectors to slow global warming and then measures this against the actual technology clients areindustry ESG leaders grew slightly by 0.1 percent to €7.1 billion. Although social impact financing using – or plan on using in the future. The SBTi SDA sets out sector-specific decarbonisationdecreased 3 percent to €750 million due to repayments, we remain committed by lending to pathways designed so as to be in line with the science-based scenarios using intensity metrics.projects that lead to, for example, basic infrastructure improvements, community development or Both methodologies use science-based scenarios developed by independent organisations like theessential services.
International Energy Agency and inform us what needs to shift, by how much and by when. This is where financing comes in – and ING can have an impact.In addition to lending, we supported 62 mandates for clients through green, social and sustainability bonds. ING increased its bonds business by 68 percent year-on-year to €5.6 billion, The client data underlying the Terra approach is obtained from global databases that track publicoutpacing the total euro denominated bond market growth.
and private asset level and company data worldwide in the sectors in scope. This is easier forING is considered one of the pioneers in sustainable finance, having introduced the first clients, as they are not required to provide any additional data themselves.sustainability ESG-linked loan and a made-to-measure sustainability improvement loan. In 2019, ING continued to shape this sector and open up new markets by developing sustainability improvement concepts and financial products.

2019 ING Group Annual Report on Form 20-F50

Alongside the growing number of green loans and bonds, there were a number of sustainability In 2019, we introduced the first sustainability-linked Schuldschein, together with machinery andfirsts in 2019. ING issued the largest green Schuldschein with Porsche for €1 billion, and the first plant manufacturer Dürr. ING jointly arranged and structured the transaction.green bond framework in the telecom sector with UK telecoms company Vodafone. The Porsche transaction is also the first of its kind by a car manufacturer, and the huge demand resulted in the In the second quarter, we announced the world’s first sustainability improvement derivative (SID)original order book volume having to be increased. ING acted as the green advisor on the project.
provided to SBM Offshore, a global company that supplies floating production units to the offshoreING also issued its first-ever green covered bond. In October, ING Bank Hipoteczny in Poland energy industry. The SID is an interest rate swap that hedges the interest rate risk of thelaunched a PLN 400 million (USD 93 million) five-year green covered bond on the back of strong construction of one of SBM Offshore’s floating production, storage and offloading facilities. It’s theinvestor interest.
world’s first derivative with a price linked to the company’s sustainability performance, as well as trading risk, capital require ments and profit. The credit spread of the SID can increase or decreaseING was also the sole green structuring advisor for the Norwegian bank SR-Boligkreditt’s €500 based on SBM Offshore’s ESG performance, as scored by Sustainalytics, an independent provider ofmillion first green covered bond, helping to draft a green bond framework that stipulates ESG research and ratings.investments in green buildings, renewable energy and clean transportation.

In October, we launched another product aimed at encouraging companies to get measured onAlmost half of our loan book consists of mortgages. Our ambition is to make our mortgage portfolio ESG goals. Our sustainability improvement capital call facility for Singapore-based Quadria Capitalenergy-positive by 2050. This means the homes in this portfolio will collectively produce more Management is the first in the world to link the interest rate of the private equity fund to theenergy than they consume.
sustainability performance of its portfolios. The USD 65 million three-year revolving capital call facility is the first of its kind in the global fund finance industry, which is currently worth USD 400To this end, we are developing retail products, tools and services to help homeowners make their billion.houses more sustainable. As houses generally account for about 20 percent of COemissions, we 2 believe this could have a meaningful impact in the fight against climate change. At the same time We continued to deepen our market credentials with sustainable finance products that support ourit will help our customers to lower their COfootprint and energy bill. We have already provided 2 corporate clients in achieving better sustainability performance.green mortgages in Germany through development bank KfW. Customers can use the new products to finance solar panels, for example, or insulate their homes. In the Netherlands and We issued 61 sustainability improvement loans and supported 62 green loans and social andBelgium, we also offer a consumer loan with a reduced interest rate to help customers pay for sustainability bonds in 2019. These include green finance frameworks and green loans for Italo,green refurbishments.

Europe’s leading high-speed rail passenger operator, and Itochu, a Japanese trading company, as well as a sustainability-linked loan for Chinese-owned trading firm COFCO. ING also closed its first sustainability improvement loan in the US, structured by ING’s sustainable finance Americas team.

2019 ING Group Annual Report on Form 20-F51

Besides these financial solutions, we also help to raise awareness on the topic. Consumers in theFinancial health

Netherlands, for example, can check the energy profile of their homes on our website, as well as As a result of our financial empowerment activities, 25.9 million people (67 percent of our customer the options and financing available to improve in this area. We also provide Dutch homeowners base) felt financially empowered in 2019. In 2018, this was 25 million or 65 percent. Our ambition who want to invest in upgrading their energy label with a free rating as we know how insights can for 2022 is for 32 million customers to feel financially empowered by ING.
help people to take the first steps towards a more sustainable home.

Information ING offers sustainable investment (SI) services to its retail banking customers in the Netherlands, We believe that the right information at the right time can help people make better financial Belgium, Luxembourg and Germany. In 2019, our retail customers in these countries invested a decisions. For example:
combined € 9.3 billion using ING’s SI services, up from € 6.3 billion in 2018. SI services represented

seven percent of ING’s total retail banking customer investments in 2019. We have the ambition to
◾In the Netherlands the’Kijk Vooruit’forecasting tool gives customers an overview of their grow our SI services.
planned and predicted transactions, allowing them to gain more control over their finances.

◾Also in the Netherlands, we launched the'Digitaal vooruit'initiative where Digicoaches are To take sustainable finance further in the business we have set up regional sustainable finance
available in pop-up stores at several locations to answer any digital questions people may have.
teams in the Americas and Asia to support our clients in these regions.
◾In Austria and Romania, we offer customers access toEmpowerCamp– a five-week programme

to help customers understand their financial profile and take steps to improve their finances.
Our efforts in this area are being recognised. In 2019, we were ranked as ‘climate action leader’ by
◾In Poland, ourYouTube videosproviding people with financial insights have had over 100 million the leading global environmental disclosure platform CDP for the fifth year.
views.

Innovation

Products and services are similar across banks. We differentiate ourselves by going a step further

and innovating to create tools that help customers make better financial decisions. For example:

◾In the Netherlands, we introduced our newvoice-activated ATMsin branches of Albert Heijn and

at Schiphol Airport. The speech function on the cash machines makes it easier for people who

have difficulty reading or who are visually impaired to withdraw money themselves.

◾In Australia,Everyday Roundupmakes saving money and paying off your home loan easier and

more convenient for customers in Australia. ING customers saved AUD 81 million via 70 million

transactions by having ERU enabled on almost 300.000 accounts. The average saving was AUD

1.16 per transaction and AUD 284.41 per account in 2019.

2019 ING Group Annual Report on Form 20-F52

◾In Spain and France, our digital investment advisorsMy Money CoachandCoach EpargneCompetition

continued to offer customers precise and intelligent investment solutions.

◾We also partnered with others to accelerate innovation likeMinna, which helps people keep track

of and manage their subscriptions.ING is a global financial institution with a strong European base, offering retail and wholesale

banking services to customers around the globe. The purpose of ING is empowering people to stay

Involvementa step ahead in life and in business.

Our involvement in both the communities we operate in and in developing countries also ING’s Retail business serves 38.8 million customers. In most of our Retail markets we offer a full contributes to financial health. For example:
range of banking products and services, covering payments, savings, insurance, investments and

secured and unsecured lending. Our Wholesale Banking business offers clients advisory value
◾Globally, we continued ourPower for Youth partnership with UNICEFto empower adolescents
propositions such as specialised lending, tailored corporate finance and debt and equity-market with financial, entrepreneurial, and civic leadership skills. Since 2015 the partnership has directly
solutions. Our clients range from large companies to multinational corporations and financial empowered more than 500,000 adolescents, benefiting more than 11 million indirectly.
institutions.
◾Also globally, hundreds of ING colleagues took part inGlobal Money Week, volunteering in

classrooms across the Netherlands, Spain, Czech Republic, Luxembourg, Philippines, and Turkey
There is substantial competition in the Netherlands and the other countries in which we do to teach young people about money management.
business for the types of wholesale banking, retail banking, investment banking and other products
◾In the Netherlands we support theYouth Perspective Fund, which helps young people aged 18 to
and services we provide.
27 to manage their debts. The initiative supports around 150 youngsters a year.

◾Also in the Netherlands we’re a founding partner in the debt-prevention programme
Such competition is most pronounced in our more mature markets of the Netherlands, Belgium, Nederlandse Schuldhulproute, along with several other banks and the Dutch Banking
the rest of Western Europe and Australia. In recent years, however, competition in emerging Association. This unique public-private collaboration aims to prevent and solve problematic debt.
markets, such as Latin America, Asia and Central and Eastern Europe, has also increased as large
◾Lastly in the Netherlands, we offered more than 250,000 lessons ondigital skills for studentsin
financial services companies from more developed countries have sought to establish themselves collaboration with organisations such as Bomberbot and DesignWeek@School.
in markets which are perceived to offer higher growth potential, and as local institutions have
◾In Romania, we supportedBanometruto help adults with financial difficulties to access financial
become more sophisticated and competitive and proceeded to form alliances, mergers or strategic planning and counselling.
relationships with our competitors. The Netherlands is our largest market. Our main competitors in

the banking sector in the Netherlands are ABN AMRO Bank and Rabobank.

Competition is coming from new market entrants (including non-bank and financial technology

competitors) with new operating models that are not burdened by potentially costly legacy

operations and that are subject to reduced regulation. New entrants rely on new technologies,

2019 ING Group Annual Report on Form 20-F53

advanced data and analytic tools, lower cost to serve, reduced regulatory burden and/or faster

processes in order to challenge traditional banks.An important example of this is the newly enacted PSD2 European directive opening the payments

market to non-bank entrants. This is causing banks to face an unlevel playing field when competing

The competitive landscape that banks face is increasingly being shaped by Big Tech companies.with new, mainly less regulated, market entrants in a lucrative area that in the past was dominated

They offer customers a superior digital experience through an open platform approach that deliversby banks and other financial services providers.

a range of their primary needs in a go-to digital ecosystem. This ability to provide for primary

needs, both with proprietary and third-party offerings that are easily accessed through mobileStatements regarding ING’s competitive position reflect the assessment of ING’s management

devices, defines their success. Banking, by contrast, is a facilitator and not a primary need. Theabout the general competitive landscape in which ING operates.

choice for banks is to challenge their existing business models, to disrupt themselves, or risk being

disintermediated and relegated to a status of white label facilitators of others’ platforms.

Regulation and Supervision

The digital customer experience is now the key differentiator, and our main competitors are no

longer just other banks. They are also Big Tech digital leaders like Apple, Google and Tencent who The banking and broker-dealer businesses of ING are subject to detailed and comprehensive are increasingly moving into financial services. The content, offerings and digital savvy of these gosupervision in all of the jurisdictions in which ING conducts business.
to platforms cater to a wide range of customers’ primary needs with a personal, instant, relevant

and seamless experience.
Regulatory agencies and supervisors have broad administrative power and enforcement

capabilities over many aspects of our business, which may include liquidity, capital adequacy, To compete in this new environment, banks have to think beyond banking and develop their own permitted investments, ethical issues, money laundering, anti-terrorism measures, privacy, platforms. Winners will be those with a superior digital experience, a strong trusted brand, and the recordkeeping, product and sale suitability, marketing and sales practices, remuneration policies, ability to leverage a large customer base to attract partners to their platforms. The successful personal conduct and our own internal governance practices. Also, regulators and other platforms take the effort out of managing finances, offering personalised, real-time advice and a supervisory authorities in the EU, the US and elsewhere continue to scrutinise payment processing suite of products and services to cover all financial and other relevant needs.
and other transactions and activities of the financial services industry through laws and regulations

governing such matters as money laundering, anti-terrorism financing, tax evasion, prohibited Developments in technology have also accelerated the use of new business models. Examples are transactions with countries or persons subject to sanctions, and bribery or other anti-corruption new business models in retail payments, consumer and commercial lending (such as peer-to-peer measures.
lending), foreign exchange and low-cost investment advisory services. A significant competitive

development is the emergence of disintermediation in the financial sector resulting from new As discussed under “Item 3. Key Information — Risk Factors”, as a large multinational financial banking, lending and payment solutions offered by rapidly evolving incumbents, challengers and institution we are subject to reputational and other risks in connection with regulatory and new entrants, especially with respect to payment services and products, and the introduction of compliance matters involving these countries.
disruptive technology.

2019 ING Group Annual Report on Form 20-F54

European Regulatory frameworkexpected; this proposal as well as certain accompanying risk reduction measures are still being

discussed in the European Parliament and in the Council.
In November 2014 the European Central Bank (ECB) assumed responsibility, conferred on it by the

Single Supervisory Mechanism (“SSM”), for a significant part of the prudential supervision of euro

Dutch Regulatory Framework area banking groups in the Eurozone, including ING Group and ING Bank. Now that the ECB

assumed responsibility for the supervision of the banking groups in the Eurozone, it has becomeThe Dutch regulatory system for financial supervision consists of prudential supervision –

ING Group’s and ING Bank’s main supervisor. The ECB is amongst others responsible for tasks suchmonitoring the soundness of financial institutions and the financial sector, and conduct-of-business

as market access, compliance with capital and liquidity requirements and governancesupervision – regulating institutions’ conduct in the markets. As far as prudential supervision has

arrangements. National regulators, including the Dutch Central Bank for ING Group and ING Bank,not been transferred to the ECB, it is exercised by the Dutch Central Bank (De Nederlandsche Bank

remain responsible for supervision of tasks that have not been transferred to the ECB such asor “DNB”), while conduct-of-business supervision is performed by the Dutch Authority for the

financial crime and payment supervision.Financial Markets (Autoriteit Financiële Markten or “AFM”). DNB is in the lead with regard to

macroprudential supervision.

ING expects to benefit from the harmonization of supervision resulting from the SSM but at the

same time does not expect such harmonization to be fully in place in the short to mid-term. INGGlobal Regulatory Environment

expects that the Dutch Central bank will continue to play a significant role in the supervision of ING There is a variety of proposals for laws and regulations that could impact ING globally, in particular Group and ING Bank.
those made by the Financial Stability Board and the Basel Committee on Banking Supervision at the

transnational level and an expanding series of supranational directives and national legislation in Another significant change in the regulatory environment is the setting up of the Single Resolution the European Union (see “Item 3. Key Information — Risk Factors — We operate in highly regulated Mechanism (“SRM”), which comprises the Single Resolution Board (“SRB”) and the national industries. Changes in laws and/or regulations governing financial services or financial institutions resolution authorities and is fully responsible for the resolution of banks within the Eurozone as of 1 or the application of such laws and/or regulations governing our business may reduce our January 2016. ING has been engaging already with the Dutch national resolution authorities and profitability). The aggregated impact and possible interaction of all of these proposals are hard to the SRB for a few years with the aim to support in the draw up a resolution plan for ING and will determine, and it may be difficult to reconcile them where they are not aligned. The financial continue to collaborate with the resolution authorities. The rules underpinning the SRM could have industry has also taken initiatives by means of guidelines and self-regulatory initiatives.
a significant impact on business models and capital structure of financial groups in order to

become resolvable but at this stage it is not fully clear what the impact on ING will be.

Dodd-Frank Act and other US Regulations

ING Bank has a limited direct presence in the United States through the ING Bank Representative As a third pillar to the Banking Union, the EU aims at further harmonizing regulations for Deposit

Offices in New York and Dallas, Texas. Although the offices’ activities are strictly limited to Guarantee Schemes (DGS). Main elements are the creation of ex-ante funded DGS funds, financed

essentially that of a marketing agent of bank products and services and a facilitator (i.e. the offices by risk-weighted contributions from banks. As a next step, the EU is discussing a pan-European (or

may not take deposits or execute any transactions), the offices are subject to the regulation of the pan-banking union) DGS (the European Deposit Insurance Scheme (EDIS)), (partly) replacing or

State of New York Department of Financial Services and the Texas Department of Banking, as well complementing national compensation schemes. The progress on the EDIS proposal is slower than

2019 ING Group Annual Report on Form 20-F55

as the Federal Reserve. ING Bank also has a subsidiary in the United States, ING Financial HoldingsThe Dodd-Frank Act also impacts U.S. banks and non-U.S. banks with branches or agencies in the Corporation, which through several operating subsidiaries (one of which is registered with the U.S.United States, primarily through the Volcker Rule and the enhanced prudential standards of Section Commodity Futures Trading Commission as a swap dealer and another of which is registered with165 of the Dodd-Frank Act. Because ING Bank does not have a U.S. banking presence, these the U.S. Securities and Exchange Commission as a securities broker-dealer) offers various financialprovisions do not currently apply to ING.

products, including lending, and financial markets products. These entities do not accept deposits in the United States on their own behalf or on behalf of ING Bank N.V.The Dodd-Frank Act also created a new agency, the Financial Stability Oversight Council (“FSOC”), an inter-agency body that is responsible for monitoring the activities of the U.S. financial system, The U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), whichdesignating systemically significant financial services firms and recommending a framework for became law on 21 July 2010, represented a significant overhaul in the regulation of U.S. financialsubstantially increased regulation of such firms, including systemically important non-bank institutions and markets. The primary impact on ING is through the establishment of a regulatoryfinancial companies that could consist of securities firms, insurance companies and other providers regime for the off-exchange derivatives market, pursuant to Title VII of the Dodd-Frank Act.of financial services, including non-U.S. companies. ING has not been designated a systemically significant non-bank financial company by FSOC and such a designation currently is unlikely.
Among other things, the Dodd-Frank Act and regulations enacted thereunder required swap dealers to register with the Commodity Futures Trading Commission (the “CFTC”, the primary swapsAlthough U.S. legislative and regulatory bodies have taken initial steps over the past year to tailor regulator in the U.S.) as ‘swap dealers’ and be subject to CFTC regulation and oversight. The INGthe regulatory regime created under Dodd-Frank, Dodd-Frank continues to impose significant subsidiary, ING Capital Markets LLC, is registered as a swap dealer. As a registered entity, it isrequirements on us, some of which may have a material impact on our operations and results, as subject to business conduct, record-keeping and reporting requirements, as well as margindiscussed further under “Item 3. Key Information — Risk Factors—We operate in highly regulated requirementsand, once regulations are finalized, capital requirements. In addition to theindustries. Changes in laws and/or regulations governing financial services or financial institutions obligations imposed on registrants, such as swap dealers, reporting, clearing, and on-facilityor the application of such laws and/or regulations governing our business may reduce our trading requirements have been imposed for much of the off-exchange derivatives market. It isprofitability”.
possible that registration, execution, clearing, margin and compliance requirements will increase the costs of and restrict participation in the derivative markets. These rules (as well as furtherBasel III and European Union Standards as currently applied by ING regulations, some of which are not yet final) could therefore restrict trading activity, reducingBank trading opportunities and market liquidity, potentially increasing the cost of hedging transactions DNB, our home country supervisor until the ECB took over that position in November 2014, has and the volatility of the relevant markets. This could adversely affect the business of ING in these given ING permission to use the most sophisticated approaches for solvency reporting under the markets.
Financial Supervision Act, the Dutch legislation reflecting the Basel II and Basel III Frameworks. DNB has shared information with host regulators of relevant jurisdictions to come to a joint decision. In all jurisdictions where the bank operates through a separate legal entity that is a credit institution, INGmust meet local implementation of Basel requirements as well. ING uses the Advanced IRB Approach for credit risk, the Internal Model Approach for its trading book exposures and the

2019 ING Group Annual Report on Form 20-F56

Advanced Measurement Approach for operational risk. A small number of portfolios are reportedThe Basel III proposals and their potential impact are monitored via semi-annual monitoring under the Standardized Approach.exercises in which ING Group participates. As a result of such monitoring exercises and ongoing discussions within the regulatory environment, revisions have been made to the original Basel III In December 2010, the Basel Committee on Banking Supervision announced higher globalproposals as was the case with the revised Liquidity Coverage Ratio in January 2013 and the minimum capital standards for banks, and has introduced a new global liquidity standard and arevised Net Stable Funding Ratio and Leverage Ratio in January 2014. In December 2017, revisions new leverage ratio. The Basel Committee's package of reforms, collectively referred to as the “Baselto Basel III were formally announced by the Basel Committee. These revisions to Basel III establish III” rules, has, among other requirements, increased the amount of common equity required to benew prudential rules for banks, including a revision to the standardised approach to credit risk, the held by subject banking institutions, has prescribed the amount of liquid assets and the long termintroduction of a capital floor based on standardised approaches, the use of internal models, funding a subject banking institution must hold at any given moment, and has limited leverage.limitation of options for modelling operating risks, and new rules for the establishment of risk- Banks are required to hold a “capital conservation buffer” to withstand future periods of stress.weighted items and unused credit lines at the banks. Such revisions have a long implementation Basel III has also introduced a “countercyclica l buffer” as an extension of the capital conservationphase and are yet to be fully transposed into EU regulation. The revisions are commonly referred to buffer, which permits national regulators to require banks to hold more capital during periods ofas "Basel III Reform" or "Basel IV.
high credit growth (to strengthen capital reserves and moderate the debt markets). Further, Basel III has strengthened the definition of capital that will have the effect of gradually disqualifyingFor European banks the Basel III requirements have been implemented through the Capital many hybrid securities during the years 2013-2022, including the hybrids that were issued by theRequirement Regulation (CRR) and the Capital Requirement Directive (“CRD IV”). The Dutch CRD IV Group, from inclusion in regulatory capital, as well as the higher capital requirements associatedImplementation Act has led to significant changes in the Dutch prudential law provisions, most with certain business conditions (for example, for credit value adjustments (“CVAs”) and illiquidnotably with regard to higher capital and liquidity requirements for all banks. The CRD IV regime collateral) as part of a number of reforms to the Basel II framework. In addition, the Baselentered into effect in August 2014 in the Netherlands, but not all requirements are to be Committee and Financial Stability Board (“FSB”) published measures that have had the effect ofimplemented all at once. Having started in 2014, the requirements have been gradually tightened, requiring higher loss absorbency capacity, liquidity surcharges, exposure limits and specialmostly before 2019, until the Basel III migration process is completed. While the full impact of the resolution regimes for, and instituting more intensive and effective supervision of, “systemicallyBasel III rules, and any additional requirements for G-SIBs if and as applicable to the Group, will important financial institutions” (“SIFIs”), in addition to the Basel III requirements otherwisedepend on how they are implemented by national regulators, including the extent to which such applicable to most financial institutions. One such measure, published by the FSB in Novemberregulators and supervisors can set more stringent limits and additional capital requirements or 2015, is the Final Total -Loss Absorbing Capacity (‘TLAC’) standard for G-SIFIs, which aims for G-SIFIssurcharges, as well as on the economic and financial environment at the time of implementation to have sufficient loss-absorbing and recapitalisation capacity available in resolution. ING Bank hasand beyond, we expect these rules to have a material impact on ING’s operations and financial been designated by the Basel Committee and FSB as a so-called “Global Systemically Importantcondition and may require the Group to seek additional capital. DNB requires the largest Dutch Bank” (“G-SIB”), since 2011, and by DNB and the Dutch Ministry of Finance as a “domestic SIB” (“D-banks, including ING Group, to hold a 3% Systemic Risk Buffer during 2016-2019 in addition to the SIB”) since 2011.capital conservation buffer and the countercyclical buffer described above, but this buffer then includes both the G-SIB and D-SIB buffers mentioned above.

2019 ING Group Annual Report on Form 20-F57

CRD IV has not only resulted in new quantitative requirements but has also led to the setting ofinternational standards agreed by the Basel Committee, the Financial Stability Board and the G20.
new standards and evolving regulatory and supervisory expectations in the area of governance,The Banking Reform Package updates the framework of harmonized rules established following the including with regard to topics like conduct and culture, strategy and business models, outsourcingfinancial crisis and introduces changes to the CRR, CRDIV, the Bank Recovery and Resolution and reporting accuracy. The European Banking Association (EBA) in particular has published newDirective (BRRD) and the Single Resolution Mechanism Regulation (SRMR). The Banking Reform guidance such as the revised Guidelines on Internal Governance (2017), the Guidelines on thePackage covers multiple areas, including the Pillar 2 framework, the leverage ratio, mandatory assessment of the suitability of members of the management body and key function holdersrestrictions on distributions, permission for reducing own funds and eligible liabilities, (2017) and the revised Guidelines on the governance framework with regard to outsourcingmacroprudential tools, a new category of ‘non-preferred’ senior debt, the minimum requirement arrangements (2019). These guidelines enhance the roles and responsibilities of the managementfor own funds and eligible liabilities (MREL) and the integration of the TLAC standard into EU body as well as those of the risk management function and put importance on the establishmentlegislation.
of a sound risk culture and code of conduct, and managing conflicts of interest. ING’s lead regulator the ECB increasingly puts emphasis on these new standards in its day to day supervision andWhilst the Banking Reform Package was being developed, the ECB introduced the Targeted Review incorporates the standards in the SREP methodology. Continuing initiatives by multiple regulatorsof Internal Models (TRIM) in June 2017 to assess reliability and comparability between banks’ and supervisors on corporate governance may significantly impact how ING Bank designs andmodels for calculating each bank’s risk-weighted assets (‘RWA’) used for determining certain of structures its governance.such bank’s capital requirements. The operating consequences of the TRIM exercise have been significant. The TRIM is expected to finalise in 2020, and could impact ING through more stringent Following the adoption of the CRR and CRD IV, regulators increasingly came to focus on theregulation on internal models. There is also heightened supervisory attention for the credit quality required capital calculations across banks. Since the start of the financial crisis there has beenof loans to corporates and/or households. These exercises could impact the RWA we recognise for much debate on the risk-weighted capitalisation of banks, and specifically on whether internalcertain assets.

models are appropriate for such purposes. These developments have suggested that stricter rules
may be applied by a later framework. The Basel Committee released seve ral consultative papers,

Regulatory Developments containing proposals to change the methodologies for the calculation of capital requirements and
is expected to issue further standards in this respect. In these proposals, the Basel Committee
suggests methods to calculate RWA using more standardised or simpler methods in order toBasel IV
achieve greater comparability, transparency and consistency.
As of 1 January 2022, the first stage of Basel IV (revised Internal Rating-Based Approach) will
probably come into effect conditional to the finalization of the legislative process in the EU. Based On 27 June 2019, a series of measures referred to as the Banking Reform Package (including on the current estimates, without management actions this is expected to potentially increase certain amendments to CRR and CRDIV commonly referred to as ‘CRR II’ and CRR V’) came into RWA by roughly 15-18% on a fully loaded basis. While any BIV impact will not come in before 2022, force, subject to various transitional and staged timetables. The adoption of the Banking Reform other banking regulations and model reviews are expected to bring forward a significant part of this Package concluded a process that began in November 2016 and marks an important step toward impact before BIV implementation date.
the completion of the European post-crisis regulatory reforms, drawing on a number of

2019 ING Group Annual Report on Form 20-F58

Requirement and guidance for 2020 Pillar 2 requirementsmeasures. The plan enhances the bank’s readiness and decisiveness in case of a financial crisis. The

plan is updated annually to make sure it stays fit for purpose. The completeness, quality and
One specific element of Basel III is the possible restriction on distributable items. This limits thecredibility of the updated plan is assessed each year by ING’s regulators.
ability of the bank to pay dividends, hybrid coupons and/or management remuneration if its capital
drops below the sum of its Pillar 1, Pillar 2 and combined buffer requirements, often referred to asThe Single Resolution Board (SRB) confirmed to ING in 2017 that a single-point-of-entry (SPE)
the Maximum Distributable Amount (MDA) trigger. The Pillar 2 requirement in the supervisorystrategy is ING’s preferred resolution strategy, with ING Groep N.V. as the resolution entity.
review and evaluation process (SREP) 2019 decision is split into:
◾Pillar 2 requirement (P2R), which is binding and therefore breaches have direct legalIn 2018, ING Group received a formal notification from De Nederlandsche Bank (DNB) of its MREL.
consequences.The MREL requirement has been established to ensure that banks in the European Union have
◾Pillar 2 guidance (P2G), which is not legally binding and therefore a breach does notsufficient own funds and eligible liabilities to absorb losses in the case of potential bank failure. The automatically trigger regulatory action.MREL requirement is set for ING Group at a consolidated level, as determined by the Single
Resolution Board (SRB). This MREL requirement has been set at 10.89% of total liabilities and own
By providing guidelines regarding the SREP, the European Banking Authority (EBA) gives furtherfunds.
direction for the internal capital adequacy assessment process (ICAAP) and enhancement of the
capital management framework.ING has been replacing, and will continue to replace, maturing ING Bank N.V. debt with ING Groep
N.V. instruments. In order to build up our MREL capacity, ING Groep N.V. issued multiple
Bank recovery and resolution directivetransactions. These transactions will not only allow us to support business growth, but will also help
to meet future MREL and TLAC requirements with ING Groep N.V. instruments only.
Since its adoption by the European Parliament in 2014, the Bank recovery and resolution directive
(BRRD) has become effective in all EU countries after transposition into national law, including in CRR II implements the Financial Stability Board’s total loss absorbing (TLAC) requirement for Global the Netherlands. The BRRD aims to safeguard financial stability and minimise the use of public Systemically Important Institutions (G-SII), which is the EU equivalent of a G-SIB. The transitional funds in case banks face financial distress or fail to comply with the BRRD. Banks across the EU requirement—the higher of 16 percent of the resolution group’s Risk weighted assets (RWA) or six need to have recovery plans in place and need to cooperate with resolution authorities to percent of the leverage ratio exposure measure—applies immediately. The higher requirement —18 determine, and make feasible, the preferred resolution strategy. The banking reform which came and 6.75 percent, respectively—comes into effect as of January 1, 2022. As a G-SII ING is expected into force on 27 June 2019 includes changes to the minimum requirement for own funds and to meet the TLAC requirement alongside the other minimum regulatory requirements set out in EU eligible liabilities (MREL) to ensure an effective bail in process. It also includes new competences for regulation.
resolution authorities and requires G-SIBs to have more loss-absorbing and recapitalisation
capacity.

ING has had a recovery plan in place since 2012. The plan includes information on crisis governance, recovery indicators, recovery options, and operational stability and communication

2019 ING Group Annual Report on Form 20-F59

Stress testingpay, or unlikely to pay, claims against it. In many jurisdictions in which we operate, these

Compensation Schemes are funded, directly or indirectly, by financial services firms which operate Stress testing is an integral component of our risk and capital management framework. It allows us
and/or are licensed in the relevant jurisdiction. ING Bank is a participant in the Dutch Deposit to (i) assess potential vulnerabilities in our businesses, business model, and/or portfolios; (ii)
Guarantee Scheme (‘DGS’), which guarantees an amount of EUR 100,000 per person per bank understand the sensitivities of the core assumptions in our strategic and capital plans; and (iii)
(regardless of the number of accounts held). On the basis of the EU Directive on deposit guarantee improve decision making throug h balancing risk and return.
schemes, ING pays quarterly risk-weighted contributions into a DGS-fund. The DGS-fund is to grow

to a target size of 0.8% of all deposits guaranteed under the DGS, which is expected to be reached In addition to running internal stress test scenarios to reflect the outcomes of the annual risk
in July 2024. In case of failure of a Dutch bank, depositor compensation is paid from the DGS-fund.
assessment, ING also participates in regulatory stress test exercises. ING participated in the 2018
If the available financial means of the fund are insufficient, Dutch banks, including ING, may be EU-wide stress test conducted by the EBA in cooperation with the European Central Bank (ECB), the
required pay to extraordinary ex-post contributions not exceeding 0.5% of their covered deposits Dutch central bank (DNB), the European Commission and the European Systemic Risk Board (ESRB).
per calendar year. In exceptional circumstances and with the consent of the competent authority, The adverse stress test scenario was developed by the ECB and covers a three-year time horizon
higher contributions may be required. However, extraordinary ex-post contributions may be (2018-2020). The stress test was carried out applying a static balance sheet assumption as of
temporarily deferred if, and for so long as, they would jeopardise the solvency or liquidity of a bank.
December 2017, and therefore does not take into account current or future business strategies and

management actions. The results also reflect the impact of IFRS 9 for determining loan loss Since 2015, the EU has been discussing the introduction of a pan-European deposit guarantee provisions in adverse circumstances.
scheme (‘EDIS’), (partly) replacing or complementing national compensation schemes in two or

three phases. Proposals contain elements of (re)insurance, mutual lending and mutualisation of The results of the EBA stress test reaffirmed the resilience of our business model and the strength
funds. The new model is intended to be ‘overall cost-neutral’. Discussions have continued in 2019, of ING’s capital base. Our commitment to maintain a robust, fully-loaded Group common equity
but it remains uncertain when EDIS will be introduced.
Tier 1 (CET1) ratio in excess of prevailing requirements remain. Under the hypothetical baseline

scenario and EBA’s methodological instructions, ING Group would have a fully loaded CET1 of

Payment Services Directive 2 (PSD2) 13.99% in 2020. Under the hypothetical adverse scenario and EBA’s methodological instructions,

ING Group would have a fully loaded CET1 ratio of 10.70% in 2020 without management actions.PSD2 entered into force in January 2018 and responds to technical change and a variety of

developments in the payments domain. It fosters innovation and competition by promoting non-

EBA will launch a new stress test exercise in January 2020 and is expected to publish the results bydiscriminatory access to payment systems and accounts, including the newly introduced account

July 2020.information services and payment initiation services. Customers benefit from greater transparency

of costs and charges, PSD2's extended geographical reach and being applicable to transactions in
Deposit Schemesany currency, a reduction of the maximum liability for unauthorized transactions and a backstop

date for complaint resolution. Finally, to combat cybercrime and online fraud, PSD2 continues the In the Netherlands and other jurisdictions, deposit guarantee schemes and similar funds
trend towards enhancing the security around the making of payments, e.g. by the introduction of (‘Compensation Schemes’) have been implemented from which compensation may become
strong customer authentication. It consists of two factor authentication, to be performed every payable to customers of financial services firms in the event the financial service firm is unable to

2019 ING Group Annual Report on Form 20-F60

time a payer accesses its payment account online or initiates electronic remote paymentFinancial Transaction Taxes
transactions. The Regulatory Technical Standards for strong customer authentication and common In February 2013, the EC adopted a proposal setting out the details of a financial transaction tax and secure communication provide further requirements to implement the strict security (‘FTT’) under the enhanced cooperation procedure, to be levied on transactions in financial requirements for payment service providers in the EU.
instruments by financial institutions if at least one of the parties to the transaction is established in
the financial transaction tax zone (‘FTT-Zone’) or if the instrument which is the subject of the

Benchmark Regulation transaction is issued within the territory of a Member State in the FFT-Zone. 10 Member States have
The London Interbank Offered Rate (‘LIBOR’), the Euro OverNight Index Average (‘EONIA’), the Euroindicated they wish to participate in the FTT (Austria, Belgium, France, Germany, Greece, Italy,
Interbank Offered Rate (‘EURIBOR’) and other interest rates or other types of rates and indicesPortugal, Slovakia, Slovenia and Spain). The initial proposal contemplated that the FTT would enter
which are deemed to be ‘benchmarks’ are the subject of ongoing national and internationalinto effect on 1 January 2014, which would have then required us to pay a tax on transactions in
regulatory reform. On 8 June 2016, the EU adopted a Regulation (the ‘Benchmarks Regulation’) onfinancial instruments with parties (including Group affiliates) located in such FTT-zone. However,
indices (such as LIBOR and EURIBOR) used in the EU as benchmarks in financial contracts. Thethe FTT remains subject to negotiation between the participating Member States and currently it is
Benchmarks Regulation became effective as of 1 January 2018. It provides that administrators ofuncertain whether and in what form and by which Member States the FTT will be adopted. The
benchmarks used in the EU generally must be authorised by or registered with regulators no laterimplementation date of any FTT will thus depend on the future approval by participating Member
than 1 January 2020, and that they must comply with a code of conduct designed primarily toStates in the Council, consultation of other EU institutions, and the subsequent transposition into
ensure reliability of input data, governing issues such as conflicts of interest, internal controls andlocal law.
benchmark methodologies. Furthermore, on 27 July 2017 the FCA announced that it will no longer
persuade or compel banks to submit rates for the calculation of the LIBOR benchmark after 2021.For additional information regarding regulatory developments, including with respect to the 5th
The announcement indicates that the continuation of the LIBOR on the current basis cannot andAML Directive, FATCA, CRS, DAC6 and MIFID II, see also this Form 20F 2019, under “Additional
will not be guaranteed after 2021. In addition, as of October 2019, the new euro risk-free rate euroInformation – ING Group Risk Management- Compliance Risk- Regulatory Developments”.

short-term rate (€STR) is being published and the EONIA benchmark was reformed, making it dependant to the €STR benchmark. The reformed EONIA benchmark will cease to exist by 1 January 2022 and therefore the European Money Markets Institute (EONIA’s administrator) has indicated that EONIA cannot be used in any contracts that will be outstanding as of 1 January 2022. Public authorities have initiated industry working groups in various jurisdictions to search for and recommend alternative risk-free rates that could serve alternatives if current benchmarks like LIBOR and EONIA cease to exist or materially change. The work of these working groups is still ongoing, though certain of such organizations have advanced proposals for benchmark replacements. For example, the US Federal Reserve’s Alternative Reference Rates Committee (commonly referred to as ‘ARRC’) has recommended adoption of the Secured Overnight Financing Rate (commonly referred to as ‘SOFR’) as an alternative to US dollar LIBOR.

2019 ING Group Annual Report on Form 20-F61

entities also includes local procedures aimed at enabling them to comply with local laws and

Know your customer (KYC)

regulations and the KYC Policy Framework. Where local laws and regulations are more stringent, ING is committed to the preservation of its reputation and integrity through compliance withthese more stringent local laws and regulations are applied.
applicable laws, regulations and ethical standards in each of the markets in which it operates. All employees are expected to adhere to these laws, regulations and ethical standards, andAs a result of frequent evaluation of the businesses from economic, strategic and risk perspective management is responsible for ensuring such compliance. Compliance is therefore an essentialING continues to believe that for business reasons doing business involving certain specified ingredient of good corporate governance. As gatekeepers of the financial system we havecountries should be discontinued. In that respect, ING has a policy not to enter into new obligations to safeguard trust in that system and prevent misuse. However, money laundering isrelationships with clients from these countries and processes remain in place to discontinue not contained within a single country or jurisdiction, it is a global challenge that impacts the entireexisting relationships involving these countries. At present these countries are Cuba, Iran, North financial system. ING, like all other participants in the financial services industry, has an importantKorea, Sudan and Syria.
role to play in helping to combat financial economic crime. We contribute knowledge and capacityIn addition to addressing financial economic crime-related requirements, the KYC policy framework to various public-private partnerships fighting financial crime. We believe we can be even morealso reflects KYC-related requirements of the FATCA/CRS policy, as well as certain elements of the effective in safeguarding the financial system if we join forces and work with other banks and withEnvironmental Social Risk policy.
national and European authorities and law enforcement to identify and manage the financial economic crime risks better, taking all relevant laws and regulations into account. Improving theKYC enhancement programme way we manage compliance risk, especially when it comes to preventing criminals from misusing In 2017, ING began implementation of its KYC enhancement programme across all customer the financial system, is a key priority for ING.
segments and in all ING business units. The KYC enhancement programme consists of, among other things:

KYC policy framework ◾Enhancing selected customer due diligence files to improve customer documentation, customer The know your customer (KYC) policy and related control standards (‘KYC policy framework’) setsdata and identity verification;
the minimum requirements and control objectives for all ING entities to guard against involvement◾Working on structural solutions to become sustainably better in the execution of our KYC policies, in financial crime activity. The KYC policy framework reflects relevant national and internationaltooling, monitoring, governance and knowledge and behaviour; and laws, regulations and industry standards related to financial economic crime (money laundering,◾Assessing selected past transactions and follows the applicable reporting process should any terrorist financing), export trade controls, proliferation financing, sanctions (economic, financial andunusual transactions be identified.
trade), countries designated by ING as ultra high risk countries (UHRC), CTI, FATCA, CRS, and (parts of) ESR. The KYC policy framework is mandatory and applies to all ING entities, majority-owned INGIn September 2018, ING announced that it had reached a settlement agreement with the Dutch business, businesses under management control, staff departments, product lines and to allPublic Prosecutor related to an investigation that found serious shortcomings in the execution of customer engagements and transactions. The KYC Policy Framework reflects relevant national andcustomer due diligence and transaction monitoring requirements related to fighting financial international laws, regulations and industry standards related to business partners and overarchingeconomic crime, and announced steps to further enhance its management of compliance risks and requirements with regards to record retention, training and awareness. The management of ING

2019 ING Group Annual Report on Form 20-F62

embed stronger awareness across the whole organisation as part of the KYC enhancementcustomers undergo an initial ESR check as part of the onboarding process. (See ‘Environmental and programme.social risk framework’ in the credit risk chapter for more information)
- We implemented a systematic integrated risk approach (SIRA) in all business lines globally.
In 2019, we continued the implementation of the KYC enhancement programme, and had moreDriven by data, the SIRA provides guidance on KYC integrity risks and helps determine which than 4,000 FTEs working on KYC-related activities globally. In March 2019, ING in Italy took steps tocustomers to accept/continue and the type and frequency of monitoring. It takes into account improve its KYC processes and compliance risks in line with the global KYC enhancementelements such as where the customer is located and the type of product and sector they are active programme after the Italian central bank identified shortcomings in anti-money launderingin. The KYC integrity risks are reviewed each year.
processes. This was based on an inspection conducted from October 2018 to January 2019. In consultation with the Banca d’Italia, ING agreed to refrain from taking on new customers in Italy◾Tooling: This pillar aims to improve processes and tooling around customer due diligence, while further discussions on the enhancement plans took place. ING continued to fully servescreening and monitoring. This entails rolling out a bank-wide KYC digital service and fulfilling existing clients in Italy while working to address the shortcomings and resolve the issues identified.client acceptance and maintenance life cycle on one global digital platform. In addition, all Please refer to Note 46 ‘Legal proceedings’ to the consolidated financial statements for morerequired screening components (name screening, pre-transaction screening, adverse media information.screening) are incorporated into the client acceptance due diligence process. Once a customer is onboarded, ongoing screening and monitoring of transactions can then be activated. Steps taken In 2019, as part of our commitment to enhance the way we manage compliance risks and embedin 2019 included:
stronger awareness across the whole organisation, we also took the following steps across our five- Developed new customer due diligence case management modules for Private Banking KYC pillars:clients in Luxembourg, and mid-corporates in Poland, which is to be rolled out in other countries with similar client segments.
◾Policies and risk: This pillar focuses on the development and roll out of a global KYC policy, a- The target adverse media screening tool was rolled out in most locations global KYC risk appetite statements and KYC risk assessments on customers, capability structure- Innovating to automate and improve KYC processes. In 2019, we developed a ‘smurfing’ tool, and maturity assessments.which uses artificial intelligence to detect instances of smurfing when large fraudulent transactions - In 2019, we updated the new KYC policy, which integrated all existing policies related to anti-are broken up into smaller transactions that will not be flagged by conventional monitoring money laundering, financial economic crime and customer due diligence. It came into effect insystems. And we are developing a virtual alerts handler that uses artificial intelligence to reduce July. (See section ‘KYC policy framework’ above).the number of false positives, freeing up KYC staff to concentrate on those alerts that do require - The global KYC policy may be stricter than local requirements, in which case the global riskattention.
appetite statement is used as the starting point to execute a uniform risk assessment and to- In September 2019, an anomaly detection tool went live to monitor the payment flow of ING’s determine the local KYC-related risk appetite.correspondent banking clients. Developed by ING, the tool uses advanced analytics to detect - As part of our due diligence process we updated the environmental and social risk (ESR)changes in behaviour that could indicate money laundering or other financial economic crime. The framework, which helps us make transparent choices about who and what we finance. Allapproach for innovations is per country and business line and based on success will be scaled up and rolled out in other locations.

2019 ING Group Annual Report on Form 20-F63

In 2019, local KYC Committees were established in the countries/regions and business lines to ◾Monitoring and screening: This pillar entails translating risk assessment outcomes into scenariosmanage and steer all KYC-related activities. These committees are overseen by the global KYC and alert definitions that can be applied in transaction monitoring. This includes the design andCommittee, which drives improve ments and ensures alignment between KYC-related projects and definitions of the applicable financial economic crime and client activity monitoring scenariosactivities. It also monitors all KYC-related costs, helps prioritise activities and steers decisions on tailored to the entity yet based on a global set, building alert definitions (including data feeds)KYC-related issues and developments.
and validating and testing the approach from risks to alerts.- Client Integrity Risk Committees (CIRCs) were set up in the retail business lines and Wholesale - In 2019, we introduced the new standard transaction monitoring tooling in the first countries.Banking to steer decisions around client acceptance and exits, based on compliance criteria and This includes risk-based scenarios, with follow-up for handling alerts and reporting suspiciousrisk appetite. The committee members represent both the first and second lines of defence to activity.ensure proper decision-making is adhered to.
In May 2019, the first version of the global transaction monitoring (TM) control guidance came into effect. It outlines the adoption of a uniform TM methodology framework to mitigate◾Knowledge and behaviour: This pillar focuses on increasing knowledge about KYC, providing financial economic crime risks.training and carrying out behavioural risk assessments to detect high-risk behaviours, - In September 2019, ING partnered with four other Dutch banks to explore options to jointlyintervening where necessary.
monitor payment transactions. Transaction Monitoring Netherlands (TMNL) is part of a broader- Internal communication in 2019 reiterated the importance of non-financial risk and cooperation with the private sector, government agencies, regulators and law enforcement tocompliance.
harmonise efforts to fight financial crime and strengthen the resilience of the financial system as a- We set up a global KYC Academy to coordinate a global learning curriculum and provide whole, both on a national and European level. We also work with the Dutch central bank and are aexpert training for specialist KYC staff and new joiners as well as awareness training for all ING member of the public-private partnership council of the Dutch Financial Expertise Centre (FEC-RAADemployees. A new KYC awareness module for all staff is due to be rolled out in 1Q 2020.
PPS).- The first behavioural risk assessments in KYC were carried out in the Netherlands, the - The increased focus on KYC and our efforts to streamline our operations led to an increasedPhilippines and the US by ING’s team of behavioural experts. The outcomes were discussed by number of accounts being closed. This includes inactive accounts and accounts of customers whosenior management at ING’s leadership days in March, as well as with the management teams of do not respond adequately to our requests for information. We are also re-evaluating certain clientthe countries involved and in Wholesale Banking with the intention of changing behaviours to and business relationships.enhance KYC, starting from the top.
Following on from that, workstreams were set up with senior managers and a number of ◾Governance: Under this pillar we are setting up a global KYC governance to ensure decisioninterventions were initiated with the aim of changing high-risk behavioural patterns. Another making on standards, operations, customer acceptance and continuous improvements. Thisbehavioural risk assessment was conducted at ING in Belgium in the fourth quarter of 2019. We started with the appointment of a global head of KYC at the end of 2018 and a global Centre ofwill start a dialogue in2020 to dive into the outcomes and root causes of the behavioural patterns Expertise, as well as a Delivery Tribe, who together with the business lines and the second line ofobserved.
defence (Risk and Compliance functions) are responsible for implementing KYC across the organisation.

2019 ING Group Annual Report on Form 20-F64

Regulatory developments KYCterrorist financing, increasing transparency to combat money laundering and helping to

strengthen the fight against tax avoidance. The most important aspects of the 5th AML Directive Compliance with applicable laws and regulations is resource -intensive. Banks continue to be faced
involve the (anti money-laundering) risks relating to the use of virtual currencies, the improvement with new and increasingly onerous regulatory requirements. Generally, we expect the scope and
of information exchange between supervising authorities, and the introduction of beneficial extent of regulations in the jurisdictions in which we operate to continue to increase.
ownership registers for corporate and other legal entities.

Regulation is becoming more extensive and complex. An example is the implementation of DAC6 ING expects to revise the KYC policy framework to reflect the requirements of the 5th AML Directive.
which like FATCA and CRS requires financial institutions to report detailed client-related information Prior to the adoption of the 5th AML Directive, European supervisory authorities (ESAs) had to the competent authorities. Customer due diligence (CDD), (sanctions) screening and transaction previously issued their final guidelines on risk factors, which came into force in June 2018. These monitoring impose requirements on financial institutions to maintain appropriate policies, guidelines promote a common understanding of the risk-based approach to anti-money procedures and controls to detect, prevent and report to the competent authorities on e.g. money laundering/combatting terrorist financing (AML/CFT) and set out how it should be applied in the laundering and terrorist financing.
context of the 4th AML Directive. These guidelines are currently in the process of being updated, in

order to support firms’ AML/CFT compliance efforts and enhance the ability of the EU’s financial The increasing regulatory scrutiny drives the need to continuous change in the various processes,
sector to effectively deter and detect money laundering/terrorist financing. The ESAs published a procedures and IT systems. In some situations the applicable laws and regulations, at local and/or
consultation version of the updated guidelines on 5 February 2020. The final updated guidelines are at global level, seem to be conflicting with each other, which imposes a significant challenge on
expected to come into force in the course of 2020. Furthermore, in September 2017, the ESAs banks as part of the implementation of requirements. In addition, the timeline for implementation
issued their final guidelines to prevent the abuse of funds transfers for terrorist financing and of those new/changed requirements is sometimes very short, which is challenging in general, yet
money laundering purposes. These guidelines came into force in June 2018.
especially in IT development. Obviously ING will continuously work on embedding the processes

and procedures reflecting the applicable requirements in our IT systems and data sources, driving a

Policy with respect to certain countries business environment which is compliant by desire and design, and will execute ongoing training

and awareness to develop its people to have the right knowledge and skills.As a result of frequent evaluation of all businesses from economic, strategic and risk perspective

ING continues to believe that for business reasons doing business involving certain specified

That also accounts for risks deriving from new technologies. As an innovative bank, INGcountries should be discontinued. In that respect, ING has a policy not to enter into new

continuously monitors regulatory developments to make risk assessments and define the banksrelationships with clients from these countries and processes remain in place to discontinue

risk appetite.Regulations on distributed ledger technology and business developments in this areaexisting relationships involving these countries. At present these countries are Cuba, Iran, North

are as rapid and impactful as the accompanying risks.Korea, Sudan and Syria.

5th AML DirectiveING Bank maintains a limited legacy portfolio of guarantees, accounts, and loans that involve

various entities with a connection to Iran. These positions remain on the books but certain accounts In addition, the 5th AML Directive will be implemented in the Netherlands. The 5th AML Directive
related thereto are ‘frozen’ where prescribed by applicable laws and procedures and in all cases was originally adopted by the EU Council in June 2018, with the aim of addressing means of

2019 ING Group Annual Report on Form 20-F65

subject to increased scrutiny within ING Bank. Specifically, ING Bank has controls in place to monitorC. Organizational structure

transactions related to these accounts. ING Bank may receive loan repayments, duly authorised by

General the relevant competent authorities where prescribed by applicable laws. For the calendar year ING Groep N.V., a publicly-listed company, is the parent of one main legal entity: ING Bank N.V. (ING 2019, ING Group had revenues of approximately USD 276.774. ING Group estimates that it had a Bank).ING Bank is the parent company of various Dutch and foreign banks.
net profit of approximately USD 16.599.

Principal Group Companies

Sanctions developments
Reference is made to Exhibit 8 “List of subsidiaries of ING Groep N.V.” The Ukraine-/Russia-related sanctions imposed by both the US and the EU remained in force. In

2019 the US added sanctions regarding the Nordstream 2 pipeline.

The US also added sanctions against Venezuela in 2019, aimed amongst others at assets from theD.Property, plants and equipment

government of Venezuela.
ING predominantly leases the land and buildings used in the normal course of its business. In

addition, ING has invested in land and buildings. Management believes that ING’s facilities are With respect to Cuba, the US lifted in 2019 the suspension of the private right of action under Title adequate for its present needs in all material respects.
III of the Helms-Burton Act. This allows former owners of properties expropriated by the Cuban

government to bring claims before the U.S. courts against foreign companies alleged to have For information on property, plants and equipment, reference is made to Note 9 ‘Property and “trafficked” with those properties.
equipment’, for information on lease liabilities reference is made to Note 17 ‘Other liabilities’ and

for information on investment properties reference is made to Note 11 ‘ Other assets’ in the In 2020, the US imposed new sanctions on Iran. The EU blocking regulation remained in force. The consolidated financial statements.
EU revised this regulation in 2018 in response to the U.S. withdrawal from the Joint Comprehensive

Plan of Action. The regulation aims to shield EU companies from U.S. sanctions on Iran, in part by

prohibiting European companies from complying with the sanctions the EU considers to beItem 4A.Unresolved Staff comments

“extraterritorial” in nature.
Not applicable.

With a view to these ongoing developments ING continuously evaluates its sanctions compliance

Item 5.Operating and financial review and prospects controls to respond to risks of new or expanding sanctions regimes.

The following operating and financial review and prospects should be read in conjunction with the

consolidated financial statements and the related Notes thereto included elsewhere herein. The

consolidated financial statements have been prepared in accordance with IFRS-IASB. Unless

otherwise indicated, financial information for ING Group included herein is presented on a

consolidated basis under IFRS-IASB.

2019 ING Group Annual Report on Form 20-F66

A.Operating resultsAdvanced economies

Factors affecting results of operationsGlobal economic growth slowed in 2019, with a decline in trade and industrial output as well as a

weakening in the services sector. In the US, economic momentum slowed as the positive effects of

2018’s fiscal stimulus ebbed away and confidence slipped against the background of increased ING Group’s results of operations are affected by demographics, regulations and by a variety of
trade tariffs. Economic growth in Netherlands, Belgium and Luxembourg remained strong despite market conditions, including economic cycles, banking industry cycles and fluctuations in stock
the weak global trade environment and remains above the eurozone average. In Germany, markets, interest and foreign exchange rates, political developments and client behavior changes.
economic growth came to a near standstill during the year due to several factors combined with For further information on regulations reference is made to “Item 4. Information on the Company –
weak external demand. In Italy, economic growth was minimal as an uncertain fiscal outlook took Regulation and Supervision”. For further information on other factors that can impact ING Group’s
its toll on domestic demand. Consistent with slowing economic growth, inflation slowed or results of operations, ref erence is made to “Item 3. Key information - Risk Factors” for more factors
remained low in major advanced economies.
that can impact ING Group’s results of operations.

Deteriorating economic sentiment and expectations about monetary policy easing drove bond

Financial environment yields down in most advanced economies. Yields on 10-year US government bonds fell to the

lowest level since July 2016, and the yield on 10-year German government bonds reached a record

Global economic developments low of -0.73 percent in August. As a result, sovereign yield curves were partially invertedin most

Being a global financial services company, ING’s revenues and earnings are affected by the advanced economies.

volatility and strength of the economic, business, liquidity, funding and capital markets

environments specific to the geographic regions in which we do business. This includes operations

in both advanced economies, as well as emerging economies.
Both the level of interest rates and the difference between short and long-term rates (the ‘slope’ of

the yield curve) impact our net interest income. Given our geographical footprint, eurozone rate

Against a backdrop of continuing US-China trade tensions, prolonged uncertainty on Brexit and developments are more important for us than US ones.

reduced US fiscal stimulus, global economic growth weakened throughout 2019. The global

economic growth rate fell to its lowest level in a decade.
Prospects for weaker economic growth and lower inflation induced both the US Federal Reserve

and the ECB to loosen monetary policy.

In addition, the first months of 2020 were marked by the spread of corona (COVID -19) virus-linked

infections in and beyond China, negatively affecting Chinese manufacturing and trade, and posing The historically low, and even negative, interest rates in the eurozone make it challenging for banks

the threat of significant disruption to global supply chains, global manufacturing, travel and to maintain positive income in the form of a margin between traditional saving and lending

tourism, investment and consumer spending.
activities.

2019 ING Group Annual Report on Form 20-F67

Emerging economiesBrexit factor

Central banks in some of the main emerging market economies eased policy to pre-empt a furtherBrexit continued to dominate 2019, with the UK finally leaving the EU on 31 January 2020.
deterioration of economic circumstances. Brazil, India, Korea and Mexico, among others, loweredMilestones in the year included British Prime Minister Theresa May making way for Boris Johnson, their policy rate.several extensions to withdrawal dates, and a snap general election, which the Conservatives won

by a landslide in December.
Economic growth in Asia was negatively impacted by the imposition of import tariffs and related uncertainty about global trade. In China, already in the midst of a structural slowdown, economicIn 2019, the financial sector, regulators and banks alike put tremendous effort into preparing for all growth slowed to its lowest rate in 29 years. To address this adverse external environment, bothBrexit scenarios, with the aim of ensuring the resilience of the banking sector even in the face of a fiscal and monetary stimuli were introduced.no-deal scenario. For banks, the implementation of their contingency planning was a key priority.
On the legislative side, EU and UK regulators took the necessary steps ensuring operational Poland continued to be resilient to slowing growth in the eurozone and the economic slowdown incontinuity.
Turkey found a floor. Falling inflation and a return of investor confidence in Turkey contributed to a general decline in interest rates.ING took several steps to prepare for Brexit, making various adaptations to ensure a smooth transition. Following Brexit, the European Central Bank (ECB) was set to classify the UK as a non-EU How exchange rates respondedor third country. As a consequence, ING has made the decision to move a number of EU-related trading operations to a location within the EU. Brussels was chosen due to its existing Exchange rate fluctuations have an influence on the business of a globally operating bank like ING, infrastructure.
including in the areas of profitability and funding. Several factors in the course of the year contributed to the exchange rate of the euro weakening against the dollar. These included yields in The proposed changes by no means dilute the importance of the UK as one of ING’s major the euro area persistently being below those of the US, uncertainty around the possibility of a Wholesale Banking hubs. The UK centres of expertise, including Financial Markets, support ING’s broadening of the US trade dispute from China to Europe, and the negative fall-out on economic clients and its teams in other countries and regions across the globe. The UK team will continue to activity of a possible no-deal Brexit.
be an important pillar for ING.

During the year, the British pound’s performance against the euro was erratic, mostly driven by

Fluctuations in equity markets changing market expectations about the possibility of the UK leaving the EU with or without a withdrawal agreement.Our banking operations are exposed to fluctuations in equity markets. ING maintains an

internationally diversified and mainly client-related trading portfolio. Accordingly, market downturns are likely to lead to declines in securities trading and brokerage activities which we execute for customers and therefore to a decline in related commissions and trading results. In addition to this, ING also maintains equity investments in its own non-trading books. Fluctuations in equity markets may affect the value of these investments.

2019 ING Group Annual Report on Form 20-F68

Fluctuations in interest ratesCritical Accounting Policies

Our banking operations are exposed to fluctuations in interest rates. Mismatches in the interest re-A number of new or amended standards became applicable for the current reporting period.

pricing and maturity profile of assets and liabilities in our balance sheet can affect the futureING Group changed its accounting policies in 2019 as a result of adopting IFRS 16 ‘Leases’

interest earnings and economic value of the bank's underlying banking operations. In addition,The other changes in standards and amendments did not have a significant impact on ING Group’s

changing interest rates may impact the (assumed) behavior of our customers, impacting theaccounting policies.

interest rate exposure, interest hedge positions and future interest earnings, solvency and For detailed information regarding ING’s accounting policies, including changes in accounting economic value of the bank’s underlying banking operations. In the current low (and in some cases policies, reference is made to Note 1 ‘Accounting Policies’ to the consolidated financial statements.
negative) interest rate environment in the Eurozone, the stability of future interest earnings and

margin also depends on the ability to actively manage pricing of customer assets and liabilities.

Consolidated result of operations Especially, the pricing of customer savings portfolios in relation to re-pricing customer assets and

ING Group’s management evaluates the results of ING Group’s banking segments using a non-IFRS other investments in our balance sheet is a key factor in the management of the bank’s interest

financial performance measure called underlying result. To give an overview of the underlying earnings.

result measure, we also present consolidated underlying result before tax and underlying net

result. Underlying figures are derived from figures determined in accordance with IFRS-IASB by

Fluctuations in exchange rates

excluding the impact of special items, adjustment of the EU ‘IAS 39 carve-out’ and Insurance Other.
ING Group is exposed to fluctuations in exchange rates. Our management of exchange rate Special items consist of items of income or expense that are significant and arise from events or sensitivity affects the results of our operations through the trading activities and because we transactions that are clearly distinct from ordinary operating activities. The adjustment of the EU prepare and publish our consolidated financial statements in euros. Because a substantial portion ‘IAS 39 carve-out’ refers to the fact that ING Group applies fair value hedge accounting for portfolio of our income, expenses and foreign investments is denominated in currencies other than euros, hedges of interest rate risk (fair value macro hedges) in accordance with the EU “carve-out” version fluctuations in the exchange rates used to translate foreign currencies, particularly the U.S. Dollar, of IAS 39. No hedge accounting is applied to these derivatives under IFRS-IASB. Insurance Other Pound Sterling, Turkish Lira, Chinese Renminbi, Australian Dollar, Japanese Yen, Polish Zloty, Korean reflects (former) insurance related activities that are not part of the discontinued operations.
Won, the Indian Rupee, Brazilian Real, Singapore Dollar, Thai Baht and Russian Ruble into euros can

impact our reported results of operations, cash flows and reserves from year to year. Fluctuations While items excluded from underlying result are significant components in understanding and in exchange rates will also impact the value (denominated in euro) of our investments in our nonassessing the Group’s consolidated financial performance, ING Group believes that the presentation euro reporting subsidiaries. The impact of these fluctuations in exchange rates is mitigated to some of underlying net result is relevant and useful for investors because it allows investors to extent by the fact that income and related expenses, as well as assets and liabilities, of each of our understand the primary method used by management to evaluate the Group’s operating non-euro reporting subsidiaries are generally denominated in the same currencies. FX translation performance and make decisions about allocating resources. In addition, ING Group believes that risk is managed by taking into account the effect of translation results on the Core Equity Tier 1 the presentation of underlying net result helps investors compare its segment performance on a ratio (CET1).
meaningful basis by highlighting result before tax attributable to ongoing operations and the

underlying profitability of the segment businesses. For example, ING believes that trends in the

2019 ING Group Annual Report on Form 20-F69

underlying profitability of its segments can be more clearly identified by disregarding the effects ofGroup Overview

special items and the impact of the IAS39 carve-out adjustment. ING Group believes that the most

directly comparable GAAP financial measure to underlying net result is net result. However, The following table sets forth the consolidated results of ING Group in accordance with IFRS-IASB for
underlying net result should not be regarded as a substitute for net result as determined in the years ended 31 December 2019, 2018 and 2017:
accordance with IFRS-IASB. Because underlying net result is not determined in accordance with

IFRS-IASB, underlying net result as presented by ING may not be comparable to other similarly

titled measures of performance of other companies. In addition, ING Group’s definition ofIFRS-IASB Consolidated Income Statement
underlying net result may change over time.| | Amounts in millions of euros | 2019 | 2018 | 2017 |
| --- | --- | --- | --- | --- |
| The section Segment Reporting Banking Operations on the next pages presents the segment results | Continuing operations | | | |
| on the basis of the performance measure underlying result. | Interest income | 28,163 | 28,129 | 43,890 |
| | Interest expense | 14,353 | 14,169 | 30,243 |
| | Net interest income | 13,811 | 13,960 | 13,647 |
| For further information on underlying result for the Banking activities, as well as the reconciliation | Net fee and commission income | 2,868 | 2,798 | 2,710 |
| of our segment underlying result before tax to our net result, see Note 34 ‘Segments’ in the | Investment and Other income | 446 | 1,566 | 2,233 |
| consolidated financial statements. | Total income | 17,125 | 18,324 | 18,590 |
| | Operating expenses | 10,353 | 10,682 | 9,829 |
| | Addition to loan loss provisions | 1,120 | 656 | 676 |
| | Total expenditure | 11,472 | 11,338 | 10,505 |
| | Result before tax | 5,653 | 6,986 | 8,085 |
| | Taxation | 1,652 | 2,116 | 2,539 |
| | Net result from continuing operations | 4,001 | 4,869 | 5,546 |
| | Non-controlling interests from continuing operations | 99 | 108 | 82 |
| | Net result IFRS-IASB | 3,903 | 4,761 | 5,464 |

Reconciliation from IFRS-IASB to ING Group’s underlying results

Amounts in millions of euros201920182017| Net result IFRS-IASB | | 3,903 | 4,761 | 5,464 |
| --- | --- | --- | --- | --- |
| -/- Special items | 1 | | -775 | 0 |
| -/- Adjustment of the EU 'IAS 39 carve-out' | | -878 | 58 | 559 |
| -/- Insurance Other | | | 90 | -52 |
| Underlying net result | | 4,781 | 5,389 | 4,957 |

2019 ING Group Annual Report on Form 20-F70

Year ended 31 December 2018 compared to year ended 31 December 2017 1.Special items: settlement agreement with the Dutch authorities on regulatory issues as announced on 4

September 2018 (EUR -775 million, 2018); tax charge of EUR 121 million at ING Australia Holdings Ltd related to the years 2013-2017, for which a full reimbursement is expected to be received from NN Group (impact on netING posted strong commercial results in 2018, but they were negatively affected by the EUR 775 result EUR 0 million, 2017).million settlement agreement with the Dutch authorities on regulatory issues. The net result dropped to EUR 4,761 million from EUR 5,464 million in 2017, primarily due to the settlement

Year ended 31 December 2019 compared to year ended 31 December 2018 agreement which was recorded as a special item. In 2017, there was a special item related to a EUR In 2019, ING showed solid commercial performance despite the challenging rate environment, 121 million tax charge at ING Australia Holdings Ltd, for which a full reimbursement will be received geopolitical uncertainties and demanding regulatory environment. However, the net result declined from NN Group. Although the bottom-line impact for ING Bank was nil, it affected both the tax and 18.0% to EUR 3,903 million in 2019 from EUR 4,761 million in 2018, which has been negatively 'other income' lines. The net result in 2018 also included EUR 58 million increase in fair value affected by the EUR 775 million settlement agreement with the Dutch authorities on regulatory changes on derivatives (including a negative impact under net interest income of ending some issues that was recorded as a special item. The net result in 2019 also included EUR 878 million hedge relationships) related to asset-liability-management activities for the mortgage and savings drop in fair value changes on derivatives related to asset-liability-management activities (including portfolios in Benelux, Germany and Czech Republic, with the EU carve-out version of IAS 39 applied, a negative impact under interest income of ending some hedge relationships), with the EU carvewhile these fair value changes were EUR 559 million in 2017. Insurance Other added EUR 90 million out version of IAS 39 applied. In 2019, there were no results from Insurance Other as ING sold its to the net result, compared with a EUR 52 million loss in 2017. Insurance Other mainly comprised last warrants related to its previous Insurance activities in November 2018. The net result in 2018 the net result on the warrants on Voya Financial and NN Group shares. ING sold its remaining part included EUR 90 million from Insurance Other, reflecting the net result on the warrants on Voya of warrants on the shares of Voya Financial in March 2018, while the warrant agreement between Financial and NN Group shares.
NN Group and ING was terminated in November 2018.

Underlying net result for 2019 was EUR 4,781 million, a decrease of 11.3% from EUR 5,389 million in Underlying net result for 2018 was EUR 5,389 million, an increase of 8.7% from EUR 4,957 million in
2018. Underlying net result is derived from total net result by excluding the impact from special 2017. Underlying net result is derived from total net result by excluding the impact of special items,
items and adjustment of the EU ‘IAS 39’ carve-out and Insurance Other.
adjustment of the ‘EU IAS 39 carve-out’ and Insurance Other.

2019 ING Group Annual Report on Form 20-F71

Segment ReportingRetail Netherlands(Market Leaders)
ING Group evaluates the resul ts of its banking segments using a non-IFRS financial performanceIncome from retail and private banking activities in the Netherlands, including the SME and midmeasure called underlying result. Underlying result is derived from result determined incorporate segments and the Real Estate Finance portfolio related to Dutch domestic midaccordance with IFRS-IASB by excluding the impact of special items, adjustment of the ‘EU IAS 39corporates. The main products offered are current and savings accounts, business lending, carve-out’ and Insurance Other.mortgages and other consumer lending in the Netherlands.

Because underlying result is not determined in accordance with IFRS-IASB, underlying result asRetail Belgium(Market Leaders)
presented by ING may not be comparable to other similarly titled measures of performance ofIncome from retail and private banking activities in Belgium (including Luxembourg), including the other companies. The underlying result of ING’s segments is reconciled to the Net result as reportedSME and mid-corporate segments. The main products offered are similar to those in the in the IFRS-IASB Consolidated profit or loss account.Netherlands.

The published 2019 Annual Accounts of ING Group includes financial information in accordanceRetail Germany(Challengers and Growth Markets)
with International Financial Reporting Standards as adopted by the European Union (IFRS-EU). TheIncome from retail and private banking activities in Germany (including Austria). The main products segment reporting in the annual report on Form 20-F has been prepared in accordance withoffered are current and savings accounts, mortgages and other customer lending.
International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS-IASB) for consistency with the other financial information contained in this report. TheRetail Other(Challengers and Growth Markets)
difference between the accounting standards is reflected in the Wholesale segment, and in theIncome from retail banking activities in the rest of the world, including the SME and mid-corporate geographical segments the Netherlands, Belgium, Germany and Other Challengers. Reference issegments in specific countries. The main products offered are similar to those in the Netherlands.

made to Note 1 ‘Accounting Policies’ for a reconciliation between IFRS-EU and IFRS-IASB.

Wholesale Banking The information presented in this section is in line with the information presented to the ExecutiveIncome from wholesale banking activities. The main products are: lending, debt capital markets, Board and Management Board Banking.working capital solutions, export finance, daily banking solutions, treasury and risk solutions, and corporate finance.
For further information on underlying result for the Banking activities, as well as the reconciliation of our segment underlying result before tax to our net result, see Note 34 ‘Segments’ in theThe accounting policies of the segments are the same as those described in Note 1 ‘Accounting consolidated financial statements.policies’ in the consolidated financial statements. Transfer prices for inter-segment transactions are set at arm’s length. Corporate expenses are allocated to business lines based on time spent by ING Group’s segments are based on the internal reporting structures. The following table specifieshead office personnel, the relative number of staff, or on the basis of income, expenses and/or the segments by line of business and the main sources of income of each of the segments:assets of the segment.

2019 ING Group Annual Report on Form 20-F72

As of 1 January 2019, the Real Estate Finance portfolio related to Dutch domestic mid-corporates,Banking Operations

which was included under Wholesale Banking, has been transferred to Retail Netherlands in order The following table sets forth the contribution of ING’s banking business lines and the corporate line

to define clearer roles and responsibilities. The presentation of previously reported underlying profit banking to the underlying net result for each of the years 2019, 2018 and 2017.

and loss amounts has been adjusted to reflect this change.

RetailRetailRetailRetailWholesaleCorporateTotal

1 January to 31 December 2019

BankingBankingBankingOtherBankingLine

Corporate Line BankingAmounts in millions of euros

NetherlandsBelgiumGermanyBanking

In addition to these segments, ING Group reconciles the total segment results to the total result of| Banking using Corporate Line Banking. The Corporate Line Banking is a reflection of capital | Underlying income: | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | - Net interest income | 3,541 | 1,907 | 1,579 | 2,787 | 3,794 | 470 | 14,079 |
| management activities and certain income and expense items that are not allocated to the | - Net fee and commission income | 674 | 374 | 268 | 423 | 1,135 | -6 | 2,868 |
| banking businesses, including a higher VAT refund in 2019 as well as a EUR 119 million gain from | - Total investment and other income | 290 | 161 | 138 | 298 | 369 | 103 | 1,360 |
| | Total underlying income | 4,505 | 2,442 | 1,985 | 3,509 | 5,298 | 568 | 18,306 |

	Underlying expenditure:
Bank and the recognition of a EUR 79 million receivable related to the insolvency of a financial	- Underlying operating expenses	2,210	1,609	1,080	2,210	2,937	307	10,353
institution (both recorded under income). Furthermore, the Corporate Line Banking includes the	- Additions to loan loss provision	91	186	-53	364	532	0	1,120
	Total underlying expenditure	2,301	1,794	1,027	2,574	3,469	307	11,472
isolated legacy costs (mainly negative interest results) caused by the replacement of short-term

funding with long-term funding during 2013 and 2014. ING Group applies a system of capital	Underlying result before taxation	2,204	647	957	935	1,830	261	6,834
	Taxation	558	192	328	234	464	179	1,955
charging for its banking operations in order to create a comparable basis for the results of business	Non-controlling interests	0	0	3	82	14	0	99
units globally, irrespective of the business units’ book equity and the currency they operate in.	Underlying net result	1,646	455	627	619	1,352	82	4,781
	Special items
	Adjustment of the EU 'IAS 39 carve-out'					-878		-878

Net result Banking1,646455627619474823,903

Net result Insurance Other

Net result from continuing operations3,903

Net result IFRS-IASB3,903

2019 ING Group Annual Report on Form 20-F73

RetailRetailRetailRetailWholesaleCorporateTotalRetailRetailRetailRetailWholesaleCorporateTotal

1 January to 31 December 2017 1 January to 31 December 2018BankingBankingBankingOtherBanking1LineBankingBankingBankingOtherBankingLine

Amounts in millions of euros Amounts in millions of eurosNetherlandsBelgiumGermanyBankingNetherlandsBelgiumGermanyBanking

1| Underlying income: | | | | | | | | Underlying income: | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| - Net interest income | 3,749 | 1,830 | 1,671 | 2,690 | 3,686 | 290 | 13,916 | - Net interest income | 3,866 | 1,842 | 1,704 | 2,437 | 3,639 | 226 | 13,714 |
| - Net fee and commission income | 664 | 371 | 225 | 395 | 1,152 | –4 | 2,803 | - Net fee and commission income | 607 | 408 | 215 | 384 | 1,102 | –3 | 2,714 |

Total investment and other income33516976230673–1131,369- Total investment and other income256224–28207919–3011,277

Total underlying income4,7472,3691,9723,3155,51017318,088Total underlying income4,7302,4731,8913,0285,660–7817,704| Underlying expenditure: | | | | | | | | Underlying expenditure: | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| - Underlying operating expenses | 2,220 | 1,610 | 1,027 | 2,033 | 2,771 | 247 | 9,907 | - Underlying operating expenses | 2,260 | 1,584 | 1,032 | 1,919 | 2,744 | 290 | 9,829 |
| - Additions to loan loss provision | –41 | 164 | –27 | 350 | 210 | –1 | 656 | | | | | | | | |
| Total underlying expenditure | 2,179 | 1,774 | 1,000 | 2,383 | 2,981 | 246 | 10,563 | - Additions to loan loss provision | 15 | 104 | –10 | 284 | 282 | 1 | 676 |

Total underlying expenditure2,2751,6881,0222,2033,02629110,505

Underlying result before taxation2,5685959729322,529–727,524| Taxation | 626 | 199 | 324 | 200 | 633 | 47 | 2,028 | Underlying result before taxatio n | 2,455 | 785 | 869 | 825 | 2,634 | –369 | 7,199 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Non-controlling interests | 0 | 6 | 3 | 80 | 19 | 0 | 108 | Taxation | 615 | 296 | 241 | 188 | 832 | –13 | 2,160 |
| Underlying net result | 1,942 | 390 | 646 | 652 | 1,877 | –119 | 5,389 | Non-controlling interests | 0 | –2 | 2 | 67 | 15 | 0 | 82 |
| Special items | | | | | | –775 | –775 | | | | | | | | |
| Adjustment of the EU 'IAS 39 carve-out' | | | | | 58 | | 58 | Underlying net result | 1,839 | 491 | 625 | 569 | 1,788 | –356 | 4,957 |

Net result Banking1,9423906466521,935–8944,672Special items00

Net result Insurance Other90Adjustment of the EU 'IAS 39 carve-out'559559

Net result from continuing operations4,761Net result Banking1,8394916255692,347–3565,516

Net result IFRS-IASB4,761Net result Insurance Other–52

Net result from continuing operations5,464

Net result IFRS-IASB5,464 1In 2019, the Dutch domestic midcorporates real estate finance portfolio transferred from Wholesale Banking to

Retail Banking Netherlands. Comparative figures have been adjusted.

2019 ING Group Annual Report on Form 20-F74

Year ended 31 December 2019 compared to year ended 31 December 201814,079 million. The increase was driven by higher interest results on customer lending mainly In 2019, ING’s banking operations showed solid commercial performance despite the challengingsupported by volume growth, partly offset by lower margins on savings and current accounts. The rate environment, geopolitical uncertainties and demanding regulatory environment. The nettotal lending margin was slightly up compared with 2018, as the impact of improved interest result Banking (including the impact of special items and adjustment of the EU ‘IAS 39 carve-out’)margins on mortgages was largely offset by lower margins on other customer lending. ING’s overall declined 16.5% to EUR 3,903 million in 2019 from EUR 4,672 million in 2018, which has beennet interest margin remained at 1.54% in 2019.
negatively affected by the EUR 775 million settlement agreement with the Dutch authorities on regulatory issues that was recorded as a special item. The net result was affected by a EUR 936Net fee and commission income rose 2.3% to EUR 2,868 million. The increase was driven by Retail million negative swing in net contribution of fair value changes on derivatives related to asset-Banking with increases in most countries, partly offset by a small decline in Wholesale Banking.
liability-management activities for the mortgage and savings portfolios in the Benelux, Germany,Investment and other income slightly decreased to EUR 1,360 million from EUR 1,369 million in France and Czech Republic. These fair value changes are mainly caused by changes in market2018, with a decline in Wholesale Banking, mainly due to negative valuation adjustments in interest rates. No hedge accounting is applied to these derivatives under IFRS-IASB.Financial Markets, and some one-offs. The decline was largely offset by increases in Retail Banking and Corporate Line. The latter was supported by a EUR 119 million gain from the release of a The underlying net result dropped 11.3% to EUR 4,781 million from EUR 5,389 million. This was incurrency translation reserve following the sale of ING’s stake in Kotak Mahindra Bank and the part due to an increased underlying effective tax rate of 28.6% from 27.0% in 2018, mainlyrecognition of a EUR 79 million receivable related to the insolvency of a financial institution.
reflecting higher non-deductible costs, including the cancellation of tax deductibility of interest expenses on additional Tier 1 instruments in the Netherlands as from 2019. Underlying net result isUnderlying operating expenses increased 4.5% to EUR 10,353 million from EUR 9,907 million in derived from total net result by excluding the impact from special items and adjustment of the EU2018. The increase was visible in all segments, except for Retail Netherlands and Retail Belgium.
‘IAS 39’ carve-out.Regulatory expenses rose to EUR 1,021 million from EUR 947 million in previous year. Excluding regulatory costs, expenses were up 4.2%, mainly due to higher KYC-related costs, increased staff The underlying result before tax declined 9.2% to EUR 6,834 million in 2019 from EUR 7,524 millioncosts and continued investments in business growth, partly offset by costs savings and one-offs in 2018, primarily due to increased operating expenses and higher risk costs. Commercial(including a higher VAT refund, recorded in Corporate Line). The cost/income ratio was 56.6% momentum remained solid, albeit at a slower pace than previous year. ING grew net core lendingversus 54.8% in 2018.
(adjusted for currency impacts, and excluding Treasury and the run-off portfolios) by EUR 17.2 billion, or 2.9%, and net customer deposits rose by EUR 23.4 billion in 2019. The global retailThe net addition to the provision for loan losses rose to EUR 1,120 million from EUR 656 million in customer base grew to 38.8 million at year-end, and the number of primary customers rose during2018. This increase was mainly caused by a number of large individual files in Wholesale Banking the year by 0.8 million to 13.3 million.and higher, but still relatively low risk costs in Retail Netherlands. Risk costs rose to 18 basis points

of average customer lending in 2019, remaining below ING Bank’s through-the-cycle average of The underlying income increased 1.2% to EUR 18,306 million from EUR 18,088 million in 2018,approximately 25 basis points, compared with 11 basis points of average customer lending in 2018.
driven by Corporate Line (predominantly one-offs) and Retail Banking, while income in Wholesale Banking (mainly in Financial Markets and Lending) declined. Net interest income rose 1.2% to EUR

2019 ING Group Annual Report on Form 20-F75

Year ended 31 December 2018 compared to year ended 31 December 2017increase of the average balance sheet was mainly driven by the continued growth in net core ING’s banking operations posted strong commercial results in 2018, but they were negativelylending and customer deposits. The interest result on customer lending activities increased driven affected by the EUR 775 million settlement agreement with the Dutch authorities on regulatoryby higher volumes at stable margins. The interest result on customer deposits slightly declined, as issues. The net result Banking (including the impact of special items and adjustment of the EU ‘IASthe impact of volume growth was more than offset by margin pressure on current accounts (due to 39 carve-out’) dropped to EUR 4,672 million from EUR 5,516 million in 2017, primarily due to thelower reinvestment yields); the interest margin on savings stabilized, mainly due to a further settlement agreement which was recorded as a special item. In 2017, there was a special itemlowering of client savings rates in several countries. Net interest income was furthermore related to a EUR 121 million tax charge at ING Australia Holdings Ltd, for which a fullnegatively affected by a decline in the volatile interest results of Financial Markets. Net fee and reimbursement will be received from NN Group. Although the bottom-line impact for ING was nil, itcommission income rose 3.3% to EUR 2,803 million. The increase was mainly in Wholesale Banking affected both the tax and 'other income' lines. The result was negatively affected by a EUR 501(supported by the inclusion of Payvision as from the second quarter of 2018) and most of the Retail million lower net contribution of fair value changes on derivatives related to asset-liability-Banking countries, except for Belgium and Turkey. Investment and other income rose to EUR 1,369 management activities for the mortgage and savings portfolios in the Benelux, Germany and Czechmillion from EUR 1,277 million in 2017, mainly caused by higher valuation results and net trading Republic. These fair value changes are mainly caused by changes in market interest rates. Noincome, including improved hedge ineffectiveness results, and one-off results. The increase was hedge accounting is applied to these derivatives under IFRS-IASB.primarily visible in Retail Banking (excluding Belgium) and the Corporate Line. In Wholesale Banking, investment and other income declined, mainly due to a loss recorded on the intended sale of an The underlying net result rose 8.7% to EUR 5,389 million in 2018 from EUR 4,957 million in 2017;Italian lease run-off portfolio in 2018, while 2017 included a gain on the sale of an equity stake in this was partly caused by a lower underlying effective tax rate supported by the tax reforms inthe real estate run-off portfolio.

Belgium and the US. Underlying net result is derived from total net result by excluding the impact from special items and adjustment of the EU ‘IAS 39 carve-out’.Underlying operating expenses increased 0.8% to EUR 9,907 million from EUR 9,829 million in 2017.
In 2018, expenses included EUR 947 million of regulatory expenses up from EUR 901 million in the The underlying result before tax rose 4.5% to EUR 7,524 million in 2018 from EUR 7,199 million inprevious year. Excluding regulatory costs, expenses were up 0.4%, as higher costs for strategic 2017, primarily driven by continued business growth at resilient interest margins, higher net feeprojects and to support business growth, were larg ely offset by lower performance-related and commission income, and slightly lower risk costs. Commercial performance was strong inexpenses and strict cost management. The underlying cost/income ratio improved to 54.8% from 2018. ING grew net core lending (adjusted for currency impacts, and excluding Bank Treasury and55.5% in 2017.
the run-off portfolios) by EUR 36.6 billion, or 6.4%, and net customer deposits rose by EUR 19.3 billion in 2018. The global retail customer base grew by one million customers to reach 38.4 millionThe net addition to the provision for loan losses declined 3.0% to EUR 656 million from EUR 676 over the year, and the number of primary customers rose by 1.1 million to 12.5 million.million in 2017. Risk costs were 11 basis points of average customer lending compared with 12 basis points in 2017.
Total underlying income increased 2.2% to EUR 18,088 million from EUR 17,704 million in 2017. Net interest income rose 1.5% to EUR 13,916 million, due to an increase of the average balance sheet total, partly offset by a narrowing of the net interest margin to 1.53% from 1.54% in 2017. The

2019 ING Group Annual Report on Form 20-F76

Underlying income fell 5.1% to EUR 4,505 million from EUR 4,747 million previous year. The interest

RETAIL NETHERLANDSresult was 5.5% lower, reflecting margin pressure on savings and current accounts due to lower re-| | | | | investment yields and lower revenues from Treasury. This was partly compensated by improved |
| --- | --- | --- | --- | --- |
| Amounts in millions of euros | 2019 | 20181 | 2017 | margins on mortgages. Net core lending (excluding the WUB run-off portfolio and Treasury-related |
| Underlying income: | | | | |
| Net interest income | 3,541 | 3,749 | 3,866 | products) grew by EUR 2.0 billion in 2019, equally divided over mortgages and other lending. Net |

Net fee and commission income674664607growth in customer deposits (excluding Treasury) was EUR 8.4 billion in 2019. Net fee and| Investment income and other income | 290 | 335 | 256 | commission income rose by EUR 10 million, or 1.5%, primarily due to higher daily banking fees. |
| --- | --- | --- | --- | --- |
| Total underlying income | 4,505 | 4,747 | 4,730 | |
| | | | | Investment and other income declined by EUR 45 million, mainly attributable to lower results from |

financial markets-related products.
Underlying expenditure:

Underlying operating expenses2,2102,2202,260| Additions to the provision for loan losses | 91 | –41 | 15 | Underlying operating expenses declined 0.5% on 2018, this was mainly due to lower regulatory |
| --- | --- | --- | --- | --- |
| Total underlying expenditure | 2,301 | 2,179 | 2,275 | |

Underlying result before tax2,2042,5682,455increased salaries as well as higher KYC and IT-related expenses.

Taxation558626615| Non-controlling interests | 0 | 0 | 0 | Risk costs in 2019 increased to a relatively low EUR 91 million, or 6 basis points of average customer |
| --- | --- | --- | --- | --- |
| Underlying net result | 1,646 | 1,942 | 1,839 | |
| Net result | 1,646 | 1,942 | 1,839 | lending, partly caused by a change in the house price index that is used for Dutch mortgages. This |

compared with a net release of EUR 41 million 2018, which included releases in both mortgages

1As from 2019, Retail Netherlands includes the real estate finance portfolio to Dutch domestic mid-corporates. This portfolioand business lending.

was transferred from Wholesale Banking to Retail Netherlands in order to define clearer roles and responsibilities. All

comparative figures have been adjusted.

Year ended 31 December 2018 compared to year ended 31 December 2017

Year ended 31 December 2019 compared to year ended 31 December 2018 Both net result and underlying net result of Retail Netherlands increased by EUR 103 million, or Both net result and underlying net result of Retail Netherlands decreased by EUR 296 million, or 5.6%, to EUR 1,942 million in 2018 from EUR 1,839 million in 2017. There were no special items in 15.2%, to EUR 1,646 million in 2019 from EUR 1,942 million in 2018. There were no special items in 2018 and 2017.
2019 and 2018.

The underlying result before tax of Retail Netherlands rose 4.6% to EUR 2,568 million from EUR The underlying result before tax of Retail Netherlands decreased 14.2% to EUR 2,204 million from 2,455 million in 2017. This was mainly due to lower risk costs and benefits from the ongoing cost- EUR 2,568 million in 2018. This was mainly due to lower income, mainly reflecting lower margins on saving programmes.
customer deposits and lower revenues from Treasury, combined with higher risk costs. Operating

expenses declined slightly.
Underlying income rose 0.4% to EUR 4,747 million. The interest result was 3.0% lower, mainly

caused by margin pressure on savings and current accounts, and a decline in the average lending

2019 ING Group Annual Report on Form 20-F77

volumes, partly offset by higher margins on mortgages. Net core lending (excluding the WUB run-Year ended 31 December 2019 compared to year ended 31 December 2018

off portfolio and Bank Treasury-related products) grew by EUR 1.5 billion as from 1 January 2018,Both net result and underlying net result of Retail Belgium (including ING in Luxembourg) increased

of which EUR 0.8 billion in mortgages and EUR 0.7 billion in other lending. Net growth in customerby EUR 65 million, or 16.7%, to EUR 455 million in 2019 from EUR 390 million in 2018. There were no

deposits (excluding Bank Treasury) was EUR 3.5 billion in 2018. Net fee and commission incomespecial items in 2019 and 2018.

rose by EUR 57 million, or 9.4%, primarily due to higher daily banking fees. Investment and other

income rose by EUR 79 million, mainly attributable to higher allocated Bank Treasury revenues.The underlying result before tax of Retail Belgium rose 8.7% to EUR 647 million in 2019, compared

with EUR 595 million in 2018. The increase reflects higher income and stable expenses, only partly

Underlying operating expenses declined 1.8% on 2017, mainly driven by the benefits from theoffset by an increase in risk costs.

ongoing cost-saving initiatives and lower expenses for legal claims.

Underlying income increased to EUR 2,442 million from EUR 2,369 million in 2018. The interest

Risk costs turned to a net release of EUR 41 million, or -3 basis points of average customer lending,result was 4.2% up to EUR 1,907 million, mainly due to volume growth, increased margins on

from a net addition of EUR 15 million in 2017, reflecting the continued positive macroeconomicmortgages, and supported by higher net interest income from Treasury -related products. This was

conditions in the Netherlands.in part offset by lower net interest income from savings and current accounts, reflecting the low

interest rate environment, and some margin pressure on non-mortgage lending. The net growth in
RETAIL BELGIUMcustomer lending (excluding Treasury) was EUR 3.3 billion, of which EUR 1.2 billion was in residential| | | | | mortgages and EUR 2.1 billion in other lending. The net inflow in customer deposits (excluding |
| --- | --- | --- | --- | --- |
| Amounts in millions of euros | 2019 | 2018 | 2017 | Treasury) was EUR 4.1 billion in 2019. Net fee and commission income increased 0.8% to EUR 374 |
| Underlying income: | | | | |
| Net interest income | 1,907 | 1,830 | 1,842 | million. Investment and other income was EUR 8 million lower, mainly due to lower Trea sury- |
| Net fee and commission income | 374 | 371 | 408 | related revenues. |
| Investment income and other income | 161 | 169 | 224 | |
| Total underlying income | 2,442 | 2,369 | 2,473 | |
| | | | | Operating expenses declined 0.1% to EUR 1,609 million, mainly due to lower staff-related expenses |

Underlying expenditure:				stemming from the transformation programmes, partly offset by higher regulatory costs and KYC-
Underlying operating expenses	1,609	1,610	1,584	related expenses.
Additions to the provision for loan losses	186	164	104
Total underlying expenditure	1,794	1,774	1,688
				Risk costs increased by EUR 22 million to EUR 186 million, or 21 basis points of average customer

Underlying result before tax	647	595	785	lending, from EUR 164 million, or 19 basis points, in 2018. The increase was mainly caused by
Taxation	192	199	296	additional provisioning on individual mid-corporates files and higher collective provisions for
Non-controlling interests	0	6	–2	consumer lending.
Underlying net result	455	390	491
Net result	455	390	491

2019 ING Group Annual Report on Form 20-F78

Year ended 31 December 2018 compared to year ended 31 December 2017RETAIL GERMANY| Both net result and underlying net result of Retail Belgium (including ING in Luxembourg) declined | Amounts in millions of euros | 2019 | 2018 | 2017 |
| --- | --- | --- | --- | --- |
| by EUR 101 million, or 20.6%, to EUR 390 million in 2018 from EUR 491 million in 2017. The | Underlying income: | | | |
| | Net interest income | 1,579 | 1,671 | 1,704 |
| decrease was partly mitigated by a lower underlying effective tax rate, because 2017 included the | Net fee and commission income | 268 | 225 | 215 |
| impact of a tax reform in Belgium, which resulted in a tax charge to record a reduction in deferred | Investment income and other income | 138 | 76 | –28 |
| tax assets. There were no special items in 2018 and 2017. | Total underlying income | 1,985 | 1,972 | 1,891 |

	Underlying expenditure:
The underlying result before tax of Retail Belgium fell 24.2% to EUR 595 million in 2018, compared	Underlying operating expenses	1,080	1,027	1,032
with EUR 785 million in 2017. The decline reflects lower income, higher expenses and an increase in	Additions to the provision for loan losses	–53	–27	–10
risk costs.	Total underlying expenditure	1,027	1,000	1,022

	Underlying result before tax	957	972	869
Underlying income decreased to EUR 2,369 million from EUR 2,473 million in 2017. The interest	Taxation	328	324	241
result declined 0.7% to EUR 1,830 million, mainly due to margin pressure on most products, in part	Non-controlling interests	3	3	2
	Underlying net result	627	646	625
offset by volume growth in the lending portfolio as well as current accounts. The net production in	Net result	627	646	625
customer lending (excluding Bank Treasury and the sale of a mortgage portfolio) was EUR 6.1

billion, of which EUR 2.2 billion was in mortgages and EUR 3.9 billion in other lending. The net inflow

Year ended 31 December 2019 compared to year ended 31 December 2018
in customer deposits was EUR 3.0 billion in 2018. Net fee and commission income decreased 9.1%,

mainly due to lower fee income on investment products. Investment and other income fell by EUR Both net result and underlying net result of Retail Germany (including ING in Austria) decreased by
55 million, mainly due to lower income from financial markets products.
EUR 19 million, or 2.9%, to EUR 627 million in 2019 from EUR 646 million in 2018. There were no

special items in 2019 and 2018.
Operating expenses rose by EUR 26 million, or 1.6%, to EUR 1,610 million, mainly due to higher

external staff expenses related to the transformation programmes and the successful integration The underlying result before tax declined 1.5% to EUR 957 million, compared with EUR 972 million
of Record Bank into ING Belgium. Risk costs increased by EUR 60 million to EUR 164 million, or 19 in 2018, mainly due to higher expenses, partly offset by slightly increased income and a higher net
basis points of average customer lending, from EUR 104 million, or 13 basis points of average release in risk costs.
customer lending, in 2017. The increase was primarily in business lending.

Underlying income increased 0.7% to EUR 1,985 million in 2019 from EUR 1,972 million a year ago.

Net interest income declined 5.5%, mainly due to lower Treasury -related interest results (with a

partial offset in other income). Excluding Treasury, net interest income rose marginally, mainly

reflecting volume growth in most products and improved margins on mortgages, offset by lower

2019 ING Group Annual Report on Form 20-F79

interest results on savings and deposits due to margin pressure. The net growth in core lendingquarter of 2018. Net fee and commission income rose 4.7%, due to higher fee income on

(excluding Treasury) was EUR 3.0 billion in 2019, of which EUR 2.4 billion in mortgages and EUR 0.6investment products and an improvement in fees on current accounts. Investment and other

billion in consumer lending. Net inflow in customer deposits (excluding Treasury) was EUR 0.8income rose to EUR 76 million, mainly due to improved hedge ineffectiveness results from Bank

billion. Net fee and commission income rose 19.1% to EUR 268 million, due to higher fees onTreasury.

mortgages and daily banking. Investment and other income rose by EUR 62 million to EUR 138

million, largely due to the aforementioned accounting asymmetry in Treasury revenues.Operating expenses declined 0.5% to EUR 1,027 million from EUR 1,032 million in 2017. This

decrease was mainly caused by lower regulatory costs and a decline in marketing expenses, partly

Operating expenses rose 5.2% to EUR 1,080 million from EUR 1,027 million in 2018. The increaseoffset by higher costs to support business growth and a restructuring provision in 2018. Risk costs

was mainly due to a restructuring provision related to the completion of ING’s Agile transformationwere EUR -27 million in 2018, compared with EUR -10 million in 2017, reflecting a benign credit

in Germany, higher KYC-related expenses, investments to accelerate the acquisition of primaryenvironment in the German market and a review of the consumer lending portfolio.

customers, and the launch of Interhyp in Austria.

RETAIL OTHER| Risk costs were EUR -53 million, or -6 basis points of average customer lending, compared with EUR | | | | |
| --- | --- | --- | --- | --- |
| -27 million in 2018. The net release in 2019 mainly related to model updates for mortgages, while | Amounts in millions of euros | 2019 | 2018 | 2017 |
| | Underlying income: | | | |
| the net release in 2018 included a significant release in the consumer lending portfolio. | Net interest income | 2,787 | 2,690 | 2,437 |
| | Net fee and commission income | 423 | 395 | 384 |
| Year ended 31 December 2018 compared to year ended 31 December 2017 | Investment income and other income | 298 | 230 | 207 |
| | Total underlying income | 3,509 | 3,315 | 3,028 |
| Both net result and underlying net result of Retail Germany (including ING in Austria) increased by | | | | |

EUR 21 million, or 3.4%, to EUR 646 million in 2018 from EUR 625 million in 2017.	Underlying expenditure:
	Underlying operating expenses	2,210	2,033	1,919
	Additions to the provision for loan losses	364	350	284
The underlying result before tax increased 11.9% to EUR 972 million, compared with EUR 869	Total underlying expenditure	2,574	2,383	2,203
million in 2017, mainly due to higher income and a net release in risk costs.
	Underlying result before tax	935	932	825
	Taxation	234	200	188
Underlying income increased 4.3% to EUR 1,972 million in 2018 from EUR 1,891 million a year ago.	Non-controlling interests	82	80	67
Net interest income declined 1.9% reflecting margin compression on mortgages and current	Underlying net result	619	652	569
accounts, and lower Bank Treasury -related interest income. This was only partly offset by higher	Net result	619	652	569

margins on savings and deposits and volume growth in most products. Net core lending growth,

Year ended 31 December 2019 compared to year ended 31 December 2018 which excludes Bank Treasury products, was EUR 4.4 billion in 2018, of which EUR 3.6 billion was in

mortgages and EUR 0.8 billion in consumer lending. Net inflow in customer deposits (excluding Retail Other consists of the Other Challengers & Growth Markets, including the bank stakes in Asia.
Bank Treasury) was EUR 5.0 billion, mainly driven by a promotional savings campaign in the fourth Both net result and underlying net result of Retail Other decreased by EUR 33 million, or 5.1%, to

2019 ING Group Annual Report on Form 20-F80

EUR 619 million in 2019 from EUR 652 million in 2018. There were no special items in 2019 andYear ended 31 December 2018 compared to year ended 31 December 2017

2018.
Retail Other consists of the Other Challengers & Growth Markets, including the stakes in Asia. Both

net result and underlying net result of Retail Other increased by EUR 83 million, or 14.6%, to EUR Retail Other’s underlying result before tax increased 0.3% to EUR 935 million in 2019, from EUR 932
652 million in 2018 from EUR 569 million in 2017. There were no special items in 2018 and 2017.
million in 2018. This was mainly due to higher income, partly offset by increased expenses and

higher risk costs.
Retail Other’s underlying result before tax increased 13.0% to EUR 932 million in 2018, from EUR

825 million in 2017. This was mainly due to higher income, partly offset by increased expenses and Total underlying income rose by EUR 194 million, or 5.9%, to EUR 3,509 million. This increase was
higher risk costs.
driven by strong results across most of the countries, whereas 2018 included a higher profit from

ING Bank’s stake in TMB due to one-offs. Net interest income rose 3.6% to EUR 2,787 million, Total underlying income rose by EUR 287 million, or 9.5%, to EUR 3,315 million. This increase was reflecting volume growth in lending and customer deposits, and a stable total interest margin. This driven by continued strong commercial results across most countries, reflecting customer growth increase was offset by accounting asymmetry in Treasury with an offset in other income. The net and higher volumes. Net interest income rose 10.4% to EUR 2,690 million, reflecting sustainable production in customer lending (excluding currency effects and Treasury) was EUR 7.8 billion, with growth in lending and customer deposits volumes and an improved total interest margin. The net increases mainly in Spain, Poland and Australia, while Turkey and Italy declined. Net customer production (excluding currency effects and Bank Treasury) in customer lending was EUR 9.6 billion, deposits grew by EUR 6.9 billion in 2019, with the largest increases in Poland, Spain and Australia.
of which EUR 6.4 billion was in mortgages and EUR 3.2 billion in other lending (mainly consumer Net commission and fee income increased 7.1% to EUR 423 million driven by increases in most loans). Net customer deposits grew by EUR 8.6 billion in 2018. Net fee and commission income rose countries, but declined in Spain and Turkey. Investment and other income rose by EUR 68 million, 2.9% driven by increases in most countries, partly offset by a decline in Turkey. Investment and mainly due to the aforementioned accounting asymmetry in Treasury and a higher dividend from other income increased by EUR 23 million, mainly due to a higher dividend from Bank of Beijing and Bank of Beijing, partly offset by a lower profit from TMB.
a higher profit contribution from ING Bank’s 25% stake in TMB (which was mainly driven by one-

offs), while previous year included a gain on the sale of MasterCard shares in Turkey.
Operating expenses increased by EUR 177 million, or 8.7%, to EUR 2,210 million. This increase was

in addition to higher regulatory costs and legal provisions, mainly due to higher expenses to Operating expenses increased by EUR 114 million, or 5.9%, to EUR 2,033 million. This increase was, support business growth and the implementation of bank-wide regulatory programmes, including next to higher regulatory costs, mainly due to higher staff expenses in most counties to support KYC.
commercial growth and higher investment s in strategic projects. Risk costs were EUR 350 million,

or 40 basis points of average customer lending, compared with EUR 284 million, or 34 basis points, Risk costs were EUR 364 million, or 38 basis points of average customer lending, compared with
in 2017. The increase was mainly attributable to higher risk costs in Italy, Romania and Poland, EUR 350 million, or 40 basis points, in 2018. The increase was mainly attributable to higher risk
while risk costs in Turkey remained on the same high level as in 2017.
costs in Spain and Poland, while risk costs in Turkey and Italy declined.

2019 ING Group Annual Report on Form 20-F81

WHOLESALE BANKINGThe full-year 2019 results for Wholesale Banking show that conditions were challenging in our| | | | | markets. The underlying result before tax dropped 27.6% to EUR 1,830 million, down from EUR |
| --- | --- | --- | --- | --- |
| Amounts in millions of euros | 2019 | 20181 | 2017 | 2,529 million in 2018. The decline reflects elevated risk costs (compared with a relatively low level a |
| Underlying income: | | | | |
| Net interest income | 3,794 | 3,686 | 3,639 | year ago), lower revenues in mainly Financial Markets and Lending, as well as higher expenses. |
| Net fee and commission income | 1,135 | 1,152 | 1,102 | |
| Investment income and other income | 369 | 673 | 919 | Lending posted an underlying result before tax of EUR 1,597 million, down 20.4% compared with |
| Total underlying income | 5,298 | 5,510 | 5,660 | |
| | | | | 2018. The decline reflects lower income combined with higher expenses (including increased |

Underlying expenditure:				regulatory costs and KYC-related expenses) and higher risk costs due to a number of large
Underlying operating expenses	2,937	2,771	2,744	individual files. Despite higher average volumes, Lending income declined, mainly due to some
Additions to the provision for loan losses	532	210	282	pressure on margins and the EUR 66 million gain related to an equity-linked bond in Belgium
Total underlying expenditure	3,469	2,981	3,026
				recorded in 2018. The underlying result before tax from Daily Banking & Trade Finance declined

Underlying result before tax	1,830	2,529	2,634	24.3% to EUR 476 million from EUR 629 million in 2018. A modest increase in income, reflecting
Taxation	464	633	832	improved margins at lower average volumes, could not compensate for higher expenses and
Non-controlling interests	14	19	15	elevated risk costs. The increased expenses reflect higher regulatory costs and KYC-related
Underlying net result	1,352	1,877	1,788
Adjustment of the EU 'IAS 39 carve-out'	–878	58	559	expenses as well as investments in Payvision and regulatory changes (including PSD2). Risk costs in
Net result	474	1,935	2,347	2019 included a sizeable provision for a suspected external fraud case.

1In 2019, the Dutch domestic midcorporates real estate finance portfolio transferred from Wholesale Banking to Retail Financial Markets recorded an underlying result before tax of EUR -121 million, compared with EUR Banking Netherlands. Comparative figures have been adjusted.
-36 million in 2018. The drop was predominantly due to lower income, which was impacted by EUR

Year ended 31 December 2019 compared to year ended 31 December 2018228 million of negative valuation adjustments versus EUR -1 million in 2018, in part offset by lower

expenses on the back of ongoing cost efficiency measures. Excluding valuation adjustments, pre-

The net result of Wholesale Banking declined to EUR 474 million in 2019 compared with EUR 1,935tax result rose by EUR 142 million compared with 2018, driven by higher client income. The

million in 2018. The adjustment of the EU ‘IAS 39 carve-out’, included in the net result, turned to aunderlying result before tax of Treasury & Other was EUR -123 million compared with EUR -70

loss of EUR 878 million in 2019, from EUR 58 million in 2018, due to fair value changes onmillion in 2018. This decline was mainly due to lower results from Treas ury-related activities and

derivatives related to asset-liability-management activities for the mortgage and savings portfoliosCorporate Investments, whereas the result of the run-off businesses improved after the EUR 123

in the Benelux, Germany, France and Czech Republic. These fair value changes are mainly a resultmillion loss on the intended sale of an Italian Lease run-off portfolio recorded in 2018. Expenses

of changes in market interest rates. No hedge accounting is applied to these derivatives under IFRS-increased mainly due to investments in KYC enhancement and innovation, while 2018 included a

IASB. The underlying net result, which excludes the adjustment of the EU ‘IAS 39 carve-out’,release from a legal provision.

declined to EUR 1,352 million from EUR 1,877 million in 2018. There were no special items in 2018

and 2017.

2019 ING Group Annual Report on Form 20-F82

Total underlying income of Wholesale Banking fell 3.8% to EUR 5,298 million compared with 2018,EUR 1,877 million from EUR 1,788 million in 2017. This increase was primarily due to a lower mainly reflecting lower revenues in Financial Markets, Lending and Tr easury-related revenues,effective tax rate supported by the impact of the corporate tax reforms in Belgium and the US.
while 2018 included the aforementioned loss on the intended sale of an Italian lease run-offThere were no special items in 2018 and 2017.
portfolio. In 2019, the net core lending book (adjusted for currency impacts and excluding Treasury and the Lease run-off portfolio) grew by EUR 1.1 billion. The inflow in net customer depositsThe underlying result before tax was EUR 2,529 million, down 4.0% from 2017, as higher results in (excluding currency impacts and Treasury) was EUR 3.1 billion. Net interest income increased 2.9%,Daily Banking & Trade Finance as well as Lending were more than offset by lower results in mainly driven by volume growth in Lending at lower margins and higher interest results in DailyFinancial Markets and Treasury & Other.
Banking & Trade Finance, especially in Bank Mendes Gans and Payments & Cash Management. Net fee and commission income declined 1.5%. Investment and other income fell by EUR 304 million,Lending posted an underlying result before tax of EUR 2,006 million, up 2.0% compared with 2017.
mainly due to lower valuation results in Financial Markets, while previous year included a gain on aHigher income, mainly due to improved margi ns and a EUR 66 million gain related to an equitybond transaction in Belgium and a loss on the intended sale of an Italian lease run-off portfolio.linked bond in Belgium in 2018, was largely offset by increased expenses (in part due to higher regulatory costs) and higher risk costs. The underlying result before tax from Daily Banking & Trade Underlying operating expenses rose 6.0% to EUR 2,937 million, in part due to higher regulatoryFinance rose to EUR 629 million from EUR 542 million in 2017. Higher income, supported by volume costs. Excluding regulatory costs, expenses rose 4.7%, mainly attributable to higher KYC, IT andgrowth and the inclusion of Payvision as from the second quarter of 2018, more than outpaced a staff-related expenses, partly offset by continued cost-efficiency savings. The underlyingslight increase in expenses (due to payment innovation initiatives and higher regulatory costs, cost/income ratio increased to 55.4%, from 50.3% in 2017.largely offset by strict cost control), whereas risk costs remained low.

Risk costs increased to EUR 532 million, or 29 basis points of average customer lending, from aFinancial Markets recorded an underlying result before tax of EUR -36 million compared with EUR relatively low EUR 210 million, or 12 basis points of average customer lending, in previous year. The68 million in 2017. The drop in result was caused by lower income, which was impacted by lower increase was mainly attributable to a number of large individual files, including a sizeable provisionclient activity and challenging global market conditions, partly offset by a modest decline in for a suspected external fraud case.expenses. The underlying result before tax of Treasury & Other fell to a loss of EUR 70 million compared with a gain of EUR 58 million in 2017. This was mainly due to lower results in the run-off Year ended 31 December 2018 compared to year ended 31 December 2017businesses (including a EUR 123 million loss recorded in the fourth quarter of 2018 on the intended The net result of Wholesale Banking declined to EUR 1,935 million in 2018 compared with EURsale of an Italian lease run-off portfolio, while 2017 included a EUR 97 million gain on the sale of an 2,347 million in 2017. The adjustment of the EU ‘IAS 39 carve-out’, included in the net result,equity stake in the real estate run-off portfolio), partly offset by lower expenses for litigation issues.
decreased to EUR 58 million in 2018, from EUR 559 million in 2017, due to fair value changes on derivatives related to asset-liability-management activities for the mortgage and savings portfoliosTotal underlying income of Wholesale Banking fell 2.7% to EUR 5,510 million compared with 2017, in the Benelux, Germany and Czech Republic. These fair value changes are mainly a result ofmainly reflecting lower revenues in Financial Markets and the loss on the intended sale of an Italian changes in market interest rates. No hedge accounting is applied to these derivatives under IFRS-lease run-off portfolio. Wholesale Banking’s net core lending book (adjusted for currency impacts, IASB. The underlying net result, which excludes the adjustment of the EU ‘IAS 39 carve-out’, rose toand excluding Bank Treasury and the Lease run-off portfolio) grew by EUR 14.9 billion in 2018. Net

2019 ING Group Annual Report on Form 20-F83

customer deposits (excluding currency impacts and Bank Treasury) shrank by EUR 0.8 billion. The
interest result rose 1.3% on 2017, whereas net fee and commission income increased 4.5%Amounts in billions of euros20192018| (supported by the inclusion of Payvision). Investment and other income fell by EUR 246 million; this | | | |
| --- | --- | --- | --- |
| | Cash and balances with central banks | 53.2 | 50.0 |
| was almost fully attributable to the aforementioned one-off results in the lease and real estate | Loans and advances to banks | 35.1 | 30.4 |
| run-off businesses. | Financial assets as at fair value through profit or loss | 96.2 | 120.5 |
| | Financial assets at fair value through other comprehensive income | 34.5 | 31.2 |
| | Securities at amortised cost | 46.1 | 47.3 |
| Underlying operating expenses increased 1.0% to EUR 2,771 million due to higher regulatory costs. | Loans and advances to customers | 608.0 | 589.7 |
| Expenses excluding regulatory costs were 0.4% lower, mainly reflecting lower performance-related | Other assets | 15.4 | 14.3 |
| expenses and strict cost control, and despite the inclusion of Payvision. The underlying cost/income | Assets held for sale | | 1.3 |
| ratio increased to 50.3% from 48.5% in 2017. Risk costs declined to EUR 210 million, or 12 basis | Total assets | 888.5 | 884.6 |

points of average customer lending, from EUR 282 million, or 18 basis points in 2017. The relatively	Deposits from banks	34.8	37.3
low risk costs in 2018 were supported by several larger net releases for clients and only a few larger	Customer deposits	574.4	555.7
new additions. On top of that, risk costs for the Italian lease run-off portfolio were significantly	Financial liabilities at fair value through profit or loss	77.9	92.7
	Other liabilities	14.4	15.5
lower than in the previous year.	Debt securities in issue/subordinated loans	135.1	133.5
	Total liabilities	836.6	834.8

B.Liquidity and capital resource s	Shareholders’ equity	51.0	49.0
Consolidated assets and liabilities	Non-controlling interests	0.9	0.8
	Total equity	51.9	49.9
The following table sets forth ING Group’s condensed consolidated assets and liabilities as of 31
December 2019 and 31 December 2018. Reference is made to the consolidated statement of	Total liabilities and equity	888.5	884.6

financial position for the complete overview of consolidated assets and liabilities of ING Group.
Shareholders’ equity per Ordinary Share (in EUR)13.0912.61

Year ended 31 December 2019 compared to year ended 31 December 2018

ING Group increased its total assets by EUR 4 billion, or 0.4%, to EUR 889 billion at year-end 2019

from EUR 885 billion on 31 December 2018. Made comparable for EUR 3 billion of positive currency

impacts, (increasing the 31 December 2018 amount due to a relative rise of other currencies versus

the euro) total assets were EUR 1 billion higher.

2019 ING Group Annual Report on Form 20-F84

The balance sheet growth was mainly due to EUR 18 billion higher loans and advances toCapital Management

customers. Also loans and advances to banks (EUR 5 billion), financial assets through other Risk and capital management remain central to the entrepreneurship of the bank. Maintaining our
comprehensive income (OCI) and cash and balances with central banks (EUR 3 billion each) were risk profile within our risk appetite and strengthening our capital base is how we grow a sustainable
up. These increases were largely offset by EUR 24 billion lower financial assets at fair value through business and achieve our strategic objectives.
profit or loss (predominantly financial assets mandatorily at fair value through profit or loss due to Our overall approach to capital management is to ensure we have enough capital to cover our
a reduction in demand for repo loans structures). Assets held for sale declined by EUR 1 billion to (economic) risks at all levels and comply with local and global regulations, while delivering a return
nil, reflecting the sale of an Italian lease run-off portfolio, which was completed on 1 July 2019.
for our shareholders and investing in innovation.

The higher loans and advances to customers was due to EUR 17 billion of growth in net core We believe that our working capital is sufficient for our present requirements.
customer lending and an increase in non-core customer lending of EUR 1 billion. The increase in In 2019, our capital position remained strong, despite higher capital requirements and additional
non-core customer lending included EUR 2 billion of positive FX impacts, a limited increase in risk-weighted asset growth from model impacts. ING’s CET1 ratio was 14.6% at the end of 2019,
Treasury lending and a EUR 1 billion decline of the WUB and Lease run-off portfolios.
which was well above our CET1 ratio ambition of around 13.5%. The CET1 ratio at the end of the

year improved as risk-weighted assets increased due to volume growth and model impacts, effects
ING Group increased its subordinated loans by EUR 3 billion. Debt securities in issue were down by that were offset by profit retention and positive risk migration.
EUR 1 billion as certificates of deposit and commercial paper were EUR 4 billion lower (related to In 2019, we issued €2.4 billion and redeemed €0.9 billion additional Tier 1 instruments.
liquidity management and the facilitation of short-term commercial activities), while other debt Furthermore, a total of €1.0 billion of Tier 2 bonds were issued whereas no Tier 2 instruments were
securities, mainly long-term debt, increased by EUR 3 billion. Customer deposits increased by EUR redeemed in 2019. In addition to these instruments, to build up our MREL capacity, we issued
19 billion. Excluding currency impacts and a EUR 5 billion decline in Treasury, net customer deposits multiple transactions in 2019 for a total amount of €6.3 billion.
growth was EUR 23 billion. Financial liabilities at fair value through profit or loss were EUR 15 billion ING’s profit generating capacity remained strong and after dividend reserves we included €2.1
lower, due to EUR 11 billion lower financial liabilities designated at FV PL and EUR 3 billion less billion of capital to our capital base.
trading liabilities.
ING’s dividend policy aims to pay a progressive dividend that will reflect considerations including

expected future capital requirements, growth opportunities available, net earnings, and regulatory
Shareholders’ equity increased by EUR 1.9 billion to EUR 51.0 billion at the end of 2019, from EUR developments. The Executive Board proposes to pay a total cash dividend of €2,689 million, or
49.0 billion on 31 December 2018. The increase was mainly due to the net result for the year 2019 €0.69 per ordinary share, over the financial year 2019. This is subject to the approval of
of EUR 3.9 billion, which was partly offset by EUR 2.6 billion of dividend paid in 2019.
shareholders at the Annual General Meeting in April 2020.

For further information regarding capital management, reference is made to Note 52 “ Capital

Management” to the consolidated financial statements. In addition to the restrictions in respect of

minimum capital and capital base requirements that are imposed by banking and other regulators

in the countries in which ING Groep N.V.’s subsidiaries operate, other limitations exist in certain

2019 ING Group Annual Report on Form 20-F85

countries. For further information, reference is made to Item 3. Key Information - Risk Factors” andAt 31 December 2019, 2018 and 2017, ING Groep N.V. had EUR nil, EUR nil and EUR nil of cash, “Item 4. Information on the Company – Regulation and Supervision.”respectively. Dividends paid to the Company by its subsidiaries amounted to EUR 2,848 million in 2019, EUR 2,517 million in 2018 and EUR 3,182 million in 2017, respectively, in each case
Funding and liquidityrepresenting dividends paid with respect to the reporting calendar year and the prior calendar year.
The amounts paid to ING Groep N.V. were received from ING Bank, EUR 2,848 million in 2019, EUR The main objective of ING’s funding and liquidity risk management is to maintain sufficient liquidity 2,517 million in 2018 and EUR 3,176 million in 2017, from ING Support Holding, EUR nil in 2019, EUR to fund the commercial activities of ING both in normal and stressed market circumstances across Nil million in 2018 and 6 million in 2017.
various geographies, currencies and tenors. This requires a diversified funding structure considering

relevant opportunities and constraints.
As a holding company, ING Groep N.V.’s total debt and capital securities outstanding to third
parties at 31 December 2019 was EUR 37,403 million, 31 December 2018 was EUR 27,901 million ING has a Funding & Liquidity (F&L) Framework which aims to maintain sufficient liquidity under and at 31 December 2017 was EUR 14,187 million. The EUR 27,901 million of debt and capital normal, adverse and stressed market circumstances. In general, ING considers the adequacy of its securities outstanding at 31 December 2019 consisted of subordinated loans of EUR 13,113 million F&L position through three main lenses: (i) Stress; (ii) Sustainability and (iii) Regulatory. For each and debenture loans of EUR 24,290 million, both specified below:
lens, ING has a set of risk appetite statements that underscore the bank’s risk appetite profile
commensurate with the principles for liquidity adequacy. These risk appetite statements are
subsequently translated into a number of metrics with appropriate boundaries and instruments to
measure and manage ING’s F&L adequacy.

ING’s funding consists mainly of retail and corporate deposits contributing 51% and 21% of the total funding respectively. These funding sources provide a relatively stable funding base. The remainder of the required funding is attracted primarily through a combination of long-term and short-term professional funding. Group Treasury manages the professional funding in line with the F&L risk appetite to ensure a sufficiently diversified and stable funding base.

The Loan-to-deposit ratio remained stable at the level of 1.06.
ING’s long-term professional funding is well diversified across maturities and currencies. The main part of it is EUR and USD denominated which is in line with the currency composition of customer lending.

For further information regarding funding and liquidity, see “Additional information – ING Group Risk Management”.

2019 ING Group Annual Report on Form 20-F86

Debenture loans

Subordinated loans

Amounts in millions of euros

Statement of

financialInterestYear of

Amounts in millions of eurosposition valuerateIssueDue date2019

Interest rateYear of issueDue date20192.755%20193 September 2031102

1.00%201913 November 20309960.100%20193 September 2025998

5.75%2019Perpetual1,3364.050%20199 April 2029896

6.75%2019Perpetual1,1213.550%20199 April 2031894

4.70%201822 March 20281,1241.625%201921 March 2029139| 2.00% | 2018 | 22 March 2030 | 759 | 1.998% | 2019 | 19 March 2029 | 46 |
| --- | --- | --- | --- | --- | --- | --- | --- |
| 1.63% | 2017 | 26 September 2029 | 997 | 1.074% | 2019 | 21 February 2029 | 173 |
| 4.00% | 2017 | 14 September 2032 | 90 | 0.810% | 2019 | 21 February 2024 | 729 |
| 4.25% | 2017 | 23 June 2032 | 146 | 3.000% | 2019 | 18 February 2026 | 1197 |
| 1.15% | 2017 | 14 June 2029 | 98 | 5.000% | 2019 | 31 January 2031 | 85 |
| 1.10% | 2017 | 31 May 2027 | 82 | 3.920% | 2019 | 23 January 2029 | 79 |
| 3.00% | 2017 | 11 April 2028 | 1,058 | 2.125% | 2019 | 10 January 2026 | 1018 |
| 2.50% | 2017 | 15 February 2029 | 764 | 3.399% | 2018 | 28 December 2030 | 71 |
| 6.88% | 2016 | Perpetual | 900 | 1.169% | 2018 | 13 December 2028 | 157 |
| 6.50% | 2015 | Perpetual | 1,123 | 0.848% | 2018 | 13 December 2023 | 880 |
| 6.00% | 2015 | Perpetual | 901 | 3.790% | 2018 | 13 December 2030 | 152 |
| 9.00% | 2008 | Perpetual | 10 | 5.000% | 2018 | 5 June 2029 | 110 |
| | | | | variable | 2018 | 5 December 2022 | 250 |
| 6.13% | 2005 | Perpetual | 631 | 2.500% | 2018 | 15 November 2030 | 1,503 |
| Variable | 2004 | Perpetual | 556 | 4.625% | 2018 | 6 January 2026 | 1,134 |
| Variable | 2003 | Perpetual | 421 | 4.100% | 2018 | 2 October 2023 | 1,347 |
| | | | 13,113 | 4.550% | 2018 | 2 October 2028 | 1,120 |

variable20182 October 2023448| At 31 December 2019 and 2018, ING Groep N.V. also owed EUR 145 million and EUR 136 million, | 2.000% | 2018 | 20 September 2028 | 1,502 |
| --- | --- | --- | --- | --- |
| | variable | 2018 | 20 September 2023 | 999 |

respectively, to ING Group companies pursuant to intercompany lending arrangements. At 311.000%201820 September 2023998

December 2019 ING Group Companies owed ING Group N.V. EUR 44,478 million (2018: EUR 34,902),1.125%201814 February 20251,006| as a result of normal intercompany transactions. | 3.950% | 2017 | 29 March 2027 | 1,344 |
| --- | --- | --- | --- | --- |
| | 3.150% | 2017 | 29 March 2022 | 1,343 |

variable201729 March 2022889| On the maturity profile of borrowings and a further description of the borrowings reference is made | 0.750% | 2017 | 9 March 2022 | 1,506 |
| --- | --- | --- | --- | --- |
| | 1.375% | 2017 | 11 January 2028 | 1,011 |
| to Notes 18 ‘Debt securities in issue’ and 19 ‘Subordinated Loans’ in the consolidated financial | 4.699% | 2007 | 1 June 2035 | 164 |

statements. The use of financial instruments for hedging purposes is described in Note 3924,290

‘Derivatives and hedge accounting’ in the consolidated financial statements.

2019 ING Group Annual Report on Form 20-F87

ING Group Consolidated Cash Flows

Year ended 31 December 2019 compared to year ended 31 December 2018

Specification of cash position:

Net cash flow from operating activities amounts to EUR 13,055 million for the year-end 2019,

Amounts in millions of euros20192018

compared to EUR 6,915 million at 31 December 2018. The increase in cash flow from operatingTreasury bills and other eligible bills43159| activities of EUR 6,140 million is explained by lower cash outflows from Loans and advances to | Amounts due from/to banks | 786 | –2,617 |
| --- | --- | --- | --- |
| | Cash and balances with central banks | 53,202 | 49,987 |
| customer (increase of EUR 14,669 million to EUR - 16,687 million in 2019), an increase in other | Cash and cash equivalents at end of year | 54,031 | 47,529 |

(increase of EUR 7,685 million to EUR + 11,752 million in 2019) mainly relating to assets

mandatorily at fair value through profit or loss and other financial liabilities at fair value through

Year ended 31 December 2018 compared to year ended 31 December 2017 profit and loss. The increases are offset by a cash outflow of trading assets and liabilities (decrease

of EUR 12,478 million to EUR – 2,568 million) and a cash outflow in loans and advances to banks Net cash flow from operating activities amounted to EUR 6,915 million for the year ended 31 (decrease of EUR 3,700 million to EUR – 3,911 million).
December 2018, compared to EUR -5,253 million at year-end 2017. The increase in cash flow from

operating activities of EUR 12,168 million was due to higher cash inflows from net trading balances, Net cash flow from investing activities amounts EUR – 2,495 million compared to EUR + 5,451 EUR 21,097 million (2018; EUR 9,910 million, 2017 EUR –11,187 million), higher cash inflows from million in 2018 the net cash flow from investing activities decreased by EUR 7,946 million. The Customer deposits EUR 1,418 million (2018 EUR 19,709 million, 2017 EUR 18,291 million) and a movement is explained by a decrease in financial assets at fair value through other comprehensive higher cash inflow from Other EUR 6,521 million (2018 EUR 4,067 million, 2017 EUR -1,751). These income in investments and advances of EUR 5,753 million to EUR – 16,270 million and securities at higher cash inflows were partly offset by an increase in cash outflows from loans and advances of amortised costs (decreased by EUR 5,708 million to EUR + 13,001 million). Moreover, financial EUR 9,966 (2018 EUR -31,356 million, 2017 EUR -21,390).
assets at fair value through other comprehensive income decreased by EUR 2,267 million to EUR +

13,390 in disposals and redemptions. These movements are offset by an increase in securities at Net cash flow from operating activities was largely affected by the cash inflow from a decrease of amortised costs of investments and advances (increase of EUR 5,717 million to EUR – 12,268 the trading assets. The cash inflow was due to lower trading balances consisting of equity million).
securities, debt securities, trading derivatives and loans and receivables. In 2017 the cash outflow

to trading assets was due to higher trading balances consisting of loans and receivables and equity Net cash flow from financing activities amounts EUR – 4,154 million in 2019, compared to EUR shares. The cash inflows related to increased customer deposits and were mainly due to increased 15,983 million in 2018. The decrease of EUR 20,137 million is explained by a decrease of EUR savings individuals and credit balances on customer accounts, this net cash inflow was in line with 61,750 million to EUR + 90,793 million in proceeds from debt securities and offset by an increase of 2017. Newly issued mortgage loans, corporate lending and personal lending led to a cash outflow EUR 36,673 million to EUR – 94,497 million in repayments of debt securities.
which was partly offset by a decrease in loans to public authorities.

The operating, investing and financing activities described above result in an increase of EUR 6,406 Net cash flow from investing activities amounted to EUR 5,451 million, from EUR 11,754 million in million in cash and cash equivalents to EUR 54,031 at year end 2019.
2017. Investments and advances in financial assets at fair value through other comprehensive

2019 ING Group Annual Report on Form 20-F88

income and securities at amortised cost amounted to EUR -10,517 million and EUR -17,985 millionSovereign Debt Exposures

respectively as in 2017 the investments in available-for-sale securities and Held-to-maturity For information regarding certain sovereign debt exposures, see Note 5 “Financial assets at fair
investments amounted to EUR -21,601 and EUR -3,609 million respectively. Disposals and value through other comprehensive income” in the financial statements and “Additional
redemptions of financial assets at fair value through other comprehensive income and securities at information ING Group Risk Management”.
amortised cost amounted to EUR 15,657 million and EUR 18,709 million respectively as in 2017 the

Disposals and redemptions of in available-for-sale securities Held-to-maturity investments

C.Research and development, patents and licenses, etc. amounted to EUR 32,788 million and EUR 2,675 million respectively.

Not applicable.
Net cash flow from financing activities amounted to EUR 15,983 million in 2018, compared to EUR -

3,948 million in 2017. The increase of EUR 19,931 million in net cash flow was mainly due higher

D.Trend information proceeds of debt securities.

For information regarding trend information, see Item 5.A of this Form 20-F.

The operating, investing and financing activities described above resulted in an increase of EUR

28,552 million in cash and cash equivalents from EUR 18,977 million at year-end 2017 to EUR

E.Off-balance sheet arrangements 47,529 million at year end 2018.
For information regarding off-balance sheet arrangements, see Note 45 ‘Contingent liabilities and

commitments’ in the financial statements and see “Risk Management” to the “Additional

Specification of cash position:information- ING Group Risk Management”.| Amounts in millions of euros | 2018 | 2017 | |
| --- | --- | --- | --- |
| Treasury bills and other eligible bills | 159 | 391 | F.Tabular disclo sure of cont ractual obligations |
| Amounts due from/to banks | –2,617 | –3,403 | |
| Cash and balances with central banks | 49,987 | 21,989 | For information about future payments in relation to pension benefit liabilities reference is made |
| Cash and cash equivalents at end of year | 47,529 | 18,977 | to Note 37 ‘Pension and other post-employment benefits’ in the consolidated financial statements. |

For information about coupon interest due on financial liabilities by maturity bucket reference is

made to Note 41 ‘Liabilities by maturity’ in the consolidated financial statements.

2019 ING Group Annual Report on Form 20-F89

Contractual obligations| | | Less than | | | More than | |
| --- | --- | --- | --- | --- | --- | --- |
| Amounts in millions of euros | Total | one year | 1-5 years | | 5 years | |
| 2019 | | | | | | |
| Lease liabilities² | 1,528 | | 217 | 668 | | 643 |
| Subordinated loans | 16,177 | | 0 | 1,780 | 14,396 | 1 |
| Debt securities in issue | 115,297 | 51,810 | | 36,895 | 26,592 | |
| Total | 133,001 | 52,026 | | 39,342 | 41,632 | |
| 2018 | | | | | | |
| Operating lease obligations | 1,376 | | 259 | 719 | | 398 |
| Subordinated loans | 13,549 | | | 1,713 | 11,836 | 1 |
| Debt securities in issue | 117,790 | 55,309 | | 41,068 | 21,413 | |
| Total | 132,715 | 55,568 | | 43,500 | 33,647 | |

¹ The maturity bucket ‘ more than 5 years’ includes subordinated loans of EUR 6,941 million (2018: EUR 5,339) with

no maturity date (perpetual).

² The lease liabilities for the period ended December 2019 has been prepared in accordance with IFRS 16.

2019 ING Group Annual Report on Form 20-F90

Item 6. Directors, Senior Management and Employees

In line with Dutch company law, the Articles of Association, the Dutch Corporate Governance Code

as well as the Charter of the Supervisory Board, all members of the Supervisory Board are required

A.Directors and senior management to:

◾act in accordance with the interests of ING Group and the business connected with it, taking into

Supervisory Board account the relevant interests of all stakeholders of ING Group;

◾perform their duties without mandate and independent of any interest in the business of ING

Appointment, suspension and dismissalGroup; and

◾refrain from supporting one interest without regard to the other interests involved.
Members of the Supervisory Board are appointed, suspended and dismissed by the General

Meeting. For the appointment of Supervisory Board members, the Supervisory Board may draw up According to the Banker’s Oath that was taken by the members of the Supervisory Board, they a binding list, which may be rendered non-binding by the General Meeting.
must carefully consider the interests of all stakeholders of ING. In that consideration they must put

the customer’s interests at the centre of all their activities. Certain resolutions of the Executive A resolution of the General Meeting to render this list non-binding, or to suspend or dismiss
Board, specified in the Articles of Association, in the Charter of the Management Board and in Supervisory Board members without this being proposed by the Supervisory Board, requires an
Charter of the Supervisory Board, are subject to approval of the Supervisory Board.
absolute majority of the votes cast. Additionally, this majority must represent more than half of the

issued share capital. The Articles of Association exclude the waiver of the latter requirement in a Pursuant to the Articles of Association ING Group indemnifies the members of the Supervisory second General Meeting. This ensures that significant proposals of shareholders cannot be adopted Board as far as legally permitted against direct financial losses in connection with claims from third in a General Meeting with a low attendance rate and can only be adopted with substantial support parties lodged or threatened to be lodged against them by virtue of their service as a member of of ING Group’s shareholders.
the Supervisory Board.

Candidates for appointment to the Supervisory Board are subject to a suitability and reliability

Profile of members of the Supervisory Board assessment by DNB and ECB and must continue to meet these while in function.

The Supervisory Board has drawn up a profile to be used as a basis for its composition. It is available

Function of the Supervisory Boardon the website of ING Group(www.ing.com).

The function of the Supervisory Board is to supervise the policy of the Executive Board and the In view of their experience and the valuable contribution that former members of the Executive general course of affairs of ING Group and its business, as well as to provide advice to the Executive Board can make to the Supervisory Board, it has been decided, taking into account the size of the Board.
Supervisory Board and ING’s wide range of activities that such individuals may become members of

2019 ING Group Annual Report on Form 20-F91

the Supervisory Board of ING Group. Former Executive Board members must wait at least one yearbackground has been maintained. In terms of nationality, the ratio between Dutch and non-Dutch

before becoming eligible for appointment to the Supervisory Board.nationalities in 2019 was 44 percent - 56 percent.

Former members of the Executive Board are not eligible for appointment to the position ofTerm of appointment of members of the Supervisory Board

chairman or vice-chairman of the Supervisory Board.
As a general rule, Supervisory Board members step down from the Supervisory Board in the fourth,

eighth, 10thand 12thyear after their initial appointment. They are eligible for re-appointment in the After a former member of the Executive Board has been appointed to the Supervisory Board, this fourth year after their initial appointment and, with explanation, also in the eighth and 10th year.
member may also be appointed to one of the Supervisory Board’s committees. However,

appointment to the Audit Committee is only possible if the individual in question resigned from the Under special circumstances the Supervisory Board may, with explanation, deviate from this
Executive Board at least three years prior to such appointment.
general rule, for instance to maintain a balanced composition of the Supervisory Board and/or to

preserve valuable expertise and experience.The retirement schedule is available on the website of The Supervisory Board of ING shall consist of a mix of persons with executive experience, preferably ING Group (www.ing.com).
gained in the banking sector, experience in corporate governance of large stock-listed companies

and experience in the political and social environment in which such companies operate. In the

Ancillary positions/conflicting interests selection of Supervisory Board members, ING is striving for a balance in nationality, gender, age,
Members of the Supervisory Board may hold other positions, including directorships, either paid or and educational and work background. In addition, there should be a balance in the experience and
unpaid.
affinity with the nature and culture of the business of ING and its subsidiaries. More specifically ING

strives to have at least 30 percent of the seats held by women, and at least 30 percent of the seats CRD IV restricts the total number of supervisory board positions or non-executive directorships with by men. These guidelines that relate to the composition of the Supervisory Board, are laid down in commercial organisations that may be held by a Supervisory Board member to four, or to two, if the Supervisory Board Profile. Based on this profile, the Supervisory Board is responsible for the Supervisory Board member also has an executive board position. The European Central Bank selecting and nominating candidates for appointment or reappointment to the Supervisory Board.
may, under special circumstances, permit a Supervisory Board member to fulfil an additional

supervisory board position or non-executive directorship. Positions with, inter alia, subsidiaries or With respect to gender diversity, three female members currently serve on the Supervisory Board:
qualified holdings are not taken into account in the application of these restrictions. Such positions Mariana Gheorghe, Margarete Haase and Herna verhagen, the latter appointed on 23 April 2019,
may not conflict with the interests of ING Group. It is the responsibility of the individual member of with her membership becoming effective per 1 October 2019. With the appointment of Herna
the Supervisory Board and the Supervisory Board collectively to ensure that the directorship duties Verhagen in 2019 the Supervisory Board has met its 30 percent gender diversity target.
are performed properly and are not affected by any other positions that the individual may hold

outside ING Group.
We believe that the Supervisory Board, diversity wise, is well balanced in terms of other relevant

diversity aspects. Overall, the preferred emphasis on members with a financial or banking

2019 ING Group Annual Report on Form 20-F92

Permanent committees of the Supervisory Board Members of the Supervisory Board are to disclose material conflicts of interest (including potential

conflicts of interest) and to provide all relevant information relating to them. The Supervisory BoardOn 31 December 2019, the Supervisory Board had four permanent committees: the Risk

– without the member concerned taking part – then decides whether a conflict of interest exists.Committee, the Audit Committee, the Nomination and Corporate Governance Committee and the

Remuneration Committee. An organisational chart of the four permanent committees of the

In case of a conflict of interest, the relevant member of the Supervisory Board abstains fromSupervisory Board can be found above.

discussions and decision-making on the topic or the transaction in relation to which he or she has a

conflict of interest with ING Group.The organisation, powers and conduct of the Supervisory Board are detailed in the Supervisory

Board Charter that can be found onwww.ing.com.

Transactions involving actual or potential conflicts of interest

Separate charters have been drawn up for the Risk Committee, the Audit Committee, the In accordance with the Dutch Corporate Governance Code, transactions involving members of the Nomination and Corporate Governance Committee and the Remuneration Committee. These Supervisory Board in which there are material conflicting interests are disclosed in the Annual charters are available on the website of ING Group(www.ing.com). A short description of the duties Report.
of the four permanent committees follows below.

Any relation that a member of the Supervisory Board may have with ING Group subsidiaries as an The Risk Committee assists and advises the Supervisory Board in monitoring the risk profile of ING ordinary, private individual is not considered a significant conflict of interest. Such relationships are as a whole as well as on the structure and operation of the internal risk management and control not reported, with the exception of any loans that may have been granted.
systems. On 31 December 2019, the members of the Risk Committee were: Robert Reibestein

(chairman), Jan Peter Balkenende, Eric Boyer de la Giroday, Mariana Gheorghe, Hermann-Josef

Independence Lamberti and Mike Rees.
The members of the Supervisory Board are requested to assess annually whether the criteria of

dependence set out in the Dutch Corporate Governance Code do not apply to them and to confirm The Audit Committee assists and advises the Supervisory Board in monitoring the integrity of the
this in writing. On the basis of these criteria, all members of the Supervisory Board, with the financial statements of ING Group and ING Bank N.V., in monitoring compliance with legal and
exception of Eric Boyer de la Giroday, are to be regarded as independent on 31 December 2019.
regulatory requirements and in monitoring the independence and performance of ING Group’s
Eric Boyer de la Giroday is not considered independent because of his former position as Chairman internal and external auditors. On 31 December 2019, the members of the Audit Committee were:
of the Board of Directors of ING Belgium SA/NV and his former positions as member of the Executive Hermann-Josef Lamberti (chairman), Eric Boyer de la Giroday, Margarete Haase, Robert Reibestein
Board of ING Group and vice-chairman of the Management Board Banking of ING Bank N.V. On the and Hans Wijers.
basis of the NYSE listing standards, all members of the Supervisory Board are independent.

The appointment of Margarete Haase as supervisory board member became effective as per 1 May

2018 (as decided by the Supervisory Board in January 2018) and per that date Margarete Haase is

considered a financial expert as defined by the SEC in its final rules implementing Section 407 of the

2019 ING Group Annual Report on Form 20-F93

Sarbanes-Oxley Act of 2002. Eric Boyer de la Giroday is a financial expert as defined in the DutchING regulations regarding insiders are available onwww.ing.com.

Corporate Governance Code considering his academic background as well as his knowledge and experience in his previous role as board member and vice-chairman of ING Groep N.V. and ING Bank

Information on members of the Supervisory Board N.V .

G.J. (Hans) Wijers (Chairman) The Nomination and Corporate Governance Committee’s tasks include advising the Supervisory
Board on the composition of the Executive Board and Supervisory Board and assisting the(Born 1951, Dutch nationality, male; appointed in 2017, term expires in 2021)
Supervisory Board in monitoring and evaluating the corporate governance of ING as a whole andFormer position: chief executive officer and member of the Executive Board of AkzoNobel N.V.
the reporting thereon in the Annual Report and to the General Meeting, and advising the
Supervisory Board on improvements. On 31 December 2019, the members of the Nomination and

Relevant positions pursuant to CRD IV
Corporate Governance Committee were: Hans Wijers (chairman), Mariana Gheorghe and Herna Chairman of the Supervisory Board of ING Groep N.V./ING Bank N.V. and member of the Supervisory Verhagen.
Board of Hal Holding N.V.

The Remuneration Committee’s tasks include advising the Supervisory Board on the terms and

Other relevant ancillary positions conditions of employment (including remuneration) of the members of the Executive Board and on Chairman of the Supervisory Board of Het Concertgebouw N.V. and member of the Temasek the policies and general principles on which the terms and conditions of employment of the European Advisory Panel of Temasek Holdings Private Limited.

members of the Executive Board and of senior managers of ING Group and its subsidiaries are based. On 31 December 2019 the members of the Remuneration Committee were: Mariana Gheorghe (chairman until 1 October 2019), Herna Verhagen (chairman from 1 October 2019),

H.J.M. (Hermann-Josef) Lamberti (Vice-Chairman) Robert Reibestein and Hans Wijers.
The composition of the Supervisory Board Committees can be found on ING Group’s website(Born 1956, German nationality, male; appointed in 2013, term expires in 2021)
www.ing.com.Former position: chief operating officer of Deutsche Bank AG.

Remuneration and share ownership

Relevant positions pursuant to CRD IV

Remuneration of the members of the Supervisory Board is determined by the General Meeting andVice-chairman of the Supervisory Board of ING Groep N.V./ING Bank N.V., non-executive member of
is not dependent on the results of ING Group. Details of remuneration are provided in thethe Board of Directors of Airbus Group N.V., chairman of the Supervisory Board of Addiko Bank
Remuneration report. Members of the Supervisory Board are permitted to hold shares in the share(including senior business adviser of Advent International GmBH) and director of Frankfurt
capital of ING Group for long-term investment purposes. Transactions by members of theTechnology Management GmbH. The ECB has authorised Hermann-Josef Lamberti to hold a third
Supervisory Board in these shares are subject to the ING regulations for insiders.non-executive position i.e. in deviation of the maximum of two provided for in section 91 of CRD IV.

2019 ING Group Annual Report on Form 20-F94

J.P. (Jan Peter) BalkenendeRelevant positions pursuant to CRD IV

Member of the Supervisory Board of ING Groep N.V./ING Bank N.V. and non-executive director of (Born 1956, Dutch nationality, male; appointed in 2017, term expires in 2021)
ContourGlobal Plc.
Former position: partner EY (on corporate responsibility).

Other relevant ancillary position

Relevant positions pursuant to CRD IV
Member of the Advisory Council of the Bucharest Academy of Economic Studies, Romania.
Member of the Supervisory Board of ING Groep N.V./ING Bank N.V.

M. (Margarete) Haase

Other relevant ancillary positions

Professor of governance, institutions and internationalisation at Erasmus University Rotterdam (the(Born 1953, Austrian nationality, female; appointed in 2017, term expires in 2021)
Netherlands), external senior adviser to EY, member of the Supervisory Board of GoldschmedingFormer position: CFO of Deutz AG.
Foundation, chairman of the Board of Maatschappelijke Alliantie (the Netherlands) and chairman of the Board of Noaber Foundation.Relevant positions pursuant to CRD IV

Member of the Supervisory Board of ING Groep N.V./ING Bank N.V. (effective per 1 May 2018),

E.F.C.B. (Eric) Boyer de la Giroday member of the Supervisory Board and chairwoman of the Audit Committee of Fraport AG, member
of the Supervisory Board and chairwoman of the Audit Committee of Osram Licht AG and member (Born 1952, Belgian nationality, male: appointed in 2014, term expires in 2022)
of the Supervisory Board and chairwoman of the Audit Committee of Marquard & Bahls AG.
Former position: member of the Executive Board of ING Groep N.V. and ING Bank N.V.

Other relevant ancillary positions

Relevant positions pursuant to CRD IV
Chairwoman of the Employers Association of Kölnmetall and member of the German Corporate Member of the Supervisory Board of ING Groep N.V./ING Bank N.V. and non-executive chairman of
Governance Commission.
the Board of Directors of ING Belgium SA/NV.

A.M.G. (Mike) Rees

Other relevant ancillary position

Non-executive director of the Board of Directors of the Instituts Internationaux de Physique et de(Born 1956, British nationality, male; appointed in 2019, term expires in 2023)
Chimie fondés par Ernest Solvay, asbl.Former position: Deputy CEO of Standard Chartered Bank PLC.

M. (Mariana) GheorgheRelevant positions pursuant to CRD IV

(Born 1956, Romanian nationality, female, appointed in 2015, term expires in 2023)Member of the Supervisory Board of ING Groep N.V./ING Bank N.V., founder and consultant of
Former position: CEO of OMV Petrom SA.Strategic Vitality Ltd and non-executive chairman of Athla Capital Management Ltd.

2019 ING Group Annual Report on Form 20-F95

Other relevant ancillary positionOther relevant ancillary positions

Non-executive director Mauritius Africa FinTech Hub.Member of the Supervisory Board, nomination committee and sponsering committee of Het

Concertgebouw N.V., member of the advisory council of Goldschmeding Foundation and member

R.W.P. (Robert) Reibesteinof the Board of VNO-NCW (inherent to her position at Post NL N.V.).

(Born 1956, Dutch nationality, male; appointed in 2012 as an observer, full member as of 2013,

Company secretary stepped down per 1 January 2020)

Former position: senior partner of McKinsey & Company.The Supervisory Board and Executive Board are assisted by the company secretary Cindy van

Eldert-Klep.

Relevant positions pursuant to CRD IV

Changes in the composition Member of the Supervisory Board of ING Groep N.V./ING Bank N.V. and member of the Supervisory

Board of IMC B.V.
Mike Rees and Herna Verhagen were appointed during the Annual General Meeting of 23 April

Henk Breukink retired from the Supervisory Board as per the end of the Annual General

Other relevant ancillary positions

Meeting of 2019. Robert Reibestein stepped down from the Supervisory Board as per 1 January Member of the Supervisory Board of Stichting World Wildlife Fund (the Netherlands) and member of 2020.
the advisory committee of Forward.one.

Appointment, suspension and dismissal

H.W.P.M.A. (Herna) Verhagen

Members of the Executive Board are appointed, suspended and dismissed by the General Meeting.
(Born 1966, Dutch nationality, female; appointed in 2019, term expires in 2023)
For the appointment of Executive Board members, the Supervisory Board may draw up a binding Former position:member of the Supervisory Board of SNS Reaal N.V. (now: SRH N.V.).
list, which may be rendered non-binding by the General Meeting. A resolution of the General

Meeting to render this list non-binding, or to suspend or dismiss Executive Board members without

Relevant positions pursuant to CRD IV this being proposed by the Supervisory Board, requires an absolute majority of the votes cast.
Member of the Supervisory Board of ING Groep N.V./ING Bank N.V. (per 1 October 2019), CEO of Additionally, this majority must represent more than half of the issued share capital. The Articles of PostNL N.V. and non-executive Board member and chairwoman of the Nomination Committee of Association exclude the waiver of the latter requirement in a second General Meeting. This ensures Rexel SA.
that significant proposals of shareholders cannot be adopted in a General Meeting with a low

attendance rate and can only be adopted with substantial support of ING Group’s shareholders.

Other relevant ancillary positions

Member of the Supervisory Board, nomination committee and sponsering committee of Het Candidates for appointment to the Executive Board are subject to a suitability and reliability

Concertgebouw N.V., member of the advisory council of Goldschmeding Foundation and member assessment by DNB and ECB and must continue to meet these while in function.

of the Board of VNO-NCW (inherent to her position at Post NL N.V.).

2019 ING Group Annual Report on Form 20-F96

Function of the Executive Boardthe desired nature and culture of the business of ING. ING strives to have at least 30 percent of the

seats held by women, and at least 30 percent of the seats by men.
The Executive Board is charged with the management of ING Group. This includes responsibility for

setting and achieving ING Group’s strategy, objectives and policies, as well as the ensuing delivery In 2018, ING introduced a new principle in a bid to bolster diversity within our organisation. The 70 of results. It also includes the day-to-day management of ING Group. The Executive Board is percent principle gives managers a basis for building mixed teams around appropriate dimensions accountable for the performance of these duties to the Supervisory Board and the General Meeting.
of diversity (with a focus on gender, nationality and age group) and strives for a 30 percent The responsibility for the management of ING Group is vested in the Executive Board collectively.
difference in team make-up. It is our ambition to adhere to this principle across the organisation The organisation, powers and modus operandi of the Executive Board are detailed in the Charter of within both local and global teams. This principle is incorporated into succession planning for the the Management Board.
Executive Board.

The Charter of the Management Board is available at www.ing.com.

Diversity and succession planning

According to the Banker’s Oath that is taken by the members of the Executive Board, they mustThe guidelines that relate to the composition of the Executive Board, are laid down in the Executive

carefully consider the interests of all stakeholders of ING. In that consideration they must put theBoard Profile. Based on this profile, the Supervisory Board is responsible for selecting and

customer’s interests at the centre of all their activities.nominating candidates for appointment or reappointment to the Executive Board.

ING Group indemnifies the members of the Executive Board against direct financial losses in

connection with claims from third parties, as far as permitted by law, on the conditions laid down inFinding suitable candidates remains challenging, as there are numerous requirements to take into

the Articles of Association and their commission contract. ING Group has taken out liabilityaccount, including gender to enhance the composition of the Executive Board and specific criteria

insurance for the members of the Executive Board.for each function, including regulatory requirements.

Profile of members of the Executive BoardAs an example to demonstrate the aforementioned: with the unexpected departure of the previous

CFO Koos Timmermans, in early 2018, the Supervisory Board was faced with the challenge of ING Group aims to have an adequate and balanced composition of its Executive Board. The appointing a successor as soon as possible. For the succession of the CFO position we reviewed a Supervisory Board annually assesses the composition of the Executive Board on a continuous basis.
number of suitable candidates from diverse backgrounds. When searching new Executive Board

members, the Supervisory Board looks broadly at diversity – considering all aspects as well as The Supervisory Board has drawn up a profile to be used as a basis for selecting members of the primarily looking to ensure ING has the best candidate for the job.
Executive Board. It is available on the website of ING Group (www.ing.com).

Succession planning ING aims for the Executive Board of ING to consist of a diverse selection of persons with executive
Currently, there are no female members of the Executive Board, although our ambition of gender experience, preferably gained in the banking sector, experience in corporate governance of large
diversity remains unchanged. The succession planning for Executive Board -positions is continually stock-listed companies and experience in the political and social environment in which such
worked on, balancing the career advancement of (female) senior managers, considering female companies operate. In addition, there should be a good balance in the experience and affinity with

2019 ING Group Annual Report on Form 20-F97

candidates fit for the role and bringing in talents from outside the bank. In view of the appointmentproducts in which the granting of credit is of a subordinated nature, e.g. credit cards and overdrafts terms of the current Executive Board members (every four years) ING considers it likely that thein current account, because of a lack of materiality.

preferred gender balance will not be achieved in the short term as replacements are not currently envisaged. We are therefore unable to set a clear deadline to reach this gender balance.For an overview of loans granted to members of the Executive Board, see the ‘Remuneration report’ chapter.
We are also looking long term and taking steps to improve the appointment of women in senior positions throughout the bank in line with our recently adopted diversity and inclusion principle.

Information on members of the Executive Board

Remuneration and share ownership

R.A.J.G. (Ralph) Hamers, chief executive officer (‘CEO’) Members of the Executive Board are permitted to hold shares in the share capital of ING Group for (Born 1966, Dutch nationality, male; appointed in 2013, will step down as of 30 June 2020)
long-term investment purposes. Transactions by members of the Executive Board in these shares

are subject to the ING regulations for insiders. These regulations are available on the website of ING Ralph Hamers has been a member of the Executive Board of ING Group since 13 May 2013 and was Group (www.ing.com).
appointed CEO and chairman of the Executive Board and the Managing Board Banking on 1 October 2013. He is responsible for the proper functioning of the Executive Board, the Management Board Details of the remuneration of members of the Executive Board, including shares granted to them, Banking and its committees, formulating and implementing ING’s strategy and acting as main together with additional information, are provided in the ‘Remuneration report’ chapter.
contact for the Supervisory Board. He is also responsible for the following departments: Innovation,
Ancillary positions/conflicting interestsLegal, Corporate Strategy, Corporate HR, CoE Comms & Brand Experience and Corporate Audit Services. He joined ING in 1991 and has held various positions including global head Wholesale No member of the Executive Board has corporate directorships at listed companies outside ING.
Banking Network from 2007 to 2010, head of Network Management for Retail Banking Direct & International from 2010 to 2011, and CEO of ING Belgium and Luxembourg from 2011 to 2013. Due

Transactions involving actual or potential conflicts of interest to the resignation of the head of Market Leaders in July 2019, he has taken up this role on an In accordance with the Dutch Corporate Governance Code, transactions with members of theinterim basis until a replacement is found. In this interim role he is also responsible for ING Bank’s Executive Board in which there are significant conflicts of interest will be disclosed in the Annualoperations in the Benelux. He holds a Master of Science degree in Business Report.Econometrics/Operations Research from Tilburg University, the Netherlands.
As announced on 20 February 2020, Ralph Hamers will step down from his position and leave ING Significant conflicting interests are considered to be absent and are not reported if a member ofas of 30 June 2020. He will join UBS on 1 September 2020 and will become group chief executive the Executive Board obtains financial products and services, other than loans, which are providedofficer per 1 November 2020. He will remain in his role as chief executive officer of ING Groep N.V.
by ING Group subsidiaries in the ordinary course of their business on terms that apply to alland ING Bank N.V. until 30 June 2020 continuing to run the daily business and working with the employees. In connection with the aforementioned, the term loans does not include financial

2019 ING Group Annual Report on Form 20-F98

Executive Board and the Management Board Banking to ensure a smooth transition of leadership.Member and CFO of the Executive Board of ING Groep N.V., member and CFO of the Management Further announcements on the succession process will be made if and when appropriate.Board Banking of ING Bank N.V., and Non-executive member of the board of ING Belgium N.V./S.A.

Relevant positions pursuant to CRD IV1S.J.A. (Steven) van Rijswijk, chief risk officer (‘CRO’)

Chairman and CEO of the Executive Board of ING Groep N.V. and of the Management Board Banking (Born 1970, Dutch nationality, male; appointed in 2017, term expires in 2021)
of ING Bank N.V.

Steven van Rijswijk has been a member of the Executive Board since 8 May 2017. He was appointed Other relevant ancillary positionsCRO on 1 August 2017. He is also a member and CRO of the Management Board Banking. Before Member of the Management Board of the Nederlandse Vereniging van Banken (NVB), member ofbecoming a member of the Executive Board, he was global head of Client Coverage within ING the Board of Directors of the Institute of International Finance, Inc., non-executive member of theWholesale Banking. Steven van Rijswijk joined ING in 1995 in the Corporate Finance team holding board Concertgebouw orkestandmember of UNICEF’s Global Board of the Young People’s Agenda.various positions in the areas of Mergers & Acquisitions and Equity Markets. He holds a master’s degree in business economics from Erasmus University Rotterdam (the Netherlands).

T. (Tanate) Phutrakul, chief financial officer (‘CFO’)

Relevant positio ns pursuant to CRD IV (Born 1965, Thai nationality, male; appointed in 2019, term expires in 2023)

Member and CRO of the Executive Board of ING Groep N.V. and member and CRO of the Management Board Banking of ING Bank N.V.
Tanate Phutrakul was appointed as chief financial officer of ING Groep N.V. and ING Bank N.V. and member of the Management Board Banking of ING Bank on 7 February 2019. Subsequently, he was

Changes in the composition appointed as a member of the Executive Board of ING Groep N.V. at the Annual General Meeting on 23 April 2019.Tanate Phutrakul was appointed as a member of the Executive Board of ING Groep N.V. at the Tanate Phutrakul is responsible for ING’s financial departments, Group Treasury (including capitalAnnual General Meeting on 23 April 2019. As announced on 20 February 2020, Ralph Hamers will management activities), Investor Relations, Group Research and Regulatory & International Affairs.step down as chief executive officer of ING Groep N.V. and ING Bank N.V. as of 30 June 2020. He will Before his appointment to the Executive Board, he was ING Group controller in Amsterdam andjoin UBS on 1 September 2020 and will become group chief executive officer per 1 November 2020.
between 2015-2018 he was the CFO of ING in Belgium.Further announcements on the succession process will be made if and when appropriate.

He holds a master’s degree in Engineering from Imperial College, University of London, and an MBA from Harvard Business School.

Relevant positions pursuant to CRD IV

1The fourth EU Capital Requirements Directive 2013/36/EU 2019 ING Group Annual Report on Form 20-F99

B.Compensationremuneration policies and share details of remuneration awarded in 2019 to the Executive Board,

including variable remuneration, and to the Supervisory Board.

Remuneration report Thereafter, we set out the remuneration approach that applies to all employees and explain more

about how total direct compensation and variable remuneration work within ING. We also explain

the performance management process and its link to remuneration, and we provide more

Our view on remuneration information on the measures we have in place to mitigate risk.
FOR INFORMATION ONLY

Overall, the Supervisory Board has concluded that the Executive Board members did well to deliver ING’s remuneration approach is designed to attract, motivate and our results in 2019. Although the underlying result before tax and underlying return on equity

retain leaders and qualified staff who have the skills, abilities,decreased compared to 2018, good progress was made in the execution of the Think Forward

strategy. This is shown by the continued growth of primary customers, ongoing execution of the values and behaviours needed to achieve our strategy. It aims to KYC enhancement programme with strong governance from top management and further ensure we offer well -balanced remuneration within our risk progress in sustainability.

appetite, promoting effective risk management. At the same time,

Looking ahead, there is an additional section in this year's report outlining the Supervisory Board's we take into account our responsibility to our customers, society proposal for remuneration policies for the Executive Board and the Supervisory Board for the and other stakeholders, whose trust – quite simply – is our licence coming years.

to operate.

This 2019 remuneration report is our first under the requirements of the Dutch Act implementing

the Shareholder Rights Directive II (SRD II). This report is also drafted in the spirit of the European ING’s remuneration principles are important to achieve the bank’s strategy, its purpose – to
Commission’s non-binding draft guidelines for disclosure. We intend to update our 2020 empower people to stay a step ahead in life and in business – and its risk profile. These principles
remuneration report to reflect the final guidelines, which we expect will have been published by apply to all employees, including members of the Executive Board (hereafter ‘EB’). They aim to
then, also taking into account the advisory vote of shareholders regarding this 2019 remuneration maintain a balance between short-term and long-term value creation for all stakeholders while
report.
being responsible and fair. Ultimately, it’s about making sure we are able to effectively reward

success and avoid rewarding for failure.

Our starting point In this report we look back on the year 2019. We report on ING’s performance and how 2019 events The Supervisory Board acknowledges that in the past it has not always got its stance on have impacted remuneration. We outline the current Executive Board and Supervisory Board remuneration right. This was especially apparent in 2018, when a proposal to amend the

2019 ING Group Annual Report on Form 20-F100

remuneration policy of the Executive Board elicited much criticism. It was subsequently withdrawnThe insights gained from the stakeholder engagement process have significantly contributed to the and the Supervisory Board promised to carry out an extensive review of the remuneration policy.quality of the remuneration policy that we intend to propose to shareholders at the next Annual General Meeting (hereafter ‘AGM’) in April 2020. Both myself and my colleagues on the Supervisory We did this review in 2019, in consultation with advisory bodies and a broad range of stakeholders,Board highly appreciate the participation of stakeholders and the meaningful insights they holding meaningful discussions to make sure our remuneration approach and subsequent proposalprovided.
achieves the right balance among the various viewpoints and interests.

Proposed way forward

Stakeholder engagement Based on the various viewpoints, interests, remarks and concerns, going forward we are proposing A long list of stakeholders participated in these discussions, including our Dutch Central Worksa moderate annual base salary increase linked to an external indexation reference point such as a Council, representatives of Dutch trade unions, the Advisory Council of ING Netherlands, tradeconsumer price index and ING’s CLA increases.
bodies and regulatory and governmental authorities such as the Dutch central bank and the European Central Bank. A number of institutional shareholders together holding approximatelyTo increase the relevancy of our peer group, the Supervisory Board is proposing to use a smaller 24% of ING’s share capital were also consulted, as well as proxy advisory firms and Dutchone based on geography, relevant talent market, size and governance framework. We intend to shareholder advocacy groups. A specialised market research firm elicited qualitative feedback frominclude a balancing factor to ensure we also consider relevant peer companies that may not fulfil customers, and we asked current members of the Executive Board for their views, in line with thethe other criteria. The proposed benchmark consists of eight comparable Dutch companies and Dutch Corporate Governance Code.eight relevant European financial services providers.

In these dialogues the most contentious point was the level of total direct compensation. SomeAmong other things it aims to provide more clarity on the performance metrics to be used for investors were concerned about ING’s ability to attract the relevant talent. Other stakeholders wereawarding variable remuneration, how targets are set and how achievements are measured, as well more critical about the general remuneration level. There was also criticism that the EURO STOXXas reflecting ING’s risk culture and compliance initiatives.

50 peer group, which ING uses as a benchmark for remuneration, includes too many companies that are not sufficiently comparable.Subject to approval by shareholders at the next AGM, the new remuneration policies for Executive Board and Supervisory Board members will become effective retroactively from On the subject of variable remuneration, stakeholders understood and supported the continuation1 January 2020.
of this within the limits of Dutch legislation (i.e. a maximum of 20% of base salary). There was a clear ask for more transparency about the metrics used to determine variable remuneration andAs the discussions with stakeholders last year showed, remuneration is an important topic for how these are applied for the performance year.many stakeholder groups, who raised varying viewpoints on the topic. Myself and my colleagues on the Supervisory Board are fully committed to making sure we get our approach to remuneration

2019 ING Group Annual Report on Form 20-F101

right – for now and in the future. It’s about achieving a balance that is right for ING, for customers, shareholders, other stakeholders and society at large.

Herna Verhagen Chairman of the Supervisory Board Remuneration Committee

2019 ING Group Annual Report on Form 20-F102

Remuneration Report Executive Board and Supervisory BoardAfter the very challenging year 2018, a majority of shareholders at the AGM in April 2019 voted

against discharge of the Executive Board and Supervisory Board members from their potential FOR ADVISORY VOTE AT 2020 AGMliability against the company for their duties performed in 2018. The Supervisory Board and Executive Board fully understand and share the underlying disappointment, especially regarding This part of the Remuneration Report explains how the 2019 EB Remuneration Policy and thethe shortcomings in the prevention of financial and economic crime, which was also expressed by current SB Remuneration was implemented during 2019. This part is the Remuneration Report asshareholders in the many direct contacts during the year. Both boards have taken the vote as a referred to in the Dutch Act implementing Shareholder Rights Directive II (SRD II). Thisclear signal and firm encouragement to continue with the enhancement programme announced in Remuneration Report will be presented to the 2020 AGM for an advisory vote. In the RemunerationSeptember 2018 and ensure we make structural improvements to bring our gatekeeping function Report 2020 an explanation will be included on how the result thereof has been taken into account.in the area of customer due diligence and anti-money laundering to the appropriate level.
Also the requirements for the report prepared by the Supervisory Board as stated in the Dutch Corporate Governance Code are taken into account.

Executive Board remuneration policy

This 2019 Remuneration Report is our first under the requirements of the Dutch Act implementingThe current Executive Board remuneration policy (hereafter called the 2019 EB Remuneration
Shareholder Rights Directive II (SRD II). This report is also drafted in the spirit of the draft (non-Policy) complies with applicable laws and regulations and is in line with the remuneration principles
binding) guidelines for disclosure from the European Commission. As such, 2019 should bethat apply to all employees.

considered a transitional year. In 2020, we aim to disclose fully in line with these final guidelines.
The current remuneration policy for the Executive Board was adopted by shareholders at the AGM on 27 April 2010. Subsequent amendments to this policy were adopted at AGMs on:

Business events 2019 9 May 2011 in response to new regulatory requirements ◾ In February 2019, Tanate Phutrakul was appointed as ING’s chief financial officer and a member of12 May 2014 with respect to pensions for the Executive Board ◾ the Management Board Banking. He was subsequently appointed to the Executive Board at the11 May 2015 to lower the maximum variable remuneration in line with legal requirements and ◾ AGM on 23 April 2019. Tanate Phutrakul succeeded Koos Timmermans who, in consultation withspecify that variable remuneration for the Executive Board be paid fully in shares the Supervisory Board, stepped down from his position as chief financial officer and member of the8 May 2017 to extend the deferral period of the variable remunerat ion from three to five years.
◾ Executive Board of ING Gro up on 7 February 2019.
For 2019, the remuneration policy for the Executive Board remained unchanged. Shareholders will At the 2019 AGM shareholders approved the reappointment of Mariana Gheorghe and thebe asked to vote on a revised Executive Board remuneration policy at the 2020 AGM, which is a appointment of Mike Rees and Herna Verhagen to the Supervisory Board.binding vote. For further information on the revised policy, we refer to the Chairman’s letter.
Supervisory Board member Robert Reibestein, announced his early resignation effective 1 January 2020 because of persistent personal health issues.

2019 ING Group Annual Report on Form 20-F103

Total direct compensationPension

Total direct compensation for the Executive Board is determined and reviewed periodically by the Since 1 January 2015, all members of the Executive Board have participated in the Collective
Supervisory Board. In line with the 2019 Executive Board Remuneration Policy, the Executive Defined Contribution (CDC) pension plan with respect to their annual salary-up to €107,593 for
Board’s total direct compensation for 2019 was compared to a peer group EURO STOXX 50 2019. This is similar to all employees working in the Netherlands without a supplementary pension
companies. The total direct compensation under the 2019 Executive Board Remuneration Policy is scheme. Above this amount, members of the Executive Board are compensated for the lack of
below the median of the EURO STOXX 50. This approach is in line with the requirements laid down pension accrual by means of a savings allowance (see Benefits), to be annually determined, on the
in the Dutch Banking Code.
same terms that apply to other participants in the Dutch pension scheme.

Variable remuneration

Benefits

Variable remuneration for Executive Board members is limited to a maximum of 20% of base Executive Board members are eligible for additional benefits (all within benchmarks), such as:
salary. At least 50% of this is based on non-financial performance criteria. The 2019 EB -costs associated with the use of a company car;
Remuneration Policy provides for an at-target variable remuneration of 16% of base salary. If -contributions to company savings plans;
performance criteria are exceeded, the Supervisory Board can increase the variable component to -expatriate allowances (if applicable);
the maximum. If performance is below target, the variable component will be decreased, -banking and insurance benefits from ING (on the same terms as for other employees of ING in
potentially to zero.
the Netherlands);

-tax and financial planning services to ensure compliance with the relevant legislative The Supervisory Board pre-determines the performance criteria for the Executive Board each year requirements.
to ensure alignment between ING's strategy and performance objectives.

Tenure Variable remuneration is paid fully in shares. Forty percent of the variable remuneration is paid

upfront and 60% is deferred. For all shares awarded to Executive Board members (in their capacityMembers of the Executive Board are appointed by shareholders at the AGM for a maximum period

as board members) there is a minimum retention period of five years from the date of conditionalof four years. They may be reappointed by the AGM in line with applicable rules and regulations.

grant and one year from the vesting date. Vesting of any deferred variable remuneration is notExecutive Board members have a commission contract for an indefinite period. ING has the option

subject to performance and can only be adjusted in case of an ex-post risk measure as described into terminate if they are not reappointed by shareholders at the AGM or if their membership of the

the Risk adjustments paragraph or if an Executive Board member leaves ING. This award approachboard is terminated. There is a three -month notice period for individual board members and a six-

aligns remuneration with creating long-term value for ING.month period for ING. During this time the board member continues to work and remains eligible

for all agreed remuneration components.

2019 ING Group Annual Report on Form 20-F104

In the event of an involuntary exit, Executive Board members are eligible for an exit arrangement. If2019 Remuneration Executive Board termination of the contract is based on mutual agreement, the Executive Board member is also eligible for a severance payment. These arrangements are subject to specific requirements (e.g.This section includes remuneration details for current and former Executive Board members limited to a maximum of one year of fixed base salary, under the condition that there should be norelating to the period that they served on the Executive Board during 2019.1

reward for failure).
In line with the Dutch Corporate Governance Code, ING determines the internal ratio of remuneration for Executive Board members and a representative reference group. Deemed most

Periodic review of the remuneration policy and the remuneration paid relevant for this ratio is the total direct compensation of the CEO compared to the average total In accordance with the 2019 EB Remuneration Policy , the Supervisory Board annually determinesdirect compensation of all ING employees. On this basis, the internal ratio in 2019 was 1:31. For the the actual remuneration for members of the Executive Board, based on the advice given by thesake of transparency we also calculated the ratio of the total direct compensation of the other Remuneration Committee of the Supervisory Board.Executive Board members compared to the average total direct compensation of all ING employees. On that basis the internal ratio in 2019 was 1:21.2The higher ratios compared to 2018, The Remuneration Committee’s responsibilities include prepar ing the Supervisory Board foris due to fact that no variable remuneration was granted over performance year 2018.3 decisions regarding the remuneration of individual members of the Executive Board. Remuneration proposals for individual Executive Board members are drawn up in accordance with the 2019 EBAs disclosed in the Annual Report 2018, in consultation with the Supervisory Board, chief financial Remuneration Policy and cover the following aspects: remuneration structure, the amount of theofficer Koos Timmermans stepped down from his position as chief financial officer and as a fixed and variable remuneration components, the performance criteria used, scenario analysesmember of the Executive Board on 7 February 2019. To facilitate an orderly transition and fulfil that are carried out and, if and when considered appropriate, the pay ratios within the companyING’s contractual notice period of six months, he continued to advise the company until 31 August and its affiliated enterprises. The Remuneration Committee takes note of the views of individual2019. In line with applicable regulations a severance payment was granted. Although entitled to a Executive Board members with regard to the amount and structure of their own remuneration,maximum severance payment of one year’s fixed annual pay, the Supervisory Board at its including the aspects mentioned above.discretion set the severance pay at a level of 50% of fixed annual pay (€601,800).

Special employment conditions

Special employment conditions, for example to secure the recruitment of new executives, may be used in exceptional circumstances subject to approval by the Supervisory Board. In 2019, there were none.

1 Koos Timmermans was an EB member until 6 February 2019; Steven van Rijswijk was appointed to the EB on 8 May 2017;2 Total direct compensation comprises fixed base salary and variable remuneration, excluding benefits such as pension Tanate Phutrakul was appointed to the EB immediately following the 23 April 2019 AGM. As Ralph Hamers has been an EBarrangements, and allowances.
member for the full years 2017-2019, the full remuneration is presented and no pro-rata method has been applied.3 The internal ratio in 2018 for the CEO was 1:29, for the other Executive Board members this amounted to 1:20. In 2017, the internal ratio for the CEO was 1:33 and for the other Executive Board members this amounted to 1:23.
2019 ING Group Annual Report on Form 20-F105

Remuneration versus company performance and average employee

remuneration

The table below shows the link between directors’ remuneration, company performance and the average remuneration of an ING employee. This is done by presenting the relative development of the remuneration for the Executive Board and Supervisory Board members over the last five years.
With respect to the remuneration of the Supervisory Board, note that there is no link to company performance to emphasise their independent role.

Furthermore, the relative performance of the company is presented on three different metrics over the last five years. The metrics consist of:
Retail primary customers ◾ Profit before tax ING Group ◾ Underlying Return on Equity ◾

Finally, we present the development of the remuneration on average (per employee). For this number the same data has been used as to determine the internal ratio. Since the internal ratio was disclosed by ING as of 2017, we only have three years of data available.

Due to the strict regulations on variable remuneration in the Netherlands (e.g. 20% bonus cap) and due to the fact that Executive Board members did not receive any variable remuneration over performance year 2018, the link between remuneration and company performance is relative.
Furthermore variable remuneration must be based on at least 50% non-financial targets.

2019 ING Group Annual Report on Form 20-F106

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| Development of directors’ remuneration, company performance and employee remuneration | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | FY 2019 | FY 2019 vs FY 2018 | | FY 2018 vs FY 2017 | 4 | FY 2017 vs FY 2016 | | FY 2016 vs FY 2015 | | FY 2015 vs FY 2014 | |
| Directors remuneration (Executive Board) | | 1, 2, 3, 5 | | | | | | | | | | | |
| Ralph Hamers | | | 2,016 | | 15.2% | | -12.8% | | 1.4% | | 2.9% | | 51.4% |
| Tanate Phutrakul | | | 973 | | - | | - | | - | | - | | - |
| Koos Timmermans | | | 818 | | | | -11.8% | | | | | | |
| Steven van Rijswijk | | | 1,399 | | 16.2% | | -11.8% | | - | | - | | - |
| Directors remuneration (Supervisory Board) | | 6 | | | | | | | | | | | |
| Hans Wijers | | | 202 | | 9.2% | | 340.5% | | - | | - | | - |
| Hermann-Josef Lamberti | | | 141 | | 1.4% | | -1.4% | | -5.4% | | 34.2% | | 37% |
| Jan-Peter Balkenende | | | 99 | | 0% | | 200% | | - | | - | | - |
| Henk Breukink | | | 40 | | -68.3% | | -0.8% | | -8.6% | | 39% | | 8.7% |
| Mariana Gheorghe | | | 118 | | 12.4% | | 11.7% | | -4.1% | | 145% | | - |
| Eric Boyer de la Giroday | | | 108 | | 0% | | 1.9% | | -7% | | 23.9% | | 73.6% |
| Margarate Haase | | | 98 | | 55.6% | | - | | - | | - | | - |
| Mike Rees | | | 73 | | - | | - | | - | | - | | - |
| Robert Reibestein | | | 136 | | -1.4% | | 1.5% | | -1.4% | | 50% | | -2.1% |
| Herna Verhagen | | | 30 | | - | | - | | - | | - | | - |
| Company’s performance | 5, 6 | | | | | | | | - | | | | |
| Retail primary relationships (in mln) | | | 13.3 | | 7% | | 10% | | 9% | | 14% | | 9% |
| Profit before Tax ING Group (continuing operations) (in mln) | | | 6,834 | | 0% | | -6% | | 23% | | -4% | | 66% |
| Underlying Return on Equity | | | 9.4% | | -2% | | 1% | | 0% | | 2% | | 1% |
| Average employee remuneration | | | | | | | | | | | | | |
| Average fixed and annual variable remuneration | | | 65 | | 7% | | -1.1% | | - | | - | | - |

1 The remuneration of the Executive Board consist of base salary and variable remuneration (total direct compensation).
2 Variable remuneration of the Executive Board is included in the year in which the performance has been delivered. Thus prior to the year in which it has been paid out.
3 The fixed remuneration for the Executive Board has not changed over 2019. Hence, the relative total compensation increase from 2018 to 2019 is fully attributed to the fact that no variable remuneration was awarded over performance year 2018. In addition, since Tanate Phutrakul has not been an Executive Board member for the full year and since Koos Timmermans left ING during the year, the comparison between 2018 and 2019 could not be made.
4 The decrease in 2018 versus 2017 comparison for the CFO and CRO is fully attributed to the fact that for performance year 2018 no variable remuneration has been awarded while over performance year 2017 variable remuneration was awarded. For the CEO the impact is less due to the fact that his fixed remuneration was increased by 2.2% in 2018 compared to 2017. The fixed remuneration for the CFO and CRO remained the same.
5 Fixed remuneration for Executive Board members within ING is not linked to company performance but is based on a benchmark exercise and total direct compensation of Executive Board members should stay below the median of the benchmark based on the Dutch Banking Code. This has a mitigating effect on the correlation with the company performance.
6 Supervisory Board members do not receive any variable remuneration. Their remuneration is based on fixed fees related to their role and amount of meetings. The high fluctuations are caused by joining and leaving the Supervisory Board during the year, change of roles during the year and the difference in the amount of meetings. Hence there is no correlation between the SB remuneration and the company performance.

2019 ING Group Annual Report on Form 20-F107

2019 Executive Board base salary2019 Executive Board performance evaluation

As announced in our 2018 Annual Report, the base salary of all Executive Board membersThe table below highlights key achievements, collectively accomplished by the Executive Board in

remained the same in 2019 as it was in 2018.2019 in the areas mentioned. It reflects both ING’s overall ambitions and the specific performance

priorities agreed with the Supervisory Board at the beginning of 2019.

2019 performance indicators Executive Board FinancialAchieved underlyingresult before taxof €6,834 million down 9.2% from 2018,

As indicated in the remuneration policy, the performance of the Executive Board is assessed onperformancereflecting a well-diversified loan book with resilient margins, despite margin

non-financial and financial indicators. The performance indicators assessed for 2019 included thepressure on customer deposits. The net profit is €4,781 million, up 1.7% from

following (overview of combined performance indicators of the Executive Board members):2018.

Financial performance indicatorsGrew net core lending by €17.2 billion (+2.9%); increased customer deposits by

Underlying result before tax€23.4 billion (+4.2%).
◾
Net core lending ◾
◾Underlying return on equity (IFRS-EU)àhurdle for variable payRealised underlyingreturn on equity(IFRS-EU) for ING Group of 9.4%, down
Underlying cost/income ratiofrom 11.2% in 2018.
◾
◾Common Equity Tier 1 ratio (SREP)àhurdle for variable pay
The underlying cost/income ratio decreased to 56.6% from 54.5% in 2018

Non-financial performance indicatorsdriven by higher KYC, staff and regulatory costs (51% excluding regulatory

costs).
Customer: ensuring growth of retail primary customers.
◾ CustomerIncreased the number ofprimary customersby more than 830,000 to 13.3 Operational control: ensuring ING is a safe and compliant bank now and in the future, in line with ◾ million in 2019 (+6.7%).
regulations.
The total retail customer base reaches 38.8 million.
Think Forward Strategy: ensuring intended outcomes of key strategic initiatives are executed

◾
and result in improved customer experience and commercial growth.
Ranked number one in Net Promotor Score rela tive to competitors in six of the People: driving initiatives to continue to be a healthy organisation and great place to work.
◾ 14 retail markets.
Sustainability: increasing ING’s social and environmental impact through our sustainability ◾
activities
A growing share of Retail customers only interacts with ING on their mobile

device, up from 26% in 2018 to 37% in 2019. Increase in conversion of

customer interactions into sale, with seven times higher mobile sales in 2019

than in 2016.

2019 ING Group Annual Report on Form 20-F108

OperationalIn 2019 countering financial and economic crime remained a priority:Development of SparQ, a global platform that uses AI to automate the ◾
ControlThe number of FTEs working globally on know your customer (KYC) relatedprocess of turning regulation into policy. It gives insight into applicable ◾
activities has increased to ~4,000.regulations, identifies changes, helps analyse documents and can link

The increased focus on KYC and efforts to streamline operations are leadingregulation directly to our policies.
◾
to an increased number of accounts being closed, including inactive

accounts or accounts of which the customers were insufficiently responsiveING is committed to periodically providing the Dutch central bank (DNB) with

to information requests.regular updates on the progress made.

Further progress was made in strengthening the global KYC organisationExecution ThinkImportant steps taken in themajor digital transformation programmes:
◾
and governance structure throughout ING.Forward StrategyUnite be+nl:Reduced the branch footprint and introduced two common ◾
Further progress was made in the global roll-out of KYC tools to enable thedigital channels across Belgium and Netherlands (OneApp and OneWeb)
◾
onboarding of customers and monitor their transactions across ING’s globalthat have been piloted with customers. Introduction of one platform for all

network in a more effective and consistent way.customer-facing collegues to allow supporting customers faster and in a

The implementation of a systematic integrity risk analysis in all businessmore uniform way.
◾
lines and regions was completed, contributing to consistent KYC riskMaggie (former Model Bank):The digital platform has now over 450,000 ◾
assessments across the bank.active customers and the platform is ready to onboard customers from

Italy, Spain and France in the coming years.

ING keeps investing in regulatory compliance, developing promising tools toWelcome:ING in Germany completed the programme early 2019 after ◾
increase accuracy and efficiency in KYC operations:introducing a new mobile app (One App) and a Go2Place platform including

A virtual alert handler using artificial intelligence (AI) to sort “false positives”e-signature, multi-banking account overview, forecasting, third-party ◾
from the alerts that need more investigation, so far reducing “falseservices and end-to-end digital process for account opening, consumer

positives” by half.loans and mortgages.

A tool to detect instances of fraudulent transactions related to “smurfing”;Wholesale TOM:Improved the experience of the ING’s Wholesale Banking ◾◾
the practice of breaking up transactions into smaller amounts to evadecustomers through the implementation of target solutions in Financial

conventional rule-based monitoring systems.Markets, Lending and Tra nsaction Services, setting up a pan-European Daily

An advanced AI-based anomaly detection model to automatically analysebanking Desk and by expanding our client platform InsideBusiness, which is ◾
and detect new potentially suspicious behaviour in foreign currency clearingused by more than 18,000 international clients.

and settlement that ING executes on behalf of others.

New initiatives developed and aligned with partners to improve the customer

experience being:

2019 ING Group Annual Report on Form 20-F109

ING’s partnership withAXAreached another milestone in 2019 by going liveAlthough ING continues to outperform our peers in most areas, there was a ◾
with its global platform, which will provide home, mobility and healthdecline in the 2019 results.

insurance services in six markets via the mobile app. The first productSustainabilityIn September ING published the first progress report onTerra, ING’s approach

launched on the platform is home insurance, delivered by the ING mobileto steer its €600 billion lending book in line with the goals of the Paris

app in Italy. This is in addition to the six products launched outside theAgreement to keep global warming to well-below two degrees.

platform in 2019.

Yolt, ING’s personal finance aggregator, reached over one million users andThe disclosure addresses developments and climate alignment for the sectors:
◾
was chosen as the best personal finance app at the International Paymentspower generation, fossil fuels, automotive, shipping, aviation, steel, cement,

Awards 2019.residential mortgages and commercial real estate. These are the sectors in

The launch ofinstant paymentsin Netherlands and Belgium, enablingING’s portfolio that are most responsible for greenhouse gas emissions. In a ◾
money to be available in five seconds to the beneficiary every moment ofClimate Alignment Dashboard (CAD) the report presents which sectors are on

the day all year round.track for climate alignment and where work is still in progress. This climate

Introduction ofApplePayto enhanced the experience of our mobile appchange disclosure is a first for banks.
◾
users.ING is recognised as anA-list company for leadership on climate actionfor the

In order to improve the credit decision process for Wholesale Bankingfifth year in a row by CDP, the leading global environmental disclosure ◾
clients, ING has invested inFlowcast. This is a start-up that uses machineplatform.

learning algorithms to create predictive models that reduce risk and unlock

credit to businesses.In 2019 ING reinforced the commitment to help customers reach their

sustainability goals by closing more than twice the amount of sustainable

Major milestone achieved in theblockchain area:finance deals compared to 2018.

ING joined a consortium with MineHub to develop a blockchain-based ◾
platform that would help ING clients in the metals and mining sector toVariable remuneration outcome
lower costs, increase transparency and contribute to sustainable production Based on these achievements, the Supervisory Board has concluded that the Executive Board
and trading.
members did well overall to deliver these results. This was despite a challenging rate environment
First client transaction completed on Komgo, a platform that digitalises and ◾and increase in costs related to the KYC enhancement programme. Although the underlying result
streamlines trade and commodity finance.
before tax and underlying return on equity decreased compared to 2018, good progress was made
PeopleThe Organisation Health Index (OHI) survey carried out 2019 showed room for in the execution of the Think Forward Strategy. This is shown by the continued growth of the
improvement. The overall health score is a performance indicator measuring primary customer base and the increase in mobile interactions by retail customers. Risk costs
organisational health relative to a global benchmark of 1,900 companies.
remained below the through-the-cycle average. ING also continued executing the KYC

enhancement programme, with strong governanc e from top management, more FTEs working in

2019 ING Group Annual Report on Form 20-F110

KYC and the roll out of global KYC tools. In sustainability ING remains a leading company, makingTotal direct compensation for individual Executive Board members| further progress with the Terra approach by partnering with 30 other banks to steer the lending | | | 2019 | | | 2018 | | | 2017 | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| portfolio towards the climate goals of the Paris Agreement. Overall this has resulted in a variable | Amounts in euros (rounded figures) | | Number of | | | Number of | | | Number of | |
| | | Amount | | shares | Amount | | shares | Amount | | shares |
| remuneration for the Executive Board members of between 15 and 16%. | Ralph Hamers (CEO) | | | | | | | | | |
| | Base salary | 1,750,000 | | | 1,750,000 | | | 1,713,000 | | |
| | Variable remuneration (fully in shares)¹ | 266,000 | 25,726 | | | | | 293,000 | 18,547 | |
| 2019 Executive Board remuneration | | | | | | | | | | |

	Tanate Phutrakul (CFO)	2
The tables below (i.e. total direct compensation, pension costs and other emoluments) show the	Base salary		831,100
remuneration awarded to individual Executive Board members with respect to the performance	Variable remuneration (fully in shares)¹		141,400	13,675

years 2019, 2018 and 2017. The 2019 figures reflect a partial year as Executive Board members for	Koos Timmermans (CFO)	3
Tanate Phutrakul and Koos Timmermans. The 2018 figures reflect an entire year for all three active	Base salary		802,400		1,203,600	781,000
members of the Executive Board. The 2017 figures reflect a partial year as Executive Board	Variable remuneration (fully in shares)¹		16,000	1,553		104,000	6,612

	Steven van Rijswijk (CRO)
	Base salary	1,203,600		1,203,600	781,000
All remuneration of the Executive Board is paid directly by ING, in other words no payments have	Variable remuneration (fully in shares)¹	195,000	18,858		104,000	6,584


Total aggregated base salary	4,587,100		4,157,200	3,275,000
Total aggregated variable remuneration	618,400			501,000
Total aggregated number of shares		59,812			31,743

1 The number of shares is based on the average ING share price (€10,34) on the day on which the year-end results were published.
2 Tanate Phutrakul was appointed to the Executive Board immediately following the 23 April 2018 AGM. This amount of variable remuneration reflects his period as an Executive Board member. Thus, for the period from 23 April 2019 – 31 December 2019.
3 Koos Timmermans left ING per 7 February 2019 as an Executive Board member. Until 31 August 2019 he received an advisor fee for the period in which he transferred his activities to his successor. Thus the base salary reflects the payments from 1 January 2019 – 31 August 2019. The amount of variable remuneration however, only reflects his period as an Executive Board member. Thus, for the period from 1 January 2019 – 7 February 2019.

2019 ING Group Annual Report on Form 20-F111

Pension costsBenefits

Members of the Executive Board participate in the Collective Defined Contribution (CDC) pensionThe individual members of the Executive Board receive other emoluments, including savings

plan. In 2019, pension accrual only applied to salary up to an amount of €107,593. The table belowallowances to compensate for the loss of pension benefits on salary above €107,593 for 2019,

shows the pension costs of the individual members of the Executive Board in 2019, 2018 and 2017.employer contributions to savings schemes, reimbursement of costs related to home/work

commute, costs associated with a company car and for expats, the costs associated with housing

Pension costs for individual Executive Board membersand schooling.| Amounts in euros (rounded figures) | | 1 | 2019 | 2018 | 2017 | |
| --- | --- | --- | --- | --- | --- | --- |
| Ralph Hamers | | | 23,000 | 26,000 | 30,000 | The other emoluments amounted in 2019, 2018 and 2017 to the following costs. |
| Tanate Phutrakul | 2 | | 16,000 | – | – | |
| Koos Timmermans | 3 | | 15,000 | 26,000 | 19,000 | |
| Steven van Rijswijk | | | 23,000 | 26,000 | 19,000 | Other emoluments |

	Amounts in euros (rounded figures)		2019	1	2018	2017	2
1 Pension accrual only applies to salary up to an annually set amount (i.e. €103,317 for 2017, €105,075 for 2018 and	Ralph Hamers		521,000	561,000		624,000
€107,593 for 2019).	Tanate Phutrakul		235,000		–		–
2 Tanate Phutrakul was appointed to the Executive Board immediately following the 23 April 2018 AGM. Thus, the figures	Koos Timmermans	3	231,000	408,000		290,000
reflect a partial year as an Executive Board member.	Steven van Rijswijk		367,000	369,000		274,000
from 1 January 2019 – 31 August 2019.	1 The 2019 emoluments reflect the partial year as an Executive Board member for Tanate Phutrakul.

member.
3 Koos Timmermans left ING per 7 February 2019 as an Executive Board member. Until 31 August 2019 he received an advisor fee for the period in which he transferred his activities to his successor. Thus the emoluments reflect the period from 1 January 2019 – 31 August 2019.

2019 ING Group Annual Report on Form 20-F112

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| Other emoluments in more detail 2019 | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | Ralph | Tanate | | Koos | Steven van | | Long-term incentives to the Executive Board members in previous years are disclosed in the table |
| Amounts in euros (rounded figures) | | Hamers | Phutrakul | 2Timmermans | | 3 | Rijswijk | ING shares held by Executive Board members. |
| Contribution individual savings | | 61,000 | 29,000 | | 28,000 | | 42,000 | |
| Individual savings allowance | | 391,000 | 179,000 | | 175,000 | | 261,000 | |
| Travel and accident insurance | | 18,000 | 13,000 | | 2,000 | | 18,000 | |
| Other amounts | 1 | 50,000 | 15,000 | | 26,000 | | 46,000 | |

1 Other amounts contains the following elements: personnel facility (mortgage), tax and financial planning, one-off compensation for Steven van Rijswijk for retroactive tax impact of use of company car and temporary housing for Tanate Phutrakul.
2 The 2019 emoluments reflect the partial year as an Executive Board member for Tanate Phutrakul.
3 Koos Timmermans left ING per 7 February 2019 as an Executive Board member. Until 31 August 2019 he received an advisor fee for the period in which he transferred his activities to his successor. Thus the emoluments reflect the period from 1 January 2019 – 31 August 2019.

Total remuneration

The table below contains the total remuneration of the Executive Board members over 2019.

Total remuneration| Amounts in euros | | Variable | Total direct | | | | Total |
| --- | --- | --- | --- | --- | --- | --- | --- |
| (rounded figures) | Base salary | remuneration | compensation | Pension | Emoluments | remuneration | |
| Ralph Hamers | 1,750,000 | 266,000 | 2,016,000 | 23,000 | 521,000 | 2,560,000 | |
| Tanate Phutrakul | 831,100 | 141,400 | 972,500 | 16,000 | 235,000 | 1,223,500 | |
| Koos Timmermans | 802,400 | 16,000 | 818,400 | 15,000 | 231,000 | 1,064,400 | |
| Steven van Rijswijk | 1,203,600 | 195,000 | 1,398,600 | 23,000 | 367,000 | 1,788,600 | |

As recognised in the profit or loss statement of 2019, the expenses for each member of the

Executive Board (active on 31 December 2019), while serving on the Executive Board, amount to

€2.4 million for the CEO, €1.1 million for the CFO and €1.7 million for the CRO.

2019 ING Group Annual Report on Form 20-F113

Employee stock options

The table below contains information on the outstanding employee stock options and the movements during the financial year of employee stock options held by the members of the Executive Board on 31

December 2019 including those awarded prior to their appointment to the Executive Board.

Options held by Executive Board members| | Outstanding on | | | | | Outstanding on | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Number of options | 31 December | | | | Waived or | 31 December | | Grant price in | | | | |
| | | 2019 | Exercised in 2019 | | expired in 2019 | | 2019 | | euros | Grant date | Vesting date | Expiry date |
| Ralph Hamers | | 19,985 | | 19,985 | | | | | 2.90 | 19 March 2009 | 19 March 2012 | 19 March 2019 |
| | | 22,124 | | | | | 22,124 | | 7.35 | 17 March 2010 | 17 March 2013 | 17 March 2020 |
| Tanate Phutrakul | | 4,163 | | 4,163 | | | | | 2.90 | 19 March 2009 | 19 March 2012 | 19 March 2019 |
| | | 11,062 | | | | | 11,062 | | 7.35 | 17 March 2010 | 17 March 2013 | 17 March 2020 |
| Steven van Rijswijk | | 1,688 | | 1,688 | | | | | 2.90 | 19 March 2009 | 19 March 2012 | 18 March 2019 |
| | | 11,658 | | 11,658 | | | | | 2.90 | 19 March 2009 | 19 March 2012 | 18 March 2019 |
| | | 2,318 | | | | | 2,318 | | 7.35 | 17 March 2010 | 17 March 2013 | 16 March 2020 |
| | | 10,694 | | | | | 10,694 | | 7.35 | 17 March 2010 | 17 March 2013 | 17 March 2020 |

2019 ING Group Annual Report on Form 20-F114

Shares

Deferred shares are shares conditionally granted subject to a tiered vesting over a period of five years (for awards in 2019 and before), with the ultimate value of each deferred share based on ING’s share

price on the vesting date. This is all conditional on there being no holdback.

Shares vested for Executive Board members during 2019| Number of shares | | | | | | End date of | | No. of shares | | No. of shares | | Vesting price in | | No. of unvested | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | Shares | 2 | Grant date | Vesting date | retention period | | granted | 5 | vested | | | euros | shares remaining | 6 |
| Ralph Hamers | | LSPP | | 11 May 2016 | 11 May 2019 | 11 May 2021 | | 28,404 | | | 5,682 | | 10.44 | | 0 |
| | | LSPP | | 11 May 2017 | 11 May 2019 | 11 May 2022 | | 23,092 | | | 4,618 | | 10.44 | | 4,619 |
| | | LSPP | | 10 May 2018 | 11 May 2019 | 10 May 2023 | | 18,547 | | | 2,225 | | 10.44 | | 8,903 |
| Tanate Phutrakul | 1 | LSPP Units | 3 | 27 March 2015 | 27 March 2019 | | N/A | | 6,915 | | 922 | | 10.55 | | 0 |
| | | LSPP Units | 3 | 25 March 2016 | 27 March 2019 | | N/A | | 7,987 | | 1,065 | | 10.55 | | 1,065 |
| | | LSPP Units | 3 | 27 March 2017 | 27 March 2019 | | N/A | | 6,032 | | 482 | | 10.55 | | 1,931 |
| | | LSPP Units | 3 | 27 March 2018 | 27 March 2019 | | N/A | | 4,972 | | 2,983 | | 10.55 | | 1,989 |
| | | LSPP | | 27 March 2019 | 27 March 2019 | 27 March 2020 | | | 2,837 | | 1,702 | | 10.55 | | 1,135 |
| Koos Timmermans | | LSPP4 | | 11 May 2016 | 11 May 2019 | 11 May 2021 | | 18,278 | | | 0 | | - | | 0 |
| | | LSPP4 | | 11 May 2017 | 11 May 2019 | 11 May 2022 | | 15,838 | | | 1,465 | | 10.44 | | 3,169 |
| | | LSPP | | 10 May 2018 | 11 May 2019 | 10 May 2023 | | 10,139 | | | 1,216 | | 10.44 | | 4,867 |
| Steven van Rijswijk | 1 | LSPP | | 25 March 2016 | 27 March 2019 | 27 March 2020 | | 19,362 | | | 3,227 | | 10.55 | | 0 |
| | | LSPP | | 27 March 2017 | 27 March 2019 | 27 March 2020 | | 13,890 | | | 2,315 | | 10.55 | | 2,315 |
| | | LSPP | | 27 March 2018 | 27 March 2019 | 27 March 2020 | | | 3,460 | | 346 | | 10.55 | | 1,384 |
| | | LSPP | | 10 May 2018 | 11 May 2019 | 10 May 2023 | | | 6,584 | | 790 | | 10.44 | | 3,160 |

1 Shares granted to Tanate Phutrakul (March 2015 to March 2019) and Steven van Rijswijk (March 2016 to March 2018) were awarded for their performance in positions prior to their Executive Board appointment.
2 All current Executive Board members participate in ING Group Long Term Sustainable Performance Plan (LSPP) under which plan rules they receive their shares.
3 Deferred share units of Tanate Phutrakul are cash settled instruments. The value of these are based on ING Group’s share price at the vesting date. No retention period applies.
4 The (partial) holdback (3,657 and 1,702) of the outstanding deferred variable remuneration, is effectuated on these grants.
5 Number of shares granted includes both deferred and upfront part awarded at the granting date.
6 The balance of unvested shares post holdback, where applicable.

2019 ING Group Annual Report on Form 20-F115

Total value of vested and unvested shares of Executive Board members - 2019Loans and advances to individual Executive Board members - 2018| | | | Unvested | Share price in | | | | Amount | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Amounts in euros (rounded figures) | Vested shares | | shares | | euros1 | Total value | | outstanding | | Average | | | |
| Ralph Hamers | 12,525 | | 13,522 | | 10.68 | 278,000 | Amount in thousands of euros | 31 December | | interest rate | | Repayments | |
| Tanate Phutrakul | | 7,154 | 6,120 | | 10.68 | 142,000 | Ralph Hamers | | 2,499 | | 1.4% | | - |
| Steven van Rijswijk | | 6,678 | 6,859 | | 10.68 | 145,000 | Koos Timmermans | | 182 | | 6.2% | | - |

Steven van Rijswijk---

1 The opening stock price on 31 December 2019.

Loans and advances to individual Executive Board members - 2017

Loans and advances to Executive Board members

Amount
The table below presents the loans and advances provided to Executive Board members that wereoutstandingAverage| outstanding on 31 December 2019, 2018 and 2017. These loans were provided on market | Amount in thousands of euros | 31 December | | interest rate | | Repayments | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| conditions with due observance of the applicable policies within ING. | Ralph Hamers | | 2,499 | | 1.4% | | - |
| | Koos Timmermans | | 182 | | 6.2% | | - |

Steven van Rijswijk---

Loans and advances to individual Executive Board members - 2019

AmountING shares held by Executive Board members

outstandingAverage

Amount in thousands of euros31 Decemberinterest rateRepaymentsExecutive Board members are encouraged to hold ING shares as a long-term investment to
Ralph Hamers2,4021.4%97 maintain alignment with ING. The table below shows an overview of the shares held by members of Tanate Phutrakul--- Steven van Rijswijk---the Executive Board on 31 December 2019, 2018 and 2017.

ING shares held by Executive Board members

Numbers of shares201920182017

Ralph Hamers93,83367,39258,094

Tanate Phutrakul9,200--

Steven van Rijswijk69,49066,15359,914

2019 ING Group Annual Report on Form 20-F116

2020 Executive Board remunerationBring remuneration levels in line with peers and with levels adequate to attract qualified
◾

(international) Supervisory Board members The Supervisory Board decided to increase the base salary of the Executive Board members by
Align remuneration with increased responsibilities and time spent.
1.5% as of 1 January 2020. This decision was based on reliable indexation reference points,◾

including the Consumer Prices Index 2020 (forecast) in line with the proposed Executive Board The Supervisory Board remuneration levels for 2019, similar to 2018, are shown below:
Remuneration Policy 2020. This increase is below the CLA increase in the Netherlands.4

Supervisory Board remuneration structure For 2020 the following target areas will be taken into account.
Annual fees in euros2019| | Chairman Supervisory Board | 125,000 |
| --- | --- | --- |
| Financial | Vice chairman Supervisory Board | 95,000 |
| ◾Profit before tax | Supervisory Board member | 70,000 |
| Return on equity | Committee fees (annual amounts) | |
| ◾ | Chairman committee | 20,000 |
| | Member committee | 10,000 |
| Non-financial | Attendance fees (per event) | |
| Customer – Retail primary customers | Attendance fee outside country of residence | 2,000 |
| ◾ | Attendance fee outside continent of residence | 7,500 |
| ◾People – Organisational Health Index | | |

Strategy – executing Think Forward Strategy ◾The remuneration of Supervisory Board members is not paid out in equity (i.e. solely cash).
Sustainability – Terra ◾Furthermore, Supervisory Board members are not eligible for any variable remuneration. In
Regulatory – deliver commitments to regulators (CRO)
◾addition, members of the Supervisory Board are reimbursed for their travel and ING-related
Manage financial and non-financial risk within Board approved risk appetite (CRO)
◾business expenses.

Remuneration Supervisory Board

Supervisory Board remuneration policy

The current remuneration policy for the Supervisory Board, as approved at the AGM on 25 April

2016, aims to:

Provide a simple and transparent structure ◾

4 The collective salary increase based on the Collective Labour Agreement in the Netherlands (agreed for the period from 1 January 2019 – 31 December 2020), per 1 September 2019 was 3% for all employees in the Netherlands. In addition, per 1 September 2020 another collective salary increase of 3% will take place.
2019 ING Group Annual Report on Form 20-F117

2019 Remuneration Supervisory BoardLoans and advances to Supervisory Board members

The table below shows the remuneration, including attendance fees per Supervisory BoardSupervisory Board members may obtain banking and insurance services from ING Group and its

member.subsidiaries in the ordinary course of their business and on terms that are customary in the sector.

The Supervisory Board members do not receive privileged financial services. On 31 December 2019,

All fees for the Supervisory Board are paid directly by ING, in other words no payments have beenthere were no loans and advances outstanding to Supervisory Board members.

made by any of our subsidiaries.

ING shares and employee stock options held by Supervisory Board members| 2019 Remuneration Supervisory Board | | | | | | | | Supervisory Board members are permitted to hold ING shares as a long-term investment. The table |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | 2019 | | 2018 | | | 2017 | below shows the holdings by members of the Supervisory Board on 31 December 2019, 2018 and |
| Amount in euros (rounded figures) | Remuneration | VAT | Remuneration | VAT | Remuneration | | VAT | 2017. |
| Hans Wijers (chairman) | 167,000 | 35,000 | 153,000 | 32,000 | | 35,000 | 7,000 | |

Hermann-Josef Lamberti (vice-	141,000		139,000		141,000
chairman)							ING shares held by Supervisory Board members
Jan Peter Balkenende	82,000	17,000	82,000	17,000	27,000	6,000	Numbers of shares	2019	2018	2017
Henk Breukink¹	33,000	7,000	104,000	22,000	105,000	22,000	Hermann-Josef Lamberti	5,700	5,700	5,700
Mariana Gheorghe	119,000		105,000		94,000		Eric Boyer de la Giroday	47,565	47,565	47,565
Eric Boyer de la Giroday	108,000		108,000		106,000		Margarete Haase	800	800
Margarete Haase	98,000		63,000

Mike Rees²	73,000
Robert Reibestein	112,000	24,000	114,000	24,000	112,000	24,000	The following table contains information on employee stock options outstanding and awards
Herna Verhagen³	25,000	5,000					vested for Supervisory Board members.

1 Henk Breukink stepped down as of 23 April 2019. The remuneration figures for 2019 reflect a partial year as a member of
the Supervisory Board.
Employee stock options on ING Groep N.V. shares held by members of the Supervisory Board on 2 Mike Rees was appointed to the Supervisory Board by the 23 April 2019 AGM. His appointment became effective as of the
end of the AGM. The remuneration figures for 2019 reflect a partial year as a member of the Supervisory Board.31 December 2019
3 Herna Verhagen was appointed to the Supervisory Board by the 23 April 2019 AGM. Her appointment became effective as

OutstandingOutstandingOutstanding of 1 October 2019. The remuneration figures for 2019 reflect a partial year as a member of the Supervisory Board.

on 31on 31on 31

DecemberExpired inDecemberExpired inDecemberExpired in

Compensation of former members of the Supervisory Board who are not included in the table aboveNumber of stock options201920192018201820172017

Eric Boyer de la Giroday--–113,479113,479113,479 amounted to nil in 2019, €69,000 in 2018 and €344,000 in 2017.

2020 Remuneration Supervisory Board

The Supervisory Board decided not to change the metrics for 2020.

2019 ING Group Annual Report on Form 20-F118

General information for all staffMitigates risk and optimises controls Risk management is an enabler of long-term value creation. ING ensures its remuneration FOR INFORMATION ONLYprinciples are properly correlated with its risk profile and stakeholder interests.

Performance driven The primary objective of ING’s remuneration principles is to enable ING to attract, motivate and ING operates a robust performance management process linked to remuneration to steer and retain qualified and expert leaders as well as senior staff (including Executive Board members) andmotivate all employees to deliver on its strategic goals, aiming to reward success and prevent
other highly qualified employees. Our remuneration principles apply to all employees, includingrewarding for failure.

Executive Board members. The approach did not change in 2019.Sustainable
ING supports the sustainable recruitment, engagement and retention of all employees.

The principles are an integral part of ING’s corporate strategy and risk profile. They maintain a

sustainable balance between short and long-term value creation and build on ING’s long-termPerformance management
responsibility towards customers, society and other stakeholders.
We aim to reward for success and avoid rewarding for failure. That is why ING’s remuneration

approach is strongly linked to a comprehensive performance management process. Outcomes of ING’s remuneration principles apply to all staff and are embedded in ING’s Remuneration performance evaluations provide direct input for remuneration. This does not necessarily mean Regulations Framework (IRRF). The IRRF complies with relevant international and local legislation that performance is directly linked to variable remuneration since within ING not all employees are and regulations.
eligible for variable remuneration. In the Netherlands, for example the vast majority of the

employees do not receive any variable remuneration.

Our remuneration principles

Step Up Performance Management is our global performance management approach applicable to Our remuneration principles apply to all employees and comprise the following:
the majority of employees. It aims to improve people’s individual performance and thereby their

team performance and ultimately ING's performance. Step Up Performance Management is one of

our people practices that help to increase focus, alignment and transparency. We do this through

Aligned with business strategy continuous conversations between managers, employees and teams. To support these ING’s remuneration principles are aligned with the business strategy and company goals.

conversations, there are three formal moments to discuss performance during the year: target

Creates long-term value setting, mid-year review and year-end evaluation.
ING’s remuneration principles contribute to long-term value creation and support a focus on the
long-term interests of its stakeholders, including employees, customers and shareholders.

Responsible and fair In line with our Orange Code values and behaviours, ING acts responsibly and treats staff fairly across the globe.

2019 ING Group Annual Report on Form 20-F119

The Step Up Performance Management approach consists of three dimensions:Board and the Management Board Banking we aim for a level below the median. To ensure we Job: the impact employees have in their daily work on an individual and team level, based onadhere to this policy, we regularly monitor and benchmark salary levels across ING.
◾ factors such as qualitative job description, dynamic planning and specific selected quantitative priorities.Fixed remuneration represents a sufficiently high proportion, in line with the level of expertise and Orange Code behaviours: how employees do their work and how effective their behaviour is as askills, and allows a fully flexible variable remuneration award. In case no variable remuneration is ◾ professional and colleague. We expect all employees to act in line with ING’s Orange Code.awarded, the compensation level is still sufficient for a decent standard of living. Variable Stretch Ambitions: at ING, we believe high performance requires stretch and investment (toremuneration is performance driven, subject to regulatory caps and prevents excessive risk taking, ◾ achieve the stretch). Therefore we ask people to set ambitions beyond their day-to-day role andwhere applicable.
connect their personal passion, expertise or interest with the long-term success of ING.

The comprehensive process around variable remuneration
All targets are agreed between the employee and their manager, as well as within management
teams, to ensure consistency across the bank. ING uses three labels to evaluate performance:The awarding of variable remuneration, where applicable, is based on individual, business line and
excellent, well done and improvement required.bank-wide performance criteria unless local legislation prescribes otherwise. In all ING countries, we
adhere to the applicable variable remuneration caps. In the Netherlands, for example, we apply a
Step Up Performance Management does not prescribe the targets employees should set. However,variable remuneration cap of 20% with limited exceptions in line with the Dutch Remuneration
the following regulatory requirements apply to specific groups:Policy for Financial Enterprises Act (Wet Beloningsbeleid Financiële Ondernemingen, hereafter
For employees eligible for variable remuneration, a minimum of 50% non-financial priorities.‘WBFO’).
◾
For all employees in control functions (Legal, Risk, Finance, Compliance, Audit and HR), no ◾
individual financial KPIs are allowed, unless required by local law.For Identified Staff (i.e. staff considered to have a material impact on ING’s risk profile), at least 40%
For identified risk takers, risk mitigation measures may lead to a downwards adjustment of theof variable remuneration is deferred over a period of three to five years with a tiered vesting ◾
performance outcome and negatively affect variable remuneration (a risk modifier can beschedule. Furthermore, at least 50% of variable remuneration is awarded in equity (linked
applied).instruments).

Total direct compensationPerformance and risk assessment

Total direct compensation is the total of fixed and variable remuneration, excluding benefits suchING applies measures to mitigate risk relating to variable remuneration. Our global remuneration
as pension and allowances.policy takes into consideration risk, capital, liquidity and the likelihood and timing of earnings.
Measures include pre-award and post-award risk assessments of variable remuneration.

ING aims to provide total direct compensation levels for expected business and individual performance which, on average, are at the median of the markets in which we operate, benchmarked against relevant peer groups. In line with the Dutch Banking Code, for the Executive

2019 ING Group Annual Report on Form 20-F120

In 2019, the Management Board Banking and the Supervisory Board approved the VariableThe Return on Equity (RoE – IFRS-EU) is equal to or higher than the percentage determined at the ◾
Remuneration Accrual Model (VRAM) set-up and approach for determining the 2019 variablebeginning of each performance year by the Management Board Banking and the Supervisory

remuneration pool based on the new VRAM formally approved in 2018.Board;

If both the CET1 ratio and RoE are met, the maximum variable remuneration pool is unlocked, as ◾
The VRAM takes a holistic view of the overall performance of ING across three key dimensions:accrued in line with the VRAM; and

(i)financial,If only one (or none) of the two tests is met, in principle, no bank-wide variable remuneration ◾
(ii)non-financial, andpool is released.

(iii)risk.

Within each of these three elements specific criteria are used to measure performance (e.g.A variable remuneration pool is also separately accrued for staff in control functions and support

customer, people, strategy, operational excellence, financial and non-financial risk).functions and for those employees subject to a collective variable remuneration plan. The amount

is defined by the Management Board Banking and approved by the Supervisory Board.

The proposal for the variable remuneration pool is prepared by Human Resources, Risk and Finance,

and in line with the VRAM principles. The Management Board Banking then proposes the amount ofRisk adjustments
the overall variable remuneration pool to the Supervisory Board, taking into account the advice of In determining the overall size of the variable remuneration pool, a multi-layered, consistent and
the Risk and the Remuneration committees.
bank-wide approach to risk tests and adjustments is applied to the process, based on an

assessment by the chief risk officer.
The variable remuneration pool (for both individual and collective variable remuneration), To establish appropriate ex ante risk adjustments, there are measures to assess the bank’s current encompasses all employees eligible for variable remuneration globally, including Identified Staff.
and future risks and whether performance sufficiently aligns with risk appetite levels. The risk ING takes a multi-step approach to determine whether to award variable remuneration in a given adjustment assessment includes measurements on ‘forward looking’ capital, liquidity and nonperformance year and the maximum amount of the pool. Within this process, a range of risk financial risk, where adjustments are made on deviation from risk appetite.
elements is assessed at various levels and, where appropriate, risk adjustments are made to the

variable remuneration pools at both a group and business line level.
In addition, ex post risk adjustments are a key element in the process of determining both final

variable remuneration pools and individual awards. Here, the chief risk officer may provide

Risk and performance hurdles additional input at a more granular level to risk adjust (downwards) ING’s overall or business line

To unlock the variable remuneration pools, regulatory and performance hurdles must be met.and/or country variable remuneration pools in circumstances where a business line or a specific

These are:unit is not performing in line with desired risk parameters or based on events that have a material

The Common Equity Tier 1 (CET1) ratio must be at or above the threshold established byimpact on ING’s financial results or reputation.
◾
applicable regulations;

2019 ING Group Annual Report on Form 20-F121

The ex ante and/or ex post risk adjustments require Supervisory Board approval, taking intoto set a variable remuneration cap higher than 100% of fixed remuneration for employees outside account the input of the Risk and Finance functions and the advice of the Risk and Remunerationof the European Economic Area (EEA), provided that the higher cap is approved by shareholders Committees.and does not conflict with ING’s capital adequacy requirements.

The final risk adjustment measure lies in the individual performance assessment itself. AnAt the 2017 AGM, shareholders approved to apply an increased maximum percentage of up to employee’s performance is extensively assessed before variable remuneration is proposed and200% for employees outside the EEA for a period of five performance years, from 2017 up to and awarded. Every manager carefully assesses the performance delivered by their individual teamincluding 2021. ING uses this facility very rarely. In 2019, it was applied to no employees worldwide.

members on the basis of pre-agreed performance priorities and in line with the Step Up Performance Management framework. In addition, managers have the discretionary power to

2019 specifics lower the proposed variable remuneration if risk taking is perceived as inappropriate. In this way, variable remuneration is aligned with any additional risks identified during the performance yearThe total amount of variable remuneration awarded to all eligible employees (worldwide) for 2019 on an individual basis.was €378 million, compared to total employee costs of €5,755 million. For 2018, the total amount was €303 million and €403 million for 2017. In comparison, the total employee costs in 2018 were Additional risk requirements apply to Identified Staff who are considered risk takers in accordance€5,420 million and €5,202 million in 2017. Variable remunerati on includes both individual and with CRD IV. These risk requirements set the minimum standards to be met during the performancecollective variable remuneration such as profit sharing arrangements.
year. Deviation from these standards may lead to downward adjustment of the variable remuneration, a so-called risk modifier. This process is run independently by the Risk function forIn 2019, eight employees in the Corporate staff, Wholesale Banking and Retail Banking business which the chief risk officer is ultimately responsible. The Supervisory Board, advised by its Risklines - excluding members of the Management Board Banking - were awarded total annual Committee, is responsible for Risk Takers within the Management Board Banking.remuneration (including employer pension contributions and severance payments made) of €1 million or more. In comparison, in 2018 seven employees were awarded total annual remuneration Finally, a post-award risk assessment can be applied. This assessment analyses whether anyof €1 million or more and 14 employees in 2017.
events or findings occurred that should lead to a downward adjustment of variable remuneration of previous years by applying a holdback (i.e., forfeiture of up to 100% of the awarded, but unvested, variable remuneration) or clawback (surrender of up to 100% of the paid or vested variable remuneration).

Shareholders ’ mandate to exceed 100% variable remuneration cap

ING’s remuneration policies comply with international and local legislation and regulations. Under the WBFO (which sets various requirements on remuneration), financial institutions are permitted

2019 ING Group Annual Report on Form 20-F122

Summary and further explanation of the proposed newING recognises that remuneration is an area of particular interest to stakeholders including
shareholders, employees and customers. The Supervisory Board actively engages with stakeholders
remuneration policy for the Executive Board and Supervisoryand takes into account their views as well as ING’s need to attract, motivate and retain leaders with

the ability, experience, skills, values and behaviours to meet its strategic priorities and its

Board from 2020 stakeholder interests.

FOR INFORMATION ONLY In line with various regulations, in the course of formulating this policy, the Supervisory Board

consulted various stakeholders in meetings, conference calls and through online surveys. Such

Executive Board: proposed remuneration policy 2020 stakeholders included Retail and Wholesale Banking customers, investors, analysts, rating

agencies, shareholder advisory firms, trade unions, employee representatives, regulators, ING's 2019 EB Remuneration Policy has been in place since 2010, with legal amendments adopted
politicians and the current members of the Executive Board.
in 2011, 2014, 2015 and 2017, as described above. In line with the Dutch Act on Implementation of
The Supervisory Board notes that stakeholder views, especially on remuneration, can vary.
SRD II, the Supervisory Board will propose a new Executive Board remuneration policy to
However, the Supervisory Board values the insight and engagement that these interactions provide, shareholders at the 2020 AGM, where it will be subject to a binding approval vote. The full proposal
including the expression of different views. This engagement is meaningful and helpful to the will be provided to our shareholders.
Supervisory Board and contributes directly to the advice made by its Remuneration Committee.

The feedback received from stakeholders was taken into account when drafting this proposed Once adopted by the AGM, the new Executive Board remuneration policy will be effective
remuneration policy.
retroactively from 1 January 2020 until the 2024 AGM at the latest. The rem uneration policy is

available in full on ING's corporate website https://www.ing.com/remuneration . In case of any

Governance differences between this summary and the published Executive Board remuneration policy, the

latter is leading. In the event of proposed changes to the new Executive Board remuneration policy,The Supervisory Board and the Remuneration Committee are responsible for reviewing the

it will be subject to AGM approval.Executive Board remuneration policy at least annually, taking into account regulatory

requirements, stakeholder views, ING's benchmark position, internal pay ratios and whether policy

The objective of ING's new Executive Board remuneration policy is to enable ING to attract,incentives take into consideration risk, capital, liquidity and the likelihood and timing of earnings.

motivate and retain leaders with the ability, experience, skills, values and behaviours to meet ING'sFollowing the periodic reviews, the Supervisory Board can propose amendments to the Executive

strategic priorities and its stakeholder interests. In designing the new Executive Board remunerationBoard remuneration policy. The amended Executive Board remuneration policy will be submitted to

policy, many factors were taken into account, such as the amount of fixed and variableshareholders at the AGM for binding approval. In case of no amendments the policy will be

remuneration, the performance measures used and, ING’s risk appetite and scenario analysessubmitted to the AGM for approval every four years.

(taking into account internal pay ratios and stakeholder support).The Risk Committee will, at least, annually review the remuneration policy and may recommend

actions to be taken by the Supervisory Board regarding the establishment of a sound Executive

Board remuneration policy without prejudice to the tasks of the Remuneration Committee.

2019 ING Group Annual Report on Form 20-F123

Remuneration componentsfinancial and non-financial institutions. Given the very different pay structures in the UK and

Switzerland we have excluded those institutions from our benchmark. Smaller companies and The individual base salaries are set according to the role, responsibilities and experience of each

financial institutions active only in one or two countries were also excluded as they are not Executive Board member with reference to market practice. The below factors are given

comparable in terms of scope and complexity.
consideration in determining base salaries:

the individual’s level of skill and performance;
◾ With regards to the relevant market for talent, ING increasingly competes with players across ING’s business performance, and market conditions;
◾ sectors and industries. Therefore not only traditional banking competitors are included in the internal pay ratios and salary increases for other ING employees within the wider ING group;
◾ benchmark, but also companies from other industries. This also aligns with the stipulation in the remuneration level within the external peer group;
◾ Banking Code.
public indexation reference points (e.g. consumer price index);
◾

stakeholder views.
◾ Size is a significant factor in the dynamics and complexity of a company. Therefore it is important

to include companies in the peer group that are broadly comparable in terms of size and The Remuneration Committee reviews the individual base salaries of the Executive Board members

complexity. For this, potential peer group companies were assessed on the metrics of market each year and advises the Supervisory Board on this. Potential future salary increases take into

capitalisation (where applicable), number of employees and revenue, with companies considered in account the factors highlighted above. The Supervisory Board will pro -actively report the base the range of one quarter up to four times the size of ING. For general industry peers and for salary development in the Annual Report. If any significant changes to Executive Board base Western-European financial services peers, this ranges from one third up to three times the size salaries are to be proposed, a stakeholder consultation will be carried out.
of ING.

In line with the Dutch Banking Code, ING aims for the total direct remuneration of members of the The applicable governance framework for the company is also seen as a relevant factor. ING is a Executive Board to be below the median when benchmarked against comparable positions inside stock listed company subject to the Dutch financial services regulatory framework, operating within

and outside the financial industry, taking into account the relevant international context. In recent the Dutch stakeholder environment. Therefore the peer group selection is aligned with the Dutch

years stakeholders have expressed discontent with the use of the EURO STOXX 50 index, which ING stakeholder environment and/or a financial services regulatory framework.

has used as a peer group since 2010. This type of benchmark is also unusual compared to the

approach taken by peers. As a result, the Supervisory Board has chosen to change the benchmark As a final factor, the Supervisory Board looks at the balance of the peer group, ensuring it keeps

for ING's proposed new Executive Board remuneration policy to a smaller peer group based on fivesight of relevant peer companies that do not sufficiently match other criteria. This resulted in the

guiding principles: (i) geography, (ii) relevant talent market, (iii) size, (iv) governance framework andinclusion of a number of relevant Dutch peer companies.

(v) a balancing factor.The Supervisory Board intends to keep the peer group as stable as possible. Each year the

appropriateness of the selected companies will be assessed against the guiding principles, which

The new benchmark is more fitting to ING, incorporating relevant companies rather than an indexwill not change. The peer group constituents will be reported in the Annual Report.5

proxy. Rules and regulations prescribe a mix of comparable relevant Dutch and relevant European

5 For more information on the peer group composition in 2020, we refer to the additional information on the next page.

2019 ING Group Annual Report on Form 20-F124

To drive and reward performance the Executive Board is eligible for annual variable remuneration,commercially sensitive and that it would be detrimental to ING to disclose target details at the start

in accordance with the applicable regulatory requirements. The amount of variable remuneration isof the relevant performance year. We will disclose according to the SRD disclosure requirements.

based on actual performance as measured against agreed financial (50%), non-financial (50%) and

risk objectives that are consistent with ING's strategy and align with the long-term interests ofWith respect to pension, Executive Board members participate in ING’s general Collective Defined

stakeholders. For the CEO and CFO the applicable performance measures are based on groupContribution (CDC) pension plan in the same way as all employees working in the Netherlands

performance. Under ING's proposed Executive Board remuneration policy, the CRO's performancewithout a supplementary pension scheme. Furthermore, Executive Board members are eligible for

will be assessed predominantly based on individual functional objectives.benefits at a level that the Supervisory Board considers appropriate in the context of the executive’s

role, specific individual circumstances and benefits offered to the wider workforce and at

Any variable remuneration awarded to the Executive Board members is fully paid in ING shares. Incomparable roles in ING’s peer group.

combination with long-term deferral and holding requirements this ensures alignment with ING's

strategy, long-term performance and sustainability goals and with long-term stakeholder interests.Contractual arrangements

For this reason ING does not operate separate short- and long-term incentive plans but rather one Members of the Executive Board are appointed by the shareholders at the Annual General Meeting
plan that has many characteristics of a long-term incentive plan. The amount of variable (AGM) for a maximum period of four years. The appointment may be renewed subject to reremuneration awarded to the Executive Board members can range from 0% to 20% of annual base election by shareholders (and in line with ING’s Articles of Association and applicable rules and
salary.
regulations).

To mitigate risk relating to variable remuneration, the Risk Committee carries out pre-award and In principle, in the event of an involuntary exit, the Executive Board member is eligible for a
post-award risk assessments of variable remuneration, which may result in a downward severance payment. If termination of the contract is based on mutual agreement, the Executive
adjustment of the variable remuneration at the discretion of the Supervisory Board.
Board member is also eligible for severance payment. The arrangements are subject to legal

requirements, including being limited to a maximum of one year of fixed base salary and under the After the performance year, the Supervisory Board reviews performance on the applicable criteria condition that there should be no reward for failure.
and determines the appropriate variable remuneration amount to be awarded. It uses input and

support from the other Supervisory Board committees, such as the Risk Committee and the Audit Additional information not included in the Executive Board remuneration policy Committee. The outcomes for each quantitative performance measure are assessed on a linear Based on these five guiding principles, the selected peer group for 2020 consists of the following 16 scale ranging from threshold, target to maximum. The outcomes for qualitative performance companies. Note the guiding principles are part of the remuneration policy. (The list below only measures are assessed using a standard 1-3 rating scale.
relates to 2020):

The actual individual performance measures and the actual outcome of the review of the

performance measures are disclosed retrospectively in the Remuneration Report. The Supervisory

Board is of the opinion that the performance measures for the variable remuneration are

2019 ING Group Annual Report on Form 20-F125

(i) be clear and easy, (ii) have remuneration levels in line with peers, (iii) enable ING to attract
qualified (international) Supervisory Board members and (iv) align remuneration with ABN AMROAhold DelhaizeBBVADeutsche Bank responsibilities and time spent.
AegonASMLBanco SantanderIntesa Sanpaolo

NN GroupHeinekenBNP ParibasSociété GénéraleGovernance

RabobankPhilipsCrédit AgricoleUniCreditThe Remuneration Committee is responsible for annually reviewing the Supervisory Board
remuneration policy and making recommendations to the Supervisory Board on amendments. The
review takes into account at least the following: (i) ING's benchmark position, (ii) stakeholders' Based on compensation data for 2018, compared to the peer group, total direct compensation views on remuneration and (iii) regulatory requirements. Following the periodic review, the levels for the CEO amount to approximately 57% of the median (43% compared to the median of Supervisory Board can propose amendments to the Supervisory Board remunerati on policy to the the EURO STOXX 50). Total direct compensation levels of the CRO and CFO amount to General Meeting for adoption. In the event of no amendments the policy will be submitted to the approximately 81% of the median (63% compared to the median of the EURO STOXX 50).
General Meeting for adoption every four years.

Supervisory Board: proposed remuneration policy 2020

Remuneration components

The Supervisory Board will propose a Supervisory Board remuneration policy to shareholders at theAs often as appropriate, but at least every four years, the total fees for Supervisory Board members 2020 AGM, where it will be subject to a binding approval vote. Compared to the existing policy,are reviewed against comparable positions in the market. Under the proposed new Supervisory which was approved at the AGM on 25 April 2016, there are no significant changes other than thatBoard remuneration policy, the Supervisory Board will use an updated benchmark, similar to the the Supervisory Board remuneration will be benchmarked against a new reference market and thatbenchmark proposed for the Executive Board . This benchmark is periodically determined by the the policy is extended to include all relevant requirements of the Dutch Act implementing SRD II.Supervisory Board and based on the following peer group guiding principles: (i) geography, (ii)
Once adopted, the new Supervisory Board remuneration policy will be effective retroactively from 1relevant talent market, (iii) size, (iv) governance framework and (v) a balancing factor. In the January 2020 until the 2024 AGM at the latest. The remuneration policy is available in full on ING'sbenchmark exercise ING’s position is for Supervisory Board member’s fees to be below the median.
corporate website https://www.ing.com/remuneration . In case of any differences between thisThe peer group will be disclosed annually in our Annual Report.
summary and the published Supervisory Board remuneration policy, the latter is leading. If any changes are proposed, the revised Supervisory Board remuneration policy will be subject to AGMThe remuneration structure of the Supervisory Board members reflects the roles and approval before becoming effective.responsibilities of individual Supervisory Board members. All fees for Supervisory Board members are paid out fully in cash. No variable remuneration is provided to ensure that the Supervisory It is important that ING is able to attract members for its Supervisory Board who have the ability,Board members can maintain independence. Additionally, the Supervisory Board members are not experience, skills, values and behaviours to deliver on the company strategy and goals and supporteligible for retirement benefits nor for any other benefits in relation to their position on the ING's purpose. The Supervisory Board strives to have a diverse composition with regards to gender,Supervisory Board.
ethnicity, nationality and generation. The Supervisory Board remuneration policy therefore aims to

2019 ING Group Annual Report on Form 20-F126

C.Board practicesThe Group employs a significant numbers of temporary employees. The average number of

temporary employees, not included in the table above, at a full time equivalent basis was 7,394 at the end of 2019.
For information regardin g board practices, see Item 6.A

Severance payments to members of the Executive Board The contracts entered into with the members of the Executive Board provide for severanceE.Share ownership payments that become due upon termination of the applicable Executive Board member’s contract, including if termination occurs in connection with a public bid as defined in section 5:70 of For information regarding share ownership, see Item 6.B of this Form 20-F and Note 27 ‘Staff the Dutch Financial Supervision Act. For purposes of calculating the amounts due, it is not relevant expenses’ to the consolidated financial statements.
whether or not termination of the employment or commission contract is related to a public bid.
Severance payments to the members of the Executive Board are limited to a maximum of one year’s fixed salary, in line with the Dutch Financial Supervision Act and the Corporate Governance Code

D.Employees

The average number of employees at a full time equivalent basis was 53,431 at the end of 2019, of which 14,415 or 27%, were employed in the Netherlands. Substantially all of the Group’s Dutch employees are subject to a collective labor agreement covering ING in the Netherlands.

The distribution of employees with respect to the Group’s continuing operations for the years 2019, 2018 and 2017 were as follows:

Average number of employees at full time equivalent basis

NetherlandsInternationalTotal

201920182017201920182017201920182017

Total average number of employees at full time equivalent basis14,41513,60013,14139,01638,63338,36353,43152,23351,504

2019 ING Group Annual Report on Form 20-F127

Item 7. Major shareholders and related party transactions

A. Major shareholdersPursuant to section 5.3 of the Dutch Financial Supervision Act (“Major Holdings Rules”), shareholders
and holders of ADSs are only required to provide updated information on their holdings once their
interest reaches, exceeds or falls below threshold levels of 3%, 5%, 10%, 15%, 20%, 25%, 30%, 40%, ING Group ordinary shares are listed on the stock exchanges of Amsterdam (Euronext Amsterdam)
50%, 60%, 75% and 95%. As a result, other than based on information available from public filings and Brussels (Euronext Brussels). ING Group American Depositary Shares (“ADSs”) are listed on the
available under the applicable laws of any other jurisdiction, ING Groep N.V. is not aware of any New York Stock Exchange (NYSE). Options on ING Group ordinary shares or in the form of American
changes in the ownership of ordinary shares or ADSs between the thresholds levels mentioned in depository receipts (ADRs) are traded on the Euronext Amsterdam Derivative Markets and the
the previous sentence.
Chicago Board Options Exchange.

On 31 December 2019, no person is known to ING Groep N.V. to be the owner of more than 10% of Holders of ordinary shares or American Depositary Shares with a stake of 3% or more the ordinary shares or ADSs. As of 31 December 2019, members of the Supervisory Board and their To the best of our knowledge, as of 31 December 2019, no holder of ordinary shares or ADSs, otherrelated third parties held 54,065 Ordinary Shares . Members of the Supervisory Board do not hold
than BlackRock Inc. and Artisan Investments GP LLC held 3% or more of ING Group’s issued shareING options.
capital. Artisan Investments GP LLC has since notified theAFM that,as of January 17, 2020 its As of 31 December 2019, members of the Executive Board and their related third parties held beneficial ownership of ING’s issued share capital had dropped to 2.96%. Artisan Investments GP 172,523 ordinary shares of which 35,905 are restricted by a retention period.
LLC has since notified the AFM that, as of February 28, 2020, its beneficial ownership of ING’s issued
share capital had increased to 3.06%.As of 31 December 2019 ING Groep N.V. was not a party to any material agreement that becomes
effective, or is required to be amended or terminated in case of a change of control of ING Groep
On 30 January 2018, BlackRock, Inc. disclosed by way of a Schedule 13G filed with the SEC,N.V. following a public bid as defined in the Dutch Financial Supervision Act. ING Groep N.V.’s
beneficial ownership of 304,505,468 ordinary shares of ING Group as of 31 December 2017,subsidiaries may have customary change of control arrangements included in agreements related
representing 7.8% of ING Group’s issued share capital. On 4 February 2019, BlackRock, Inc. disclosedto various business activities, such as joint venture agreements, letters of credit and other credit
by way of a Schedule 13G filed with the SEC, beneficial ownership of 233,492,874 ordinary shares offacilities, ISDA-agreements, hybrid capital and debt instruments, reinsurance contracts and futures
ING Group as of 31 December 2018, representing 6.0% of ING Group’s issued share capital.and option trading agreements. Following a change of control of ING Groep N.V. (as the result of a
On 5 February 2020, BlackRock, Inc. disclosed by way of a Schedule 13G filed with the SEC,public bid or otherwise), such agreements may be amended or terminated, leading, for example, to
beneficial ownership of 259,231,767 ordinary shares of ING Group as of 31 December 2019,an obligatory transfer of the interest in the joint venture, early repayment of amounts due, loss of
representing 6.7% of ING Group’s issued share capital.credit facilities or reinsurance cover and liquidation of outstanding futures and option trading
positions.
On 31 December 2019, ING Groep N.V. and its subsidiaries held 919,387 ordinary shares or ADSs,
representing 0.02% of ING Group’s issued share capital. ING Groep N.V. does not have voting rightsAs of 31 December 2019 ING Groep N.V. was not aware of any arrangements the operation of
in respect of shares and ADSs it holds or which are held by its subsidiaries.which may result in a change of control of ING Groep N.V.
2019 ING Group Annual Report on Form 20-F128

B. Related Party Transactions

In addition, ING Group has entered into various transactions with related parties. For more
information, reference is made to Note 50 “Related parties” in the consolidated financial In the normal course of business, ING Group enters into various transactions with related parties.
statements.
Parties are considered to be related if one party has the ability to control or exercise significant

influence over the other party in making financial or operating decisions. Related parties of ING Group include, among others, its subsidiaries, associates, joint ventures, key managementC. Interests of experts and counsel personnel, and various defined benefit and contribution plans. Transactions between related parties include rendering or receiving of services, leases, transfers under finance arrangements and This item does not apply to annual reports on Form 20-F.
provisions of guarantees or collateral. There are no significant provisions for doubtful debts or individually significant bad debt expenses recognised on outstanding balances with related parties.

As of 31 December 2019, there was no amount outstanding in respect of loans and advances, including mortgages, made to members of the Supervisory Board. The amount outstanding in respect of loans and advances, mostly mortgages, to members of the Executive Board was EUR 2.402 million at an average interest rate of 1.49%. The largest aggregate amount of loans and advances outstanding to the members of the Executive Board during 2019 was EUR 2.681 million.

The loans and advances mentioned in the preceding paragraph (1) were made in the ordinary course of business, (2) were granted on conditions that are comparable to those of loans and advances granted to all employees and (3) did not involve more than the normal risk of collectability or present other unfavorable features. Loans and advances to members of the Executive Board are compliant with the standards set out in the DNB guidelines for loans to officers and directors of a regulated entity, such as ING.

As described under “Item 6. Directors, Senior Management and Employees”, some members of the Supervisory Board are current or former senior executives of leading multi-national corporations based primarily in the Netherlands. ING Group may at any time have lending, investment banking or other financial relationships with one or more of these corporations in the ordinary course of business on terms which we believe are no less favorable to ING than those reached with unaffiliated parties of comparable creditworthiness.

2019 ING Group Annual Report on Form 20-F129

Item 8. Financial information

currency of a country other than the Netherlands in which the shares are traded. Amounts payable

to holders of ADSs that are paid to the Depositary in a currency other than dollars will be converted

A.Consolidated statements and other financial information to dollars and subjected to a charge by the Depositary for any expenses incurred by it in such

Consolidated statementsconversion.

For information regarding consolidated statements and other financial information, see Item 18 of

this Form 20-F.If the Executive Board has been designated as a body authorised to resolve to issue shares, it may

decide, with the approval of the Supervisory Board, that a distribution on ordinary shares shall be

Legal Proceedingsmade in the form of ordinary shares instead of cash or to determine that the holders of ordinary

shares shall be given the choice of receiving the distribution in cash or in the form of ordinary For a description of ING’s legal proceedings, see Note 46 ‘Legal proceedin gs’ in the consolidated shares on such terms as the Executive Board, with the approval of the Supervisory Board, may financial statements.
decide.

Policy on dividend distribution The right to dividends and distributions in respect of the ordinary shares will lapse if such dividends

or distributions are not claimed within five years following the day after the date on which they ING Group’s dividend policy aims to pay a progressive dividend that will reflect considerations were made available.
including expected future capital requirements, growth opportunities available to the Group, net

earnings, and regulatory developments.
There are no legislative or other legal provisions currently in force in the Netherlands or arising

under ING Groups’ Articles of Association restricting the remittance of dividends to holders of The Executive Board proposes to pay a total cash dividend of EUR 2,689 million, or EUR 0.69 per ordinary shares, or ADSs not resident in the Netherlands. Insofar as the laws of the Netherlands are ordinary share, over the financial year 2019. This is subject to the approval of shareholders at the concerned, cash dividends paid in Euro may be transferred from the Netherlands and converted Annual General Meeting in April 2020.
into any other currency, except that for statistical purposes such payments and transactions must

be reported by ING Group to DNB and, further, no payments, including dividend payments, may be Taking into account the interim dividend of EUR 0.24 per ordinary share paid in August 2019, the made to jurisdictions or persons, that are subject to certain sanctions, adopted by the Government final dividend will amount to EUR 0.45 per ordinary share and will be paid fully in cash. These of the Netherlands, implementing resolutions of the Security Council of the United Nations, or payments per share repre sent gross amounts which are subject to Dutch dividend withholding tax.
adopted by the European Union.

Cash distributions on ING Groups ordinary shares are generally paid in Euros. However, the

Executive Board may decide, with the approval of the Supervisory Board, to declare dividends in the

2019 ING Group Annual Report on Form 20-F130

Dividends are subject to withholding taxes in the Netherlands as described under Item 10, “Additional Information -Taxation - Netherlands Taxation”.

B.Significant changes

For information on subsequent events reference is made to Note 51 ‘Subsequent events’ of the consolidated financial statements.

Since 31 December 2019, until the filing of this report, no other significant changes have occurred in the financial statements of the Group included in “Item 18 Consolidated Financial Statements” of this document.

2019 ING Group Annual Report on Form 20-F131

Item 9. The offer and listing

A.Offer and listing details

Ordinary Shares (nominal value EUR 0.01 per share) are traded on Euronext Amsterdam, the principal trading market for the Ordinary Shares, under the symbol “INGA”. The Ordinary Shares are also listed on the stock exchange of Euronext Brussels, under the symbol “INGA”. ADSs, representing an equal number of Ordinary Shares, are traded on the New York Stock Exchange under the symbol “ING”.

B.Plan of distribution

This item does not apply to annual reports on Form 20-F.

C.Markets

For information regarding markets, see Item 9.A of this Form 20-F.

D.Selling shareholders

This item does not apply to annual reports on Form 20-F.

E.Dilution

This item does not apply to annual reports on Form 20-F.

F.Expenses of the issue

This item does not apply to annual reports on Form 20-F.

2019 ING Group Annual Report on Form 20-F132

Item 10. Additional information

A.Share capitalE.Taxation

This item does not apply to annual reports on Form 20-F.The following is a summary of certain Netherlands tax consequences, and the United States federal

income tax consequences, of the ownership of our Ordinary Shares or American Depositary Shares

(“ADSs”) by U.S. Shareholders (as defined below) who hold Ordinary Shares or ADSs as capital

B.Memorandu m and articles of association assets.

For a description of ING’s memorandum and articles of association, please see Exhibit 2.1For the purposes of this summary, a “U.S. Shareholder” is a beneficial owner of Ordinary Shares or

“Description of Securities Registered under Section 12 of the Exchange Act”, which is incorporatedADSs that is:

by reference herein.

an individual citizen or resident of the United States, ◾

a corporation organized under the laws of the United States or of any state of the United States, C.Material contracts◾

or any entity taxable as United States corporation,

Except for the settlement of ING Bank N.V. with the Dutch Public Prosecution Service (DPPS) in 2018 an estate, the income of which is subject to United States federal income tax without regard to ◾
on regulatory issues in the ING Netherlands business that resulted in penalties totalling EUR 775 its source, or

million, there have been no material contracts outside the ordinary course of business to which ING a trust if a court within the United States is able to exercise primary supervision over the ◾
Groep N.V. or any of its subsidiaries is a party in the last two years.
administration of the trust and one or more United States persons have the authority to control

all substantial decisions of the trust.

D.Exchange controls

Further, this summary is limited to U.S. Shareholders who are not, and are not deemed to be, a Cash distributions, if any, payable in Euros on Ordinary Shares and ADSs may be officially resident of the Netherlands for Dutch tax purposes.
transferred from the Netherlands and converted into any other currency without violating Dutch

law, except that for statistical purposes such payments and transactions must be reported by ING This summary is based on the United States Internal Revenue Code of 1986 and the laws of the
Groep N.V. to the Dutch Central Bank and, further, no payments, including dividend payments, may Netherlands, each as amended, their legislative history, existing and proposed regulations,
be made to jurisdictions or persons subject to certain sanctions, adopted by the government of the published rulings and court decisions, and the tax treaty between the United States and the
Netherlandsor the European Union.
Netherlands for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect

to Taxes on Income (“Treaty”), all as of the date hereof. These laws are subject to change, possibly

2019 ING Group Annual Report on Form 20-F133

on a retroactive basis. The information provided below is neither intended as tax advice norNetherlands Taxation

purports to describe all of the tax considerations that may be relevant to investors and prospective

investors. It should not be read as extending to matters not specifically discussed, and investorsWithholding tax on dividends

should consult their own advisors as to the tax consequences of their ownership and disposal of The Netherlands imposes a withholding tax on a distribution of a dividend at the statutory rate of
Ordinary Shares or ADSs. In particular, the summary does not take into account the specific 15%. Dividends include:
circumstances of particular investors (such as tax-exempt organizations, banks, insurance

companies, dealers in securities, traders in securities that elect to mark-to-market their securities i.dividends paid in cash and in kind;
holdings, investors liable for alternative minimum tax, investors whose functional currency is not ii.deemed and constructive dividends;
the U.S. dollar, investors that actually or constructively own 10% or more of the combined voting iii.the consideration for the repurchase or redemption of shares in excess of the qualifying
power of the voting stock or of the total value of ING Groep N.V., investors that hold Ordinary average paid-in capital unless such repurchase is made for temporary investment purposes
Shares or ADSs as part of a straddle or a hedging or conversion transaction, investors that acquired or is exempt by law;
or dispose of Ordinary Shares or ADSs as part of a wash sale, or investors that own Ordinary Shares iv.any (partial) repayment of paid-in capital not qualifying as capital for Dutch dividend
or ADSs through a partnership), some of which may be subject to special rules.
withholding tax purposes;

v.liquidation proceeds in excess of the qualifying average paid-in capital for Dutch dividend Moreover, this summary does not discuss the Dutch tax treatment of a holder of Ordinary Shares or withholding tax purposes; and ADSs that is an individual who receives income or capital gains derived from the Ordinary Shares vi.stock dividends up to their nominal value (unless distributed out of ING Groep N.V.’s qualifying and ADSs and this income received or capital gains derived are attributable to the past, present or paid-in capital).
future employment activities of such holder.

Reduction of Dutch dividend withholding tax based on Dutch law The summary is based in part upon the representations of the Depositary and the assumption that

each obligation in the Deposit Agreement and any related agreement will be performed in Under certain circumstances, a reduction of Dutch dividend withholding tax can be obtained based
accordance with its terms. In general, for United States federal income tax and Netherlands tax on Dutch law:
purposes, holders of ADSs will be treated as the owners of the Ordinary Shares underlying the ADSs,

and exchanges of Ordinary Shares for ADSs, and exchanges of ADSs for Ordinary Shares, will not be i.An exemption at source is available if the Dutch participation exemption applies and the
subject to United States federal income tax or Netherlands income tax. References to Ordinary Ordinary Shares or ADSs are attributable to a business carried out in the Netherlands. To
Shares in this section include references to ADSs.
qualify for the Dutch participation exemption, the U.S. Shareholder must generally hold at

least 5.0 percent of our nominal paid-in capital and meet certain other requirements.
It is assumed, for purposes of this summary, that a U.S. Shareholder is eligible for the benefits of

the Treaty and that a U.S. Shareholder’s eligibility is not limited by the limitation on benefits

provisions of the Treaty.

2019 ING Group Annual Report on Form 20-F134

ii.An exemption at source is available for dividend distributions to certain qualifying corporateReduction of Dutch dividend withholding tax based on the Treaty U.S. Shareholders owning our Ordinary Shares or ADSs if such shareholder would have been able to apply the Dutch participation exemption if it would have been resident of thePursuant to the provisions of the Treaty, certain corporate U.S. Shareholders owning directly at Netherlands, unless such shareholder holds the Ordinary Shares or ADSs with the primary aimleast 10% of our voting power are eligible for a reduction to 5% Dutch dividend withholding tax or one of the primary aims to avoid the levy of Dutch dividend withholding tax at the level ofprovided that the U.S. Shareholder is the beneficial owner of the dividends received and does not another person and the Ordinary Shares or ADSs are not held for valid commercial reasonshave an enterprise or an interest in an enterprise that is, in whole or in part, carried on through a that reflect economic reality.permanent establishment or permanent representative in the Netherlands to which the dividends iii.Certain tax exempt organizations (e.g. pension funds and excluding collective investmentare attributable. The Treaty also provides for a dividend withholding tax exemption on dividends, vehicles) may be eligible for a refund of Dutch dividend withholding tax upon their request.but only for a shareholder owning directly at least 80.0 percent of our voting power and meeting all Based on domestic law not yet entered into force, in those circumstances, an exemption atother requirements.
source may also become available upon request.
iv.Upon request and under certain conditions, certain qualifying individual and corporate U.SProvided that certain conditions are met, under the Treaty dividends paid to qualifying exempt Shareholders of Ordinary Shares or ADSs which are not subject to personal or corporatepension trusts and other qualifying exempt organizations, as defined in the Treaty, are exempt income tax in the Netherlands may request a refund of Dutch dividend withholding taxfrom Dutch dividend withholding tax. To obtain a refund of the tax withheld such qualifying exempt insofar the withholding tax withheld on the gross dividend is higher than the personal orpension trusts are required to file a request. Only if certain conditions are fulfilled, such qualifying corporate income tax which would have been due on the net dividend if they were resident orexempt pension trusts may be eligible for relief at source upon payment of the dividend. Qualifying established in the Netherlands. This refund is however not applicable when, based on theexempt organizations (other than qualifying exempt pension trusts) can only file for a refund of the Treaty, the Dutch dividend withholding tax can be fully credited in the United States by thetax withheld.

U.S. Shareholder. However, it is unclear whether (i) which (financing) costs can be taken into account when determining the hypothetical personal or corporate income tax due on the netAnti-dividend stripping rules income (ii) or how the Netherlands would determine whether, based on the double taxation convention, a full credit is available in the country of residence of the holder for purposes ofPursuant to the Dutch anti-dividend stripping rules, in the case of dividend-stripping, the 15% this refund. See “United States Taxation —Taxes on dividends” for more information. Thedividend withholding tax cannot be reduced or refunded. Dividend-stripping is deemed to be provision in essence is intended to be a codification of certain judgments by both thepresent if the recipient of a dividend is, different from what has been assumed above, not the European Free Trade Association Court of Justice and the European Court of Justice thatbeneficial owner thereof and is entitled to a larger credit, reduction or refund of dividend already indicated that in certain circumstances a refund should be available prior to thewithholding tax than the beneficial owner of the dividends. Under these rules, a recipient of introduction of the provision in Dutch law. It is possible that this provision is an insufficientdividends will not be considered the beneficial owner thereof if as a consequence of a combination codification of these judgments and that based on EU law a larger refund should be provided.of transactions a person other than the recipient wholly or partly benefits from the dividends, whereby such person retains, whether directly or indirectly, an interest similar to the shares on which the dividends were paid.

2019 ING Group Annual Report on Form 20-F135

Credit for ING Groep N.V.iii.such income and capital gains are derived from a direct, indirect or deemed substantial interest in the share capital of ING Groep N.V. (such substantial interest not being a business ING Groep N.V. may, with respect to certain dividends received from qualifying non-Netherlandsasset), and in the case of a non-Dutch resident corporate shareholder only, that substantial subsidiaries, credit taxes withheld from those dividends against the Netherlands withholding taxinterest is being held with the primary aim or one of the primary aims to avoid the levy of imposed on certain qualifying dividends that are redistributed by ING Groep N.V., up to a maximumincome tax from another person and is put in place without valid economic reasons that of the lesser of:reflect economic reality;
iv.in case of a non-Dutch resident corporate shareholder, such shareholder is a resident of 3% of the amount of qualifying dividends redistributed by ING Groep N.V.; andAruba, Curacao or Saint Martin with a permanent establishment or permanent representative ◾ 3% of the gross amount of certain qualifying dividends received by ING Groep N.V.in Bonaire, Eustatius or Saba to which the Ordinary Shares or ADS are attributable, while the ◾ profits of such shareholder are taxable in the Netherlands pursuant to Article 17(3)(c) of the The reduction is applied to the Dutch dividend withholding tax that ING Groep N.V. must pay to theDutch Corporate Tax Act 1969; or Dutch tax authorities and not to the Dutch dividend withholding tax that ING Groep N.V. mustv.in case of a non-Dutch resident individual, such individual derives income or capital gains withhold.from the Ordinary Shares or ADSs that are taxable as benefits from ‘miscellaneous activities’ in the Netherlands (‘resultaat uit overige werkzaamheden’, as defined in the Dutch Income Taxes on income and capital gainsTax Act 2001), which includes the performance of activities with respect to the Ordinary Income and capital gainsShares or ADSs that exceed regular portfolio management.

Income and capital gains derived from the Ordinary Shares or ADSs by an individual or corporateSubstantial interest

U.S. Shareholder are generally not subject to Netherlands income tax or corporation tax, unless:
Generally speaking, for Dutch tax purposes, an interest in the share capital of ING Groep N.V., i.such income and gains are attributable to a (deemed) permanent establishment or (deemed)should not be considered a substantial interest if the holder of such interest, and, in case of an permanent representative in the Netherlands of the U.S. Shareholder; orindividual, his or her spouse, registered partner, certain other relatives or certain persons sharing ii.the shareholder is entitled to a share in the profits of an enterprise or (in case of a non-Dutchthe holder’s household, alone or together, does or do not hold, either directly or indirectly, the resident corporate shareholder only) a co-entitlement to the net worth of an enterprise, thatownership of, or certain rights over, shares or rights resembling shares representing 5% or more of is effectively managed in the Netherlands (other than by way of securities) and to whichthe total issued and outstanding capital, or the issued and outstanding capital of any class of enterprise the Ordinary Shares or ADSs are attributable; orshares, of ING Groep N.V.

2019 ING Group Annual Report on Form 20-F136

Gift or inheritance taxdetermined for United States federal income tax purposes, will be treated as a non-taxable return

No Netherlands gift or inheritance tax will be imposed on the transfer or deemed transfer of theof capital to the extent of a U.S. Shareholder’s basis in the Ordinary Shares and thereafter as capital

Ordinary Shares or ADSs by way of a gift by or on the death of a U.S. Shareholder if, at the time ofgain. Because ING Groep N.V. does not keep account of its earnings and profits, as determined for

the gift or the death of that shareholder, such shareholder is not a (deemed) resident of theUnited States federal income tax purposes, U.S. Shareholders should generally expect to treat any

Netherlands.distribution as a dividend for U.S. federal income tax purposes.

Netherlands inheritance or gift taxes (as the case may be) are due, however, if the transfer of theFor foreign tax credit purposes, dividends will generally be income from sources outside the United

bearer receipts or ADSs are construed as an inheritance or as a gift made by or on behalf of aStates and will, depending on the circumstances of the U.S. Shareholder, generally be “passive”

person who, at the time of the gift or death, is deemed to be a resident of the Netherlands. For theincome for purposes of computing the foreign tax credit allowable to the shareholder. A dividend

purposes of Netherlands gift or inheritance tax, an individual of Dutch nationality is deemed to be awill not be eligible for the dividends received deduction generally allowed to U.S. corporations in

resident of the Netherlands if he or she has been a resident thereof at any time during the tenrespect of dividends received from other U.S. corporations. Dividends paid to a non-corporate U.S.

years preceding the time of the gift or death. For the purposes of Netherlands gift tax, any person isShareholder that are considered qualified dividend income will be taxable to the shareholder at

deemed to be a resident of the Netherlands if he or she has resided therein at any time in thepreferential rates applicable to long-term capital gains provided that the shareholder holds the

twelve months preceding the gift.Ordinary Shares for more than 60 days during the 121-day period beginning 60 days before the ex-

dividend date and meets other holding period requirements. Dividends paid by ING Groep N.V. with

United States Taxationrespect to the Ordinary Shares generally will be qualified dividend income.

Taxes on dividendsSubject to certain limitations, a U.S. Shareholder may generally deduct from income, or credit

against its United States federal income tax liability, the amount of any Netherlands withholding The tax treatment of owning Ordinary shares will depend in part on whether or not ING Groep N.V.
taxes under the Treaty. The Netherlands withholding tax will likely not be creditable against the U.S.
is classified as a passive foreign investment company, or PFIC, for United States federal income tax Shareholder’s United States tax liability, however, to the extent that ING Groep N.V. is allowed to purposes. Except as discussed below under “-PFIC Rules”, this discussion assumes that we are not reduce the amount of dividend withholding tax paid over to the Netherlands Tax Administration by classified as a PFIC for United States federal income tax purposes.
crediting withholding tax imposed on certain dividends paid to ING Groep N.V. In addition, special

rules apply in determining the foreign tax credit limitation with respect to dividends that are Under the United States federal income tax laws, a U.S. Shareholder will be required to include in
subject to preferential rates. To the extent a reduction or refund of the tax withheld is available to gross income the full amount of a cash dividend (including any Netherlands withholding tax
you under Dutch law or under the Treaty, the amount of tax withheld that could have been withheld) as ordinary income when the dividend is actually or constructively received by the U.S.
reduced or is refundable will not be eligible for credit against your United States federal income tax Shareholder. For this purpose, a “dividend” will include any distribution paid by ING Groep N.V. with
liability. In addition, to the extent an amount of Dutch tax withheld is contingent on the availability respect to the Ordinary Shares, but only to the extent such distribution is not in excess of ING Groep
of a credit against the amount of income tax owed to another country, that amount of Dutch tax N.V.’s current and accumulated earnings and profits as determined for United States federal
withheld will not be eligible for a credit against your United States federal income tax liability. It is income tax purposes. Distributions in excess of current and accumulated earnings and profits, as

2019 ING Group Annual Report on Form 20-F137

unclear whether or how the Netherlands would apply this rule in determining whether, based onIf ING Groep N.V. were to be treated as a PFIC, unless a U.S. Shareholder made an effective election the Treaty, a credit is available in the United States for purposes of the dividend withholding taxto be taxed annually on a mark-to-market basis with respect to the Ordinary Shares, any gain from refund provision described in Section IV under “Netherlands Taxation —Withholding tax onthe sale or disposition of Ordinary Shares by a U.S. Shareholder would be allocated ratably to each dividends—Reduction of Dutch dividend withholding tax based on Dutch law”.year in the holder’s holding period and would be treated as ordinary income. Tax would be imposed on the amount allocated to each year prior to the year of disposition at the highest rate in effect Since payments of dividends with respect to Ordinary Shares will be made in Euros, a U.S.for that year, and interest would be charged at the rate applicable to underpayments on the tax Shareholder will generally be required to determine the amount of dividend income by translatingpayable in respect of the amount so allocated. The same rules would apply to “excess the Euro into United States dollars at the “spot rate” on the date the dividend distribution isdistributions”, defined generally as distributions in a single taxable year exceeding 125% of the includable in the income of the U.S. Shareholder. Generally, any gain or loss resulting from currencyaverage annual distribution made by ING Groep N.V. over the shorter of the holder’s holding period exchange fluctuations during the period from the date the dividend distribution is includable in theor the three preceding years. Dividends received by a U.S. Shareholder will not be eligible for the income of the U.S. Shareholder to the date such payment is converted into U.S. dollars will bespecial tax rates applicable to qualified dividend income if ING Groep N.V. were to be treated as a treated as ordinary income or loss and will not be eligible for the special tax rate applicable toPFIC with respect to the shareholder either in the taxable year of the distribution or the preceding qualified dividend income. Such gain or loss will generally be income or loss from sources within thetaxable year, but instead will be taxable at rates applicable to ordinary income.

United States for foreign tax credit limitation purposes.
A U.S. Shareholder who owns Ordinary Shares during any year that ING Groep N.V. is a PFIC may be Taxes on capital gainsrequired to file Internal Revenue Service Form 8621.

Gain or loss on a sale or exchange of Ordinary Shares by a U.S. Shareholder will generally be a
capital gain or loss for United States federal income tax purposes. If such U.S. Shareholder has held

F.Dividends and paying agents

the Ordinary Shares for more than one year, such gain or loss will generally be long-term capital This item does not apply to annual reports on Form 20-F.
gain or loss. Long-term capital gain of a non-corporate U.S. Shareholder is generally taxed at preferential rates. In general, gain or loss from a sale or exchange of Ordinary Shares by a U.S.
Shareholder will be treated as income or loss from sources within the United States for foreign taxG.Statement by experts credit limitation purposes.
This item does not apply to annual reports on Form 20-F.

PFIC rules

ING Groep N.V. believes it is not a PFIC for United States federal income tax purposes, and it doesH.Documents on display
not expect to become a PFIC in the foreseeable future. However, this conclusion is a factual ING Groep N.V. is subject to the informational requirements of the Securities Exchange Act of 1934, determination that must be made annually and thus may be subject to change. It is therefore as amended. In accordance with these requirements, ING Groep N.V. files reports and other possible that we could become a PFIC in a future taxable year information with the Securities and Exchange Commission (”SEC”). These materials, including this
Annual Report and its exhibits, may be inspected and copied on the SEC’s website at www.sec.gov.

2019 ING Group Annual Report on Form 20-F138

You may also inspect ING Groep N.V.’s SEC reports and other information on the website of ING Groep N.V. (www.ing.com).

I.Subsidiary information

This item does not apply to annual reports on Form 20-F.

2019 ING Group Annual Report on Form 20-F139

Item 11. Quantitative and Qualitative Disclosure of Market Risk

See “Item 5. Operating and Financial Review and Prospects – Factors Affecting Results of Operations” and “Additional information - ING Group Risk Management” for these disclosures, including disclosures relating to operational, compliance and other non-market-related risks.

2019 ING Group Annual Report on Form 20-F140

Item 12. Description of Securities Other Than Equity Securities

The charges of the ADR depositary payable which may be payable by investors are as follows:

Type of ServiceADR Depositary ActionsFee Payable

A.Debt securities Depositing orIssuance of ADSs against the deposit of Ordinary$5.00 for each 100 ADSs (or
substituting theShares, including deposits and issuances in respectportion thereof) issued, delivered This item does not apply to annual reports on Form 20-F.
underlying Ordinaryof:or upon which a share distributive
Sharesor elective distribution is made or
· share distributions, rights and otheroffered. The ADR depositary may B.Warrants and rightsdistributions.sell sufficient securities or

property received in respect of This item does not apply to annual reports on Form 20-F.share distributions, rights and · a stock dividend or stock split.
other distributions prior to such
deposit to pay such charge.
· a merger, exchange of securities or

C.Other securities other transactions or events affecting
the ADSs or the underlying Ordinary This item does not apply to annual reports on Form 20-F.
Shares.
Receiving orDistribution of cash dividends or other cash$0.05 or less per ADS held.
distributing cashdistributions, or offering of elective cash/stock D.American depositary sharesdividendsdividends.

Selling or exercising· additional ADRs resulting from aAn amount equal to the fee for

Fees and Charges Payable by a Holder of ADSs rightsdividend or free distribution consistingthe execution and delivery of
of Ordinary Shares, or U.S dollarsADSs which would have been
resulting from sales of Ordinary Sharescharged as a result of the deposit JPMorgan Chase Bank, N.A., as ADR depositary, may collect fees for, among other things, thereceived in a distribution.of such securities.

delivery and surrender of ADSs directly from investors, or from intermediaries acting for them, · Instruments representing rights to depositing Ordinary Shares or surrendering ADSs for the purpose of withdrawal.
acquire additional ADRs as a result of distribution on Ordinary Shares, or U.S dollars resulting from sales of such rights.

· other securities available to the ADR depositary resulting from any distribution on the deposited Ordinary Shares, or U.S dollars resulting from sales of such other securities.

2019 ING Group Annual Report on Form 20-F141

Other charges andThe ADR depositary may incur charges and expensesPayable by holders or persons

Withdrawing anAcceptance of ADSs surrendered for withdrawal of$5.00 for each 100 ADSs (orexpenses of the ADRon behalf of holders in connection with:depositing Ordinary Shares.
underlying Ordinarydeposited Ordinary Sharesportion thereof) reduced,depositary

Sharecancelled or surrendered.· stock transfer or other taxes and otherPayable by persons depositing, or

governmental charges.holders of ADRs delivering

underlying Ordinary Shares, Ads

Type of ServiceADR Depositary ActionsFee Payable · SWIFT, cable, telex and facsimileor deposited securities.
Transferring, splittingRegistration, registration of transfer, combination$1.50 per ADR.
transmission and delivery charges
or grouping of ADRsand split-up of ADRs in the ADR register as evidenced incurred at the request of personsPayable by persons depositing or
by the ADRs surrendered or upon delivery of proper depositing, or holders of ADRs deliveringwithdrawing deposited securities.
instruments of transfer underlying Ordinary Shares, ADRs or

deposited securities.Payable by persons receiving
General depositaryOther services performed by the ADR depositary in$0.05 per ADS per calendar yearsuch foreign currency, as the ADR
services, particularlyadministering the ADR program(or portion thereof), which may · transfer or registration fees for thedepositary will deduct any fees,
those charged on anbe charged on a periodic basis registration or transfer of depositedexpenses and other charges prior
annual basisduring each calendar yearsecurities.to distributing such foreign
against holders of the record currency.
date(s) set by the ADR depositary · fees, expenses and other charges of the and shall be payable at the sole ADR depositary or its agent in discretion of the ADR depositary connection with the conversion of by billing such holders or foreign currency into U.S. dollars.
deducting such charge from one

or more cash distributions.

Reimbursement ofThe ADR depositary and/or any of its agents mayFees and charges shall beFees and Payments made by the ADR depositary to ING

fees, charges andincur fees, charges and expenses (includingassessed on a proportionate basis

expenses of the ADRexpenses incurred on behalf of holders of ADRs inagainst holders of ADRs as of the

depositaryconnection with compliance with foreign exchangerecord date or dates set by theIn consideration for acting as depositary, the ADR depositary has agreed to provide ING with certain
control regulations or any law or regulation relatingADR depositary and shall be amounts on an annual basis. In the year ended 31 December 2019, the ADR depositary paid to foreign investment) in connection with thepayable at the sole discretion of
servicing of the underlying Ordinary Shares or otherthe ADR depositary by billingaggregate fees and made other direct and indirect payments to ING in an amount of USD

deposited securities, the sale of securities (including,such holders of ADRs or by 6,807,428.
without limitation, deposited securities), the deliverydeducting such charge from one

of deposited securities or otherwise in connectionor more cash dividends or other

with the ADR depositary’s compliance withcash distributions.Under certain circumstances, including removal of the ADR depositary or termination of the ADR

applicable law, rule or regulation.
program by ING, ING is required to repay the ADR depositary certain amounts reimbursed and/or

expenses paid to or on behalf of ING.

Type of ServiceADR Depositary ActionsFee Payable

2019 ING Group Annual Report on Form 20-F142

2019 ING Group Annual Report on Form 20-F143

PART II.

Disclosure Controls and Procedures

Item 13. Defaults, Dividend Arrearages and Delinquencies The Company’s management under the supervision and with the participation of the CEO and CFO,

has performed an evaluation of the effectiveness of the design and operation of the Company’s None.

disclosure controls and procedures. Based on that evaluation, the Company’s management

concluded that the Company’s disclosure controls and procedures were effective as of December

Item 14. Material Modifications to the Rights of Security Holders and 31, 2019, the end of the period covered by the 2019 Form 20-F.

Use of Proceeds

Report of the Executive Board on Internal Control Over Financial Reporting None.

The Executive Board is responsible for establishing and maintaining adequate internal control over

financial reporting. ING’s internal control over financial reporting is a process designed under the

Item 15. Controls and Procedures supervision of our principal executive and principal financial officers to provide reasonable

assurance regarding the reliability of financial reporting and the preparation of financial

Internal control over financial reportingstatements for external purposes in accordance with generally accepted accounting principles.

Due to the listing of ING shares on the New York Stock Exchange, ING Group is required to comply Our internal control over financial reporting includes those policies and procedures that:
with the SEC regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act (SOX 404).
●Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
These regulations require that the Chief Executive Officer (“CEO”) and the Chief Financial Officer the transactions and dispositions of assets of ING;
(“CFO”) of ING Group report and certify on an annual basis on the effectiveness of ING Group’s ●Provide reasonable assurance that transactions are recorded as necessary to permit
internal controls over financial reporting. Furthermore, the external auditors are required to preparation of financial statements in accordance with generally accepted accounting
provide an opinion on the effectiveness of ING Group’s internal controls over financial reporting.
principles, and that our receipts and expenditures are being made only in accordance with

SOX 404 activities are organized along the lines of the governance structure, and involve theauthorisations of our management and directors; and

participation of senior management across ING. Following the SOX 404 process, ING is in the●Provide reasonable assurance regarding prevention or timely detection of unauthorised

position to publish an unqualified statement that the Company’s internal control over financialacquisition, use or disposition of our assets that could have a material effect on our financial

reporting was effective as of 31 December 2019. The SOX 404 statement by the Executive Board isstatements.

included on this page, followed by the report of the external auditor as issued on Form 20-F.
Because of its inherent limitations, internal control over financial reporting may not prevent or

detect misstatements. Also, projections of any evaluation of effectiveness to future periods are

2019 ING Group Annual Report on Form 20-F144

subject to the risk that controls may become inadequate because of changes in conditions, or thatOpinion on Internal Control Over Financial Reporting
the degree of compliance with the policies or procedure s may deteriorate.We have audited ING Groep N.V. and subsidiaries’ (the Company) internal control over financial
reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated The Executive Board assessed the effectiveness of internal control over financial reporting as of 31 Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway December 2019. In making this assessment, the Executive Board performed tests based on the Commission. In our opinion, the Company maintained, in all material respects, effective internal criteria of the Committee of Sponsoring Organisations of the Treadway Commission (“COSO”) in control over financial reporting as of December 31, 2019, based on criteria established in Internal Internal Reporting – Integrated Framework (2013 Framework). Based on the Executive Board’s Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the assessment and those criteria, the Executive Board concluded that the Company’s internal control Treadway Commission.
over disclosure and financial reporting was effective as of 31 December 2019.
We also have audited, in accordance with the standards of the Public Company Accounting
Attestation Report of the Registered Public Accounting FirmOversight Board (United States) (“PCAOB”), the consolidated statements of financial position of the
Our independent registered public accounting firm has audited and issued their report on ING’sCompany as of December 31, 2019 and 2018, the related consolidated statements of profit or loss,
internal control over financial reporting, which appears on the page below.comprehensive income, changes in equity, and cash flows for each of the years in the three year
period ended December 31, 2019, and the related notes and specific disclosures described in Note 1
Changes in Internal Controls over Financial Reportingof the consolidated financial statements as being part of the consolidated statements (collectively,
There have been no changes in the Company’s internal controls over financial reporting during thethe consolidated financial statements), and our report dated March 2, 2020 expressed an
period covered by this Annual Report that have materially affected or are reasonably likely tounqualified opinion on those consolidated financial statements.
materially affect, our internal controls over financial reporting.

Basis for Opinion

Report of Independent Registered Public Accounting FirmThe Company’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Report of the Executive Board on Internal Control over Financial To the Shareholders and the Supervisory Board Reporting. Our responsibility is to express an opinion on the Company’s internal control over ING Groep N.V.:

financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of

2019 ING Group Annual Report on Form 20-F145

internal control over financial reporting included obtaining an understanding of internal controlItem 16A. Audit Committee Financial Expert

over financial reporting, assessing the risk that a material weakness exists, and testing and The Supervisory Board has determined that Margarete Haase, who is a member of the Supervisory
evaluating the design and operating effectiveness of internal control based on the assessed risk.
Board, qualifies as an “audit committee financial expert” as defined by the SEC pursuant to section
Our audit also included performing such other procedures as we considered necessary in the 407 of the Sarbanes-Oxley Act of 2002. The Supervisory Board has further determined that
circumstances. We believe that our audit provides a reasonable basis for our opinion.
Margarete Haase is “independent”, as defined in Rule 10A-3 under the U.S. Securities Exchange Act

of 1934. She was appointed as a member of the Supervisory Board at the General Meeting in May

Definition and Limitations of Internal Control Over Financial Reporting 2017 and her appointment became effective as per 1 May 2018, as decided by the Supervisory A company’s internal control over financial reporting is a process designed to provide reasonable Board in January 2018.
assurance regarding the reliability of financial reporting and the preparation of financial

statements for external purposes in accordance with generally accepted accounting principles. A

Item 16B. Code of Ethics company’s internal control over financial reporting includes those policies and procedures that (1)

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the

transactions and dispositions of the assets of the company; (2) provide reasonable assurance thatHow we work

transactions are recorded as necessary to permit preparation of financial statements in Creating a differentiating employee experience starts with ING’s distinctive culture: entrepreneurial,
accordance with generally accepted accounting principles, and that receipts and expenditures of open, collaborative, innovative and energetic. Who we are and how we work are set out in the
the company are being made only in accordance with authorizations of management and Orange Code, our internal Code of Ethics. Putting‘integrity above all’, it comprises:
directors of the company; and (3) provide reasonable assurance regarding prevention or timely

detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a • Our values.The non-negotiable promises we make to the world no matter what.
material effect on the financial statements.
• We are honest.

Because of its inherent limitations, internal control over financial reporting may not prevent or• We are responsible.

detect misstatements. Also, projections of any evaluation of effectiveness to future periods are• We are prudent.

subject to the risk that controls may become inadequate because of changes in conditions, or that

the degree of compliance with the policies or procedures may deteriorate.• Our behaviours.The commitments we make to each other and the standards by which we

measure each other’s performance:
/s/ KPMG Accountants N.V.
• You take it on and make it happen.

Amstelveen, The Netherlands• You help others to be successful.
March 2, 2020 • You are always a step ahead.

The Orange Code is supported by a compliments tool, kudos, that allows employees to give each

other compliments based on Orange Code behaviours. Employees are introduced to the Orange

2019 ING Group Annual Report on Form 20-F146

Code early with new joiners invited to complete a global online e-learning introduction module that explains more about ING’s culture, how we work and what we expect from employees. In 2019, INGRegarding reporting of breaches of the Orange Code and raising concerns about suspected or also developed a global code of conduct that builds on the Orange Code and sets the standards weactual criminal conduct, unethical conduct or other misconduct by or within ING, ING maintains a expect our people to uphold. This ING Global Code of Conduct was launched in February 2020.Whistleblower Policy next to the standard reporting and escalation lines. This requires prompt internal reporting of violations of the Orange Code and applies to all employees worldwide, Our Orange Code behaviours are included within the performance management process andincluding the principal executive, financial and accounting officers. A description of the discussed throughout the year. They are also linked to our Employee Value Proposition, whichWhistleblower Policy is available on the ING website atwww.ing.com/About -us/Compliance/INGforms the basis of all people-related programmes. Through these activities, our aim is to develop aGroup-Whistleblower-Policy.
culture that is focused on long- term value creation.ING did not grant any waivers (including implicit waivers) under the Whistleblower Policy to the

principal executive, financial or accounting officers in 2019.
The Orange Code applies to all employees worldwide, including the principal executive, financial
and accounting officers. The values and behaviours of the Orange Code are available on the INGBanker’s Oath
website athttps://www.ing.jobs/Global/Careers/Orange-code.htm.
All employees working for ING in the Netherlands (including ING's principal executive, financial or In 2019, there were no amendments to the Orange Code. ING did not grant any waivers (including accounting officers) take the Banker's Oath. The oath contains a set of principles affirming the implicit waivers) under the Orange Code to the principal executive, financial or accounting officers banking industry's commitment to maintain high standards of ethical behaviour. Accountability in 2019.
and a disciplinary sanction mechanism are linked to breaches of these principles.
Regarding the management of actual or potential conflicts of interest, ING maintains a Policy on Compliance is trained to support employees in dealing with dilemmas via workshops and dialogue Information Barriers and Conflicts of Interest which applies to all employees worldwide, including sessions, using the Orange Code dilemma model (a so-called “four-step approach” weighing the the principal executive, financial and accounting officers. A description of the Policy on Information rights and interest of stakeholders involved).
Barriers and Conflicts of Interest is available to view on the ING website atIn 2019, there were no amendments to the Banker's Oath. ING did not grant any waivers under the
https://www.ing.com/About -us/Compliance/Information-Barriers-Conflicts-of-Interest.htm.Banker's Oath to principal executive, financial or accounting officers in 2019. The text of the
The relevant principle as defined in the Conflict of Interest Policy is:Banker’s oath can be found here:https://www.ing.com/About -us/Corporate-governance/Dutch- ‘Any person not being a third party working for or on behalf of ING Bank, on contract or temporary,Banking-Code.htm including Senior Management and members of the Executive Board, Management Board Banking and the Supervisory Board must not put themselves in a position in which their personal, financial

Item 16C. Principal Accountant Fees and Services or otherwise, might influence or give the foreseeable appearance of influencing any action they take, judgment they make, or advice they give on behalf of ING’.
At the Annual General Meeting held on 11 May 2015, KPMG was appointed as the external audit
In 2019, there were no amendments to the Policy on Information Barriers and Conflicts of Interest.firm for ING Group for the financial years 2016 through 2019. This appointment includes the
ING did not grant any waivers (including implicit waivers) under the Policy on Information Barriersresponsibility to provide an audit opinion on the financial statements and internal control over
and Conflicts of Interest to the principal executive, financial or accounting officers in 2019.financial reporting on 31 December 2019 and to report on the outcome of these audits to the Executive Board and the Supervisory Board.
2019 ING Group Annual Report on Form 20-F147

Audit-related fee s

The external auditor may be questioned at the Annual General Meeting in relation to its audit Audit-related fees were paid for assurance and related services that are reasonably related to the
opinion on the financial statements. The external auditor will therefore attend and be entitled to performance of the audit or review of the consolidated financial statements and are not reported
addresses this meeting. The external auditor attended the meetings of the Risk Committee and of under the audit fee item above. These services consisted primarily of specific agreed-upon
the Audit Committee and attended and addressed the 2019 Annual General Meeting, at which the procedure engagements and assurance engagements.
external auditor was questioned its audit opinion.

Tax fees The external auditor may only provide services to ING Group and its subsidiaries with the Over 2019 no tax fees were paid. Under the current ING Policy on External Auditor Independence permission of the Audit Committee, in line with the ING Group Policy on External Auditor most tax services are prohibited and some tax services are only allowed after specific approval Independence. All services were pre -approved by the Audit Committee and the exception under an ‘exception procedure’.
procedure was not applied to any engagement.

Reference is made to Note 28 in the consolidated financial statements for audit, audit-related, tax Following the advice of the Supervisory Board, in 2019 the General Meeting of Shareholders and all other fees paid to the external auditors in 2019, 2018 and 2017.
reappointed KPMG as external auditor for the fiscal years 2020 up and until 2023. More information

on ING Group’s policy on External Auditor Independence is available on the website of ING Group

www.ing.com.Item 16D. Exemptions from the Listing Standards for Audit

Committees

Audit fees Not applicable.
Audit fees were paid for professional services rendered by the auditors for the audit of the

consolidated financial statements of ING Group and statutory financial statements of ING’s

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated subsidiaries or services provided in connection with the audit of Form 20-F and other filings for

Purchasers regulatory and supervisory purposes as well as the review on interim financial statements and

work performed relating to comfort letters issued in connection with prospectuses and reviews of There were no purchases by us or any of our affiliated purchasers of any of our equity securities
SEC product filings.
registered pursuant to Section 12 of the U.S. Securities Exchange Act of 1934 during the fiscal years

ended December 31, 2019 and 2018.

2019 ING Group Annual Report on Form 20-F148

Item 16F. Changes in Registrant ’s Certifying Accountantavailable on ING Group’s website (www.ing.com). ING Group voluntarily applies the principles of the

Banking Code regarding remuneration of the members of its Executive Board. ING Group’s Not applicable.
remuneration policy for the Executive Board and senior management is compliant with the Banking

Code principles.

Item 16G. Corporate Governance

This chapter reports on the application of the Dutch Corporate Governance Code effective as from 1Differences between Dutch and US corporate governance practices

January 2017, by ING Groep N.V. (‘ING Group’), including information on ING’s share capital, control,ING Groep N.V. is a public limited liability company (naamloze vennootschap) organised under the

Executive Board, Supervisory Board and external auditor.laws of the Netherlands and qualifies as a foreign private issuer under SEC rules and for the

purposes of the New York Stock Exchange (‘NYSE’) listing standards. Under NYSE listing standards,

listed companies that are foreign private issuers are permitted to follow home-country practice in

Dutch Corporate Governance Code

some circumstances in lieu of the provisions of the corporate governance rules contained in Section

303A of the NYSE Listed Company Manual that are applicable to US listed companies. In

Compliance with the Dutch Corporate Governance Code accordance with the requirements of the SEC and NYSE, ING Group must disclose in its Annual ING Group uses the Dutch Corporate Governance Code as reference for its corporate governance Report on Form 20-F any significant differences between its corporate governance practices and structure and practices.
those applicable to US companies under NYSE listing standards. ING Group believes the following to

be the significant differences between its corporate governance practices and the NYSE corporate
The Dutch Corporate Governance Code can be downloaded from the website of the Dutch governance rules applicable to US companies:
Corporate Governance Code Monitoring Committeewww.commissiecorporategovernance.nl.
ING Group has a two-tier board structure, in contrast to the one-tier board structure used by ◾

most US companies. In the Netherlands, a public limited liability company with a two-tier board ING’s application of the Dutch Corporate Governance Code is described in the 2019 publicationING’s structure has an executive board as its management body and a supervisory board that advises application of the Dutch Corporate Governance Code, available on the website of ING Group and supervises the executive board. Supervisory board members are often former state or www.ing.com. This is to be read in conjunction with this chapter and is deemed to be incorporated business leaders and sometimes former members of the executive board. A member of the into this chapter.
executive board or other officer or employee of the company cannot simultaneously be a

member of the supervisory board. The supervisory board must approve specified decisions of the

executive board.

Dutch Banking Code

The Dutch Banking Code (‘Banking Code’), a revised version of which was adopted by the Dutch

Banking Association in 2014, is applicable only to ING Bank N.V. and not to ING Group. The Banking

Code can be downloaded from the website of the Dutch Banking Association (www.nvb.nl). Its

application by ING Bank is described in ‘Application of the Dutch Banking Code by ING Bank N.V.’,

2019 ING Group Annual Report on Form 20-F149

NYSE listing standards generally require that a majority of board members be ‘independent’ asNYSE listing standards applicable to US companies require that external auditors be appointed by ◾◾ determined under the NYSE listing standards. Under the Corporate Governance Code, allthe audit committee. By contrast, Dutch law requires that ING Group’s external auditors be members of the supervisory board, with the exception of not more than one person, should beappointed by the General Meeting and not by the Audit Committee. The Audit Committee is ‘independent’ as determined under the Corporate Governance Code. However, the definition ofresponsible for preparing the Supervisory Board’s nomination to the General Meeting for the ‘independent’ under the Corporate Governance Code differs in its details from the definition ofappointment and remuneration of the Group’s external auditor, and annually evaluates the ‘independent’ under the NYSE listing standards. In some cases, Dutch requirements are stricter; inindependence and functioning of, and the developments in the relationship with, the Group’s other cases the NYSE listing standards are stricter. All members of the Supervisory Board, otherexternal auditor and informs the Supervisory Board of its findings and proposed measures.

than Eric Boyer de la Giroday, are independent as determined under the Corporate Governance Code.The Articles of Association provide that there are no quorum requirements to hold a General Meeting, although certain shareholder actions and certain resolutions may require a quorum.
NYSE listing standards require a US company to have a compensation committee and a ◾ nominating/corporate governance committee, each composed entirely of independent directors.Under NYSE listing standards, shareholders of US companies must be given the opportunity to ◾ The Nomination and Corporate Governance Committee and Remuneration Committee arevote on all equity compensation plans and to approve material revisions to those plans, with composed entirely of members of the Supervisory Board who are independent as determinedlimited exceptions set forth in the NYSE rules. The NYSE rules require a shareholder vote on all under the Corporate Governance Code.equity compensation plans applicable to any employee, director or other service provider of a company. The results of such votes are advisory in nature rather than binding. Under Dutch law NYSE listing standards require that, when a member of the audit committee of a US companyand the Corporate Governance Code, binding shareholder approval is only required for equity ◾ serves on four or more audit committees of public companies, the company should disclosecompensation plans (or changes thereto) for members of the executive board and supervisory (either on its website or in its annual proxy statement or annual report filed with the SEC) thatboard, and not for equity compensation plans for other groups of employees.
the board of directors has determined that this simultaneous service would not impair the director’s service to the company. Dutch law does not require the Supervisory Board to makeNYSE listing standards applicable to US companies require that external auditors be appointed ◾ such a determination.by the audit committee. By contrast, Dutch law requires that ING Group’s external auditors be appointed by the General Meeting and not by the Audit Committee. The Audit Committee is In contrast to the NYSE listing standards, the Corporate Governance Code contains an ‘apply-orresponsible for preparing the Supervisory Board’s nomination to the General Meeting for the ◾ explain’ principle, offering the possibility of deviating from the Corporate Governance Code. Forappointment and remuneration of the Group’s external auditor, and annually evaluates the any deviations by ING Group, please refer to the paragraph ‘Compliance with the Dutchindependence and functioning of, and the developments in the relationship with, the Group’s Corporate Governance Code’external auditor and informs the Supervisory Board of its findings and proposed measures.

2019 ING Group Annual Report on Form 20-F150

The Articles of Association provide that there are no quorum requirements to hold a General ◾
Meeting, although certain shareholder actions and certain resolutions may require a quorum.

Under NYSE listing standards, shareholders of US companies must be given the opportunity to ◾

vote on all equity compensation plans and to approve material revisions to those plans, with limited exceptions set forth in the NYSE rules. The NYSE rules require a shareholder vote on all equity compensation plans applicable to any employee, director or other service provider of a company. The results of such votes are advisory in nature rather than binding. Under Dutch law and the Corporate Governance Code, binding shareholder approval is only required for equity compensation plans (or changes thereto) for members of the executive board and supervisory board, and not for equity compensation plans for other groups of employees.

Item 16H. Mine Safety Disclosure

Not applicable.

2019 ING Group Annual Report on Form 20-F151

PART III.

Item 17. Consolidated Financial Statements

Not applicable.

Item 18. Consolidated Financial Statements

Reference is made to the Consolidated financial statements of ING Group starting on page F-1.

2019 ING Group Annual Report on Form 20-F152

Item 19. Exhibits

The following exhibits are filed as part of this Annual Report:
ExhibitAmended and Restated Articles of Association of ING Groep N.V.,ExhibitSixth Supplemental Indenture, dated 13 June 2007, between the 1.1dated 26 July 2016 (incorporated by reference to ING Groep N.V.’s2.5Company and The Bank of New York (incorporated by reference Report on Form 6-K furnished on 6 January 2017)to Exhibit 4.1 of ING Groep N.V.’s Report on Form 6-K filed on 12 June 2007)
ExhibitDescription of Securities Registered under Section 12 of the 2.1Exchange ActExhibitFirst Supplemental Indenture between ING Groep N.V. and The 2.6Bank of New York Mellon, London Branch, as trustee, dated 16 April 2015, in respect of 6.000% Perpetual Additional Tier 1 ExhibitSubordinated Indenture, dated 18 July 2002, between theContingent Convertible Capital Securities (incorporated by 2.2Company and The Bank of New York, (incorporated by referencereference to Exhibit 4.2 of ING Groep N.V.’s Report on Form 6-K to Exhibit 2.1 of ING Groep N.V.’s Annual Report on Form 20-F forfiled on 16 April 2015)
the year ended 31 December 2002, File No. 1-14642 filed on 27 March 2003)ExhibitSecond Supplemental Indenture between ING Groep N.V. and The 2.7Bank of New York Mellon, London Branch, as trustee, dated 16 ExhibitThird Supplemental Indenture, dated 28 October 2003, betweenApril 2015, in respect of 6.500% Perpetual Additional Tier 1 2.3the Company and The Bank of New York (incorporated byContingent Convertible Capital Securities (incorporated by reference to Exhibit 2.4 of ING Groep N.V.’s Annual Report onreference to Exhibit 4.3 of ING Groep N.V.’s Report on Form 6-K Form 20-F for the year ended 31 December 2003, File No. 1-filed on 16 April 2015)
14642 filed on 30 March 2004)

ExhibitFourth Supplemental Indenture, dated 26 September 2005,ExhibitSenior Debt Securities Indenture between ING Groep N.V. and The
2.4between the Company and The Bank of New York (incorporated2.8Bank of New York Mellon, London Branch, as Trustee, dated 29
by reference to Exhibit 4.2 of ING Groep N.V.’s Report on Form 6-KMarch 2017 (incorporated by reference to Exhibit 4.1 of ING Groep
filed on 23 September 2005)N.V.’s Report on Form 6-K filed on 29 March 2017)

2019 ING Group Annual Report on Form 20-F153

ExhibitFirst Supplemental Indenture between ING Groep N.V. and TheExhibitCertification of the Registrant’s Chief Executive Officer pursuant to 2.9Bank of New York Mellon, London Branch, as trustee, dated 2912.1Section 302 of the Sarbanes Oxley Act of 2002 March 2017, in respect of 3.150% Fixed Rate Senior Notes due 2022, 3.950% Fixed Rate Senior Notes due 2027 and Floating RateExhibitCertification of the Registrant’s Chief Financial Officer pursuant to Senior Notes due 2022 (incorporated by reference to Exhibit12.2Section 302 of the Sarbanes-Oxley Act of 2002

4.2 of ING Groep N.V.’s Report on Form 6-K filed on 29 March 2017)
ExhibitCertification of the Registrant’s Chief Executive Officer pursuant to ExhibitThird Supplemental Indenture between ING Groep N.V. and The13.118 U.S.C. Section 1350, as adopted pursuant to Section 906 of the 2.10Bank of New York Mellon, London Branch, as trustee, dated 9 AprilSarbanes-Oxley Act of 2002 2019, in respect of 3.550% Fixed Rate Senior Notes due 2024 and 4.050% Fixed Rate Senior Notes due 2029 (incorporated byExhibitCertification of the Registrant’s Chief Financial Officer pursuant to reference to Exhibit 4.1 of ING Groep N.V's Report on Form 6-K13.218 U.S.C. Section 1350, as adopted pursuant to Section 906 of the filed on 9 April 2019)Sarbanes-Oxley Act of 2002

ExhibitThird Supplemental Indenture between ING Groep N.V. and TheExhibitConsent of KPMG Accountants 2.11Bank of New York Mellon, London Branch, as trustee, dated 1015.1 September 2019, in respect of 5.750% Perpetual Additional Tier 1 Contingent Convertible Capital Securities (incorporated byExhibiteXtensible Business Reporting Language (XBRL)
reference to Exhibit 4.1 of ING Groep N.V's Report on Form 6-K101 filed on 10 September 2019)

Exhibit 8List of Subsidiaries of ING Groep N.V.

2019 ING Group Annual Report on Form 20-F154

SIGNATURES

The registrant hereby certifies that it meets all the requirements for filing on Form 20-F and that it has duly caused and authorised the undersigned to sign this annual report on its behalf.

ING Groep N.V.
(Registrant)

By:/s/T. Phutrakul T. Phutrakul Chief Financial Officer

Date: March 2, 2020

2019 ING Group Annual Report on Form 20-F155

Additional information

'Financial Instruments: Disclosures'.These disclosures are an integral part of ING Group Consolidated financial statements and are indicated by the symbol (*). Chapters, paragraphs,

ING Group Risk Management graphs or tables within the risk management section that are indicated with this symbol in the As a global financial institution with a strong European base, offering banking services, ING isrespective headings or table header are considered to be an integral part of the consolidated exposed to a variety of risks. We manage these risks through a comprehensive risk managementfinancial statements.
framework that integrates risk management into daily business activities and strategic planning.
This safeguards ING Group’s financial strength by promoting the identification, measurement andThis risk management section also includes additional disclosures beyond those required by IFRScontrol of risks at all levels of the organisation. Taking measured risks is the core of ING’s business.IASB standards, such as certain legal and regulatory disclosures. Not all information in this section can be reconciled back to the primary financial statements and corresponding notes, as it has been The risk management function supports the Executive Board in formulating the risk appetite,prepared using risk data that differs to the accounting basis of measurement. Examples of such strategies, policies and limits. It provides review, oversight and support functions throughout ING ondifferences include the exclusion of accrued interest and certain costs and fees from risk data, and risk-related items. ING’s main financial risks exposures are to credit risk (including transfer risk),timing differences in exposure values (IFRS 9 models report expected credit loss on underlying market risk (including interest rate, equity, real estate, credit spread, and foreign exchange risks),exposures). Disclosures in accordance with Part Eight of the CRR and CRD IV, and as required by the funding & liquidity risk and business risk. ING Group is also exposed to non-financial risks, includingsupervisory authority, are published in our ‘Additional Pillar III Report’, which can be found on our operational, IT and compliance risks, as well as to model risks. The ING Group Chief Risk Officer (CRO)corporate website ing.com.
is also the CRO of ING Bank.

Risk governance (*)
This section sets out how ING manages its risks on a day-to-day basis. It explains how the risk Effective risk management requires firm-wide risk governance. ING’s risk and control structure is management function is embedded within the organisation based on the ‘three lines of defence’. It based on the ‘three lines of defence’ governance model, whereby each line has a specific role and describes the key risks that arise from ING’s business model and how these are managed by defined responsibilities in such a way that the execution of tasks is separated from the control of dedicated risk management departments, with various specific areas of expertise. The section these same tasks. At the same time, they have to work closely together to identify, assess, and provides qualitative and quantitative disclosures about credit, market, funding & liquidity, business, mitigate risks. This governance framework is designed such that risk is managed in line with the risk operational, IT, compliance and model risks.
appetite as approved by the Management Board Banking (MBB), the Executive Board (EB) and the
Supervisory Board (SB), and is cascaded throughout ING. The MBB is composed of the Executive

Basis of disclosures

Board of ING Group, the heads of the business lines and the chief operating officer.
The risk management section contains information relating to the nature and the extent of the risks of financial instruments as required by International Financial Reporting Standards (IFRS) 7

2019 ING Group Annual Report on Form 20-F156

The heads of ING’s banking business & support functions and the heads of the country units, or their delegates, are the first line of defence. They have the primary ownership, accountability and responsibility for assessing, controlling and mitigating all financial and non-financial risks affecting(*)

their businesses, and, for the completeness and accuracy of the financial statements and risk reports with respect to their responsible areas. The COO is responsible and accountable for proper security and controls on global applications and IT platforms servicing the Bank and implementing proper processes.

The second line of defence consists of oversight and specialised functions in risk management and compliance, and includes at least the control functions Risk and Compliance. They (i) have coresponsibility for risk management, through articulating and translating the risk appetite into methodologies and policies to support and monitor business management's control of risk, (ii)
objectively challenge risk management execution and control processes and coordinate the reporting of risks and controls by the first line of defence, (iii) advise management on risk management and compliance and have decision-making power in relation to business activities that are judged to present unacceptable risks to ING and (iv) can set minimum requirements in terms of quality and quantity of global resourcing in the risk management and compliance functions.

The internal audit function forms the third line of defence. It provides an independent assessment of the effectiveness of internal controls over the risks to ING’s business processes and assets, including risk management activities performed in both the first and second lines of defence. To protect its independent nature, decisions regarding the appointment, re-appointment or dismissal from office as well as the remuneration package of the head of the internal audit function require supervisory board approval.

The next graph illustrates the different key senior management level committees in place in the risk governance structure.

2019 ING Group Annual Report on Form 20-F157

Board level risk oversight (*)

ING has a two-tier board structure consisting of a management board (EB for ING Group and MBB◾Global Credit & Trading Policy Committee (GCTP) discusses and approves policies, methodologies,
for ING Bank) and the SB; both tiers play an important role in managing and monitoring the riskand procedures related to credit, trading, country, and reputation (i.e. environmental and social
management framework.risk or ESR) risks. The GCTP meets on a monthly basis. After the MBB and the GCTP, the Credit &
Trading Risk Committee (CTRC) is the highest level body authorised to discuss and approve
The SB is responsible for supervising EB and MBB policy, the general course of affairs of INGpolicies, methodologies, and procedures related to credit risk;
◾
Group, ING Bank and its business (including its financial policies and corporate structure). For risk◾Global Credit Committee – Transaction Approval (GCC(TA)) discusses and approves transactions
management purposes the SB is advised mainly by the Risk Committee, which assists andthat entail taking credit risk (including investment risk), country, legal, and ESR risk. The GCC(TA)
advises in monitoring the risk profile and approving the overarching risk appetite of the companymeets twice a week;
as well as the structure and effective operation of the internal risk management and control◾Asset and Liability Committee Bank (ALCO Bank) discusses and steers, on a monthly basis, the
systems.overall risk profile of all ING Bank’s balance sheet and capital management risks. ALCO Bank
The EB is responsible for managing risks associated with all activities of ING Group, whereas thediscusses and approves policies, methodologies and procedures regarding solvency, market risk ◾
MBB is responsible for managing risks associated with all activities of ING Bank. The EB and MBBin the banking book and funding and liquidity risks;
responsibilities include ensuring that internal risk management and control systems are effective◾Non-Financial Risk Committee Bank (NFRC Bank) is accountable for the design and maintenance
and that ING Group and ING Bank comply with relevant legislation and regulations. On a regularof the Non-Financial Risk Management Framework including Operational Risk Management,
basis, the EB and MBB report on these issues and discuss the internal risk management andCompliance and Legal policies, minimum standards, procedures and guidelines, development of
control systems with the SB. On a quarterly basis, the EB and MBB report on ING’s risk profiletools, methods, and key parameters (including major changes) for risk identification,
versus its risk appetite to the Risk Committee, explaining changes in the risk profile.measurement, mitigating and monitoring/ reporting. NFRC Bank meetings are at least quarterly;
and
As a member of the EB and the MBB, the CRO is responsible for ensuring that risk management◾The Model Risk Management Committee (MoRMC) aims to align overall model strategy, model
issues are heard and discussed at the highest level. The CRO steers a risk organisation both atrisk appetite, supporting model frameworks, policies and methodologies.
head-office and business-unit levels, which participates in commercial decision-making, bringing
countervailing power to keep the agreed risk profile within the risk tolerance. The CRO reports to theRegional and business unit level (*)
SB committees on ING’s risk appetite levels and on ING’s risk profile at least quarterly. In addition,ING’s regional and/or business unit management have primary responsibility for the management
the CRO briefs them on developments in internal and external risk-related issues and seeks toof risks (credit, market, funding and liquidity, operational, IT and compliance risks) that arise in their
ensure they understand specific risk concepts.daily operations. They are accountable for the implementation and execution of appropriate risk
frameworks affecting their businesses in order to comply with procedures and processes at the
Executive level (*)corporate level. Where necessary, the implementation is adapted to local requirements. The
The key risk committees described below act within the overall risk policy and delegated authoritiesregional and/or business unit CROs are involved in these activities. The local (regional and BU) CRO
granted by the MBB:is responsible for the analysis, control and management of risks across the whole value chain (from

2019 ING Group Annual Report on Form 20-F158

front to back office). The local risks are discussed in local risk committees that roll up to the key risk(*)

committees at executive level. Local Client Integrity Risk Committees (CIRCs) assess client integrity risk and they have a final decision on client acceptance or client off-boarding, from a risk-based perspective, in the areas of Financial Economic Crime (FEC), Foreign Account Tax Compliance Act (FATCA), Common Reporting Standards (CRS) and ESR.

Risk management function (*)

Organisational structure (*)

Over the past years, banks have been faced with regulatory and public pressure with regard to their risk management policies, processes, and systems. A raft of new requirements and regulations has been introduced and implemented. To address these internal and external (market and regulatory)
developments and challenges effectively, ING regularly reviews the set-up of its risk-management organisation. This allows for better support of the Bank’s Think Forward strategy and enhances the interconnectedness of the risk oversight responsibilities in business units with global risk functions.
The organisation chart illustrates the reporting lines in 2019 for the risk organisation:

Risk policies, procedures and standards (*)

ING has a framework of risk management policies, procedures, and minimum standards in place to create consistency throughout the organisation, and to define requirements that are binding to all business units. The goal of the governance framework of the local business units is to align with ING’s framework and to meet local (regulatory) requirements. Senior management is responsible for the implementation and adherence to policies, procedures and standards. Policies, procedures, and standards are regularly reviewed and updated via the relevant risk committees to reflect changes in requirements, markets, products and practices.

Internal Control Framework

ING has organised its Internal Control Framework (ICF) with the objective to translate policies and control objectives into consistent standards and controls in the business lines and as such support and promote an effective risk and control environment. The framework includes binding principles, 2019 ING Group Annual Report on Form 20-F159

definitions, process steps and roles and responsibilities to create consistent bank-wide policies andAll policies, procedures and control standards are published on ING’s intranet and new and updated standards.documents are periodically communicated by means of a policy update to all country senior

managers and heads of business departments.
The scope of the ICF is the development and maintenance or update of global internal control documents: policies, minimum standards, product control frameworks, support control frameworksRisk model governance and validation (*) and process-related control standards. These global documents are designed by head officeRisk models are built according to ING’s internal risk modelling methodology standards and model functions and are to be adhered to by entities and support functions. Domain ownership of policieslife cycle. After the review and documentation of each model by the Model Development (MD) and and minimum standards is with the 2nd Line of Defence, whereas product and support controlModel Risk Management (MoRM) departments, dedicated risk committees approve new and frameworks are owned by the 1st Line of Defence and are approved by 2nd line of Defence. Processchanged models. After approval by the applicable risk committee, and where necessary by the control standards can be owned by both 1st and 2nd Line of Defence, related to the underlyingregulator, the risk model is implemented. MoRM re-validates models on a regular basis. Validation processes involved.results and capital impacts are reported on a quarterly basis to senior management, the risk committees and the supervisor.
Domain owners are responsible for a specific risk domain and aim that their internal policies and standards do not overlap with other documents. The ICF aims for single testing for multipleThe MoRM department is one of the cornerstones of ING’s risk model governance. The department purposes meaning that the same control should not have to be tested more than once for differentsets and maintains a model risk framework containing (1) the governance setting out the functions. This means that the test results of one control can be used for more than one sign-off.responsibilities; (2) the model risk appetite; (3) model risk management policies and standards; and (4) the model management inventory and tooling. MoRM monitors global model risk and model The principal role of the independent ICF gatekeeper function is that of a quality assurance role andperformance.
to provide advice for approval to the SB, EB, MBB and NFRC Bank. The ICF gatekeeper challenges the alignment of the internal control documents with the agreed methodology and taxonomy andThe validation teams provide independent model validation, which starts with the determination verifies that the process of development and communication of internal control documents isthat a model is appropriate for its intended use. This is followed by an on going process whereby executed in adherence to the process as described below. The ICF gatekeeper is the guardian of thethe reliability of the model is verified at different stages during its lifecycle: at conception, before ICF binding principles.approval, periodically after implementation and when significant changes to the model are made.
The validation process contains a mix of developmental evidence assessment, process verification The process of developing internal control documents is standardised for each type of internaland outcome analysis. When model validation identifies model risks, it provides recommendations control document. Domain owners should adhere to the standardised process that includes theto address those.
following steps: domain owner identification, risk-based approach, impact assessment, approval body and involvement of local entities for sounding on key and expected controls. The gatekeeper

Risk culture oversees the steps above.
The reputation and integrity of ING’s organisation are core elements to operate successfully in the financial world. ING’s risk culture promotes awareness of collectively shared values, ideas and

2019 ING Group Annual Report on Form 20-F160

goals, but also of potential threats and aligns the individual performance objectives with the short-We also developed a global code of conduct that builds on the Orange Code and sets the standards and long-term strategy. ING therefore aims to make risk responsibilities transparent within thewe expect our people to uphold. This global code of conduct was launched during 1Q 2020.

different levels of the organisation and to hold every employee accountable for his/her actions.

Orange code dilemma dialogue

Orange code To enhance risk awareness we continued to support the business in the area of risk culture and Commonly seen as norms and traditions of behaviour of individuals and of groups within anmonitor compliance risk. This included training by compliance and data experts to enhance organisation, risk culture determines the way in which employees identify, understand, discuss,balanced decision-making in line with the Orange Code dilemma model (introduced in 2017) to and act on the risks the organisation is confronted with and the risks it takes. This is a continuoussupport well-balanced and integrity-led decision-making. This four-step model helps to delay long-term commitment and journey. In this respect, The Orange Code is a declaration of who wejudgment and aims to find out where the moral weight lies for a potential decision.
are. It describes what we can expect from each other when we turn up to work each day. It is a set of standards that we collectively value, strive to live up to, and invite others to measure us by.The model is already embedded in some decision-making processes (such as the data ethics governance process) and we are exploring how to embed it in other decisive governance processes The Orange Code is the sum of two parts, the ING values and ING behaviours, with integrity beingwithin the bank. During early 2019 around 30 compliance officers were trained globally to support the overarching principle. The ING values (being honest, prudent and responsible) are designed tothe organisation in properly applying the model in practice in their respective countries.
be non-negotiable promises we make to the world, principles we seek to stick to, no matter what.

The ING behaviours (take it on and make it happen, help others to be successful, and always be a step ahead) represent our way to differentiate ourselves. The Orange Code is embedded in commitments we make to each other and the standards by which we will measure each other’s performance.

Risk awareness is about being alert to potential threats that can occur during day-to-day business, which can be specific to the sector, the region or the clients ING is doing business with. To support the further embedding of risk culture into business practices, ING has initiated different programmes and issued several guidelines.

Global data ethics and the I-for-integrity programme To reinforce the values and behaviours in our Orange Code, which puts integrity above all, we invite Other initiatives such Global Data Ethics and the I-for-integrity programme within the Netherlands all employees to participate in e-learnings that aim to equip them to make the right decisions and Belgium are continuing. In addition, new employees undergo a series of e-learnings on topics when faced with a dilemma or issue. In 2019, we commenced the creation of new e-learnings on such as KYC, compliance, dealing with dilemmas, data risk and integrity in practice.
anti-competitive conduct, anti-bribery and corruption and data protection for launch early 2020.

2019 ING Group Annual Report on Form 20-F161

We also introduced a new global learning model in 2019 to further professionalise Compliance, KYCand how its governance is structured. Informal drivers are less tangible, such as group dynamics or and risk training. It introduces governance, a board to approve trainings based on business needs,underlying beliefs that influence behaviour.
global planning and greater cooperation between content owners, learning experts and corporate communications teams to ensure the best fit for the training need. In addition, a Risk Academy wasAt ING, BRM is positioned in the second line of defence, reporting directly to the chief risk officer.
set up for people working in risk, with the aim of eventually bringing Risk training to a broaderThe global BRM Centre of Expertise, set up in 2018, not only assesses behavioural risk in the audience if necessary.organisation, but also has the mandate to direct, challenge and support business owners to

intervene on high-risk behaviours and their underlying drivers.

Banker’s Oath

Behavioural risk assessment s In the Netherlands, employees of all financial institutions – and that includes ING – are required to take the Banker’s Oath. This requirement came into force on 1 April 2015 as part of the jointBehavioural risk assessments identify, analyse and mitigate high-risk behaviours within ING and approach from all banks, known as ‘Future -oriented Banking.' The introduction of social regulations,provide management with specific direction on how to change these behaviours. They focus on the the revision of the Dutch Banking Code, and the implementation of a Banker’s Oath (with theeffectiveness of groups rather than individuals, the role of leadership and on less visible aspects associated rules of conduct and disciplinary law), are a way for Dutch banks to show society whatsuch as team dynamics and unwritten social norms. The goal is to understand and systematically they stand for and are accountable for, as both individual banks and as a sector.assess what drives undesired habits at ING. The BRM model of behavioural risk will be used as the standard across ING to signal behavioural risks going forward.

Remuneration

ING aims to align its remuneration policy with its risk profile and the interests of all stakeholders.In 2019, the outcomes of the first behavioural risk assessments were shared with senior leaders at For more information on ING’s compensation and benefits policies and its relation to the risk taken,ING’s International Conference in March and with the relevant departments. These were primarily please refer to the “Capital Requirements Regulation (CRR) Remuneration disclosure” published onteams involved in Know Your Customer activities in the Netherlands, US and Philippines. Based on the corporate website ing.com. https://www.ing.com/About -us/Annual-reporting-suite.htmthese outcomes, a number of interventions have been implemented with the goal to change highrisk behavioural patterns.

Centre of Expertise on Behavioural Risk

Behavioural Risk Management (BRM) is a new expertise that has been added to ING's global Risk organisation. Behavioural risk is an increasingly important risk area for ING and across the financial industry. It arises when behavioural patterns are at the root of financial and non-financial risks in the organisation.

The complexity of this type of risk is less tangible compared to other risk areas. It is about how decisions are made, how people communicate and whether they can take ownership. Behaviour is motivated by formal and informal drivers. Examples of formal drivers are the processes ING applies

2019 ING Group Annual Report on Form 20-F162

Behavioural risk assessments were also carried out in Belgium and the interventions based on these outcomes will be implemented in 2020. The BRM team will continue to assess behavioural risk, focusing predominantly on KYC.

Behavioural risk interventions

Effective mitigation requires a deep understanding of what drives undesired behaviours. Theory and evidence-based techniques and tools developed in behavioural science play an important role in designing and evaluating interventions. These interventions impact all levels of the organisation.

Employees are invited to participate in ‘nudge labs’ where they work together to identify small behavioural changes that can have a positive impact on processes and collaboration.

Given the crucial role of leaders in creating the right conditions for employees, interventions are first initiated at leadership level. These include leadership labs, which address topics such as ‘governance and ownership’ and ‘alignment and trust’, as well as bringing together the ‘whole system in the room’. Here senior leaders delve into the outcomes of the assessments, identifying deeply rooted and often complex issues for improvement.

The BRM team works closely with the business units and departments such as HR, Audit, and Compliance to align on and embed desired leadership and risk behaviours (i.e. speak up, psychological safety, communication, guiding leadership).

Risk profile

This chart provides high level information on the risks arising from ING’s business activities:

2019 ING Group Annual Report on Form 20-F163

Risk cycle processRisk assessment
ING uses a step-by-step risk management approach to monitor, manage and mitigate its financialEach identified risk is assessed to determine its importance. This enables ING to decide which of the
and non-financial risks. The approach consists of a cycle of five recurrent activities: riskidentified risks need control measures and how strict or tolerant these measures should be. Known
identification, risk assessment, risk control, risk monitoring, and risk reporting. In short, this implies:risks are re-assessed to detect any change in the risk level.
determining what the risks are, assessing which of those risks can really do harm, taking mitigating
measures to control these risks, monitoring the development of the risk to see if the measuresThe importance of a risk is based on the likelihood that the risk materialises and the subsequent
taken are effective, and reporting the findings to management at all relevant levels to enable themfinancial or reputational impact that may occur should the risk arise. Unlikely risks with a
to take action when needed.potentially high impact need to be controlled. A risk that is likely to happen regularly but expected

to have a modest financial impact may not need to be mitigated if the consequences are accepted The recurrence is twofold. Firstly, the identification, assessment, review, and update of mitigatingby management.
measures are done periodically. Secondly, the periodic monitoring exercise may indicate emerging

Risk control risks, known risks that are changing, risk levels that are changing, or current control measures that are not effective enough. Further analyses of these findings may result in renewed and moreRisks can be controlled by mitigating measures that lower the likelihood the risk occurs, lower the frequent risk identification, and/or assessment, and/or change of mitigating measures.impact when it occurs or both. The ultimate measure to lower a risk is to stop the activity or service that causes the risk (risk avoidance). Risk control and mitigation measures are defined and maintained at both the bank-wide and local level.

Risk identification

Monitoring and reporting Risk identification is a joint effort of the business and the risk management functions. Its goal is to detect potential new risks and determine changes in known risks. Regular risk identification isING monitors the risk control measures by checking if they are executed, complied with and have essential for effective risk management. Potential risks that are not identified, will not be controlledthe expected mitigating effects and by following the development of the risks and their risk levels.
and monitored and may lead to surprises later. Known risks may have changed over time and as aRisk reporting provides senior and local management with information needed to manage risks.
consequence the existing mitigating measures and monitoring may be inadequate or obsolete.

Risk Appetite Framework Risk identification is performed periodically. In case of material internal or external change, The Risk Appetite Framework (RAF) is one of the pillars of the Enterprise Risk Management (ERM)
additional ad-hoc risk identification can be performed.
Framework. Its objective is to set the appropriate risk appetite at the consolidated level across the different risk categories and to allocate the risk appetite throughout the organisation.

The RAF policy states the overarching global risk appetite. Within the RAF, ING monitors a range of financial and non-financial risk metrics to ensure that our risk profile is in line with our risk appetite while executing our strategy. ING’s RAF, which is approved by the Supervisory Board (SB), defines

2019 ING Group Annual Report on Form 20-F164

our desired risk profile that is integrated in the strategic decision-making and financial planning process. It is designed to be able to withstand market volatility and stress, while meeting regulatory requirements. The framework including underlying assumptions and metrics, is regularly reviewed so that it remains relevant. The RAF combines various financial and nonfinancial risk appetite statements into a single coordinated approach to provide the business with a clear overview of the relevant risks and the tools to manage them. This view allows the Executive Board (EB), the Management Board Banking (MBB) and senior management to form an opinion on the adequacy of internal risk management and control systems for the risks ING faces while pursuing its strategy.

Process

The RAF is focused on setting the risk appetite at the consolidated level and across the different risk categories, and provides the principles for cascading this risk appetite down into the organisation.
The RAF and underlying limit allocation is reviewed on an annual basis, or more frequently if necessary, based on their quarterly review in the EB, the MBB and the SB. It is therefore a top-down process, which bases itself on the ambition of the bank in terms of its risk profile and is a function of the capital and liquidity levels, the regulatory environment, and the economic context. The set of limits used are split based on the approval level needed for them. The limits that need SB approval are called Boundary and the underlying metrics supporting the boundaries which need EB and MBB approval are called instruments.

2019 ING Group Annual Report on Form 20-F165

Step 1. Identify & assess ING’s key risks

The outcome of the risk identification & risk assessment process is used as starting point for the review of the RAF. Within this step the risks ING is facing when executing its strategy are identified, it is assessed if the potential impact is material and if it is controlled within ING’s risk management function; benchmarking current risk framework versus regulatory developments; re-assessing known risks to confirm risk level or detect potential changes; and reflecting on the current set of Risk Appetite Statements.

Step 2. Set Risk Appetite Framework

Based on ING’s risk assessment and risk purpose, boundary for the overarching risk frameworks are set. Once the overarching risk appetite thresholds have been set and approved by EB/MBB and subsequent SB, the statements are translated into risk-type specific statements and lower level thresholds which are set and approved by senior risk committees ALCO Bank, GCTP and NFRC Bank.
Cascading is done via a number of detailed risk appetite statements which have been defined per risk type, the combination of which ensure compliance with the overarching Solvency, Concentration and Funding & Liquidity RAS.

Step 3. Cascade into statements per risk type and business unit

The bank-wide risk appetite is translated per risk type, which is further cascaded into the organisation to the lowest level. Risk appetite statements are then translated into dedicated underlying risk limits that are used for the day-to-day monitoring and management of ING’s risks.
The suite of risk appetite statements serve as inputs for the quarterly planning process as well as for the establishment of key performance indicators and targets for senior management.

2019 ING Group Annual Report on Form 20-F166

Risk Appetite StatementsStep 4. Monitor and manage underlying risk limits

BoundariesUnderlying risk metrics In order to verify that it remains within the risk appetite framework, ING reports its risk positions vis- Funding & LiquidityLiquidity Coverage Ratio à-vis its limits on a regular basis to senior management committees. The Quarterly Risk Update Net Liquidity Position – internal stress
reflecting the exposure of ING against the risk appetite targets is submitted quarterly to the EB and test

SolvencyCET1 ratiothe MBB and to the (Risk Committee of the) SB. Moreover every quarter the financial plan is checked

Leverage ratiofor potential limit breaches within a 1 year horizon, where in the strategic dialog the MBB can take

Capital Utilisation mitigating measures or adjustments to the dynamic plan can be made.
MREL

TLAC

Stress testing ConcentrationConcentration event Risk (LGD)

Event RiskStress testing is an important risk management tool that provides input for strategic decisions and

capital planning. The purpose of stress testing is to assess the impact of plausible but severe stress

InstrumentsUnderlying risk metrics scenarios on ING’s capital and liquidity position. Stress tests provide insights into the vulnerabilities
Credit RiskEAD of certain portfolios, with regards to adverse macroeconomic circumstances, stressed financial RWA markets, and changes in the (geo)political climate.
ECL

INCAP

Types of stress tests Market Risk (Trading Book)Value-at-Risk

Stressed VaRWithin ING, different types of stress tests are performed. The most comprehensive type of stress
Incremental Risk Charge tests are the firm-wide scenario analyses, which involve setting scenario assumptions for all the Regulatory/ Economic Market Risk relevant macroeconomic and financial market variables in all countries relevant to ING. These capital
assumptions usually follow a qualitative narrative that provides a background to the scenario. In Market Risk (Banking Book)IFRS P&L-at-Risk

NPV-at-Riskaddition to firm-wide scenario analyses, ING executes scenario analyses for specific countries or

Customer Behavior/Market Riskportfolios. Furthermore, sensitivity analyses are performed, which focus on stressing one or more

Economic capital risk drivers; usually without an underlying scenario narrative. Finally, ING performs reverse stress
Revaluation-Reserve-at-Risk tests, which aim to determine scenarios that could lead to a pre-defined severe adverse outcome.
Non-Financial RiskExpected Loss

Regulatory/ Economic Operational

Process Risk capital

Overdue iRiskThe stress testing process of ING consists of several stages, which are:

Business RiskIFRS P&L-at-Risk

2019 ING Group Annual Report on Form 20-F167

Risk identification & risk assessment: It identifies & assesses the risks ING or the relevant entity isRegulatory environment ◾
facing when executing its strategy based on the current and possible future economic, political,

regulatory and technological environment. It provides a description of the main risks related toCRRII/CRDV and BRRDII

the nature of ING’s business, activities and vulnerabilities.
On 16 April 2019, the European Parliament (EP) approved the final agreement on a package of
Scenario definition & parameterisation: Based on the outcome of the previous step, a set of ◾reforms proposed by EC to strengthen the resilience and resolvability of European banks. The
scenarios should be determined where the relevant scope and set of risk drivers is determined for package of reforms comprises two regulations and two directives, namely amendments to the
each scenario, as well as the severity, the key assumptions and input parameters. The output of Capital Requirements Regulation and Directive (CRR/CRD), the Bank Recovery and Resolution
this phase includes a quantitative description of the stress scenarios to be analysed, the relevant Directive (BRRD), and the Single Resolution Mechanism Regulation (SRMR).
output metrics and, when applicable, a narrative description.

Impact calculation and aggregation: Based on the quantitative description of the stress scenarios ◾The key changes introduced by the banking reform package consist of among others a binding
determined in the previous step, the impact is determined for the relevant scenario, scope and Leverage Ratio (LR) requirement, independent from the riskiness of the underlying exposures, as a
horizon. The impact calculation and aggregation can be part of a recurring process or are part of backstop to risk-weighted capital requirements, and a Net Stable Funding Ratio (NSFR) based on the
a specific process set-up for one-off stress tests.
Basel NSFR standard but including adjustments with regard to pass-through models and covered
Scenario reporting: For each stress test, a report is prepared after each calculation which ◾bonds issuance. Further, the EBA obtained a mandate to investigate how to incorporate
describes the results of the scenario, gives a recap of the scenario and its main assumptions and environmental, social, and governance (ESG) risks into the supervisory process and what the
parameters. It is complemented, if needed, with an advice for management action based on the prudential treatment of assets associated with environmental or social objectives should look like.
stress testing results.
Also, the rules on the subordination of Minimum Requirement for own funds and Eligible Liabilities
Scenario control & management assessment: Depending on the outcomes of the stress test and ◾(MREL) instruments are tightened and a new category of large banks with a balance sheet size
the likelihood of the scenario, mitigating actions may be proposed. Mitigating actions may greater than EUR 100 billion, is introduced.
include, but are not limited to, sales or transfers of assets and reductions of risk limits.

Basel III revisions and upcoming regulations

Methodology In December 2017, the Basel III revisions were formally announced by the Basel Committee on Detailed and comprehensive models are used to calculate the impact of the scenarios. In these Banking Supervision (BCBS). These new prudential rules for banks consist of a revision to the models, statistical analysis is combined with expert opinion to make sure that the results standardised approach to credit risk, the introduction of a capital floor based on standardised adequately reflect the scenario assumptions. The methodologies are granular and portfolio-specific approaches, the use of internal models, the limitation of options for modelling operating risks, and and use different macroeconomic and market variables as input variables. The calculations are in new rules for the establishment of risk-weighted items and unused credit lines at the banks. In line with our accounting and regulatory reporting frameworks. The stress testing models are Europe, this will be implemented through the CRR III / CRD VI in the coming years. With this long subject to review by Model Risk Management.
implementation phase and the transposition into EU regulation still pending, some question marks

remain on how this will shape up.

2019 ING Group Annual Report on Form 20-F168

Targeted Review of Internal ModelsTop and emerging risks
In order to make capital levels more comparable and to reduce variability in banks’ internal models,The risks listed below are defined as material existing and emerging risks that may have a the European Central Bank (ECB) introduced the Targeted Review of Internal Models (TRIM) in Junepotentially significant impact on our financial position or our business model. They may have a 2017 to assess the reliability and comparability between banks’ models. The TRIM aims to create amaterial impact on the reputation of the company, introduce volatility in future operation results, level playing field by harmonising the regulatory guidance around internal models with theor impact ING’s medium and long-term strategy including the ability to pay dividends, maintain ultimate goal to restore trust in European banks’ use of internal models.appropriate levels of capital or meet liquidity and funding targets. An emerging risk is defined as a
risk that has the potential to have a significant negative effect on our performance, but whose In July 2019, the ECB published final chapters of the guide to internal models, covering credit risk,impact on the organisation is currently more difficult to assess than other risk factors that are not market risk and counterparty credit risk. These risk type-specific chapters are intended to ensure aidentified as emerging risks.
common and consistent approach to the most relevant aspects of the regulations on internal models for banks directly supervised by the ECB. Additionally, they provide transparency on howThe topics have emerged as part of the annual Risk Assessment that is performed as part of the the ECB understands the regulations on the use of internal models to calculate own fundsStress Testing Framework and the Risk Appetite Framework. The sequence in which the risks are requirements for the three risk types. Impact on ING is through more stringent regulation onpresented below is not indicative of their likelihood of occurrence or the potential magnitude of internal models as well as an increase of Risk Weigthed Assets (RWA).their financial consequences.

During 2019, several changes were made to our top and emerging risks. The top risks in 2019 are related to financial crime, cybercrime and persistent low interest rates in Eurozone. Also, climate change risk remains an emerging risk, reflecting the impact a deterioration of the climate may have for the financial position and/or reputation of ING.

Macroeconomic developments

The economic activity was marked in 2019 by a slowdown in global growth led by prolonged uncertainty on Brexit, effects of US-China trade tensions and reduced US fiscal stimulus. The decision of the United Kingdom to leave the European Union (‘Brexit’) remains a major political and economic event that continues to affect sentiment. Despite negotiating a revised deal in October 2019, the vote in the UK parliament did not go ahead. The UK parliament chose to postpone the vote on the deal until legislation needed to turn the withdrawal agreement into UK law was completed. ING continued to take steps throughout the year to prepare for various options.
Although ING has activities in the UK through the Wholesale Banking (WB) business line, no material asset quality deterioration following the Brexit decision has taken place.

2019 ING Group Annual Report on Form 20-F169

The coronavirus, COVID-19, is recently dominating global news. As the coronavirus outbreakIn 2019, we initiated a programme (the Model Paradigm Shift) to improve the availability and spreads rapidly, a central ING team has been set up to monitor the situation globally and providequality of our data, model governance and processes, further strengthening our risk modelling and guidance on health and safety measures, travel advice and business continuity for our company.data capabilities to give ING a competitive advantage.
As the situation differs from country to country, we are following local government guidelines in our response to the virus. Also the potential economic implications for the countries and sectorsCybercrime where ING is active in are being assessed and discussed in order to identify possible mitigatingCybercrime remains a continuous threat to companies in general and to financial institutions actions.specifically. Both the frequency and the intensity of attacks increase on a global scale. Threats from

Distributed Denial of Service (DDoS), targeted attacks (also called Advanced Persistent Threats) and

Financial economic crime Ransomware have intensified worldwide.
Knowing who we do business with helps us to protect our customers, society and our bank from financial economic crimes (FEC). We believe that as gatekeepers to the financial system we have anING builds on its cybercrime resilience through its dedicated Cyber Crime Expertise and Response obligation to prevent criminals from misusing it or detect and respond when it is being misused. WeTeam, further enhancing the control environment to protect, detect and respond to e-banking believe we can be even more effective in safeguarding the financial system if we join forces andfraud, DDoS and targeted attacks. Controls and monitoring continue to be embedded in the work with other banks and with national, European and global authorities and law enforcementorganisation as part of the overall internal control framework and are continuously re-assessed agencies to tackle financial economic crime.against existing and new threats. The identification and monitoring of new threat actors and campaigns relevant to ING also informs this process as does the closer alignment between IT In 2019, we continued to implement and execute policies and procedures to further enhance oursecurity and fraud teams. In addition, ING continues to strengthen its global cybercrime and fraud Know Your Customer (KYC) activities. We continued to work on the global KYC enhancementresilience through extensive collaboration with financial industry peers, law enforcement programme that started at ING in 2017 and which we built on in 2018 and 2019. The programmeauthorities, government (e.g. National Cyber Security Center) and internet service providers (ISPs).
encompasses all customer segments in all ING business units. For more information on FEC and KYC see ‘Compliance risk’ chapter.Low interest rates in Eurozone

The persistence of a low interest rate environment in Europe, where central banks held their rates

Model risk at very low and even negative levels in most countries, continued to negatively impact short-term Risk management also depends on models more and more as banking has become a digitalas well as long-term market rates. This is posing a challenge for banks to maintain positive income business in a volatile, uncertain, complex and ambiguous world with constantly changing customerin the form of net interest income from traditional savings activities.
needs, more demanding regulatory expectations, increasing dependency on the use of models and the need to adapt and react quickly.Sourcing risk and third -party resources

The amount of business processes that is sourced to third-parties increased significantly over the years. Most notable is our (internal) sourcing in Poland, the Philippines and Slovakia but also (external) third-party sourcing increased.

2019 ING Group Annual Report on Form 20-F170

Through the renewed sourcing policy and related control standard, ING will actively monitor theTask Force on Climate-Related Financial Disclosures (TCFD)

controls around sourcing (internal & external). According to 2019 EBA guidelines, all external and ING endorses the Financial Stability Board’s (FSB) Task Force on Climate-Related Financial
internal contracts have to re-assessed and properly classified and registered before end of 2021. In Disclosures (TCFD) recommendations. This voluntary disclosure outlines the progress made to date.
2020, NFR will focus on improving business units’ risk data on Sourcing risk and related reporting.
To further strengthen understanding and adoption of TCFD recommendations, ING has joined the

UNEP FI TCFD Phase 2 to develop transition and physical risk assessment models in 2019.

Climate change risk

The urgency around climate change is escalating and climate-related risk tops the World EconomicGovernance

Forum’s global ranking in terms of likelihood and impact. The potential financial impacts of extreme ING’s Climate Change Committee (CCC) is mandated to oversee and set priorities for the
weather events such as hurricanes, floods and heatwaves are elevating the risks associated with implementation of the TCFD recommendations and other strategic climate-related topics that
climate change. With more than 38 million customers in over 40 countries, our business activities impact the group. For details please refer to our approach to climate governance.
can both significantly influence communities and the environment and be impacted by climate

risks. As such, we take our responsibility to help mitigate this risk seriously.Strategy

In order to get an understanding of our company’s exposure to climate risk, we have started with Shifts in societal expectations on climate change and developments in climate science are driving the analysis of climate-affected sectors as outlined in the report ‘Recommendations of the Task new initiatives and policy updates within the bank to address this threat. For example, we’ve set Force on Climate-related Financial Disclosures (June 2017)’. We conducted an Energy Transition ambitious targets to reduce financing for coal power generation to close to zero by 2025, and no assessment for particularly sensitive sectors within the Transportation, Industrials, Power and Real longer provide financing to new clients whose business is over 50 percent reliant on coal-fired Estate sectors where the results can help improve our understanding of the impacts of changing power. By the end of 2025, we will not finance any clients in the utilities sector who are more than regulation and technology developments. ING is committed to continuously reviewing and five percent reliant on coal. In addition, we are steering our loan portfolio to meet the well-below monitoring its policies and strategies as climate-related risks and opportunities emerge. As a result two degrees goal of the Paris Climate Accord. In 2019, we published our first progress report on of transition risk ING further refined its coal policy in 2017, targeting near-zero coal exposure by Terra, our pathway towards climate alignment in the sectors most responsible for climate change.
2025.

We expect climate change to remain firmly on ING’s agenda, as well as the agendas of our In 2018, ING started measuring and steering our lending portfolio towards the Paris Agreement’s
customers and of regulatory and supervisory bodies around the world. We have committed to well-below two degree goal by 2040 – our Terra Approach (Report of the Executive Report). For
report in line with the recommendations of the Taskforce for Climate-related Financial Disclosures instance, our automotive, real estate and power portfolio have been assessed. For an overview of
(TCFD) and we continue to work on the challenging exercise of translating potential climate risks how we capitalise on climate-related opportunities, please refer to Responsible Finance (Report of
and transition risks into financial risk for ING.
the Executive Report).

2019 ING Group Annual Report on Form 20-F171

Risk ManagementCredit risk

Our approach continues to evolve as we develop a better understanding of climate risk and weIntroduction

start to embed climate risk within our risk management process. ING has a Risk Identification and Credit risk is the risk of loss from the default and/or credit rating deterioration of clients. Credit risks

Risk Assessment process in place, helping us to adjust risk appetite and policies to reflect external arise in ING's lending, financial markets and investment activities. The credit risk section provides

environment management.
information on how ING measures, monitors and manages credit risk and gives an insight into the

portfolio from a credit risk perspective.

ING’s Environmental and Social Risk (ESR) management process evaluates risks on a client and

transaction basis. In 2019, we updated our ESR policy and implemented a standalone climate

Governance (*)

change policy which aims to limit deal-specific potential negative climate impacts. (refer to ESR ING’s credit risk strategy is to maintain an internationally diversified loan and bond portfolio, policy).
avoiding large risk concentrations. The emphasis is on managing business developments within the

business lines by means of a top-down risk appetite framework, which sets concentration limits for

Metrics and Targets countries, individual clients, sectors, products, secondary risk (collateral/guarantees) and We have set climate-related targets in our lending portfolio. This includes exiting coal by 2025 and investment activities. The aim is to support relationship-banking activities, while maintaining steering our €600 billion portfolio towards meeting the Paris Agreement’s well-below two degree internal risk/reward guidelines and controls.
goal (Terra Approach). Under Terra, we need to set one target per sector for each of the nine

sectors. As of year-end 2019, we had developed an approach and target for five sectors. For details Credit risk is a Tier 1 level risk function within ING and is part of the second line of defence. It is refer to our 2019 Terra Progress Report. For our approach to setting opportunity-related metrics managed by regional and/or business unit CROs. The CRO Wholesale Banking (WB), CRO and targets please refer to Climate Fi nance.
Challengers & Growth Markets (C&G), CRO Netherlands and CRO Belux focus on specific risks in the

geographical and/or business areas of their responsibilities. The Financial Risk department is a Tier 2

Next Steps

level risk function, which is responsible for the consolidated risk appetite setting, risk frameworks, In the course of 2020 we aim to identify physical risk in our lending portfolio while we continue our model development and policies.
transition risk analysis. We utilise learnings and best practices from sector initiatives and our

participation in the UNEP FI TCFD programme.
The credit risk function encompasses the following activities:

Measuring, monitoring and managing credit risks in the bank’s portfolio;
◾

Challenging and approving new and modified transactions and borrower reviews;
◾

Managing the levels of provisioning and risk costs, and advising on impairments; and ◾

Providing consistent credit risk policies, systems and tools to manage the credit lifecycle of all ◾

activities.

2019 ING Group Annual Report on Form 20-F172

Credit risk categories ()Pre-settlement (PS) risk*: arises when a client defaults on a transaction before settlement and ◾

ING must replace the contract by a trade with another counterparty at the then prevailing Credit risk uses the following risk categories to differentiate between the different types of credit

(possibly unfavourable) market price. This credit risk category is associated with derivatives risk:

transactions (exchange-traded derivatives, over-the-counter (OTC) derivatives and securities Lending risk:is the risk that the client (counterparty, corporate or individual) does not pay the ◾

financing transactions).
principal, interest or fees on a loan when they are due, or on demand for letters of credit (LCs)

Settlement risk: is the risk that arises when there is an exchange of value (funds or instruments)
and guarantees provided by ING..◾

for the same value date or different value dates and receipt is not verified or expected until after Investment risk: is the credit default and risk rating migration risk that is associated with ING’s ◾

ING has given irrevocable instructions to pay or has paid or delivered its side of the trade. The risk investments in bonds, commercial paper, equities, securitisations, and other similar publicly

is that ING delivers but does not receive delivery from its counterparty. ING manages settlement traded securities. This can be viewed as the potential loss that ING may incur as a result of

risk in the same way as other credit risks by setting a risk limit per client. Due to the short-term holding a position in underlying securities whose Issuer's credit quality deteriorates or defaults.

nature (typically one day), ING does not hold provisions or capital for settlement risk. Although a All investments in the banking book are classified in the investment risk category. The primary

relatively low risk, ING increasingly uses DVP (delivery versus payment) and safe settlement purpose of ING’s investments in the banking books is for liquidity management.

payment techniques to reduce settlement risk.
Money market (MM) risk: arises when ING places short-term deposits with a counterparty in ◾

order to manage excess liquidity. In the event of a counterparty default, ING may lose the

For the reconciliation between credit risk outstandings categories and financial assets, refer to table deposit placed.

below:

2019 ING Group Annual Report on Form 20-F173

Reconciliation between credit risk categories and financial position()
Credit risk categoriesMainly relates to:Notes in the financial statements* Lending risk-Cash and balances with central banksNote 2 Cash and balances with central banks

-Loans and advances to banksNote 3 Loans and advances to banks

-Loans and advances to customersNote 4 Financial assets at fair value through profit or loss -Off-balance sheet items e.g. obligations under financial guarantees and letters of credit and undrawn credit Note 5 Financial assets at fair value through other comprehensive income

facilities Note 7 Loans and advances to customers Note 45 Contingent liabilities and commitments Investment risk-Debt securitiesNote 4 Financial assets at fair value through profit or loss -Equity securitiesNote 5 Financial assets at fair value through other comprehensive income Note 6 Securities at amortised cost Money market (MM) risk-Cash and balances with central banksNote 2 Cash and balances with central banks -Loans and advances to banksNote 3 Loans and advances to banks -Loans and advances to customersNote 7 Loans and advances to customers Pre-settlement (PS) risk-Financial assets at fair value through profit or loss (trading assets and non-trading derivatives)Note 4 Financial assets at fair value through profit or loss -Financial liabilities at fair value through profit or loss (trading assets and non-trading derivatives)Note 15 Financial liabilities at fair value through profit or loss -Securities financingNote 44 Offsetting financial assets and liabilities Settlement risk-Financial assets at fair value through profit or loss (trading assets and non-trading derivatives)Note 4 Financial assets at fair value through profit or loss -Financial liabilities at fair value through profit or loss (trading assets and non-trading derivatives)Note 11 Other assets -Amounts to be settledNote 15 Financial liabilities at fair value through profit or loss Note 17 Other liabilities

Clarity about the credit risks that ING is prepared to assume, target setting and prudent risk ◾
Credit risk appetite and concentration risk framework (*)management;

Consistent communication to different stakeholders;
The credit risk appetite and concentration risk framework is designed to prevent undesired high◾
Guidelines on how to align reporting and monitoring tools with the organisational structure and levels of credit risk and credit concentrations within various levels of the ING portfolio. It is derived◾
strategy; and from the concepts of boundaries and instruments as described in the Risk Appetite Framework.
Alignment of business strategies and key performance indicators of business units with ING’s ◾
credit risk appetite through dynamic planning..

Credit risk appetite statements (*)

Credit risk appetite is the maximum level of credit risk ING is willing to accept for growth and value Credit risk appetite is present across different levels within ING, at portfolio level as well as creation. The credit risk appetite is linked to the overall bank-wide risk appetite framework. The transaction level. The various credit risk appetite components at portfolio and transaction levels credit risk appetite is expressed in quantitative and qualitative measures. Having a credit risk together result in the credit risk appetite framework .
appetite achieves:

2019 ING Group Annual Report on Form 20-F174

Sector policies: These are detailed analyses of defined products and/or industries. They identify ◾ The credit risk appetite and concentration risk framework is composed of:the major risk drivers and mitigants, the internal business mandate, and propose the risk (including business) parameters – and potentially the maximum product and/or portfolio limit - Country risk concentration: Country risk is the risk that arises due to events in a specific countryto undertake that business. A sector policy is always prepared by the front office responsible for ◾ (or group of countries). In order to manage the maximum country event loss ING is willing tothe internal business mandate and requires an approval from the designated approval authority.
accept, boundaries are approved by the Supervisory Board ensure ING’s consolidated 3-yearSector policies may carry various names and/or may have geographical and/or business average result before tax can absorb an estimated country event loss due to a country risklimitations (e.g. local vs global).
occurrence. The estimated level is correlated to the risk rating assigned to a given country.Reference benchmarks:The maximum credit risk appetite per obligor group is expressed as a ◾ Actual country limits are set by means of country instruments, which are reviewed monthly and(benchmark) exposure at the concentration risk level, which corresponds to (maximum) internal updated when needed. For countries with elevated levels of geopolitical or severe economic cyclecapital consumption for credit risk. It is used as a reference amount in the credit approval risk, monitoring is performed on a more frequent basis with strict pipeline and exposureprocess.
management.Credit approval process: The purpose of the credit approval process is that individual ◾ Single name and industry sector concentration: ING has established a credit concentration risktransactions and the risk associated with these transactions are assessed on a name-by-name ◾ framework in order to identify, measure and monitor single name concentration and industrybasis. For each type of client there is a dedicated process with credit risk managers specialised sector concentration (systemic risk). The same concept of boundaries and instruments arealong the business lines of ING. The credit approval process is supported by a risk rating system applied.and exposure monitoring system. Risk ratings are used to indicate a client’s creditworthiness Product and secondary risk concentration: ING has established a concentration framework towhich translates into a probability of default. This is used as input to determine the maximum ◾ identify, measure and monitor product concentration and secondary risk.risk appetite that ING has for a given type of client (reference benchmark). The determination of Scenarios and stress tests: Stress testing evaluates ING’s financial stability under severe, butthe delegated authority (the amount that can be approved at various levels of the organisation)
◾ plausible stress scenarios, and supports decision-making that assures ING remains a financiallyis a function of the risk rating of the client and ING’s credit risk exposure on the client.
going concern even after a severe event occurs. In addition to the bank-wide stress testing framework as described above, ING performs regularly sensitivity analysis to assess portfolio risksGiven the nature of the retail business, roles and responsibilities of the local credit risk policy are and concentrations. These sensitivity analyses are consistent with the stress scenario establisheddelegated to local retail credit risk management. However, the global retail risk policy prescribes in the Group-wide credit risk appetite framework .no-go criteria and minimum standards for underwriting. Lending standards, including material Product approvals: The product approval and review process (PARP) assesses and manages riskschanges to those standards, are approved by the global head of retail risk.
◾ associated with the introduction of new or modified products. It ensures that sound due diligence is performed by relevant stakeholders and the relevant risks (credit, operational, compliance,Environmental and Social Risk Framework etc.) are addressed appropriately ..
ING’s environmental and social risk (ESR) policy framework helps us make transparent choices about how, where and who we do business with. In 2019 we renewed our ESR Framework based on input from different stakeholders including clients, peers, NGOs and our own colleagues. Through

2019 ING Group Annual Report on Form 20-F175

regular updates like these we keep abreast of societal norms and regulation relating toCredit risk portfolio per economic sector and application of ESR framework

sustainability and challenge our own increasingly strong commitments on the topics of human
rights and climate change.

2019

in percentage

outstandings
ESR in practice in 2019ING ValuesHuman rightsEnvironmental complianceAnimal welfareDefenceForestry and AgrocommoditiesTobaccoInfrastructureManufacturingChemicalsEnergy*Fisheries*

Equator principlesMining and Metals

Generic engineering*
The ESR policy framework includes standards and best practice guidance for ESR-sensitive sectors.Consumer lending32.4%●
It includes explicit restrictions on activities not in line with ING’s values and harmful to people or theFinancial institutions20.5%●
Governments7.1%●
environment (for example companies involved in manufacturing cluster munitions), which we will
Other0.4%●
not directly finance.
Corporates39.6%●●●
Real estate6.6%●●●●
The next table gives insight into the ESR policies that are part of the Framework and where they are
Natural resources5.5%●●●●●●
applied.:Transportation & logistics4.4%●●●●●●
Services3.7%●●●●●●●
Food, beverages & personal care3.2%●●●●●●●●●
General industries3.2%●●●●●●●
Builders & contractors2.0%●●●●●
Chemicals, health & pharmaceuticals2.0%●●●●●●●
Other1.9%●●●●
Utilities1.5%●●●●●
Media and telecom1.4%●●●●●●
Retail1.1%●●●●
Automotive0.8%●●●●●●
Technology2.2%●●●●●●●

Fully or partially excluded activities.
** Includes policies on Oil and Gas, Coal, Nuclear Energy and Power Generation.

The way the Framework is applied in practice differs per product type. Generally the largest potential environmental and social impacts come from large corporates within our Wholesale Banking (WB) segment. WB is therefore the initial focus of our assessments and where we promote active ESR dialogue. We have been working with wholesale clients for more than 15 years to

2019 ING Group Annual Report on Form 20-F176

support them in understanding and managing their environmental and social impact. A simplifiedthe world every year in risk, front-office, KYC and compliance teams, so that ESR knowledge is built version of the ESR policy framework, following the same rationale and principles, applies to ING’son and spread.
retail activities for mid-corporates and small medium enterprises.

Updates in the ESR Framework

The ESR policy framework is incorporated in ING’s KYC policy framework, meaning the ESR clientThe renewed ESR Framework went live in July 2019. In this review, building on internal and external assessment is part of client on-boarding and review. The ESR framework minimum requirementsstakeholder input, we improved our structure and aimed to provide more clarity on the scope and are also included in ING’s procurement policy and apply to the scree ning of suppliers of ING’sgovernance of ESR. The Framework now includes standalone policies on human rights and climate procurement activities.change and an infrastructure policy. This reflects external developments, societal expectations and ESR is applied in practice in different ways, including an ESR client assessment during KYCour ambitions for these topics and sustainability in general.
onboarding, an ESR transaction assessment for Wholesale Banking, separate in-depth advice from the global ESR team for ESR high-risk WB transactions and name screening for transactions withNew restrictions in the updated framework include arctic offshore oil and gas exploration and fully restricted clients. These ESR check and controls are integrated into our client and transactionproduction, white phosphorus, asbestos and small arms and light weapons for private individuals.
due diligence processes.We have a zero -tolerance policy for some of the restrictions, such as with companies involved in the production of cluster munitions. For others, we try to refrain as much as possible from any form Of all WB engagements in scope of the ESR policy framework in 2019, 85 percent were consideredof involvement, whether directly or indirectly. The new framework also affects companies with ESR low risk, 9 percent ESR medium risk and 6 percent ESR high risk. ESR high-risk cases requireboth controversial and non-controversial activities.
specialised advice from the global ESR team. The team now consists of 13 dedicated ESR advisors, 11 of them are in Amsterdam and two are located in Geneva and New York. Whereas we have aIn the updated ESR policy framework we have ensured that each sector policy includes the proper strong ESR policy framework, we acknowledge that we need to further improve our processes inreferences to the relevant standards of the human rights and climate change overarching pillars.
order to ensure accuracy and completeness of the data. The ESR advice assesses the specificIncorporating these helps us to determine which transactions require further analysis and action, product offered and impacts associated with it, the sector, operating context and geography of theand provides our stakeholders with a better understanding of our approach to human rights and engagement and other relevant factors. Based on this in-depth research, a binding advice is givenclimate change when assessing transactions. The updated ESR policy also encourages clients to that can only be overruled at Board level. Of the 304 ESR advices given in 2019, 45 percent wereidentify and be transparent about how human rights and/or environmental issues affect their positive, 25 percent positive subject to conditions and 30 percent negative. Conditions can play ansupply chains. They should provide evidence of proper monitoring and where relevant, translate important role in helping clients transition towards improved environmental and socialthese findings into acceptance criteria for partners and suppliers.

performance on the ground.

Developing international best practice and stakeholder engagement The ESR team’s main focus is on its policy development and transaction advisory roles. However Our ESR approach helps us and our clients to gradually enhance the implementation of key the team also provides training (both in-person and via webinars) to hundreds of colleagues around standards like the UN Guiding Principles on Human Rights and the Organisation for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises. But beyond

2019 ING Group Annual Report on Form 20-F177

stimulating better environmental and social performance in our own portfolio, ING activelyUnited Nations Human Rights Office: In May, at the request of the UN Human Rights Office of ◾ collaborates with other institutions, peers and regulators to address the environmental and socialthe High Commissioner, ING hosted a meeting with Dutch private sector industrials and the UN challenges we face:High Commissioner for Human Rights, Ms Michelle Bachelet, during her first official visit to the Netherlands, to discuss the role and leverage of the private sector in this important area.
ING and the Equator Principles (EPs):The EPs, an environmental and social risk management ◾ framework adopted by over 100 banks globally, were updated in 2019. The new version (EP4),By taking part in the above-mentioned initiatives, we aim to contribute our viewpoint and those of has increased the scope to capture more project-related transactions. It contains newour clients, employees and other stakeholders to help shape a consensus and develop clear commitments on human rights, climate change, Indigenous people and biodiversity. ING, anguidelines that can serve as a standard for our industry.
active EP Association member, co-led the coordination of the EP4 update process. ING is a member of several working groups, including those on social risks, climate change and scope. INGCredit risk models (*) also co-leads the capacity building and training working group, which resulted in the roll-out ofWithin ING, internal Basel compliant models are used to determine probability of default (PD), an online EP learning tool to ING risk and front-office employees last year. The tool is used byexposure at default (EAD) and loss given default (LGD) for regulatory and economic capital other EP banks globally.purposes. These models also form the basis of ING’s IFRS 9 loan loss provisioning (see “IFRS 9 Dutch Banking Sector Agreement: We continued our engagement in Dutch multi-stakeholdermodels” below). Bank-wide, ING has implemented around 100 credit risk models, for regulatory ◾ platforms to implement the Dutch Banking Sector Agreement on International Responsiblecapital, economic capital and loan loss provisioning purposes.
Business Conduct Regarding Human Rights. In 2018, we published our first human rights report in which we disclosed our saliency process and the human rights salient to ING – child labour,There are two main types of PD, EAD and LGD models used throughout the Bank:
forced labour and land-related community issues. In 2019, we published an update focused onStatistical modelsare created where a large set of default or detailed loss data is available. They ◾ our role as a corporate lender and the outcome of an exercise where we proactively engagedare characterised by a sufficient number of data points that facilitate meaningful statistical with 29 clients in human rights.estimation of the model parameters. The model parameters are estimated with statistical Thun Group: In the international arena, ING actively participates in the Thun Group, an informaltechniques based on the data set available;
◾ group of bank representatives sharing expertise and experience to support the integration of theHybrid modelscontain characteristics of statistical models combined with knowledge and ◾ UN Guiding Principles on Business and Human Rights into the policies and practices of banks.experience of experts from risk management and front-office staff, literature from rating OECD: ING’s active role in promoting and integrating human rights is reflected in our participationagencies, supervisors and academics. These models are especially appropriate for ‘low default ◾ as a formal advisory member to the OECD on responsible business conduct in our sector. In 2019portfolios’, where limited historical defaults exist.

the OECD published the Due Diligence for Responsible Corporate Lending and Securities Underwriting report that provides a global environmental and social risk framework for financial institutions. We participate in the annual meetings for practitioners from financial institutions (export credit agencies, EP financial institutions, commercial banks, development institutions, etc.) organised by the OECD in Paris, enhancing knowledge sharing and collaboration.

2019 ING Group Annual Report on Form 20-F178

Credit risk rating process (*)Enterprise (SME) companies in Central Europe, the Netherlands, Belgium, Luxembourg, as well as

In principle, all risk ratings are based on a Risk Rating (PD) Model that complies with the minimumresidential mortgage and consumer loan models in the various retail markets.

requirements detailed in CRR/CRDIV, ECB Supervisory Rules and EBA guidelines. This concerns all

borrower types and segments.Rating models for retail clients are predominantly statistically driven and automated, such that

ratings can be updated on a monthly basis. Rating models for large corporates, institutions and

ING’s PD rating models are based on a 1-22 scale (1=highest rating; 22=lowest rating) referred to asbanks include both statistical characteristics and manual input, with the ratings being manually

the ‘Master scale’, which roughly corresponds to the rating grades that are assigned by externalupdated on at least an annual basis.

rating agencies, such as Standard & Poor’s, Moody’s and Fitch. For example, an ING rating of 1

corresponds to an S&P/Fitch rating of AAA and a Moody’s rating of Aaa; an ING rating of 2Credit risk models - Pre -settlement measurement models

corresponds to an S&P/Fitch rating of AA+ and a Moody’s rating of Aa1, and so on.
For regulatory capital, pre-settlement (PS) exposure is calculated using a marked to market (MtM)

plus regulatory-based add-on. For internal capital purposes, ING uses a combination of a MtM plus
The 22 grades are composed of the following categories:
model add-on approach and a scenario simulation approach.:
Investment grade (risk rating 1-10);
◾
Non-investment grade (risk rating 11-17);
◾ING recognises that the above approaches are not sufficiently accurate for certain trading products
Sub-standard (risk rating 18-19); and ◾such as highly structured or exotic derivative transactions. For the assessment of risk exposures of
Non-performing (risk rating 20-22).
◾such complex products a bespoke calculation is made.

The three first categories (1-19) are risk ratings for performing loans. The ratings are calculated in IT Under Pillar 1, ING uses the Current Exposure Method (Mark to Market method), which is a standard
systems with internally developed models based on data that is either manually or automatically approach prescribed by the regulation. There are no exposures under the advanced, Internal Model
fed. Under certain conditions, the outcome of a manually fed model can be challenged through a Method (IMM) under Pillar1. Under Pillar 2 however, for FX and interest rate derivatives, ING uses a
rating appeal process. Risk ratings for non-performing loans (NPL) (20-22) are set by the global or risk sensitive approach based on Monte Carlo simulations.
regional credit restructuring department. For securitisation portfolios, the external ratings of the

tranche in which ING has invested are leading.

Credit risk tools

Risk ratings assigned to clients are reviewed at least annually, with the performance of the

Credit risk systems and data standards underlying models monitored regularly. Over 90 percent of ING’s credit exposures have been rated The acceptance, maintenance, measurement, management and reporting of credit risks at all using one of the in-house developed PD rating models. Some of these models are global in nature, levels of ING is executed through single, common credit risk data standards using shared credit risk such as models for large corporates, commercial banks, insurance companies, central tools that support standardised and transparent credit risk practices. ING has chosen to develop governments, local governments, funds, fund managers, project finance and leveraged companies.
credit risk tools centrally. The philosophy is to use a single source of data, in an integrated Other models are more regional- or country-specific: there are PD models for Small Medium approach that includes ING policy, the regulatory environment in which we operate, and the daily

2019 ING Group Annual Report on Form 20-F179

processes that are active throughout the Group. Disciplined application in these three areas isThe prior period outstandings have been updated to improve consistency and comparability to the
essential for achieving high data quality standards. The customer-centric data model conforms tocurrent year presentation. This is applicable to all following tables in the sections credit risks
the three core business needs of ING:portfolio, credit risk mitigation and credit quality that include outstandings with prior period
To monitor the risks we undertake.comparatives.
◾ To be compliant with our internal and external obligations; and ◾ To transact effectively and efficiently with our clients.Portfolio analysis per business line (*) ◾

Credit risk portfolio (*)

ING’s credit exposure is mainly related to lending to individuals and businesses followed by investments in bonds and securitised assets. Loans to individuals are mainly mortgage loans secured by residential property. Loans (including guarantees issued) to businesses are often collateralised, but may be unsecured based on the internal analysis of the borrower’s creditworthiness. Bonds in the investment portfolio are generally unsecured, but predominantly consist of bonds issued by central governments and EU and/or OECD based financial institutions.
Secured bonds, such as mortgage backed securities and asset backed securities are secured by the underlying diversified pool of assets (commercial or residential mortgages, car loans and/or other assets) held by the securities issuer. The last major credit risk source involves pre -settlement (PS)
exposures which arise from trading activities, including derivatives, repurchase transactions and securities lending/borrowing transactions. This is also commonly referred to as counterparty credit risk.

2019 ING Group Annual Report on Form 20-F180

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| Outstandings per line of business | 1,2,3() | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | Wholesale Banking | | | Retail Benelux | | Retail Challengers & | | Corporate Line | | | | Total |
| | | | | | | | | Growth Markets | | | | | | |
| Rating class | | | 2019 | 2018 | 2019 | | 2018 | 2019 | 2018 | 2019 | 2018 | | 2019 | 2018 |
| | | 1 (AAA) | 31,859 | 25,179 | 372 | | 466 | 18,973 | 16,390 | 24,774 | 29,333 | 75,978 | | 71,368 |
| Investment grade | | 2-4 (AA) | 46,394 | 46,847 | 5,853 | | 5,572 | 36,460 | 28,515 | 1,832 | 1,431 | 90,539 | | 82,365 |
| | | 5-7 (A) | 66,756 | 63,917 | 20,922 | 19,645 | | 48,587 | 41,325 | 323 | 398 | 136,588 | | 125,285 |
| | | 8-10 (BBB) | 115,888 | 110,875 | 115,192 | 109,844 | | 49,681 | 56,551 | 3,190 | 3,149 | 283,951 | | 280,419 |
| | | 11-13 (BB) | 86,342 | 93,152 | 63,993 | 66,899 | | 41,584 | 43,154 | 31 | 957 | 191,950 | | 204,162 |
| Non-Investment grade | | 14-16 (B) | 22,929 | 18,462 | 15,845 | 16,447 | | 14,755 | 12,098 | | 13 | 53,528 | | 47,020 |
| | | 17 (CCC) | 1,081 | 1,648 | 2,223 | | 2,324 | 933 | 764 | 98 | 90 | | 4,335 | 4,826 |
| | | 18 (CC) | 1,228 | 1,441 | 1,409 | | 1,492 | 531 | 602 | | | . | 3,168 | 3,536 |
| Substandard grade | | | | | | | | | | | | | | |
| | | 19 (C) | 659 | 298 | 1,056 | | 1,093 | 672 | 630 | | | . | 2,387 | 2,022 |
| NPL grade | | 20-22 (D) | 4,516 | 4,395 | 4,316 | | 4,229 | 2,399 | 2,189 | 275 | 314 | 11,506 | | 11,128 |
| Total | | | 377,651 | 366,214 | 231,180 | 228,011 | | 214,575 | 202,220 | 30,524 | 35,685 | 853,930 | | 832,130* |

Industry
Private Individuals	31	32	164,466	164,220	167,262	156,385			331,758	320,637
Central Banks	34,044	28,962			8,383	6,124	23,339	27,116	65,766	62,202
Commercial Banks	44,152	45,213	250	251	8,884	8,889	3,502	4,461	56,788	58,814
Natural Resources	54,113	52,458	976	1,153	806	910			55,894	54,521
Central Governments	37,449	32,356	1,364	1,306	6,356	6,244	3,131	3,131	48,300	43,037
Non-Bank Financial Institutions	45,214	37,032	1,832	2,138	378	623	512	926	47,936	40,720
Real Estate	30,819	38,517	12,769	12,222	2,732	2,353			46,320	53,092
Transportation & Logistics	27,334	27,009	2,882	2,704	764	769			30,980	30,481
Food, Beverages & Personal Care	16,691	14,996	5,960	5,601	2,151	2,325			24,802	22,923
Services	10,252	12,461	10,929	9,911	862	990	3	2	22,046	23,363
General Industries	12,599	14,799	4,269	3,934	2,764	2,801			19,632	21,535
Lower Public Administration	3,594	3,459	5,619	5,296	8,184	8,227			17,397	16,983
Utilities	16,377	15,154	741	597	145	143			17,263	15,893
Chemicals, Health & Pharmaceuticals	9,213	10,190	6,213	6,258	1,017	1,129			16,443	17,577
Other	35,769	33,574	12,910	12,420	3,889	4,309	36	50	52,603	50,353
Total	377,651	366,214	231,180	228,011	214,575	202,220	30,524	35,685	853,930	832,130

Region EuropeNetherlands41,25541,807142,547142,62190565725,34030,025210,046215,110

2019 ING Group Annual Report on Form 20-F181

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| | Belgium | 33,936 | 36,546 | 82,368 | 79,362 | 572 | | 671 | 18 | 16 | 116,894 | 116,595 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | Germany | 18,067 | 15,832 | 485 | 476 | 99,966 | | 96,278 | 43 | 45 | 118,561 | 112,630 |
| | Poland | 15,713 | 14,377 | 66 | 66 | 20,377 | | 17,801 | | | 36,156 | 32,244 |
| | Spain | 8,849 | 10,957 | 68 | 64 | 21,838 | | 19,092 | 30 | 15 | 30,785 | 30,128 |
| | United Kingdom | 27,026 | 26,633 | 277 | 256 | 225 | | 258 | 1,872 | 1,463 | 29,400 | 28,610 |
| | Luxemburg | 22,209 | 18,145 | 4,051 | 3,779 | 1,554 | | 1,603 | 13 | 13 | 27,827 | 23,540 |
| | France | 13,914 | 13,736 | 519 | 519 | 6,267 | | 4,605 | 3 | 5 | 20,703 | 18,865 |
| | Rest of Europe | 65,432 | 65,324 | 406 | 400 | 22,816 | | 23,962 | 25 | 21 | 88,679 | 89,706 |
| Americas | | 67,893 | 64,672 | 223 | 294 | 1,457 | | 1,572 | 340 | 379 | 69,912 | 66,917 |
| Asia | | 52,065 | 48,563 | 103 | 105 | 180 | | 194 | 2,840 | 3,703 | 55,188 | 52,564 |
| Australia | | 8,622 | 6,755 | 27 | 28 | 38,416 | | 35,524 | 1 | 1 | 47,066 | 42,308 |
| Africa | | 2,671 | 2,867 | 40 | 43 | | 2 | 4 | | | 2,713 | 2,915 |
| Total | | 377,651 | 366,214 | 231,180 | 228,011 | 214,575 | 202,220 | | 30,524 | 35,685 | 853,930 | 832,130 |

1 Based on credit risk measurement contained in lending, pre-settlement, money market and investment activities.
2 Based on the total amount of credit risk in the respective column using ING’s internal credit risk measurement methodologies. Economic sectors (industry) below 2% are not shown separately but grouped in Other.
3 Geographic areas are based on country of residence, except for private individuals for which the geographic areas are based on the primary country of risk.

Overall Portfolio (*)With respect to the rating distribution within the Business lines, in Wholesale Banking AAA-rated
During 2019, ING’s portfolio size increased by EUR 22.3 billion (2.69%) to EUR 854 billionassets increased driven by the reserve deposit to Banque Centrale du Luxembourg and bond
outstanding, driven by volume growth and foreign exchange rate changes. The net volume growthexposure to the Federal Government of the United States of America. Wholesale A rating class
was concentrated in the Lending risk category. FX rate movements contributed to EUR 3.2 billion ofincreased as a result of outstanding to Bank of Japan and large corporate customers in the US, Asia
the total growth, driven by the appreciation of the US dollar (+1.8%), British pound (+5.5%),and the Netherlands. Reduced concentration in the BB rating class was mainly seen in real estate
Australian dollar (+1.5%) and Polish new zloty (+0.9%), partially off-set by the depreciation of Newexposure.

Turkish Lira (-9.0%) and New Romania Leu (-2.7%) against the Euro .
In Retail Challengers & Growth Markets, the increase in AAA-rating was explained by increased Rating distribution (*)reserve deposit to Deutsche Bundesbank. Volume growth in AA and A-rated residential mortgages Overall the rating class concentration improved. The share of Investment grade rating classeswas visible in Australia, Germany, Poland and Spain. This positive effect on the rating composition increased from 67.2% to 68.7%, while the share of non-investment grade slightly decreased, fromof C&G was slightly off-set by an increase in B rating related to lower ratings of Turkey’s mid- 30.8% to 29.3%. Substandard grade outstanding remained stable at EUR 5.5 billion whereas thecorporate segment.
NPL grade increased by 3.4%.

2019 ING Group Annual Report on Form 20-F182

The rating distribution for Retail Benelux improved mostly driven by improved risk profile of DutchEstate (Italy and the Benelux), Services (France and Belgium), and General Industries (US and the

residential mortgages shifting from rating classes BB to BBB, driven by historically lowNetherlands).

unemployment rate and continuing increase of the NVM House price index, improving LTV’s.

Portfolio analysis per geographical area (*)

Corporate line decreased concentration in AAA rating class due to a reduction in the reserveThe portfolio analysis per geographical area re-emphasizes the international distribution of the ING
deposit with De Nederlandsche Bank.portfolio. The share of Netherlands in the overall portfolio decreased further from 25.9% to 24.6%.

Industry (*)The most noticeable outstanding trends in the Netherlands were the previously mentioned
The industry composition within Retail is concentrated in private individuals with 71% for Retailreduction in regulatory reserves with the central bank. The lower volumes of residential mortgage
Benelux and 78% for Retail Challengers & Growth. In C&G, mortgage volume increased, primarily inloans were almost completely off-set by a growth in term loans granted to SMEs. For Belgium the
Germany, Poland and Australia.overall exposure remained fairly stable as the reduction in the central bank deposit was off-set by

increased exposures to Non-Bank FIs and growth in term loans to mid-corporates. Outstanding in In Retail Benelux the slight increase in Belgium and Luxemburg was largely off-set by the overallGermany increased mainly due to residential mortgage lending, instalment loans and central bank reduction in Dutch mortgages due to a trend of early pre-payments and the transfer fromexposures.
Westland Utrecht Bank to Nationale Nederlanden.

The higher exposure in the Americas was mainly driven by bond exposures to the US central Within Wholesale Banking, the sector development in Central Governments and Central Banks isgovernment. In Asia, the concentration of outstanding slightly increased, with noticeable growth in consistent with the aforementioned development in the AAA-rating category. Exposure towardsexposure to Japan and Singapore, partly off-set by reduced exposures in China and Republic of Commercial Banks decreased mainly due to reduced pre-settlement and lending exposures withinKorea. Australia reported a growth in outstanding which was mainly driven by trade related UK, Republic of Korea and Spain. Outstanding to Non-Bank FIs increased, most notably in funds &transactions with Commercial Banks and mortgage lending to Private Individuals.
fund management sub-industry in Western Europe.

The top 5 countries within Rest of Europe based on outstanding were: Italy (EUR 16,781 million), Apart from the movements against the financial counterparties, ING Wholesale increased itsSwitzerland (EUR 12,016 million), Turkey (EUR 11,383 million), Romania (EUR 7,473 million) and exposure to Food, Beverages & Personal Care industry (in Brazil and Hong Kong); to NaturalRussian Federation (EUR 5,652 million).
Resources (UK and Singapore), and to Utilities (Luxemburg and the UK). Exposure decreased in Real

2019 ING Group Annual Report on Form 20-F183

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| Outstandings by economic sectors and geographical area | | | | 1 | () | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | Region | | | | | | | | | | | | | | | | | | | Total | | Total |
| Industry | Netherlands | | Belgium | Germany | | Poland | Spain | United | | Luxemburg | | France | Rest of | America | | Asia | Australia | | Africa | 2019 | | 2018 |
| | | | | | | | | Kingdom | | | | | Europe | | | | | | | | | |
| Private Individuals | 117,194 | | 43,057 | | 84,281 | 11,296 | 20,758 | | 248 | 3,019 | | 2,242 | 15,626 | | 222 | 179 | 33,602 | | | 36 | 331,758 | 320,637 |
| Central Banks | 21,635 | | 16,651 | | 7,573 | 211 | 370 | | 1,867 | 5,048 | | 796 | 6,454 | | 0 | 4,951 | | 200 | | 8 | 65,766 | 62,202 |
| Commercial Banks | | 1,918 | | 358 | 4,231 | 254 | 743 | | 7,206 | 3,771 | | 5,945 | 7,398 | 7,682 | | 13,576 | 3,353 | | 352 | | 56,788 | 58,814 |
| Natural Resources | | 2,556 | 1,323 | | 959 | 729 | 220 | | 4,307 | 2,339 | | 652 | 16,037 | 9,521 | | 15,442 | | 749 | 1,061 | | 55,894 | 54,521 |
| Central Governments | | 7,970 | 5,777 | | 3,033 | 6,626 | 4,597 | | 42 | | 184 | 1,554 | 6,668 | 9,724 | | 1,071 | | 689 | 367 | | 48,300 | 43,037 |
| Non-Bank Financial Institutions | | 4,168 | 2,516 | | 3,824 | 1,292 | 906 | | 7,486 | 4,438 | | 1,815 | 4,974 | 12,435 | | 3,259 | | 674 | 149 | | 47,936 | 40,720 |
| Real Estate | 17,162 | | 8,949 | | 450 | 2,375 | 659 | | 326 | 2,410 | | 3,006 | 3,682 | 3,395 | | 805 | 3,091 | | | 8 | 46,320 | 53,092 |
| Transportation & Logistics | | 4,722 | 2,298 | | 505 | 1,100 | 569 | | 2,081 | | 868 | 812 | 6,129 | 3,979 | | 6,818 | | 651 | 447 | | 30,980 | 30,481 |
| Food, Beverages & Personal Care | | 6,301 | 3,095 | | 322 | 2,093 | 329 | | 995 | 1,779 | | 874 | 2,602 | 4,632 | | 1,651 | | 111 | | 19 | 24,802 | 22,923 |
| Services | | 4,683 | 9,272 | | 574 | 822 | 162 | | 774 | | 646 | 711 | 1,109 | 2,264 | | 604 | | 426 | | 0 | 22,046 | 23,363 |
| General Industries | | 4,096 | 3,301 | | 1,143 | 2,295 | 274 | | 382 | | 437 | 144 | 3,504 | 2,628 | | 1,423 | | 5 | | 0 | 19,632 | 21,535 |
| Lower Public Administration | | 522 | 5,949 | | 5,798 | 727 | | 4 | | | 728 | 471 | 536 | | 958 | 18 | 1,686 | | | 0 | 17,397 | 16,983 |
| Utilities | | 1,331 | 1,056 | | 1,673 | 654 | 418 | | 2,032 | | 571 | 445 | 3,103 | 3,493 | | 1,380 | | 843 | 265 | | 17,263 | 15,893 |
| Chemicals, Health & Pharmaceuticals | | 4,160 | 3,517 | | 935 | 1,066 | 112 | | 95 | | 257 | 524 | 2,812 | 2,286 | | 474 | | 205 | | 0 | 16,443 | 17,577 |
| Other | 11,628 | | 9,774 | | 3,260 | 4,614 | 664 | | 1,560 | 1,331 | | 712 | 8,045 | 6,694 | | 3,536 | | 782 | | 2 | 52,603 | 50,353 |
| Total | 210,046 | | 116,894 | | 118,561 | 36,156 | 30,785 | | 29,400 | 27,827 | | 20,703 | 88,679 | 69,912 | | 55,188 | 47,066 | | 2,713 | | 853,930 | 832,130* |

Rating class
Investment grade	144,134	73,010	95,685	22,921	23,598	24,429	21,444	15,418	50,878	42,689	41,134	31,542	175	587,056	559,437
Non-Investment grade	60,937	39,994	21,616	12,219	6,832	4,807	6,229	5,163	35,775	25,660	13,553	14,573	2,457	249,814	256,007
Substandard grade	1,993	1,023	555	212	85	17	75	25	484	464	347	265	9	5,555	5,558
NPL grade	2,983	2,867	705	806	270	148	79	96	1,541	1,100	154	686	71	11,506	11,128
Total	210,046	116,894	118,561	36,156	30,785	29,400	27,827	20,703	88,679	69,912	55,188	47,066	2,713	853,930	832,130

1 Geographic areas are based on country of residence, except for private individuals for which the geographic areas are based on the primary country of risk.

cover may be an important mitigant of credit risk and an alternative source of repayment,

Credit risk mitigation (*)generally it is ING’s practice to lend on the basis of the customer’s creditworthiness rather than
exclusively relying on the value of the cover .
ING uses various credit risk mitigation techniques and instruments to mitigate the credit risk

associated with an exposure and to reduce the losses incurred subsequent to a default by a

customer. The most common terminology used in ING for credit risk protection is ‘cover’. While a

2019 ING Group Annual Report on Form 20-F184

Cover forms ()Cover values ()**

Within ING, there are two distinct forms of covers. First, where the asset has been pledged to ING asThis section provides insight into the types of covers and the extent to which exposures benefit collateral or security ING has the right to liquidate it should the customer is unable to fulfil itsfrom collateral or guarantees. The disclosure differentiates between risk categories (lending, financial obligation. As such, the proceeds can be applied towards full or partial compensation ofinvestment, money market and pre-settlement). The most relevant types of cover include the customer's outstanding exposure. This may be tangible (such as cash, securities, receivables,mortgages, financial collateral (cash and securities) and guarantees. ING obtains cover that is inventory, plant and machinery, and mortgages on real estate properties) or intangible (such aseligible for credit risk mitigation under CRR/CRDIV, as well as cover that is not eligible. Collateral patents, trademarks, contract rights and licenses). Second, where there is a third-party obligation,covering financial market transactions is valued on a daily basis, and as such not included in the indemnification or undertaking (either by contract and/or by law) ING has the right to claim fromfollowing tables. To mitigate the credit risk arising from Financial Markets transactions, the bank that third party an amount, if the customer fails on its obligations. The most common examplesenters into legal agreements governing the exchange of financial collateral (high-quality are guarantees (such as parent guarantees and export credit insurances), letters of comfort orgovernment bonds and cash).

third-party pledged mortgages.
The cover values are presented for the total portfolio of ING, both the performing and non- Cover valuation methodology (*)performing portfolio. Our definition of non-performing is explained in detail in the Credit General guidelines for cover valuation are established to ensure consistent application within ING.restructuring section (below). For additional insight, a breakdown of ING’s portfolio by industry and These also require that the value of the cover is monitored on a regular basis. Covers are revaluedgeography is provided.
periodically and whenever there is reason to believe that the market is subject to significant changes in conditions. The frequency of monitoring and revaluation depends on the type of cover.Exposures are categorised into different Value to Loan (VTL) buckets that give insight in the level of collateralisation of ING’s portfolio. VTL is calculated as the cover value divided by the outstandings The valuation method also depends on the type of covers. For asset collateral, the valuationat the balance sheet date. The cover values are indexed where appropriate and exclude any cost of sources can be the customer’s balance sheet (e.g. inventory, machinery and equipment), nominalliquidation. Covers can either be valid for all or some of a borrower’s exposures or particular value (e.g. cash and receivables), market value (e.g. securities and commodities), independentoutstandings, the latter being the most common. For the purpose of aggregation, overvaluations (commercial real estate) and market indices (residential real estate). For third-partycollateralisation is ignored in the total overview and VTL coverage of more than 100% is reported as obligations, the valuation is based on the value that is attributed to the contract between ING andfully covered. For VTL coverage in the tables for Dutch mortgages, consumer lending and business that third party.lending, each cover is subsequently assigned to one of the six defined VTL buckets: no cover, >0% to 25%, >25% to 50%, >50% to 75%, >75% to <100%, and ≥ 100%.

The next table gives an overview of the collateralisation of the ING’s total portfolio.

2019 ING Group Annual Report on Form 20-F185

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| | | | | | | Cover type | | | | | Value to Loan | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | Outstandings | | | | Financial | | | | | Partially | | | |
| | | | | Mortgages | | Collateral | Guarantees | Other covers | | No Cover | covered | | Fully covered | |
| Consumer Lending | | 329,949 | | 574,786 | | 3,775 | 26,766 | | 36,774 | 6.9% | | 7.6% | 85.5% | |
| Business Lending | | 378,444 | | 154,351 | | 21,073 | 93,407 | | 296,286 | 36.7% | | 24.3% | 39.1% | |
| Investment and Money Market | | | 94,866 | | 33 | 133 | | 64 | 266 | 96.0% | | 3.9% | | 0.1% |
| Total Lending, Investment and Money Market | | 803,258 | | 729,171 | | 24,981 | 120,236 | | 333,326 | 31.4% | | 15.0% | 53.5% | |
| Pre-settlement | 1 | | 50,672 | | | | | | | | | | | |
| Total Bank | | 853,930 | | | | | | | | | | | | |

1 More information on the credit risk mitigants can be found in the Pre-settlement section.| | | | | Cover type | | | | | Value to Loan | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | Outstan-dings | Mortgages | Financial | Guarantees | | Other | No Cover | Partially | | Fully covered | |
| | | | | Collateral | | | | | covered | | | |
| Consumer Lending | | 318,804 | 547,832 | 3,509 | 25,760 | | 39,446 | 6.6% | | 7.9% | 85.4% | |
| Business Lending | | 365,804 | 147,205 | 19,090 | 86,222 | | 257,929 | 37.0% | | 24.5% | 38.5% | |
| Investment and Money Market | | 95,857 | | 80 | | 145 | 214 | 90.8% | | 9.1% | | 0.2% |
| Total Lending, Investment and Money Market | | 780,465 | 695,037 | 22,679 | 112,128 | | 297,590 | 31.2% | | 15.8% | 52.9% | |
| Pre-settlement | 1 | 51,665 | | | | | | | | | | |
| Total Bank | | 832,130 | | | | | | | | | | |

1 More information on the credit risk mitigants can be found in the Pre-settlement section.

Over the year, the collateralisation level of the total portfolio remained stable. Excluding the pre-Consumer lending portfolio (*)
settlement portfolio, 53.5% of ING Group’s outstandings were fully collateralised in 2019 (2018:The consumer lending portfolio accounts for 38.6% of ING’s total outstanding, primarily consisting
52.9%). Since investments traditionally do not require covers, the percentage for ‘no covers’ in thisof residential mortgage loans and other consumer lending loans, which mainly comprise term
portfolio is close to 90%. However, 99% of the investment outstanding is investment grade.loans, revolvers and personal loans to consumers. As a result, most of the collateral consists of
Improved economic conditions in ING’s main markets contributed to improved collateral valuations,mortgages. The mortgage values are collected in an internal central database and in most cases
observed in consumer lending.external data is used to index the market value (e.g. mortgage values for the Netherlands are
updated on a quarterly basis using the NVM house price index).

2019 ING Group Annual Report on Form 20-F186

A significant part of ING’s residential mortgage portfolio is in the Netherlands (37.9%), followed byConsumer lending portfolio – cover values (*)
Germany (25.0%), Belgium and Luxembourg (13.6%) and Australia (10.7%). Given the size of theThe below tables show the values of different covers and the VTL split between performing and
Dutch mortgage portfolio, the valuation methodology to determine the cover values for Dutchnon-performing loans.
residential mortgages is provided below.

Dutch mortgages valuation (*)

When a mortgage loan is granted in the Netherlands, the policy dictates maximum loan to market value (LTMV) for an existing property and for construction property financing of 100 percent.

In case of newly built houses usually the building /purchase agreement is sufficient as valuation. In the case of existing houses three types of valuations are allowed. If the LTMV is below 90 percent, either WOZ (fiscal market value, determined by government authorities) or an automated model valuation (the Calcasa ING Valuation) are permitted. In most cases, a valuation is performed by certified valuers that are registered at one of the organisations accepted by ING. In addition, the valuer must be a member of the NVM (Nederlandse Vereniging van Makelaars – Dutch Association of Real Estate Agents), VBO (Vereniging Bemiddeling Onroerend Goed – Association of Real Estate Brokers), VastgoedPRO (Association of Real Estate Professionals) or NVR (Nederlandse Vereniging van Rentmeesters).

2019 ING Group Annual Report on Form 20-F187

Cover values including guarantees received - Consumer lending portfolio – 2019()
Cover typeValue to Loan Outstan-Financial dingsMortgagesColla-teralGuaranteesOther coversNo Cover>0% - 25%>25%-50%>50% - 75%>75% - <100%≥ 100%| Performing | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Residential Mortgages (Private Individuals) | 294,658 | 561,766 | 2,897 | 24,281 | 30,541 | | | 0.1% | 0.8% | 7.2% | 91.8% |
| Residential Mortgages | | | | | | | | | | | |
| (SME)1 | 5,687 | 8,786 | 258 | 145 | 1,402 | | 0.2% | 0.8% | 1.4% | 8.0% | 89.6% |
| Other Consumer Lending | 26,025 | 183 | 603 | 2,204 | 3,980 | 83.8% | 0.3% | 0.1% | 0.1% | 0.3% | 15.4% |
| Total Performing | 326,370 | 570,734 | 3,759 | 26,630 | 35,922 | 6.7% | – | 0.1% | 0.8% | 6.7% | 85.7%* |

Non-performing
Residential Mortgages (Private Individuals)	2,477	3,804	14	121	720	0.2%	0.2%	0.7%	2.3%	9.6%	87.1%
Residential Mortgages
(SME)1	147	240	–	7	36	0.2%	0.3%	0.8%	2.9%	6.0%	89.8%
Other Consumer Lending	956	7	2	8	96	94.0%	0.4%	0.2%	0.4%	0.5%	4.6%
Total Non-performing	3,579	4,052	16	136	852	25.3%	0.2%	0.5%	1.8%	7.0%	65.2%

Total Consumer Lending329,949574,7863,77526,76636,7746.9%–0.1%0.8%6.7%85.5%

1 Consists mainly of residential mortgages to small one man business clients

2019 ING Group Annual Report on Form 20-F188

Cover values including guarantees received - Consumer lending portfolio – 2018()
Cover typeValue to Loan OutstandingFinancial>75% sMortgagesCollateralGuaranteesOther coversNo Cover>0% - 25%>25%-50%>50% - 75%<100%≥ 100%| Performing | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Residential Mortgages (Private Individuals) | 285,976 | 535,664 | 2,839 | 23,741 | 33,446 | | | 0.1% | 1.0% | 7.3% | 91.6% |
| Residential Mortgages | | | | | | | | | | | |
| (SME)1 | 5,383 | 8,219 | 160 | 155 | 1,239 | | 0.3% | 0.8% | 1.7% | 7.5% | 89.7% |
| Other Consumer Lending | 23,937 | 156 | 493 | 1,694 | 4,072 | 84.7% | 0.3% | 0.1% | 0.1% | 0.5% | 14.3% |
| Total Performing | 315,297 | 544,039 | 3,492 | 25,591 | 38,757 | 6.4% | 0.1% | 0.1% | 0.9% | 6.8% | 85.7%* |

Non-performing
Residential Mortgages (Private Individuals)	2,490	3,568	16	152	607	0.5%	0.2%	0.8%	2.9%	13.6%	82.0%
Residential Mortgages
(SME)1	134	218		9	29	0.4%		0.7%	2.4%	8.9%	87.7%
Other Consumer Lending	884	7	1	9	52	95.4%	0.5%	0.1%	0.2%	0.6%	3.2%
Total Non-performing	3,508	3,793	17	169	689	24.4%	0.2%	0.6%	2.2%	10.1%	62.4%

Total Consumer Lending318,804547,8323,50925,76039,4466.6%0.1%0.1%1.0%6.9%85.4%

1 Consists mainly of residential mortgages to small one man business clients

The collateralisation of the consumer lending portfolio continued to improve during 2019. The riseBusiness lending portfolio (*)
in collateralisation levels was due to rising housing prices observed in different mortgage markets,Business lending accounts for 44.3 percent of ING’s total outstanding (44.0 percent in 2018). In line
specifically noticeable in the Netherlands.with our objective to give stakeholders insight into the portfolio, we present the business lending
portfolio per industry breakdown in accordance with the NAICS definition and per region and main
ING’s residential mortgage outstanding increased mainly in Germany (3.1%), Spain (14.8%) andmarket. Business Lending presented in this section does not include pre-settlement, investment
Poland (23.2%). Mortgage outstanding in the Netherlands decreased slightly (0.8%). For theand money market exposures, which are outlined in the next sections.

residential mortgages portfolio, the cover type guarantees relate to mortgages covered by governmental insurers under the Nationale Hypotheek Garantie (NHG) in the Netherlands. The NHG guarantees the repayment of a loan in case of a forced property sale.

2019 ING Group Annual Report on Form 20-F189

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| | | | Financial | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Industry | Outstandings | Mortgages | Collateral | Guarantees | | Other covers | No Cover | | >0% - 25% | >25%-50% | >50% - 75% | >75% - <100% | | ≥ 100% |
| Natural Resources | 53,796 | 1,197 | 2,426 | | 22,041 | 35,691 | | 26.6% | 15.3% | 9.6% | 11.6% | | 12.9% | 24.1% |
| Real Estate | 45,927 | 85,946 | 1,442 | | 5,942 | 17,765 | | 2.6% | 0.7% | 1.9% | | 2.0% | 9.7% | 83.1% |
| Central Banks | 42,087 | | | 7 | | | | 100.0% | | | | | | |
| Non-Bank Financial Institutions | 30,230 | 13,726 | 11,486 | | 6,565 | 43,672 | | 26.2% | 2.8% | 4.6% | | 5.0% | 5.9% | 55.6% |
| Transportation & Logistics | 29,303 | 3,293 | 168 | | 7,519 | 36,223 | | 17.0% | 6.4% | 2.3% | | 4.1% | 11.3% | 58.9% |
| Food, Beverages & Personal Care | 22,585 | 8,030 | 407 | | 8,777 | 34,633 | | 24.5% | 5.2% | 7.8% | 10.3% | | 12.8% | 39.5% |
| Commercial Banks | 22,508 | 331 | 129 | | 1,656 | | 6,062 | 72.4% | 3.3% | 2.0% | | 1.6% | 5.9% | 14.8% |
| Services | 21,044 | 10,090 | 1,519 | | 8,799 | 29,470 | | 30.7% | 5.0% | 6.3% | | 6.5% | 6.9% | 44.6% |
| General Industries | 18,849 | 5,031 | 246 | | 5,369 | 22,154 | | 32.2% | 5.1% | 4.3% | | 8.3% | 9.6% | 40.6% |
| Utilities | 15,952 | 242 | 1,036 | | 3,785 | | 7,928 | 41.7% | 19.7% | 3.9% | | 5.5% | 2.0% | 27.3% |
| Chemicals, Health & Pharmaceuticals | 15,410 | 8,361 | 203 | | 3,744 | 12,439 | | 26.4% | 6.7% | 3.9% | | 7.5% | 11.8% | 43.7% |
| Builders & Contractors | 15,054 | 7,449 | 201 | | 3,802 | 15,704 | | 27.5% | 6.7% | 7.2% | | 8.6% | 8.7% | 41.2% |
| Others1 | 45,698 | 10,655 | 1,800 | | 15,407 | 34,546 | | 41.5% | 4.9% | 4.6% | | 5.8% | 7.7% | 35.4% |

Total Business Lending	378,444	154,351	21,073	93,407	296,286	36.7%	6.0%	4.4%	5.7%	8.2%	39.1%
of which Total Non-performing	7,856	2,600	281	2,643	6,305	32.6%	3.6%	7.9%	9.2%	16.5%	30.2%

1 ‘Others’ comprises industries with outstandings lower than EUR 10 billion.

2019 ING Group Annual Report on Form 20-F190

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| | | | Financial | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Industry | Outstandings | Mortgages | Collateral | Guarantees | | Other covers | No Cover | | >0% - 25% | >25%-50% | >50% - 75% | >75% - <100% | | ≥ 100% |
| Natural Resources | 52,783 | 1,170 | 2,142 | | 17,944 | 38,366 | | 23.9% | 15.5% | 11.9% | 11.2% | | 13.3% | 24.2% |
| Real Estate | 52,476 | 93,181 | 1,500 | | 7,399 | 10,995 | | 4.3% | 1.2% | 2.2% | 3.1% | | 7.6% | 81.6% |
| Central Banks | 34,365 | | | 6 | | | 100.0% | | | | | | | |
| Non-Bank Financial Institutions | 21,083 | 1,581 | 9,163 | | 5,529 | 32,346 | | 34.6% | 5.6% | 3.2% | 9.1% | | 6.9% | 40.6% |
| Transportation & Logistics | 28,980 | 3,085 | 148 | | 7,470 | 30,855 | | 17.7% | 6.2% | 3.0% | 4.5% | | 10.3% | 58.4% |
| Food, Beverages & Personal Care | 20,970 | 7,376 | 302 | | 7,380 | 24,099 | | 28.7% | 4.9% | 6.8% | 10.3% | | 11.8% | 37.6% |
| Commercial Banks | 23,876 | 323 | 338 | | 1,312 | 3,918 | | 78.8% | 2.6% | 1.7% | 0.3% | | 6.2% | 10.4% |
| Services | 22,248 | 9,379 | 2,889 | | 7,480 | 21,432 | | 34.1% | 4.7% | 4.2% | 6.7% | | 6.0% | 44.3% |
| General Industries | 20,391 | 5,027 | 263 | | 6,065 | 31,648 | | 33.2% | 5.9% | 3.7% | 8.4% | | 8.3% | 40.5% |
| Utilities | 14,442 | 376 | 616 | | 3,447 | 7,955 | | 42.2% | 16.4% | 5.6% | 5.1% | | 3.6% | 27.1% |
| Chemicals, Health & Pharmaceuticals | 16,444 | 8,634 | 203 | | 3,899 | 10,849 | | 35.5% | 2.8% | 3.9% | 7.6% | | 11.9% | 38.3% |
| Builders & Contractors | 14,843 | 7,132 | 205 | | 4,370 | 13,739 | | 27.0% | 7.5% | 5.7% | 8.2% | | 10.5% | 41.1% |
| Others1 | 42,901 | 9,941 | 1,315 | | 13,927 | 31,728 | | 43.5% | 4.2% | 5.1% | 4.7% | | 7.8% | 34.6% |

Total Business Lending	365,804	147,205	19,090	86,222	257,929	37.0%	5.9%	4.6%	5.9%	8.2%	38.5%
of which Total Non-performing	7,543	3,578	266	2,676	4,447	28.7%	3.8%	4.9%	9.1%	15.7%	37.7%

1 ‘Others’ comprises industries with outstandings lower than EUR 10 billion.

2019 ING Group Annual Report on Form 20-F191

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| | | | | | | Financial | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Region | | Outstandings | | Mortgages | | Collateral | Guarantees | | Other covers | No Cover | | >0% - 25% | >25%-50% | >50% - 75% | >75% - <100% | | ≥ 100% |
| | Netherlands | 81,383 | | 60,334 | | 3,265 | | 8,845 | 52,909 | | 37.4% | 2.8% | 3.7% | 5.3% | | 10.7% | 40.1% |
| | Belgium | 51,881 | | 35,937 | | 1,231 | | 23,583 | 51,204 | | 25.4% | 1.8% | 2.6% | 4.0% | | 6.7% | 59.5% |
| | Germany | 18,366 | | 3,143 | | 95 | | 1,237 | 4,916 | | 62.7% | 9.2% | 2.4% | 2.2% | | 2.5% | 20.9% |
| | Luxembourg | 19,013 | | 7,076 | | 1,690 | | 3,780 | 31,685 | | 48.3% | 2.3% | 6.6% | 3.2% | | 3.0% | 36.7% |
| Europe | Poland | 17,498 | | 8,896 | | 135 | | 3,053 | 27,356 | | 30.1% | 3.4% | 4.6% | 7.0% | | 11.4% | 43.4% |
| | United Kingdom | 14,919 | | 1,132 | | 1,128 | | 4,381 | 10,159 | | 39.0% | 18.0% | 5.7% | 8.9% | | 5.3% | 23.0% |
| | Switzerland | 11,328 | | | 83 | 656 | | 2,950 | 6,085 | | 35.7% | 13.7% | 12.3% | 7.4% | | 11.7% | 19.2% |
| | France | 10,015 | | 6,843 | | 147 | | 2,003 | 4,661 | | 39.5% | 5.7% | 5.5% | 3.5% | | 1.3% | 44.6% |
| | Rest of Europe | 48,494 | | 15,504 | | 2,873 | | 17,219 | 40,243 | | 32.1% | 7.8% | 4.9% | 4.7% | | 10.2% | 40.2% |
| America | | 48,048 | | 7,253 | | 7,856 | | 8,827 | 39,792 | | 39.7% | 6.1% | 5.0% | 6.6% | | 9.2% | 33.4% |
| Asia | | 45,131 | | 920 | | 1,941 | | 14,051 | 24,632 | | 37.2% | 8.4% | 4.5% | 9.2% | | 7.2% | 33.5% |
| Australia | | | 9,731 | 7,219 | | | 4 | 1,640 | 1,867 | | 37.3% | 9.6% | 1.5% | 3.0% | | 5.5% | 43.1% |
| Africa | | | 2,638 | | 9 | 51 | | 1,838 | | 778 | 9.2% | 16.5% | 9.6% | 13.2% | | 12.2% | 39.3% |

Total Business Lending	378,444	154,351	21,073	93,407	296,286	36.7%	6.0%	4.4%	5.7%	8.2%	39.1%
of which Non-performing	7,856	2,600	281	2,643	6,305	32.6%	3.6%	7.9%	9.2%	16.5%	30.2%

2019 ING Group Annual Report on Form 20-F192

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| | | | | | | Financial | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Region | | Outstandings | | Mortgages | | Collateral | Guarantees | Other covers | | No Cover | | >0% - 25% | >25%-50% | >50% - 75% | >75% - <100% | | ≥ 100% |
| | Netherlands | 84,669 | | 56,560 | | 2,978 | 7,560 | | 49,346 | | 43.4% | 2.1% | 2.9% | 5.7% | | 9.8% | 36.1% |
| | Belgium | 49,464 | | 34,299 | | 990 | 18,601 | | 45,209 | | 25.0% | 2.0% | 3.1% | 4.2% | | 6.4% | 59.4% |
| | Germany | 15,168 | | 2,288 | | 71 | 1,366 | | 4,064 | | 62.4% | 5.0% | 3.3% | 3.9% | | 2.3% | 23.1% |
| | Luxembourg | 12,903 | | 6,834 | | 2,626 | 3,768 | | 22,132 | | 23.4% | 5.6% | 12.8% | 6.1% | | 3.6% | 48.5% |
| Europe | Poland | 15,982 | | 7,992 | | 122 | 3,054 | | 26,346 | | 30.2% | 3.8% | 3.4% | 7.1% | | 10.1% | 45.4% |
| | United Kingdom | 14,623 | | 1,031 | | 1,191 | 3,411 | | 7,883 | | 41.1% | 18.5% | 4.8% | 3.4% | | 9.9% | 22.3% |
| | Switzerland | 11,109 | | | 18 | 470 | 2,543 | | 4,773 | | 30.7% | 25.2% | 11.0% | 7.6% | | 6.8% | 18.8% |
| | France | | 9,828 | 7,312 | | 106 | 2,631 | | 4,054 | | 42.1% | 2.5% | 4.8% | 4.0% | | 1.0% | 45.6% |
| | Rest of Europe | 52,084 | | 17,813 | | 2,690 | 18,908 | | 28,064 | | 33.7% | 7.5% | 4.7% | 6.2% | | 8.3% | 39.7% |
| America | | 47,458 | | 6,105 | | 6,408 | 7,007 | | 39,839 | | 40.1% | 5.6% | 6.1% | 6.8% | | 9.1% | 32.2% |
| Asia | | 41,943 | | 868 | | 1,153 | 14,391 | | 23,332 | | 37.9% | 9.1% | 5.2% | 7.4% | | 9.0% | 31.3% |
| Australia | | | 7,741 | 6,074 | | 226 | | 939 | 1,965 | | 33.6% | 3.4% | 1.8% | 3.7% | | 6.3% | 51.2% |
| Africa | | | 2,830 | | 10 | 62 | 2,043 | | 925 | | 15.5% | 4.6% | 6.5% | 16.6% | | 25.0% | 31.7% |

Total Business Lending	365,804	147,205	19,090	86,222	257,929	37.0%	5.9%	4.6%	5.9%	8.2%	38.5%
of which Non-performing	7,543	3,578	266	2,676	4,447	28.7%	3.8%	4.9%	9.1%	15.7%	37.7%

All industry types experienced an increase in total covers, but while the industries’ cover

The tables above describe the collateralisation of ING’s business lending portfolio. Breakdowns arelevels grew, only the outstanding for Utilities grew slightly faster.

provided by industry as well as by geographical region or market, based on the residence of the

borrowers.The largest increases in outstanding in absolute figures were seen in Germany (21.1%) and Asia

(7.6%). The increase in Germany (EUR 3.2 billion) was primarily due to increases in term loans,

Broken down by industry, the largest increase in outstanding is attributable to Non-Bank Financialregulatory reserve deposits and nostro accounts. As these deposits and nostro accounts are not

Institutions (EUR 9.1 billion, 43.1%), followed by Central Banks (EUR 7.7 billion, 22.5%), with lowcollateralised, this increase had only a small impact on total cover amounts.

covers. The largest decrease in outstanding was observed in Chemicals, Health & Pharmaceuticals

(EUR 8.2 billion), where the total cover percentage increased.Credit quality (*)

Following the higher credit risk levels seen as a result of the financial crisis and economic downturn, The proportion of the business lending portfolio in Africa and the Netherlands with no cover credit quality has been improving since 2014 and also continued the improving trend in 2019..
decreased substantially year-on-year, respectively from 15.5% to 9.2% and from 43.4% to 37.4% in

2019 ING Group Annual Report on Form 20-F193

partially offset by the decrease in non-performing exposures in Netherlands Retail (EUR 0.4 billion)
Credit risk categories()
and Real Estate & Other (EUR 0.4 billion).
RestructurinNon- RegularWatch List g1performing1
Possible ratings1–191–1911–2020-22Past due obligations ()**
Typical ratings1–1415–1718–2020-22 Retail Banking continuously measures its portfolio in terms of payment arrears and on a monthly Not Deterioration in riskSignificantSignificantSignificant significantbasis determines if there are any significant changes in the level of arrears. This methodology is
Significant interventionNot requiredNot requiredRequiredRequiredprincipally extended to loans to private individuals, such as residential mortgage loans, car loans
Includes impairmentsNoNoYesYes and other consumer loans. An obligation is considered ‘past due’ if a payment of interest or Account OwnershipFront OfficeFront OfficeFront OfficeFront Office principal is more than one day late. ING aims to help its customers as soon as they are past due by CreditCredit
Credit Risk ManagementRegularRegularRestructurinRestructurincommunicating to remind them of their payment obligations. In its contact with the customers,
gg ING aims to solve the (potential) financial difficulties by offering a range of measures (e.g. payment CreditCredit arrangements, restructuring). If the issues cannot be cured, for example because the customer is Primary ManagerFront OfficeFront OfficeRestructurinRestructurin
ggunable or unwilling to pay, the contract is sent to the recovery unit. The facility is downgraded to
Accounting provisioningStage 1/2Stage 1/2Stage 2/3Stage 3 risk rating 20 (non-performing) when arrears exceed 90 days past due and to risk rating 21 or 22

when the contract is terminated. The table below captures all past due exposures starting from day 1 More information on the Restructuring and Non-performing categories can be found in the Credit restructuring section.
1.| Credit quality outstandings | | () | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | 2019 | 2018 | Aging analysis (past due but performing): Consumer lending portfolio, outstandings | 1() | |
| Neither past due nor non-performing | | | | 831,340 | 816,588 | | 2019 | 2018 |
| Business lending past due but performing (1–90 days)1 | | | 1 | 7,747 | | Past due for 1–30 days | 2,564 | 3,283 |
| Consumer lending past due but performing (1–90 days) | | | | 3,367 | 4,440 | Past due for 31–60 days | 639 | 892 |
| Non-performing | 2 | | | 11,477 | 11,102 | Past due for 61–90 days | 163 | 265 |
| Total | | | | 853,930 | 832,130 | Total | 3,367 | 4,440 |

1 For 2018, the business lending amount past due but performing could not be isolated.1 Based on consumer lending. The amount of past due but performing financial assets in respect of non-lending activities was
not significant.
2 Based on lending and investment activities

The credit quality of the ING portfolio improved overall. For consumer lending past due but

performing, the portfolio decreased by EUR 1.1 billion mainly in Retail portfolio in Belgium &

Luxembourg, from EUR 1.9 billion to EUR 0.9 billion. For non-performing assets, an increase was

observed mainly in Belgium & Luxembourg for Retail portfolio (EUR 0.4 billion) and Wholesale

Banking portfolio (EUR 0.3 billion), and the United Kingdom WB (EUR 0.3 billion). This increase was

2019 ING Group Annual Report on Form 20-F194

Aging analysis (past due but performing): Consumer lending portfolio by geographic area,◾The borrower has failed in the payment of principal or interest/fees and such payment failure has

outstandings1(*)remained unresolved for the following periods:

20192018for corporates: more than 90 days; and
Residentialfor financial institutions and governments – from day 1. However, a period of 14 calendar days RegionOther retailTotalTotal Mortgageswill be observed in order for ING to establish whether the payment default was due to non-

Netherlands82911840934operational reasons (i.e. the deteriorated credit quality of the financial institution) or due to

Belgium7331668991,870operational reasons. The latter does not trigger default.| Germany | 372 | 104 | 476 | 606 | ING believes the borrower is unlikely to pay; the borrower has evidenced significant financial |
| --- | --- | --- | --- | --- | --- |
| Poland | 145 | 90 | 236 | 215 | ◾ |

difficulty, to the extent that it will have a negative impact on the future cash flows of the
EuropeLuxemburg21365646

Spain3242755financial asset. The following events could be seen as indicators of financial difficulty:| | France | 2 | 10 | 13 | 11 | The borrower (or third party) has started insolvency proceedings. |
| --- | --- | --- | --- | --- | --- | --- |
| | United Kingdom | 3 | | 3 | 5 | A group company/co -borrower has NPL status. |
| | Rest of Europe | 195 | 290 | 484 | 515 | |
| | | | | | | Significant fraud (affecting the company’s ability to service its debt). |
| America | | 3 | | 3 | 3 | There is doubt as to the borrower’s ability to generate stable and sufficient cash flows to |
| Asia | | 3 | | 3 | 2 | service its debt. |

Australia	310	18	328	178	Restructuring of debt.
Africa				1	◾ING has granted concessions relating to the borrower’s financial difficulty, the effect of which is a

reduction in expected future cash flows of the financial asset below current carrying amount.

Total2,6197493,3674,440

1 Based on consumer lending. The amount of past due but performing financial assets in respect of non-lending activitiesFurther, Wholesale Banking has an individual name approach, using Early Warnings indicators to

was not significant.
signal possible future issues in debt service.

Total past due, but performing exposure, for consumer loans decreased by EUR 1.1 billion. The Aging analysis (past due but performing): Business lending, outstandings(*)

improvement was mainly visible in the 1-30 days bucket driven by Belgium and the Netherlands2019

residential mortgages due to macro-economic factors (low unemployment, low inflation andPast due for 1–30 days6,681

Past due for 31–60 days658 increasing house prices). This was partially offset by the increase in Australia. Less significant

Past due for 61–90 days408 decreases were witnessed in the 31-60 and 61-90 days past due buckets mainly driven by the

Total7,747

Belgium residential mortgages portfolio.

In Wholesale Banking, ING classifies the relevant obligors for business loans (governments,

institutions, and corporates) as non-performing when any of the following default triggers occur:

2019 ING Group Annual Report on Form 20-F195

Aging analysis (past due but performing): Business lending portfolio by geographic area,Credit restructuring (*)
outstandings()
Global Credit Restructuring (GCR) is the dedicated and independent department that deals with| Region | | Total | non-performing loans and loans that hold a reasonable probability that ING will end up with a loss, | |
| --- | --- | --- | --- | --- |
| | Netherlands | 751 | if no specific action is taken. GCR deals with accounts or portfolios requiring an active approach, | |
| | Belgium | 1,028 | which may include renegotiation of terms & conditions and business or financial restructuring. The | |
| | Germany | 385 | loans are managed by GCR or by units in the various regions and business units. | |
| | United Kingdom | 820 | | |
| Europe | Spain | 688 | | |
| | France | 639 | ING uses three distinct statuses to categorise the management of clients with (perceived) | |
| | Luxemburg | 340 | deteriorating credit risk profiles, i.e. there is doubt as to the performance and the collectability of | |
| | Poland | 279 | the client’s contractual obligations: | |
| | Rest of Europe | 1,445 | | |
| America | | 1,159 | ◾Watch List* | : Usually, a client is first classified as Watch List when there are concerns of any |
| Asia | | 187 | potential or material deterioration in credit risk profile that may affect the ability of the client to | |
| Australia | | 23 | adhere to its debt service obligations or to refinance its existing loans. Watch List status requires | |
| Africa | | 2 | more than usual attention, increased monitoring and quarterly reviews. Some clients with a | |

Watch List status may develop into a Restructuring status or even a Recovery status.

Total7,747 Restructuring: A client is classified in Restructuring when there are concerns about the client’s ◾
financial stability, credit worthiness, and/or ability to repay, but where the situation does not

require the recall or acceleration of facilities or the liquidation of collateral. ING’s actions aim to

maintain the going concern status of the client by:

oRestoring the client’s financial stability;
oSupporting the client’s turnaround;
oRestoring the balance between debt and equity; and
oRestructuring the debt to a sustainable situation.
Recovery: A client is classified as in Recovery when ING and/or the client concludes that the ◾
client’s financial situation cannot be restored and a decision is made to end the (credit)

relationship or even to enter into bankruptcy. ING will prefer an amicable exit, but will enforce

and liquidate the collateral or claim under the guarantees if deemed necessary.

Watch List, Restructuring and Recovery accounts are reviewed at least quarterly by the front office,

GCR, and the relevant credit risk management executives.

2019 ING Group Annual Report on Form 20-F196

Non-performing loans ()Non-performing Loans: outstandings by economic sector and business lines1()
Retail Challengers ING’s loan portfolio is under constant review. Loans with past due financial obligations of more than Wholesale& Growth
90 days are reclassified as non-performing. For commercial lending portfolios, there generally areBankingRetail BeneluxMarketsCorporate LineTotal| reasons for declaring a loan non-performing prior to being 90 days past due. These reasons include, | Industry | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| but are not limited to, ING’s assessment of the customer’s perceived inability to meet its financial | Private Individuals | – | 1 | 2,173 | 2,163 | 1,573 | 1,535 | | | 3,746 | 3,698 |
| obligations, or the customer filing for bankruptcy or bankruptcy protection. | Natural Resources | 1,108 | 925 | 35 | 43 | 53 | 54 | | | 1,196 | 1,022 |
| | Food, Beverages & | 599 | 372 | 351 | 294 | 168 | 109 | | | 1,119 | 775 |
| | Personal Care | | | | | | | | | | |

The table below represents the breakdown by industry of credit risk outstandings for lending and	Transportation &	651	599	96	177	40	28	787	804
investment positions that have been classified as non-performing.	Logistics
	Services	320	260	357	265	60	38	737	563

Builders & Contractors265405258332168152691889

Real Estate312823311333936311,159

General Industries248373204186153135605693

Non-Bank Financial 4262534272246254 Institutions

Retail89801721346344325258

Other2467507326274110902753141,1781,187

Total4,4874,3704,3164,2292,3992,18827531311,47711,102

1 Based on Lending and Investment outstandings.
2 Economic sectors not specified in above overview are grouped in Other.

2019 ING Group Annual Report on Form 20-F197

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| Non-performing Loans: outstandings by economic sectors and geographical area | | | | | | | | () | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | Region | | | | | | | | | | | | | | | | | | | Total | | Total |
| Industry | Netherlands | | Belgium | Germany | | Poland | Spain | | United | France | Luxemburg | Rest of | | America | | Asia | Australia | | Africa | | 2019 | 2018 |
| | | | | | | | | Kingdom | | | | Europe | | | | | | | | | | |
| Private Individuals | | 840 | 1,271 | | 585 | 134 | | 195 | | 4 | 14 | 24 | 411 | | 4 | | 3 | 261 | | 1 | 3,746 | 3,698 |
| Natural Resources | | 83 | | 21 | | | 28 | | | 63 | | | 254 | | 533 | 84 | | 111 | | 20 | 1,196 | 1,022 |
| Food, Beverages & Personal | | 315 | | 153 | 63 | 117 | | 1 | | 12 | 68 | 1 | 109 | | 254 | 26 | | | | | 1,119 | 775 |
| Transportation & Logistics | | 432 | | 48 | 1 | | 31 | 47 | | 49 | | 3 | 88 | | 32 | 10 | | 46 | | | 787 | 804 |
| Services | | 224 | | 377 | 0 | | 36 | | | | | 3 | 49 | | 42 | | 6 | | | | 737 | 563 |
| Builders & Contractors | | 88 | | 226 | 1 | 103 | | 1 | | | | 3 | 230 | | 39 | | | | | | 691 | 889 |
| Real Estate | | 219 | | 225 | 0 | | 96 | 19 | | | 7 | 28 | 27 | | 8 | | | 4 | | | 631 | 1,159 |
| General Industries | | 176 | | 148 | 12 | | 89 | | | 3 | | 1 | 127 | | 48 | | 1 | | | | 605 | 693 |
| Non-Bank Financial Institutions | | 53 | | 8 | | | 3 | 7 | | 0 | 0 | 5 | 14 | | 107 | | | 264 | | | 462 | 54 |
| Retail | | 74 | | 147 | | | 40 | | | 4 | 7 | 1 | 52 | | | | | | | | 325 | 258 |
| Other1 | | 464 | | 239 | 44 | 130 | | | | 10 | 1 | 9 | 173 | | 34 | 23 | | | | 51 | 1,178 | 1,187 |
| Total | | 2,968 | 2,864 | | 705 | 805 | | 270 | 144 | | 96 | 79 | 1,534 | 1,099 | | 154 | | 686 | | 71 | 11,477 | 11,102* |

1 Economic sectors not specified in above overview are grouped in Other.

The non-performing portfolio increased slightly during 2019. The increase was mainly visible inForbearance (*)
Challengers & Growth and Wholesale Banking. The increase in Challengers & Growth was due to aForbearance occurs when a client is unable to meet their financial commitments due to financial
combination of various smaller items, while the increase in Wholesale Banking was mainly drivendifficulties it faces or is about to face and ING grants concessions towards this client. Forborne
by Food, Beverages & Personal Care and Natural Resources. This was largely offset by a significantassets are assets in respect of which forbearance measures have been granted.

decrease in Real Estate NPL outstandings. The largest increases were witnessed in Belgium in the services industry, the natural resources industry in the Americas and in Australia over variousForbearance may enable clients experiencing financial difficulties to continue repaying their debt.
smaller items. The largest decreases were visible in the Netherlands in real estate and private individuals. .For business customers, ING mainly applies forbearance measures to support clients with fundamentally sound business models that are experiencing temporary difficulties with the aim of maximising the client’s repayment ability and therewith avoiding a default situation or helping the client to return to a performing situation.

2019 ING Group Annual Report on Form 20-F198

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| For ING retail units, clear criteria have been established to determine whether a client is eligible for | Summary Forborne portfolio by forbearance type | | | 1() | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| forbearance process. Specific approval mandates are in place to approve the measures, as well as | | | 2019 | | | | 2018 | | |
| procedures to manage, monitor and report the forbearance activities. | | | | Of which: | | | | Of which: | |
| | | | Of which: | Non- | | | Of which: | Non- | |
| | | Outstandi | Perfor- | Perfor- | % of total | Outstandi | Perfor- | Perfor- | % of total |
| ING reviews the performance of forborne exposures at least quarterly, either on a case-by-case | Forbearance type | ngs | ming | ming | portfolio | ngs | ming | ming | portfolio |
| | Loan modification | 8,285 | 4,800 | 3,485 | 1.1% | 8,410 | 4,827 | 3,583 | 1.2% |
| (business) or on a portfolio (retail) basis. | Refinancing | 1,208 | 585 | 622 | 0.2% | 1,684 | 1,122 | 561 | 0.2% |
| | Total | 9,492 | 5,385 | 4,107 | 1.3% | 10,094 | 5,949 | 4,145 | 1.4%* |
| All exposures are eligible for forbearance measures, i.e. both performing (Risk Ratings 1-19) and | | | | | | | | | |
| non-performing (Risk Ratings 20-22) exposures. ING uses specific criteria to move forborne | 1 Undrawn commitments are excluded. | | | | | | | | |

exposures from non-performing to performing or to remove the forbearance statuses that are As per December 2019 ING’s total forborne assets decreased by EUR 0.6 billion (6%) against consistent with the corresponding EBA standards. An exposure is reported as forborne for a December 2018 to EUR 9.5 billion, mainly driven by Wholesale Banking (-EUR 0.5 billion). Please minimum of two years. An additional one year probation period is observed for forborne exposures note, that 2018 amount includes EUR 46 million of non-IFRS eligible items (i.e. undrawn that move from non-performing back to performing.
commitments and guarantees).

The prior period outstandings and performing/ non-performing amounts in the table Summary

Forborne assets have been updated by EUR 46 million to improve consistency and comparability to

Wholesale Banking(*) the current year presentation. This is also applicable to the other tables in this section As per December 2019, Wholesale Banking forborne assets amounted to EUR 4.6 billion, which Forbearance.
represented 1.7% of the total Wholesale Banking portfolio.

Summary Forborne portfolio1()| | | | Of which: | | | | Of which: | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | Of which: | Non- | | | Of which: | Non- | |
| | Outstandi | Perfor- | Perfor- | % of total | Outstandi | Perfor- | Perfor- | % of total |
| Business Line | ngs | ming | ming | portfolio | ngs | ming | ming | portfolio |
| Wholesale Banking | 4,632 | 2,699 | 1,932 | 1.7% | 5,081 | 3,088 | 1,994 | 1.9% |
| Retail Banking | 4,861 | 2,686 | 2,175 | 1.1% | 5,012 | 2,862 | 2,151 | 1.2% |
| Total | 9,492 | 5,385 | 4,107 | 1.3% | 10,094 | 5,949 | 4,145 | 1.4%* |

1 Undrawn commitments are excluded.

2019 ING Group Annual Report on Form 20-F199

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| Wholesale Banking: Forborne portfolio by geographical area | | | | 1() | | | | | Wholesale Banking: Forborne portfolio by economic sector | | 1() | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | 2019 | | | | 2018 | | | | 2019 | | | 2018 | | | |
| | | | | Of which: | | | | Of which: | | | | Of which: | | | | Of which: | |
| | | | Of which: | | Non- | | Of which: | Non- | | | Of which: | Non- | | Of which: | | Non- | |
| | | Outstandi | Perfor- | | Perfor- | Outstandi | Perfor- | Perfor- | | Outstandi | Perfor- | Perfor- | Outstandi | | Perfor- | Perfor- | |
| Region | | ngs | | ming | ming | ngs | ming | ming | Industry | ngs | ming | ming | | ngs | ming | ming | |
| | Netherlands | 822 | | 410 | 412 | 1,138 | 687 | 451 | Natural Resources | 1,587 | 909 | 678 | 1,474 | | 943 | 532 | |
| | Belgium | | 41 | 16 | 25 | 131 | 102 | 29 | Transportation & Logistics | 674 | 362 | 313 | | 833 | 445 | 388 | |
| | Germany | 246 | | 182 | 63 | 127 | 94 | 33 | General Industries | 427 | 286 | 142 | | 402 | 190 | 212 | |
| | United Kingdom | 332 | | 251 | 81 | 287 | 246 | 41 | Food, Beverages & Personal Care | 375 | 227 | 148 | | 244 | 161 | 83 | |
| Europe | Italy | 197 | | 115 | 83 | 388 | 113 | 275 | Real Estate | 374 | 207 | 167 | | 998 | 601 | 397 | |
| | Ukraine | 169 | | 77 | 93 | 297 | 108 | 189 | Chemicals, Health & Pharmaceuticals | 212 | 209 | | 3 | 189 | 171 | 19 | |
| | Norway | 151 | | 124 | 27 | 258 | 236 | 22 | Builders & Contractors | 195 | 79 | 116 | | 145 | 37 | 109 | |
| | Poland | 134 | | 31 | 103 | 190 | 78 | 113 | Utilities | 188 | 55 | 133 | | 181 | 30 | 152 | |
| | Rest of Europe | 502 | | 322 | 180 | 462 | 288 | 174 | Services | 129 | 69 | 60 | | 129 | 76 | 53 | |
| America | | 1,315 | | 759 | 556 | 1,173 | 695 | 478 | Retail | 114 | 92 | 22 | | 118 | 84 | 34 | |
| Asia | | 316 | | 206 | 109 | 378 | 300 | 78 | Automotive | 108 | 72 | 36 | | 134 | 131 | | 3 |
| Australia | | 214 | | 85 | 129 | 104 | 86 | 17 | Other | 248 | 134 | 114 | | 233 | 220 | 12 | |
| Africa | | 192 | | 122 | 71 | 148 | 55 | 93 | Total | 4,632 | 2,699 | 1,932 | 5,081 | | 3,088 | 1,994 | |
| Total | | 4,632 | 2,699 | | 1,932 | 5,081 | 3,088 | 1,994 | | | | | | | | | |
| | | | | | | | | | 1 Undrawn commitments are excluded. | | | | | | | | |
| 1 Undrawn commitments are excluded. | | | | | | | | | | | | | | | | | |

The main concentration of forborne assets in a single country was in the Netherlands with 18%

(2018: 22%) of the total Wholesale Banking forborne assets and 21% (2018: 23%) of the total non-

performing forborne assets.

Wholesale Banking forborne assets decreased by EUR 0.5 billion compared to 2018, of which the

performing forborne assets decreased by EUR 0.4 billion. The decrease of the performing forborne

assets was attributed mostly to a few cured large entities which exited forborne status.

Wholesale Banking forborne assets were mainly concentrated in Natural Resources, Transportation

& Logistics and General Industries. Together they accounted for 58% of the total Wholesale

Banking forborne assets and 59% of the total Wholesale Banking non-performing forborne assets.

Back in 2018, the main concentration was witnessed in Natural Resources, Real Estate and

Transportation & Logistics, with 65% of the total WB forborne. A significant decrease in forborne

2019 ING Group Annual Report on Form 20-F200

assets was visible in the Real Estate industry (EUR 0.6 billion) during 2019, followed by theThe main concentration of forborne assets in a single country was in the Netherlands with 46%

Tra nsportation & Logistics (-EUR 0.2 billion), partly offset by the Food, Beverages & Personal Care(2018: 49%) of the total Retail Banking forborne assets and 39% (2018: 44%) of the non-performing

and the Natural Resources (+EUR 0.1 billion each).forborne assets. .

Retail Banking()Loan Loss Provisioning ()**

As per end of December 2019, Retail Banking forborne assets amounted to a total of EUR 4.9 billion,Since 1 January 2018, ING has recognised loss allowances based on the expected credit loss model

which represented 1.1% of the total Retail Banking portfolio.(ECL) of IFRS 9, which is designed to be forward-looking. The IFRS 9 impairment requirements are

applicable to on-balance sheet financial assets measured at amortised cost or fair value through Retail Banking: Forborne portfolio by geographical area1(*)
other comprehensive income (FVOCI), such as loans, debt securities and lease receivables, as well

20192018 as off-balance sheet items such as undrawn loan commitments, certain financial guarantees, and Of which:Of which:
undrawn committed revolving credit facilities. These financial instruments are divided into three Of which:Non-Of which:Non- OutstandiPerfor-Perfor-OutstandiPerfor-Perfor-groups, depending on the stage of credit quality deterioration.
Regionngsmingmingngsmingming| Netherlands | 2,212 | 1,367 | 845 | 2,461 | 1,514 | 946 | IFRS 9 models (*) |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Belgium | 1,149 | 435 | 714 | 1,046 | 383 | 663 | |

Germany425294131462337126The IFRS 9 models leverage the advanced internal rating -based (AIRB) models (PD, LGD, EAD), which| | Turkey | 314 | 184 | 130 | 273 | 197 | 77 | include certain required conservatism. In order to include IFRS 9 requirements, such regulatory |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Europe | Poland | 209 | 101 | 109 | 216 | 115 | 101 | conservatism is removed from the ECL parameters (PD, LGD and EAD). The IFRS9 models apply two |
| | Romania | 101 | 55 | 46 | 69 | 36 | 33 | |
| | Italy | 25 | 13 | 12 | 25 | 13 | 12 | types of adjustments to the ECL parameters: (1) to economic outlook and (2) for stage 2 and stage |

Spain2513123923163 assets only, to the lifetime horizon. The IFRS9 model parameters are estimated based on| | Rest of Europe | 43 | 22 | 22 | 37 | 18 | 19 | statistical techniques and supported by expert judgement. |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| America | | 2 | 1 | 1 | 1 | | 1 | |

Asia	1	0	1	3	2	1	*Portfolio quality ()**
Australia	354	201	153	381	225	156

AfricaAs shown in the table below, 94.0% of the total gross carrying amounts is classified as stage 1,

Total4,8612,6862,1755,0122,8622,151mainly composed of investment grade, while stage 2 and 3 make up 4.7% and 1.3% of total

amounts, respectively..
1 Undrawn commitments are excluded.

2019 ING Group Annual Report on Form 20-F201

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| Gross Carrying amount per IFRS 9 stage and rating class | 1,2,3,4 | () | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | 2019 | Stage 1 | | | Stage 2 | | | Stage 3 | | | Total | | |
| Rating class | | | Gross Carrying | | Provisions | Gross Carrying | | Provisions | Gross Carrying | | Provisions | Gross Carrying | | Provisions | |
| | | | | Amount | | | Amount | | | Amount | | Amount* | | | |
| | 1 (AAA) | | | 75,144 | | 1 | | | | | | | 75,144 | | 1 |
| | 2-4 (AA) | | | 82,992 | | 3 | 28 | | | | | | 83,020 | | 3 |
| Investment grade | | | | | | | | | | | | | | | |
| | 5-7 (A) | | | 131,931 | | 11 | 273 | | | | | 132,204 | | | 11 |
| | 8-10 (BBB) | | | 295,449 | | 55 | 4,905 | | 6 | | | 300,354 | | | 61 |
| | 11-13 (BB) | | | 194,643 | 209 | | 7,925 | | 54 | | | 202,568 | | 263 | |
| Non-Investment grade | 14-16 (B) | | | 36,683 | 202 | | 18,416 | 367 | | | | | 55,099 | 569 | |
| | 17 (CCC) | | | 405 | | 7 | 4,067 | 146 | | | | | 4,472 | 153 | |
| | 18 (CC) | | | | | | 3,253 | 160 | | | | | 3,253 | 160 | |
| Substandard grade | | | | | | | | | | | | | | | |
| | 19 (C) | | | | | | 2,216 | 148 | | | | | 2,216 | 148 | |
| NPL grade | 20-22 (D) | | | | | | | | | 10,955 | 3,275 | | 10,955 | 3,275 | |

Total817,24749041,08288110,9553,275869,2844,646

1 Compared to the credit risk portfolio, the differences are mainly undrawn committed amounts (EUR 115 billion) not included in Credit outstandings and non-IFRS 9 eligible assets (EUR 100 billion, mainly guarantees, letters of credit and pre-settlement exposures)
included in Credit outstandings.2 For a reference to the Notes in the consolidated financial statements, we refer to the table ‘Reconciliation between credit risk categories and financial position’, page 176.
3 IAS 37 provisions (EUR 93.3 million) are excluded.
4 The table is generated in 2019 for the first time, no comparable schedule for 2018 available.

2019 ING Group Annual Report on Form 20-F202

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| | | | | | | | | | | | | | | | | | ##SL |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Changes in gross carrying amounts and loan loss provisions | () | | | | | | | | | | | | | | | | 1,2,3,4 |
| 2019 | | | Stage 1 | | | | Stage 2 | | | | Stage 3 | | | | Total | | |
| | | Gross carrying | | | | Gross carrying | | | | Gross carrying | | | | Gross carrying | | | |
| | | amount | | Provisions | | amount | | Provisions | | amount | | Provisions | | amount | | Provisions | |
| Opening balance | | 788,537 | | 501 | | | 46,949 | 925 | | | 10,758 | 3,141 | | 846,244 | | 4,568 | |
| Transfer into 12-month ECL (Stage 1) | | | 12,856 | | 30 | | -12,579 | -253 | | | -277 | | -23 | | | -246 | |
| Transfer into lifetime ECL not credit impaired (Stage 2) | | | -21,577 | | -73 | | 22,382 | 474 | | | -805 | | -81 | | | 320 | |
| Transfer into lifetime ECL credit impaired (Stage 3) | | | -2,210 | | -6 | | -1,753 | -135 | | | 3,964 | 1,113 | | | | 972 | |
| Net remeasurement of loan loss provisions | | | | | -77 | | | | 36 | | | 283 | | | | 242 | |
| New financial assets originated or purchased | | 180,605 | | 205 | | | | | | | | | | 180,605 | | 205 | |
| Financial assets that have been derecognised | | -126,082 | | -103 | | | -9,108 | -162 | | | -1,659 | -137 | | -136,849 | | -402 | |
| Net drawdowns and repayments | | | -14,880 | | | | -4,807 | | | | 1 | | | | -19,686 | | |
| Changes in models/risk parameters | | | | | 15 | | | | 2 | | | | -8 | | | | 9 |
| Increase in loan loss provisions | | | | | -9 | | | -39 | | | | 1,147 | | | | 1,099 | |
| Write-offs | | | -1 | | -1 | | -2 | | -2 | | -1,027 | -1,028 | | | -1,030 | -1,031 | |
| Recoveries of amounts previously written off | | | | | | | | | | | | | 55 | | | | 55 |
| Foreign exchange and other movements | | | | | -1 | | | | -3 | | | | -41 | | | | -45 |
| Closing balance | | 817,247 | | 490 | | | 41,082 | 881 | | | 10,955 | 3,275 | | 869,284 | | 4,646* | |

1 At the end of December 2019, the Gross carrying amounts included loans and advances to central banks (EUR 51.2 billion), loans and advances to banks (EUR 35.1 billion), financial assets at FVOCI (EUR 32.2 billion), securities at amortised cost (EUR 46.1 billion), loans and advances to customers (EUR 612.6 billion) and contingent liabilities (credit replacements) in scope of IFRS 9 (EUR 115.7 billion) and excludes receivables related to securities in reverse repurchase transaction (EUR -9.9 billion), cash collateral in respect of derivatives (EUR -10.2 billion), a receivable that is offsetted by a liquidity facility (EUR -1.3 billion), de-netting of cash pool balances (EUR -1.8 billion) and other differences amounting to EUR -0.3 billion.
2 Stage 3 Lifetime credit impaired includes EUR 1 million Purchased or Originated Credit Impaired (2018: EUR 2 million).
3 At the end of December 2019, the stock of provisions included provisions for loans and advances to central banks (EUR 1 million), loans and advances to banks (EUR 9 million), financial assets at FVOCI (EUR 10 million), securities at amortised cost (EUR 10 million), provisions for loans and advances to customers (EUR 4,590 million) and provisions for contingent liabilities (credit replacements) recorded under Provisions (EUR 25 million).
4 The table is generated in 2019 for the first time, no comparable schedule for 2018 available.

2019 ING Group Annual Report on Form 20-F203

The table above provides a reconciliation by stage of the gross carrying/nominal amount andThe following table provides the following information:
- Information on financial assets that were modified during the year (i.e. qualified as forborne) while they had a loss allowances for loans and advances to banks and customers, including loan commitments and allowance measured at an amount equal to lifetime ECL (i.e. stage 2).
financial guarantees. The transfers of financial instruments represents the impact of stage- Financial assets that were reclassified to stage 1 during the period.

transfers upon the gross carrying/nominal amount and associated allowance for ECL. This includes Financial assets modified(*)
the net remeasurement of ECL arising from stage transfers, for example, moving from a 12-month

20192018 (stage 1) to a lifetime (stage 2) ECL measurement basis.

Financial assets modified during the period

Amortised cost before modification2,6622,503

The net remeasurement line represents the changes in provisions for facilities that remain in theNet modification results164-50

same stage.

Financial assets modified since initial recognition

Gross carrying amount at 31 December of financial assets for which loss allowance has The following table shows the reconciliations from the opening to the closing balance of the loan689908 changed to 12-month measurement during the period
loss provisions in 2018.

Sensitivity analysis of key sources of estimation uncertainty (*)

Changes in loan loss provisions()
The introduction of IFRS 9, with its inherent complexities and potential impact on the carrying 2018*Stage 1Stage 2Stage 3Total amounts of our assets and liabilities, represents a key source of estimation uncertainty. In

ProvisionsProvisionsProvisionsProvisions
particular, the Group’s reportable ECL numbers are most sensitive to the forward -looking Opening balance4389553,9235,316

Transfer into 12-month ECL (Stage 1)19-206-23-209macroeconomic forecasts used as model inputs, the probability-weights applied to each of the| Transfer into lifetime ECL not credit impaired (Stage 2) | -62 | 501 | -56 | 383 | three scenarios, and the criteria for identifying a significant increase in credit risk. As such, these |
| --- | --- | --- | --- | --- | --- |
| Transfer into lifetime ECL credit impaired (Stage 3) | -7 | -86 | 707 | 615 | crucial components require consultation and management judgement, and are subject to |
| Net remeasurement of loan loss provisions | 17 | -55 | 312 | 274 | |
| Changes in models/risk parameters | | | | | extensive governance. |

New financial assets originated or purchased213212

Financial assets that have been derecognised-101-145-341-588Forward -looking macroeconomics used as model inputs (*)| Increase in loan loss provisions | 80 | 9 | 599 | 688 | As a baseline for IFRS 9, ING Group uses the consensus outlook for economic variables. The Oxford |
| --- | --- | --- | --- | --- | --- |
| Write-offs | | | -1,043 | -1,044 | |
| | | | | | Economics’ Global Economic Model (OEGEM) is then used to complement the consensus with |
| Recoveries of amounts previously written off | | | 53 | 53 | |
| Foreign exchange and other movements | -18 | -38 | -390 | -446 | consistent projections for variables for which there are no consensus estimates available (most |

Closing balance5019253,1414,568notably House Price Index (HPI) and unemployment), and to ensure general consistency of the

scenarios.

The Group’s consensus view of the baseline scenario suggests economic growth will level off over

the initial (three year) forecast period, as the pace of expansion in the main advanced economies

2019 ING Group Annual Report on Form 20-F204

and emerging markets is expected to wane. For the eurozone, as output gaps close and monetaryupside scenario is represented by the 10th percentile of the distribution. The distribution of the policy begins to normalise, growth is expected to decline. For the US, the near-term outlook is stillscenarios, taking into account the applicable percentile of the distribution, results in the upside and positive. The Group continues to monitor the potential escalation of an international trade conflict,downside scenario being weighted at 20% each. Consequently, the base case scenario has a 60% and the likely outcome of any Brexit deal, which, at present remains unclear.probability weighting. Please note that, given their technical nature, the downside scenario and

upside scenario are not explicitly based on a specific narrative.
The downside scenario sees a relatively synchronised global downturn with economic growth in advanced economies falling close to zero, and emerging markets suffering a pronouncedBased on the above two sources of estimation uncertainty, analysis on the sensitivity of key slowdown. The upside scenario sees economic growth returning to rates not seen since theforward-looking macroeconomic inputs used in the ECL collective-assessment modelling process financial crisis and a return to pre-crisis unemployment rates.and the probability-weights applied to each of the three scenarios is presented below. The countries included in the analysis are the Group’s most significant geographic regions, in terms of The relevance and selection of macro-economic variables is defined by the ECL models under creditboth gross contribution to reportable ECL, and sensitivity of ECL to forward -looking risk model governance. The scenarios are review ed and challenged by two panels. The first panelmacroeconomics. Accordingly, the Group considers these portfolios to present the most significant consists of economic experts from Global Markets Research and Risk and Modelling specialists,risk of resulting in a material adjustment to the carrying amount of financial assets within the next while the second panel consists of relevant senior managers.financial year. The Group also observes that, in general, the Wholesale business is more sensitive to the impact of forward-looking macroeconomic scenarios.

Probability weights applied to each of the three sce narios (*)

The alternative scenarios are technically based on the forecast errors of the OEGEM. To understandReal GPD, unemployment rate and HPI (in that order) are considered the variables with the largest
the baseline level of uncertainty around any forecast, Oxford Economics keeps track of all itsimpact on the LLP. Exposure class based the largest impact is observed in Corporates, followed by
forecast errors of the past 20 years. The distribution of forecast errors for GDP, unemployment,Retail Mortgages, SMEs and Retail non-SMEs. This is supported by statistical analysis. These
house prices and share prices is applied to the baseline forecast creating a broad range offorward-looking macroeconomics (among others) are used in the calculation of the Group’s unalternative outcomes. In addition, to understand the balance of risks facing the economy in anweighted ECLs, to which are applied the probability-weightings as disclosed, to arrive at the
unbiased way, Oxford Economics runs a survey with respondents from around the world andreportable ECL for collectively-assessed assets. While the table does give a high-level indication of
across a broad range of industries. In this survey the respondents put forward their views of keythe sensitivity of the outputs to the different scenarios, it does not provide insight on the
risks. Following the survey results, the distribution of forecast errors (that is being used forinterdependencies and correlations between different macroeconomic variable inputs.
determining the scenarios) may be skewed.Furthermore, in addition to forward -looking macroeconomics, there are a number of other model

inputs and processes which contribute to the calculation of un-weighted ECLs. Any sensitivity For the downside scenario, ING has chosen for the 90th percentile of that distribution because thisanalysis which relies on this data should consider these complexities.
corresponds with how within risk management earnings at risk is defined within the Group. The

2019 ING Group Annual Report on Form 20-F205

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| Sensitivity analysis | 1,2,3() | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | 2020 | 2021 | 2022 | Un-weighted | Probability- | Reportable ECL | | |
| | | | | | ECL (Eur mln) | weighing | (Eur mln) | 4 | |
| Netherlands | | | | | | | | | |
| | Real GDP | 2.3 | 3.5 | 3.2 | | | | | |
| Upside scenario | Unemployment | 2.8 | 2.4 | 2.3 | 370 | 20% | | | |
| | HPI | 14.1 | 11.3 | 2.9 | | | | | |
| | Real GDP | 1.4 | 1.5 | 1.6 | | | | | |
| Baseline Scenario | Unemployment | 3.6 | 3.9 | 4.2 | 416 | 60% | 428 | | |
| | HPI | 3.3 | 2.9 | 2.8 | | | | | |
| | Real GDP | -0.7 | -0.9 | 0.5 | | | | | |
| Downside scenario | Unemployment | 5.0 | 6.3 | 7.1 | 520 | 20% | | | |
| | HPI | -7.5 | -7.0 | 2.7 | | | | | |
| Germany | | | | | | | | | |
| | Real GDP | 2.6 | 2.8 | 1.8 | | | | | |
| Upside scenario | Unemployment | 2.4 | 1.7 | 1.4 | 458 | 20% | | | |
| | HPI | 9.7 | 7.0 | 6.4 | | | | | |
| | Real GDP | 0.8 | 1.1 | 1.3 | | | | | |
| Baseline Scenario | Unemployment | 3.2 | 3.2 | 3.3 | 495 | 60% | 502 | | |
| | HPI | 6.1 | 3.5 | 2.9 | | | | | |
| | Real GDP | -1.2 | -1.7 | 0.5 | | | | | |
| Downside scenario | Unemployment | 4.3 | 4.8 | 5.2 | 567 | 20% | | | |
| | HPI | 2.5 | -0.3 | -1.1 | | | | | |
| Belgium | | | | | | | | | |
| | Real GDP | 2.3 | 2.6 | 2.0 | | | | | |
| Upside scenario | Unemployment | 5.5 | 5.4 | 5.3 | 323 | 20% | | | |
| | HPI | 5.1 | 4.2 | 4.3 | | | | | |
| | Real GDP | 1.1 | 1.2 | 1.3 | | | | | |
| Baseline Scenario | Unemployment | 5.8 | 5.9 | 6.1 | 350 | 60% | 357 | | |
| | HPI | 3.5 | 3.4 | 3.4 | | | | | |
| | Real GDP | -0.4 | -0.2 | 1.0 | | | | | |
| Downside scenario | Unemployment | 7.5 | 8.4 | 8.4 | 411 | 20% | | | |
| | HPI | 1.5 | 2.6 | 2.4 | | | | | |
| United States* | | | | | | | | | |
| | Real GDP | 2.6 | 4.1 | 3.8 | | | | | |
| Upside scenario | Unemployment | 2.6 | 1.7 | 1.5 | 74 | 20% | 144 | | |
| | HPI | 5.0 | 8.0 | 8.1 | | | | | |
| Baseline Scenario | Real GDP | 1.8 | 1.8 | 1.9 | 127 | 60% | | | |
| 2019 ING Group Annual Report on Form 20-F | | | | | | | | | 206 |

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| | Unemployment | 3.7 | 3.7 | 3.8 | | |
| --- | --- | --- | --- | --- | --- | --- |
| | HPI | 2.6 | 2.6 | 2.8 | | |
| | Real GDP | -0.6 | -0.5 | 0.3 | | |
| Downside scenario | Unemployment | 5.2 | 6.5 | 7.1 | 267 | 20% |
| | HPI | 0.1 | -3.1 | -3.4 | | |

1 Real GDP, in % year-on-year change 2 Unemployment in % of total labour force 3 House Price Index (HPI) in % year-on-year 4 Sensitivity does not include the effect of manual adjustments, which are not material

The setting of PD threshold bandings requires management judgement, and is a key source of Criteria for identifying a significant increase in credit risk (*)estimation uncertainty. To demonstrate the sensitivity of the ECL to these PD thresholds bandings, All assets and off-balance sheet items are in scope of IFRS 9 impairment and which are subject toanalysis was run on all collectively-assessed assets, which assumed all assets were below the collective ECL assessment are allocated a 12-month ECL if deemed to belong in Stage 1, or athreshold, and apportioned a 12 month ECL. On the same asset base, analysis was run which lifetime ECL if deemed to belong in Stages 2 and 3. An asset belongs in Stage 2 if it is considered toassumed all performing assets were above the threshold, and apportioned a lifetime ECL. This gave have experienced a significant increase in credit risk since initial origination or purchase. The stagerise to a hypothetical collective-assessment ECLs of EUR 866 million (2018: EUR 888 million) and allocation process involves an asset’s derived scenario weighted average PD being assessed againstEUR 2,665 million (2018: EUR 3,333 million) respectively. Please note that in this analysis all other a set of PD threshold bandings, which determines the appropriate staging and ECL. Stage 2 isECL risk parameters (except for the stage) were kept equal.
triggered when either a threshold for absolute change in lifetime PD or relative change in lifetime PD is hit. The thresholds for the absolute change in lifetime PD vary between 75bps for RetailIt should be noted that the lifetime PD thresholds are not the only drivers of stage allocation. An portfolios, 100bp for Wholesale and 250bps for SMEs, based on the characteristics of the specificasset can change stages by virtue of being in arrears, on a Watch List, being forborne etc. Refer to portfolio. The threshold for the relative change in LT PD are inversely correlated with the PD atsection 1.6.8 of Note 1 ‘Accounting Policies’ for an exhaustive list. Furthermore, this analysis is origination; the higher the PD at origination, the lower the threshold. Despite this, the relativerudimentary in that other parameters would change when an asset changes stages.

threshold is punitive for Investment grade assets while the absolute threshold primarily affects Speculative grade assets. The Group reports total ECL collective-assessment of EUR 1,291 million (2018: EUR 1,391 million).

2019 ING Group Annual Report on Form 20-F207

Market riskMarket risk management results and findings are reported to the necessary governing
◾

departments and approval bodies.

Introduction

Market risk is the risk that movements in market variables, such as interest rates, equity prices,

Governance (*) foreign exchange rates, credit spreads and real estate prices negatively impact the bank’s earnings,

A governance framework has been established defining specific roles and responsibilities of capital, market value or liquidity position. Market risk either arises through positions in banking

business management units, market risk management units, and internal approval bodies per books or trading books. The banking book positions are intended to be held for the long-term (or

activity.
until maturity) or for the purpose of hedging other banking book positions. The trading book

positions are typically held with the intention of short-term trading or in order to hedge other

Supervision of market risk falls under the responsibility of the MBB and is delegated to the ALCO positions in the trading book. This means that financial instruments in the trading books should be

function, where ALCO Bank is the highest approval authority and sets the market risk appetite.
free of trade restrictions. Policies and processes are in place to monitor the inclusion of positions in

ALCO Bank monitors ING’s adherence to the risk appetite for market risk and sets additional limits either the trading or banking book as well as to monitor the transfer of risk between the trading

where appropriate. These limits are cascaded through the organisation through lower level ALCOs.
and banking books.

This ALCO structure facilitates top-down risk management, limit setting, and the monitoring and

control of market risk.
ING recognises the importance of sound market risk management and bases its market risk

management framework on the approach to identify, assess, control and manage market risks.

The monitoring and control of market risk is the responsibility of the Financial Risk (FR) department The approach consists of a cycle of five recurring activities: risk identification, risk assessment, risk

and Financial Institutions – Financial Markets (FI-FM) Risk. FR and FI-FM Risk are the designated control, risk monitoring and risk reporting.

departments of the second line of defence that report to the CRO function and are responsible for

the design and execution of the bank’s market risk and counterparty credit risk management

(*)

functions in support of the ALCO function. FR focuses on the market risks in the banking books, Risk identification is a joint effort of the first and second lines of defence out of the three lines of ◾
whereas FI-FM Risk is responsible for counterparty credit risk and market risks resulting from the the defence. The goal of risk identification is to detect potential new risks and any changes in

Financial Markets trading books. FR and FI-FM Risk are responsible for determining adequate policies known risks. See the Risk Governance paragraph under the Group risk Management section for

and procedures for actively managing market risk in the banking and trading books and for more on our “three lines of defence” governance model;

monitoring ING’s compliance with these guidelines.
Identified risks are assessed and measured by means of various risk metrics to determine the ◾

importance of the risk to ING and subsequently to identify the control measures needed;

FR and FI-FM Risk also maintain a limit framework in line with ING’s Risk Appetite Framework. The Risk control measures used by ING include policies, procedures, minimum standards, limit ◾
businesses are responsible for adhering to limits that are ultimately approved by the ALCO Bank.
frameworks, buffers and stress tests;

Limit excesses are reported to senior management on a timely basis and the business is required Risk monitoring occurs to check if the implemented risk controls are executed, complied with ◾
to take appropriate actions to reduce the risk position. To adhere to the established limit across the organisation, and are effective; and

framework, ING implements hedging and risk mitigation strategies that range from the use of

2019 ING Group Annual Report on Form 20-F208

traditional market instruments, such as interest rate swaps, to more sophisticated hedgingMarket risks in banking books; and ◾
strategies to address a combination of risk factors arising at the portfolio level.Market risks in trading books.
◾

The organisational structure facilitates top-down risk management by recognising that risk taking

and risk management to a large extent occur at the regional/local level. Bottom-up reporting fromMarket risk economic capital (trading and banking books)

regional/local units to head office units allows each management level to fully assess the market Economic capital for market risk is the economic capital necessary to withstand unexpected value
risks relevant at the respective levels.
movements due to changes in market variables and model risk.

Several committees govern communication between the parties involved in market risk Economic capital for market risk is calculated for exposures both in trading portfolios and banking
management. These committees have a functional reporting line to ALCO Bank, which derives its portfolios and includes interest rate risk, credit spread risk, equity price risk, foreign exchange rate
global discretion from the ING Group Decision Structure and as such is the highest level ING Bank risk, real estate risk, model risks and pension risk. Economic capital for market risk is calculated
body with the exception of the Management Board Banking (MBB). The Market Risk Model using internally developed methodologies with a 99.9% confidence level and a horizon of one year.
Committee (MRMC) is the dedicated authority within ING for the approval of all trading and banking

risk models, methodologies and parameters related to market risk. The Trading Pricing Model For the trading books and the linear interest rate risk and equity investments in the banking books,
Committee (TPMC) approves pricing models for trading and banking books. Financial Risk and FI-FM the Value at Risk (VaR) is taken as a starting point for the economic capital calculations for market
Risk departments provide systematic risk reporting to the EB and MBB, the senior executive risk. The VaR is measured at a 99% confidence level, a one day holding period.
management of the CRO function and the senior executive management of related business

functions.
To arrive at the economic capital for market risk, a simulation based model is used which includes

scaling to the required confidence level and holding period. In determining this scaling factor, other The FI-FM Risk Management Framework governs the boundary between trading books and banking factors are also taken into account like the occurrence of large market movements (events).
books. It defines the activities ING considers to be trading according to a regulatory definition and

for own funds requirement purposes. The trading activity is systematically reviewed and positions Embedded options, e.g. the prepayment option and offered rate option in mortgages in the
are assessed against the mandates jointly by the first and second lines of defence. As specified in banking books, result in non-linear interest rate risk in the banking books. The embedded options
the framework, the transfer of risk or the transfer of positions between banking and trading books are economically hedged using a delta-hedging methodology, leaving the mortgage portfolio
is in principle not allowed but in exceptional cases when a re-designation is deemed necessary, the exposed to convexity risk, volatility risk and model risk. For the calculation of economic capital for
re-designation should be approved by senior management.
this non-linear interest rate risk, ING performs a Monte Carlo simulation.

The following market risk paragraphs elaborate on the various elements of the risk management Real estate price risk includes the market risks in both the real estate investment and the
framework for:
development portfolio of the ING Wholesale Banking business line. The economic capital for real
Market risk economic capital (trading and banking books);
◾estate price risk is calculated by stressing the underlying market variables.

2019 ING Group Annual Report on Form 20-F209

While aggregating the different economic capital market risk figures for the different portfolios, diversification benefits (based on stressed correlations) are taken into account as it is not expected that all extreme market movements will appear at the same moment.

Market risk in banking books (*)(*)

ING makes a distinction between the trading and banking (non-trading) books. Positions in banking books originate from the market risks inherent in commercial products that are sold to clients, Group Treasury exposures, and from the investment of our own funds (core capital). Both the commercial products and the products used to hedge market risk exposures in these products are intended to be held until maturity, or at least for the long-term.

Risk transfer (*)

An important element of the management of market risks in the banking book is the risk transfer process. In this process the interest rate, FX, funding and liquidity risks are transferred from the commercial books through matched funding to Group Treasury, where it is centrally managed. The scheme below presents the transfer and management process of market risks in the banking books:

2019 ING Group Annual Report on Form 20-F210

Risk measurement (*)

The main concepts and metrics used for measuring market risk in the banking book are described below per risk type.

Interest rate risk in banking book (*)

Interest rate risk in the banking book is defined as the exposure of a bank’s earnings, capital, and market value to adverse movements in interest rates originated from positions in the banking book.

Governance (*)

The management of interest rate risk follows the Interest Rate Risk in the Banking Book (IRRBB)
framework as approved by ALCO Bank. This framework describes roles, responsibilities, risk metrics, the policies and procedures related to interest rate risk management. Furthermore ALCO Bank sets the risk appetite for interest rate risk, which is then translated into limits for the interest rate risk metrics.

ING’s approach to interest rate risk management, as set forth in this framework, is the centralisation of risks from commercial books (that capture the products sold to clients) to globally managed interest rate risk books. This enables a clear demarcation between commercial business results and results on unhedged interest rate positions.

ING distinguishes between three types of activities that generate interest rate risk in the banking book:
Investment of own funds (by Group Treasury);
◾ Commercial business (e.g. Retail business); and ◾ The strategic interest rate position (Group Treasury).
◾

Below the three activities are described in more detail:

2019 ING Group Annual Report on Form 20-F211

Group Treasury is responsible for managing the investment of own funds (core capital), moreWholesale Banking loans typically do not experience interest rate prepayment behavior as they ◾ information can be found in the Capital Management section. Capital is invested for longer periodsare hedged from an interest rate risk perspective and therefore do not contain significant fixed to keep earnings stable.rate convexity risk.

The commercial activities can result in linear interest rate risk, for example, when re-pricing tenorsCustomer behaviour in relation to mortgages, loans, savings and demand deposits is modelled, of assets differ from those of liabilities. Also, interest rate risk can arise from customer behaviourbased on extensive research. Per business unit and product type, exposures are typically depending on the nature of the underlying product characteristics. Customer behaviour risk issegmented into different portfolios based on expected client behaviour. For each of the segments, defined as the potential future value loss due to deviations in the actual behaviour of clients versusmodel parameters for example for the pass through rate and customer behaviour are determined the modelled behaviour towards the embedded options in commercial products. General sources ofbased on historical data and expert opinion. Models are back tested and updated when deemed customer behaviour risk include the state of the economy, competition, changes in regulation,necessary. Model parameters and the resulting risk measures are approved by (local) ALCO.
legislation and tax regime, and developments in the housing market. Since these risk factors cannot be (fully) mitigated, ING holds capital to be able to absorb possible losses as a result ofLinear interest rate risk is transferred from the commercial business to the treasury book (Group changed customer behaviour.Treasury), if necessary, using estimations of customer behaviour. The originating commercial business is ultimately responsible for estimating customer behaviour, leaving convexity risk and From an interest rate risk perspective, commercial activities can typically be divided into three main(unexpected) customer behaviour risk with the commercial business. Risk measurement and the product types: savings and demand deposits, mortgages, and loans.risk transfer process take place on a monthly basis, but more often if deemed necessary, for Savings and demand deposits are generally invested with the goal to hedge their value andinstance in volatile markets.
◾ minimize the sensitivity of the margin to market interest rates. Interest rate risk can arise when there is a lag between savings rate adjustments and the adjustments experienced throughThe commercial business manages the convexity risk that is the result of products that contain market rates or when market rate changes cannot be passed on to clients. Interest rate risk isembedded options, like mortgages. Here the convexity risk is defined as the optionality effects in modelled based on the stability of the deposit and the pass through rate. This takes into accountthe value due to interest rate changes, excluding the first-order effects. In some cases, convexity different elements, such as pricing strategies, volume developments and the level and shape ofrisk is transferred from the commercial books to treasury books using cap/floor contracts.
the yield curve. Savings volumes are typically assumed not to be sensitive to interest rate shocks;
Interest rate risk for mortgages arises through prepayment behaviour. In modelling this risk,Group Treasury manages the strategic interest rate position including capital investments. The ◾ interest rate dependent pre -payments are considered. Next to the dependence on interest rates,main objective is to maximise the economic value of the book and to generate adequate and stable modelled prepayment may include other effects such as loan to value, seasonality and the resetannual earnings within the risk appetite boundaries set by ALCO Bank.

date of the loan. In addition, the interest sensitivity of embedded offered rate options is considered; andIn the following sections, the interest rate risk exposures in the banking books are presented. ING uses risk measures based on both an earnings and a value perspective. Net Interest Income (NII)at-Risk is used to provide the earnings perspective and the Net Present Value (NPV)-at-Risk and

2019 ING Group Annual Report on Form 20-F212

Basis Point Value (BPV) figures provide the value perspective. Please note that corrective The NII-at-Risk is mainly influenced by the sensitivity of savings to interest rate movements due to pass through rate

management actions are not taken into account in these figures although price adjustments are differences between savings rates and investment yields, but is partially offset by the sensitivity of mortgages. The investment

included in the earnings risk measure.
of own funds only impacts the earnings sensitivity marginally, as only a relatively small part has to be (re)invested within the

1-year horizon.
During 2019, the following refinements to the risk measurement for Interest Rate Risk in theNII-at-Risk banking book per currency - year 1(*)

20192018 Banking Book were made:
Ramped, unflooredRamped, unfloored
Review of the risk appetite for Interest Rate Risk for the Banking Book;
◾parallel▼parallel▲parallel▼parallel▲
Annual review of the interest rates scenarios used for calculating NII-a-Risk and NPV-at-Risk; and;
◾By currency| ◾Savings model updates for market developments. | Euro | -134 | 65 | –81 | 60 |
| --- | --- | --- | --- | --- | --- |
| | US Dollar | 25 | -24 | 20 | –20 |

*Net Interest Income (NII) at Risk ()**	Other	-27	39	–57	65
	Total	-136	79	–119	106
NII-at-Risk measures the impact of changing interest rates on (before tax) net interest income of

the banking book with a time horizon of one year. This excludes credit spread sensitivity and longer

Year -on-year variance analysis (*)

term earnings impact. The NII-at-Risk figures in the tables below reflect a parallel interest rate The change in NII-at-Risk is mainly visible for Retail Banking Benelux and Retail Challengers & shock with a time horizon of one year. Next to parallel scenarios, IRRBB monitoring and Growth Markets. This is driven by the savings model updates for market developments in ING management includes the impact of non-parallel scenarios and the impact over a longer horizon.
Belgium, ING Germany, ING Netherlands, ING Spain and ING Poland. The annual update of the The NII-at-Risk asymmetry between the downward and upward ramped scenarios (gradual shock ≈ interest rate scenarios also led to a limited increase in the NII-a-Risk for year 1.
+/-100bps) is primarily caused by the convexity risk in the mortgage and savings portfolio due to

the embedded options and pricing constraints.

Net Present Value (NPV) at Risk (*)

NPV-at-Risk measures the impact of changing interest rates on value. The NPV-at-Risk is defined as NII-at-Risk banking books per business - year 1(*)
the outcome of an instantaneous increase and decrease in interest rates from applying currency

20192018

Ramped, unflooredRamped, unflooredspecific scenarios. The NPV-at-Risk asymmetry between the downward and upward shock is

parallel▼parallel▲parallel▼parallel▲primarily caused by convexity risk in the mortgage and savings portfolio. The NPV-at-Risk figures

By business are also calculated using the updated interest rate scenarios.
Wholesale Banking–1212–204239| Retail Banking Benelux | –91 | 40 | –49 | 22 | |
| --- | --- | --- | --- | --- | --- |
| Retail Challengers & Growth Markets | –3 | –3 | 165 | –186 | The full value impact cannot be directly linked to the financial position or profit or loss account, as |

Corporate Line Banking–3030–3030fair value movements in banking books are not necessarily reported through the profit or loss

Total–13679–119106 account or through Other Comprehensive Income (OCI). The value mutations are expected to

materialise over time in the profit and loss account if interest rates develop according to forward

rates throughout the remaining maturity of the portfolio.

2019 ING Group Annual Report on Form 20-F213

free rates. This process is at different stages, and is progressing at different speeds, across several

NPV-at-Risk banking books per business(*)major currencies.

20192018 ING is currently making the necessary preparations for the potential cessation and transition of
unflooredunfloored IBORs in the years to come, where we take 2022 as the potential first date that this could parallel▼parallel▲parallel▼parallel▲
materialise. Due to the many uncertainties the overall IBOR transition still faces, at this stage the

By business

Wholesale Banking182400–55134potential impact of this major event on ING’s credit risk profile, business model and funding profiles

Retail Banking Benelux-1,431268–1,344–269is not entirely clear. We would like to underline however that ING is aware of the significant impact| Retail Challengers & Growth Markets | -259 | -452 | –521 | –54 | of this transition and is therefore putting all efforts into making sure that it is properly prepared for |
| --- | --- | --- | --- | --- | --- |
| Corporate Line Banking | 0 | 0 | –38 | 35 | |
| Total | -1,508 | 216 | –1,958 | –153 | this transition in a timely manner. For this purpose, ING has established a global program across all |

areas of the bank to coordinate ING’s transition activities and to assess the potential risks and

impacts of any transition. It is a multi-year global program that encompasses various workstreams The asymmetry between the NPV-at-Risk for a downward and an upward shock scenario is

and departments including the client facing teams, Legal, Finance, Operations and IT.
primarily caused by the convexity risk, which arises from (embedded) optionality in the savings and

The following interest rate benchmarks are in scope of ING’s IBOR transition program: GBP LIBOR, mortgage portfolio.

USD LIBOR, EUR LIBOR, EURIBOR, EONIA, CHF LIBOR and JPY LIBOR.

Year -on-year variance analysis(*)

ING is pro-actively reaching out to industry participants, counterparties and clients to create The change in NPV-at-Risk for Retail Banking Benelux was driven by updates in the savings model

awareness and support on the upcoming transition.
to reflect the most recent market developments in The Netherlands and Belgium. The internal view

on capital replication of the own funds long-term investments is included in the NPV-at-Risk figures.

Given that IBOR reform may have various accounting implications, the International Accounting Only a mismatch from the target investment profile results in NPV-at-Risk.

Standards Board (IASB) has commenced a two phase project. Phase 1 addresses those issues that

affect financial reporting before the replacement of an existing benchmark and Phase 2 focuses on

IBOR Transition (*)

issues that may affect financial reporting when the existing benchmark rate is reformed or Interbank offered rates, such as Euribor and Libor, are widely used as benchmarks to set interest replaced. In 2019, ING early adopted the amendments to IFRS issued by the IASB as part of Phase 1 rates across a broad range of financial products and contracts. The financial markets are going (refer to section 1.6.5 of Note 1 of the financial statements). Refer to Note 39 ‘Derivatives and through a significant reform and financial institutions are obligated to implement a replacement of hedge accounting’ for the disclosure requirements relating to the application of the amendments these major interest rate reference rates. In line with recommendations from the Financial Stability as part of Phase 1. Phase 2 of the project is still ongoing and focusses on, amongst others, Board, a fundamental review and reform of the major interest rates benchmarks has been accounting for changes to contracts due to the IBOR reform and impact on hedge accounting. ING undertaken. For the Eurozone, this led to a reform of the EURIBOR benchmark rate and continues to monitor the progress of Phase 2 of the project and will assess the impact as more development of €STR as the recommended new nearly risk free rate to replace EONIA. For LIBOR information becomes available.
benchmarks the reform will include replacing interest rate benchmarks with alternative, nearly risk-

2019 ING Group Annual Report on Form 20-F214

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| Foreign exchange (FX) risk in banking books (*) | Net banking currency exposures banking books | () | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | | | Foreign | | Hedges | Net exposures | |
| FX exposures in banking books result from core banking business activities (business units doing | | Investments | | | | | |
| business in currencies other than their base currency), foreign currency investments in subsidiaries | | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 |
| (including realised net profit and loss), and strategic equity stakes in foreign currencies. The policy | US Dollar | 8,031 | 5,794 | -11 | –1 | 8,020 | 5,793 |
| regarding these exposures is briefly explained below. | Pound Sterling | -22 | 614 | | | -22 | 614 |
| | Polish Zloty | 2,522 | 2,563 | -278 | –526 | 2,244 | 2,036 |
| | Australian Dollar | 3,565 | 3,569 | -2,033 | –2,398 | 1,532 | 1,171 |
| Governance – Core banking business () | Turkish Lira | 1,337 | 1,219 | | | 1,337 | 1,219 |
| Every business unit hedges the FX risk resulting from core banking business activities into its base | Chinese Yuan | 2,255 | 2,208 | | | 2,255 | 2,208 |
| currency. Consequently, assets and liabilities are matched in terms of currency. | Indian Rupee | | 917 | | | | 917 |
| | Russian Rouble | 540 | 460 | -85 | –101 | 455 | 359 |
| Governance – FX translation result () | Other currency | 4,742 | 4,462 | -1,834 | –2,057 | 2,907 | 2,405 |
| | Total | 22,969 | 21,806 | -4,242 | –5,084 | 18,727 | 16,722* |

limiting the volatility in the profit and loss account. Therefore, hedge accounting is applied to the The USD net exposure increased due to optimization of the capitalization and funding of the NY
largest extent possible. Taking this into account, the CET1 ratio hedge can be achieved by entity. In 2019, we reviewed and updated our methodology for specific CET1 deductibles. This
deliberately taking foreign currency positions equal to certain target positions, such that the target drives the move in GBP net exposure and applies to the calculation of the FX Translation figures in
CET1 capital and risk-weighted assets are equally sensitive in relative terms to changing FX rates.
the above table hence has no impact on the reported CET1 figure itself. ING sold its stake in Kotak
For a selection of emerging market currencies ING decided not to enter into foreign currency Mahindra in February 2019 and therefore no longer has exposure on Indian Rupee.
hedges as allowed under the policy.

Equity price risk in banking books(*)

Risk profile – FX translation result (*)

The following table presents the currency exposures in the banking books for the most importantGovernance (*)

currencies for the FX translation result. Positive figures indicate long positions in the respective ING maintains a strategic portfolio with substantial equity exposure in its banking books. Local
currency. As a result of the strategy to hedge the CET1 ratio a net foreign currency exposure exists.
offices are responsible for the management of the equity investment positions. Financial Risk is

responsible for monitoring the regulatory capital for equity investments on a monthly basis and In order to measure the sensitivity of the target CET1 ratio against FX rate fluctuations, the acts independently from ING’s / Local management when monitoring these positions.
Historical Value at Risk is used based on historical series of last year’s FX rates. It measures the drop

in the CET1 ratio from the target based on historical FX rates. Based on these time series and with aRisk Profile(*)
probability of 10%, the drop in the CET1 ratio would be 0.09%..
Equity price risk arises from the possibility that an equity security’s price will fluctuate, affecting the

value of the equity security itself as well as other instruments whose value react similarly to the

2019 ING Group Annual Report on Form 20-F215

particular security, a defined basket of securities, or a securities index. ING’s equity exposure mainlyMarket risk in trading books (*)

consists of the investments in associates and joint ventures of EUR 1,790 million (2018: EUR 1,203 Within the trading portfolios, positions are maintained in the financial markets. These positions are
million) and equity securities held at fair value through other comprehensive income (FVOCI) of EUR often a result of transactions with clients and may benefit from short-term price movements. In
2,306 million (2018: EUR 3,228 million). The value of equity securities held at FVOCI is directly linked 2019, ING continued its strategy of undertaking trading activities to develop its client-driven
to equity security prices with increases/decreases being recognized in the revaluation reserve.
franchise and deliver a differentiating experience by offering multiple market and trading products.
Investments in associates and joint ventures are measured in accordance with the equity method

of accounting and the balance sheet value is therefore not directly linked to equity security prices.Governance (*)

The Financial Markets Risk Committee (FMRC) is the market risk committee that, within the risk

Year -on-year variance analysis (*) appetite set by ALCO Bank, sets market risk limits both on an aggregated level and on a desk level,
The revaluation reserve relating to equity securities at FVOCI moved from EUR 1,914 million per and approves new products. FI-FM Risk advises both FMRC and ALCO Bank on the market risk
year end 2018 to EUR 1,580 million per year end 2019. In 2019, the securities at FVOCI decreased appetite of trading activities.
by EUR 334 million following the full disposal of Kotak in the same year.| | | | | With respect to the trading portfolios, FI-FM Risk focuses on the management of market risks of |
| --- | --- | --- | --- | --- |
| Revaluation reserve equity securities at fair value through other comprehensive income | | 1() | | Wholesale Banking (mainly Financial Markets) as this is the only business line within ING where |
| | 2019 | 2018 | | |
| Positive re-measurement | 1,582 | 1,923 | | trading activities take place. Trading activities include facilitation of client business and market |
| Negative re-measurement | -2 | | –8 | making. FI-FM Risk is responsible for the development and implementation of trading risk policies |
| Total | 1,580 | 1,914* | | and risk measurement methodologies, and for reporting and monitoring risk exposures against |

approved trading limits. FI-FM Risk also reviews trading mandates and limits, and performs the

gatekeeper role in the product review process. The management of market risk in trading portfolios

Real Estate price risk in banking books(*) is performed at various organisational levels. The FI-FM Risk Management Framework defines

Real Estate price risk arises from the possibility that Real Estate prices fluctuate. This affects bothpolicies and procedures for the overall management of trading books. Trading activity is

the value of Real Estate assets and the earnings related to Real Estate activities.systematically reviewed and positions against the mandates are assessed jointly by the first and

second lines of defence.

Governance (*)

Real Estate is a run-off business consisting of Real Estate Development and Real Estate InvestmentRisk measurement (*)

Management activities which are being wound down by sale of assets, strict execution of contractING uses a comprehensive set of methodologies and techniques to measure market risk in trading

maturity, or through portfolio sales.books: Value at Risk (VaR) and Stressed Value at Risk (SVaR), Incremental Risk Charge (IRC), and

Event Risk (stress testing). Systematic validation processes are in place to validate the accuracy

and internal consistency of data and parameters used for the internal models and modelling

processes.

2019 ING Group Annual Report on Form 20-F216

Value at Risk ()Backtesting ()**

FI-FM Risk uses the historical simulation VaR methodology (Hvar) as its primary risk measure. TheBacktesting is a technique for the ongoing monitoring of the plausibility of the HVaR model in use.
HVaR for market risk quantifies, with a one-sided confidence level of 99%, the maximum overnightAlthough HVaR models estimate potential future trading results, estimates are based on historical loss that could occur in the trading portfolio of ING due to changes in risk factors (e.g. interest rates,market data. In a backtest, the actual daily trading result (excluding fees and commissions) is equity prices, foreign exchange rates, credit spreads, implied volatilities) if positions remaincompared with the one-day HVaR. In addition to using actual results for backtesting, ING also uses unchanged for a time period of one day. Next to general market movements in these risk factors,hypothetical results, which exclude the effects of intraday trading, fees, and commissions. When HVaR also takes into account market data movements for specific moves in e.g. the underlyingan actual or a hypothetical loss exceeds the HVaR, an ‘outlier’ occurs. Based on ING’s one-sided issuer of securities. A single model that diversifies general and specific risk is used. In general, a fullconfidence level of 99%, an outlier is expected once in every 100 business days. In 2019, there were revaluation approach is applied, and for a limited number of linear trading positions and risk factorsfive actual outliers i.e. occurrences of actual loss and four hypothetical outliers i.e. occurrences of in commodity and equity risk classes a sensitivity-based approach is applied. The potential impacthypothetical loss, when the daily trading loss exceeded the daily consolidated HVaR of ING. The of historical market movements on today’s portfolio is estimated, based on equally weightedoutliers were driven by interest rates market moves mainly related to quantitative easing. ING observed market movements of the previous year (260 days). When simulating potentialreports the backtesting results on a quarterly basis to the ECB.
movements in risk factors, depending on the risk factor type, either an absolute or a relative shift is used. The data used in the computations is updated daily. ING uses HVaR with a one-day horizonStressed HVaR (*) for internal risk measurement, management control, and backtesting, and HVaR with a ten-dayThe Stressed HVaR (SVaR) is intended to replicate the HVaR calculation that would be generated on horizon for determining regulatory capital. To compute HVaR with a ten-day horizon the one daythe bank’s current portfolio with inputs calibrated to the historical data from a continuous 12risk factor shifts are scaled by the square root of ten and then used as an input for the revaluation.month period of significant financial stress relevant to the bank’s portfolio. To calculate SVaR, ING The same model is used for all legal entities within ING with market risk exposure in the tradinguses the same model that is used for 1DHVaR, with a ten-day horizon. The data for historical stress portfolio.period used currently includes the height of the credit crisis around the fall of Lehman Brothers,

and this choice is reviewed regularly. The historical data period is chosen so that it gives the worst scenario loss estimates for the current portfolio. The same SVaR model is used for management

Limitations (*) purposes and for regulatory purposes. The same SVaR model is used for all legal entities within ING HVaR has some limitations: HVaR uses historical data to forecast future price behaviour, but futurewith market risk exposure in the trading portfolio.
price behaviour could differ substantially from past behaviour. Moreover, the use of a one-day holding period (or ten days for regulatory capital calculations) assumes that all positions in theIncremental Risk Charge (*) portfolio can be liquidated or hedged in one day. In periods of illiquidity or market events, thisThe IRC for ING is an estimate of the default and migration risks for unsecuritised credit products in assumption may not hold. Also, the use of a 99% confidence level means that HVaR does not takethe trading book, over a one-year capital horizon, with a 99.9% confidence level. The same IRC into account any losses that occur beyond this confidence level.model is used for all legal entities within ING with market risk exposure in the trading portfolio.
Unsecuritised trading positions of ING, which are subject to specific interest rate risk included in the internal model approach for market risk regulatory capital, are in scope of the IRC model. By model

2019 ING Group Annual Report on Form 20-F217

choice, equity is excluded from the model. For the calculation of IRC, ING performs a Monte-Carlo simulation based on a Gaussian copula model. The asset correlations used in the Gaussian copulaING’s Event Risk policy is based on a large set of possible stress scenarios per risk type. In stress model are determined using the IRB correlation formula. The rating change is simulated for allscenarios, shocks are applied to prices (credit spreads, interest rates, equity, commodities, and fx issuers over the different liquidity horizons (i.e. time required to liquidate the position or hedge allrates) and volatilities. Depending on the type of the stress test, additional scenario assumptions significant risks) within one year. Movements across different rating categories and probabilities ofcan be made, for example on correlations, dividends, or recovery rates. For example, for equity default are governed by a credit -rating transition matrix. An external transition matrix is obtainedproducts both a crisis scenario (prices decrease) as well as a bull scenario (prices increase) are from Standard & Poor’s (S&P). The financial impact is then determined for the simulated migrationassumed. Scenarios are calculated based on events happening independently, jointly by region, or to default, or for the simulated migration to a different rating category, based on LGD or creditin all countries simultaneously. This way, for each risk type, a large set of scenarios is calculated.
spread changes, respectively.The worst scenarios per market are combined across markets by assessing both independent

events per market, and the worst events happening in all markets at the same time.
The liquidity horizon has been set to the regulatory minimum of three months for all positions in
scope. ING reviews the liquidity horizons regularly based on a structured assessment of the time itRisk measurement - Other trading controls
takes to liquidate the positions in the trading portfolio.
HVaR and Event Risk limits are the most important limits to control the trading portfolios.
Additionally, limits have been set on SVaR and IRC. Furthermore, ING uses a variety of other ING periodically assesses the compliance of the IRC model with regulatory requirements by controls to supplement these limits. Position and sensitivity limits are used to prevent large performing gap analyses, substantiating the modelling choices, and quantifying the impact of concentrations in specific issuers, sectors, or countries. Moreover, other risk limits are set with alternative approaches.
respect to the activities in complex derivatives trading. The market risk of these products is
controlled by product specific limits and constraints.

Stress Testing and Event Risk (*)

Stress Testing and Event Risk are valuable risk management tools. In addition to the bank-wide

Risk profile
stress test framework as described in the stress testing section, FI-FM Risk performs structured The following chart shows the development of the overnight HVaR under a 99% confidence level stressed scenario tests under the Event Risk framework to monitor market risks under extreme and a one-day horizon versus actual and hypothetical daily trading profits and losses. In calculation market conditions. Event Risk is calculated because HVaR in general does not produce an estimate of the hypothetical daily profit and loss, the trading position is kept constant and only the market of the potential losses that can occur as a result of extreme market movements, i.e. beyond the movement is taken into account. The overnight HVaR is presented for the ING trading portfolio from confidence level. Event Risk evaluates the bank’s financial stability under severe but plausible stress 2014 to 2019.

scenarios and assists in decision-making aimed at maintaining a financially healthy going-concern institution after a severe event occurs. Event Risk is based on historical as well as hypothetical extreme scenarios. The result is an estimate of the profit and loss caused by a potential event and its world-wide impact for ING. The Event Risk number for ING trading activity is generated on a weekly basis. Like for HVaR, risk appetite for Event Risk is limited by ALCO Bank.

2019 ING Group Annual Report on Form 20-F218

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| | | 1d VaR for Internal Model Approach trading portfolios | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | Minimum | | Maximum | | Average | | Year end | |
| | | amounts in millions of | | | | | | | | | |
| EU MR4: Consolidated trading HVaR | 1 | euros | | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 |
| | | Interest rate | 1 | 3 | 3 | 13 | 7 | 6 | 5 | 12 | 4 |
| | | Equity and commodity | | 1 | 1 | 7 | 10 | 2 | 3 | 1 | 7 |
| | | Foreign exchange | | 1 | 1 | 11 | 10 | 2 | 4 | 1 | 9 |
| | | Credit spread | | 4 | 3 | 7 | 6 | 6 | 4 | 5 | 6 |
| | | Diversification | 2 | | | | | -6 | –8 | -6 | –13 |
| | | Total VaR | | 6 | 5 | 15 | 16 | 10 | 9 | 13 | 13 |

1 For calculation of HVaR per risk class the full valuation is performed according to HVaR methodology using a set of scenario changes for the risk factors for the particular risk class, while risk factors for all other risk classes are kept unchanged.

2 The total HVaR for the columns Minimum and Maximum cannot be calculated by taking the sum of the individual components since the minimum/maximum observations for both the individual markets as well as for total HVaR may occur on different dates. Therefore, diversification is not calculated for the minimum and maximum categories.

3 CVA risk is not included in VaR.

1 CVA risk is not included in VaR.
.
Average 1D/10D HVaR, 10D SVaR and IRC over 2019 are in line with the average over

The average for foreign exchange decreased compared to 2018 while credit The risk figures in the backtesting graph above and in the table below relate to all trading books for
spread increased compared to 2018, both driven by portfolio changes. The VaR at the which the internal model approach is applied, i.e. all trading books, including Credit Exposure period end of 2019 and 2018 was EUR 13 million, however the asset class Management books.
decomposition changed significantly. The risk moved from foreign exchange and

equity and commodity towards interest rate asset class

2019 ING Group Annual Report on Form 20-F219

EU MR3: Internal Model Approach values for trading portfoliosStandardised Approach

amounts in millions of euros20192018| VaR (10 day 99%) | | | EU MR1: Market risk under Standardised Approach | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 1 Maximum value | 42 | 46 | | | 2019 | | | 2018 |
| 2 Average value | 27 | 25 | | | | | | |
| 3 Minimum value | 16 | 15 | | | Capital | | Capital | |
| 4 Period end | 33 | 40 | | requirement | | | requirement | |
| Stressed VaR (10 day 99%) | | | amounts in EUR millions | RWA | s | RWA | | s |
| | | | Outright products | | | | | |
| 5 Maximum value | 126 | 139 | | | | | | |
| 6 Average value | 72 | 73 | 1 Interest rate risk (general and specific) | 14 | 1 | | | |
| 7 Minimum value | 47 | 41 | 2 Equity risk (general and specific) | | | | | |
| 8 Period end | 76 | 124 | 3 Foreign exchange risk | | | 1,131 | | 90 |

Incremental Risk Charge (99.9%)4 Commodity risk

9 Maximum value169107Options

10 Average value76625 Simplified approach

11 Minimum value42406 Delta-plus method
12 Period end6458 7 Scenario approach

Comprehensive Risk capital charge (99.9%) 8 Securitization (specific risk)
13 Maximum valuen/an/a 9Total1411,13190 14 Average valuen/an/a

15 Minimum valuen/an/a

16 Period endn/an/aThe MRWA under Standardised Approach decreased significantly compared to 4Q2018. At the

beginning of 2019 an important FX position in the banking book was closed causing the FX

Regulatory Capitalexposure to decrease below the 2% own funds threshold. According to Art. 351 CRR, in such a case,

the calculation of Market Risk regulatory capital is not required. As of 3Q2019, CIU exposures in According to the Capital Requirements Regulation (CRR/CRD IV), regulatory capital (own funds

trading books are capitalised in Market risk under Standardised Approach under interest rate requirements) for market risk can be calculated using the standardised approach or an internal

specific risk and foreign exchange risk categories.
model approach. ING received regulatory approval to use an internal model to determine the

regulatory capital for the market risk in all trading books of ING. Market risk capital of trading books

Internal Model Approach is calculated according to the CRR, using internal HVaR, SVaR, and IRC models, where diversification

is taken into account. Capital for foreign exchange risk from the banking books and for CollectiveMarket risk Regulatory Capital increased during the 2019 compared to 2018. The increase is driven

Investment Undertakings (CIUs) exposures in trading books are calculated using Standardisedby an increase in IRC, while VaR and SVaR slightly decreased. IRC capital increased as a result of

Approach with fixed risk weights. ING does not have a correlation trading portfolio or any otherchanges in the portfolio in combination with credit spread movements.

securitisations in the trading book.

2019 ING Group Annual Report on Form 20-F220

EU MR2-A: Market risk under Internal Model ApproachSensitivities (*)| | | 2019 | | | 2018 | As part of the risk monitoring framework, FI-FM Risk actively monitors the daily changes of |
| --- | --- | --- | --- | --- | --- | --- |
| | | Capital | | Capital | | |
| | requirement | | | requirement | | sensitivities of the trading portfolios. Sensitivities measure the impact of movements in individual |
| amounts in EUR millions | RWA | s | RWA | | s | market risk factors (foreign exchange rates, interest rates, credit spreads, equity, and commodity |
| 1VaR (higher of values a and b) | 1,261 | 101 | 1,394 | | 112 | prices) on profit and loss results of the trading positions and portfolios. |

(b) Average of the daily VaR (Article 365(1)) on each of the					The following tables show the five largest trading positions in terms of sensitivities to foreign
preceding sixty business days	1,261	101
(VaRavg) x multiplication factor ((mc) in accordance with					exchange, interest rate and credit spread risk factor movements. These largest exposures also
Article 366)			1,394	112	reflect concentrations of risk in FX risk per currency, IR risk per currency, and Credit Spread risk per
2SVaR (higher of values a and b)	3,011	241	3,217	257	country and rating and sector. Due to the nature of the trading portfolios, positions in the portfolios
sixty business days (sVaRavg) x	3,011	241			accordingly.
multiplication factor (ms) (Article 366)			3,217	257
3Incremental risk charge -IRC (higher of values a and b)	1,278	102	767	61

(a) Most recent IRC value (incremental default and migration						Most important foreign exchange year-end trading positions
risks section 3 calculated in		799	64
accordance with Section 3 articles 370/371)				727	58	amounts in EUR millions	2019	2018
						Foreign exchange	Foreign exchange
4Comprehensive Risk Measure –	CRM(higher of values a, b					Chinese Yuan Renminbi	-21Chinese Yuan Renminbi	–18
and c)						South Korean Won	20Swiss Franc	–14
portfolio (article 377)						Japanese Yen	-10South Korean Won	14

(b) Average of the risk number for the correlation trading portfolio over the preceding 12-weeks

(c) 8 % of the own funds requirement in SA on most recent risk number for the correlation trading portfolio (Article 338(4))

5Total5,5504445,378430

2019 ING Group Annual Report on Form 20-F221

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| Most important interest rate and credit spread sensitivities at year-end (*) | | | | | Funding and liquidity risk (*) |
| --- | --- | --- | --- | --- | --- |
| amounts in EUR thousands | | 2019 | | 2018 | |
| Interest Rate (BPV) | 1 | Interest Rate (BPV) | 1 | | |
| Euro | | -740Euro | | –214 | Introduction (*) |
| US Dollar | | -325US Dollar | | 189 | Funding and liquidity (F&L) risk is the risk that ING Group or one of its subsidiaries cannot meet its |
| Russian Ruble | | -105Great-Britain Pound | | –112 | financial liabilities when they are due at reasonable cost and in a timely manner. ING incorporates |
| Great-Britain Pound | | -68Taiwan New Dollar | | 96 | |
| Australian Dollar | | -31Polish Zloty | | 54 | funding and liquidity management in its business strategy and applies a funding and liquidity risk |
| | | | | | framework in order to manage such risks within pre -defined boundaries. |

Credit Spread (CSO1)	Credit Spread (CSO1)
United States	360Germany	345	A high-level overview of the F&L framework is provided in the next figure.
Germany	163United States	330
France	117Russian Federation	177
Russian Federation	73Netherlands	164
United Kingdom	72France	151

1 Basis Point Value (BPV) measures the impact on value of a 1 basis point increase in interest rates. The figures include
commodity risk in banking books.2 Credit Spread Sensitivity (CS01) measures the impact on value of a 1 basis point increase in credit spreads. Exposures to
supranational institutions are not assignedto a specific country.| | | | | 2019 | | | 2018 |
| --- | --- | --- | --- | --- | --- | --- | --- |
| amounts in EUR thousands | | Corporate | | Financial | Corporate | | Financial |
| | | | Institutions | | | Institutions | |
| Credit Spread (CSO1) | 1 | | | | | | |
| Risk classes | | | | | | | |
| 1 (AAA) | | | 1 | -1 | | –6 | 90 |
| 2–4 (AA) | | -15 | | -63 | | 3 | –24 |
| 5–7 (A) | | 143 | | 32 | | 117 | 78 |
| 8–10 (BBB) | | 273 | | | 1 | 245 | –2 |
| 11–13 (BB) | | 148 | | | 9 | 85 | 6 |
| 14–16 (B) | | | 51 | | 1 | 37 | 13 |
| 17–22 (CCC and NPL) | | | 26 | | 0 | 18 | |
| Not rated | | | 0 | | 0 | 1 | |
| Total | | 626 | | -21 | | 500 | 161 |

1 1 Credit Spread Sensitivity (CS01) measures the impact on value of a 1 basis point increase in credit spreads.
2019 ING Group Annual Report on Form 20-F222

()Governance ()**

Funding & liquidity risk management within ING falls under the supervision of the ALCO Bank function which approves the funding and liquidity risk appetite that is subsequently cascaded throughout the organisation. In addition, ALCO Bank has delegated responsibilities concerning the ICLAAP processes and documents as per the ICLAAP Framework of ING Group towards the Internal Capital & Liquidity Adequacy Assessment Process (ICLAAP) Committee. Therefore, it focuses on technical liquidity documents and oversees business processes and deliverables concerning ILAAP.
The EB and MBB, staff departments from the CRO and CFO domain as well as Group Treasury have oversight of and are responsible for managing funding and liquidity risk.

ING’s liquidity risk framework is based on the three lines of defence concept whereby risk principles are implemented, monitored and controlled in conjunction with both first and second line of defence functions.

Group Treasury and business lines are the first line of defence functions. Group Treasury’s main responsibility is to manage ING’s (regulatory) liquidity and funding position by executing ING’s funding plan, maintaining access to both the short and the long term professional funding markets and managing the liquidity buffer. Business lines are responsible for managing the funding and liquidity positions from the originated business. A large part of this is replicated with Group Treasury.

The second line of defence Financial Risk function is responsible for developing and maintaining ING’s policies, standards and guidelines on F&L risk management as well as for setting the F&L risk appetite. Furthermore, the Financial Risk function measures funding & liquidity risks, executes stress testing, provides management information and controls the liquidity and funding requirements on commercial products. The Finance function is responsible for management and regulatory reporting related to funding and liquidity risk management.

2019 ING Group Annual Report on Form 20-F223

Funding and liquidity management strateg y and objectives ()ING Group long-term debt maturity profile by currency1()

Beyond
The main objective of ING’s funding and liquidity risk management is to maintain sufficient liquidity202020212022202320242025Total

2025

to fund the commercial activities of ING both in normal and stressed market circumstances acrossCurrency| various geographies, currencies and tenors. This requires a diversified funding structure considering | EUR | 9 | 9 | 8 | 5 | 1 | 4 | 26 | 62 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| relevant opportunities and constraints. | USD | 3 | 2 | 4 | 4 | 1 | - | 8 | 22 |
| | Other | 1 | 2 | 1 | 1 | 1 | - | 2 | 10 |

Total13141310343794

ING’s funding consists mainly of retail and corporate deposits contributing 51% and 21% of the1 Nominal amounts in EUR billion.

total funding respectively. These funding sources provide a relatively stable funding base. The

remainder of the required funding is attracted primarily through a combination of long-term andFunding and liquidity adequacy and risk appetite (*)

short-term professional funding. Group Treasury manages the professional funding in line with the ING distinguishes several key drivers of future liquidity and funding needs:

F&L risk appetite to ensure a sufficiently diversified and stable funding base.
Refinancing needs resulting from maturing debt and asset growth;
◾| | | | | ◾Current and future regulatory requirements;; |
| --- | --- | --- | --- | --- |
| ING Bank Funding Mix | 1() | | | Risk appetite statements set by ING’s funding and liquidity risk function;; |
| | | 2019 | 2018 | ◾ |
| Funding type* | | | | ◾The outcomes of various stress tests; |
| Customer deposits (retail) | | 51% | 50% | ◾Ability to distribute and transfer liquidity. |

Customer deposits (corporate)21%21%| Interbank | 5% | 5% | Taking into consideration the abovementioned factors, ING Group assesses its current and future |
| --- | --- | --- | --- |
| Lending/repurchase agreement | 5% | 7% | liquidity adequacy and, if deemed necessary, takes steps to further improve ING’s liquidity position |
| CD/CP | 5% | 6% | |
| Long-term debt | 11% | 11% | and to ensure sufficient counterbalancing capacity. That is achieved through the quarterly update |

Subordinated debt2%2%of the Liquidity adequacy statement and the execution of the ILAAP process.

Total100%100%

1 Liabilities excluding trading securities and IFRS equityING’s Funding and Liquidity framework aims to ensure sufficient liquidity under normal, adverse

and stressed market circumstances. ING assesses its F&L adequacy through three lenses: (i) Stress, The Loan-to-deposit ratio remained stable at the level of 1.06.
(ii) Sustainability and (iii) Regulatory.

ING’s long-term professional funding is well diversified across maturities and currencies. The main (i) Through the Stress lens ING evaluates its ability to withstand a period of prolonged F&L stress
part of it is EUR and USD denominated which is in line with the currency composition of customer (idiosyncratic, market-wide or a combination of the two) which is characterised by customer
lending:
deposit outflows and/or deterioration of funding markets access;

2019 ING Group Annual Report on Form 20-F224

ii) Through the Sustainability lens ING assesses the extent to which its customers, professionalThe risk appetite with respect to the stress lens is set to ensure there is sufficient counterbalancing counterparties and investors are comfortable extending funding in tenors, currencies andcapacity under various internally defined stress scenarios. Regarding the sustainability perspective, instruments necessary to sustainably fund ING under a going-concern situation;an internally defined Stable funding to loans (SFL) ratio (supplemented by other metrics) is used to (iii) Through the Regulatory lens ING ascertains that it is in a position to meet both current andensure a diversified funding base and to prevent overreliance on professional funding. Finally, the future regulatory requirements.Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR) regulatory metrics are

monitored in terms of both ING’s risk appetite and regulatory requirements.
For each lens, ING has established a related set of risk appetite statements which define ING’s risk appetite commensurate with the principles of liquidity adequacy. These risk appetite statementsThe LCR compares the volume of available high quality liquid assets (HQLA) to net outflows are summarised in the next graph.(outflows- inflows) over a 30-day stress scenario defined by the regulator. ING’s liquidity buffer is part of the counterbalancing capacity which serves as a liquidity cushion under normal and (*)stressed conditions.

The liquidity buffer consists mainly of Level 1 assets which are represented by government and central bank assets and are of the highest liquidity quality. Only assets that are freely available (not pledged under existing contracts) for liquidity purposes are included in the buffer. The size and composition of the Liquidity buffer are driven by ING’s risk appetite as well as by regulatory requirements.

The macroeconomic and market environment are also important considerations in ING’s funding and liquidity framework.

The macroeconomic environment comprises various exogenous factors over which ING has no
control but which may have a material impact on ING’s F&L position. The main macroeconomic
factors analysed on a regular basis include:
Global and local economic performance: e.g. shifts in GDP, inflation rate, unemployment rates ◾ and public deficit/surplus;
Changing geopolitical trends;
The F&L risk appetite statements are translated into a number of metrics with appropriate◾ Monetary policy with special focus on the impact of the eventual reversal of unconventional boundaries and instruments which are used to measure and manage ING’s funding and liquidity◾ monetary measures employed by central banks in recent years; and risk.

2019 ING Group Annual Report on Form 20-F225

Regulatory requirements: e.g. understanding the changing regulatory landscape as well as themonitoring of the liquidity position;
◾◾ impact of ING’s actions on existing regulatory boundaries.contingency funding plan; and ◾ early warning indicators.
◾ The strategic ambitions of ING, together with the design and execution of the funding plan, areThe Funding and liquidity stress testing framework is also subject to regular internal validation.
assessed under both current and projected market conditions. Key emphasis is placed on understanding overall market trends and developments, credit rating changes and peerIn line with ECB regulation, ING’s liquidity position is stress tested on a monthly basis using comparison.particular scenarios that form part of the F&L risk appetite statement. In addition, the results of all internal stress scenarios are monitored and assessed on a regular basis. They also serve as input in Liquidity Stress Testing (*)the decision on additional contingency measures.

Funding and liquidity stress testing forms part of the overall F&L framework. It allows ING to Contingent F&L risks are addressed in the contingency funding plan whose focus is on early examine the effects of exceptional but plausible future events on ING’s liquidity position and warning indicators as well as organisation and planning of liquidity management in times of stress.
provides insight into which entities, business lines or portfolios are vulnerable to which types of risk The contingency funding measures are developed in conjunction with the ING recovery plan and and under which scenarios.
are tested on a regular basis.

The stress testing framework encompasses the funding and liquidity risks of the consolidated balance sheet of ING Group including all entities, business lines as well as on and off-balance sheet positions. The Net liquidity position and Time-to-survive are the two main stress testing output metrics. Both metrics are impacted differently under specific F&L stress scenarios with related parameterisation.

The stress testing framework considers idiosyncratic, market-wide and combined (idiosyncratic and market-wide) stress scenarios. Moreover, it differentiates between stress events that develop in a gradual and in a fast manner. The generic design of the framework, which is based on empirical evidence supplemented by expert judgment, can easily be applied to a specific scenario. For example, it can be used as input for firm-wide stress testing and reverse stress testing.

The outcomes of the stress testing are taken into account in all the key aspects of ING’s F&L risk framework and F&L risk management:
risk appetite framework (through risk appetite statements);
◾ risk identification and assessment;
◾

2019 ING Group Annual Report on Form 20-F226

Non-f inancial riskRisk categories

ING categorises NFR risks in a number of areas:

Introduction

Non-financial risk is defined as the risk of financial loss, legal or regulatory sanctions, or Information (Technology)risk is the risk of financial loss, regulatory sanctions or reputational ◾ reputational damage due to inadequate or failing internal processes, people and systems; a failure damage due to breaches of confidentiality, integrity or availability within business processes or to comply with laws, regulations and standards; or external events. The Non-Financial Risk (NFR)
information or lack of information quality;
function encompasses Operational Risk Management (ORM), Information Risk Management (IRM), Continuity risk is the risk of financial loss, regulatory sanctions or reputational damage due to ◾ the Independent Validation Unit (IVU) and Corporate Security & Investigations (CSI).
business disruptions (loss of people, processes, systems, data, premises);

Control and processing riskare the risks of financial loss, regulatory sanctions or reputational ◾

Governance
damage due to ineffective organisational structures and governance procedures (including

The head of Corporate ORM, Corporate IRM, IVU, CSI, Professional Practice Unit and Strategy, Central unclear roles and responsibilities and inadequate reporting structure), failed (transaction)

Services & Digitalisation Unit report to the global head of NFR, who directly reports to the bank processing (input, execution, output) or failing process management; monitoring and

CRO.. The global head of Non-Financial Risk is responsible for developing the framework of nonenforcement of risk mitigating measures; and risk culture;

financial risk policies and standards within ING, and for monitoring the quality of non-financial risk Internal fraud riskis the risk of financial loss, regulatory sanctions or reputational damage due to ◾
management in the ING entities.
deliberate abuse of procedures, systems, assets, products and/or services of ING by employees

(incl. temporary workers, third party contractors, internships and consultants) who intend to

Non-Financial risk measurement deceitfully or unlawfully benefit themselves or others;

In line with the Advanced Measurement Approach (AMA), the bank has in place a model to define◾External fraud riskis the risk of financial loss, regulatory sanctions or reputational damage due to

the required level of own funds for operational risk (operational risk capital). This model predictsdeliberate abuse of procedures, systems, assets, products and/or services of ING by external

potential operational risk losses (annually aggregated) by combining a forward-looking and aparties (clients, potential clients or other third parties, including vendors and outside agencies)

backward-looking view on operational risk events. The business has a leading role in assessingwho intend to deceitfully or unlawfully benefit themselves or others;

scenario severities, with the ORM function validating and challenging the results.◾Unauthorised activity riskis the risk of financial loss, regulatory sanctions or reputational damage

due to employees performing outside the normal course of their business, intentionally giving

ING uses its AMA model for regulatory capital calculation purposes and reports the regulatoryunauthorised approvals or overstepping their authority;

capital numbers on a quarterly basis. The bank is currently not using any insurance or risk transfer◾Personal and physical security riskis the risk of financial loss, regulatory sanctions or reputational

mechanisms for the mitigation of risk in the context of the AMA capital calculation.damage due to criminal and environmental threats that might endanger the security or safety of

ING personnel at work, people in ING locations, ING assets or assets entrusted to ING, people at

ING event locations, or might have an impact on ING organisation's confidentiality, integrity or

availability; and

2019 ING Group Annual Report on Form 20-F227

Employment practice riskis the risk of financial loss, regulatory sanctions or reputational damageDealing with current and emerging fraud threats effectively requires continuous improvement of ◾◾
due to acts that are inconsistent with employment, health and/or safety laws, regulations orfraud management capabilities such as real-time transaction and response capabilities and

agreements, from payment of personal injury claims, or from diversity/discrimination events.better alignment and standardisation of cross border fraud management across ING and related

platforms as well as exchanging data cross border. With legislation such as EBA PSDII and the
Data Governance and Data Qualitycontinuing emphasis on duty of care, financial institutions are becoming more and more

ING recognises that information and underlying data are assets that are key (together with people,responsible for losses incurred by clients, and taking on more of the burden of reclaiming those
processes and IT systems) to further develop its digital profile. Cooperation and mutual agreementlosses.

on global data management roles and responsibilities in ING are critical success factors to meet

Enterprise Risk Management this objective. As such ING has embraced multiple data management and governance initiatives

triggered by internal and external stakeholders (e.g. Principles for Effective Risk Data AggregationIn 2019, a professional practice unit (PPU) has been set up to establish an Enterprise Risk

and Risk Reporting). These principles are embedded in risk data management and enshrined withinManagement (“ERM”) Framework gatekeeper for policy design. ERM is designed to be an

the Data Governance framework. The framework outlines roles and responsibilities relevant for theoverarching risk management framework (RMF) pulling together common design principles and

risk lifecycle and data quality assurance.roles & responsibilities for all risk types (Financial, Non-financial, and Strategic). The purpose and

benefits of the ERM Framework facilitates clear and easy communication and improving the visible
Main developments in 2019and transparent link to ING’s Strategy, business activities and processes. The ERM Framework is

Cybercrime and Fraudbeing implemented to ensure standardisation of all risk frameworks and, once finalised, it will apply
to all businesses lines and entities on global and local level.
Controls and monitoring continue to be embedded in the organisation as part of the overall ◾
internal control framework and are continuously re-assessed against existing and new threats.

The identification and monitoring of new threat actors and campaigns relevant to ING also

User Access Management (UAM) informs this process as does the closer alignment between IT security and fraud teams. In
UAM is one of the focus areas of ING and an important element in our control framework to addition, ING continues to strengthen its global cybercrime and fraud resilience through
mitigate the risk of unauthorized and / or inappropriate access to systems, processes and the data extensive collaboration with financial industry peers, law enforcement authorities, government
and information contained therein. Consequently, the UAM processes, controls and practices are (e.g. National Cyber Security Centre) and internet service providers (ISPs).
periodically reviewed, tested, adapted and improved by a dedicated UAM team to address ongoing Concerns over the potential impact of insider threats continues to increase with specific ◾ developments in and outside ING. In 2019, ING continued to mature, with attention to information relating to external instances or trends in the financial industry remaining limited,
standardization, harmonisation of processes via standardized workflows and further automation of albeit collaboration within the financial sector is improving.
UAM controls, which will continue in 2020.
The increasing use of third party vendors for services and the implementation of PSD2 are likely

to present ongoing fraud management and IT security challenges; both in the short- and

medium-term as criminal actors target financial and broader PII data outside the traditional

banking environment.

2019 ING Group Annual Report on Form 20-F228

GDPRCompliance risk

As per 25 May 2018, the European General Data Protection Regulation (GDPR) became effective.

Introduction GDPR affords greater protection to individuals and requires more control on data and transparency Compliance risk is defined as the risk of impairment of ING’s integrity, leading to damage to ING’s regarding the use of data by companies. In 2019, ING continued its central programme, initiated in reputation, legal or regulatory sanctions, or financial loss, due to a failure (or perceived failure) to 2016, in a continuing effort to mature our data protection standards in line with GDPR standards.
comply with applicable laws, regulations and standards and the ING Orange Code .

Outsourcing Risk

Governance In 2019, a renewed Sourcing Policy became effective, outlining the inherent critical and high risks The Compliance Risk Management function is organised via countries and business lines. The heads that can materialise during the sourcing life-cycle. In addition, a Sourcing Guideline was issued to of Financial Crime Compliance, Regulatory & Conduct Compliance, Strategy & Transformation support updated requirements, issued by EBA in 1Q 2019. Support Control Framework (SCF)
Office at the head office, as well as the heads of compliance in the Netherlands and Belux and the Sourcing defines the controls that have to be implemented and tested to effectively mitigate the business lines Challenge & Growth and Wholesale Banking report to the chief compliance officer risks. The scope of sourcing encompasses outsourcing to external providers as well as intra -group (CCO), who is the global head of Compliance Risk Management. This is an independent function that sourcing.
is amongst others responsible for developing and establishing bank-wide policies and minimum

standards for managing compliance risks. The CCO assists the Supervisory Board, Executive Board

BCBS239
and Management Board Banking in managing ING’s compliance risks and control framework. The In January 2013 the Basel Committee on Banking Supervision published the principles for effective CCO is a permanent participant of the Risk Committee of the Supervisory Board. The CCO regularly risk data aggregation and risk reporting (BCBS 239), which is adopted by the ECB and became meets the chairman of the Risk Committee of the SB.
effective for all G-Sib’s as of January 2016. ING initiated a central program which is continued in

2019 to improve the risk data aggregation and reporting capa bilities.

Risk categories

ING categorises compliance risk into four conduct-related integrity risk areas:

Client/third party conduct refers to the compliance risks arising from the relationship with or ◾
generated by the conduct of our customers and/or business partners, like money laundering or

terrorist financing. Those risks are generally defined within ING as financial economic crimes.

Furthermore, client conduct refers to the compliance risks relating to FATCA, CRS, CTI and US

withholding tax and information reporting regulations;

Personal conduct refers to the compliance risks arising from the conduct of ING employees. The ◾
scope includes amongst others personal conduct related conflicts of interest, bribery and

corruption, protection of personal data;

2019 ING Group Annual Report on Form 20-F229

Financial services conduct refers to the compliance risks arising from or generated by theemployees are expected to adhere to these laws, regulations and ethical standards, and ◾ conduct of ING when developing product offerings, marketing and/or selling products andmanagement is responsible for ensuring such compliance. Compliance is therefore an essential services to its clients as well as customer interest and protection; andingredient of good corporate governance. As gatekeepers of the financial system we have Organisational conduct refers to the compliance risks arising from the way the bank isobligations to safeguard trust in that system and prevent misuse. For example a recent study organising itself to develop its activities. This category covers among others the licencesfound almost €13 billion worth of criminal money is laundered in the Netherlands each year – required to perform its regulated banking activities, the operating effectiveness of itsaround 1.6 percent of the GDP. However, money laundering is not contained within a single information barriers, organisation conduct conflicts of interest, anti-competitive conduct,country or jurisdiction, it is a global challenge that impacts the entire financial system. ING, like all record retention .other participants in the financial services industry, has an important role to play in helping to combat financial economic crime. We contribute knowledge and capacity to various public-private Controls aiming to mitigate the compliance risks associated with the above-mentioned risk areaspartnerships fighting financial crime. We believe we can be even more effective in safeguarding the are designed and applied to the day-to-day processes in the bank. The effectiveness of the controlsfinancial system if we join forces and work with other banks and with national and European is tested and monitored periodically, and senior management is responsible for ensuring thatauthorities and law enforcement to identify and manage the financial economic crime risks better, processes are compliant with applicable laws and regulations, ING’s internal policies, and thetaking all relevant laws and regulations into account. Improving the way we manage compliance Orange Code.risk, especially when it comes to preventing criminals from misusing the financial system, is a key

priority for ING.
In cases where an employee of ING suspects an actual or potential irregularity or misconduct within ING that leads or could lead to a violation of the Orange Code, any ING policy and/or anyKYC policy framework applicable law, regulation or code, this can be reported anonymously in line with the Whistle- The know your customer (KYC) policy and related control standards (‘KYC policy framework’) sets blower Policy, via internal or external channels as well as through normal reporting channels.
the minimum requirements and control objectives for all ING entities to guard against involvement in financial crime activity. The KYC policy framework reflects relevant national and international laws, regulations and industry standards related to financial economic crime (money laundering,

Strengthening the global compliance function terrorist financing), export trade controls, proliferation financing, sanctions (economic, financial and ING has introduced measures to strengthen the Compliance Risk Management function. Thesetrade), countries designated by ING as ultra high risk countries (UHRC), CTI, FATCA, CRS, and (parts measures are being implemented as part of a multi-year, global compliance strategy andof) ESR. The KYC policy framework is mandatory and applies to all ING entities, majority-owned ING transformation programme The programme encompasses the whole compliance function andbusiness, businesses under management control, staff departments, product lines and to all aims at enhancing global steering and oversight by the compliance function.customer engagements and transactions. The KYC Policy Framework reflects relevant national and international laws, regulations and industry standards related to business partners and overarching Know your customer (KYC)requirements with regards to record retention, training and awareness. The management of ING entities also includes local procedures aimed at enabling them to comply with local laws and ING is committed to the preservation of its reputation and integrity through compliance with applicable laws, regulations and ethical standards in each of the markets in which it operates. All

2019 ING Group Annual Report on Form 20-F230

regulations and the KYC Policy Framework. Where local laws and regulations are more stringent,embed stronger awareness across the whole organisation as part of the KYC enhancement these more stringent local laws and regulations are applied.programme.

As a result of frequent evaluation of the businesses from economic, strategic and risk perspectiveIn 2019, we continued the implementation of the KYC enhancement programme, and had more ING continues to believe that for business reasons doing business involving certain specifiedthan 4,000 FTEs working on KYC-related activities globally. In March 2019, ING in Italy took steps to countries should be discontinued. In that respect, ING has a policy not to enter into newimprove its KYC processes and compliance risks in line with the global KYC enhancement relationships with clients from these countries and processes remain in place to discontinueprogramme after the Italian central bank identified shortcomings in anti-money laundering existing relationships involving these countries. At present these countries are Cuba, Iran, Northprocesses. This was based on an inspection conducted from October 2018 to January 2019. In Korea, Sudan and Syria.consultation with the Banca d’Italia, ING agreed to refrain from taking on new customers in Italy while further discussions on the enhancement plans took place. ING continued to fully serve In addition to addressing financial economic crime-related requirements, the KYC policy frameworkexisting clients in Italy while working to address the shortcomings and resolve the issues identified.
also reflects KYC-related requirements of the FATCA/CRS policy, as well as certain elements of thePlease refer to Note 46 ‘Legal proceedings’ to the consolidated financial statements for more Environmental Social Risk policy.information.

KYC enhancement programmeIn 2019, as part of our commitment to enhance the way we manage compliance risks and embed
In 2017, ING began implementation of its KYC enhancement programme across all customerstronger awareness across the whole organisation, we also took the following steps across our five
segments and in all ING business units. The KYC enhancement programme consists of, amongKYC pillars:
other things:
◾Enhancing selected customer due diligence files to improve customer documentation, customer◾Policies and risk: This pillar focuses on the development and roll out of a global KYC policy, a
data and identity verification;global KYC risk appetite statements and KYC risk assessments on customers, capability structure
Working on structural solutions to become sustainably better in the execution of our KYC policies,and maturity assessments.
◾
tooling, monitoring, governance and knowledge and behaviour; andoIn 2019, we updated the new KYC policy, which integrated all existing policies related to anti- Assessing selected past transactions and follows the applicable reporting process should anymoney laundering, financial economic crime and customer due diligence. It came into effect ◾
unusual transactions be identified.in July. (See section ‘KYC policy framework’ above).
oThe global KYC policy may be stricter than local requirements, in which case the global risk
In September 2018, ING announced that it had reached a settlement agreement with the Dutchappetite statement is used as the starting point to execute a uniform risk assessment and to
Public Prosecutor related to an investigation that found serious shortcomings in the execution ofdetermine the local KYC-related risk appetite.
customer due diligence and transaction monitoring requirements related to fighting financial
economic crime, and announced steps to further enhance its management of compliance risks and

2019 ING Group Annual Report on Form 20-F231

oAs part of our due diligence process we updated the environmental and social risk (ESR)oIn September 2019, an anomaly detection tool went live to monitor the payment flow of framework, which helps us make transparent choices about who and what we finance. AllING’s correspondent banking clients. Developed by ING, the tool uses advanced analytics to customers undergo an initial ESR check as part of the onboarding process. (Seedetect changes in behaviour that could indicate money laundering or other financial ‘Environmental and social risk framework’ in the credit risk chapter for more information)economic crime. The approach for innovations is per country and business line and based on oWe implemented a systematic integrated risk approach (SIRA) in all business lines globally.success will be scaled up and rolled out in other locations.
Driven by data, the SIRA provides guidance on KYC integrity risks and helps determine whichMonitoring and screening: This pillar entails translating risk assessment outcomes into scenarios ◾ customers to accept/continue and the type and frequency of monitoring. It takes intoand alert definitions that can be applied in transaction monitoring. This includes the design and account elements such as where the customer is located and the type of product and sectordefinitions of the applicable financial economic crime and client activity monitoring scenarios they are active in. The KYC integrity risks are reviewed each year. .tailored to the entity yet based on a global set, building alert definitions (including data feeds)
and validating and testing the approach from risks to alerts.
◾Tooling: This pillar aims to improve processes and tooling around customer due diligence,oIn 2019, we introduced the new standard transaction monitoring tooling in the first countries.
screening and monitoring. This entails rolling out a bank-wide KYC digital service and fulfillingThis includes risk-based scenarios, with follow-up for handling alerts and reporting suspicious client acceptance and maintenance life cycle on one global digital platform. In addition, allactivity.
required screening components (name screening, pre-transaction screening, adverse mediaoIn May 2019, the first version of the global transaction monitoring (TM) control guidance screening) are incorporated into the client acceptance due diligence process. Once a customer iscame into effect. It outlines the adoption of a uniform TM methodology framework to onboarded, ongoing screening and monitoring of transactions can then be activated. Steps takenmitigate financial economic crime risks.
in 2019 included:oIn September 2019, ING partnered with four other Dutch banks to explore options to jointly oDeveloped new customer due diligence case management modules for Private Bankingmonitor payment transactions. Transaction Monitoring Netherlands (TMNL) is part of a clients in Luxembourg, and mid-corporates in Poland, which is to be rolled out in otherbroader cooperation with the private sector, government agencies, regulators and law countries with similar client segments.enforcement to harmonise efforts to fight financial crime and strengthen the resilience of the oThe target adverse media screening tool was rolled out in most locationsfinancial system as a whole, both on a national and European level. We also work with the oInnovating to automate and improve KYC processes. In 2019, we developed a ‘smurfing’ tool,Dutch central bank and are a member of the public-private partnership council of the Dutch which uses artificial intelligence to detect instances of smurfing when large fraudulentFinancial Expertise Centre (FEC-RAAD PPS).
transactions are broken up into smaller transactions that will not be flagged by conventionaloThe increased focus on KYC and our efforts to streamline our operations led to an increased monitoring systems. And we are developing a virtual alerts handler that uses artificialnumber of accounts being closed. This includes inactive accounts and accounts of customers intelligence to reduce the number of false positives, freeing up KYC staff to concentrate onwho do not respond adequately to our requests for information. We are also re-evaluating those alerts that do require attention.certain client and business relationships.

2019 ING Group Annual Report on Form 20-F232

Governance: Under this pillar we are setting up a global KYC governance to ensure decisionFollowing on from that, workstreams were set up with senior managers and a number of ◾
making on standards, operations, customer acceptance and continuous improvements. Thisinterventions were initiated with the aim of changing high-risk behavioural patterns. Another

started with the appointment of a global head of KYC at the end of 2018 and a global Centre ofbehavioural risk assessment was conducted at ING in Belgium in the fourth quarter of 2019. We

Expertise, as well as a Delivery Tribe, who together with the business lines and the second line ofwill start a dialogue in 2020 to dive into the outcomes and root causes of the behavioural patterns

defence (Risk and Compliance functions) are responsible for implementing KYC across theobserved.

organisation.

oIn 2019, local KYC Committees were established in the countries/regions and business lines toRegulatory developments

manage and steer all KYC-related activities. These committees are overseen by the global Compliance with applicable laws and regulations is resource -intensive. Banks continue to be faced
KYC Committee, which drives improveme nts and ensures alignment between KYC-related with new and increasingly onerous regulatory requirements. Generally, we expect the scope and
projects and activities. It also monitors all KYC-related costs, helps prioritise activities and extent of regulations in the jurisdictions in which we operate to continue to increase.
steers decisions on KYC-related issues and developments.

oClient Integrity Risk Committees (CIRCs) were set up in the retail business lines and WholesaleRegulation is becoming more extensive and complex. An example is the implementation of DAC6
Banking to steer decisions around client acceptance and exits, based on compliance criteria which like FATCA and CRS requires financial institutions to report detailed client-related information
and risk appetite. The committee members represent both the first and second lines of to the competent authorities. Customer due diligence (CDD), (sanctions) screening and transaction
defence to ensure proper decision-making is adhered to.
monitoring impose requirements on financial institutions to maintain appropriate policies,

procedures and controls to detect, prevent and report to the competent authorities on e.g. money
Knowledge and behaviour: This pillar focuses on increasing knowledge about KYC, providing ◾laundering and terrorist financing.
training and carrying out behavioural risk assessments to detect high-risk behaviours intervening

where necessary.
The increasing regulatory scrutiny drives the need to continuous change in the various processes,
oInternal communication in 2019 reiterated the importance of non-financial risk andprocedures and IT systems. In some situations the applicable laws and regulations, at local and/or
compliance.
at global level, seem to be conflicting with each other, which imposes a significant challenge on
oWe set up a global KYC Academy to coordinate a global learning curriculum and providebanks as part of the implementation of requirements. In addition, the timeline for implementation
expert training for specialist KYC staff and new joiners as well as awareness training for all of those new/changed requirements is sometimes very short, which is challenging in general, yet
ING employees.
especially in IT development. Obviously ING will continuously work on embedding the processes
oThe first behavioural risk assessments in KYC were carried out in the Netherlands, theand procedures reflecting the applicable requirements in our IT systems and data sources, driving a
Philippines and the US by ING’s team of behavioural experts. The outcomes were discussed business environment which is compliant by desire and design, and will execute ongoing training
by senior management at ING’s leadership days in March, as well as with the management and awareness to develop its people to have the right knowledge and skills.
teams of the countries involved and in Wholesale Banking with the intention of changing

behaviours to enhance KYC, starting from the top.
That also accounts for risks deriving from new technologies. As an innovative bank, ING

continuously monitors regulatory developments to make risk assessments and define the banks

2019 ING Group Annual Report on Form 20-F233

risk appetite. Regulations on distributed ledger technology and business developments in this areaactions taken to comply with FATCA and other US withholding tax regulations, ING is for example

are as rapid and impactful as the accompanying risks.updating and strengthening its withholding compliance programme and reviewing, amending and

filing the necessary tax returns and information reports.

5th AML Directive

In addition, the 5th AML Directive will be implemented in the Netherlands. The 5th AML DirectiveMany countries, including the Netherlands, have entered into agreements (intergovernmental
was originally adopted by the EU Council in June 2018, with the aim of addressing means ofagreements or IGAs) with the US to facilitate the type of information reporting required under
terrorist financing, increasing transparency to combat money laundering and helping toFATCA. While the existence of IGAs will not eliminate the risk of the withholding tax described
strengthen the fight against tax avoidance. The most important aspects of the 5th AML Directiveabove, these agreements are expected to reduce that risk for financial institutions and investors in
involve the (anti money-laundering) risks relating to the use of virtual currencies, the improvementcountries that have entered into IGAs. IGAs often require financial institutions in those countries to
of information exchange between supervising authorities, and the introduction of beneficialreport information on their US account holders to the taxing authorities of those countries, who
ownership registers for corporate and other legal entities.then pass the information to the IRS.

If the Group cannot rely on IGA or satisfy the requirements, certain payments to the Group may be ING expects to revise the KYC policy framework to reflect the requirements of the 5th AML Directive.
subject to withholding under FATCA. Certain payments may also be subject to other US withholding Prior to the adoption of the 5th AML Directive, European supervisory authorities (ESAs) had tax regulations. The possibility of such withholding and the need for account holders and investors
previously issued their final guidelines on risk factors, which came into force in June 2018. These to provide certain information may adversely affect the sales of certain of the Group’s products. In
guidelines promote a common understanding of the risk-based approach to anti-moneyaddition, compliance with the terms of such IGAs and with FATCA, any regulations or other
laundering/combatting terrorist financing (AML/CFT) and set out how it should be applied in theguidance promulgated thereunder, or any legislation promulgated under an IGA, and offering
products that generate ‘withholdable payments’, may substantially increase the Group’s context of the 4th AML Directive. These guidelines are currently in the process of being updated, in
compliance costs.
order to support firms’ AML/CFT compliance efforts and enhance the ability of the EU’s financial

sector to effectively deter and detect money laundering/terrorist financing. The ESAs published a

Common Reporting Standard (CRS) consultation version of the updated guidelines on 5 February 2020. The final updated guidelines are Similarly, the Organisation for Economic Cooperation and Development (‘OECD’) has developed a expected to come into force in the course of 2020. Furthermore, in September 2017, the ESAs Common Reporting Standard (‘CRS’) and model competent authority agreement to enable the issued their final guidelines to prevent the abuse of funds transfers for terrorist financing and multilateral and automatic exchange of financial account information. CRS requires financial money laundering purposes. These guidelines came into force in June 2018.
institutions to identify and report the tax residency and account details of non-resident customers

Financial Account Tax Compliance Act (FATCA)to the relevant authorities in CRS-compliant jurisdictions. As of 19 September 2019, 109
Under provisions of US tax law commonly referred to as FATCA, non-US financial institutions arejurisdictions (‘signatory countries’), including the Netherlands, have signed a multilateral
required to provide certain information on their US account holders and/or certain US investors tocompetent authority agreement to automatically exchange information pursuant to CRS. The
the US Internal Revenue Service (IRS). A 30 percent withholding tax will be imposed onmajority of countries where ING has a presence have committed to CRS. The EU has made CRS
‘withholdable payments’ made to non-compliant non-US financial institutions. As part of themandatory for all its member states. The first information exchange by the Netherlands (as for

2019 ING Group Annual Report on Form 20-F234

approximately half of the signatory countries) was executed in 2017. Most other signatory countries commenced their information exchange in 2018 and some in 2019.The requirements set out in MiFID II/MiFIR are manifold and impact a large part of our organisation and day-to-day business. In order to ensure compliance with these rules, standard controls were The OECD has also introduced two additional new measures to tackle global tax avoidance/evasion:rolled out throughout the ING EU entities. In addition, a framework measuring MiFID compliance risk Mandatory Disclosure Rules for Addressing CRS Avoidance Arrangements and Opaque Offshorewas implemented in order to stay abreast of any compliance issues that need addressing.
◾ Structures Preventing Abuse of Residence by Investment (RBI) and Citizenship by Investment (CBI) SchemesRegulatory guidance around MiFID II/MiFIR continues to evolve and key requirements are currently ◾ under review. As a result, ING will ensure that the organisation has continuous access to central to Circumvent the CRS.

guidance giving a clear steer on expected conduct and processes. A network of experts has been set up to ensure timely implementation of any regulatory changes.
These measures are in the process of being implemented in local laws. With regard to the mandatory disclosure rules for EU jurisdictions, this was done via the amendment to Directive 2011/16 (DAC6). See below.

Learning

DAC6 (EU2018/822, an amendment to EU Directive 2011/16) In 2019 we continued to develop our approach to learning on compliance and risk culture (and e.g.
DAC6 imposes mandatory disclosure requirements for taxpayers and intermediaries involving theestablished the KYC Academy). Supporting staff to deliver a sound and consistent risk culture is a reporting of cross-border arrangements affecting at least one EU member state that fall within onefocus for our learning. We emphasise a standard and streamlined approach that facilitates of a number of ‘hallmarks’. These hallmarks are broad categories setting out particularconsistent messaging and learning across the bank, as appropriate. More focus is being given to characteristics identified as potentially indicative of aggressive tax avoidance. The reportingrole of specific training in ensuring staff continue to extend knowledge, skills and behaviours for obligations apply to ‘intermediaries’ (financial institutions like ING may fall under this term) or, intheir particular roles and responsibilities.
some circumstances, the taxpayer itself. There will be a mandatory automatic exchange of information on such reportable cross-border schemes via the Common Communication Network

Model risk (CCN) between the member states which will be set-up by the EU. Although DAC6 is not effective until 1 July 2020, taxpayers and intermediaries have been required to monitor cross-borderIntroduction arrangements since 25 June 2018.
Model risk is the risk that the financial or reputational position of ING is negatively impacted as a consequence of the use of models. Model risk can arise from errors in the development,

MiFID II implementation, use or interpretation of models, or from incomplete or wrong data etc., leading to Integrity and transparency in financial markets are essential for public and investor confidence. The inaccurate, noncompliant or misinterpreted model outputs.
revised Markets in Financial Instruments Directive European legislation (MiFID II/MiFIR) came into effect in January 2018 and had a major impact on ING and the markets in which it operates. A A model is defined as a quantitative method, system, or approach that applies statistical, central programme continued in 2019 to support ING’s commitment to further embed the revised economic, financial, or mathematical theories, techniques, and assumptions to process input data legislation throughout the organisation.
into quantitative estimates.
2019 ING Group Annual Report on Form 20-F235

A candidate model is considered a model when:
the outcome is used for a decision: by the customer, community, business / colleagues, and / or ◾ other internal or external stakeholders such as regulators or shareholders, and the model is repeatedly used without a manual change of the design, and ◾ the outcome is an estimation, not the 100 percent measured truth; and ◾ it processes the data input with a quantitative method or approach that applies statistical, ◾ economic, financial, or mathematical theories, techniques and / or assumptions.

Models governance

The growing complexity and number of models created and utilised every year for decision-making makes it important to manage and control the associated model risk accordingly. Within ING this overarching responsibility for this risk type lies within Model Risk Management. The department, in addition to its traditional function of model validation, is also responsible for global model risk oversight. It sets and maintains a model risk management framework containing: (1) the governance, (2) the model risk appetite, (3) model risk management policies and standards and (4)
the global model inventory tool. It is also responsible for monitoring and reporting the global model risk exposures of ING.

The Model Risk Management Committee (MoRMC) has been established to align the overall model strategy and the model risk appetite, and approve model policies, procedures and methodologies.
Mandated by the MBB and chaired by the CRO of ING, the MoRMC meets monthly.

Model lines of defence

ING’s model risk and control structure is based on the three model lines of defence (MLoD)
approach. This approach aims to provide a sound governance framework for model risk management by defining and implementing three different management layers with distinct roles and oversight responsibilities.

2019 ING Group Annual Report on Form 20-F236

In terms of composition and main activities:and (ii) the overarching components to manage ING’s model risk of all models: continuous model
The 1st LoD is composed of the model owners (mainly the business), data management andinventory and reporting.
◾
model development, accountable for, among others, the development, implementation and use
of the models as well as monitoring the effectiveness of the models;Model lifecycle
◾The 2nd LoD is composed of model validation and model risk management, which owns theThe next figure provides a schematic overview of the model lifecycle, where orange represents the
model risk management framework and the risk appetite; and1st model LoD, blue the 2nd and grey the 3rd. It is composed of a set of processes starting after a
◾The 3rd LoD is the internal audit, reviewing the quality of execution in all lines of defence andmodel is identified. The objectives of the different processes are outlined below.
providing independent assurance.

An important difference with the financial and non-financial risk lines of defence is that models can also be owned by risk (normally a 2nd LoD), e.g. for bank wide stress testing, or by the audit service (normally a 3rd LoD), e.g. to support their audits. In that case both domains (risk or audit service)
become 1st model line of defence.

Model Risk Appetite (MoRAS)

The model risk appetite is designed to control the level of model risk ING is willing to accept in pursuit of its strategic objectives. It is derived from the concepts of boundaries and instruments as described in the Risk Appetite Framework. Model RAS and related boundaries and instruments will be set in 2020 and going forward will be reviewed on an annual basis. RAS requires approval from the MBB/EB and ratification from SB.

Model risk management

Since models are by definition simplifications of reality, model risk is inherent in the use of models and therefore model risk must be identified and managed. Model risk management includes the identification, assessment, control (acceptance or mitigation) and monitoring (and reporting) of the risks caused by applying models.

Model management is executed through the model life cycle with two types of components, which are (i) the stages that each individual model goes through, from initiation to final decommissioning Initiation or change: The initiation of the development of a new model or change of an existing model can be triggered by different factors. These may be (i) internal, such as the introduction of a

2019 ING Group Annual Report on Form 20-F237

new product that cannot be handled by the existing models, a change in ING’s organisation,During theimplementationstage, the model is realised, tested and made available in a production financial or commercial strategy or findings and issues by an auditor, validator or based onenvironment.
monitoring; or (ii) external, such as innovation/new technology that becomes available (for example the Fintech models), new or upcoming supervisory regulations or ongoing technicalIn themodel usestage the model is applied by the users for the specific purpose it was designed developments.for. The model can only be used after formal validation and approval for use of the model.

Data collectionis the process of defining and collecting data that meets the defined data qualityThe objective of modelperformance monitoringis to regularly check if the model is performing as requirements for model development. The process includes the definition of the data needed,intended, also after possible changes in the commercial, organisational or legal environment.
assessment of data availability and quality, assumptions and limitations, as well as the gatheringModel performance monitoring begins when model use has started and continues until the model of the data needed for the analyses, impact study and testing during the model developmenthas officially been decommissioned.
process.
Periodic validation: During the life time of a model the ongoing validity of the models must be Model developmentis a structured process that leads to a model that is ready for validation andsafeguarded. This is done by periodical independent (re)validation that assesses whether the model subsequent use.is still valid for its intended use. There are two types of validation: (1) periodic, such as annual, which is mandatory for regulatory models, or (2) ad hoc, for example triggered by changes in the Depending on the development approach these first stages can be separate or integrated. Anmodel, the business or financial instruments etc. The actual frequency of periodic validation example of the latter is data science based application development.depends on the model risk, model type and applicable regulation.

Pre-approval validationis the independent confirmation that the model is valid for its intendedA model that is / will no longer be used must be decommissioned.Decommissioningdisables the use, before the new or changed model is submitted for use approval. To ensure objectivity andmodel. It can, for example, be triggered because (1) the product, organisation or risk the model is effective challenge, the model validator is independent from other model parties such as the modelmade for has changed considerably or no longer exists, (2) the model is outdated, underperforming developer, model owner or model approver. Model validation applies equally to in-house developedor better alternatives are available, (3i) the model became obsolete due to standardisation or (4)
and third-party models.the external approver withdraws its approval for the model.

The objective of themodel approvalstage is approval for use. The model owner submits the modelContinuous model inventory and reporting: Keeping an inventory of all models and their status for formal consent by the internal approver before being deployed and used. Theduring their lifecycle is a continuous process. It supports management and control of the models in recommendations and validation report prepared by the model validator are key inputs forscope, both per individual model and the overarching management of all ING’s models. Periodic approval for use.model risk reporting provides the relevant internal and external stakeholders with an overview of the models in use and the associated model risk given the defined model risk appetite..

2019 ING Group Annual Report on Form 20-F238

Business RiskSELECTED STATISTICAL INFORMATION ON BANKING OPERATIONS

IntroductionReference is made to Note 1 ‘ Accounting Policies’ of the Consolidated financial statements for

information on Changes in accounting principles, estimates and presentation of the consolidated Business Risk for ING has been defined as the exposure to value loss due to fluctuations in
financial statements and related notes.
volumes/margins as well as expenses. It is the risk inherent to strategy decisions and internal

efficiency. Business risk capital is calculated via the variance-covariance methodology for expense The information in this section sets forth selected statistical information regarding the Group’s risk, covering the risk that expenses will deviate from the expected expenses over the horizon of the operations.
relevant activities. This risk primarily relates to inability of adjusting expenses when that is needed.
Information for 2019, 2018 and 2017 is set forth under IFRS-IASB. Unless otherwise indicated, Expense risk only concerns non-financial expenses (e.g. staff and IT expenses); financial expenses average balances, when used, are calculated from monthly data and the distinction between are not in scope.
domestic and foreign is based on the location of the office where the assets and liabilities are

booked, as opposed to the domicile of the customer. However, the Company believes that the

Governance and risk management presentation of these amounts based upon the domicile of the customer would not result in ING applies an explicit Risk Appetite Statement regarding business risk, focusing on earnings material differences in the amounts presented in this section.
stability and diversification of the business mix. Avoiding putting all eggs in one basket reduces the| risk that volumes and/or margins will suddenly drop due to unexpected changes in the business | Year ended 31 December | 2019 | 2018 | 2017 |
| --- | --- | --- | --- | --- |
| environment for certain markets and products. Furthermore, the underlying risk types (expense risk | Return on equity | 7.8% | 9.9% | 11.4% |
| and volume-margin risk) are mitigated and managed differently. Expense risk is monitored and | Return on assets | 0.4% | 0.5% | 0.6% |
| managed via the financial performance of the bank and the local units, whereby the reported | Equity to assets | 5.7% | 5.5% | 5.7% |
| | Net interest margin | 1.5% | 1.5% | 1.5% |
| expense numbers are compared on a quarterly basis with the projected cost/income ratio. | | | | |

Deviations from this ambition are monitored as part of the financial projections that are discussed

continuously within different parts of the organisation.AVERAGE BALANCES AND INTEREST RATES

The following tables show the Group’s operations, average interest -earning assets and average

interest-bearing liabilities, together with average rates, for the periods indicated. The interest

income, interest expense and average yield figures do not reflect interest income and expense on

derivatives and other interest income and expense not considered to be directly related to interest-

bearing assets and liabilities. These items are reflected in the corresponding interest income,

interest expense and net interest income figures in the consolidated financial statements. A

reconciliation of the interest income, interest expense and net interest income figures to the

corresponding line items in the consolidated financial statements is provided hereunder.

2019 ING Group Annual Report on Form 20-F239

ASSETS

Interest-earning assets

LIABILITIES

201920182017

Interest-bearing liabilities

Averag201920182017| | | Average | Interest | e yield | Average | Interest | Average | Average | Interest | Average | | | Average | Interest | Average | Average | Interest | Average | Average | Interest | Average |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | balance | income | % | balance | income | yield % | balance | income | yield % | | | balance | expense | yield | balance | expense | yield | balance | expense | yield |
| | | (EUR millions) | | | (EUR millions) | | | (EUR millions) | | | | | (EUR millions) | | % | (EUR millions) | | % | (EUR millions) | | % |
| Time deposits with banks | 1 | | | | | | | | | | Time deposits from banks | | | | | | | | | | |
| domestic | | 8,213 | 95 | 1.2 | 3,395 | 41 | 1.2 | 16,234 | 89 | 0.6 | domestic | | 17,673 | 28 | 0.2 | 17,805 | 22 | 0.1 | 17,219 | 25 | 0.1 |
| foreign | | 34,583 | 912 | 2.6 | 40,970 | 1,016 | 2.5 | 39,807 | 536 | 1.4 | foreign | | 14,270 | 200 | 1.4 | 15,262 | 210 | 1.4 | 15,169 | 234 | 1.5 |
| Loans and advances | 1 | | | | | | | | | | Demand deposits | | | | | | | | | | |
| domestic | | 190,143 | 5,679 | 3.0 | 187,440 | 5,893 | 3.1 | 204,229 | 6,109 | 3.0 | domestic | | 66,667 | 498 | 0.7 | 60,679 | 289 | 0.5 | 59,207 | 164 | 0.3 |
| foreign | | 461,833 | 13,973 | 3.0 | 445,512 | 13,539 | 3.0 | 417,708 | 12,280 | 2.9 | foreign | | 108,193 | 32 | 0.0 | 95,977 | 29 | 0.0 | 83,878 | 21 | 0.0 |
| Interest-earning securities | 2 | | | | | | | | | | Time deposits | (1) | | | | | | | | | |
| domestic | | 29,892 | 347 | 1.2 | 29,454 | 336 | 1.1 | 28,856 | 400 | 1.4 | domestic | | 14,019 | 336 | 2.4 | 21,746 | 391 | 1.8 | 26,315 | 239 | 0.9 |
| foreign | | 50,156 | 917 | 1.8 | 50,699 | 1,055 | 2.1 | 61,035 | 1,341 | 2.2 | foreign | | 14,114 | 300 | 2.1 | 14,607 | 259 | 1.8 | 15,766 | 255 | 1.6 |
| Other interest-earning assets | | | | | | | | | | | Savings deposits | | | | | | | | | | |
| domestic | | 30,659 | 56 | 0.2 | 36,898 | 34 | 0.1 | 22,526 | 24 | 0.1 | domestic | | 93,911 | 114 | 0.1 | 92,203 | 121 | 0.1 | 92,818 | 246 | 0.3 |
| foreign | | 24,978 | 66 | 0.3 | 30,224 | 80 | 0.3 | 30,215 | 75 | 0.2 | foreign | | 266,470 | 1,301 | 0.5 | 261,398 | 1,257 | 0.5 | 263,340 | 1,502 | 0.6 |
| Total | | 830,456 | 22,047 | 2.7 | 824,594 | 21,994 | 2.7 | 820,610 | 20,854 | 2.5 | Short term debt | | | | | | | | | | |
| Non-interest earning assets | | 54,459 | | | 59,345 | | | 34,286 | | | domestic | | 22,559 | 180 | 0.8 | 18,253 | 96 | 0.5 | 6,958 | 47 | 0.7 |
| Derivatives assets | | 25,322 | | | 27,432 | | | 33,572 | | | foreign | | 17,928 | 405 | 2.3 | 31,521 | 553 | 1.8 | 23,479 | 260 | 1.1 |
| Total assets | | 910,238 | | | 911,370 | | | 888,468 | | | Long term debt | | | | | | | | | | |

Percentage of assets				domestic	72,012	1,700	2.455,080	1,525	2.860,915	1,520	2.5
applicable to foreign				foreign	14,110	317	2.212,765	345	2.714,424	435	3.0
operations	70.0%	70.2%	67.5%	Subordinated liabilities
				domestic	15,304	664	4.316,444	721	4.416,635	395	2.4

Interest income on				foreign		77	3	4.3	81	3	4.1	6	4.1
derivatives	5,499	5,556	22,498	Other interest	‑bearing
Other	617	579	644	liabilities
Total interest income	28,163	28,129	43,996	domestic		1,508	146	9.7	4,227	100	2.416,375	106	0.7
				foreign		10,162	140	1.416,310		192	1.264,595	756	1.2

Total748,9796,3630.8734,3596,1130.8777,2436,2110.8

(1) Securities purchased with agreements to resell are reflected in the categories Time deposits with banks, and Loans andNon-interest bearing

advances.liabilities86,107102,44935,447

(2) Substantially all interest-earning securities held by the banking operations of the Company are taxable securities.Derivatives liabilities24,37625,92733,297

Total Liabilities859,461862,735845,987

Group Capital50,77748,63542,481

Total liabilities and capital910,238911,370888,468

2019 ING Group Annual Report on Form 20-F240

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| | | | | | LIABILITIES | | | | | | | | 2019 over 2018 | | | | 2018 over 2017 | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | Interest-bearing liabilities | | | | | | | | | Increase (decrease) | | | | Increase (decrease) | | | |
| | | 2019 | | | 2018 | | | 2017 | | | | | due to changes in | | | | due to changes in | | | |
| | Average | Interest | Average | Average | Interest | Average | Average | Interest | Average | | | Average | Average | | Net | Average | Average | | Net | |
| | balance | expense | yield | balance | expense | yield | balance | expense | yield | | | volume | | rate | change | volume | | rate | change | |
| | (EUR millions) | | % | (EUR millions) | | % | (EUR millions) | | % | | | | (EUR millions) | | | | (EUR millions) | | | |
| | | | | | | | | | | Interest-earning assets | | | | | | | | | | |
| Percentage of liabilities | | | | | | | | | | Time deposits to banks | | | | | | | | | | |
| applicable to foreign | | | | | | | | | | domestic | | | 58 | –4 | 54 | –71 | | 22 | –48 | |
| operations | | 63.5% | | | 65.2% | | | 62.3% | | foreign | | –158 | | 55 | –103 | | 16 | 462 | 478 | |
| Other interest expense: | | | | | | | | | | Loans and advances | | | | | | | | | | |
| Interest expenses on | | | | | | | | | | domestic | | | 97 | –311 | –214 | –504 | | 289 | –216 | |
| derivatives | | 5,925 | | | 6,212 | | | 23,064 | | foreign | | 520 | | –85 | 435 | 818 | | 442 | 1,259 | |
| other | | 2,064 | | | 1,844 | | | 1,074 | | Interest-earning securities | | | | | | | | | | |
| Total interest expense | | 14,353 | | | 14,169 | | | 30,349 | | Domestic | | | 5 | 7 | 12 | | 8 | –73 | –65 | |
| Total net interest result | | 13,811 | | | 13,960 | | | 13,647 | | foreign | | –11 | | –127 | –138 | –227 | | –59 | –286 | |
| | | | | | | | | | | Other interest-earning assets | | | | | | | | | | |
| | | | | | | | | | | domestic | | | –6 | 28 | 22 | | 15 | –5 | 11 | |
| (1) These captions do not include deposits from banks. | | | | | | | | | | foreign | | –14 | | –1 | –15 | | – | 5 | | 5 |
| | | | | | | | | | | Interest income | | | | | | | | | | |
| ANALYSIS OF CHANGES IN NET INTEREST INCOME | | | | | | | | | | domestic | | 154 | | –280 | –126 | –552 | | 233 | –319 | |
| | | | | | | | | | | foreign | | 336 | | –157 | 179 | 606 | | 850 | 1,457 | |
| The following table allocates changes in the Group’s operations’ interest income and expense and | | | | | | | | | | Total | | 490 | | –437 | 53 | | 55 | 1,083 | 1,138 | |
| net interest result between changes in average balances and rates for the periods indicated. | | | | | | | | | | Other interest income | 1 | | | | –19 | | | | –17,007 | |
| | | | | | | | | | | Total interest income | | | | | 34 | | | | –15,869 | |
| Changes due to a combination of volume and rate have been allocated to changes in average | | | | | | | | | | | | | | | | | | | | |

volume. The net changes in interest income, interest expense and net interest result, as calculated (1) Since 2018, ING Group changed its separate presentation of interest (income and expenses) for trading derivatives, trading
in this table, have been reconciled to the changes in interest income, interest expense and netsecurities and trading loans / deposits (mainly repo’s) to presenting the full fair value movements in ‘Valuation results and
net trading income’.
interest result in the consolidated financial statements. See introduction to “Average Balances and

Interest Rates” for a discussion of the differences between interest income, interest expense and

net interest result as calculated in the following table and as set forth in the consolidated financial

statements.

2019 ING Group Annual Report on Form 20-F241

The following table shows the interest spread and net interest margin for the past two years.| | 2019 | 2018 | | | | 2019 over 2018 | | | | 2018 over 2017 | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | Average | Average | | | | Increase (decrease) | | | | Increase (decrease) | | | |
| | rate | rate | | | | due to changes in | | | | due to changes in | | | |
| | % | % | | | Average | Average | | Net | Average | | Average | | Net |
| Interest spread | | | | | volume | | rate | change | volume | | rate | change | |
| Domestic | 1.2 | 1.3 | | | | (EUR millions) | | | | (EUR millions) | | | |
| Foreign | 2.2 | 2.1 | Interest-bearing liabilities | | | | | | | | | | |
| Total | 1.8 | 1.8 | Time deposits from banks | | | | | | | | | | |
| Net interest margin | | | domestic | | | –0 | 7 | | 7 | 1 | | –5 | –4 |
| Domestic | 1.0 | 1.2 | foreign | | –14 | | 4 | | –9 | 1 | –26 | | –24 |
| Foreign | 2.3 | 2.2 | Demand deposits | | | | | | | | | | |
| Total | 1.9 | 1.9 | domestic | | | 29 | 180 | 209 | | 4 | 122 | | 126 |
| | | | foreign | | | 4 | –1 | | 3 | 3 | | 5 | 8 |
| | | | Time deposits | | | | | | | | | | |
| | | | domestic | | –139 | | 84 | –55 | | –42 | 193 | | 151 |
| | | | foreign | | | –9 | 49 | 40 | | –19 | | 23 | 4 |
| | | | Savings deposits | | | | | | | | | | |
| | | | domestic | | | 2 | –10 | | –8 | –1 | –124 | | –125 |
| | | | foreign | | | 25 | 18 | 44 | | –11 | –234 | | –245 |
| | | | Short term debt | | | | | | | | | | |
| | | | domestic | | | 23 | 62 | 85 | | 76 | –27 | | 49 |
| | | | foreign | | –238 | | 91 | –148 | | 89 | 203 | | 292 |
| | | | Long term debt | | | | | | | | | | |
| | | | domestic | | 469 | | –294 | 175 | | –146 | 150 | | 5 |
| | | | foreign | | | 36 | –64 | –28 | | –50 | –40 | | –90 |
| | | | Subordinated liabilities | | | | | | | | | | |
| | | | domestic | | –50 | | –8 | –58 | | –5 | 331 | | 326 |
| | | | foreign | | | –0 | 0 | | 0 | –3 | | –0 | –3 |
| | | | Other interest-bearing liabilities | | | | | | | | | | |
| | | | domestic | | –64 | | 110 | 46 | | –79 | | 72 | –6 |
| | | | foreign | | –72 | | 20 | –52 | | –565 | | 1 | –564 |
| | | | Interest expense | | | | | | | | | | |
| | | | domestic | | 269 | | 131 | 400 | | –191 | 712 | | 521 |
| | | | foreign | | –268 | | 118 | –150 | | –554 | –67 | | –622 |
| | | | Total | | | 1 | 249 | 250 | | –745 | 645 | | –100 |
| | | | Other interest expense | 1 | | | | –67 | | | | | –16,082 |
| | | | Total interest expense | | | | | 183 | | | | | –16,182 |
| | | | Net interest | | | | | | | | | | |
| | | | domestic | | –115 | | –411 | –526 | | –361 | –479 | | –840 |
| | | | foreign | | 604 | | –275 | 329 | | 1,160 | 918 | | 2,078 |
| | | | Net interest | | 488 | | –686 | –197 | | 800 | 439 | | 1,239 |
| | | | Other net interest result | | | | | 48 | | | | | –925 |
| | | | Net interest result | | | | | –149 | | | | | 314 |

2019 ING Group Annual Report on Form 20-F242

INVESTMENTS OF THE GROUP’S BANKING OPERATIONS
(1)Since 2018, ING Group changed its separate presentation of interest (income and expenses) for trading derivatives, tradingThe following table shows the balance sheet value under IFRS-IASB of the investments of the
securities and trading loans / deposits (mainly repo’s) to presenting the full fair value movements in ‘Valuation results and Group’s banking operations (excluding debt securities held in the trading portfolio).
net trading income’.| | Year ended 31 December | | |
| --- | --- | --- | --- |
| | 2019 | 2018 | 2017 |
| Debt securities at fair value through other comprehensive income | 30,483 | 25,616 | n/a |
| Debt securities at amortised cost | 46,108 | 47,276 | n/a |
| Debt securities at fair value through profit or loss | 3,067 | 3,218 | 1,739 |
| Debt securities available for sale | n/a | n/a | 65,747 |
| Debt securities held to maturity | n/a | n/a | 9,343 |

Shares and convertible debentures		2,464	3,4382	3,983
Land and buildings	1	803	834	839
Total		82,926	80,382	81,651

(1)Including commuted ground rents (2)The prior period has been updated to improve consistency and comparability.

2019 ING Group Annual Report on Form 20-F243

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| | Year ended 31 December | | | | | Year ended 31 December | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | 2019 | 2018 | | 2017 | | 2019 | 2018 | | 2017 |
| | | (EUR millions) | | | | | (EUR millions) | | |
| Debt securities at fair value through other comprehensive income | | | | | Debt securities available for sale | | | | |
| Dutch government | 1,831 | | 1,444 | n/a | Dutch government | n/a | | n/a | 7,053 |
| German government | 2,836 | | 2,278 | n/a | German government | n/a | | n/a | 10,682 |
| Belgian government | 1,997 | | 2,059 | n/a | Belgian government | n/a | | n/a | 4,892 |
| Other governments | 13,729 | 11,847 | | n/a | Other governments | n/a | | n/a | 19,804 |
| Central banks | 43 | | | n/a | Central banks | n/a | | n/a | 1,216 |
| Banks and financial institutions | 5,164 | | 5,321 | n/a | Banks and financial institutions | n/a | | n/a | 15,356 |
| Other corporate debt securities | 486 | | 484 | n/a | Other corporate debt securities | n/a | | n/a | 1,493 |
| U.S. Treasury and other U.S. Government agencies | 3,190 | | 1,061 | n/a | U.S. Treasury and other U.S. Government agencies | n/a | | n/a | 3,034 |
| Other debt securities | 1,206 | | 1,123 | n/a | Other debt securities | n/a | | n/a | 2,217 |
| Total debt securities at fair value through other comprehensive income | 30,483 | 25,616 | | n/a | Total debt securities available for sale | n/a | | n/a | 65,747 |

Debt securities at amortised cost				Debt securities held to maturity
Dutch government	6,155	6,484	n/a	Dutch government	n/a	n/a	1,087
German government	4,863	4,959	n/a	German government	n/a	n/a	238
Belgian government	1,975	2,285	n/a	Belgian government	n/a	n/a	628
Other governments	13,004	12,771	n/a	Other governments	n/a	n/a	2,240
Central banks	712	1,455	n/a	Central banks	n/a	n/a	310
Banks and financial institutions	11,478	11,906	n/a	Banks and financial institutions	n/a	n/a	908
Other corporate debt securities	305	974	n/a	Other corporate debt securities	n/a	n/a	209
U.S. Treasury and other U.S. Government agencies	6,419	4,959	n/a	U.S. Treasury and other U.S. Government agencies	n/a	n/a	3,507
Other debt securities	1,199	1,483	n/a	Other debt securities	n/a	n/a	216
Total debt securities at amortised cost	46,108	47,276	n/a	Total debt securities held to maturity	n/a	n/a	9,343

2019 ING Group Annual Report on Form 20-F244

Banking investment strategy

Year ended 31 December 2019 ING’s investment strategy for its investment portfolio related to the banking activities is formulated

BetweenBetween by the Asset and Liability Committee (“ALCO”). The exposures of the investments to market rate

1 year or1 and 55 and 10Over 10
movements are managed by modifying the asset and liability mix, either directly or through thelessyearsyearsyearsTotal| use of derivative financial products including interest rate swaps, futures, forwards and purchased | Securities at amortised cost | | | | |
| --- | --- | --- | --- | --- | --- |
| | Dutch government | 1,426 | 4,729 | | 6,155 |
| option positions such as interest rate caps, floors and collars. See “Item 11. Quantitative and | German government | 692 | 4,131 | 40 | 4,863 |
| Qualitative Disclosure of Market Risk”. | Belgian government | 110 | 139 | 1,726 | 1,975 |

Other governments2,3194,7535,49843313,004

Central banks712––712| | Banks and financial institutions | 2,524 | 6,634 | 2,320 | 11,478 |
| --- | --- | --- | --- | --- | --- |
| Portfolio maturity | Other corporate debt securities | 35 | 236 | 33 | 305 |

U.S. Treasury and other U.S. Government| | Year ended 31 December 2019 | | | | agencies | 32 | 3,391 | 1,551 | 1,445 | 6,419 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | Other debt securities | 2 | 543 | 459 | 195 | 1,199 |
| | Between | Between 5 | | | Total Securities at amortised cost | 7,851 | 24,556 | 11,628 | 2,074 | 46,108 |
| 1 year or | 1 and 5 | and 10 | Over 10 | | Yield(1) | 3.1 | 1.9 | 1.3 | 3.5 | |
| less | years | years | years | Total | | | | | | |

Fair value through other comprehensive
income(1) Since substantially all investment securities held by the banking operations of the Company are taxable securities, the
Dutch government161,400416–01,831yields are on a tax-equivalent basis.

German government631,9738012,836| Belgian government | 202 | 1,165 | 630 | | 1,997 | On 31 December 2019, ING Group also held the following securities for the banking operations that |
| --- | --- | --- | --- | --- | --- | --- |
| Other governments | 685 | 6,620 | 6,410 | 15 | 13,729 | exceeded 10 % of shareholders’ equity: |
| Central banks | 43 | | | | 43 | |

Banks and financial institutions3342,8671,963–05,164

Other corporate debt securities1761821284862019| U.S. Treasury and other U.S. Government | | | | | | | Book value | Market |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| agencies | 18 | 229 | 2,133 | 810 | 3,190 | | | value |
| Other debt securities | 1 | 91 | 659 | 455 | 1,206 | | (EUR millions) | |
| Fair value through other comprehensive | | | | | | German government | 11,527 | 11,796 |
| income | 1,537 | 14,528 | 13,139 | 1,280 | 30,483 | Dutch government | 9,403 | 9,538 |
| Yield(1) | 2.8 | 2.8 | 1.6 | 2.2 | | US Treasury and other US governments | 10,651 | 10,745 |
| | | | | | | Polish government | 7,450 | 7,442 |

(1) Since substantially all investment securities held by the banking operations of the Company are taxable securities, the yields are on tax-equivalent basis.

2019 ING Group Annual Report on Form 20-F245

LOAN PORTFOLIOMaturities and sensitivity of loans to changes in interest rates

The following table analyses loans and advances to banks and customers by time remaining until

maturity as of 31 December 2019.

Loans and advances to banks and customers| | | 1 year | 1 year | | After | |
| --- | --- | --- | --- | --- | --- | --- |
| | | or less | to 5 years | | 5 years | Total |
| Loans and advances to banks include all receivables from credit institutions, except for cash, | | | (EUR millions) | | | |
| current accounts and deposits with other banks (including central banks). Loans and advances to | By domestic offices: | | | | | |
| customers includes lending facilities to corporate and private customers encompass among others, | Loans guaranteed by public authorities | 2,311 | 1,897 | | 21,132 | 25,340 |
| loans, overdrafts and finance lease receivables. | Loans secured by mortgages | 5,811 | 16,091 | | 95,298 | 117,199 |
| | Loans guaranteed by credit institutions | 12,705 | 1,060 | | 82 | 13,847 |
| | Other private lending | 1,591 | | 905 | 987 | 3,482 |
| The following table sets forth the gross loans and advances to banks and customers as of 31 | Other corporate lending | 22,253 | 13,215 | | 4,177 | 39,645 |
| December 2019, 2018, 2017, 2016 and 2015 under IFRS-IASB. | Total domestic offices | 44,670 | 33,167 | | 121,676 | 199,514 |

						By foreign offices:
IFRS-IASB		Year ended December 31				Loans guaranteed by public authorities	3,507	6,440	6,902	16,849
	2019	2018	2017	2016	2015	Loans secured by mortgages	23,577	57,244	150,506	231,327
By domestic offices:						Loans guaranteed by credit institutions	18,725	3,658	2,686	25,069
Loans guaranteed by public authorities	25,340	24,547	26,975	27,746	30,912	Other private lending	6,439	12,826	5,504	24,768
Loans secured by mortgages	117,199	117,848	119,514	123,378	124,771	Other corporate lending	55,966	72,772	21,495	150,233
Loans to or guaranteed by credit institutions	13,847	8,163	8,157	10,582	16,343	Total foreign offices	108,213	152,940	187,093	448,246
Other private lending	3,482	3,304	3,162	3,236	5,636	Total gross loans and advances to banks and customers	152,883	186,107	308,769	647,759
Other corporate lending	39,645	37,213	38,208	39,669	197,069
Total domestic offices	199,514	191,074	196,016	204,611	374,731
						The following table analyzes loans and advances to banks and customers by interest rate

By foreign offices:							sensitivity by maturity as of 31 December 2019.
Loans guaranteed by public authorities	16,849		17,257	19,397	18,634	18,214
Loans secured by mortgages	231,327	219,530		204,451	195,328	179,938			1 Year or
Loans to or guaranteed by credit institutions	25,069		25,364	22,641	19,427	17,688			less	Over 1 Year	Total
Other private lending	24,768		21,563	20,074	18,723	17,041	Non-interest earning		3,584	1,032	4,617
Asset backed securities excluding MBS		–	–	2,209	3,380	4,937	Fixed interest rates		61,570	87,181	148,751
Other corporate lending	150,233	149,787		140,455	134,092	119,161	Floating or adjustable interest rates	(1)	87,729	406,662	494,391
Total foreign offices	448,246	433,500		409,227	389,585	356,979	Total		152,883	494,876	647,759

Total gross loans and advances to banks and

customers647,759624,575605,243594,196731,710 (1) Loans that have an interest rate that remains fixed for more than one year and which can then be changed are classified as “adjustable interest rates”

2019 ING Group Annual Report on Form 20-F246

Loan concentrationFor commercial lending portfolios, there generally are reasons for declaring a loan non-performing

The following industry concentrations were in excess of 10% of total loans as of 31 December,prior to being 90 days past due.

2019:

These reasons include, but are not limited to, ING’s assessment of the customer’s perceived

Total outstandinginability to meet its financial obligations, or the customer filing for bankruptcy or bankruptcy
Private Individuals38.9% protection.

The total loans classified as non performing, including those loans classified as past due 90 days

Risk elements and still accruing interest, amounts to EUR 11,477 million as of 31 December 2019.

Loans Past Due 90 days and Still Accruing Interest For information on credit restructuring reference is made to “Additional information – ING Group Loans past due 90 days and still accruing interest are loans that are contractually past due 90 days Risk Management”.
or more as to principal or interest on which we continue to recognize interest income on an accrual

basis in accordance with IFRS-IASB. Once an impairment loss is recognized for a loan, interest

Troubled Debt Restructurings

income is recognized using the rate of interest used to discount the future cash flows for the Troubled debt restructurings are loans that we have restructured due to deterioration in the purpose of measuring the impairment loss.
borrower’s financial position and in relation to which, for economic or legal reasons related to the

borrower’s deteriorated financial position, we have granted a concession to the borrower that we The following table sets forth the gross balance of the loans past due 90 days and still accruing would not have otherwise granted.
interest for the years ended 31 December 2019, 2018, 2017, 2016 and 2015 under IFRS-IASB.

The following table sets forth the gross outstanding balances of the troubled debt restructurings as IFRS-IASBYear ended 31 December of December 31 2019, 2018, 2017, 2016 and 2015 under IFRS-IASB.

(EUR millions)

20192018201720162015| Domestic | 2,272 | 2,948 | 4,343 | 5,292 | 7,523 | IFRS-IASB | | Year ended 31 December | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Foreign | 3,126 | 2,427 | 3,861 | 3,338 | 4,055 | | 2019 | 2018 | 2017 | 2016 | 2015 |
| Total loans past due 90 days and still accruing | | | | | | | | | (EUR millions) | | |
| interest | 5,398 | 5,375 | 8,204 | 8,630 | 11,578 | Troubled debt restructurings: | | | | | |

Domestic86967267532586| As of 31 December 2019, EUR5,398 million of the loans past due 90 days and still accruing interest | Foreign | 946 | 779 | 330 | 277 | 376 |
| --- | --- | --- | --- | --- | --- | --- |
| | Total troubled debt restructurings | 1,815 | 1,451 | 1,005 | 602 | 462 |
| have a loan loss provision. ING’s loan portfolio is under constant review. Loans with past due | | | | | | |

financial obligations of more than 90 days are reclassified as non-performing.

2019 ING Group Annual Report on Form 20-F247

Relationship Between Forbearance and Troubled Debt Restructurings (TDR)corporate borrowers. As ING will ordinarily receive compensation in connection with such
Both forbearance and TDR refer to a situation in which a debtor is facing financial difficulties andconcessions (generally through additional interest income), these concessions would typically not
the creditor grants concessions in respect of the terms of the loans, but the application of theresult in a significant NPV loss or would result in a delay in payment that we would consider to be
respective guidance, specifically the entry criteria under both standards, results in differencesinsignificant taking into account the remaining duration of the loan. Debt forgiveness, either
between the total amount of reported forborne loans and the amount of forborne loans which arethrough principal or interest reductions, is generally not granted by ING, but to the extent granted
considered TDR.would likely result in the loan being classified as TDR.

This difference is due to ING’s determination of forbearance being based on the criteria in theAs a result of the application of these two standards, ING reports a significantly larger amount of
European Implementing Technical Standards on Supervisory reporting on forbearance and non-loans in the forborne category than in the TDR category. The following table (in EUR millions) sets
performing exposures under article 99(4) of Regulation (EU) No 575/2013 (the “EU Standard”), whileforth total forborne loans and loans that are TDR as of December 31, 2019, 2018 and 2017, as well
ING’s determination of Troubled Debt Restructurings (TDR) is based on FASB codification (ASC) 310-as a reconciliation indicating the categories of forborne loans under the EU Standard which do not
40 “Troubled Debt Restructurings by Creditors” (the “TDR Standard”).meet the criteria of the TDR Standard.| Under the EU Standard, all concessions that ING makes in respect of a loan given to a debtor in | | 2019 | 2018 | 2017 |
| --- | --- | --- | --- | --- |
| financial difficulty will result in a loan being considered forborne, including modification of payment | Total Forborne Loans (EU Standard) | 9,492 | 10,094 | 11,819 |
| terms (such as interest deferrals or extensions of maturity) as well as concessions that do not have | Wholesale Banking: | | | |
| any impact on cash flows, such as when ING waives covenant or other non-payment-related loan | Concessions not reducing cash flows (e.g., covenant waiver) | –1,018 | –1,429 | –2,359 |
| | Concessions that do not result in significant delay in payment (1) | –2,536 | –2,244 | –2,817 |
| terms. As a result, the “Total Forborne Loans” in the table below represents all loans where ING has | | | | |
| made borrower concessions, regardless of the impact of such concessions on the timing or | Retail Banking: | | | |
| likelihood of repayment. | Concessions that do not result in significant delay of payment | –4,029 | –4,696 | –5,317 |

	Other	–94	–274	–321
Under the TDR Standard, however, loans may only be classified as TDR if the creditor has granted a	Total Loans that are Troubled Debt Restructurings (TDR Standard)	1,815	1,451	1,005

concession and as a result of such concession does not expect to collect all amounts due, including (1) This category includes concessions where the NPV loss is less than 1%.
both interest and principal. For these purposes, the TDR Standard also provides that concessions that result in a delay in payment that is only considered “insignificant” will not result in the loan being considered TDR. This means that the loans reported by ING as TDR will not include loans for which covenant or other non-payment terms have been modified, as well as loans for which payment-related concessions would, in ING’s judgment, result in only insignificant delays in repayment. Examples of concessions which result in only insignificant delays in payment would include temporary payment holidays for retail mortgage clients, or standstill arrangements with

2019 ING Group Annual Report on Form 20-F248

Interest Income on Troubled Debt Restructuringswere no outstandings exceeding 1% of total assets in any country where current conditions give

The following table sets forth the gross interest income that would have been recorded during therise to liquidity problems which are expected to have a material impact on the timely repayment of

year ended 31 December 2019 on troubled debt restructurings had such loans been current ininterest or principal.

accordance with their original contractual terms and interest income on such loans that was

actually included in interest income during the year ended 31 December 2019.The following tables analyze cross-border outstandings as of the end of 31 December 2019, 2018

and 2017 stating the name of the country and the aggregate amount of cross-border outstandings| | Domestic | Foreign | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | Offices | Offices | | Total | | | | | | | | | | |
| Interest income that would have been recognized under the | | | | | | | | | Year ended 31 December 2019 | | | | | |
| original contractual terms | | 17 | 40 | 58 | | | | Banks & | | | | | Cross- | |
| Interest income recognized in the profit and loss account | | 10 | 17 | 27 | | Government | | other | | | | | border | |
| | | | | | | & official | | financial | Commercial | | | | Commitmen | |
| Potential Problem Loans | | | | | | institutions | institutions | | & industrial | | Other | Total | ts | |
| | | | | | | | | | | (EUR millions) | | | | |
| Potential problem loans are loans that are not classified as loans past due 90 days and still | | | | | United States of America | 9,890 | | 5,994 | | 70,325 | 1,707 | 87,917 | 25,965 | |
| accruing interest or troubled debt restructurings and amounted to EUR 4,845 million as of 31 | | | | | United Kingdom | 1,811 | | 18,552 | | 14,665 | 3,496 | 38,525 | 7,314 | |
| | | | | | France | 1,318 | | 15,824 | | 17,720 | 991 | 35,854 | 8,670 | |
| December 2019. Of this total, EUR 1,865 million relates to domestic loans and EUR 2,980 million | | | | | Ireland | | 55 | 1,628 | | 19,168 | 211 | 21,061 | 1,720 | |
| relates to foreign loans. These loans are considered potential problem loans as there is known | | | | | Luxembourg | | 949 | 7,165 | | 6,595 | 1,286 | 15,996 | 3,303 | |
| information about possible credit problems causing us to have serious doubts as to the ability of | | | | | Germany | 2,400 | | 5,216 | | 3,985 | 3,869 | 15,470 | 11,974 | |
| | | | | | Switzerland | 1,192 | | 717 | | 11,501 | 1,989 | 15,399 | 2,060 | |
| the borrower to comply with the present loan repayment terms and which may result in classifying | | | | | Singapore | | 0 | 1,322 | | 12,343 | 1,119 | 14,783 | | 795 |
| the loans as loans past due 90 days and still accruing interest or as troubled debt restructurings. | | | | | Cayman Islands | | | 10,657 | | 645 | 143 | 11,445 | | 479 |
| | | | | | China | | 54 | 4,924 | | 1,180 | 4,563 | 10,721 | | 331 |

Cross-border outstandings

Cross-border outstandings are defined as loans (including accrued interest), acceptances, interest-

earning deposits with other banks, other interest-earning investments and any other monetary

assets that are denominated in euro or other non-local currency. To the extent that material local

currency outstandings are not hedged or are not funded by local currency borrowings, such

amounts are included in cross-border outstandings.

Commitments such as irrevocable letters of credit are not considered as cross border outstanding.

Total outstandings are in line with Dutch Central Bank requirements. On 31 December 2019, there

2019 ING Group Annual Report on Form 20-F249

The following table Discloses cross-border outstandin’s as of the end of 31 December 2019, 2018

Year ended 31 December 2018and 2017 stating the name of the country and the aggregate amount of cross-border outstandings| | | | Banks & | | | | Cross- | | to borrowers in each foreign country where such outstandings are between 0.75 percent and 1.0 | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | Government | | other | | | | border | | | |
| | & official | | financial | Commercial | | | Commitmen | | percent of total assets. | |
| | institutions | institutions | | & industrial | Other | Total | ts | | | |
| | | | | (EUR millions) | | | | | | Year ended |
| United States of America | 6,054 | | 5,759 | 71,956 | 2,407 | 86,176 | 19,819 | | | 2019 |
| United Kingdom | 1,420 | | 14,756 | 13,213 | 2,376 | 31,766 | 6,415 | | | |
| France | 1,851 | | 11,535 | 16,017 | 979 | 30,383 | 2,360 | | | (EUR millions) |
| Ireland | | | 1,819 | 19,506 | 142 | 21,467 | 1,008 | | Belgium | 8,277 |
| Switzerland | | 220 | 3,087 | 13,406 | 1,886 | 18,598 | 2,272 | | Hong Kong | 8,232 |
| Germany | 2,965 | | 3,837 | 3,800 | 3,935 | 14,537 | 12,142 | | Canada | 8,169 |
| Luxembourg | | 863 | 2,969 | 8,026 | 1,369 | 13,227 | 3,901 | | Japan | 7,674 |
| Singapore | | | 1,163 | 9,823 | 769 | 11,755 | | 774 | Turkey | 6,630 |
| China | | 31 | 4,920 | 1,848 | 3,969 | 10,768 | | 733 | | |
| Belgium | | 997 | 1,805 | 7,054 | 845 | 10,702 | 13,954 | | | Year ended |

2018| | | | | Year ended 31 December 2017 | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | Banks & | | | | | Cross- | | | (EUR millions) |
| | Government | | other | | | | | border | | Cayman Islands | 8,516 |
| | & official | | financial | Commercial | | | | Commitmen | | Turkey | 7,831 |
| | institutions | institutions | | & industrial | | Other | Total | ts | | Spain | 7,523 |
| | | | | | (EUR millions) | | | | | Hong Kong | 7,083 |
| United States | 6,665 | | 7,165 | | 65,444 | 2,727 | 82,001 | 16,621 | | Japan | 6,792 |
| France | 2,564 | | 24,353 | | 15,333 | 1,230 | 43,479 | 7,840 | | | |
| United Kingdom | 1,263 | | 13,493 | | 14,373 | 2,574 | 31,702 | 6,442 | | | Year ended |
| Switzerland | | 4 | 7,594 | | 10,800 | 2,700 | 21,098 | 2,521 | | | 2017 |
| Ireland | | | 574 | | 19,686 | 161 | 20,421 | | 927 | | |
| Germany | 4,404 | | 5,873 | | 3,897 | 3,267 | 17,441 | 12,585 | | | (EUR millions) |
| Belgium | | 439 | 2,612 | | 12,496 | 812 | 16,359 | 14,484 | | Japan | 8,332 |
| China | | 85 | 7,849 | | 2,248 | 5,490 | 15,671 | | 320 | Canada | 6,116 |
| Singapore | | | 1,601 | | 9,175 | 550 | 11,326 | | 618 | Cayman Islands | 6,062 |
| Luxembourg | | 508 | 2,151 | | 6,910 | 1,598 | 11,167 | 3,445 | | | |
| Turkey | 1,274 | | 3,710 | | 5,312 | 234 | 10,530 | 1,139 | | | |
| Hong Kong | | | 4,512 | | 4,134 | 575 | 9,221 | | 300 | | |

2019 ING Group Annual Report on Form 20-F250

Summary of Loan Loss Experience| | IFRS-IASB | | Calendar period | | | |
| --- | --- | --- | --- | --- | --- | --- |
| | | 2019 | 2018(1) | 2017 | 2016 | 2015 |
| For further explanation on loan loss provision reference is made to Note 1 ‘Accounting Policies’ and | | | (EUR millions) | | | |
| Additional info – Risk Management. | Balance on 1 January | 4,568 | 4,521 | 5,308 | 5,786 | 5,995 |
| | Effect of changes in accounting policy | | 795 | | | |
| | Write-offs: | | | | | |
| The following table presents the movements in allocation of the provision for loan losses on loans | Domestic: | | | | | |
| accounted for as loans and advances to banks and customers for 2019, 2018, 2017, 2016 and 2015 | Loans guaranteed by public authorities | | –69 | | –207 | |
| under IFRS-IASB. | Loans secured by mortgages | –127 | –127 | –231 | –323 | –436 |
| | Loans to or guaranteed by credit institutions | | | –5 | | |
| | Other private lending | –72 | –177 | –48 | –93 | –121 |
| | Other corporate lending | –264 | –105 | –409 | –234 | –447 |
| | Foreign: | | | | | |
| | Loans secured by mortgages | –48 | –70 | –66 | –129 | –154 |
| | Loans to or guaranteed by credit institutions | | –1 | | | |
| | Other private lending | –144 | –141 | –188 | –233 | –303 |
| | Other corporate lending | –375 | –354 | –331 | –275 | –257 |
| | Total write-offs | –1,030 | –1,044 | –1,278 | –1,494 | –1,718 |

Loans guaranteed by public authorities
Loans secured by mortgages	13	15	24	14	23
Other private lending	10	11	15	15	16
Other corporate lending	7	14	19	6	–5
Foreign:
Loans secured by mortgages	2	2	3	3	4
Other private lending	11	4	7	8	37
Other corporate lending	12	7	–8	48	16
Total recoveries	55	53	60	94	91
Net write-offs	–975	–992	–1,218	–1,400	–1,627

Additions and other adjustments (included in value Adjustments
to receivables of the Banking operations)		1,052	244	538	922	1,418
Balance on 31 December		4,645	4,568	4,628	5,308	5,786
Ratio of net charge	‑offs to average loans and advances to banks
and customers		0.14%	0.15%	0.20%	0.23%	0.28%

(1) As from 1 January 2018 changes in loan loss provision presents IFRS 9 expected credit losses (excluding IAS 37 provisions for non-credit replacement positions). The IAS 39 comparative 2017 amount includes IAS 37 provision for all off balance positions

2019 ING Group Annual Report on Form 20-F251

Additions to the provision for loan losses presented in the table above were influenced by(2) As from 1 January 2018 changes in loan loss provision presents IFRS 9 expected credit losses (excluding IAS 37 provisions

for non-credit replacement positions). The IAS 39 comparative 2017 amount includes IAS 37 provision for all off balance developments in general economic conditions as well as certain individual exposures. The following positions.

table shows the allocation of the provision for loan losses on loans accounted for as loans and

advances to banks and to customers, to financial assets at at fair value through otherDEPOSITS

comprehensive income and amortised cost and contingent liabilities for 2019, 2018, 2017, 2016

and 2015 under IFRS-IASB.
For information on deposits reference is made to Note 13 ‘Deposits from banks’ and Note 14 ‘

Customer deposits’ of the consolidated financial statements.

IFRS-IASBYear ended December 31

20192018(2)201720162015

EUR%(1)EUR%(1)EUR%(1)EUR%(1)EUR%(1)For the years ended 31 December 2019, 2018 and 2017 the aggregate amount of deposits by

(EUR millions)foreign depositors in domestic offices was EUR 27,649 million EUR 27,586 million and EUR 43,572

Domestic: million, respectively.
Loans guaranteed by public

authorities44455| Loans secured by mortgages | 472 | 18421 | 19 | 347 | 20 | 550 | 21 | 819 | 22 | Outstanding of time certificates of deposit and other time deposits > EUR 20.000 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Loans to or guaranteed by credit | | | | | | | | | | |
| institutions | 6 | 2 | 5 | 1 | 2 | 1 | 2 | 2 | 2 | On 31 December 2019, the amount of domestic time certificates of deposit and other time |

Other private lending7211191118112211771deposits, exceeding EUR 20,000, issued by domestic offices by time remaining until maturity was:

Other corporate lending657695961,26861,73861,9047| Total domestic | 1,207 | 311,504 | 31 | 1,735 | 32 | 2,412 | 34 | 2,900 | 37 | | | Time certificates of | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Foreign: | | | | | | | | | | | | | deposit | | Other time deposits | |
| Loans guaranteed by public | | | | | | | | | | | | (EUR | | % | (EUR | % |
| authorities | 3 | 3 | 7 | 3 | 3 | 3 | 7 | 3 | 2 | 3 | | millions) | | | millions) | |
| Loans secured by mortgages | 599 | 36700 | 35 | 526 | 34 | 638 | 32 | 717 | 30 | | 3 months or less | 3,912 | | 39.5 | 7,487 | 29.5 |
| Loans to or guaranteed by credit | | | | | | | | | | | 6 months or less but over 3 months | 1,298 | | 13.1 | 11,093 | 43.6 |
| institutions | 4 | 4 | 8 | 4 | 7 | 412 | | 315 | | 3 | 12 months or less but over 6 months | 4,702 | | 47.4 | 913 | 3.6 |
| Other private lending | 820 | 4763 | | 3746 | | 3620 | | 3712 | | 3 | Over 12 months | | | | 5,921 | 23.3 |
| Mortgage backed securities | | | | | 9 | | 2 | 1 | 2 | 1 | | | | | | |
| Other corporate lending | 1,992 | 231,563 | 24 | 1,602 | 23 | 1,617 | 23 | 1,438 | 22 | | Total | 9,912 | | | 25,414 | |

Total foreign3,418693,041692,893672,896662,88663

Total4,6251004,5451004,6281005,3081005,786100

LLP financial assets at FVOCI1011

LLP Securities at AC1011

Total provisions4,6454,568

(1) The percentages represent the loans in each category as a percentage of the total loan portfolio for loans and advances to

banks and customers.

2019 ING Group Annual Report on Form 20-F252

The following table shows the amount outstanding for time certificates of deposit and other timeThe following table sets forth certain information relating to the categories of our short-term

deposits exceeding EUR 20,000 issued by foreign offices on December 31 2019.borrowings.

IFRS-IASBYear ended 31 December| | (EUR | | 2019 | 2018 | 2017 |
| --- | --- | --- | --- | --- | --- |
| Time certificates of deposit | millions)4,000 | | (EUR millions, except % data) | | |
| Other time deposits | 23,279 | Commercial paper: | | | |
| Total | 27,278 | Balance at the end of the year | 27,581 | 33,471 | 20,506 |
| | | Monthly average balance outstanding during the year | 28,751 | 34,647 | 17,600 |
| | | Maximum balance outstanding at any period end during the year | 36,692 | 39,556 | 20,748 |
| | | Weighted average interest rate during the year | 1.36% | 1.37% | 1.19% |
| Short-term Borrowings | | Weighted average interest rate on balance at the end of the year | 1.42% | 1.42% | 1.02% |

Short-term borrowings are borrowings with an original maturity of one year or less. Commercial	Securities sold under repurchase agreements:
paper and securities sold under repurchase agreements are the only significant categories of short-	Balance at the end of the year	43,255	52,481	41,672
	Monthly average balance outstanding during the year	57,501	76,953	65,465
term borrowings within our banking operations.	Maximum balance outstanding at any period end during the year	64,334	92,796	89,225
	Weighted average interest rate during the year	2.42%	1.63%	0.98%
	Weighted average interest rate on balance at the end of the year	3.22%	2.38%	1.54%

2019 ING Group Annual Report on Form 20-F253

Contents

Consolidated statement of financial positionF – 4

Consolidated statement of profit or lossF – 5

Consolidated statement of comprehensive incomeF – 7

Consolidated statement of changes in equityF – 8

Consolidated statement of cash flowsF – 11

Notes to the consolidated financial statementsF – 13

2019 ING Group Annual Report on Form 20-FF - 1

Report of independent registered public accounting firm

Recognition and Measurement’ and IFRS 7 ‘Financial Instruments: Disclosures’ in relation to the To the Shareholders and the Supervisory Board
Interest Rate Benchmark Reform as issued by the IASB in September 2019. The Company changed ING Groep N.V.:
its method of accounting for financial instruments in 2018 due to the adoption of International

Opinion on the Consolidated Financial StatementsFinancial Reporting Standard 9, ‘Financial Instruments’.

We have audited the accompanying consolidated statements of financial position of ING Groep N.V.

Basis for Opinion and subsidiaries (‘the Company’) as of December 31, 2019 and 2018, the related consolidated
These consolidated financial statements are the responsibility of the Company’s management. Our statements of profit or loss, comprehensive income, changes in equity, and cash flows for each of
responsibility is to express an opinion on these consolidated financial statements based on our the years in the three year period ended December 31, 2019, and the related notes and specific
audits. We are a public accounting firm registered with the PCAOB and are required to be disclosures described in Note 1 of the consolidated financial statements as being part of the
independent with respect to the Company in accordance with the U.S. federal securities laws and consolidated financial statements (collectively: ‘the consolidated financial statements’). In our
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
opinion, the consolidated financial statements present fairly, in all material respects, the financial

position of the Company as of December 31, 2019 and 2018, and the results of its operations and itsWe conducted our audits in accordance with the standards of the PCAOB. Those standards require

cash flows for each of the years in the three year period ended December 31, 2019, in conformitythat we plan and perform the audit to obtain reasonable assurance about whether the consolidated

with International Financial Reporting Standards as issued by the International Accountingfinancial statements are free of material misstatement, whether due to error or fraud. Our audits

Standards Board.included performing procedures to assess the risks of material misstatement of the consolidated

financial statements, whether due to error or fraud, and performing procedures that respond to those We also have audited, in accordance with the standards of the Public Company Accounting
risks. Such procedures included examining, on a test basis, evidence regarding the amounts and Oversight Board (United States) (‘PCAOB’), the Company’s internal control over financial reporting
disclosures in the consolidated financial statements. Our audits also included evaluating the as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework
accounting principles used and significant estimates made by management, as well as evaluating (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our
the overall presentation of the consolidated financial statements. We believe that our audits provide report dated March 2, 2020 expressed an unqualified opinion on the effectiveness of the Company’s
a reasonable basis for our opinion.
internal control over financial reporting.

Critical Audit Matter

Changes in Accounting Principle

The Critical Audit Matter communicated below is a matter arising from the current period audit of the As discussed in Note 1 to the consolidated financial statements, the Company has changed its
consolidated financial statements that was communicated or required to be communicated to the method of accounting in 2019 due to the adoption of International Financial Reporting Standard 16,
Audit Committee and that: (1) relates to accounts or disclosures that are material to the consolidated ‘Leases’. The Company early adopted the amendments to IAS 39 ‘Financial Instruments:

2019 ING Group Annual Report on Form 20-FF - 2

financial statements and (2) involved our especially challenging, subjective, or complex judgement.-We involved professionals with specialised skills and knowledge who assisted in:

The communication of a Critical Audit Matter does not alter in any way our opinion on the ●evaluating the inputs, assumptions and judgements to determine the PD, LGD, and EAD
consolidated financial statements, taken as a whole, and we are not, by communicating the Critical parameters in models used by the Company to calculate the collective provisions;

Audit Matter below, providing a separate opinion on the Critical Audit Matter or on the accounts or ●assessing the criteria and thresholds used to identify loans that experienced a significant disclosures to which it relates.
increase in credit risk.

Assessment of Expected Credit Losses on loans and advances to customers and banks.-With the assistance of Corporate Finance professionals and Real Estate Valuation professionals

As discussed in the Credit Risk section on pages 172-207, and in Note 7 and Note 3 to thewith specialised skills and knowledge, we assessed the methodologies, cash flows and collateral
consolidated financial statements, the loans and advances to customers and loans and advances tovalues used in expected future recovery cash flow assessments of provisions for impaired loans,
banks amounts are EUR 608 billion and EUR 35 billion, respectively, as at December 31, 2019.including the Company’s judgements made.

These loans and advances are measured at amortised cost, less a provision for Expected Credit-We involved economic professionals with specialised skills and knowledge to assist in the
Losses (‘ECL’) of EUR 4.6 billion. Considerable judgement is exercised in determining the amount of assessment of the Company’s methodology in determining the macro-economic scenarios used
ECL for loans and advances to customers and banks assessed on both a collective and an in the ECL calculation.
individual basis.
/s/ KPMG Accountants N.V.
We identified the assessment of ECL on loans and advances to customers and banks as a Critical We have served as the Company’s auditor since 2016.
Audit Matter because there was a high degree of estimation uncertainty as a result of complexity of
Amstelveen, the Netherlands the models, inputs, assumptions and judgements in measuring the ECL. Specifically, assessment of
March 2, 2020 the probability of default (‘PD’), the loss given default (‘LGD’), and the exposure at default (‘EAD’),

including expected future recovery cash flows, the use of the macro-economic assumptions in the

ECL, and the criteria for identifying significant increase in credit risk (‘SICR’) required significant and

complex auditor judgement and knowledge and experience in the industry.

The primary procedures we performed to address this Critical Audit Matter, included the following:

-We tested certain internal controls over the Company’s ECL process for loans and advances to

customers and banks, including controls related to governance and monitoring of the ECL, review

of the relevant loan inputs used in the collective provisioning models, determination of risk ratings,

and the estimated future recovery cash flows of individual loan provisions. Furthermore, we tested

certain internal controls with respect to the assessment of the PD, LGD, and EAD assumptions in

credit risk models used to calculate the collective ECL, including the development of macro-

economic scenarios, SICR criteria, and review of model outputs.

2019 ING Group Annual Report on Form 20-FF - 3

Consolidated statement of financial position

As at 31 December| in EUR million | | | | | | 2019 | 1 | 2018 | | | | | 2019 | 1 | 2018 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Assets | | | | | | | | | Liabilities | | | | | | |
| Cash and balances with central banks | | | 2 | | | 53,202 | 49,987 | | Deposits from banks | | 13 | | 34,826 | 37,330 | |
| Loans and advances to banks | | 3 | | | | 35,136 | 30,422 | | Customer deposits | | 14 | | 574,355 | 555,729 | |
| Financial assets at fair value through profit or loss | | | | 4 | | | | | Financial liabilities at fair value through profit or loss | | | 15 | | | |
| – Trading assets | | | | | | 49,254 | 50,152 | | – Trading liabilities | | | | 28,042 | 31,215 | |
| – Non-trading derivatives | | | | | | 2,257 | | 2,664 | – Non-trading derivatives | | | | 2,215 | | 2,299 |
| – Designated as at fair value through profit or loss | | | | | | 3,076 | | 2,887 | – Designated as at fair value through profit or loss | | | | 47,684 | 59,179 | |
| – Mandatorily at fair value through profit or loss | | | | | | 41,600 | 64,783 | | Current tax liabilities | | | | 554 | | 822 |
| Financial assets at fair value through other comprehensive income | | | | | 5 | 34,468 | 31,223 | | Deferred tax liabilities | | 37 | | 322 | | 180 |
| Securities at amortised cost | | 6 | | | | 46,108 | 47,276 | | Provisions | 16 | | | 688 | | 1,011 |
| Loans and advances to customers | | | 7 | | | 608,029 | 589,653 | | Other liabilities | 17 | | | 12,829 | 13,510 | |
| Investments in associates and joint ventures | | | | 8 | | 1,790 | | 1,203 | Debt securities in issue | | 18 | | 118,528 | 119,751 | |
| Property and equipment | | 9 | | | | 3,172 | | 1,659 | Subordinated loans | | 19 | | 16,588 | 13,724 | |
| Intangible assets | 10 | | | | | 1,916 | | 1,839 | Total liabilities | | | | 836,631 | 834,751 | |
| Current tax assets | | | | | | 251 | | 202 | | | | | | | |
| Deferred tax assets | 37 | | | | | 1,242 | | 958 | Equity20 | | | | | | |
| Other assets | 11 | | | | | 7,018 | | 8,433 | Share capital and share premium | | | | 17,117 | 17,088 | |
| Assets held for Sale | 12 | | | | | | | 1,262 | Other reserves | | | | 4,013 | | 3,621 |
| | | | | | | | | | Retained earnings | | | | 29,866 | 28,339 | |
| | | | | | | | | | Shareholders’ equity (parent) | | | | 50,996 | 49,049 | |
| | | | | | | | | | Non-controlling interests | | | | 893 | | 803 |
| | | | | | | | | | Total equity | | | | 51,889 | 49,851 | |

Total assets888,520884,603Total liabilities and equity888,520884,603

1 The amounts for the period ended December 2019 have been prepared in accordance with IFRS 16. The right-of-use-assets are presented under line-item 'Property and Equipment' and the lease liability is included in line-item 'Other liabilities'. Prior period amounts have not been restated.
References relate to the accompanying notes. These are an integral part of the Consolidated financial statements.

2019 ING Group Annual Report on Form 20-FF - 4

Consolidated statement of profit or loss

for the years ended 31 December| in EUR million | | 2019 | 1 | 20181 | 2017 | 1 | | | | 20191 | 20181 | 20171 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Continuing operations | | | | | | | | | | | | |
| Interest income using effective interest rate method | | 25,056 | 25,249 | | n/a | | Addition to loan loss provisions | | 7 | 1,120 | 656 | 676 |
| Other interest income | | 3,107 | | 2,880 | n/a | | Staff expenses | 27 | | 5,755 | 5,420 | 5,202 |
| Total interest income | | 28,163 | 28,129 | | 43,996 | | Other operating expenses | | 28 | 4,598 | 5,262 | 4,627 |
| | | | | | | | Total expenses | | | 11,472 | 11,338 | 10,505 |
| Interest expense using effective interest rate method | | –11,268 | –11,171 | | n/a | | | | | | | |
| Other interest expense | | –3,084 | –2,997 | | n/a | | Result before tax from continuing operations | | | 5,653 | 6,986 | 8,085 |
| Total interest expense | | –14,353 | –14,169 | | –30,349 | | | | | | | |
| | | | | | | | Taxation | 37 | | 1,652 | 2,116 | 2,539 |
| Net interest income | 21 | 13,811 | 13,960 | | 13,647 | | Net result from continuing operations | | | 4,001 | 4,869 | 5,546 |

Fee and commission income		4,439	4,240	3,865	Net result (before non-controlling interests)	4,001	4,869	5,546
Fee and commission expense		–1,571	–1,442	–1,155	Net result attributable to Non-controlling interests	99	108	82
Net fee and commission income	22	2,868	2,798	2,710	Net result attributable to Equityholders of the parent	3,903	4,761	5,464

Valuation results and net trading income23–1591,2271,5121 The amounts for the period ended 31 December 2019 and 2018 have been prepared in accordance with IFRS 9. The| | | | | | | | adoption of IFRS 9 led to new presentation requirements. 2017 period amounts have not been restated. |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Investment income | 24 | | | 188 | 183 | 192 | comparability. |
| Share of result from associates and joint ventures | | | 8 | 48 | 143 | 178 | |
| Result on disposal of group companies | | 25 | | 117 | –123 | 1 | |
| Other income | 26 | | | 252 | 136 | 350 | |
| Total income | | | | 17,125 | 18,324 | 18,590 | |

Reference relate to the accompanying notes. These are an integral part of the Consolidated financial statements.

2019 ING Group Annual Report on Form 20-FF - 5

Consolidated statement of profit or loss – continued| in EUR | | 2019 | 2018 | 2017 |
| --- | --- | --- | --- | --- |
| Earnings per ordinary share | 29 | | | |
| Basic earnings per ordinary share | | 1.00 | 1.22 | 1.41 |
| Diluted earnings per ordinary share | | 1.00 | 1.22 | 1.41 |

Earnings per ordinary share from continuing operations	29
Basic earnings per ordinary share from continuing operations		1.00	1.22	1.41
Diluted earnings per ordinary share from continuing operations		1.00	1.22	1.41

Dividend per ordinary share300.690.680.67

References relate to the accompanying notes. These are an integral part of the Consolidated financial statements.

2019 ING Group Annual Report on Form 20-FF - 6

Consolidated statement of comprehensive income| | | | | For the disclosure on the income tax effects on each component of the other comprehensive |
| --- | --- | --- | --- | --- |
| in EUR million | 20191 | 20181 | 20171 | income reference is made to Note 37 ‘Taxation’. |
| Net result (before non-controlling interests) | 4,001 | 4,869 | 5,546 | |

Items that will not be reclassified to the statement of profit or loss:
Realised and unrealised revaluations property in own use		58	1	26
Remeasurement of the net defined benefit asset/liability	36	58	6	–29
Net change in fair value of equity instruments at FVOCI		139	–461	n/a
Change in fair value of own credit risk of financial liabilities at FVPL		–116	199	n/a

loss:
Unrealised revaluations AFS investments and other revaluations	n/a	n/a	–283
Realised gains/losses on AFS investments reclassified to the statement of	n/a	n/a	–92
profit or loss
Net change in fair value of debt instruments at FVOCI	–42	–177	n/a
Realised gains/losses on debt instruments at FVOCI reclassified to the	–34	–56	n/a
statement of profit or loss
Changes in cash flow hedge reserve	640	382	–525
Exchange rate differences	–29	–396	–864
Share of other comprehensive income of associates and joint ventures and	–	14	–5
other income
Total comprehensive income	4,674	4,381	3,774

Comprehensive income attributable to:
Non-controlling interests	142	132	109
Equity holders of the parent	4,532	4,250	3,665
	4,674	4,381	3,774

1 The amounts for the period ended 31 December 2019 and 2018 have been prepared in accordance with IFRS 9. The adoption of IFRS 9 led to new presentation requirements. 2017 period amounts have not been restated.

References relate to the accompanying notes. These are an integral part of the Consolidated financial statements.

2019 ING Group Annual Report on Form 20-FF - 7

Consolidated statement of changes in equity

For the years ended 31 December

ShareSharecapital andholders'NonshareOtherRetainedequitycontrollingTotal in EUR millionpremiumreservesearnings(parent)interestsequity Balance as at 31 December 201817,0883,62128,33949,04980349,851| Net change in fair value of equity instruments at fair value through other comprehensive income | –335 | 472 | 137 | 1 | 139 |
| --- | --- | --- | --- | --- | --- |
| Net change in fair value of debt instruments at fair value through other comprehensive income | –43 | | –43 | 1 | –42 |
| Realised gains/losses on debt instruments at fair value through other comprehensive income reclassified to the statement of profit or loss | –33 | | –33 | –1 | –34 |

Changes in cash flow hedge reserve			604		604	36	640
Realised and unrealised revaluations property in own use			49	9	58	–0	58
Remeasurement of the net defined benefit asset/liability	36		58		58	–	58
Exchange rate differences and other			–36		–36	7	–29
Share of other comprehensive income of associates			69	–69	–	–	–
and joint ventures and other income
Change in fair value of own credit risk of financial liabilities at fair value through profit or loss			–123	6	–116	–	–116
Total amount recognised directly in other comprehensive income net of tax		–	211	418	629	44	673
Net result		–	180	3,723	3,903	99	4,001
Total comprehensive income net of tax		–	391	4,141	4,532	142	4,674

Dividends	–	–	–2,650	–2,650	–29	–2,679
Changes in treasury shares	–	1	–	1	–	1
Employee stock option and share plans	28	–	13	41	0	41
Changes in the composition of the group and other changes	–	–	23	23	–23	–0
Balance as at 31 December 2019	17,117	4,013	29,866	50,996	893	51,889

References relate to the accompanying notes. These are an integral part of the Consolidated financial statements.
Changes in individual Reserve components are presented in Note 20 ‘Equity’.

2019 ING Group Annual Report on Form 20-FF - 8

Consolidated statement of changes in equity - continued| | Share | | | Share- | | |
| --- | --- | --- | --- | --- | --- | --- |
| | capital and | | | holders' | Non- | |
| | share | Other | Retained | equity | controlling | Total |
| in EUR million | premium | reserves | earnings | (parent) | interests | equity |
| Balance as at 31 December 2017 | 17,045 | 4,362 | 27,022 | 48,429 | 715 | 49,144 |
| Effect of change in accounting policy due to implementation of IFRS 9 | | –604 | –390 | –993 | –14 | –1,008 |
| Balance as at 1 January 2018 | 17,045 | 3,759 | 26,632 | 47,435 | 700 | 48,136 |

Net change in fair value of equity instruments at fair value through other comprehensive income	–518	56	–461	0	–461
Net change in fair value of debt instruments at fair value through other comprehensive income	–177		–177	0	–177
Realised gains/losses on debt instruments at fair value through other comprehensive income reclassified to the statement of profit or loss	–54		–54	–2	–56

Changes in cash flow hedge reserve		342	–	342	41	382
Realised and unrealised revaluations property in own use		–2	3	1	–0	1
Remeasurement of the net defined benefit asset/liability	36	6		6	–	6
Exchange rate differences and other		–380		–380	–16	–396
Share of other comprehensive income of associates and joint ventures and other income		283	–270	14		14
Change in fair value of own credit risk of financial liabilities at fair value through profit or loss		199		199		199
Total amount recognised directly in other comprehensive income net of tax		–301	–211	–512	24	–488
Net result		160	4,601	4,761	108	4,869
Total comprehensive income net of tax		–141	4,391	4,250	132	4,381

Dividends				–2,607	–2,607	–61	–2,668
Changes in treasury shares			4		4		4
Employee stock option and share plans		44		19	63	0	63
Changes in the composition of the group and other changes	1			–96	–96	31	–65
Balance as at 31 December 2018		17,088	3,621	28,339	49,049	803	49,851

1 Includes an amount for the initial recognition of the redemption liability related to the acquisition of Payvision Holding B.V. and Makelaarsland B.V. that reduces the Retained earnings of the Group. Future re measurements of the redemption liability are recognised in the statement of profit or loss.

2019 ING Group Annual Report on Form 20-FF - 9

Consolidated statement of changes in equity - continued

ShareSharecapital andholders'NonshareOtherRetainedequitycontrollingTotal in EUR millionpremiumreservesearnings(parent)interestsequity Balance as at 1 January 201716,9895,89724,37147,25760647,863| Unrealised revaluations available-for sale investments and other revaluations | | | –293 | | –293 | 10 | –283 |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Realised gains/losses transferred to the statement of profit or loss | | | –90 | | –90 | –2 | –92 |
| Changes in cash flow hedge reserve | | | –514 | | –514 | –11 | –525 |
| Unrealised revaluations property in own use | | | | 26 | 26 | | 26 |
| Remeasurement of the net defined benefit asset/liability | 36 | | –29 | | –29 | | –29 |
| Exchange rate differences | | | –894 | | –894 | 30 | –864 |
| Share of other comprehensive income of associates and joint ventures and other income | | | 138 | –143 | –5 | | –5 |
| Total amount recognised directly in other comprehensive income | | – | –1,682 | –117 | –1,799 | 27 | –1,772 |
| Net result from continuing and discontinued operations | | | 153 | 5,311 | 5,464 | 82 | 5,546 |
| Total comprehensive income net of tax | | | –1,529 | 5,194 | 3,665 | 109 | 3,774 |

Dividends			–2,564	–2,564		–2,564
Changes in treasury shares		–6		–6		–6
Employee stock option and share plans	56		21	77		77
Balance as at 31 December 2017	17,045	4,362	27,022	48,429	715	49,144

2019 ING Group Annual Report on Form 20-FF - 10

Consolidated statement of cash flows

for the years ended 31 December| in EUR million | | | 2019 | 12018 | 1 | 2017 | 1 | | | 2019 | 12018 | 1 | 2017 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Cash flows from operating activities | | 31 | | | | | Disposals and redemptions: | – Associates and joint ventures | | 67 | | 116 | 245 |
| Result before tax | | | 5,653 | 6,986 | | 8,085 | | – Available-for-sale investments | | n/a | | n/a | 32,788 |
| Adjusted for: | – Depreciation and amortisation | | 789 | | 520 | 520 | | – Held-to-maturity investments | | n/a | | n/a | 2,675 |
| | – Addition to loan loss provisions | | 1,120 | | 656 | 676 | | - Financial assets at fair value through other | | 13,390 | 15,657 | | n/a |
| | | | | | | | | comprehensive income | | | | | |
| | – Other non-cash items in Result before tax | | 1,213 | –1,763 | | 703 | | - Securities at amortised cost | | 13,001 | 18,709 | | n/a |
| Taxation paid | | | –2,345 | –1,602 | | –1,691 | | – Property and equipment | | 81 | | 17 | 79 |
| Changes in: | – Net change in Loans and advances to/from banks, | | –3,911 | | –211 | 3,194 | | – Loans sold | | 744 | | 206 | 1,815 |
| | not available/payable on demand | | | | | | | | | | | | |
| | – Net change in Trading assets and Trading liabilities | | –2,568 | 9,910 | | –11,187 | | – Other investments | | 34 | | | 9 |
| | – Loans and advances to customers | | –16,687 | –31,356 | | –21,390 | Net cash flow from/(used in) investing activities | | | –2,495 | 5,451 | | 11,754 |
| | – Customer deposits | | 18,040 | 19,709 | | 18,291 | | | | | | | |
| | – Other | 31 | 11,752 | 4,067 | | –2,454 | Cash flows from financing activities | | | | | | |
| Net cash flow from/(used in) operating activities | | | 13,055 | 6,915 | | –5,253 | Proceeds from debt securities | | | 90,793 | 152,543 | | 95,458 |
| | | | | | | | Repayments of debt securities | | | –94,497 | –131,170 | | –96,837 |
| Cash flows from investing activities | | | | | | | Proceeds from issuance of subordinated loans | | | 3,429 | 1,859 | | 2,331 |
| Investments and advances: | - Acquisition of subsidiaries, net of cash acquired | | –17 | | –111 | | Repayments of subordinated loans | | | –933 | –4,646 | | –2,343 |
| | - Associates and joint ventures | | –507 | | –97 | –79 | Repayments of principal portion of lease liabilities | | 2 | –271 | | n/a | n/a |
| | – Available-for-sale investments | | n/a | | n/a | –21,601 | Purchase/sale of treasury shares | | | 1 | | 4 | 7 |
| | – Held-to-maturity investments | | n/a | | n/a | –3,609 | Dividends paid | | | –2,679 | –2,607 | | –2,564 |
| | - Financial assets at fair value through other | | –16,270 | –10,517 | | n/a | Other financing | | | 2 | | | |
| | comprehensive income | | | | | | | | | | | | |
| | - Securities at amortised cost | | –12,268 | –17,985 | | n/a | Net cash flow from/(used in) financing activities | | | –4,154 | 15,983 | | –3,948 |
| | – Property and equipment | | –355 | | –286 | –304 | Net cash flow | | | 6,406 | 28,349 | | 2,553 |
| | – Other investments | | –395 | | –258 | –264 | Cash and cash equivalents at beginning of year | | 33 | 47,529 | 18,977 | | 16,164 |
| | | | | | | | Effect of exchange rate changes on cash and cash equivalents | | | 95 | | 204 | 260 |
| | | | | | | | Cash and cash equivalents at end of year | | 33 | 54,031 | 47,529 | | 18,977 |

2019 ING Group Annual Report on Form 20-FF - 11

1The amounts for the period ended 31 December 2019 and 2018 have been prepared in accordance with IFRS 9. The

adoption of IFRS 9 led to new presentation requirements. 2017 period amounts have not been restated.
2The amount for the period ended 31 December 2019 has been prepared in accordance with IFRS 16. Previous period amounts have not been restated.

As at 31 December 2019, Cash and cash equivalents includes cash and balances with central banks of EUR 53,202 million (2018: EUR 49,987 million; 2017: EUR 21,989 million). The increase in cash and balances with central banks reflects ING’s liquidity management. Reference is made to Note 33 ‘Cash and cash equivalents’.

References relate to the accompanying notes. These are an integral part of the Consolidated financial statements.

The table below presents the Interest and dividend received and paid.| | 2019 | 1 | 20181 | 2017 | 1 |
| --- | --- | --- | --- | --- | --- |
| Interest received | 28,957 | 28,722 | | 45,014 | |
| Interest paid | –14,550 | –14,948 | | –31,032 | |
| | 14,407 | 13,774 | | 13,982 | |

Dividend received	2	219	183	206
Dividend paid		–2,679	–2,607	–2,564

1.The amounts for the period ended 31 December 2019 and 2018 have been prepared in accordance with IFRS 9, the

adoption of IFRS 9 led to new presentation requirements; 2017 period amounts have not been restated, refer also to note 21 ‘Net interest income’.
2.Includes dividends received as recognized within Investment Income, from equity securities included in the Financial assets at fair value through profit or loss, Financial assets at fair value through OCI, and from Investments in associates and joint ventures. Dividend paid and received from trading positions have been included.

Interest received, interest paid and dividends received are included in operating activities in the Consolidated statement of cash flow. Dividend paid is included in financing activities in the Consolidated statement of cash flow.

2019 ING Group Annual Report on Form 20-FF - 12

Notes to the Consolidated financial statements

Standards Board, including the decisions ING Group made with regard to the options available

under IFRS-IASB.

1Basis of preparation and accounting policies

The ING Group Consolidated financial statements have been prepared on a going concern basis.

1.1Reporting entity

The consolidated financial statements are presented in euros and rounded to the nearest million, ING Groep N.V. is a company domiciled in Amsterdam, the Netherlands. Commercial Register of
unless stated otherwise. Amounts may not add up due to rounding.
Amsterdam, number 33231073. These Consolidated financial statements, as at and for the year

ended 31 December 2019, comprise ING Groep N.V. (the Parent company) and its subsidiaries,

1.3.1 Presentation of Risk management disclosures together referred to as ING Group. ING Group is a global financial institution with a strong European

base, offering a wide range of retail and wholesale banking services to customers in over 40To improve transparency, reduce duplication and present related information in one place, certain

countries.disclosures of the nature and extent of risks related to financial instruments required by IFRS 7 are

now included in the “ING Group Risk management” section of the Annual Report.

1.2 Authorisation of the Consolidated financial statements

These disclosures are an integral part of ING Group Consolidated financial statements and are The ING Group Consolidated financial statements, as at and for the year ended 31 December 2019,
indicated in the ‘Risk management’ section by the symbol (*). Chapters, paragraphs, graphs or were authorised for issue in accordance with a resolution of the Executive Board on 2 March 2020.
tables within the risk management section that are indicated with this symbol in the respective The Executive Board may decide to amend the financial statements as long as these are not
headings or table header are considered to be an integral part of the consolidated financial adopted by the General Meeting of Shareholders. The General Meeting of Shareholders may decide
statements.
not to adopt the financial statements, but may not amend these.

1.3.2 Reconciliation between IFRS-EU and IFRS-IASB

1.3 Basis of preparation of the Consolidated financial statements

The published 2019 Annual Accounts of ING Group are prepared in accordance with IFRS-EU. IFRS- The ING Group Consolidated financial statements have been prepared in accordance with
EU refers to International Financial Reporting Standards (‘IFRS’) as adopted by the European Union International Financial Reporting Standards as issued by the International Accounting Standards
(EU), including the decisions ING Group made with regard to the options available under IFRS as Board for purposes of reporting with the U.S. Securities and Exchange Commission (SEC), including
adopted by the EU. IFRS-EU differs from IFRS-IASB in respect of certain paragraphs in IAS 39 financial information contained in this Annual report on Form 20-F. The term ‘IFRS-IASB’ is used to
‘Financial Instruments: Recognition and Measurement’ regarding hedge accounting for portfolio refer to International Financial Reporting Standards as issued by the International Accounting
hedges of interest rate risk.

2019 ING Group Annual Report on Form 20-FF - 13

Reconciliation net result under IFRS-EU and IFRS-IASB| Under IFRS-EU, ING Group applies fair value hedge accounting for portfolio hedges of interest rate | | | | Net result |
| --- | --- | --- | --- | --- |
| | | 2019 | 2018 | 2017 |
| risk (fair value macro hedges) in accordance with the EU carve-out version of IAS 39. Under the EU | In accordance with IFRS-EU | 4,781 | 4,703 | 4,905 |

IAS 39 carve-out, hedge accounting may be applied, in respect of fair value macro hedges, to coreAdjustment of the EU IAS 39 carve-out–1,181148817| deposits and hedge ineffectiveness is only recognised when the revised estimate of the amount of | Tax effect of the adjustment | 1) | 303 | –90 | –258 |
| --- | --- | --- | --- | --- | --- |
| | Effect of adjustment after tax | | –878 | 58 | 559 |
| cash flows in scheduled time buckets falls below the original designated amount of that bucket and | | | | | |

is not recognised when the revised amount of cash flows in scheduled time buckets is more thanIn accordance with IFRS-IASB (attributable to the equityholders of the parent)3,9034,7615,464| the original designated amount. Under IFRS-IASB, hedge accounting for fair value macro hedges | Non-controlling interests | 99 | 108 | 82 |
| --- | --- | --- | --- | --- |
| | In accordance with IFRS-IASB Total net result | 4,001 | 4,869 | 5,546 |
| cannot be applied to core deposits and ineffectiveness arises whenever the revised estimate of the | 1)includes the effect of changes in tax rate. | | | |

amount of cash flows in scheduled time buckets is either more or less than the original designated

amount of that bucket.

Reconciliation shareholders’ equity under IFRS-EU and IFRS-IASB

Total Equity

This information is prepared by reversing the hedge accounting impacts that are applied under the201920182017| EU ‘carve-out’ version of IAS 39. Financial information under IFRS-IASB accordingly does not take | In accordance with IFRS-EU | 53,769 | 50,932 | 50,406 |
| --- | --- | --- | --- | --- |
| account of the possibility that had ING Group applied IFRS-IASB as its primary accounting | Adjustment of the EU IAS 39 carve-out | –3,658 | –2,460 | –2,655 |
| | Tax effect of the adjustment | 885 | 577 | 678 |
| framework it might have applied alternative hedge strategies where those alternative hedge | Effect of adjustment after tax | –2,773 | –1,883 | –1,977 |

strategies could have qualified for IFRS-IASB compliant hedge accounting. These decisions could

have resulted in different shareholders’ equity and net result amounts compared to those indicatedShareholders’ equity50,99649,04948,429| in this Annual Report on Form 20-F. | Non-controlling interests | 893 | 803 | 715 |
| --- | --- | --- | --- | --- |
| | In accordance with IFRS-IASB Total Equity | 51,889 | 49,851 | 49,144 |

A reconciliation between IFRS-EU and IFRS-IASB is included below.

1.4 Changes to accounting policies Both IFRS-EU and IFRS-IASB differ in several areas from accounting principles generally accepted in

ING Group has consistently applied its accounting policies to all periods presented in these the United States of America (US GAAP).

Consolidated financial statements, except for changes due to the introduction of IFRS 16 in 2019

and IFRS 9 in 2018. Comparatives were not restated when applying these Standards.

2019 ING Group Annual Report on Form 20-FF - 14

1.4.1 Changes in IFRS effective in 2019The amendments to IFRS 9 ‘Financial Instruments’: Prepayment Features with Negative Compensation and Modifications of Financial Liabilities (issued on 12 October 2017) were early ING Group changed its accounting policies in 2019 as a result of adopting IFRS 16 ‘Leases’.
adopted by ING Group in 2018.

The impact of the adoption of IFRS 16 is disclosed in paragraph 1.4.3 ‘Changes to accounting
Apart from the amendments to IAS 39 and IFRS 7 in relation to Interest Rate Benchmark Reform, policies in 2019’ of Note 1.

ING Group has not early adopted any other standard, interpretation or amendment in 2019 which
has been issued, but is not yet effective.
ING Group early adopted the amendments to IAS 39 ‘Financial Instruments: Recognition and
Measurement’ and IFRS 7 ‘Financial Instruments: Disclosures’ in relation to the Interest Rate

1.4.2 Upcoming changes in IFRS after 2019 Benchmark Reform as issued by the IASB in September 2019. These amendments are early
adopted retrospectively to hedging relationships that existed at the start of the reporting period orThe following published amendments are not mandatory for 2019 and have not been early
were designated thereafter. The amendments provide temporary relief from applying specificadopted by ING Group. ING Group is still currently assessing the detailed impact of these
hedge accounting requirements to hedging relationships directly affected by IBOR reform. Theamendments, however the implementation of these amendments is expected to have no
amendments require certain additional disclosures and have no further impact. Refer to paragraphsignificant impact on ING Group’s Consolidated financial statements.
1.6.5 of Note 1 and to Note 39 ‘Derivatives and hedge accounting’ for more information on the
adoption of these amendments.The list of upcoming changes to IFRS, which are applicable for ING Group:
Effective in 2020:
The other changes in IFRS that became effective in 2019 did not have a significant impact on INGAmendments to IFRS 3 ‘Business Combinations’: Definition of a Business (issued on 22 October ◾
Group’s accounting policies, ING Group’s results or financial position:2018);
◾Annual Improvements to IFRS Standards 2015-2017 Cycle: Amendments to IFRS 3 ‘Business◾Amendments to IAS 1 and IAS 8: ‘Definition of Material’ (issued on 31 October 2018); and
Combinations’, IFRS 11 ‘Joint Arrangements’, IAS 12 ‘Income Taxes’, IAS 23 ‘Borrowing Costs’Amendments to References to the Conceptual Framework in IFRS Standards (issued on 29 March ◾
(issued on 12 December 2017);2018).
Amendments to IAS 19 ‘Employee Benefits’: Plan Amendment, Curtailment or Settlement (issued ◾
on 7 February 2018);Effective in 2022:
◾Amendments to IAS 28 ‘Investments in Associates and Joint Ventures’: Long -term Interests in◾Amendments to IAS 1 ‘Presentation of Financial Statements’: Classification of Liabilities as
Associates and Joint Ventures (issued on 12 October 2017); andCurrent or Non-current (issued on 23 January 2020).
IFRIC 23 ‘Uncertainty over Income Tax Treatments’ (issued on 7 June 2017).
◾
The IASB has also issued IFRS 17 ‘Insurance Contracts’. The original effective date of IFRS 17 was 1
January 2021, but in June 2019 the IASB has published an Exposure Draft proposing 1 January
2022 as the new effective date. ING Group is currently assessing the detailed impact of IFRS 17.

2019 ING Group Annual Report on Form 20-FF - 15

1.4.3 Changes to accounting policies in 2019

The weighted average incremental borrowing rate applied to lease liabilities recognised in the

IFRS 16 ‘Leases’statement of financial position at the date of initial application is 2.47%.

IFRS 16 ‘Leases’ was issued by the IASB in January 2016. IFRS 16 replaces IAS 17 ‘Leases’, IFRIC 4
The following table reconciles the future rental commitments for operating lease contracts under ‘Determining whether an Arrangement contains a Lease’, SIC-15 ‘Operating Leases - Incentives’ and
IAS 17 to the lease liability under IFRS 16 on transition to IFRS 16 as of 1 January 2019:
SIC-27 ‘Evaluating the Substance of Transactions Involving the Legal Form of a Lease’. ING Group

has adopted IFRS 16 retrospectively from 1 January 2019, but has not restated comparatives for

1 January
the 2018 and 2017 reporting periods, as permitted under the specific transitional provisions in the2019
Standard, the so-called ‘modified retrospective approach'. The reclassifications and theFuture rental commitments for operating lease contract disclosed under IAS 17 as at 31 December 1,378

2018 adjustments arising from the new leasing rules are therefore recognised in the opening statement (Less) discounting effect using ING’s incremental borrowing rate at 1-1-2019–108
of financial position on 1 January 2019.
(Less) recognition exemption for short-term leases–16
(Less) recognition exemption for low value assets–3
IFRS 16 ‘Leases’ – Impact of adoption(Less) non-lease components of a contract–78
Add extension and termination options reasonably certain to be exercised143
(Less) variable lease payments based on an index or a rate–15

Transition

Lease liability recognised under IFRS 16 at 1 January 20191,301
For lessee accounting, the new Standard removes the distinction between operating and finance
leases. All leases are recognised on the statement of financial position with exemptions for short-In applying IFRS 16 for the first time, ING Group has used the following practical expedients
term leases with a lease term of less than 12 months and leases of low-value assets (for examplepermitted by the Standard:
mobile phones or laptops).◾Reliance on previous assessments whether a contract is, or contains a lease at the date of initial application;
◾The use of a single discount rate to a portfolio of leases with reasonably similar characteristics;
There is no significant impact of the adoption of IFRS 16 on ING Group’s Net Result, Comprehensive◾Reliance on previous assessments on whether leases are onerous;
income and Shareholders’ equity on transition. This follows ING Group’s implementation decision◾The accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as
where the value of the right-of-use asset is based on the value of the lease liability, adjusted forshort-term leases;
any previously recognised prepaid and/or accrued lease payments on that lease contract, as is◾The exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application;
permitted under the Standard.and
◾The use of hindsight in determining the lease term where the contract contains options to extend or terminate
On transition to IFRS 16, ING Group recognised lease liabilities of EUR 1,301 million and right-of-usethe lease.

assets of EUR 1,279 million equal to the lease liability adjusted for any previously recognised

prepaid or accrued lease payments on that lease.

2019 ING Group Annual Report on Form 20-FF - 16

IFRS 16 ‘Leases’ – Accounting policies applied from 1 January 2019 Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis

as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets

ING Group as the lessee comprise mainly IT-equipment (for example mobile phones or laptops) and small items of office furniture.
A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a

corresponding liability representing its obligation to make lease payments at the date at which the leased asset is The right-of-use asset is included in the statement of financial position line-item ‘Property and equipment’, the available for use by ING Group. Each lease payment is allocated between the repayment of the liability and finance lease liability is included in the statement of financial position line-item ‘Other liabilities’. Refer to Note 9 ‘Property cost. The finance costs are charged to profit or loss over the lease period so as to produce a constant periodic rate of and equipment’ and Note 17 ‘Other liabilities’.
interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the

shorter of the asset’s useful life and the lease term on a straight-line basis.
Subsequently, the right-of-use asset will amortise using a straight-line method to the income statement over the

life of the lease. The lease liability will subsequently increase for the accrual of interest and decrease when Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the payments are made. Any remeasurement of the lease liability due to a lease modification or other reassessment net present value of the following lease payments:
result in a corresponding adjustment to the carrying amount of the right-of-use asset.
◾Fixed payments (including in-substance fixed payments), less any lease incentives receivable;

◾Variable lease payments that are based on an index or a rate;ING Group as the lessor
◾Amounts expected to be payable by the lessee under residual value guarantees;When ING Group acts as a lessor, a distinction should be made between finance leases and operating leases. For ING
◾The exercise price of a purchase option if the lessee is reasonably certain to exercise that option; andGroup as a lessor these are mainly finance leases. The present value of the lease payments is recognised as a
◾Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.receivable under Loans and advances to customers or Loans and advances to banks. The difference between the

gross receivable and the present value of the receivable is unearned finance lease income. Lease income is The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily recognised over the term of the lease using the net investment method (before tax), which reflects a constant determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to periodic rate of return.
borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms

and conditions. This rate is approximated by using the risk free rate applicable to the lease term, the currency of theOperating leases for lessees prior to 1 January 2019 under IAS 17

lease payment and jurisdiction, with the Fund Transfer Pricing (FTP) rate as an add-on. The FTP rate is used toThe comparative figures presented are accounted for using the previous Standard, IAS 17 ‘Leases’. Under this
transfer interest rate risk and funding and liquidity risk positions between the ING Group business and treasuryStandard a distinction was made between finance leases and operating leases. A lease was considered a finance
departments. It is determined by either ING Group or Local Asset and Liability Committee (ALCO).lease if it transfers substantially all risks and rewards of the ownership of the asset. All other leases are operating

leases.
Right-of-use assets are measured at cost comprising the amount of the initial measurement of the lease liability,

any lease payments made at or before the commencement date less any lease incentives received and any initialLeases entered into by ING Group as a lessee were primarily operating leases. The total payments under operating
direct costs and restoration costs.leases were recognised in the statement of profit or loss on a straight-line basis over the period of the lease.

2019 ING Group Annual Report on Form 20-FF - 17

1.5 Significant judgements and critical accounting estimates and assumptions1.6 Financial instruments

The preparation of the consolidated financial statements requires management to make

1.6.1 Recognition and derecogniti on of financial instruments judgements in the process of applying its accounting policies and to use estimates and assumptions. The estimates and assumptions affect the reported amounts of the assets and liabilities and the amounts of the contingent assets and contingent liabilities at the balance sheetRecognition of financial assets date, as well as reported income and expenses for the year. The actual outcome may differ fromFinancial assets are recognised in the balance sheet when ING becomes a party to the contractual these estimates. The process of setting assumptions is subject to internal control procedures andprovisions of the instrument. For a regular way purchase or sale of a financial asset, trade date and approvals.settlement date accounting is applied depending on the classification of the financial asset.

ING Group has identified areas that require management to make significant judgements and useDerecognition of financial assets
critical accounting estimates and assumptions based on the information and financial data thatFinancial assets are derecognised when the rights to receive cash flows from the financial assets
may change in future periods. These areas are:have expired or where ING Group has transferred substantially all risks and rewards of ownership. If
◾The determination of the fair values of financial assets and liabilities;ING Group neither transfers nor retains substantially all the risks and rewards of ownership of a
◾Loan loss provisions; andfinancial asset, it derecognises the financial asset if it no longer has control over the asset. The
◾Provisions.difference between the carrying amount of a financial asset that has been extinguished and the

consideration received is recognised in profit or loss.
For further discussion of the significant judgements and critical accounting estimates and assumptions in these areas, reference is made to the relevant parts in paragraph 1.6 ‘FinancialRecognition of financial liabilities instruments’, 1.17 ‘Provisions, contingent liabilities and contingent assets’ of Note 1 and the Financial liabilities are recognised on the date that the entity becomes a party to the contractual applicable notes to the Consolidated financial statements.
provisions of the instrument.

Derecognition of financial liabilities

Financial liabilities are derecognised when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished and the consideration paid is recognised in profit or loss.

2019 ING Group Annual Report on Form 20-FF - 18

1.6.2 Classification and measurement of financial instrumentsContractual cash flows Solely Payments of Principal and Interest (SPPI)

The contractual cash flows of a financial asset are assessed to determine whether they represent

Financial assets SPPI. Interest includes consideration for the time value of money, credit risk and also considera tion

ING Group classifies its financial assets in the following measurement categories:for liquidity risk and costs associated with holding the financial asset for a particular period of time.

those to be measured subsequently at fair value (either through OCI, or through profit or loss);In addition, interest can include a profit margin that is consistent with a basic lending arrangement.
◾
andFinancial assets with embedded derivatives are considered in their entirety when determining

those to be measured at amortised cost (AC).whether their cash flows are SPPI.
◾

At initial recognition, ING Group measures a financial asset at its fair value plus, in the case of aIn assessing whether the contractual cash flows are SPPI, ING Group considers the contractual

financial asset not at FVPL, transaction costs that are directly attributable to the acquisition of theterms of the instrument. This includes assessing whether the financial asset contains a contractual

financial asset. Transaction costs of financial assets carried at fair value through profit or loss (FVPL)term that could change the timing or amount of contractual cash flows such that it would not

are expensed in the statement of profit or loss.meet this condition. In making the assessment, terms such as the following are considered, with an

example of an SPPI failure for each consideration:

Financial assets - Debt instrumentsprepayment terms. For example a prepayment of an outstanding principal amount plus a
◾
The classification depends on the entity’s business model for managing the financial assets and thepenalty which is not capped to three or six months of interest;
contractual terms of the cash flows at initial recognition.◾leverage features, which increase the variability of the contractual cash flows with the result that
they do not have the economic characteristics of interest. An example is a Libor contract with a

Business modelsmultiplier;

terms that limit ING Group’s claim to cash flows from specified assets - e.g. non-recourse asset Business models are classified as Hold to Collect (HtC), Hold to Collect and Sell (HtC&S) or Other◾
arrangements. This could be the case if payments of principal and interest are met solely by the depending on how a portfolio of financial instruments as a whole is managed. ING Group’s business
cash flows generated by the underlying asset, for example instances in real estate, shipping and models are based on the existing management structure of the bank, and refined based on an
aviation financing; and analysis of how businesses are evaluated and reported, how their specific business risks are
features that modify consideration of the time value of money. These are contracts with for managed and on historic and expected future sales. Sales are permissible in a HtC business model◾
example an interest rate which is reset every month to a one-year rate. ING Group performs when these are due to an increase in credit risk, take place close to the maturity date (where the
either a qualitative or quantitative benchmark test on a financial asset with a modified time proceeds from the sales approximate the collection of the remaining contractual cash flows), are
value of money element. A qualitative test is performed when it is clear with little or no analysis insignificant in value (both individually and in aggregate) or are infrequent.
whether the contractual cash flows solely represent SPPI.

2019 ING Group Annual Report on Form 20-FF - 19

Based on the entity’s business model for managing the financial assets and the contractual termsdesignated as at FVPL is recognised in profit or loss and presented within Interest income or of the cash flows, there are three measurement categories into which ING Group classifies its debtInterest expense in the period in which it arises. The interest arising on a debt instrument that is instruments:part of a hedge relationship, but not subject to hedge accounting, is recognised in profit or loss Amortised Cost (AC):and presented within Interest income or Interest expense in the period in which it arises.
◾ Debt instruments that are held for collection of contractual cash flows under a HtC business model where those cash flows represent SPPI are measured at AC. Interest income from theseING Group reclassifies debt investments when, and only when, its business model for managing financial assets is included in Interest income using the EIR method. Any gain or loss arising onthose assets changes. Such changes in business models are expected to be very infrequent. There derecognition is recognised directly in profit or loss. Impairment losses are presented as ahave been no reclassifications during the reporting period.
separate line item in the Consolidated statement of profit or loss.
FVOCI:Financial assets - Equity instruments ◾ Debt instruments that are held for collection of contractual cash flows and for selling theAll equity investments are measured at fair value. ING Group applies the fair value through OCI financial assets under a HtC&S business model, where the assets’ cash flows represent SPPI, areoption to investments which are considered strategic, consisting of investments that add value to measured at FVOCI. Movements in the carrying amount are recognised in OCI, except for theING Group’s core banking activities.
recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, theThere is no subsequent recycling of fair value gains and losses to profit or loss following the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or lossderecognition of investments if elected to be classified and measured as FVOCI. Dividends from and presented in Investment income or Other income, based on the specific characteristics ofsuch investments continue to be recognised in profit or loss as Investment income when ING the business model. Interest income from these financial assets is included in Interest incomeGroup’s right to receive payments is established. Impairment requirements are not applicable to using the EIR method. Impairment losses are presented as a separate line item in theequity investments classified and measured as FVOCI.
Consolidated statement of profit or loss.
◾FVPL:Other remaining equity investments are measured at FVPL. All changes in the fair value are Debt instruments that do not meet the criteria for AC or FVOCI are measured at FVPL. Thisrecognised in Valuation result and Net trading income in the Consolidated statement of profit or includes debt instruments that are held-for-trading (presented separately as Trading assets)loss.

and all other debt instruments that do not meet the criteria for AC or FVOCI (presented separately as Mandatorily at FVPL). ING Group may in some cases, on initial recognition, irrevocably designate a financial asset as classified and measured at FVPL. This is the case where doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise on assets measured at AC or FVOCI. Fair value movements on trading securities, trading loans and deposits (mainly reverse repo’s) are presented fully within valuation result and net trading income, this also includes interest. The interest arising on financial assets

2019 ING Group Annual Report on Form 20-FF - 20

Financial liabilitiesunadjusted quoted market prices where available. Such quoted market prices are primarily
Financial liabilities are classified and subsequently measured at AC, except for financial guaranteeobtained from exchange prices for listed financial instruments. Where an exchange price is not
contracts, derivatives and liabilities designated at FVPL. Financial liabilities classified and measuredavailable, quoted prices in an active market may be obtained from independent market vendors,
at FVPL are presented as follows:brokers, or market makers. In general, positions are valued at the bid price for a long position and
the amount of change in the fair value that is attributable to changes in own credit risk of theat the offer price for a short position or are valued at the price within the bid-offer spread that is ◾
liability designated at FVPL is presented in OCI. Upon derecognition this Debit Valuationmost representative of fair value in the circumstances. In some cases where positions are marked
Adjustment (DVA) impact does not recycle from OCI to profit or loss; andat mid-market prices, a fair value adjustment is calculated.
the remaining amount of change in the fair value is presented in profit or loss in ‘Valuation ◾
results and net trading income’. Interest on financial liabilities at FVPL is also recognised in theFor certain financial assets and liabilities, quoted market prices are not available. For such
valuation result, except for items voluntarily designated as FVPL for which interest is presentedinstruments, fair value is determined using valuation techniques. These range from discounting of
within ‘Other interest income (expense).cash flows to various valuation models, where relevant pricing factors including the market price of
underlying reference instruments, market parameters (volatilities, correlations and credit ratings),
A financial guarantee contract is a contract that requires ING Group to make specified payments toand customer behaviour are taken into account. ING maximises the use of market observable
reimburse the holder for a loss it incurs because a specified debtor fails to make payment wheninputs and minimises the use of unobservable inputs in determining the fair value. It can be
due in accordance with the original or modified terms of a debt instrument. Such a contract issubjective dependent on the significance of the unobservable input to the overall valuation. All
initially recognised at fair value and is subsequently measured at the higher of (a) the amountvaluation techniques used are subject to internal review and approval. Most data used in these
determined in accordance with impairment provisions of IFRS 9 (see section “Impairment ofvaluation techniques are validated on a daily basis when possible.

financial assets”) and (b) the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with the revenue recognition principle of IFRS 15.When a group of financial assets and liabilities are managed on the basis of their net risk exposures, the fair value of a group of financial assets and liabilities are measured on a net portfolio 1.6.3 Fair values of financial assets and liabilitieslevel.

All financial assets and liabilities are recognised initially at fair value. Subsequently, except for financial assets and financial liabilities measured at amortised cost, all the other financial assetsTo include credit risk in fair value, ING applies both Credit and Debit Valuation Adjustments (CVA, and liabilities are measured at fair value.DVA). Own issued debt and structured notes that are designated as measured at FVPL are adjusted for credit risk by means of a DVA. Additionally, derivatives valued at fair value are adjusted for
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liabilitycredit risk by a CVA. The CVA is of a bilateral nature as both the credit risk on the counterparty as in an orderly transaction between market participants at the measurement date. It assumes thatwell as the credit risk on ING are included in the adjustment. All input data that is used in the market participants would use and take into account the characteristics of the asset or liabilitydetermination of the CVA is based on market implied data. Additionally, wrong-way risk (when when pricing the asset or liability. Fair values of financial assets and liabilities are based onexposure to a counterparty is increasing and the credit quality of that counterparty deteriorates)
and right-way risk (when exposure to a counterparty is increasing and the credit quality of that

2019 ING Group Annual Report on Form 20-FF - 21

counterparty improves) are taken into account in the measurement of the valuation adjustment.1.6.4 Credit risk management classification and maximum credit risk exposure
ING applies an additional ‘Funding Valuation Adjustment’ (FVA) to the uncollateralised derivativesCredit risk management disclosures are provided in the Credit risk’ paragraph ‘Credit risk categories’
based on the market price of funding liquidity.of the ‘Risk management’ section in the Annual Report.

Significant judgements and critical accounting estimates and assumptions:The maximum credit risk exposure for items in the statement of financial position is generally the
Even if market prices are available, when markets are less liquid there may be a range of prices forcarrying value for the relevant financial assets. For the off-balance sheet items the maximum credit
the same security from different price sources. Selecting the most appropriate price requiresexposure is the maximum amount that could be required to be paid. Re ference is made to Note 45
judgement and could result in different estimates of fair value.‘Contingent liabilities and commitments’ for these off-balance sheet items. Collateral received is

not taken into account when determining the maximum credit risk exposure.
Valuation techniques are subjective in nature and significant judgement is involved in establishing fair values for certain financial assets and liabilities. Valuation techniques involve variousThe manner in which ING Group manages credit risk and determines credit risk exposures for that assumptions regarding pricing factors. The use of different valuation techniques and assumptionspurpose is explained in the Credit risk paragraph ‘Credit Risk Appetite and Concentration Risk could produce significantly different estimates of fair value.Framework’ of the ‘Risk management’ section in the Annual Report.

Price testing is performed to assess whether the process of valuation has led to an appropriate fair1.6.5 Derivatives and hedge accounting value of the position and to an appropriate reflection of these valuations in the statement of profitDerivatives are initially recognised at fair value on the date on which a derivative contract is or loss. Price testing is performed to minimise the potential risks for economic losses due toentered into and are subsequently measured at fair value. Fair values are obtained from quoted incorrect or misused models.market prices in active markets, including market transactions and valuation techniques (such as
discounted cash flow models and option pricing models), as appropriate. All derivatives are carried Reference is made to Note 38 ‘Fair value of assets and liabilities’ and Market risk paragraph in theas assets when their fair value is positive and as liabilities when their fair value is negative. Fair ‘Risk management’ section of the Annual Report for the basis of the determination of the fair valuevalue movements on derivatives are presented in profit or loss in Valuation result and net trading of financial instruments and related sensitivities.income, except for derivatives in either a formal hedge relationship and so-called economic hedges
that are not in a formal hedge accounting relationship where a component is presented separately in interest result in line with ING’s risk management strategy.

Embedded derivatives are separated from financial liabilities and other non-financial contracts and accounted for as a derivative if, and only if:
a) the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract;

2019 ING Group Annual Report on Form 20-FF - 22

b) a separate instrument with the same terms as the embedded derivative would meet theFair value hedges
definition of a derivative; andChanges in the fair value of derivatives that are designated and qualify as fair value hedges are
c) the combined instrument is not measured at fair value with changes in fair value reported inrecognised in the statement of profit or loss, together with fair value adjustments to the hedged
profit or loss.item attributable to the hedged risk. If the hedge relationship no longer meets the criteria for hedge
accounting, the cumulative adjustment of the hedged item is, in the case of interest bearing
If an embedded derivative is separated, the host contract is accounted for as a similar free-instruments, amortised through the statement of profit or loss over the remaining term of the
standing contract.original hedge or recognised directly when the hedged item is derecognised. For non-interest

bearing instruments, the cumulative adjustment of the hedged item is recognised in the statement The method of recognising the resulting fair value gain or loss depends on whether the derivative isof profit or loss only when the hedged item is derecognised.
designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as hedges of the fair value of recognised assets or liabilities or firmCash flow hedges commitments (fair value hedge), hedges of highly probable future cash flows attributable to aThe effective portion of changes in the fair value of derivatives that are designated and qualify as recognised asset or liability or a forecast transaction (cash flow hedge), or hedges of a netcash flow hedges are recognised in the Other Comprehensive Income. The gain or loss relating to investment in a foreign operation. Hedge accounting is used for derivatives designated in this waythe ineffective portion is recognised immediately in the statement of profit or loss. Amounts provided certain criteria are met.accumulated in the Other Comprehensive Income are recycled to the statement of profit or loss in
the periods in which the hedged item affects net result. When a hedging instrument expires or is At the inception of the transaction ING Group documents the relationship between hedgingsold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or instruments and hedged items, its risk management objective, together with the methods selectedloss existing in the Other Comprehensive Income at that time remains in the Other Comprehensive to assess hedge effectiveness. The Group also documents its assessment, both at hedge inceptionIncome and is recognised when the forecast transaction is ultimately recognised in the statement and on an ongoing basis, of whether the derivatives that are used in hedging transactions areof profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or highly effective in offsetting changes in fair values or cash flows of the hedged items.loss that was reported in the Other Comprehensive Income is transferred immediately to the
statement of profit or loss.
ING Group applies also macro cash flow hedge accounting to hedge the variability in future cash flows of non-trading assets and liabilities due to the interest rate risk and foreign currencyNet investment hedges exchange rate risk. The designated hedged items are floating rated assets or liabilities, such as Hedges of net investments in foreign operations are accounted for in a similar way to cash flow floating rate mortgages and corporate loans. The effective portion of changes in the fair value of hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is the derivatives are recognised in the Other Comprehensive Income.
recognised in the Other Comprehensive Income and the gain or loss relating to the ineffective portion is recognised immediately in the statement of profit or loss. Gains and losses accumulated

2019 ING Group Annual Report on Form 20-FF - 23

in the Other Comprehensive Income are included in the statement of profit or loss when the foreignamendments when this uncertainty is no longer present or when the hedging relationship is

operation is disposed.discontinued.

Specific policies applicable from 1 January 2019 for hedges directly affected by IBOR reformNon-trading derivatives that do not qualify for hedge accounting

ING Group early adopts the amendments as described in paragraph 1.4.1 ‘Changes in IFRS effectiveDerivative instruments that are used by the Group as part of its risk management strategies, but

in 2019’ of Note 1. The amendments provide temporary reliefs which enable hedge accounting towhich do not qualify for hedge accounting under ING Group’s accounting policies, are presented as

continue during the period of uncertainty before the replacement of an existing interest ratenon-trading derivatives. Non-trading derivatives are measured at fair value with changes in the fair

benchmark with an alternative nearly risk-free interest rate (an “RFR”). The following temporaryvalue taken to the statement of profit or loss.

reliefs are part of the amendment:

●Highly probable requirement for cash flow hedges1.6.6 Offsetting of financial assets and financial liabilities

When determining whether a forecast transaction is highly probable, it is assumed that the Financial assets and financial liabilities are offset, and the net amount reported, in the statement of
interest rate benchmark on which the hedged cash flows are based is not altered as a result of financial position when the Group has a current legally enforceable right to set off the recognised
the reform.
amounts and intends to either settle on a net basis or to realise the asset and settle the liability
●Prospective assessment of hedge effectivenesssimultaneously. Offsetting is applied to certain interest rate swaps for which the services of a
When performing the prospective assessment it is assumed that the interest rate benchmark on central clearing house are used.
which the hedged cash flows are based is not altered as a result of the reform.

●Retrospective assessment of hedge effectiveness1.6.7 Repurchase transactions and reverse repurchase transactions

When performing the retrospective assessment hedges are allowed to pass the assessment Securities sold subject to repurchase agreements (repos), securities lending and similar agreements
even if actual results are outside the 80-125% range, during the period of uncertainty arising continue to be recognised in the consolidated statement of financial position. The counterparty
from the IBOR reform.
liability is measured at FVPL (designated) and included in Other financial liabilities at FVPL if the
●Designation of a component of an item as a hedged item asset is measured at FVPL. Otherwise, the counterparty liability is included in Deposits from banks,
For hedges of the benchmark component of interest rate risk affected by the reform, the Customer deposits, or Trading, as appropriate.
separately identifiable requirement only needs to be demonstrated at the inception of such

hedging relationships (including macro hedges).
Securities purchased under agreements to resell (reverse repos), securities borrowings and similar

agreements are not recognised in the consolidated statement of financial position. The The amendments are relevant given that ING Group hedges and applies hedge accounting to consideration paid to purchase securities is recognised as Loans and advances to customers, Loans benchmark interest rate exposure part of IBOR reform . Hedging instruments and hedged items and advances to banks, Other financial assets at FVPL or Trading assets, as appropriate. The continue to be indexed by the IBOR benchmark rates. Therefore, there is uncertainty over the difference between the sale and repurchase price is treated as interest and amortised over the life timing and the amount of the replacement rate cash flows. ING Group will cease to apply the

2019 ING Group Annual Report on Form 20-FF - 24

of the agreement using the effective interest method for instruments that are not measured atFinancial assets showing a significant increase in credit risk since initial recognition. A provision is FVPL.made for the life time ECL representing losses over the life of the financial instrument (lifetime ECL);
or 1.6.8 Impairment of financial assets (IFRS 9)Stage 3: Lifetime ECL credit impaired ◾ An ECL model is applied to on-balance sheet financial assets accounted for at AC and FVOCI such asFinancial instruments that are credit impaired require a life time provision.
loans, debt securities and lease receivables, as well as off-balance sheet items such as undrawn Significant increase in credit risk loan commitments, certain financial guarantees, and undrawn committed revolving credit facilities.
Under the ECL model ING Group calculates the allowance for credit losses (loan loss provision, LLP)ING Group established a framework, incorporating quantitative and qualitative indicators, to by considering on a discounted basis the cash shortfalls it would incur in various default scenariosidentify and assess significant increases in credit risk (SICR). This is used to determine the for prescribed future periods and multiplying the shortfalls by the probability of each scenarioappropriate ECL Staging for each financial asset.
occurring. The LLP is the sum of these probability-weighted outcomes and the ECL estimates are unbiased and include supportable information about past events, current conditions, and forecastsThe main determinate of SICR is a quantitative test, whereby the lifetime PD of an asset at each of future economic conditions. ING Group’s approach leverages the existing regulatory capitalreporting date is compared against its lifetime PD at the date of origination or purchase. If the delta models that use the Advanced Internal Ratings Based (AIRB) models for regulatory purposes.is above pre-defined absolute or relative PD thresholds, then an asset is considered to have experienced a SICR, which is a trigger for movement between Stage 1 and Stage 2. In these Three stage approachinstances, assets will cease reporting a 12 month ECL, and instead report a lifetime ECL. Assets can
Financial assets are classified in any of the below 3 Stages at each reporting date. A financial assetalso return to Stage 1 if there is sufficient evidence that there has been a significant reduction in can move between Stages during its lifetime. The Stages are based on changes in credit qualitycredit risk.
since initial recognition and defined as follows:
Stage 1: 12 month ECL;ING Group relies on a number of qualitative indicators to identify and assess SICR. These include:
◾ Financial assets that have not had a significant increase in credit risk since initial recognition (i.e. no◾Forbearance status;
Stage 2 or 3 triggers apply). Assets are classified as stage 1 upon initial recognition (with the◾Watch List status. Loans on the Watch List are individually assessed for Stage 2 classification;
exception of purchased or originated credit impaired (POCI) assets) and have a provision for ECL◾Intensive care management;
associated with the probability of default (PD) events occurring with the next 12 months (12◾Substandard Internal rating; and months ECL). For those financial assets with a remaining maturity of less than 12 months, a PD is◾Arrears status.
used that corresponds to the remaining maturity;
Stage 2: Lifetime ECL not credit impaired ◾

2019 ING Group Annual Report on Form 20-FF - 25

Credit impaired financial assets (Stage 3)Measurement of ECL

Financial assets are assessed for credit-impairment at each reporting date and more frequentlyING Group applies a collective assessment method to measure ECL for performing (Stage 1), underwhen circumstances warrant further assessment. Evidence of credit -impairment includes arrears ofperforming (Stage 2), and certain non-performing (Stage 3) assets. Other non-performing assets over 90 days on any material credit obligation, indications that the borrower is experiencingsubject to ECL measurement apply the individual assessment method, and are all in Stage 3.
significant financial difficulty, a breach of contract, bankruptcy or distressed restructuring.
Collectively assessed assets (Stages 1 to 3)

An asset that is in stage 3 will move back to stage 2 when, as at the reporting date, it is no longerThis is a model-based approach that calculates ECL in a formula that is expressed simplistically as considered to be credit-impaired. The asset will migrate back to stage 1 when its credit risk at thePD x EAD x LGD, adjusted for the time value of money. Assets that are collectively assessed are reporting date is no longer considered to have increased significantly since initial recognition.grouped on the basis of similar credit risk characteristics, taking into account loan type, industry, geographic location, collateral type, past due status and other relevant factors. These Definition of default characteristics are relevant to the estimation of future cash flows for groups of such assets by ING Group has aligned the definition of credit impaired under IFRS 9 (Stage 3) with the definition ofbeing indicative of the debtors’ ability to pay all amounts due according to the contractual terms of default for prudential purposes. This is also the definition used for internal risk managementthe assets being evaluated.

purposes.
For Stage 3 assets the PD equals 100% and the LGD and EAD represent a lifetime view of the losses Macroeconomic scenariosbased on characteristics of defaulted facilities.

ING has established a quarterly process whereby forward-looking macroeconomics scenarios and probability weightings are developed for ECL calculation purposes. ING Group applies dataTo build the IFRS 9 models, ING Group’s expected loss models (PD, LGD, EAD) used for regulatory predominantly from a leading service provider enriched with the internal ING Group view. Aand capital purposes have been adjusted by removing embedded prudential conservatism (such as baseline, up-scenario and a down-scenario are determined to reflect an unbiased and probability-floors) and converted through-the-cycle estimates to point-in-time estimates to support the weighted ECL amount. As a baseline scenario, ING Group applies the market-neutral viewcalculation of collective-assessment ECL under IFRS 9. The models assess ECL on the basis of combining consensus forecasts for economic variables such as unemployment rates, GDP growth,forward-looking macroeconomic forecasts and other inputs. For most financial assets, the expected house prices, commodity prices, and short-term interest rates. Applying market consensus in thelife is limited to the remaining maturity. For overdrafts and certain revolving credit facilities, such as baseline scenario ensures unbiased estimates of the expected credit losses.credit cards, the maturity is estimated based on historical data as these do not have a fixed term or repayment schedule.

The alternative scenarios are based on observed forecast errors in the past, adjusted for the risks affecting the economy today and the forecast horizon. The probabilities assigned are based on the likelihoods of observing the three scenarios and are derived from confidence intervals on a probability distribution. The forecasts for the economic variables are adjusted on a quarterly basis.

2019 ING Group Annual Report on Form 20-FF - 26

Individually assessed assets (Stage 3)Purchased or Originated Credit Impaired (POCI) assets

ING Group estimates individual impairment provisions for individually significant credit impairedPOCI assets are financial assets that are credit-impaired on initial recognition. Impairment on a financial assets within Stage 3. Individual provisions are calculated using the discounted expectedPOCI asset is determined based on lifetime ECL from initial recognition. POCI assets are recognised future cash flow method. To determine expected future cash flows, one or more scenarios areinitially at an amount net of impairments and are measured at AC using a credit-adjusted effective used. Each scenario is analysed based on the probability of occurrence and including forwardinterest rate. In subsequent periods any changes to the estimated lifetime ECL are recognised in looking information.profit or loss. Favourable changes are recognised as an impairment gain even if the lifetime ECL at

the reporting date is lower than the estimated lifetime ECL at origination.
In determining the scenarios, all relevant factors impacting the future cash flows are taken into account. These include expected developments in credit quality, business and economic forecasts,Modifications and estimates of if/when recoveries will occur and taking into account ING’s restructuring/recoveryIn certain circumstances ING grants borrowers postponement and/or reduction of loan principal strategy.and/or interest payments for a temporary period of time to maximise collection opportunities, and
if possible, avoid default, foreclosure, or repossession. When such postponement and/or reduction The best estimate of ECL is calculated as the weighted-average of the shortfall (gross carryingof loan principal and/or interest payments is executed based on credit concerns it is also referred to amount minus discounted expected future cash flow using the original EIR) per scenario, based onas forbearance (refer to the ‘Risk Management’ section of the Annual Report for more details). In best estimates of expected future cash flows. Recoveries can be from different sources includingsuch cases, the net present value of the postponement and/or reduction of loan and/or interest repayment of the loan, collateral recovery, asset sale etc. Cash flows from collateral and otherpayments is taken into account in the determination of the appropriate level of impairment loss. If credit enhancements are included in the measurement of the expected credit losses of the relatedthe forbearance results in a substantial modification of the terms of the loan, the original loan is financial asset when it is part of or integral to the contractual terms of the financial asset and thederecognised and a new loan is recognised at its fair value at the modification date. ING Group credit enhancement is not recognised separately. For the individual assessment, with granulardetermines whether there has been a substantial modification using both quantitative and (company or deal-specific) scenarios, specific factors can have a larger impact on the future cashqualitative factors.
flows than macroeconomic factors.

Write-off and debt forgiveness When a financial asset is credit-impaired, interest ceases to be recognised on the regular accrual If there is no reasonable expectation of recovery and/or collectability of amounts due a write-off basis, which accrues income based on the gross carrying amount of the asset. Rather, interest can occur. The following events can lead to a write-off:
income is calculated by applying the original EIR to the AC of the asset, which is the gross carrying After a restructuring has been completed and there is a high improbability of recovery of part of ◾ amount less the related loan loss provision.
the remaining loan exposure (including partial debt forgiveness);
In a bankruptcy liquidation scenario;
◾ After divestment or sale of a credit facility at a discount;
◾ Upon conversion of a credit facility into equity; or ◾

2019 ING Group Annual Report on Form 20-FF - 27

ING Group releases a legal (monetary) claim it has on its customer.because the LLP and the underlying exposures subject to impairment assessment are material, ◾ these assumptions are considered critical accounting assumptions. The sensitivity of these When a loan is uncollectable, it is written off against the related loan loss provision. Subsequentassumptions is assessed in the credit risk section of the ‘Risk Management’ section in the Annual recoveries of amounts previously written off are recognised in the statement of profit or loss.Report.

Debt forgiveness (or debt settlement) involves write-off but additionally involves the forgiveness ofThe critical accounting estimates and assumptions are:
a legal obligation, in whole or in part. This means that ING forfeits the legal right to recover theThe use of forward-looking macroeconomic scenarios in both collective and individual impairment debt. As a result, the financial asset needs to be derecognised. Distinction is made in situationsassessments. Forward-looking macroeconomic scenarios are subjective and uncertain in nature.
where ING ends the relationship with the client and situations where ING (partially) continues theThe process the Group follows involves using inputs from third party provider Oxford Economics financing of the client.(OE), and subjecting these to internal expert review and challenge to ensure the inputs used in the models reflect ING’s view on the macro economy. Two internal groups, the Macroeconomics Presentation of ECLScenarios Team and the Macroeconomics Scenarios Expert Panel, were established for this purpose.
Loss allowances for financial assets measured at AC are deducted from the gross carrying amountThe latter team consists of senior management representatives from the Business, Risk and of the assets. For debt instruments at FVOCI, the loss allowance is recognised in OCI, instead ofFinance. The use of alternate forward-looking macroeconomic scenarios can produce significantly deducting the carrying amount of the asset. For impaired financial assets with drawn and undrawndifferent estimates of ECL. This is demonstrated in the sensitivity analysis in the ‘Risk Management’ components, ECL also reflects any credit losses related to the portion of the loan commitment thatsection of the Annual Report, where the un-weighted ECL under each of the three scenarios for is expected to be drawn down over the remaining life of the instrument. The loss allowance onsome significant portfolios is disclosed.
issued financial guarantee contracts, in scope of IFRS 9 and not measured at FVPL, are recognised as liabilities and presented in Other provisions. ECL are presented in profit or loss in Addition to loanThe probability weights applied to each of the three scenarios. This is a management judgement loss provision.that ultimately requires estimation and consideration of the range of possibilities. This ensures consensus view on the likelihood of each scenario materializing is appropriately reflected in the Significant judgements and critical accounting estimates and assumptions:weights applied by the Group for collective assessment ECL calculations. The sensitivity analysis in Considerable management judgement is exercised in determining the amount of LLP for financialthe ‘Risk Management’ section of the Annual Report discloses these weights used.
assets assessed on both a collective and an individual impairment basis. In particular, this judgement requires ING Group to make various assumptions about the risk of default, theThe significant judgements are:
subsequent expected loss rates in the event of default, and expected future cash flows. TheseThe criteria for identifying a significant increase in credit risk. When determining whether the credit assumptions are based on a combination of the Group’s past history, existing market conditionsrisk on a financial asset has increased significantly, ING Group considers reasonable and and forward-looking estimates at the end of each reporting period. Changes in these assumptionssupportable information available to compare the risk of default occurring at reporting date with may lead to changes in the LLP over time. Given they are subjective and complex in nature, andthe risk of a default occurring at initial recognition of the financial asset. Whilst judgement is required in applying each financial asset with a PD rating, there is significant judgement used in

2019 ING Group Annual Report on Form 20-FF - 28

determining the stage allocation PD banding thresholds. The process of comparing a financialclassified at fair value through profit or loss is generally recognised in ‘Valuation results and net asset’s PD with the PD banding thresholds determines its ECL stage. Assets in Stage 1 are allocatedtrading income’ in the statement of profit or loss when the dividend has been declared.
a 12 month ECL, and those in Stage 2 are allocated a lifetime ECL, and the difference is often significant. As such, the judgement made both in assigning financial asset PDs and in setting PDEmbedded derivatives banding thresholds constitute a significant judgement. Analysis of the sensitivity associated withCertain derivatives embedded in other contracts are measured as separate derivatives when their the assessment of significant increase in credit risk is presented in the ‘Risk Management’ section ofeconomic characteristics and risks are not closely related to those of the host contract, the host the Annual Report.contract is not carried at fair value through profit or loss, and if a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative. These The definition of default. Judgement is exercised in management’s evaluation of whether there isembedded derivatives are measured at fair value with changes in fair value recognised in the objective evidence of impairment loss has been incurred for larger exposures. Managementstatement of profit or loss. An assessment is carried out when ING Group first becomes party to the judgement is required in assessing evidence of credit -impairment.contract. A reassessment is carried out only when there is a change in the terms of the contract

that significantly modifies the expected cash flows.

1.7 Financial instruments, prior to 1 January 2018 under IAS 39

Investments The following is applicable to periods prior to 1 January 2018 for financial instruments accounted for under IAS 39, to the extent not already discussed earlier in this section. The 2017 comparativeInvestments (including loans quoted in active markets) are classified either as held-to-maturity or period was not restated for the adoption of IFRS 9.available-for-sale. Investment debt securities and loans quoted in active markets with fixed maturity where management has both the intent and the ability to hold to maturity are classified 1.7.1 Classification and measurement of financial assets and financial liabilitiesas held-to-maturity. Investment securities and quoted loans intended to be held for an indefinite (IAS 39)period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices, are classified as available-for-sale financial assets.
Financial assets and liabilities designated at fair value through profit or loss Available -for-sale financial assets Management will designate a financial asset or a financial liability as such only if this eliminates a measurement inconsistency, if the related assets and liabilities are managed on a fair value basisAvailable-for -sale financial assets include available-for-sale debt securities and available-for-sale or classified as an embedded derivative as described below.equity securities. Available-for-sale financial assets are initially recognised at fair value plus transaction costs. For available-for-sale debt securities, the difference between cost and Interest income and expense from financial instruments classified at fair value through profit orredemption value is amortised. Interest income is recognised using the effective interest method.
loss is recognised in Interest income using the effective interest method (where applicable). TheAvailable-for -sale financial assets are subsequently measured at fair value. Interest income from remaining changes in fair value of such instruments are recognised in Valuation results and netdebt securities classified as available-for-sale is recognised in Interest income in the statement of trading income in the statement of profit or loss. Dividend income from equity instrumentsprofit or loss. Dividend income from equity instruments classified as available-for-sale is recognised

2019 ING Group Annual Report on Form 20-FF - 29

in Investment income in the statement of profit or loss when the dividend has been declared.of the asset, but before the balance sheet date, (a loss event) and that loss event (or events) has an

Unrealised gains and losses arising from changes in the fair value are recognised in equity and areimpact on the estimated future cash flows of the financial asset or group of financial assets that

recycled to the statement of profit or loss as Investment income when the asset is disposed.can be reliably estimated. The following circumstances, among others, are considered objective

Investments in prepayment sensitive securities such as Interest-Only and Principal-Only strips areevidence that a financial asset or group of assets is impaired:

generally classified as available-for-sale.The borrower has sought or has been placed in bankruptcy or similar protection and this leads to ◾
the avoidance of or delays in repayment of the financial asset;
Held-to-maturity investmentsThe borrower has failed in the repayment of principal, interest, or fees and the payment failure
◾
Non-derivative financial assets with fixed or determinable payments and fixed maturity for whichhas remained unsolved for a certain period;
ING Group has the positive intent and ability to hold to maturity and which are designated by◾The borrower has demonstrated significant financial difficulty, to the extent that it will have a
management as held-to-maturity assets are initially recognised at fair value plus transaction costs.negative impact on the expected future cash flows of the financial asset;
Subsequently, they are carried at AC using the effective interest method less any impairment◾The credit obligation has been restructured for non-commercial reasons. ING Group has granted
losses. Interest income from debt securities classified as held-to-maturity is recognised in Interestconcessions, for economic or legal reasons relating to the borrower’s financial difficulty, the
income in the statement of profit or loss using the effective interest method. Held-to-maturityeffect of which is a reduction in the expected future cash flows of the financial asset; and
investments include only debt securities.◾Historical experience, updated for current events where necessary, provides evidence that a
proportion of a group of assets is impaired although the related events that represent

Loans and receivablesimpairment triggers are not yet captured by ING Group’s credit risk systems.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that
Losses expected as a result of future events, no matter how likely, are not recognised.
are not quoted in an active market. They are initially recognised at fair value plus transaction costs.

Subsequently, they are carried at AC using the effective interest method less any impairment ING Group first assesses whether objective evidence of impairment (a loss event/trigger) exists losses. Loans and receivables include Cash and balances with central banks, Loans and advances to individually for financial assets that are individually significant, and then individually or collectively banks, Loans and advances to customers, and some categories of Other assets and are reflected in for financial assets that are not individually significant. If ING Group determines that no objective these line items in the statement of financial position. Interest income from loans and receivables is evidence of impairment (a loss event/trigger) exists for an individually assessed financial asset, recognised in Interest income in the statement of profit or loss using the effective interest method.
whether significant or not, it includes the asset in a group of financial assets with similar credit risk

Impairments of financial assets at amortised cost (loan loss provisions) (IAS 39)characteristics and collectively assesses them for impairment. Assets that are individually assessed
for impairment and for which an impairment loss is or continues to be recognised are not included ING Group assesses periodically and at each balance sheet date whether there is objective evidence
in a collective assessment of impairment.
that a financial asset or group of financial assets is impaired. A financial asset or a group of

financial assets is impaired and impairment losses are incurred if, and only if, there is objective If there is objective evidence that an impairment loss on an asset carried at AC has been incurred, evidence of impairment as a result of one or more events that occurred after the initial recognition the amount of the loss is measured as the difference between the asset’s carrying amount and the

2019 ING Group Annual Report on Form 20-FF - 30

present value of estimated future cash flows (excluding future credit losses that have not beenrelated to an event occurring after the impairment loss was recognised in the statement of profit or
incurred) discounted at the financial asset’s original effective interest rate. The carrying amount ofloss, the impairment loss is reversed through the statement of profit or loss.
the asset is reduced through the use of an allowance account (loan loss provision) and the amount
of the loss is recognised in the statement of profit or loss under Addition to loan loss provision. If1.8 Consolidation
the asset has a variable interest rate, the discount rate for measuring any impairment loss is theING Group comprises ING Groep N.V. (the Parent Company), ING Bank N.V. and all other subsidiaries.
current effective interest rate determined under the contract.Subsidiaries are entities controlled by ING Groep N.V. Control exists if ING Groep N.V. is exposed or
has rights to variable returns and has the ability to affect those returns through the power over the
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can beinvestee. Control is usually achieved through situations including, but not limited to:
related objectively to an event occurring after the impairment was recognised (such as anOwnership, directly or indirectly, of more than half of the voting power;
◾
improvement in the debtor’s credit rating), the previously recognised impairment loss is reversedAbility to appoint or remove the majority of the board of directors;
◾
by adjusting the provision. The amount of the reversal is recognised in the statement of profit orPower to govern operating and financial policies under statute or agreement; and
◾
loss.Power over more than half of the voting rights through an agreement with other investors.
◾

Impairments on other debt instruments (Loans and held-to-maturity investments) are part of theThe existence and effect of potential voting rights that are currently exercisable or convertible are
loan loss provision as described above.considered in assessing whether Group controls another entity.

Impairment of AFS assets For interests in structured entities, the existence of control requires judgement as these entities are At each balance sheet date, ING Group assesses whether there is objective evidence that a financialdesigned so that voting or similar rights are not the dominant factor in deciding who controls the asset or a group of financial assets is impaired. In the specific case of equity investments classifiedentity. This judgement includes, for example, the involvement in the design of the structured entity, as available-for-sale, a significant or prolonged decline in the fair value of the security below its costcontractual arrangements that give rights to direct the structured entities relevant activities and is considered in determining whether the assets are impaired. Significant and prolonged arecommitment to ensure that the structured entity operates as designed.

interpreted on a case-by-case basis for specific equity securities; generally 25% and six months are used as triggers. If any objective evidence exists for available-for-sale debt and equity investments,A list of principal subsidiaries is included in Note 48 ‘Principal subsidiaries’.
the cumulative loss, measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in net result, isA list containing the information referred to in Section 379 (1), Book 2 of the Dutch Civil Code has removed from equity and recognised in the statement of profit or loss. Impairment lossesbeen filed with the office of the Commercial Register of Amsterdam, in accordance with Section 379 recognised on equity instruments can never be reversed. If, in a subsequent period, the fair value of(5), Book 2 of the Dutch Civil Code.
a debt instrument classified as available-for-sale increases and the increase can be objectively

2019 ING Group Annual Report on Form 20-FF - 31

The results of the operations and the net assets of subsidiaries are included in the statement of1.9 Segment reporting
profit or loss and the statement of financial position from the date control is obtained until the dateAn operating segment is a distinguishable component of the Group, engaged in providing products
control is lost. On disposal, the difference between the sales proceeds, net of directly attributableor services, whose operating results are regularly reviewed by the Executive Board of ING Group
transaction costs, and the net assets is included in net result.and the Management Board Banking (together the Chief Operating Decision Maker (CODM)) to
make decisions about resources to be allocated to the segments and assess its performance. A
A subsidiary which ING Group has agreed to sell but is still legally owned by ING Group may still begeographical area is a distinguishable component of the Group engaged in providing products or
controlled by ING Group at the balance sheet date and therefore, still be included in theservices within a particular economic environment that is subject to risks and returns that are
consolidation. Such a subsidiary may be presented as a held for sale disposal group if certaindifferent from those of segments operating in other economic environments.

conditions are met.
The CODM examines ING Group’s performance both by line of business and geographic perspective All intercompany transactions, balances and unrealised surpluses and deficits on transactionsand has identified five reportable segments by line of business and six by geographical area. The between group companies are eliminated. Where necessary, the accounting policies used bygeographical analyses are based on the location of the office from which the transactions are subsidiaries are changed to ensure consistency with group policies. In general, the reporting datesoriginated.
of subsidiaries are the same as the reporting date of ING Groep N.V.

1.10 Foreign currency translation ING Groep N.V. and its Dutch group companies are subject to legal restrictions regarding the amount of dividends they can pay to their shareholders. The Dutch Civil Code contains theFunctional and presentation currency restriction that dividends can only be paid up to an amount equal to the excess of the company’s Items included in the financial statements of each of the Group’s entities are measured using the own funds over the sum of the paid-up capital and reserves required by law. Additionally, certain currency of the primary economic environment in which the entity operates (the functional Group companies are subject to restrictions on the amount of funds they may transfer in the form currency). The Consolidated financial statements are presented in euros, which is Group’s of dividends, or otherwise, to the parent company.
presentation currency.

Furthermore, in addition to the restrictions in respect of minimum capital requirements that areTransactions and balances
imposed by industry regulators in the countries in which the subsidiaries operate, other limitations Foreign currency transactions are translated into the functional currency using the exchange rate
exist in certain countries.
prevailing at the date of the transactions. Exchange rate differences resulting from the settlement

of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of profit or loss, except when deferred in equity as part of qualifying cash flow hedges or qualifying net investment hedges.

2019 ING Group Annual Report on Form 20-FF - 32

Non-monetary items that are measured in terms of historical cost in a foreign currency areOn consolidation, exchange rate differences arising from the translation of a monetary item that translated using the exchange rate at the date of the transaction.forms part of the net investment in a foreign operation, and of borrowings and other instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign Exchange rate differences on non-monetary items, measured at fair value through profit or loss,operation is sold, the corresponding exchange rate differences are recognised in the statement of are reported as part of the fair value gain or loss. Non-monetary items are retranslated at the dateprofit or loss as part of the gain or loss on sale.

fair value is determined. Exchange rate differences on non-monetary items measured at fair value
through the revaluation reserve are included in the revaluation reserve in equity.Goodwill and fair value adjustments arising from the acquisition of a foreign operation are treated
as assets and liabilities of the foreign operation and translated at the exchange rate prevailing at
Exchange rate differences in the statement of profit or loss are generally included in ‘Valuationthe balance sheet date.
results and net trading income’. Reference is made to Note 23 ‘Valuation results and net trading
income’, which discloses the amounts included in the statement of profit or loss. Exchange rate1.11 Investments in associates and joint ventures
differences relating to the disposal of debt and FVPL equity securities are considered to be anAssociates are all entities over which the Group has significant influence but not control. Significant
inherent part of the capital gains and losses recognised in Investment income. As mentionedinfluence is the ability to participate in the financial and operating policies of the investee. It
below, in Group companies relating to the disposals of group companies, any exchange rategenerally results from a shareholding of between 20% and 50% of the voting rights or through
difference deferred in equity is recognised in the statement of profit or loss in ‘Result on disposal ofsituations including, but not limited to one or more of the following:
group companies’. Reference is also made to Note 20 ‘Equity’, which discloses the amountsRepresentation on the board of directors;
◾ included in the statement of profit or loss.Participation in the policymaking process; and ◾ Interchange of managerial personnel.
◾

Group companies

The results and financial positions of all group companies that have a functional currency differentJoint ventures are entities over which the Group has joint control. Joint control is the contractually from the presentation currency are translated into the presentation currency as follows:agreed sharing of control over an arrangement or entity, which exists only when decisions about Assets and liabilities included in each statement of financial position are translated at the closingthe relevant activities require the unanimous consent of the parties sharing control. Joint control ◾ rate at the date of that statement of financial position;means that no party to the agreement is able to act unilaterally to control the activity of the Income and expenses included in each statement of profit or loss are translated at averageentity. The parties to the agreement must act together to control the entity and therefore exercise ◾ exchange rates (unless this average is not a reasonable approximation of the cumulative effectthe joint control.
of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); andInvestments in associates and joint ventures are initially recognised at cost and subsequently All resulting exchange rate differences are recognised in a separate component of equity.accounted for using the equity method of accounting.
◾

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The Group’s investment in associates and joint ventures (net of any accumulated impairment loss)useful life (in general 20–50 years). Depreciation is calculated on a straight -line basis. On disposal, includes goodwill identified on acquisition. The Group’s share of its associates and joint venturesthe related revaluation reserve is transferred to retained earnings.
post-acquisition profits or losses is recognised in the statement of profit or loss, and its share of post-acquisition changes in reserves is recognised in equity. The cumulative post-acquisitionThe fair values of land and buildings are based on regular appraisals done by independent qualified changes are adjusted against the carrying amount of the investment. When the Group’s share ofvaluers or by internal valuers, similar to appraisals of real estate investments. Subsequent losses in an associate or joint venture equals or exceeds its interest in the associate or joint venture,expenditure is included in the asset’s carrying amount when it is probable that future economic including any long-term interests in the associate like uncollateralised loans that are neitherbenefits associated with the item will flow to the Group and the cost of the item can be measured planned nor likely to be settled in the foreseeable future, the Group does not recognise furtherreliably.
losses, unless it has incurred obligations or made payments on behalf of the associate or joint venture.Equipment

Equipment is stated at cost less accumulated depreciation and any impairment losses. The cost of
Unrealised gains on transactions between the Group and its associates and joint ventures arethe assets is depreciated on a straight line basis over their estimated useful lives, which are
eliminated to the extent of the Group’s interest in the associates and joint ventures. Unrealisedgenerally as follows: for data processing equipment two to five years, and four to ten years for
losses are also eliminated unless they provide evidence of an impairment of the asset transferred.fixtures and fittings. Expenditure incurred on maintenance and repairs is recognised in the
Accounting policies of associates and joint ventures have been changed where necessary to ensurestatement of profit or loss as incurred. Expenditure incurred on major improvements is capitalised
consistency with the policies adopted by the Group. The reporting dates of all significant associatesand depreciated.

and joint ventures are consistent with the reporting date of the Group.

Disposals of property and equipment

1.12 Property and equipment The difference between the proceeds on disposal and net carrying value is recognised in the statement of profit or loss under Other income.

Property in own use

Land and buildings held for own use are stated at fair value at the balance sheet date. Increases in1.13 Acquisitions, goodwill and other intangible assets the carrying amount arising on revaluation of land and buildings held for own use are credited to the revaluation reserve in shareholders’ equity. Decreases in the carrying amount that offsetAcquisitions and goodwill previous increases of the same asset are charged against the revaluation reserve directly in equity;
ING Group’s acquisitions are accounted for using the acquisition method of accounting. The all other decreases are charged to the statement of profit or loss. Increases that reverse a consideration for each acquisition is measured at the aggregate of the fair values (at the date of revaluation decrease on the same asset previously recognised in net result are recognised in the exchange) of assets given, liabilities incurred or assumed, and equity instruments issued in statement of profit or loss. Depreciation is recognised based on the fair value and the estimated exchange for control of the acquiree. Goodwill, being the difference between the cost of the acquisition (including assumed debt) and the Group’s interest in the fair value of the acquired

2019 ING Group Annual Report on Form 20-FF - 34

assets, liabilities and contingent liabilities as at the date of acquisition, is capitalised as anresults (including the currency translation reserve in equity) is included in the statement of profit or intangible asset. Goodwill is only recognised separately on acquisitions. The results of theloss.
operations of the acquired companies are included in the statement of profit or loss from the date control is obtained.Goodwill impairment

ING assesses at each reporting period, whether there is an indication that an intangible asset may Where applicable, the consideration for the acquisition includes any asset or liability resulting frombe impaired. Irrespective of whether there is an indication of impairment, intangible assets with an a contingent consideration arrangement, the contingent consideration is measured at itsindefinite useful life, including goodwill acquired in a business combination, and intangible assets acquisition-date fair value. Contingent consideration arrangements classified as an asset or anot yet available for use, are tested annually for impairment. Goodwill is allocated to groups of liability, are subsequently measured at fair value and the changes in fair value will be recognised inCGUs (that is, the group of cash generating units or CGUs) for the purpose of impairment testing.
the statement of profit or loss. Changes in the fair value of the contingent consideration classifiedThese groups of CGUs represent the lowest level at which goodwill is monitored for internal as equity, are not recognised.management purposes. Goodwill is tested for impairment by comparing the carrying value of the group of CGUs to the recoverable amount of that group of CGUs. The carrying value is determined Where a business combination is achieved in stages, ING Group’s previously held interests in theas the IFRS net asset value including goodwill. In compliance with IAS 36 ‘Impairment of assets’, the assets and liabilities of the acquired entity are remeasured to fair value at the acquisition date (i.e.carrying value is determined on a basis that is consistent with the way in which the recoverable the date ING Group obtains control) and the result ing gain or loss, if any, is recognised in theamount of the CGU is determined. When the carrying values need to be allocated between Retail statement of profit or loss. Amounts arising from interests in the acquiree prior to the acquisitionand Wholesale solvency (risk-weighted assets) are used as a basis. The recoverable amount is date that have previously been recognised in other comprehensive income are reclassified to theestimated as the higher of fair value less costs of disposal and value in use. Several methodologies statement of profit or loss, where such treatment would be appropriate if that interest wereare applied to arrive at the best estimate of the recoverable amount. Impairment of goodwill, if disposed of. Acquisition related costs are recognised in the statement of profit or loss as incurredapplicable, is included in the statement of profit or loss in Other operating expenses.

and presented in the statement of profit or loss as Other operating expenses.

Computer software The initial accounting for the fair value of the net assets of the companies acquired during the year Computer software that has been purchased or generated internally for own use is stated at cost may be determined only provisionally as the determination of the fair value can be complex and less amortisation and any impairment losses. Amortisation is calculated on a straight-line basis the time between the acquisition and the preparation of the Financial statements can be limited.
over its useful life. This period will generally not exceed five years. Amortisation is included in Other The initial accounting shall be completed within a year after acquisition. Adjustments to the fair operating expenses.
value as at the date of acquisition of acquired assets and liabilities, that are identified within one year after acquisition are recognised as an adjustment to goodwill; any subsequent adjustment is recognised as income or expense. On disposal of group companies where control is lost, the difference between the sale proceeds and carrying value (including goodwill) and the unrealised

2019 ING Group Annual Report on Form 20-FF - 35

Other intangible assetsUncertain tax positions are assessed continually by ING Group and in case it is probable that there
Other intangible assets are capitalised and amortised over their expected economic life, which iswill be a cash outflow; a current tax liability is recognised.

generally between three and ten years. Intangible assets with an indefinite life are not amortised.

1.15 Other assets

1.14 Taxation

Investment property Income tax on the result for the year comprises current and deferred tax. Income tax is recognised in the statement of profit or loss but it is recognised directly in equity if the tax relates to items thatInvestment properties are recognised at fair value at the balance sheet date. Changes in the are recognised directly in equity.carrying amount resulting from revaluations are recognised in the statement of profit or loss. On disposal, the difference between the sale proceeds and carrying value is recognised in the Deferred income taxstatement of profit or loss.

Deferred income tax is provided in full, using the liability method, on temporary differences arising

Property obtained from foreclosures between the tax basis of assets and liabilities and their carrying amounts in the consolidated
financial statements. Deferred income tax is determined using tax rates (and laws) that have beenProperty obtained from foreclosures is stated at the lower of cost and net realisable value. Net
enacted or substantively enacted by the balance sheet date and are expected to apply when therealisable value is the estimated selling price, less applicable variable selling expenses. Property
related deferred income tax asset is realised or the deferred income tax liability is settled. Deferredobtained from foreclosures is included in Other assets - Property development and obtained from
tax assets and liabilities are not discounted.foreclosures.

Deferred tax assets are recognised where it is probable that future taxable profit will be availableProperty development
against which the temporary differences can be utilised. Deferred income tax is provided onProperty developed and under development is included in Other assets – Property development
temporary differences arising from investments in subsidiaries and associates, except where theand obtained from foreclosures. Depending on the intention of ING Group after completion of the
timing of the reversal of the temporary difference is controlled by the Group and it is probable thatdevelopment, the property is measured as follows:
the difference will not reverse in the foreseeable future. The tax effects of income tax lossesIntention to sell: at the lower of cost and net realisable value;
available for carry forward are recognised as an asset where it is probable that future taxableIntention to use as a real estate investment: at fair value.
profits will be available against which these losses can be utilised.

Fair value remeasurement of debt and equity instruments measured at FVOCI and cash flow hedges are recognised directly in equity. Deferred tax related to this fair value remeasurement is also recognised directly in equity and is subsequently recognised in the statement of profit or loss together with the deferred gain or loss.

2019 ING Group Annual Report on Form 20-FF - 36

1.16 Disposal groups held for sale and discontinued operationsassets and liabilities as a result of classification as held for sale are included in the notes in the line Disposal groups (and groups of non-current assets) are classified as held for sale if their carrying‘Changes in composition of the group and other changes’.
amount will be recovered principally through a sale transaction rather than through continuing use. This is only the case when the sale is highly probable and the disposal group (or group of1.17 Provisions, contingent liabilities and contingent assets assets) is available for immediate sale in its present condition; management must be committed toA provision is a present obligation arising from past events, the settlement of which is expected to the sale, which is expected to occur within one year from the date of classification as held for sale.result in an outflow of resources embodying economic benefits, however the timing or the amount

is uncertain. Provisions are discounted when the effect of the time value of money is significant Upon classification as held for sale, the disposal group is measured at the lower of its carryingusing a pre-tax discount rate.
amount and fair value less costs to sell, except where specifically exempt from IFRS 5. An impairment loss is recognised for any initial or subsequent write-down of the disposal group to fairReorganisation provisions include employee termination benefits when the Group is demonstrably value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs tocommitted to either terminating the employment of current employees according to a detailed sell of the disposal group, but not in excess of any cumulative impairment loss previouslyformal plan without possibility of withdrawal, or providing termination benefits as a result of an recognised. A gain or loss not previously recognised by the date of the sale of the disposal group isoffer made to encourage voluntary redundancy.
recognised at the date of derecognition. Assets within the disposal group are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to theA liability is recognised for a levy when the activity that triggers payment, as identified by the liabilities of a disposal group classified as held for sale continue to be recognised. The assets of therelevant legislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the disposal group classified as held for sale are presented separately from the other assets in theliability is recognised only upon reaching the specified minimum threshold.
balance sheet. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the balance sheet.A contingent liability is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not When a group of assets that is classified as held for sale represents a major line of business orwholly within the control of ING Group; or a present obligation that arises from past events but is geographical area the disposal group is classified as discontinued operations. Upon classification ofnot recognised because it is either not probable that an outflow of economic benefits will be a business as held for sale and discontinued operations the individual income and expenses arerequired to settle the obligation or the amount of the obligation cannot be measured reliably.
presented within the Total net result from discontinued operations instead of being presented inContingent liabilities are not recognised in the statement of financial position, but are rather the usual line items in the Consolidated statement of profit or loss. All comparative years in thedisclosed in the notes unless the possibility of the outflow of economic benefits is remote.
Consolidated statement of profit or loss are restated and presented as discontinued operations for all periods presented. Furthermore, the individual assets and liabilities are presented in theA contingent asset is a possible asset that arises from past events and whose existence will be Consolidated statement of financial position as Assets and liabilities held for sale and are no longerconfirmed only by the occurrence or non-occurrence of one or more uncertain future events not included in the usual line items in the Consolidated statement of financial position. Changes inwholly within the control of ING Group. Contingent assets are recognised in the statement of

2019 ING Group Annual Report on Form 20-FF - 37

financial position only when realisation of the income that arises from such an asset is virtually1.18 Other liabilities
certain. Contingent assets are disclosed in the notes when an inflow of economic benefits is
probable.Defined benefit plans

The net defined benefit asset or liability recognised in the statement of financial position in respect
Significant judgements and critical accounting estimates and assumptions:of defined benefit pension plans is the fair value of the plan assets less the present value of the
The recognition and measurement of provisions is an inherently uncertain process involving usingdefined benefit obligation at the balance sheet date.

judgement to determine when a present obligation exists and estimates regarding probability, amounts and timing of cash flows.Plan assets are measured at fair value at the balance sheet date. For determining the pension expense, the return on plan assets is determined using a high quality corporate bond rate identical ING Group may become involved in legal proceedings. The degree of uncertainty and the methodto the discount rate used in determining the defined benefit obligation.
of making the accounting estimate depends on the individual case, its nature and complexity.
Legal cases are usually one of a kind. Judgement is required to estimate the probability of anChanges in plan assets that effect Shareholders’ equity and/or Net result, include mainly:
unfavourable outcome and the amount of potential loss. For the assessment of litigation provisionsReturn on plan assets using a high quality corporate bond rate at the start of the reporting period ◾ ING Group consults with legal experts. Even taking into consideration legal experts’ advice, thewhich are recognised as staff costs in the statement of profit or loss; and probability of an outflow of economic benefits can still be uncertain and the amount provisionedRemeasurements which are recognised in Other comprehensive income (equity).
◾ can remain sensitive to the assumptions used which may have a broad range of outcomes.
Reference is made to Note 16 ‘Provisions’. For legal proceedings where it is not possible to make aThe defined benefit obligation is calculated by internal and external actuaries through actuarial reliable estimate of the expected financial effect, that could result from the ultimate resolution ofmodels and calculations using the projected unit credit method. This method considers expected the proceedings, no provision is recognised, however disclosure is included in the financialfuture payments required to settle the obligation resulting from employee service in the current statements. Reference is made to Note 46 ‘Legal proceedings’.and prior periods, discounted using a high quality corporate bond rate. Inherent in these actuarial models are assumptions including discount rates, rates of increase in future salary and benefit Critical accounting estimates and assumptions for the reorganisation provision are in estimatinglevels, mortality rates, consumer price index and the expected level of indexation. The assumptions the amounts and timing of cash flows as the announced transformation initiatives areare based on available market data as well as management expectations and are updated implemented over a period of several years. Reference is made to Note 16 ‘Provisions’.regularly. The actuarial assumptions may differ significantly from the actual results due to changes in market conditions, economic and mortality trends, and other assumptions. Any changes in these assumptions could have a significant impact on the defined benefit plan obligation and future pension costs.

2019 ING Group Annual Report on Form 20-FF - 38

Changes in the defined benefit obligation that effects Shareholders’ equity and/or Net result,1.19 Income recognition
include mainly:
Service cost which are recognised as staff costs in the statement of profit or loss;Interest ◾
◾Interest expenses using a high quality corporate bond rate at the start of the period which areInterest income and expense are recognised in the statement of profit or loss using the effective
recognised as staff costs in the Statement of profit or loss; andinterest method. The effective interest method is a method of calculating the amortised cost of a
◾Remeasurements which are recognised in Other comprehensive income (equity).financial asset or a financial liability and of allocating the interest income or interest expense over
the relevant period. The effective interest rate is the rate that exactly discounts estimated future
Remeasurements recognised in other comprehensive income are not recycled to profit or loss. Anycash payments or receipts through the expected life of the financial instrument or, when
past service cost relating to a plan amendment is recognised in profit or loss in the period of theappropriate, a shorter period to the net carrying amount of the financial asset or financial liability.
plan amendment. Gains and losses on curtailments and settlements are recognised in theWhen calculating the effective interest rate, the Group estimates cash flows considering all
statement of profit or loss when the curtailment or settlement occurs.contractual terms of the financial instrument (for example, prepayment options) but does not

consider future credit losses.
The recognition of a net defined benefit asset in the Consolidated statement of financial position is limited to the present value of any economic benefits available in the form of refunds from theThe calculation includes all fees and points paid or received between parties to the contract that plans or reductions in future contributions to the plans.are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. Once a financial asset or a group of similar financial assets has been written down as a Defined contribution plansresult of an impairment loss, interest income is recognised using the rate of interest used to For defined contribution plans, the Group pays contributions to publicly or privately administereddiscount the future cash flows for the purpose of measuring the impairment loss.
pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised asInterest results on instruments classified at Amortised Cost, assets measured at FVOCI and staff expenses in the profit or loss when they are due. Prepaid contributions are recognised as anderivatives in a formal hedge accounting relationship is presented in ‘Interest income (expense)
asset to the extent that a cash refund or a reduction in the future payments is available.using effective interest rate method’. Interest result on financial assets and liabilities voluntarily designated as at FVPL and derivatives in so called economic hedges and instruments designated at Other post-employment obligationsfair value are presented in ‘Other interest income (expense)’. Interest result on all other financial Some group companies provide other post-employment benefits to certain employees and formerassets and liabilities at FVTPL is recognised in ‘Valuation results and net trading income’.
employees. The entitlement to these benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment using an accounting methodology similar to that for defined benefit pension plans.

2019 ING Group Annual Report on Form 20-FF - 39

Fees and commissions1.20 Expense recognition

Fees and commissions are generally recognised as the service is provided. Loan commitment feesExpenses are recognised in the statement of profit or loss as incurred or when a decrease in future for loans that are likely to be drawn down are deferred (together with related direct costs) andeconomic benefits related to a decrease in an asset or an increase in a liability has arisen that can recognised as an adjustment to the effective interest rate on the loan. Loan syndication fees arebe measured reliably. Fee and commission expenses are generally a result from a contract with ING recognised as income when the syndication has been completed and the Group has retained noservice providers in order to perform the service for ING Group’s customers. Costs are generally part of the loan package for itself or has retained a part at the same effective interest rate as thepresented as ‘Commission expenses’ if they are specific, incremental, directly attributable and other participants. Commission and fees arising from negotiating, or participating in theidentifiable to generate commission income.
negotiation of, a transaction for a third party – such as the arrangement of the acquisition of shares or other securities or the purchase or sale of businesses – are recognised on completion ofShare-based payments the underlying transaction. Portfolio and other management advisory and service fees areShare-based payment expenses are recognised as a staff expense over the vesting period. A recognised based on the applicable service contracts as the service is provided. Asset managementcorresponding increase in equity is recognised for equity-settled share-based payment fees related to investment funds and investment contract fees are recognised on a pro-rata basistransactions. A liability is recognised for cash-settled share-based payment transactions. The fair over the period the service is provided. The same principle is applied for wealth management,value of equity-settled share-based payment transactions are measured at the grant date, and the financial planning and custody services that are continuously provided over an extended period offair value of cash-settled share-based payment transactions are measured at each balance sheet time. Fees received and paid between banks for payment services are classified as commissiondate. Rights granted will remain valid until the expiry date, even if the share based payment income and expenses.scheme is discontinued. The rights are subject to certain conditions, including a pre-determined continuous period of service.

Lease income

The proceeds from leasing out assets under operating leases are recognised on a straight-line basis1.21 Earnings per ordinary share
over the life of the lease agreement. Lease payments received in respect of finance leases whenEarnings per ordinary share is calculated on the basis of the weighted average number of ordinary
ING Group is the lessor are divided into an interest component (recognised as interest income) andshares outstanding. In calculating the weighted average number of ordinar y shares outstanding:
a repayment component.Own shares held by group companies are deducted from the total number of ordinary shares in
◾
issue;
The computation is based on daily averages; and ◾
In case of exercised warrants, the exercise date is taken into consideration.
◾

The non-voting equity securities are not ordinary shares, because their terms and conditions (especially with regard to coupons and voting rights) are significantly different. Therefore, the

2019 ING Group Annual Report on Form 20-FF - 40

weighted average number of ordinary shares outstanding during the period is not impacted by theCash flows arising from foreign currency transactions are translated into the functional currency non-voting equity securities.using the exchange rates at the date of the cash flows.

Diluted earnings per share data are computed as if all convertible instruments outstanding at year-The net cash flow shown in respect of Loans and advances to customers relates only to end were exercised at the beginning of the period. It is also assumed that ING Group uses thetransactions involving actual payments or receipts. The Addition to loan loss provision which is assumed proceeds thus received to buy its own shares against the average market price in thededucted from the item Loans and advances to customers in the statement of financial position financial year. The net increase in the number of shares resulting from the exercise is added to thehas been adjusted accordingly from the result before tax and is shown separately in the statement average number of shares used to calculate diluted earnings per share.of cash flows.

Share options with fixed or determinable terms are treated as options in the calculation of dilutedThe difference between the Net cash flow in accordance with the statement of cash flows and the earnings per share, even though they may be contingent on vesting. They are treated aschange between the opening and closing balance of Cash and cash equivalents in the statement of outstanding on the grant date. Performance-based employee share options are treated asfinancial position is due to exchange rate differences and is presented separately in the cash flow contingently issuable shares because their issue is contingent upon satisfying specified conditionsstatement.

in addition to the passage of time.
Liabilities arising from financing activities are debt securities and subordinated loans.

1.22 Statement of cash flows

The statement of cash flows is prepared in accordance with the indirect method, classifying cash flows as cash flows from operating, investing and financing activities. In the net cash flow from operating activities, the result before tax is adjusted for those items in the statement of profit or loss and changes in items per the statement of financial position, which do not result in actual cash flows during the year.

For the purposes of the statement of cash flows, Cash and cash equivalents comprise balances with less than three months’ maturity from the date of acquisition, including cash and balances with central banks, treasury bills and other eligible bills, amounts due from other banks, and deposits from banks. Investments qualify as a cash equivalent if they are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

2019 ING Group Annual Report on Form 20-FF - 41

AssetsAs at 31 December 2019, Loans include receivables related to securities in reverse repurchase

transactions amounting to EUR 8,943 million (2018: EUR 6,686 million) and receivables related to

finance lease contracts amounting to EUR 24 million (2018: EUR 51 million). Reference is made to

2Cash and balances with central banks| Cash and balances with central banks | | | |
| --- | --- | --- | --- |
| | 2019 | 2018 | As at 31 December 2019, all loans and advances to banks are non-subordinated. |
| Amounts held at central banks | 51,178 | 47,655 | |
| Cash and bank balances | 2,024 | 2,333 | |
| | 53,202 | 49,987 | 4 Financial assets at fair value through profit or loss |

The movement in Cash and balances with central banks reflects ING’s active liquidity management.	Financial assets at fair value through profit or loss
Amounts held at central banks reflect on demand balances.		2019	2018
	Trading assets	49,254	50,152
	Non-trading derivatives	2,257	2,664
Reference is made to Note 42 ‘Assets not freely disposable’ for restrictions on Cash balances with	Designated at fair value through profit or loss	3,076	2,887
central banks.	Mandatorily measured at fair value through profit or loss	41,600	64,783
		96,187	120,486

3 Loans and advances to banks Financial assets at fair value through profit or loss includes securities lending and sales and| Loans and advances to banks | | | | | | | repurchase transactions which were not derecognised, because ING Group continues to be exposed |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | Netherlands | | International | | | Total | to substantially all risks and rewards of the transferred financial asset. These assets are included in |
| | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | Trading assets and Financial assets mandatorily measured at fair value through profit or loss. |
| Loans | 13,641 | 7,967 | 21,499 | 22,460 | 35,140 | 30,428 | Reference is made to Note 43 ‘Transfer of financial assets’ for information on transferred assets |
| Cash advances, overdrafts and other balances | 0 | 1 | 4 | 3 | 5 | 3 | |
| | 13,641 | 7,968 | 21,504 | 22,463 | 35,145 | 30,431 | which were not derecognised. |

Loan loss provisions	–6	–5	–3	–5	–9	–9	Trading assets
	13,635	7,963	21,501	22,458	35,136	30,422
							Trading assets by type
Reference is made to Note 42 ‘Assets not freely disposable’ for restrictions on Loans and advances								2019	2018
to banks.							Equity securities	8,499	8,898
Loans include balances (mainly short-term deposits) with central banks amounting to EUR 3,185							Debt securities	6,256	5,213
							Derivatives	21,694	22,110
million (2018: EUR 4,713 million).							Loans and receivables	12,806	13,931
								49,254	50,152

2019 ING Group Annual Report on Form 20-FF - 42

Trading assets include assets that are classified under IFRS as Trading, but are closely related toNon-trading derivatives| governments, products that are traded on the financial markets. | Non-trading derivatives by type | | |
| --- | --- | --- | --- |
| A significant part of the derivatives in the trading portfolio is related to servicing corporate clients in | | 2019 | 2018 |
| | Derivatives used in | | |
| their risk management to hedge for example currency or interest rate exposures. In addition, ING | - fair value hedges | 524 | 650 |
| provides its customers access to equity and debt markets for issuing their own equity or debt | - cash flow hedges | 677 | 1,012 |
| securities (securities underwriting). Although these are presented as Trading under IFRS, these are | - hedges of net investments in foreign operations | 23 | 41 |
| | Other non-trading derivatives | 1,033 | 961 |
| directly related to services to ING’s customers. | | 2,257 | 2,664 |

Reference is made to Note 39 ‘Derivatives and hedge accounting’ for information on derivatives Part of the trading assets are sold subject to repurchase agreements, securities lending and similar
used in hedge accounting.
agreements comparable to collateralised lending, and continue to be recognised in the

consolidated statement of financial position.
Other non-trading derivatives mainly includes interest rate swaps and foreign exchange currency From a risk perspective, the gross amount of trading assets must be considered together with the
swaps for which no hedge accounting is applied.
gross amount of trading liabilities, which are presented separately on the statement of financial

position since IFRS does not always allow netting of these positions in the statement of financial

Designated at fair value through profit or loss position.| | Designated at fair value through profit or loss by type | | |
| --- | --- | --- | --- |
| As at 31 December 2019, Trading Assets - Loans and receivables include receivables of EUR 11,969 | | 2019 | 2018 |
| million (2018: EUR 12,939 million) with regard to reverse repurchase transactions. | Debt securities | 2,334 | 2,114 |
| | Loans and receivables | 742 | 772 |
| | | 3,076 | 2,887 |

on trading liabilities.‘Financial assets designated at fair value through profit or loss’ includes a portfolio of loans and

receivables which is economically hedged by credit derivatives. The hedges do not meet the criteria

for hedge accounting and the loans are recorded at fair value to avoid an accounting mismatch.

The maximum credit exposure of the loans and receivables included in ‘Financial assets designated

at fair value through profit or loss’ approximates its carrying value. The cumulative change in fair

value of the loans attributable to changes in credit risk is not significant.

2019 ING Group Annual Report on Form 20-FF - 43

The notional value of the related credit derivatives is EUR 1,672 million (2018: EUR 1,364 million).5 Financial assets at fair value through other comprehensive income| loans were first designated, amounts to EUR 29 million (2018: EUR -23 million) and the change for | Financial assets at fair value through other comprehensive income by type | | | |
| --- | --- | --- | --- | --- |
| the current year amounts to EUR -52 million (2018: EUR 17 million). | | | 2019 | 2018 |
| | Equity securities | | 2,306 | 3,228 |
| | Debt securities | 1 | 30,483 | 25,616 |
| The changes in fair value of the (designated) loans attributable to changes in credit risk have been | Loans and advances | 1 | 1,680 | 2,379 |
| calculated by determining the changes in credit spread implicit in the fair value of bonds issued by | | | 34,468 | 31,223 |

entities with similar credit characteristics.
1 Debt securities include an amount of EUR -7 million (2018: EUR -6 million) and the Loans and advances includes EUR -3 million (2018: EUR -5 million) of Loan loss provisions.

Mandatorily at fair value through profit or loss| | 2019 | 2018 | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Equity securities | 159 | 210 | Equity securities designated as at fair value through other comprehensive | | | | |
| Debt securities | 733 | 1,103 | income | Carrying | Dividend | Carrying | Dividend |
| Loans and receivables | 40,708 | 63,469 | | value | income | value | income |
| | 41,600 | 64,783 | | 2019 | 2019 | 2018 | 2018 |
| | | | Investment in Bank of Beijing | 2,001 | 93 | 1,967 | 83 |
| None of the equity securities are individually significant for ING Group. | | | Investment in Kotak Mahindra Bank | – | – | 919 | 1 |
| | | | Other Investments | 305 | 18 | 342 | 8 |
| For details on ING Group’s total exposure to debt securities reference is made to Note 6 ‘Securities | | | | 2,306 | 111 | 3,228 | 92 |

at amortised cost’.
For strategic equity securities, ING decided to apply the option to irrevocably designate these

investments at fair value through other comprehensive income, instead of the IFRS 9 default As at 31 December 2019, Loans and receivables mandatorily measured at fair value through profit measurement of fair value through profit or loss.
or loss includes EUR 38,985 million (2018: EUR 63,022 million) with regard to reverse repurchase

transactions.
As at 31 December 2019 ING holds approximately 13% (2018: 13%) of the shares of Bank of

Beijing, a bank listed on the stock exchange of Shanghai. Following a change in regulatory

requirements set by China Banking and Insurance Regulatory Commission, ING, as a shareholder

holding more than 5% or more of the shares, is required to supply additional capital when

necessary. No request for additional capital was received in 2019 (2018: not applicable).

2019 ING Group Annual Report on Form 20-FF - 44

The following table presents changes in financial assets at fair value through other comprehensive6 Securities at amortised cost

income.

Securities at amortised cost fully consist of Debt securities.

Changes in fair value through other comprehensive income financial assets| FVOCI equity | | FVOCI debt | | | | ING Group’s exposure to debt securities is included in the following lines in the statement of |
| --- | --- | --- | --- | --- | --- | --- |
| securities | | instruments | 1 | | Total | financial position: |
| 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | Exposure to debt securities |

Opening balance as at 1 January	3,228	3,983	27,995	65,747	31,223	69,730		2019	2018
Effect of change in accounting policy due to the							Debt securities at fair value through other comprehensive income	30,483	25,616
implementation of IFRS 9		–184		–31,945		–32,129	Debt securities at amortised cost	46,108	47,276
Additions	11	33	16,259	10,486	16,270	10,518	Debt securities at fair value through other comprehensive income and amortised cost	76,592	72,893
Amortisation			–12	–12	–12	–12

Transfers and reclassifications		3	1	–0	1	3	2	Trading assets	6,256	5,213
Changes in unrealised revaluations	2	139	–463	258	–660	397	–1,123	Debt securities at fair value through profit or loss	3,067	3,218
Impairments				–2		–2		Total debt securities at fair value through profit or loss	9,323	8,431
Reversals of impairments				1	16	1	16		85,914	81,323

Disposals and redemptions–1,091–178–12,298–15,478–13,389–15,656| Exchange rate differences | 15 | 35 | –40 | –159 | –25 | –124 | ING Group’s total exposure to debt securities (excluding debt securities held in the trading portfolio) |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Changes in the composition of the group and other | | | | | | | |
| changes | | 0 | 2 | 1 | 3 | 1 | of EUR 79,659 million (31 December 2018: EUR 76,111 million) is specified as follows: |

Closing balance2,3063,22832,16327,99534,46831,223

1 Fair value through other comprehensive income debt instruments includes both debt securities and loans and advances.

2 Changes in unrealised revaluations include changes on hedged items which are recognised in the statement of profit or loss.

Following a partial divestment in the fourth quarter of 2018, ING sold its last tranche of shares in

India’s Kotak Mahindra Bank (Kotak) in the first quarter of 2019 for EUR 880 million. The transaction,

for a stake of 3.07%, concluded the divestment process and was the main driver for the increase in

the ‘disposal’ line.

Reference is made to Note 6 ‘Securities at amortised cost’ for details on ING Group’s total exposure

to debt securities.

2019 ING Group Annual Report on Form 20-FF - 45

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| Debt securities by type of exposure | | | | | | | | | As at 31 December 2019, Loans and advances to customers – corporate loans include receivables | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | Debt Securities | | Debt Securities | | Debt Securities | | | | with regard to securities which have been acquired in reverse repurchase transactions amounting | | |
| | | at FVPL | | at FVOCI | | at AC | | Total | to EUR 180 million (2018: EUR 266 million). | | |
| | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | | | |
| Government bonds | 408 | 142 | 20,300 | 15,580 | 25,627 | 24,659 | 46,334 | 40,381 | Loans and advances to customers by subordination | | |
| Sub-sovereign, Supranationals and | | | | | | | | | | 2019 | 2018 |
| Agencies | 505 | 467 | 6,606 | 5,928 | 10,689 | 11,244 | 17,801 | 17,639 | Non-subordinated | 607,908 | 589,533 |
| Covered bonds | | | 1,734 | 2,245 | 6,960 | 6,722 | 8,693 | 8,967 | Subordinated | 121 | 120 |
| Corporate bonds | – | 23 | 476 | 485 | 143 | 765 | 619 | 1,273 | | 608,029 | 589,653 |
| Financial institutions' bonds | 1,440 | 1,527 | 332 | 460 | 1,536 | 2,415 | 3,308 | 4,402 | | | |
| ABS portfolio | 714 | 1,059 | 1,043 | 924 | 1,163 | 1,483 | 2,920 | 3,466 | No individual loan or advance has terms and conditions that significantly affect the amount, timing | | |
| | 3,067 | 3,218 | 30,491 | 25,622 | 46,118 | 47,288 | 79,676 | 76,128 | or certainty of the consolidated cash flows of the Group. | | |
| Loan loss provisions | | | –7 | –6 | –10 | –11 | –17 | –17 | | | |
| Bond portfolio | 3,067 | 3,218 | 30,483 | 25,616 | 46,108 | 47,276 | 79,659 | 76,111 | | | |
| | | | | | | | | | Loans and advances to customers and Loans and advances to banks include finance lease | | |

receivables and are detailed as follows:
Approximately 90% (2018: 99%) of the exposure in the ABS portfolio is externally rated AAA, AA or

A. There are no borrowed debt securities recognised in the statement of financial position.

7 Loans and advances to customers| Loans and advances to customers by type | | | | | | |
| --- | --- | --- | --- | --- | --- | --- |
| | Netherlands | | International | | | Total |
| | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 |
| Loans to, or guaranteed by, public authorities | 25,340 | 24,547 | 16,849 | 17,257 | 42,190 | 41,803 |
| Loans secured by mortgages | 117,199 | 117,848 | 231,327 | 219,530 | 348,526 | 337,379 |
| Loans guaranteed by credit institutions | 206 | 195 | 3,569 | 2,901 | 3,775 | 3,095 |
| Personal lending | 3,482 | 3,304 | 24,768 | 21,563 | 28,250 | 24,867 |
| Corporate loans | 39,645 | 37,213 | 150,233 | 149,787 | 189,878 | 187,000 |
| | 185,873 | 183,106 | 426,746 | 411,037 | 612,619 | 594,144 |

Loan loss provisions	–1,193	–1,480	–3,398	–3,011	–4,590	–4,491
	184,680	181,626	423,349	408,027	608,029	589,653

2019 ING Group Annual Report on Form 20-FF - 46

Finance lease receivables8 Investments in associates and joint venture s

20192018| Maturities of gross investment in finance lease receivables | | | Investments in associates and joint ventures | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| - within 1 year | 3,116 | 2,374 | | | Fair value | | | | | |
| - between 1-2 years | 3,811 | n/a | | | of listed | Balance | | | | |
| - between 2-3 years | 2,145 | n/a | | Interest | invest- | sheet | Total | Total | Total | Total |
| - between 3-4 years | 717 | n/a | 2019 | held (%) | ments | value | assets | liabilities | income | expenses |
| - between 4-5 years | 367 | n/a | TMB Public Company Limited | 23 | 1,109 | 1,509 | 55,804 | 49,974 | 1,145 | 891 |
| - more than 1 year but less than 5 years | n/a | 5,959 | Other investments in associates and joint | | | 281 | | | | |
| - more than 5 years | 434 | 1,646 | ventures | | | | | | | |
| | 10,591 | 9,979 | | | | 1,790 | | | | |

Unearned future finance income on finance leases	–580	–673	Investments in associates and joint ventures
Net investment in finance leases	10,011	9,306			Fair value
					of listed	Balance
Included in Loans and advances to banks	24	51		Interest	invest-	sheet	Total	Total	Total	Total
Included in Loans and advances to customers	9,987	9,256	2018	held (%)	ments	value	assets	liabilities	income	expenses
	10,011	9,306	TMB Public Company Limited	30	776	991	23,494	20,884	1,055	722
			Other investments in associates and joint			212
			ventures
The finance lease receivables mainly relate to the financing of equipment and to a lesser extent						1,203
real estate for third parties, where ING is the lessor. The finance lease receivables are part of

corporate loans. Interest income in 2019 on Finance lease receivables amounts to EUR 251 millionTMB is a financial institution providing products and services to Wholesale, Small and Medium

(2018: EUR 269 million).Enterprise (SME), and Retail customers. TMB is domiciled in Bangkok, Thailand and is listed on the

Expected credit losses for uncollectable finance lease receivables of EUR 136 million as at 31Stock Exchange of Thailand (SET). In December 2019 TMB merged with Thanachart Bank and

December 2019 (2018: EUR 150 million) is included in the loan loss provision. The loan loss provisionbecame Thailand’s sixth largest bank. Prior to this merger ING paid a capital contribution to TMB of

for finance lease receivables is classified into the following loan loss provision stages; stage 1: EUR 2EUR 381 million. As a result of the merger transaction ING recognized a gain of EUR 16 million

million (2018: EUR 5 million), stage 2: EUR 6 million (2018: EUR 11 million), and stage 3: EUR 128mainly to partial release of the related foreign currency reserves.

million (2018: EUR 134 million).

Other investments in associates and joint ventures are mainly financial services and financial

No individual finance lease receivable has terms and conditions that significantly affect thetechnology funds or vehicles operating predominantly in Europe

amount, timing or certainty of the consolidated cash flows of the Group.

ING Group does not hold any interests in Investments in associates and joint ventures that are

individually significant to ING Group. Other investments in associates and joint ventures represents

2019 ING Group Annual Report on Form 20-FF - 47

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| a large number of associates and joint ventures with an individual carrying value of less than EUR | Changes in Investments in associates and joint ventures | | |
| --- | --- | --- | --- |
| 50 million. | | 2019 | 2018 |
| | Opening balance | 1,203 | 1,088 |
| | Effect of change in accounting policy due to the implementation of IFRS 9 | | –28 |
| Significant influence for associates in which the interest held is below 20%, is based on the | Additions | 507 | 97 |
| combination of ING Group’s financial interest and other arrangements, such as participation in the | Transfers to and from Investments/Other assets and liabilities | 4 | 5 |
| | Revaluations | –18 | –2 |
| Board of Directors. | Share of results | 82 | 146 |
| | Dividends received | –58 | –30 |
| The reporting dates of certain associates and joint ventures can differ from the reporting date of | Disposals | –10 | –116 |
| | Impairments | –34 | –3 |
| the Group, but by no more than three months. | Exchange rate differences | 113 | 47 |
| | Closing balance | 1,790 | 1,203 |

Accumulated impairments of EUR 49 million (2018: EUR 15 million) have been recognised. The Share of results from associates and joint ventures of EUR 82 million (2018: EUR 146 million) as values presented in the tables above could differ from the values presented in the individual included in the table above, is mainly attributable to results of TMB of EUR 77 million (2018: EUR financial statements of the associates and joint ventures, due to the fact that the individual values 117 million).
have been brought in line with ING Group’s accounting principles. When the fair value of the Share of results from associates and joint ventures as presented in the statement of profit or loss investment is below cost for a significant amount or prolonged period of time, an impairment test includes, besides above mentioned share of results, also impairments.
is performed.

The associates and joint ventures of ING are subject to legal and regulatory restrictions regarding

9 Property and equipment the amount of dividends it can pay to ING. These restrictions are for example dependent on the

laws in the country of incorporation for declaring dividends or as a result of minimum capitalProperty and equipment by type| requirements that are imposed by industry regulators in the countries in which the associates and | | 2019 | 2018 |
| --- | --- | --- | --- |
| joint ventures operate. In addition, the associates and joint ventures also consider other factors in | Property in own use | 757 | 780 |
| | Equipment | 940 | 879 |
| determining the appropriate levels of equity needed. These factors and limitations include, but are | Right- of- use assets | 1,476 | n/a |
| not limited to, rating agency and regulatory views, which can change over time. | | 3,172 | 1,659 |

As ING has implemented IFRS 16 Leases without restating comparatives, no Right-of-use assets

were recognised in 2018. Reference is made to Note 1 ‘Accounting policies’, 1.4.3. IFRS 16 ’leases’ –

Impact of adoption.

ING considers valuations from third party experts in determining the fair values of Property, Plant

and Equipment.

2019 ING Group Annual Report on Form 20-FF - 48

Changes in equipment| Changes in property in own use | | | | | Data processing | | Fixtures and fittings | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | 2019 | 2018 | | | equipment | and other equipment | | | | Total |
| Opening balance | | 780 | 774 | | 2019 | 2018 | | 2019 | 2018 | 2019 | 2018 |
| Additions | | 5 | 5 | Opening balance | 290 | 291 | | 589 | 626 | 879 | 917 |
| Reclassifications | | | | Additions | 149 | 148 | | 200 | 136 | 349 | 284 |
| | - Transfers to and from Other Assets | –1 | 11 | Disposals | –1 | | –1 | –8 | –4 | –9 | –5 |
| | | | | Depreciation | –136 | –133 | | –142 | –164 | –278 | –298 |
| Amounts recognised in the statement of profit or loss for the year | | | | Impairments | –0 | | –4 | –1 | –1 | –1 | –5 |
| | - Depreciation | –11 | –14 | Exchange rate differences | 1 | | –8 | 1 | –5 | 2 | –13 |
| | - Impairments | –2 | –4 | Changes in the composition of the group | | | | | | | |
| | - Reversal of impairments | 6 | 17 | and other changes | 3 | | –4 | –5 | 1 | –3 | –2 |
| | | –7 | –1 | Closing balance | 307 | 290 | | 633 | 589 | 940 | 879 |
| Revaluations recognised in equity during the year | | 58 | 23 | | | | | | | | |
| Disposals | | –72 | –12 | Gross carrying amount as at 31 December | 1,479 | 1,346 | | 2,408 | 2,305 | 3,886 | 3,651 |
| Exchange rate differences | | –7 | –20 | Accumulated depreciation as at 31 December | –1,171 | –1,055 | –1,774 | | –1,716 | –2,946 | –2,771 |
| Closing balance | | 757 | 780 | Accumulated impairments as at 31 December | –1 | | –1 | –1 | –0 | –1 | –1 |
| | | | | Net carrying value as at 31 December | 307 | 290 | | 633 | 589 | 940 | 879 |

Gross carrying amount as at 31 December	1,279	1,320
Accumulated depreciation as at 31 December	–385	–387	Right-of-use assets relates to leased land and buildings, cars and other assets.

Accumulated impairments as at 31 December–137–153

Net carrying value as at 31 December757780

Revaluation surplus

Opening balance280279

Revaluation in the year591

Closing balance339280

The cost or the purchase price amounted to EUR 940 million (2018: EUR 1,040 million). Cost or the

purchase price less accumulated depreciation and impairments would have been EUR 417 million

(2018: EUR 500 million) had property in own use been valued at cost instead of at fair value.

2019 ING Group Annual Report on Form 20-FF - 49

Changes in Right-of-use assets10 Intangible assets

Other| | Property | Cars | leases | Total | Changes in intangible assets | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | 2019 | 2019 | 2019 | 2019 | | Goodwill | | Software | | | Other | | Total |
| Opening balance | n/a | n/a | n/a | n/a | | | | | | | | | |
| Effect of changes in accounting policy due to the implementation of IFRS 16 | 1,138 | 70 | 72 | 1,280 | | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 |
| Additions | 381 | 65 | –2 | 444 | Opening balance | 918 | 816 | 868 | 648 | 53 | 5 | 1,839 | 1,469 |

Depreciation–211–40–12–262Additions1720294950111297

Impairments–0–0Capitalised expenses285286285286| Remeasurements | 29 | 1 | 0 | 30 | Amortisation | | | –235 | –204 | –2 | –5–237 | | –209 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Disposals | –18 | –0 | –0 | –19 | Impairments | | | –61 | –12 | –0 | | –61 | –12 |
| Exchange rate differences | 8 | –0 | –1 | 7 | | | | | | | | | |
| Changes in the composition of the group and other changes | –4 | 0 | | –4 | Exchange rate differences | –28 | –99 | 0 | –5 | – | 0 | –28 | –104 |
| Closing balance | 1,323 | 96 | 57 | 1,476 | Disposals | | | –1 | 0 | | –0 | –1 | 0 |
| Gross carrying amount as at 31 December | 1,503 | 135 | 69 | 1,707 | Changes in the composition of the group | | | 8 | 59 | 1 | 52 | 9 | 111 |
| Accumulated depreciation as at 31 December | –213 | –40 | –12 | –265 | and other changes | | | | | | | | |

Accumulated impairments as at 31 December–0–0Closing balance90791895886852531,9161,839

Accumulated remeasurement as at 31 December331034

Net carrying value as at 31 December1,32396571,476Gross carrying amount as at 31 December9079182,6082,35961603,5753,338

Accumulated amortisation as at 31 December–1,641–1,487–7–5–1,648–1,492

Accumulated impairments as at 31 December–9–4–2–2–11–6

Net carrying value as at 31 December90791895886852531,9161,839

2019 ING Group Annual Report on Form 20-FF - 50

GoodwillMethodology

Goodwill is allocated to groups of cash generating units (CGUs) as follows:Several methodologies are applied to arrive at the best estimate of the recoverable amount. In line

with IFRS, the recoverable amount is determined as the higher of the fair value less costs of

Goodwill allocation to group of CGUs
disposal and Value in Use (VIU). Fair value less costs of disposal is based on observable share prices Method used forDiscountLong term GoodwillGoodwill recoverable amountrategrowth rate(Level 1 inputs in the fair value hierarchy), observable Price-to-Book multiples of relevant peer| Group of CGU’s | | | | | 2019 | 2018 | banks (Level 2), or based on a discounted free cash flow model (Level 3). The VIU calculation is |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Retail Netherlands | | Values in use | 6.10% | 0.00% | 30 | 14 | based on a Dividend Discount model using four year management approved plans. When |
| Retail Belgium | | Values in use | 6.94% | 0.00% | 50 | 50 | |
| Retail Germany | | Values in use | 6.10% | 0.00% | 349 | 349 | estimating the VIU of a CGU, local conditions and requirements determine the capital |
| Retail Growth Markets | 1 | Values in use | 10.47% | 3.34% | 209 | 231 | requirements, discount rates, and terminal growth rates. These local conditions and requirements |
| Wholesale Banking | 1 | Values in use | 7.29% | 0.69% | 268 | 274 | determine the ability to upstream excess capital and profits to ING Group. The discount rate |
| | | | | | 907 | 918 | calculation includes other inputs such as equity market premium, country risk premium, and long |

term inflation which are based on market sources and management’s judgement. The long term

growth rate for EU-countries is based on long-term risk-free rate by reference to the yield of a 1Goodwill related to Growth Countries is allocated across two groups of CGUs, EUR 209 million to Retail Growth Markets and
EUR 61 million to Wholesale Banking (2018: EUR 230 million to Retail Growth Markets and EUR 67 million to Wholesalecomposite index consisting of Euro generic government bonds, with a maturity of 30 years. For
Banking).
other countries, the growth rate includes long term inflation rate obtained from market sources.

Changes in the goodwill in 2019 mainly relate to the acquisition of 80% of the shares of The recoverable amount exceeds the carrying value of the CGUs for 2019 and 2018 and therefore Intersoftware Group B.V. The transaction resulted in recognition of EUR 16 million of goodwill which no impairment is required.
is fully allocated to Retail Netherland CGU.

Sensitivity of key assumptions In 2018, changes in the goodwill relate to the acquisition of 75% of the shares of Payvision Holding Key assumptions in the goodwill impairment test model are the Price-to-Book ratios, level 1 inputs B.V. and 90% of the shares of Makelaarsland B.V. The acquisition of Payvision and Makelaarsland (e.g. share price of a listed subsidiary), and the local parameters for CET1, discount rate, and long resulted in a recognition of goodwill of respectively EUR 188 million, allocated to Wholesale term growth rates. The model was tested for sensitivity by changing the key parameters in the Banking, and EUR 14 million, allocated to Retail Netherland.
model to more conservative values. The sensitivity analysis did not trigger additional impairment

considerations.
Other changes in goodwill of the CGU’s Wholesale Banking and Retail Growth Markets relate to

changes in currency exchange rates. Reference is made to Note 47 ‘Consolidated companies and

businesses acquired and divested’ for further information on the acquisitions that took place inSoftware and Other intangible assets

2018, 2019 and the goodwill recognised.Software, includes internally developed software amounting to EUR 741 million (2018: EUR 624

million).

2019 ING Group Annual Report on Form 20-FF - 51

Accrued assets

In 2018, Changes in the composition of the group and other changes mainly relates to the Accrued assets relate to income to be received attributable to 2019 and amounts paid in advance
recognition of intangible assets following the acquisition of Payvision. Reference is made to Note in respect of costs chargeable to subsequent periods.
47 ‘Consolidated companies and businesses acquired and divested’ for further information on the

acquisitions that took place in 2018 and the assets and liabilities recognised.

Amounts to be settled

Amounts to be settled include primarily transactions not settled at the balance sheet date. The The carrying value of CGU Wholesale Banking includes EUR 20 million of intangibles with indefinite nature of these transaction is short term and are expected to settle shortly after the closing date of life which relates to acquired trade names in the payments and cash management business. The the balance sheet.
asset is deemed to have indefinite life because there is no foreseeable limit to the cash flows

generated by those intangible assets.

Other

Other relates to various receivables in the normal course of business, amongst others, short term No impairment of indefinite useful life asset was recognised in 2019 (2018: nil).

receivables relating to mortgage issuance and other amounts receivable from customers.

11 Other assets

12 Assets and liabilities held for sale

Other assets by type

20192018Assets and liabilities held for sale includes disposal groups whose carrying amount will be recovered

Net defined benefit assets709527principally through a sale transaction rather than through continuing operations.

Investment properties4654| Property development and obtained from foreclosures | 98 | 124 | In December 2018, ING reached an agreement to sell part of the ING Lease Italy business and |
| --- | --- | --- | --- |
| Accrued assets | 783 | 783 | classified the this Italian lease business as Assets held for Sale (EUR 1.261 million). In the first 6 |
| Amounts to be settled | 2,835 | 4,248 | |
| Other | 2,546 | 2,696 | months of 2019 customers repaid EUR 100 million on outstanding. The sale of this Italian lease |
| | 7,018 | 8,433 | business was completed per 1 July 2019. The settlement price amounted to EUR 1.162 million, |
| | | | consisted of a EUR 368 million cash settlement, a EUR 20 million Deferred Purchase Price and a EUR |

Disclosures in respect of Net defined benefit assets are provided in Note 36 ‘Pension and other post-774 million Senior Loan facility for the portfolio of lease receivables. The deferred purchase price is

employment benefits’.linked to the performance of the sold portfolio and is reported under the financial assets

mandatorily measured at fair value through profit and loss. The additional loss in 2019 amounted

to EUR -2 million (2018: EUR -123 million).

2019 ING Group Annual Report on Form 20-FF - 52

Reference is made to Note 25 ‘Result on disposal of group companies’ and to Note 47 ‘ConsolidatedCustomer deposits by type
NetherlandsInternationalTotal companies and businesses acquired and divested’.

201920182019201820192018

Non-interest bearing19,03016,84124,78225,34243,81242,182

13 Deposits from banksInterest bearing159,546155,910370,997357,635530,543513,546

178,576172,751395,779382,977574,355555,729 Deposits from banks include non-subordinated debt from banks, except for amounts in the form of

debt securities.
Savings accounts relate to the balances on savings accounts, savings books, savings deposits, and

time deposits of private individuals.

Deposits from banks by type

NetherlandsInternationalTotal

15 Financial liabilities at fair value through profit or loss

201920182019201820192018| Non-interest bearing | 107 | 22 | 73 | 412 | 180 | 434 | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Interest bearing | 17,544 | 17,211 | 17,101 | 19,686 | 34,646 | 36,896 | Financial liabilities at fair value through profit or loss |

17,65117,23317,17520,09734,82637,33020192018

Trading liabilities28,04231,215| Deposits from banks includes ING’s participation in the targeted longer-term refinancing operations | Non-trading derivatives | 2,215 | 2,299 |
| --- | --- | --- | --- |
| (TLTRO) of EUR 17.7 billion (2018: EUR 17.7 billion). The TLTRO aims to stimulate lending to the real | Designated at fair value through profit or loss | 47,684 | 59,179 |
| economy in the Eurozone. The interest rate on the TLTRO’s is fixed over the life of each operation at | | 77,942 | 92,693 |

the benchmark rate of the European Central Bank.
Reference is made to Note 43 ‘Transfer of financial assets’ for information on securities lending as

well as sale and repurchase transactions included in Trading liabilities and Financial liabilities

14 Customer deposits designated at fair value through profit or loss.

Customer deposits

Trading liabilities

201920181| Savings accounts | 326,864 | 322,711 | Trading liabilities by type | | |
| --- | --- | --- | --- | --- | --- |
| Credit balances on customer accounts | 224,022 | 205,053 | | | |
| Corporate deposits | 22,329 | 26,920 | | 2019 | 2018 |
| Other | 1,140 | 1,044 | Equity securities | 193 | 355 |
| | 574,355 | 555,729 | Debt securities | 1,201 | 5,363 |
| | | | Funds on deposit | 5,322 | 3,968 |

1 The prior periods have been updated to improve consistency and comparability.Derivatives21,32521,528

28,04231,215

2019 ING Group Annual Report on Form 20-FF - 53

As at 31 December 2019, Trading liabilities include funds on deposit of EUR 4,556 million (2018: EURAs at 31 December 2019, the change in the fair value of financial liabilities designated at fair value

3,227 million) with regard to repurchase transactions.through profit or loss attributable to changes in credit risk is EUR 139 million (2018: EUR 18 million)

on a cumulative basis. This change has been determined as the amount of change in fair value of

Non-trading derivatives the financial liability that is not attributable to changes in market conditions that gave rise to

market risk (i.e. mainly interest rate risk based on yield curves).

Non-trading derivatives by type| | 2019 | 2018 | |
| --- | --- | --- | --- |
| Derivatives used in: | | | The amount that ING Group is contractually required to pay at maturity to the holders of financial |
| - fair value hedges | 873 | 1,035 | liabilities designated at fair value through profit or loss excluding repurchase agreements is EUR |

cash flow hedges3394588,634 million (2018: EUR 9,934 million).
hedges of net investments in foreign operations5117

Other non-trading derivatives95379116 Provisions

2,2152,299| | Provisions by type | | |
| --- | --- | --- | --- |
| Reference is made to Note 39 ‘Derivatives and hedge accounting’ for information on derivatives | | | |
| | | 2019 | 2018 |
| used for hedge accounting. | Reorganisation provisions | 385 | 613 |

Other provisions303399

Other non-trading derivatives mainly includes interest rate swaps and foreign currency swaps for6881,011

hedging purposes, but for which no hedge accounting is applied.Reorganisation provisions

Designated at fair value through profit or lossChanges in reorganisation provisions

20192018| Designated at fair value through profit or loss by type | | | Opening balance | 613 | 1,097 |
| --- | --- | --- | --- | --- | --- |
| | 2019 | 2018 | Additions | 56 | 53 |
| Debt securities | 8,053 | 8,216 | Unused amounts reversed | –49 | –49 |
| Funds entrusted | 39,386 | 50,650 | Utilised | –234 | –487 |
| Subordinated liabilities | 246 | 313 | Other changes | –0 | –2 |
| | 47,684 | 59,179 | Closing balance | 385 | 613 |

In 2019 the addition to the reorganisation provision is mainly related to ING’s Agile transformation As at 31 December 2019, financial liabilities designated at fair value through profit or loss include
in Germany and updates in existing reorganization provisions.
funds entrusted of EUR 38,492 million (2018: EUR 49,010 million) with regard to repurchase

transactions.

2019 ING Group Annual Report on Form 20-FF - 54

In 2018, changes in the reorganisation provisions were mainly attributable to existing initiatives

17 Other liabilities following the digital transformation programmes of ING Bank. These initiatives are implemented| uncertain. The provision at the balance sheet date represents the best estimate of the expected | | | | | | | Other liabilities by type | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| redundancy costs and are expected to be sufficient to cover these costs. | | | | | | | | 2019 | 2018 |
| | | | | | | | Net defined benefit liability | 483 | 421 |
| Other provisions | | | | | | | Other post-employment benefits | 84 | 76 |
| | | | | | | | Other staff-related liabilities | 526 | 473 |
| | | | | | | | Share-based payment plan liabilities | 6 | 9 |
| Changes in other provisions | | | | | | | Other taxation and social security contributions | 442 | 403 |
| | Litigation | | | Other | | Total | Rents received in advance | 9 | 61 |
| | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | Costs payable | 2,111 | 2,272 |
| Opening balance | 165 | 365 | 234 | 251 | 399 | 616 | Amounts to be settled | 4,741 | 6,098 |
| Effect of change in accounting policies | | | 7 | 11 | 7 | 11 | Lease liabilities | 1,507 | n/a |
| Additions | 74 | 59 | 46 | 35 | 120 | 95 | Other | 2,921 | 3,697 |
| Interest | | | –5 | 1 | –5 | 1 | | 12,829 | 13,510 |

Unused amounts reversed	–31	–76	–38	–37	–68	–113
Utilised	–104	–186	–12	–28	–116	–214	Disclosures in respect of Net defined benefit liabilities are provided in Note 36 ‘Pension and other
Exchange rate differences	–1	–4	–0	1	–1	–3	post-employment benefits’.
Other changes	–0	6	–31	–0	–31	6
Closing balance	102	165	201	234	303	399
							Other staff-related liabilities

Reference is made to Note 46 ‘Legal proceedings’ for developments in litigation provisions.Other staff-related liabilities includes vacation leave provisions, variable compensation provisions,

jubilee provisions, and disability/illness provisions.

In 2019, Other provisions – other includes provisions of EUR 25 million (2018: EUR 42 million) that

relate to credit replacement facilities and EUR 93 million (2018: EUR 80 million) that relate to non-Costs payable

credit replacement, off balance facilities.
Costs payable relate to costs attributable to 2019, which will be paid in subsequent periods.

As at 31 December 2019 amounts expected to be settled within twelve months, amount to EUR

Amounts to be settled

146 million. The amounts included in Other provisions are based on best estimates with regard to Amounts to be settled include primarily transactions not settled at the balance sheet date. The amounts and timing of cash flows required to settle the obligation.
nature of these transaction is short term and are expected to settle shortly after the closing date of

the balance sheet.
Further reference is made to Note 28 ‘Other operating expenses’.

2019 ING Group Annual Report on Form 20-FF - 55

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| As ING has implemented IFRS 16 Leases without restating comparatives, no Lease Liabilities were | Fixed rate debt securities | | |
| --- | --- | --- | --- |
| recognised in 2018. Reference is made to Note 1 ‘Accounting policies’, 1.4.3. IFRS 16 ’leases’ – | Within 1 year | 26,871 | 32,626 |
| Impact of adoption. | More than 1 year but less than 2 years | 10,358 | 7,766 |
| | More than 2 years but less than 3 years | 9,527 | 10,267 |
| | More than 3 years but less than 4 years | 6,321 | 8,228 |
| The total cash outflow for leases in 2019 was EUR 271 million. | More than 4 years but less than 5 years | 2,836 | 6,288 |
| | More than 5 years | 29,007 | 20,321 |
| Other | Total fixed rate debt securities | 84,920 | 85,496 |

	Floating rate debt securities
	Within 1 year	24,938	22,684
18 Debt securities in issue	More than 1 year but less than 2 years	3,126	4,134
	More than 2 years but less than 3 years	3,041	1,587
Debt securities in issue relate to debentures and other issued debt securities with either fixed	More than 3 years but less than 4 years	1,541	1,234
interest rates or interest rates based on floating interest rate levels, such as certificates of deposit	More than 4 years but less than 5 years	144	1,563
	More than 5 years	816	3,053
and accepted bills issued by ING Group, except for subordinated items. Debt securities in issue do	Total floating rate debt securities	33,608	34,255

Group does not have debt securities that are issued on terms other than those available in theTotal debt securities118,528119,751

normal course of business. The maturities of the debt securities are as follows:

In 2019 Debt securities in issue decreased by EUR 1.2 billion. This decrease is mainly attributable to

a decrease in commercial paper of EUR 6.1 billion, matured savings certificates of EUR 1.2 billion,

the redemption of RMBS (residential mortgage backed securities) of EUR 2.3 billion, partly offset by

the issuance of long term maturity bonds of EUR 2.8 billion, covered bonds of EUR 2.9 billion and

certificates of deposits of EUR 1.9 billion, and an increase in other Debt securities in issue of EUR 0.8

billion.

2019 ING Group Annual Report on Form 20-FF - 56

19 Subordinated loansEquity

20 Equity

Subordinated loans by group companies| | 2019 | 2018 | | | | |
| --- | --- | --- | --- | --- | --- | --- |
| ING Groep N.V. | 13,069 | 10,355 | Total equity | | | |
| ING Group companies | 3,519 | 3,370 | | 2019 | 2018 | 2017 |
| | 16,588 | 13,724 | Share capital and share premium | | | |
| | | | - Share capital | 39 | 39 | 39 |
| Subordinated loans issued by ING Groep N.V. include bonds issued to raise Tier 1 and lower Tier 2 (CRD IV eligible) | | | - Share premium | 17,078 | 17,050 | 17,006 |
| | | | | 17,117 | 17,088 | 17,045 |

considered capital. Subordinated loans issued by ING Group companies comprise, for the most part, subordinated			Other reserves
loans which are subordinated to all current and future liabilities of ING Bank N.V.			- Revaluation reserve: Available-for -sale and other	n/a	n/a	3,447
			- Revaluation reserve: Equity securities at FVOCI	1,580	1,914	n/a
Changes in subordinated loans			- Revaluation reserve: Debt instruments at FVOCI	322	398	n/a
	2019	2018	- Revaluation reserve: Cash flow hedge	1,208	604	263
Opening balance	13,724	15,968	- Revaluation reserve: Credit liability	–114	8	n/a
Effect of change in accounting policy due to the implementation of IFRS 9		241	- Revaluation reserve: Property in own use	253	204	203
New issuances	3,429	1,859	- Net defined benefit asset/liability remeasurement reserve	–336	–394	–400
Repayments	–933	–4,646	- Currency translation reserve	–2,079	–2,043	–1,663
Exchange rate differences and other	367	302	- Share of associates and joint ventures and other reserves	3,189	2,940	2,527
Closing balance	16,588	13,724	- Treasury shares	–10	–11	–15
				4,013	3,621	4,362

In 2019 ING Groep N.V. issued two Perpetual additional Tier 1 Contingent Convertible Capital
Retained earnings29,86628,33927,022 Securities of USD 1.25 billion with first call date on 16 April 2024 and USD 1.5 billion with first call| date on 16 November 2026. In addition, subordinated Tier 2 notes of EUR 1 billion have been issued | | | | |
| --- | --- | --- | --- | --- |
| | Shareholders’ equity (parent) | 50,996 | 49,049 | 48,429 |
| on 13 November 2019. | Non-controlling interests | 893 | 803 | 715 |

Total equity51,88949,85149,144

In June 2019 ING redeemed USD 1 billion Tier 1 ING Perpetual Hybrid Capital Securities.

The average interest rate on subordinated loans is 4.38% (2018: 4.44%). The interest expense

during the year 2019 was EUR 660 million (2018: EUR 711 million).

2019 ING Group Annual Report on Form 20-FF - 57

Share capital and share premium

Share capitalOrdinary shares| | | | | | Ordinary shares (par value EUR 0.01) | | | acknowledgement by ING Groep N.V. Ordinary shares are listed on various stock exchanges. The |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | Number x 1,000 | | | | Amount | par value of ordinary shares is EUR 0.01 . The authorised ordinary share capital of ING Groep N.V. |
| | 2019 | 2018 | | 2017 | 2019 | 2018 | 2017 | |
| Authorised share capital | 14,729,000 | 14,729,000 | 14,729,000 | | 147 | 147 | 147 | currently consists of 14,729 million ordinary shares. As at 31 December 2019, 3,897 million |
| Unissued share capital | 10,832,266 | 10,837,272 | 10,843,210 | | 108 | 108 | 108 | ordinary shares were issued and fully paid. |
| Issued share capital | 3,896,734 | 3,891,728 | 3,885,790 | | 39 | 39 | 39 | |

	Number x		obligations with regard to the existing stock option plan and the share plans will be funded either
	1,000	Amount	by cash or by newly issued shares at the discretion of ING Group.
Issued share capital as at 1 January 2017	3,878,484	39

Issue of shares	7,306		Share premium
Issued share capital as at 31 December 2017	3,885,790	39

Issue of shares	5,938		Share premium
Issued share capital as at 31 December 2018	3,891,728	39		2019	2018	2017
Issue of shares	5,006		Opening balance	17,050	17,006	16,950
Issued share capital as at 31 December 2019	3,896,734	39	Issue of shares	28	44	56
			Closing balance	17,078	17,050	17,006
In 2019, ING Groep N.V. issued 5.0 million ordinary shares (2018: 5.9 million ordinary shares, 2017:

7.3 million). These issues were made in order to fund obligations arising from share-basedThe increase in share premium, is a result of the issuance of ordinary shares related to share-based

employee incentive programmes.employee incentive programmes.

In 2019, 2018 and 2017 respectively, ING Groep N.V. issued USD 2,750 million, nil and nil Perpetual

Additional Tier 1 Contingent Convertible Capital Securities which can, in accordance with their terms

and conditions, convert by operation of law into ordinary shares if the conditions to such

conversion are fulfilled. As a result of this conversion, the issued share capital can increase by no

more than 306 million ordinary shares. Reference is made to Note 19 ‘Subordinated loans’.

2019 ING Group Annual Report on Form 20-FF - 58

Other reserves

Revaluation reserves

Changes in revaluation reserve| | Equity securities at FVOCI | | | Debt instruments at FVOCI | | | AFS and other | | | Cash flow hedge | | | Credit liability | | | Property in own use | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 |
| Opening balance | 1,914 | n/a | n/a | 398 | n/a | n/a | n/a | 3,447 | 3,830 | 604 | 263 | 777 | 8 | n/a | n/a | 204 | 203 | 204 |
| Effect of change in accounting policy due to the implementation of | | 2,432 | | | 629 | | | -3,447 | | | | | | -190 | | | | |
| IFRS 9 | | | | | | | | | | | | | | | | | | |
| Changes in credit liability reserve | | | | | | | | | | | | | -116 | 199 | | | | |
| Unrealised revaluations | 137 | -461 | | -43 | -177 | | | | -293 | 604 | 342 | -514 | | | | 58 | 3 | 25 |
| Realised gains/losses transferred to the statement of profit or loss | | | | -33 | -54 | | | | -90 | | | | | | | | | |

Realised revaluations transferred to retained earnings-472-56-6-9-2-26

Closing balance1,5801,914n/a322398n/an/an/a3,4471,208604263(114)8n/a253204203

Equity securities at FVOCIAvailable-for-sale and other In 2019, the unrealised revaluations of EUR 137 million are due to the revaluation of shares in BankAs from 2018, due to implementation of IFRS 9, the revaluation results of Available-for-sale and of Beijing EUR 35 million and shares in EquensWorldLine EUR 101 million. The EUR -472 millionother are reported in the FVOCI reserve.

transfer of revaluation reserve to retained earnings is mainly related to the sale of shares in Kotak Mahindra Bank EUR -320 million and EquensWorldLine EUR -149 million.In 2017, the Available-for-sale revaluation reserve decreased by EUR 383 million mainly due to the revaluation of shares in Bank of Beijing EUR -479 million, partly offset by revaluation of shares in In 2018, the Equity securities at FVOCI revaluation reserve decreased by EUR 517 million, mainlyKotak Mahindra Bank EUR 302 million.
due to the revaluation of shares in Bank of Beijing EUR -549 million, partly offset by revaluation of shares in Kotak Mahindra Bank EUR 71 million.Cash flow hedge ING mainly hedges floating rate lending with interest rate swaps. Due to decrease in interest rate yield curve in 2019 the interest rate swaps had a positive revaluation of EUR 604 million which is recognised in cah flow hedge reserve.

2019 ING Group Annual Report on Form 20-FF - 59

Net defined benefit asset/liability remeasurement reserveTreasury shares| | | | | Changes in treasury shares | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Currency translation reserve | | | | | | | Amount | | | | Number |
| | | | | | 2019 | 2018 | 2017 | 2019 | | 2018 | 2017 |
| Changes in currency translation reserve | | | | Opening balance | –11 | –15 | –8 | 1,137,701 | | 944,257 | 600,634 |
| | 2019 | 2018 | 2017 | Purchased/sold | 1 | 4 | –7 | –218,314 | | 193,444 | 343,623 |
| Opening balance | –2,043 | –1,663 | –770 | Closing balance | –10 | –11 | –15 | 919,387 | 1,137,701 | | 944,257 |
| Unrealised revaluations | –134 | 71 | 192 | | | | | | | | |
| Realised gains/losses transferred to the statement of profit or loss | –138 | | | Retained earnings | | | | | | | |
| Exchange rate differences | 236 | –451 | –1,085 | | | | | | | | |
| Closing balance | –2,079 | –2,043 | –1,663 | Changes in retained earnings | | | | | | | |
| | | | | | | | | 2019 | | 2018 | 2017 |
| Realised gains/losses transferred to the statement of profit or loss is related to the sale of shares in | | | | Opening balance | | | | 28,339 | | 27,022 | 24,371 |
| Kotak Mahindra Bank (EUR -119 million) and the effect of the merger transaction of TMB (EUR -18 | | | | Effect of change in accounting policy due to the implementation of IFRS 9 | | | | | | –390 | |
| million). | | | | Transfer to/from other reserves | | | | 418 | | –211 | –139 |
| Unrealised revaluations relates to changes in the value of hedging instruments that are designated | | | | Result for the year | | | | 3,723 | | 4,601 | 5,311 |
| | | | | Dividend | | | | –2,650 | | –2,607 | –2,564 |
| as net investment hedges. The hedging strategy is to hedge the CET1 ratio. The net increase of | | | | Employee stock options and share plans | | | | | 13 | 19 | 21 |
| unrealized revaluations and Exchange rate differences of EUR 102 million is related to several | | | | Changes in composition of the group and other changes | | | | | 23 | –96 | 22 |
| currencies. | | | | Closing balance | | | | 29,866 | | 28,339 | 27,022 |

Changes in the composition of the group

Share of associates, joint ventures and other reserves
In 2019 ING acquired the additional 23% of shares in Payvsion. Given that ING already had control| Changes in share of associates, joint ventures and other reserves | | | | over Payvision, the acquisition of the shares in 2019 represents a shareholder transaction and |
| --- | --- | --- | --- | --- |
| | 2019 | 2018 | 2017 | resulted in a transfer between Non-controlling interest and Retained earnings within Shareholders |
| Opening balance | 2,940 | 2,527 | 2,235 | equity of EUR 24 million. Reference is made to Note 47, 'Consolidated companies and businesses |
| Effect of change in accounting policy due to the implementation of IFRS 9 | | –28 | | acquired and divested', 'Acquisitions'. |
| Result for the year | 180 | 160 | 153 | |
| Transfer to/from retained earnings | 69 | 280 | 139 | |
| Closing balance | 3,189 | 2,940 | 2,527 | Dividend |
| | | | | In 2019, a cash dividend of EUR 2,650 million (2018: EUR 2,607 million and 2017: EUR 2,564 million) |

was paid to the shareholders of ING Group.

For further information, reference is made to Note 30 ‘Dividend per ordinary share’.

2019 ING Group Annual Report on Form 20-FF - 60

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| Ordinary shares - Restrictions with respect to dividend and repayment of capital | Non-distributable reserves | | | |
| --- | --- | --- | --- | --- |
| | | 2019 | 2018 | 2017 |
| The following equity components cannot be freely distributed: Revaluation reserves, Net defined | ING Bank | 8,397 | 7,603 | 7,603 |
| benefit asset/liability remeasurement reserve, Currency translation reserve, Share of associates | Other | 0 | 97 | 75 |

and joint ventures reserve and Other reserves including the part related to the former StichtingNon-distributable reserves8,3987,7007,678

Regio Bank and the former Stichting Vakbondsspaarbank SPN.
Furthermore there are restrictions to the ability of subsidiaries, associates and joint ventures to

distribute reserves to ING Groep N.V. as a result of minimum capital requirements that are imposed As at 31 December 2019, an amount of EUR 1,818 million (2018: EUR 1,638 million; 2017: EUR 1,478
by industry regulators in the countries in which the subsidiaries operate.
million) related to the former Stichting Regio Bank and the former Stichting Vakbondsspaarbank

SPN is included.
In addition to the legal and regulatory restrictions on distributing dividends from subsidiaries,

associates and joint ventures to ING Groep N.V. there are various other considerations and ING Groep N.V. is subject to legal restrictions regarding the amount of dividends it can pay to the limitations that are taken into account in determining the appropriate levels of equity in the holders of its ordinary shares. Pursuant to the Dutch Civil Code, dividends can only be paid up to an Group’s subsidiaries, associates and joint ventures. These considerations and limitations include, amount equal to the excess of the company’s own funds over the sum of the paid-up capital and but are not restricted to, rating agency and regulatory views, which can change over time; it is not reserves required by law.
possible to disclose a reliable quantification of these limitations. For an overview of the minimal

capital requirements of ING Group refer to the ‘Capital Management’ section.
Moreover, ING Groep N.V.’s ability to pay dividends is dependent on the dividend payment ability of

its subsidiaries, associates and joint ventures. ING Groep N.V. is legally required to create a non- Without prejudice to the authority of the Executive Board to allocate profits to reserves and to the distributable reserve insofar as profits of its subsidiaries, associates and joint ventures are subject fact that the ordinary shares are the most junior securities issued by ING Groep N.V., no specific to dividend payment restrictions which apply to those subsidiaries, associates and joint ventures dividend payment restrictions with respect to ordinary shares exist.
themselves. Such restrictions may among others be of a similar nature as the restrictions which

apply to ING Groep N.V., including minimum capital requirements that are imposed by industry Furthermore, ING Groep N.V. is subject to legal restrictions with respect to repayment of capital to regulators in the countries in which the subsidiaries, associates and joint ventures operate, or other holders of ordinary shares. Capital may be repaid to the holders of ordinary shares pursuant to an limitations which may exist in certain countries.
amendment of ING Groep N.V.’s Articles of Association whereby the ordinary shares are written

down.
Non distributable reserves, determined in accordance with the financial reporting requirements

included in Part 9 of Book 2 of the Dutch Civil Code, from ING Group’s subsidiaries, associates and Pursuant to the Dutch Civil Code, capital may only be repaid if none of ING Groep N.V.’s creditors joint ventures are as follows:
opposes such a repayment within two months following the announcement of a resolution to that

effect.

2019 ING Group Annual Report on Form 20-FF - 61

Cumulative preference shares (not issued)

Pursuant to the Articles of Association of ING Groep N.V. the authorised cumulative preference share capital consists of 4.6 billion cumulative preference shares, of which none have been issued.
The par value of these cumulative preference shares is EUR 0.01.

The cumulative preference shares rank before the ordinary shares in entitlement to dividend and to distributions upon liquidation of ING Groep N.V.

The dividend on the cumulative preference shares will be equal to a percentage, calculated on the amount compulsorily paid up or yet to be paid up. This percentage shall be equal to the average of the Euro OverNight Index Average (EONIA) as calculated by the European Central Bank during the financial year for which the distribution is made; this percentage being weighted on the basis of the number of days for which it applies, and increased by 2.5 percentage points.

If, and to the extent that the profit available for distribution is not sufficient to pay the dividend referred to above in full, the shortfall will be made up from the reserves insofar as possible. If, and to the extent that, the dividend distribution cannot be made from the reserves, the profits earned in subsequent years shall first be used to make up the shortfall before any distribution may be made on shares of any other category.

ING Groep N.V.’s Articles of Association make provision for the cancellation of cumulative preference shares. Upon cancellation of cumulative preference shares and upon liquidation of ING Groep N.V., the amount paid up on the cumulative preference shares will be repaid together with the accrued dividend as well as any dividend shortfall in preceding years, insofar as this shortfall has not yet been made up.

No specific dividend payment restrictions with respect to the cumulative preference shares exist.

2019 ING Group Annual Report on Form 20-FF - 62

Notes to the Consolidated statement of pro fit or loss

21 Net interest income| Net interest income | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | 2019 | 2018 | | 2017 | | 2019 | 2018 | | 2017 |
| Interest income on loans | 19,028 | 18,966 | 118,338 | | Interest expense on deposits from banks | 361 | 362 | | 301 |
| Interest income on financial assets at fair value through OCI | 615 | 554 | | n/a | Interest expense on customer deposits | 2,934 | 2,607 | | 2,664 |
| Interest income on financial assets at amortised cost | 673 | 780 | 1 | n/a | Interest expense on debt securities in issue | 2,350 | 2,254 | | 2,054 |
| Interest income on non-trading derivatives (hedge accounting) | 4,319 | 4,497 | | n/a | Interest expense on subordinated loans | 660 | 711 | | 784 |
| Negative interest on liabilities | 422 | 453 | | 500 | Negative interest on assets | 349 | 412 | | 407 |
| Total interest income using effective interest rate method | 25,056 | 25,249 | | n/a | Interest expense on non-trading derivatives (hedge accounting) | 4,615 | 4,826 | | 5,946 |
| | | | | | Total interest expense using effective interest rate method | 11,268 | 11,171 | | n/a |
| Interest income on financial assets at fair value through profit or loss | 1,897 | 1,795 | | n/a | | | | | |
| Interest income on investments | n/a | n/a | | 1,494 | Interest expense on financial liabilities at fair value through profit or loss | 1,695 | 1,578 | | n/a |
| Interest income on trading derivatives | n/a | n/a | 16,108 | | Interest expense on trading derivatives | n/a | n/a | 16,117 | |
| Interest income on other trading portfolio | n/a | n/a | | 1,028 | Interest expense on other trading liabilities | n/a | n/a | | 744 |
| Interest income on non-trading derivatives (no hedge accounting) | 1,181 | 1,059 | 1 | 7001 | Interest expense on non-trading derivatives (no hedge accounting) | 1,311 | 1,387 | 1 | 1,0011 |
| Interest income on non-trading derivatives (hedge accounting) | n/a | n/a | | 5,690 | Interest expense on lease liabilities | 25 | n/a | | n/a |
| Interest income other | 30 | 25 | | 138 | Interest expense other | 54 | 33 | | 331 |
| Total other interest income | 3,107 | 2,880 | | n/a | Total other interest expense | 3,084 | 2,997 | | n/a |
| Total interest income | 28,163 | 28,129 | 43,996 | | Total interest expense | 14,353 | 14,169 | 30,349 | |

Net interest income13,81113,96013,647

1 The prior periods have been updated to improve consistency and comparability.

Total Net interest income of EUR 13,811 million (2018: EUR 13,960 million) includes interest income To further enhance the relevance of the interest disclosures, ING Group changed its separate
and expense for instruments calculated using the effective interest rate method and other interest presentation since 2018 of interest (income and expenses) for trading derivatives, trading securities
income and interest expense. IFRS 9 resulted in changes to IAS 1 for the presentation of Interest and trading loans / deposits (mainly repo’s) to presenting the full fair value movements in
income for instruments calculated using the effective interest rate method, which ING reports as a ‘Valuation results and net trading income’. The change in presentation is in line with the changed
separate line item in the consolidated statement of profit or loss as from 2018.

2019 ING Group Annual Report on Form 20-FF - 63

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| presentation of accrued interest in the balance sheet that is no longer separately presented, but | Fee and commission expenses | | | |
| --- | --- | --- | --- | --- |
| included in the corresponding balance sheet item of the host contract. | | 2019 | 2018 | 2017 |
| | Funds transfer | 659 | 597 | 437 |
| | Securities business | 140 | 170 | 150 |
| The new interest presentation was applied prospectively together with the other presentation | Insurance broking | 2 | 2 | 4 |
| requirements of IFRS 9 as from 2018. | Asset management fees | 8 | 4 | 5 |

Brokerage and advisory fees282220192| 22 Net fee and commission income | Other | 481 | 448 | 367 |
| --- | --- | --- | --- | --- |
| | | 1,571 | 1,442 | 1,155 |

Fee and commission income
				All of ING’s net fee and commission income are in scope of IFRS 15 ‘Revenue from Contracts with
	2019	2018	2017
Funds transfer	1,513	1,394	1,172	Customers’. Reference is made to Note 34 ‘Segments’ which includes net fee and commission
Securities business	603	618	532	income, as reported to the Executive Board and the Management Board Banking, disaggregated by

Insurance broking	191	173	176	line of business and by geographical segment.
Asset management fees	205	170	116

Brokerage and advisory fees	611	584	548	23 Valuation results and net trading income
Other	1,317	1,302	1,321

4,4394,2403,865

Valuation results and net trading income| Other, mainly consists of commission fees in respect of bank guarantees of EUR 202 million (2018: | | 2019 | 2018 | 2017 |
| --- | --- | --- | --- | --- |
| EUR 207 million; 2017: EUR 209 million), in respect of underwriting syndication loans of EUR 10 | Securities trading results | 974 | –722 | 656 |
| | Derivatives trading results | –998 | 540 | 59 |
| million (2018: EUR 4 million; 2017: EUR 52 million), in respect of structured finance fees of EUR 141 | Other trading results | 117 | 116 | 62 |
| million (2018: EUR 129 million; 2017: EUR 136 million), and in respect of collective instruments | Change in fair value of derivatives relating to | | | |

distributed but not managed by ING of EUR 167 million (2018: EUR 165 million; 2017: EUR 165	– fair value hedges	–318	185	–184
million).	– cash flow hedges (ineffective portion)	47	–19	44
	– other non-trading derivatives	93	868	–301
	Change in fair value of assets and liabilities (hedged items)	–518	–176	91

Valuation results on assets and liabilities designated at FVPL –358366–109 (excluding trading)

Foreign exchange transactions results801691,194

–1591,2271,512

2019 ING Group Annual Report on Form 20-FF - 64

Securities trading results includes the results of market making in instruments such as governmentIn 2019, Derivatives trading results include EUR 39 million CVA/DVA adjustments on trading securities, equity securities, corporate debt securities, money-market instruments, and interestderivatives (2018: EUR -20 million; 2017: EUR 47 million).
rate derivatives such as swaps, options, futures, and forward contracts. Foreign exchange transactions results include gains and losses from spot and forward contracts, options, futures, and‘Valuation results and net trading income’ include the fair value movements on derivatives (used translated foreign currency assets and liabilities. As from current year the other trading results arefor both hedge accounting and economically hedging exposures) as well as the changes in the fair presented separately in this disclosure. Prior year figures are updated accordingly. Other tradingvalue of assets and liabilities included in hedging relationships as hedged items. Reference is made results include the results of trading loans and funds entrusted.to Note 39 ‘Derivatives and hedge accounting’ for information on derivatives used for hedge

accounting.
The portion of trading gains and losses relating to trading securities still held as at 31 December 2019 amounts to EUR -82 million (2018: EUR 396 million; 2017: EUR -68 million).The fair value movements on the derivatives are influenced by changes in the market conditions, such as stock prices, interest rates and currency exchange rates. In addition, ‘Valuation results and Net trading income relates to trading assets and trading liabilities which include assets andnet trading income’ include the results on assets and liabilities designated at fair value through liabilities that are classified under IFRS as Trading but are closely related to servicing the needs ofprofit or loss.
the clients of ING. ING offers products that are traded on the financial markets to institutional clients, corporate clients, and governments. ING Group’s trading books are managed based onThe Valuation results on assets and liabilities designated at fair value through profit or loss include internal limits and comprise a mix of products with results which could be offset. A significant partfair value changes on certain issued debt securities. Valuation results on assets and liabilities of the derivatives in the trading portfolio are related to servicing corporate clients in their riskdesignated at fair value through profit or loss were mainly due to changes in the fair value of management to hedge for example currency or interest rate exposures. From a risk perspective,financial liabilities driven by changes in market conditions as disclosed in Note 15 ‘Financial the gross amount of trading assets must be considered together with the gross amount of tradingliabilities at fair value through profit or loss’.
liabilities, which are presented separately on the statement of financial position. However, IFRS does not always allow netting of these positions in the statement of financial position. Reference isIn 2019, Valuation results on assets and liabilities designated at fair value through profit or loss made to Note 4 ‘Financial assets at fair value through profit or loss’ and Note 15 ‘Financial liabilities(excluding trading) include fair value adjustments on own issued notes amounting to EUR -424 at fair value through profit or loss’ for information on trading liabilities.million (2018: EUR 302 million; 2017: EUR -107 million). In 2017, DVA adjustment on own issued notes amounting to EUR -79 million was included in Valuation results. Starting 2018, in accordance The majority of the risks involved in security and currency trading is economically hedged withwith IFRS 9, the DVA adjustment on own issued notes is recognised in Other Comprehensive Income derivatives. The securities trading results are partly offset by results on these derivatives. The result‘Credit liability reserve’.
of these derivatives is included in Derivatives trading results. The result on currency trading is included in foreign exchange transactions results.Compared to previous years, in 2019 Valuation results and net trading income do not include results on non-trading derivatives related to warrants on the shares of Voya and NN Group (2018:

2019 ING Group Annual Report on Form 20-FF - 65

EUR 90 million; 2017: EUR -52 million). As at 31 December 2018 ING no longer holds any warrantsIn 2019, 2018 and 2017, Dividend income mainly consists of dividend received from ING’s equity

on the shares of Voya and NN Group.stake in Bank of Beijing.

Interest income from trading assets in 2019 amounted to EUR 15,187 million (2018: EUR 13,924Impairments and reversals of impairments on investments are presented within Investment

million). Interest expense from trading liabilities in 2019 amounted to EUR 14,922 million (2018:income, which is part of Total income.

EUR 13,976 million).

25 Result on disposal of group companies| in the line Result before tax - Adjusted for: other. | | | | Result on disposal of group companies | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | 2019 | 2018 | 2017 |
| 24 Investment income | | | | Baring Private Equity Partners | | | 1 |
| | | | | ING Lease Italy | –2 | –123 | |
| Investment income | | | | ING Mauritius | 119 | | |
| | 20191 | 20181 | 20171 | | 117 | –123 | 1 |
| Dividend income | 115 | 102 | 80 | | | | |
| | | | | In 2019 the Result on disposal of group companies is mainly impacted by the sale of ING’s stake in | | | |

Realised gains/losses on disposal of debt instruments measured at FVOCI	46	77	n/a	Kotak Mahindra Bank by ING Mauritius during 1Q 2019. ING Mauritius is in the process of being
Realised gains/losses on disposal of Available-for -sale debt securities	n/a	n/a	64	liquidated and consequently, the release of the currency translation reserve (CTA) and the release
Impairments of Available-for-sale debt securities	n/a	n/a		of the Net Investment Foreign Entities reserve resulted in a one-off gain of EUR 119 million.
Reversal of impairments of Available -for-sale debt securities	n/a	n/a	3
Realised gains/losses and impairments of debt instruments measured at	46	77	67
FVOCI				The Result on disposal of group companies includes the result (fair value less cost to sell) on the
				sale of part of the ING Lease Italy business amounting to EUR -123 million, which was recognized in

Realised gains/losses on disposal of Available-for -sale equity securitiesn/an/a482018 and a final result of EUR -2 million recognized in 2019.
Impairments of Available-for-sale equity securitiesn/an/a–6 Realised gains/losses and impairments of Available-for -sale equity n/an/a42In 2017 the Result on disposal of group companies included realised deferred profits on securities divestments in prior periods related to Baring Private Equity Partners| Income from and fair value gains/losses on investment properties | 27 | 4 | 3 |
| --- | --- | --- | --- |
| Investment income | 188 | 183 | 192 |

1 The adoption of IFRS 9 led to new presentation requirements for 2019 and 2018; 2017 period amounts have not been restated.’.

2019 ING Group Annual Report on Form 20-FF - 66

26 Other incomeNumber of employees
NetherlandsInternationalTotal In 2019, Other income of EUR 252 million (2018: EUR 136 million; 2017: EUR 350 million) includes

201920182017201920182017201920182017

the recognition of EUR 79 million receivable related to the insolvency of a financial institution.
Total average number of internal employees at14,41513,60013,14139,01638,63338,36353,43152,23351,504 Furthermore, Other income includes income from subleasing right of use assets and gains or lossesfull time equivalent basis

from sale and lease back transactions amounting to EUR 5 million as well as income from positive

recovery of defaulted receivables of EUR 32 million. The remainder of the Other income is mainlyShare-based compensation arrangements include EUR 38 million (2018: EUR 46 million; 2017: EUR
impacted by positive results on the sale of loans and property and various other non-recurring69 million) relating to equity-settled share-based payment arrangements and EUR 3 million (2018:
results.EUR 3 million; 2017: EUR 5 million) relating to cash-settled share-based payment arrangements.

In 2017 an amount of EUR 121 million is included related to a tax charge at ING Australia Holdings

Remuneration of senior management, Executive Board and Supervisory Board
Ltd., for which a full reimbursement is expected to be received from NN Group.
Reference is made to Note 50 ‘Related parties’.

27 Staff expenses

Stock option and share plans| Staff expenses | | | | ING Groep N.V. has granted option rights on ING Groep N.V. shares and conditional rights on shares |
| --- | --- | --- | --- | --- |
| | 2019 | 2018 | 2017 | to a number of senior executives (members of the Executive Board, general managers and other |
| Salaries | 3,572 | 3,287 | 3,273 | officers nominated by the Executive Board), and to a considerable number of employees of ING |
| Pension costs and other staff-related benefit costs | 366 | 385 | 381 | Group. The purpose of the option and share schemes, apart from promoting a lasting growth of ING |
| Social security costs | 530 | 509 | 499 | |
| Share-based compensation arrangements | 41 | 49 | 74 | Group, is to attract, retain and motivate senior executives and staff. |
| External employees | 974 | 901 | 716 | |
| Education | 64 | 87 | 76 | ING grants four types of share awards, deferred shares, performance shares and upfront shares, |
| Other staff costs | 208 | 202 | 183 | which form part of the variable remuneration offering via the Long term Sustainable Performance |
| | 5,755 | 5,420 | 5,202 | |
| | | | | Plan (LSPP), as well as fixed shares. The entitlement to the LSPP share awards is granted |

conditionally. If the participant remains in employment for an uninterrupted period between the

grant date and the vesting date, the entitlement becomes unconditional, with the exception of the

upfront shares which are immediately vested upon grant. Additionally, a condition before vesting

was applied to performance shares until 2018. As of 2019, this performance condition is no longer

applicable. Upfront and deferred shares awarded to the Management Board members of ING Group

2019 ING Group Annual Report on Form 20-FF - 67

as well as identified staff, have a retention obligation that must be adhered to upon vesting, aChanges in option rights outstanding
Options outstandingWeighted average exercise price minimum retention of 12 months applies. ING has the authority to apply a hold back to awarded (in numbers)(in euros)
but unvested shares and a claw-back to vested shares.

201920182017201920182017| | Opening balance | 5,123,853 | 15,141,980 | 25,574,912 | 5.69 | 12.36 | 15.53 |
| --- | --- | --- | --- | --- | --- | --- | --- |
| In addition to the LSPP share awards, ING also pays a number of senior employees fixed shares. The | Exercised | –2,186,316 | –827,755 | –2,216,764 | 4.40 | 5.91 | 5.89 |
| number of shares are determined each month from a cash value that forms part of the employee | Forfeited | –45,852 | –89,816 | –168,007 | 7.01 | 8.09 | 14.26 |
| | Expired | –535,342 | –9,100,556 | –8,048,161 | 3.51 | 16.75 | 24.18 |
| fixed remuneration. The shares are immediately vested to the employee, but have a minimum | Closing balance | 2,356,343 | 5,123,853 | 15,141,980 | 7.35 | 5.69 | 12.36 |
| holding requirement of two years before the employee can dispose of the shares. The fixed shares | | | | | | | |

are not subject to holdback or clawback.As per 31 December 2019, total options outstanding consists of 1,733,349 options (2018:

3,754,976; 2017: 10,156,219) relating to equity-settled share-based payment arrangements and

The share awards granted in 2019 relate to the performance year 2018. In 2019, no share awards622,994 options (2018: 1,368,877; 2017: 4,985,761) relating to cash-settled share-based payment

(2018: 31,743; 2017: 54,768) were granted to the members of the Executive Board of ING Groeparrangements.

N.V., and 2,837 share awards (2018: 80,036; 2017: 104,449) were granted to the Management

Board Banking (related to pre -board service period). To senior management and other employeesThe weighted average share price at the date of exercise for options exercised during 2019 is EUR

2,167,817 share awards (2018: 3,989,214; 2017: 4,846,903) were granted.10.89 (2018: EUR 13.65; 2017: 13.81). All option rights are vested.| Every year, the ING Group Executive Board decides whether the option and share schemes are to | Summary of stock options outstanding and exercisable | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| be continued and, if so, to what extent. In 2010, the Group Executive Board decided not to continue | | Options outstanding and exercisable as | | | | Weighted average | | Weighted average exercise | | | |
| | | | at 31 December | | | remaining contractual life | | | | price | |
| the option scheme as from 2011. The existing option schemes will run off in the coming year as the | Range of exercise | | | | | | | | | | |
| | price in euros | | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 |
| option rights will expire in 2020. | | | | | | | | | | | |
| | 0.00 – 5.00 | | | 1,930,068 | 2,294,423 | | 0.21 | 1.21 | | 2.88 | 2.88 |

The option rights are valid for a period of ten years. Option rights that are not exercised within this	5.00 – 10.00	2,356,343	3,193,785	3,754,542	2.21	7.38
	10.00 – 15.00			110,086	0.71	14.35
period, lapse. Option rights granted will remain valid until the expiry date, even if the option	15.00 – 20.00			8,982,929	0.21	16.84
scheme is discontinued. The option rights are subject to certain conditions, including a pre-		2,356,343	5,123,853	15,141,980
determined continuous period of service. The exercise prices of the options are the same as the

quoted prices of ING Groep N.V. shares at the date on which the options are granted.All options outstanding are exercisable. As at 31 December 2019, the aggregate intrinsic value of

options outstanding and exercisable is EUR 8 million (2018: EUR 19 million; 2017: EUR 59 million).

The obligations with regard to the existing stock option plan and the share plans will be funded

either by cash or by newly issued shares at the discretion of ING Group.Cash received from stock option exercises for the year ended 31 December 2019 is EUR 7 million

(2018: EUR 4 million; 2017: EUR 10 million).

2019 ING Group Annual Report on Form 20-FF - 68

28 Other operating expenses

Changes in share awards| | | | Share awards | | Weighted average grant date fair value | | | Other operating expenses | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | (in numbers) | | | | (in euros) | | | | |
| | 2019 | | 2018 | 2017 | 2019 | 2018 | 2017 | | 2019 | 2018 | 2017 |
| Opening balance | 5,854,999 | 7,222,279 | | 8,382,963 | 11.62 | 11.46 | 10.44 | Regulatory costs | 1,021 | 947 | 901 |
| Granted | 2,170,654 | 4,100,993 | | 5,006,120 | 10.04 | 12.50 | 13.20 | Audit and non-audit services | 30 | 26 | 22 |
| Performance effect | | –341,623 | | 379,934 | 11.12 | 11.65 | 10.47 | IT related expenses | 759 | 779 | 737 |
| Vested | –3,945,020 | –5,565,093 | | –6,328,318 | 11.23 | 12.05 | 11.40 | Advertising and public relations | 391 | 402 | 455 |
| Forfeited | –223,585 | –244,803 | | –218,420 | 11.39 | 11.52 | 10.83 | External advisory fees | 416 | 358 | 353 |
| Closing balance | 3,857,048 | 5,854,999 | | 7,222,279 | 11.14 | 11.62 | 11.46 | Office expenses | 325 | 564 | 587 |
| | | | | | | | | Travel and accommodation expenses | 140 | 179 | 178 |

	Contributions and subscriptions	108	91	91
As at 31 December 2019 the share awards consists of 3,346,004 share awards (2018: 5,211,339;	Postal charges	46	54	50

2017: 6,416,705) relating to equity-settled share-based payment arrangements and 511,044Depreciation of property and equipment1551312319

share awards (2018: 643,660; 2017: 805,574) relating to cash-settled share -based paymentAmortisation of intangible assets237209179| arrangements. | Impairments and reversals on property and equipment and intangibles | 59 | 19 | 18 |
| --- | --- | --- | --- | --- |
| | Addition/(unused amounts reversed) of provision for reorganisations | 6 | 4 | –5 |

Addition/(unused amounts reversed) of other provisions29–13167

The fair value of share awards granted is recognised as an expense under Staff expenses and isOther4771,332575

allocated over the vesting period of the share awards. The fair value calculation takes into account4,5985,2624,627

the current stock prices, expected volatities and the dividend yield of ING shares.

1 Includes depreciation expenses of right-of-use assets as recognised under IFRS 16.

As at 31 December 2019, total unrecognised compensation costs related to share awards amount

Regulatory costs to EUR 15 million (2018: EUR 29 million; 2017: EUR 37 million). These costs are expected to be

Regulatory costs represent contributions to the Deposit Guarantee Schemes (DGS), The Single recognised over a weighted average period of 1.4 years (2018: 1.4 years; 2017: 1.4 years).

Resolution Fund (SRF), local bank taxes and local resolution funds. Included in Regulatory costs for

2019, are contributions to DGS of EUR 362 million (2018: EUR 364 million; 2017: EUR 341 million)

mainly related to the Netherlands, Germany, Belgium, Poland, and Spain and contributions to the

SRF and local resolution funds of EUR 239 million (2018: EUR 208 million; 2017: EUR 179 million). In

2019 local bank taxes increased by EUR 45 million from EUR 375 million in 2018 to EUR 420 million

(2017: EUR 381 million).

2019 ING Group Annual Report on Form 20-FF - 69

Audit and non-audit servicesIn 2018, impairment losses on property development mainly relate to impairments in Spain and

Italy due to lower expected Net Realizable Values.
Total audit and non-audit services include the following fees for services provided by the Group’s| Fees of Group’s auditors | | | | impairments previously recognised in the statement of profit or loss and mainly include |
| --- | --- | --- | --- | --- |
| | 2019 | 2018 | 2017 | impairments on property in own use that were reversed following the sale process of office |
| Audit fees | 21 | 19 | 18 | buildings. |
| Audit related fees | 2 | 1 | 1 | |
| Total1 | 23 | 20 | 19 | |
| | | | | Addition/(unused amounts reversed) of provision for reorganisations |
| 1 The Group’s auditors did not provide any non-audit services. | | | | Included in Addition/(unused amounts reversed) provision for reorganisations in 2019, is an |

Fees as disclosed in the table above relate to the network of the Group’s auditors and are theincrease in relation to the reorganisation relating to ING’s Agile transformation in Germany.
amounts related to the respective years, i.e. on an accrual basis. The increase in audit fees 2019Reference is made to Note 16 ‘Provisions’.

primarily relates to audit activities for the implementation of IFRS 16, new statutory audits and new
IT systems in scope.Addition/(unused amounts reversed) of other provisions

Included in Addition/(unused amounts reversed) of other provisions in 2019, are movements
Tangible and Intangible impairments and reversalsmainly in the litigation provision. Reference is made to Note 16 ‘Provisions’ and Note 46 ‘Legal| Impairments and reversals of property and equipment and intangibles | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | Impairment losses | | Reversals of impairments | | | | | | Total | Other |
| | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | |
| Property and equipment | 4 | 9 | 10 | –6 | –17 | –24 | –3 | –8 | –14 | In 2018 Other operating expenses - Other included, amongst others, the settlement with the Dutch |
| Property development | 1 | 15 | 2 | | | | 1 | 15 | 2 | Public Prosecution Service of EUR 775 million. The settlement related to previously disclosed |
| Software and other | 61 | 12 | 30 | –0 | | | 61 | 12 | 30 | investigations regarding various requirements for client on-boarding and the prevention of money |
| intangible assets | | | | | | | | | | laundering and corrupt practices. Reference is made to Note 46 ‘Legal proceedings’. |
| (Reversals of) other impairments | 66 | 35 | 42 | –7 | –17 | –24 | 59 | 19 | 18 | |

Impairment losses on software and intangible assets in 2019 relate to rescoping of IT

transformation programs. 2018 and 2017 impairments include software that was impaired to its

Value in Use, related to the acceleration of the Think Forward Strategy.

2019 ING Group Annual Report on Form 20-FF - 70

29 Earnings per ordinary share30 Dividend per ordinary share| | | | | | Weighted average | | | | | | | Per ordinary | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | number of ordinary | | | | | | | share | | Total |
| | | | | | shares outstanding | | | | | | | (in EUR) | (in EUR million) | |
| | | | Amount | | during the period | | | Per ordinary share | | | Dividends on ordinary shares: | | | |
| | | (in EUR million) | | | | (in millions) | | | | (in EUR) | In respect of 2017 | | | |
| | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | | 2019 | 2018 | 2017 | - Interim dividend, paid in cash in August 2017 | | 0.24 | 933 |
| Basic earnings | 3,903 | 4,761 | 5,464 | 3,894.8 | 3,888.9 | 3,882.8 | | 1.00 | 1.22 | 1.41 | - Final dividend, paid in cash in May 2018 | | 0.43 | 1,670 |
| Basic earnings from | 3,903 | 4,761 | 5,464 | | | | | 1.00 | 1.22 | 1.41 | Total dividend in respect of 2017 | | 0.67 | 2,603 |
| continuing operations | | | | | | | | | | | In respect of 2018 | | | |
| | | | | | | | | | | | - Interim dividend, paid in cash in August 2018 | | 0.24 | 934 |
| Effect of dilutive | | | | | | | | | | | - Final dividend, paid in cash in May 2019 | | 0.44 | 1,714 |
| instruments: | | | | | | | | | | | Total dividend in respect of 2018 | | 0.68 | 2,648 |
| Stock option and share | | | | 0.5 | 1.5 | | 2.8 | | | | In respect of 2019 | | | |
| plans | | | | | | | | | | | - Interim dividend, paid in cash in August 2019 | | 0.24 | 935 |
| | | | | 0.5 | 1.5 | | 2.8 | | | | - Final dividend declared | | 0.45 | 1,754 |
| | | | | | | | | | | | Total dividend in respect of 2019 | | 0.69 | 2,689 |
| Diluted earnings | 3,903 | 4,761 | 5,464 | 3,895.3 | 3,890.4 | 3,885.6 | | 1.00 | 1.22 | 1.41 | | | | |
| Diluted earnings from | 3,903 | 4,761 | 5,464 | | | | | 1.00 | 1.22 | 1.41 | ING Groep N.V. is required to withhold tax of 15% on dividends paid. | | | |
| continuing operations | | | | | | | | | | | | | | |

Dilutive instruments

Diluted earnings per share is calculated as if the stock options and share plans outstanding at the

end of the period had been exercised at the beginning of the period and assuming that the cash

received from exercised stock options and share plans is used to buy own shares against the

average market price during the period. The net increase in the number of shares resulting from

exercising stock options and share plans is added to the average number of shares used for the

calculation of diluted earnings per share.

2019 ING Group Annual Report on Form 20-FF - 71

31 Net cash flo w from operating activities32 Changes in liabilities arising from financing activities

The table below shows a detailed overview of the net cash flow from operating activities.

Changes in liabilities arising from financing activities| Cash flows from operating activities | | | | | | Debt securities in | | Subordinated Loans | | Lease liabilities | | Total Liabilities from | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | issue | | | | | financing activities | |
| in EUR million | | 2019 | 2018 | 2017 | | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 |
| Cash flows from operating activities | | | | | Opening balance | 119,751 | 96,086 | 13,724 | 15,968 | n/a | n/a | 133,475 | 112,054 |
| Result before tax | | 5,653 | 6,986 | 8,085 | Effect of change in | | | | | | | | |
| Adjusted for: | - Depreciation and amortisation | 789 | 520 | 520 | accounting policy due to | | | | | | | | |

Addition to loan loss provisions1,120656676the implementation of
Other non-cash items included in result before tax1,213–1,763703IFRS 9/16–740–2411,3011,301981

Taxation paid–2,345–1,602–1,691Cashflows:

Changes in:– Loans and advances to banks, not available on demand–1,338–777–3,126Additions90,793152,5433,4291,859–94,222154,402

– Deposits from banks, not payable on demand–2,5745666,320Redemptions / Disposals–94,497–131,170–933–4,646–271–95,700–135,816

Net change in loans and advances to/ from banks,Non cash changes:

–3,911–2113,194 not available/ payable on demandAmortisation135851132516198

– Trading assets60516,928–1,612 Other21–026443490–0

– Trading liabilities–3,173–7,018–9,575 Changes in FV1,018–53201–73–1,220–126| Net change in Trading assets and Trading liabilities | –2,568 | 9,910 | –11,187 | Foreign exchange | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Loans and advances to customers | –16,687 | –31,356 | –21,390 | movement | 1,306 | 1,521 | 140 | 362 | 8 | 1,454 | 1,883 |

Customer deposits18,04019,70918,291Closing balance118,528119,75116,58813,7241,507n/a136,622133,475

– Non–trading derivatives1,072–215–2,239

33 Cash and cash equivalents – Assets designated at fair value through profit or loss–7–725441| – Assets mandatorily at fair value through profit or loss | 23,343 | –6,968 | n/a | |
| --- | --- | --- | --- | --- |
| – Other assets | 1,363 | 684 | –430 | Cash and cash equivalents |

	– Other financial liabilities at fair value through profit or loss	–12,235	10,522	–565		2019	2018	2017
	– Provisions and other liabilities	–1,784	769	339	Treasury bills and other eligible bills	43	159	391
	Other	11,752	4,067	–2,454	Deposits from banks/Loans and advances to banks	786	–2,617	–3,403
					Cash and balances with central banks	53,202	49,987	21,989
Net cash flow from/(used in) operating activities		13,055	6,915	–5,253	Cash and cash equivalents at end of year	54,031	47,529	18,977

2019 ING Group Annual Report on Form 20-FF - 72

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| Treasury bills and other eligible bills included in cash and cash equivalents | | | | Segment reporting |
| --- | --- | --- | --- | --- |
| | 2019 | 2018 | 2017 | |
| Treasury bills and other eligible bills included in trading assets | 0 | 17 | 5 | |
| Treasury bills and other eligible bills included in AFS investments | n/a | n/a | 386 | 34 Segments |
| Treasury bills and other eligible bills included in FVOCI | | –0 | n/a | |
| Treasury bills and other eligible bills included in securities at AC | 43 | 142 | n/a | a. General |
| | 43 | 159 | 391 | ING Group’s segments are based on the internal reporting structures by lines of business. |

Deposits from banks/Loans and advances to banks
	2019	2018	2017	The Executive Board of ING Group and the Management Board Banking set the performance
Included in cash and cash equivalents:				targets, approve and monitor the budgets prepared by the business lines. Business lines formulate
– Deposits from banks	–8,519	–8,520	–8,563	strategic, commercial, and financial plans in conformity with the strategy and performance targets
– Loans and advances to banks	9,304	5,903	5,160	set by the Executive Board of ING Group and the Management Board Banking.
	786	–2,617	–3,403
Not included in cash and cash equivalents:
– Deposits from banks	–26,307	–28,811	–28,258	Recognition and measurement of segment results are in line with the accounting policies as
– Loans and advances to banks	25,832	24,519	23,651	described in Note 1 ‘Accounting policies’. Corporate expenses are allocated to business lines based
	–476	–4,292	–4,607	on time spent by head office personnel, the relative number of staff, or on the basis of income,
Total as included in the statement of financial position:				expenses and/or assets of the segment.
– Deposits from banks	–34,826	–37,330	–36,821
– Loans and advances to banks	35,136	30,422	28,811
	310	–6,909	–8,010

Cash and cash equivalents includes deposits from banks and loans and advances to banks that are

on demand.

Included in Cash and cash equivalents, are minimum mandatory reserve deposits to be held with

various central banks. Reference is made to Note 42 ‘Assets not freely disposable’ for restrictions on

Cash and balances with central banks.

2019 ING Group Annual Report on Form 20-FF - 73

The following table specifies the segments by line of business and main sources of income of eachThe geographical segments for the Banking results are presented on page F - 79.

of the segments:

Specification of geographical segments

Geographical segmentsMain countries
Specification of the main sources of income of each of the segments by line of businessThe Netherlands
Segments of the Banking results byBelgiumIncluding Luxembourg
line of businessMain source of incomeGermanyIncluding Austria
Income from retail and private banking activities in the Netherlands,Australia, France, Italy, Spain, Portugal, Czech Republic, and UK Legacy and
Retail NetherlandsOther Challengers including the SME and mid-corporate segments, and the Real EstateOther
Finance portfolio related to Dutch domestic mid-corporates. The main Growth MarketsPoland, Romania, Turkey, Philippines and Asian bank stakes
(Market Leaders)products offered are current and savings accounts, business lending,Wholesale Banking Rest of WorldUK, Americas, Asia and other countries in Central and Eastern Europe
mortgages and other consumer lending in the Netherlands.
OtherCorporate Line Banking and the run-off portfolio of Real Estate

Retail BelgiumIncome from retail and private banking activities in Belgium (including
Luxembourg), including the SME and mid-corporate segments. The mainING Group evaluates the results of its banking segments using a financial performance measure
(Market Leaders)products offered are similar to those in the Netherlands.
called underlying result. Underlying result is used to monitor the performance of ING Group at a

Retail GermanyIncome from retail and private banking activities in Germany (includingconsolidated level and by segment. The Executive Board and the Management Board Banking
Austria). The main products offered are current and savings accounts,consider this measure to be relevant to an understanding of the Group’s financial performance,
(Challengers and Growth Markets)mortgages and other customer lending.
because it allows investors to understand the primary method used by management to evaluate

the Group’s operating performance and make decisions about allocating resources. In addition, ING Retail OtherIncome from retail banking activities in the rest of the world, including the
SME and mid-corporate segments in specific countries. The main productsGroup believes that the presentation of underlying net result helps investors compare its segment
(Challengers and Growth Markets)offered are similar to those in the Netherlands.
performance on a meaningful basis by highlighting result before tax attributable to ongoing

Income from wholesale banking activities. The main products are: lending,operations and the underlying profitability of the segment businesses. Underlying result is derived
Wholesale Bankingdebt capital markets, working capital solutions, export finance, daily by excluding from IFRS the following: special items, adjustment of the EU ‘IAS 39 carve out’, the banking solutions, treasury and risk solutions, and corporate finance.
impact of divestments and Insurance Other.

As of 1 January 2019, the Real Estate Finance portfolio related to Dutch domestic mid-corporates, Special items include items of income or expense that are significant and arise from events or which was included under Wholesale Banking, has been transferred to Retail Netherlands in order transactions that are clearly distinct from the regular operating activities. Disclosures on to define clearer roles and responsibilities. The presentation of previously reported underlying profit comparative periods also reflect the impact of divestments. Insurance Other reflects (former)
and loss amounts has been adjusted to reflect this change.
insurance related activities that are not part of the discontinued operations.

ING Group reconciles the total segment results to the total result of Banking using Corporate Line

Banking. The Corporate Line Banking is a reflection of capital management activities and certain

2019 ING Group Annual Report on Form 20-FF - 74

income and expenses that are not allocated to the banking businesses, including a higher VAT refund in 2019 as well as a EUR 119 million gain from the release of a currency translation reserve following the sale of ING’s stake in Kotak Mahindra Bank and the recognition of a EUR 79 million receivable related to the insolvency of a financial institution (both recorded under income).
Furthermore, the Corporate Line Banking includes the isolated legacy costs (mainly negative interest results) caused by the replacement of short-term funding with long-term funding during 2013 and 2014. ING Group applies a system of capital charging for its banking operations in order to create a comparable basis for the results of business units globally, irrespective of the business units’ book equity and the currency they operate in.

Underlying result as presented below is a non-GAAP financial measure and is not a measure of financial performance under IFRS. Because underlying result is not determined in accordance with IFRS, underlying result as presented by ING may not be comparable to other similarly titled measures of performance of other companies. The underlying result of ING’s segments is reconciled to the net result as reported in the IFRS Consolidated statement of profit or loss below.
The information presented in this note is in line with the information presented to the Executive Board of ING Group and Management Board Banking.

This note does not provide information on the revenue specified to each product or service as this is not reported internally and is therefore not readily available.

2019 ING Group Annual Report on Form 20-FF - 75

b. ING Group

Reconciliation between IFRS and Underlying income, expenses and net result

201920182017

Non-Non-Non- ControllingControllingControlling IncomeExpensesTaxationinterestsNet result¹IncomeExpensesTaxationinterestsNet result¹IncomeExpensesTaxationinterestsNet result¹

Net result IFRS attributable to equity holder of the parent17,12511,4721,652993,90318,32411,3382,1161084,76118,59010,5052,539825,464| Remove impact of: | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Special items | 2 | | | | | | | | –775 | | | 775 | –121 | | –121 | | 0 |
| Insurance Other | 3 | | | | | | | –89 | | 1 | | –90 | 53 | | 1 | | 52 |
| Adjustment of the EU 'IAS 39 carve out' | | 4 | 1,181 | | 303 | | 878 | –148 | | –90 | | –58 | –817 | | –258 | | –559 |
| Underlying | 5 | | 18,306 | 11,472 | 1,955 | 99 | 4,781 | 18,088 | 10,563 | 2,028 | 108 | 5,389 | 17,704 | 10,505 | 2,160 | 82 | 4,957 |

1 Net result, after tax and non-controlling interests.
2 Special items in 2018 comprised a settlement agreement with the Dutch authorities on regulatory issues as announced on 4 September 2018.
Special items in 2017 comprised a tax charge at ING Australia Holdings Ltd related to the years 2013-2017, for which a full reimbursement is expected to be received from NN Group.
3 Insurance Other comprises the net result relating to warrants on the shares of Voya Financial and NN Group. In March 2018 ING sold its remaining part of warrants on the shares of Voya Financial. In November 2018 the warrant agreement between NN Group and ING was terminated.
4 ING prepares the Form 20-F in accordance with IFRS-IASB. This information is prepared by reversing the hedge accounting impacts that applied under the EU 'carve-out' 5 Underlying figures are derived from figures according to IFRS by excluding the impact of adjustment of the EU 'IAS 39 carve-out', special items and Insurance Other.

2019 ING Group Annual Report on Form 20-FF - 76

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| ING Group Total | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | 2019 | | | | | | 2018 | | | | | 2017 | | | | |
| | ING | Other | | Total | Legacy | | ING | Other | Total | Legacy | | ING | Other | Total | Legacy | |
| | Bank N.V. | Banking | 1Banking | | Insurance | Total | Bank N.V. | Banking | 1Banking | Insurance | Total | Bank N.V. | Banking | 1Banking | Insurance | Total |
| Underlying income | | | | | | | | | | | | | | | | |
| Net interest income | 14,074 | | 414,079 | | | 14,079 | 13,949 | –34 | 13,916 | | 13,916 | 13,782 | –68 | 13,714 | | 13,714 |
| Net fee and commission income | 2,868 | –0 | 2,868 | | | 2,868 | 2,803 | –0 | 2,803 | | 2,803 | 2,714 | –0 | 2,714 | | 2,714 |
| Total investment and other income | 1,352 | | 81,360 | | | 1,360 | 1,350 | 19 | 1,369 | | 1,369 | 1,259 | 17 | 1,277 | | 1,277 |
| Total underlying income | 18,295 | 12 | 18,306 | | | 18,306 | 18,102 | –15 | 18,088 | | 18,088 | 17,755 | –51 | 17,704 | | 17,704 |

Underlying expenditure
Operating expenses	10,343	910,353	10,353	9,920	–13	9,907	9,907	9,795	34	9,829	9,829
Additions to loan loss provision	1,120	01,120	1,120	656	0	656	656	676	0	676	676
Total underlying expenses	11,463	911,472	11,472	10,576	–1310,563		10,563	10,472	3410,505		10,505

Underlying result before taxation	6,831	3	6,834	6,834	7,526	–27,524		7,524		7,283	–84	7,199		7,199
Taxation	1,889	66	1,955	1,955	2,036	–82,028			2,028	2,182	–22	2,160		2,160
Non-controlling interests	99		99	99	108		108		108	82		82		82
Underlying net result	4,843	–63	4,781	4,781	5,382	65,389		5,389		5,019	–62	4,957		4,957
Special items					–775		–775		–775	0		0		0
Insurance Other								90	90				–52	–52
Adjustment of the EU 'IAS 39 carve out'	–878		–878	–878	58		58		58	559		559		559

Net result IFRS attributable to equity holder of the parent3,966–633,9033,9034,66564,672904,7615,578–625,516–525,464

1 Comprises for the most part the funding charges of ING Groep N.V. (Holding).

2019 ING Group Annual Report on Form 20-FF - 77

c. Banking activities

Segments Banking by line of business

201920182017| | Retail | | | | | | | | Retail | | | | | | | | Retail | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | Nether- | Retail | Retail | Retail | Wholesale | Corporate Line | | Total | Nether- | Retail | Retail | Retail | Wholesale | Corporate Line | | Total | Nether- | Retail | Retail | Retail | Wholesale | Corporate Line | | Total |
| | lands | Belgium | Germany | Other | Banking | Banking | | Banking | lands1 | Belgium | Germany | Other | Banking | 1Banking | | Banking | lands1 | Belgium | Germany | Other | Banking | 1Banking | | Banking |
| Underlying income | | | | | | | | | | | | | | | | | | | | | | | | |
| – Net interest income | 3,541 | 1,907 | 1,579 | 2,787 | 3,794 | | 47014,079 | | 3,749 | 1,830 | 1,671 | 2,690 | 3,686 | | 290 | 13,916 | 3,866 | 1,842 | 1,704 | 2,437 | 3,639 | | 226 | 13,714 |
| – Net fee and commission income | 674 | 374 | 268 | 423 | 1,135 | | –6 | 2,868 | 664 | 371 | 225 | 395 | 1,152 | | –4 | 2,803 | 607 | 408 | 215 | 384 | 1,102 | | –3 | 2,714 |
| – Total investment and other income | 290 | 161 | 138 | 298 | 369 | | 103 | 1,360 | 335 | 169 | 76 | 230 | 673 | | –113 | 1,369 | 256 | 224 | –28 | 207 | 919 | | –301 | 1,277 |
| Total underlying income | 4,505 | 2,442 | 1,985 | 3,509 | 5,298 | 568 | 18,306 | | 4,747 | 2,369 | 1,972 | 3,315 | 5,510 | | 173 | 18,088 | 4,730 | 2,473 | 1,891 | 3,028 | 5,660 | | –78 | 17,704 |

Underlying expenditure
– Operating expenses	2,210	1,609	1,080	2,210	2,937	307	10,353	2,220	1,610	1,027	2,033	2,771	247	9,907	2,260	1,584	1,032	1,919	2,744	290	9,829
– Additions to loan loss provision	91	186	–53	364	532	–0	1,120	–41	164	–27	350	210	–1	656	15	104	–10	284	282	1	676
Total underlying expenses	2,301	1,794	1,027	2,574	3,469	30711,472		2,179	1,774	1,000	2,383	2,981	24610,563		2,275	1,688	1,022	2,203	3,026	29110,505

Underlying result before taxation	2,204	647	957	935	1,830	261	6,834	2,568	595	972	932	2,529	–72	7,524	2,455	785	869	825	2,634	–369	7,199
Taxation	558	192	328	234	464	179	1,955	626	199	324	200	633	47	2,028	615	296	241	188	832	–13	2,160
Non-controlling interests		0	3	82	14		99		6	3	80	19		108		–2	2	67	15		82
Underlying net result	1,646	455	627	619	1,352	82	4,781	1,942	390	646	652	1,877	–119	5,389	1,839	491	625	569	1,788	–356	4,957
Special items													–775	–775						0	0

Adjustment of the EU 'IAS 39 carve out'–878–8785858559559| Net result Banking | 1,646 | 455 | 627 | 619 | 474 | 823,903 | 1,942 | 390 | 646 | 652 | 1,935 | –894 | 4,672 | 1,839 | 491 | 625 | 569 | 2,347 | –356 | 5,516 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Net result Insurance Other | | | | | | | | | | | | | 90 | | | | | | | –52 |
| Net result IFRS-IASB | | | | | | 3,903 | | | | | | | 4,761 | | | | | | | 5,464 |

1 In 2019, the Dutch domestic midcorporates real estate finance portfolio transferred from Wholesale Banking to Retail Banking Netherlands. Comparative figures have been adjusted.

2019 ING Group Annual Report on Form 20-FF - 78

Geographical segments Banking

201920182017| | | | | | | Wholesale | | | | | | | | Wholesale | | | | | | | | Wholesale | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | Nether- | | | Other | Growth | Banking Rest | | Total | Nether- | | | Other | Growth | Banking Rest | | Total | Nether- | | | Other | Growth | Banking Rest | | Total |
| | lands | BelgiumGermany | | Challengers | markets | of World | Other | Banking | landsBelgium | 1Germany | | Challengers | markets | of World | 1Other | Banking | landsBelgium | 1Germany | | Challengers | markets | of World | 1Other | Banking |
| Underlying income | | | | | | | | | | | | | | | | | | | | | | | | |
| – Net interest income | 4,213 | 2,233 | 2,122 | 1,808 | 1,606 | 1,636 | 46114,079 | | 4,374 | 2,137 | 2,200 | 1,732 | 1,639 | 1,548 | 285 | 13,916 | 4,537 | 2,110 | 2,172 | 1,527 | 1,515 | 1,625 | 227 | 13,714 |
| – Net fee and commission | 994 | 533 | 315 | 283 | 299 | 451 | –7 | 2,868 | 980 | 520 | 273 | 254 | 297 | 482 | –4 | 2,803 | 871 | 521 | 269 | 232 | 316 | 507 | –3 | 2,714 |

income
– Total investment and other	119	233	169	16411	301	111	1,360	509	379	99	–92	333	245–104	1,369	445	480	–17	22296	245–193	1,277
income

Total underlying income5,3252,9992,6062,1072,3162,38856618,3065,8633,0372,5721,8952,2692,27417718,0885,8533,1112,4241,7812,1272,3773117,704| Underlying expenditure | | | | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| – Operating expenses | 2,994 | 1,925 | 1,237 | 1,318 | 1,261 | 1,309 | 30810,353 | | 2,929 | 1,932 | 1,171 | 1,217 | 1,175 | 1,222 | 263 | 9,907 | 2,930 | 2,071 | 1,154 | 1,142 | 1,126 | 1,105 | 301 | 9,829 |
| – Additions to loan loss | 146 | 268 | –40 | 171 | 271 | 303 | –0 | 1,120 | –65 | 153 | 6 | 163 | 274 | 126 | –1 | 656 | 3 | 160 | –15 | 201 | 241 | 85 | 1 | 676 |
| provision | | | | | | | | | | | | | | | | | | | | | | | | |

Total underlying expenses3,1402,1941,1971,4891,5331,61230811,4722,8632,0851,1761,3801,4491,34726210,5632,9332,2311,1401,3441,3671,19030110,505| Underlying result before | 2,185 | 8051,409 | | 618 | 784 | 776 | 258 | 6,834 | 3,000 | 9521,396 | | 515 | 820 | 927 | –85 | 7,524 | 2,920 | 8801,285 | | 437 | 760 | 1,188 | –270 | 7,199 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| taxation | | | | | | | | | | | | | | | | | | | | | | | | |
| Taxation | 549 | 247 | 476 | 207 | 166 | 137 | 173 | 1,955 | 741 | 291 | 459 | 178 | 143 | 174 | 43 | 2,028 | 708 | 369 | 407 | 145 | 151 | 379 | –1 | 2,160 |

Non-controlling interests–003969916398108––228282| Underlying net result | 1,637 | 558 | 929 | 411 | 521 | 639 | 854,781 | 2,258 | 655 | 935 | 337 | 580 | 753–128 | 5,389 | 2,212 | 512 | 875 | 292 | 527 | 808–269 | 4,957 | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Special items | | | | | | | – | – | | | | | –775 | –775 | | | | | | | 0 | 0 |
| Insurance Other | | | | | | | – | – | | | | | | 90 | 90 | | | | | | –52 | –52 |
| Adjustment of the EU 'IAS 39 | –273 | –372 | –232 | –0 | | | –878 | 106 | 22 | –72 | 2 | | | | 58465 | 38 | 113 | –58 | | | | 558 |
| carve out' | | | | | | | | | | | | | | | | | | | | | | |
| Net result IFRS | 1,363 | 186 | 697 | 411 | 521 | 639 | 853,903 | 2,364 | 677 | 863 | 339 | 580 | 753–813 | 4,761 | 2,677 | 550 | 988 | 234 | 527 | 808–321 | 5,464 | |

1 As from 2019, financials of Nordics locations (which are managed from Brussels( transferred from 'Wholesale Banking rest of the World' to 'Belgium'. Comparative figures have been adjusted.

2019 ING Group Annual Report on Form 20-FF - 79

35 Information on geographical areas

ING Group’s business lines operate in seven main geographical areas: the Netherlands, Belgium,

Rest of Europe, North America, Latin America, Asia and Australia. A geographical area is a

distinguishable component of the Group engaged in providing products or services within a

particular economic environment that is subject to risks and returns that are different from those of

geographical areas operating in other economic environments. The geographical analyses are

based on the location of the office from which the transactions are originated. The Netherlands is

ING Group’s country of domicile.

The tables below provide additional information, for the years 2019, 2018 and 2017 respectively, on

names of principal subsidiaries and branches, nature of main activities and average number of

employees on a full time equivalent basis by country/tax jurisdiction.| Additional information by country | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | Country/Tax | Name of principal | Main (banking) | Average number of employees | | | | | | | | | | | | | | |
| Geographical area | jurisdiction | subsidiary | activity | at full time equivalent basis | | | | Total Income | | | Total assets | | | Result before tax | | | Taxation | |
| | | | | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 |
| Netherlands | Netherlands | ING Bank N.V. | Wholesale / Retail | 14,415 | 13,600 | 13,141 | 5,198 | 6,130 | 6,396 | 267,368 | 259,387 | 239,342 | 1,397 | 1,973 | 2,940 | 437 | 738 | 812 |
| Belgium | Belgium | ING België N.V. | Wholesale / Retail | 7,694 | 8,248 | 8,893 | 2,277 | 2,838 | 3,041 | 121,813 | 120,287 | 119,068 | 291 | 898 | 1,093 | 142 | 285 | 455 |
| | Luxemburg | ING Luxembourg S.A. | Wholesale / Retail | 841 | 791 | 777 | 292 | 315 | 298 | 16,608 | 13,310 | 14,748 | 123 | 199 | 68 | 29 | 50 | 27 |
| Rest of Europe | Poland | ING Bank Slaski S.A | Wholesale / Retail | 8,968 | 8,829 | 8,664 | 1,344 | 1,229 | 1,119 | 37,220 | 33,040 | 29,976 | 533 | 525 | 444 | 141 | 128 | 112 |
| | Germany | ING DiBa A.G. | Wholesale / Retail | 4,639 | 4,625 | 4,587 | 2,141 | 2,315 | 2,477 | 147,642 | 144,861 | 138,185 | 1,032 | 1,203 | 1,405 | 355 | 397 | 448 |
| | Romania | Branch of ING Bank N.V. | Wholesale / Retail | 2,575 | 2,269 | 1,968 | 457 | 403 | 314 | 7,424 | 7,112 | 5,940 | 221 | 183 | 135 | 34 | 25 | 23 |
| | Spain | Branch of ING Bank N.V. | Wholesale / Retail | 1,233 | 1,201 | 1,135 | 706 | 600 | 509 | 26,118 | 23,757 | 23,858 | 249 | 195 | 97 | 72 | 71 | 25 |
| | Italy | Branch of ING Bank N.V. | Wholesale / Retail | 959 | 911 | 838 | 269 | 231 | 336 | 15,726 | 16,991 | 16,728 | –39 | –101 | –4 | 4 | –24 | 7 |
| | UK | Branch of ING Bank N.V. | Wholesale | 692 | 672 | 603 | 594 | 505 | 550 | 61,088 | 64,016 | 78,573 | 214 | 180 | 324 | 52 | 44 | 76 |
| | France1 | Branch of ING Bank N.V. | Wholesale / Retail | 659 | 620 | 591 | 308 | 323 | 310 | 12,058 | 12,063 | 10,678 | 70 | 111 | 93 | 35 | 45 | 32 |
| | Russia | ING Bank (Eurasia) Z.A.O. | Wholesale | 293 | 277 | 270 | 93 | 82 | 136 | 1,499 | 1,449 | 1,607 | 68 | 25 | 78 | 22 | 3 | 20 |
| | Czech Republic | Branch of ING Bank N.V. | Wholesale / Retail | 339 | 306 | 245 | 88 | 106 | –5 | 4,494 | 6,278 | 5,640 | 10 | 39 | –55 | 2 | 10 | –11 |
| | Hungary | Branch of ING Bank N.V. | Wholesale | 138 | 141 | 146 | 24 | 40 | 32 | 1,299 | 1,227 | 1,003 | –7 | 5 | – | 2 | 3 | 2 |
| | Slovakia | Branch of ING Bank N.V. | Wholesale | 703 | 571 | 497 | 14 | 14 | 14 | 587 | 487 | 677 | 2 | –0 | 2 | –0 | 1 | 1 |
| | Ukraine | PJSC ING Bank Ukraine | Wholesale | 111 | 109 | 106 | 43 | 36 | 30 | 481 | 368 | 321 | 31 | 22 | 9 | 9 | 3 | 2 |
| | Austria | Branch of ING DiBa A.G. | Wholesale / Retail | 279 | 235 | 225 | 80 | 85 | 80 | 1,441 | 753 | 682 | 0 | 18 | 25 | 1 | 6 | –1 |
| | Bulgaria | Branch of ING Bank N.V. | Wholesale | 68 | 69 | 70 | 12 | 9 | 9 | 358 | 360 | 268 | 2 | –0 | –2 | – | – | – |
| | Ireland | Branch of ING Bank N.V. | Wholesale | 48 | 47 | 43 | 71 | 68 | 57 | 2,575 | 2,868 | 2,337 | 58 | 65 | 47 | 8 | 8 | 6 |
| | Portugal | Branch of ING Bank N.V. | Wholesale | 12 | 11 | 11 | 18 | 18 | 14 | 899 | 905 | 667 | 14 | 13 | 9 | 4 | 4 | 3 |
| | Switzerland | Branch of ING België N.V. | Wholesale | 257 | 244 | 204 | 234 | 257 | 224 | 8,577 | 8,266 | 9,737 | 126 | 169 | 145 | –36 | 35 | 38 |

2019 ING Group Annual Report on Form 20-FF - 80

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| Additional information by country (continued) | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Geographical area | Country/Tax | Name of principal | Main (banking) | Average number of employees | | | | | | | | | | | | | | | | |
| | jurisdiction | subsidiary | activity | at full time equivalent basis | | | | | Total Income | | | Total assets | | | Result before tax | | | | Taxation | |
| | | | | 2019 | | 2018 | 2017 | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | |
| North America | Canada | Payvision Canada Services | Wholesale | | 1 | 1 | | 3 | 3 | | 1 | 2 | 2 | | 0 | | | 0 | | – |

		Ltd.
	USA	ING Financial Holdings	Wholesale	626	617	564	813	736	724	45,521	61,440	42,873	366	343	371	118	61	134
		Corp.
Latin America	Brazil	Branch of ING Bank N.V.	Wholesale	89	88	78	43	35	47	2,921	1,974	1,184	27	16	16	6	9	4
	Colombia	ING Capital Colombia	Wholesale	3	3	2	1	1	1	2	2	2
		S.A.S.
	Mexico	ING Consulting, S.A. de	Wholesale	8	8	8	1	1	1	2	2	2	–2	–2	–2
Asia	China	Branch of ING Bank N.V.	Wholesale	89	86	81	35	37	35	2,031	2,107	2,298	7	3	7	–1	7	–2
	Japan	Branch of ING Bank N.V.	Wholesale	33	32	35	31	36	33	5,109	2,300	2,238	22	19	17	8	5	11
	Singapore	Branch of ING Bank N.V.	Wholesale	592	546	512	349	340	297	27,982	32,222	25,803	76	176	133	13	21	9
	Macau	Payvision Macau Ltd.	Wholesale			n/a		–	n/a		–	n/a		–	n/a		–	n/a
	Hong Kong	Branch of ING Bank N.V.	Wholesale	128	122	108	96	110	94	7,350	6,975	7,850	38	52	55	7	8	7
	Philippines	Branch of ING Bank N.V.	Wholesale/ Retail	1,420	878	604	25	17	18	412	395	322	–11	0	6	–5	3	2
	South Korea	Branch of ING Bank N.V.	Wholesale	79	80	82	60	55	55	5,457	4,299	4,602	25	14	21	7	3	6
	Taiwan	Branch of ING Bank N.V.	Wholesale	34	33	33	26	23	23	2,873	2,839	3,910	10	7	11	0	0	–
	Indonesia	PT ING Securities	Wholesale	0	3	5	0	0	1	6	6	6	–0	–0	–
		Indonesia
	Malaysia	Branch of ING Bank N.V.	Wholesale	5	5	5	1	1		166	139	29	0	0	–1	0	0
	India	Branch of ING Bank N.V.	Wholesale	–	–	–	0		1		1	2	0	–	1	0	–0
	Turkey	ING Bank A.S.	Wholesale / Retail	4,074	4,709	5,221	677	678	741	9,927	11,521	13,798	304	245	267	66	50	54
	United Arabic	Branch of ING Bank N.V.	Wholesale	11	11	10	–1	–0		0	0		–2	–1	–2
	Emirates
Australia	Australia	ING Bank (Australia) Ltd.	Wholesale / Retail	1,319	1,234	1,143	701	647	577	43,482	39,673	37,982	400	389	330	121	118	235
Other	Mauritius	ING Mauritius Ltd.	Investment				0	1	1	1	920	939	–0	1	–
			Management
Total				53,431	52,233	51,504	17,125	18,324	18,590	888,520	884,603	843,878	5,653	6,986	8,085	1,652	2,116	2,539

2019

2018
The relatively high tax charge of 31% in the Netherlands (compared to statutory rate of 25%) is The relatively high tax charge of 37% in the Netherlands (compared to statutory rate of 25%) is
mainly caused by the non-deductible Dutch bank tax (EUR 177 million) and the non-deductible AT1 mainly caused by non-deductible expenses of EUR 775 million upon the settlement agreement
interest expenses (EUR 276 million).
reached with the Dutch authorities on regulatory issues.
The relatively low tax charge in Switzerland is caused by a deferred tax benefit following a tax rate

reduction in 2019.

2017

2019 ING Group Annual Report on Form 20-FF - 81

Australia has a very high tax charge due to a tax charge at ING Australia Holdings Ltd related to the

years 2007-2013, for which a full reimbursement is expected to be received from NN Group.ING Group provides other post-employment benefits to certain employees and former employees.

Although the impact on net result was nil, this special item affected both the tax and ‘otherThese are primarily post-employment healthcare benefits and discounts on ING products provided

income’ line in the Consolidated statement of profit or loss.to employees and former employees.

Due to the tax reforms in the US and Belgium, which resulted in a tax charge to record a reduction

in deferred tax assets, the tax charge is significantly higher.Statement of financial position - Net defined benefit asset/liability

Austria, China, Singapore and Taiwan all have lower tax charges due to prior year adjustments.Plan assets and defined benefit obligation per country| | | | | Defined benefit | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | | Plan assets | | obligation | | Funded Status | |
| Additional notes to the Consolidated financial statements | | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 |
| | The Netherlands | 454 | 394 | 634 | 540 | –180 | –146 |
| | United States | 277 | 222 | 275 | 224 | 3 | –3 |
| 36 Pension and other post-employment benefits | United Kingdom | 1,887 | 1,703 | 1,184 | 1,179 | 703 | 524 |
| | Belgium | 590 | 547 | 676 | 636 | –85 | –88 |
| Most group companies sponsor defined contribution pension plans. The assets of all ING Group’s | Other countries | 168 | 154 | 383 | 334 | –214 | –181 |
| defined contribution plans are held in independently administered funds. Contributions are | Funded status (Net defined benefit asset/liability) | 3,377 | 3,019 | 3,151 | 2,913 | 226 | 106 |

Netherlands, the premium paid is also dependent on the interest rate developments and the	Presented as:
methodology of the Dutch Central Bank for determining the ultimate forward rate. These plans do	- Other assets	709	527
not give rise to provisions in the statement of financial position, other than relating to short-term	- Other liabilities	–483	–421
		226	106
timing differences included in other assets/liabilities.

The most recent (actuarial) valuations of the plan assets and the present value of the defined ING Group maintains defined benefit retirement plans in some countries. These plans provide benefit obligation were carried out as at 31 December 2019. The present value of the defined benefits that are related to the remuneration and service of employees upon retirement. The benefit obligation, and the related current service cost and past service cost, were determined benefits in some of these plans are subject to various forms of indexation. The indexation is, in using the projected unit credit method.
some cases, at the discretion of management; in other cases it is dependent upon the sufficiency

of plan assets.
Changes in the fair value of plan assets for the period were as follows:

Annual contributions are paid to the funds at a rate necessary to adequately finance the accrued

liabilities of the plans calculated in accordance with local legal requirements. Plans in all countries

are designed to comply with applicable local regulations governing investments and funding levels.

2019 ING Group Annual Report on Form 20-FF - 82

Changes in fair value of plan assetsChanges in defined benefit obligation and other post-employment benefits| | 2019 | 2018 | | | | Other post- | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Opening balance | 3,019 | 3,206 | | Defined benefit | | employment | |
| Interest income | 70 | 66 | | obligation | | | benefits |
| Remeasurements: Return on plan assets excluding amounts included in interest income | 274 | –143 | | 2019 | 2018 | 2019 | 2018 |
| Employer's contribution | 34 | 66 | Opening balance | 2,913 | 3,140 | 76 | 87 |
| Participants contributions | 2 | 3 | Current service cost | 28 | 39 | –1 | –4 |
| Benefits paid | –126 | –176 | Interest cost | 65 | 61 | 3 | 2 |
| Exchange rate differences | 104 | –3 | Remeasurements: Actuarial gains and losses arising from changes in | –6 | 2 | | |
| Closing balance | 3,377 | 3,019 | demographic assumptions | | | | |
| | | | Remeasurements: Actuarial gains and losses arising from changes in | 206 | –153 | 7 | –11 |
| Actual return on the plan assets | 344 | –77 | financial assumptions | | | | |
| | | | Participants’ contributions | 2 | 3 | 1 | 1 |

As at 31 December 2019 the various defined benefit plans did not hold any direct investments in	Benefits paid	–130	–179	–1	–1
	Past service cost		0
ING Groep N.V. (2018: nil). During 2019 and 2018 there were no purchases or sales of assets	Exchange rate differences	73	2	1	2
between ING and the pension funds.	Changes in the composition of the group and other changes	0	–1

Closing balance3,1512,9138476

ING does not manage the pension funds and thus receives no compensation for fund Amounts recognised directly in Other comprehensive income (equity) were as follows:
management. The pension fund has not engaged ING in any swap or derivative transactions to

manage the risk of the pension funds.Changes in the net defined benefit assets/liability remeasurement reserve

20192018

Opening balance–394–400 No plan assets are expected to be returned to ING Group during 2020.| | Remeasurement of plan assets | 274 | –143 |
| --- | --- | --- | --- |
| Changes in the present value of the defined benefit obligation and other post-employment benefits | Actuarial gains and losses arising from changes in demographic assumptions | 6 | –2 |
| for the period were as follows: | Actuarial gains and losses arising from changes in financial assumptions | –206 | 153 |
| | Taxation and Exchange rate differences | –15 | –3 |

Total Other comprehensive income movement for the year586

Closing balance–336–394

In 2019, EUR 274 million remeasurement of plan assets recognized as a gain in Other

comprehensive income is driven by higher yields on investments. The EUR -206 million actuarial

gains and losses arising from changes in financial assumptions in the calculation of the defined

benefit obligation are mainly due to a decrease in discount rates.

2019 ING Group Annual Report on Form 20-FF - 83

The key assumption in the determination of the net defined benefit asset/liability is the discount

The accumulated amount of remeasurements recognised directly in Other comprehensive incomerate. The discount rate is the weighted average of the discount rates that are applied in different

(equity) is EUR -378 million (EUR -336 million after tax) as at 31 December 2019 (2018: EUR -453regions where ING Group has defined benefit pension plans (weighted by the defined benefit

million; EUR -394 million after tax).obligation). The discount rate is based on a methodology that uses market yields on high quality

corporate bonds of the specific regions with durations matching the pension liabilities as key input.

Amounts recognised in the statement of profit or loss related to pension and other staff relatedMarket yields of high quality corporate bonds reflect the yield on corporate bonds with an AA rating

benefits are as follows:for durations where such yields are available. An extrapolation is applied in order to determine the

yield to the longer durations for which no AA-rated corporate bonds are available. As a result of the

Pension and other staff-related benefit costs limited availability of long-duration AA-rated corporate bonds, extrapolation is an important
Net defined benefitOther post- OtherTotalelement of the determination of the discount rate. The weighted average discount rate applied for asset/liabilityemployment benefits
201920182017201920182017201920182017201920182017net defined benefit asset/liability for 2019 was 1.5% 2018: (2.3%) based on the pension plan in the

Current service cost283934–1–4–3122–2295729Netherlands, Germany, Belgium, The United States of America, and the United Kingdom. The| Net Interest cost | –5 | –4 | –4 | 3 | 2 | 3 | 0 | 1–2 | –2 | | average discount rate applied for Other post-employment benefits was 3.3% 2018: (3.9%). |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Effect of curtailment | | | –3 | | | | –1 | | –1 | –3 | |
| or settlement | | | | | | | | | | | |
| Other | | | | | | | | | | | Sensitivity analysis of key assumptions |

Defined benefit plans2335272–1221–1265426ING performs sensitivity analysis on the most significant assumptions: discount rates, mortality,

expected rate of salary increase, and indexation. The sensitivity analysis has been carried out
Defined contribution 340331355under the assumption that the changes occurred at the end of the reporting period.
plans

366385381 The sensitivity analysis calculates the financial impact on the defined benefit obligation of an

increase or decrease of the weighted averages of each significant actuarial assumption, all other

Determination of the net defined benefit asset/liabilityassumptions held constant. In practice, this is unlikely to occur, and some changes of the

assumptions may be correlated. Changes to mortality, expected rate of salary increase, and The net defined benefit asset/liability is reviewed and adjusted annually. The assumptions used in
indexation would have no material impact on the defined benefit obligation. The most significant the determination of the net defined benefit asset/liability and the Other post-employment
impact would be from a change in the discount rate. An increase or decrease in the discount rate of benefits include discount rates, mortality rates, expected rates of salary increases (excluding
1% creates an impact on the defined benefit obligation of EUR -443 million and EUR 561 million, promotion increases), and indexation. The rates used for salary developments, interest discount
respectively.
factors, and other adjustments reflect country-specific conditions.

2019 ING Group Annual Report on Form 20-FF - 84

Expected cash flowsChanges in deferred tax
Changes Annual contributions are paid to the funds at a rate necessary to adequately finance the accrued in the
liabilities of the plans calculated in accordance with local legal requirements. Plans in all countriesNetcomposi-Net
liability (-)tion of theliability (-)
are designed to comply with applicable local regulations governing investments and funding levels.
NetChangeChangeExchangegroup andNet ING Group’s subsidiaries should fund the cost of the entitlements expected to be earned on a yearlyasset (+)throughthroughrateotherasset (+)
basis.20192018equitynet resultdifferenceschanges2019
Financial assets at FVOCI1–11823–11–1–107| | Investment properties | | –6 | –1 | –0 | | –7 |
| --- | --- | --- | --- | --- | --- | --- | --- |
| For 2020 the expected contributions to defined benefit pension plans are EUR 44 million. | Financial assets and liabilities at FVPL | 1 | 632 | 314 | 2 | –2 | 947 |

	Depreciation		–23		5	–0		–19
The benefit payments for defined benefit and other post-employment benefits expected to be	Cash flow hedges		–140	–199		2		–337
made by the plan between 2020-2024 are estimated to be between EUR 100 million and EUR 135	Pension and post-employment benefits		59	–14	2	–5		42
	Other provisions		10		–1	–3		6
million per annum. From 2025 to 2029 the total payments made by the plan are expected to be	Loans and advances	1	474	–1	18			491
EUR 882 million.	Unused tax losses carried forward		51		5	5	–0	61

Other	–160	16	–13	1	–0	–156
	778	–176	318	2	–2	920

	position as:
Statement of financial position – Deferred tax	– Deferred tax liabilities	–180	–322
Deferred taxes are recognised on all temporary differences under the liability method using tax	– Deferred tax assets	958	1,242
		778	920
rates applicable in the jurisdictions in which ING Group is subject to taxation.

1The prior period has been updated to improve consistency and comparability.

IFRS 16 Leases (implemented per 1 January 2019) requires lessees to recognise right-of-use assets

and lease liabilities on the balance sheet. The above table shows netted amounts which include in

the row ‘Other’ a deferred tax amount for right-of-use assets of EUR 370 million (1 January 2019:

EUR 320 million) and a deferred tax amount for lease liabilities of EUR -376 million (1 January 2019:

EUR -323 million).

2019 ING Group Annual Report on Form 20-FF - 85

Financial assets and liabilities FVPL changes through net result in 2019 relates to the increase in fairThe deferred tax balance recorded under 'Other provisions' declined in 2018 by EUR 187 million

value of derivatives due to decreased interest yield curves.change through net result of which EUR 90 million relates to the decline of the Belgian

reorganisation provision.

Changes in deferred tax

Effect of Changes in the Composition of the Group and other changes include the deferred tax liability (EUR changes in

accountingChanges in30 million) regarding the acquisition of Payvision.

policies duethe composi-Net| | | Net | to the | | | | | tion of the | | liability (-) | Deferred tax in connection with unused tax losses carried forward | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | liability (-) | implement- | | Change | Change | Exchange | group and | | Net | | 2019 | 2018 |
| | | Net | ation of IFRS | | through | through | rate | | other | asset (+) | | | |
| 2018 | | asset (+) | | 9 | equity | net result | differences | changes | | 2018 | To tal unused tax losses carried forward | 1,685 | 1,773 |
| Financial assets FVOCI | 1 | –663 | | 157 | 113 | 273 | | 4 | –2 | –118 | Unused tax losses carried forward not recognised as a deferred tax asset | 922 | 1,010 |
| Investment properties | | –5 | | | | –1 | | 0 | | –6 | Unused tax losses carried forward recognised as a deferred tax asset | 764 | 763 |

Financial assets and		1,082	–15	–453	17	1	632	Average tax rate	21.4%	20.4%
liabilities at FVPL	1							Deferred tax asset	163	156
Depreciation		–24		1	–0		–23

Cash flow hedges	–72	–76		7	1	–140
Pension and post-							Total unused tax losses carried forward analysed by expiry terms
employment benefits	76	–12	–8	2	0	59		No deferred tax	Deferred tax

asset recognisedasset recognised Other provisions1984–187–7110

2019201820192018 Loans and advances13371373–5–02474| Unused tax losses carried | | | | | | | | Within 1 year | 1 | 1 | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| forward | –8 | | | 61 | –2 | –0 | 51 | More than 1 year but less than 5 years | 4 | 2 | 17 | 2 |
| Other | –178 | 45 | –53 | 55 | 1 | –31 | –160 | More than 5 years but less than 10 years | 92 | 83 | | 1 |
| Total | 744 | 328 | –25 | –265 | 23 | –27 | 778 | Unlimited | 824 | 923 | 746 | 759 |
| | | | | | | | | | 922 | 1,010 | 764 | 763 |

Presented in the The above mentioned deferred tax of EUR 163 million (2018: EUR 156 million) and the related statement of financial

position as:unused tax losses carried forward exclude the deferred tax liability recorded in the Netherlands

– deferred tax liabilities–362–180with respect to the recapture of previously deducted UK tax losses in the Netherlands for the| – deferred tax assets | 1,106 | 958 | amount of EUR -102 million (2018: EUR -105 million). |
| --- | --- | --- | --- |
| | 744 | 778 | |

Deferred tax assets are recognised for temporary deductible differences, for tax losses carried 1The prior period has been updated to improve consistency and comparability.

forward and unused tax credits only to the extent that realisation of the related tax benefit is

probable.

2019 ING Group Annual Report on Form 20-FF - 86

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| Breakdown of certain net deferred tax asset positions by jurisdiction | | | ING Group’s effective income tax rate | | | |
| --- | --- | --- | --- | --- | --- | --- |
| | 2019 | 2018 | | 2019 | 2018 | 2017 |
| Italy | 181 | 189 | Result before tax from continuing operations | 5,653 | 6,986 | 8,085 |
| Philippines | 7 | | Weighted average statutory tax rate | 25.8% | 25.8% | 27.5% |
| Slovakia | 1 | | Weighted average statutory tax amount | 1,459 | 1,803 | 2,226 |
| | 189 | 189 | | | | |
| | | | Participation exemption | –49 | –77 | –45 |
| The table above include a breakdown of certain net deferred tax asset positions by jurisdiction for | | | Other income not subject to tax | –76 | –70 | –74 |
| which the utilisation of the deferred tax asset is dependent on future taxable profits in excess of the | | | Expenses not deductible for tax purposes | 237 | 346 | 156 |
| | | | Impact on deferred tax from change in tax rates | –57 | 50 | 55 |
| profits arising from the reversal of existing taxable temporary differences whilst the related entities | | | Deferred tax benefit from previously unrecognised amounts | | | –4 |
| have incurred losses in either the current or the preceding year. | | | Current tax from previously unrecognised amounts | 48 | 28 | 66 |
| | | | Write-off/reversal of deferred tax assets | 2 | 4 | 2 |
| | | | State and local taxes | 72 | 25 | 47 |
| Statement of profit or loss – Tax ation | | | Adjustment to prior periods | 16 | 7 | 110 |
| | | | Effective tax amount | 1,652 | 2,116 | 2,539 |

Taxation by type
										Effective tax rate	29.2%	30.3%	31.4%
		Netherlands			International				Total
	2019	2018	2017	2019	2018	2017	2019	2018	2017	The weighted average statutory tax rate in 2019 is equal to the rate of 25.8% in 2018. The
Current taxation	488	587	488	1,481	1,264	1,527	1,970	1,851	2,015
Deferred taxation	–51	151	324	–267	114	200	–318	265	524	weighted average statutory tax rate in 2018 is lower compared to 2017, due to a decrease in
	437	738	812	1,214	1,379	1,727	1,652	2,116	2,539	statutory income tax rates in the USA and Belgium in that year.

The effective tax rate of 29.2% in 2019 is higher than the weighted average statutory tax rate. This

is mainly caused by a high amount of expenses non-deductible for tax purposes with respect to

interest on additional Tier 1 securities and non-deductible bank tax in the Netherlands and

regulatory expenses non-deductible for tax purposes in some other European countries.

The effective tax rate of 30.3% in 2018 is significantly higher than the weighted average statutory

tax rate. This is mainly caused by a high amount of expenses non-deductible for tax purposes (tax

amount: EUR 346 million).

2019 ING Group Annual Report on Form 20-FF - 87

This relatively high amount of non-deductible expenses is caused by the EUR 775 millionTax Contingency

settlement agreement reached with the Dutch Public Prosecution Service (tax amount: EUR 194 The contingent liability (also disclosed in note 45 ‘Contingent liabilities’) in connection with taxation
million).
in the Netherlands refers to a possible obligation arising from the deduction from Dutch taxable

profit of losses incurred by ING Bank in the United Kingdom in previous years. The existence of this The effective tax rate in 2017 was with 31.4% significantly higher than the weighted average obligation will be confirmed only by the occurrence of future profits in the United Kingdom.
statutory tax rate. This was caused by the following items:

A relatively high amount of prior period tax adjustments which ING, for the most part is ◾
reimbursed by NN Group (reimbursement is included in the result before tax), recognised under

38 Fair value of assets and liabilities ‘Adjustment to prior periods’;

Impact on deferred tax positions following changes in the income tax rate in the USA anda) Financial assets and liabilities ◾
Belgium, recognised under ‘Impact on deferred tax from change in tax rates’; andThe following table presents the estimated fair values of ING Group’s financial assets and liabilities.
◾The recapture of previously deducted UK tax losses in the Netherlands due to increasedCertain items per the statement of financial position are not included in the table, as they do not
profitability in the United Kingdom, recognised under ‘Current tax from previously unrecognisedmeet the definition of a financial asset or liability. The aggregation of the fair values presented
amounts’.below does not represent, and should not be construed as representing, the underlying value of

ING Group.

Equity – Other comprehensive income| Income tax related to components of other comprehensive income | | | |
| --- | --- | --- | --- |
| | 2019 | 20181 | 2017 |
| Unrealised revaluations financial assets at fair value through other comprehensive | 11 | 90 | 103 |

income and other revaluations
Realised gains/losses transferred to the statement of profit or loss	12	23	20
(reclassifications from equity to profit or loss)
Changes in cash flow hedge reserve	–199	–76	167
Remeasurement of the net defined benefit asset/liability	–14	–12	–25
Changes in fair value of own credit risk of financial liabilities at fair value through	7	–33
profit or loss
Exchange rate differences and other	7	–18	–12
Total income tax related to components of other comprehensive income	–176	–25	253

1The prior period has been updated to improve consistency and comparability.

2019 ING Group Annual Report on Form 20-FF - 88

Fair value of financial assets and liabilitiesValuation Methods

Statement of financialThe estimated fair values represent the price that would be received to sell an asset or paid to

Estimated fair valueposition value transfer a liability in an orderly transaction between market participants at the measurement date.

2019201820192018
It is a market-based measurement, which is based on assumptions that market participants would

Financial assets

Cash and balances with central banks53,20249,98753,20249,987use and takes into account the characteristics of the asset or liability that market participants| Loans and advances to banks | 35,133 | 30,549 | 35,136 | 30,422 | would take into account when pricing the asset or liability. Fair values of financial assets and |
| --- | --- | --- | --- | --- | --- |
| Financial assets at fair value through profit or loss | | | | | |
| – Trading assets | 49,254 | 50,152 | 49,254 | 50,152 | liabilities are based on quoted prices in active market where available. When such quoted prices are |

– Non-trading derivatives2,2572,6642,2572,664not available, the fair value is determined by using valuation techniques.

– Assets mandatorily as at fair value through profit or loss41,60064,78341,60064,783

– Assets designated as at fair value through profit or loss3,0762,8873,0762,887
ING uses unadjusted quotes where available. Unadjusted quoted prices are primarily obtained from Financial assets at fair value through other comprehensive

income– Equity securities2,3063,2282,3063,228exchange prices for listed financial instruments. Where an exchange price is not available, quoted| – Debt securities | 30,483 | 25,616 | 30,483 | 25,616 | market prices in active markets may be obtained from independent market vendors, brokers, or |
| --- | --- | --- | --- | --- | --- |
| – Loans and advances | 1,680 | 2,379 | 1,680 | 2,379 | |
| Securities at amortised cost | 46,928 | 47,815 | 46,108 | 47,276 | market makers. In general, positions are valued at the bid price for a long position and at the offer |

Loans and advances to customers621,194602,841608,029589,653price for a short position or are valued at the price within the bid-offer spread that is most| Other assets | 1 | 5,854 | 7,397 | 5,854 | 7,397 | representative of fair value at the date of valuation. |
| --- | --- | --- | --- | --- | --- | --- |
| | | 892,966 | 890,299 | 878,985 | 876,444 | |

Financial liabilitiesFor certain financial assets and liabilities quoted market prices are not available. For these financial| Deposits from banks | 35,086 | 37,631 | 34,826 | 37,330 | assets and liabilities, fair value is determined using valuation techniques. These valuation |
| --- | --- | --- | --- | --- | --- |
| Customer deposits | 575,055 | 556,127 | 574,355 | 555,729 | |
| Financial liabilities at fair value through profit or loss | | | | | techniques range from discounting of cash flows to various valuation models, where relevant |

– Trading liabilities28,04231,21528,04231,215pricing factors including the market price of underlying reference instruments, market parameters| – Non-trading derivatives | | 2,215 | 2,299 | 2,215 | 2,299 | (e.g. volatilities, correlations and credit ratings), and customer behaviour are taken into account. |
| --- | --- | --- | --- | --- | --- | --- |
| – Designated as at fair value through profit or loss | | 47,684 | 59,179 | 47,684 | 59,179 | |
| Other liabilities | 2 | 9,776 | 12,117 | 9,776 | 12,117 | ING maximises the use of market observable inputs and minimises the use of unobservable input in |

Debt securities in issue118,844119,893118,528119,751determining the fair value. The fair value can be subjective dependent on the significance of the| Subordinated loans | 17,253 | 13,519 | 16,588 | 13,724 | unobservable input to the overall valuation. All valuation techniques used are subject to internal |
| --- | --- | --- | --- | --- | --- |
| | 833,956 | 831,980 | 832,014 | 831,345 | |
| | | | | | review and approval. Data used in these valuation techniques are validated on a daily basis when |

1Other assets do not include, among others: (deferred) tax assets, net defined benefit asset, inventory, property developmentpossible.
and property obtained from foreclosures.

2Other liabilities do not include, among others: (deferred) tax liabilities, net defined benefit and related employee benefit

liabilities, reorganisation and other provisions, other taxation, social security contributions and lease liabilities.When a group of financial assets and financial liabilities are managed on the basis of their net risk

exposures, are measured the fair value of a group of financial assets or liabilities on net portfolio

level.

2019 ING Group Annual Report on Form 20-FF - 89

Control framework
To determine whether the valuations based upon data inputs have led to an appropriate fair value,Valuation Adjustments
the process of independent price verification (‘IPV’) or price testing is applied. This is done to ensureValuation adjustments are an integral part of the fair value. They are included as part of the fair
the appropriate reflection of these valuations in balance sheet and the profit and loss accounts. IPVvalue to provide better estimation of market exit value on measurement date. ING considers
tests and confirms the reliability of the market data used in these valuations and can lead tovarious valuation adjustments to arrive at the fair value including Bid-Offer adjustments, Credit
adjustments in valuation. The IPV process is performed at least monthly or more frequentlyValuation Adjustments (CVA), Debt Valuation Adjustments (DVA), Model Risk Adjustments,
depending on the nature of the market or trading activity. Multiple data sources are used to theCollateral Valuation Adjustment (CollVA), Funding Valuation Adjustment (FVA) and Exceptional
extent that such prices are available and taking into account cost-benefit ratio of retrieving suchValuation Adjustments. The combination of Credit Valuation adjustment and Debt Valuation
prices. Valuation differences between primary and secondary source data are assessed. Whenadjustment for derivatives is called Bilateral Valuation Adjustment (BVA).
differences resulting from price testing exceed pre-approved thresholds, adjustments to the profitBid-Offer adjustments are required to adjust mid-market values to appropriate bid or offer value ◾
and loss shall be made. Differences and adjustments must be assessed individually, approved byin order to best represent the exit value, and therefore fair value. It is applicable to financial
the Local Parameter Committee, and reported back in the meeting minutes. In case a materialassets and liabilities that are valued at mid-price initially. In practice this adjustment accounts for
difference in value is found through the IPV process, it must be fully understood what thethe difference in valuation from mid to bid and mid to offer for long and short exposures
underlying cause is for the difference, and if a systematic change is required (e.g. change ofrespectively. In principle assets are valued at the bid prices and liabilities are valued at the offer
source). Pricing and price testing is applied at individual trade level and is organised at a desk level.price. For certain assets or liabilities, where market quoted price is not available, the price within
the bid-offer spread that is most representative of fair value is used.
Valuation processes are governed by various governance bodies, which include Local ParameterBilateral Valuation Adjustment (BVA) is the valuation component for the counterparty credit risk ◾
Committees (LPC), Global Price Testing and Impairment Committee (GP&IC), Market Dataof the derivative contracts. It has bilateral nature, where both counterparty’s credit risk and ING’s
Committee (MDC), Trading Pricing Model Committee (TPMC). All relevant committees meet on aown credit risks is taken into account. The calculation is based on the estimation of the expected
quarterly basis or more frequent as required. Key valuation controls including product approvalexposure, the counterparties’ risk of default, and taking into account the collateral agreements
process (PARP), IPV, valuation adjustments, and model use is monitored.as well as netting agreements. The counterparties’ risk of default is measured by probability of
default and expected loss given default, which is based on market information including credit
The Global Price Testing and Impairment Committee is responsible for the oversight and thedefault swap (CDS) spread. Where counterparty CDS spreads are not available, relevant proxy
approval of the outcome of impairments (other loan loss provisions) and valuation- (price-testing)spreads are used. Additionally, wrong-way risk (when exposure to a counterparty is increasing
processes It oversees the quality and coherence of valuation methodologies and processes.. Theand the credit quality of that counterparty deteriorates) and right-way risk (when exposure to a
TMPC is responsible for validating the appropriate models. Local Parameter Committees monitorcounterparty is increasing and the credit quality of that counterparty improves) are included in
the appropriateness of (quoted) pricing, any other relevant market info, as well as that of pricingthe adjustment.

models themselves related to the fair valued positions to which they are applied. LPC executes valuation methodology and processes at a local level. The Market Data Committee approves and reviews all pricing inputs for the calculation of market parameters.

2019 ING Group Annual Report on Form 20-FF - 90

ING applies Debt Valuation Adjustment (DVA) to own issued financial liabilities that are measuredrates including appropriate spreads offered for receivables with similar characteristics, similar to ◾

at fair value through profit or loss, if the credit risk component has not been included in theLoans and advances to customers described below.

prices. In the DVA calculation, the default probability of the institution are estimated based on

the ING Funding spread.Financial assets at fair value through profit or loss, Financial assets at fair value through other

comprehensive income and Securities at amortised cost Model risk adjustments reduce the risk of possible financial losses resulting from the use of a mis- ◾

Derivatives specified, misapplied, or incorrect implementation of a model.

Derivatives contracts can either be exchange-traded or over the counter (OTC). The fair value of Collateral Valuation Adjustment (CollVA) is a derivative valuation adjustment capturing specific ◾
exchange-traded derivatives is determined using quoted market prices in an active market and features of CSA (Credit Support Annex) with a counterparty that the regular valuation framework

those derivatives are classified in Level 1 of the fair value hierarchy. For those instruments not does not capture. Non-standard CSA features may include deviations in relation to the currency

actively traded, fair values are estimated based on valuation techniques. OTC derivatives and in which ING posts or receives collateral, deviations in remuneration rate on collateral which may

derivatives trading in an inactive market are valued using valuation techniques because quoted pay lower or higher rate than overnight rate or even no interest at all. Other deviations can be

market prices in an active market are not available for such instruments. The valuation techniques posting securities rather than cash as collateral.

and inputs depend on the type of derivative and the nature of the underlying instruments. The ING applies an additional ‘Funding Valuation Adjustment’ (FVA) to address the funding costs ◾
principal techniques used to value these instruments are based on (amongst others) discounted associated with thecollateral funding asymmetry on uncollateralized or partially collateralized

cash flows option pricing models and Monte Carlo simulation. These valuation models calculate the derivatives in the portfolio. This adjustment is based on the expected exposure profiles of the

present value of expected future cash flows, based on ‘no-arbitrage’ principles. These models are uncollateralized or partially collateralized OTC derivatives and market-based funding spreads.

commonly used in the financial industry. Inputs to valuation models are determined from Exceptional Valuation Adjustments - Exceptional valuation adjustments are valuation ◾
observable market data where possible. Certain inputs may not be observable in the market, but adjustments of temporary nature and are subject to approval of GP&IC.

can be determined from observable prices via valuation model calibration procedures. The inputs

used include for example prices available from exchanges, dealers, brokers or providers of pricing, The following methods and assumptions were used by ING Group to estimate the fair value of the

yield curves, credit spreads, default rates, recovery rates, dividend rates, volatility of underlying financial instruments:

interest rates, equity prices, and foreign currency exchange rates. These inputs are determined

with reference to quoted prices, recently executed trades, independent market quotes and

a.1) Financial assets

consensus data, where available.

Cash and balances with central banks

The carrying amount of cash approximates its fair value.
For uncollateralised OTC derivatives, ING applies Credit Valuation Adjustment to correctly reflect the

counterparty credit risk in the valuation. See section CVA/DVA/BVA for more details regarding the

Loans and advances to banks

calculation.
The fair values of receivables from banks are generally based on quoted market prices or, if

unquoted, on estimates based on discounting future cash flows using available market interest

2019 ING Group Annual Report on Form 20-FF - 91

Equity securities

The fair values of publicly traded equity securities are based on quoted market prices whenOther assets
available. Where no quoted market prices are available, fair value is determined based on quotedThe other assets are stated at their carrying value which is not significantly different from their fair
prices for similar securities or other valuation techniques.value.

The fair value of private equity is based on quoted market prices, if available. In the absence ofa.2) Financial liabilities
quoted prices in an active market, fair value is estimated on the basis of an analysis of the

Deposits from banks
investee’s financial position and results, risk profile, prospects, price, earnings comparisons and The fair values of payables to banks are generally based on quoted market prices or, if not
revenue multiples, and by reference to market valuations for similar entities quoted in an active available, on estimates based on discounting future cash flows using available market interest
market.
rates and credit spreads for payables to banks with similar characteristics.

Debt securities

Customer deposits
Fair values for debt securities are based on quoted market prices, where available. Quoted market The carrying values of customer deposits with an immediate on demand features approximate
prices may be obtained from an exchange, dealer, broker, industry group, pricing service, or their fair values. The fair values of deposits with fixed contractual terms have been estimated based
regulatory service. The quoted prices from non-exchange sources are assessed to determine if they on discounting future cash flows using the interest rates currently applicable to deposits of similar
are tradable prices. This distinction determines where it falls in the fair value hierarchy.
maturities.

If quoted prices in an active market are not available, fair value is based on an analysis of availableFinancial liabilities at fair value through profit or loss
market inputs, which may include consensus prices obtained from one or more pricing services orThe fair values of securities in the trading portfolio and other liabilities at fair value through profit or
by a valuation technique that discounts expected future cash flows using a market interest rateloss are based on quoted market prices, where available. For those securities not actively traded,
curves, referenced credit spreads, maturity of the investment, and estimated prepayment ratesfair values are estimated based on internal discounted cash flow valuation techniques using
where applicable.interest rates and credit spreads that apply to similar instruments. Reference is made to Financial

assets at fair value through profit or loss above.

Loans and advances to customers

For loans and advances that are repriced frequently and have had no significant changes in creditOther liabilities
risk, carrying amounts represent a reasonable estimate of the fair value. The fair value of otherThe other liabilities are stated at their carrying value which is not significantly different from their
loans is estimated by discounting expected future cash flows using a discount rate that reflectsfair value.
credit risk, liquidity, and other current market conditions. The fair value of mortgage loans is

estimated by taking into account prepayment behaviour. Loans with similar characteristics are

aggregated for calculation purposes.

2019 ING Group Annual Report on Form 20-FF - 92

Debt securities in issueObservable inputs reflect market data obtained from independent sources. Unobservable inputs are
The fair value of debt securities in issue is generally based on quoted market prices, or if notinputs which are based on the Group’s own assumptions about the factors that market participants
available, on estimated prices by discounting expected future cash flows using a current marketwould use in pricing an asset or liability, developed based on the best information available in the
interest rate and credit spreads applicable to the yield, credit quality and maturity.market. Unobservable inputs may include volatility, correlation, spreads to discount rates, default

rates and recovery rates, prepayment rates, and certain credit spreads. Transfers into and transfers

Subordinated loans out of fair value hierarchy levels are made on a quarterly basis.
The fair value of publicly traded subordinated loans are based on quoted market prices when

available. Where no quoted market prices are available, fair value of the subordinated loans isLevel 1 – (Unadjusted) quoted prices in active markets
estimated using discounted cash flows based on interest rates and credit spreads that apply toThis category includes financial instruments whose fair value is determined directly by reference to
similar instruments.(unadjusted) quoted prices in an active market that ING Group can access. A financial instrument is

regarded as quoted in an active market if quoted prices are readily and regularly available from an
a.3) Fair value hierarchyexchange, dealer markets, brokered markets, or principal to principal markets. Those prices

ING Group has categorised its financial instruments that are either measured in the statement ofrepresent actual and regularly occurring market transactions with sufficient frequency and volume
financial position at fair value or of which the fair value is disclosed, into a three level hierarchyto provide pricing information on an ongoing basis. Transfers out of Level 1 into Level 2 or Level 3
based on the priority of the inputs to the valuation. The fair value hierarchy gives the highestoccur when ING Group establishes that markets are no longer active and therefore (unadjusted)
priority to (unadjusted) quoted prices in active markets for identical assets or liabilities and thequoted prices no longer provide reliable pricing information.

lowest priority to valuation techniques supported by unobservable inputs. An active market for the

Level 2 – Valuation technique supported by observable inputs asset or liability is a market in which transactions for the asset or liability occur with sufficient
This category includes financial instruments whose fair value is based on market observables other frequency and volume to provide reliable pricing information on an ongoing basis. The fair value
than (unadjusted) quoted prices. The fair value for financial instruments in this category can be hierarchy consists of three levels, depending upon whether fair values were determined based on
determined by reference to quoted prices for similar instruments in active markets, but for which (unadjusted) quoted prices in an active market (Level 1), valuation techniques with observable
the prices are modified based on other market observable external data or reference to quoted inputs (Level 2) or valuation techniques that incorporate inputs which are unobservable and which
prices for identical or similar instruments in markets that are not active. These prices can be have a more than insignificant impact on the fair value of the instrument (Level 3). Financial assets
obtained from a third party pricing service. ING analyses how the prices are derived and determines in Level 3 include for example illiquid debt securities, complex derivatives, certain complex loans
whether the prices are liquid tradable prices or model based consensus prices taking various data (for which current market information about similar assets to use as observable, corroborated data
as inputs.
for all significant inputs into a valuation model is not available), and asset backed securities for

which there is no active market and a wide dispersion in quoted prices.
For financial instruments that do not have a reference price available, fair value is determined using

a valuation technique (e.g. a model), where inputs in the model are taken from an active market or

2019 ING Group Annual Report on Form 20-FF - 93

are observable, such as interest rates and yield curves observable at commonly quoted intervals,Financial instruments at fair value
implied volatilities, and credit spreads.The fair values of the financial instruments were determined as follows:

If certain inputs in the model are unobservable, the instrument is still classified in this category, provided that the impact of those unobservable inputs on the overall valuation is insignificant. The notion of significant is particularly relevant for the distinction between Level 2 and Level 3 assets and liabilities. ING Group has chosen to align the definition of significant with the 90% confidence range as captured in the prudent value definition by EBA. Unobservable parameters are shifted down and upwards to reach this 90% confidence range. The same 90% confidence range is applied to model uncertainty. If the combined change in asset value resulting from the shift of the unobservable parameters and the model uncertainty exceeds the threshold, the asset is classified as Level 3. A value change below the threshold results in a Level 2 classification.

Valuation techniques used for Level 2 assets and liabilities range from discounting of cash flows to various industry standard valuation models such as option pricing model and Monte Carlo simulation model, where relevant pricing factors including the market price of underlying reference instruments, market parameters (volatilities, correlations, and credit ratings), and customer behaviour are taken into account.

Level 3 – Valuation technique supported by unobservable inputs This category includes financial instruments whose fair value is determined using a valuation technique (e.g. a model) for which more than an insignificant part of the inputs in terms of the overall valuation are not market observable. This category also includes financial assets and liabilities whose fair value is determined by reference to price quotes but for which the market is considered inactive. An instrument in its entirety is classified as Level 3 if a significant portion of the instrument’s fair value is driven by unobservable inputs. Unobservable in this context means that there is little or no current market data available from which to derive a price that an unrelated, informed buyer would purchase the asset or liability at.

2019 ING Group Annual Report on Form 20-FF - 94

Methods applied in determining fair values of financial assets and liabilities (carried at fair value) Level 1Level 2Level 3Total

20192018201920182019201820192018| Financial assets at fair value through profit or loss | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| - Trading assets | 13,228 | 13,041 | 35,852 | 36,617 | 174 | 494 | 49,254 | 50,152 |
| - Non-trading derivatives | | | 2,249 | 2,636 | 8 | 27 | 2,257 | 2,664 |
| - Assets mandatorily at fair value through profit or loss | 22 | 141 | 40,196 | 63,601 | 1,381 | 1,042 | 41,600 | 64,783 |
| - Assets designated as at fair value through profit or loss | 203 | 147 | 1,628 | 1,665 | 1,244 | 1,075 | 3,076 | 2,887 |
| Financial assets at fair value through other comprehensive income | 32,165 | 27,218 | 343 | 1,256 | 1,961 | 2,749 | 34,468 | 31,223 |
| | 45,618 | 40,547 | 80,269 | 105,775 | 4,768 | 5,387 | 130,655 | 151,709 |

Financial liabilities at fair value through profit or loss
– Trading liabilities	1,446	5,706	26,401	25,387	195	122	28,042	31,215
– Non-trading derivatives			2,105	2,219	110	80	2,215	2,299
– Financial liabilities designated as at fair value through profit or loss	1,081	1,166	46,419	57,305	184	708	47,684	59,179
	2,527	6,872	74,924	84,911	490	910	77,942	92,693

In 2019, the decrease in financial assets mandatorily at fair value through profit or loss, mainly relates to reverse repurchase transactions for which the valuation technique is supported by observable inputs.

In 2019 there were no significant transfers between level 1 and 2 and no significant changes in valuation techniques.

2019 ING Group Annual Report on Form 20-FF - 95

Changes in Level 3 Financial assets| | | | | | | Non-trading | | | Financial assets | | Financial assets | | Financial assets | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | Trading assets | | | derivatives | | mandatorily at FVPL | | designated at FVPL | | | at FVOCI | | Total |
| | | | | 2019 | 2018 | 2019 | 2018 | | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 |
| Opening balance | | | | 494 | 1,104 | 27 | | 85 | 1,042 | | 1,075 | 365 | 2,749 | 480 | 5,387 | 2,034 |
| Effect of change in accounting policy due to the implementation of IFRS 9 | | | | | | | | | | 1,653 | | –1 | | 3,446 | | 5,097 |
| Realised gain/loss recognised in the statement of profit or loss during the period | | | 1 | 40 | –54 | –21 | 109 | | –63 | 10 | –6 | –20 | –15 | 1 | –66 | 45 |
| Revaluation recognised in other comprehensive income during the period | | 2 | | | | | | | | | | | 155 | –131 | 155 | –131 |
| Purchase of assets | | | | 28 | 359 | | | 2 | 1,494 | 1,154 | 360 | 731 | 11 | 85 | 1,893 | 2,331 |
| Sale of assets | 3 | | | –53 | –120 | –3 | –166 | | –832 | –1,677 | –212 | | –680 | –557 | –1,780 | –2,521 |
| Maturity/settlement | 3 | | | –11 | –42 | | | | –461 | –78 | –35 | | –212 | –330 | –719 | –450 |
| Reclassifications | | | | –279 | | | | | 279 | | | | 3 | 2 | 4 | 2 |
| Transfers into Level 3 | | | | 26 | 85 | 4 | | | 9 | | 63 | | | –0 | 103 | 85 |
| Transfers out of Level 3 | | | | –72 | –839 | | | | –88 | –37 | | | –53 | –249 | –214 | –1,125 |
| Exchange rate differences | | | | 1 | | | | | –1 | 17 | | | 1 | 3 | 1 | 20 |
| Changes in the composition of the group and other changes | | | | | | | | | 2 | | | | 1 | –1 | 3 | –1 |
| Closing balance | | | | 174 | 494 | 8 | | 27 | 1,381 | 1,042 | 1,244 | 1,075 | 1,961 | 2,749 | 4,768 | 5,387 |

1 Net gains/losses were recorded as ‘Valuation results and net trading income’ in the statement of profit or loss. The total amounts includes EUR 43 million of unrealised gains and losses recognised in the statement of profit or loss.
2 Revaluation recognised in other comprehensive income is included on the line ‘Net change in fair value of debt instruments at fair value through other comprehensive income’.
3 Prior period of Financial assets at FVOCI has been updated to improve consistency and comparability.

In 2019 the amounts reported on the line reclassifications relate to syndicated loans reclassed From trading assets to financial assets mandatory at FVPL.

2019 ING Group Annual Report on Form 20-FF - 96

Changes in Level 3 Financial liabilities| | | | | | | Financial liabilities designated as at fair | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | Trading liabilities | | Non-trading derivatives | | | value through profit or loss | | Available-for-sale investments | |
| | 2019 | | 2018 | 2019 | 2018 | | 2019 | 2018 | 2019 | 2018 |
| Opening balance | 122 | | 1,073 | 80 | 68 | | 708 | 101 | 910 | 1,242 |

Effect of change in accounting policy due to the implementation of IFRS 9					4				4
Realised gain/loss recognised in the statement of profit or loss		102	–67	–16	8	32	1	118	–58
during the period	1
Issue of liabilities		72	42	46		35	545	154	587

Early repayment of liabilities–30–87–0–10–20–40–106

Maturity/settlement–32–37–479–11–511–49

Reclassifications

Transfers into Level 31339499262131

Transfers out of Level 3–52–844–150–202–844

Exchange rate differences–0–0–0

Changes in the composition of the group and other changes22

Closing balance19512211080184708490910

1 Net gains/losses were recorded as ‘Valuation results and net trading income’ in the statement of profit or loss. The totalUnrealised gains and losses that relate to ‘Financial assets at fair value through other
amount includes EUR 115 million of unrealised gains and losses recognised in the statement of profit or loss.
comprehensive income’ (2019 and 2018) are included in the Revaluation reserve – Equity securities

at fair value through other comprehensive income or Debt Instruments at fair value through other In 2019 and 2018, financial liabilities mainly repo’s were transferred out of Level 3 mainly due to comprehensive income (2019 and 2018).
the valuation not being significantly impacted by unobservable inputs.

Level 3 Financial assets and liabilities

Recognition of unrealised gains and losses in Level 3
Financial assets measured at fair value in the statement of financial position as at 31 December Amounts recognised in the statement of profit or loss relating to unrealised gains and losses during 2019 of EUR 131 billion includes an amount of EUR 4.8 billion ( 3.6%) which is classified as Level 3 the year that relates to Level 3 assets and liabilities are included in the line item ‘Valuation results (31 December 2018: EUR 5.4 billion, being 3.6%). Changes in Level 3 from 31 December 2018 to 31 and net trading income’ in the statement of profit or loss.
December 2019 are detailed above in the table Changes in Level 3 Financial assets.

2019 ING Group Annual Report on Form 20-FF - 97

Financial liabilities measured at fair value in the statement of financial position as at 31 DecemberThe remaining EUR 1.0 billion (31 December 2018: EUR 0.8 billion) of the fair value classified in Level 2019 of EUR 78 billion includes an amount of EUR 0.5 billion ( 0.6%) which is classified as Level 3 (313 financial assets is established using valuation techniques that incorporates certain inputs that are December 2018: EUR 0.9 billion, being 1.0%). Changes in Level 3 from 31 December 2018 to 31unobservable.

December 2019 are disclosed above in the table ‘Changes in Level 3 Financial liabilities’.
Of the total amount of financial liabilities classified as Level 3 as at 31 December 2019 of EUR 0.5 Financial assets and liabilities in Level 3 include both assets and liabilities for which the fair valuebillion (31 December 2018: EUR 0.9 billion), an amount of EUR 0.2 billion (39.3%) (31 December was determined using (i) valuation techniques that incorporate unobservable inputs as well as (ii)2018: EUR 0.7 billion, being 82.0%) is based on unadjusted quoted prices in inactive markets. As ING quoted prices which have been adjusted to reflect that the market was not actively trading at ordoes not generally adjust quoted prices using its own inputs, there is no significant sensitivity to around the balance sheet date. Unobservable inputs are inputs which are based on ING’s ownING’s own unobservable inputs.
assumptions about the factors that market participants would use in pricing an asset or liability, developed based on the best information available in the circumstances. Unobservable inputs mayFurthermore, Level 3 financial liabilities includes approximately EUR 0.1 billion (31 December 2018:
include volatility, correlation, spreads to discount rates, default rates and recovery rates,EUR 0.1 billion) which relates to financial liabilities that are part of structures that are designed to prepayment rates, and certain credit spreads. Valuation techniques that incorporate unobservablebe fully neutral in terms of market risk. As explained above, the fair value of each of the inputs are sensitive to the inputs used.components of these structures may be sensitive to unobservable inputs, but the overall sensitivity is by design not significant.
Of the total amount of financial assets classified as Level 3 as at 31 December 2019 of EUR 4.8 billion (31 December 2018: EUR 5.4 billion), an amount of EUR 2.5 billion ( 52.6%) (31 DecemberThe remaining EUR 0.2 billion (31 December 2018: EUR 0.1 billion) of the fair value classified in Level 2018: EUR 3.4 billion, being 63.2%) is based on unadjusted quoted prices in inactive markets. As ING3 financial liabilities is established using valuation techniques that incorporates certain inputs that does not generally adjust quoted prices using its own inputs, there is no significant sensitivity toare unobservable.
ING’s own unobservable inputs.
The table below provides a summary of the valuation techniques, key unobservable inputs and the Furthermore, Level 3 financial assets includes approximately EUR 1.3 billion (31 December 2018:lower and upper range of such unobservable inputs, by type of Level 3 asset/liability. The lower and EUR 1.1 billion) which relates to financial assets that are part of structures that are designed to beupper range mentioned in the overview represent the lowest and highest variance of the respective fully neutral in terms of market risk. Such structures include various financial assets and liabilitiesvaluation input as actually used in the valuation of the different financial instruments. Amounts for which the overall sensitivity to market risk is insignificant. Whereas the fair value of individualand percentages stated are unweighted. The range can vary from period to period subject to components of these structures may be determined using different techniques and the fair valuemarket movements and change in Level 3 position. Lower and upper bounds reflect the variability of each of the components of these structures may be sensitive to unobservable inputs, the overallof Level 3 positions and their underlying valuation inputs in the portfolio, but do not adequately sensitivity is by design not significant.reflect their level of valuation uncertainty. For valuation uncertainty assessment, reference is made to section Sensitivity analysis of unobservable inputs (Level 3)

2019 ING Group Annual Report on Form 20-FF - 98

Valuation techniques and range of unobservable inputs (Level 3)| | | Assets | | Liabilities | Valuation techniques | Significant unobservable inputs | Lower range | | | Upper range | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | 2019 | 2018 | 2019 | 2018 | | | 2019 | 2018 | 2019 | | 2018 |
| At fair value through profit or loss | | | | | | | | | | | |
| Debt securities | 920 | 807 | | | 3Price based | Price (%) | 0% | 0% | 121% | 105% | |
| | | | | | Net asset value | Price (%) | n/a | 0% | n/a | | 0% |
| | | | | | Present value techniques | Credit spread (bps) | n/a | 131 | n/a | | 131 |
| | | | | | Loan pricing model | Credit spread (bps) | n/a | n/a | n/a | | n/a |
| Equity securities | 146 | 162 | 1 | | Price based | Price | 0 | 0 | 5,475 | 5,475 | |
| Loans and advances | 1,576 | 1,047 | | 15 | Price based | Price (%) | 0% | 1% | 104% | 102% | |
| | | | | | Present value techniques | Price (%) | n/a | 100% | n/a | 100% | |
| | | | | | | Credit spread (bps) | 1 | 19 | 250 | | 550 |
| (Reverse) repo's | 3 | 481 | 1 | 424 | Present value techniques | Price (%) | 4% | 3% | 4% | | 4% |
| Structured notes | | | 184 | 284 | Price based | Price (%) | 83% | 77% | 124% | 108% | |
| | | | | | Net asset value | Price (%) | n/a | n/a | n/a | | n/a |
| | | | | | Option pricing model | Equity volatility (%) | 13% | 13% | 20% | | 34% |
| | | | | | | Equity/Equity correlation | 0.6 | 0.6 | 0.8 | | 0.9 |
| | | | | | | Equity/FX correlation | -0.5 | -0.7 | 0.3 | | 0.5 |
| | | | | | | Dividend yield (%) | 2% | 1% | 4% | | 5% |
| | | | | | | Interest rate volatility (%) | n/a | 49 | n/a | | 86 |
| | | | | | | IR/IR correlation | n/a | 0.8 | n/a | | 0.8 |
| | | | | | Present value techniques | Implied correlation | n/a | (0.7) | n/a | | 0.7 |
| Derivatives | | | | | | | | | | | |
| – Rates | 13 | 57 | 68 | 39 | Option pricing model | Interest rate volatility (bps) | 17 | 23 | 137 | | 300 |
| | | | | | | Interest rate correlation | n/a | 0.8 | n/a | | 0.8 |
| | | | | | | IR/INF correlation | n/a | n/a | n/a | | n/a |
| | | | | | Present value techniques | Reset spread (%) | 2% | 2% | 2% | | 2% |
| | | | | | | Prepayment rate (%) | n/a | n/a | n/a | | n/a |
| | | | | | | Inflation rate (%) | n/a | n/a | n/a | | n/a |
| | | | | | | Credit spread (bps) | n/a | 46 | n/a | | 46 |
| – FX | 1 | | | | Present value techniques | Inflation rate (%) | n/a | n/a | n/a | | n/a |
| | | | | | Option pricing model | FX volatility (bps) | 5 | | 8 | | |
| – Credit | 102 | 67 | 183 | 86 | Present value techniques | Credit spread (bps) | 2 | 8 | 11,054 | | 364 |
| | | | | | | Implied correlation | n/a | 0.7 | n/a | | 0.7 |
| | | | | | | Jump rate (%) | 12% | 12% | 12% | | 12% |
| | | | | | Price based | Price (%) | n/a | n/a | n/a | | n/a |
| – Equity | 42 | 68 | 50 | 54 | Option pricing model | Equity volatility (%) | 4% | 4% | 84% | | 94% |
| | | | | | | Equity/Equity correlation | - | 0.2 | - | | 0.9 |
| | | | | | | Equity/FX correlation | -0.6 | -0.80 | 0.6 | | 0.5 |

2019 ING Group Annual Report on Form 20-FF - 99

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| Valuation techniques and range of unobservable inputs (Level 3) | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | Assets | | Liabilities | Valuation techniques | Significant unobservable inputs | Lower range | | Upper range | |
| | 2019 | 2018 | 2019 | 2018 | | | 2019 | 2018 | 2019 | 2018 |
| | | | | | | Dividend yield (%) | 0% | 0% | 13% | 13% |
| – Other | 3 | 2 | 3 | | 5Option pricing model | Commodity volatility (%) | 11% | 12% | 53% | 79% |
| | | | | | | Com/Com correlation | 0.3 | 0.3 | 0.9 | 0.9 |
| | | | | | | Com/FX correlation | -0.5 | -0.5 | -0.3 | -0.5 |
| At fair value through other comprehensive income | | | | | | | | | | |
| – Debt | | | | | Price based | Price (%) | n/a | n/a | n/a | n/a |
| – Loans and advances | 1,680 | 2,379 | | | Present value techniques | Prepayment rate (%) | 6% | 6% | 6% | 6% |
| – Equity | 282 | 317 | | | Present value techniques | Credit spread (bps) | n/a | 3.2 | n/a | 3.2 |
| | | | | | | Inflation rate (%) | 3% | 3% | 3% | 3% |
| | | | | | | Price | 1 | - | 187 | - |
| | | | | | | Other | n/a | 63 | n/a | 80 |
| Total | 4,768 | 5,387 | 490 | 910 | | | | | | |

recovery is expected, while prices significantly in excess of 100% or par are expected to pay a good

Non-listed equity investmentsyield.

Level 3 equity securities mainly include corporate investments, fund investments and other equity

Credit spreads securities which are not traded in active markets. In the absence of an active market, fair values are

estimated on the basis of the analysis of fund managers reports, company’s financial position,Credit spread is the premium above a benchmark interest rate, typically LIBOR or relevant Treasury

future prospects, and other factors, considering valuations of similar positions or by the referenceinstrument, required by the market participant to accept a lower credit quality. Higher credit

to acquisition cost of the position. For equity securities best market practice will be applied usingspreads indicate lower credit quality and a lower value of an asset.

the most relevant valuation method.

Volatility
All non-listed equity investments, including investments in private equity funds, are subject to Volatility is a measure for variation of the price of a financial instrument or other valuation input
a standard review framework which ensures that valuations reflect fair values.
over time. Volatility is one of the key inputs in option pricing models. Typically, the higher the

volatility, the higher value of the option. Volatility varies by the underlying reference (equity,

Price commodity, foreign currency and interest rates), by strike, and maturity of the option. The

For securities where market prices are not available fair value is measured by comparison withminimum level of volatility is 0% and there is no theoretical maximum.

observable pricing data from similar instruments. Prices of 0% are distressed to the point that no

2019 ING Group Annual Report on Form 20-FF - 100

CorrelationSensitivity analysis of unobservable inputs (Level 3)

Correlation is a measure of dependence between two underlying references which is relevant forWhere the fair value of a financial instrument is determined using inputs which are unobservable

valuing derivatives and other instruments which have more than one underlying reference. Forand which have a more than insignificant impact on the fair value of the instrument, the actual

example, correlation between underlying equity names may be a relevant input parameter forvalue of those inputs at the balance date may be drawn from a range of reasonably possible

basket equity option pricing models. High positive correlation (close to 1) indicates strong positivealternatives. In line with market practice the upper and lower bounds of the range of alternative

(statistical) relationship between underlyings, implying they typically move in the same direction.input values reflect a 90% level of valuation certainty. The actual levels chosen for the

High negative correlation, on the other hand, implies that underlyings typically move in oppositeunobservable inputs in preparing the financial statements are consistent with the valuation

directions.methodology used for fair valued financial instruments.

Interest ratesIf ING had used input values from the upper and lower bound of this range of reasonably possible

alternative input values when valuing these instruments as of 31 December 2019, then the impact Examples of interest rate related unobservable inputs are prepayment rates, reset rates and
would have been higher or lower as indicated below. The purpose of this disclosure is to present the inflation rates.
possible impact of a change of unobservable inputs in the fair value of financial instruments where Prepayment rate and reset spread are key inputs to mortgage linked prepayment swaps valuation.
unobservable inputs are significant to the valuation.
Prepayment rate is the estimated rate at which mortgage borrowers will repay their mortgages

early, e.g. 5% per year. Reset spread is the future spread at which mortgages will re-price at As ING has chosen to apply a 90% confidence level for its IFRS valuation of fair valued financial interest rate reset dates.
instruments, the downward valuation uncertainty has become immaterial, whereas the potential

upward valuation uncertainty, reflecting a potential profit, has increased.
Inflation rate is a key input to inflation linked instruments. Inflation linked instruments protect

against price inflation and are denominated and indexed to investment units. Interest payments
In practice valuation uncertainty is measured and managed per exposure to individual valuation would be based on the inflation index and nominal rate in order to receive/pay the real rate of
inputs (i.e. risk factors) at portfolio level across different product categories. Where the disclosure return. A rise in nominal coupon payments is a result of an increase in inflation expectations, real
looks at individual Level 3 inputs the actual valuation adjustments may also reflect the benefits of rates, or both. As markets for these inflation linked derivatives are illiquid, the valuation parameters
portfolio offsets.
become unobservable.

Because of the approach taken, the valuation uncertainty in the table below is broken down by

Dividend yield related risk class rather than by product.
Dividend yield is an important input for equity option pricing models showing how much dividends

a company is expected to pay out each year relative to its share price. Dividend yields are generally In reality some valuation inputs are interrelated and it would be unlikely that all unobservable expressed as an annualised percentage of share price.
inputs would ever be simultaneously at the limits of their respective ranges of reasonably possible

2019 ING Group Annual Report on Form 20-FF - 101

alternatives. Therefore it can be assumed that the estimates in the table below show a greater fairOther financial instruments

value uncertainty than the realistic position at year end assuming normal circumstances/normal The fair values of the financial instruments carried at amortised cost in the statement of financial
markets.
position, but for which fair values are disclosed are determined as follows:

Also, this disclosure does not attempt to indicate or predict future fair value movement. The

numbers in isolation give limited information as in most cases these Level 3 assets and liabilities

should be seen in combination with other instruments (for example as a hedge) that are classified

as Level 2.

The possible impact of a change of unobservable inputs in the fair value of financial instruments at

fair value through other comprehensive income are estimated to be immaterial.

Sensitivity analysis of Level 3 instruments| | possible alternatives | | possible alternatives | |
| --- | --- | --- | --- | --- |
| | 2019 | 2018 | 2019 | 2018 |
| Fair value through profit or loss | | | | |
| Equity (equity derivatives, structured notes) | 35 | 60 | | 4 |
| Interest rates (Rates derivatives, FX derivatives) | 40 | 43 | | |
| Credit (Debt securities, Loans, structured notes, credit derivatives) | 10 | 39 | | |
| | 85 | 142 | – | 4 |

2019 ING Group Annual Report on Form 20-FF - 102

Methods applied in determining fair values of financial assets and liabilities (carried at amortised cost)| | | | Level 1 | | Level 2 | | Level 3 | | Total |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 |
| Financial Assets | | | | | | | | | |
| Loans and advances to banks | 1 | 728 | 445 | 11,469 | 7,152 | 20,570 | 20,742 | 32,767 | 28,339 |
| Loans and advances to customers | 1 | 165 | 138 | 12,622 | 14,656 | 588,063 | 567,016 | 600,850 | 581,810 |
| Securities at amortised cost | | 43,784 | 43,550 | 2,304 | 3,024 | 840 | 1,242 | 46,928 | 47,815 |
| | | 44,677 | 44,132 | 26,395 | 24,832 | 609,473 | 589,000 | 680,545 | 657,964 |

Financial liabilities
Deposits from banks	1		128	23,900	24,433	6,589	7,314	30,490	31,875
Customer deposits	1	5,666	6,695	18,003	26,645	20,760	22,172	44,429	55,512
Debt securities in issue		57,563	47,985	42,638	52,194	18,642	19,713	118,844	119,893
Subordinated loans		14,552	10,840	2,701	2,679			17,253	13,519
		77,781	65,648	87,243	105,951	45,992	49,199	211,016	220,799

1 Financial assets and liabilities that are on demand are excluded from the fair value hierarchy as their fair value approximates the carrying value.

respectively and is categorised as Level 3 of the fair value hierarchy on the basis of methods

b) Non-financial assets and liabilitiesapplied in determining the fair values.

ING Group’s non-financial assets comprise Investments in associates and joint ventures, Property in
Amounts recognised in the statement of profit or loss relating to unrealised gains and losses during own use, Investment property as included in the statement of financial position in the line items
the year that relate to Level 3 non-financial assets are included in the statement of profit or loss as Investments in associates and joint ventures, Property and equipment, and Other assets
follows:
respectively.
Impairments on Property in own use are included in Other operating expenses - Impairments and ◾
reversals on property and equipment and intangibles ; and Investments in associates and joint ventures are accounted for using the equity method. For
Changes in the fair value of Investment property are included in Investment income.
further information, reference is made to Note 8 ’Investments in associates and joint ventures’.◾

Other non-financial assets (Property in own use, and Investment properties) are recognised at fair Unrealised gains and losses on Property in own use are included in the Revaluation reserve – value at the balance sheet date.
Property in own use reserve.

As at 31 December 2019, the estimated fair value of Property in own use and Investment property For amounts recognised in the Statement of profit or loss and other changes in non-financial assets amounts to EUR 757 million (2018: EUR 780 million) and EUR 46 million (2018: EUR 54 million)
during the year, reference is made to Note 9 ‘Property and equipment’ and Note 11 ‘Other assets’.

2019 ING Group Annual Report on Form 20-FF - 103

IBOR transition As at 31 December 2019, ING Group has no non-financial liabilities measured at fair value (2018:
Following the decision by global regulators to seek alternatives for current critical benchmarks in none).
use in various jurisdiction in order to comply with the EU Benchmarks Regulation, the IBOR transition program of ING was initiated in 2018 to prepare the Group for the reform.

39 Derivatives and hedge accounting Reference is made to note Risk management/ IBOR Transition for more information on to what

Use of derivatives rates ING is exposed and on how ING is managing the transition to alternative benchmark rates.
ING Group uses derivatives for economic hedging purposes to manage its asset and liabilityAt the reporting date, ING Group assessed the extent to which hedge relationships are subject to
portfolios and structural risk positions. The primary objective of ING Group’s hedging activities is touncertainties driven by the IBOR reform.
manage the risks which arises from structural imbalances in the duration and other profiles of itsING applies fair value and cash flow hedge accounting in accordance with IAS 39, and interest rate
assets and liabilities. The objective of economic hedging is to enter into positions with an oppositeand foreign currency risks are designated as hedged risks in various micro and macro models.
risk profile to an identified risk exposure to reduce that exposure. The main risks which are beingExcept for EONIA and EUR LIBOR all IBOR’s in scope of ING’s program are a component of either
hedged are interest rate risk and foreign currency exchange rate risk. These risks are primarilyhedging instrument and/or hedged item where the interest rate and/or foreign currency risk are
hedged with interest rate swaps cross currency swaps and foreign exchange forwards/swaps.the designated hedged risk. The hedged exposures are mainly loan portfolio’s, issued debt

securities and purchased debt instruments.
ING Group uses credit derivatives to manage its economic exposure to credit risk, including total return swaps and credit default swaps, to sell or buy protection for credit risk exposures in the loan,ING Group early adopted the amendments to IAS 39 issued in September 2019 to these hedging investment, and trading portfolios. Hedge accounting is not applied in relation to these creditrelationships directly affected by IBOR reform. This excludes EURIBOR hedges as EURIBOR is derivatives.Benchmarks Regulation compliant.

Hedge accountingLIBOR indexed fair value and cash flow hedges are expected to be directly affected by the
Derivatives that qualify for hedge accounting under IFRS are classified and accounted for inuncertainties arising from the IBOR reform. In particular, uncertainties over the timing and amount
accordance with the nature of the instrument hedged and the type of IFRS hedge model that isof the replacement rate may impact the effectiveness and highly probable assessment.
applicable. The three models applicable under IFRS are: fair value hedge accounting, cash flow
hedge accounting, and hedge accounting of a net investment in a foreign operation. How and toFor these affected fair value and cash flow hedge relationships ING Group assumes that the LIBOR
what extent these models are applied are described under the relevant headings below. Thebased cash flows from the hedging instrument and hedged item will remain unaffected.
company’s detailed accounting policies for these three hedge models are set out in paragraph 1.6The same assumption is used while assessing the likelihood of occurrence of the forecast
‘Financial instruments’ of Note 1 ‘Basis of preparation and accounting policies’.transaction that are subject to cash flow hedges. The cash flow hedges directly impacted by the

2019 ING Group Annual Report on Form 20-FF - 104

IBOR reform still meet the highly probable requirement assuming the respective LIBOR benchmarkmost of the derivatives through Central Clearing Counterparties. In addition ING Group only enters

on which the hedged cash flows are based are not altered as a result of the reform.into transactions with high-quality counterparties and requires posting collateral.

The following table contains details of the gross notional amounts of hedging instruments as at 31

December 2019 that are used in the Group's hedge accounting relationships for which theING Group applies fair value hedge accounting on micro level in which one hedged item is hedged

amendments to IAS39 were applied:with one or multiple hedging instruments. Micro fair value hedge accounting is mainly applied on| Hedging instruments in EUR | | |
| --- | --- | --- |
| Benchmark | Notional | Before fair value hedge accounting is applied by ING Group, ING Group determines whether an |
| | Amount | |
| USD LIBOR | 45,496 | economic relationship between the hedged item and the hedging instrument exists based on an |
| GBP LIBOR | 2,184 | evaluation of the quantitative characteristics of these items and the hedged risk that is supported |
| JPY LIBOR | 2,922 | by quantitative analysis. ING Group considers whether the critical terms of the hedged item and |
| CHF LIBOR | 313 | hedging instrument closely align when assessing the presence of an economic relationship. ING |

Group evaluates whether the fair value of the hedged item and the hedging instrument respond

similarly to similar risks. In addition ING is mainly using regression analysis to assess whether the
Approximately 68% of the above notional amounts have a maturity date beyond 2021.
hedging instrument is expected to be and has been highly effective in offsetting changes in the fair

value of the hedged item.
The notional amounts of the derivative hedging instruments (in above table) provide a close

approximation of the extent of the risk exposure ING manages through these hedging relationships.ING Group uses the following derivative financial instruments in a fair value hedge accounting| | Gross carrying value of derivatives designated under fair value hedge accounting | | | | |
| --- | --- | --- | --- | --- | --- |
| ING Group’s fair value hedges principally consist of interest rate swaps that are used to protect | | Assets | Liabilities | Assets | Liabilities |
| against changes in the fair value of fixed-rate instruments due to movements in market interest | | 2019 | 2019 | 2018 | 2018 |
| rates. ING Group’s approach to manage market risk, including interest rate risk, is discussed in ‘Risk | As at 31 December | | | | |
| management –Market risk’. ING Group’s exposure to interest rate risk is disclosed in paragraph | Hedging instrument on interest rate risk | | | | |
| ‘Interest rate risk in banking book’. | – Interest rate swaps | 5,133 | 5,486 | 3,222 | 4,085 |
| | – Other interest derivatives | 87 | 70 | 78 | 65 |

By using derivative financial instruments to hedge exposures to changes in interest rates, ING The derivatives used for fair value hedge accounting are included in the statement of financial
Group also exposes itself to credit risk of the derivative counterparty, which is not offset by the position line-item ‘Financial assets at fair value through profit or loss – Non-trading derivatives’ for
hedged item. ING Group minimises counterparty credit risk in derivative instruments by clearing EUR 524 million (2018: EUR: 650 million) respectively ‘Financial liabilities at fair value through profit

2019 ING Group Annual Report on Form 20-FF - 105

or loss – Non-trading derivatives’ EUR 873 million (2018: EUR 1,035 million). The remaining derivatives are offset with other derivatives and collaterals paid or received.

For our main currencies the average fixed rate for interest rate swaps used in fair value hedge accounting are 2.98% (2018: 1.76%)for EUR and 3.55% (2018: 3.38%) for USD.

The following table shows the net notional amount of derivatives designated in fair value hedging, split into the maturity of the instruments. The net notional amounts presented in the table are a combination of payer (-) and receiver (+) swaps.

Maturity derivatives designated in fair value hedging

Less

than 11 to 33 to 121 to 22 to 33 to 44 to 5 As at 31 December 2019monthmonthsmonthsyearyearsyearsyears>5 yearsTotal| interest rate risk | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| – Interest rate swaps | –59 | 612 | 6,394 | 12,936 | 7,637 | 7,195 | 3,266 | 16,494 | 54,475 |
| – Other interest | –20 | –22 | 58 | –242 | –404 | –290 | –44 | 1,075 | 110 |
| derivativesAs at 31 December 2018 | | | | | | | | | |
| Hedging instrument on | | | | | | | | | |
| interest rate risk | | | | | | | | | |
| - Interest rate swaps | 467 | 511 | 869 | 13,531 | 8,826 | 6,806 | 8,337 | 9,983 | 49,331 |
| – Other interest | –11 | –53 | –101 | –55 | –228 | –325 | –325 | –51 | –1,148 |
| derivatives | | | | | | | | | |
| Gains and losses on derivatives designated under fair value hedge accounting are recognised in the | | | | | | | | | |
| recognised in the statement of profit or loss. As a result, only the net accounting ineffectiveness | | | | | | | | | |
| has an impact on the net result. | | | | | | | | | |

2019 ING Group Annual Report on Form 20-FF - 106

Hedged items included in a fair value hedging relationship| | | | | | | | | Change in fair value | | | | Hedge ineffectiveness | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | Accumulated amount of fair value hedge | | | | used for measuring | | | | recognised in the | |
| | | | | adjustment on the hedged item included in | | | ineffectiveness for the | | | Change in fair value | | statement of profit or | |
| | Carrying amount of the hedged items | | | the carrying amount of the hedged item | | | | | period | hedge instruments | | loss gain (+) / loss (-) | |
| | | Assets | Liabilities | | Assets | Liabilities | | | | | | | |
| As at 31 December 2019 | | | | | | | | | | | | | |
| – Amounts due from banks | | | | | | | | | –0 | | | | |
| – Debt securities at fair value through other comprehensive income | | 23,281 | | | n/a | | | | 357 | | | | |
| – Loans at FVOCI | | | | | n/a | | | | | | | | |
| – Loans and advances to customers | | 959 | | | 75 | | | | 31 | | | | |
| – Debt instruments at amortised cost | | 6,133 | | | 429 | | | | 356 | | | | |
| – Debt securities in issue | | | 62,236 | | | 2,706 | | | –1,018 | | | | |
| – Subordinated loans | | | 14,970 | | | 261 | | | –201 | | | | |
| – Amounts due to banks | | | 8,783 | | | 38 | | | 1 | | | | |
| – Customer deposits and other funds on deposit | | | 299 | | | | 2 | | –12 | | | | |
| – Discontinued hedges | | | | | 688 | | 7 | | | | | | |
| Total | | 30,373 | 86,288 | | 1,192 | 3,014 | | | –487 | | 504 | | 18 |

– Amounts due from banks						–1
– Debt securities at fair value through other comprehensive income	18,471		n/a			1
– Loans at FVOCI	–0		n/a
– Loans and advances to customers	2,909			273		–134
– Debt instruments at amortised cost	16,843			687		–91
– Debt securities in issue		55,081			1,659	53
– Subordinated loans		12,799			53	57
– Amounts due to banks		17,717			55	–52
– Customer deposits and other funds on deposit		193			–0	–11
– Discontinued hedges				272
Total	38,223	85,790		1,232	1,767	–176	185	8

The main sources of ineffectiveness are:different interest rate curves applied to discount the hedged item(s) and hedging instrument(s);
◾
differences in maturities of the hedged item(s) and hedging instrument(s);differences in timing of cash flows of the hedged item(s) and hedging instrument(s).
◾◾

2019 ING Group Annual Report on Form 20-FF - 107

Gains and losses on the effective portions of derivatives designated under cash flow hedge

Additionally, for portfolio (macro) fair value hedges of ING Group’s fixed rate mortgage portfolio,accounting are recognised in Other Comprehensive Income. Interest cash flows on these

ineffectiveness also arises from the disparity between expected and actual prepaymentsderivatives are recognised in the statement of profit or loss in ‘Net interest income’ consistent with

(prepayment risk).the manner in which the forecasted cash flows affect net result. The gains and losses on ineffective

portions of such derivatives are recognised immediately in the statement of profit or loss in

There were no other sources of ineffectiveness in these hedging relationships.‘Valuation results and net trading income’.

Cash flow hedge accountingING Group determines an economic relationship between the cash flows of the hedged item and

the hedging instrument based on an evaluation of the quantitative characteristics of these items ING Group’s cash flow hedges mainly consist of interest rate swaps and cross-currency swaps that
and the hedged risk that is supported by quantitative analysis. ING Group considers whether the are used to protect against the exposure to variability in future cash flows on non-trading assets
critical terms of the hedged item and hedging instrument closely align when assessing the and liabilities that bear interest at variable rates or are expected to be refunded or reinvested in the
presence of an economic relationship. ING Group evaluates whether the cash flows of the hedged future. The amounts and timing of future cash flows, representing both principal and interest flows,
item and the hedging instrument respond similarly to the hedged risk, such as the benchmark are projected for each portfolio of financial assets and liabilities, based on contractual terms and
interest rate of foreign currency. In addition (for macro FX hedging relationships) a regression other variables including estimates of prepayments. These projected cash flows form the basis for
analysis is performed to assess whether the hedging instrument is expected to be and has been identifying the notional amount subject to interest rate risk or foreign currency exchange rate risk
highly effective in offsetting changes in the fair value of the hedged item.
that is designated under cash flow hedge accounting.

ING Group uses the following derivative financial instruments in a cash flow hedge accounting ING Group’s approach to manage market risk, including interest rate risk and foreign currency
relationship:
exchange rate risk, is discussed in ‘Risk management – Credit risk and Market risk’. ING Group

determines the amount of the exposures to which it applies hedge accounting by assessing the

Gross carrying value of derivatives used for cash flow hedge accounting potential impact of changes in interest rates and foreign currency exchange rates on the future

AssetsLiabilitiesAssetsLiabilities
cash flows from its floating-rate assets and liabilities. This assessment is performed using analytical

2019201920182018
techniques.As at 31 December 2019

Hedging instrument on interest rate risk
As noted above for fair value hedges, by using derivative financial instruments to hedge exposures– Interest rate swaps2,6152,8485,7573,664 Hedging instrument on combined interest and FX rate to changes in interest rates and foreign currency exchange rates, ING Group exposes itself to credit

risk risk of the derivative counterparty, which is not offset by the hedged items. This exposure is– Cross currency interest rate derivatives358158204154
managed similarly to that for fair value hedges.

2019 ING Group Annual Report on Form 20-FF - 108

The derivatives used for cash flow hedge accounting are included in the statement of financialMaturity derivatives designated in cash flow hedging

Less than position line-item ‘Financial assets at fair value through profit or loss – Non-trading derivatives’ EUR

11 to 33 to 121 to 22 to 33 to 44 to 5
677 million (2018: EUR 1,012 million) respectively ‘Financial liabilities at fair value through profit orAs at 31 December 2019monthmonthsmonthsyearyearsyearsyears>5 yearsTotal

loss – Non-trading derivatives’ EUR 339 million (2018: EUR 458 million). The remaining derivativesHedging instrument on interest rate risk are offset with other derivatives and collaterals paid or received.
– Interest rate swaps–401580–2,591–6,512–5,541–5,788–5,364–23,009–48,627| accounting are 0.54% (2018: 1.21%)for EUR, 2.38% (2018: 2.53%)for PLN, 2.51% (2018: 2.49%) for | rate risk | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| USD and 1.50% (2018: 1.97%) for AUD. The average currency exchange rates for cross currency | – Cross currency interest | –1,098 | –2,068 | –5,044 | –2,509 | –1,473 | 3 | 104–12,086 |
| | rate derivatives | | | | | | | |
| swaps used in cash flow hedge accounting is for EUR/USD 1.11 (2018: 1.14) and for EUR/AUD 1.55 | As at 31 December 2018 | | | | | | | |
| (2018: 1.52). | Hedging instrument on | | | | | | | |
| | interest rate risk | | | | | | | |

– Interest rate swaps–107–2,546–7,107–5,591–9,883–7,928–8,980–29,629–71,771 The following table shows the net notional amount of derivatives designated in cash flow hedging Hedging instrument on split into the maturity of the instruments. The net notional amounts presented in the table are a combined interest and FX
combination of payer (+) and receiver (-) swaps.rate risk| – Cross currency interest | 5 | 48 | –601 | –4,461 | –5,622 | –2,647 | –793 | –239–14,311 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| rate derivatives | | | | | | | | |

The following table shows the cash flow hedge accounting impact on profit or loss and

comprehensive income:

2019 ING Group Annual Report on Form 20-FF - 109

Cash flow hedging – impact of hedging instruments on the statement of profit or loss and other comprehensive income

Change in value usedCarrying amountHedge ineffectiveness for calculating hedgecash flow hedgeAmount reclassifiedCash flow is noChange in value ofrecognised in the ineffectiveness for thereserve at the end offrom CFH reserve tolonger expectedhedging instrumentstatement of profit or periodthe reporting periodprofit or lossto occurrecognised in OCIloss, gain (+) / loss (-)

As at 31 December 2019| Interest rate risk on; | | | | | | |
| --- | --- | --- | --- | --- | --- | --- |
| – Floating rate lending | –940 | 1,395 | 357 | | | |
| – Floating rate borrowing | 133 | –198 | –201 | | | |
| – Other | –211 | 169 | 53 | | | |
| – Discontinued hedges | | 316 | –112 | | | |
| Total interest rate risk | –1,018 | 1,682 | 97 | | 851 | 44 |
| Combined interest and FX rate risk on; | | | | | | |
| – Floating rate lending | –22 | –42 | –498 | | | |
| – Floating rate borrowing | 12 | 15 | –12 | –1 | | |
| – Other | 1 | –1 | –4 | | | |
| – Discontinued hedges | | | –3 | | | |
| Total combined interest and Fx | –10 | –28 | –517 | –1 | 475 | 3 |
| Total cash flow hedge | –1,028 | 1,654 | –420 | –1 | 1,326 | 47 |

Interest rate risk on;
– Floating rate lending	–540	730	280	–2
– Floating rate borrowing	51	5	–47

– Highly probable forecast transaction
– Other	–72	101	34
– Discontinued hedges			–25	2
Total interest rate risk	–561	836	242	–1	231	–18
Combined interest and FX rate risk on;
– Floating rate lending	53	–60	–377
– Floating rate borrowing	–35	47	–1
– Financial assets at FVOCI
– Highly probable forecast transaction
– Other		–0	–1
– Discontinued hedges
Total combined interest and Fx	18	–13	–378		347	–1
Total cash flow hedge	–543	823	–137	–1	578	–19

2019 ING Group Annual Report on Form 20-FF - 110

ING Group has the following derivative financial instruments used for net investment hedging;
The main sources of ineffectiveness for cash flow hedges are:

differences in timing of cash flows of the hedged item(s) and hedging instrument(s);Gross carrying value of derivatives used for net investment hedging ◾
mismatches in reset frequency between hedged item and hedging instrument.AssetsLiabilitiesAssetsLiabilities ◾

2019201920182018| As a result of interest rate developments in 2019 ING Group de-designated cash flow hedge | As at 31 December | | | | |
| --- | --- | --- | --- | --- | --- |
| | – FX forwards and futures | 23 | 51 | 41 | 16 |
| accounting portfolios with a total notional value of approximately EUR 25 billion. | – Other FX derivatives | 0 | - | 0 | 0 |

The derivatives used for net investment hedge accounting are included in the statement of

Hedges of net investments in foreign operations financial position line-item ‘Financial assets at fair value through profit or loss – Non-trading

A foreign currency exposure arises from a net investment in subsidiaries that have a differentderivatives’ EUR 23 million (2018: EUR 41 million) respectively ‘Financial liabilities at fair value

functional currency from that of ING Group. The risk arises from the fluctuation in spot exchangethrough profit or loss – Non trading derivatives’ EUR 51 million (2018: EUR 17 million). The

rates between the functional currency of the subsidiaries and ING Group’s functional currency,remaining derivatives are offset with other derivatives and collaterals paid or received.

which causes the amount of the net investment to vary in the consolidated financial statements of

ING Group. This risk may have a significant impact on ING Group’s financial statements. ING Group’sFor ING Group’s main currencies the average exchange rates used in net investment hedge

policy is to hedge these exposures only when not doing so be expected to have a significant impactaccounting for 2018 are EUR/USD 1.12 (2018: 1.18), EUR/PLN 4.30 (2018: 4.26), EUR/AUD 1.61 (2018:

on the regulatory capital ratios of ING Group and its subsidiaries.1.58) and EUR/THB 34.79 (2018: 38.15).

ING Group’s net investment hedges principally consist of derivatives (including currency forwardsThe following table shows the notional amount of derivatives designated in net investment hedging

and swaps) and non-derivative financial instruments such as foreign currency denominatedsplit into the maturity of the instruments:

funding. When the hedging instrument is foreign currency denominated debt, ING Group assesses

Maturity derivatives designated in net investment hedging effectiveness by comparing past changes in the carrying amount of the debt that are attributable

Less to a change in the spot rate with past changes in the investment in the foreign operation due to

than 11 to 33 to 121 to 22 to 33 to 44 to 5 movement in the spot rate (the offset method).As at 31 December 2019monthmonthsmonthsyearyearsyearsyears>5 yearsTotal
– FX forwards and futures–3,179–999–54–4,232| Gains and losses on the effective portions of derivatives designated under net investment hedge | – Other FX derivatives | | | | | |
| --- | --- | --- | --- | --- | --- | --- |
| | As at 31 December 2018 | 1 | | | | |
| accounting are recognised in Other Comprehensive Income. The balance in equity is recognised in | – FX forwards and futures | –3,444 | | –853 | –54 | –4,351 |
| the statement of profit or loss when the related foreign subsidiary is disposed. The gains and losses | – Other FX derivatives | | –0 | | | –0 |
| on ineffective portions are recognised immediately in the statement of profit or loss. | | | | | | |
| | 1The prior period has been updated to improve consistency and comparability. | | | | | |

2019 ING Group Annual Report on Form 20-FF - 111

40 Assets by contractual maturity The effect of the net investment hedge accounting in the statement of profit or loss and other Amounts presented in these tables by contractual maturity are the amounts as presented in the comprehensive income is as follows:
statement of financial position and are discounted cash flows. Reference is made to ‘Risk

Management – Funding and liquidity risk’.
Net investment hedge accounting – Impact on statement of profit or loss and other

comprehensive income

Carrying Change in valueamount netHedge used forinvestmentChange in valueineffectiveness calculatinghedge reserveHedged itemof hedgingrecognised in hedgeat the end ofaffectedinstrumentthe statement ineffectivenessthe reportingstatement ofrecognised inof profit or loss, As at 31 December 2019for the periodperiodprofit or lossOCIgain(+) / Loss(-)
Investment in foreign 13444044–1340 operations

Discontinued hedges–210

As at 31 December 2018
Investment in foreign –71540-712 operations

Discontinued hedges0-210-00

2019 ING Group Annual Report on Form 20-FF - 112

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| Assets by contractual maturity | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2019 | Less then 1 month | 1 | 1-3 months | | 3-12 months | | 1-5 years | Over 5 years | Maturity not applicable | | Total |
| Cash and balances with central banks | | 53,202 | | | | | | | | | 53,202 |
| Loans and advances to banks | | 22,820 | 3,100 | | 5,090 | | 3,729 | | 397 | | 35,136 |
| Financial assets at fair value through profit or loss | | | | | | | | | | | |
| – Trading assets | | 12,754 | 6,589 | | 8,469 | | 8,240 | 13,203 | | | 49,254 |
| – Non-trading derivatives | | 110 | | 161 | | 215 | 998 | | 773 | | 2,257 |
| – Mandatorily at fair value through profit or loss | | 22,645 | 13,784 | | 2,357 | | 1,010 | 1,645 | | 159 | 41,600 |
| – Designated as at fair value through profit or loss | | 259 | | 126 | 1,004 | | 442 | 1,245 | | | 3,076 |

other comprehensive income
– Equity securities								2,306	2,306
– Debt securities			216	175	1,146	14,528	14,419		30,483
– Loans and advances			26	36	202	627	788		1,680
Securities at amortised cost			1,005	916	5,930	24,556	13,701		46,108
Loans and advances to customers			55,138	18,586	45,871	180,972	307,462		608,029
Intangible assets					127	506		1,283	1,916
Other assets	2		4,618	369	1,049	1,177	1,251	46	8,511
Remaining assets (for which maturities are not applicable)		3						4,962	4,962
Total assets			172,793	43,842	71,460	236,784	354,885	8,756	888,520

1 Includes assets on demand.
2 Includes Other assets, Assets held for sale, and Current and Deferred tax assets as presented in the Consolidated statement of financial position.
3 Included in remaining assets for which maturities are not applicable are property and equipment, and investments in associates and joint ventures. Due to their nature remaining assets consist mainly of assets expected to be recovered after more than 12 months.

2019 ING Group Annual Report on Form 20-FF - 113

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| Assets by contractual maturity | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2018 | | | Less then 1 month | | 1 | 1-3 months | | 3-12 months | | 1-5 years | Over 5 years | Maturity not applicable | | Total |
| Cash and balances with central banks | | | | 49,987 | | | | | | | | | | 49,987 |
| Loans and advances to banks | | | | 15,864 | | 3,693 | | 4,830 | | 5,599 | | 437 | | 30,422 |
| Financial assets at fair value through profit or loss | | | | | | | | | | | | | | |
| – Trading assets | | | | 15,815 | | 6,032 | | 8,123 | | 9,276 | 10,906 | | | 50,152 |
| – Non-trading derivatives | | | | 274 | | | 323 | | 173 | 1,059 | | 835 | | 2,664 |
| - Mandatorily at fair value through profit or loss | | | | 48,240 | | 9,047 | | 5,325 | | 1,238 | | 723 | 210 | 64,783 |
| - Designated at fair value through profit or loss | | | | 265 | | | 208 | | 784 | 635 | | 994 | | 2,887 |
| Financial assets at fair value through other comprehensive income | | | | | | | | | | | | | | |
| - Equity securities | | | | | | | | | | | | | 3,228 | 3,228 |
| - Debt securities | | | | 272 | | | 234 | 1,597 | | 13,409 | 10,103 | | | 25,616 |
| - Loans and advances | | | | 42 | | | 97 | | 254 | 1,023 | | 962 | | 2,379 |
| Securities at amortised cost | | | | 1,126 | | 2,537 | | 2,737 | | 22,169 | 18,708 | | | 47,276 |
| Loans and advances to customers | | | | 55,736 | | 17,689 | | 39,213 | | 176,448 | 300,567 | | | 589,653 |
| Intangible assets | | | | | | | | | 120 | 481 | | | 1,238 | 1,839 |
| Other assets | 2 | | | 6,894 | | | 165 | 2,447 | | 637 | | 497 | 214 | 10,854 |
| Remaining assets (for which maturities are not applicable) | | 3 | | | | | | | | | | | 2,861 | 2,861 |
| Total assets | | | | 194,516 | | 40,024 | | 65,604 | | 231,974 | 344,732 | | 7,751 | 884,603 |

1Includes assets on demand.
2Includes Other assets, Assets held for sale, and Current and Deferred tax assets as presented in the Consolidated statement of financial position.
3Included in remaining assets for which maturities are not applicable are property and equipment, and investments in associates and joint ventures. Due to their nature remaining assets consist mainly of assets expected to be recovered after more than 12 months.

2019 ING Group Annual Report on Form 20-FF - 114

41 Liabilities by maturity

The tables below include all financial liabilities by maturity based on contractual, undiscounted cash flows. Perpetual liabilities are included in column ‘Maturity not applicable’. Furthermore, the undiscounted future coupon interest on financial liabilities payable is included in a separate line and in the relevant maturity bucket. Derivative liabilities are included on a net basis if cash flows are settled net. For other derivative liabilities the contractual gross cash flow payable is included.

Non-financial liabilities are included based on a breakdown of the amounts per the statement of financial position, by expected maturity. Reference is made to the liquidity risk paragraph in ‘Risk Management – Funding and liquidity risk’ for a description on how liquidity risk is managed.| Liabilities by maturity | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2019 | Less than 1 month | | 1 | 1–3 months | | 3–12 months | | 1–5 years | Over 5 years | Maturity not applicable | | Adjustment | 2 | Total |
| Deposits from banks | | 9,903 | | | 847 | 12,011 | | 10,280 | 1,965 | | | | –180 | 34,826 |
| Customer deposits | | 540,544 | | 13,892 | | 13,784 | | 3,646 | 2,381 | | | | 108 | 574,355 |
| Financial liabilities at fair value through profit or loss | | | | | | | | | | | | | | |
| – Other trading liabilities | | 4,666 | | | 646 | | 436 | 568 | | 333 | | | 68 | 6,717 |
| – Trading derivatives | | 1,589 | | 1,492 | | 3,312 | | 7,771 | 7,011 | | | | 151 | 21,325 |
| – Non-trading derivatives | | 379 | | | 91 | | 152 | 616 | | 440 | | | 539 | 2,215 |
| – Designated at fair value through profit or loss | | 27,048 | | 10,467 | | 1,885 | | 2,938 | 5,089 | | 7 | | 251 | 47,684 |
| Debt securities in issue | | 2,616 | | 13,278 | | 35,915 | | 36,895 | 26,592 | | | 3,231 | | 118,528 |
| Subordinated loans | | | | | | | | 1,780 | 7,455 | | 6,941 | | 411 | 16,588 |
| Lease liabilities | | 16 | | | 39 | | 161 | 668 | | 643 | – | | –21 | 1,507 |
| Financial liabilities | | 586,762 | | 40,753 | | 67,656 | | 65,160 | 51,909 | | 6,948 | 4,557 | | 823,745 |

Other liabilities	3	7,916	820	2,361	728	1,061			12,886
Non-financial liabilities		7,916	820	2,361	728	1,061	-	-	12,886

Total liabilities594,67741,57370,01765,88852,9706,9484,557836,631

Coupon interest due on financial liabilities5746921,4825,7904,35537913,271

1 Includes liabilities on demand.
2 This column reconciles the contractual undiscounted cash flows on financial liabilities to the statement of financial position values. The adjustments mainly relate to the impact of discounting, and for derivatives, to the fact that the contractual cash flows are presented on a gross basis (unless the cash flows are actually settled net).
3 Includes Other liabilities, Current and deferred tax liabilities, and Provisions as presented in the Consolidated statement of financial position.

2019 ING Group Annual Report on Form 20-FF - 115

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| Liabilities by maturity | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2018 | | Less than 1 month | | 1 | 1–3 month | | 3–12 months | | 1–5 years | Over 5 years | Maturity not applicable | | Adjustment | 2 | Total |
| Deposits from banks | | | 10,506 | | 1,068 | | 1,940 | | 21,571 | 2,242 | | | | 2 | 37,330 |
| Customer deposits | 4 | | 515,094 | | 17,354 | | 16,086 | | 4,695 | 2,500 | | | | | 555,729 |
| Financial liabilities at fair value through profit or loss | | | | | | | | | | | | | | | |
| – Other trading liabilities | | | 4,075 | | 1,318 | | 1,465 | | 888 | 1,655 | | | | 286 | 9,687 |
| – Trading derivatives | | | 1,711 | | 1,873 | | 3,680 | | 6,855 | 6,035 | | | 1,374 | | 21,528 |
| – Non-trading derivatives | | | 458 | | 312 | | | 252 | 988 | | 866 | | | –577 | 2,299 |
| – Designated at fair value through profit or loss | | | 34,914 | | 11,753 | | 4,115 | | 3,519 | 4,921 | | | | –43 | 59,179 |
| Debt securities in issue | | | 4,066 | | 20,961 | | 30,282 | | 41,068 | 21,413 | | | 1,961 | | 119,751 |
| Subordinated loans | | | | | | | | 0 | 1,713 | 6,497 | | 5,339 | | 176 | 13,724 |
| Lease liabilities | | | n/a | | | n/a | | n/a | n/a | | n/a | n/a | | n/a | n/a |
| Financial liabilities | | | 570,824 | | 54,639 | | 57,820 | | 81,297 | 46,129 | | 5,339 | 3,180 | | 819,228 |

Other liabilities	3	10,560	899	2,455	1,044	566			15,524
Non-financial liabilities		10,560	899	2,455	1,044	566	-	-	15,524

Total liabilities581,38455,53860,27582,34146,6955,3393,180834,751

Coupon interest due on financial liabilities48426591,7195,6263,83928712,971

2019 ING Group Annual Report on Form 20-FF - 116

42 Assets not freely disposable43 Transfer of financial assets

The assets not freely disposable consist primarily of Loans and advances to customers pledged toThe majority of ING's financial assets that have been transferred, but do not qualify for

secure Debt securities in issue, deposits from the Dutch Central Bank and other banks. They servederecognition are debt instruments used in securities lending or sale and repurchase transactions.

to secure margin accounts and are used for other purposes required by law. The assets not freely

Transfer of financial assets not qualifying for derecognition disposable are as follows:
Securities lendingSale and repurchase| Assets not freely disposable | | | | | | Equity | | Debt | | Equity | | Debt |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | 2019 | 2018 | | | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 |
| Banks | | | Transferred assets at carrying amount | | | | | | | | | |
| – Cash and balances with central banks | 1,382 | 1,471 | Financial assets at fair value through | | | | | | | | | |
| – Loans and advances to banks | 6,337 | 4,373 | profit or loss | | 2,542 | 2,962 | 1,974 | 1,170 | 1,682 | 2,396 | 9,538 | 7,1342 |
| Financial assets at fair value through profit or loss | 614 | 4491 | Financial assets at fair value through | | | | | | | | | |
| Financial assets at fair value through OCI | 240 | 2531 | other comprehensive income | | | | 193 | 168 | | | 6 | 325 |
| Securities at amortised cost | 189 | 6271 | Loans and advances to customers | | | | | | | | | |
| Loans and advances to customers | 75,755 | 74,352 | Securities at amortised cost | | | | | | | | | |
| Other assets | 908 | 734 | | | | | 195 | 142 | | | 734 | 910 |
| | 85,425 | 82,258 | | | | | | | | | | |
| | | | Associated liabilities at carrying | | | | | | | | | |
| 1 The prior period amounts have been updated to improve consistency and comparability. | | | amount | 1 | | | | | | | | |

Deposits from banksn/an/an/an/a
In addition, in some jurisdictions ING Bank N.V. has an obligation to maintain a reserve with central
Customer depositsn/an/an/an/a
banks. As at 31 December 2019, the minimum mandatory reserve deposits with various centralFinancial liabilities at fair value through
banks amount to EUR 9,975 million (2018: EUR 9,359 million).profit or lossn/an/an/an/a1,6192,3733,8052,225

1 The table includes the associated liabilities which are reported after offsetting, compared to the gross positions of the
Loans and advances to customers that have been pledged as collateral for Debt securities in issueencumbered assets.
and for liquidity purposes, amount in The Netherlands to EUR 45,530 million (2018: EUR 46,3202 The prior period amount has been updated to improve consistency and comparability.

million), in Germany to EUR 13,222 million (2018: EUR 12,143 million), in Belgium EUR 11,298 million Included in the table above, are the carrying amounts of transferred assets under repurchase (2018: EUR 11,894 million), in Australia to EUR 4,150 million (2018: EUR 2,638 million) and in the agreements, and securities lending that do not qualify for derecognition.
United States to EUR 1,010 million (2018: EUR 1,183 million).

The table above does not include assets transferred to consolidated securitisation entities as the The table does not include assets relating to securities lending as well as sale and repurchase
related assets remain recognised in the consolidated statement of financial position.
transactions. Reference is made to Note 43 ‘Transfer of financial assets’.

2019 ING Group Annual Report on Form 20-FF - 117

44 Offsetting financial assets and liabilities

The following tables include information about rights to offset and the related arrangements. The amounts included consist of all recognised financial instruments that are presented net in the statement of financial position under the IFRS offsetting requirements (legal right to offset and intention to net settle) and amounts presented gross in the statement of financial position but subject to enforceable master netting arrangements or similar arrangement.

2019 ING Group Annual Report on Form 20-FF - 118

Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements

Gross amounts of recognisedNet amounts of financial assetsRelated amounts not offset financial liabilities offset in thepresented in the statement ofin the statement of financial position Gross amounts ofstatement of financialfinancialCash and financial instru-ments 2019recognised financial assetspositionpositionFinancial instrumentsreceived as collateralNet amount

Statement of financial position

line itemFinancial instrument Loans and advances to banksReverse repurchase, securities 86886821738109| | borrowing and similar agreements | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | | 868 | – | 868 | 21 | 738 | 109 |
| Financial assets at fair value | | | | | | | |
| through profit or loss | | | | | | | |
| Trading assets | Derivatives | 19,766 | –3,851 | 15,914 | 13,725 | 3 | 2,186 |
| Trading and Non-trading | Reverse repurchase, securities | 57,328 | –20,545 | 36,783 | 50 | 36,553 | 181 |
| | borrowing and similar agreements | | | | | | |
| | | 77,094 | –24,396 | 52,698 | 13,774 | 36,556 | 2,368 |
| Non-trading derivatives | Derivatives | 54,689 | –53,321 | 1,368 | 1,167 | – | 201 |
| | | 54,689 | –53,321 | 1,368 | 1,167 | – | 201 |

Loans and advances to customers	Debit balances on customer accounts	169,313	–166,624	2,689	1,422	813	454
		169,313	–166,624	2,689	1,422	813	454

Other items where offsetting is applied
in the statement of financial position9,787–9,42336415349| Impact of enforceable master netting | | | | | | –4,380 | 3,965 | 415 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| arrangements or similar arrangements | 1 | Derivatives | | | | | | |
| | | Other | | | | –3 | | 3 |
| | | | | | | –4,383 | 3,965 | 418 |
| Total financial assets | | | 311,750 | –253,764 | 57,986 | 12,016 | 42,072 | 3,898 |

1 The line ‘Impact of enforceable master netting agreements or similar arrangements’ contains derivative positions under the same master netting arrangements being presented in different statement of financial position line items.

2019 ING Group Annual Report on Form 20-FF - 119

Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements| | | | | | Gross amounts of recognised | | Net amounts of financial assets | | Related amounts not offset | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | financial liabilities offset in the | | presented in the statement of | | in the statement of financial position | | | | | |
| | | | Gross amounts of | | statement of financial | | | financial | | | Cash and financial instru- | | | |
| 2018 | | recognised financial assets | | | | position | | position | Financial instruments | | ments received as collateral | | Net amount | |
| Statement of financial position line item | Financial instrument | | | | | | | | | | | | | |
| Loans and advances to banks | Reverse repurchase, securities | | | 1,947 | | | | 1,947 | | | | 1,838 | 109 | |
| | borrowing and similar agreements | | | | | | | | | | | | | |
| | Other | | | 0 | | –0 | | 0 | | | | | | 0 |
| | | | | 1,947 | | –0 | | 1,947 | | | | 1,838 | 109 | |
| Financial assets at fair value through profit or loss | | | | | | | | | | | | | | |
| Trading assets | Derivatives | | | 17,181 | | –1,012 | | 16,168 | | 14,664 | | 2 | 1,502 | |
| Trading and non-trading | Reverse repurchase, securities | | | 76,983 | | –18,337 | | 58,647 | | 1,102 | | 57,304 | 240 | |
| | borrowing and similar agreements | | | | | | | | | | | | | |
| | | | | 94,164 | | –19,349 | | 74,815 | | 15,766 | | 57,307 | 1,742 | |
| Non-trading derivatives | Derivatives | | | 41,263 | | –39,648 | | 1,615 | | 1,520 | | –0 | | 96 |

Loans and advances to customersReverse repurchase, securities 223–223 borrowing and similar agreements

Debit balances on customer accounts161,730–159,5962,1341,166605363

161,953–159,8192,1341,166605363

Other items where offsetting is applied in the 5,705–5,1935121510

statement of financial position| Impact of enforceable master netting arrangements or | | Derivatives | | | | –5,041 | 3,518 | 1,523 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| similar arrangements | 1 | | | | | | | |
| | | Other | | | | –0 | | 0 |
| | | | | | | –5,041 | 3,518 | 1,523 |
| Total financial assets | | | 305,032 | –224,008 | 81,023 | 13,412 | 63,267 | 4,344 |

2019 ING Group Annual Report on Form 20-FF - 120

Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements

Related amounts not offset in the statement of financial position| | | Gross amounts of | | Gross amounts of recognised | | Net amounts of financial liabilities | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | recognised financial | | financial assets offset in the | | presented in the statement of | | | | | Cash and financial instruments | | | |
| 2019 | | | liabilities | statement of financial position | | | financial position | | Financial instruments | | | pledged as collateral | Net amount | |
| Statement of financial position line item | Financial instrument | | | | | | | | | | | | | |
| Deposits from banks | Repurchase, securities lending and | | 26 | | | | | 26 | | 26 | | | 21 | –21 |
| | similar agreements | | | | | | | | | | | | | |
| | | | 26 | | | | | 26 | | 26 | | | 21 | –21 |
| Customer deposits | Repurchase, securities lending and | | | | | | | | | | | | | |
| | similar agreements | | | | | | | | | | | | | |
| | Corporate deposits | | 5,783 | | –5,432 | | | 351 | | | | | | 351 |
| | Credit balances on customer | | 175,490 | | –161,193 | | | 14,297 | | 1,419 | | | | 12,878 |

	accounts
		181,273	–166,624	14,649	1,419		13,230
Financial liabilities at fair value through profit or loss
Trading liabilities	Derivatives	20,935	–3,842	17,093	16,073	6	1,014
Trading and Non-trading	Repurchase, securities lending and	56,818	–20,545	36,273	50	35,787	436
	similar agreements
		77,752	–24,386	53,366	16,123	35,793	1,450
Non-trading derivatives	Derivatives	55,194	–53,823	1,371	1,177	191	3

Other items where offsetting is applied in the statement of 9,200–8,93026911258 financial position| Impact of enforceable master netting arrangements or | | | | | | –6,731 | 7,620 | –889 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| similar arrangements | 1 | Derivatives | | | | | | |
| | | Other | | | | –8 | | 8 |
| | | | | | | –6,739 | 7,620 | –881 |
| Total financial liabilities | | | 323,445 | –253,764 | 69,681 | 12,016 | 43,625 | 14,040 |

2019 ING Group Annual Report on Form 20-FF - 121

Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements

Related amounts not offset in the statement of financial position| | | Gross amounts of | | Gross amounts of recognised | | Net amounts of financial | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | recognised | | financial assets offset in the | | liabilities presented in the | | | | Cash and financial instruments | | | |
| 2018 | | financial liabilities | | statement of financial position | | statement of financial position | | Financial instruments | | | pledged as collateral | Net amount | |
| Statement of financial position line item | Financial instrument | | | | | | | | | | | | |
| Deposits from banks | Repurchase, securities lending and | | 36 | | –36 | | –0 | | | | | | –0 |
| | similar agreements | | | | | | | | | | | | |
| | Other | | 0 | | – | | 0 | | 0 | | | | – |
| | | | 37 | | –36 | | 0 | | 0 | | | | –0 |
| Customer deposits | Repurchase, securities lending and | | 224 | | –186 | | 37 | | | | | 37 | |
| | similar agreements | | | | | | | | | | | | |
| | Corporate deposits | | 9,567 | | –9,078 | | 489 | | | | | | 489 |
| | Credit balances on customer | | 161,552 | | –150,518 | | 11,034 | | 1,166 | | | 4 | 9,864 |

	accounts
		171,343	–159,782	11,561	1,166	42	10,353
Financial liabilities at fair value through profit or loss
Trading liabilities	Derivatives	17,105	–1,021	16,084	15,301	2	781
	Repurchase, securities lending and	64,324	–18,337	45,987	1,102	44,801	85
	similar agreements
	Other
		81,429	–19,357	62,071	16,403	44,803	866

Non-trading derivativesDerivatives42,675–41,1981,4771,312178–13| Other items where offsetting is applied in the statement of | | | 4,353 | –3,634 | 718 | –4 | | 723 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| financial position | | | | | | | | |
| Impact of enforceable master netting arrangements or similar | | | | | | –5,464 | 5,773 | –309 |
| arrangements | 1 | Derivatives | | | | | | |
| | | Other | | | | –0 | | 0 |
| | | | | | | –5,464 | 5,773 | –309 |
| Total financial liabilities | | | 299,836 | –224,008 | 75,827 | 13,412 | 50,796 | 11,619 |

2019 ING Group Annual Report on Form 20-FF - 122

45 Contingent liabilities and commitments

In the normal course of business, ING Group is party to activities where risks are not reflected in

whole or in part in the consolidated financial statements. In response to the needs of its customers,

the Group offers financial products related to loans. These products include traditional off-balance

sheet credit-related financial instruments.

Contingent liabilities and commitments| | | Less than 1 month | | | 1–3 months | | 3–12 months | | | 1–5 years | | Over 5 years | | Maturity not applicable | | | Total |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | 2019 | 2018 | 2019 | 2018 | | 2019 | 20182 | 2019 | 2018 | 2019 | | 2018 | 2019 | 2018 | 2019 | 20182 |
| Contingent liabilities in respect of | | | | | | | | | | | | | | | | | |
| – Guarantees | 1 | 11,441 | 12,644 | 1,187 | | 891 | 3,373 | 3,475 | 6,355 | 3,536 | 5,146 | 5,710 | | | | 27,502 | 26,256 |
| – Irrevocable letters of credit | | 9,770 | 10,346 | 4,987 | 4,499 | | 1,259 | 998 | 322 | 374 | 3 | | 3 | | | 16,340 | 16,220 |
| – other | | 57 | 53 | | | | | | 75 | 115 | | | | | | 131 | 168 |
| | | 21,268 | 23,043 | 6,174 | 5,389 | | 4,631 | 4,473 | 6,752 | 4,026 | 5,149 | 5,713 | | | | 43,974 | 42,644 |

Guarantees issued by ING Groep N.V.319364319364| Irrevocable facilities | 64,036 | 63,499 | 2,289 | 2,699 | 16,766 | 13,731 | 30,152 | 32,717 | 6,760 | 6,876 | 120,002 | 119,522 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | 85,304 | 86,541 | 8,462 | 8,088 | 21,397 | 18,204 | 36,905 | 36,743 | 12,228 | 12,954 | 164,296 | 162,530 |

1 The prior period has been updated to improve consistency and comparability of the amounts per maturity of guarantees.Irrevocable letters of credit mainly secure payments to third parties for a customer’s foreign and
2 ING in the Netherlands offers credit facilities to clients, linked to ING current accounts. After a review of the product domestic trade transactions in order to finance a shipment of goods. ING Group’s credit risk in these conditions in 2019, it has been concluded that these facilities are irrevocable and therefore reported as such above. The
prior period has been updated to improve consistency and comparability.transactions is limited since these transactions are collateralised by the commodity shipped and

are of a short duration.
Guarantees relate both to credit and non-credit substitute guarantees. Credit substitute

guarantees are guarantees given by ING Group in respect of credit granted to customers by a third Other contingent liabilities include acceptances of bills and are of a short-term nature. Other party. Many of them are expected to expire without being drawn on and therefore do not contingent liabilities also include contingent liabilities resulting from the operations of the Real necessarily represent future cash outflows. In addition to the items included in contingent liabilities, Estate business including obligations under development and construction contracts. Furthermore ING Group has issued guarantees as a participant in collective arrangements of national industry other contingent liabilities include a contingent liability in connection with a possible Dutch tax bodies and as a participant in government required collective guarantee schemes which apply in obligation that relates to the deduction from Dutch taxable profit for losses incurred by ING Bank in different countries.
the United Kingdom in previous years. The existence of this obligation will be confirmed only by the

occurrence of future profits in the United Kingdom.

2019 ING Group Annual Report on Form 20-FF - 123

46 Legal proceedings

ING Group has issued certain guarantees as participant in collective arrangements of national

banking funds and as a participant in required collective guarantee schemes. For example, ING ING Group and its consolidated subsidiaries are involved in governmental, regulatory, arbitration
Bank N.V. provided a guarantee to the German Deposit Guarantee Fund (‘Einlagensicherungsfonds’ and legal proceedings and investigations in the Netherlands and in a number of foreign
or ESF) under section 5 (10) of the by-laws of this fund, where ING Bank N.V. indemnifies the jurisdictions, including the U.S., involving claims by and against them which arise in the ordinary
Association of German Banks Berlin against any losses it might incur as result of actions taken with course of their businesses, including in connection with their activities as lenders, broker-dealers,
respect to ING Germany. The ESF is a voluntary collective guarantee scheme for retail savings and underwriters, issuers of securities and investors and their position as employers and taxpayers. In
deposits in excess of EUR 100,000.
certain of such proceedings, very large or indeterminate amounts are sought, including punitive

and other damages. While it is not feasible to predict or determine the ultimate outcome of all As at 31 December 2019, ING Groep N.V. guarantees various US dollar debentures (that mature pending or threatened governmental, regulatory, arbitration and legal proceedings and between 2023 and 2036) which were issued by a subsidiary of Voya Financial Inc. In the investigations, ING is of the opinion that some of the proceedings and investigations set out below Shareholder’s agreement between ING Groep N.V. and Voya Financial Inc. it is agreed that the may have or have in the recent past had a significant effect on the financial position, profitability or aggregate outstanding principal amount of the debentures will be reduced to nil as at 31 December reputation of ING and/or ING and its consolidated subsidiaries.
2019 (2018: EUR 87 million).

Settlement Agreement:On 4 September 2018, ING announced that it had entered into a Per the Shareholder’s agreement, the decrease in the aggregate outstanding principal shall be settlement agreement with the Dutch Public Prosecution Service relating to previously disclosed deemed to have been reduced to the extent of collateral deposited by Voya Financial Inc. As at 31 investigations regarding various requirements for client on-board ing and the prevention of money December 2019, EUR 331 million (2018: EUR 233 million) was pledged to ING Groep N.V. as laundering and corrupt practices. Under the terms of the settlement agreement ING paid a fine of collateral.
€675 million and €100 million for disgorgement. In connection with the investigations, ING had also

received information reques ts from the US Securities and Exchange Commission (SEC). As ING Irrevocable facilities mainly constitute unused portions of irrevocable credit facilities granted to announced on 5 September 2018, ING has received a formal notification from the SEC that it has corporate clients. Many of these facilities are for a fixed duration and bear interest at a floating concluded its investigation. In the letter dated 4 September 2018 the Division of Enforcement rate. ING Group’s credit risk and interest rate risk in these transactions is limited. The unused states that, based on information as of the date thereof, it does not intend to recommend an SEC portion of irrevocable credit facilities is partly secured by customers’ assets or counter-guarantees enforcement action against ING. Following the entry into the settlement agreement, ING has by the central governments and exempted bodies under the regulatory requirements. Irrevocable experienced heightened scrutiny from authorities in various countries. ING is also aware, including facilities also include commitments made to purchase securities to be issued by governments and as a result of media reports, that other parties may, among other things, seek to commence legal private issuers.
proceedings against ING in connection with the subject matter of the settlement, have filed or may

file requests to reconsider the prosecutor’s decision to enter into the settlement agreement with

2019 ING Group Annual Report on Form 20-FF - 124

ING and not to prosecute ING or (former) ING employees in court, or have filed or may file requestsd’Italia. ING Italy will continue to fully serve existing clients in Italy and is working hard to address for disciplinary proceedings against ING employees based on the Dutch “Banker’s oath.the shortcomings and resolve the issues identified.
ING announced steps in September 2018 to enhance its management of compliance risks and Findings regarding AML processes:As previously disclosed, after its September 2018 settlementembed stronger awareness across the whole organisation. This programme started in 2017 and with Dutch authorities concerning Anti-Money Laundering matters, and in the context ofincludes enhancing KYC files and working on various structural improvements in compliance significantly increased attention on the prevention of financial economic crime, ING haspolicies, tooling, monitoring, governance, knowledge and behaviour.
experienced heightened scrutiny by authorities in various countries. The interactions with such regulatory and judicial authorities have included, and can be expected to continue to include,Tax cases:Because of the geographic spread of its business, ING may be subject to tax audits, onsite visits, information requests, investigations and other enquiries. Such interactions, as well asinvestigations and procedures in numerous jurisdictions at any point in time. Although ING believes ING’s internal assessments in connection with its global enhancement programme, have in somethat it has adequately provided for all its tax positions, the ultimate resolution of these audits, cases resulted in satisfactory outcomes, and also have resulted in, and may continue to result in,investigations and procedures may result in liabilities which are different from the amounts findings, or other conclusions which may require appropriate remedial actions by ING, or may haverecognised. ING has also identified issues in connection with its U.S. tax information reporting and other consequences. ING intends to continue to work in close cooperation with authorities as itwithholding obligations in respect of prior periods. ING has agreed with the US Internal Revenue seeks to improve its management of non-financial risks in terms of policies, tooling, monitoring,Service (“IRS”) to resolve these issues by paying the tax owed. ING has made the payment out of governance, knowledge and behaviour.the provision it had already recognised.

Also as previously disclosed in March 2019, ING Italy was informed by the Banca d’Italia of theirLitigation regarding products of a former subsidiary in Mexico:Proceedings in which ING is report containing their conclusions regarding shortcomings in AML processes at ING Italy, whichinvolved include complaints and lawsuits concerning the performance of certain interest sensitive was prepared based on an inspection conducted from October 2018 until January 2019. ING Italyproducts that were sold by a former subsidiary of ING in Mexico. A provision has been taken in the has been engaged in discussions with Banca d’Italia and Italian judiciary authorities. In Februarypast.
2020 the Italian court confirmed and approved a plea bargain agreement with the Italian judiciary authorities. As a consequence, ING Italy has paid an administrative fine and disgorgement of profit.SIBOR – SOR litigation:In July 2016, investors in derivatives tied to the Singapore Interbank Offer In addition, in February 2020 the Banca d’Italia imposed an administrative fine on ING Italy. BothRate (“SIBOR”) filed a U.S. class action complaint in the New York District Court alleging that several amounts were already provisioned for in 2019.banks, including ING, conspired to rig the prices of derivatives tied to SIBOR and the Singapore Swap Offer Rate (“SOR”). The lawsuit refers to investigations by the Monetary Authority of Singapore In line with the enhancement programme announced in 2018, ING Italy is taking steps intended to(“MAS”) and other regulators, including the U.S. Commodity Futures Trading Commission (“CFTC”), improve processes and management of compliance risks as required by the Banca d’Italia. Inin relation to rigging prices of SIBOR- and SOR based derivatives. In October 2018, the New York consultation and in agreement with the Banca d’Italia, ING Italy has agreed that it will refrain fromDistrict Court issued a decision dismissing all claims against ING Group and ING Capital Markets LLC, taking on new customers during further discussions on the enhancement plans with the Bancabut leaving ING Bank, together with several other banks, in the case, and directing plaintiffs to file an amended complaint consistent with the Court's rulings. In October 2018, plaintiffs filed such

2019 ING Group Annual Report on Form 20-FF - 125

amended complaint, which asserts claims against a number of defendants but none against INGAs requested by the AFM, ING has reviewed a significant part of the files of clients who bought Bank (or any other ING entity), effectively dismissing ING Bank from the case. In December 2018,interest rate derivatives. In December 2015, the AFM concluded that Dutch banks may have to replaintiffs sought permission from the Court to file a further amended complaint that names INGassess certain client files, potentially including certain derivative contracts that were terminated Bank as a defendant. In July 2019, the New York District Court granted the defendants’ motion toprior to April 2014 or other client files. As advised by the AFM, the Minister of Finance appointed a dismiss and denied leave to further amend the complaint, effectively dismissing all remainingCommittee of independent experts (the “Committee”) which has established a uniform recovery claims against ING Bank. In November 2019, plaintiffs filed an appeal against this judgment.framework for Dutch SME clients with interest rate derivatives. ING has adopted this recovery framework and has reassessed individual files against this framework. ING has taken an additional Claims regarding accounts with predecessors of ING Bank Turkey: ING Bank Turkey has receivedprovision for the financial consequences of the recovery framework. In 2017, ING has informed the numerous claims from (former) customers of legal predecessors of ING Bank Turkey. The claims aremajority of the relevant clients whether they are in scope of the recovery framework, and thus based on offshore accounts held with these banks, which banks were seized by the Savings Depositeligible for compensation, or not. Because implementation by ING of the uniform recovery Insurance Fund (SDIF) prior to the acquisition of ING Bank Turkey in 2007 from OYAK. SDIF has alsoframework encountered delay, ING has previously offered advance payments to customers out of filed various lawsuits against ING Bank Turkey to claim compensation from ING Bank Turkey, withthe existing provision. As of December 2018, all customers in scope of the uniform recovery respect to amounts paid out to offshore account holders so far. At this moment it is not possible toframework have received an offer of compensation from ING (including offers of no compensation).
assess the outcome of these procedures nor to provide an estimate of the (potential) financialAs of 1 July 2019, the required process under the uniform recovery framework had been completed effect of these claims.for approximately 99% of all customers in scope.

Interest rate derivatives claims:ING is involved in several legal proceedings in the NetherlandsING is awaiting feedback from the independent dispute committee on one file for which the with respect to interest rate derivatives that were sold to clients in connection with floating interestrelevant client opted for a 'binding advice' procedure. Hearings with the independent dispute rate loans in order to hedge the interest rate risk of the loans. These proceedings are based oncommittee took place in November and December 2019. It is not clear when the committee will several legal grounds, depending on the facts and circumstances of each specific case, inter aliapresent its verdict.
alleged breach of duty of care, insufficient information provided to the clients on the product and its risks and other elements related to the interest rate derivatives that were sold to clients. In someInterest surcharges claims:ING received complaints and was involved in litigation with natural cases, the court has ruled in favour of the claimants and awarded damages, annulled the interestpersons (natuurlijke personen) in the Netherlands regarding increases in interest surcharges with rate derivative or ordered repayment of certain amounts to the claimants. The total amounts thatrespect to several credit products, including but not limited to commercial property (commercieel need to be repaid or compensated in some cases still need to be determined. ING may decide toverhuurd onroerend goed). ING has reviewed the relevant product portfolio. The provision appeal against adverse rulings. Although the outcome of the pending litigation and similar casespreviously taken has been reversed for certain of these complaints. All claims are dealt with that may be brought in the future is uncertain, it is possible that the courts may ultimately rule inindividually. Thus far, the courts have ruled in favour of ING in each case, ruling that ING was favour of the claimants in some or all of such cases. Where appropriate a provision has been taken.allowed to increase the interest surcharged based upon the essential obligations in the contract.
The aggregate financial impact of the current and future litigation could become material.

2019 ING Group Annual Report on Form 20-FF - 126

Criminal proceedings regarding cash company financing:In June 2017, a Belgian criminal Courtcosts have to be borne in full by the bank. Allocation of valuation costs between the bank and the ruled that ING Luxembourg assisted third parties in 2000 to commit a tax fraud in the context ofcustomer were not addressed by the Spanish Supreme Court decisions and remain uncertain.
the purchase of the shares of a cash company. The Court convicted ING Luxembourg, among others, and ordered ING to pay a penal fine of EUR 120,000 (suspended for half of the totalImtech claim:In January 2018, ING Bank received a claim from Stichting ImtechClaim.nl and amount). The court also ordered ING Luxembourg jointly and severally with other parties, to payImtech Shareholders Action Group B.V. on behalf of certain (former) shareholders of Imtech N.V.
EUR 31.48 million (together with any interest payable under applicable law) to the bankruptcy(“Imtech”). Furthermore, on 28 March 2018, ING Bank received another claim on the same subject trustee of the cash company. In July 2017, ING Luxembourg filed an appeal against this judgment.matter from the Dutch Association of Stockholders (Vereniging van Effectenbezitters, “VEB”). Each A settlement with all the civil parties involved was reached in mid-2018. However, this settlementof the claimants allege inter alia that shareholders were misled by the prospectus of the rights does not apply to the criminal conviction of ING Luxembourg. In January 2020, the Court of Appealissues of Imtech in July 2013 and October 2014. ING Bank, being one of the underwriters of the of Antwerp reformed the first judgment: ING Luxemburg benefitted from an "opschorting van derights issues, is held liable by the claimants for the damages that investors in Imtech would have uitspraak/suspension du prononcé" which means that the conviction has been upheld, but no penalsuffered. ING Bank responded to the claimants denying any and all responsibility in relation to the sanction has been pronounced (penalties suspended). ING Luxembourg is analyzing the judgement.allegations made in the relevant letters. In September 2018, the trustees in the bankruptcy of Imtech claimed from various financing parties, including ING, payment of what the security agent Mortgage expenses claims:ING Spain has received claims and is involved in procedures withhas collected following bankruptcy or intends to collect, repayment of all that was repaid to the customers regarding reimbursement of expenses associated with the formalisation of mortgages.financing parties, as well as compensation for the repayment of the bridge financing. At this In most court proceedings in first instance the expense clause of the relevant mortgage contractmoment it is not possible to assess the outcome of these claims nor to provide an estimate of the has been declared null and ING Spain has been ordered to reimburse all or part of the applicable(potential) effect of these claims.
expenses. The courts in first instance have applied in their rulings different criteria regarding the reimbursement of expenses. ING Spain has filed an appeal against a number of these courtMexican Government Bond litigation:A class action complaint was filed adding ING Bank N.V., ING decisions. ING Spain has also been included, together with other Spanish banks, in two class actionsGroep N.V., ING Bank Mexico S.A. and ING Financial Markets LLC (“ING”) as defendants to a filed by customer associations. The outcome of the pending litigation and similar cases that maycomplaint that had previously been filed against multiple other financial institutions. The complaint be brought in the future is uncertain. A provision has been taken. However, the aggregate financialalleges that the defendants conspired to fix the prices of Mexican Government Bonds. ING is impact of the current and future litigation could change. In February 2018, the Spanish Supremedefending itself against the allegations. Currently, it is not possible to provide an estimate of the Court ruled that Stamp Duty (Impuesto de Actos Jurídicos Documentados) expenses are(potential) financial effect of this claim. On 30 September 2019, the relevant court dismissed the chargeable to the customer, while in October 2018 it ruled that Stamp Duty is chargeable to theantitrust complaint, finding that the plaintiffs had failed to identify any facts that links each banks. In November 2018, the Spanish Supreme Court clarified the issue regarding Stamp Duty bydefendant to the alleged conspiracy. On 9 December 2019, the plaintiffs filed an amended stating that this tax should be borne by the customer. As for the remaining types of the expenses,complaint removing all ING entities as defendants on the condition that the ING entities enter into in January 2019, the Spanish Supreme Court issued several decisions that stated that the client anda tolling agreement for the duration of two years. The relevant ING entities subsequently entered the bank each have to bear half of the notary and management company costs and that registryinto a tolling agreement, which provides that the statute of limitations will not be tolled for the two year duration of the agreement. Should the plaintiffs discover any evidence of potential

2019 ING Group Annual Report on Form 20-FF - 127

involvement by ING in the activities alleged in the complaint, ING could be brought back into theDivestments
litigation.
In July 2019 ING completed the sale of part of the ING Lease Italy business. The settlement price

amounted to EUR 1.162 million, consisted of a EUR 368 million cash settlement, a EUR 20 million
47 Consolidated companies and businesses acquired and divestedDeferred Purchase Price and a EUR 774 million Senior Loan facility for the portfolio of lease receivables. The deferred purchase price is linked to the performance of the sold portfolio and is reported under the financial assets mandatorily measured at fair value through profit and loss. The

Acquisitions additional loss in 2019 amounted EUR -2 million (2018: EUR -123 million). The Italian lease business In May 2019 ING acquired 80% of the shares of Intersoftware Group B.V., Findata Access B.V. and was reported as Assets Held for Sale as at 31 December 2018 and previously included in the Unitrust B.V. (ISW Group) for a total consideration of EUR 18 million. The acquisition of ISW Group business line segment Wholesale Banking and geographical segment Other Challengers.
resulted in the recognition of goodwill of EUR 17 million.

Reference is made to Note 12 ‘Assets and liabilities held for sale’ and Note 25 ‘Result on the
In 2018 ING Bank obtained control over Payvision Holding B.V. (Payvision) by acquiring 75% of its disposal of group companies’.

shares. The share purchase agreement included a put option exercisable by the original shareholders and a call option exercisable by ING for the remaining 25% shares. The put and call

48 Principal subsidiaries, investments in associates and joint ventures option led to the recognition of a financial liability with initial recognition through shareholders’ equity of EUR 87 million. In November 2019 ING Bank agreed to purchase the remaining 25%For the majority of ING’s principal subsidiaries, ING Groep N.V. has control because it either directly shares in three tranches between November 2019 and April 2020 for a total consideration of EURor indirectly owns more than half of the voting power. For subsidiaries in which the interest held is 90 million. This resulted in the remeasurement of the financial liability to EUR 90 million. A stake ofbelow 50%, control exists based on the combination of ING’s financial interest and its rights from 23% was purchased in 2019 which reduced the outstanding financial liability. As at 31 Decemberother contractual arrangements which result in control over the operating and financial policies of 2019 the ownership interest of ING Bank was 98% with an outstanding financial liability of EUR 7the entity.
million to acquire the remaining shares. Given that ING Bank already had control over Payvision, the acquisition of the shares in 2019 represents a shareholder transaction and resulted in a transferFor each of the subsidiaries listed, the voting rights held equal the proportion of ownership interest between Non-controlling interest and Shareholders equity of EUR 24 million.and consolidation by ING is based on the majority of ownership.

The purchase price of Payvision in 2018 included contingent consideration in the form of futureFor the principal investments in associates and joint ventures ING Group has significant influence
milestone payments. A total of EUR 16 million was paid in 2019.but not control. Significant influence generally results from a shareholding of between 20% and

50% of the voting rights, but also the ability to participate in the financial and operating policies through situations including, but not limited to one or more of the following:
Representation on the board of directors;
◾

2019 ING Group Annual Report on Form 20-FF - 128

Participation in the policymaking process; and ◾
Interchange of managerial personnel.
◾

The principal subsidiaries, investments in associates and joint ventures of ING Groep N.V. and their

statutory place of incorporation or primary place of business are as follows:

Principal subsidiaries, investments in associates and joint ventures Proportion of ownership and interest held by the group

20192018| Subsidiary | | Statutory place of Incorporation | Country of operation | | |
| --- | --- | --- | --- | --- | --- |
| ING Bank N.V. | | Amsterdam | the Netherlands | 100% | 100% |
| Bank Mendes Gans N.V. | | Amsterdam | the Netherlands | 100% | 100% |
| ING Belgium S.A./N.V. | | Brussels | Belgium | 100% | 100% |
| ING Luxembourg S.A. | | Luxembourg City | Luxembourg | 100% | 100% |
| ING-DiBa AG | | Frankfurt am Main | Germany | 100% | 100% |
| ING Bank Slaski S.A. | 1 | Katowice | Poland | 75% | 75% |
| ING Financial Holdings Corporation | | Delaware | United States of America | 100% | 100% |
| ING Bank A.S. | | Istanbul | Turkey | 100% | 100% |
| ING Bank (Australia) Ltd | | Sydney | Australia | 100% | 100% |
| ING Commercial Finance B.V. | | Amsterdam | the Netherlands | 100% | 100% |
| ING Groenbank N.V. | | Amsterdam | the Netherlands | 100% | 100% |

Investments in associates and joint ventures TMB Bank Public Company Ltd2BangkokThailand23%30%

1 The shares of the non-controlling interest stake of 25% are listed on the Warsaw Stock Exchange, for summarised financial

information we refer to ‘Note 35 ‘Information on geographical areas.

2 Reference is made to Note 8 Investments in Associates and Joint Ventures.

2019 ING Group Annual Report on Form 20-FF - 129

49 Structured entitiesThe structured entity issues securitised notes (traditional securitisations) which are eligible

collateral for central bank liquidity purposes. In most programmes ING Group acts as investor of the ING Group’s activities involve transactions with various structured entities (SE) in the normal course
securitised notes. ING Group continues to consolidate these structured entities if it is deemed to of its business. A structured entity is an entity that has been designed so that voting or similar
control the entities.
rights are not the dominant factor in deciding who controls the entity, such as when any voting

rights relate to administrative tasks only and the relevant activities are directed by means of The structured entity issues securitisation notes in two or more tranches, of which the senior contractual arrangements. ING Group’s involvement in these entities varies and includes both debt tranche obtains a high rating (AAA or AA) by a rating agency. The tranche can subsequently be financing and equity financing of these entities as well as other relationships. Based on its used by ING Group as collateral in the money market for secured borrowings.
accounting policies, as disclosed in the section Principles of valuation and determination of results

of these financial statements, ING establishes whether these involvements result in no significant ING Group originated various securitisations, as at 31 December 2019, these consisted of influence, significant influence, joint control or control over the structured entity.
approximately EUR 57 billion (2018: EUR 66 billion) of senior and subordinated notes, of which

approximately EUR 4 billion (2018: EUR 5 billion) were issued externally. The underlying exposures The structured entities over which ING can exercise control are consolidated. ING may provide
are residential mortgages and SME loans. Apart from the third party funding, these securitisations support to these consolidated structured entities as and when appropriate. However, this is fully
did not impact ING Group’s Consolidated statement of financial position and profit or loss.
reflected in the consolidated financial statements of ING Group as all assets and liabilities of these

entities are included and off-balance sheet commitments are disclosed.
In 2019, there are no non-controlling interests as part of the securitisation structured entities that

are significant to ING Group. ING Group for the majority of the securitisation vehicles provides the ING’s activities involving structured entities are explained below in the following categories:
funding for the entity except for EUR 4 billion (2018: EUR 5 billion).
1.Consolidated ING originated securitisation programmes;

2.Consolidated ING originated Covered bond programme (CBC);
In addition ING Group originated various securitisations for liquidity management optimisation 3.Consolidated ING sponsored Securitisation programme (Mont Blanc);
purposes. As at 31 December 2019, these consisted of approximately EUR 3 billion (2018: EUR 4 4.Unconsolidated Securitisation programme; and billion) of senior secured portfolio loans, which have been issued to ING subsidiaries in Germany.
5.Other structured entities.
The underlying exposures are senior loans to large corporations and financial institutions, and real

estate finance loans, mainly in the Netherlands. These securitisations did not impact ING Group’s

1. Consolidated ING originated securitisation programmes
consolidated statement of financial position and profit or loss.
ING Group enters into liquidity management securitisation programmes in order to obtain funding

and improve liquidity. Within the programme ING Group sells ING originated assets to a structured

2. Consolidated ING originated Covered bond programme (CBC)

entity. The underlying exposures include residential mortgages in the Netherlands, Belgium, Spain, ING Group has entered into a covered bond programme. Under the covered bond programme ING Italy and Australia and SME Loans in Belgium.
issues bonds. The payment of interest and principal is guaranteed by the ING administered

2019 ING Group Annual Report on Form 20-FF - 130

structured entities, ING Covered Bond Company B.V., and ING SB Covered Bond Company B.V. In order for these entities to fulfil their guarantee, ING legally transfers mainly Dutch mortgage loansING Group supports the commercial paper programmes by providing Mont Blanc Capital Corp. with originated by ING. Furthermore ING offers protection against deterioration of the mortgage loans.short-term liquidity facilities. Once drawn these facilities bear normal credit risk.| | mortgage loans | | |
| --- | --- | --- | --- |
| | 2019 | 2018 | The standby liquidity facilities are reported under irrevocable facilities. All facilities, which vary in |
| Dutch Covered Bond Companies | 24,297 | 24,336 | risk profile, are granted to the Mont Blanc Capital Corp. subject to normal ING Group credit and |
| | 24,297 | 24,336 | liquidity risk analysis procedures. The fees received for services provided and for facilities are |
| | | | charged subject to market conditions. |

In addition, subsidiaries of ING in Germany, Belgium and Australia also issued covered bonds with pledged mortgages loans of approximately EUR 16 billion (2018: EUR 14 billion) in total.4. Unconsolidated Securitisation programme In 2013 ING transferred financial assets (mortgage loans) for an amount of approximately EUR 2 In general, the third-party investors in securities issued by the structured entity have recourse onlybillion to a newly established special purpose vehicle (SPV). The transaction resulted in full to the assets of the entity and not to the assets of ING Group.derecognition of the financial assets from ING’s statement of financial position. The derecognition did not have a significant impact on net result. Following this transfer ING continues to have two 3. Consolidated ING sponsored Securitisation programme (Mont Blanc)types of on-going involvement in the transferred assets: as counterparty to the SPE of a non- In the normal course of business, ING Group structures financing transactions for its clients bystandard interest rate swap and as servicer of the transferred assets. ING has an option to unwind assisting them in obtaining sources of liquidity by selling the clients’ receivables or other financialthe transaction by redeeming all notes at their principal outstanding amount, in the unlikely event assets to a Special Purpose Vehicle (SPV). The senior positions in these transactions may be fundedof changes in accounting and/or regulatory requirements that significantly impact the transaction.
by the ING administered multi seller Asset Backed Commercial Paper (ABCP) conduit Mont BlancThe fair value of the swap held by ING at 31 December 2019 amounted to EUR (45) million (2018:
Capital Corp. (rated A-1/P-1). Mont Blanc Capital Corp. funds itself externally in the ABCP markets.EUR (33) million); fair value changes on this swap recognised in the statement of profit or loss in 2019 were EUR 12 million (2018: EUR 8 million). Service fee income recognised, for the role as In its role as administrative agent, ING Group facilitates these transactions by acting asadministrative agent, in the statement of profit or loss in 2019 amounted to EUR 2 million (2018:
administrative agent, swap counterparty and liquidity provider to Mont Blanc Capital Corp. INGEUR 2 million). The cumulative income recognised in profit or loss since derecognition amounts to Group also provides support facilities (i.e. liquidity) backing the transactions funded by the conduit.EUR 15 million.
The types of asset currently in the Mont Blanc conduit include trade receivables, consumer finance receivables, car leases and residential mortgages.

2019 ING Group Annual Report on Form 20-FF - 131

5. Other structured entitiesSubsidiaries| In the normal course of business, ING Group enters into transactions with structured entities as | Transactions with ING Groep N.V.'s main subsidiaries | | |
| --- | --- | --- | --- |
| counterparty. Predominantly in its structured finance operations, ING can be instrumental in | | 2019 | 2018 |
| | Assets | 44,242 | 34,902 |
| facilitating the creation of these structured entity counterparties. These entities are generally not | Liabilities | 163 | 140 |
| as administrative agent by providing structuring, accounting, funding, lending, and operation | Income received | 1,103 | 629 |
| | Expenses paid | 9 | 26 |
| services. | | | |

ING Group offers various investment fund products to its clients. ING Group does not invest in theseTransactions between ING Groep N.V. and its subsidiaries are eliminated on consolidation.
investment funds for its own account nor acts as the fund manager.Reference is made to Note 48 ‘Principal subsidiaries’ for a list of principal subsidiaries and their
statutory place of incorporation.

Assets from ING’s subsidiaries mainly comprise long-term funding. Liabilities to ING’s subsidiaries

50 Related parties mainly comprise short-term deposits.
In the normal course of business, ING Group enters into various transactions with related parties.

Parties are considered to be related if one party has the ability to control or exercise significant

Associates and joint ventures
influence over the other party in making financial or operating decisions. Related parties of ING| Group include, among others, its subsidiaries, associates, joint ventures, key management | Transactions with ING Group’s main associates and joint ventures | | | | |
| --- | --- | --- | --- | --- | --- |
| personnel, and various defined benefit and contribution plans. For post-employment benefit plans, | | Associates | | Joint ventures | |
| reference is made to Note 36 ‘Pension and other postemployment benefits’. Transactions between | | 2019 | 2018 | 2019 | 2018 |
| related parties include rendering or receiving of services, leases, transfers under finance | Assets | 96 | 54 | | –0 |
| | Liabilities | 97 | 98 | 6 | 1 |
| arrangements and provisions of guarantees or collateral. All transactions with related parties took | Off-balance sheet commitments | 29 | 120 | | – |
| place at conditions customary in the market. There are no significant provisions for doubtful debts | | | | | |
| or individually significant bad debt expenses recognised on outstanding balances with related | Income received | 11 | 2 | | |

parties.
Assets, liabilities, commitments, and income related to Associates and joint ventures result from

transactions which are executed as part of the normal Banking business.

2019 ING Group Annual Report on Form 20-FF - 132

Key management personnel compensationIn addition to above remuneration the members of the Executive Board and Management Board

Transactions with key management personnel (Executive Board, Management Board Banking andBanking receive other emoluments, such as Company Car, Travel and Accident Insurance,

Supervisory Board) are transactions with related parties.personnel discount on financial products, of EUR 0.4 million in total (2018: EUR 0.3 million).

In 2019 and 2018, three members of the Executive Board of ING Groep N.V. were also members of Key management personnel compensation (Executive Board and Management Board Banking)

the Management Board Banking. The members of the Management Board Banking are considered
ExecutiveManagement
to be key management personnel and their compensation is therefore included in the tables below.2018Board of INGBoard

in EUR thousandsGroep N.V.Banking1Total

Key management personnel compensation (Executive Board and Management Board Banking)Fixed Compensation

ExecutiveManagement– Base salary4,1573,6727,829

2019Board of INGBoard– Collective fixed allowances21,1919902,181

in EUR thousandsGroep N.V.3Banking1,4Total– Pension costs78103181

Fixed Compensation– Severance benefits3602602

– Base salary4,5873,8478,434Variable compensation4| – Collective fixed allowances | 2 | 1,167 | 937 | 2,104 | – Upfront cash |
| --- | --- | --- | --- | --- | --- |
| – Pension costs | | 78 | 94 | 172 | |
| – Severance benefits | | | | | – Upfront shares |
| Variable compensation | | | | | – Deferred cash |

– Upfront cash361361– Deferred shares

– Upfront shares247378625– Other| – Deferred cash | | 541 | 541 | Total compensation | 6,028 | 4,765 | 10,793 |
| --- | --- | --- | --- | --- | --- | --- | --- |
| – Deferred shares | 371 | 566 | 937 | | | | |

– Other 1 Excluding members that are also members of the Executive Board of ING Groep N.V Total compensation6,4506,72413,174 2 The collective fixed allowances consist of two savings allowances applicable to employees in the Netherlands; an individual

savings allowance of 3.5% and a collective savings allowance to compensate for loss of pension benefits with respect to 1 Excluding members that are also members of the Executive Board of ING Groep N.V. One Management Board Banking salary in excess of EUR 105,075.
member was appointed to the Executive Board during the year .
3 Following the settlement agreement and in consultation with the Supervisory Board, the CFO stepped down from his 2 The collective fixed allowances consist of two savings allowances applicable to employees in the Netherlands; an individual position as member of the Executive Board of ING Group on 7 February 2019. In line with applicable regulations a severance savings allowance of 3.5% and a collective savings allowance to compensate for loss of pension benefits with respect to payment was granted. The Supervisory Board has set the severance pay at a level of 50% of fixed annual pay.
salary in excess of EUR 107,539.
4 No variable remuneration for 2018, as the members of the Executive Board and Management Board Banking volunteered to 3 In 2019 one member of the Executive Board left and one member joined. The table includes their compensation earned in forfeit their entitlement to variable remuneration immediately, following the settlement agreement with the Dutch Public the capacity as board member and in addition an advisor fee for the period in which the activities were transferred to the Prosecution Service as announced by ING on 4 September 2018.
successor.

4 One member left ING during the year. The table includes compensation earned in the capacity as board member..

2019 ING Group Annual Report on Form 20-FF - 133

Key management personnel compensation (Supervisory Board)51 Subsequent events| in EUR thousands | 2019 | 2018 | |
| --- | --- | --- | --- |
| Total compensation | 1,045 | 1,032 | There are no subsequent events to report. |

The table above shows the fixed remuneration, expense allowances and attendance fees for the

52 Capital management Supervisory Board for 2019 and 2018.

Objectives

Loans and advances to key management personnel Group Treasury (“GT”) Capital Management, part of Balance Sheet & Capital Management, is Amount outstandingWeighted average

31 Decemberinterest rateRepaymentsresponsible for maintaining the adequate capitalisation of ING Group and ING Bank entities, to| in EUR thousands | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | manage the risk associated with ING’s business activities. This involves not only managing, planning |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Executive Board members | 2,402 | 2,681 | 1.4% | 1.8% | 97 | | |
| Management Board Banking | 350 | 550 | 2.6% | 2.3% | | | and allocating capital within ING Group, ING Bank and its various entities, but also helping to |

Supervisory Board membersexecute necessary capital market transactions, term (capital) funding and risk management

Total2,7523,23197 transactions. ING takes an integrated approach to assess the adequacy of its capital position in

relation to its risk profile and operating environment. This means GT Capital Management takes into

Number of ING Groep N.V. shares and stock options to key management personnelaccount both regulatory and internal, economic based metrics and requirements as well as the

Stock options oninterests of key stakeholders such as shareholders and rating agencies.
ING Groep N.V. sharesING Groep N.V. shares| in numbers | 2019 | 2018 | 2019 | 2018 | |
| --- | --- | --- | --- | --- | --- |
| Executive Board members | 172,523 | 226,639 | 46,198 | 68,467 | ING applies the following main capital definitions: |

Management Board Banking	147,713	159,393	–	27,240	Common Equity Tier 1 capital (CET1) - is defined as shareholders’ equity less regulatory
Supervisory Board members	54,065	54,065		–	◾
Total number of shares and stock options	374,301	440,097	46,198	95,707	adjustments. CET1 capital divided by risk-weighted assets equals the CET1 ratio.

Tier 1 capital – is defined as CET1 capital including Additional Tier 1 (hybrid) securities and other ◾ Key management personnel compensation is generally included in Staff expenses in the statement regulatory adjustments. Tier 1 capital divided by risk-weighted assets equals the Tier 1 capital of profit or loss. The total remuneration of the Executive Board and Management Board Banking is ratio.
disclosed in the table above. Under IFRS, certain components of variable remuneration are not

Total capital – is Tier 1 capital including subordinated Tier 2 liabilities and regulatory
recognised in the statement of profit or loss directly, but are allocated over the vesting period of◾

the award. The comparable amount recogni sed in Staff expenses in 2019 and included in Totaladjustments. Total capital divided by risk-weighted assets equals the Total capital ratio.

expenses in 2019, relating to the fixed expenses of 2019 and the vesting of variable remunerationCommon Equity Tier 1 ratio ambition –is built on potential impact of a standardised and pre- ◾
of earlier performance years, is EUR 11 million in 2019 (2018: EUR 12 million).determined 1-in-10-year stress event (i.e. at a 90% confidence level with a 1-year horizon).

Leverage ratio – is defined as Tier 1 capital divided by the total exposure amount.
◾

2019 ING Group Annual Report on Form 20-FF - 134

Contents|PartI|PartII|Part III|Additional Information|Financial Statements| Capital Developments | ING Group capital position according to CRR/CRD IV | | | | |
| --- | --- | --- | --- | --- | --- |
| The capital position remained robust in 2019 reflecting strong profitability with a lower risk weight | | | | 2019 | 2018 |
| | Shareholders’ equity | 4 | | 53,769 | 50,932 |
| and complemented with the optimisation of the capital structure. At both the consolidated and | Interim profit not included in CET1 capital | | 1 | –1,754 | –1,712 |
| entity level, ING has sufficient buffers to withstand certain adverse scenarios without breaching | Other adjustments | | | –4,464 | –3,776 |
| currently applicable and likely future requirements. | Regulatory adjustments | | | –6,217 | –5,489 |
| | Available common equity Tier 1 capital | | | 47,552 | 45,443 |

The CET1 ratio at the end of the year improved as risk-weighted assets increased due to volume	Additional Tier 1 securities	2	6,916	5,339
growth and model impacts, effects that were offset by profit retention and positive risk migration.	Regulatory adjustments additional Tier 1		51	48
ING continues to maintain a strong and high quality capital level. ING Groep N.V. has a Common	Available Tier 1 capital		54,519	50,831

Equity Tier 1 ratio of 14.6% as at 31 December 2019 versus a current CRR/CRD IV solvency
requirement of 11.83%.	Supplementary capital Tier 2 bonds	3	8,943	8,248
	Regulatory adjustments Tier		–1,158	–1,136
	Available Total capital		62,303	57,943
The Group’s Tier 1 ratio (including grandfathered securities) increased to 16.7%, as of 31 December

Compared with previous year, the Total capital ratio (including grandfathered securities)Risk weighted assets326,414314,149| increased from 18.4% to 19.1%. | | | |
| --- | --- | --- | --- |
| | Common equity Tier 1 ratio | 14.57% | 14.47% |
| | Tier 1 ratio | 16.70% | 16.18% |
| ING Bank N.V. has a CET1 ratio of 13.1%, thereby complying with CRR/CRD IV solvency | Total capital ratio | 19.09% | 18.44% |
| requirements. ING Bank N.V. paid EUR 2,819 million of dividend to ING Group in 2019. The Tier 1 | | | |

ratio (including grandfathered securities) increased from 14.5% to 15.1%, primarily reflecting 1) The interim profit not included in CET1 capital as per 31 December 2019 (EUR 1,754 million) includes EUR 42 million for 4Q developments in ING Bank’s CET1 ratio. The Banks’s total capital ratio (including grandfathered

2019.(Full Year 2019: EUR 2,689 million).
securities) increased from 17.2% to 17.9%.2) Including EUR 5,312 million which is CRR/CRD IV-compliant (2018: EUR 2,833 million) and EUR 1,604 million to be replaced as capital recognition is subject to CRR/CRD IV grandfathering rules (2018: EUR 2,506 million).
3) Including EUR 8,789 million which is CRR/CRD IV-compliant (2018: EUR 8,079 million), and EUR 153 million to be replaced as capital recognition is subject to CRR/CRD IV grandfathering rules (2018: EUR 168 million).
4) Shareholders' equity is determined in accordance with IFRS-EU.

In accordance with the applicable regulation, credit and operational risk models used in the capital

ratios calculations are not audited.

2019 ING Group Annual Report on Form 20-FF - 135

Dividendaddition to internal stress test scenarios reflecting the outcomes of the annual risk assessment, ING

also participates in regulatory stress test exercises. ING participated in the 2018 EU-wide stress test ING Group’s dividend policy aims to pay a progressive dividend that will reflect considerations
conducted by EBA.
including expected future capital requirements, growth opportunities available to the Group, net

earnings, and regulatory developments. The Executive Board proposes to pay a total cash dividend

Regulatory requireme nts of EUR 2,689 million, or EUR 0.69 per ordinary share, over the financial year 2019. This is subject to

the approval of shareholders at the Annual General Meeting in April 2020.Capital adequacy and the use of required regulatory capital are based on the guidelines developed

Taking into account the interim dividend of EUR 0.24 per ordinary share paid in August 2019, theby the Basel Committee on Banking Supervision (The Basel Committee) and the European Union

final dividend will amount to EUR 0.45 per ordinary share and will be paid fully in cash. The totalDirectives, as implemented by the Dutch Central Bank (Dutch Central Bank until 3 November 2014,

amount of EUR 1,754 million is completely covered by the remaining balance of ”interim profits notthe ECB thereafter) for supervisory purposes. In 2010, the Basel Committee issued new solvency

included in CET1 capital” at year-end 2019.and liquidity requirements that superseded Basel II. The minimum requirements, excluding buffers,

for the CET 1 ratio is 4.5%, the minimum Tier 1 requirement is 6% and the Total capital ratio is 8%

Processes for managing capitalof risk-weighted assets.

Besides assessing capital adequacy, ING also ensures the availability of sufficient capital above the
The CET1 requirement for ING Group at a consolidated level was set at 11.83% in 2019. This set targets and limits for ING Group and ING Bank. Additionally, GT Capital Management ensures
requirement is the sum of a 4.5% Pillar I requirement, a 1.75% Pillar II requirement, a 2.5% Capital adherence to the set limits and targets by planning and executing capital management
Conservation Buffer (CCB), a 0.08% Countercyclical Buffer (based on December 2019 positions) and transactions. The ongoing assessment and monitoring of capital adequacy is embedded in the
the 3.0% Systemic Risk Buffer (SRB) that are set separately for Dutch systemic banks by the Dutch capital planning process within the ICAAP framework. As part of the dynamic business planning
Central Bank (De Nederlandsche Bank). Due to changes in the Countercyclical Buffer setting in process, ING prepares a capital and funding plan on a regular basis for all its material businesses
some jurisdictions, ING expects an increase to 0.24% in 2020 (based on 4Q 2019 positions). This and assesses continuously the timing, need and feasibility for capital management actions in
requirement excludes the Pillar II capital guidance, which is not disclosed.
scope of its execution strategy. Sufficient financial flexibility should be preserved to meet important

financial objectives. ING’s risk appetite statements set targets and are at the foundation of the The Maximum Distributable Amount (MDA) trigger level stood at 11.83% in 2019, based on stable capital plan. These limits are cascaded to the different businesses in line with our risk management Pillar II capital requirements. In the event that ING Group breaches the MDA level, ING may face framework.
restrictions on dividend payments, AT1 instruments coupons and bonus payments.

Adverse planning and stress testing are integral components of ING’s risk and capital management

framework. It allows us to (i) identify and assess potential vulnerabilities in our businesses, business

model, portfolios or operating environment; (ii) understand the sensitivities of the core assumptions

used in our strategic and capital plans; and (iii) improve decision-making and business steering

through balancing risk and return following a foresighted and prudent management approach. In

2019 ING Group Annual Report on Form 20-FF - 136

Ratings

Main credit ratings of ING at 31 December 2019 Standard & Poor’sMoody’sFitch RatingOutlookRatingOutlookRatingOutlook

ING Groep N.V. Long-termA-StableBaa1StableA+Stable

ING Bank N.V. Long-termA+StableAa3StableAA-Stable Short-termA-1P-1F1+

ING’s key credit ratings and outlook are shown in the table above. Each of these ratings reflects only the view of the applicable rating agency at the time the rating was issued, and any explanation of the significance of a rating may be obtained only from the rating agency.

A security rating is not a recommendation to buy, sell or hold securities and each rating should be evaluated independently of other ratings. There is no assurance that any credit rating will remain in effect for any given period of time or that a rating will not be lowered, suspended or withdrawn entirely by the rating agency if, in the rating agency’s judgment, circumstances so warrant. ING accepts no responsibility for the accuracy or reliability of the ratings.

2019 ING Group Annual Report on Form 20-FF - 137

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ING Groep N.V. Annual Report 2019

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ING Groep N.V. — Annual Report 2019

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