ING Groep N.V. — Annual Report 2020

Mar 12, 2021

20-F 1 ing20f2020.htm FORM 20-F EDGAR HTML document created by Certent CDM HD version: 20.11.1 ing20f2020

UNITED STATESP.O. Box 1800, 1000 BV Amsterdam

The Netherlands

SECURITIES AND EXCHANGE COMMISSION (Address of principal executive offices)

WASHINGTON, D.C. 20549

Erwin Olijslager

FORM 20-F

Telephone: +31 20 564 7705

E-mail: Erwin.Olijslager@ing.com

Bijlmerdreef 106

(Mark One)
☐REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES1102 CT Amsterdam

The Netherlands

EXCHANGE ACT OF 1934 (Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

OR

☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTSecurities registered or to be registered pursuant to Section 12(b) of the Act.

OF 1934Name of each exchange on which

Title of each classTrading symbolsregistered
For the fiscal year ended 31 December 2020American Depositary SharesINGNew York Stock Exchange

Ordinary sharesNew York Stock Exchange(i)

OR 3.150% Fixed Rate Senior Notes due 2022ING22New York Stock Exchange
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE3.950% Fixed Rate Senior Notes due 2027ING27New York Stock Exchange

ACT OF 1934Floating Rate Senior Notes due 2022ING22ANew York Stock Exchange
Floating Rate Senior Notes due 2023ING23ANew York Stock Exchange
OR4.100% Fixed Rate Senior Notes due 2023ING23New York Stock Exchange

☐SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES4.550% Fixed Rate Senior Notes due 2028ING28New York Stock Exchange
3.550% Fixed Rate Senior Notes due 2024ING24New York Stock Exchange

EXCHANGE ACT OF 1934 4.050% Fixed Rate Senior Notes due 2029ING29New York Stock Exchange

Commission File Number: 001-14642

ING GROEP N.V. (i)Not for trading, but only in connection withthe registration of American Depositary Shares representing such (Exact name of Registrant as specified in its charter)
ordinary shares, pursuant to the requirements of the Securities and Exchange Commission.

ING GROUP Securities registered or to be registered pursuant to Section12(g) of the Act.None
(Translation of Registrant’s name into English)
Securities forwhich there is a reporting obligation pursuant to Section15(d) of the Act.None

The Netherlands Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the (Jurisdiction of incorporation or organization)
close of the period covered by the annual report.

ING Groep N.V. Bijlmerdreef 106

1102 CT Amsterdam OrdinaryShares, nominal value EUR 0.01 per Ordinary Share3.900.668.635

†The term “new or revised financial accounting standard” refers to any update issued by the Financial Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the SecuritiesAccounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Act.☐Yes☒No Indicate by check mark whether the registrant has filed a report on and attestation to its management’s If this report is an annual or transition report, indicate by check mark if the registrant is not required to fileassessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 193Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit ☐Yes☒Noreport.☒

Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 orIndicate by check mark which basis of accounting the registrant has used to prepare the financial statements 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.included in this filing:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d)U.S. GAAP☐International Financial Reporting Standards as issuedOther☐ of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that theby the International Accounting Standards Board☒ registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.If “Other” has been checked in response to the previous question, indicate by check mark which financial ☒Yes☐Nostatement item the registrant has elected to follow.
☐Item 17☐Item 18 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 monthsIf this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule (or for such shorter period thatthe registrant was required to submit and post such files).12b-2 of the Exchange Act).☐Yes☒No ☒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☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant 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.☐

ING GROUP

Annual Report 2020 on Form 20-F

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Contents

Part IPart II| PRESENTATION OF INFORMATION | 5 | 13DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES | 132 |
| --- | --- | --- | --- |
| CAUTIONARY STATEMENT WITH RESPECT TO FORWARD -LOOKING | | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE | |
| STATEMENTS | 6 | 14OF PROCEEDS | 132 |
| 1IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS | 8 | 15CONTROLS AND PROCEDURES | 132 |
| 2OFFER STATISTICS AND EXPECTED TIMETABLE | 8 | 16AAUDIT COMMITTEE FINANCIAL EXPERT | 134 |
| 3KEY INFORMATION | 8 | 16BCODE OF ETHICS | 134 |
| 4INFORMATION ON THE COMPANY | 30 | 16CPRINCIPAL ACCOUNTANT FEES AND SERVICES | 136 |
| 4AUNRESOLVED STAFF COMMENTS | 66 | 16DEXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES | 136 |
| 5OPERATING AND FINANCIAL REVIEW AND PROSPECTS | 67 | PURCHASES OF REGISTERED EQUITY SERVICES BY THE ISSUER AND AFFILIATED | |
| 6DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES | 85 | 16EPURCHASERS | 136 |
| 7MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS | 119 | 16FCHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT | 137 |
| 8FINANCIAL INFORMATION | 121 | 16HMINE SAFETY DISCLOSURE | 138 |
| 9THE OFFER AND LISTING | 122 | | |
| 10ADDITIONAL INFORMAT ION | 123 | | |
| 11QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK | 129 | Part III | |
| 12DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES | 130 | | |
| | | 17FINANCIAL STATEMENTS | 139 |
| | | 18FINANCIAL STATEMENTS | 139 |
| | | 19EXHIBITS | 140 |

Additional information

RISK MANAGEMENT142 SELECTED STATISTICAL INFORMATION ON BANKING OPERATIONS242

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

PRESENTATION OF INFORMATIONIFRS-EU differs from IFRS-IASB, in respect of certain paragraphs in IAS 39 ‘Financial Instruments: Recognition and

Measurement’ regarding hedge accounting for portfolio hedges of interest rate risk. Under IFRS-EU, ING Group

applies fair value hedge accounting for portfolio hedges of interest rate risk (fair value macro hedges) in

accordance with the EU “carve-out” version of IAS 39. Under the EU “IAS 39 carve-out”, hedge accounting may be In this Annual Report, and unless otherwise stated or the context otherwise dictates, references to "ING Groep applied, in respect of fair value macro hedges, to core deposits and hedge ineffectiveness is only recognised N.V.", "ING Groep" and "ING Group" refer to ING Groep N.V. and references to "ING", the "Company", the when the revised estimate of the amount of cash flows in scheduled time buckets falls below the original "Group", "we" and "us" refer to ING Groep N.V. and its consolidated subsidiaries. ING Groep N.V.'s primary designated amount of that bucket, and is not recognised when the revised amount of cash flows in scheduled banking subsidiary is ING Bank N.V. (together with its consolidated subsidiaries, "ING Bank"). References to time buckets is more than the original designated amount. Under IFRS-IASB, hedge accounting for fair value "Executive Board" and "Supervisory Board" refer to the Executive Board or Supervisory Board of ING Groep N.V., macro hedges cannot be applied to core deposits and hedge ineffectiveness arises whenever the revised respectively.
estimate of the amount of cash flows in scheduled time buckets is either more or less than the original

designated amount of that bucket. IFRS-IASB financial information is prepared by reversing the hedge accounting ING presents its consolidated financial statements in euros, the currency of the European Economic and impacts that are applied under the EU “carve-out”’ version of IAS 39. Financial information under IFRS-IASB Monetary Union. Unless otherwise specified or the context otherwise requires, references to “$”, “US$” and accordingly does not take account of the possibility that, had ING Group applied IFRS-IASB as its primary “Dollars” are to the United States dollars and references to “EUR” are to euros.
accounting framework, it might have applied alternative hedge strategies where those alternative hedge

strategies could have qualified for IFRS-IASB compliant hedge accounting. These decisions could have resulted in ING prepares financial information in accordance with International Financial Reporting Standards as issued by different shareholders’ equity and net result amounts compared to those indicated in this Annual Report on the International Accounting Standards Board (“IFRS-IASB”) for purposes of reporting with the U.S. Securities and Form 20-F.
Exchange Commission (“SEC”), including financial information contained in this Annual Report on Form 20-F. ING

Group’s accounting policies and its use of various options under IFRS -IASB are described under ‘Principles of Other than for the purpose of SEC reporting, ING Group intends to continue to prepare its Annual Accounts valuation and determination of results’ in the consolidated financial statements. In this document the term “IFRSunder IFRS-EU. A reconciliation between IFRS-EU and IFRS -IASB for shareholders’ equity and net result is included IASB” is used to refer to IFRS-IASB as applied by ING Group.
in Note 1 ‘accounting policies’ to the consolidated financial statements.

The published 2020 Annual Accounts of ING Group, however, are prepared in accordance with IFRS-EU. IFRS-EU Certain amounts set forth herein, such as percentages, may not sum due to rounding.
refers to International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”), including

the decisions ING Group made with regard to the options available under IFRS as adopted by the EU (IFRS-EU).
This Annual Report on Form 20-F contains inactive textual addresses to Internet websites operated by us and

third parties. Reference to such websites is made for information purposes only, and information found at such

websites is not incorporated by reference into this Annual Report on Form 20-F.

ING Group Annual Report 2020 on Form 20-F5

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

CAUTIONARY STATEMENT WITH RESPECT

TO FORWARD -LOOKING STATEMENTS

Certain of the statements contained herein are not historical facts, including, without limitation, certain●legal and regulatory risks in certain countries with less developed legal and regulatory statements made of future expectations and other forward-looking statements that are based on management’sframeworks, current views and assumptions and involve known and unknown risks and uncertainties that could cause actual●prudential supervision and regulations, including in relation to stress tests and regulatory results, performance or events to differ materially from those expressed or implied in such statements. Actualrestrictions on dividends and distributions, (also among members of the group), results, performance or events may differ materially from those in such statements due to a number of factors,●regulatory consequences of the United Kingdom’s withdrawal from the European Union, including, without limitation,including authorizations and equivalence decisions, ●ING’s ability to meet minimum capital and other prudential regulatory requirements, ●changes in general economic conditions, in particular economic conditions in ING’s core●changes in regulation of US commodities and derivatives businesses of ING and its customers, markets, including changes affecting currency exchange rates,●application of bank recovery and resolution regimes, including write-down and conversion ●the effects of the COVID-19 pandemic and related response measures, including lockdowns andpowers in relation to our securities, travel restrictions, on economic conditions in countries in which ING operates, on ING’s business●outcome of current and future litigation, enforcement proceedings, investigations or other and operations and on ING’s employees, customers and counterparties,regulatory actions, including claims by customers who feel mislead and other conduct issues, ●changes affecting interest rate levels,●changes in tax laws and regulations and risks of non-compliance or investigation in connection ●any default of a major market participant and related market disruption,with tax laws, including FATCA, ●changes in performance of financial markets, including in Europe and developing markets,●operational risks, such as system disruptions or failures, breaches of security, cyber-attacks, ●political instability and fiscal uncertainty in Europe and the United States,human error, changes in operational practices or inadequate controls including in respect of ●discontinuation of or changes in ‘benchmark’ indices,third parties with which we do business, ●inflation and deflation in our principal markets,●risks and challenges related to cybercrime including the effects of cyber-attacks and changes in ●changes in conditions in the credit and capital markets generally, including changes in borrowerlegislation and regulation related to cybersecurity and data privacy, and counterparty creditworthiness,●changes in general competitive factors, including ability to increase or maintain market share, ●failures of banks falling under the scope of state compensation schemes,●the inability to protect our intellectual property and infringement claims by third parties, ●non-compliance with or changes in laws and regulations, including those financial services and●inability of counterparties to meet financial obligations or ability to enforce rights against such tax laws, and the interpretation and application thereof,counterparties, ●geopolitical risks, political instabilities and policies and actions of governmental and regulatory●changes in credit ratings, authorities,●business, operational, regulatory, reputation and other risks and challenges in connection with climate change,

ING Group Annual Report 2020 on Form 20-F6

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

●inability to attract and retain key personnel, ●future liabilities under defined benefit retirement plans, ●failure to manage business risks, including in connection with use of models, use of derivatives,

or maintaining appropriate policies and guidelines, ●changes in capital and credit markets, including interbank funding, as well as customer deposits, which provide the liquidity and capital required to fund our operations, and, ●the other risks and uncertainties detailed in the most recent annual report of ING Groep N.V.
(including the Risk Factors contained therein) and ING’s more recent disclosures, including press releases, which are available on www.ING.com .

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

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

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

ING Group Annual Report 2020 on Form 20-F7

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

PART IC.Reasons for the offer and use of proceeds

This item does not apply to annual reports on Form 20-F.

D.Risk Factors Item 1.Identity of Directors, Senior

Management And AdvisorsSummary of Risk factors

The following is a summary of the principal risk factors that could have a material adverse effect on the business activities, financial condition, results and prospects of ING. Please carefully consider all of the information discussed in this Item 3.D “Risk Factors” for a detailed description of these risks.
Not Applicable.

Item 2.Offer Statistics and ExpectedRisks related to financial conditions, market environment and general economic trends
●Our revenues and earnings are affected by the volatility and strength of the economic, business,
Timetableliquidity, funding and capital markets environments of the various geographic regions in which we

conduct business, as well as by changes in customer behaviour in these regions, and an adverse change in any one region could have an impact on our business, results and financial condition.
●ING’s business, results and financial condition have been, and likely will continue to be, adversely Not Applicable.affected by the Covid-19 pandemic.
●Interest rate volatility and other interest rate changes may adversely affect our business, results and Item 3.Key Information financial condition.
●The default of a major market participant could disrupt the markets and may have an adverse effect on our business, results and financial condition.
●Continued risk of political instability and fiscal uncertainty in Europe and the United States, as well as

A.Selected financial data ongoing volatility in the financial markets and the economy generally have adversely affected, and may Not applicable.continue to adversely affect, our business, results and financial condition.
●Discontinuation of or changes to ‘benchmark’ indices may negatively affect our business, results and B.Capitalization and indebtednessfinancial condition.
●Inflation and deflation may negatively affect our business, results and financial condition.
This item does not apply to annual reports on Form 20-F.●Market conditions, including those observed over the past few years, and the application of IFRS 9 may increase the risk of loans being impaired and have a negative effect on our results and financial condition.
●We may incur losses due to failures of banks falling under the scope of state compensation schemes.

ING Group Annual Report 2020 on Form 20-F8

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Risks related to the regulation and supervision of the GroupRisks related to the Group’s business and operations

●Non-compliance with laws and/or regulations concerning financial services or financial institutions,●Operational risks, such as systems disruptions or failures, breaches of security, cyber attacks, human including with respect to financial economic crimes, could result in fines and other liabilities, penalties orerror, changes in operational practices, inadequate controls including in respect of third parties with consequences for us, which could materially affect our business and reduce our profitability.which we do business, natural disasters or outbreaks of communicable diseases may adversely impact ●Changes in laws and/or regulations governing financial services or financial institutions or the applicationour reputation, business and results.
of such laws and/or regulations may increase our operating costs and limit our activities.●We are subject to increasing risks related to cybercrime and compliance with cybersecurity regulation.
●We are subject to additional legal and regulatory risk in certain countries where we operate with less●Because we operate in highly competitive markets, including our home market, we may not be able to developed or predictable legal and regulatory frameworks.increase or maintain our market share, which may have an adverse effect on our results.
●We are subject to the regulatory supervision of the ECB and other regulators with extensive supervisory●We may not always be able to protect our intellectual property developed in our products and services and investigatory powers.and may be subject to infringement claims, which could adversely impact our core business, inhibit ●The regulatory consequences of the United Kingdom’s withdrawal from the European Union may haveefforts to monetize our internal innovations and restrict our ability to capitalize on future opportunities.
adverse effects on our business, results and financial condition.●The inability of counterparties to meet their financial obligations or our inability to fully enforce our ●Failure to meet minimum capital and other prudential regulatory requirements as applicable to us fromrights against counterparties could have a material adverse effect on our results.
time to time may have a material adverse effect on our business, results and financial condition and on●Ratings are important to our business for a number of reasons, and a downgrade or a potential our ability to make payments on certain of our securities.downgrade in our credit ratings could have an adverse impact on our results and net results.
●Our US commodities and derivatives business is subject to CFTC and SEC regulation under the Dodd-●We may be exposed to business, operational, regulatory, reputational and other risks in connection with Frank Act.climate change.
●We are subject to several other bank recovery and resolution regimes that include statutory write down●An inability to retain or attract key personnel may affect our business and results.
and conversion as well as other powers, which remains subject to significant uncertainties as to scope●We may incur further liabilities in respect of our defined benefit retirement plans if the value of plan and impact on us.assets is not sufficient to cover potential obligations, including as a result of differences between actual

results and underlying actuarial assumptions and models.
Risks related to litigation, enforcement proceedings and investigations and to changes in tax

lawsRisks related to the Group’s risk management practices
●We may be subject to litigation, enforcement proceedings, investigations or other regulatory actions,●Risks relating to our use of quantitative models or assumptions to model client behaviour for the and adverse publicity.purposes of our market calculations may adversely impact our reputation or results.
●We are subject to different tax regulations in each of the jurisdictions where we conduct business, and●We may be unable to manage our risks successfully through derivatives.
are exposed to changes in tax laws, and risks of non-compliance with or proceedings or investigations with respect to, tax laws.Risks related to the Group’s liquidity and financing activities ●We may be subject to withholding tax if we fail to comply with the Foreign Account Tax Compliance Act●We depend on the capital and credit markets, as well as customer deposits, to provide the liquidity and (“FATCA”) and other US withholding tax regulationscapital required to fund our operations, and adverse conditions in the capital and credit markets, or ●ING is exposed to the risk of claims from customers who feel misled or treated unfairly because of advicesignificant withdrawals of customer deposits, may impact our liquidity, borrowing and capital positions, or information received.as well as the cost of liquidity, borrowings and capital.
ING Group Annual Report 2020 on Form 20-F9

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

●As a holding company, ING Groep N.V. is dependent for liquidity on payments from its subsidiaries, manyRisks related to financial conditions, market environment and general economic trends of which are subject to regulatory and other restrictions on their ability to transact with affiliates.

Our revenues and earnings are affected by the volatility and strength of the economic, business,

Additional risks relating to ownership of ING shares liquidity, funding and capital markets environments of the various geographic regions in which
●Holders of ING shares may experience dilution of their holdings.we conduct business, as well as by changes in customer behaviour in these regions, and an
●Because we are incorporated under the laws of the Netherlands and many of the members of our adverse change in any one region could have an impact on our business, results and financial Supervisory and Executive Board and our officers reside outside of the United States, it may be difficult

condition. to enforce judgments against ING or the members of our Supervisory and Executive Boards or our
officers.
Because ING is a multinational banking and financial services corporation, with a global presence and serving
around 39.3 million customers, corporate clients and financial institutions in over 40 countries, ING’s business,

Risk factors

results and financial condition may be significantly impacted by turmoil and volatility in the worldwide financial markets or in the particular geographic areas in which we operate. In Retail Banking, our products include Any of the risks described below could have a material adverse effect on the business activities, financialsavings, payments, investments, loans and mortgages in most of our Retail Banking markets. In Wholesale condition, results and prospects of ING. ING may face a number of the risks described below simultaneously andBanking, we provide specialised lending, tailored corporate finance, debt and equity market solutions, payments some risks described below may be interdependent. While the risk factors below have been divided into& cash management, trade and treasury services. As a result, negative developments in financial markets and/or categories, some risk factors could belong in more than one category and investors should carefully consider allcountries or regions in which we operate, have in the past had and may in the future have a material adverse of the risk factors set out in this section. Additional risks of which the Company is not presently aware, or that areimpact on our business, results and financial condition, including as a result of the potential consequences listed currently viewed as immaterial, could also affect the business operations of ING and have a material adversebelow.
effect on ING’s business activities, financial condition, results and prospects. The market price of ING shares or other securities could decline due to any of those risks including the risks described below, and investors couldFactors such as interest rates, securities prices, credit spreads, liquidity spreads, exchange rates, consumer lose all or part of their investments.spending, changes in customer behaviour, business investment, real estate values and private equity valuations, government spending, inflation or deflation, the volatility and strength of the capital markets, political events Although the most material risk factors have been presented first within each category, the order in which theand trends, terrorism, pandemics and epidemics (such as Covid-19, as described in greater detail below under the remaining risk factors are presented is not necessarily an indication of the likelihood of the risks actuallyheading “– ING’s business, results and financial condition have been, and likely will continue to be adversely materialising, of the potential significance of the risks or of the scope of any potential negative impact to ouraffected by the Covid-19 pandemic”) or other widespread health emergencies all impact the business and business, results, financial condition and prospects.economic environment and, ultimately, our solvency, liquidity and the amount and profitability of business we conduct in a specific geographic region. Certain of these risks are often experienced globally as well as in specific geographic regions and are described in greater detail below under the headings “–Interest rate volatility and other interest rate changes may adversely affect our business, results and financial condition”, “–Inflation and deflation may negatively affect our business, results and financial condition”, “–Market conditions, including those observed over the past few years and the application of IFRS 9 may increase the risk of loans being impaired and have a negative effect on our results and financial condition” and “–Continued risk of political

ING Group Annual Report 2020 on Form 20-F10

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

instability and fiscal uncertainty in Europe and the United States, as well as ongoing volatility in the financialFor further information on ING’s exposure to particular geographic areas, see Note 35 ‘Information on

markets and the economy generally have adversely affected, and may continue to adversely affect, our business,geographic areas’ to the consolidated financial statements .

results and financial condition”. All of these are factors in local and regional economies as well as in the global

economy, and we may be affected by changes in any one of these factors in any one country or region, and moreING’s business, results and financial condition have been, and likely will continue to be,

if more of these factors occur simultaneously and/or in multiple countries or regions or on a global scale.adversely affected by the Covid-19 pandemic.

In case one or more of the factors mentioned above adversely affects the profitability of our business, this might The Covid-19 pandemic and the related response measures introduced by various national and local
also result, among other things, in the following:
governmental authorities aimed at preventing the further spread of the disease (such as bans on public events
◾reserve and provisions inadequacies, which could ultimately be realised through profit and loss andwith over a certain number of attendees, closures of places where larger groups of people gather such as schools,
shareholders’ equity;
sports facilities, bars and restaurants, lockdowns, border controls and travel and other restrictions) have
◾the write-down of tax assets impacting net results and/or equity;disrupted the normal flow of business operations in those countries and regions where we and our customers
◾impairment expenses related to goodwill and other intangible assets, impacting net result; and/orand counterparties operate (such as, among others, Benelux, Germany, France, Italy, Spain, the U.K. and the
◾movements in risk weighted assets for the determination of required capital.U.S.). This disruption has adversely affected, and will likely continue to adversely affect, global economic growth,

supply chains, manufacturing, tourism, consumer spending, asset prices and unemployment levels, and has In particular, we are exposed to financial, economic, market and political conditions in the Benelux countries and resulted in volatility and uncertainty across the global economy and financial markets.
Germany, from which we derive a significant portion of our revenues in both Retail Banking and Wholesale

Banking, and which present risks of economic downturn. Though less material, we also derive substantial In addition to the measures aimed at preventing the further spread of Covid-19, governments and central banks revenues in the following geographic regions: Turkey, Eastern Europe (primarily Poland among others), Southern around the world have also introduced measures aimed at mitigating the economic consequences of the Europe (primarily Spain among others), East Asia (primarily Singapore among others) and Australia which also pandemic and related response measures, such as guarantee schemes, compensation schemes and cutting present risks of economic downturn. In an economic downturn, we expect that higher unemployment, lower interest rates. For example, the Dutch government has implemented economic measures aimed at protecting family income, lower corporate earnings, higher corporate and private debt defaults, lower business investments jobs, households’ wages and companies, e.g., by way of tax payment holidays, guarantee schemes and a and lower consumer spending would adversely affect the demand for banking products, and that ING may need compensation scheme for heavily affected sectors in the economy. These announced measures and any to increase its reserves and provisions, each of which may result in overall lower earnings. The impact of the additional measures, including any payment holidays with respect to mortgages or other loans, have had and Covid-19 pandemic, as an example of an economic downturn, as well as the substantial monetary and may continue to have a significant impact on our customers and other counterparties.
government measures, are still materialising and expected to continue to affect our business. For more

information, refer to the risk factor described under heading “–ING’s business, results and financial condition Governments, regulators and central banks (including the ECB), have also announced that they are taking or
have been, and likely will continue to be adversely affected by the Covid-19 pandemic”. Securities prices, real considering measures seeking to safeguard the stability of the financial sector, to prevent lending to the business
estate values and private equity valuations may also be adversely impacted, and any such losses would be sector from being jeopardised and to ensure the payment system continues to function properly. The ECB
realised through profit and loss and shareholders’ equity. We also offer a number of financial products that currently allows banks to operate below the level of capital required by the Pillar 2 Guidance, capital
expose us to risks associated with fluctuations in interest rates, securities prices, corporate and private default conservation buffer and the liquidity coverage ratio, and banks are also permitted to use a portion of their capital
rates, the value of real estate assets, exchange rates and credit spreads.
instruments that do not qualify as CET1 capital to meet the Pillar 2 Requirements. Several countries also released

or reduced countercyclical buffers (CCyB). The ECB has also issued a recommendation to the banks that it

supervises that such banks should exercise extreme prudence when deciding on or paying out dividends or

ING Group Annual Report 2020 on Form 20-F11

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

performing share buy-backs until September 30, 2021. However, it is not certain whether these or futurecommitments and higher credit and valuation adjustments on financial assets. In addition, persistently low measures will be extended or maintained for a sufficient period of time, or whether such measures will beinterest rates for a longer period, as well as a potential further decline in interest rates might result in further successful in mitigating the economic consequences of the pandemic and related response measures. If thedecreases in net interest income. These factors and other consequences of the Covid-19 pandemic may pandemic is prolonged or the actions are unsuccessful, additional actions by governments and central banks maymaterially adversely affect our business, results and financial condition.

follow and the adverse impact on the global economy will deepen, and our business, results and financial condition may be materially adversely affected.Our capital and liquidity position may also be adversely impacted by the Covid-19 pandemic and related response measures, including as a result of changes in future levels of savings and deposits from customers, changes in In 2020, the Covid-19 pandemic affected all of our businesses, including lower or negative interest rates, lower oilasset quality, and the effects of government or regulatory responses to the pandemic, and may require changes prices and credit deterioration of loans to ING’s customers. These effects have also resulted in an increase in theto our funding structure, impact our ability to comply with regulatory capital requirements and adversely affect allowance for credit losses and impairments on non-financial assets, and reduced net interest income due toour cost of capital and credit rating. Any of the foregoing developments may have a material adverse impact on lower interest rates. While these effects were partly offset by resilient fee and commission income in 2020, thisour business, results and financial condition.
level of activity may not persist in future periods. With Covid-19 infection rates having recently increased, especially in some European countries, and further lockdowns measures having been reintroduced, this mayAs of December 31, 2020, most of our staff continue to work from home. Since May 2020, staff in various result in changes in government responses and further downside risk towards macro-economic developments,countries have started rotation schemes to return to work in the office in a controlled manner, taking into with possibly a deeper risk aversion and a delayed recovery. These developments may result in further negativeaccount local circumstances and any applicable government measures (including with respect to social impact on our business, results and financial condition.distancing). This controlled office opening process is expected to allow for essential face-to-face meetings.
However, with Covid-19 infection rates having recently increased, we expect that more staff will again work from In 2020, ING also took certain measures to support customers impacted by the Covid-19 pandemic, includinghome. Due to the uncertainties relating to the future development of the Covid-19 pandemic, it is not certain payment holidays, offering credit facilities to business customers under government guarantee schemes andwhen our employees may be generally expected or permitted to return to the offices. If due to illness, technical providing liquidity under credit facilities to large corporate customers. Although, following supervisory guidelines,limitations or other restrictions in connection with the pandemic, employees are unable to work or are not able payment holidays do not automatically trigger an immediate classification of the loans as in default or asto operate as effectively and efficiently as in the office, this may adversely affect our business, results and forborne, the credit quality of these loans will be monitored for future transitions into Stage 2 and could result infinancial condition.
increased risk costs and additional risk weighted assets in future periods. As of December 31, 2020, in line with the European Banking Association (EBA) moratoria guidelines, ING has a total amount of €19.4 billion of paymentIn addition, a situation in which most or some of our employees continue working from home may raise holidays or 2.6% of total credit outstandings, granted to approximately 196,000 customers. While theseoperational risks, including with respect to information security, data protection, availability of key systems and customers are located across nearly all countries in which ING operates, over 55% of these customers are in theinfrastructure integrity. There is also a risk that we will not be effective in implementing regulatory or strategic Netherlands and Belgium. ING also recorded €2,675 million of net additions to loan loss provisions in 2020change programs in the current environment. The Covid-19 pandemic has led to new banking behaviour from compared with €1,120 million in 2019. The 2020 risk costs were severely impacted by a combination of increasedcustomers. There has been an increase in the digital behaviour of our customers leading to reduced traffic in collective provisioning reflecting the worsened macro -economic indicators due to the Covid-19 pandemic, higherbranches. Over 80% of our customers now interact with us via digital channels only. Criminals are also taking Individual Stage 3 provisions, and negative rating migration. Should these global economic conditions beadvantage of the Covid-19 pandemic to carry out financial fraud and exploitation scams, with examples including prolonged or worsen, or should the pandemic lead to additional market disruptions, we may experience moreadvertising and trafficking in counterfeit medicines, offering fraudulent investment opportunities, fundraising for customer defaults and further additions to loan loss provisions. In these circumstances, we may also experiencefake charities and engaging in phishing schemes that prey on virus-related fears. National authorities and reduced customer activity and demand for its products and services, increased utilization of lendinginternational bodies (including the Financial Action Task Force) warn citizens and businesses on impostor,

ING Group Annual Report 2020 on Form 20-F12

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

investment and product scams. Although we have organized a Covid-19 taskforce to identify and analyse new◾lower profitability since we may not be able to fully track the decline in interest rates in our savings

behavioural patterns, leading to new cases of unusual transactions being reported to the relevant authorities,rates;

new banking behaviours may result in additional Know Your Customer (KYC) risks. If any of these risks were to◾lower profitability since we may not always be entitled to impose surcharges to customers to

materialize that may adversely affect our business, results and financial condition.compensate for the decline in interest rates;

◾lower profitability since we may have to pay a higher premium for the defined contribution scheme in

The duration of the pandemic and the impact of measures taken in response by governmental authorities,the Netherlands for which the premium paid is dependent on interest rate developments and the Dutch

central banks and other third parties, whether direct or indirect, such as by increasing sovereign debt of certainCentral Bank’s (“DNB’s”) methodology for determining the ultimate forward rate;

countries which may result in increased volatility and widening credit spreads, remain uncertain. Therefore, it is◾lower interest rates may cause asset margins to decrease thereby lowering our results. This may for

difficult to predict the extent to which our business, results and financial condition, as well as our ability to accessexample be the consequence of increased competition for investments as result of the low rates,

capital and liquidity on financial terms acceptable for us, may be materially adversely affected.thereby driving margins down; and/or

◾(depending on the position) a significant collateral posting requirement associated with our interest rate

Interest rate volatility and other interest rate changes may adversely affect our business, resultshedge programs, which could materially and adversely affect liquidity and our profitability.

and financial condition.

The foregoing impacts have been and may be further amplified in a negative interest rate environment, since we

may not be able to earn interest on our assets (including reserves). In addition, we have, and may continue to, Changes in prevailing interest rates may negatively affect our business, including the level of net interest revenue earn negative interest on certain of our assets (including cash balances, loans and bonds), while still paying we earn, and the levels of deposits and the demand for loans. A sustained increase in the inflation rate in our positive interest or no interest to others to hold our liabilities, resulting in an adverse impact on our credit spread principal markets may also negatively affect our business, results and financial condition. For example, a and lowering of our net interest income. Furthermore, in the event that a negative interest rate environment sustained increase in the inflation rate may result in an increase in nominal market interest rates. A failure to results in ING’s depositors being forced to pay interest to ING to hold cash deposits, some depositors may choose accurately anticipate higher inflation and factor it into our product pricing assumptions may result in mispricing to withdraw their deposits rather than pay interest to ING, which would have an adverse effect on our of our products, which could materially and adversely impact our results. On the other hand, recent concerns reputation, business, results and financial condition. For example, in March 2020, the U.S. Federal Reserve has regarding negative interest rates and the low level of interest rates generally may negatively impact our net cut the benchmark U.S. interest rate in response to the Covid-19 pandemic and related impacts on the economy interest income, which may have an adverse impact on our profitability.
and financial markets. On 1 January 2021, ING announced that it will charge negative interest to customers on

current and deposit accounts exceeding €250,000 (such negative interest rate will only apply to the amount by A prolonged period of low interest rates, and in some situations negative interest rates, has resulted in, and may
which the current or deposit account exceeds €250,000 ). Such declines in interest rates in the United States or continue to result in:
other markets in which ING and its customers and counterparties operate may have a significant adverse effect
◾lower earnings over time on investments, as reinvestments will earn lower rates;
on our business and operations.
◾increased prepayment or redemption of mortgages and fixed maturity securities in our investment

portfolios, as well as increased prepayments of corporate loans. This as borrowers seek to borrow at
Alternatively, any period of rapidly increasing interest rates may result in:
lower interest rates potentially combined with lower credit spreads. Consequently, we may be required
to reinvest the proceeds into assets at lower interest rates;◾a decrease in the demand for loans;
◾lower profitability as the result of a decrease in the spread between client rates earned on assets and◾higher interest rates to be paid on customer deposits and on debt securities that we have issued or may
issue on the financial markets from time to time to finance our operations, which would increase our client rates paid on savings, current account and other liabilities;
interest expenses and reduce our results;
◾higher costs for certain derivative instruments that may be used to hedge certain of our product risks;

ING Group Annual Report 2020 on Form 20-F13

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

◾higher interest rates which can lead to lower investments prices and reduce the revaluation reserves,Continued risk of political instability and fiscal uncertainty in Europe and the United States, as
thereby lowering IFRS equity and the capital ratios. Also the lower securities value leads to a loss ofwell as ongoing volatility in the financial markets and the economy generally have adversely

liquidity generating capacity which needs to be compensated by attracting new liquidity generatingaffected, and may continue to adversely affect, our business, results and financial condition.
capacity which reduces our results;

◾prepayment losses if prepayment rates are lower than expected or if interest rates increase too rapidly Our global business and results are materially affected by conditions in the global capital markets and the to adjust the accompanying hedges; and/or economy generally. In Europe, there are continuing concerns over weaker economic conditions, levels of
◾(depending on the position) a significant collateral posting requirement associated with our interest rate unemployment, the availability and cost of credit, credit spreads, and the impact of continued quantitative hedge program.
easing within the Eurozone through bond repurchases and the ECB’s targeted longer-term refinancing operation

(‘TLTRO’). In addition, geopolitical issues, including trade tensions between the US and China, increasing

The default of a major market participant could disrupt the markets and may have an adverseprotectionism between key countries, and issues with respect to the Middle East, Russia/Ukraine and North

effect on our business, results and financial condition.Korea may all contribute to adverse developments in the global capital markets and the economy generally.

Adverse developments in the market have included, for example, temporary decrease in liquidity, increased price Within the financial services industry, the severe distress or default of any one institution (including sovereigns
volatility, credit downgrade events, and increased probability of default for fixed income securities. Moreover, and central counterparties (CCPs)) could lead to defaults by, or the severe distress of, other market participants.
there is a risk that an adverse credit event at one or more European sovereign debtors (including a credit rating While prudential regulation may reduce the probability of a default by a major financial institution, the actual
downgrade or a default) could trigger a broader economic downturn in Europe and elsewhere. In addition, the occurrence of such a default could have a material adverse impact on ING. Such distress of, or default by, a major
confluence of these and other factors has resulted in volatile foreign exchange markets. International equity financial institution could disrupt markets or clearance and settlement systems and lead to a chain of defaults by
markets have also continued to experience heightened volatility and turmoil, with issuers, including ourselves, other financial institutions, since the commercial and financial soundness of many financial institutions may be
that have exposure to the real estate, mortgage, private equity and credit markets particularly affected. These closely related as a result of credit, trading, clearing or other relationships. Also the perceived lack of
events, market upheavals and continuing risks, including high levels of volatility, have had and may continue to creditworthiness of a sovereign or a major financial institution (or a default by any such entity) may lead to
have an adverse effect on our results, in part because we have a large investment portfolio.
market-wide liquidity problems and losses or defaults by us or by other institutions. This risk is sometimes

referred to as ‘systemic risk’ and may adversely affect financial intermediaries, such as clearing agencies, clearing There is also continued uncertainty over the long-term outlook for the tax, spending and borrowing policies of houses, banks, securities firms and exchanges with whom we interact on a daily basis and financial instruments the US, the future economic performance of the US within the global economy and any potential future of sovereigns in which we invest. Systemic risk could impact ING directly, by exposing it to material credit losses budgetary restrictions in the US, with a potential impact on a future sovereign credit ratings downgrade of the US on transactions with defaulting counterparties or indirectly by significantly reducing the available market liquidity government, including the rating of US Treasury securities. A downgrade of US Treasury securities could also on which ING and its lending customers depend to fund their operations and/or leading to a write down of loans impact the ratings and perceived creditworthiness of instruments issued, insured or guaranteed by institutions, or securities held by ING. In addition, ING may also be faced with additional open market risk for which hedging agencies or instrumentalities directly linked to the US government. US Treasury securities and other US or mitigation strategies may not be available or effective (either by hedges eliminated by defaulting government-linked securities are key assets on the balance sheets of many financial institutions and are widely counterparties, or reduce market liquidity). Systemic risk could have a material adverse effect on our ability to used as collateral by financial institutions to meet their day-to -day cash flows in the short-term debt market. The raise new funding and on our business, results and financial condition. In addition, such distress or failure could impact of any further downgrades to the sovereign credit rating of the US government or a default by the US impact future product sales as a potential result of reduced confidence in the financial services industry.
government on its debt obligations would create broader financial turmoil and uncertainty, which would weigh

ING Group Annual Report 2020 on Form 20-F14

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

heavily on the global financial system and could consequently result in a significant adverse impact to the(commonly referred to as ‘SOFR’) as an alternative to USD LIBOR, and the limited extension announced by the
Group’s business and operations.IBA has eased the timeline for the transition of existing contracts referencing USD LIBOR. For EURIBOR, the
Working Group on Euro Risk-Free Rates is continuing its work on developing recommended fallback rates based
In many cases, the markets for investments and instruments have been and remain illiquid, and issues relating toon the “euro short-term rate” (€STR). €STR is being published and is now widely used, and calculation of the
counterparty credit ratings and other factors have exacerbated pricing and valuation uncertainties. Valuation ofEONIA benchmark described above has been modified to refer to the €STR benchmark until the EONIA
such investments and instruments is a complex process involving the consideration of market transactions,benchmark is discontinued.
pricing models, management judgment and other factors, and is also impacted by external factors, such as
underlying mortgage default rates, interest rates, rating agency actions and property valuations. HistoricallyPublic authorities have also recognised that certain LIBOR contracts do not contain any alternatives, contain
these factors have resulted in, among other things, valuation and impairment issues in connection with ourinappropriate alternatives, or cannot be renegotiated or amended prior to the expected cessation of LIBOR. In
exposures to European sovereign debt and other investments.response to this challenge the FCA, as the supervisor of LIBOR, plans to make use of the proposed powers
granted to them to enable continued publication of a “synthetic” LIBOR using a different methodology and
Any of these general developments in global financial and political conditions could negatively impact to ourinputs, which may help reduce disruption to holders of tough legacy contracts. However, there is no certainty as
business, results and financial condition in future periods.to whether the FCA will exercise these powers or what form the revised methodology would take, and the FCA
has consequently encouraged users of LIBOR to renegotiate or amend as many contracts as possible before the
Discontinuation of or changes to ‘benchmark’ indices may negatively affect our business, resultsrelevant LIBOR ceases. In response, the European Commission has announced various legislative fixes, that most
and financial condition.notably reduce the scope for potential conflict with the solutions proposed by other jurisdictions. However, there is no guarantee that regulators will implement measures to address such legacy contracts, or that such measures
will be effective in avoiding business disruption or contractual disputes.
Financial markets have historically relied on Interbank Offered Rates (‘IBORs’) benchmarks, such as the London
Interbank Offered Rate (‘LIBOR’), the Euro OverNight Index Average (‘EONIA’) and the Euro Interbank Offered The potential discontinuation of interest rate benchmarks or any other benchmark, or changes in the Rate (‘EURIBOR’). These interest rate ‘benchmarks’ have been the subject of ongoing national and international methodology or manner of administration of any benchmark, could result in a number of risks for the Group, its regulatory reform. For example, ICE Benchmark Administration (IBA), as the administrator of LIBOR, issued a customers, and the financial services industry more widely. These risks include legal risks in relation to changes consultation with respect to its plans for the cessation for most LIBOR rates at the end of 2021, with an 18 month required to documentation for new and existing transactions. The Group may also be exposed to operational extension proposed for USD LIBOR, one of the most widely used LIBOR rates. EONIA will cease to be published by risks or incur additional costs due to the potential requirement to adapt IT systems, trade reporting infrastructure 1 January 2022 and the European Money Markets Institute (EONIA’s administrator) has indicated that EONIA processes, or in relation to communications with clients or other parties and engagement during the transition cannot be used in any contracts that may be outstanding as of 1 January 2022. Following the implementation of period. In addition to the heightened conduct and operational risks, the process of adopting new reference rates such reforms, the manner of administration of benchmarks may change, with the result that they may perform or may expose the Group to an increased level of financial risk, such as potential earnings volatility resulting from be calculated differently than in the past, or such benchmarks may cease to exist entirely, or there could be other contract modifications and changes in hedge accounting relationships. It is not currently possible to determine consequences which cannot be predicted.
the full impact of such changes on the Group, and the implementation of alternative benchmark rates may have
a material adverse effect on our business, results and financial condition.
Public authorities have initiated industry working groups in various jurisdictions to develop and recommend

alternative rates that could serve as replacements when such rates cease to exist or materially change. This is commonly referred to as a fallback rate. The US Federal Reserve’s Alternative Reference Rates Committee (commonly referred to as ‘ARRC’) has recommended adoption of the Secured Overnight Financing Rate

ING Group Annual Report 2020 on Form 20-F15

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Inflation and deflation may negatively affect our business, results and financial condition.Market conditions, including those observed over the past few years, and the application of IFRS

9 may increase the risk of loans being impaired and have a negative effect on our results and

A sustained increase in the inflation rate in our principal markets would have multiple impacts on us and mayfinancial condition.

negatively affect our business, results and financial condition. For example, a sustained increase in the inflation

rate may result in an increase in market interest rates, which may:We are exposed to the risk that our borrowers (including sovereigns) may not repay their loans according to their
◾decrease the estimated fair value of certain fixed income securities that we hold in our investmentcontractual terms and that the collateral securing the payment of these loans may be insufficient. We may see
portfolios, resulting in:adverse changes in the credit quality of our borrowers and counterparties, for example, as a result of their
◾reduced levels of unrealised capital gains available to us, which could negatively impact ourinability to refinance their indebtedness, with increasing delinquencies, defaults and insolvencies across a range
solvency position and net income, and/orof sectors. This may lead to impairment charges on loans and other assets, higher costs and additions to loan loss
◾a decrease in collateral values,provisions. A significant increase in the size of our provision for loan losses could have a material adverse effect
◾result in increased withdrawal of certain savings products, particularly those with fixed rates belowon our business, results and financial condition. Also see above under the heading “–ING’s business, results and
market rates,financial condition have been, and likely will continue to be adversely affected by the Covid-19 pandemic”. As set
◾require us, as an issuer of securities, to pay higher interest rates on debt securities that we issue in theout there, we expect to be affected by the Covid-19 pandemic through its impact on, among others, the financial
financial markets from time to time to finance our operations, which would increase our interestcondition of our customers or other counterparties.
expenses and reduce our results.

IFRS 9 ‘Financial Instruments’ became effective as per 1 January 2018 and results in loan loss provisions that may
A significant and sustained increase in inflation has historically also been associated with decreased prices forbe recognized earlier, on a more forward looking basis and on a broader scope of financial instruments than was
equity securities and sluggish performance of equity markets generally. A sustained decline in equity marketspreviously the case under IAS 39. ING has applied the classification, measurement, and impairment requirements
may:retrospectively by adjusting the opening balance sheet and opening equity as at 1 January 2018. As a result of
◾result in impairment charges to equity securities that we hold in our investment portfolios and reducedapplying IFRS 9, a shift in the forward looking consensus view of economic conditions may materially impact the
levels of unrealised capital gains available to us which would reduce our net income, andmodels used to calculate loan loss provisions under IFRS 9 and cause more volatility in, or higher levels of, loan
◾lower the value of our equity investments impacting our capital position.loss provisions, any of which could adversely affect the Group’s results, financial condition or regulatory capital

position.
In addition, a failure to accurately anticipate higher inflation and factor it into our product pricing may result in a

systemic mispricing of our products, which would negatively impact our results.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 On the other hand, deflation experienced in our principal markets may also adversely affect our financialimpairment losses. Additionally, continuing low oil prices could have an influence on the repayment capacity of performance. In recent years, the risk of low inflation and even deflation (i.e., a continued period with negativecertain corporate borrowers active in the oil and oil related services industries.
rates of inflation) in the Eurozone has materialized. Deflation may erode collateral values and diminish the

quality of loans and cause a decrease in borrowing levels, which would negatively affect our business and results.

ING Group Annual Report 2020 on Form 20-F16

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

We may incur losses due to failures of banks falling under the scope of state compensationING has faced, and in the future may continue to face, the risk of consequences in connection with non-

schemes.compliance with applicable laws and regulations. For additional information on legal proceedings, see Note 45

‘Legal proceedings’ to the consolidated financial statements. There are a number of risks in areas where

applicable regulations may be unclear, subject to multiple interpretations or under development, or where While prudential regulation is intended to minimize the risk of bank failures, in the event such a failure occurs,
regulations may conflict with one another, or where regulators revise their previous guidance or courts overturn given our size, we may incur significant compensation payments to be made under the Dutch Deposit Guarantee
previous rulings, which could result in our failure to meet applicable standards. Regulators and other authorities Scheme (DGS), which we may be unable to recover from the bankrupt estate, and therefore the consequences of
have the power to bring administrative or judicial proceedings against us, which could result, among other things, any future failure of such a bank could be significant to ING. Such costs and the associated costs to be borne by
in suspension or revocation of our licenses, cease and desist orders, fines, civil penalties, criminal penalties or us may have a material adverse effect on our results and financial condition. On the basis of the EU Directive on
other disciplinary action, which could materially harm our results and financial condition. If we fail to address, or deposit guarantee schemes, ING pays quarterly risk-weighted contributions into a DGS-fund. The DGS-fund is to
appear to fail to address, any of these matters appropriately, our reputation could be harmed and we could be grow to a target size of 0.8% of all deposits guaranteed under the DGS, which is expected to be reached in July
subject to additional legal risk, which could, in turn, increase the size and number of claims and damages brought 2024. In case of failure of a Dutch bank, depositor compensation is paid from the DGS-fund. If the available
against us or subject us to enforcement actions, fines and penalties.
financial means of the fund are insufficient, Dutch banks, including ING, may be required pay to extraordinary ex-

post contributions not exceeding 0.5% of their covered deposits per calendar year. In exceptional circumstances Furthermore, as a financial institution, we are exposed to the risk of unintentional involvement in criminal and with the consent of the competent authority, higher contributions may be required. However, extraordinary activity in connection with the commission of financial economic crimes, including with respect to money ex-post contributions may be temporarily deferred if, and for so long as, they would jeopardise the solvency or laundering and the funding of terrorist and other criminal activities. The failure or perceived failure by us to liquidity of a bank. Depending on the size of the failed bank, the available financial means in the fund, and the comply with legal and regulatory requirements with respect to financial economic crimes may result in adverse required additional financial means, the impact of the extraordinary ex-post contributions on ING may be publicity, claims and allegations, litigation and regulatory investigations and sanctions, which may have a material material.
adverse effect on our business, results, financial condition and/or prospects in any given period. For further

discussion of the impact of litigation, enforcement proceedings, investigations or other regulatory actions with Since 2015, the EU has been discussing the introduction of a pan-European deposit guarantee scheme (‘EDIS’),
respect to financial economic crimes, see “– We may be subject to litigation, enforcement proceedings, (partly) replacing or complementing national compensation schemes in two or three phases. Proposals contain
investigations or other regulatory actions, and adverse publicity” below.
elements of (re)insurance, mutual lending and mutualisation of funds. The new model is intended to be ‘overall

cost-neutral’. Discussions have continued in 2020, but it remains uncertain when EDIS will be introduced and, if Changes in laws and/or regulations governing financial services or financial institutions or the introduced, what impact EDIS would have on ING’s business and operations.
application of such laws and/or regulations may increase our operating costs and limit our

Risks related to the regulation and supervision of the Groupactivities.

Non-compliance with laws and/or regulations concerning financial services or financialWe are subject to detailed banking laws and financial regulation in the jurisdictions in which we conduct

institutions, including with respect to financial economic crimes, could result in fines and otherbusiness. Regulation of the industries in which we operate is becoming increasingly more extensive and complex,
while also attracting supervisory scrutiny. Compliance with applicable and new laws and regulations is resources- liabilities, penalties or consequences for us, which could materially affect our business and intensive, and may materially increase our operating costs. Moreover, these regulations intended to protect our

reduce our profitability. customers, markets and society as a whole can limit our activities, among others, through stricter net capital,

ING Group Annual Report 2020 on Form 20-F17

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

market conduct and transparency requirements and restrictions on the businesses in which we can operate orweighted assets or other surcharges depending on the individual situation of the bank and take or require other invest.measures, such as restrictions on or changes to the Group’s business. Competent authorities may also, if the Group fails to comply with regulatory requirements, in particular with supervisory actions, minimum capital Our revenues and profitability and those of our industry have been and will continue to be impacted byrequirements (including buffer requirements) or with liquidity requirements, or if there are shortcomings in its requirements relating to capital, additional loss-absorbing capacity, leverage, minimum liquidity and long-termgovernance and risk management processes, prohibit the Group from making dividend payments to shareholders funding levels, requirements related to resolution and recovery planning, derivatives clearing and margin rulesor distributions to holders of its regulatory capital instruments. Generally, a failure to comply with prudential or and levels of regulatory oversight, as well as limitations on which and, if permitted, how certain businessconduct regulations could have a material adverse effect on the Group’s business, results and financial condition.

activities may be carried out by financial institutions.
The regulatory consequences of the United Kingdom’s withdrawal from the European Union may We are subject to additional legal and regulatory risk in certain countries where we operate withhave adverse effects on our business, results and financial condition.

less developed or predictable legal and regulatory frameworks.

On 24 December 2020, the United Kingdom and the EU agreed to the EU-UK Trade and Cooperation Agreement In certain countries in which we operate, judiciary and dispute resolution systems may be less effective. As a(the “TCA”) in connection with the departure of the UK from the EU (commonly referred to as ‘Brexit’). However, result, in case of a breach of contract, we may have difficulties in making and enforcing claims against contractualthe financial services provisions of the TCA are very limited and , as a result, UK-based financial services providers counterparties and, if claims are made against us, we might encounter difficulties in mounting a defence againstlost EU passporting rights as of 1 January 2021 and EU-UK financial services are now subject to unilateral such allegations. If we become party to legal proceedings in a market with an insufficiently developed judicialequivalence decisions. EU and UK regulators have, however, taken certain measures to address overall financial system, it could have an adverse effect on our operations and net results.stability risks, such as the temporary extension by the EU of equivalence recognition to UK-based central counterparties (UK CCPs) through to 30 June 2022. There is, however, no guarantee that such equivalence In addition, as a result of our operations in certain countries, we are subject to risks of possible nationalisation,decisions will be issued by the EU or the UK in the future, or that any extensions or renewals of temporary expropriation, price controls, exchange controls and other restrictive government actions, as well as the outbreakequivalence decisions or similar transitional arrangements will be made by the EU or the UK in the future. The of hostilities and or war, in these markets. Furthermore, the current economic environment in certain countriesabsence of such equivalence decisions for financial services could have a negative impact on ING’s activities, with in which we operate may increase the likelihood for regulatory initiatives to enhance consumer protection or tothe absence of future UK CCPs recognition expected to increase costs for both ING and its financial markets protect homeowners from foreclosures. Any such regulatory initiative could have an adverse impact on ourcustomers. In addition, Brexit has required and will require other changes to ING’s business and operations, ability to protect our economic interest, for instance in the event of defaults on residential mortgages .including requiring ING to apply for a third country branch banking licenses in the UK for which ECB conditions and PRA & FCA authorisation decisions remain pending. ING is also progressing the move of certain financial We are subject to the regulatory supervision of the ECB and other regulators with extensivemarkets activities from London to Amsterdam in light of ECB’s supervisory expectations on booking models as a supervisory and investigatory powers.result of Brexit. The regulatory impact of Brexit continues to present material risks and uncertainties, particularly

as to how regulations may diverge between the EU and the UK, which could materially increase ING’s compliance costs and have a material adverse effect on ING’s business, results and financial condition.
In its capacity as principal prudential supervisor in the EU, the ECB has extensive supervisory and investigatory powers, including the ability to issue requests for information, to conduct regulatory investigations and on-site inspections, and to impose monetary and other sanctions. For example, under the Single Supervisory Mechanism (SSM), the regulators with jurisdiction over the Group, including the ECB, may conduct stress tests and have discretion to impose capital surcharges on financial institutions for risks that are not otherwise recognised in risk- ING Group Annual Report 2020 on Form 20-F18

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Failure to meet minimum capital and other prudential regulatory requirements as applicable tocompliance costs and could adversely affect the profitability of this business, as well as exposing ING to the risk

us from time to time may have a material adverse effect on our business, results and financialof non-compliance with these regulations.

condition and on our ability to make payments on certain of our securities.

ING Capital Markets LLC is also expected to register with the SEC as a security-based swap dealer pursuant to

Dodd-Frank and SEC regulations enacted thereunder effective 1 November 2021. SEC registration may increase ING is subject to a variety of regulations that require us to comply with minimum requirements for capital (own ING Capital Markets LLC’s operational costs as a result of compliance, margin, capital and other requirements, funds) and additional loss absorbing capacity, as well as for liquidity, and to comply with leverage restrictions. In and result in a substantial portion or all of ING’s security-based swap activities with U.S. persons being conducted addition, such capital, liquidity and leverage requirements and their application and interpretation may change.
through ING Capital Markets LLC. These registration and related requirements may also reduce trading activity, Any changes may require us to maintain more capital or to raise a different type of capital by disqualifying reduce market liquidity and increase volatility in the relevant markets.
existing capital instruments from continued inclusion in regulatory capital, requiring replacement with new

capital instruments that meet the new criteria. Sometimes changes are introduced subject to a transitional In addition, new position limits under Dodd-Frank applicable to the derivatives market generally for uncleared period during which the new requirements are being phased in, gradually progressing to a fully phased-in, or swaps referencing any of twenty -five commodity futures contracts could limit ING’s position sizes in these swaps fully-loaded, application of the requirements.
and similarly limit the ability of counterparties to utilize certain of our products to the extent hedging exemptions

from the position limits are unavailable. Such regulation of the derivative markets and market participants will Any failure to comply with these requirements, or to adapt to changes in such requirements, may have a material likely result in increased cost of hedging and other trading activities, both for ING and its customers, which could adverse effect on our business, results and financial condition, and may require us to seek additional capital.
expose our business to greater risk and could reduce the size and profitability of our customer business. The Failures to meet minimum capital or other prudential requirements may also result in ING being prohibited from imposition of these regulatory restrictions and requirements, could also result in reduced market liquidity, which making payments on certain of our securities. Because implementation phases and transposition into EU or could in turn increase market volatility and the risks and costs of hedging and other trading activities.
national regulation where required may often involve a lengthy period, the impact of changes in capital, liquidity Any of the foregoing factors, and any further regulatory developments with respect to commodities and and leverage regulations on our business, results and financial condition, and on our ability to make payments on derivatives, could have a material impact on our business, results and financial condition.
certain of our securities, is often unclear.

For further discussion of the impact of regulation of commodities and derivatives on ING, see “Item 4.
For further discussion of the impact of minimum capital and other prudential regulatory requirements on ING, Information on the Company—Regulation and Supervision—Regulatory Developments —Dodd-Frank Act and see “Item 4. Information on the Company—Regulation and Supervision—Regulatory Developments—Basel III and other US Regulations.” European Union Standards as currently applied by ING Group.”

We are subject to several other bank recovery and resolution regimes that include statutory Our US commodities and derivatives business is subject to CFTC and SEC regulation under the write down and conversion as well as other powers, which remains subject to significant

Dodd-Frank Act.

uncertainties as to scope and impact on us.

Our affiliate ING Capital Markets LLC is registered with the Commodity Futures Trading Commission (“CFTC”) as a We are subject to several recovery and resolution regimes, including the Single Resolution Mechanism (‘SRM’), swap dealer and is subject to CFTC regulation of the off-exchange derivatives market pursuant to Title VII of the the ‘Bank Recovery and Resolution Directive’ (‘BRRD’) as implemented in national legislation, and the Dutch U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). Operating as a swap dealer ‘Intervention Act’ (Wet bijzondere maatregelen financiële ondernemingen, as implemented in the Dutch requires compliance with CFTC regulatory requirements, which may be burdensome, impose additional Financial Supervision Act). The SRM applies to banks that are supervised by the ECB under the SSM, with the aim

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of ensuring an orderly resolution of failing banks at minimum costs for taxpayers and the real economy. Theprohibited transactions with countries or persons subject to sanctions, and bribery or other anti-corruption BRRD establishes a common framework for the recovery and resolution for banks within the European Union,measures and anti-terrorist-financing procedures and their effectiveness, regulatory investigations of the banking with the aim of providing supervisory authorities and resolution authorities with common tools and powers toindustry, and litigation that arises from the failure or perceived failure by us to comply with legal, regulatory, tax address banking crises pre-emptively in order to safeguard financial stability and minimise taxpayers’ exposure toand compliance requirements could result in adverse publicity and reputational harm, lead to increased losses. In addition, the Intervention Act confers wide-ranging powers to the Dutch Minister of Finance, including,regulatory supervision, affect our ability to attract and retain customers and maintain access to the capital among other things, in relation to shares and other securities issued by us or with our cooperation or othermarkets, result in cease and desist orders, claims, enforcement actions, fines and civil and criminal penalties, claims on us (including, without limitation, expropriation thereof) if there is a serious and immediate threat toother disciplinary action or have other material adverse effects on us in ways that are not predictable. Some the stability of the financial system. Any application of statutory write-down and conversion or other powersclaims and allegations may be brought by or on behalf of a class and claimants may seek large or indeterminate would not be expected to constitute an event of default under our securities entitling holders to seek repayment.amounts of damages, including compensatory, liquidated, treble and punitive damages. Our reserves for If any of these powers were to be exercised in respect of ING, there could be a material adverse effect on bothlitigation liabilities may prove to be inadequate. Claims and allegations, should they become public, need not be ING and on holders of ING securities, including through a material adverse effect on credit ratings and/or thewell founded, true or successful to have a negative impact on our reputation. In addition, press reports and other price of our securities. Investors in our securities may lose their investment if resolution measures are takenpublic statements that assert some form of wrongdoing could result in inquiries or investigations by regulators, under current or future regimes.legislators and law enforcement officials, and responding to these inquiries and investigations, regardless of their ultimate outcome, is time consuming and expensive. Adverse publicity, claims and allegations, litigation and For further discussion of the impact of bank recovery and resolution regimes on ING, see “Item 4. Information onregulatory investigations and sanctions may have a material adverse effect on our business, results, financial the Company—Regulation and Supervision—Regulatory Developments—Bank Recovery and Resolutioncondition and/or prospects in any given period.

Directive.” We are subject to different tax regulations in each of the jurisdictions where we conduct Risks related to litigation, enforcement proceedings and investigations and to changes in taxbusiness, and are exposed to changes in tax laws, and risks of non-compliance with or

lawsproceedings or investigations with respect to, tax laws.

We may be subject to litigation, enforcement proceedings, investigations or other regulatoryChanges in tax laws (including case law) could increase our taxes and our effective tax rates and could materially
actions, and adverse publicity.impact our tax receivables and liabilities as well as deferred tax assets and deferred tax liabilities, which could have a material adverse effect on our business, results and financial condition. Changes in tax laws could also
We are involved in governmental, regulatory, arbitration and legal proceedings and investigations involvingmake certain ING products less attractive, which could have adverse consequences for our businesses and claims by and against us which arise in the ordinary course of our businesses, including in connection with ourresults. Because of the geographic spread of its business, ING may be subject to tax audits, investigations and activities as financial services provider, employer, investor and taxpayer. As a financial institution, we are subjectprocedures in numerous jurisdictions at any point in time. Although we believe that we have adequately to specific laws and regulations governing financial services or financial institutions. See “– Changes in lawsprovided for all our tax positions, the ultimate resolution of these audits, investigations and procedures may and/or regulations governing financial services or financial institutions or the application of such laws and/orresult in liabilities which are different from the amounts recognized. In addition, increased bank taxes in regulations may increase our operating costs and limit our activities” above. Financial reporting irregularitiescountries where the Group is active result in increased taxes on ING’s banking operations, which could negatively involving other large and well-known companies, possible findings of government authorities in variousimpact our operations, financial condition and liquidity.

jurisdictions which are investigating several rate-setting processes, notifications made by whistleblowers, increasing regulatory and law enforcement scrutiny of ‘know your customer’ anti-money laundering, tax evasion, ING Group Annual Report 2020 on Form 20-F20

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

We may be subject to withholding tax if we fail to comply with the Foreign Account Taxassociated with current and historical sales practices have been or will be identified, nor that any issues already

Compliance Act (“FATCA”) and other US withholding tax regulationsidentified will not be more widespread than presently estimated.

Due to the nature of its business, ING is subject to various provisions of US tax law. These include FATCA, whichThe negative publicity associated with any sales practices, any compensation payable in respect of any such

requires ING to provide certain information for the US Internal Revenue Service (“IRS”) and the Qualifiedissues and regulatory changes resulting from such issues, has had and could have a material adverse effect on our

Intermediary (“QI”) requirements, which require withholding tax on certain non US-source payments. Failure toreputation, business, results, financial condition and prospects. For additional information regarding legal

comply with FATCA and/or QI requirements and regulations could also harm our reputation and could subject theproceedings or claims, see Note 45 ‘Legal proceedings’ to the consolidated financial statements .

Group to enforcement actions, fines and penalties, which could have a material adverse effect on our business,

reputation, revenues, results, financial condition and prospects. For additional information with respect toRisks related to the Group’s business and operations

specific proceedings, see Note 45 ‘Legal proceedings’ to the consolidated financial statements. For further

discussion of FATCA and QI requirements with respect to ING, see “Item 4. Information on the Company—Operational risks, such as systems disruptions or failures, breaches of security, cyber attacks,

Regulation and Supervision—Regulatory Developments—Bank Recovery and Resolution Directive.” human error, changes in operational practices, inadequate controls including in respect of third

parties with which we do business, natural disasters or outbreaks of communicable diseases may ING is exposed to the risk of claims from customers who feel misled or treated unfairly because

adversely impact our reputation, business and results.

of advice or information received.

We face the risk that the design and operating effectiveness of our controls and procedures may prove to be Our products and services, including banking products and advice services for third-party products are exposed inadequate. Operational risks are inherent to our business. Our businesses depend on the ability to process and to claims from customers who might allege that they have received misleading advice or other information from report a large number of transactions efficiently and accurately. In addition, we routinely transmit, receive and advisers (both internal and external) as to which products were most appropriate for them, or that the terms and store personal, confidential and proprietary information by email and other electronic means. Although we conditions of the products, the nature of the products or the circumstances under which the products were sold, endeavour to safeguard our systems and processes, losses can result from inadequately trained or skilled were misrepresented to them. When new financial products are brought to the market, ING engages in a personnel, IT failures (including due to a computer virus or a failure to anticipate or prevent cyber attacks or multidisciplinary product approval process in connection with the development and distribution of such other attempts to gain unauthorised access to digital systems for purposes of misappropriating assets or products, including production of appropriate marketing and communication materials. Notwithstanding these sensitive information, corrupting data, or impairing operational performance, or security breaches by third processes, customers may make claims against ING if the products do not meet their expectations. Customer parties), inadequate or failed internal control processes and systems, regulatory breaches, human errors, protection regulations, as well as changes in interpretation and perception by both the public at large and employee misconduct, including fraud, or from natural disasters or other external events that interrupt normal governmental authorities of acceptable market practices, influence customer expectations.
business operations. Such losses may adversely affect our reputation, business and results. We depend on the

secure processing, storage and transmission of confidential and other information in our computer systems and Products distributed through person-to-person sales forces have a higher exposure to such claims as the sales networks. The equipment and software used in our computer systems and networks may not always be capable forces may provide face-to-face financial planning and advisory services. Complaints may also arise if customers of processing, storing or transmitting information as expected. Despite our business continuity plans and feel that they have not been treated reasonably or fairly, or that the duty of care has not been complied with.
procedures, certain of our computer systems and networks may have insufficient recovery capabilities in the While a considerable amount of time and resources have been invested in reviewing and assessing historical event of a malfunction or loss of data. As part of our Accelerated Think Forward strategy, we are consistently sales practices and products that were sold in the past, and in the maintenance of risk management, legal and managing and monitoring our IT risk profile globally. ING is subject to increasing regulatory requirements compliance procedures to monitor current sales practices, there can be no assurance that all of the issues

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including EU General Data Protection Regulation (‘GDPR’) and EU Payment Services Directive (‘PSD2’). Failure tocloud technology. In particular, ING is regularly subject to DDoS attacks, which are becoming increasingly appropriately manage and monitor our IT risk profile could affect our ability to comply with these regulatorysophisticated. For example, in 2020 ING experienced DDoS attacks in Turkey and Belgium. However, to date ING requirements, to securely and efficiently serve our clients or to timely, completely or accurately process, storehas not experienced a material loss of money or data due to cybercrime.
and transmit information, and may adversely impact our reputation, business and results. For further description of the particular risks associated with cybercrime, which is a specific risk to ING as a result of its strategic focus onCybersecurity, customer data and data privacy have become the subject of increasing legislative and regulatory technology and innovation, see “–We are subject to increasing risks related to cybercrime and compliance withfocus. The EU’s second Payment Services Directive (‘PSD2’) and GDPR are examples of such regulations. In certain cybersecurity regulation” below.locations where ING is active, there are additional local regulatory requirements and legislation on top of EU regulations that must be followed for business conducted in that jurisdiction. Some of these legislations and Widespread outbreaks of communicable diseases may impact the health of our employees, increasingregulations may be conflicting due to local regulatory interpretations. We may become subject to new EU and absenteeism, or may cause a significant increase in the utilisation of health benefits offered to our employees,local legislation or regulation concerning cybersecurity, security of customer data in general or the privacy of either or both of which could adversely impact our business. Also see above under the heading “–ING’s business,information we may store or maintain. Compliance with such new legislation or regulation could increase the results and financial condition have been, and likely will continue to be adversely affected by the Covid-19Group’s compliance cost. Failure to comply with new and existing legislation or regulation could harm our pandemic”. As set out there, we expect to be affected by the Covid-19 pandemic through its impact on, amongreputation and could subject the Group to enforcement actions, fines and penalties.
others, our employees. We also face physical risks, including natural disasters as a direct result of climate change, such as extreme weather events or rising water levels, which could have a material adverse effect on ourING may be exposed to the risks of misappropriation, unauthorised access, computer viruses or other malicious operations, particularly where our headquarters may be impacted. For further description of the risks associatedcode, cyber attacks and other external attacks or internal breaches that could have a security impact. These herewith, see “–We may be exposed to business, operational, regulatory, reputational and other risks inevents could also jeopardise our confidential information or that of our clients or our counterparties and this connection with climate change’ below. In addition, other events including unforeseeable and/or catastrophiccould be exacerbated by the increase in data protection requirements as a result of GDPR. These events can events can lead to an abrupt interruption of activities, and our operations may be subject to losses resulting frompotentially result in financial loss and harm to our reputation, hinder our operational effectiveness, result in such disruptions. Losses can result from destruction or impairment of property, financial assets, trading positions,regulatory censure, compensation costs or fines resulting from regulatory investigations and could have a and the loss of key personnel. If our business continuity plans are not able to be implemented, are not effectivematerial adverse effect on our business, reputation, revenues, results, financial condition and prospects. Even or do not sufficiently take such events into account, losses may increase further.when we are successful in defending against cyber attacks, such defence may consume significant resources or

impose significant additional costs on ING.
We are subject to increasing risks related to cybercrime and compliance with cybersecurity regulation.Because we operate in highly competitive markets, including our home market, we may not be able to increase or maintain our market share, which may have an adverse effect on our results.

Like other financial institutions and global companies, we are regularly the target of cyber attacks, which is a specific risk to ING as a result of its strategic focus on technology and innovation. In particular, threats fromThere is substantial competition in the Netherlands and the other countries in which we do business for the types Distributed Denial of Service (‘DDoS’), targeted attacks (also called Advanced Persistent Threats) andof wholesale banking, retail banking, investment banking and other products and services we provide. Customer Ransomware intensify worldwide, and attempts to gain unauthorised access and the techniques used for suchloyalty and retention can be influenced by a number of factors, including brand recognition, reputation, relative attacks are increasingly sophisticated. We have faced, and expect to continue to face, an increasing number ofservice levels, the prices and attributes of products and services, scope of distribution, credit ratings and actions cyber attacks (both successful and unsuccessful) as we have further digitalized. This includes the continuingtaken by existing or new competitors (including non-bank or financial technology competitors). A decline in our expansion of our mobile- and other internet-based products and services, as well as our usage and reliance oncompetitive position as to one or more of these factors could adversely impact our ability to maintain or further

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increase our market share, which would adversely affect our results. Such competition is most pronounced in ourWe may not always be able to protect our intellectual property developed in our products and

more mature markets of the Netherlands, Belgium, the rest of Western Europe and Australia. In recent years,services and may be subject to infringement claims, which could adversely impact our core

however, competition in emerging markets, such as Asia and Central and Eastern Europe, has also increased asbusiness, inhibit efforts to monetize our internal innovations and restrict our ability to capitalize

large financial services companies from more developed countries have sought to establish themselves in

on future opportunities.

markets which are perceived to offer higher growth potential, and as local institutions have become more

sophisticated and competitive and proceeded to form alliances, mergers or strategic relationships with our In the conduct of our business, we rely on a combination of contractual rights with third parties and copyright, competitors. The Netherlands is our largest market. Our main competitors in the banking sector in the trademark, trade name, patent and trade secret laws to establish and protect our intellectual property, which we Netherlands are ABN AMRO Bank and Rabobank.
develop in connection with our products and services. Third parties may infringe or misappropriate our

intellectual property. We may have to litigate to enforce and protect our copyrights, trademarks, trade names, Competition could also increase due to new entrants (including non-bank and financial technology competitors)
patents, trade secrets and know-how or to determine their scope, validity or enforceability. In that event, we in the markets that may have new operating models that are not burdened by potentially costly legacy may be required to incur significant costs, and our efforts may not prove successful. The inability to secure or operations and that are subject to reduced regulation. New entrants may rely on new technologies, advanced protect our intellectual property assets could have an adverse effect on our core business and our ability to data and analytic tools, lower cost to serve, reduced regulatory burden and/or faster processes in order to compete, including through the monetization of our internal innovations.
challenge traditional banks. Developments in technology has also accelerated the use of new business models,

and ING may not be successful in adapting to this pace of change or may incur significant costs in adapting its We may also be subject to claims made by third parties for (1) patent, trademark or copyright infringement, (2)
business and operations to meet such changes. For example, new business models have been observed in retail breach of copyright, trademark or licence usage rights, or (3) misappropriation of trade secrets. Any such claims payments, consumer and commercial lending (such as peer-to-peer lending), foreign exchange and low-cost and any resulting litigation could result in significant expense and liability for damages. If we were found to have investment advisory services. In particular, the emergence of disintermediation in the financial sector resulting infringed or misappropriated a third-party patent or other intellectual property right, we could in some from new banking, lending and payment solutions offered by rapidly evolving incumbents, challengers and new circumstances be enjoined from providing certain products or services to our customers or from utilizing and entrants, in particular with respect to payment services and products, and the introduction of disruptive benefiting from certain methods, processes, copyrights, trademarks, trade secrets or licences. Alternatively, we technology may impede our ability to grow or retain our market share and impact our revenues and profitability.
could be required to enter into costly licensing arrangements with third parties or to implement a costly

workaround. Any of these scenarios could have a material adverse effect on our business and results and could Increasing competition in the markets in which we operate (including from non-banks and financial technology restrict our ability to pursue future business opportunities.
competitors) may significantly impact our results if we are unable to match the products and services offered by

our competitors. Future economic turmoil may accelerate additional consolidation activity. Over time, certain The inability of counterparties to meet their financial obligations or our inability to fully enforce sectors of the financial services industry have become more concentrated, as institutions involved in a broad our rights against counterparties could have a material adverse effect on our results. range of financial services have been acquired by or merged into other firms or have declared bankruptcy. These

developments could result in our competitors gaining greater access to capital and liquidity, expanding their

ranges of products and services, or gaining geographic diversity. We may experience pricing pressures as a resultThird parties that have an payment obligations to ING, or obligations to return money, securities or other assets,

of these factors in the event that some of our competitors seek to increase market share by reducing prices.may not pay or perform under their obligations. These parties include the issuers and guarantors (including

sovereigns) of securities we hold, borrowers under loans originated, reinsurers, customers, trading

counterparties, securities lending and repurchase counterparties, counterparties under swaps, credit default and

other derivative contracts, clearing agents, exchanges, clearing houses and other financial intermediaries.

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Defaults by one or more of these parties on their obligations to us due to bankruptcy, lack of liquidity, downturnsIn addition, we are subject to the risk that our rights against third parties may not be enforceable in all in the economy or real estate values, continuing low oil or other commodity prices, operational failure or othercircumstances. The deterioration or perceived deterioration in the credit quality of third parties whose securities factors, or even rumours about potential defaults by one or more of these parties or regarding a severe distressor obligations we hold could result in losses and/ or adversely affect our ability to rehypothecate or otherwise of the financial services industry generally, could have a material adverse effect on our results, financial conditionuse those securities or obligations for liquidity purposes. A significant downgrade in the credit ratings of our and liquidity. Given the high level of interdependence between financial institutions, we are and will continue tocounterparties could also have a negative impact on our income and risk weighting, leading to increased capital be subject to the risk of deterioration of the commercial and financial soundness, or perceived soundness, ofrequirements. While in many cases we are permitted to require additional collateral from counterparties that sovereigns and other financial services institutions. This is particularly relevant to our franchise as an importantexperience financial difficulty, disputes may arise as to the amount of collateral we are entitled to receive and and large counterparty in equity, fixed income and foreign exchange markets, including related derivatives.the value of pledged assets. Also in this case, our credit risk may also be exacerbated when the collateral we hold cannot be liquidated at prices sufficient to recover the full amount of the loan or derivative exposure due to us, We routinely execute a high volume of transactions, such as unsecured debt instruments, derivative transactionswhich is most likely to occur during periods of illiquidity and depressed asset valuations, such as those and equity investments with counterparties and customers in the financial services industry, including brokersexperienced during the financial crisis of 2008. The termination of contracts and the foreclosure on collateral and dealers, commercial and investment banks, mutual and hedge funds, insurance companies, institutionalmay subject us to claims. Bankruptcies, downgrades and disputes with counterparties as to the valuation of clients, futures clearing merchants, swap dealers, and other institutions, resulting in large periodic settlementcollateral tend to increase in times of market stress and illiquidity. Any of these developments or losses could amounts, which may result in our having significant credit exposure to one or more of such counterparties ormaterially and adversely affect our business, results, financial condition, and/or prospects.
customers. As a result, we could face concentration risk with respect to liabilities or amounts we expect to collect from specific counterparties and customers. We are exposed to increased counterparty risk as a result of recentRatings are important to our business for a number of reasons, and a downgrade or a potential financial institution failures and weakness and will continue to be exposed to the risk of loss if counterpartydowngrade in our credit ratings could have an adverse impact on our results and net results. financial institutions fail or are otherwise unable to meet their obligations. A default by, or even concerns about the creditworthiness of, one or more of these counterparties or customers or other financial services institutions Credit ratings represent the opinions of rating agencies regarding an entity’s ability to repay its indebtedness.
could therefore have an adverse effect on our results or liquidity.
Our credit ratings are important to our ability to raise capital and funding through the issuance of debt and to the cost of such financing. In the event of a downgrade, the cost of issuing debt will increase, having an adverse With respect to secured transactions, our credit risk may be exacerbated when the collateral held by us cannot effect on our net results. Certain institutional investors may also be obliged to withdraw their deposits from ING be or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due to us.
following a downgrade, which could have an adverse effect on our liquidity. They can also have lower risk We also have exposure to a number of financial institutions in the form of unsecured debt instruments, appetite for our debt notes, leading to lower purchases of (newly issued) debt notes. We have credit ratings from derivative transactions and equity investments. For example, we hold certain hybrid regulatory capital S&P, Moody’s Investor Service and Fitch Ratings. Each of the rating agencies reviews its ratings and rating instruments issued by financial institutions which permit the issuer to cancel coupon payments on the methodologies on a recurring basis and may decide on a downgrade at any time.
occurrence of certain events or at their option. The EC has indicated that, in certain circumstances, it may require these financial institutions to cancel payment. If this were to happen, we expect that such instruments may As rating agencies continue to evaluate the financial services industry, it is possible that rating agencies will experience ratings downgrades and/or a drop in value and we may have to treat them as impaired, which could heighten the level of scrutiny that they apply to financial institutions, increase the frequency and scope of their result in significant losses. There is no assurance that losses on, or impairments to the carrying value of, these credit reviews, request additional information from the companies that they rate and potentially adjust upward assets would not materially and adversely affect our business, results or financial condition.
the capital and other requirements employed in the rating agency models for maintenance of certain ratings levels. It is possible that the outcome of any such review of us would have additional adverse ratings consequences, which could have a material adverse effect on our results and financial condition. We may need to

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take actions in response to changing standards or capital requirements set by any of the rating agencies, whichfor senior management, is intense. ING Group’s ability to attract and retain key personnel, in senior management could cause our business and operations to suffer. We cannot predict what additional actions rating agenciesand in particular areas such as technology and operational management, client relationship management, may take, or what actions we may take in response to the actions of rating agencies.finance, risk and product development, is dependent on a number of factors, including prevailing market

conditions and compensation packages offered by companies competing for the same talent.
Furthermore, ING Bank’s assets are risk-weighted. Downgrades of these assets could result in a higher riskweighting, which may result in higher capital requirements. This may impact net earnings and the return onThe (increasing) restrictions on remuneration, plus the public and political scrutiny especially in the Netherlands, capital, and may have an adverse impact on our competitive position.will continue to have an impact on existing ING Group remuneration policies and individual remuneration packages for personnel. For example, under the EU’s amended Shareholder Rights Directive, known as ‘SRD II’, We may be exposed to business, operational, regulatory, reputational and other risks inwhich came into effect on June 10, 2019, ING is required to hold a shareholder (binding) vote on ING’s Executive connection with climate change.Board remuneration policy and Supervisory Board remuneration policy at least every four years. Furthermore the shareholders have an advisory vote on ING’s remuneration report annually. This may restrict our ability to offer competitive compensation compared with companies (financial and/or non-financial) that are not subject to such Climate change is an area of significant focus for governments and regulators, investors and ING’s customers, and restrictions and it could adversely affect ING Group’s ability to retain or attract key personnel, which, in turn, may developments with respect to climate change topics may expose ING to significant risks. The perception of affect our business and results.
climate change as a risk by civil society, shareholders, governments and other stakeholders continues to increase, including in relation to the financial sector’s operations and strategy, and international actions regulating or We may incur further liabilities in respect of our defined benefit retirement plans if the value of restricting CO2 emissions, such as the Paris agreement, may also result in financial institutions coming under plan assets is not sufficient to cover potential obligations, including as a result of differences increased pressure from such stakeholders regarding the management and disclosure of their climate risks and related lending and investment activities. For further information regarding the alignment of ING’s lendingbetween actual results and underlying actuarial assumptions and models. portfolio with its climate-related goals, see “Item 4. – Information on the Company – Business Overview – Responsible finance” below.ING Group companies operate various defined benefit retirement plans covering the post-employment benefits of a number of our employees. The liability recognised in our consolidated balance sheet in respect of our For a description of the physical risks to our business resulting from natural disasters as a result of climatedefined benefit plans is the present value of the defined benefit obligations at the balance sheet date, less the change, see “–Operational risks, such as systems disruptions or failures, breaches of security, cyber attacks,fair value of each plan’s assets, together with adjustments for unrecognised actuarial gains and losses and human error, changes in operational practices, inadequate controls including in respect of third parties withunrecognised past service costs. We determine our defined benefit plan obligations based on internal and which we do business, natural disasters or outbreaks of communicable diseases may adversely impact ourexternal actuarial models and calculations using the projected unit credit method. Inherent in these actuarial reputation, business and results” above.models are assumptions, including discount rates, rates of increase in future salary and benefit levels, mortality rates and consumer price index. These assumptions are based on available market data and are updated An inability to retain or attract key personnel may affect our business and results.annually. Nevertheless, the actuarial assumptions may differ significantly from actual results due to changes in market conditions, economic and mortality trends and other assumptions. Any changes in these assumptions ING Group relies to a considerable extent on the quality of its senior management, such as members of thecould have a significant impact on our present and future liabilities and costs associated with our defined benefit executive committee, and management in the jurisdictions which are material to ING’s business and operations.plans.
The success of ING Group’s operations is dependent, among other things, on its ability to attract and retain highly qualified personnel. Competition for key personnel in most countries in which ING Group operates, and globally ING Group Annual Report 2020 on Form 20-F25

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Risks related to the Group’s risk management practicescan completely insulate us from risks associated with those fluctuations. Our hedging strategies also rely on

assumptions and projections regarding our assets, liabilities, general market factors and the creditworthiness of

Risks relating to our use of quantitative models or assumptions to model client behaviour for theour counterparties that may prove to be incorrect or prove to be inadequate. Accordingly, our hedging activities

may not have the desired beneficial impact on our results or financial condition. Poorly designed strategies or purposes of our market calculations may adversely impact our reputation or results.

improperly executed transactions could actually increase our risks and losses. Hedging strategies involve

transaction costs and other costs, and if we terminate a hedging arrangement, we may also be required to pay We use quantitative methods, systems or approaches that apply statistical, economic financial, or mathematical additional costs, such as transaction fees or breakage costs. There have been periods in the past, and it is likely theories, techniques and assumptions to process input data into quantitative estimates. Errors in the that there will be periods in the future, during which we have incurred or may incur losses on transactions, development, implementation, use or interpretation of such models, or from incomplete or incorrect data, can possibly significant, after taking into account our hedging strategies. Further, the nature and timing of our lead to inaccurate, noncompliant or misinterpreted model outputs, which may adversely impact our reputation hedging transactions could actually increase our risk and losses. Hedging instruments we use to manage product and results. In addition, we use assumptions in order to model client behaviour for the risk calculations in our and other risks might not perform as intended or expected, which could result in higher (un)realised losses, such banking books. Assumptions are used to determine the interest rate risk profile of savings and current accounts as credit value adjustment risks or unexpected P&L effects, and unanticipated cash needs to collateralise or settle and to estimate the embedded option risk in the mortgage and investment portfolios. Assumptions based on such transactions. Adverse market conditions can limit the availability and increase the costs of hedging past client behaviour may not always be a reliable indicator of future behaviour. The realisation or use of instruments, and such costs may not be recovered in the pricing of the underlying products being hedged. In different assumptions to determine client behaviour could have a material adverse effect on the calculated risk addition, hedging counterparties may fail to perform their obligations, resulting in unhedged exposures and figures and, ultimately, our future results or reputation. Furthermore, we may be subject to risks related to losses on positions that are not collateralised. As such, our hedging strategies and the derivatives that we use or changes in the laws and regulations governing the risk management practices of financial institutions. For further may use may not adequately mitigate or offset the risks they intend to cover, and our hedging transactions may information, see “Risks related to the regulation and supervision of the Group – Changes in laws and/or result in losses.
regulations governing financial services or financial institutions or the application of such laws and/or regulations

may increase our operating costs and limit our activities” above. As noted there, regulation of the industries in Our hedging strategy additionally relies on the assumption that hedging counterparties remain able and willing to which we operates is becoming increasingly more extensive and complex, while also attracting supervisory provide the hedges required by our strategy. Increased regulation, market shocks, worsening market conditions scrutiny. Compliance failures may lead to changes in the laws and regulations governing the risk management (whether due to the ongoing euro crisis or otherwise), and/or other factors that affect or are perceived to affect practices and materially increase our operating costs.
the financial condition, liquidity and creditworthiness of ING may reduce the ability and/or willingness of such

counterparties to engage in hedging contracts with us and/or other parties, affecting our overall ability to hedge

We may be unable to manage our risks successfully through derivatives. our risks and adversely affecting our business, results and financial condition.

We employ various economic hedging strategies with the objective of mitigating the market risks that are

inherent in our business and operations. These risks include currency fluctuations, changes in the fair value of our

investments, the impact of interest rates, equity markets and credit spread changes, the occurrence of credit

defaults and changes in client behaviour. We seek to control these risks by, among other things, entering into a

number of derivative instruments, such as swaps, options, futures and forward contracts, including, from time to

time, macro hedges for parts of our business, either directly as a counterparty or as a credit support provider to

affiliate counterparties. Developing an effective strategy for dealing with these risks is complex, and no strategy

ING Group Annual Report 2020 on Form 20-F26

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Risks related to the Group’s liquidity and financing activitiesIn the event that our current resources do not satisfy our needs, we may need to seek additional financing. The

availability of additional financing will depend on a variety of factors, such as market conditions, the general

We depend on the capital and credit markets, as well as customer deposits, to provide theavailability of credit, the volume of trading activities, the overall availability of credit to the financial services
industry, our credit ratings and credit capacity, as well as the possibility that customers or lenders could develop liquidity and capital required to fund our operations , and adverse conditions in the capital and a negative perception of our long- or short-term financial prospects. Also see under the heading “Ratings are credit markets, or significant withdrawals of customer deposits, may impact our liquidity, important to our business for a number of reasons, and a downgrade or a potential downgrade in our credit borrowing and capital positions, as well as the cost of liquidity, borrowings and capital. ratings could have an adverse impact on our results and net results”. Similarly, our access to funds may be limited

if regulatory authorities or rating agencies take negative actions against us. If our internal sources of liquidity Adverse capital market conditions have in the past affected, and may in the future affect, our cost of borrowedprove to be insufficient, there is a risk that we may not be able to successfully obtain additional financing on funds and our ability to borrow on a secured and unsecured basis, thereby impacting our ability to supportfavourable terms, or at all. Any actions we might take to access financing may, in turn, cause rating agencies to and/or grow our businesses. Furthermore, although interest rates are at or near historically low levels, since there-evaluate our ratings.
recent financial crisis, we have experienced increased funding costs due in part to the withdrawal of perceived

government support of such institutions in the event of future financial crises. In addition, liquidity in theDisruptions, uncertainty or volatility in the capital and credit markets may also limit our access to capital. Such
financial markets has also been negatively impacted as market participants and market practices and structuresmarket conditions may in the future limit our ability to raise additional capital to support business growth, or to
adjust to new regulations.counterbalance the consequences of losses or increased regulatory capital and rating agency capital

requirements. This could force us to (i) delay raising capital, (ii) reduce, cancel or postpone payment of dividends We need liquidity to fund new and recurring business, to pay our operating expenses, interest on our debt andon our shares, (iii) reduce, cancel or postpone interest payments on our other securities, (iv) issue capital of dividends on our capital stock, maintain our securities lending activities and replace certain maturing liabilities.different types or under different terms than we would otherwise, or (v) incur a higher cost of capital than in a Without sufficient liquidity, we will be forced to curtail our operations and our business will suffer. The principalmore stable market environment. This would have the potential to decrease both our profitability and our sources of our funding include a variety of short-and long-term instruments, including deposit fund, repurchasefinancial flexibility. Our results, financial condition, cash flows, regulatory capital and rating agency capital agreements, commercial paper, medium- and long-term debt, subordinated debt securities, capital securities andposition could be materially adversely affected by disruptions in the financial markets.
shareholders’ equity.

Furthermore, regulatory liquidity requirements in certain jurisdictions in which we operate are remain stringent, In addition, because we rely on customer deposits to fund our business and operations, the confidence ofundermining our efforts to maintain centralised management of our liquidity. These developments may cause customers in financial institutions may be tested in a manner that may adversely impact our liquidity and capitaltrapped pools of liquidity and capital, resulting in inefficiencies in the cost of managing our liquidity and solvency, position. Consumer confidence in financial institutions may, for example, decrease due to our or our competitors’and hinder our efforts to integrate our balance sheet. An example of such trapped liquidity includes our failure to communicate to customers the terms of, and the benefits to customers of, complex or high-feeoperations in Germany where German regulations impose separate liquidity requirements that restrict ING’s financial products. Reduced confidence could have an adverse effect on our liquidity and capital position throughability to move a liquidity surplus out of the German subsidiary.
withdrawal of deposits, in addition to our revenues and results. Because a significant percentage of our customer

deposit base is originated via Internet banking, a loss of customer confidence may result in a rapid withdrawal of

deposits over the Internet.

ING Group Annual Report 2020 on Form 20-F27

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

As a holding company, ING Groep N.V. is dependent for liquidity on payments from itscapital or liquidity levels at the level of the resolution entity or at particular subsidiaries. This may result in,
subsidiaries, many of which are subject to regulatory and other restrictions on their ability toamong other things, the issuance of additional long-term debt issuance at the level of ING Groep N.V. or
transact with affiliates.particular subsidiaries.

Additional risks relating to ownership of ING shares ING Groep N.V. is a holding company and, therefore, depends on dividends, distributions and other payments
from its subsidiaries to fund dividend payments to its shareholders and to fund all payments on its obligations,
including debt service obligations.Holders of ING shares may experience dilution of their holdings.

ING Groep N.V.’s ability to obtain funds to meet its obligations depends on legal and regulatory restrictionsING’s AT1 Securities may, under certain circumstances, convert into equity securities, and such conversion would applicable to ING Groep N.V.’s subsidiaries. Many of ING Groep N.V.’s direct and indirect subsidiaries, includingdilute the ownership interests of existing holders of ING shares and such dilution could be substantial.
certain subsidiaries of ING Bank N.V., may be subject to laws that restrict dividend payments, as well asAdditionally, any conversion, or the anticipation of the possibility of a conversion, could depress the market price requirements with respect to capital and liquidity levels. For example, certain local governments and regulatorsof ING shares. Furthermore, we may undertake future equity offerings with or without subscription rights. In case have taken steps and may take further steps to “ring fence” or impose minimum internal total loss-absorbingof equity offerings with subscription rights, holders of ING shares in certain jurisdictions, however, may not be capacity on the local affiliates of a foreign financial institution in order to protect clients and creditors of suchentitled to exercise such rights unless the rights and the related shares are registered or qualified for sale under affiliates in the event of financial difficulties involving such affiliates or the broader banking group. Increasedthe relevant legislation or regulatory framework. Holders of ING shares in these jurisdictions may suffer dilution local regulation and supervision have therefore limited and may in the future further limit the ability to moveof their shareholding should they not be permitted to, or otherwise chose not to, participate in future equity capital and liquidity among affiliated entities and between ING Groep N.V. and its direct and indirect subsidiaries,offerings with subscription rights.
limit the flexibility to structure intercompany and external activities of ING as otherwise deemed most operationally efficient, and increase in the overall level of capital and liquidity required by ING on a consolidatedBecause we are incorporated under the laws of the Netherlands and many of the members of basis.our Supervisory and Executive Board and our officers reside outside of the United States, it may

be difficult to enforce judgments against ING or the members of our Supervisory and Executive Lower earnings of a local entity may also reduce the ability of such local entity to make dividends and

Boards or our officers. distributions to ING Groep N.V. Other restrictions, such as restrictions on payments from subsidiaries or
limitations on the use of funds in client accounts, may also apply to distributions to ING Groep N.V. from its Most of our Supervisory Board members, our Executive Board members and some of the experts named in this subsidiaries.
Annual Report, as well as many of our officers are persons who are not residents of the United States, and most
of our and their assets are located outside the United States. As a result, investors may not be able to serve ING Groep N.V. has also in the past and may in the future continue to guarantee the payment obligations of process on those persons within the United States or to enforce in the United States judgments obtained in US some of its subsidiaries, including ING Bank N.V. Any such guarantees may require ING Groep N.V. to provide courts against us or those persons based on the civil liability provisions of the US securities laws.
substantial funds or assets to its subsidiaries or the creditors or counterparties of these subsidiaries at a time
when the guaranteed subsidiary is in need of liquidity to fund their own obligations.
Investors also may not be able to enforce judgments of US courts under the US federal securities laws in courts
outside the United States, including the Netherlands. The United States and the Netherlands do not currently Finally, ING Groep N.V., as the resolution entity of ING, has an obligation to remove impediments to resolution have a treaty providing for the reciprocal recognition and enforcement of judgments (other than arbitration and to improve resolvability. Regulatory authorities have required and may continue to require ING to increase

ING Group Annual Report 2020 on Form 20-F28

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

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

Based on the foregoing, there can be no assurance that U.S. investors will be able to enforce against us or members of our board of directors, officers or certain experts named herein who are residents of the Netherlands or countries other than the United States any judgments obtained in U.S. courts in civil and commercial matters, including judgments under the U.S. federal securities laws.

In addition, there is doubt as to whether a Dutch court would impose civil liability on us, the members of our board of directors, our officers or certain experts named herein in an original action predicated solely upon the U.S. federal securities laws brought in a court of competent jurisdiction in the Netherlands against us or such members, officers or experts, respectively.

ING Group Annual Report 2020 on Form 20-F29

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Item 4.Information on the CompanyThe name and address of ING Group’s agent for service of process in the United States in connection with ING’s
registration statement on Form F-3 is:

ING Financial Holdings Corporation

A.History and development of the company 1133 Avenue of the Americas
GeneralNew York, NY 10036 United States of America ING Groep N.V. was established as a Naamloze Vennootschap (a Dutch public limited liability company) on March Telephone +1 646 424 6000 4, 1991. ING Groep N.V. is incorporated under the laws of the Netherlands.
The corporate site of ING, www.ing.com, provides news, investor relations and general information about theChanges in the composition of the Group company.
For information on changes in the composition of the Group, reference is made to Note 46 ‘Consolidated companies and businesses acquired and divested’.
ING is required to file certain documents and information with the United States Securities and Exchange

Commission (SEC). These filings relate primarily to periodic reporting requirements applicable to issuers of securities, as well as to beneficial ownership reporting requirements as a holder of securities. The most common filings we submit to the SEC are Forms 6-K and 20-F (periodic reporting requirements) and Schedules 13D and 13G (beneficial ownership requirements). The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. ING’s electronic filings are available on the SEC’s internet site under CIK ID 0001039765 (ING Groep N.V.).

The official address of ING Group is:

ING Groep N.V.
Bijlmerdreef 106 1102 CT Amsterdam P.O. Box 1800, 1000 BV Amsterdam The Netherlands Telephone +31 20 563 9111

ING Group Annual Report 2020 on Form 20-F30

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Our strategysome markets and amplified our focus on income diversification through fee income growth, particularly in retail
investment products.

ING’s Think Forward strategy is as relevant as ever. With our data-driven digital That said, the impact of the global pandemic is still reverberating through societies worldwide. The second wave
and mobile-first approach we’re continuing to empower people to stay a stepthat surged through Europe and the US in the autumn continued to pile pressure on consumers, businesses,
communities and economies. It has fundamentally changed the way people work, travel, shop and socialise and ahead in life and in business – also at a time of social and economic disruption.
the expected economic consequences will be felt for some time yet. We are considering various post-coronavirus The global coronavirus pandemic has illustrated just how digital society hasscenarios focused on the next two to five years that take account of the severity of the economic downturn and
become, reinforcing trends like the shift to mobile banking and contactlesslevel of global cooperation in the recovery period.

payments.

Universal digital bank

Delivering on our strategy is about living up to our customer promise to be clear and easy, anytime, anywhere,The coronavirus crisis has accelerated the urgency of implementing end-to-end digitalisation, both to meet the
empowering and keep getting better . Digitalisation remains central to this and we’re adapting our processes andgrowing demand for mobile banking and to enhance operational excellence. Operational excellence in particular
service models to make banking even safer, more personal, easier and smarter. Combined with mastering data,helps to ensure that our customers are able to do their daily banking without disruption, even during global
it’s how we can stand out as a bank that truly knows its customers and anticipates their evolving needs, findinglockdowns, and makes it possible for employees to work safely and securely from home.

innovative ways to add value , both within and beyond banking.
Now we’re taking steps to deliver on our strategic priorities, not least to keep pace with society’s accelerated
We’re doing all of this while striving to live up to the highest possible standards of integrity. Being a safe, secureadoption of digital resources during the coronavirus. We’ve been working on transforming our organisation to and compliant bank remains a top priority for ING. Our Orange Code of values and behaviours places integritybecome a mobile-first digital platform, offering all of our 39.3 million customers a harmonised customer above all else.experience everywhere. But there’s still work to do to become the leading data-driven digital bank we aspire to be.

Factors influencing our business in 2020 Building on what we’ve learnt and achieved over the past five years, we took steps in 2020 to further consolidate The spread of Covid-19, and the global measures to contain it, affected ING in a number of ways in 2020,our business and reinforce alignment. This includes uniting all our Retail operations – including the Business impacting our customers, our employees and our communities. However, it was not the only factor influencingBanking segment serving small and medium-sized businesses and mid-corporate clients – under one global our business. The negative interest rate environment in the eurozone and low interest rates elsewhere, havemanagement team with one consistent unified approach. Their focus will be on operational excellence through posed a significant challenge to banks’ business models since 2016, eroding margins on customer deposits andincreased digitalisation, using our technology foundation globally – this includes shared data lakes, cloud and putting pressure on net interest income. Until 2020, we were able to counter the effects of this mainly throughmodular IT building blocks – and rolling out global digital product offerings.
profitable lending growth and a presence in non-eurozone countries.
However, the pandemic made these levers less effective in 2020, resulting in a decrease of net interest income,At the same time, the challenging external environment reconfirm s the importance of scrutinising costs and as loan demand weakened in a number of markets due to strong direct government support, while the inflow oflooking for new ways to grow our fee income and diversify our revenues in areas beyond traditional banking.
customer deposits accelerated and interest rates in non-eurozone countries significantly reduced. In response to the pressure on net interest income we introduced negative interest rates on deposits for retail customers in ING Group Annual Report 2020 on Form 20-F31

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

We need to be flexible in dealing with these challenges, and with changing customer behaviour, continuallyPlatform approach

weigh up benefits versus costs, apply our learnings and focus our activities. For Wholesale Banking this means
While many businesses struggled in 2020 to survive global lockdowns, many Big Tech companies thrived on deepening our relationship with our core clients, reducing our geographic footprint in Asia and closing our offices
society’s growing reliance on technology and the online economy. ING’s competitive landscape is also in South America. In Retail Banking it means stopping the Maggie transformation programme (to standardise the
increasingly shaped by these companies, which offer an engaging digital experience on an open platform that customer experience and product offering in four Challengers Markets) and instead focusing on using and reusing
meets a range of needs in one go-to digital ecosystem.
existing apps and modular components to drive scaling and speed of delivery.

We believe platform providers are all about customer experience. They use data to pinpoint what customers Recognising the need to move even faster if we want to stay a step ahead of the changes and evolutions in the
need and partner with third parties to ensure there is always a fitting product or service to meet this. Platforms world, we announced in 2020 that we are combining all our innovation activities into a dedicated business area
are empowering. To remain relevant, ING has to be where our (future) customers are, on the platforms they’re called ING Neo. This will help sharpen our focus and create more impact, ultimately deepening our relationships
on, while maintaining the highest possible standard of integrity.
with our customers as their primary bank for financial and other needs.

In an age of disruption and changing customer expectations we have to keep adapting our banking services to The introduction in 2020 of our first global tagline ‘do your thing’ moved the ING brand another step closer to
become clearer, easier and more accessible while empowering our growing global customer base to stay a step looking, sounding and feeling the same everywhere. It articulates ING’s purpose. We want to make banking
ahead in life and in business. Open banking creates opportunities for ING to frictionless, removing barriers to progress and giving people confidence in their ability to move forward.
add value for customers by connecting to the products and services of others, both within and beyond banking.

Think Forward When it comes to platforms, we are developing our own solutions. We’re building digital channels on top of our

ING’s purpose is empowering people to stay a step ahead in life and in business. Our Think Forward strategytechnology platform, like ING’s mobile OneApp, which is used by customers in the Netherlands, Belgium and

promises customers we’ll make banking clear and easy, anytime anywhere, empower them to make informedGermany. We’re investing in independent initiatives such as Spanish finance app Fintonic, and we’re connecting

financial decisions and keep getting better. Where our purpose guides us, the strategic priorities set out in ourto third-party platforms offering relevant products and services. Among these are initiatives that have evolved

Think Forward strategy help us to focus on the elements we need to be successful.into stand-alone platforms such as smart money app Yolt and corporate multibank platform Cobase.

These strategic priorities are: earning the primary relationship, mastering data, being innovative to serve

changing customer needs, and developing new services and business models beyond banking. We achieve this by

simplifying and standardising our products and processes, being operationally excellent, enhancing our

performance culture and expanding our lending capabilities. These are the strategic enablers for executing on

our strategy. See the graphics in this chapter for more information about our strategic priorities and enablers.

ING Group Annual Report 2020 on Form 20-F32

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Touchpoint platform

Supporting our ambition to be the leading data-driven digital bank, we’re using a modular technology foundation to create business-wide propositions that are globally scalable. This includes an open technology platform called Touchpoint. The Touchpoint platform provides ready-made solutions, modular components and reusable services the business and IT can use to build and run scalable business services and global value propositions.
They can also distribute these to a large third-party ecosystem. In this way we can share innovations, use and reuse standardised components, and bring new products to customers faster and in more countries.

Through the Touchpoint platform, new and existing ING business initiatives have access to 25.2 million customers (around 65 percent of our customer base) in an internal and third-party ecosystem. It is enabling scalable business solutions that aim to harmonise the customer experience. And it connects ING to third parties through common architecture and shared application programming interfaces (APIs). The Amazon partnership was made possible by using Touchpoint to integrate fintech Lendico’s lending platform for small and medium-sized businesses with ING in Germany.

ING Group Annual Report 2020 on Form 20-F33

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Strategic priorities

Earning theBy this we mean increasing the number of customers who have multiple ING products (including a currentMaterial topics:financial performance, usability primaryaccount into which a recurring income, such as a salary, is paid) or Wholesale Banking clients with anchorand accessibility of our products relationshipproducts such as lending and transaction services. It’s closely linked to customer experience and satisfaction:
the more satisfied customers are, the more likely they’ll choose ING for additional products and services. Over the past five years we’ve consistently increased the number of primary customers.

Using ourHaving the right data at our fingertips will enable us to achieve many of our strategic priorities. We use data toMaterial topics:customer privacy, culture, ethics advanced datapersonalise our customer interactions and gain insights to deliver a differentiating experience. It also helps usand integrity, digitalisation and interconnectivity, capabilities tomake sound business decisions and drives innovation. At the same time, we want to protect people’s data andcyber resilience understand ourtheir privacy and are committed to handling data safely and being open about how we use it.

customersbetter

Increase the paceNew technologies enable new ways to do things and disrupt the status quo. To stay relevant it’s essential thatMaterial topics:innovation, usability and of innovation towe evolve too. This means coming up with disruptive products, services and experiences that support ouraccessibility of our products, digitalisation and serve changingstrategic ambitions and keep ING a step ahead.interconnectivity

customer needs

Thinking beyondPersistent low/negative interest rates offer savers little incentive, challenging our traditional business model.Material topics:innovation, digitalisation and traditional bankingDigital platforms are an opportunity to become relevant to customers by providing new products and services,interconnectivity, customer privacy, culture, ethics to develop newalso in areas beyond banking, which offer new revenue streams for ING and provide a better customerand integrity services and businessexperience.

models

ING Group Annual Report 2020 on Form 20-F34

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Mastering data

For example, in the Regtech space, we’re using analytics solutions to identify potentially risky shell companies in
Data is the lifeblood of organisations like ING. We use data to personalise our customer interactions and gain corresponding networks. In the retail domain, we developed and implemented machine learning interest rate
insights to deliver a differentiating experience. It helps us make better business decisions, while being mindful of optimisation models for better-priced mortgages in Germany, Italy and the Netherlands. In risk management we
using our data responsibly and in line with people’s expectations . We rely on data-driven models to manage our built more topic detection models for the early warning signals (EWS) monitoring tool, which should ultimately
capital and risk-weighted assets and improve risk management. Data on customers and their transactions is also help reduce risk costs. We’re also using analytics to develop acceptance models for consumer and business
essential in the fight against money laundering and other financial economic crime. Not least, data drives lending in Austria, Belgium, the Netherlands and Spain, which help lower risk costs and increase acceptance
innovation. It is the main ingredient for artificial intelligence and robotics solutions.
rates. New collections models for the Netherlands and Italy help us identify clients in financial difficulty and that

need our support at an early stage.
However, to make data meaningful it needs to be sorted, harmonised and put into context. The accuracy of our

models relies heavily on the quality of the data that’s used to develop them. It’s essential to have one common In addition, we stepped up our experiments and experience with chatbots and are creat ing value and scale. The
approach for using and storing data. ING’s data management strategy includes standardised data definitions (ING benefits for customers include 24/7 contact, fewer human errors and a simpler user experience. In the
Esperanto) and data models (Esperanto Warehouse Model), which contribute to the availability, quality, Philippines, we launched a virtual assistant that directs customers to their needed answers. Similar initiatives
integrity, usability, control and governance of our data.
have been or will be rolled out to other countries. In Germany, ING’s virtual assistant ING answered 7.3 million

customer questions in 2020, recognising 94 percent of queries on current accounts (the best chatbot out of 22

Ethics and privacy tested in various industry sectors), while our Turkish chatbot INGo not only answered customers questions, but

We acknowledge the need to protect people’s privacy and are committed to handling our data safely and beingalso approved 547.6 million lira worth of personal loans (89 million lira in 2019).

honest about how it’s used. This means we inform our customers and employees about how we use their data

and respect their privacy when processing it.

Analytics and building our data capabilities

Becoming a truly data-driven organisation requires stepping up our analytics capabilities. This means promoting

data fluency among our employees and strengthening our analytics delivery. ING’s Analytics Unit is responsible

for coordinating these activities globally and aligning them with our business strategy, as well as building one

analytics and data community. To enhance our data science capabilities – which we have identified as one of the

‘Big 6’ capabilities ING needs to succeed – we have an Analytics Academy, we’ve added an analytics track to our

International Talent Programme for graduates, and we collaborate with academic institutions like Dutch Delft

University of Technology (TU Delft) on artificial intelligence research.

Our analytics delivery is focused on solutions in nine areas: customer interactions, customer dialogue, risk and

pricing, financial crime and regulatory technology (Regtech), intelligent operations, innovation and beyond

banking, people and finance, and Wholesale Banking. In 2020, we further accelerated our advanced analytics

capabilities and delivered solutions to different domains.

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Innovating to stay a step ahead

Innovation at ING is about creating a differentiating experience for customers. As such, it’s at the heart of our Think Forward strategy. We rely on innovation to remain relevant to our customers and live up to our purpose.
Developing truly disruptive products, services and experiences is also a prerequisite for realising our platform ambitions and moving beyond banking.

So far, our innovation focus has allowed us to turn great ideas into products and services that customers really need. Smart money app Yolt now has more than 1.6 million registered users. Blockchain solutions in trade finance are helping to make trades faster and simpler, for example by reducing the processing time for letters of credit from around 10 days to under 24 hours.

When the coronavirus crisis first hit, our focus shifted towards adjusting our operations to accommodate the new, more digital environment. Radical innovation moved down the priority list and certain projects were shelved: for example, an initiative to digitalise aircraft financing. Other initiatives benefitted from the growing demand for digital solutions, such as the trade finance tools of our co-owned blockchain-based software company Komgo.

With the creation of ING Neo we’re aiming to increase the speed and impact of our innovation by bringing together initiatives in Wholesale Banking, Retail Banking (platforms and beyond banking activities), the Chief Innovation Office and our venture capital vehicle, ING Ventures.

ING was recognised by Global Finance magazine as the most innovative bank in Western Europe at its Innovators 2020 awards. Our home-grown innovations in cash management (Zero Knowledge Proof Notary on Corda), the corporate finance category (CoorpID) and payments (FINN Banking of Things) also won individual awards.

ING Group Annual Report 2020 on Form 20-F36

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

How we innovateWeLab (automated consumer loans in China and Hong Kong), Fintonic (Spanish finance app), Cobase (multi-

banking platform for corporate clients), Ascent (regulatory compliance platform) and Axyon (AI-powered asset Innovative ideas come from inside and outside ING. All our employees are encouraged to think creatively and manager).
come up with ways of doing things faster, better and more efficiently. We stimulate their ideas through our bank-

wideInnovation Bootcampand local innovation ambassadors. For Innovation Bootcamp 2020, we received 444 ING partners with those who look at banking from a different perspective. Companies like Scalable Capital in ideas in four areas: how to disrupt lending before others do; empowering customers to strengthen their financial Germany, a robo-advisor, which attracted a billion euros in assets under management in its first 2.5 years. Or health; delivering a unique digital customer experience; and creating a world-class employee experience. The Eigen, a natural language processing fintech that offers ING a strategic capability in the intelligent operations winning idea was ImpactING, which aims to make it easy for customers to have a positive impact on the planet domain. Deployed in use cases across retail and wholesale banking, Eigen is contributing to ING’s digital via a sustainable bank account that allows them to contribute to a good cause with every transaction.
transformation, creating tangible value for customers and employees by applying machine learning in areas such

as corporate lending and SME banking.
In November, we hosted the first Innovation Summit for all employees. The three-day digital event explored

ING’s impact on the lives of customers and employees, shed light on global digital trends and showcased our Currently, ING has more than 200 partnerships. Not all our collaborations lead to new products or services, latest innovations. It was streamed to over 30 ING countries and reached approximately 1,500 unique users.
however, and we’ve ended over 110 so far, mostly after unsuccessful or unsatisfactory proofs of concept .

ING’s customised innovation methodology, PACE , combines lean start-up, design thinking and agile scrum. Its key In November 2020, in light of the impact of Covid-19 on the economy, which required us to reprioritise and feature is customer validation. This ensures we develop only what customers really want. More than 10,000 reassess our programmes, we decided to stop our activities forCumulus Park Studios. Part of the Cumulus Park employees have been trained in PACE to date.
innovation district in Amsterdam, where several ING buildings are located, Cumulus Park Studios is a

collaborative initiative with local government and educational institutions to drive innovation and co-creation In 2020, theING Innovation Fundallocated €25 million to accelerate innovation across the bank. Funding is around the themes of urbanisation and digital identity. We remain committed to further developing the available to any employee who wants to turn a breakthrough idea into reality.
innovation district and will continue to collaborate with our district partners on a lower ambition level.

External collaboration ING Labsis our incubator for potential scale-ups. Here we work with external experts, combining corporate

Nobody knows what the future looks like or the technologies that may emerge . We recognise weinnovation and entrepreneurial experience. We believe this contributes to a higher success rate and greater

don’t have all the skills and knowledge in-house and we’re open to investing, partnering and building with others.impact than either could achieve alone. We have four Labs worldwide, each with its own specific value space that

matches local expertise and ecosystems. These are trade (Singapore), property, real estate and regulatory

ING Venturesis our €300 million fund investing in early-stage companies. It targets disruptive technologies thatprocesses (London), creating minimum viable companies that are ready to scale (Amsterdam) and proofs of

ensures customers and clients get access to best-in-class services. It also helps entrepreneurs with hands-onconcept with fintechs to bring new tech solutions to market faster (Brussels, formerly Fintech Village).

support, know-how and access to ING’s distribution network. We currently have 34 investments, including

ING Group Annual Report 2020 on Form 20-F37

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Strategic enablers

Simplify and streamlineStandardised products, systems and processes, shared services, one IT infrastructure and one Way of Working lay theMaterial topics:usability and accessibility of our products

foundation for the superior digital experience we strive to deliver. We believe this allows us to respond more quickly to changing customer needs and low-cost competitors by becoming more cost-effective, cost -efficient and agile, and by bringing new products and services to market faster.

Operational excellenceING promises customers we’ll keep getting better. This includes accelerating the digitalisation of end-to-end processes for aMaterial topics:IT systems and platforms, cyber resilience frictionless customer experience and greater efficiency. It’s also about ensuring safe and secure operations, stable IT systems and platforms and the highest standards of data security.

Performance cultureDelivering a differentiating customer experience requires engaged employees who are motivated to go the extra mile.Material topics:culture, ethics and integrity

That’s why we strive to create a great employee experience and develop great leaders who can enhance performance and inspire our people to deliver on our strategy. Diversity and inclusion contribute to this – people perform better when they are free to be themselves. ING does not tolerate discrimination in any form. We are guided in everything we do by the values and behaviours in our Orange Code and global Code of Conduct.

Lending capabilitiesWe are seeking opportunities to broaden and diversify our retail lending capabilities in the Business Banking and consumerMaterial topics:financial performance, climate resilience

lending segments. In Wholesale Banking we continue to build on our lending capabilities in our markets, combined with our sector lending franchises and product capabilities, to build primary relationships to be able to diversity our income by generating more fees. ING is considered a pioneer in sustainable finance, having introduced the first sustainability-linked loan and a made-to-measure sustainability improvement loan.

ING Group Annual Report 2020 on Form 20-F38

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

TransformationTo further develop our universal digital bank, we’ll focus instead on using our global technology foundation,

reusing already developed mobile app components, and rolling out global digital product offerings in the areas of
To deliver a differentiating customer experience globally we are streamlining our products and processes, insurance, investments and consumer lending. When identifying areas to build cross-border capabilities we’ll
enhancing operational excellence and harmonising our customer engagement platforms, supported by a global weigh up impact versus complexity, always with the aim of increasing scalability and delivery speed. In this way
technology foundation. This foundation includes shared data lakes, cloud solutions and modular IT building we only need to develop once for multiple countries and can create a sustainable competitive advantage,
blocks. It’s also about monitoring and executing regulatory programmes globally that aim to ensure ING is a safe, accelerating customer engagement and business impact. Updating legacy IT systems with new technology
secure and compliant bank.
standards and global solutions will also contribute to greater efficiency as we move towards becoming a global

digital bank.
To accelerate the execution of our Think Forward journey, we launched a series of transformation programmes in

2016 to unite similar businesses and bring us closer to one mobile-first digital platform offering one ING The creation in 2020 of one global retail management team was the next step in our journey to unify and
experience everywhere. These included:
harmonise our retail approach in all our markets. This will further reinforce alignment, improve prioritisation and
• Unite be+nlto combine the respective strengths of the Netherlands and Belgium.drive a consistent retail strategy that aims to accelerate digitalisation, use our global technology foundation to
•Maggie(formerly Model Bank) to standardise the customer experience and product offering in fourenhance operational efficiency and excellence, and roll out global digital product offerings in areas such as
Challengers markets - Czech Republic, France, Italy and Spain.insurance, investment and consumer lending.
• Welcometo digitalise ING in Germany, which was completed in 2019.
•The Wholesale Target Operating Model (WTOM) programme has come to a natural conclusion as it achieved WTOMto optimise, digitalise and standardise our Wholesale Banking offering in all countries.
cost, risk and income benefits for the Wholesale Banking franchise globally, the result of extensive work over the

last years to replace legacy systems, applications with target solutions, and create a range of shared operational Unite be+nl involved, among other things, the large-scale integration of 600,000 Record Bank customers in services. We have now decided to end WTOM and commence with digitalisation-orientated programmes in our Belgium in 2018, and the replacement of many existing IT systems with one digital platform. Integrating the back- Transaction Services, Lending and Financial Markets businesses.
end systems turned out to be more complicated. Yet despite the challenges and adjustments to the programme

in response to changing circumstances, all our Belgian retail customers now use the same internet banking

Laying the foundation environment as the Netherlands (OneWeb) and 90 percent have migrated to the mobile OneApp used in the

Netherlands and Germany. Unite be+nl runs until 1H 2021.Building a universal digital bank requires a strong foundation that’s the same everywhere: the

same approach to data, the same processes, same systems and infrastructure and the same way

Given the coronavirus-related economic headwinds and our learnings from the complexities and costs of cross-of working.

border systems and product integration, we decided to refocus our activities in 2020 to ensure faster customer

delivery and a continuously improving end-to-end digital customer experience.At the heart of this is our IT strategy. ING is building a technology platform to facilitate our journey from a

traditional bank to a data-driven digital bank. It is designed to create speed, scale and security as well as cost

This underpinned our decision in 2020 to stop Maggie as a programme. Launched in 2016 to integrate ourefficiency through programmes like ING Private Cloud, Touchpoint, the data lake foundation and OnePipeline.

product offering and provide a standardised easy, personal and smart digital experience for customers in fourThis last programme supports the engineering journey from idea to working code that underlies our digital

Challengers markets, Maggie delivered various customer experience building blocks and sales and servicesservices and can easily be reused by other engineers worldwide. We continuously adjust and improve IT projects

journeys.and programmes based on new insights, lessons learnt and the impact of developments such as the coronavirus.

For example, at the start of the outbreak we had to increase our network capacity by 365 percent to facilitate the

ING Group Annual Report 2020 on Form 20-F39

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

large numbers of users connecting from home: daily remote connections have grown by 285 percent since March.ING’s one Way of Working (WoW) is based on agile, purpose-driven teams and allows us to respond quickly to changing customer demands and feedback. We’ve implemented ING’s WoW in all retail countries as well as in We changed the top structure of the Tech organisation in January 2021, to better align with ING’s digital andWholesale Banking and in many of our business support activities. Uniting so many different cultures requires a data-driven ambitions. This has brought all the assets belonging to the banking technology platform under onebehavioural shift, guided by our Orange Code, and is supported by WoW ambassadors, bootcamps and training senior management line, helping to further the consumption and delivery of the features of the bankingprogrammes. The coronavirus pandemic has made it necessary to adapt to new ways of working and technology platform and improve impact.collaborating remotely.

Related to this, theING Private Cloud(IPC) is the target platform standardising our IT infrastructure. It’s whereGovernment measures to curb the spread of Covid-19 in ING countries required us to adapt quickly to extended we store and process data and IT services such as our mobile phone apps to give customers a consistentremote working. This accelerated certain IT programmes, such as the roll-out of cloud-based tools, enabling experience in a secure and reliable way. Unlike traditional infrastructure, cloud computing enables pay-as-you-goonline collaboration and meetings. Remote working brings certain increased operational risks with respect to usage, elasticity and full management by the user. To keep up with global usage, scalability, availability andinformation security, data protection, the availability of key systems and infrastructure integrity. In 2020, ING delivery speed, ING is adding public cloud computing to our infrastructure offering. By end-2020, IPC was used incontinued to focus strongly on managing exposure to these risks and took steps to increase the efficiency and 15 countries. Around a quarter of global infrastructure now runs on IPC, up from 15 percent at the end of 2019.effectiveness of our IT infrastructure to ensure the continuity of our business from outside the office.

Data lakesserve as digital repositories for all the internal and external data we collect, making it easier to share itWe also have preventative measures in place that continuously test our resilience against cyberattacks and across the company. Having one ‘home’ for data is in line with our strategy of simplifying our banking systems.attempts to gain unauthorised access to our systems. These include a dedicated cybercrime expertise and Aggregating our data allows us to exchange information and knowledge with each other more easily. To enableresponse team and ‘ethical’ hackers.
this data exchange we’ve created a universal data language calledING Esperanto. Translating local data of all ING entities is a significant challenge as it requires both subject matter expertise of local businesses and regulationsWhen and how our employees return to the office remains hard to predict and largely depends on the situation and knowledge of ING Esperanto to be able to create and benefit from aggregated data in a governed way.in each country. When it is safe to do so, there are rotation schemes to allow a controlled return to the office.
We will also pilot global principles that will guide our future way of working in the post-coronavirus world. These ING Business Shared Services BV (IBSS) is a fully-owned service company employing around 10 percent of INGare based on feedback from employees and aim to balance the advantages of working from home and working colleagues globally. Itsshared service centresin Bratislava, Manila, Katowice, Warsaw and Bucharest contributefrom the office. We’re taking a step-by-step approach that provides a degree of flexibility for local to ING’s digital transformation and cross-border scalability by centralising operational and IT support tasks inimplementation and respects local labour laws.

areas such as global data management, Tech services, non-financial risk and compliance, KYC, data analytics and modelling.
Recognising the need for a strong engineering culture to achieve our Think Forward ambitions, we strive to develop and grow a global workforce of highly skilled engineers. We run global performance days, where we assess and calibrate engineers based on one engineering profile. The ING Tech Academy keeps engineers updated on the latest technology. We are pursuing initiatives to improve diversity in our teams. These include the ING Women in Engineering days and the Sparks community at ING in Australia , which aims to inspire and empower women in technology.

ING Group Annual Report 2020 on Form 20-F40

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

B. Business overviewAt the same time, to provide our 39.3 million customers with a differentiating and engaging experience

everywhere and to move closer to becoming a universal data-driven digital leader, we aligned our Retail

organisation under one management team with shared global priorities aimed at harmonising customer Market trends like the shift to mobile and online banking confirm ING’s mobileengagement and selected products on cross-border platforms.

first digital approach. Building on this, we adapted our processes and service

We also centralised innovation, introduced ‘do your thing’ - ING’s first global tagline – and harmonised our models to make banking safer, easier and always accessible to customers in a activities for small and medium enterprises (SMEs) and mid-corporate clients in seven countries in a new
time of social distancing, and put measures in place to help them deal with theBusiness Banking segment.

impact of the coronavirus pandemic on their finances.
In Wholesale Banking we deepened our focus on core clients, supported by steps to build differentiating value

propositions to meet their needs. This also supports our strategy to diversify income by generating more fee- These included contactless payments, more flexibility on loan and mortgage repayments, financial advice and based business. We continued to focus on digitalising our processes and st reamlining our organisation to deliver partnering with business clients big and small to support them in the most appropriate way. We also strived to faster and better to clients. As part of the focus on core clients, we announced measures to simplify our provide uninterrupted access to our banking services. In 2020, weighted system availability for Retail Banking geographical footprint, withdrawing from South America and selected Asia markets while continuing to serve the customers in the Netherlands and Belgium was 99.6 percent and for Wholesale Banking clients worldwide system needs of clients in those markets from our regional hubs.
availability was 99.9 percent.

Our markets Reduced economic activity during the year meant demand for consumer and business loans was lower in a

number of markets, and the ongoing low/negative interest rate environment pushed our net interest incomeING serves over 39.3 million individual customers as well as small and medium-sized businesses up to
down. Yet our results remained resilient throughout the year. Demand for mortgages remained healthy and wemultinational corporations and financial institutions.
were able to grow our fee income as considerably more customers chose ING’s accessible digital retail

investment products. We ended the year with improving cost control and a strong capital position, contributingOur Retail Banking business line offers private individuals a full range of products and services covering
to a full-year result before tax of €3,399 million in accordance with IFRS-IASB.payments, savings, insurance, investments and secured and unsecured lending. This segment also includes self-

employed entrepreneurs, micro businesses, small-to-medium enterprises (SMEs) and mid-corporate companies
Recognising the growing demand for digital and platform services, we took steps in 2020 to increase the pace ofwho are served by our Business Banking proposition in several European countries. These business customers
end-to-end digitalisation across our business and make our products and processes even easier, smarter andearn revenues of up to €250 million and our goal is to help them manage and accelerate their business.
more efficient, from onboarding new customers to instant payments.Wholesale Banking offers corporate clients advisory value propositions such as specialised lending, tailored

corporate finance, green structuring and debt and equity-market solutions. It also serves their daily banking

needs with payments and cash management, trade and treasury services.

ING Group Annual Report 2020 on Form 20-F41

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Our markets

Market Leaders Netherlands, Belgium, Luxembourg

• Leading retail and wholesale banks

• Cross-border customer interaction platform with mobile-first customer experience and cost efficiency

Challengers Australia, Austria, Czech Republic, France, Germany, Italy, Spain

• Digital bank with uniform, mobile-first customer experience

• Broadening product capabilities

Growth Markets Poland, Romania, Turkey, the Philippines and our stakes in Asia

• Universal banks in economies with high growth potential

• Developing differentiating customer experience based on mobile-first approach

Wholesale Banking International network and global franchises

• Active in more than 40 countries

• Extensive international client base across all regions

• Sector-focused client business in lending, capital structuring and advisory, transaction services and financial markets.

Our customers We offer:
39.3 million

• Payments, savings, insurance, investments and lending products and (year-end 2020)
services to individuals, SMEs and mid-corporate clients

• Daily banking and strategic finance and advisory propositions to corporate
clients

ING Group Annual Report 2020 on Form 20-F42

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Supporting customers in crisisPayment holidays

Customers in all retail countries were offered mortgage holidays and deferrals on loans and credit card The Covid-19 crisis impacted our customers in many ways. Across our business we took action to help them
repayments. We granted 196,000 customers payment holidays totalling €19.4 billion since government measures navigate the economic headwinds and stay in control of their finances during this turbulent time. ING’s support
were introduced in various countries to protect people impacted by job losses and loss of income during the began with the basics: aiming to provide uninterrupted access to our mobile and digital channels when
lockdowns. Of these, 55 percent were for customers in the Netherlands and Belgium. By the end of the year, 93% customers need them most and making their lives easier with digital tools such as contactless payments.
of payment holidays had expired. We also provided around €1.5 billion of government-guaranteed facilities to

support our business clients.
To ensure the continuity of services our Wholesale Banking clients rely on, certain business-critical operations

such as Financial Markets, Treasury, and Payments, were split across different locations during global lockdowns.
In addition, ING worked closely with business clients to understand the direct impact on their individual

situations. Some industries, such as travel, hospitality and transport, were more severely affected than others. In In the Netherlands, 85 percent of all card payments in 2020 were contactless via plastic cards and third-party
the most heavily affected sectors governments also stepped in to protect companies and jobs with measures services like Apple Pay, as well as our own Android solution in the banking app, which is now also available in
such as tax payment holidays and compensation schemes. Between March and May we collected feedback from Australia, Poland, Romania, Germany, France, the UK (via Yolt), Italy and Spain. Driven by accelerating digital
over 18,000 businesses in six countries through regular pulse checks to gain insight into their needs.
behaviour of our customers, the use of mobile payments increased rapidly against a backdrop of lockdowns and

other Covid-19 measures, both as a share of total card payments and total contactless payments. Customers While it is impossible to predict how the pandemic will develop, additional lockdowns across Europe in the appreciate not having to enter their pin code on a terminal.
autumn and the phasing out of related payment holiday schemes and other support measures could potentially

lead to more business insolvencies and unemployment. This could lead to more customers getting into financial In countries such as the Netherlands, Spain, Belgium, Germany and Turkey, we increased the daily limit for
difficulties and to higher levels of default.
contactless payments so customers could use this option more often and made it free to withdraw cash from

ATMs (in some countries this is already a free service). Customers in Poland can use their mobile phones to make
More information on the impact of Covid-19 on ING as well on the related risk measures taken to address it can contactless ATM transactions. Also in Poland, it’s now possible to open a new account from home using just a
be found in the ‘Risk Management’ section.
mobile phone and an ID card.

Short-term liquidity New mortgage customers in Australia can now validate their identity by video; video calls to advise customers on

investments and other matters replaced face-to-face contact in Belgium and the Netherlands. For primaryIn times of crisis, companies need to be able to make swift decisions and want a financial partner they can trust
customers in Australia, ING maintained a higher savings interest rate even when they did not reach the salaryto be there for them. For many businesses, their most urgent initial need was support with liquidity, particularly
deposit requirement.when markets are as volatile as today.

In some countries, a limited number of branches remained open for customers who wanted in-person advice. InIn Turkey, ING worked with the World Bank and Turk Eximbank on a €380 million loan to support exporters with
our branches we took precautions to ensure the safety of customers and employees, such as installing plexiglassfinancing during the crisis.
screens, making hand sanitisers available, splitting teams and limiting visits to by appointment only.

In the Netherlands, we dedicated €1.1 billion for loans to SMEs. Part of these funds will be guaranteed by the

European Investment Bank and €702 million of these loans will be sold against a favourable interest rate.

ING Group Annual Report 2020 on Form 20-F43

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Achieving our business goals

ING proactively contacted Wholesale Banking and Business Banking clients to discuss ways to ease the impact on

We still have a lot to do to become the leading data-driven digital bank we aspire to be, but we also have to their businesses, which in some cases was significant. By monitoring the business landscape to better understand

remain flexible in dealing with the impact of the coronavirus pandemic, changing customer behaviour, which industries are most impacted we can tailor our support and solutions to specific industries and determine

persistently low/negative interest rates and increasing regulation. That means continually weighing up benefits who needs our help the most.

versus costs, consistently using what we have already developed, quickly applying learnings and best practices,

and taking decisions to focus our activities to ensure we deliver on our strategic priorities.
These tailored solutions included ways of easing their short-term liquidity needs with funding set apart for Covid-

19 facilities. ING’s capital markets teams placed €39 billion of bonds via active bookrunner roles for corporates

These considerations informed the decision to reduce the geographical footprint of our Wholesale Banking and financial institutions and approved around 70 new liquidity facilities for top-segmented clients. By converting

business and to stop Maggie, our transformation programme to simplify and harmonise the product offering and Covid-19 facilities into capital market mandates we believe we helped clients secure longer term funding more

experience of retail customers in four Challengers markets. Instead, as we develop our universal digital bank, we easily while lessening the risks for our bank by shifting exposure to the institutional market.

will focus on the global use of ING’s technology foundation to build scalable cross-border products and a

consistent end-to-end digital customer experience in all our markets.
In May, ING collaborated with French bond issuer Caisse Francaise de Financement Local (CAFFIL) on Europe’s

first Covid-19-related bond to raise financing for French public hospitals.

Global priorities

Financial healthThe accelerated shift to mobile and online banking in 2020 increased the urgency of stepping up the end-to-end

digitalisation of our products and services. Linked to this is the need for good quality data to drive the engaging Managing money is one of the leading causes of stress for people around the world as many struggle to meet
and personalised customer experience we are aiming for.
their day-to-day needs or plan for their future. This was amplified during the Covid-19 pandemic. ING offered

budgeting and debt relief advice and guidance to customers in financial difficulty in partnership with Building on what we’ve learnt and achieved over the past years, we adapted our Retail organisation in 2020 to organisations like the Dutch ‘Geldfit’ website, and financial counselling services in Australia and Romania.
increase alignment around key priorities that will contribute to our ambition to become one global digital bank.

Led by the new global Retail Banking management team, we will focus on rolling out global digital propositions Using our knowledge of innovation and digitalisation, we put insights about people and money into products,
converging towards a common engagement platform. And we are looking for new ways to be relevant to our tools, research and education that help contribute to a financially healthy society. We believe that the right
customers and generate alternate revenue sources.
information at the right time can help people make better financial decisions. We are delivering that through

forecasting tools, such as ‘Kijk Vooruit’ which gives Dutch customers an overview of upcoming payments. With Innovation is essential here. To increase the impact of our innovation and speed up execution, ING has created a Everyday Roundup, available in Australia, Poland and Romania, we help customers save while they spend (see new dedicated business area, ING Neo, which combines all of our initiatives and activities in this area.
‘differentiating customer experience’ below). In Belgium, we’ve partnered with fintech Minna to manage

customer subscriptions (see ‘Platform thinking’ below).
Of course, keeping our bank safe, secure and compliant remains a priority for ING. Customers trust us to protect

their money and their data. That trust is our licence to operate.
As a result of our financial empowerment activities, 27.8 million people (71 percent of our customer base) felt

financially empowered by ING in 2020. In 2019, this was 25.9 million or 67 percent. Our ambition for 2022 is for

30.2 million customers to feel financially empowered by ING.

ING Group Annual Report 2020 on Form 20-F44

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Unleashing sector potential

In 2020, we remained focused on providing our corporate clients with relevant advice, data-driven insights and customised, integrated solutions that make their day-to-day banking more efficient and support their business ambitions. This is in line with the revised Wholesale Banking strategy we introduced in 2018 to enable us to adapt to and overcome a challenging and complex market environment, as well as increased regulatory requirements, evolving technology, greater competition and our clients’ changing needs. Addressing these challenges, amplified by the effects of Covid-19, required us to accelerate our priorities and refocus our activities to ensure we deliver to our customers faster and continuously improve the end-to-end digital experience.

We further developed our sectors strategy over the year, pairing local and global insight with sector knowledge and financial expertise, and we enhanced our client segmentation model, which helps us tailor our daily banking and advisory value propositions to clients specific needs. Based on similar considerations of aligning with our core client base and deepening our relationship, we made the decision to withdraw from a number of countries in South America and Asia. We’ll continue serving the international needs of our clients in these countries from regional hubs. We will stay focused on improving client service delivery and streamline our operating model by clustering similar activities and know-how in existing centres of expertise.

Several deals in 2020 reflect this sector focus. These included a €1.6 billion debt financing package for Swedish sustainable battery producer Northvolt to finance Europe's first home-grown gigafactory for lithium-ion batteries. ING co-led the lending consortium. ING was also involved in the largest green loan to date in Asia- Pacific in the commercial and industrial (C&I) renewables sector, a US$75 million loan to Singapore-based Cleantech Solar.

We work with our Wholesale Banking clients to finance and facilitate their transition to low-carbon technologies.
We’ve developed a comprehensive suite of sustainability products and services to help them, including green loans and green bonds.

In July, we announced that due to Brexit we will move some Financial Markets activities from London to Amsterdam. Here we already have a relatively large Financial Institutions/Financial Markets risk organisation, which can be effectively used during and after the transfer of the operations. The move does not impact our clients or client coverage.

ING Group Annual Report 2020 on Form 20-F45

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

A differentiating customer experiencesecurities savings plans that allow all customers to invest small amounts (from €1) in shares, exchange traded

funds (ETFs) or mutual funds. With savings plans available for more than 1,800 securities, including more than More and more people are discovering how easy and efficient it is to do their banking online, with the number of
200 funds and ETFs without purchasing costs, it’s a low-threshold entry into investing .
digital interactions growing to 5.3 billion in 2020 from 4.5 billion in 2019. Of these, 87 percent are mobile

interactions, with a growing number of Retail customers only interacting with ING via their mobile phone: 40 ING’s Everyday Roundup (ERU) product is helping to make saving simpler. First introduced in Poland, then in percent versus just 12 percent in 2016.
Australia and Germany, it is now also available in Romania. More countries will follow in 2021. By rounding up

every transaction and transferring the difference to the customer’s savings account, it makes saving frictionless This digital connectivity yields data and insights that contribute to a more personalised and empowering
at a time when customers may be financially vulnerable (due to the corona virus crisis). ING in Germany launched experience, giving customers even more reasons to interact with us. This is how we can become an essential part
a 'donate to Unicef' option for rounding up and ING in Australia has a roundup option for mortgages. The next of people’s digital lives.
step will be investments. There are 850,000 active ERU users, of which almost half are in Poland and Australia,

while users in Germany rose to 156,000.
To provide customers with an even more personal, easy and smart experience, we held our first fully virtual

customer experience (CX) day in October 2020. More than 2,000 colleagues from Belgium and the Netherlands Our Yolt smart money app introduced a similar feature in 2020 called Money Jar. It too allows users to save while attended. They made small changes that can have a big impact, resulting in 291 customer experience they spend by rounding up purchases to the nearest pound or euro and offering cashback from selected retailers.
improvements.
The money jar feature also offers handy tips and reminders for users to increase their savings. It's trained to

recognise and save refunds, salary raises and even bonuses.
Among the new mobile features introduced in 2020 is a single sign-on that allows customers in the Netherlands

to seamlessly switch between their mobile app and online banking, and we made it easier for them to block, Through ING’s bancassurance partnership with AXA, customers can create their own personalised insurance unblock and replace their bank cards themselves. In Belgium, customers can use their bank app to manage cover in a clear and easy way using their ING mobile app or the ING website. For example, customers in Italy only subscriptions via third party Minna and send payment requests through Payconiq. And we extended ‘magician have to answer three questions to get building and contents insurance compared to 60+ previously – something mode’ to Germany, which hides customers’ account information when they swipe their hand in front of their they appreciate, rating the service with a 4.5 out of five for advice and satisfaction. The bancassurance offering is phone camera while using the app in public.
now available in five countries through 11 insurance products delivering banking linked to lending and home/life

protection. A further two propositions for mobility and wellness are being built to provide full lifestyle protection For visually impaired customers, ING is the first bank in the Netherlands to provide a bank card with a notch in
for customers through ING’s five billion digital engagements.
the side so they can easily recognise it and insert it correctly into an ATM.

In the Business Banking segment, we are digitalising our proposition for SMEs, micro businesses, mid-corporate s In the Philippines, ING’s newest mobile-only retail market, the ING app has been installed more than two million
and self-employed customers using the Touchpoint platform. This will enable us to standardise our offering for times since its launch in November 2018. The introduction in the Philippines of ING Pay in November 2020 led to
over 1.5 million businesses in Belgium, Luxembourg, the Netherlands, Poland, Romania, Germany and Turkey, over 60,000 new daily accounts in its first month.
avoiding duplication and unlocking synergies between the countries.

Our call-centre platform, developed as part of the Unite be+nl programme, is providing a harmonised customer With customers looking for alternatives to savings accounts in the low/negative interest rate environment, we’re
contact experience across multiple customer interaction channels in eight countries. Because it is cloud-based, empowering them with smart digital investment tools like My Money Coach in Spain, Coach Epargne in France
customers receive the same services everywhere and it makes it easier for ING to share and adopt innovations and Easy Invest in the Netherlands. In 2020, our retail investment products in Germany and Spain reached €56
and adjust to changing customer needs.
billion and €12.3 billion in assets under management respectively. In Germany, ING is the first bank to offer

ING Group Annual Report 2020 on Form 20-F46

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

One brandMaking life easier for commuters on the go, ING is piloting Invisible Tickets, a Dutch initiative that allows them to
seamlessly pay for public transport using mobile phone sensors. It is aimed at countries where the use of public The introduction in 2020 of ING’s new global ‘do your thing’ tagline in the Netherlands, Belgium, Romania, transport is high, such as Germany, France, Italy, the UK and the Netherlands.
Poland and Wholesale Banking brings a common brand direction to the bank that will be extended to the other
ING countries over time. We launched advertising campaigns that included

Platform thinking new brand elements like a new style of photography, a sound logo and always signing off with
‘do your thing’.
The power of platforms is that they are open, borderless, scalable, empowering and generate large amounts of
data through frequent user interactions that can in turn be used to improve users’ experience. To remain The tagline articulates ING’s empowering purpose and encourag es people to do more of the things that move relevant to our customers we need to be on the digital platforms where they are spending their time shopping, them or their business. It is about people being free to focus on what matters most to them knowing that, socialising and working.
whether in their private or professional lives, they can make their world a little better
for it.
ING is exploring various platform business solutions. We are building our own platforms. Some of these have
evolved into stand-alone platforms. Smart money app Yolt, mobile payments app Payconiq and corporate In Wholesale Banking, do your thing is linked to ‘changemakers’ – companies and people that ignite and lead multibank platform Cobase are three examples.
sustainable change in a responsible way.

Yolt, which now has over 1.6 million registered users in the UK, Italy and France, added new features in 2020,

Instant payments such as Money Jar, which helps customers save while they spend. Yolt Pay, currently in beta, uses open banking
Open banking has changed the way people pay, giving consumers more options and opening up this service toAPIs to initiate money transfers between users’ accounts and to pay others. The app also links to partners like
non-traditional providers. To keep up with payment trends, ING has introduced instant payments executed inMoneySuperMarket, PensionBee and Wealthify so they can invest, save on household bills and grow their
real time 24/7, 365 days a year. In 2020, the service was extended, enabling payments instantly from thesavings. In 2020, Yolt was named the best personal finance app at the Wealth and Finance Fintech Awards.
Netherlands to the rest of Europe. ING is also working with major retailers in the Netherlands to extend peer-topeer payments (apps that enable users to request and receive payments instantly) so merchants can send theirING can also add value for our customers by connecting to relevant products and services on third-party
customers a mobile payment request on deliveryplatforms. In 2020, we strengthened our SME offering as the first bank in Germany to offer loans through
of goods.Amazon’s sellers platform, which is mainly used by SME companies. ING’s banking platform offers these clients

access to the digital lending solution of fintech Lendico, which provides loan approvals within 48 hours.
Following a successful pilot in 2019, ING now uses SWIFT gpi in nine ING countries to make international transfers quicker and easier. With SWIFT gpi around 80 percent of international money transfers are done on theIn Belgium, we partnered with Minna Technologies on a subscription service for customers. Using the ING app, same day, compared with three to five days previously.customers can keep track of and manage their subscriptions, and even cancel unused subscriptions or switch to better alternatives through an automated process, helping them save money and time.
For Business Banking customers, ING added a bulk payment functionality to its payment initiation application programme interface (API), making it possible to pay up to 5,000 recipients simultaneously. In addition, itThe integration of international payments platform Payvision strengthens ING’s digital payments business, supports multiple strong customer authentication, that allows all types of payments requiring two or moreespecially in e-commerce. Payvision is a subsidiary of ING that facilitates more than 80 payment methods in 150 authorisations.currencies. Its combined e-commerce and in-store solution helps merchants to offer their shoppers a seamless ING Group Annual Report 2020 on Form 20-F47

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checkout experience across all channels. Since acquiring Payvision in 2018, ING is exiting Payvision clients that noCross-border customer engagement
longer fit our risk profile.
Internally, we are working to harmonise our customer experience where it’s possible and beneficial on truly
cross-border platforms, giving ING the same face in different markets and the same banking interface with the

Open banking

same look and feel everywhere.
The introduction of the European Payment Service Directive 2 (PSD2) in 2019 is reshaping the banking industry. It requires banks to rethink traditional products and services and create new customer experiences that stand outOne such example is InsideBusiness – ING’s digital banking portal that provides Wholesale Banking clients with a in a competitive landscape. At the same time, open banking allows us to connect to other providers and integratesingle point of access to a growing range of products and services around the globe. It is accessible anytime and products and services to add value for our customers. Our open banking platform provides the key capabilitiesanywhere via web, mobile app and tablet. In 2020, there was rapid growth in the adoption of the InsideBusiness that allow ING to open up by establishing secure, scalable, compliant and uniform connectivity with externalapp: user numbers doubled from around 2,500 to nearly 6,000 unique users, while usage went up by 96 percent.
parties via application programming interfaces (APIs).We also doubled the number of self-service processes clients can initiate from InsideBusiness.

We believe open banking and APIs are a great way to foster innovation, accelerate digitalisation and integrateGiven the complexities and costs of cross-border system and product integration, and in light of coronavirusand co-create with others. Open banking propositions powered by API technology include the Lendico SMErelated economic headwinds, we announced in November 2020 that we will stop the Maggie transformation lending platform in Germany and the Minna Technologies subscription management app in Belgium. In dailyprogramme. Launched in 2016, Maggie aimed to integrate our product offering and provide a standardised banking, APIs boost treasury departments by delivering real-time cash and liquidity management.experience for retail customers in four Challengers markets. We will instead focus on using ING’s global technology foundation – shared data lakes, cloud and modular IT building blocks – to further develop our Yolt Technology Services (YTS), the business-to-business arm of the smart money app, facilitates open bankinguniversal digital bank and the rollout of global digital product offerings in insurance, investments and consumer for businesses across Europe by providing them with access to bank APIs that connect them to users’ banklending. We will continue to focus on implementing global solutions locally as a way to harmonise and accounts to initiate payments. In 2020, YTS surpassed one billion API calls – single uses of its API. In thestandardise the customer experience.

Netherlands, France and the UK, it offers businesses API coverage to over 90 percent of bank accounts and its API infrastructure can connect to 80 percent of bank accounts in Belgium, Italy and Spain.In the Netherlands and Belgium, where ING is already a market leader, we are uniting our respective strengths to deliver an even better and more consistent experience across all channels for our combined 11 million In Poland, ING introduced the first aggregator service that allows customers to manage multiple bank accountscustomers. In the second quarter, customers in Belgium were migrated to the OneWeb banking environment from their ING Moje account. The new service is available through ING’s online banking channel and the mobileshared with our Dutch customers. They also now use the same OneApp mobile environment as in the app.Netherlands and Germany, bringing us a step closer towards our ambition to provide customers everywhere with the same easy, smart and personal experience. Around 1.8 million customers in Belgium are now using OneApp We also use APIs to connect to our insurance partner AXA on ING’s first multi-country product platform.and OneWeb for online banking. In the Netherlands around five million customers use the app. New features were introduced in 2020 to empower customers to take charge of their own banking affairs via their mobile phone, for example to block a lost card or change their daily withdrawal limit, cutting back on the need to contact customer service.

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Beyond banking servicesIn the know your customer (KYC) space, CoorpID provides a digital vault where corporate clients can securely
store and share the KYC documentation required by multiple financial institutions. CoorpID was connected to Thinking beyond traditional banking is crucial to find new ways to be relevant to customers and create new ING’s KYC organisation in 2020.
revenue streams for ING. It strengthens our core businesses by engaging customers early, increasing the
customer lifetime value and contributing to a more sustainable banking business model.
ING moved steadfastly on its housing strategy across Dutch and German markets with disruptive concepts like
Scoperty and Makelaarsland. The near-term objective is to independently grow these and invest in synergistic We can introduce new and complementary services through platforms. Shopping services can use our scale to business models. Makelaarsland is a property platform empowering people in the Netherlands to buy and sell provide better deals or cashbacks to customers. The DealWise shopping platform gathers cashback deals and their homes online themselves or with the support of a local agent.
discounts in one place. Users can save on their daily spending while merchants gain insights that help them
better understand, acquire, develop and maintain customers. It is now available in Romania, with plans to enter In Germany, ING partnered with Sprengnetter on Scoperty, a real-estate platform connecting buyers and sellers Germany next.
of more than 35 million properties. The pre-qualification process for mortgages is aligned with that of Interhyp,
ING’s independent mortgage brokerage platform in Germany and Austria. Interhyp offers buyers access to 400 Similarly, ING+Deals in Belgium and ING Punten in the Netherlands are shopping platforms offering customers mortgage lenders. In 2020 its market share rose to 10 percent in Germany (nine percent in 2019).
exclusive deals in partnership with various A-brands. In addition to promoting customer loyalty, these shopping

platforms help to increase interactions with ING’s own digital channels. ING+Deals, with over 200,000 users generated more than €5 million revenue for our merchants in 2020, while ING Punten delivered a turnover ofEarning the primary relationship €45 million from the sale of 1.4 million products.
Customer numbers grew in 2020, especially the number of primary customers. These are Retail customers with multiple active products, including a current account with recurrent income, such as a salary. In Wholesale Banking these are clients lending and daily banking products and at least one other product generating recurring Retail markets NPSWholesale Banking NPSrevenues.

Earning the primary relationship is a strategic priority for ING as it leads to deeper relationships, greater Number 1 in13% above

customer satisfaction and ultimately customers choosing us for more of their banking needs. We want our customers to do more than just some of their banking with us; we want to be their first partner, where they deposit their salary, handle their payments and do most of their other banking business.
6 out of 14industry In 2020, the number of primary customers increased by 578,000 to 13.9 million. Across retail segments , this comprises 5.8 million for Market Leaders, 4.9 million for the Challengers Markets – where primary customers in marketsaverageGermany grew by 330,000, a record 56 percent in net growth versus 2019 – and 3.2 million for Growth Markets.

Measuring customer satisfaction

One of the ways we measure our progress is through the Net Promoter Score (NPS), which indicates customer satisfaction and loyalty (whether they would recommend ING to others). The score is calculated as the difference ING Group Annual Report 2020 on Form 20-F49

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between the percentage of promoters (who rate ING as 9 or 10 out of 10) and detractors (those scoring ING below a 6). Our aim is to achieve a number one NPS ranking in all our retail markets, with a 10-point lead over our main competitors.

Based on a rolling average of our NPS scores in 2020, ING ranked number one in six of our 14 retail markets:
Australia, Germany, Poland, Romania, Spain and the Philippines. In four of these we are more than 10 points ahead of our nearest competitor. ING also has a top-three position in a further six markets. The introduction of current account fees in Germany in February 2020 led to a downward dip in our NPS score here, but overall we retained our number one position in Germany in all four quarters. In France, more innovative competitors overtook ING in the number one position.

In the Business Banking segment, we measure NPS in four markets. These are the Netherlands, Belgium, Poland and Romania. The NPS for mid-corporate clients in the Netherlands improved to +18.4 (from +12.4 in 4Q 2019), well above our competitors (-23.3), based on feedback from clients who do business with multiple banks. Clients appreciate our sector knowledge combined with regional presence, with satisfaction highest in the services, industry and transport and logistics sectors. However, there is room for improvement to make the digital customer experience easier and more personal, especially for Dutch SMEs and self-employed clients, where our NPS among both client groups declined to -26 from -20 and -18 respectively. In Poland, the combined NPS for SME and mid-corporate clients improved to +43 (from +30 in 4Q 2019). As we revised our methodology in Belgium we don’t have comparable figures for 2020. Although slightly lower than in 2019, the NPS for micro clients and SMEs in Romania is still a high +43 and +54 for mid-corporates.
The NPS programme also runs in 26 Wholesale Banking markets. In addition, we introduced a transactional NPS to measure client satisfaction on service requests for daily banking. In 2020, the customer satisfaction exceeded 8.5 (scale 1-10). The overall NPS rating reached +56.3 (on a scale of -100 to +100), up from a score of +49.6 in 2019, and 13 percent ahead of the industry average of +49.8. The response rate also increased to 60 percent compared with 50 percent in 2019, showing higher client engagement with ING. The scores are based on thousands of responses from clients representing more than 50 percent of Wholesale Banking revenue.The NPS

of Platinum and Gold clients showed an even higher year-on-year increase of 33 percent and 21 percent, respectively. All sectors also registered stronger NPS, with Energy achieving an exceptionally high score of +71.3, a 26 percent increase year-on-year.The higher scores suggest that clients appreciate our approach (see ‘Unleashing sector potential’ above) and that Wholesale Banking is succeeding in its strategy to focus on core clients, with as a result more resources allocated to a smaller group of clients and higher client satisfaction.

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External recognitionWholesale Banking clients in Asia, provides banks with a single platform for digitally managing KYC requirements,

Recognising our efforts, Global Finance magazine named ING as the best consumer digital bank in Germany whileconnecting to trusted data sources, generat ing tailored KYC files for its clients and quickly implementing
Euromoney named us the best digital bank in Central and Eastern Europe, as well as best bank in the Netherlandsregulatory changes. Loan Optics is a platform for digitally-native loans. It reduces operational costs by
and in Poland.streamlining the primary and secondary loan implementation processes. Stemly is creating an autonomous
decision system for supply chain and finance processes.

For the 14th year, German consumers voted ING their preferred bank in €uro magazine’s annual survey. In Australia, ING was named ‘Best Bank’ by financial comparison sites Mozo and Canstar . ING was also Canstar’sIn Wholesale Banking Advanced Analytics we’re building artificial intelligence-powered products to better Bank of the Year and ‘Most Trusted Financial Institution’ at the Australian Banking Innovation Awards. In theunderstand and serve our clients. These include improved monitoring and analysis activities for client -facing Forbes list of the world’s best banks, ING ranked among the top five in seven count ries in 2020.departments and Hunter, a tool that accelerates the detection and investigation of money laundering schemes, reducing the workload for our KYC colleagues. Domino is a tool that gives us a ‘360 view’ of mid-corporate and

Global Finance also named ING as the most innovative bank in Western Europe. Three ING innovations also woncorporate clients to ensure we’re having the right conversations at the right time to meet their needs. In
Innovators 2020 Awards: Zero Knowledge Proof Notary (cash management category), CoorpID (corporate financeaddition, in 2020, we delivered a proof of concept to gain insight into how mid-corporate clients are dealing with
sector) and FINN – Banking of things (payments sector).the coronavirus crisis so we can help them where they need it most. It provides insights that go beyond our
traditional knowledge of real-time client situations such as whether the client is receiving government support or

In Wholesale Banking, ING was recognised as Western Europe’s best bank for transaction services (Euromoney)needs support with tax payments.

and the best investment bank and best trade finance provider in the Netherlands (Global Finance).

Distributed ledger technology and blockchain

Continuing to innovateWhen it comes to distributed ledger technology (DLT), ING is considered an industry leader. For the second

consecutive year, Forbes ranked ING as one of the top $50 billion companies embracing blockchain technology.
Since the introduction of direct banking in 1997, ING is still finding new ways to improve the banking experience Cryptoground, a blockchain and cryptocurrency hub, named ING among the best blockchain stocks investments for our customers. Many of these advances stem from twinning the latest technologies with data insights.
in 2020.
Growing demand for digital solutions is also spurring new ideas.

Initiatives that have benefitted from this include the trade finance tools of the blockchain-based software Easy Trading Connect (now Komgo.io) was one of the first to reinvent commodities trade financing in 2017.
company Komgo, which grew out of ING’s Innovation Bootcamp (see ‘Distributed ledger technology and Komgo, co-owned by ING, offers products that streamline trade finance, optimise liquidity, manage risk and
blockchain’ below). Also in trade finance, ING teamed up in 2020 with AI-driven trade platform Tradeteq, the first verify customers. It recently created a new feature, TRAKK, that uses DLT to create provenance and immutability,
electronic platform that allows banks and institutional investors to transact trade assets. Tradeteq uses advanced allowing traders to ensure the documents are genuine and are not used for pledges to other parties. New DLT
analytics and artificial intelligence to derive more accurate risk scores, helping investors to better evaluate initiatives currently in the execution phase include solutions for digital assets safekeeping, tokenisation and
opportunities and offers an end-to-end solution covering portfolio management, risk analytics and securitisationissuance of a structured finance loan for institutional investors, and an intra -bank settlements utility token,
as-a-service.
among others.

At the ING Labs in Amsterdam, Brussels, London and Singapore, over 20 initiatives are currently in development In October 2020, Contour went live. Co-founded by ING in a consortium with other major global banks, Contour
to make disruptive impact in the value spaces of trade, lending, safety and compliance, financial health, and connects buyers, suppliers and banks across a decentralised digital platform to bring transparency and trust into
housing. Examples are Blacksmith, Loan Optics and Stemly. Blacksmith, which ING has started using for trade financing. In its testing phase, Contour reduced the processing time for letters of credit (LCs) from an

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average of 10 days to under 24 hours. Another ING initiative is securities lending platform HQLAx, which uses DLTFintech partnerships
to facilitate trades in high-quality liquid assets, serving as an additional liquidity pool. It was commerciallyING entered into several fintech partnerships this year that help our businesses execute our strategy. Through
launched in December 2020.our investment arm, ING Ventures , we invest in companies with a strategic relevance for ING. These are start-ups

with disruptive technologies that have the potential to improve the customer experience or ING’s operati onal ING’s zero-knowledge proof notary service, a solution aimed at improving the privacy and security of DLT -basedefficiency.
transactions, received an Innovators 2020 Award from Global Finance magazine in the cash management category. Built specifically to address the privacy requirements of R3’s Corda platform, the capability is our latestA number of partnerships are focused on enhancing our data analytics capabilities. One example is London-based development in this field of cryptography, following a suite of open-source privacy tools released in previousEigen Technologies, which is working on natural language processing (NLP) models tailored to the financial years.industry’s need for data extraction. The partnership is applying NLP and machine learning in areas such as
corporate lending, trade finance and SME banking to automate processes and reduce risk and cost.
We amplify our DLT impact by addressing how ING’s solutions can solve key problems in the finance industry.
Our DLT research team is constantly producing knowledge assets that can serve and influence the widerFor our Business Banking clients we have a number of partnerships. Funding Options helps British and Dutch community: from reflecting on the challenges and benefits of digital assets, to collaborating with the GlobalSMEs find the right loan for their business. FinCompare gives German corporate customers a quick and Blockchain Business Council and the World Economic Forum on the creation of blockchain standards.independent overview of their financing options. TransferMate provides SME customers and corporate clients
with faster, cheaper and easier payment solutions. We are also exploring new business models. Countingup, a mobile banking app for self-employed entrepreneurs and freelancers, combines accounting and banking features into one seamless solution, greatly reducing operating complexity and cost.

On the topics of aggregation, PSD2 and open banking, ING is working with an ING-initiated company, Cobase, which is making it easier and more efficient for international corporate clients to work with multiple banks from one cloud-based platform.

In the area of operational excellence, we’re working with fintech Duco on a reconciliation solution that strongly improves time to market in building reconciliations and lowers the cost of carrying these out.

In the Philippines, ING teamed up with the UNICEF Innovation Office to support fintech start-ups working on financial inclusion challenges (www.fintechforimpact.com ). The Fintech for Impact initiative will provide financial support and mentoring for five projects: an app to bring affordable healthcare to rural communities; a tool to help migrant workers manage their finances; a platform connecting farmers and fishermen directly to buyers; an app connecting students to education loans; and an AI-enabled platform to deliver grassroots insurance to lowincome families.

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Responsible finance

As a bank, we are committed to contributing to a low-carbon and financially healthy society, both through our own efforts and by helping our clients to be more sustainable. We make the most impact through our financing, via the loans we provide to clients. That’s why we are committed to steering our €600 billion lending portfolio towards meeting the well-below two-degree goal of the Paris Agreement. We call our approach to measuring and steering, Terra.

Terra approach

ING’s Terra sets out our approach for aligning our lending portfolio with the Paris climate goals in the nine sectors most responsible for climate change. Since 2019, we have made significant progress in further developing, refining and applying the Terra approach. In October 2020, we released our second progress report on Terra. It included quantitative results and targets for all of these nine sectors, fulfilling the commitment we made the previous year.

The report’s Climate Alignment Dashboard tracks our performance, showing the CO2 intensity per sector of our portfolio compared to the market and the relevant climate scenario. The portfolios for power generation, shipping, cement and steel are ‘on track’ for climate alignment, while residential real estate, automotive and aviation are ‘close to being on track’. For the remaining two sectors we cannot yet benchmark our performance.
For upstream oil and gas this is because the 2019 portfolio is our starting point and we will need to see movement relative to the scenario pathway, starting next year, before indicator status can be given. For commercial real estate we still lack complete and up-to-date market data.

ING’s power generation portfolio continues to outperform the market and both the International Energy Agency’s sustainable development scenario (SDS) and the OECD scenario. In the 12 months measured in the Terra report, ING reduced its direct exposure to coal-fired power plants by 43 percent (in line with our commitment to reduce it to close to zero by the end of 2025) and increased financing for renewable energy generation by €1.19 billion. Other sectors face more challenges, such as the residential mortgage sector. There we encounter a shortage of accurate data to measure progress and a general lack of homeowner action. Read the full Terra report on ing.com, and see ‘Greener homes’ below for more information about making our mortgage portfolio energy positive by 2050.

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One of the targets included in the report is our aim to reduce financing to upstream oil and gas by 19 percent byFacilitating change
2040 from 2019 levels. We’ll align this portfolio both by decreasing exposure and engaging with clients to helpSustainability is about planet and people. We believe we can make more impact with what we do finance than
them shift to low-carbon technology. The measurement is based on three indicators: emission intensity, anwhat we don’t. So when it comes to people, we aim to increase our social impact finance portfolio by lending to
absolute reduction in financing and a relative transition of the financing mix from high-carbon to low-carbon andprojects that lead to, for example, basic infrastructure improvements, community development or essential
renewable energy. This target is also aligned with the SDS scenario, which is not static. If more or quicker actionservices. And we’re working on making a positive contribution to human rights as financier, employer, taxpayer
is needed and this scenario is adjusted, our target will adjust accordingly.and driver of progress and prosperity. This is also in line with the United Nations’ Principles for Responsible

Banking, of which ING was a founding signatory Terra’s sector-based approach respects the fact that each sector has its own transition pathway for it toin 2019.
contribute to a low-carbon, below-two-degree world. We therefore use the most appropriate methodology per sector. One example is PACTA for Banks, which was co-developed by ING and non-profit think tank the 2°We have an inclusive approach to driving sustainable business. We work with our clients to facilitate and finance Investing Initiative (2DII). The methodology-specific application was further refined with more banks andthe shift to low-carbon technology. This includes environmental, social and governance (ESG) checks to ensure published as an open-source methodology for all banks to use in 2020.that our financing is in line with our own sustainability goals. Read more about our environmental and social risk It looks at the technology shift that’s needed across certain sectors to slow global warming and then measurespolicy framework at www.ing.com/Sustainability/Sustainable -business/Environmental-and-social-riskthis against the actual technology clients are using – or plan on using in the future.policies.htm

We believe that working together to achieve an industry-wide standard will increase transparency and ultimatelyING is considered a pioneer in sustainable finance, having introduced the first sustainability -linked loan and a help the entire financial sector to make a bigger impact. We also believe in an inclusive approach to climatemade-to-measure sustainability improvement loan. We offer various financial instruments such as green loans, alignment, as we work with our clients to facilitate and finance their shift to low-carbon technology.sustainability improvement loans, green bonds and advisory services.

We will continue to monitor and report on our progress, engaging with clients and other stakeholders to advanceIn 2020, we saw a visible softening of lending demand due to the impact of Covid-19 on economic activity. Our on the journey to combat climate change. We conduct strategic dialogues with clients on how we can help themclimate finance portfolio decreased by 12 percent in 2020 to €16.5 billion (from €18.7 billion in 2019), mainly due align their business with the Paris Agreement goals, for example by advising them on how to structure theirto lower lending volumes in renewable energy and sustainable buildings. Social impact financing for projects that financing and gain access to funding. We also contribute to policymaking to influence change on a larger scale.lead to, for example, basic infrastructure improvements, community development or essential services, For example, we’re working with the European Investment Bank on the implementation of the European Greendecreased by 29 percent to €533 million.

Deal and we’re providing input for proposals by the Network for Greening the Financial System on sustainable stress testing to assess the resilience of the financial system to climate-related shocks.Despite the decline in demand, we continued to shape sustainable finance in 2020 with the introduction of an innovative financing method to make inland shipping in the Netherlands more sustainable. A pay -per-use Our efforts in this area are being recognised. In 2020, we were ranked as ‘climate action leader’ byfinancing structure for renewable battery containers makes it easier for ship owners to transition from dieselthe leading global environmental disclosure platform CDP for the seventh consecutive year. We also ranked firstpowered barges to electrical power without the need for a large up-front investment. ING and partners formed a in our market-cap group by Sustainalytics and MSCI upgraded ING’s rating to ‘AA’, which underscores soundnew company called Zero Emissions Services (ZES) to facilitate the transformation. The Dutch transport sector is corporate governance and our strengths in financing environmental impact, among others.responsible for 21 percent of the country’s CO2 emissions; ZES is moving it a step closer towards the Paris Agreement goals.

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In 2020, we started to link the circular economy even more closely with our green finance products. The ZESOur current carbon intensity measurement covers our Dutch and German mortgage portfolio, with a combined transaction is an example of how ING is exploring circular financial business models with various partners. Theoutstanding lending amount of roughly €180 billion (60 percent of total mortgage outstandings) and more than circular economy offers a systematic response to the climate crisis. It’s about rethinking our use of raw materialsone million financed homes. See the latest Terra report on ing.com for information on the underlying and resources to reduce waste and emissions, shifting from ‘take, make and waste’ to ‘reduce, reuse, recycle’.measurement.

Companies like ZES stimulate other use models for depleted battery packs once they are exchanged to give them a second or even third lifecycle.We are developing retail products, tools and services to help homeowners make their houses more sustainable.
Customers can use these products to finance solar panels, for example, or insulate their homes. In Germany, we ING issued 36 sustainability improvement loans and 20 green loans. Among these was the largest green loan yetprovide green mortgages through development bank KfW.
in the Asia-Pacific commercial and industrial renewables sector. The $75 million financing for Cleantech Solar will support more than 500 megawatts of solar power projects across Southeast Asia.In addition to financial solutions, we help to raise awareness on the topic. Consumers in the Netherlands, for example, can check the energy profile of their homes on our website, as well as the options and financing In addition to lending, ING supported 60 mandates for clients through green, social and sustainability bonds. Inavailable to improve in this area. And we provide d Dutch homeowners who want to invest in upgrading their September, ING was involved in Ireland’s first-ever green bond issued by AIB bank. The €1 billion will be used toenergy label with a free rating as we know how insights can help people to take the first steps towards a more finance renewable energy projects and green buildings in Ireland and Britain.sustainable home.

ING broke new ground with Europe’s first Covid-19-related bond, which raised financing for French publicHowever, the number of homeowners taking up this offer remains low. This likely reflects the cumbersome hospitals. ING was the joint bookrunner in the €1 billion deal with French bond issuer Caisse Francaise deprocess of gathering data for an energy label upgrade. And although an up-to-date energy label is required when Financement Local (CAFFIL). Issued in May, it was the first negative yield bond launch since the end of Februaryselling a home, only a small percentage of properties in our portfolio are sold each year.
when the pandemic triggered a global sell-off and closed the primary market. ING’s previous collaboration with CAFFIL on the first French social covered bond was a winner at Environmental Finance’s Bond Awards 2020.Sustainable investment services

ING offers sustainable investment (SI) services to its Retail Banking customers in the Netherlands, Belgium,
ING subsequently supported a further three issuers with Covid-19-related bonds, helping them to overcome theLuxembourg and Germany. In 2020, ING’s retail brokerage division recorded €13.2 billion in sustainability assets
impact of the crisis. We acted as bookrunner in the €500 million social bond for Korea Housing Financeunder management, up from €9.3 billion in 2019. This underlines our clients’ appetite for products and services
Corporation; as joint bookrunner in the €1 billion social bond for CaixaBank; and joint lead manager on the €500that integrate sustainability criteria .

million bond for the Export-Import Bank of Korea (KEXIM).

Competition

Greener homes ING is a global financial institution with a strong European base, offering retail and wholesale banking services to A significant part of our loan book consists of residential mortgages, and houses generally account for about 22 customers in over 40 countries. The purpose of ING is empowering people to stay a step ahead in life and in percent of direct and indirect CO2 emissions in the EU. We’re working with clients to improve the energy business.
consumption of the houses we finance as a way of achieving our Paris alignment goals. Our long-term vision is to have an energy-positive mortgage portfolio by 2050. This means that the houses in our portfolio will collectively generate more energy than they consume.

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ING’s Retail business serves 39 million customers, from individuals to small and medium-sized businesses andThe opening up of the European payments market under the PSD2 directive is a significant competitive mid-corporate clients. In most of our Retail markets we offer a full range of banking products and services,development. It is creating a more crowded, uneven playing field as new providers enter this lucrative area once covering payments, savings, mortgages, insurance, investments and secured and unsecured lending. Ourdominated by banks. Newcomers include third party mobile and online payment platforms like ApplePay and Wholesale Banking business offers clients advisory value propositions such as specialised lending, tailoredAlipay, as well as fintechs and other non-banks. These new entrant have operating models that are not burdened corporate finance and debt and equity-market solutions. These clients range from large companies towith potentially costly legacy operations. They are less regulated than banks and use technologies like multinational corporations and financial institutions.blockchain, robotics and artificial intelligence and advanced data and analytic tools to lower cost to serve and

speed up processes.
There is substantial competition in the Netherlands and the other countries in which we do business for the types of wholesale banking, retail banking, investment banking and other products and services we provide.Advances in technology are accelerating the use of new business models, for example in retail payments, peerto-peer lending, foreign exchange and low-cost investment advisory services. New solutions offered by rapidly This competition is most pronounced in our more mature markets of the Netherlands, Belgium, the rest ofevolving incumbents, challengers and new entrants, especially with respect to payment services and products, Western Europe and Australia. Our largest market is the Netherlands, where our main competitors are ABNare disrupting the financial services sector and leading to the emergence of disintermediation. To remain AMRO and Rabobank. In recent years, competition has increased in emerging markets such as Asia and Centralcompetitive, banks have to think beyond banking and develop their own platforms. Winners will be those with a and Eastern Europe. Financial services companies from more developed countries see these markets as offeringsuperior digital experience, a strong trusted brand, and the ability to mobilise a large customer base to attract higher growth potential, while local institutions have become more sophisticated and competitive and havepartners to their platforms.
proceeded to form alliances, mergers or strategic relationships with our competitors.
Successful platforms take the effort out of managing finances, offering personalised, real-time advice and However, our competitive landscape is transforming as society becomes increasingly digitalised and ever moreproducts and services for all financial and other relevant needs. Open banking offers opportunities to add value reliant on technology and the online economy – a trend amplified during the Covid-19 pandemic, whichby connecting to the products and services of others, also in areas beyond banking. Statements regarding ING’s accelerated the shift to mobile banking and contactless payments. Our main competitors are no longer just othercompetitive position reflect the assessment of ING’s management about the general competitive landscape in banks. The big winners in 2020 were the tech companies that offer an engaging digital experience on an openwhich ING operates.
platform that meets a range of needs in one go-to digital ecosystem.

Regulation and Supervision Platform providers are all about customer experience. They use data and advanced analytics to pinpoint what The banking and broker-dealer businesses of ING are subject to detailed and comprehensive supervision in all of people need and partner with third parties to meet this with a fitting product or service, ensuring customers the jurisdictions in which ING conducts business.
come back for more. This ability to meet people’s primary needs in a way that is easily accessed on mobile devices is what defines their success. Banking, by contrast, is a facilitator and not a primary need. The choice for banks is to challenge their existing business models and disrupt themselves, or risk being eliminated as an intermediary and relegated to the status of white label facilitator of others’ platforms. In this environment, the digital customer experience is the key differentiator, shaped by customer expectations based on their interactions online and on their smartphones: easy, smart and personal.

ING Group Annual Report 2020 on Form 20-F56

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Regulatory agencies and supervisors have broad administrative power and enforcement capabilities over manyAs a third pillar to the Banking Union, the EU aims at further harmonizing regulations for Deposit Guarantee

aspects of our business, which may include liquidity, capital adequacy, permitted investments, ethical issues,Schemes (DGS). Main elements are the creation of ex-ante funded DGS funds, financed by risk-weighted

money laundering, anti-terrorism measures, privacy, recordkeeping, product and sale suitability, marketing andcontributions from banks. As a next step, the EU is discussing a pan-European (or pan-banking union) DGS (the

sales practices, remuneration policies, personal conduct and our own internal governance practices. Also,European Deposit Insurance Scheme (EDIS)), (partly) replacing or complementing national compensation

regulators and other supervisory authorities in the EU, the US and elsewhere continue to scrutinise paymentschemes. The progress on the EDIS proposal is slower than expected; this proposal as well as certain

processing and other transactions and activities of the financial services industry through laws and regulationsaccompanying risk reduction measures are still being discussed in the European Parliament and in the Council.

governing such matters as money laundering, anti-terrorism financing, tax evasion, prohibited transactions with

countries or persons subject to sanctions, and bribery or other anti-corruption measures.

Dutch Regulatory Framework

The Dutch regulatory system for financial supervision consists of prudential supervision – monitoring the As discussed under “Item 3. Key Information — Risk Factors”, as a large multinational financial institution we are soundness of financial institutions and the financial sector, and conduct -of-business supervision – regulating subject to reputational and other risks in connection with regulatory and compliance matters involving these institutions’ conduct in the markets. As far as prudential supervision has not been transferred to the ECB, it is countries.
exercised by the Dutch Central Bank (De Nederlandsche Bank or “DNB”), while conduct-of-business supervision is

performed by the Dutch Authority for the Financial Markets (Autoriteit Financiële Markten or “AFM”). DNB is in

European Regulatory framework the lead with regard to macroprudential supervision.
The Single Supervisory Mechanism (“SSM”) – the first pillar of the Banking Union – was launched on 4 November

1. Since that date, the European Central Bank (ECB) assumed responsibility for a significant part of the

Global Regulatory Environment prudential supervision of banking groups in the Eurozone, including ING Group and ING Bank. Under the SSM, the There is a variety of proposals for laws and regulations that could impact ING globally, in particular those made ECB has become ING Group’s and ING Bank’s principal prudential supervisor. The ECB is amongst others by the Financial Stability Board and the Basel Committee on Banking Supervision at the transnational level and an responsible for tasks such as market access, compliance with capital and liquidity requirements and governance expanding series of supranational directives and national legislation in the European Union (see “Item 3. Key arrangements. National supervisors, including the Dutch Central Bank for ING Group and ING Bank, remain Information — Risk Factors — We operate in highly regulated industries. Changes in laws and/or regulations responsible for supervision of tasks that have not been transferred to the ECB such as financial crime and governing financial services or financial institutions or the application of such laws and/or regulations governing payment supervision.
our business may reduce our profitability). The aggregated impact and possible interaction of all of these

proposals are hard to determine, and it may be difficult to reconcile them where they are not aligned. The Another significant change in the regulatory environment is the setting up of the Single Resolution Mechanism
financial industry has also taken initiatives by means of guidelines and self-regulatory initiatives.
(“SRM”). It is the second pillar of the Banking Union. The SRM comprises the Single Resolution Board (“SRB”) and

the national resolution authorities and is fully responsible for the resolution of banks within the Eurozone as of 1

January 2016. ING has been engaging already with the Dutch national resolution authorities and the SRB for a

few years with the aim to support in the draw up of a resolution plan for ING and will continue to collaborate

with the resolution authorities. The rules underpinning the SRM could have a significant impact on business

models and capital structure of financial groups in order to become resolvable.

ING Group Annual Report 2020 on Form 20-F57

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Dodd-Frank Act and other US RegulationsThe Dodd-Frank Act and SEC regulations enacted thereunder, effective 1 November 2021, also require security-

ING Bank has a limited direct presence in the United States through the ING Bank Representative Offices in Newbased swap dealers to register with the SEC. The SEC has adopted regulations, among others, establishing
York and Dallas, Texas. Although the offices’ activities are strictly limited to essentially that of a marketing agentregistration, reporting, risk management, business conduct, and margin and capital requirements for securityof bank products and services and a facilitator (i.e. the offices may not take deposits or execute any transactions),based swaps. ING Capital Markets is expected to be registered with the SEC as a security-based swap dealer.
the offices are subject to the regulation of the State of New York Department of Financial Services and the TexasRegistration could increase ING Capital Markets LLC’s operational costs, reduce trading activity and market
Department of Banking, as well as the Federal Reserve. ING Bank also has a subsidiary in the United States, INGliquidity, and increase volatility of the relevant markets. It will also result in a substantial portion or all of ING’s
Financial Holdings Corporation, which through several operating subsidiaries (one of which is registered with thesecurity-based swap activities with U.S. persons being conducted through ING Capital Markets LLC.

CFTC as a swap dealer and another of which is registered with the U.S. Securities and Exchange Commission as a securities broker-dealer) offers various financial products, including lending, and financial markets products.In addition, new position limits requirements for uncleared swaps referencing any of twenty-five commodity These entities do not accept deposits in the United States on their own behalf or on behalf of ING Bank N.V.futures contracts for market participants could limit ING’s position sizes in these swaps referencing specified physical commodities and similarly limit the ability of counterparties to utilize certain of our products to the

Dodd-Frank Act, which became law on 21 July 2010, represented a significant overhaul in the regulation of U.S.extent hedging exemptions from the position limits are unavailable.

financial institutions and markets. The primary impact on ING is through the establishment of a regulatory regime for the off-exchange derivatives market, pursuant to Title VII of the Dodd-Frank Act.The Dodd-Frank Act also impacts U.S. banks and non-U.S. banks with branches or agencies in the United States, primarily through the Volcker Rule and the enhanced prudential standards of Section 165 of the Dodd-Frank Act.

Among other things, the Dodd-Frank Act and regulations enacted thereunder require swap dealers to registerBecause ING Bank does not have a U.S. banking presence, these provisions do not currently apply to ING.

with the CFTC, the primary swaps regulator in the U.S.) as ‘swap dealers’ and be subject to CFTC regulation and
oversight. The ING subsidiary, ING Capital Markets LLC, is registered as a swap dealer. As a registered entity, it isThe Dodd-Frank Act also created a new agency, the Financial Stability Oversight Council (“FSOC”), an inter-agency
subject to business conduct, record-keeping and reporting requirements, as well as margin requirements andbody that is responsible for monitoring the activities of the U.S. financial system, designating systemically
capital requirements, which will become effective in late 2021. In addition to the obligations imposed onsignificant financial services firms and recommending a framework for substantially increased regulation of such
registrants (such as swap dealers), other requirements relating to reporting, clearing, and on-facility trading havefirms, including systemically important non-bank financial companies that could consist of securities firms,
been imposed for much of the off-exchange derivatives market. It is possible that registration, execution,insurance companies and other providers of financial services, including non-U.S. companies. ING has not been
clearing, margin, capital and business conduct compliance requirements will increase the costs of and restrictdesignated a systemically significant non-bank financial company by FSOC and such a designation currently is
participation in the derivative markets. These rules could therefore restrict trading activity, reducing tradingunlikely.

opportunities and market liquidity, potentially increasing the cost of hedging transactions and the volatility of the relevant markets. This could adversely affect the business of ING in these markets.Dodd-Frank continues to impose significant requirements on us, some of which may have a material impact on our operations and results, as discussed further under “Item 3. Key Information — Risk Factors—We operate in

highly regulated industries. Changes in laws and/or regulations governing financial services or financial

institutions or the application of such laws and/or regulations governing our business may reduce our

profitability”.

ING Group Annual Report 2020 on Form 20-F58

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Basel III and European Union Standards as currently applied by ING Bank

CRR /CRD IV DNB, our principal home country supervisor until the ECB took over that position in November 2014, has given

ING permission to use the most sophisticated approaches for solvency reporting under the Financial SupervisionFor European banks the Basel III requirements have been implemented through the Capital Requirement

Act, the Dutch legislation reflecting the Basel II and Basel III Frameworks. DNB has shared information with hostRegulation (CRR) and the Capital Requirement Directive (“CRD IV”). The CRD IV regime entered into effect in

regulators of relevant jurisdictions to come to a joint decision. In all jurisdictions where the bank operatesAugust 2014 in the Netherlands, but not all requirements were implemented all at once. Having started in 2014,

through a separate legal entity that is a credit institution, ING must meet the local implementation of Baselthe requirements have been gradually tightened, mostly before 2019, until the Basel III migration process was

requirements as well. ING uses the Advanced IRB Approach for credit risk, the Internal Model Approach for itscompleted.

trading book exposures and the Advanced Measurement Approach for operational risk. A small number ofCRD IV has not only resulted in new quantitative requirements but has also led to the setting of new standards

portfolios including certain sovereign exposures are reported under the Standardized Approachand evolving regulatory and supervisory expectations in the area of governance, including with regard to topics

like conduct and culture, strategy and business models, outsourcing and reporting accuracy.

In December 2010, the Basel Committee on Banking Supervision announced higher global minimum capital

standards for banks, and has introduced a new global liquidity standard and a new leverage ratio. The BaselCRRII / CRD V and BRRDII

Committee's package of reforms, collectively referred to as the “Basel III” rules, has, among other requirements,On 27 June 2019, a series of measures referred to as the Banking Reform Package (including certain amendments
increased the amount of common equity required to be held by subject banking institutions, has prescribed theto CRR and CRDIV commonly referred to as ‘CRR II’ and CRD V’) came into force, subject to various transitional
amount of liquid assets and the long term funding a subject banking institution must hold at any given moment,and staged timetables. The adoption of the Banking Reform Package concluded a process that began in
and has limited leverage. Banks are required to hold a “capital conservation buffer” to withstand future periodsNovember 2016 and marks an important step toward the completion of the European post-crisis regulatory
of stress. Basel III has also introduced a “countercyclical buffer” as an extension of the capital conservationreforms, drawing on a number of international standards agreed by the Basel Committee, the Financial Stability
buffer, which permits national regulators to require banks to hold more capital during periods of high creditBoard and the G20. CRDV was implemented in Dutch law in 2020. The Banking Reform Package updates the
growth (to strengthen capital reserves and moderate the debt markets). Further, Basel III has strengthened theframework of harmonized rules established following the financial crisis of 2008 and introduces changes to the
definition of capital that has the effect of gradually disqualifying many hybrid securities during the years 2013-CRR, CRDIV, the Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism Regulation
2022, including the hybrids that were issued by the Group, from inclusion in regulatory capital, as well as the(SRMR). The Banking Reform Package covers multiple areas, including the Pillar 2 framework, the introduction of
higher capital requirements associated with certain business conditions (for example, for credit valuea leverage ratio requirement of 3% and a leverage ratio buffer requirement of 50% of the G-SIB buffer
adjustments (“CVAs”) and illiquid collateral) as part of a number of reforms to the Basel II framework. In addition,requirement (applicable per 1 January 2023), a binding Net Stable Funding (NSFR) ratio based on the Basel NSFR
the Basel Committee and Financial Stability Board (“FSB”) published measures that have had the effect ofstandard but including adjustments with regard to e.g. pass-through models and covered bonds issuance,
requiring higher loss absorbency capacity, liquidity surcharges, exposure limits and special resolution regimes for,mandatory restrictions on distributions, permission for reducing own funds and eligible liabilities,
and instituting more intensive and effective supervision of, “systemically important financial institutions”macroprudential tools, a new category of ‘non-preferred’ senior debt, the minimum requirement for own funds
(“SIFIs”), in addition to the Basel III requirements otherwise applicable to most financial institutions. One suchand eligible liabilities (MREL) and the integration of the TLAC standard into EU legislation. Further, the EBA
measure, published by the FSB in November 2015, is the Final Total -Loss Absorbing Capacity (‘TLAC’) standard forobtained a mandate to investigate how to incorporate environmental, social, and governance (ESG) risks into the
G-SIFIs, which aims for G-SIFIs to have sufficient loss-absorbing and recapitalisation capacity available insupervisory process and what the prudential treatment of assets associated with environmental or social
resolution. ING Bank has been designated by the Basel Committee and FSB as a so-called “Global Systemicallyobjectives should look like.
Important Bank” (“G-SIB”), since 2011, and by DNB and the Dutch Ministry of Finance as a “other SII” (“O-SII”)

since 2011. DNB requires ING Group to hold a 2.5% O-SII Buffer in addition to the capital conservation buffer and

the countercyclical buffer described above .

ING Group Annual Report 2020 on Form 20-F59

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Whilst the Banking Reform Package was being developed, the ECB introduced the Targeted Review of InternalFinal Basel III reforms

Models (TRIM) in June 2017 to assess reliability and comparability between banks’ models for calculating eachIn December 2017 the Basel Committee finalised its Basel III post-crisis reforms with the publication of the
bank’s risk-weighted assets (‘RWA’) used for determining certain of such bank’s capital requirements. In Julyrevisions to the prudential standards for credit, operational and credit valuation adjustment (CVA) risk as well as
2019, the ECB published the final chapters of the guide to internal models, covering credit risk, market risk andthe introduction of an output floor. This package of reforms aims to increase consistency in risk-weighted asset
counterparty credit risk. These risk type-specific chapters are intended to ensure a common and consistentcalculations and improve the comparability of banks’ capital ratios. The use of internal models will be reduced
approach to the most relevant aspects of the regulations on internal models for banks directly supervised by theand the standardised approaches will be made more risk-sensitive and granular.
ECB. Additionally, they provide transparency on how the ECB understands the regulations on the use of internal

models to calculate own funds requirements for the three risk types. Impact on ING is through more stringentFollowing a one-year deferral due to COVID-19, these reforms will take effect from 1 January 2023 and will be
regulation on the end-to-end process and governance around internal models as well as an increase of riskphased in over five years. The EU Commission postponed the issuance of its legislative proposal (“CRR3”/”CRD6”)
weighted assets (RWA).to implement the final elements of the Basel III framework in the EU until 2021. The implementation date of

“CRR3/CRD6” is therefore not yet decided on. The implementation of the EU/Basel III reforms will have impact In 2020, the last TRIM ECB inspection ended. Per rating system the ECB has sent and will send final TRIM decisionon ING’s risk-weighted assets and capital ratios, but it is expected that other new banking regulations and model letters, which will include obligations that ING shall remediate. Also certain limitations have or might be put inreviews bring forward a significant part of this impact before the EU implementation date.
place until these obligations are fully addressed and closed.

CRR “quick fix” in response to the Covid‐19 pandemic

Basel III revisions and upcoming regulations On 26 June 2020 Regulation (EU) 2020/873 of the European Parliament and of the Council of 24 June 2020 In December 2017, revisions to Basel III were formally announced by the Basel Committee. These revisions toamending Regulations CRR as regards certain adjustments in response to the COVID-19 pandemic (commonly Basel III establish new prudential rules for banks, including a revision to the standardised approach to credit risk,referred to as CRR ”quick fix”) was published.
the introduction of a capital floor based on standardised approaches, the use of internal models, limitation of

options for modelling operating risks, and new rules for the establishment of risk-weighted items and unusedThe CRR ”quick fix” is part of a series of measures taken by European institutions to mitigate the impact of the
credit lines at the banks. Such revisions have a long implementation phase and are not yet fully transposed intoCOVID-19 pandemic on institutions across EU Member States. In addition to the flexibility already provided in the
EU regulation. The revisions are commonly referred to as "Basel III Reform" or "Basel IV”. In Europe, this will beexisting rules, the CRR ‘quick fix’ introduces certain adjustments to the CRR, including temporary measures and
implemented through the ‘CRR III’ / ‘CRD VI’ in the coming years. With this long implementation phase and themeasures that early adopt changes in the regulations that were intended to become effective at a future date.
transposition into EU regulation still pending, some question marks remain on how this will shape up.This notably included reduced capital requirement for certain exposures to small- and medium sized enterprises

(SMEs), a more favourable prudential treatment for certain software assets, one year delay in the application of
The full impact of the Basel III Reform rules and TRIM, and any additional requirements if and as applicable to thethe leverage ratio buffer requirement of 50% of the G-SIB buffer (to 1 January 2023). Also the following
Group, will depend on how they are implemented by national regulators, including the extent to which suchadjustments were introduced have an impact on disclosures:
regulators and supervisors can set more stringent limits and additional capital requirements or surcharges, as●frontloading from CRR2 the possibility of temporarily excluding certain exposures to central banks from
well as on the economic and financial environment at the time of implementation and beyond. We expect thesethe calculation of an institution’s total exposure measure (Article 500b of CRR);
rules could have a material impact on ING’s operations and financial condition and may require the Group to●extending by 2 years transitional arrangements for mitigating the impact on own funds of the
seek additional capital.introduction of IFRS 9 (Article 473a (8) of CRR).

ING Group Annual Report 2020 on Form 20-F60

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

In August 2020, the EBA issued guidelines to provide institutions with the necessary clarifications on how to applyIn addition, governments in various countries have introduced measures aimed at mitigating the economic the measures set out in the CRR ‘quick fix’ supervisory reporting and disclosures. These Guidelines are an interimconsequences of the outbreak. For example, the Dutch government has announced economic measures aimed at solution until the new comprehensive ITS on disclosure start to apply (June 2021).protecting jobs, households’ wages and companies, e.g., by way of tax payment holidays, guarantee schemes and a compensation scheme for heavily affected sectors in the economy. These announced measures and any Capital requirements applicable to ING Group at a consolidated leveladditional measures, including any payment holidays with respect to mortgages or other loans, have had and In accordance with the CRR the minimum Pillar I capital requirements applicable to ING Group are: a Commonmay continue to have a significant impact on ING’s customers and other counterparties.

Equity Tier 1 (CET1) ratio of 4.5%, a Tier 1 ratio of 6% and a Total capital ratio of 8% of risk-weighted assets.
The various measures by governments and ING to alleviate the impact of Covid-19 also impact the loan
In 2020, as a reaction to the COVID-19 pandemic, relevant regulators introduced a number of changes to theclassification in terms of forbearance and consequently IFRS 9 staging. In light of this, the EBA has provided Pillar II capital requirements and the capital buffer requirements applicable to ING, including structuralguidelines that expired on 30 September 2020, which defined eligibility criteria for a payment holiday reductions. The structural reductions of these capital requirements reflect the application of Art.104a in CRD V,arrangement offered to a large group of customers to be classified as a “general payment moratorium”. Based on which allowed ING to replace CET1 capital with additional Tier 1 / Tier 2 securities to meet Pillar II requirement,these guidelines, customers that were granted the payment holidays did not lead to a forbearance classification.
and a reduction in the overall systemic buffer (i.e. the Systemic Risk Buffer plus the highest of the O-SII and G-SIITherefore it did not automatically trigger recognition of lifetime Expected Credit Loss (ECL) either. ING followed buffer) by the Dutch National Bank from 3% to 2.5%. Similarly, various competent authorities changed orthe EBA guidelines and when a payment holiday was provided to a customer as part of a “general payment removed their Countercyclical Buffer (CCyB) requirements reducing the CCyB for ING from 24 basis points to 3moratorium”, ING did not consider this measure to classify as forbearance. EBA further extended these basis points.guidelines in the first week of December 2020, valid until 31 March 2021, with certain extra conditions.
Regarding these extensions, ING has taken a prudent decision to treat all payment holiday requests under new
As a consequence, the CET1 requirement, including buffers, for ING Group at a consolidated level was 10.51% inor extended schemes (after September 2020) as stage 2 or stage 3 exposures.
2020. This requirement is the sum of a 4.5% Pillar I requirement, a 0.98% Pillar II requirement (2019: 1.75%), a

Bank recovery and resolution directive 2.5% Capital Conservation Buffer (CCB), a 0.03% Countercyclical Buffer (CCyB) (based on December 2020 positions) and a 2.5% O-SII buffer that is set separately for Dutch systemic banks by the Dutch Central Bank (DeSince its adoption by the European Parliament in 2014, the Bank recovery and resolution directive (BRRD) has Nederlandsche Bank). This requirement excludes the Pillar II guidance, which is not disclosed.become effective in all EU countries after transposition into national law, including in the Netherlands. The BRRD aims to safeguard financial stability and minimise the use of public funds in case banks face financial distress or The Maximum Distributable Amount (MDA) trigger level stood at 10.51% in 2020 for CET1, 12.33% for Tier 1fail to comply with the BRRD. Banks across the EU need to have recovery plans in place and need to cooperate Capital and 14.77% for Total Capital (after the application of Art.104a of CRDV), based on stable Pillar II capitalwith resolution authorities to determine, and make feasible, the preferred resolution strategy. The banking requirements. In the event that ING Group breaches the MDA level, ING may face restrictions on dividendreform which came into force on 27 June 2019 includes changes to the minimum requirement for own funds and payments, AT1 instruments coupons and payment of variable remuneration.eligible liabilities (MREL) to ensure an effective bail in process. It also includes new competences for resolution authorities and requires G-SIBs and other banks to build up loss-absorbing and recapitalization capacity.

Covid-19 pandemic

Various countries and local governmental authorities across the world have introduced measures aimed at preventing the further spread of Covid-19.

ING Group Annual Report 2020 on Form 20-F61

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

ING has had a recovery plan in place since 2012. The plan includes information on crisis governance, recoveryStress testing

indicators, recovery options, and operational stability and communication measures. The plan enhances theStress testing is an integral component of our risk and capital management framework. It allows us to (i) assess
bank’s readiness and decisiveness in case of a financial crisis. The plan is updated annually to make sure it stayspotential vulnerabilities in our businesses, business model, and/or portfolios; (ii) understand the sensitivities of
fit for purpose. The completeness, quality and credibility of the updated plan is assessed each year by ING’sthe core assumptions in our strategic and capital plans; and (iii) prepare and assess management actions that can
regulators.reduce or mitigate the impact of adverse scenarios.

The Single Resolution Board (SRB) confirmed to ING in 2017 that a single-point-of-entry (SPE) strategy is ING’sIn addition to running internal stress test scenarios to reflect the outcomes of the annual risk assessment, ING
preferred resolution strategy, with ING Groep N.V. as the resolution entity.also participates in regulatory stress test exercises. ING participated in the 2020 EU-wide stress test conducted by

the EBA in cooperation with the European Central Bank (ECB), the Dutch central bank (DNB), the European In 2019, ING Group received a formal notification from De Nederlandsche Bank (DNB) of its MREL. The MRELCommission and the European Systemic Risk Board (ESRB). The baseline scenario was developed by the ECB and requirement has been established to ensure that banks in the European Union have sufficient own funds andthe adverse stress test scenario by the ESRB, both cover a three-year time horizon (2020-2022). The ECB and the eligible liabilities to absorb losses in the case of potential bank failure. The MREL requirement is set for INGEBA decided in March 2020 to postpone the EU-wide stress test exercise due to the outbreak of COVID-19. EBA Group at a consolidated level, as determined by the Single Resolution Board (SRB). This MREL requirement haswill launch a new stress test exercise in January 2021 and is expected to publish the results by July 2021.
been set at 10.54% of total liabilities and own funds. The current MREL requirement is not binding, but a new

MREL requirement will be determined by ING’s resolution authorities in 2021 based on the BRRD II.The last EU-wide stress test exercise that was completed concerns the 2018 edition. This stress test was carried

out applying a static balance sheet assumption as of December 2017, therefore does not take into account
ING has been replacing, and will continue to replace, maturing ING Bank N.V. debt with ING Groep N.V.current or future business strategies and management actions. The results of this stress test also cover a threeinstruments. In order to build up our MREL capacity, ING Groep N.V. issued multiple transactions. Theseyear horizon (2018-2020) and reflect the impact of IFRS 9 for determining loan loss provisions in adverse
transactions will not only allow us to support business growth, but will also help to meet future MREL and TLACcircumstances. The results of the EBA stress test reaffirmed the resilience of our business model and the strength
requirements with ING Groep N.V. instruments only.of ING’s capital base. Our commitment to maintain a robust, fully-loaded Group common equity Tier 1 (CET1)

ratio in excess of prevailing requirements remains. ING started the EU-wide stress test exercise with a CET1 ratio CRR II implements the Financial Stability Board’s total loss absorbing (TLAC) requirement for Global Systemicallyof 14.51% per 2017 year-end. Under the hypothetical baseline scenario and EBA’s methodological instructions, Important Institutions (G-SII), which is the EU equivalent of a G-SIB. The transitional requirement—the higher ofING Group would have a fully loaded CET1 of 13.99% in 2020. Under the hypothetical adverse scenario and EBA’s 16 percent of the resolution group’s Risk weighted assets (RWA) or six percent of the leverage ratio exposuremethodological instructions, ING Group would have a fully loaded CET1 ratio of 10.70% in 2020 without measure—applies immediately. The higher requirement —18 and 6.75 percent, respectively—comes into effectmanagement actions.
as of January 1, 2022. As a G-SII ING is expected to meet the TLAC requirement alongside the other minimum

regulatory requirements set out in EU regulation.

ING Group Annual Report 2020 on Form 20-F62

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Deposit Schemes

Benchmark Regulation In the Netherlands and other jurisdictions, deposit guarantee schemes and similar funds (‘Compensation Schemes’) have been implemented from which compensation may become payable to customers of financialBenchmarks, such as the London Interbank Offered Rate (‘LIBOR’), the Euro Overnight Index Average (‘EONIA’), services firms in the event the financial service firm is unable to pay, or unlikely to pay, claims against it. In manythe Euro Interbank Offered Rate (‘EURIBOR’) and other interest rates, as well as commodity benchmarks or other jurisdictions in which we operate, these Compensation Schemes are funded, directly or indirectly, by financialtypes of rates and indices which are deemed to be ‘benchmarks’ are the subject of ongoing national and services firms which operate and/or are licensed in the relevant jurisdiction. ING Bank is a participant in theinternational regulatory reform.
Dutch Deposit Guarantee Scheme (‘DGS’), which guarantees an amount of EUR 100,000 per person per bank (regardless of the number of accounts held). On the basis of the EU Directive on deposit guarantee schemes, INGIn 2016, the EU adopted a Regulation (the ‘Benchmarks Regulation’ or ‘BMR’) on indices used in the EU as pays quarterly risk-weighted contributions into a DGS-fund. The DGS-fund is to grow to a target size of 0.8% ofbenchmarks in financial contracts and financial instruments. The Benchmarks Regulation became effective on 1 all deposits guaranteed under the DGS, which is expected to be reached in July 2024. In case of failure of a DutchJanuary 2018.
bank, depositor compensation is paid from the DGS-fund. If the available financial means of the fund are insufficient, Dutch banks, including ING, may be required pay to extraordinary ex-post contributions notThe BMR among others requires that supervised entities may only use benchmarks in the EU if these benchmarks exceeding 0.5% of their covered deposits per calendar year. In exceptional circumstances and with the consentare provided by administrators that are registered with the European Securities and Markets Authority (‘ESMA’).

of the competent authority, higher contributions may be required. However, extraordinary ex-post contributions may be temporarily deferred if, and for so long as, they would jeopardise the solvency or liquidity of a bank.Benchmarks that are based on input from contributors shall have a code of conduct in place designed primarily to ensure reliability of input data, governing issues such as conflicts of interest, internal controls and benchmark Since 2015, the EU has been discussing the introduction of a pan-European deposit guarantee scheme (‘EDIS’),methodologies. Financial contracts and financial instruments in which benchmarks are used by supervised (partly) replacing or complementing national compensation schemes in two or three phases. Proposals containentities require to have robust fall back wording included in their documentation.
elements of (re)insurance, mutual lending and mutualisation of funds. The new model is intended to be ‘overall cost-neutral’. Discussions have continued in 2020, but it remains uncertain when EDIS will be introduced.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 Payment Services Directive 2 (PSD2)or materially change. The work of these working groups is still ongoing, though certain of such organizations have
PSD2 entered into force in January 2018 and responds to technical change and a variety of developments in theadvanced proposals for benchmark replacements.
payments domain. It fosters innovation and competition by promoting non-discriminatory access to payment systems and accounts, including the newly introduced account information services and payment initiationThe market has indicated that it will stop the calculation of certain benchmarks and that they will proceed with services. Customers benefit from greater transparency of costs and charges, PSD2's extended geographical reachthe use of risk free rates as benchmarks. For instance the FCA announced that it will no longer persuade or and being applicable to transactions in any currency, a reduction of the maximum liability for unauthorizedcompel banks to submit rates for the calculation of the LIBOR benchmark after 2021. The FCA and Bank of transactions and a backstop date for complaint resolution. Finally, to combat cybercrime and online fraud, PSD2England are working together with market participants on the transition to use SONIA as the primary interest continues the trend towards enhancing the security around the making of payments, e.g. by the introduction ofrate benchmark in sterling markets. Furthermore, the working group on euro risk-free rate has adopted the euro strong customer authentication. It consists of two factor authentication, to be performed every time a payershort-term rate (€STR), which was published for the first time on 2 October 2019, as a replacement for the EONIA accesses its payment account online or initiates electronic remote payment transactions. The Regulatorybenchmark that will be discontinued by the end of 2021. The US Federal Reserve’s Alternative Reference Rates Technical Standards for strong customer authentication and common and secure communication provide furtherCommittee (commonly referred to as ‘ARRC’) has recommended adoption of the Secured Overnight Financing requirements to implement the strict security requirements for payment service providers in the EU.Rate (commonly referred to as ‘SOFR’) as an alternative to US dollar LIBOR.
ING Group Annual Report 2020 on Form 20-F63

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

The increasing regulatory scrutiny drives the need to continuous change in the various processes, procedures and

Financial Transaction TaxesIT systems. In some situations the applicable laws and regulations, at local and/or at global level, seem to be

In February 2013, the EC adopted a proposal setting out the details of a financial transaction tax (‘FTT’) under theconflicting with each other, which imposes a significant challenge on banks as part of the implementation of
enhanced cooperation procedure, to be levied on transactions in financial instruments by financial institutions ifrequirements. In addition, the timeline for implementation of those new/changed requirements is sometimes
at least one of the parties to the transaction is established in the financial transaction tax zone (‘FTT-Zone’) or ifvery short, which is challenging in general, yet especially in IT development. ING aims to continuously work on
the instrument which is the subject of the transaction is issued within the territory of a Member State in the FFT-embedding the processes and procedures reflecting the applicable requirements in our IT systems and data
Zone. 10 Member States have indicated they wish to participate in the FTT (Austria, Belgium, France, Germany,sources, driving a business environment which is compliant by desire and design, and will execute ongoing
Greece, Italy, Portugal, Slovakia, Slovenia and Spain). The initial proposal contemplated that the FTT would entertraining and awareness to develop its people to have the right knowledge and skills.

into effect on 1 January 2014, which would have then required us to pay a tax on transactions in financial
instruments with parties (including Group affiliates) located in such FTT-zone. However, the FTT remains subjectThat also accounts for risks deriving from new technologies. ING aims to continuously monitor regulatory
to negotiation between the participating Member States and currently it is uncertain whether and in what formdevelopments to make risk assessments and define the banks risk appetite.Regulations on distributed ledger
and by which Member States the FTT will be adopted. The implementation date of any FTT will thus depend ontechnology and business developments in this area are as rapid and impactful as the accompanying risks.

the future approval by participating Member States in the Council, consultation of other EU institutions, and the

5th AML Directive subsequent transposition into local law.

In addition, the 5th AML Directive will be implemented in the Netherlands. The 5th AML Directive was originally

KYC Requirementsadopted by the EU Council in June 2018, with the aim of addressing means of terrorist financing, increasing

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

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

consultation version of the updated guidelines on 5 February 2020. The final updated guidelines are expected to

come into force in the course of 2020. Furthermore, in September 2017, the ESAs issued their final guidelines to

prevent the abuse of funds transfers for terrorist financing and money laundering purposes. These guidelines

came into force in June 2018.

ING Group Annual Report 2020 on Form 20-F64

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Policy with respect to certain countriesTensions between the US and China continued, resulting in (additional) sanctions and export controls imposed by

As a result of frequent evaluation of all businesses from economic, strategic and risk perspective ING continuesthe US, amongst others in response to China’s alleged human rights abuses in Hong Kong and against China’s
to believe that for business reasons doing business involving certain specified countries should be discontinued.Uyghur minority population. In addition, the U.S. Department of Commerce’s Bureau of Industry and Security
In that respect, ING has a policy not to enter into new relationships with clients from these countries and(BIS) continued applying U.S. export controls on dual-use goods, software, and technology, and it imposed a
processes remain in place to discontinue existing relationships involving these countries. At present thesenumber of significant new controls on trade with China and Hong Kong. BIS also added several entities on the
countries are Cuba, Iran, North Korea, Sudan and Syria.Entity List under the US Export Administration Regulations, and thereby further tightened the export control
regime in that respect. In response, China has announced to take resolute countermeasures deemed required to

IING Bank maintains a limited legacy portfolio of guarantees, accounts, and loans that involve various entitiessafeguard the legitimate rights and interests of Chinese companies and related personnel as well as China’s
with a connection to Iran. These positions remain on the books but certain accounts related thereto are ‘frozen’sovereignty, security and development interests. These announced Chinese actions include visa restrictions and
where prescribed by applicable laws and procedures and in all cases subject to increased scrutiny within INGpotentially other measures firmly opposing US sanctions.
Bank. ING Bank may receive loan repayments, duly authorised by the relevant competent authorities whereThe US issued criminal indictments against President Maduro and several other high-level officials of the
prescribed by applicable laws. For the calendar year 2020, ING Group had revenues of approximately USD 274Venezuelan government. In addition, the US government further restricted dealings with the Venezuela’s oil
thousand. ING Group estimates that it had a net profit of approximately USD 17 thousand.sector and imposed sanctions on certain parties included in the sale and transport of Venezuelan crude.

Sanctions related developmentsIn respect of Syria, the US continued to pressure the Assad regime as well as other actors in the region to stop
committing human rights abuses against the Syrian civilian population.
In 2020, the EU and the US continued sanctions programs with respect to several regions and countries, including The EU blocking regulation remained in full force in 2020. This EU regulation aims to shield EU companies from Ukraine/Russia, Iran, China, Venezuela and Syria. There are notable differences between the EU and US sanctions U.S. sanctions against Iran, Cuba and Libya, in part by prohibiting European companies from complying with the programs.
sanctions that the EU considers to be “extraterritorial” in nature.

With a view to these and other developments, ING continuously evaluates its sanctions compliance controls to The US, for example, continued and updated its sanctions with respect to the Nord Stream 2 pipeline and the respond to risks of new or expanding sanctions regimes.
second line of Turkstream, both originating in Russia. Also with respect to Iran, where a significant number of EU

sanctions were lifted pursuant to the Iran Nuclear Agreement, the US continued to take various measures in light For additional information regarding regulatory developments, including with respect to the 5th AML Directive, of its ‘maximum pressure campaign’ against Iran and all major Iranian financial institutions are now designated FATCA, CRS, DAC6 and MIFID II, see also this Form 20F 2020, under “Additional Information – ING Group Risk by OFAC.
Management- Compliance Risk- Regulatory Developments”.

ING Group Annual Report 2020 on Form 20-F65

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

C. Organisational structure

ING Groep N.V., a publicly-listed company, is the parent of one main legal entity: ING Bank N.V. (ING Bank).ING Bank is the parent company of various Dutch and foreign banking and other subsidiaries.

Reference is made to Exhibit 8 “List of subsidiaries of ING Groep N.V.” for a list of principal subsidiaries of ING Groep. N.V. For the majority of ING’s principal subsidiaries, ING Groep N.V. has control because it either directly or indirectly owns more than half of the voting power. For subsidiaries in which the interest held is below 50%, control exists based on the combination of ING’s financial interest and its rights from other contractual arrangements which result in control over the operating and financial policies of the entity.

D.Property, plants and equipment

ING predominantly leases the land and buildings used in the normal course of its business. In addition, ING has invested in land and buildings. Management believes that ING’s facilities are adequate for its present needs in all material respects.

For information on property, plants and equipment, reference is made to Note 9 ‘Property and equipment’, for information on lease liabilities reference is made to Note 16 ‘Other liabilities’ and for information on investment properties reference is made to Note 11 ‘ Other assets’ in the consolidated financial statements.

Item 4A.Unresolved Staff comments

Not applicable.

ING Group Annual Report 2020 on Form 20-F66

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Item 5.Operating and financial reviewCovid-19 pandemic

Covid-19 was declared a global pandemic by the World Health Organization on 11 March 2020. National and local and prospects

governments across the world introduced measures aimed at preventing the further spread of the virus. These included the closure of schools, sports facilities, bars and restaurants; bans on public events; and travel restrictions and border controls. Such measures disrupted the normal flow of business operations in most countries, including those where ING operates. It affected global supply chains, manufacturing, tourism, The following operating and financial review and prospects should be read in conjunction with the consolidated consumer spending and asset prices, and has increased volatility and uncertainty across the global economy and financial statements and the related Notes thereto included elsewhere herein. The consolidated financial in financial markets.
statements have been prepared in accordance with IFRS-IASB. Unless otherwise indicated, financial information In an effort to mitigate the economic consequences, governments introduced measures to protect households for ING Group included herein is presented on a consolidated basis under IFRS-IASB.
and companies. These included tax-payment holidays, guarantee schemes and compensation for heavily affected A.Operating resultssectors in the economy. Still, the economic consequences had – and may continue to have – a significant impact on ING’s customers, employees, shareholders and other stakeholders.
Our business is shaped by events and developments in the world around us and our operating results for the financial year should be viewed in the context of these event and developments. The biggest of these in 2020There were also regulatory developments in light of Covid-19. The European and other central banks took steps was the coronavirus pandemic, which was first and foremost a human tragedy, but which also impactedto help by relaxing rules on capital buffers that banks need to hold and made recommendations on paying governments, economies, supply chains and jobs.dividends, which remain in effect until at least September 2021. This gives banks more buffer capital available to lend to businesses during coronavirus restrictions, and to absorb losses when businesses can’t repay those loans.
ING has had to adapt to the practical implications this had for customers and employees, as well as to the newThe European Central Bank (ECB) also undertook various monetary policy measures to provide liquidity to the market trends and stakeholder expectations. At the same time, our business continues to be affected byeconomy and banks in particular.
regulatory changes and the persistent low interest rate environment For further information on regulatory changes reference is made to “Item 4. Information on the Company – Regulation and Supervision”.ING also took steps to protect and provide relief for our customers, employees and communities. For example, we offered customers payment holidays and provided business clients with liquidity. We worked hard to Other material events and uncertainties that have an impact on our operating results are:safeguard the wellbeing of our employees. We built on our digital foundation and equipped employees with the ●Covid-19 pandemicnecessary facilities to work from home without interrupting the high standards of service we offer customers. For ●Marco economic developmentscommunities, we encouraged our businesses and employees to donate time and funds to help address the initial ●Climate changechallenges the coronavirus brought, as well as looking towards the future and how we can help build back better.
●Financial crime risk ●Cybersecurity resilienceMacroeconomic developments ●Fluctuations in equity markets, interest rates and foreign exchange rates As a global financial services company, our profitability, solvency and liquidity are influenced by the state of the economy and the market environment for business, liquidity, funding and capital. The year’s volatility had a For further information on other factors that can impact ING Group’s results of operations, reference is made to marked impact on our performance.
“Item 3. Key information - Risk Factors”.

ING Group Annual Report 2020 on Form 20-F67

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

The Covid-19 pandemic threw the world economy into turmoil. The global economy shrank in 2020 as demandAdditional economic uncertainty came from continuing US-China trade tensions and the US elections in and supply, trade, and finance were severely disrupted. Although we started to see a recovery mid-year asNovember. To help ING’s leadership in their strategic planning, we developed scenarios for various potential lockdowns were relaxed, a second wave of the virus caused governments to slow reopening and/or re-imposeoutcomes to these developments so we are better prepared for different possible futures. The ongoing negative lockdowns, and the economic recovery lost momentum. In most advanced economies, despite effectiveinterest rate environment is also making it a priority for ING to diversify our income.

monetary and fiscal policy support, output remained substantially below pre-pandemic levels.
Large amounts of fiscal stimulus deployed by governments worldwide in 2020 were combined with monetary Western European economies were hit hard by the coronavirus pandemic and associated mobility-reducingstimulus. The US Federal Reserve lowered key interest rates and the ECB stepped up bond purchasing. In the measures. In Germany, the Netherlands and Belgium, economic activity in the first half of 2020 dropped by 10-eurozone, the yield curve flattened. In general, the euro appreciated compared with its main trading partners, 15%. Economic activity in the second quarter of 2020 recorded the largest contractions since World War II.reflecting perceived changes in global risk sentiment and interest rate developments. Towards the end of the year, positive news about vaccines improved financial market sentiment, although a strong eruption of new Following a rapid implementation of sizeable policy support measures and after most economic activities werecoronavirus cases and the emergence of new, more contagious variants are sobering the economic outlook.
allowed to resume (subject to social distancing and hygiene measures), the economic environment turned more favourable during the summer. However, despite a strong economic rebound in the third quarter, the level ofUncertainty around the future relationship between the European Union and the United Kingdom continued economic activity at the end of the year was still below year-end 2019 levels as a resurgence of new coronavirusthroughout the year, compounding the impact of Covid-19, which weakened the British pound vis-à-vis the euro.
cases necessitated the re-imposition of lockdown measures.In July, we announced that due to Brexit we will move ING’s European trading activities from London to Amsterdam. The successful conclusion of an EU/UK-trade deal at year-end avoided economic disruption at the Helped by job retention schemes, the rise in unemployment was relatively mild and levelled off in the second halfstart of 2021.
of the year. Despite the unemployment rate having increased, housing markets remained firm, helped by interest rates remaining low.China regained control of the outbreak of the coronavirus relatively swiftly by implementing strict sanitary and economic measures, and in the second half of the year almost all activities had restarted and exceeded pre- There was an asymmetric impact across the euro area, with southern countries (Spain, Italy) generally hit thepandemic levels. However, the number of cases began increasing again towards the end of 2020 and beginning of hardest during the first wave of the coronavirus. This was partly due to the variation in the length and strictness2021.
of containment measures, the size of discretionary fiscal support, and differences in the economic importance of international tourism.Australia was hit less severely by the coronavirus pandemic than other countries. The Australian authorities introduced considerable fiscal and monetary support to the economy. The central bank reduced its policy rate As in the eurozone, economic performance in Poland was heavily influenced by lockdown measures, theand three-year Australian government bond yield target to 0.1% and extended its long-term, low-cost funding to introduction of job protection schemes and increased public expenditure. Uncertainty about domestic factorsbanks to boost business loans. The central bank also introduced an asset purchase programme targeted at longand the economic recovery held back private investment, as in most other European countries. The central bankterm bonds to ease further financial conditions.
of Poland reduced the benchmark interest rate to 0.1% and purchased assets in the secondary market to improve banks’ liquidity.

ING Group Annual Report 2020 on Form 20-F68

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Climate changeWhile our Terra approach helps measure the impact of our loans on the climate, we are increasingly aware of the

risks associated with climate change. These include physical risks, which can be acute (such as floods and Climate change is one of the world’s most urgent problems. The International Monetary Fund (IMF) says it will wildfires) or chronic (temperature increases and rising sea levels); and transition risk, which is driven by policy, have a potentially catastrophic environmental, human and economic toll if left unaddressed. We believe that ING technology or market changes as we shift towards a low-carbon global economy and potentially lead to stranded can make the biggest impact in fighting climate change through our financing.
assets. Our climate risk programme helps measure the impact of climate change on our loan book. Following a

year of floods, droughts and wildfires, climate-related risk again topped the World Economic Forum’s (WEF) 2020 We work with our clients to finance and facilitate their transition to low-carbon technologies. We’ve developed a global risk ranking in terms of likelihood of occurrence and impact. The IMF is examining the impact of climate on comprehensive suite of sustainability products and services to help them, including green loans and green bonds.
the world’s financial markets and whether it is priced into market valuations. The European Central Bank (ECB)

published a guide in 2020 on how they expect banks to prudently manage and transparently disclose climate- With our Terra approach, we aim to align our loan book with the Paris Agreement’s well-below two-degrees related and environmental risks under current prudential rules.
Celsius goal in the nine sectors most responsible for climate change. In 2020, we released our second Terra

progress report. The report includes quantitative results and targets for all of these nine sectors, fulfilling the We are continuing to advance our understanding and approach to climate risks and opportunities. In 2020 ING commitment we made the previous year. One of these targets is a 19% reduction in our financing to upstream oil published our first Climate Risk Report, setting out our approach to managing this emerging strategic and credit and gas by 2040 compared with 2019 levels. It’s important to note that this target is in line with the International risk. We’re integrating climate risk into our risk management framework, governance and business strategy.
Energy Association’s sustainable development scenario, and that it’s not static. If more or quicker action is Please see the Environmental, social and governance risk chapter for more information.
needed and the scenario is adjusted, our target will adjust accordingly. For more details on our targets and

exposure in these nine sectors, please see the latest Terra progress report on ing.com.

Financial crime risks

Our approach to climate action is collaborative and inclusive. We helped develop an open-source climateMoney laundering is a crime in and of itself. It also facilitates other crimes, such as people trafficking and drug

methodology with our partner, the 2˚ Investing Initiative (2DII). This was published in 2020 for all banks to use.smuggling. According to the United Nations Office on Drugs and Crime, suspicious transactions continue to reach

We’re working with other banks to make this an industry-wide standard, as we believe this will lead to greateras much as $2 trillion a year. This scale illustrates the scope of the problem – it is not something one bank can

transparency and help the financial sector make a bigger impact. In December 2018, ING and four peers signedfight on its own.

the Katowice Commitment and in September 2020 these same banks published a blueprint of how we’ll all use

the methodology developed with 2DII.To be more effective in our efforts to fight financial economic crime, we work closely with our peers, regulators

and law enforcement. This includes initiatives with other Dutch and Belgian banks to jointly monitor transactions,

Our work with the Katowice Commitment laid the groundwork for the Collective Commitment to Climate Actionand further professionalising our KYC organisation by means of internationally recognised certifications.

(CCCA), now signed by 38 banks globally. This is the banking sector’s farthest -reaching commitment to climate

alignment. ING is co-lead of the implementation of the CCCA. In December 2020 an overview was published ofNext to this, improving customer due diligence and transaction monitoring activities are top priorities for ING.

the concrete measures CCCA signatory banks took in the first 12 months to deliver on their commitment. ING is aSince 2017, we’ve been running a programme to enhance our know your customer activities in all customer

founding signatory of the Principles for Responsible Banking, adopted by more than 200 banks, representing asegments of all ING business units. This has led to standardised KYC policies, global governance and consistent

third of the world's banking assets.processes, tools and training, which contribute to becoming sustainably better in the way we address money

laundering risks and comply with laws and regulations.

ING Group Annual Report 2020 on Form 20-F69

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Structural solutions include interventions aimed at addressing undesirable behavioural patterns identified withinsome cases negative) interest rate environment in the Eurozone, the stability of future interest earnings and the organisation and encouraging desirable behaviours that will positively influence KYC execution.margin also depends on the ability to actively manage pricing of customer assets and liabilities. Especially, the pricing of customer savings portfolios in relation to re-pricing customer assets and other investments in our Cybersecurity resiliencebalance sheet is a key factor in the management of the bank’s interest earnings.

Digital technology has connected the world in an unprecedented way. The Covid-19 outbreak highlighted just

Fluctuations in exchange rates

how much people rely on the internet to work, socialise and shop. At the same time, there are growing concerns about unequal access, a lack of governance, data privacy and increasingly sophisticated cyberattacks.ING Group is exposed to fluctuations in exchange rates. Our management of exchange rate sensitivity affects the results of our operations through the trading activities and because we prepare and publish our consolidated Cybercrime is a growing threat to companies in general and to the financial system in particular. The expansion offinancial statements in euros. Because a substantial portion of our income, expenses and foreign investments is mobile and online banking, and ING’s own reliance on cloud technology – especially at a time when manydenominated in currencies other than euros, fluctuations in the exchange rates used to translate foreign employees are working from home – have increased the risk of criminals gaining unauthorised access to INGcurrencies, particularly the U.S. Dollar, Pound Sterling, Turkish Lira, Chinese Renminbi, Australian Dollar, Japanese networks. The global lockdowns due to the pandemic also presented opportunities for criminals to continue toYen, Polish Zloty, Korean Won, Brazilian Real, Singapore Dollar, Thai Baht and Russian Ruble into euros can target customers with phishing attacks, identity theft and online fraud.impact our reported results of operations, cash flows and reserves from year to year. Fluctuations in exchange rates will also impact the value (denominated in euro) of our investments in our non-euro reporting subsidiaries.
One of our top priorities is to keep our bank safe, secure and compliant and to retain customers’ trust. Our multi-The impact of these fluctuations in exchange rates is mitigated to some extent by the fact that income and faceted approach aims to anticipate threats and prevent them from becoming reality. Safeguards include securityrelated expenses, as well as assets and liabilities, of each of our non-euro reporting subsidiaries are generally and communication-monitoring capabilities that use behavioural analysis, machine learning and rules engines.denominated in the same currencies. FX translation risk is managed by taking into account the effect of We are also partnering with fintechs and others to facilitate security innovation for the bank and our industry.translation results on the Core Equity Tier 1 ratio (CET1).

Fluctuations in equity marketsConsolidated result of operations

Our banking operations are exposed to fluctuations in equity markets. ING maintains an internationallyING Group monitors and evaluates the performance of ING Group at a consolidated level and by segment using diversified and mainly client-related trading portfolio. Accordingly, market downturns are likely to lead toresults based on figures according to IFRS as adopted by the European Union (IFRS-EU). The Executive Board and declines in securities trading and brokerage activities which we execute for customers and therefore to a declinethe Management Board Banking consider this measure to be relevant to an understanding of the Group’s in related commissions and trading results. In addition to this, ING also maintains equity investments in its ownfinancial performance, because it allows investors to understand the primary method used by management to non-trading books. Fluctuations in equity markets may affect the value of these investments.evaluate the Group’s operating performance and make decisions about allocating resources. In addition, ING Group believes that the presentation of results in accordance with IFRS-EU helps investors compare its segment Fluctuations in interest ratesperformance on a meaningful basis by highlighting result before tax attributable to ongoing operations and the
profitability of the segment businesses. IFRS-EU result is derived by including the impact of the IFRS-EU ‘IAS 39 Our banking operations are exposed to fluctuations in interest rates. Mismatches in the interest re-pricing and carve out’ adjustment from IFRS-IASB.
maturity profile of assets and liabilities in our balance sheet can affect the future interest earnings and economic value of the bank's underlying banking operations. In addition, changing interest rates may impact the (assumed)
The IFRS-EU ‘IAS 39 carve-out’ adjustment relates to fair value portfolio hedge accounting strategies for the behavior of our customers, impacting the interest rate exposure, interest hedge positions and future interest mortgage and savings portfolios in the Benelux, Germany and Other Challengers that are not eligible under IFRSearnings, solvency and economic value of the bank’s underlying banking operations. In the current low (and in

ING Group Annual Report 2020 on Form 20-F70

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

IASB. As no hedge accounting is applied to these mortgage and savings portfolios under IFRS-IASB, the fair valueING Group’s segments are based on the internal reporting structures by lines of business. The following table changes of the derivatives are not offset by fair value changes of the hedge items (mortgages and savings).specifies the segments by line of business and the main sources of income of each of the segments:

As from the financial year 2020 the information presented to the executive Board is no longer based onRetail Netherlands(Market Leaders) underlying results but on IFRS as endorsed by the EU. Previously monitoring and evaluation of ING Group’sIncome from retail and private banking activities in the Netherlands, including the SME and mid-corporate segments was based on a non-GAAP financial performance measure called underlying. Underlying result wassegments, and the Real Estate Finance portfolio related to Dutch domestic mid-corporates. The main products derived by excluding the impact of the IFRS-EU ‘IAS 39 carve-out’ adjustment, special items, divestments andoffered are current and savings accounts, business lending, mortgages and other consumer lending in the results from former insurance related activities from the IFRS-EU results. In 2020 and 2019 no special items,Netherlands.
divestments or results from former insurance related activities were recorded anymore. 2018 included a special item of EUR 775 million special item related to the settlement agreement with the Dutch authorities onRetail Belgium (Market Leaders) regulatory issues, as well as a EUR 90 million net result from the former Insurance activities.
Income from retail and private banking activities in Belgium (including Luxembourg) , including the SME and midcorporate segments. The main products offered are similar to those in the Netherlands.

Segment Reporting

The published 2020 Annual Accounts of ING Group includes financial information in accordance withRetail Germany (Challengers and Growth Markets)
International Financial Reporting Standards as adopted by the European Union (IFRS-EU). The segment reportingIncome from retail and private banking activities in Germany (including Austria). The main products offered are
in the annual report on Form 20-F has been reconciled with International Financial Reporting Standards as issuedcurrent and savings accounts, mortgages and other customer lending.
by the International Accounting Standards Board (IFRS-IASB) for consistency with the other financial information
contained in this report. The difference between the accounting standards is reflected in the Wholesale BankingRetail Other (Challengers and Growth Markets)
segment, and in the geographical split of the segments in the Netherlands, Belgium, Germany and OtherIncome from retail banking activities in the rest of the world, including the SME and mid-corporate segments in
Challengers. Reference is made to Note 1 ‘Accounting Policies’ for a reconciliation between IFRS-EU and IFRS-specific countries. The main products offered are similar to those in the Netherlands.

IASB.

Wholesale Banking Recognition and measurement of segment results are in line with the accounting policies as described in Note 1Income from wholesale banking activities. The main products are: lending, debt capital markets, working capital ‘Accounting policies’. Transfer prices for inter-segment transactions are set at arm’s length. Corporate expensessolutions, export finance, daily banking solutions, treasury and risk solutions, and corporate finance.
are allocated to business lines based on time spent by head office personnel, the relative number of staff, or on the basis of income, expenses and/or assets of the segment.Corporate Line

In addition to these segments, ING Group reconciles the total segment results to the total result using Corporate The Executive Board of ING Group and the Management Board Banking set the performance targets, approve Line. The Corporate Line is a reflection of capital management activities and certain income and expense items and monitor the budgets prepared by the business lines. Business lines formulate strategic, commercial, and that are not allocated to the banking businesses, including the recognition of value-added tax (VAT) refunds in financial plans in conformity with the strategy and performance targets set by the Executive Board of ING Group the Netherlands (recorded under expenses). In 2020, net interest income on the Corporate Line sharply declined, and the Management Board Banking.
mainly due to lower interest results from foreign currency hedging due to lower interest rate differentials. In
2019, a EUR 119 million gain from the release of a currency translation reserve following the sale of ING’s stake in

ING Group Annual Report 2020 on Form 20-F71

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Kotak Mahindra Bank was included, and the recognition of a EUR 79 million receivable related to the insolvencyTotal Operations of a financial institution (both recorded under income). In 2018, the EUR 775 million settlement agreement withThe following table sets forth the contribution of ING’s business lines and the corporate line to the net result for the Dutch authorities on regulatory issues was included as well as a EUR 90 million net result from the formereach of the years 2020, 2019 and 2018. As of year 2020 consolidated results of ING Group are based on IFRS as Insurance activities. Furthermore, the Corporate Line includes the isolated legacy costs (mainly negative interestadopted by the European Union (IFRS-EU), and not on underlying anymore; furthermore, results of former results) caused by the replacement of short-term funding with long-term funding during 2013 and 2014. INGInsurance activities are included in Corporate Line; historical figures have been adjusted (only in 2018). Reference Group applies a system of capital charging for its banking operations in order to create a comparable basis for theis made to 2019 Annual report on Form 20F for detailed information on the discussion of 2019 and 2018 results.
results of business units globally, irrespective of the business units’ book equity and the currency they operate in.

Total operations

RetailRetailRetailRetailWholesaleCorporateTotal 1 January to 31 December 2020BankingBankingBankingOtherBankingLine

Amounts in millions of eurosNetherlandsBelgiumGermany| Income: | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| - Net interest income | 3,511 | 1,816 | 1,587 | 2,760 | 3,718 | 21213,604 | |
| - Net fee and commission income | 681 | 413 | 437 | 412 | 1,069 | -1 | 3,011 |
| - Total investment and other income | 279 | 145 | 93 | 89 | 609 | -192 | 1,022 |
| Total income | 4,471 | 2,373 | 2,117 | 3,261 | 5,396 | 1817,637 | |

Expenditure:
- Operating expenses	2,236	1,737	1,110	2,469	3,218	38311,153
- Additions to loan loss provision	157	514	57	593	1,351	2	2,675
Total expenditure	2,393	2,251	1,167	3,063	4,568	38513,828

Result before taxation	2,078	122	950	199	827	-367	3,809
Taxation	523	51	331	105	295	-58	1,246
Non-controlling interests	-1	0	4	55	20	0	78
Net result IFRS-EU	1,556	71	615	39	512	-308	2,485
Adjustment of the EU 'IAS 39 carve-out'	0	0	0	0	-234	0	-234
Net result IFRS-IASB	1,556	71	615	39	278	-308	2,250

ING Group Annual Report 2020 on Form 20-F72

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

RetailRetailRetailRetailWholesaleCorporateTotalRetailRetailRetailRetailWholesaleCorporateTotal 1 January to 31 December 2019BankingBankingBankingOtherBankingLine1 January to 31 December 2018BankingBankingBankingOtherBankingLine Amounts in millions of eurosNetherlandsBelgiumGermanyAmounts in millions of eurosNetherlandsBelgiumGermany| Income: | | | | | | | | Income: | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| - Net interest income | 3,541 | 1,907 | 1,579 | 2,787 | 3,794 | 47014,079 | | - Net interest income | 3,749 | 1,830 | 1,671 | 2,690 | 3,686 | 29013,916 | |
| - Net fee and commission income | 674 | 374 | 268 | 423 | 1,135 | -6 | 2,868 | - Net fee and commission income | 664 | 371 | 225 | 395 | 1,152 | -8 | 2,798 |
| - Total investment and other income | 290 | 161 | 138 | 298 | 369 | 103 | 1,360 | - Total investment and other income | 335 | 169 | 76 | 230 | 673 | -20 | 1,462 |
| Total income | 4,505 | 2,442 | 1,985 | 3,509 | 5,298 | 56818,306 | | Total income | 4,747 | 2,369 | 1,972 | 3,315 | 5,510 | 26218,176 | |

Expenditure:								Expenditure:
- Operating expenses	2,210	1,609	1,080	2,210	2,937	30710,353		- Operating expenses	2,220	1,610	1,027	2,033	2,771	1,022	10,682
- Additions to loan loss provision	91	186	-53	364	532	0	1,120	- Additions to loan loss provision	-41	164	-27	350	210	-1	656
Total expenditure	2,301	1,794	1,027	2,574	3,469	30711,472		Total expenditure	2,179	1,774	1,000	2,383	2,981	1,021	11,338

Result before taxation	2,204	647	957	935	1,830	261	6,834	Result before taxation	2,568	595	972	932	2,529	-759	6,838
Taxation	558	192	328	234	464	179	1,955	Taxation	626	199	324	200	633	46	2,027
Non-controlling interests	0	0	3	82	14	0	99	Non-controlling interests	-0	6	3	80	19	-0	108
Net result IFRS-EU	1,646	455	627	619	1,352	82	4,781	Net result IFRS-EU	1,942	390	646	652	1,877	-804	4,703
Adjustment of the EU 'IAS 39 carve-out'					-878		-878	Adjustment of the EU 'IAS 39 carve-out'					58		58
Net result IFRS-IASB	1,646	455	627	619	474	82	3,903	Net result IFRS-IASB	1,942	390	646	652	1,935	-804	4,761

ING Group Annual Report 2020 on Form 20-F73

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Year ended 31 December 2020 compared to year ended 31 December 2019Net fee and commission income increased 5.0% to EUR 3,011 million from 2,868 million in 2019. In Retail
ING’s net result (including the adjustment of the EU ‘IAS 39 carve-out’) decreased by EUR 1,653 million, or 42.4%,Banking, net fee and commission income rose by EUR 204 million, or 11.7%. This was mainly driven by higher fee
to EUR 2,250 million compared with EUR 3,903 million in 2019. The net result was affected by a EUR 234 millionincome on investment products, predominantly in Germany, whereas daily banking fees slightly increased
negative contribution of fair value changes on derivatives related to asset-liability-management activities for thesupported by increased package fees, which countered the impact of a drop in payment transactions due to
mortgage and savings portfolios in the Benelux, Germany, France and Czech Republic, versus a EUR 878 millionlockdown measures and travel restrictions. Total fee income in Wholesale Banking declined by EUR 66 million, or
negative contribution in 2019. These negative fair value changes were mainly caused by changes in market5.8%, predominantly in Trade & Commodity Finance as a result of lower average oil prices as well as lower
interest rates. No hedge accounting is applied to these derivatives under IFRS-IASB.syndicated deal activity in Lending.

The IFRS-EU net result (before adjustment of the EU ‘IAS 39 carve-out’) fell 48.0% to EUR 2,485 million from EURTotal investment and other income decreased to EUR 1,022 million 2020 from EUR 1,360 million in previous year.
4,781 million in 2019. The effective tax rate in 2020 was relatively high at 32.7% (versus 28.6% in 2019) and wasThe decline was mainly in Retail Banking, largely due to a EUR 230 million goodwill impairment related to ING’s
mainly caused by the lower result before tax, which included higher non-deductible amounts like thestake in TMB, and in the Corporate Line. In 2019, the latter had included a EUR 119 million one-off gain from the
impairments on goodwill and on our stake in TMB.release of a currency translation reserve related to the sale of ING’s stake in Kotak Mahindra Bank and a EUR 79

million receivable related to the insolvency of a financial institution. These declines were partly offset by The result before tax declined 44.3% to EUR 3,809 million in 2020 from EUR 6,834 million in 2019, primarilyWholesale Banking, predominantly in Financial Markets due to a positive swing in valuation adjustments.
caused by elevated risk costs reflecting the (expected) economic impact of the Covid-19 pandemic, combined with impairments on goodwill, restructuring provisions and other impairments. Net core lending (adjusted forOperating expenses increased by EUR 800 million, or 7.7%, to EUR 11,153 million. Expenses in 2020 included EUR currency impacts, and excluding Treasury and the run-off portfolios) declined by EUR 2.5 billion in 2020, while1,105 million of regulatory costs, compared with EUR 1,021 million previous year. The increase was furthermore net customer deposit inflow was high at EUR 41.4 billion. The global retail customer base grew to 39.3 million atcaused by EUR 673 million of incidental items recorded in 2020, mainly reflecting EUR 310 million of goodwill year-end, and the number of primary customers rose during the year by 578,000 to 13.9 million.impairments and several restructuring provisions and impairments related to the review of activities and measures announced (including those on Wholesale Banking and the Maggie project). Excluding regulatory costs Income declined 3.7% to EUR 17,637 million from EUR 18,306 million in 2019. The decline was mainly in theand these incidental items, expenses increased by EUR 43 million, or 0.5%, as the impact of collective-labour- Corporate Line due to lower interest results from foreign currency ratio hedging and to some positive one-offsagreement (CLA) salary increases and higher IT expenses, was largely offset by the impact of continued costrecorded in 2019. Income at Retail Banking decreased due to an impairment on our equity stake in TMB, whereasefficiency measures (including lower marketing and travel costs as a result of the Covid-19 restrictions). The income in Wholesale Banking (mainly in Financial Markets) increased.cost/income ratio was 63.2% versus 56.6% in 2019.

Net interest income decreased 3.4% to EUR 13,604 million. The decline was largely due to lower interest resultsNet additions to loan loss provisions were EUR 2,675 million, or 43 basis points of average customer lending,
on current accounts and savings, reflecting the continued pressure on liability margins, combined with lowercompared with EUR 1,120 million, or 18 basis points, in 2019. The increase was mainly due to various Individual
interest results from foreign currency ratio hedging due to lower interest rate differentials. This decline wasStage 3 provisions, including a sizeable provision for an alleged external fraud case in 2020, and high collective
largely offset by higher interest results at Treasury (supported by the introduction of the ECB’s two-tieringStage 1 and Stage 2 provisioning as a result of the economic impact of the Covid-19 pandemic. Risk costs in 2020
system at the end of October 2019) and, to a lesser extent, on lending products, reflecting a slight increase in theincluded EUR 590 million of collective provisions related to the worsened macro -economic indicators, including
total lending margin. ING’s overall net interest margin declined to 1.44% from 1.54% in 2019.provisioning related to loans subject to a payment holiday.

ING Group Annual Report 2020 on Form 20-F74

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Year ended 31 December 2019 compared to year ended 31 December 2018Net fee and commission income rose 2.5% to EUR 2,868 million. The increase was driven by Retail Banking with
In 2019, ING’s operations showed solid commercial performance despite the challenging rate environment,increases in most countries, partly offset by a small decline in Wholesale Banking. Investment and other income
geopolitical uncertainties and demanding regulatory environment. The net result (including the adjustment ofslightly decreased to EUR 1,360 million from EUR 1,462 million in 2018, with a decline in Wholesale Banking,
the EU ‘IAS 39 carve-out’) declined 18.0% to EUR 3,903 million in 2019 from EUR 4,761 million in 2018, which hasmainly due to negative valuation adjustments in Financial Markets, and some one-offs. The decline was largely
been negatively affected by the EUR 775 million settlement agreement with the Dutch authorities on regulatoryoffset by increases in Retail Banking and Corporate Line. The latter was supported by a EUR 119 million gain from
issues. The net result was affected by a EUR 936 million negative swing in net contribution of fair value changesthe release of a currency translation reserve following the sale of ING’s stake in Kotak Mahindra Bank and the
on derivatives related to asset-liability-management activities the mortgage and savings portfolios in therecognition of a EUR 79 million receivable related to the insolvency of a financial institution.

Benelux, Germany, France and Czech Republic. These fair value changes are mainly caused by changes in market interest rates. No hedge accounting is applied to these derivatives under IFRS-IASB.Operating expenses declined 3.1% to EUR 10,353 million from EUR 10,682 million in 2018, mainly due to the aforementioned settlement agreement with the Dutch authorities. Excluding this settlement, operating expenses The net result IFRS-EU (excluding the adjustment of the EU ‘IAS 39 carve-out’) increased 1.6% to EUR 4,781increased 4.5% to EUR 10,353 million from EUR 9,907 million in 2018. The increase was visible in all segments, million from EUR 4,703 million. This was in part due to a decreased effective tax rate of 28.6% from 29.6% inexcept for Retail Netherlands and Retail Belgium. Regulatory expenses rose to EUR 1,021 million from EUR 947 2018, mainly reflecting lower non-deductible costs, as 2018 included the aforementioned settlement agreementmillion in previous year. Excluding regulatory costs and the settlement agreement, expenses were up 4.2%, with the Dutch authorities. This decline was partly offset by the cancellation of tax deductibility of interestmainly due to higher KYC-related costs, increased staff costs and continued investments in business growth, expenses on additional Tier 1 instruments in the Netherlands as from 2018.partly offset by costs savings and one-offs (including a higher VAT refund, recorded in Corporate Line). The cost/income ratio was 56.6% versus 58.8% in 2018.

The result before tax declined 0.1% to EUR 6,834 million in 2019 from EUR 6,838 million in 2018, primarily due to
higher risk costs. Commercial momentum remained solid, albeit at a slower pace than previous year. ING grewThe net addition to the provision for loan losses rose to EUR 1,120 million from EUR 656 million in 2018. This
net core lending (adjusted for currency impacts, and excluding Treasury and the run-off portfolios) by EUR 17.2increase was mainly caused by a number a large individual files in Wholesale Banking and higher, but still
billion, or 2.9%, and net customer deposits rose by EUR 23.4 billion in 2019. The global retail customer base grewrelatively low risk costs in Retail Netherlands. Risk costs rose to 18 basis points of average customer lending,
to 38.8 million at year-end, and the number of primary customers rose during the year by 0.8 million to 13.3remaining below ING Bank’s through-the-cycle average of approximately 25 basis points, compared with 11 basis
million.points of average customer lending in 2018.

For the following information per business line the IFRS-EU measures are in place, in line with management The income increased 0.7% to EUR 18,306 million from EUR 18,176 million in 2018, driven by Corporate Linereporting.
(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 14,079 million. The increase was driven by higher interest results on customer lending mainly supported by volume growth, partly offset by lower margins on savings and current accounts. The total lending margin was slightly up compared with 2018, as the impact of improved interest margins on mortgages was largely offset by lower margins on other customer lending. ING’s overall net interest margin remained at 1.54% in 2019.

ING Group Annual Report 2020 on Form 20-F75

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements| Retail Netherlands | | | | investment product fees. Investment and other income was EUR 11 million lower. |
| --- | --- | --- | --- | --- |
| Amounts in millions of euros | 2020 | 2019 | 2018 | |
| Income: | | | | Operating expenses rose by EUR 26 million, or 1.2%, to EUR 2,236 million from EUR 2,210 million in 2019, of |
| Net interest income | 3,511 | 3,541 | 3,749 | which EUR 65 million was caused by higher regulatory costs to EUR 255 million from EUR 190 million in 2019. |
| Net fee and commission income | 681 | 674 | 664 | Expenses excluding regulatory costs declined 1.9% as the impact of CLA salary increases, higher IT expenses as |
| Investment income and other income | 279 | 290 | 335 | well as provisions related to redundancies and customer claims, were more than offset by lower external staff |
| Total income | 4,471 | 4,505 | 4,747 | |
| | | | | costs and lower marketing and travel expenses. |
| Expenditure: | | | | |
| Operating expenses | 2,236 | 2,210 | 2,220 | The net addition to loan loss provisions was EUR 157 million, or 10 basis points of average customer lending, |
| Additions to the provision for loan losses | 157 | 91 | –41 | compared with EUR 91 million, or 6 basis points, in 2019. Risk costs in 2020 included EUR 118 million of collective |
| Total expenditure | 2,393 | 2,301 | 2,179 | provisions related to the worsened macro-economic indicators, including provisioning related to loans subject to |
| Result before tax | 2,078 | 2,204 | 2,568 | a payment holiday. |
| Taxation | 523 | 558 | 626 | |
| Non-controlling interests | –1 | –0 | –0 | Year ended 31 December 2019 compared to year ended 31 December 2018 |
| Net result IFRS-IASB | 1,556 | 1,646 | 1,942 | The net result of Retail Netherlands decreased by EUR 296 million, or 15.2%, to EUR 1,646 million in 2019 from |
| | | | | EUR 1,942 million in 2018. |

The result before tax of Retail Netherlands decreased 14.2% to EUR 2,204 million from EUR 2,568 million in 2018.
Year ended 31 December 2020 compared to year ended 31 December 2019This was mainly due to lower income, mainly reflecting lower margins on customer deposits and lower revenues The net result of Retail Netherlands decreased by EUR 90 million, or -5.5%, to EUR 1,556 million in 2020 fromfrom Treasury, combined with higher risk costs. Operating expenses declined slightly.

EUR 1,646 million in 2019.
Income fell 5.1% to EUR 4,505 million from EUR 4,747 million previous year. The interest result was 5.5% lower, The result before tax of Retail Netherlands decreased 5.7% to EUR 2,078 million from EUR 2,204 million in 2019.reflecting margin pressure on savings and current accounts due to lower re-investment yields and lower This decline was mainly attributable to higher risk costs reflecting the worsened macro-economic environmentrevenues from Treasury. This was partly compensated by improved margins on mortgages. Net core lending and an increase in regulatory costs.(excluding the WUB run-off portfolio and Treasury -related products) grew by EUR 2.0 billion in 2019, equally divided over mortgages and other lending. Net growth in customer deposits (excluding Treasury) was EUR 8.4 Total income declined by EUR 34 million, or -0.8%, to EUR 4,471 million, compared with EUR 4,505 million inbillion in 2019. Net fee and commission income rose by EUR 10 million, or 1.5%, primarily due to higher daily 2019. Net interest income declined 0.8%, mainly due to lower margins on savings and current accounts,banking fees. Investment and other income declined by EUR 45 million, mainly attributable to lower results from combined with a decline in average lending volumes, which was largely offset by higher Treasury- relatedfinancial markets-related products.
revenues. Net core lending (which excludes Treasury products and a EUR 1.1 billion decline in the WUB run-off portfolio) decreased by EUR 3.2 billion in 2020, of which EUR 0.8 billion was in residential mortgages and EUR 2.4

ING Group Annual Report 2020 on Form 20-F76

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Operating expenses declined 0.5% on 2018, this was mainly due to lower regulatory costs, benefits from theThe result before tax of Retail Belgium fell to EUR 122 million, compared with EUR 647 million in 2019. The ongoing cost-saving initiatives and some positive one-offs, partly offset by increased salaries as well as higher KYCdecline was attributable to higher risk costs reflecting the worsened macro-economic environment, combined and IT-related expenses.higher expenses and lower income.

Risk costs in 2019 increased to a relatively low EUR 91 million, or 6 basis points of average customer lending,Income declined by EUR 69 million, or 2.8%, to EUR 2,373 million from EUR 2,442 million in 2019. Net interest partly caused by a change in the house price index that is used for Dutch mortgages. This compares with a netincome was 4.8% down to EUR 1,816 million, mainly reflecting lower margins on savings and current accounts, release of EUR 41 million 2018, which included releases in both mortgages and business lending.and lower Treasury related revenues, partly offset by higher interest results from mortgages. Net core lending| Retail Belgium | | | | products and mortgages. Investment and other income declined by EUR 16 million, mainly from Financial |
| --- | --- | --- | --- | --- |
| Amounts in millions of euros | 2020 | 2019 | 2018 | Markets. |
| Income: | | | | |
| Net interest income | 1,816 | 1,907 | 1,830 | Operating expenses rose by EUR 128 million, of which EUR 43 million was due to a goodwill impairment related |
| Net fee and commission income | 413 | 374 | 371 | |
| Investment income and other income | 145 | 161 | 169 | to an acquisition in the past by ING Belgium and EUR 40 million related to restructuring costs recorded in the |
| Total income | 2,373 | 2,442 | 2,369 | fourth quarter of 2020. The remaining increase was mainly due to higher regulatory costs and IT expe nses. |

Expenditure:				The net addition to the provision for loan losses increased to EUR 514 million, or 57 basis points of average
Operating expenses	1,737	1,609	1,610	customer lending, from EUR 186 million, or 21 basis points, in 2019. Risk costs in 2020 included EUR 158 million
Additions to the provision for loan losses	514	186	164	of collective provisions related to the worsened macro -economic indicators, including provisioning related to
Total expenditure	2,251	1,794	1,774
Result before tax	122	647	595	provisioning on a number of individual files.
Taxation	51	192	199
Non-controlling interests	0	0	6	Year ended 31 December 2019 compared to year ended 31 December 2018
Net result IFRS-IASB	71	455	390	The net result of Retail Belgium (including ING in Luxembourg) increased by EUR 65 million, or 16.7%, to EUR 455
				million in 2019 from EUR 390 million in 2018.

The result before tax of Retail Belgium rose 8.7% to EUR 647 million in 2019, compared with EUR 595 million in

Year ended 31 December 2020 compared to year ended 31 December 2019 2018. The increase reflects higher income and stable expenses, only partly offset by an increase in risk costs.
The net result of Retail Belgium (including ING in Luxembourg) declined by EUR 384 million to EUR 71 million in 2020 from EUR 455 million in 2019.
Income increased to EUR 2,442 million from EUR 2,369 million in 2018. The interest result was 4.2% up to EUR 1,907 million, mainly due to volume growth, increased margins on mortgages, and supported by higher net interest income from Treasury -related products. This was in part offset by lower net interest income from savings

ING Group Annual Report 2020 on Form 20-F77

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

and current accounts, reflecting the low interest rate environment, and some margin pressure on non-mortgageYear ended 31 December 2020 compared to year ended 31 December 2019

lending. The net production in customer lending (excluding Treasury) was EUR 3.3 billion, of which EUR 1.2 billionThe net result of Retail Germany (including ING in Austria) decreased by EUR 12 million, or 1.9%, to EUR 615
was in residential mortgages and EUR 2.1 billion in other lending. The net inflow in customer deposits (excluding million in 2020 from EUR 627 million in 2019.
Treasury) was EUR 4.1 billion in 2019. Net fee and commission income increased 0.8% to EUR 374 million.

Investment and other income was EUR 8 million lower, mainly due to lower Treasur y-related revenues.
The result before tax declined 0.7% to EUR 950 million, compared with EUR 957 million in 2019, as higher income

Operating expenses declined 0.1% to EUR 1,609 million, mainly due to lower staff -related expenses stemminglargely offset the impact of higher risk costs (after a net release in 2019) and increased expens es.

from the transformation programmes, partly offset by higher regulatory costs and KYC -related expenses.

Total income rose 6.6% to EUR 2,117 million from EUR 1,985 million in 2019. The increase was driven by EUR 169 Risk costs increased by EUR 22 million to EUR 186 million, or 21 basis points of average customer lending, from million higher fee income, predominantly on investment products due to higher assets under management, new EUR 164 million, or 19 basis points, in 2018. The increase was mainly caused by additional provisioning on account openings and a higher number of brokerage trades in volatile markets. Net interest income increased individual mid-corporates files and higher collective provisions for consumer lending.
0.5% to EUR 1,587 million, as higher interest results from lending and accounting asymmetry in Treasury (with an

offset in other income), was largely offset by margin pressure on savings and current accounts. In 2020, net core

Retail Germanylending (which excludes Treasury products) increased EUR 4.5 billion, of which EUR 4.2 billion was in residential

mortgages and EUR 0.3 billion in consumer lending. Net customer deposits (excluding Treasury) increased by EUR| Retail Germany | | | | 5.8 billion, largely in current accounts. Investment and other income declined by EUR 45 million, mainly due to |
| --- | --- | --- | --- | --- |
| Amounts in millions of euros | 2020 | 2019 | 2018 | the aforementioned accounting asymmetry and lower capital gains. |
| Income: | | | | |
| Net interest income | 1,587 | 1,579 | 1,671 | |
| Net fee and commission income | 437 | 268 | 225 | Operating expenses increased by EUR 30 million, or 2.8%, to EUR 1,110 million in 2020. The increase was mainly |
| Investment income and other income | 93 | 138 | 76 | due to investments to support business growth as well as the consolidation of a subsidiary as from the first |
| Total income | 2,117 | 1,985 | 1,972 | |
| | | | | quarter of 2020, while previous year included a EUR 36 million restructuring provision. |

Expenditure:
Operating expenses	1,110	1,080	1,027
Additions to the provision for loan losses	57	–53	–27	The net addition to the provision for loan losses was EUR 57 million, or 6 basis points of average customer
Total expenditure	1,167	1,027	1,000	lending, compared with a net release of EUR 53 million in 2019, which had included model updates on

				mortgages. Risk costs in 2020 included EUR 8 million of collective provisions related to the worsened macro-
Result before tax	950	957	972	economic indicators.
Taxation	331	328	324
Non-controlling interests	4	3	3
Net result IFRS-IASB	615	627	646	Year ended 31 December 2019 compared to year ended 31 December 2018

The net result of Retail Germany (including ING in Austria) decreased by EUR 19 million, or 2.9%, to EUR 627

million in 2019 from EUR 646 million in 2018.

ING Group Annual Report 2020 on Form 20-F78

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

The result before tax declined 1.5% to EUR 957 million, compared with EUR 972 million in 2018, mainly due toRetail Other

higher expenses, partly offset by slightly increased income and a higher net release in risk costs.| | Retail Other | | | |
| --- | --- | --- | --- | --- |
| Income increased 0.7% to EUR 1,985 million in 2019 from EUR 1,972 million a year ago. Net interest income | Amounts in millions of euros | 2020 | 2019 | 2018 |
| declined 5.5%, mainly due to lower Treasury-related interest results (with a partial offset in other income). | Income: | | | |
| Excluding Treasury, net interest income rose marginally, mainly reflecting volume growth in most products and | Net interest income | 2,760 | 2,787 | 2,690 |
| | Net fee and commission income | 412 | 423 | 395 |
| improved margins on mortgages, offset by lower interest results on savings and deposits due to margin pressure. | Investment income and other income | 89 | 298 | 230 |
| The net growth in core lending (excluding Treasury) was EUR 3.0 billion in 2019, of which EUR 2.4 billion in | Total income | 3,261 | 3,509 | 3,315 |

mortgages and EUR 0.6 billion in consumer lending. Net inflow in customer deposits (excluding Treasury) was
EUR 0.8 billion. Net fee and commission income rose 19.1% to EUR 268 million, due to higher fees on mortgages	Expenditure:
and daily banking. Investment and other income rose by EUR 62 million to EUR 138 million, largely due to the	Operating expenses	2,469	2,210	2,033
	Additions to the provision for loan losses	593	364	350
aforementioned accounting asymmetry in Treasury revenues.	Total expenditure	3,063	2,574	2,383

Operating expenses rose 5.2% to EUR 1,080 million from EUR 1,027 million in 2018. The increase was mainly due	Result before tax	199	935	932
to a restructuring provision related to the completion of ING’s Agile transformation in Germany, higher KYC-	Taxation	105	234	200
related expenses, investments to accelerate the acquisition of primary customers, and the launch of Interhyp in	Non-controlling interests	55	82	80
Austria.	Net result IFRS-IASB	39	619	652

Risk costs were EUR -53 million, or -6 basis points of average customer lending, compared with EUR -27 million in

1. The net release in 2019 mainly related to model updates for mortgages, while the net release in 2018

Year ended 31 December 2020 compared to year ended 31 December 2019 included a significant release in the consumer lending portfolio.
Retail Other consists of the Other Challengers & Growth Markets, including the bank stakes in Asia. The net result

of Retail Other decreased to EUR 39 million in 2020, from EUR 619 million in 2019.

Retail Others’ result before tax fell to EUR 199 million, from EUR 935 million in 2019, mainly reflecting

impairments on TMB and the Maggie project as well as higher risk costs.

Total income declined by EUR 248 million to EUR 3,261 million in 2020, of which EUR 230 million related to an

impairment on ING’s equity stake in TMB. Excluding this impairment, total income decreased by EUR 18 million,

or -0.5%. Net interest income was down 1.0% to EUR 2,760 million, reflecting margin pressure on savings and

current accounts, largely offset by higher interest results from lending products and Treasury. Net customer

lending (adjusted for currency effects and Treasury) grew by EUR 2.6 billion in 2020, with growth in all countries,

except Italy. The net inflow in customer deposits, also adjusted for currency impacts and Treasury, was EUR 11.9

billion, with largest increases in Poland and Spain. Net fee and commission income declined 2.6% to EUR 412

ING Group Annual Report 2020 on Form 20-F79

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

million, largely due to a decline in Turkey, which was partly offset by increases in most of the other countries.aforementioned accounting asymmetry in Treasury and a higher dividend from Bank of Beijing, partly offset by a Excluding the aforementioned impairment, investment and other income rose by EUR 21 million.lower profit from TMB.

Operating expenses increased by EUR 259 million, or 11.7%, to EUR 2,469 million from EUR 2,210 million in 2019,Operating expenses increased by EUR 177 million, or 8.7%, to EUR 2,210 million. This increase was in addition to of which EUR 140 million related to an impairment on capitalised software following the decision to stop thehigher regulatory costs and legal provisions, mainly due to higher expenses to support business growth and the Maggie transformation programme (previously called Model Bank) and EUR 27 million of restructuring provisionsimplementation of bank-wide regulatory programmes, including KYC.
and impairments related to the project and some other countries. Excluding these incidental items, expenses increased by EUR 92 million, or 4.2%, mainly due to higher regulatory costs, investments in business growth andRisk costs were EUR 364 million, or 38 basis points of average customer lending, compared with EUR 350 million, lower capitalization of costs following the decision on Maggie. These increases were partly offset by lower legalor 40 basis points, in 2018. The increase was mainly attributable to higher risk costs in Spain and Poland, while provisions as well as lower marketing and travel expenses.risk costs in Turkey and Italy declined.| the worsened macro-economic indicators, including provisioning related to loans subject to a payment holiday, | Wholesale Banking | | | |
| --- | --- | --- | --- | --- |
| as well as a EUR 59 million Stage 3 provision for expected losses on CHF-indexed mortgages in Poland. The | Amounts in millions of euros | 2020 | 2019 | 2018 |
| increase versus 2019 was mainly visible in Poland, Romania and Australia, whereas risk costs in Turkey declined. | Income: | | | |
| | Net interest income | 3,718 | 3,794 | 3,686 |
| | Net fee and commission income | 1,069 | 1,135 | 1,152 |
| Year ended 31 December 2019 compared to year ended 31 December 2018 | Investment income and other income | 609 | 369 | 673 |
| Retail Other consists of the Other Challengers & Growth Markets, including the bank stakes in Asia. The net result | Total income | 5,396 | 5,298 | 5,510 |
| | Expenditure: | | | |
| Retail Other’s result before tax increased 0.3% to EUR 935 million in 2019, from EUR 932 million in 2018. This was | Operating expenses | 3,218 | 2,937 | 2,771 |
| | Additions to the provision for loan losses | 1,351 | 532 | 210 |
| mainly due to higher income, partly offset by increased expenses and higher risk costs. | Total expenditure | 4,568 | 3,469 | 2,981 |

Total income rose by EUR 194 million, or 5.9%, to EUR 3,509 million. This increase was driven by strong results	Result before tax	827	1,830	2,529
across most of the countries, whereas 2018 included a higher profit from ING Bank’s stake in TMB due to one-	Taxation	295	464	633
offs. Net interest income rose 3.6% to EUR 2,787 million, reflecting volume growth in lending and customer	Non-controlling interests	20	14	19
deposits, and a stable total interest margin. This increase was offset by accounting asymmetry in Treasury with	Net result IFRS-EU	512	1,352	1,877
an offset in other income. The net production in customer lending (excluding currency effects and Treasury) was	Adjustment of the EU 'IAS 39 carve-out'	–234	–878	58
	Net result IFRS-IASB	278	474	1,935

customer deposits grew by EUR 6.9 billion in 2019, with the largest increases in Poland, Spain and Australia. Net commission and fee income increased 7.1% to EUR 423 million driven by increases in most countries, but declined in Spain and Turkey. Investment and other income rose by EUR 68 million, mainly due to the

ING Group Annual Report 2020 on Form 20-F80

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Year ended 31 December 2020 compared to year ended 31 December 2019
The net result of Wholesale Banking declined to EUR 278 million in 2020 compared with EUR 474 million in 2019.The net addition to loan loss provisions rose to EUR 1,351 million, or 75 basis points of average customer lending,
The adjustment of the EU ‘IAS 39 carve-out’, included in the net result, was EUR -234 million in 2020, comparedcompared with EUR 532 million, or 29 basis points, in 2019. The increase was predominantly due to various
with EUR -878 million in 2019, due to fair value changes on derivatives related to asset-liability-managementIndividual Stage 3 provisions, including a sizeable provision for an alleged external fraud case in 2020, and high
activities for the mortgage and savings portfolios in the Benelux, Germany, France and Czech Republic. These faircollective Stage 1 and Stage 2 provisions as a result of the economic impact of the Covid-19 pandemic, including
value changes were mainly a result of changes in market interest rates. No hedge accounting is applied to theseEUR 192 million of collective provisions related to the worsened macro -economic indicators.

derivatives under IFRS-IASB.
Lending posted a result before tax of EUR 691 million, down 56.7% compared with EUR 1,597 million in 2019, The IFRS-EU net result, which is before the adjustment of the EU ‘IAS 39 carve-out’, declined to EUR 512 millionpredominantly due to elevated risk costs. Risk costs in 2020 were primarily impacted by various large individual from EUR 1,352 million in 2019.files, including a sizeable provision for an alleged external fraud case, as well as the economic impact of the Covid-19 pandemic. Lending income declined 3.2%, reflecting lower lending margins and lower syndicated deal The full-year 2020 results for Wholesale Banking were also strongly affected by the impact of the Covid-19activity. Expenses declined 3.1%, mainly due to lower regulatory costs.
pandemic. The result before tax dropped 54.8% to EUR 827 million, down from EUR 1,830 million in 2019. The decline was predominantly due to elevated risk costs and higher expenses (including impairments andThe result before tax from Daily Banking & Trade Finance fell to EUR 246 million from EUR 476 million in 2019.
restructuring provisions), partly offset by higher income.This decline was due to lower income and higher expenses, partly offset by lower risk costs as previous year included a sizeable provision for an external fraud case. The decline in income mainly reflect lower margins on Total income rose 1.8% to EUR 5,396 million in 2020, compared with EUR 5,298 million in 2019, reflecting highercurrent accounts as well as lower fee income, mainly in Trade & Commodity Finance as a result of lower average revenues in Financial Markets and Treasury & Other, partly offset by lower income in Daily Banking & Tradeoil prices. Expenses rose 9.8%, mainly due to impairments on Payvision’s intangible assets.
Finance and Lending. The net core lending book (adjusted for currency impacts and excluding Treasury and the Lease run-off portfolio) declined by EUR 4.9 billion in 2020. The inflow in net customer deposits (excludingFinancial Markets recorded a result before tax of EUR 230 million, compared with a loss of EUR 121 million in currency impacts and Treasury) was EUR 4.4 billion. Net interest income decreased 2.0%, mainly due to lower2019. The increase was predominantly due to higher income, which included EUR 73 million of positive valuation margins on current accounts and lower average lending volumes. This decline was largely offset by higheradjustments versus EUR -228 million in 2019, and lower expenses in part due to lower staff expenses and interest results from Treasury (with an offset in other income). Net fee and commission income decreased 5.8%regulatory costs. Excluding valuation adjustments, pre-tax result rose by EUR 50 million compared with 2019, on 2019, mainly due to lower syndicated deal activity in Lending and lower fees in Trade & Commodity Finance.mainly in the Global Capital Markets business.
Investment and other income rose by EUR 240 million, primarily due to higher valuation results in Financial Markets, partly offset by Treasury.The result before tax of Treasury & Other was EUR -339 million compared with EUR -123 million in 2019. This decline was mainly explained by a EUR 260 million goodwill impairment and EUR 95 million of restructuring Operating expenses rose 9.6% to EUR 3,218 million from EUR 2,937 million in 2019, mainly due to a EUR 260provisions and related impairments following the announced refocusing of activities, partly offset by higher million goodwill impairment and EUR 124 million of restructuring provisions and impairments recorded in theTreasury income.
fourth quarter of 2020, following the announced refocusing of activities, including an additional impairment on Payvision. Excluding the aforementioned incidental items, expenses decreased 3.5%, mainly due to lower regulatory costs and the impact of continued cost-efficiency measures as well as lower travel expenses as a result of the Covid-19 restrictions.

ING Group Annual Report 2020 on Form 20-F81

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Year ended 31 December 2019 compared to year ended 31 December 2018
The net result of Wholesale Banking declined to EUR 474 million in 2019 compared with EUR 1,935 million inLending posted a result before tax of EUR 1,597 million, down 20.4% compared with 2018. The decline reflects
2018. The adjustment of the EU ‘IAS 39 carve-out’, included in the net result, turned to a loss of EUR 878 millionlower income combined with higher expenses (including increased regulatory costs and KYC -related expenses)
in 2019, from EUR 58 million in 2018, due to fair value changes on derivatives related to asset-liability-and higher risk costs due to a number of large individual files. Despite higher average volumes, Lending income
management activities for the mortgage and savings portfolios in the Benelux, Germany, France and Czechdeclined, mainly due to some pressure on margins and the EUR 66 million gain related to an equity-linked bond
Republic. These fair value changes are mainly a result of changes in market interest rates. No hedge accounting isin Belgium recorded in 2018.

applied to these derivatives under IFRS-IASB. The net result IFRS-EU, which excludes the adjustment of the EU ‘IAS 39 carve-out’, declined to EUR 1,352 million from EUR 1,877 million in 2018.The result before tax from Daily Banking & Trade Finance declined 24.3% to EUR 476 million from EUR 629 million in 2018. A modest increase in income, reflecting improved margins at lower average volumes, could not The full-year 2019 results for Wholesale Banking show that conditions were challenging in our markets. Thecompensate for higher expenses and elevated risk costs. The increased expenses reflect higher regulatory costs result before tax dropped 27.6% to EUR 1,830 million, down from EUR 2,529 million in 2018. The decline reflectsand KYC-related expenses as well as investments in Payvision and regulatory changes (including PSD2). Risk costs elevated risk costs (compared with a relatively low level a year ago), lower revenues in mainly Financial Marketsin 2019 included a sizeable provision for a suspected external fraud case.
and Lending, as well as higher expenses.
Financial Markets recorded a result before tax of EUR -121 million, compared with EUR -36 million in 2018. The Total income of Wholesale Banking fell 3.8% to EUR 5,298 million compared with 2018, mainly reflecting lowerdrop was predominantly due to lower income, which was impacted by EUR 228 million of negative valuation revenues in Financial Markets, Lending and Treasury -related revenues, while 2018 included the aforementionedadjustments versus EUR -1 million in 2018, in part offset by lower expenses on the back of ongoing cost efficiency loss on the intended sale of an Italian lease run-off portfolio. In 2019, the net core lending book (adjusted formeasures. Excluding valuation adjustments, pre-tax result rose by EUR 142 million compared with 2018, driven currency impacts and excluding Treasury and the Lease run-off portfolio) grew by EUR 1.1 billion. The inflow inby higher client income.
net customer deposits (excluding currency impacts and Treasury) was EUR 3.1 billion. Net interest income increased 2.9%, mainly driven by volume growth in Lending at lower margins and higher interest results in DailyThe result before tax of Treasury & Other was EUR -123 million compared with EUR -70 million in 2018. This Banking & Trade Finance, especially in Bank Mendes Gans and Payments & Cash Management. Net fee anddecline was mainly due to lower results from Treasury -related activities and Corporate Investments, whereas the commission income declined 1.5%. Investment and other income fell by EUR 304 million, mainly due to lowerresult of the run-off businesses improved after the EUR 123 million loss on the intended sale of an Italian Lease valuation results in Financial Markets, while previous year included a gain on a bond transaction in Belgium and arun-off portfolio recorded in 2018. Expenses increased mainly due to investments in KYC enhancement and loss on the intended sale of an Italian lease run-off portfolio.innovation, while 2018 included a release from a legal provision.

Operating expenses rose 6.0% to EUR 2,937 million, in part due to higher regulatory costs. Excluding regulatoryB.Liquidity and capital resources
costs, expenses rose 4.7%, mainly attributable to higher KYC, IT and staff-related expenses, partly offset by ING believes that its working capital is sufficient for its present requirements.
continued cost-efficiency savings. The cost/income ratio increased to 55.4%, from 50.3% in 2017.

For information regarding our material short and long- term cash requirements from known contractual and Risk costs increased to EUR 532 million, or 29 basis points of average customer lending, from a relatively low EUR other obligations, see “Additional information – ING Group Risk Management section Funding and liquidity risk” 210 million, or 12 basis points of average customer lending, in previous year. The increase was mainly and “Note 51 – Capital Management” in the consolidated financial statements.
attributable to a number of large individual files, including a sizeable provision for a suspected external fraud
case.

ING Group Annual Report 2020 on Form 20-F82

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

For information on legal or economic restrictions on the ability of subsidiaries to transfer funds to the companyand liabilities (decrease of EUR 5,134 million to EUR 2,566 in 2020). The increases are partly offset by lower cash in the form of cash dividends, loans or advances, see “Note 19 – Equity” in the consolidated financial statements.inflows from (reverse) repurchase transactions (decrease EUR 12,041 to EUR -933 million in 2020).

For information on the maturity profile of borrowings and a further description of the borrowings, please seeNet cash flow from investing activities amounts to EUR -8,487 million compared to EUR -2,495 million in 2019 the “Note 17 - Debt securities in issue”, “Note 18 - Subordinated Loans” and “Note 41 – Liabilities and off-balancenet cash flow from investing activities decreased by EUR 5,992 million. The movement is explained by a net sheet commitments by maturity” in the consolidated financial statements.increase in Securities at amortised costs of EUR 6,337 million.

For information on currency and interest rate structure, see “Additional information – ING Group RiskNet cash flow from financing activities amounts to EUR -34,796 million in 2020, compared to EUR -4,154 million Management section Market risk” and “Additional information – ING Group Risk Management section Fundingin 2019. The decrease of EUR 30,642 million is explained by a net decrease of EUR 30,200 million of debt and liquidity risk”.securities and EUR 3,117 million of subordinated loans offset by lower dividend payments of EUR 2,676 million.

For information on the use of financial instruments for hedging purposes, please see “Note 39 - Derivatives andThe operating, investing and financing activities described above result in an increase of EUR 57,960 million in hedge accounting” in the consolidated financial statements.cash and cash equivalents to EUR 111,566 at year end 2020. The increase in cash and cash equivalent was supported by the combination of lower demand for credit and the continued inflow of customer deposits as ING Group Consolidated Cash Flowsresult of Covid-19, as well as the TLTRO III participation.| cash and cash equivalents | | | | Year ended 31 December 2019 compared to year ended 31 December 2018 |
| --- | --- | --- | --- | --- |
| Amounts in millions of euros | 2020 | 2019 | 2018 | Net cash flow from operating activities amounts to EUR 13,055 million for the year -end 2019, compared to EUR |
| Treasury bills and other eligible bills | 0 | 43 | 159 | 6,915 million at 31 December 2018. The increase in cash flow from operating activities of EUR 6,140 million is |
| Amounts due from/to banks | 478 | 786 | –2,617 | |
| Cash and balances with central banks | 111,087 | 53,202 | 49,987 | explained by lower cash outflows from Loans and advances to customer (increase of EUR 14,669 million to EUR - |
| Cash and cash equivalents at end of year | 111,566 | 54,031 | 47,529 | 16,687 million in 2019), an increase in other (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 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 (decrease of EUR
Year ended 31 December 2020 compared to year ended 31 December 20193,700 million to EUR – 3,911 million).
Net cash flow from operating activities amounts to EUR 101,243 million for the year-end 2020, compared to EUR 13,055 million at 31 December 2019. The increase in cash flow from operating activities of EUR 88,187 million isNet cash flow from investing activities amounts EUR – 2,495 million compared to EUR + 5,451 million in 2018 the explained by higher cash inflows from Loans and advances to banks (increase of EUR 56,989 million to EURnet cash flow from investing activities decreased by EUR 7,946 million. The movement is explained by a decrease 53,078 million in 2020 due to new TLTRO III as the ECB modified the terms and conditions of its TLTRO programmin financial assets at fair value through other comprehensive income in investments and advances of EUR 5,753 to further support the provision of credit to households and firms in view of the COVID-19 pandamic) andmillion to EUR – 16,270 million and securities at amortised costs (decreased by EUR 5,708 million to EUR + 13,001 Customer deposits (increase of EUR 21,700 million to EUR 39,740 million in 2020) as well as lower cash outflowsmillion). Moreover, financial assets at fair value through other comprehensive income decreased by EUR 2,267 of Loans and advances to Customers (decrease of EUR 19,563 million to EUR 2,876 in 2020) and Trading assetsmillion to EUR + 13,390 in disposals and redemptions. These movements are offset by an increase in securities at amortised costs of investments and advances (increase of EUR 5,717 million to EUR – 12,268 million).

ING Group Annual Report 2020 on Form 20-F83

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Net cash flow from financing activities amounts EUR – 4,154 million in 2019, compared to EUR 15,983 million in 2018. The decrease of EUR 20,137 million is explained by a decrease of EUR -61,750 million to EUR + 90,793 million in proceeds from debt securities and offset by an increase of EUR 36,673 million to EUR – 94,497 million in repayments of debt securities.

The operating, investing and financing activities described above result in an increase of EUR 6,406 million in cash and cash equivalents to EUR 54,031 at year end 2019.

C.Research and development, patents and licenses, etc.

Not applicable.

D.Trend information

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

E.Critical Accounting Estimates

Reference is made to Note 1 ‘accounting policies’ to the consolidated financial statements, for detailed information on Critical Accounting Estimates.

ING Group Annual Report 2020 on Form 20-F84

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Item 6. Directors, Senior Management and

Employees

A.Directors and senior managementFunction of the Executive Board

The Executive Board is charged with the management of ING Group. This includes responsibility for setting and

Executive Boardachieving ING Group’s strategy, objectives and policies, as well as ensuring the delivery of results. It also includes

the day-to-day management of ING Group. The Executive Board is accountable for the performance of these

Appointment, suspension and dismissalduties to the Supervisory Board and the General Meeting. The responsibility for the management of ING Group is

vested in the Executive Board collectively. The organisation, powers and modus operandi of the Executive Board Members of the Executive Board are appointed, suspended and dismissed by the General Meeting. For the are detailed in the Charter of the Management Board.
appointment of Executive Board members, the Supervisory Board may draw up a binding list, which may be

rendered non-binding by the General Meeting. A resolution of the General Meeting to render this list non- The Charter of the Management Board is available on ing.com.
binding, or to suspend or dismiss Executive Board members without this being proposed by the Supervisory

Board, requires an absolute majority of the votes cast. Additionally, this majority must represent more than half In accordance with the Banker’s Oath that is taken by the members of the Executive Board, they must carefully of the issued share capital. The Articles of Association exclude the waiver of the latter requirement in a second consider the interests of all stakeholders of ING. In that consideration they must put the customer’s interests at General Meeting. This ensures that significant shareholders proposals cannot be adopted in a General Meeting the centre of all their activities.
with a low attendance rate and can only be adopted with substantial support of ING Group’s shareholders.

ING Group indemnifies the members of the Executive Board against direct financial losses in connection with Candidates for appointment to the Executive Board are subject to a suitability and reliability assessment by the claims from third parties, as far as permitted by law, on the conditions laid down in the Articles of Association Dutch Central Bank and European Central Bank (DNB and ECB) and must continue to meet these while in and their commission contract. ING Group has taken out liability insurance for the members of the Executive function.
Board.

Profile of members of the Executive Board

ING Group aims for its Executive Board to have an adequate and balanced composition. The Supervisory Board

regularly assesses the composition of the Executive Board.

ING Group Annual Report 2020 on Form 20-F85

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

The Supervisory Board has drawn up a profile to be used as a basis for selecting members of the Executive Board,the Executive Board at the AGM on 26 April 2021. In terms of the dimensions of diversity, Ljiljana Čortan will add

which is available on ing.com. This profile among others includes guidelines that relate to the composition of theboth nationality and gender diversity to the Executive Board and Management Board in line with our 70 percent

Executive Board.principle.

Diversity and succession planningSuccession planning for Executive Board positions is continuously worked on, balancing the career advancement

of (female) senior managers, considering female candidates for the role and bringing in talents from outside the ING aims for the Executive Board of ING to consist of a diverse selection of persons with executive experience, bank.
preferably gained in the banking sector, experience in corporate governance of large stock-listed companies and

experience in the political and social environment in which such companies operate. In addition, there should be On 31 December 2020, there were no female members of the Executive Board. ING considers that the preferred a good balance in the experience of and affinity with the desired nature and culture of the business of ING. ING gender balance will be achieved with the appointment of Ljiljana Čortan following the AGM on 26 April 2021.
strives to have at least 30 percent of the seats held by women, and at least 30 percent of the seats by men.

ING is still looking long term and taking steps to improve the appointment of women in senior positions In 2018, ING introduced a new principle in a bid to bolster diversity within our organisation. The 70 percent throughout the bank in line with the adopted diversity and inclusion principle.
principle gives managers a basis for building mixed teams around appropriate dimensions of diversity (with a

focus on gender, nationality and age group) and strives for a 30 percent difference in team composition. It is our

ambition to adhere to this principle across the organisation within both local and global teams. This principle isRemuneration and share ownership

incorporated into succession planning for the Executive Board.
Members of the Executive Board are permitted to hold shares in the share capital of ING Group for long-term

investment purposes. Transactions by members of the Executive Board in these shares are subject to the ING The Supervisory Board is responsible for selecting and nominating candidates for appointment or reappointment regulations for insiders. These regulations are available on ing.com.
to the Executive Board, among others based on the Executive Board profile.

Details of the remuneration of members of the Executive Board, including shares granted to them, together with Finding suitable candidates remains challenging, as there are numerous requirements to take into account, additional information, are provided in the Remuneration report.
including gender to enhance the composition of the Executive Board and specific criteria for each function,

including regulatory requirements.

Ancillary positions/conflicting interests

As an example to demonstrate the aforementioned: with the departure of the CEO Ralph Hamers on 30 JuneNo member of the Executive Board has corporate directorships at listed companies outside ING.

2020, the Supervisory Board was faced with the challenge of appointing a successor. Considering all aspects the

Supervisory Board appointed Steven van Rijswijk as the successor of Ralph Hamers with effect from 1 July 2020.Transactions involving actual or potential conflicts of interest

The Supervisory Board concluded that Steven van Rijswijk has the right combination of experience, leadership In accordance with the DCGC, transactions with members of the Executive Board in which there are significant
skills and deep understanding of ING’s business to lead ING into the next phase of ING’s strategic direction.
conflicts of interest will be disclosed in the Annual Report.

With the position change of Steven van Rijswijk on 1 July 2020, the CRO position became vacant.
Significant conflicting interests are considered to be absent and are not reported if a member of the Executive ING appointed Ljiljana Čortan as CRO of ING and member of the Management Board Banking with effective date Board obtains financial products and services, other than loans, which are provided by ING Group subsidiaries in 1 January 2021. The Supervisory Board will propose to the shareholders to appoint Ljiljana Čortan as member of

ING Group Annual Report 2020 on Form 20-F86

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

the ordinary course of their business on terms that apply to all employees. In connection with theT. (Tanate) Phutrakul, chief financial officer (CFO)

aforementioned, such loans do not include banking and financial products in which the granting of credit is of a (Born 1965, Thai nationality, male; appointed in 2019, term expires in 2023)
secondary nature, e.g. credit cards and overdrafts in current account.

Tanate Phutrakul was appointed as CFO of ING Groep N.V. and ING Bank N.V. and member of the Management For an overview of loans granted to members of the Executive Board, the Remuneration report.
Board Banking of ING Bank on 7 February 2019. Subsequently, he was appointed as a member of the Executive

Board of ING Groep N.V. at the AGM on 23 April 2019.

Information on members of the Executive Board

Tanate Phutrakul is responsible for ING’s financial departments, Group Treasury (including capital management

S.J.A. (Steven) van Rijswijk, chief executive officer (CEO)activities), Investor Relations, Group Research and Regulatory and International Affairs. Before his appointment
to the Executive Board, he was ING Group controller in Amsterdam and between 2015-2018 he was the CFO of
(Born 1970, Dutch nationality, male; appointed in 2017, term expires in 2021)
ING in Belgium.

Steven van Rijswijk has been a member of the Executive Board since 8 May 2017. He was appointed CEO and He holds a master’s degree in Engineering from Imperial College, University of London, and an MBA from Harvard
chairman of the Executive Board and the Management Board Banking with effect from 1 July 2020. Prior to this Business School.
he was ING’s CRO. The Supervisory Board will propose to the shareholders to reappoint him as member of the

Executive Board and CEO of ING Group at the AGM on 26 April 2021.
As from 1 July 2020 Tanate Phutrakul temporarily assumed the responsibility for risk on the Executive Board until
He is responsible for the proper functioning of the Executive Board, the Management Board Banking and its the appointment of a successor to ING’s former CRO Steven van Rijswijk.
committees, formulating and implementing ING’s strategy and acting as main contact for the Supervisory Board.

He is also responsible for the following departments: Innovation, Legal, Corporate Strategy, Corporate HR, CentreRelevant positions pursuant to CRD IV
of Excellence Communications and Brand Experience and Corporate Audit Services. Steven van Rijswijk joined CFO and member of the Executive Board of ING Groep N.V., CFO and member of the Management Board Banking ING in 1995 in the Corporate Finance department holding various positions in the areas of Mergers and of ING Bank N.V., and Non-executive member of the board of ING Belgium N.V./S.A.
Acquisitions and Equity Markets. Before becoming a member of the Executive Board, he was global head of Client

Coverage at Wholesale Banking.

Other relevant ancillary positions He holds a master’s degree in business economics from Erasmus University Rotterdam (the Netherlands).
None.

Relevant positions pursuant to CRD IV

Temporary status chief risk officer (CRO) CEO and chairman of the Executive Board of ING Groep N.V. and of the Management Board Banking of ING Bank

N.V.With the position change of Steven van Rijswijk on 1 July 2020, the CRO position became vacant.

Other relevant ancillary positions

In November 2020, ING announced the appointment of Ljiljana Čortan as CRO and member of the Management Member of the Management Board of the Dutch Banking Association (Nederlandse Vereniging van Banken),
Board Banking from 1 January 2021. In the interim, the day-to-day risk management activities were performed by member of the Board of Directors of the Institute of International Finance, Inc.
Karst Jan Wolters , reporting to chief financial officer Tanate Phutrakul.

ING Group Annual Report 2020 on Form 20-F87

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Changes in the compositionIn line with Dutch company law, the Articles of Association, the DCGC as well as the Charter of the Supervisory

Board, all members of the Supervisory Board are required to:
Ralph Hamers stepped down from his position as CEO and chairman of the Executive Board of ING Groep N.V.
• be guided by the interests of ING Group and the business connected with it, thereby carefully balancing the and of the Management Board Banking of ING Bank N.V. as of 30 June 2020.
interests of all stakeholders of ING and when drawing that balance, give paramount importance to the He was succeeded by Steven van Rijswijk.
customer’s interest, as set out in the Dutch Banker’s Oath;

•
The Supervisory Board will propose to the shareholders to appoint Ljiljana Čortan as member of the Executivefoster a culture focused on long-term value creation, financial and non-financial risk awareness, compliance

Board of ING Group at the AGM on 26 April 2021 (see ‘Diversity and succession planning’ above).with the Company’s risk appetite, responsible and ethical behaviour and stimulate openness and

accountability within ING and its subsidiaries;

Supervisory Board•
perform their duties without mandate and independent of any interest in the business of ING;

• refrain from supporting one interest without regard to the other interests involved; and

Appointment, suspension and dismissal
• ensure that it functions effectively.
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 a binding list, which may be According to the Banker’s Oath that is taken by the members of the Supervisory Board, they must carefully
rendered non-binding by the General Meeting.
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 Board, specified in the Articles of Association, A resolution of the General Meeting to render this list non-binding, or to suspend or dismiss Supervisory Board in the Charter of the Management Board and in the Charter of the Supervisory Board, are subject to approval by members without this being proposed by the Supervisory Board, requires an absolute majority of the votes cast.
the Supervisory Board.
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 second General Meeting. This ensures that significant proposals In accordance with the Articles of Association ING Group indemnifies the members of the Supervisory Board as
of shareholders cannot be adopted in a General Meeting with a low attendance rate and can only be adopted far as legally permitted against direct financial losses in connection with claims from third parties lodged or
with substantial support of ING Group’s shareholders.
threatened to be lodged against them by virtue of their service as a member of the Supervisory Board.

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

Profile of members of the Supervisory Board
Dutch Central Bank and European Central Bank (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 on ing.com.

Function of the Supervisory BoardIn view of their experience and the valuable contribution that former members of the Executive Board can make

to the Supervisory Board, it has been decided, taking into account the size of the Supervisory Board and ING’s The function of the Supervisory Board is to supervise the policy(beleid)of the Executive Board and the general wide range of activities that such individuals may become members of the Supervisory Board of ING Group.
course of affairs of ING Group and the business connected with it, as well as to provide advice to the Executive Former Executive Board members must wait at least one year before becoming eligible for appointment to the Board.
Supervisory Board.

ING Group Annual Report 2020 on Form 20-F88

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Former members of the Executive Board are not eligible for appointment to the position of chairman or vice-Term of appointment of members of the Supervisory Board
chairman of the Supervisory Board.
As a general rule, Supervisory Board members step down from the Supervisory Board in the 4th, 8th, 10th or
12th year after their initial appointment. They are eligible for re-appointment in the 4th year after their initial After a former member of the Executive Board has been appointed to the Supervisory Board, this member may appointment and, with explanation, also in the 8th and 10th year.
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 Executive Board at least three years prior to such Under special circumstances the Supervisory Board may, with explanation, deviate from this general rule, for appointment.
instance to maintain a balanced composition of the Supervisory Board and/or to preserve valuable expertise and
experience. The retirement schedule is available on ing.com.
The Supervisory Board of ING shall consist of a mix of persons with executive experience, preferably gained in the
banking sector, experience in corporate governance of large stock -listed companies and experience in the

Ancillary positions/conflicting interests political and social environment in which such companies operate. In the selection of Supervisory Board
members, ING is striving for a balance in nationality, gender, age, and educational and work background. InMembers of the Supervisory Board may hold other positions, including directorships, either paid
addition, there should be a balance in the experience and affinity with the nature and culture of the business ofor unpaid.
ING and its subsidiaries. More specifically ING strives to have at least 30 percent of the seats held by women, andCRD IV restricts the total number of supervisory board positions or non-executive directorships with commercial
at least 30 percent of the seats by men. These guidelines that relate to the composition of the Supervisory Board,organisations that may be held by a Supervisory Board member to four, or to two, if the Supervisory Board
are laid down in the Supervisory Board Profile. Based on this profile, the Supervisory Board is responsible formember also has an executive board position. The European Central Bank may, under special circumstances,
selecting and nominating candidates for appointment or reappointment to the Supervisory Board.permit a Supervisory Board member to fulfil an additional supervisory board position or non-executive
directorship. Positions with, inter alia, subsidiaries or qualified holdings are not taken into account in the
With respect to gender diversity, three female members currently serve on the Supervisory Board: Marianaapplication of these restrictions. Such positions may not conflict with the interests of ING Group. It is the
Gheorghe, Margarete Haase and Herna Verhagen, resulting in the Supervisory Board meeting its 30 percentresponsibility of the individual member of the Supervisory Board and the Supervisory Board collectively to ensure
gender diversity target.that the directorship duties are performed properly and are not affected by any other positions that the

individual may hold outside ING Group.
We believe the Supervisory Board is well balanced in terms of other relevant diversity aspects. Overall, the preferred emphasis on members with a financial or banking background has been maintained. In terms ofMembers of the Supervisory Board are to disclose material conflicts of interest (including potential conflicts of nationality, the ratio between Dutch and non-Dutch nationalities in 2020 was 56 - 44 percent.interest) and to provide all relevant information relating to them. The Supervisory Board – excluding the member concerned – decides whether a conflict of interest exists.
Other diversity related aspects are also taken into consideration in light of the overall Supervisory Board composition.ChapSuperVIn case of a conflict of interest, the relevant member of the Supervisory Board abstains from discussions and decision-making on the topic or the transaction in relation to which he or she has a conflict of interest with ING Group.

ING Group Annual Report 2020 on Form 20-F89

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Transactions involving actual or potential conflicts of interest

Separate charters have been drawn up for the Risk Committee, the Audit Committee, the Nomination and In accordance with the DCGC, transactions with members of the Supervisory Board in which there are material Corporate Governance Committee and the Remunerat ion Committee. These charters are also available on conflicting interests will be disclosed in the Annual Report.
ing.com. A short description of the duties of the four permanent committees follows below.

Any relation that a member of the Supervisory Board may have with an ING Group subsidiary as an ordinary, The Risk Committee assists and advises the Supervisory Board with performance of its duties in relation to private individual is not considered a significant conflict of interest. Such relationships are not reported, with the overseeing (i) the setting and monitoring of the Company’s risk appetite and risk strategy for all types of risk exception of any loans that may have been granted.
including but not limited to financial and non-financial risk, (ii) the effectiveness of the internal risk management
and control systems and (iii) other related risk management topics. The Risk Committee shall prepare the For an overview of loans granted to members of the Supervisory Board, see the Remuneration report.

discussions within and decisions of the Supervisory Board on such matters. On 31 December 2020, the members of the Risk Committee were: Mike Rees (chairman), Jan Peter Balkenende, Juan Colombás, Mariana Gheorghe,

Independence Margarete Haase, Herman Hulst, Harold Naus and Hans Wijers.
The members of the Supervisory Board are requested to assess annually whether the criteria of dependence set out in the DCGC do not apply to them and to confirm this in writing. On the basis of these criteria, all members ofThe Audit Committee assists and advises the Supervisory Board with the performance of its duties in relation to the Supervisory Board are to be regarded as independent on 31 December 2020. On the basis of the NYSE listingthe integrity and quality of the Company’s financial reporting and the related effectiveness of the Company’s standards, all members of the Supervisory Board are independent.internal risk management and control systems and shall prepare the discussions within and the decisions of the Supervisory Board on such matters. On 31 December 2020, the members of the Audit Committee were:
Permanent committees of the Supervisory BoardMargarete Haase (chairwoman), Juan Colombás, Herman Hulst, Mike Rees and Hans Wijers.

On 31 December 2020, the Supervisory Board had four permanent committees: the Risk Committee, the Audit The appointment of Margarete Haase in 2017 as Supervisory Board member became effective as per 1 May 2018 Committee, the Nomination and Corporate Governance Committee and the Remuneration Committee. An and per that date Margarete Haase is considered a financial expert as defined by the SEC in its final rules organisational chart of the four permanent committees of the Supervisory Board can be found above.
implementing Section 407 of the Sarbanes-Oxley Act of 2002.

The Nomination and Corporate Governance Committee assists the Supervisory Board with the performance of its duties in relation to selection and nomination of among others the Supervisory Board members and Management Board members, talent management and the effectiveness of the Company’s governance arrangements and shall prepare the discussions with and decisions of the Supervisory Board on such matters. On 31 December 2020, the members of the Nomination and Corporate Governance Committee were: Hans Wijers (chairman), Mariana Gheorghe and Herna Verhagen.

The organisation, powers and conduct of the Supervisory Board are detailed in the Supervisory Board Charter onThe Remuneration Committee assists the Supervisory Board, with the performance of its duties in relation to
ing.com.remuneration policies and the application and compliance thereof and shall prepare the discussion within and

ING Group Annual Report 2020 on Form 20-F90

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

decisions of the Supervisory Board on such matters. In doing so, the Remuneration Committee will take intoVice-chairman of the Supervisory Board of ING Groep N.V./ING Bank N.V., non-executive chairman of Athla account the adequacy of information provided to shareholders on remuneration policies and practices. On 31Capital Management Ltd., non-executive chairman of Travelex Topco Limited and non-executive chairman of the December 2020 the members of the Remuneration Committee were: Herna Verhagen (chairwoman), Marianaboard of Satsanga Fintech Holdings.

Gheorghe, Harold Naus and Hans Wijers.

Other relevant ancillary positions The composition of the Supervisory Board committees can also be found on ing.com.Non-executive chairman of Mauritius Africa FinTech Hub.

Remuneration and share ownershipJ.P. (Jan Peter) Balkenende

Remuneration of the members of the Supervisory Board is determined by the General Meeting and is not(Born 1956, Dutch nationality, male; appointed in 2017, term expires in 2021)
dependent on the results of ING Group. Details of remuneration are provided in the Remuneration report.Former position: partner EY (on corporate responsibility).
Members of the Supervisory Board are permitted to hold shares in the share capital of ING Group for long-term
investment purposes. Transactions by members of the Supervisory Board in these shares are subject to the INGRelevant positions pursuant to CRD IV
insider regulations, which are available on ing.com.
Member of the Supervisory Board of ING Groep N.V./ING Bank N.V.

Information on members of the Supervisory Board

Other relevant ancillary positions

G.J. (Hans) Wijers (chairman)Professor of governance, institutions and internationalisation at Erasmus University Rotterdam (the
Netherlands), external senior adviser to EY, member of the Supervisory Board of Goldschmeding Foundation, (Born 1951, Dutch nationality, male; appointed in 2017, term expires in 2021)
chairman of the Board of Maatschappelijke Alliantie (the Netherlands) and chairman of the Board of Noaber Former position: chief executive officer and member of the Executive Board of AkzoNobel N.V.
Foundation.

Relevant positions pursuant to CRD IV

J. (Juan) Colombás Chairman of the Supervisory Board of ING Groep N.V./ING Bank N.V. and member of the supervisory board of Hal (Born 1962, Spanish nationality, male, appointed in 2020, term expires in 2024)
Holding N.V.
Former position: chief operating officer and executive board member of the board of directors of Lloyds Banking
Other relevant ancillary positionsGroup.

Member of the Temasek European Advisory Panel of Temasek Holdings Private Limited.

Relevant positions pursuant to CRD IV

A.M.G. (Mike) ReesMember of the Supervisory Board of ING Groep N.V./ING Bank N.V.

(Born 1956, British nationality, male; appointed in 2019, term expires in 2023)Other relevant ancillary positions
Former position: Deputy CEO of Standard Chartered Bank PLC.
None.

Relevant positions pursuant to CRD IV ING Group Annual Report 2020 on Form 20-F91

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

M. (Mariana) Gheorghe

Other relevant ancillary positions (Born 1956, Romanian nationality, female, appointed in 2015, term expires in 2023)
Former position: CEO of OMV Petrom SA.None.

H.H.J.G. (Harold) Naus

Relevant positions pursuant to CRD IV

Member of the Supervisory Board of ING Groep N.V./ING Bank N.V. and non-executive director of ContourGlobal(Born 1969, Dutch nationality, male, appointed in 2020, term expires in 2024)
Plc.Former position: global head of Trading Risk Management and general manager Market Risk management of ING

Bank N.V.

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. , CEO of Cardano Risk Management B.V. and M. (Margarete) HaaseCFO of Cardano Holding Ltd.

(Born 1953, Austrian nationality, female; appointed in 2017, term expires in 2021)

Other relevant ancillary positions Former position: CFO of Deutz AG.
Chairman of the Curatorium VU Amsterdam “Risk Management for Financial Institutions”

Relevant positions pursuant to CRD IV

H.W.P.M.A. (Herna) Verhagen Member of the Supervisory Board of ING Groep N.V./ING Bank N.V. (effective per 1 May 2018), member of the supervisory board and chairwoman of the audit committee of Fraport AG, member of the supervisory board and(Born 1966, Dutch nationality, female; appointed in 2019, term expires in 2023)
chairwoman of the audit committee of Osram Licht AG, and member of the supervisory board and chairwomanFormer position: member of the Supervisory Board of SNS Reaal N.V. (now: SRH N.V.).

of the audit committee of Marquard & Bahls AG.

Relevant positions pursuant to CRD IV

Other relevant ancillary positions Member of the Supervisory Board of ING Groep N.V./ING Bank N.V. CEO of PostNL N.V. and non-executive board Chairwoman of the Employers Association of Kölnmetall and member of the German Corporate Governancemember and chairwoman of the nomination committee of Rexel SA.
Commission.

Other relevant ancillary positions

H.A.H. (Herman) Hulst Member of the supervisory board, member of the audit committee of Het Concertgebouw N.V , member of the (Born 1955, Dutch nationality, male, appointed in 2020, term expires in 2024)advisory council of Goldschmeding Foundation and member of the Board of VNO-NCW (inherent to her position Former position: global vice chair EY Japan and member of Global Practice Group.at Post NL N.V.).

Relevant positions pursuant to CRD IV

Member of the Supervisory Board of ING Groep N.V./ING Bank N.V.
ING Group Annual Report 2020 on Form 20-F92

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Changes in the composition

Eric Boyer de la Giroday and Hermann-Josef Lamberti retired from the Supervisory Board effective from the close of 2020 AGM. Juan Colombás, Herman Hulst and Harold Naus were appointed by the AGM of 28 April 2020. The appointments of Herman Hulst and Harold Naus became effective on this date. The appointment of Juan Colombás became effective on 1 October 2020.

Company secretary

The Supervisory Board and Executive Board are assisted by the company secretary Cindy van Eldert-Klep.

ING Group Annual Report 2020 on Form 20-F93

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

B. CompensationOur remuneration principles are important to achieve our strategy and our purpose – empowering people to stay

a step ahead in life and in business. These principles apply to all employees, including members of the Executive

Remuneration report Board.

FOR INFORMATION ONLY The 2020 Remuneration Report is subject to an advisory vote at the AGM in April 2021. In the report we look

back on the year 2020. We report on ING’s performance and how 2020 events such as the coronavirus pandemic In what was a challenging year for ING, one of the biggest factors influencing our business was

impacted our business results and subsequently remuneration. We explain how the Executive Board and Covid-19. First and foremost, it’s a human tragedy that has affected the lives, jobs and wellbeing of

Supervisory Board remuneration policies are implemented and share details of remuneration awarded in 2020 to people everywhere, including our customers and employees. Naturally, it also affected our

the Executive Board and to the Supervisory Board. In addition, we also set out the key performance indicators for business performance, which has a direct impact on the way we recognise and reward many of our

the year ahead.
employees. In this context there will be no changes to remuneration for the Executive Board and

the Supervisory Board in 2021 and the Executive Board will forgo their variable remuneration for

Halfway through the year, Steven van Rijswijk succeeded Ralph Hamers as chief executive officer. The same performance year 2020.

remuneration principles apply to him as did to his predecessor. As such, Steven’s remuneration until 1 July 2020

is reflected in his previous role as chief risk officer, and in the second half of the year as CEO.
ING’s approach to remuneration is designed to attract, motivate and retain people with the skills, abilities, values

and behaviours needed to achieve its strategy. At the same time, we have a responsibility to be balanced and In line with ING’s commitment to increase transparency and accountability, this year we provide insight into the fair, taking into account all our stakeholders in what was, and continues to be, a difficult environment.
organisational as well as the personal performance objectives of the Executive Board members. Among other

things we aim to clarify the performance metrics used for awarding variable remuneration, how targets are set, That’s why we aim to have an ongoing dialogue with our regulators, customers, shareholders , works councils how achievements are measured, and the important role risk management plays in influencing remuneration, and other stakeholder groups. Due to the Covid-19 restrictions, we engaged with our stakeholders in 2020 mainly including the pre- and post award risk assessment.
through indirect and online channels. This included consultations in preparation for this year’s remuneration

approach, strengthening the link between performance and remuneration outcomes. We will continue these In addition, we set out the remuneration approach that applies to all employees. We explain more about how interactions in 2021.
remuneration works within ING. This includes the performance management process and its link to

remuneration, as well as the measures we have in place to mitigate risk.

Our view on remuneration

Remuneration policy ING seeks to effectively reward success and avoid rewarding for failure. We aim to offer well-balanced

remuneration that focuses on creating short- and long-term value for all our stakeholders. We make our biggest This 2020 Remuneration Report is the first to reflect ING’s new Executive Board and Supervisory Board contribution to society through our business: processing payments, providing loans and protecting people’s remuneration policies, which came into effect on 1 January 2020. The policies were drawn up based on the money. At the same time, as a gatekeeper to the financial system we have responsibility to keep our bank safe, various viewpoints, interests, remarks and concerns of our stakeholder groups. When presented in March 2020, secure and compliant. Achieving the balance between our function as a bank and managing the inherent risks stakeholders were largely positive. At the Annual General Meeting (AGM) in April 2020, shareholders approved this brings, is reflected in our remuneration approach.
the Executive Board and Supervisory Board remuneration policies with 94.4% and 98.6% of the votes

respectively.

ING Group Annual Report 2020 on Form 20-F94

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Under the 2020 policy, and in line with the requirements laid down in the Dutch Banking Code, the total directFor all other eligible staff, variable remuneration is based on group, business line and individual performance

compensation of the Executive Board is below the median of our peer group. This group is selected on the basiscriteria, is for at least 50% based on non-financial targets and comes in the form of discretionary and collective

of geography, talent market, size and governance framework, as well as a balancing factor to ensure relevance ofvariable remuneration. The total amount awarded was significantly lower than for the previous year, reflecting

our benchmark. Our peer group in 2020 consists of eight comparable Dutch companies and eight relevantdeclining financial performance and recognising broader stakeholder interests. The biggest reductions occur at

European financial services providers, which are listed in the ‘Total direct compensation’paragraph.the more senior levels of the organisation (see ‘2020 specifics’ for more information). This is in line with the

recommendations of the European Central Bank urging moderation with respect to awarding variable

Performance year 2020remuneration. Similarly, ING complies with the prevailing ECB recommendation on shareholder distributions.

The impact of the global coronavirus pandemic reverberated across all of our businesses in all locations. While In closing, I’d like to express my heartfelt gratitude to every ING employee, at every level of the organisation, for
2020 was a tough year, ING’s financial results remained resilient and we continued to attract more primary their ongoing commitment and dedication over the past year. It hasn’t always been easy to adapt to working at a
customers, even during the wide-spread lockdowns that took place around the world. At the same time, the distance, often while also juggling the demands of family life or recovering from illness. Yet even in the most
economic headwinds required us to remain flexible and sharpen our focus on activities that will ensure ING challenging circumstances, they have shown true orange spirit and continued to take things on and make them
delivers on its strategic priorities. And of course, there is a link between performance and remuneration.
happen for customers, for ING and for all stakeholders. Thank you.

In light of the economic headwinds and the pressure Covid-19 placed on our business, our customers and on

society, the Supervisory Board and the Executive Board jointly agreed that the Executive Board members will not

Herna Verhagen
receive any variable remuneration rela ted to the performance year 2020.
Chairman of the Supervisory Board Remuneration Committee
Additionally, the Supervisory Board decided not to increase the base salary of Executive Board members from 1

January 2021. The fees for the Supervisory Board will also be unchanged for 2021.

ING Group Annual Report 2020 on Form 20-F95

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Remuneration Report Executive Board and Supervisory BoardIn addition to the 2019 Remuneration Report, the 2020 EB remuneration policy and 2020 SB remuneration policy

were up for a binding vote at the 2020 AGM. To come to a balanced proposal we incorporated feedback from the

FOR ADVISORY VOTE AT 2021 ING GROEP N.V. ANNUAL GENERAL MEETING (AGM) broad stakeholder consultation carried out in the autumn and winter of 2019. This extensive stakeholder reach-

out was essential before any decision over 2020 was taken. The vote was 94.4% in favour of the EB remuneration

About this report policy and 98.6% in favour of the SB remuneration policy. Both policies were adopted by shareholders and

This Remuneration Report explains the 2020 Executive Board remuneration policy (hereafter called the 2020 EBbecame effective retroactively from 1 January 2020 until the 2024 AGM at the latest.

remuneration policy) and 2020 Supervisory Board remuneration policy (hereafter called the 2020 SB remuneration policy) and how these have been implemented. Both these policies were approved at the 2020We remain aware of the fact that remuneration is an important topic for many stakeholder groups and that AGM. This section of the report is the Remuneration Report as referred to in the Dutch act implementing theviewpoints on the topic may vary. The Supervisory Board is fully committed to ensuring that our approach to Shareholder Rights Directive II (SRD II). It will be presented to shareholders at the 2021 AGM for an advisory vote.remuneration achieves a balance that aligns the best interest of ING and the viewpoints of our stakeholders.
An explanation of how the results of this vote are taken into account will be included in the 2021 RemunerationStakeholder engagement is a key element in the formulation of our remuneration policies, as demonstrated by Report.the extensive process we carried out in 2019. The Supervisory Board will continue to foster a transparent dialogue on remuneration and future policy amendments.

This report is prepared in the spirit of the draft (non-binding) ‘Guidelines on the standardised presentation of the

Board changes and business events 2020 remuneration report’ from the European Commission published in March 2019. Although the finalised guidelines

were expected to be published in 2020, these were not available at the time of preparing this report. In that Ralph Hamers stepped down as chief executive officer (CEO) and member of the Executive Board of ING Group
context therefore, 2020 should still be considered a transitional year though with increased transparency where on 30 June 2020. The Supervisory Board appointed Steven van Rijswijk as his successor from 1 July 2020. Steven
possible. This is for instance processed in the paragraphs ‘2020 Executive Board performance assessment & van Rijswijk, who was ING’s chief risk officer (CRO), was already a member of the Executive Board. The agreed
reward process’ and ‘2020 Executive Board performance evaluation’. In the 2021 Remuneration Report we aim remuneration package for Steven van Rijswijk is the same as for the previous CEO and in line with the 2020 EB
to disclose fully in line with the final guidelines (if available).
remuneration policy.

2020 AGM Until the appointment of a new CRO, Karst Jan Wolters, reporting to chief financial officer (CFO) Tanate

The 2019 Remuneration Report was presented for an advisory vote at the AGM held on 28 April 2020 (hereafterPhutrakul, carried out the day-to-day risk management activities ad interim. On 6 November 2020 it was
called the 2020 AGM). The outcome was that 93.4% of shareholders were in favour of the report. There were noannounced that Ljiljana Čortan was appointed as the new CRO and member of the Management Board Banking
additional comments or questions on the advisory vote, aside from the ask for additional transparency oneffective 1 January 2021. The agreed remuneration package for Ljiljana Čortan is the same as for the previous
variable remuneration of the Executive Board. As explained at the 2020 AGM, the 2019 Remuneration ReportCRO and in line with the 2020 EB remuneration policy. The targets for 2021 are set in anticipation of her CRO role
included a new approach for Executive Board variable remuneration also setting out how this links toas the Supervisory Board will propose to shareholders to appoint her as member of the Executive Board and CRO
performance as of performance year 2020. The 2020 Remuneration Report aims to provide greater transparencyof ING Group at the AGM in April 2021.

regarding the Executive Board performance, as also promised during our stakeholder consultation.
Shareholders at the 2020 AGM approved the appointment of Juan Colombás, Herman Hulst and Harold Naus to

the Supervisory Board. Robert Reibestein resigned from the Supervisory Board effective from 1 January 2020,

because of persistent health issues, while Eric Boyer de la Giroday and Hermann-Josef Lamberti retired at the end

of the 2020 AGM.

ING Group Annual Report 2020 on Form 20-F96

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Main decisions on the remuneration of the Executive Board and Supervisory Board

for 2021

To summarise, the following decisions have been made in relation to remuneration for 2021:
◾no changes to the 2020 EB and SB remuneration policies will be proposed;
◾the Supervisory Board and Executive Board jointly agreed that the Executive Board members will not

receive any variable remuneration related to the performance year 2020;
◾the Supervisory Board decided not to increase the base salary of the Executive Board members from 1 January 2021; and ◾no changes to the current remuneration structure for the Supervisory Board members will be made for 2021.

ING Group Annual Report 2020 on Form 20-F97

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Remuneration Executive Board

Guiding principleShort description GeographyING is headquartered in the Netherlands, but has an international profile

Executive Board remuneration policy Talent marketING is increasingly experiencing a cross-pollination of talent across sectors/industries, not limited to traditional banking competitors The 2020 EB remuneration policy complies with applicable laws and regulations and is in line with the remuneration principles that apply to all ING employees.SizeING acknowledges the importance of including companies that are broadly comparable in terms of size and complexity
The 2020 EB remuneration policy is disclosed in full on ing.com under the section ‘Remuneration’. Should policyGovernance frameworkING is subject to the Dutch (financial services) regulatory framework and changes be proposed, we will first engage with our stakeholders to inform and discuss the proposed changes,operates within a Dutch stakeholder environment after which a revised version of the 2020 EB remuneration policy will be submitted for adoption by shareholdersBalancingING acknowledges the importance of retaining sight of relevant peer companies at the General Meeting before it becomes effective. Please note that the following paragraphs, present a briefthat do not match on the other criteria

summary of the current applicable 2020 EB remuneration policy.
In line with the Dutch Banking Code, the peer group should consist of both financial and non-financial companies,
Total direct compensationtaking into account the relevant international context. In addition, the Supervisory Board decided to exclude the
UK and Switzerland from our peer group, due to very different pay structures in their financial sectors. Smaller Total direct compensation is the total of fixed and variable remuneration, excluding benefits such as pension and banks and companies were also excluded because these are less complex compared to a large enterprise like allowances.
ING. The composition of the peer group is explicitly not included in the 2020 EB remuneration policy. In 2020, the
peer group comprised:1 Total direct compensation for the Executive Board members is determined and reviewed periodically by the
Supervisory Board. In line with the 2020 EB remuneration policy, the Executive Board’s total direct compensation ABN AMROAhold DelhaizeBBVADeutsche Bank for 2020 was compared to a new peer group as formulated in the 2020 EB remuneration policy. This peer group AegonASMLBanco SantanderIntesa Sanpaolo is based on five guiding principles, reflecting ING’s current profile, and further explained in the 2020 EB
remuneration policy. These principles can be described as follows.NN GroupHeinekenBNP ParibasSociete Generale RabobankPhilipsCredit AgricoleUniCredit

We aim to keep our peer group as constant as possible. In line with the requirements laid down in the Dutch Banking Code the total direct compensation under the 2020 EB remuneration policy is below the median of the peer group. The calculation of the position towards the median of the peer group has been performed based on the actual fixed remuneration 2020 and the actual variable remuneration related to performance year 2019. Due to the fact that there was no variable remuneration related to the current performance year (2020), we use the variable remuneration related to the previous performance year (2019) for this calculation.

1 The exact composition of the peer group is disclosed in the Annual Report annually retroactively.
ING Group Annual Report 2020 on Form 20-F98

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Fixed remuneration

The individual base salaries are set according to the role, responsibilities and experience of each Executive Board member with reference to market practice. The Remuneration Committee reviews the individual base salaries of the Executive Board members each year and advises the Supervisory Board on this. The Supervisory Board has the discretion to increase the individual base salaries annually. The below factors are given consideration in determining their base salaries:
◾the individual’s level of skill and performance;
◾ING’s business performance, and market conditions;
◾internal pay ratios and salary increases for other employees within ING;
◾remuneration level at the external peer group;
◾public indexation reference points (e.g. consumer price index); and ◾stakeholder views.

Variable remuneration

Variable remuneration for Executive Board members is limited to a maximum of 20% of base salary in line with legislative requirements. At least 50% of this is based on non-financial performance criteria. The 2020 EB remuneration policy provides for an at-target variable remuneration of 16% of base salary. If performance criteria are exceeded, the Supervisory Board can increase the variable component to the maximum. If performance is below target, the variable component will be decreased, potentially to zero. All variable remuneration is awarded fully in shares. There is a minimum holding period of five years from the award date plus an additional holding year as of the vesting date. This combination (i.e. all shares plus a long holding period)
fosters alignment with shareholders and a focus on the long term.

The Supervisory Board pre-determines the performance criteria for the Executive Board each year to ensure alignment between ING's strategy, performance objectives and long-term interest.

For further details on the pay-out of variable remuneration please see the 2020 EB remuneration policy which is disclosed in full on ing.com under the section ‘Remuneration’.
On the right, is a visual illustrating the potential pay-out scheme of variable remuneration for Executive Board members.

ING Group Annual Report 2020 on Form 20-F99

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

PensionIn the event of an involuntary exit, Executive Board members are eligible for an exit arrangement. If termination

of the contract is based on mutual agreement, the Executive Board member is also eligible for a severance Since 1 January 2015, all members of the Executive Board participate in the Collective Defined Contribution payment. These arrangements are subject to specific requirements (e.g. limited to a maximum of one year of pension plan, which is accrued on an annual salary of up to €110,111 for 2020. This is the same as for all fixed base salary and under the condition that there should be no reward for failure). If an Executive Board employees working in the Netherlands without a supplementary pension scheme. Executive Board members are member departs voluntarily or in circumstances involving fraud, gross negligence, wilful misconduct or any compensated for the lack of pension accrual above this amount by means of a savings allowance (see ‘Benefits’), activity detrimental to ING, no severance payment or award of variable remuneration over the performance year to be annually determined, on the same terms that apply to other participants in the Dutch pension scheme. The will be made.
set-up of this compensation for the lack of pension accrual is in line with best practices.

Periodic review of the Executive Board remuneration policy and the remuneration

Benefits

awarded

Executive Board members are eligible for additional benefits, such as:
In accordance with the 2020 EB remuneration policy, the Supervisory Board annually determines the actual ◾the use of a company car;
remuneration for members of the Executive Board, based on advice from the Remuneration Committee of the ◾contributions to company savings plans;
Supervisory Board.
◾individual savings allowance;

◾expatriate allowances (if applicable);
The Remuneration Committee’s responsibilities include preparing the Supervisory Board for decisions regarding
◾banking and insurance benefits from ING (on the same terms as for other employees of ING in the the individual remuneration of members of the Executive Board. Remuneration proposals for individual Executive
Netherlands);
Board members are drawn up in accordance with the 2020 EB remuneration policy and cover the following
◾tax and financial planning services to ensure compliance with the relevant legislative requirements.
aspects: remuneration structure, the amount of the fixed and variable remuneration components, the

performance criteria used, scenario analyses that were carried out and, if and when considered appropriate

Tenure stakeholder engagement, review of the EB remuneration policy, the pay ratios within the company and its

Members of the Executive Board are appointed by shareholders at the AGM for a maximum period of four years.affiliated enterprises. In the performance of its tasks the Remuneration Committee works closely together with

They may be reappointed by shareholders at the General Meeting in line with ING’s Articles of Association andthe Risk Committee.

applicable rules and regulation. Executive Board members have a commission contract for an indefinite period.The Remuneration Committee takes note of the views of individual Executive Board members with regard to the

ING has the option to terminate the contract if a member is not reappointed by shareholders at the AGM, or ifamount and structure of their own remuneration, including the aspects mentioned above.

their membership of the Executive Board is terminated. There is a three -month notice period for individual board
members and a six-month period for ING. During this time the board member continues to work and in principleSpecial employment conditions

remains eligible for all agreed remuneration components.
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. The Supervisory Board aims to minimise

these payments and ensure they are compliant with regulatory requirements. This is in line with the 2020 EB

remuneration policy. In 2020, there were none.

ING Group Annual Report 2020 on Form 20-F100

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

2020 Remuneration Executive BoardRemuneration versus company performance and average employee remuneration

The table on the next page shows the link between directors’ remuneration (Executive Board and Supervisory This section includes details of remuneration for current and former Executive Board members relating to the
Board members), company performance and the average remuneration of an ING employee. This is carried out period served on the Executive Board in 2020.2
by showing the development of the remuneration for Executive Board and Supervisory Board members over the

last five years presented in percentages. With respect to the remuneration of the Supervisory Board, it should be In line with the Dutch Corporate Governance Code, ING calculates an internal ratio of remuneration for Executive
noted that there is no link to company performance in order to safeguard its independent role. No component of Board members and a representative reference group. Deemed most relevant for this ratio is the total direct
the remuneration of the Supervisory Board members is linked to company performance, since this is all and only compensation of the CEO compared to the average total direct compensation of all ING employees. On this basis,
dependant on attendance.
the internal ratio in 2020 was 1:28 (2019: 1:31, 2018: 1:29). For the sake of transparency we also calculate the

ratio of total direct compensation for other Executive Board members compared to the average total direct The relative performance of the company is presented on three different metrics over the last five years. The compensation of all ING employees. On that basis the internal ratio in 2020 was 1:19 (2019: 1:21, 2018: 1:20).3 metrics consist of:
The lower ratios for 2020 compared to 2019, are mainly because the Supervisory Board and the Executive Board ◾Retail primary relationships jointly agreed that the Executive Board members will not receive any variable remuneration award related to the ◾Profit before tax for ING Group performance year 2020.
◾Return on equity based on IFRS-EU Equity.

As was announced in February 2020, Ralph Hamers stepped down from his position as ING’s CEO and chairman
Finally, we present the development of the remuneration on average (per employee). For this number we use of the Executive Board on 30 June 2020. As his departure was voluntary, no exit arrangements were agreed or
the same data as is used to determine the internal ratio. As ING has only disclosed the internal ratio since 2017, paid, in line with the 2020 EB remuneration policy. All outstanding variable remuneration that was awarded in
no comparison for 2016 and 2015 is presented.
previous years and not yet vested before his departure, has lapsed. This means he will not receive any future

pay-outs of variable remuneration related to previous performance years.
Due to the strict regulations on variable remuneration in the Netherlands (i.e. 20% bonus cap) and to the fact

that Executive Board members were not awarded any variable remuneration for performance year 2020, the link

between remuneration and company performance is correlated but limited. Furthermore, the requirement that

variable remuneration must be based on at least 50% non-financial targets means there is only a partial

relationship between the company’s financial performance and the remuneration of Executive Board members.

3 Total direct compensation comprises fixed base salary and variable remuneration, excluding benefits such as pension arrangements, and
2 Ralph Hamers stepped down from the Executive Board on 30 June 2020; Tanate Phutrakul was appointed to the Executive Boardallowances.

immediately after the AGM on 23 April 2019. Steven van Rijswijk was an Executive Board member for the full years 2018-2019. For 2020, a pro-rata method is applied to his remuneration as CEO from 1 July 2020.
ING Group Annual Report 2020 on Form 20-F101

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements| Development of directors’ remuneration, company performance and employee remuneration | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Amount in thousands of euros unless otherwise stated | | | FY 2020 | FY 2020 vs FY 2019 | 6, 7 | FY 2019 vs FY 2018 | | FY 2018 vs FY 2017 | 8 | FY 2017 vs FY 2016 | | FY 2016 vs FY 2015 | |
| Directors remuneration (Executive Board) | | 1, 2, 3, 4 | | | | | | | | | | | |
| Ralph Hamers | | | 888 | | -55.9% | | 15.2% | | -12.8% | | 1.4% | | 2.9% |
| Steven van Rijswijk | | | 1,499 | | 7.2% | | 16.2% | | -11.8% | | - | | - |
| Tanate Phutrakul | | | 1,222 | | 25.6% | | - | | - | | - | | - |
| Company’s performance | 4, 5 | | | | | | | | | | - | | |
| Retail primary relationships (in mln) | | | 13.9 | | 5% | | 7% | | 10% | | 9% | | 14% |
| Profit before Tax ING Group (continuing operations) (in mln) | | | 3,809 | | -44% | | 0% | | -6% | | 23% | | -4% |
| Return on equity based on IFRS-EU Equity | | | 4.8% | | -49% | | -4% | | -3% | | 6% | | - |
| Average employee remuneration | | | | | | | | | | | | | |
| Average fixed and annual variable remuneration | | | 64 | | -1.7% | | 7% | | -1.1% | | - | | - |
| Directors remuneration (Supervisory Board) | | 5 | | | | | | | | | | | |
| Hans Wijers | | | 209 | | 3.5% | | 9.2% | | 340.5% | | - | | - |
| Hermann-Josef Lamberti | | | 48 | | -66% | | 1.4% | | -1.4% | | -5.4% | | 34.2% |
| Mike Rees | | | 129 | | 76.7% | | - | | - | | - | | - |
| Jan Peter Balkenende | | | 97 | | -2% | | 0% | | 200% | | - | | - |
| Juan Colombás | | | 23 | | - | | - | | - | | - | | - |
| Mariana Gheorghe | | | 108 | | -8.5% | | 12.4% | | 11.7% | | -4.1% | | 145% |
| Eric Boyer de la Giroday | | | 38 | | -64.8% | | 0% | | 1.9% | | -7% | | 23.9% |
| Margarete Haase | | | 105 | | 7.1% | | 55.6% | | - | | - | | - |
| Herman Hulst | | | 82 | | - | | - | | - | | - | | - |
| Harold Naus | | | 82 | | - | | - | | - | | - | | - |
| Herna Verhagen | | | 121 | | 303.3% | | - | | - | | - | | - |

1 The remuneration of the Executive Board consists 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 was delivered i.e. prior to the year in which it is paid out.
3 The fixed remuneration for the Executive Board did not change in 2019. Hence, the relative total compensation increase from 2018 to 2019 is fully attributed to the fact that no variable remuneration was awarded for performance year 2018. In addition, as Tanate Phutrakul was not an Executive Board member for the full year, a comparison between 2018 and 2019 cannot be made.
4 Fixed remuneration for Executive Board members of ING is not linked to company performance but is predominantly 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.
5 Supervisory Board members do not receive any variable remuneration. Their remuneration is based on fixed fees related to their role and number of meetings. The high fluctuations are caused by members joining or leaving the Supervisory Board during the year, role changes during the year, and differences in the number of meetings. Hence there is no correlation between the Supervisory Board remuneration and the company performance.
6 The decrease in the 2020 versus 2019 comparison for Ralph Hamers is due to the fact that his remuneration is only for the period from 1 January 2020 until 30 June 2020, when he stepped down as an Executive Board member. The increase for Tanate Phutrakul in this comparison is because he was appointed by the AGM on 23 April 2019 and therefore his 2019 remuneration reflects a partial year as an Executive Board member while the 2020 remuneration presents a full year as an Executive Board member. The increase for Steven van Rijswijk in this comparison is caused by his appointment as CEO as of 1 July 2020 and the higher remuneration package.
7 The decrease in the 2020 versus 2019 comparison for Hermann-Josef Lamberti and Eric Boyer de la Giroday is fully attributed to the fact that both retired after the AGM on 28 April 2020. The increase in this comparison for Mike Rees and Herna Verhagen is because they were appointed by the AGM on 23 April 2019 and therefore reflect a partial year as Supervisory Board members whereas 2020 is presented as a full year as a Supervisory Board member.
8 The decrease in the 2018 versus 2017 comparison for the CFO and CRO is fully attributed to the fact that for performance year 2018 no variable remuneration was awarded while over performance year 2017 variable remuneration was awarded.

ING Group Annual Report 2020 on Form 20-F102

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

2020 Executive Board performance assessment & reward processThe core performance scorecard for each Executive Board member consists of both quantitative and qualitativebased KPIs. Quantitative-based KPIs are assessed on a primarily formulaic basis where the expected target
performance level must be achieved before the on-target pay-out can be earned. Qualitative-based KPIs are The Executive Board performance process includes a number of key steps. This process serves as the foundation assessed using a standard three-point rating scale:
to determine the variable remuneration for Executive Board members.

1 = maximum = exceeding expectations; 2 = target = meeting expectations; 3 = threshold = not meeting expectations. The overall outcome of the performance scorecard assessment based on the above is the ‘starting point’ for determining the variable remuneration of the Executive Board members.

The integrated performance assessment process for determining variable remuneration also takes into account financial and operational performance, risk and compliance, as well as behaviour and conduct of each Executive Board member. This is supported by a robust framework for considering risk and conduct, which is in line with At the start of the performance year, the Supervisory Board approves the financial and non-financialregulations. It includes the following elements:
performance measures applicable to Executive Board members for the upcoming financial year:◾Performance hurdles– Executive Board members are only eligible for consideration for variable ◾Financial performance measuresincluding profit-based and return-based measures.remuneration if both of the performance hurdles are met. This is line with all employees who are eligible ◾Non-financial performance measuresincluding customer, people, strategy and sustainability measures.for discretionary variable remuneration. See ‘Performance hurdles’ for further details.
Each performance measure is weighted and totals 100%. The Dutch Remuneration Policy for Financial Enterprises◾Risk tests and adjustments– Performance under three metrics (covering financial and non-financial risk)
Act (Wet Beloningsbeleid Financiële Ondernemingen, WBFO) specifies that at least 50% of variable remunerationis considered against thresholds set at the beginning of the financial year, taking into account ING’s risk metrics must be based on non-financial targets. The performance measures for the CEO and CFO are based onappetite statement framework. When these risk tests are not within the risk appetite it may lead to a group performance. The measures for the CRO are based 75% on functional key performance indicators (KPIs)downward variable remuneration adjustment.
and 25% on group results, in line with regulations for control functions.◾Ex-post risk assessment– Adjustments may be made based on risk management performance, including

events that had a financial or reputational impact on ING. Risk and Human Resources also assess Throughout the year, regular conversations take place between the Supervisory Board and the Executive Boardpotential holdbacks or clawbacks impacting variable remuneration.
to review their performance to date. While no formal assessments are completed, progress of performance measures is discussed and the extent to which progress is on track.The CRO is responsible for recommending any risk-adjustments to variable remuneration awards. The final decision is at the level of the Supervisory Board. The Supervisory Board, based on the advice of the Remuneration At the end of the year, the Risk Committee and Remuneration Committee are both responsible for providingCommittee and Risk Committee, decides on any risk adjustments (potentially to zero) to variable remuneration input into and assessing the performance of the Executive Board members to determine the variablefor Executive Board members.
remuneration to be awarded. They jointly advise the Supervisory Board on the recommendations to get finalAs a final step in the process, in exceptional circumstances the Supervisory Board may apply its discretion to approval of the awards. This follows a multi-step and integrated process that closely aligns with the way thatadjust upwards or downwards the variable remuneration of Executive Board members.
variable remuneration is determined for the wider ING workforce. The process covers an assessment of their performance, based on individual performance scorecards. It includes KPIs and targets agreed at the beginning of the performance year, along with risk assessments measured on an ex-ante and ex-post risk adjustment basis.

ING Group Annual Report 2020 on Form 20-F103

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

2020 Executive Board base salaryFinancial performance| The base salary of all Executive Board members increased with 1.5% on 1 January 2020, as was announced in our | | Measure | Target - minimum | Target - maximum | | Performance | Assessment |
| --- | --- | --- | --- | --- | --- | --- | --- |
| 2019 Annual Report. This decision was based on reliable indexation reference points, including the (forecast) | | Profit before tax (CEO/CFO weight 25%, CRO | | | | | |
| Consumer Prices Index 2020, in line with the 2020 EB remuneration policy. As stated in our 2019 Remuneration | | 12.5%) | | 6,509 | 7,195 | 3,809 | 0% |
| Report, the increase for Executive Board members is below the collective labour agreement CLA increase for | | Return on Equity (CEO/CFO weight 25%, CRO | | 8% | 10% | 4.8% | 0% |
| employees in the Netherlands. | 4 | 12.5%) | | | | | |

2020 Executive Board performance evaluationThe performance assessment and outcome of the Executive Board members is summarised in the tables below.

The Executive Board is evaluated along the following perform ance target areas:

Financial ◾Profit before tax ◾Return on equity

Non-financial ◾Customer (except for CRO)
◾Sustainability ◾People ◾Strategic priorities ◾Regulatory (for CRO only, replacing Customer)

This section includes more details on the financial and non-financial performance of the Executive Board members. Key financial achievements, collectively accomplished by the Executive Board in 2020 in the predefined target areas are summarised in one table. The non-financial, individual performance of each the Executive Board members is summarised in separate tables.

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% took place.
ING Group Annual Report 2020 on Form 20-F104

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Chief executive officerChief financial officer

TargetPerformanceTargetPerformance

CustomerCustomer

Increase number ofIncrease number ofIn 2020 the number of primary customers increased with 578,000 to 13.9m. The increase was lower
primary customersIn 2020 the number of primary customers increased by 578,000 to 13.9 million. The increase was lowerprimary customersthan projected at the beginning of 2020 and was impacted by the challenges of Covid-19.
than projected at the beginning of 2020 and was impacted by the challenges related to Covid-19.

SustainabilitySustainability

In 2Q a US$1 billion green bond was issued to fund loans for renewable energy and green buildings, In October 2020 the second progress report on Terra was published. Five of the sectors (automotive,Green issuance which was beyond the agreed target.
power generation, residential real estate, commercial real estate, and cement) are outlined in
comparison to 2019. An additional four sectors - fossil fuels, aviation, steel and shipping - were added,People Cover nine sectors in Terra in line with the target to cover all nine sectors in scope in 2020, including quantitative results andThe Organisational Health Pulse survey for 2020 was focused on progress against three priorities – Improve organisational targets. The report’s Climate Alignment Dashboard shows most sectors are on track for climatedirection, leadership and innovation & learning. ING reached significant improvement across all health on three priorities alignment, with progress still needed in some.business lines with all priorities in the top decile or top quartile.

Strategic priorities

People

The Organisational Health Pulse survey for 2020 was focused on progress against three priorities –Deliver on the regulatory Improve organisationaldirection, leadership and innovation & learning. ING reached significant improvement across allcommitmentsDelivered regulatory commitments related to implementation of new regulations on time and at the
health on three prioritiesrequired levels.
business lines with all priorities in the top decile or top quartile.

Strategic priorities - Migrated all private individual customers in Belgium to the OneApp/OneWeb services.
Deliver on the regulatoryDelivered regulatory commitments related to implementation of new regulations on time and at the- The Wholesale TOM programme achieved cost, risk and income benefits and came to a natural close.
commitmentsrequired levels.- Stopped the Maggie transformation programme and refocused our activities to ensure faster Deliver on the strategiccustomer delivery and a continuously improving end-to-end digital customer experience.
priorities- Extended the roll out of ING’s Touchpoint platform, which gives new and existing business initiatives - Migrated all private individual customers in Belgium to the OneApp/OneWeb services.access to 25.2 million ING customers (65% of customer base).
- The Wholesale TOM programme achieved cost, risk and income benefits and came to a natural close.- Introduced innovative services such as CoorpID and Blacksmith, which digitalise the know your - Stopped the Maggie transformation programme and refocused our activities to ensure fastercustomer process for corporate clients.
Deliver on the strategiccustomer delivery and a continuously improving end-to-end digital customer experience.
priorities- Extended the roll out of ING’s Touchpoint platform, which gives new and existing business initiatives access to 25.2 million ING customers (65% of customer base).
- Introduced innovative services such as CoorpID and Blacksmith, which digitalise the know your customer process for corporate clients.

ING Group Annual Report 2020 on Form 20-F105

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Chief risk officer

TargetPerformance2020 variable remuneration outcome

Regulatory

Deliver on regulatoryDelivered identified regulatory commitments related to implementation of new regulations on timeIn light of the economic headwinds and the pressure Covid-19 placed on our business, our customers and on
commitmentsand at the required levels.society, the Supervisory Board and the Executive Board jointly agreed for the Executive Board to forgo their

Sustainability variable remuneration related to the performance year 2020. Although it was decided to forgo variable
Digitalisation of retail Standardisation and digitalisation of retail credit risk processes in line with target.remuneration, in the table on the left the individual performance of the members of the Executive Board against credit risk
their set-targets is shown to illustrate the performance to stakeholders.
Install compliance byElements of compliance and non-financial risk have been digitalised and robotised in line with target,
designimproving sustainable embedding of compliance and NFR processes.

Strategic prioritiesAs Steven van Rijswijk had a split year as CRO and then CEO, his award was calculated against the CEO

Manage credit- marketperformance results (50%) and the CRO performance results (50%).
and non-financial risk Credit risk, market risk and non-financial risk effectively managed within ING’s risk appetite profile.In the second half of the year, risk management reported into CFO Tanate Phutrakul ad interim, in addition to his within Board approved risk
appetiterole as CFO. As such, his variable remuneration award was calculated against the CFO performance results for the
Peoplefull year, also taking into consideration the CRO performance results for the second half of the year.

The Organisational Health Pulse survey for 2020 was focused on progress against three priorities – Improve organisational
health on three prioritiesdirection, leadership and innovation & learning. ING reached significant improvement across allFollowing the performance hurdles a thorough performance assessment has been completed including ex-ante business lines with all priorities in the top decile or top quartile.
risk tests. Based on this assessment and the overall achievements, the Supervisory Board has concluded that the

• Sustainability for the CRO has been focused on sustainable embedding of risk in the organisation.Executive Board members delivered relatively strong results despite a challenging year due to Covid-19.

The performance assessment and outcome of the Executive Board members is summarised in the tables below, In addition, the Supervisory Board considered if any discretionary adjustment was required and they determined
taking into account the pre- and post award risk assessment.
both the financial and non-financial results speak for themselves in the current environment. Furthermore the

Supervisory Board considers the behaviour of the Executive Board members and following their assessment no

Outcome performance assessment discretionary adjustments were applied.

CEOCFOCRO

WeightingAssessmentOutcomeWeightingAssessmentOutcomeWeightingAssessmentOutcomeIn the final step, the Supervisory Board reviewed the CRO’s assessment of ex-post risk adjustments. Whilst the

(%)(%)(%)(%)(%)(%)(%)(%)(%) Global KYC program has made clear progress in 2020 and has delivered on most milestones it was considered a Profit before tax25%0%0%25%0%0%12.5%0%0%
90% modifier (10% discount) to the CEO portion of his 2020 variable remuneration award would be applied.
Return on equity25%0%0%25%0%0%12.5%0%0%

Customer12.5%0%0%12.5%0%0%---

Regulatory------25%100%25%Following this performance assessment process the resulting variable remuneration awards for Steven van| Sustainability | 12.5% | 90% | 11.3% | 12.5% | 90% | 11.3% | 10% | 90% | 9% | Rijswijk would have been €158,139 and for Tanate Phutrakul €109,338. |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| People | 12.5% | 100% | 12.5% | 12.5% | 100% | 12.5% | 10% | 100% | 10% | |

Strategic priorities	12.5%	90%	11.3%	12.5%	90%	11.3%	30%	100%	30%	Overall this would have equated to variable remuneration for the CEO at 10.6% of his maximum 20% cap and a
Total	100%		35%	100%		35%	100%		74%
* Due to rounding, percentages presented in the table may not add up precisely to the total percentages provided.										34.1% reduction against target. For the CFO it would represent 9.0% of his maximum 20% cap and a 44.8%

ING Group Annual Report 2020 on Form 20-F106

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements| | | Total direct compensation for (active) individual Executive Board members | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Awards made to Executive Board members reflect the Supervisory Board’s assessment of each of the Executive | | | | | 2020 | | | 20194 | | 2018 | |
| Board members’ performance against the objectives in their scorecards, as outlined in the previous section. The | | Amounts in euros (rounded figures) | | | | Number of | | Number of | | | Number of |
| Remuneration Committee also consulted the Risk Committee and took into consideration its feedback on risk and | | | | Amount | | shares | Amount | | sharesAmount | | shares |
| compliance matters. In addition to the modifier as stated above, there was no reasoning to apply any individual | | Ralph Hamers (CEO) | 1 | | | | | | | | |
| | | Base salary | | | 888,100 | | 1,750,000 | | | 1,750,000 | |
| risk mitigating measures in accordance with ING’s Remuneration Regulations Framework (IRRF). | 5 | Variable remuneration (fully in shares) | | 2 | - | | -266,000 | 25,726 | | | |

2020 Executive Board remuneration							Steven van Rijswijk (CEO role)	3
							Base salary		888,100
Total remuneration							Variable remuneration (fully in shares)	2	-	-
Amounts in euros (rounded		Variable	Total direct			Total
figures)	Base salary	remuneration	compensation	Pension	Emoluments	remuneration	Tanate Phutrakul (CFO)
Ralph Hamers	888,100		-888,100	11,600	779,900	1,679,600	Base salary		1,221,700	831,100	5
Steven van Rijswijk (CEO role)	888,100		-888,100	11,600	242,000	1,141,700	Variable remuneration (fully in shares)	2	-	-141,400	13,675

Tanate Phutrakul	1,221,700	-1,221,700	23,300	358,500	1,603,500
Steven van Rijswijk (CRO role)	610,800	-610,800	11,600	169,000	791,400	Steven van Rijswijk (CRO role)	3
						Base salary		610,800	1,203,600		1,203,600
As recognised in the profit or loss statement of 2020, the expenses for each Executive Board member (active on						Variable remuneration (fully in shares)	2	-	-195,000	18,858

31 December 2020), relating to their role on the Executive Board, amount to €2.0 million for the CEO and €1.6	Total aggregated base salary	3,608,700	3,784,700		2,953,600
million for the CFO. These amounts include deferred elements from previous years, paid out in 2020.	Total aggregated variable remuneration	-	602,400
	Total aggregated number of shares		-	58,259

The following tables (i.e. total direct compensation, pension costs and other emoluments) show the 1 Ralph Hamers stepped down as an Executive Board member on 30 June 2020. His base salary reflects the payments from 1 January 2020 – remuneration awarded to individual Executive Board members with respect to the performance years 2020, 2019 30 June 2020.
and 2018. The 2020 figures reflect a partial year as an Executive Board member for Ralph Hamers. In addition,2 The number of shares is based on the average ING share price on the day the year-end results were published.
the figures for Steven van Rijswijk are divided between his two different roles on the Executive Board. The 20193 Steven van Rijswijk was appointed CEO as of 1 July 2020. His total direct compensation is divided between his role as CRO and then as
CEO. The annualised base salary for Steven van Rijswijk as of 1 July 2020 is EUR 1,776,250 (this includes the 1.5% salary increase as per 1 figures reflect a partial year as an Executive Board member for Tanate Phutrakul. The 2018 and 2019 figures January 2020).
reflect a full year as Executive Board members for Ralph Hamers and Steven van Rijswijk.

4 The variable remuneration percentage for the Executive Board members are as follows: CEO 15%, CFO 15% and CRO 16%. The applicable percentage for the CFO is the full percentage for 2019, partially in his capacity as a Management Board Banking member and since 23 April All Executive Board remuneration is paid directly by ING with the exception of director’s fees for Tanate2019 in his capacity as an Executive Board member.
Phutrakul as non-executive director at ING Belgium.5 The 2019 details for Tanate Phutrakul reflect a partial year as an Executive Board member.

5 The IRRF consists of the most important regulatory requirements with respect to remuneration to which all remuneration policies of majority owned entities have to adhere to. Furthermore, it consists of our general remuneration principles that apply to all staff globally working under the responsibility of ING.
ING Group Annual Report 2020 on Form 20-F107

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Pension costsThe other emoluments in 2020, 2019 and 2018 amounted to the following costs.| Members of the Executive Board participate in the Collective Defined Contribution (CDC) pension plan. In 2020, | Other emoluments | | | |
| --- | --- | --- | --- | --- |
| pension accrual applied to salary up to an amount of € 110,111. The table below shows the pension costs of the | Amounts in euros (rounded figures) | 20201 | 20192 | 2018 |
| individual members of the Executive Board in 2020, 2019 and 2018. | Ralph Hamers | 779,9004 | 613,0005 | 561,000 |

Steven van Rijswijk (CEO role)3242,000-–| Pension costs for individual Executive Board members | | | | | | Tanate Phutrakul | | | | | | 358,500 | 235,000 | | - |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Amounts in euros (rounded figures) | | 1 | 2020 | 20194 | 2018 | Steven van Rijswijk (CRO role) | 3 | | | | | 169,000 | 367,000 | 369,000 | |
| Ralph Hamers | 2 | | 11,600 | 23,000 | 26,000 | 1 The 2020 emoluments reflect the partial year as an Executive Board member for Ralph Hamers. | | | | | | | | | |
| Steven van Rijswijk (CEO role) | | 3 | 11,600 | | | 2 The 2019 emoluments for Tanate Phutrakul reflect a partial year as an Executive Board member. | | | | | | | | | |
| Tanate Phutrakul | | | 23,300 | 16,000 | | 3 Steven van Rijswijk was appointed as CEO from 1 July 2020. His emoluments are divided between his role as CRO and then as CEO. | | | | | | | | | |
| Steven van Rijswijk (CRO role) | | 3 | 11,600 | 23,000 | 26,000 | 4 This amount does not consist of any exit arrangements due to the fact his departure was voluntary and therefore nothing has been agreed | | | | | | | | | |
| 1 Pension accrual only applies to salary up to an annually set amount (i.e. EUR 105,075 for 2018, EUR 107,593 for 2019 and EUR 110,111 for | | | | | | or paid, which is fully in line with the 2020 EB remuneration policy. | | | | | | | | | |
| 2020). | | | | | | 5 The prior period has been updated to improve consistency and comparability. | | | | | | | | | |
| 30 June 2020. | | | | | | Breakdown of other emoluments paid in 2020 | | | | | | | | | |
| 3 Steven van Rijswijk was appointed as CEO from 1 July 2020. Therefore his pension costs for 2020 are divided between his role of CRO and | | | | | | Amounts in euros (rounded figures) | | | Steven van Rijswijk | | | | Steven van Rijswijk | | |
| then as CEO. | | | | | | | | Ralph Hamers | 1 | (CEO role) | 2Tanate Phutrakul | | | (CRO role) | 2 |
| 4 The 2019 emoluments for Tanate Phutrakul reflect a partial year as an Executive Board member. | | | | | | Contribution individual savings | | 31,100 | | 31,100 | | 42,800 | | 21,400 | |
| | | | | | | Individual savings allowance | | 193,100 | | 192,400 | | 257,200 | | 128,800 | |

BenefitsTravel and accident insurance8,2008,30016,5008,200
Other amounts3547,50010,20042,00010,600 The individual members of the Executive Board receive other emoluments, including savings allowances to 1 The 2020 emoluments reflect the partial year as an Executive Board member for Ralph Hamers.
compensate for the loss of pension benefits on salary above € 110,111 in 2020, employer contributions to savings 2 Steven van Rijswijk was appointed as the new CEO as of 1 July 2020. The emoluments are divided between his role as CRO and then as schemes, reimbursement of costs related to home/work commute, costs relating to tax and financial planning CEO.
services, costs related to reimbursement of the Directors & Officers indemnity, costs associated with a company3 Other amounts includes the following elements: personnel facility (mortgage), tax and financial planning, reimbursement of costs under
car and for expats, the costs associated with housing and schooling.the Directors & Officers indemnity provided by ING, redemption of the holiday allowance for Ralph Hamers and payment of director’s fees for Tanate Phutrakul as non-executive director at ING Belgium.

ING Group Annual Report 2020 on Form 20-F108

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Long-term incentives awarded in previous yearsShares vested for Executive Board members during 2020

No. of

Long-term incentives to the Executive Board members in previous years are disclosed in the table ‘ING shares
Number of sharesEnd date ofNo. ofNo. ofVestingunvested

held by Executive Board members’. In line with the 2020 EB remuneration policy we do not operate (active) long-retentionsharessharesprice inshares

Shares3Grant dateVesting dateperiodgranted5vestedeurosremaining6 term incentive plans anymore.

11 May11 May Ralph Hamers1LSPP11 May 202223,0924,6195.15- 20172020

Employee stock options10 May11 May
LSPP10 May 202318,5472,2255.15- 20182020

The table below contains information on outstanding employee stock options and movements during the 11 May LSPP11 May 202011 May 202525,72610,2905.15financial year of employee stock options held by the members of the Executive Board on 31 December 2020. This2020

includes employee stock options awarded prior to their appointment to the Executive Board. Please note that allTanate Phutrakul2LSPP Units425 March27 MarchN/A7,9871,0655.73- 20162020 unexercised options lapsed in 2020 when the applicable stock option plans reached the end of their 10-year

27 March27 March
lifespan.LSPP Units420172020N/A6,0324825.731,449

27 March27 March LSPP Units4N/A4,9723975.731,592
Options held by Executive Board members20182020

27 March27 March27 March
Outstanding onWaived orOutstanding onGrantLSPP2019202020212,8372275.73908

31 DecemberExercisedexpired in31 Decemberprice inGrantVestingExpiry 11 May
Number of options2019in 202020202020eurosdatedatedateLSPP711 May 202011 May 202517,6947,0785.1510,616 2020| Ralph Hamers | 22,124 | 022,124 | 07.35 | 17 March | 17 March | 17 March | | | 27 March | | 27 March | 27 March | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | 2010 | 2013 | 2020 | Steven van Rijswijk | 2 | LSPP | 2017 | 2020 | 2021 | 13,890 | 2,315 | 5.73 | - |

Tanate Phutrakul	11,062	011,062	07.35	17 March	17 March	17 March	27 March		27 March	27 March
				2010	2013	2020	LSPP	2018	2020	2021	3,460	346	5.73	1,038

Steven van Rijswijk	2,318	02,318	07.35	17 March	17 March	16 March		10 May	11 May
				2010	2013	2020	LSPP	2018	202010 May 2023	6,584	790	5.15	2,370

Steven van Rijswijk	10,694	010,694	07.35	17 March	17 March	17 March		11 May	11 May
				2010	2013	2020	LSPP	2020	202011 May 2025	18,858	7,543	5.15	11,315

Shares1 All the outstanding deferrals of Ralph Hamers lapsed when he voluntarily stepped down as an Executive Board member.

2 Shares granted to Tanate Phutrakul (March 2016 to March 2019) and Steven van Rijswijk (March 2017 to March 2018) were awarded for

Deferred shares are shares conditionally granted subject to a tiered vesting over a period of five years (fortheir performance in positions prior to their Executive Board appointment.

3 All current Executive Board members participate in the ING Group Long-term Sustainable Performance Plan (LSPP) and receive their awards in 2020 and before), with theultimate value of each deferredsharebased on ING’sshareprice on the

shares under its plan rules.

vesting date. This is conditional on there being no holdback.
4 Deferred share units of Tanate Phutrakul are cash settled instruments. The value of these are based on ING Group’s share price at the

The main condition for exercise is that these require continued employment through vesting date.vesting date. No retention period applies.

5 Number of shares granted includes both the deferred and upfront part awarded at the granting date.

6 The balance of unvested shares post holdback, where applicable.

7 The number of shares granted is split between the service period Tanate Phutrakul was a Management Board member and Executive

Board member.

ING Group Annual Report 2020 on Form 20-F109

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements| Total value of vested and unvested shares of Executive Board members - 2020 | | | | | | | Amount | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | Total value in | | outstanding 31 | Average interest | | | |
| Amounts in euros (rounded figures) | Vested shares | Unvested shares | Share price in euros | 1 | euros | Amount in thousands of euros | December | | rate | Repayments | |
| Ralph Hamers | 17,134 | | – | 7.61 | 130,390 | Ralph Hamers | 2,499 | | 1.4% | | - |
| Tanate Phutrakul | 9,249 | 14,565 | | 7.61 | 181,225 | Steven van Rijswijk | | - | - | | - |
| Steven van Rijswijk | 10,994 | 14,723 | | 7.61 | 195,706 | | | | | | |

ING shares held by Executive Board members 1 The opening share price on 31 December 2020.

Executive Board members are encouraged to hold ING shares as a long-term investment to maintain alignment

Loans and advances to Executive Board members

with ING. The table below shows an overview of the shares held by members of the Executive Board on 31 The table below presents the loans and advances provided to Executive Board members that were outstandingDecember 2020, 2019 and 2018.
on 31 December 2020, 2019 and 2018. Since Ralph Hamers was no longer an Executive Board member on 31| December 2020, there is no information included for 2020. These loans were provided on market conditions with | | | | | ING shares held by Executive Board members | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| due observance of the applicable policies within ING. | | | | | Numbers of shares | | 2020 | 2019 | 2018 |
| | | | | | Ralph Hamers | 1 | – | 93,833 | 67,392 |
| Loans and advances to individual Executive Board members – 2020 | | | | | Steven van Rijswijk | | 75,490 | 69,490 | 66,153 |
| | Amount | | | | Tanate Phutrakul | | 13,251 | 9,200 | - |
| | outstanding 31 | Average interest | | | 1 Since Ralph Hamers was no longer an Executive Board member on 31 December 2020, there is no information included for 2020. | | | | |
| Amount in thousands of euros | December | | rateRepayments | | | | | | |
| Steven van Rijswijk | | – | – | – | | | | | |
| Tanate Phutrakul | | – | – | – | | | | | |

Loans and advances to individual Executive Board members – 2019

Amount

outstanding 31Average interest Amount in thousands of eurosDecemberrateRepayments Ralph Hamers2,4021.4%97 Tanate Phutrakul--- Steven van Rijswijk---

ING Group Annual Report 2020 on Form 20-F110

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

2021 Executive Board remuneration

The Supervisory Board decided not to increase the base salary of the Executive Board members from 1 January 2021.

The pandemic did not result in any adjustment of the target areas compared to 2020. Therefore, for 2021 the following target areas will be taken into account:

Financial ◾Profit before tax ◾Return on equity

Non-financial ◾Customer (except for CRO)
oIncrease number of primary customers as it leads to deeper relationships, greater customer satisfaction and, ultimately, customers choosing ING for more of their financial needs oIncrease mobile sales per 1,000 active customers oIncrease percentage of personal interaction with customers ◾People oStrengthen organisational health with a focus on four priority areas: direction, leadership, innovation & learning and role clarity oStrengthen ING’s leadership cadre oIncrease gender balance in ING’s leadership cadre ◾Strategy oDeliver on digitalisation initiatives oDeliver on innovation initiatives ◾Sustainability oDevelopment of integrated climate risk strategy ◾Regulatory oDeliver commitments to regulators

ING Group Annual Report 2020 on Form 20-F111

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements| Remuneration Supervisory Board | | 2020 Remuneration Supervisory Board | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | 2020 | | 2019 | | 2018 |
| Supervisory Board remuneration policy | | Amount in euros (rounded figures) | | | Remuneration | | VAT | Remuneration | VAT | Remuneration | VAT |
| | | Hans Wijers (chairman) | | | | 173,000 | 36,000 | 167,000 | 35,000 | 153,000 | 32,000 |
| In line with the Dutch act implementing SRD II, the 2020 SB remuneration policy was presented to shareholders | | Hermann-Josef Lamberti (vice-chairman) | | | 1 | 48,000 | | 141,000 | | 139,000 | |
| at the 2020 AGM. Based on the result of the binding vote (98.6% in favour), the 2020 AGM adopted the SB | | Mike Rees (vice-chairman) | | 2 | | 129,000 | | 73,000 | | | |
| remuneration policy with retroactive effect from 1 January 2020 until the 2024 AGM at the latest. The 2020 SB | | Jan Peter Balkenende | | | | 80,000 | 17,000 | 82,000 | 17,000 | 82,000 | 17,000 |
| remuneration policy is disclosed in full on ing.com in the section ‘Remuneration’. | | Juan Colombás | 3 | | | 23,000 | | | | | |
| | | Mariana Gheorghe | | | | 108,000 | | 119,000 | | 105,000 | |
| The Supervisory Board remuneration levels for 2020, similar to 2019, are shown below: | | Eric Boyer de la Giroday | | 1 | | 38,000 | | 108,000 | | 108,000 | |
| | | Margarete Haase | | | | 105,000 | | 98,000 | | 63,000 | |
| Supervisory Board remuneration structure | | Herman Hulst | 4 | | | 68,000 | 14,000 | | | | |
| Annual fees in euros | 2020 | Harold Naus | 4 | | | 68,000 | 14,000 | | | | |
| Chairman Supervisory Board | 125,000 | Herna Verhagen | | | | 100,000 | 21,000 | 25,000 | 5,000 | | |
| Vice chairman Supervisory Board | 95,000 | 1 Hermann-Josef Lamberti and Eric Boyer de la Giroday retired after the AGM on 28 April 2020. The remuneration figures for 2020 reflect a | | | | | | | | | |
| Supervisory Board member | 70,000 | partial year as a member of the Supervisory Board. | | | | | | | | | |
| Committee fees (annual amounts) | | 2 Mike Rees became vice-chairman after the AGM on 28 April 2020. | | | | | | | | | |
| Chairman committee | 20,000 | 3 Juan Colombás was appointed to the Supervisory Board by the AGM on 28 April 2020 and became effective on 1 October 2020. The | | | | | | | | | |
| Member committee | 10,000 | remuneration figures for 2020 reflect a partial year as a member of the Supervisory Board. | | | | | | | | | |
| Attendance fees (per event) | | 4 Herman Hulst and Harold Naus were appointed to the Supervisory Board by the AGM on 28 April 2020 with effect from that date. The | | | | | | | | | |
| Attendance fee outside country of residence | 2,000 | remuneration figures for 2020 reflect a partial year as a member of the Supervisory Board. | | | | | | | | | |
| Attendance fee outside continent of residence | 7,500 | | | | | | | | | | |

Compensation of former members of the Supervisory Board not included in the table above amounted to nil in All fees are paid out fully in cash. No variable remuneration is provided to ensure that the Supervisory Board2020, €176,000 in 2019 and €333,000 in 2018.
members can maintain independence. The Supervisory Board members are not eligible for retirement benefits

nor any other benefits in relation to their position on the Supervisory Board. Members of the Supervisory BoardLoans and advances to Supervisory Board members
are reimbursed for their travel and ING-related business expenses.
Supervisory Board members may obtain banking and insurance services from ING Group and its subsidiaries in

2020 Remuneration Supervisory Boardthe 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 2020, there were no loans and advances The table below shows the remuneration, including attendance fees for each Supervisory Board member. All feesoutstanding to Supervisory Board members.
for the Supervisory Board are paid directly by ING. The only exception to this is for Eric Boyer de la Giroday who

received payments from ING Belgium for his role in the Supervisory Board of ING Belgium.

ING Group Annual Report 2020 on Form 20-F112

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

ING shares and employee stock options held by Supervisory Board members

Supervisory Board members are permitted to hold ING shares as a long-term investment. The table below shows the holdings by members of the Supervisory Board on 31 December 2020, 2019 and 2018.| ING shares held by Supervisory Board members | | | | |
| --- | --- | --- | --- | --- |
| Numbers of shares | | 2020 | 2019 | 2018 |
| Hermann-Josef Lamberti | 1 | | 5,700 | 5,700 |
| Eric Boyer de la Giroday | 1 | | 47,565 | 47,565 |
| Margarete Haase | | | 800 | 800 |
| Herman Hulst | | 3,650 | | |
| Harold Naus | | 1,645 | | |

1 Since both Hermann-Josef Lamberti and Eric Boyer de la Giroday retired after the 2020 AGM on 28 April 2020, there is no information included for 2020.

The following table contains information on employee stock options outstanding and awards vested for Supervisory Board members.

Employee stock options on ING Groep N.V. shares held by members of the Supervisory Board on 31 December 2020| | Outstanding on | | | Outstanding on | | | Outstanding on | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | 31 December | | Expired in | 31 December | | Expired in | 31 December | | Expired in |
| Number of stock options | | 2020 | 2020 | | 2019 | 2019 | | 2018 | 2018 |
| Eric Boyer de la Giroday | | - | - | | - | - | | – | 113,479 |

2021 Remuneration Supervisory Board

The Supervisory Board decided not to change the fees for 2021.

ING Group Annual Report 2020 on Form 20-F113

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

General information for all staffOur remuneration principles

FOR INFORMATION ONLY AT 2021 ING GROEP N.V. ANNUAL GENERAL MEETING (AGM)Our remuneration principles apply to all employees and comprise the following:

The primary objective of ING’s remuneration principles is to attract, motivate and retain qualified and expert
leaders as well as senior staff (including Executive Board members) and other highly qualified staff who have theAligned with business strategy ING’s remuneration principles are aligned with the business strategy and company goals.
desired Orange Code values and behaviours, skills and knowledge to deliver on ING’s purpose and Think Forward
strategy in a sustainable way.Creates long-term value ING’s remuneration principles contribute to long-term value creation and support a focus on the long-term interests of its stakeholders, including employees, customers and shareholders.
The remuneration principles are an integral part of ING’s strategy and risk profile. They maintain a sustainable

Responsible and fair balance between short and long-term value creation and build on ING’s long-term responsibility towards its In line with our Orange Code values and behaviours, ING acts responsibly and treats staff fairly across the globe.
employees, customers, shareholders and other stakeholders. Our approach to the remuneration principles did

Mitigates risk and optimises controls not change in 2020.
Risk management is an enabler of long-term value creation. ING ensures its remuneration principles are properly correlated with its risk profile and stakeholder interests.
Our remuneration principles apply to all staff and are embedded in ING’s Remuneration Regulations Framework

Performance driven (IRRF) and our people offer (OPO). Introduced in 2020, OPO sets out ING’s differentiating offer as an employer inING operates a fair, objective and transparent performance management process linked to remuneration to steer and motivate all
the marketplace and states what we ask of our people in return. It gives guidance to our global people practices,employees to deliver on its strategic goals, aiming to reward success and prevent rewarding for failure.
while supporting our Think Forward Strategy. The IRRF and OPO comply with relevant international and localSustainable
legislation and regulations.ING supports the sustainable recruitment, engagement and retention of all employees.

Performance management

We aim to reward for success and avoid rewarding for failure. That is why ING’s remuneration approach is strongly linked to a robust and transparent performance management process. Outcomes of performance evaluations (including collective and individual risk assessments) provide input for remuneration. As not all employees are eligible for variable remuneration there is not necessarily a link to financial performance. In the Netherlands, for example the vast majority of the employees do not receive any variable remuneration.

Step Up Performance Management is our global performance management approach applicable to the majority of employees. It aims to improve people’s individual performance and thereby team performance and ultimately ING's performance. Step Up Performance Management is one of our people practices that help to increase focus, alignment and transparency. We do this through continuous conversations between managers, employees and teams. To support these conversations, there are three formal moments to discuss performance during the year:
target setting, mid-year review and year -end evaluation.

ING Group Annual Report 2020 on Form 20-F114

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Fixed remuneration represents a sufficiently high proportion, in line with the level of expertise and skills, and

The Step Up Performance Management approach consists of three dimensions:allows a fully flexible variable remuneration award. When no variable remuneration is awarded, the

Job:the impact employees have in their daily work on an individual and team level, based on factorscompensation level is still enough for a decent standard of living. Variable remuneration is performance driven,

such as qualitative job description, dynamic planning and specific selected quantitative priorities.subject to regulatory caps and prevents excessive risk taking, where applicable.

Orange Code behaviours:how employees do their work and how effective their behaviour is as a

professional and colleague. We expect all employees to act in line with ING’s Orange Code.The comprehensive process around variable remuneration

Stretch ambitions:at ING, we believe high performance requires stretch and investment (to achieve the The awarding of variable remuneration, where applicable, is based on group, business line and individual stretch). Therefore we ask people to set ambitions beyond their day-to-day role and connect their performance criteria unless local legislation prescribes otherwise. In all ING countries, we adhere to the personal passion, expertise or interest with the long-term success of ING.
applicable variable remuneration caps.
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: excellent, well done and For Identified Staff (i.e. staff considered to have a material impact on ING’s risk profile), at least 40% of variable improvement required.
remuneration is deferred over a period of three to five years with a tiered vesting schedule. Furthermore, at least

50% of variable remuneration is awarded in equity (or equity-linked instruments unless local legislation Step Up Performance Management does not prescribe the targets employees should set. However, the following prescribes otherwise).
regulatory requirements apply to specific groups:

For employees eligible for variable remuneration, a minimum of 50% non-financial priorities.

Performance and risk assessment For all employees in control functions (Legal, Risk, Finance, Compliance, Audit and Human Resources), no

individual financial KPIs are allowed, unless required by local law.ING applies measures to mitigate risk relating to variable remuneration. Our global remuneration policy takes

For identified risk takers, risk mitigation measures may lead to a downwards adjustment of theinto consideration risk, capital, liquidity and the likelihood and timing of earnings. Measures include pre-award

performance outcome and negatively affect variable remuneration (a risk modifier can be applied).and post-award risk assessments of variable remuneration.

In 2020, the Management Board Banking and the Supervisory Board approved the Variable Remuneration

Total direct compensationAccrual Model (VRAM) set-up and approach to determine the 2020 discretionary risk-adjusted variable

remuneration pools.
ING aims to provide total direct compensation or expected business and individual performance at levels which,

on average, are at the median of the markets in which we operate, benchmarked against relevant peer groups. In The VRAM takes a holistic view of the overall performance of ING across three key dimensions:
line with the Dutch Banking Code, the current remuneration levels of the Executive Board are below the median (i)financial, of the peer group introduced with the 2020 EB remuneration policy. This year, remuneration levels for members (ii)non-financial, and of the Management Board Banking were also benchmarked against the same peer group as the Executive Board.
(iii)risk.
The Executive Board and the other members of the Management Board Banking are on average below the Within each of these three elements specific criteria are used to measure performance (e.g. profit, return on median. Three members of the Management Board Banking are on or slightly above the median. Due to their equity, customer, people, strategy, sustainability as well as financial and non-financial risk).
ING-specific roles it is difficult to have a good comparison inside and outside of the financial industry in the

Netherlands as well as abroad. There are limited comparable positions for these roles. To ensure we adhere to

our 2020 EB remuneration policy, we regularly monitor and benchmark salary levels across ING.

ING Group Annual Report 2020 on Form 20-F115

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

The proposal for the variable remuneration pool is prepared by Human Resources, Risk and Finance, and followsTo establish appropriate risk-adjusted variable remuneration pools, ex ante risk adjustments are made based on the VRAM’s step-by-step process and construct including CEO discretion to adjust the proposed variablemeasures used to assess the bank’s current and future risks and whether performance sufficiently aligns with risk remuneration pool. The CEO considers several factors when making this decision. This discretion is checked byappetite levels. The risk adjustment assessment includes measurements on ‘forward looking’ capital, liquidity and the Supervisory Board and requires their approval.non-financial risk, where adjustments are made on deviation from risk appetite.

The Management Board Banking reviews the variable remuneration pool on behalf of the Supervisory Board, taking into account the advice of the Risk Committee and the Remuneration Committee.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 CRO may provide additional input at a more granular level The total variable remuneration pool (for individual and collective variable remuneration), encompasses allto adjust ING’s overall, business line and/or country variable remuneration pools based on their risk management employees eligible for variable remuneration globally, including Identified Staff.performance.
ING takes a multi-step approach to determine whether to award variable remuneration in a given performance year and the maximum amount of the pool. Within this process, a range of risk elements is assessed at variousThe ex-ante and/or ex-post risk adjustments require Supervisory Board approval, taking into account the input of levels and, where appropriate, risk adjustments are made to the variable remuneration pools.the Risk and Finance functions and the advice of the Risk Committee and Remuneration Committee.

The final risk adjustment measure lies in the individual performance assessment itself. An employee’s

Performance hurdles performance is extensively assessed before variable remuneration is proposed and awarded. Every manager To unlock the discretionary variable remuneration pools, both of the following performance hurdles must becarefully assesses the performance delivered by their individual team members on the basis of pre -agreed met. These are:performance priorities and in line with the Step Up Performance Management framework. In addition, managers The Common Equity Tier 1 (CET1) ratio must be at or above the threshold established by applicablehave the discretionary power to lower the proposed variable remuneration if risk taking is perceived as regulations;inappropriate. In this way, variable remuneration is aligned with any additional risks identified on an individual The return on equity (underlying RoE) is equal to or higher than the percentage determined at thebasis during the performance year.
beginning of each performance year by the Management Board Banking and the Supervisory Board.
Underlying RoE, in line with the VRAM Policy (as established in PY 2019) and approved by governingAdditional risk requirements apply to Identified Staff who are considered risk takers in accordance with CRD IV.
bodies, can be adjusted due to one-time charges or infrequent occurrences, such as but not limited toThese risk requirements set the minimum standards to be met during the performance year. Deviation from macro-economic events and pandemic events, during a given performance year.these standards may lead to downward adjustment of the variable remuneration, a so-called risk modifier. This process is run independently by the Risk function for which the CRO is ultimately responsible. Within the A variable remuneration pool is also separately accrued for staff in control functions and support functions andExecutive Board, risk modifiers were applied to the CEO for the performance year 2020. The Supervisory Board, for those employees subject to a collective variable remuneration plan. The amount is defined by theadvised by its Risk Committee, is responsible for risk modifiers within the Management Board Banking.

Management Board Banking and approved by the Supervisory Board.
Finally, a post-award risk assessment can be applied. This assessment analyses whether any events or findings
Risk adjustmentsoccurred 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 In determining the overall size of the variable remuneration pool, a multi-layered, consistent and bank-wide (surrender of up to 100% of the paid or vested variable remuneration).
approach for risk tests and adjustments is applied to the process, based on an assessment by the CRO.

ING Group Annual Report 2020 on Form 20-F116

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Shareholders’ mandate to exceed 100% variable remuneration capThe award of discretionary variable remuneration is based on a clear, transparent and verifiable mechanism for

measuring performance and applying adjustments for risks (the Variable Remuneration Accrual Model or VRAM).
ING’s remuneration policies comply with international and local legislation and regulations. Under the Dutch The starting point is an aggregate of the individual target incentive amounts from all eligible employees across WBFO (which sets various requirements on remuneration), financial institutions are permitted to set a variable the group. The next step is to unlock the discretionary pool based on the results of the performance hurdles.
remuneration cap higher than 100% (but not higher than 200%) of fixed remuneration for employees outside of First, the underlying RoE was calculated and this performance hurdle passed. The underlying RoE, in line with the the European Economic Area (EEA), provided that the higher cap is approved by shareholders and does not VRAM Policy and approved by governing bodies, has been adjusted for macro-economic and pandemic events conflict with ING’s capital adequacy requirements.
during performance year 2020. The CET1 performance hurdle was also calculated and passed. Subsequent to the

results of these performance hurdles the discretionary pool was unlocked. This ‘discretionary pool’ is then At the 2017 AGM, shareholders approved to apply an increased maximum percentage of up to 200% for subject to a number of adjustments including for financial and non-financial performance and for risk.
employees outside the EEA for a period of five performance years until end-2021. For 2020, it was applied to zero

employees worldwide. At the 2021 AGM, we will ask for a new mandate to apply an increased maximum In 2020 the impact of COVID-19 presented unprecedented challenges for ING. While considerations around staff percentage of up to 200% for employees outside the EEA for a further period of five performance years, from well-being and the wider societal impact of the pandemic are paramount, these circumstances have led to 2022 until 2026. This mandate is rarely used by ING and was applied to zero employees worldwide in 2018 and weaker performance results and this led to a negative adjustment to the discretionary pool. Furthermore, in line 2019.
with our policy, executive discretion was applied to further adjust the pool amount downwards in light of

declining financial performance and recognising broader stakeholder interests. Overall, these adjustments

2020 specifics accounted for a downward adjustment of the discretionary pool amount by approximately 26% from target

ING awards variable remuneration across the global organisation in line with our remuneration principles, globaldiscretionary pool and resulting in approximately 20% decline versus the previous performance year. A

and local legislation and market practices. The awarding of variable remuneration, where applicable, is based ondifferentiated approach was taken in the allocation of the discretionary variable remuneration, with a

group, business line and individual performance criteria, both financial and non-financial, and comes in the formsignificantly larger reduction for senior leaders than for junior employees (on average 30% reduction for senior

of discretionary and collective variable remuneration.leaders).

Collective variable remuneration is based on collective labour agreements and/or profit sharing schemes that areThe total actual amount of both discretionary and collective variable remuneration awarded to all eligible

driven by regulation, law and/or workers council agreements in various countries. Over the past years the totalemployees globally for 2020 was €314.2 million (€93.6 million in collective variable remuneration), compared to

amount of collective variable remuneration has been relatively stable and typically accounted for around 25% oftotal staff expenses of €5,812 million. For 2019, the total amount was €378.0 million (€98.0 million in collective

the total amount of variable remuneration.variable remuneration) on €5,755 million staff expenses and €303.1 million (€93.9 million in collective variable

remuneration) out of €5,420 million in 2018.

In 2020, two employees – excluding members of the Management Board Banking – were awarded total annual

remuneration (including employer pension contributions and excluding severance payments made) of €1 million

or more.

ING Group Annual Report 2020 on Form 20-F117

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

C.Board practicesE.Share ownership

For information regarding board practices, see Item 6.AFor information regarding share ownership, see Item 6.B of this Form 20-F and Note 27 ‘Staff expenses’ to the consolidated financial statements.

Severance payments to members of the Executive Board

The contracts entered into with the members of the Executive Board provide for severance payments that become due upon termination of the applicable Executive Board member’s contract, including if termination occurs in connection with a public bid as defined in section 5:70 of the Dutch Financial Supervision Act. For purposes of calculating the amounts due, it is not relevant whether or not termination of the employment or commission contract is related to a public bid. Severance payments to the members of the Executive Board are limited to a maximum of one year’s fixed salary, in line with the Dutch Financial Supervision Act and the Corporate Governance Code

D.Employees

The average number of employees at a full time equivalent basis was 55,901 at the end of 2020, of which 15,201 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 2020, 2019 and 2018 were as follows:| Number of employees | | | | | | |
| --- | --- | --- | --- | --- | --- | --- |
| | | Netherlands | Rest of the world | | | Total |
| | 2020 | 20192018 | 2020 | 20192018 | 2020 | 20192018 |
| Total average number | | | | | | |
| of internal employees at full time | | | | | | |
| equivalent basis | 15,20114,415 | 13,600 | 40,70139,016 | 38,633 | 55,90153,431 | 52,233 |

The Group employs a significant numbers of temporary employees. The average number of temporary employees, not included in the table above, at a full time equivalent basis was 7,886 at the end of 2020.

ING Group Annual Report 2020 on Form 20-F118

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Item 7.Major shareholders and related

party transactions

A. Major shareholdersOn 31 December 2020, ING Groep N.V. and its subsidiaries held 571,671 ordinary shares or ADSs, ,representing
0.01% of ING Group’s issued share capital. ING Groep N.V. does not have voting rights in respect of shares and ING Group ordinary shares are listed on the stock exchanges of Amsterdam (Euronext Amsterdam) and ADSs it holds or which are held by its subsidiaries. Pursuant to section 5.3 of the Dutch Financial Supervision Brussels (Euronext Brussels). ING Group American Depositary Shares (“ADSs”) are listed on the New York Stock Act (“Major Holdings Rules”), any person who, directly or indirectly, acquires or disposes of an interest in the Exchange (NYSE). Options on ING Group ordinary shares or in the form of American depository receipts (ADRs)
voting rights and/or the capital of (in short) a public limited company incorporated under the laws of the are traded on the Euronext Amsterdam Derivative Markets and the Chicago Board Options Exchange.

Netherlands with an official listing on a stock exchange within the European Economic Area, as a result of which acquisition or disposal the percentage of his voting rights or capital interest - whether through Holders of ordinary shares or American Depositary Shares with a stake of 3% or more ownership of shares, American depositary receipts (ADRs) or any other financial instrument, whether stocksettled or cash-settled, such as call or put options, warrants, swaps or any other similar contract - reaches, To the best of our knowledge, as of 31 December 2020, no holder of ordinary shares or ADSs, other thanexceeds or falls below the threshold levels of 3%, 5%, 10%, 15%, 20%, 25%, 30%, 40%, 50%, 60%, 75% and 95% BlackRock Inc. held 3% or more of ING Group’s issued share capital.is required to provide updated information on its holdings. As a result, other than based on information available from public filings available under the applicable laws of any other jurisdiction, ING Groep N.V. is not On 4 February 2019, BlackRock, Inc. disclosed by way of a Schedule 13G filed with the SEC, beneficialaware of any changes in the ownership of ordinary shares or ADSs between the thresholds levels mentioned in ownership of 233,492,874 ordinary shares of ING Group as of 31 December 2018, representing 6.0% of INGthe previous sentence.
Group’s issued share capital. On 5 February 2020, BlackRock, Inc. disclosed by way of a Schedule 13G filed with the SEC, beneficial ownership of 259,231,767 ordinary shares of ING Group as of 31 December 2019,On 31 December 2020, no person is known to ING Groep N.V. to be the owner of more than 10% of the representing 6.7% of ING Group’s issued share capital. On 29 January 2021, BlackRock, Inc. disclosed by way ofordinary shares or ADSs. As of 31 December 2020, members of the Supervisory Board and their related third a Schedule 13G filed with the SEC, beneficial ownership of 289,185,500 ordinary shares of ING Group as of 31parties held 5,295 Ordinary Shares. Members of the Supervisory Board do not hold ING options.
December 2020, representing 7.4% of ING Group’s issued share capital.
As at 31 December 2020, members of the Executive Board and their related third parties held 88,741 ordinary shares.

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As at 31 December 2020 ING Groep N.V. was not a party to any material agreement that becomes effective, orC. Interests of experts and counsel is required to be amended or terminated in case of a change of control of ING Groep N.V. following a public bid This item does not apply to annual reports on Form 20-F.

as defined in the Dutch Financial Supervision Act. ING Groep N.V.’s subsidiaries may have customary change of control arrangements included in agreements related to various business activities, such as joint venture agreements, letters of credit and other credit facilities, ISDA-agreements, hybrid capital and debt instruments, reinsurance contracts and futures and option trading agreements. Following a change of control of ING Groep N.V. (as the result of a public bid or otherwise), such agreements may be amended or terminated, leading, for example, to an obligatory transfer of the interest in the joint venture, early repayment of amounts due, loss of credit facilities or reinsurance cover and liquidation of outstanding futures and option trading positions.
As of 31 December 2020 ING Groep N.V. was not aware of any arrangements the operation of which may result in a change of control of ING Groep N.V.

B. Related Party Transactions

In the normal course of business, ING Group enters into various transactions with related parties. Parties are considered to be related if one party has the ability to control or exercise significant influence over the other party in making financial or operating decisions. Related parties of ING Group include, among others, its subsidiaries, associates, joint ventures, key management personnel, and various defined benefit and contribution plans. Transactions between related parties include rendering or receiving of services, leases, transfers under finance arrangements and provisions of guarantees or collateral. There are no significant provisions for doubtful debts or individually significant bad debt expenses recognised on outstanding balances with related parties.

ING Group has entered into various transactions with related parties. For more information, reference is made to Note 49 “Related parties”in the consolidated financial statements.

As described under “Item 6. Directors, Senior Management and Employees”, some members of the Supervisory Board are current or former senior executives of leading multi-national corporations based primarily in the Netherlands. ING Group may at any time have lending, investment banking or other financial relationships with one or more of these corporations in the ordinary course of business on terms which we believe are no less favorable to ING than those reached with unaffiliated parties of comparable creditworthiness.

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Item 8.Financial informationThe right to dividends and distributions in respect of the ordinary shares will lapse if such dividends or distributions are not claimed within five years following the day after the date on which they were made available.

A.Consolidated statements and other financial information There are no legislative or other legal provisions currently in force in the Netherlands or arising under ING
Groups’ Articles of Association restricting the remittance of dividends to holders of ordinary shares, or ADSs

Consolidated statements
not resident in the Netherlands. Insofar as the laws of the Netherlands are concerned, cash dividends paid in For information regarding consolidated statements and other financial information, see Item 18 of this Form Euro may be transferred from the Netherlands and converted into any other currency, except that for 20-F.
statistical purposes such payments and transactions must be reported by ING Group to DNB and, further, no
payments, including dividend payments, may be made to jurisdictions or persons, that are subject to certain

Legal Proceedings sanctions, adopted by the Government of the Netherlands, implementing resolutions of the Security Council of
For a description of ING’s legal proceedings, see Note 45 ‘Legal proceedings’ in the consolidated financial the United Nations, or adopted by the European Union.
statements.

Dividends are subject to withholding taxes in the Netherlands as described under Item 10, “Additional

Policy on dividend distribution

Information - Taxation - Netherlands Taxation”.
In the third quarter of 2020, ING announced a change in its distribution policy from a progressive dividend to a pay-out ratio of 50% of resilient net profit and additional return of structural excess capital. For detailedB.Significant changes information on ING’s 2020 dividend, reference is made to Note 51 ‘Capital Management’.
For information on subsequent events reference is made to Note 50 ‘Subsequent events’ of the consolidated
Cash distributions on ING Groups ordinary shares are generally paid in Euros. However, the Executive Boardfinancial statements.
may decide, with the approval of the Supervisory Board, to declare dividends in the currency of a country other than the Netherlands in which the shares are traded. Amounts payable to holders of ADSs that are paid to theSince 31 December 2020, until the filing of this report, no other significant changes have occurred in the Depositary in a currency other than dollars will be converted to dollars and subjected to a charge by thefinancial statements of the Group included in “Item 18 Consolidated Financial Statem ents” of this document.
Depositary for any expenses incurred by it in such conversion.

If the Executive Board has been designated as a body authorised to resolve to issue shares, it may decide, with the approval of the Supervisory Board, that a distribution on ordinary shares shall be made in the form of ordinary shares instead of cash or to determine that the holders of ordinary shares shall be given the choice of receiving the distribution in cash or in the form of ordinary shares on such terms as the Executive Board, with the approval of the Supervisory Board, may decide.

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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.

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Item 10.Additional information

◾an individual citizen or resident of the United States,

◾a corporation organized under the laws of the United States or of any state of the United States, or any

entity taxable as United States corporation,

A.Share capital ◾an estate, the income of which is subject to United States federal income tax without regard to its

source, or This item does not apply to annual reports on Form 20-F.
◾a trust if a court within the United States is able to exercise primary supervision over the

B.Memorandum and articles of associationadministration of the trust and one or more United States persons have the authority to control all
substantial decisions of the trust.

For a description of ING’s memorandum and articles of association, please see Exhibit 2.1 “Description ofFurther, this summary is limited to U.S. Shareholders who are not, and are not deemed to be, a resident of the

Securities Registered under Section 12 of the Exchange Act”, which is incorporated by reference herein.Netherlands for Dutch tax purposes.

C.Material contractsThis summary is based on the United States Internal Revenue Code of 1986 and the laws of the Netherlands,

each as amended, their legislative history, existing and proposed regulations, published rulings and court
There have been no material contracts outside the ordinary course of business to which ING Groep N.V. or any decisions, and the tax treaty between the United States and the Netherlands for the Avoidance of Double
of its subsidiaries is a party in the last two years.
Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (“Treaty”), all as of the date

hereof. These laws are subject to change, possibly on a retroactive basis. The information provided below is

D.Exchange controls neither intended as tax advice nor purports to describe all of the tax considerations that may be relevant to

investors and prospective investors. It should not be read as extending to matters not specifically discussed, Cash distributions, if any, payable in Euros on Ordinary Shares and ADSs may be officially transferred from the and investors should consult their own advisors as to the tax consequences of their ownership and disposal of Netherlands and converted into any other currency without violating Dutch law, except that for statistical Ordinary Shares or ADSs. In particular, the summary does not take into account the specific circumstances of purposes such payments and transactions must be reported by ING Groep N.V. to the Dutch Central Bank and, particular investors (such as tax-exempt organizations, banks, insurance companies, dealers in securities, further, no payments, including dividend payments, may be made to jurisdictions or persons subject to certain traders in securities that elect to mark-to-market their securities holdings, investors liable for alternative sanctions, adopted by the government of the Netherlandsor the European Union.
minimum tax, investors whose functional currency is not the U.S. dollar, investors that actually or

constructively own 10% or more of the combined voting power of the voting stock or of the total value of ING

E.Taxation Groep N.V., investors that hold Ordinary Shares or ADSs as part of a straddle or a hedging or conversion

The following is a summary of certain Netherlands tax consequences, and the United States federal income taxtransaction, investors that acquired or dispose of Ordinary Shares or ADSs as part of a wash sale, or investors
consequences, of the ownership of our Ordinary Shares or American Depositary Shares (“ADSs”) by U.S.that own Ordinary Shares or ADSs through a partnership), some of which may be subject to special rules.

Shareholders (as defined below) who hold Ordinary Shares or ADSs as capital assets.
Moreover, this summary does not discuss the Dutch tax treatment of a holder of Ordinary Shares or ADSs that

For the purposes of this summary, a “U.S. Shareholder” is a beneficial owner of Ordinary Shares or ADSs that is:is an individual who receives income or capital gains derived from the Ordinary Shares and ADSs and this

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income received or capital gains derived are attributable to the past, present or future employment activities

of such holder.i.An exemption at source is available if the Dutch participation exemption applies and the Ordinary

Shares or ADSs are attributable to a business carried out in the Netherlands. To qualify for the Dutch

The summary is based in part upon the representations of the Depositary and the assumption that eachparticipation exemption, the U.S. Shareholder must generally hold at least 5.0 percent of our nominal

obligation in the Deposit Agreement and any related agreement will be performed in accordance with itspaid-in capital and meet certain other requirements.

terms. In general, for United States federal income tax and Netherlands tax purposes, holders of ADSs will beii.An exemption at source is available for dividend distributions to certain qualifying corporate U.S.

treated as the owners of the Ordinary Shares underlying the ADSs, and exchanges of Ordinary Shares for ADSs,Shareholders owning our Ordinary Shares or ADSs if such shareholder would have been able to apply

and exchanges of ADSs for Ordinary Shares, will not be subject to United States federal income tax orthe Dutch participation exemption if it would have been resident of the Netherlands, unless such

Netherlands income tax. References to Ordinary Shares in this section include references to ADSs.shareholder holds the Ordinary Shares or ADSs with the primary aim or one of the primary aims to

avoid the levy of Dutch dividend withholding tax at the level of another person and the Ordinary

It is assumed, for purposes of this summary, that a U.S. Shareholder is eligible for the benefits of the Treaty andShares or ADSs are not held for valid commercial reasons that reflect economic reality.

that a U.S. Shareholder’s eligibility is not limited by the limitation on benefits provisions of the Treaty.iii.Certain tax exempt organizations (e.g. pension funds and excluding collective investment vehicles) may

be eligible for a refund of Dutch dividend withholding tax upon their request. Based on domestic law

Netherlands Taxationnot yet entered into force, in those circumstances, an exemption at source may also become available

upon request.

Withholding tax on dividends iv.Upon request and under certain conditions, certain qualifying individual and corporate U.S
The Netherlands imposes a withholding tax on a distribution of a dividend at the statutory rate of 15%.
Shareholders of Ordinary Shares or ADSs which are not subject to personal or corporate income tax in
Dividends include:
the Netherlands may request a refund of Dutch dividend withholding tax insofar the withholding tax

withheld on the gross dividend is higher than the personal or corporate income tax which would have
i.dividends paid in cash and in kind;
been due on the net dividend if they were resident or established in the Netherlands. This refund is
ii.deemed and constructive dividends;
however not applicable when, based on the Treaty, the Dutch dividend withholding tax can be fully
iii.the consideration for the repurchase or redemption of shares in excess of the qualifying average paidcredited in the United States by the U.S. Shareholder. However, it is unclear whether (i) which
in capital unless such repurchase is made for temporary investment purposes or is exempt by law;
(financing) costs can be taken into account when determining the hypothetical personal or corporate
iv.any (partial) repayment of paid-in capital not qualifying as capital for Dutch dividend withholding tax income tax due on the net income (ii) or how the Netherlands would determine whether, based on the
purposes;
double taxation convention, a full credit is available in the country of residence of the holder for
v.liquidation proceeds in excess of the qualifying average paid-in capital for Dutch dividend withholding purposes of this refund. See “United States Taxation —Taxes on dividends” for more information. The
tax purposes; and provision in essence is intended to be a codification of certain judgments by both the European Free
vi.stock dividends up to their nominal value (unless distributed out of ING Groep N.V.’s qualifying paid-in Trade Association Court of Justice and the European Court of Justice that already indicated that in
capital).
certain circumstances a refund should be available prior to the introduction of the provision in Dutch

law. It is possible that this provision is an insufficient codification of these judgments and that based

Reduction of Dutch dividend withholding tax based on Dutch law on EU law a larger refund should be provided.
Under certain circumstances, a reduction of Dutch dividend withholding tax can be obtained based on Dutch

law:

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ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Reduction of Dutch dividend withholding tax based on the Tre aty3% of the gross amount of certain qualifying dividends received by ING Groep N.V.
Pursuant to the provisions of the Treaty, certain corporate U.S. Shareholders owning directly at least 10% of our voting power are eligible for a reduction to 5% Dutch dividend withholding tax provided that the U.S.The reduction is applied to the Dutch dividend withholding tax that ING Groep N.V. must pay to the Dutch tax Shareholder is the beneficial owner of the dividends received and does not have an enterprise or an interest inauthorities and not to the Dutch dividend withholding tax that ING Groep N.V. must withhold.
an enterprise that is, in whole or in part, carried on through a permanent establishment or permanent representative in the Netherlands to which the dividends are attributable. The Treaty also provides for aTaxes on income and capital gains dividend withholding tax exemption on dividends, but only for a shareholder owning directly at least 80.0Income and capital gains

percent of our voting power and meeting all other requirements.
Income and capital gains derived from the Ordinary Shares or ADSs by an individual or corporate U.S.
Provided that certain conditions are met, under the Treaty dividends paid to qualifying exempt pension trustsShareholder are generally not subject to Netherlands income tax or corporation tax, unless:
and other qualifying exempt organizations, as defined in the Treaty, are exempt from Dutch dividend withholding tax. To obtain a refund of the tax withheld such qualifying exempt pension trusts are required toi.such income and gains are attributable to a (deemed) permanent establishment or (deemed)
file a request. Only if certain conditions are fulfilled, such qualifying exempt pension trusts may be eligible forpermanent representative in the Netherlands of the U.S. Shareholder; or relief at source upon payment of the dividend. Qualifying exempt organizations (other than qualifying exemptii.the shareholder is entitled to a share in the profits of an enterprise or (in case of a non-Dutch resident pension trusts) can only file for a refund of the tax withheld.corporate shareholder only) a co-entitlement to the net worth of an enterprise, that is effectively managed in the Netherlands (other than by way of securities) and to which enterprise the Ordinary Anti-dividend stripping rulesShares or ADSs are attributable; or Pursuant to the Dutch anti-dividend stripping rules, in the case of dividend-stripping, the 15% dividendiii.such income and capital gains are derived from a direct, indirect or deemed substantial interest in the withholding tax cannot be reduced or refunded. Dividend-stripping is deemed to be present if the recipient of ashare capital of ING Groep N.V. (such substantial interest not being a business asset), and in the case dividend is, different from what has been assumed above, not the beneficial owner thereof and is entitled to aof a non-Dutch resident corporate shareholder only, that substantial interest is being held with the larger credit, reduction or refund of dividend withholding tax than the beneficial owner of the dividends. Underprimary aim or one of the primary aims to avoid the levy of income tax from another person and is put these rules, a recipient of dividends will not be considered the beneficial owner thereof if as a consequence ofin place without valid economic reasons that reflect economic reality;
a combination of transactions a person other than the recipient wholly or partly benefits from the dividends,iv.in case of a non-Dutch resident corporate shareholder, such shareholder is a resident of Aruba, whereby such person retains, whether directly or indirectly, an interest similar to the shares on which theCuracao or Saint Martin with a permanent establishment or permanent representative in Bonaire, dividends were paid.Eustatius or Saba to which the Ordinary Shares or ADS are attributable, while the profits of such shareholder are taxable in the Netherlands pursuant to Article 17(3)(c) of the Dutch Corporate Tax Act Credit for ING Groep N.V.1969; or v.in case of a non-Dutch resident individual, such individual derives income or capital gains from the ING Groep N.V. may, with respect to certain dividends received from qualifying non-Netherlands subsidiaries,Ordinary Shares or ADSs that are taxable as benefits from ‘miscellaneous activities’ in the Netherlands credit taxes withheld from those dividends against the Netherlands withholding tax imposed on certain(‘resultaat uit overige werkzaamheden’, as defined in the Dutch Income Tax Act 2001), which includes qualifying dividends that are redistributed by ING Groep N.V., up to a maximum of the lesser of:the performance of activities with respect to the Ordinary Shares or ADSs that exceed regular portfolio management.
3% of the amount of qualifying dividends redistributed by ING Groep N.V.; and

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Substantial interestsuch distribution is not in excess of ING Groep N.V.’s current and accumulated earnings and profits as

Generally speaking, for Dutch tax purposes, an interest in the share capital of ING Groep N.V., should not bedetermined for United States federal income tax purposes. Distributions in excess of current and accumulated
considered a substantial interest if the holder of such interest, and, in case of an individual, his or her spouse,earnings and profits, as determined for United States federal income tax purposes, will be treated as a nonregistered partner, certain other relatives or certain persons sharing the holder’s household, alone or together,taxable return of capital to the extent of a U.S. Shareholder’s basis in the Ordinary Shares and thereafter as
does or do not hold, either directly or indirectly, the ownership of, or certain rights over, shares or rightscapital gain. Because ING Groep N.V. does not keep account of its earnings and profits, as determined for
resembling shares representing 5% or more of the total issued and outstanding capital, or the issued andUnited States federal income tax purposes, U.S. Shareholders should generally expect to treat any distribution
outstanding capital of any class of shares, of ING Groep N.V.as a dividend for U.S. federal income tax purposes.

Gift or inheritance taxFor foreign tax credit purposes, dividends will generally be income from sources outside the United States and
will, depending on the circumstances of the U.S. Shareholder, generally be “passive” income for purposes of No Netherlands gift or inheritance tax will be imposed on the transfer or deemed transfer of the Ordinary
computing the foreign tax credit allowable to the shareholder. A dividend will not be eligible for the dividends Shares or ADSs by way of a gift by or on the death of a U.S. Shareholder if, at the time of the gift or the death of
received deduction generally allowed to U.S. corporations in respect of dividends received from other U.S.
that shareholder, such shareholder is not a (deemed) resident of the Netherlands.
corporations. Dividends paid to a non-corporate U.S. Shareholder that are considered qualified dividend

income will be taxable to the shareholder at preferential rates applicable to long-term capital gains provided Netherlands inheritance or gift taxes (as the case may be) are due, however, if the transfer of the bearer
that the shareholder holds the Ordinary Shares for more than 60 days during the 121-day period beginning 60 receipts or ADSs are construed as an inheritance or as a gift made by or on behalf of a person who, at the time
days before the ex-dividend date and meets other holding period requirements. Dividends paid by ING Groep of the gift or death, is deemed to be a resident of the Netherlands. For the purposes of Netherlands gift or
N.V. with respect to the Ordinary Shares generally will be qualified dividend income, provided that, in the year inheritance tax, an individual of Dutch nationality is deemed to be a resident of the Netherlands if he or she
that you receive the dividend, we are eligible for the benefits of the Treaty. We believe that we are currently has been a resident thereof at any time during the ten years preceding the time of the gift or death. For the
eligible for the benefits of the Treaty and we therefore expect that dividends on the Ordinary Shares will be purposes of Netherlands gift tax, any person is deemed to be a resident of the Netherlands if he or she has
qualified dividend income, but there can be no assurance that we will continue to be eligible for the benefits of resided therein at any time in the twelve months preceding the gift.
the Treaty.

United States Taxation Subject to certain limitations, a U.S. Shareholder may generally deduct from income, or credit against its

Taxes on dividends United States federal income tax liability, the amount of any Netherlands withholding taxes under the Treaty.

The tax treatment of owning Ordinary shares will depend in part on whether or not ING Groep N.V. is classifiedThe Netherlands withholding tax will likely not be creditable against the U.S. Shareholder’s United States tax

as a passive foreign investment company, or PFIC, for United States federal income tax purposes. Except asliability, however, to the extent that ING Groep N.V. is allowed to reduce the amount of dividend withholding

discussed below under “-PFIC Rules”, this discussion assumes that we are not classified as a PFIC for Unitedtax paid over to the Netherlands Tax Administration by crediting withholding tax imposed on certain dividends

States federal income tax purposes.paid to ING Groep N.V. In addition, special rules apply in determining the foreign tax credit limitation with

respect to dividends that are subject to preferential rates. To the extent a reduction or refund of the tax

Under the United States federal income tax laws, a U.S. Shareholder will be required to include in gross incomewithheld is available to you under Dutch law or under the Treaty, the amount of tax withheld that could have

the full amount of a cash dividend (including any Netherlands withholding tax withheld) as ordinary incomebeen reduced or is refundable will not be eligible for credit against your United States federal income tax

when the dividend is actually or constructively received by the U.S. Shareholder. For this purpose, a “dividend”liability. In addition, to the extent an amount of Dutch tax withheld is contingent on the availability of a credit

will include any distribution paid by ING Groep N.V. with respect to the Ordinary Shares, but only to the extentagainst the amount of income tax owed to another country, that amount of Dutch tax withheld will not be

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eligible for a credit against your United States federal income tax liability. It is unclear whether or how thethe year of disposition at the highest rate in effect for that year, and interest would be charged at the rate Netherlands would apply this rule in determining whether, based on the Treaty, a credit is available in theapplicable to underpayments on the tax payable in respect of the amount so allocated. The same rules would United States for purposes of the dividend withholding tax refund provision described in Section IV underapply to “excess distributions”, defined generally as distributions in a single taxable year exceeding 125% of the “Netherlands Taxation —Withholding tax on dividends—Reduction of Dutch dividend withholding tax based onaverage annual distribution made by ING Groep N.V. over the shorter of the three preceding taxable years or Dutch law”.the portion of the holder’s holding period that preceded the current taxable year. Dividends received by a U.S.
Shareholder will not be eligible for the special tax rates applicable to qualified dividend income if ING Groep Since payments of dividends with respect to Ordinary Shares will be made in Euros, a U.S. Shareholder willN.V. were to be treated as a PFIC with respect to the shareholder either in the taxable year of the distribution generally be required to determine the amount of dividend income by translating the Euro into United Statesor the preceding taxable year, but instead will be taxable at rates applicable to ordinary income.
dollars at the “spot rate” on the date the dividend distribution is includable in the income of the U.S.
Shareholder. Generally, any gain or loss resulting from currency exchange fluctuations during the period fromA U.S. Shareholder who owns Ordinary Shares during any year that ING Groep N.V. is a PFIC may be required to the date the dividend distribution is includable in the income of the U.S. Shareholder to the date such paymentfile Internal Revenue Service Form 8621.

is converted into U.S. dollars will be treated as ordinary income or loss and will not be eligible for the special tax rate applicable to qualified dividend income. Such gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes.

Taxes on capital gains

Gain or loss on a sale or exchange of Ordinary Shares by a U.S. Shareholder will generally be a capital gain or loss for United States federal income tax purposes. If such U.S. Shareholder has held the Ordinary Shares for more than one year, such gain or loss will generally be long-term capital gain or loss. Long-term capital gain of a non-corporate U.S. Shareholder is generally taxed at preferential rates. In general, gain or loss from a sale or exchange of Ordinary Shares by a U.S. Shareholder will be treated as income or loss from sources within the United States for foreign tax credit limitation purposes.

PFIC rules

ING Groep N.V. believes it is not a PFIC for United States federal income tax purposes, and it does not expect to become a PFIC in the foreseeable future. However, this conclusion is a factual determination that must be made annually and thus may be subject to change. It is therefore possible that we could become a PFIC in a future taxable year

If ING Groep N.V. were to be treated as a PFIC, unless a U.S. Shareholder made an effective election to be taxed annually on a mark-to-market basis with respect to the Ordinary Shares, any gain from the sale or disposition of Ordinary Shares by a U.S. Shareholder would be allocated ratably to each year in the holder’s holding period and would be treated as ordinary income. Tax would be imposed on the amount allocated to each year prior to ING Group Annual Report 2020 on Form 20-F127

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

F.Dividends and paying agents

This item does not apply to annual reports on Form 20-F.

G.Statement by experts

This item does not apply to annual reports on Form 20-F.

H.Documents on display

ING Groep N.V. is subject to the informational requirements of the Securities Exchange Act of 1934, as amended. In accordance with these requirements, ING Groep N.V. files reports and other information with the Securities and Exchange Commission (”SEC”). These materials, including this Annual Report and its exhibits, may be inspected and copied on the SEC’s website at www.sec.gov. You may also inspect ING Groep N.V.’s SEC reports and other information on the website of ING Groep N.V. (www.ing.com).

I.Subsidiary information

This item does not apply to annual reports on Form 20-F.

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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.

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Item 12. Description of Securities Other

Than Equity SecuritiesType of ServiceADR Depositary ActionsFee Payable Depositing orIssuance of ADSs against the deposit of Ordinary Shares,$5.00 for each 100 ADSs (or portion substituting theincluding deposits and issuances in respect of:thereof) issued, delivered or upon underlying Ordinarywhich a share distributive or elective Shares· share distributions, rights and otherdistribution is made or offered. The A.Debt securitiesdistributions.ADR depositary may sell sufficient securities or property received in This item does not apply to annual reports on Form 20-F.· a stock dividend or stock split.respect of share distributions, rights and other distributions prior to such · a merger, exchange of securities ordeposit to pay such charge.
B.Warrants and rightsother transactions or events affecting the ADSs or the underlying Ordinary This item does not apply to annual reports on Form 20-F.Shares.

C.Other securitiesReceiving orDistribution of cash dividends or other cash distributions, or$0.05 or less per ADS held.
distributing cashoffering of elective cash/stock dividends.
This item does not apply to annual reports on Form 20-F.dividends
Selling or exercising· additional ADRs resulting from aAn amount equal to the fee for the
rightsdividend or free distribution consistingexecution and delivery of ADSs which

D.American depositary shares of Ordinary Shares, or U.S dollarswould have been charged as a result
resulting from sales of Ordinary Sharesof the deposit of such securities.

Fees and Charges Payable by a Holder of ADSs received in a distribution.

· Instruments representing rights to JPMorgan Chase Bank, N.A., as ADR depositary, may collect fees for, among other things, the delivery and acquire additional ADRs as a result of
surrender of ADSs directly from investors, or from intermediaries acting for them, depositing Ordinary Sharesdistribution on Ordinary Shares, or U.S
or surrendering ADSs for the purpose of withdrawal.dollars resulting from sales of such rights.

The charges of the ADR depositary payable which may be payable by investors are as follows:· 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.

Withdrawing anAcceptance of ADSs surrendered for withdrawal of deposited$5.00 for each 100 ADSs (or portion underlying OrdinaryOrdinary Sharesthereof) reduced, cancelled or Sharesurrendered.

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Other charges andThe ADR depositary may incur charges and expenses on behalfPayable by holders or persons Type of ServiceADR Depositary ActionsFee Payableexpenses of the ADRof holders in connection with:depositing Ordinary Shares.
depositary Transferring,Registration, registration of transfer, combination and split-up$1.50 per ADR.
· stock transfer or other taxes and otherPayable by persons depositing, or splitting or groupingof ADRs in the ADR register as evidenced by the ADRs governmental charges.holders of ADRs delivering underlying of ADRssurrendered or upon delivery of proper instruments of transfer Ordinary Shares, Ads or deposited · SWIFT, cable, telex and facsimilesecurities.
General depositaryOther services performed by the ADR depositary in$0.05 per ADS per calendar year (ortransmission and delivery charges services, particularlyadministering the ADR programportion thereof), which may beincurred at the request of personsPayable by persons depositing or those charged on ancharged on a periodic basis duringdepositing, or holders of ADRs deliveringwithdrawing deposited securities.
annual basiseach calendar year against holders ofunderlying Ordinary Shares, ADRs or the record date(s) set by the ADRdeposited securities.Payable by persons receiving such depositary and shall be payable atforeign currency, as the ADR the sole discretion of the ADR· transfer or registration fees for thedepositary will deduct any fees, depositary by billing such holders orregistration or transfer of depositedexpenses and other charges prior to deducting such charge from one orsecurities.distributing such foreign currency.
more cash distributions.
· fees, expenses and other charges of the ADR depositary or its agent in connection with the conversion of Reimbursement ofThe ADR depositary and/or any of its agents may incur fees,Fees and charges shall be assessedforeign currency into U.S. dollars.
fees, charges andcharges and expenses (including expenses incurred on behalfon a proportionate basis against expenses of the ADRof holders of ADRs in connection with compliance with foreignholders of ADRs as of the record date depositaryexchange control regulations or any law or regulation relatingor dates set by the ADR depositary to foreign investment) in connection with the servicing of theand shall be payable at the sole underlying Ordinary Shares or other deposited securities, thediscretion of the ADR depositary by sale of securities (including, without limitation, depositedbilling such holders of ADRs or by securities), the delivery of deposited securities or otherwise indeducting such charge from one orFees and Payments made by the ADR depositary to ING connection with the ADR depositary’s compliance withmore cash dividends or other cash applicable law, rule or regulation.distributions.
In consideration for acting as depositary, the ADR depositary has agreed to provide ING with certain amounts

on an annual basis. In the year ended 31 December 2020, the ADR depositary paid aggregate fees and made

other direct and indirect payments to ING in an amount of USD 3,335,215.

Type of ServiceADR Depositary ActionsFee Payable Under certain circumstances, including removal of the ADR depositary or termination of the ADR program by

ING, ING is required to repay the ADR depositary certain amounts reimbursed and/or expenses paid to or on

behalf of ING.

ING Group Annual Report 2020 on Form 20-F131

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

PART II.Item 15. Controls and Procedures

Internal control over financial reporting Item 13. Defaults, Dividend Arrearages and Due to the listing of ING shares on the New York Stock Exchange, ING Group is required to comply with the SEC regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act (SOX 404). These regulations require that Delinquencies

the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”) of ING Group report and certify on an annual basis on the effectiveness of ING Group’s internal control over financial reporting. Moreover, the external auditors are required to provide an opinion on the effectiveness of ING Group’s internal control over financial reporting.
None.
SOX 404 activities are organized along the lines of the governance structure, and involve the participation of Item 14. Material Modifications to thesenior management across ING. Following the SOX 404 process, ING is in the position to publish an unqualified statement that the Company’s internal control over financial reporting was effective as of 31 December 2020.
The SOX 404 statement by the Executive Board is included on this page, followed by the report of the external Rights of Security Holders and Use of auditor as issued on Form 20-F.

Proceeds

Disclosure Controls and Procedures

The Company’s management, under the supervision and with the participation of the CEO and CFO, has performed an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls None.and procedures. Based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2020, the end of the period covered by the 2020 Form 20-F.

Report of the Executive Board on Internal Control Over Financial Reporting

The Executive Board is responsible for establishing and maintaining adequate internal control over financial reporting. ING’s internal control over financial reporting is a process designed under the supervision of our principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Our internal control over financial reporting includes those policies and procedures that:
◾Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets of ING;

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ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

◾Provide reasonable assurance that transactions are recorded as necessary to permit preparation ofReport of Independent Registered Public Accounting Firm
financial statements in accordance with generally accepted accounting principles, and that our receipts
and expenditures are being made only in accordance with authorisations of our management and To the Shareholders and the Supervisory Board directors; and ING Groep N.V.:
◾Provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use
or disposition of our assets that could have a material effect on our financial statements.

Opinion on Internal Control Over Financial Reporting

Because of its inherent limitations, internal control over financial reporting may not prevent or detectWe have audited ING Groep N.V. and subsidiaries’ (‘the Company’) internal control over financial reporting as of
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk thatDecember 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by
controls may become inadequate because of changes in conditions, or that the degree of compliance with thethe Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company
policies or procedures may deteriorate.maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020,
based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of The Executive Board assessed the effectiveness of internal control over financial reporting as of 31 December Sponsoring Organizations of the Treadway Commission.
2020. In making this assessment, the Executive Board performed tests based on the criteria of the Committee of
Sponsoring Organisations of the Treadway Commission (“COSO”) in Internal Reporting – Integrated Framework We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (2013 Framework). Based on the Executive Board’s assessment and those criteria, the Executive Board concluded (United States) (‘PCAOB’), the consolidated statements of financial position of the Company as of December 31, that the Company’s internal control over financial reporting was effective as of 31 December 2020.
2020 and 2019, the related consolidated statements of profit or loss, comprehensive income, changes in equity,
and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes

Attestation Report of the Registered Public Accounting Firm and specific disclosures described in Note 1 of the consolidated financial statements as being part of the Our independent registered public accounting firm has audited and issued their report on ING’s internal controlconsolidated financial statements (collectively, ‘the consolidated financial statements’), and our report dated
over financial reporting, which appears on the page below.March 8, 2021 expressed an unqualified opinion on those consolidated financial statements.

Changes in Internal Controls over Financial ReportingBasis for Opinion

There have been no changes in the Company’s internal controls over financial reporting during the periodThe Company’s management is responsible for maintaining effective internal control over financial reporting and
covered by this Annual Report that have materially affected or are reasonably likely to materially affect, ourfor its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
internal control over financial reporting.Report of the Executive Board on Internal Control Over Financial Reporting. Our responsibility is to express an

opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we planItem 16A. Audit Committee Financial Expert

and perform the audit to obtain reasonable assurance about whether effective internal control over financial

reporting was maintained in all material respects. Our audit of internal control over financial reporting included

obtaining an understanding of internal control over financial reporting, assessing the risk that a material The Supervisory Board has determined that Margarete Haase, who is a member of the Supervisory Board, weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on qualifies as an “audit committee financial expert” as defined by the SEC pursuant to section 407 of the Sarbanesthe assessed risk. Our audit also included performing such other procedures as we considered necessary in the Oxley Act of 2002. The Supervisory Board has further determined that Margarete Haase is “independent”, as circumstances. We believe that our audit provides a reasonable basis for our opinion.
defined in Rule 10A-3 under the U.S. Securities Exchange Act of 1934. She was appointed as a member of the

Supervisory Board at the General Meeting in May 2017 and her appointment became effective as per 1 May

Definition and Limitations of Internal Control Over Financial Reporting 2018, as decided by the Supervisory Board in January 2018. Margarete Haase is chairwoman of the Audit A company’s internal control over financial reporting is a process designed to provide reasonable assurance Committee.
regarding the reliability of financial reporting and the preparation of financial statements for external purposes inItem 16B. Code of Ethics

accordance with generally accepted accounting principles. A company’s internal control over financial reporting

includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,

accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statementsHow we work

in accordance with generally accepted accounting principles, and that receipts and expenditures of the company Creating a differentiating employee experience starts with ING’s distinctive culture: entrepreneurial, open, are being made only in accordance with authorisations of management and directors of the company; and (3)
collaborative, innovative and energetic. Who we are and how we work are set out in the Orange Code, our provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or internal Code of Ethics. Putting‘integrity above all’, it comprises:
disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect Our values.The non-negotiable promises we make to the world no matter what.
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that ◾We are honest.
controls may become inadequate because of changes in conditions, or that the degree of compliance with the ◾We are responsible.
policies or procedures may deteriorate.
◾We are prudent.

/s/ KPMG Accountants N.V.
Our behaviours.The commitments we make to each other and the standards by which we measure each other’s
Amstelveen, The Netherlands performance:
March 8, 2021 ◾You take it on and make it happen.

◾You help others to be successful.

◾You are always a step ahead.

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ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

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 Code early with newRegarding reporting of breaches of the Orange Code, encouraging a speak up culture and raising concerns about joiners invited to complete a global online e-learning introduction module that explains more about ING’ssuspected or actual criminal conduct, unethical conduct or other misconduct by or within ING, ING maintains a culture, how we work and what we expect from employees. In 2019, ING also developed a global code of conductWhistleblower Policy next to the standard reporting and escalation lines. This requires prompt internal reporting that builds on the Orange Code and sets the standards we expect our people to uphold. This ING Global Code ofof violations of the Orange Code and applies to all employees worldwide, including the principal executive, Conduct was launched in February 2020. All employees were requested to perform online e-learning explainingfinancial and accounting officers. A description of the Whistleblower Policy is available on the ING website at the Global Code of Conduct in more detail and signed off on adherence to the Global Code of Conduct.www.ing.com/About -us/Compliance/ING-Group-Whistleblower-Policy.htm.

Our Orange Code is included within the performance management process and discussed throughout the year. ItING did not grant any waivers (including implicit waivers) under the Whistleblower Policy to the principal
is also linked to our Employee Value Proposition (or Our People Offer), which forms the basis of all people-executive, financial or accounting officers in 2020.
related programmes. Through these activities, our aim is to develop a culture that is focused on long- term valueBanker’s Oath
creation.
All employees working for ING in the Netherlands (including ING's principal executive, financial or accounting
officers) take the Banker's Oath. The oath contains a set of principles affirming the banking industry's The Orange Code applies to all employees worldwide, including the principal executive, financial and accounting commitment to maintain high standards of ethical behaviour. Accountability and a disciplinary sanction officers. The values and behaviours of the Orange Code are available on the ING website at mechanism are linked to breaches of these principles.
https://www.ing.jobs/Global/Careers/Orange -code.htm.
Compliance is trained to support employees in dealing with dilemmas via workshops and dialogue sessions, using In 2020, there were no amendments to the Orange Code. ING did not grant any waivers (including implicit the Orange Code Decision Making model (a so-called “four-step approach” weighing the rights and interest of waivers) under the Orange Code to the principal executive, financial or accounting officers in 2020.
stakeholders involved).

Regarding the management of actual or potential conflicts of interest, ING maintains a Policy on Information In 2020, there were no amendments to the Banker's Oath. ING did not grant any waivers under the Banker's Oath Barriers and Conflicts of Interest which applies to all employees worldwide, including the principal executive, to principal executive, financial or accounting officers in 2020. The text of the Banker’s oath can be found here:
financial and accounting officers. A description of the Policy on Information Barriers and Conflicts of Interest is https://www.ing.com/About -us/Corporate-governance/Dutch-Banking-Code.htm available to view on the ING website at https://www.ing.com/About -us/Compliance/Information-Barriers- Conflicts-of-Interest.htm.

The Conflict of Interest Policy “aims to identify, assess, manage and mitigate or prevent actual and potential conflicts between ING customers and between the interests of ING an the private interests of ING Employees, including members of ING’s Senior Management which could adversely influence the performance of their duties and responsibilities”.

In 2020, an updated Conflicts of Interest was launched and implemented throughout ING globally. . ING did not grant any waivers (including implicit waivers) under the Conflicts of Interest Policy to the principal executive, financial or accounting officers in 2020.

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ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Item 16C. Principal Accountant Fees andAudit-related fees

Audit-related fees were paid for assurance and related services that are reasonably related to the performance of Servicesthe audit or review of the consolidated financial statements and are not reported under the audit fee item above. These services consisted primarily of specific agreed-upon procedure engagements and assurance engagements.

At the Annual General Meeting held on 23 April 2019, KPMG was re-appointed as the external audit firm for ING

Tax fees Group for the financial years 2020 through 2023. This appointment includes the responsibility to provide an audit Over 2020 no tax fees were paid. Under the current ING Policy on External Auditor Independence most tax opinion on the financial statements and internal control over financial reporting on 31 December 2020 and to services are prohibited and some tax services are only allowed after specific approval under an ‘exception report on the outcome of these audits to the Executive Board and the Supervisory Board.
procedure’.

The external auditor may be questioned at the Annual General Meeting in relation to its audit opinion on the Reference is made to Note 28 ‘Other operating expenses’ in the consolidated financial statements for audit, financial statements. The external auditor will therefore attend and be entitled to address this meeting. The audit-related, tax and all other fees paid to the external auditors in 2020, 2019 and 2018.

external auditor attended the meetings of the Risk Committee and of the Audit Committee and attended and
addressed the 2020 Annual General Meeting, at which the external auditor was questioned about its audit Item 16D. Exemptions from the Listing opinion.

The external auditor may only provide services to ING Group and its subsidiaries with the permission of the AuditStandards for Audit Committees Committee, in line with the ING Group Policy on External Auditors’ Independence. All services were approved by the Audit Committee.

Not applicable.
More information on the ING Group Policy on External Auditors’ Independence is available on the website of ING
Group www.ing.com.
Item 16E. Purchases of Equity Securities by

Audit fees the Issuer and Affiliated Purchasers

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 subsidiaries or services provided in connection with the audit of Form 20-F and other filings for regulatory and supervisory purposes as well as the review on interim financial statements and work performed relating to comfort letters issued in connection withThere were no purchases by us or any of our affiliated purchasers of any of our equity securities registered prospectuses and reviews of SEC product filings.pursuant to Section 12 of the U.S. Securities Exchange Act of 1934 during the fiscal years ended December 31, 2020 and 2019.

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Item 16F. Changes in Registrant’s CertifyingDifferences between Dutch and US corporate governance practices

ING Group is a public limited liability company (naamloze vennootschap) organised under the laws of the Accountant

Netherlands. It qualifies as a foreign private issuer under the US Securities and Exchange Commission (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 some circumstances, in lieu of the provisions of the corporate governance rules contained in Section 303A of the NYSE Not applicable.
Listed Company Manual applicable to US-listed companies. In accordance with the requirements of the SEC and

Dutch Corporate Governance Code NYSE, ING Group must disclose in its Annual Report on Form 20-F any significant differences between its ING Group uses the Dutch Corporate Governance Code (DCGC) as reference for its corporate governancecorporate governance practices and those applicable to US companies under NYSE listing standards. ING Group structure and practices.believes the following to be the significant differences between its corporate governance practices and the NYSE corporate governance rules applicable to US companies:
ING’s application of the DCGC is described in the 2020 ‘Application of the Dutch Corporate Governance Code by ING Groep N.V.’, dated 8 March 2021, available on ing.com. This is to be read in conjunction with this chapter•ING Group has a two-tier board structure, in contrast to the one-tier board structure used by most US and is deemed to be incorporated into this chapter.companies. In the Netherlands, a public limited liability company with a two-tier board structure has an
executive board as its management body and a supervisory board that advises and supervises the executive The DCGC can be downloaded from the website mccg.nl.board. Supervisory board members are often former state or business leaders and sometimes former
members of the executive board. A member of the executive board or other officer or employee of the

Dutch Banking Code company cannot simultaneously be a member of the supervisory board. The supervisory board must approve specified decisions of the executive board.
The Dutch Banking Code (Banking Code), is only applicable to ING Bank N.V. (ING Bank) and not to ING Group.
However, ING Group voluntarily applies the principles of the Banking Code regarding remuneration to its • Executive Board members and senior management. The application by ING Bank is described in the 2020NYSE listing standards generally require a majority of board members to be ‘independent’ as determined publication ‘Application of the Dutch Banking Code by ING Bank N.V.’, dated 8 March 2021, available on ing.com.under the NYSE listing standards. Under the DCGC, all members of the supervisory board, with the exception of not more than one person, should be ‘independent’ as determined under the DCGC. However, the The Banking Code can be downloaded from the website nvb.nl/english/.definition of ‘independent’ under the DCGC differs in its details from the definition of ‘independent’ under the NYSE listing standards. In some cases, Dutch requirements are stricter; in other cases the NYSE listing standards are stricter. All members of ING’s Supervisory Board, are independent as determined under the DCGC.

• NYSE listing standards require a US company to have a compensation committee and a nominating/corporate governance committee, each composed entirely of independent director s (as determined under the NYSE listing standards). ING’s Nomination and Corporate Governance Committee and Remuneration Committee are composed entirely of members of the Supervisory Board who are independent as determined under the

ING Group Annual Report 2020 on Form 20-F137

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

DCGC.auditor, and annually evaluates the independence and functioning of, and developments in the relationship with, ING Group’s external auditor and informs the Supervisory Board of its findings and proposed measures.
• NYSE listing standards require that, when a member of the audit committee of a US company serves on four • or more audit committees of public companies, the company should disclose (on its website, in its annualUnder NYSE listing standards, shareholders of US companies must be given the opportunity to vote on all proxy statement or in its annual report filed with the SEC) that the board of directors has determined thisequity compensation plans and to approve material revisions to those plans, with limited exceptions set forth simultaneous service would not impair the director’s service to the company. Dutch law does not require thein the NYSE rules. The NYSE rules require a shareholder vote on all equity compensation plans applicable to Supervisory Board to make such a determination.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 DCGC, binding shareholder approval is only required for •In contrast to the NYSE listing standards, the DCGC contains an ‘apply-or-explain’ principle, offering theequity compensation plans (or changes thereto) for members of the executive board and supervisory board,
possibility of deviating from the DCGC. For any deviations by ING Group, please refer to the paragraph ‘Dutchand not for equity compensation plans for other groups of employees.
Corporate Governance Code’.
Item 16H. Mine Safety Disclosure

• NYSE listing standards applicable to US companies require external auditors to be appointed by the audit

committee. By contrast, Dutch law requires ING Group’s external auditors to be appointed by the General Meeting and not by the Audit Committee. The Audit Committee is responsible for preparing the SupervisoryNot applicable.
Board’s nomination to the General Meeting for the appointment and remuneration of ING Group’s external

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ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

PART III.

Item 17. Consolidated Financial Statements

Not applicable.

Item 18. Consolidated Financial Statements

Reference is made to the Consolidated financial statements of ING Group on page F-249.

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Item 19. ExhibitsExhibit 2.7Second Supplemental Indenture between ING Groep N.V. and The Bank of New York Mellon,

London Branch, as trustee, dated 16 April 2015, in respect of 6.500% Perpetual Additional Tier

1 Contingent Convertible Capital Securities (incorporated by reference to Exhibit 4.3 of ING

Groep N.V.’s Report on Form 6-K filed on 16 April 2015)
The following exhibits are filed as part of this Annual Report:

Exhibit 2.8Senior Debt Securities Indenture between ING Groep N.V. and The Bank of New York Mellon, Exhibit 1.1Amended and Restated Articles of Association of ING Groep N.V., dated May 6, 2020 London Branch, as Trustee, dated 29 March 2017 (incorporated by reference to Exhibit 4.1 of (incorporated by reference to Exhibit 99.1 of ING Groep N.V.’s Report on Form 6-K filed on 25 ING Groep N.V.’s Report on Form 6-K filed on 29 March 2017)
August 2020)

Exhibit 2.9First Supplemental Indenture between ING Groep N.V. and The Bank of New York Mellon, Exhibit 2.1Description of Securities Registered under Section 12 of the Exchange Act London Branch, as trustee, dated 29 March 2017, in respect of 3.150% Fixed Rate Senior Notes

due 2022, 3.950% Fixed Rate Senior Notes due 2027 and Floating Rate Senior Notes due 2022

(incorporated by reference to Exhibit 4.2 of ING Groep N.V.’s Report on Form 6-K filed on 29 Exhibit 2.2Subordinated Indenture, dated 18 July 2002, between the Company and The Bank of New March 2017)
York, (incorporated by reference to Exhibit 2.1 of ING Groep N.V.’s Annual Report on Form 20-

F for the year ended 31 December 2002, File No. 1-14642 filed on 27 March 2003)
Exhibit 2.10Third Supplemental Indenture between ING Groep N.V. and The Bank of New York Mellon,

London Branch, as trustee, dated 9 April 2019, in respect of 3.550% Fixed Rate Senior Notes Exhibit 2.3Third Supplemental Indenture, dated 28 October 2003, between the Company and The Bank due 2024 and 4.050% Fixed Rate Senior Notes due 2029 (incorporated by reference to Exhibit of New York (incorporated by reference to Exhibit 2.4 of ING Groep N.V.’s Annual Report on 4.1 of ING Groep N.V's Report on Form 6-K filed on 9 April 2019)
Form 20-F for the year ended 31 December 2003, File No. 1-14642 filed on 30 March 2004)

Exhibit 2.11Third Supplemental Indenture between ING Groep N.V. and The Bank of New York Mellon, Exhibit 2.4Fourth Supplemental Indenture, dated 26 September 2005, between the Company and The London Branch, as trustee, dated 10 September 2019, in respect of 5.750% Perpetual Bank of New York (incorporated by reference to Exhibit 4.2 of ING Groep N.V.’s Report on Additional Tier 1 Contingent Convertible Capital Securities (incorporated by reference to Form 6-K filed on 23 September 2005)
Exhibit 4.1 of ING Groep N.V's Report on Form 6-K filed on 10 September 2019)

Exhibit 2.5Sixth Supplemental Indenture, dated 13 June 2007, between the Company and The Bank of Exhibit 8List of Subsidiaries of ING Groep N.V.
New York (incorporated by reference to Exhibit 4.1 of ING Groep N.V.’s Report on Form 6-K

filed on 12 June 2007)
Exhibit 12.1Certification of the Registrant’s Chief Executive Officer pursuant to Section 302 of the

Sarbanes Oxley Act of 2002 Exhibit 2.6First Supplemental Indenture between ING Groep N.V. and The Bank of New York Mellon,

London Branch, as trustee, dated 16 April 2015, in respect of 6.000% Perpetual Additional Tier Exhibit 12.2Certification of the Registrant’s Chief Financial Officer pursuant to Section 302 of the 1 Contingent Convertible Capital Securities (incorporated by reference to Exhibit 4.2 of ING Sarbanes-Oxley Act of 2002 Groep N.V.’s Report on Form 6-K filed on 16 April 2015)

ING Group Annual Report 2020 on Form 20-F140

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

SIGNATURES Exhibit 13.1Certification of the Registrant’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 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.
Exhibit 13.2Certification of the Registrant’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

ING Groep N.V.

(Registrant) Exhibit 15.1Consent of KPMG Accountants

Exhibit 101eXtensible Business Reporting Language (XBRL)

By:/s/T. Phutrakul

T. Phutrakul

Chief Financial Officer

Date: March 8, 2021

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ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Risk management at ING Group

Risk managementRisk profile

This chart provides high-level information on the risks arising from ING’s business activities:

The Covid-19 pandemic and subsequent lockdown measures have thrown theRisk profile

world into turmoil. The global economy shrank in 2020 as domestic demand

and supply, trade and finance have been severely disrupted. This section

explains ING’s approach towards risk management and how this was impacted

by the Covid-19 pandemic.

As a global financial institution with a strong European base, offering banking services, ING is exposed to a variety of risks. We manage these risks through a comprehensive risk management framework that integrates risk management into daily business activities and strategic planning. This safeguards ING’s financial strength and reputation by promoting the identification, measurement and control of risks at all levels of the organisation.
Taking measured risks is core to ING’s business.

The risk management function supports the Executive Board in formulating the risk appetite, strategies, policies and limits. It provides review, oversight and support functions throughout ING on risk-related items. ING’s main financial risks exposures are to credit risk (including transfer risk), market risk (including interest rate, equity, real estate, credit spread, and foreign exchange risks), funding and liquidity risk, and business risk. ING is also exposed to non-financial risks such as operational, IT and compliance risks, as well as to model risks. The ING Group chief risk officer (CRO) is also the CRO of ING Bank.

This section sets out how ING manages its risks on a day-to-day basis. It explains how the risk management function is embedded within the organisation based on the ‘three lines of defence’ model. It describes the key risks that arise from ING’s business model and how these are managed by dedicated risk management departments, with various specific areas of expertise. The section provides qualitative and quantitative disclosures about solvency, credit, market, funding and liquidity, ESG, business, operational, IT, compliance and model risks.

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ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Risk management at ING Group

The 2020 risk assessment confirmed our top and emerging risks. The top risks in 2020 are related to financial
Basis of disclosures (*)crime, cybercrime and a persistent low interest rate environment. On top of that, the Covid-19 pandemic impacted our business environment. Climate change risk remains an important risk, reflecting the impact that The risk management section contains information relating to the nature and extent of the risks of climate change may have for the financial position and/or reputation of ING.
financial instruments as required by International Financial Reporting Standards (IFRS) 7 'Financial Instruments: Disclosures'. These disclosures are an integral part of ING Group Consolidated financial statements and are indicated by the symbol (). Chapters, paragraphs, graphs or tables within the riskCovid-19 pandemic* management section that are indicated with this symbol in the respective headings or table headerCovid-19 was declared a global pandemic by the World Health Organization on 11 March 2020. Various countries are considered to be an integral part of the consolidated financial statements.
and local governmental authorities across the world have introduced measures aimed at preventing the further
spread of Covid-19. Read more in ‘The world around us‘.
This risk management section also includes additional disclosures beyond those required by IFRS standards, such as certain legal and regulatory disclosures. Not all information in this section can be reconciled back to the primary financial statements and corresponding notes, as it has been preparedIn addition, governments in various countries have introduced measures aimed at mitigating the economic using risk data that differs to the accounting basis of measurement. Examples of such differencesconsequences of the outbreak. For example, the Dutch government has announced economic measures aimed at include the exclusion of accrued interest and certain costs and fees from risk data, and timingprotecting jobs, households’ wages and companies, e.g., by way of tax payment holidays, guarantee schemes and differences in exposure values (IFRS 9 models report expected credit loss on underlying exposures).
a compensation scheme for heavily affected sectors in the economy. These announced measures and any Disclosures in accordance with Part Eight of the CRR and CRD IV, and as required by the supervisory additional measures, including any payment holidays with respect to mortgages or other loans, have had and authority, are published in our ‘Additional Pillar III Report’, which can be found on our corporate website ing.com.may continue to have a significant impact on ING’s customers and other counterparties. Read more in ‘Our business’, in ‘Credit risk’ and in Note 51 ‘Capital Management’.

The Covid-19 pandemic has affected all of ING’s businesses. These effects have included increased volatility, widening of credit spreads, and credit deterioration of loans to ING’s customers. The 2020 risk costs were

Top and emerging risks impacted by a combination of increased collective provisioning reflecting the worsened macroeconomic The risks listed below are defined as existing and emerging risks that may have a potentially significant impact onindicators and uncertainty, higher individual Stage 3 provisions, negative rating migration and manual overlays to our financial position or our business model. They may have a material impact on the reputation of the company,address the risk on payment holidays and for the delay in observed defaults as a result of the Government introduce volatility in future operational results, or impact ING’s medium and long-term strategy including thesupport measures. Sectors particularly impacted by the Covid-19 pandemic were Aviation (Transportation and ability to pay dividends, maintain appropriate levels of capital or meet liquidity and funding targets. An emergingLogistics), Hospitality and Leisure (Services and Food, Beverages and Personal Care) and Non-food retail (Retail).
risk is defined as a risk that has the potential to have a significant negative effect on our performance, but whose impact on the organisation is currently more difficult to assess than other risk factors that are not identified asIncreased attention is being paid to our financial risks. This was especially true during the initial phases of the emerging risks.pandemic, which included high frequency calls between senior management of the bank, as well as with external stakeholders like the ECB, to intensely monitor developments relating to liquidity, market and credit risks. ING The topics have emerged as part of the annual risk assessment that is performed as part of the Stress Testingalso performed several types of stress tests and sectoral reviews to assess the potential impact on its financial Framework and the Risk Appetite Framework. The sequence in which the risks are presented below is notposition, which helped ING to get further insights into the potential impact and to define appropriate mitigating indicative of their likelihood of occurrence or the potential magnitude of their financial consequences.actions. Read more in ‘Credit risk’, ‘Market risk’ and ‘Funding and Liquidity risk’.

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ING is monitoring the evolving Covid-19 pandemic carefully to understand the impact on its people and business.ING’s Brexit preparations were predicated on a no trade deal outcome and certain business model adaptations A central ING team has been set up to monitor the situation globally and provide guidance on health and safetyhave been implemented to ensure the continuity of business post-Brexit. ING was well prepared with both our measures, travel advice, and business continuity for our company. In addition, a situation in which most or someEU and UK post-Brexit authorisations. ECB’s authorisation decision conditions have been met or are on track for of ING’s employees continue working from home may raise operational risks, including with respect totheir September 2021 due dates. Pending PRA & FCA authorisation decision, UK Temporary Permissions Regime information security, data protection, availability of key systems and infrastructure integrity. Read more in ‘Non-is allowing continuity of UK branch authorisation from 1 January 2021. Some FM trading activities will move from financial risk’.London to Amsterdam as a result of Brexit.

The duration of the pandemic and the impact of measures taken in response by governmental authorities,ING continuously monitors the developments and outlook in geopolitical risk and assesses what impacts these central banks and other third parties remain uncertain. Recent increases in Covid-19 infection rates amplifiedmay have on our portfolios. Internal stress testing and scenario analyses are used to assess the potential impact uncertainty and affect the recovery path. Potential economic implications for the countries and sectors whereand adjust the limits to exposures according to our risk appetite.
ING is active, which could have a material adverse effect on ING’s business and operations, are continuously being identified, assessed and monitored in order to execute possible mitigating actions.Financial economic crime

Knowing who we do business with helps us protect our customers, society and our bank from financial economic

Geopolitical risk crimes (FEC). We believe that as gatekeepers to the financial system we have an obligation to prevent criminals ING`s business and portfolios are exposed to geopolitical risks such as political instability, social unrest or militaryfrom misusing it, detect misuse where it occurs and respond accordingly. We believe we can be even more conflicts, which could adversely affect our operations. Global tensions over trade, technology and ideology poseeffective in safeguarding the financial system if we join forces and work with other banks and with national, challenges and have negative effects for economic growth. The Covid-19 pandemic could accelerate and amplifyEuropean and global authorities and law enforcement agencies to tackle financial economic crime. In 2020, ING the negative impact, with divergence both between and within countries leading to increased inequality.continued to execute and update policies and procedures to further enhance our know your customer (KYC)

activities. In addition, ING set up a special taskforce to monitor transactions for financial economic crime related The US-China relationship stands out as an important geopolitical risk, with (related) trade tensions, negativelyto Covid-19.
impacting global growth. Increasing protectionism between key countries could lead to a slowdown in global production and adversely affect global trade and investments .Cybercrime

Cybercrime remains a continuous threat to companies in general and to financial institutions in particular. Both On 24 December 2020, the United Kingdom and the European Union agreed a post-Brexit "EU-UK Trade andthe frequency and the intensity of attacks are increas ing on a global scale. Threats from distributed denial of Cooperation" Agreement (the “TCA”). The financial services provisions of the TCA are very limited. UK-basedservice (DDoS) attacks, targeted attacks (also called advanced persistent threats) and ransomware have financial services providers lost EU passporting rights from 1 January 2021 and EU-UK financial services haveintensified worldwide.
become subject to unilateral equivalence decisions. The EU and UK regulators have taken measures to address overall financial stability risks (e.g. extension to recognition of UK CCPs).

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ING builds on its cybercrime resilience through its dedicated Cyber Crime Expertise and Response Team, furtherClimate change risk

enhancing the control environment to protect from, and detect and respond to, e-banking fraud, DDoS andING is increasingly aware of the risks associated with climate change. This includes physical risk and transition
targeted attacks. Controls and monitoring continue to be embedded in the organisation as part of the overallrisk. Physical risk can be acute, such as flood and wildfires, or chronic, such as increase in temperature and sea
internal control framework and are continuously re-assessed against existing and new threats. The identificationlevel rise. Transition risk can be driven by policy, technological or market changes occurring as we shift towards a
and monitoring of new threat actors and campaigns relevant to ING inform this process as does closer alignmentlow-carbon global economy and potentially lead to stranded assets.
between IT security and fraud teams. In addition, ING continues to strengthen its global cybercrime and fraud

resilience through extensive collaboration with financial industry peers, law enforcement authorities,In addition to our Climate Expert Group (CEG), in 2020 we established an internal climate risk working group to
government (e.g. National Cybersecurity Center) and internet service providers (ISPs).address the impacts resulting from climate change as part of a bank-wide approach. As such, climate should be

considered to be included in our risk management framework and integrated into a forward-looking approach.

Data management Our Climate Risk Report 2020 details our approach and sector-specific insights.

ING is using a large number of systems and applications to support key business processes and operations to best
focus on our customers and their needs. The reconciliation of multiple data sources and the protection ofRisk governance (*)

customer data are regarded as crucial processes in ING, and further spurred by its strategic focus on digital Effective risk management requires firm-wide risk governance. ING’s risk and control structure is based on the service delivery, technology and innovation. We depend on the secure processing, storage and transmission of ‘three lines of defence’ governance model. Each line has a specific role and defined responsibilities, with the confidential and other information in our computer systems and networks. ING is also subject to increasing execution of tasks being distinct from the control of these same tasks. The three lines work closely together to regulatory requirements including EU General Data Protection Regulation (GDPR) and the Basel Committee for identify, assess, and mitigate risks.
Banking Supervision (BCBS 239) principles. ING is continuing to improve data governance, execute data-quality

framework controls consistently across the Bank and prioritising implementation of the target infrastructure to This governance framework is designed in such a way that risk is managed in line with the risk appetite approved further simplify, standardise and modernise its activities.
by the Management Board Banking (MBB), the Executive Board (EB) and the Supervisory Board (SB); and this

approach is cascaded throughout ING. The MBB is composed of the Executive Board of ING Group, the heads of

Low/negative interest rate environment the business lines and the chief operating officer.
The persistent low/negative interest rate environment, with central banks holding their rates at negative levels in

most countries, continued to negatively impact short-term as well as long-term market rates. The Covid-19The heads of ING’s banking business and support functions and the heads of the country units, or their delegates,
pandemic intensified the low/negative interest rate environment and it is expected to remain at this level forare the first line of defence. They have the primary ownership, accountability and responsibility for assessing,
some time. This is posing a challenge for bank business models that earn income from net interest income fromcontrolling and mitigating all financial and non-financial risks affecting their businesses, and, for the
traditional savings activities. In addition, loans are being repriced at lower rates which is putting more pressurecompleteness and accuracy of the financial statements and risk reports with respect to their responsible areas.
on margins and impacting long-term profitability. ING is continuously assessing this market environment. ING hasThe COO is responsible and accountable for proper security and controls on global applications and IT platforms
introduced negative charging and is reducing thresholds for charging negative rates. Further, ING is expandingservicing the Bank and implementing proper processes.
other sources of income such as net fee and commission income.

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The second line of defence consists of oversight and specialised functions in risk management and compliance.()
They (i) have co-responsibility for risk management, through articulating and translating the risk appetite intoRisk governance*

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.

ING Group Annual Report 2020 on Form 20-F146

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Board-level risk oversight ()Executive level ()**

ING has a two-tier board structure consisting of a Management Board (EB for ING Group and MBB for ING Bank)The key risk committees described below act within the overall risk policy and delegated authorities granted by and a Supervisory Board (SB); both tiers play an important role in managing and monitoring the risk managementthe MBB:
framework.
◾Global Credit and Trading Policy Committee (GCTP) discusses and approves policies, methodologies, and ◾The SB is responsible for supervising EB and MBB policy, the general course of affairs of ING Group, INGprocedures related to credit, trading, country, and reputation (i.e. environmental and social risk or ESR)
Bank and its business (including its financial policies and corporate structure). For risk managementrisks. The GCTP meets on a monthly basis. After the MBB and the GCTP, the Credit and Trading Risk purposes the SB is advised mainly by the Risk Committee, which assists and advises in monitoring the riskCommittee (CTRC) is the highest level body authorised to discuss and approve policies, methodologies, profile and approving the overarching risk appetite of the company as well as the structure and effectiveand procedures related to credit and trading risk.
operation of the internal risk management and control systems.◾Global Credit Committee – Transaction Approval (GCC(TA)) discusses and approves transactions that ◾The EB is responsible for managing risks associated with all activities of ING Group, whereas the MBB isentail taking credit risk (including investment risk), country, legal, and environmental and social risk. The responsible for managing risks associated with all activities of ING Bank. The EB and MBB responsibilitiesGCC(TA) meets twice a week.
include ensuring that internal risk management and control systems are effective and that ING Group◾Asset and Liability Committee Bank (ALCO Bank) discusses and steers, on a monthly basis, the overall risk and ING Bank comply with relevant legislation and regulations. On a regular basis, the EB and MBBprofile of all ING Bank’s balance sheet and capital management risks. ALCO Bank discusses and approves report on these issues and discuss the internal risk management and control systems with the SB. On apolicies, methodologies and procedures regarding solvency, market risk in the banking book and funding quarterly basis, the EB and MBB report on ING’s risk profile versus its risk appetite to the Riskand liquidity risks.
Committee, explaining changes in the risk profile.◾Non-Financial Risk Committee Bank (NFRC Bank) is accountable for the design and maintenance of the Non-financial risk management framework including operational risk management, compliance and legal As a member of the EB and the MBB, the CRO is responsible for ensuring that risk management issues are heardpolicies, minimum standards, procedures and guidelines, development of tools, methods, and key and discussed at the highest level. The CRO steers a risk organisation both at head-office and business-unit levels,parameters (including major changes) for risk identification, measurement, mitigating and monitoring/ which participates in commercial decision-making, bringing countervailing power to keep the risk profile withinreporting. NFRC Bank meetings are held at least quarterly.
the agreed risk tolerance. The CRO reports to the SB committee on ING’s risk appetite levels and on ING’s risk◾The Model Risk Management Committee (MoRMC) discusses and steers, on a monthly basis, the overall profile at least quarterly. In addition, the CRO briefs them on developments in internal and external risk-relatedmodel strategy. MoRMC discusses and approves policies and methodologies related to model risk issues and seeks to ensure they understand specific risk concepts.management.

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Regional and business unit level (*)(*)

Risk function ING’s regional and/or business unit management have primary responsibility for the management of risks (credit,

market, funding and liquidity, operational, IT, compliance and model) that arise in their daily operations. They are accountable for the implementation and execution of appropriate risk frameworks affecting their businesses in order to comply with procedures and processes at the corporate level. Where necessary, the implementation is adapted to local requirements.
The regional and/or business unit CROs are involved in these activities. The local (regional and BU) CRO is responsible for the analysis, monitoring and management of risks across the whole value chain (from front to back office). The local risks are discussed in local risk committees that roll up to the key risk committees at 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 Standard (CRS) and environmental and social risk (ESR).

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 following organisation chart illustrates the reporting lines in 2020 for the risk organisation:

ING Group Annual Report 2020 on Form 20-F148

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Risk policies, procedures and standards (*)At the end of 2019, the ICF gatekeeper function was split into a first and a second LoD gatekeeper function. The
ING has a framework of risk management policies, procedures, and minimum standards in place to create2nd LoD gatekeeper oversees the policy design process, while the first LoD gatekeeper oversees the design
consistency throughout the organisation, and to define requirements that are binding for all business units. Theprocess for the process control standard. The principal role of these gatekeepers is to provide quality assurance
goal of the governance framework of the local business units is to align with ING’s framework and to meet localand to advise on the relevant approval bodies. The ICF gatekeepers challenge document owners on the
(regulatory) requirements. Senior management is responsible for the implementation of and adherence toalignment of internal control documents with the agreed methodology and risk taxonomy, and verify that the
policies, procedures and standards. Policies, procedures and standards are regularly reviewed and updated viadevelopment and communication of those documents are in line with the agreed process.

the relevant risk committees to reflect changes in requirements, markets, products and practices .
All policies, control standards, and procedures are published on ING’s intranet. New and updated documents are
Internal control frameworkperiodically communicated by means of a dedicated policy update bulletin to the country managers and senior heads of business departments.
ING has organised its internal control framework (ICF) so as to translate regulations and internal requirements into policies articulating specific risks and control objectives. These policies form the basis for translation into

Risk culture process control standards, which are used by the business to support and promote an effective risk and control environment. The ICF includes binding principles, definitions, process steps, and roles and responsibilities toAt ING we attach great importance to a sound risk culture, which is essential for performing our role in society create consistent bank-wide policies and control standards.responsibly and to keep the bank safe, secure and compliant. Our risk culture determines the way in which employees identify, understand, discuss, and act on the risks we are confronted with and the risks we take. In Global policies and control standards are developed and maintained or updated within the ICF. These global2020, we conducted a self-assessment of our risk culture and are working on developing our envisaged risk documents are designed by head-office functions and are to be adhered to by all ING entities and supportculture, built on the foundation of our Orange Code and Global Code of Conduct, and in line with our Think functions. In line with the Enterprise Risk Management approach, ownership for policies will be with the 2ndLineForward strategy.
of Defence (2ndLoD), while control standards are to be owned by the 1stLoD. Global policy and control standard documents are approved by relevant approval bodies (e.g. Supervisory Board, Executive Board, ManagingTo support ING’s ambition to safeguard a sound risk culture, several enhancement projects are ongoing in areas Banking Board and Bank Non-Financial Risk Committee).such as our approach to monitoring risk culture, our escalation behaviour and further linking non-financial risk related topics to our purpose and strategy.
The policies are based on the risk taxonomy, which is designed to prevent overlaps in policy control objectives.
The control standard owners are responsible for defining the key controls that mitigate the significant inherentOrange Code and the global Code of Conduct risks in the business processes. The ICF aims to achieve single key-control testing for multiple purposes, whereAs mentioned above, the Orange Code and the global Code of Conduct are the foundation of ING’s risk culture. In controls mitigate more than one risk.February 2020 ING launched a new global Code of Conduct linking the Orange Code to its main ING policies,
minimum standards and guidelines. In addition to the Orange Code, it further defines the most essential conduct The process of developing policy and process control standard documents includes the following steps: identifyprinciples expected from ING employees in their daily activities, to create additional risk awareness and better the document owner, determine the relevant stakeholders, define a risk-based approach, perform an impactmeet expectations stated in external rules and guidelines. Additionally, the global Code of Conduct will be linked assessment, involve relevant stakeholders and (local) entities for sounding on key and expected controls, andto the employees’ performance management cycle to ensure continuous attention to the Global Code of determine an approval body. This overall process is currently being further strengthened by implementing anConduct, and dialogue on how to apply it in the daily work practice of our employees.
updated Regulatory Management Process also covering horizon scanning.

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The Orange Code is a declaration of who we are. It describes what we can expect from each other when we turn

up to work each day. It is a set of standards that we collectively value, strive to live up to, and invite others to

measure us by.

The Orange Code is the sum of two parts, the ING values and ING behaviours, with integrity being the

overarching principle. The ING values (being honest, prudent and responsible) are designed to 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.

To reinforce the values and behaviours in our Orange Code, which puts integrity above all, we invite all (new)

employees to participate in e-learnings that aim to equip them to make the right decisions when faced with a

Global data ethics dilemma or issue. In 2020, we developed and rolled out new e-learnings on the Global Code of Conduct, Data ethics is key for an enhanced and sustainable trusted relationship with ING customers and society. Our Sanctions, Getting Data Protection Right and Keeping up with KYC.
vision is to integrate data ethics as part of our culture, behaviours and decision-making process. We have defined

values that should guide our employees’ behaviours. Furthermore, we have set up data ethics councils that help

Orange Code decision-making ensure we use data responsibly.
To enhance risk awareness, we continued to support monitoring risk culture and compliance risk in the business.

This included training by compliance and data experts to enhance balanced decision-making in line with the

Learning Orange Code decision-making model (introduced in 2017) to support moral learning and well-balanced decision- In 2020 we continued to strengthen and expand our learning offering on risk topics and the governance around making. This four-step model helps to delay judgement and aims to find out where the moral weight lies for a this. The learning focuses on compliance, non-financial risk and risk.
potential decision.

We established a board to approve and monitor progress on the required learning that is taken by all staff. This The model is already embedded in some decision-making processes (such as the data ethics governance process
will ensure improved learner engagement, bank-wide alignment, and connection between learning, business and the global Product Approval and Review Process policy) and we are exploring how to embed it in other
impact and management actions and also improved feedback and evidencing of outputs. The board brings decisive governance processes within the bank. Compliance is continuing to train experts in this area within the
together content owners, learning experts and corporate communications teams to ensure the best fit for the local Compliance teams to support the organisation in properly applying the model in practice in their respective
training need.
countries.

We also took steps to expand our learning for risk professionals, with the Risk Academy which provides focused

learning for Risk staff. These take the form of various online learning modules and frameworks that support

employees in developing their knowledge, skills and behaviours.

ING Group Annual Report 2020 on Form 20-F150

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Banker’s OathBehavioural risk assessments

In the Netherlands, all employees of ING take the Banker’s Oath and pledge this in a meaningful ceremony. TheBehavioural risk assessments (BRAs) identify and analyse undesired behaviours within ING and provide oath came into force in the Netherlands on 1 April 2015 as part of a joint approach from all banks. Themanagement with specific direction on how to change these behaviours. They focus on the effectiveness of introduction of social regulations, the revision of the Dutch Banking Code, and the implementation of thegroups rather than individuals, the role of leadership and on less visible aspects such as team dynamics and Banker’s Oath (with the associated rules of conduct and disciplinary law), are a way for Dutch banks to showunwritten social norms. The goal is to understand and systematically assess what drives undesired habits at ING.
society what they stand for and are accountable for, both as individual banks and as a sector. In 2020, due to theThe BRM model of behavioural risk is used as the standard across ING to signal behavioural risks going forward.
Covid-19 crisis, ING NL developed a virtual Banker’s Oath ceremony via Skype/Teams – in addition to the physical one – to ensure that all new employees (around 400 a month) can still take the Banker’s Oath in timely fashionBehavioural risk interventions and in a meaningful ceremony. Before taking the oath, its importance is discussed, as well as dilemmasBased on the results of the executed behavioural risk assessments (BRAs), BRM mitigates behavioural risk in a employees may come across in their daily work, to ensure a careful balancing of the interests of all ourfocused manner. Effective mitigation requires a deep understanding of what drives undesired behaviours. Theory stakeholders, in the decisions they make. In 2020, the whole Banker’s Oath programme was revised and updated,and evidence-based techniques and tools developed in behavioural science play an important role in designing to keep it aligned with the current external circumstances as well as with ING’s do your thing branding.and evaluating interventions. Given the crucial role of leaders in creating the right conditions for employees, interventions are first initiated at leadership level. These include leadership labs, which address topics such as

Remuneration ‘connection, alignment and trust’, as well as bringing together the ‘whole system in the room’. Here senior ING aims to align its remuneration policy with its risk profile and the interests of all stakeholders. For moreleaders delve into the outcomes of the assessments, identifying deeply rooted and often complex issues for information on ING’s compensation and benefits policies and its relation to the risk taken, please refer to theimprovement.

Capital Requirements Regulation (CRR) Remuneration Disclosure published on the corporate website ing.com.
In addition, interventions are also set in motion that focus on enabling employees to build awareness on Centre of Expertise on Behavioural Risk Management (BRM)behavioural risk and support them in initiating solutions to mitigate the potential behavioural risks. After each
Behavioural risk is an increasingly important risk area for ING and across the financial industry. It arises whenassessment the results are shared with the management teams of the assessed units and with the participants of behavioural patterns are at the root of financial and non-financial risks in the organisation.the BRA in a so-called ‘feedback session’. This feedback session is followed up with a dialogue starter toolkit, enabling teams to reflect on the results, discuss opportunities for improvement and call for first steps towards
The complexity of this type of risk is that it is less tangible compared to other risk areas because it focuses onsustainable solutions.
behavioural patterns and their drivers. Patterns in how decisions are made, how people communicate and whether they can take ownership. Behaviour is driven by formal and informal mechanisms. Examples of formalA ‘nudge lab’ can be organised to co-create effective nudges (i.e. a gentle push in the right direction, based on drivers are the processes ING applies and how its governance is structured. Informal drivers are less tangible,behavioural insight) for solutions to issues that were identified during a BRA. The solutions that have been such as group dynamics or underlying beliefs that influence behaviour.developed are now being scaled up globally.

At ING, behavioural risk management (BRM) is positioned in the second line of defence, reporting directly to theThe BRM team works closely with the business units and departments such as HR, Audit, and Compliance to align
CRO. The global BRM Centre of Expertise not only assesses behavioural risk in the organisation, but also has theon and embed desired leadership and risk behaviours (i.e. speak up, psychological safety, communication,
mandate to direct, challenge and support business owners to intervene on behavioural patterns and theirguiding leadership).
underlying drivers.

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Risk cycle processThe importance of a risk is based on both the likelihood that the risk materialises and the subsequent financial or

reputational impact that may occur should the risk arise. Unlikely risks with a potentially high impact need to be ING uses a step-by-step risk management approach to identify, manage and mitigate its financial and noncontrolled. A risk that is likely to happen regularly but expected to have a modest financial impact may not need financial risks. The approach consists of a cycle of five recurrent activities: risk identification, risk assessment, risk to be mitigated if the consequences are accepted by management.
control, risk monitoring, and risk reporting. The cycle is designed to determine what the risks are, assess which of

these risks can really do harm, take mitigating measures to control these risks, monitor the development of the

Risk control

risk to see if the measures taken are effective, and report the findings to management at all relevant levels to enable them to take action when needed.Risks can be controlled by mitigating measures that lower the likelihood the risk occurs, lower the impact when it occurs or both. The ultimate measure to lower a risk is to stop the activity or service that causes the risk (risk

The cycle recurs in two ways. First, the identification, assessment, review, and update of mitigating measures areavoidance). Risk control and mitigation measures are defined and maintained at both the bank-wide and local
repeated periodically. Second, this periodic monitoring exercise may indicate emerging risks, known risks that arelevel.

changing, risk levels that are changing, or current control measures that are not effective enough. Further

Monitoring and reporting analyses of these findings may then result in renewed and more frequent risk identification, and/or assessment,

and/or change of mitigating measures.ING monitors the risk-control measures by checking if they are executed, complied with and have the expected

mitigating effects and by following the development of the risks and their risk levels. Risk reporting provides

Risk identificationsenior and local management with the information they need to manage risks.

Risk identification is a joint effort of the business and the risk management functions. Its goal is to detect

Risk Appetite Framework potential new risks and determine changes in known risks. Regular risk identification is essential for effective risk

management. Potential risks that are not identified, will not be controlled and monitored and may lead toThe Risk Appetite Framework (RAF) is one of the pillars of the Enterprise Risk Management (ERM) Framework. Its
surprises later. Known risks may have changed over time and as a consequence the existing mitigating measuresobjective is to set the appropriate risk appetite at the consolidated level across the different risk categories and
and monitoring may be inadequate or obsolete.to allocate the risk appetite throughout the organisation.

Risk identification is performed periodically. In case of material internal or external change, additional ad hoc riskPolicy
identification can be performed.
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

Risk assessment strategy. ING’s RAF, which is approved by the Supervisory Board (SB), defines the desired risk profile that is to be
Each identified risk is assessed qualitatively or quantitatively to determine its importance. This enables ING tointegrated in the strategic decision-making and financial planning process. It is designed to be able to withstand
decide which of the identified risks need control measures and how strict or tolerant these measures should be.market volatility and stress, while meeting regulatory requirements. The framework, including underlying
Known risks are re-assessed to detect any change in the risk level.assumptions and metrics, is regularly reviewed so that it remains relevant. The RAF combines various financial

and non-financial risk appetite statements (RASs) into a single, coordinated approach to provide the business

with a clear overview of the relevant risks and the tools to manage them. This view allows the 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.

ING Group Annual Report 2020 on Form 20-F152

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Risk management at ING Group

Risk appetite framework process

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 are reviewed on an annual basis, or more frequently if necessary, based on their quarterly review in the EB, the MBB and the SB. It is therefore a top-down process, which bases itself on the ambition of the bank in terms of its risk profile, the regulatory environment and the economic context. The set of limits used is split according to the approval levels needed for them. Limits that need SB approval are called boundaries and the underlying metrics supporting the boundaries which need EB and MBB approval are called instruments. Since the outbreak of the Covid-19 virus, ING re-assessed its risk appetite to take into account the potential impact of the virus and the uncertainties caused by the virus.

ING Group Annual Report 2020 on Form 20-F153

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Risk management at ING Group

Step 1. Identify and assess ING’s key risksRisk appetite framework policy

The outcome of the risk identification and risk assessment process is used as the starting point for the review of the RAF. Within this step, the risks ING faces when executing its strategy are identified in the context of the current economic, political, regulatory and technological environment. The assessment identifies whether the potential impact is material and if it is sufficiently controlled within ING’s risk management function. It benchmarks the current risk framework against regulatory developments. Known risks are re-assessed either to confirm risk levels or to take account of potential changes. The assessment is contextualised by the current set of risk appetite statements.

Step 2. Set Risk Appetite Framework

Based on ING’s risk assessment and risk purpose, boundaries for the overarching risk frameworks are set. Once the overarching risk appetite thresholds have been set and approved by EB/MBB and subsequently by SB, the statements are translated into risk-type-specific statements and lower level thresholds which are set and approved by senior risk committees, ALCO Bank, GCTP and Bank NFRC. Cascading is done via a number of detailed risk appetite statements which have been defined per risk type, the combination of which ensures compliance with the overarching Solvency, Concentration and Funding and Liquidity RASs.

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 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.

ING Group Annual Report 2020 on Form 20-F154

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Risk management at ING Group

Risk Appetite Statements

Step 4. Monitor and manage underlying risk limits

BoundariesUnderlying risk metrics

SolvencyCET1 ratioIn order to verify that it remains within the Risk Appetite Framework, ING reports its risk positions vis-à-vis its
Leverage ratio limits on a regular basis to senior management committees. The Quarterly Risk Update reflecting the exposure of Economic capital utilisation ING against the risk appetite is submitted quarterly to the EB and the MBB and to the (Risk Committee of the) SB.
MREL
TLACMoreover every quarter the financial plan is checked for potential limit breaches within a one-year horizon,
Total capital ratiowhere in the strategic dialogue the MBB can take mitigating measures or adjustments to the dynamic plan can be
Funding and liquidityLiquidity coverage ratio made.
Net liquidity position – internal stress test
Stable funding-to-loans ratio

ConcentrationConcentration event risk (LGD)Stress testing Event risk InstrumentsUnderlying risk metricsStress testing is an important risk management tool that provides input for strategic decisions and capital

Solvency and profitabilityIFRS P&L-at-riskplanning. The purpose of stress testing is to assess the impact of plausible but severe stress scenarios on ING’s
Funding and liquidityAsset encumbrancecapital and liquidity position. Stress tests provide complementary and forward -looking insights into the
Economic counterbalancing capacity vulnerabilities of certain portfolios, with regards to adverse macroeconomic circumstances, stressed financial Stable funding surplus
Liquidity coverage ratio surplusmarkets, and changes in the (geo)political climate. Since the outbreak of the Covid-19 pandemic, ING assessed
Funding mixthe potential impact on its financial position via different types of stress tests. In addition to assessing P&L,
Interbank market stress up to one year capital and liquidity position of ING for a range of different scenarios, idiosyncratic risks were also included. The Credit riskEAD outcome of these Covid-19 stress tests helped management to get insight into the potential impact and to define

RWA ECLactions to mitigate this potential impact.
INCAP

Market risk (trading book)Value-at-risk / stressed value-at-risk
Incremental risk chargeTypes of stress tests
Regulatory/ economic market risk capital Within ING, different types of stress tests are performed. The most comprehensive type of stress tests are the Market risk (banking book)IFRS P&L-at-risk
NPV-at-riskfirm-wide scenario analyses, which involve setting scenario assumptions for all the relevant macroeconomic and
Customer behavior/market risk economic capitalfinancial market variables in all countries relevant to ING. These assumptions usually follow a qualitative
Revaluation-reserve-at-risk narrative that provides a background to the scenario. In addition to firm-wide scenario analyses, ING executes Non-financial riskExpected loss
Regulatory/ economic operational risk capitalscenario analyses for specific countries or portfolios. Furthermore, sensitivity analyses are performed, which
Overdue iRiskfocus on stressing one or more risk drivers; usually without an underlying scenario narrative. Finally, ING
RWAperforms reverse stress tests, which aim to determine scenarios that could lead to a pre-defined severe adverse
Business riskIFRS P&L-at-risk outcome.
Economic capital
RWA

ING Group Annual Report 2020 on Form 20-F155

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Risk management at ING Group

Developments in the regulatory environment

Process

The stress testing process of ING consists of several stages, which are:CRRII/CRDV and BRRDII

Risk identification and risk assessment: It identifies and assesses the risks ING or the relevant entity isOn 27 June 2019, a series of measures referred to as the Banking Reform Package (including certain amendments

facing when executing its strategy based on the current and possible future economic, political,to CRR and CRDIV commonly referred to as ‘CRR II’ and CRD V’) came into force, subject to various transitional

regulatory and technological environment. It provides a description of the main risks and risk driversand staged timetables. The adoption of the Banking Reform Package concluded a process that began in

related to the nature of ING’s business, activities and vulnerabilities.November 2016 and marks an important step toward the completion of the European post-crisis regulatory

Scenario definition and parameterisation: Based on the outcome of the previous step, a set of scenariosreforms, drawing on a number of international standards agreed by the Basel Committee, the Financial Stability
is determined with the relevant scope and set of risk drivers for each scenario, as well as its severity, theBoard and the G20. CRDV was implemented in Dutch law in 2020. The Banking Reform Package updates the
key assumptions and input parameters. The output of this phase includes a quantitative description offramework of harmonized rules established following the financial crisis of 2008 and introduces changes to the
the stress scenarios to be analysed, the relevant output metrics and, when applicable, a narrativeCRR, CRDIV, the Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism Regulation
description.(SRMR). The Banking Reform Package covers multiple areas, including the Pillar 2 framework, the introduction of
a leverage ratio requirement of 3% and a leverage ratio buffer requirement of 50% of the G-SIB buffer Impact calculation and aggregation: Based on the quantitative description of the stress scenarios requirement (applicable per 1 January 2023), a binding Net Stable Funding (NSFR) ratio based on the Basel NSFR determined in the previous step, the impact is determined for the relevant scenario, scope and horizon.
standard but including adjustments with regard to e.g. pass-through models and covered bonds issuance, The impact calculation and aggregation can be part of a recurring process or part of a specific process mandatory restrictions on distributions, permission for reducing own funds and eligible liabilities, set-up for one-off stress tests.
macroprudential tools, a new category of ‘non-preferred’ senior debt, the minimum requirement for own funds Scenario reporting: For each stress test, a report is prepared after each calculation which describes the and eligible liabilities (MREL) and the integration of the TLAC standard into EU legislation. Further, the EBA results of the scenario, and gives a recap of the scenario with its main assumptions and parameters. The obtained a mandate to investigate how to incorporate environmental, social, and governance (ESG) risks into the stress test report is sent to the relevant risk committees and/or senior management. It is complemented, supervisory process and what the prudential treatment of assets associated with environmental or social if needed, with advice for management action based on the stress testing results.
objectives should look like.
Scenario control and management assessment: Depending on the outcomes of the stress test and the

likelihood of the scenario, mitigating actions may be proposed. Mitigating actions may include, but are

Basel III revisions and upcoming regulations not limited to, sales or transfers of assets and reductions of risk limits.
In December 2017, revisions to Basel III were formally announced by the Basel Committee. These revisions to

Basel III establish new prudential rules for banks, including a revision to the standardised approach to credit risk,

Methodology the introduction of a capital floor based on standardised approaches, the use of internal models, limitation of
Detailed and comprehensive models are used to calculate the impact of the scenarios. In these models, statisticaloptions for modelling operating risks, and new rules for the establishment of risk-weighted items and unused
analysis is combined with expert opinion to make sure that the results adequately reflect the scenariocredit lines at the banks. Such revisions have a long implementation phase and are not yet fully transposed into
assumptions. The methodologies are granular and portfolio-specific and use different macroeconomic andEU regulation. The revisions are commonly referred to as "Basel III Reform" or "Basel IV”. In Europe, this will be
market variables as input variables. The calculations are in line with our accounting and regulatory reportingimplemented through the ‘CRR III’ / ‘CRD VI’ in the coming years. With this long implementation phase and the
frameworks. The stress-testing models are subject to review by Model Risk Management.transposition into EU regulation still pending, some question marks remain on how this will shape up.

ING Group Annual Report 2020 on Form 20-F156

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Risk management at ING Group

Targeted review of internal models

In order to make capital levels more comparable and to reduce variability in banks’ internal models, in June 2017 the European Central Bank (ECB) introduced the Targeted Review of Internal Models (TRIM) to assess the reliability and comparability between banks’ models. The TRIM aims to create a level playing field by harmonising the regulatory guidance around internal models with the ultimate goal of restor ing trust in European banks’ use of internal models.

In July 2019, the ECB published the final chapters of the guide to internal models, covering credit risk, market risk and counterparty credit risk. These risk-type-specific chapters are intended to ensure a common and consistent approach to the most relevant aspects of the regulations on internal models for banks directly supervised by the ECB. Additionally, they provide transparency on how the ECB understands the regulations on the use of internal models to calculate own funds requirements for the three risk types. Impact on ING is through more stringent regulation on the end-to-end process and governance around internal models as well as an increase of risk weighted assets (RWA).

In 2020, the last TRIM ECB inspection ended. Per rating system the ECB has sent and will send final TRIM decision letters, which will include obligations that ING shall remediate. Also certain limitations such as restrictions on PD and/or LGD, effectively resulting in higher capital requirements, have or might be put in place until these obligations are fully addressed and closed.

ING Group Annual Report 2020 on Form 20-F157

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Solvency risk

Solvency riskforces. The process of balancing these strategic goals is captured in the ICAAP framework and enabled by the
building blocks and elements facilitating the ICAAP. The following building blocks have been defined in the ICAAP

Introduction Framework, which are applied for both the ‘normative’ and ‘economic’ perspective as defined in the ECB Guide
Solvency risk is the risk of lacking sufficient capital to fulfil the business objectives, regulatory requirements orto ICAAP that was published in November 2018:
market expectations. A bank that is completely insolvent is unable to pay its debts and will be forced into●Risk identification and assessment
bankruptcy.●Risk appetite ●Capital planning
The level and quality of capital is crucial for the resilience of individual banks. Banks are expected to●Capital management
assess the risks they face, and in a forward-looking manner ensure that all material risks are identified, managed●Stress testing
and covered sufficiently by loss absorbing capital to ensure continuity in case of●Continuity
materialisation of unexpected risks in times of stress. Given the interdependencies to other financial
and non-financial risks this balancing act of capital adequacy needs to be done within a sound andSolvency risk related to Covid-19
integrated management approach coherently linking all moving parts of the bank in line with the long-term The outbreak of the Covid-19 stress tests resulted in several additional analyses to assess the potential impact of business strategy.
the virus on the actual and future solvency position. For instance, in 2020 ING performed a sequence of Covid-19
stress tests to assess potential scenarios of how the virus would develop and how it may impact society and

Solvency risk management economies. These Covid-19 stress tests were used to prepare potential mitigating actions, but also served as
starting point for the review of ING’s risk appetite and of the financial and capital planning. In light of this, ING

ICAAP Framework also updated the management actions in the Contingency Capital & Funding Plan and the Recovery Plan and ING’s Internal Capital Adequacy Assessment Processes (ICAAP) aims to ensure that capital levels are assessed potential additional mitigating actions to counter this very specific crisis.
adequate to cover all material risks at all levels and to ensure compliance with regulations. ING follows an
integrated approach to assess the adequacy of its capital position in relation to its business activities, underlying

Risk identification and assessment business strategy, market positioning risk profile and operating environment. This implies taking into account the
interests of its various stakeholders such as regulators, shareholders, investors, rating agencies, clients andING’s capital management and solvency risk management starts with the risk identification & risk assessment
customers.process. Its main purpose is to detect potential new risks and to identify changes in the potential impact of known risks. On an annual basis, ING performs a thorough review of its solvency risks or risks to capital. Within
The continued strength of ING’s capital position, the adequacy of the financial position and the riskthis assessment, bottom-up assessments are combined with top-down assessments, including a questionnaire
management effectiveness are essential for achieving the Think Forward strategy. ING’s ICAAPand interviews with senior management. The results of the risk assessment are discussed in ALCO Bank which
ultimately supports this strategy and contributes thereby to the continuity of ING Group, ING Bank and all itscomprises almost the full Management Board Banking. Once approved, the conclusions of the risk assessment
business units.feed into the annual review of the Risk Appetite Framework, the Stress Testing Framework and the Economic

Capital Framework. In addition to this annual process, ING also re-assesses its risks as part of its Capital Adequacy Managing ING’s capital requirements and allocation entails finding a balance between the forcesStatement, a quarterly process to assess ING’s capital adequacy.
governing supply and demand. The uncertainties surrounding these factors are a reflection of changing market circumstances and continuous unpredictability in regulatory and macroeconomic

ING Group Annual Report 2020 on Form 20-F158

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Solvency risk

Solvency risk appetiteStress testing

As explained in the Risk Appetite Framework section in the previous chapter, ING has established overarchingSolvency stress testing allows a bank to examine the effect of exceptional but plausible future solvency risk boundaries. Boundaries are risk appetite statements that are essential for risk management activity,events on the solvency position and provides insight into which entities or portfolios are vulnerable to making it of paramount importance to keep these boundaries within the defined level. The SB is responsible forwhich type of risks or in which type of scenarios. Solvency stress testing is an important tool in identifying, approving and monitoring the boundaries. These boundaries are complemented by a sequence of risk-type-assessing, measuring and controlling risks to capital, providing a complementary and forward -looking perspective specific instruments. These underlying risk appetite statements are cascaded down into the organisation to theto other solvency risk management tools.
lowest level deemed necessary and dedicated risk thresholds are set that are used for day-to-day monitoring and management of ING’s risks. ING has solvency risk appetite statements in place for the following metrics: CET1ING distinguishes the following three types of stress test analyses:
ratio, Total capital ratio, leverage ratio, TLAC RWA/leverage ratio and economic capital utilisation.●Sensitivity analysis: Within these analyses, ING assess the impact of a pre-defined shock in one or more risk drivers. The key purpose of sensitivity analyses is to monitor the impact of this pre-defined (or Capital planningstandardised) shock over time to get an understanding of how the risk profile of the bank has developed.
The capital and funding plan is an integral part of the dynamic plan, ING’s financial and business planning●Scenario analysis: Scenario analyses are used to assess an integral impact of historical, statistical and/or process. Its objective is to inform and advise the management on the capital development and need of INGhypothetical circumstances on the financial position of ING. These stress tests often build on a Group and ING Bank, under base case and adverse scenarios. It describes how ING shall finance the expectedqualitative scenario narrative and reflect risk topics that are deemed relevant for ING given, for example, capital constraints taking into consideration growth projections, capital and risk evolution, macro and marketits business model. Scenarios can be derived from historical realisations, but also reflect e.g. potential conditions, both under the normative and economic perspective. The capital & funding plan is updated at leastmacroeconomic, geopolitical or climate risk related events. These scenarios can be used for one-off twice a year, and discussed and approved by ALCO Bank. Within these updates, ING takes into account recentanalyses, but can also be translated into a set of regular or standardised stress tests that are assessed on market and risk developments and ensures that the capital planning adheres to the solvency risk appetite set bya quarterly basis.
the SB.●Reverse stress testing: The purpose of reverse stress testing is to identify scenarios that could lead to a pre-defined outcome. This could for example be a pre-defined solvency level. The added value of reverse
Capital managementstress testing is to explore risk drivers and stress scenarios outside the existing range.

Among the solvency management tools the formulation of the CET1 ambition forms a key element. The target The outcomes of solvency stress test analyses are taken into account in capital planning, but also for setting risk ratio which is based on the management buffer concept enables ING’s senior management to steer, benchmark appetite statements and the capital management buffer.

and assess the bank’s current and future capital levels much more efficiently while the ambition level clearly supports trust building among ING’s key stakeholders (e.g. regulators, investors, customers and clients).
The capital management buffer aims to protect the interests of key stakeholders (e.g. shareholders, investors)
and plays an important role in the overall capital adequacy governance.
The rationale behind the concept of the management buffer is that it provides an additional cushion on top of the (local) regulatory minimum requirements (e.g. SREP requirements) to withstand a certain level of stress and to facilitate awareness and preparedness to take management actions. ING reviews its capital management buffer on a regular basis to determine its effectiveness and robustness, and updates it as appropriate.

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Solvency risk

Contingency and recovery Planning

Contingent capital events are unexpected situations or business conditions that may increase the risk with respect to ING’s capital position. These events may be ING-specific, or arise from external factors. The Contingency Capital and Funding Plan (CCFP) sets out the organisation and actions in case of contingency events.
The CCFP has a suite of monitoring metrics that are aligned with the risk appetite statements that are in place for managing ING’s capital, liquidity and funding position. The Recovery Plan is designed by ING to detect and act upon possible major and unforeseen deterioration of its solvency position in a timely fashion. This plan has integrated several risk appetite statements to allow timely identification of possible stress on the company.
Incorporating risk appetite statements into both plans ensures a seamless continuum between the ING’s business-as-usual management and its contingency or recovery management.

Assessing capital adequacy: Capital Adequacy Statement (CAS)

The Capital Adequacy Statement (CAS) is ING Group’s quarterly assessment of its capital adequacy and takes into account different elements with respect to its capital position. The degree to which ING’s capital position is considered to be adequate depends on a variety of internal and external drivers:
●Current supervisory requirements and (expected) requirements going forward;
●Current internal requirements and (expected) requirements going forward;
●Coherence of the available capital with the (realisation of) strategic plans; and ●The ability to meet internal and external requirements in the case of stressed events or should a risk materialise.

The CAS assesses the adequacy of ING’s capital position in relation to above -mentioned drivers and states the extent to which the capital position consequently is considered as adequate. On a quarterly basis the CAS document is prepared. Additionally each year, the management body signs and provides a comprehensive assessment of ING’s capital adequacy, supported by the ICAAP outcomes, in the form of a Capital Adequacy Statement.

ING Group Annual Report 2020 on Form 20-F160

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk

Credit risk

Credit risk categories (*)

Introduction Credit risk uses the following risk categories to differentiate between the different types of credit risk:
Credit risk is the risk of loss from the default and/or credit rating deterioration of clients. Credit risks arise in ◾Lending risk:is the risk that the client (counterparty, corporate or individual) does not pay the principal, ING's lending, financial markets and investment activities. The credit risk section provides information on how interest or fees on a loan when they are due, or on demand for letters of credit (LCs) and guarantees ING measures, monitors and manages credit risk and gives an insight into the portfolio from a credit risk provided by ING.
perspective.
◾Investment risk: is the credit default and risk rating migration risk that is associated with ING’s

investments in bonds, commercial paper, equities, securitisations, and other similar publicly traded

Governance (*) securities. This can be viewed as the potential loss that ING may incur as a result of holding a position in

ING’s credit risk strategy is to maintain an internationally diversified loan and bond portfolio, while avoiding largeunderlying securities whose issuer's credit quality deteriorates or defaults. All investments in the banking
risk concentrations. The emphasis is on managing business developments within the business lines by means of abook are classified in the investment risk category. The primary purpose of ING’s investments in the
top-down risk appetite framework, which sets concentration limits for countries, individual clients, sectors,banking books is for liquidity management.
products, secondary risk (collateral/guarantees) and investment activities. The aim is to support relationship-◾Money market (MM) risk: arises when ING places short-term deposits with a counterparty in order to
banking activities, while maintaining internal risk/reward guidelines and controls.manage excess liquidity. In the event of a counterparty default, ING may lose the deposit placed.
◾Pre-settlement (PS) risk: arises when a client defaults on a transaction before settlement and ING must

ING has organised support functions at two levels: Tier 1, operational unit level, and Tier 2, head office level.replace the contract by a trade with another counterparty at the then prevailing (possibly unfavourable)
Credit risk is a Tier 1 level risk function within ING and is part of the second line of defence. It is managed bymarket price. This credit risk category is associated with derivatives transactions (exchange-traded
regional and/or business unit CROs. The CRO Wholesale Banking (WB), CRO Challengers & Growth Marketsderivatives, over-the-counter (OTC) derivatives and securities financing transactions).
(C&G), CRO Netherlands and CRO Belux focus on specific risks in the geographical and/or business areas of their◾Settlement risk: is the risk that arises when there is an exchange of value (funds or instruments) for the
responsibilities. The Financial Risk department is a Tier 2 level risk function, which is responsible for thesame value date or different value dates and receipt is not verified or expected until after ING has given
consolidated risk appetite setting, risk frameworks, model development and policies.irrevocable instructions to pay or has paid or delivered its side of the trade. The risk is that ING delivers
but does not receive delivery from its counterparty. ING manages settlement risk in the same way as

The credit risk function encompasses the following activities:other credit risks by setting a risk limit per client. Due to the short-term nature (typically one day), ING
◾Measuring, monitoring and managing credit risks in the bank’s portfolio, including the measures takendoes not hold provisions for settlement risk. Although a relatively low risk, ING increasingly uses DVP
since the start of the Covid-19 crisis;(delivery versus payment) and safe settlement payment techniques to reduce settlement risk.

◾Challenging and approving new and modified transactions and borrower reviews;
◾Managing the levels of provisioning and risk costs, and advising on impairments; andFor the reconciliation between credit risk outstandings categories and financial assets, refer to the table below:

◾Providing consistent credit risk policies, systems and tools to manage the credit lifecycle of all activities.

ING Group Annual Report 2020 on Form 20-F161

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk

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 banksNote2Cash and balances with central banks -Loans and advances to banksNote3Loans and advances to banks -Loans and advances to customersNote4Financial assets at fair value through profit or loss -Off-balance sheet items e.g. obligations under financial guarantees and letters of credit and undrawnNote5Financial assets at fair value through other comprehensive income credit facilitiesNote7Loans and advances to customers Note44Contingent liabilities and commitments Investment risk-Debt securitiesNote4Financial assets at fair value through profit or loss -Equity securitiesNote5Financial assets at fair value through other comprehensive income Note6Securities at amortised cost Money market (MM) risk-Cash and balances with central banksNote2Cash and balances with central banks -Loans and advances to banksNote3Loans and advances to banks -Loans and advances to customersNote7Loans and advances to customers Pre-settlement (PS) risk-Financial assets at fair value through profit or loss (trading assets and non-trading derivatives)Note4Financial assets at fair value through profit or loss -Financial liabilities at fair value through profit or loss (trading assets and non-trading derivatives)Note14Financial liabilities at fair value through profit or loss -Securities financingNote43Offsetting financial assets and liabilities Settlement risk-Financial assets at fair value through profit or loss (trading assets and non-trading derivatives)Note4Financial assets at fair value through profit or loss -Financial liabilities at fair value through profit or loss (trading assets and non-trading derivatives)Note11Other assets -Amounts to be settledNote14Financial liabilities at fair value through profit or loss Note16Other liabilities

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Credit risk

Credit risk appetite and concentration risk framework (*)◾Product and secondary risk concentration: ING has established a concentration framework to identify,

measure and monitor product concentration and secondary risk.
The credit risk appetite and concentration risk framework is designed to prevent undesired high levels of credit ◾Scenarios and stress tests: Stress testing evaluates ING’s financial stability under severe, but plausible risk and credit concentrations within various levels of the ING portfolio. It is derived from the concepts of stress scenarios, and supports decision-making that assures ING remains a financially going concern even boundaries and instruments as described in the ING Risk Appetite Framework.
after a severe event occurs. In addition to the bank-wide stress testing framework described above, ING

performs regularly sensitivity analyses to assess portfolio risks and concentrations. These sensitivity Credit risk appetite is the maximum level of credit risk ING is willing to accept for growth and value creation. The analyses are consistent with the stress scenario established in the Group -wide credit risk appetite credit risk appetite is linked to the overall bank-wide risk appetite framework. The credit risk appetite is framework. In light of Covid-19 ING incorporated pandemic specific scenarios for the stress tests to gain expressed in quantitative and qualitative measures. Having a credit risk appetite achieves:
insight into the potential effects of Covid-19 on the credit risk in the portfolios .
◾Clarity about the credit risks that ING is prepared to assume, target setting and prudent risk ◾Product approvals: The product approval and review process (PARP) assesses and manages risks management;
associated with the introduction of new or modified products. It ensures that sound due diligence is ◾Consistent communication to diffe rent stakeholders;
performed by relevant stakeholders and the relevant risks (credit, operational, compliance, etc.) are ◾Guidelines on how to align reporting and monitoring tools with the organisational structure and strategy;
addressed appropriately.
and ◾Sector strategy and risk appetite papers: These are detailed analyses of defined products and/or ◾Alignment of business strategies and key performance indicators of business units with ING’s credit risk industries. They identify the major risk drivers and mitigants, the internal business mandate, and appetite through dynamic planning.
propose the risk (including business) parameters – and potentially the maximum product and/or

portfolio limit - to undertake that business. A sector strategy and risk appetite paper is always prepared Credit risk appetite is set at different levels within ING and specifies the scope and focus of the credit risk of ING, by the front office responsible for the internal business mandate and requires an approval from the and the composition of the credit portfolio, including its concentration and diversification objectives in relation designated approval authority. Sector strategy and risk appetite papers may carry various names and/or to business lines, sectors and products.
may have geographical and/or business limitations (e.g. local vs global).

◾Credit approval process: The purpose of the credit approval process is that individual transactions and The credit risk appetite and concentration risk framework is composed of:
the risk associated with these transactions are assessed on a name-by-name basis. For each type of

client there is a dedicated process with credit risk managers specialised along the business lines of ING, ◾Country risk concentration: Country risk is the risk that arises due to events in a specific country (or including the use of automated decision-making in certain cases. The credit approval process is group of countries). In order to manage the maximum country event loss ING is willing to accept, supported by a risk rating system and exposure monitoring system. Risk ratings are used to indicate a boundaries are approved by the SB. The estimated level is correlated to the risk rating assigned to a client’s creditworthiness which translates into a probability of default. This is used as input to determine given country. Actual country limits are set by means of country instruments, which are reviewed the maximum risk appetite that ING has for a given type of client (reference benchmark). The monthly and updated when needed. For countries with elevated levels of geopolitical or severe determination of the delegated authority (the amount that can be approved at various levels of the economic cycle risk, monitoring is performed on a more frequent basis with strict pipeline and exposure organisation) is a function of the risk rating of the client and ING’s credit risk exposure on the client.
management.
Where necessary, underwriting standards were reviewed and refined to limit the credit risk to portfolios ◾Single name and industry sector concentration: ING has established a credit concentration risk particularly sensitive to Covid-19.
framework in order to identify, measure and monitor single name concentration and industry sector

concentration (systemic risk). The same concept of boundaries and instruments is applicable.

ING Group Annual Report 2020 on Form 20-F163

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk

Credit risk models (*)The three first categories (1-19) are risk ratings for performing loans. The ratings are calculated in IT systems with

internally developed models based on data that is either manually or automatically fed. Under certain conditions, Within ING, internal Basel compliant models are used to determine probability of default (PD), exposure at the outcome of a manually fed model can be challenged through a rating appeal process. Risk ratings for nondefault (EAD) and loss given default (LGD) for regulatory and economic capital purposes. These models also form performing loans (NPL) (20-22) are set by the global or regional credit restructuring department. For the basis of ING’s IFRS 9 loan loss provisioning (see ‘IFRS 9 models’ below). Bank-wide, ING has implemented securitisation portfolios, the external ratings of the tranche in which ING has invested are leading.
around 100 credit risk models, for regulatory capital, economic capital and loan loss provisioning purposes.

Risk ratings assigned to clients are reviewed at least annually, with the performance of the underlying models There are two main types of PD, EAD and LGD models used throughout the Bank:
monitored regularly. Some of these models are global in nature, such as models for large corporates, commercial ◾Statistical modelsare created where a large set of default or detailed loss data is available. They are banks, insurance companies, central governments, local governments, funds, fund managers, project finance and characterised by a sufficient number of data points that facilitate meaningful statistical estimation of the leveraged companies. Other models are more regional- or country-specific: there are PD models for small model parameters. The model parameters are estimated with statistical techniques based on the data medium enterprise (SME) companies in Central Europe, the Netherlands, Belgium, Luxembourg, as well as set available;
residential mortgage and consumer loan models in the various retail markets.
◾Hybrid modelscontain characteristics of statistical models combined with knowledge and experience of

experts from risk management and front-office staff, literature from rating agencies, supervisors and Rating models for retail clients are predominantly statistically driven and automated, such that ratings can be academics. These models are especially appropriate for ‘low default portfolios’, where limited historical updated on a monthly basis. Rating models for large corporates, institutions and banks include both statistical defaults exist.
characteristics and manual input, with the ratings being manually updated on at least an annual basis. During

2020, portfolios and clients most at risk of being affected by the pandemic were subject to more frequent (e.g.
Credit risk rating process (*)
quarterly) reviews to closely monitor the development of credit risk.

In principle, all risk ratings are based on a Risk Rating (PD) Model that complies with the minimum requirements

detailed in CRR/CRDIV, ECB Supervisory Rules and EBA guidelines. This concerns all borrower types and

segments.

ING’s PD rating models are based on a 1-22 scale (1=highest rating; 22=lowest rating) referred to as the ‘Master

scale’, which roughly corresponds to the rating grades that are assigned by external rating agencies, such as

Standard & Poor’s, Moody’s and Fitch. For example, an ING rating of 1 corresponds to an S&P/Fitch rating of AAA

and a Moody’s rating of Aaa; an ING rating of 2 corresponds to an S&P/Fitch rating of AA+ and a Moody’s rating

of Aa1, and so on.

The 22 grades are composed of the following categories:

◾Investment grade (risk rating 1-10);

◾Non-investment grade (risk rating 11-17);

◾Sub-standard (risk rating 18-19); and

◾Non-performing (risk rating 20-22).

ING Group Annual Report 2020 on Form 20-F164

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk

Credit risk systems

Credit risk tools and data standards

The acceptance, maintenance, measurement, management and reporting of credit risks at all levels of ING is executed through single, common credit risk data standards using shared credit risk tools that support standardised and transparent credit risk practices. ING has chosen to develop credit risk tools centrally with the philosophy of using a single source of data in an integrated way. This includes applying a combination of the ING policy, the regulatory environment in which we operate and the daily processes that are active throughout the Group. Disciplined application in these three areas is essential for achieving high data quality standards.

In 2020, ING established a Credit Risk Control Unit (CRCU), which is part of the Financial Risk department, with the main objective to contribute to compliant and continuously improving rating systems.

Credit risk portfolio (*)

ING’s credit exposure is mainly related to lending to individuals and businesses followed by investments in bonds and securitised assets, and money market. Loans to individuals are mainly mortgage loans secured by residential property. Loans (including guarantees issued) to businesses are often collateralised, but may be unsecured based on the internal analysis of the borrower’s creditworthiness. Bonds in the investment portfolio are generally unsecured, but predominantly consist of bonds issued by central governments and EU and/or OECD based financial institutions. Secured bonds, such as mortgage backed securities and asset backed securities are secured by the underlying diversified pool of assets (commercial or residential mortgages, car loans and/or other assets)
held by the securities issuer. For money market, exposure is mainly deposits to central banks. The last major credit risk source involves pre-settlement (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.

The prior period outstandings by economic sector (industry) have been updated reflecting improved classification of clients. This is applicable to all following tables in the sections credit risk portfolio, credit risk mitigation and credit quality that includes outstandings by economic sectors with prior period comparatives.

ING Group Annual Report 2020 on Form 20-F165

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk

Portfolio analysis per business line (*)| Outstandings per line of business (*) | 1, 2, 3, 4 | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| in EUR million | | | Wholesale Banking | | Retail Benelux | Retail Challengers & Growth | | | Corporate Line | | | Total |
| | | | | | | | | Markets | | | | |
| Rating class | | | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| | | 1 (AAA) | 74,735 | 31,859 | 357 | 372 | 34,782 | 18,973 | 2,375 | 24,774 | 112,248 | 75,978 |
| Investment grade | | 2-4 (AA) | 63,239 | 46,394 | 6,119 | 5,853 | 38,586 | 36,460 | 18 | 1,832 | 107,961 | 90,539 |
| | | 5-7 (A) | 66,537 | 66,756 | 23,143 | 20,922 | 54,381 | 48,587 | 349 | 323 | 144,409 | 136,588 |
| | | 8-10 (BBB) | 104,987 | 115,888 | 120,714 | 115,192 | 53,346 | 49,681 | 2,692 | 3,190 | 281,738 | 283,951 |
| | | 11-13 (BB) | 65,832 | 86,342 | 61,797 | 63,993 | 39,823 | 41,584 | 0 | 31 | 167,451 | 191,950 |
| Non-Investment grade | | 14-16 (B) | 20,925 | 22,929 | 17,759 | 15,845 | 10,299 | 14,755 | | | 48,983 | 53,528 |
| | | 17 (CCC) | 1,822 | 1,081 | 2,543 | 2,223 | 844 | 933 | 128 | 98 | 5,338 | 4,335 |
| Substandard grade | | 18 (CC) | 1,690 | 1,228 | 1,170 | 1,409 | 514 | 531 | | | 3,374 | 3,168 |
| | | 19 (C) | 518 | 659 | 1,306 | 1,056 | 600 | 672 | | | 2,423 | 2,387 |
| NPL grade | | 20-22 (D) | 4,415 | 4,516 | 5,614 | 4,316 | 3,203 | 2,399 | 295 | 275 | 13,526 | 11,506 |
| Total | | | 404,699 | 377,651 | 240,520 | 231,180 | 236,377 | 214,575 | 5,857 | 30,524 | 887,454 | 853,930 |

Industry
Private Individuals	25	31	160,884	164,466	172,390	167,262			333,299	331,758
Central Banks	84,697	34,044			27,921	8,383	632	23,339	113,250	65,766
Real Estate	26,271	38,338	24,064	13,205	3,297	2,732			53,632	54,275
Commercial Banks	42,088	44,152	201	250	8,211	8,884	3,010	3,502	53,509	56,788
Central Governments	43,753	37,449	1,691	1,364	4,482	6,356	1,697	3,131	51,623	48,300
Natural Resources	43,905	54,113	1,090	976	553	806			45,549	55,894
Non-Bank Financial Institutions	40,581	37,695	1,488	1,396	323	378	456	512	42,848	39,981
Transportation & Logistics	24,692	27,334	3,571	2,882	696	764			28,960	30,980
Food, Beverages & Personal Care	14,706	16,691	6,162	5,960	1,975	2,151			22,843	24,802
Services	8,878	10,252	11,302	10,929	808	862	4	3	20,993	22,046
Lower Public Administration	5,698	3,594	4,756	5,619	9,010	8,184			19,464	17,397
Utilities	17,062	16,377	1,358	741	136	145			18,556	17,263
General Industries	10,943	12,599	4,346	4,269	2,359	2,764			17,648	19,632
Other	41,398	44,982	19,607	19,123	4,214	4,906	58	36	65,279	69,046
Total	404,699	377,651	240,520	231,180	236,377	214,575	5,857	30,524	887,454	853,930

ING Group Annual Report 2020 on Form 20-F166

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk| Outstandings per line of business (*) - continued | 1, 2, 3 | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| in EUR million | | | Wholesale Banking | | Retail Benelux | Retail Challengers & Growth | | | Corporate Line | | | Total |
| | | | | | | | | Markets | | | | |
| Region | | | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| | | Netherlands | 72,236 | 41,255 | 149,686 | 142,547 | 645 | 905 | 2,965 | 25,340 | 225,532 | 210,046 |
| | | Belgium | 36,517 | 33,936 | 84,104 | 82,368 | 642 | 572 | 19 | 18 | 121,282 | 116,894 |
| | | Germany | 21,102 | 18,067 | 542 | 485 | 119,032 | 99,966 | 45 | 43 | 140,722 | 118,561 |
| | | Poland | 18,296 | 15,713 | 55 | 66 | 20,750 | 20,377 | | | 39,101 | 36,156 |
| Europe | | Spain | 9,157 | 8,849 | 66 | 68 | 25,255 | 21,838 | 35 | 30 | 34,512 | 30,785 |
| | | United Kingdom | 30,582 | 27,026 | 193 | 277 | 170 | 225 | 73 | 1,872 | 31,018 | 29,400 |
| | | Luxemburg | 20,080 | 22,209 | 4,373 | 4,051 | 864 | 1,554 | 13 | 13 | 25,330 | 27,827 |
| | | France | 15,651 | 13,914 | 618 | 519 | 6,447 | 6,267 | 6 | 3 | 22,721 | 20,703 |
| | | Rest of Europe | 61,213 | 65,432 | 525 | 406 | 20,573 | 22,816 | 13 | 25 | 82,324 | 88,679 |
| Americas | | | 64,688 | 67,893 | 210 | 223 | 1,535 | 1,457 | 312 | 340 | 66,745 | 69,912 |
| Asia | | | 44,961 | 52,065 | 91 | 103 | 166 | 180 | 2,376 | 2,840 | 47,594 | 55,188 |
| Australia | | | 8,134 | 8,622 | 22 | 27 | 40,294 | 38,416 | 0 | 1 | 48,451 | 47,066 |
| Africa | | | 2,082 | 2,671 | 36 | 40 | 3 | 2 | | | 2,121 | 2,713 |
| Total | | | 404,699 | 377,651 | 240,520 | 231,180 | 236,377 | 214,575 | 5,857 | 30,524 | 887,454 | 853,930 |

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.
4 The prior period outstandings by economic sector (industry) have been updated reflecting improved classification of clients.

Overall portfolio ()Rating distribution ()**

During 2020, ING’s portfolio size increased by €33.5 billion (+ 3.93%) to €887.5 billion outstandings. The netIn 2020, governments and banks introduced numerous measures to financially support individuals and volume growth was concentrated in the Money Market and Lending risk categories and was mainly due tobusinesses during the Covid-19 pandemic. These support measures in many case prevent or delay financial growth in exposures to Central Banks relating to participation in TLTRO III. Excluding Central Banks, the portfoliodifficulties of customers. As a result, Covid-19 did not materially affect the overall rating distribution in the size decreased by €14.0 billion, driven by a reduction in Lending exposures and FX impact mainly due to theportfolio per 31 December 2020. Refer to ‘Covid-19 sensitive sectors’ for the impact on the portfolios most weakening of the US dollar against euro.sensitive to Covid-19.

Foreign exchange rate changes had a negative impact on portfolio growth and reduced total outstanding by €13.9 billion. This was driven by the depreciation of the US dollar (-8.45%), Polish new zloty (-6.64%), New Turkish lira (-26.65%) and the British pound (-5.36%) against the euro.

ING Group Annual Report 2020 on Form 20-F167

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk

Overall, the rating class concentration slightly improved. The share of investment grade rating classes increasedIndustry (*)
from 68.7% to 72.8%, while the share of non-investment grade decreased, from 29.3% to 25.0%. SubstandardThe industry composition within Retail is concentrated in private individuals with 67% for Retail Benelux and 73%
grade outstanding remained stable at 0.7% of total portfolio, whereas the non-performing loans (NPL) gradefor Retail Challengers & Growth. Dutch residential mortgages continued to decrease driven by run-off at
increased share from 1.3% to 1.5%.Westland Utrecht bank and higher regular repayments, partly mitigated by stable new production at Domestic

Bank NL throughout 2020. In Belgium, residential mortgages slightly decreased in total volume, while an increase With respect to the rating distribution within the business lines, in Wholesale Banking AAA and AA rated assetswas seen with lease products in Belgium mid-corporate portfolio.
increased driven by Central Banks exposures, mainly due to the transfer of the reserve deposit with the Dutch central bank (DNB) from Corporate Line Bank to Wholesale Banking. Further decrease in BBB rating class forIn C&G, apart from mortgage volumes growth, an increased outstanding was seen in Lower Public Administration Wholesale Banking was seen with Commercial Banks’ exposures, while for BB rating the outstanding decreased(seen in Germany, France and Australia) and in Real Estate (Australia) .
primarily in natural resources and transportation and logistics industries .

Within Wholesale Banking, the sector development in Central Banks is consistent with the development in the The rating distribution for Retail Benelux improved mostly because of Dutch residential mortgages, shifting frominvestment grade category above. Exposures towards Central Governments increased due to higher bond rating class BB to ratings A and BBB, driven by continuing increase of the NVM house price index and improvinginvestments with Italy, Poland and France, while Commercial Banks decreased exposure, driven by lower LTVs, despite Covid-19. Additionally, a trend of early repayments was visible in the Dutch mortgage portfolio,volumes of trade-related transactions, seen in Australia.
further reducing the share of BB rating class. Residential mortgages in Belgium also improved in rating distribution, reducing concentration in BB and B ratings, while increasing in AA, A and BBB. On the other hand,The most noticeable reduction in Wholesale Banking was seen in Natural Resources, where exposures decreased the retail mid-corporates portfolio showed a worsening of rating distribution both in Belgium and thesignificantly, most visible in Singapore, Luxembourg, US, UK and UAE. Outstanding to Transportation & Logistics Netherlands, shifting volumes from BBB to B rating.also decreased, seen in the Netherlands, Hong Kong and Belgium, partly mitigated by an increase in Germany.

Apart from the above ING Wholesale increased its exposure to Lower Public Administration (Germany and In Retail Challengers & Growth Markets, the increase in AAA-rating was explained by increased reserve depositsFrance), while overall exposure decreased in Food, Beverages & Personal Care (Belgium and Argentina) .
the central banks of Germany and Australia. Similarly, rating class A increased due to exposures to Banco de Espana. Further, the increase in AA is partially explained by Australian residential mortgages . In GermanyCovid-19 sensitive sectors (*) residential mortgage loans grew steadily, mainly in rating classes A and BBB, with Poland and Spain also Aviation (Transportation & Logistics):exposure amounted to €4.6 billion outstanding (0.52% of total portfolio).
contributing to the growth of A-rated residential mortgages.
In terms of rating, the distribution of outstanding worsened compared to 2019, with main concentration shifting from BBB to BB and B rating classes. Substandard grade outstanding increased to 1.2% from 0% of Aviation Corporate line decreased concentration in AAA rating class due to the transfer of the reserve deposit with the portfolio, whereas the non-performing grade increased to 4.5% from 0%.
Dutch central bank (DNB) to Wholesale Banking.

ING Group Annual Report 2020 on Form 20-F168

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk

Hospitality & Leisure (Services and Food, Beverages & Personal Care):exposure amounted to €5.9 billion outstanding (0.67% of total portfolio). Rating distribution worsened compared to 2019, with outstanding shifting from BBB and BB ratings into B, CCC and CC rating classes. Substandard grade increased to 9.7% from 1.8%, whereas the NPL grade increased to 6.2% from 2.5%.

Non-food retail (Retail):exposure slightly reduced and amounted to €10.8 billion (1.22% of total portfolio).
Rating distribution remained relatively stable, with concentration reducing in BBB, BB and B ratings and slightly increasing in A rating class. Substandard grade decreased to 0.7% from 0.9%, while NPL grade increased to 3.3% from 3.2%.

ING Group Annual Report 2020 on Form 20-F169

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk| Outstandings by economic sectors and geographical area (*) | | 1 | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| in EUR million | Region | | | | | | | | | | | | | | | Total |
| Industry | Netherlands | Belgium | | Germany | Poland | Spain | United | Luxemburg | France | Rest of Europe | America | | Asia | Australia | Africa | 2020 |
| | | | | | | | Kingdom | | | | | | | | | |
| Private Individuals | 114,219 | | 42,443 | 88,178 | 12,216 | 21,775 | 186 | 3,203 | 2,644 | 14,717 | | 169 | 173 | 33,346 | 29 | 333,299 |
| Central Banks | 43,615 | | 22,840 | 23,601 | 31 | 3,058 | 6,247 | 3,855 | 811 | 3,655 | | 0 | 4,090 | 1,424 | 23 | 113,250 |
| Real Estate | 18,349 | | 10,540 | 1,374 | 2,478 | 1,460 | 313 | 3,846 | 3,511 | 3,839 | | 2,889 | 828 | 4,197 | 7 | 53,632 |
| Commercial Banks | 1,640 | | 265 | 4,546 | 607 | 468 | 6,931 | 3,478 | 6,218 | 6,926 | | 7,434 | 13,222 | 1,476 | 298 | 53,509 |
| Central Governments | 6,636 | | 6,762 | 2,010 | 8,956 | 4,435 | 55 | 175 | 2,130 | 10,020 | | 8,949 | 344 | 712 | 439 | 51,623 |
| Natural Resources | 2,830 | | 1,214 | 1,102 | 626 | 286 | 3,435 | 959 | 316 | 13,542 | | 8,193 | 11,442 | 821 | 782 | 45,549 |
| Non-Bank Financial Institutions | 2,743 | | 940 | 3,301 | 1,502 | 126 | 6,348 | 4,054 | 1,547 | 4,096 | | 14,726 | 3,089 | 376 | 0 | 42,848 |
| Transportation & Logistics | 4,162 | | 2,016 | 1,503 | 1,018 | 539 | 1,934 | 641 | 782 | 6,229 | | 3,628 | 5,468 | 743 | 295 | 28,960 |
| Food, Beverages & Personal Care | 6,623 | | 2,783 | 306 | 1,932 | 515 | 782 | 1,663 | 789 | 2,202 | | 3,975 | 1,072 | 191 | 10 | 22,843 |
| Services | 4,281 | | 9,307 | 584 | 783 | 159 | 520 | 454 | 411 | 1,054 | | 2,314 | 612 | 515 | 0 | 20,993 |
| Lower Public Administration | | 432 | 4,875 | 7,526 | 721 | 0 | | 583 | 1,693 | | 528 | 1,026 | 30 | 2,050 | 0 | 19,464 |
| Utilities | 1,731 | | 1,277 | 1,815 | 618 | 610 | 2,105 | 583 | 402 | 2,975 | | 3,196 | 1,716 | 1,292 | 237 | 18,556 |
| General Industries | 4,176 | | 2,802 | 1,030 | 2,134 | 252 | 234 | 266 | 194 | 3,014 | | 2,477 | 1,053 | 16 | 0 | 17,648 |
| Other | 14,094 | | 13,218 | 3,843 | 5,478 | 829 | 1,926 | 1,572 | 1,273 | 9,527 | | 7,769 | 4,456 | 1,293 | 0 | 65,279 |
| Total | 225,532 | | 121,282 | 140,722 | 39,101 | 34,512 | 31,018 | 25,330 | 22,721 | 82,324 | | 66,745 | 47,594 | 48,451 | 2,121 | 887,454 |

Rating class
Investment grade	169,111	78,294	118,082	26,045	26,622	25,924	19,528	16,688	51,233	44,279	35,879	34,545	127	646,357
Non-Investment grade	51,818	38,113	21,185	11,979	7,468	4,837	5,530	5,870	29,051	20,758	10,696	12,651	1,816	221,772
Substandard grade	1,794	1,159	516	215	102	101	191	37	679	476	94	349	83	5,798
NPL grade	2,808	3,715	939	862	320	156	81	126	1,360	1,232	925	905	95	13,526
Total	225,532	121,282	140,722	39,101	34,512	31,018	25,330	22,721	82,324	66,745	47,594	48,451	2,121	887,454

ING Group Annual Report 2020 on Form 20-F170

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk| Outstandings by economic sectors and geographical area (*) | | 1, 2 | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| in EUR million | Region | | | | | | | | | | | | | | | Total |
| Industry | Netherlands | Belgium | | Germany | Poland | Spain | United | Luxemburg | France | Rest of Europe | America | | Asia | Australia | Africa | 2019 |
| | | | | | | | Kingdom | | | | | | | | | |
| 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 |
| Central Banks | 21,635 | | 16,651 | 7,573 | 211 | 370 | 1,867 | 5,048 | 796 | 6,454 | | 0 | 4,951 | 200 | 8 | 65,766 |
| 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 |
| 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 |
| 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 |
| Non-Bank Financial Institutions | 2,852 | | 1,178 | 2,856 | 1,252 | 175 | 7,462 | 2,983 | 1,318 | 4,117 | | 12,145 | 3,178 | 315 | 149 | 39,981 |
| Real Estate | 18,478 | | 10,287 | 1,418 | 2,415 | 1,390 | 350 | 3,865 | 3,503 | 4,539 | | 3,685 | 886 | 3,450 | 8 | 54,275 |
| Transportation & Logistics | 4,722 | | 2,298 | 505 | 1,100 | 569 | 2,081 | 868 | 812 | 6,129 | | 3,979 | 6,818 | 651 | 447 | 30,980 |
| 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 |
| Services | 4,683 | | 9,272 | 574 | 822 | 162 | 774 | 646 | 711 | 1,109 | | 2,264 | 604 | 426 | 0 | 22,046 |
| General Industries | 4,096 | | 3,301 | 1,143 | 2,295 | 274 | 382 | 437 | 144 | 3,504 | | 2,628 | 1,423 | 5 | 0 | 19,632 |
| Utilities | 1,331 | | 1,056 | 1,673 | 654 | 418 | 2,032 | 571 | 445 | 3,103 | | 3,493 | 1,380 | 843 | 265 | 17,263 |
| Lower Public Administration | | 522 | 5,949 | 5,798 | 727 | 4 | 0 | 728 | 471 | | 536 | 958 | 18 | 1,686 | 0 | 17,397 |
| Chemicals, Health & Pharmaceuticals | 4,160 | | 3,517 | 935 | 1,066 | 112 | 95 | 257 | 524 | 2,812 | | 2,286 | 474 | 205 | 0 | 16,443 |
| 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 |
| 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 |

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
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
Substandard grade	1,993	1,023	555	212	85	17	75	25	484	464	347	265	9	5,555
NPL grade	2,983	2,867	705	806	270	148	79	96	1,541	1,100	154	686	71	11,506
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

ING Group Annual Report 2020 on Form 20-F171

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk

reduction in outstanding for Natural Resources was visible in Asia (mainly in Singapore and UAE), which was

Portfolio analysis per geographical area (*)partially offset by increased exposure to Technology industry.

The portfolio analysis per geographical area re-emphasises the international distribution of the ING portfolio. The share of the Netherlands in the overall portfolio remained stable at 25%.In Australia, outstanding increased, driven by Central Bank exposures and exposures in Real Estate, partly compensated by lower volumes of trade related transactions with Commercial Banks.

The most noticeable trend in the Netherlands was the increase in exposure with the central bank. Apart from
that, lower volumes of residential mortgage loans were visible, as well as lower bond exposures towards theIn terms of rating distribution for America region the share of investment grade increased to 66.3% from 61.1%,
Dutch Central Government. For Belgium the increase in exposures towards the central bank was partially offsetwhile non-investment grade decreased to 31.1% from 36.7%. Substandard grade remained at 0.7%, while NPL
by reduced outstanding to Lower Public Administration and slight decrease in residential mortgage volumes.slightly increased to 1.8% from 1.6%. For Asia, investment grade moved slightly up to 75.4%, non-investment and
In terms of rating distribution, the share of investment grade increased in both the Netherlands and Belgium (duesubstandard decreased to 22.5% and 0.2% respectively, while the NPL increased its share to 1.9% from 0.3% of
to central banks), while non-investment grade reduced, mainly seen with private individuals (mortgages shiftingoutstanding in Asia. Australia’s rating distribution remained stable with slight shift of outstanding from nonto investment grade). For both countries substandard grade remained relatively stable (little below 1%). For theinvestment to investment grade.

Netherlands, the NPL grade decreased to 1.2% from 1.4%, while for Belgium it increased to 3.1% from 2.5%.
The top five countries within Rest of Europe based on outstanding were: Italy (€17,544 million), Switzerland

In Germany, Spain and Poland, residential mortgages increased due to strong market position and stable business(€10,494 million), Turkey (€9,579 million), Romania (€8,484 million) and Russian Federation (€4,964 million).

volume growth. Germany, Spain and Australia also showed increased exposures to central banks.

Credit risk mitigation (*)

Rating distribution in Germany improved: the share of investment grade increased (central banks), while non- ING uses various credit risk mitigation techniques and instruments to mitigate the credit risk associated with an
investment grade slightly decreased. Substandard grade (0.4%) also reduced share, while NPL grade slightly exposure and to reduce the losses incurred subsequent to a default by a customer. The most common
increased (0.7%). Poland and Spain also showed rating distributions improvement, as in both investment grade terminology used in ING for credit risk protection is ‘cover’. While a cover may be an important mitigant of credit
share increased (central banks and mortgages). Substandard grade remained stable at 0.6% for Poland and 0.3% risk and an alternative source of repayment, generally it is ING’s practice to lend on the basis of the customer’s
for Spain, as for NPL grade, it was stable at 2.2% for Poland and 0.9% for Spain.
creditworthiness rather than exclusively relying on the value of the cover.

In Luxemburg despite the reduced overall exposure to central banks and Natural Resources, the rating

Cover forms (*) distribution remained stable: investment grade at 77.1%, non-investment grade slightly decreased to 21.8%.
Within ING, there are two distinct forms of covers. First, where the asset has been pledged to ING as collateral or Substandard grade increased to 0.8% from 0.3%, while NPL grade remained at 0.3%.
security, ING has the right to liquidate it should the customer be unable to fulfil its financial obligation. As such,

the proceeds can be applied towards full or partial compensation of the customer's outstanding exposure. This For Rest of Europe, the exposure decreased due to lower exposure with the central bank of the Czech Republic, may be tangible (such as cash, securities, receivables, inventory, plant and machinery, and mortgages on real lower outstanding in Turkey, mainly due to FX impact and a reduction of exposure in Switzerland, visible in estate properties) or intangible (such as patents, trademarks, contract rights and licences). Second, where there Natural Resources.
is a third-party obligation, indemnification or undertaking (either by contract and/or by law), ING has the right to

claim from that third party an amount if the customer fails on its obligations. The most common examples are The lower exposure in the Americas was mainly driven by FX impact and decreased volumes of term loans to US guarantees (such as parent guarantees and export credit insurances) or third-party pledged mortgages.
Corporates, mainly in Natural Resources, partly offset by higher outstanding to US Non-Bank FIs. A similar

ING Group Annual Report 2020 on Form 20-F172

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk

Cover valuation methodology (*)not eligible. Collateral covering financial market transactions is valued on a daily basis, and as such not included

General guidelines for cover valuation are established to ensure consistent application within ING. These alsoin the following tables. To mitigate the credit risk arising from Financial Markets transactions, the bank enters
require that the value of the cover is monitored on a regular basis. Covers are revalued periodically andinto legal agreements governing the exchange of financial collateral (high-quality government bonds and cash).

whenever there is reason to believe that the market is subject to significant changes in conditions. The frequency of monitoring and revaluation depends on the type of cover.The cover values are presented for the total portfolio of ING, both the performing and non-performing portfolio.
Our definition of non-performing is explained in detail in ‘Credit restructuring’ (below). For additional insight, a

The valuation method also depends on the type of covers. For asset collateral, the valuation sources can be thebreakdown of ING’s portfolio by industry and geography is provided.

customer’s balance sheet (e.g. inventory, machinery and equipment), nominal value (e.g. cash and receivables), market value (e.g. securities and commodities), independent valuations (commercial real estate) and marketExposures are categorised into different value-to-loan (VTL) buckets that give insight in the level of indices (residential real estate). For third-party obligations, the valuation is based on the value that is attributedcollateralisation of ING’s portfolio. VTL is calculated as the cover value divided by the outstandings at the balance to the contract between ING and that third party.sheet date. The cover values are indexed where appropriate and exclude any cost of liquidation. Covers can either be valid for all or some of a borrower’s exposures or particular outstandings, the latter being the most

Cover values (*)common. For the purpose of aggregation, over-collateralisation is ignored in the total overview and VTL coverage
of more than 100% is reported as fully covered. For VTL coverage in the tables for Dutch mortgages, consumer This section provides insight into the types of cover and the extent to which exposures benefit from collateral or lending and business lending, each cover is subsequently assigned to one of the six defined VTL buckets: no guarantees. The disclosure differentiates between risk categories (lending, investment, money market and precover, >0% to 25%, >25% to 50%, >50% to 75%, >75% to <100%, and ≥ 100%.
settlement). The most relevant types of cover include mortgages, financial collateral (cash and securities) and

guarantees. ING obtains cover that is eligible for credit risk mitigation under CRR/CRDIV, as well as cover that is The next table gives an overview of the collateralisation of the ING’s total portfolio.

ING Group Annual Report 2020 on Form 20-F173

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk| Cover values including guarantees received (*) | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| in EUR million | | | | Cover type | | | | Value to Loan | | |
| 2020 | Outstandings | Mortgages | Financial Collateral | | Guarantees | Other covers | No Cover | Partially covered | | Fully covered |
| Consumer Lending | 331,288 | 609,967 | | 6,208 | 26,117 | 38,438 | 6.7% | | 7.5% | 85.8% |
| Business Lending | 388,270 | 161,474 | | 20,431 | 94,913 | 302,357 | 43.1% | | 21.2% | 35.7% |
| Investment and Money Market | 121,809 | 95 | | 121 | 782 | 245 | 99.2% | | 0.1% | 0.7% |
| Total Lending, Investment and Money Market | 841,367 | 771,536 | | 26,761 | 121,811 | 341,039 | 36.9% | | 12.7% | 50.4% |
| Pre-settlement | 46,086 | | | | | | | | | |
| Total Bank | 887,454 | | | | | | | | | |

Cover values including guarantees received (*)
in EUR million			Cover type				Value to Loan
2019			Financial
	Outstandings	Mortgages	Collateral	Guarantees	Other	No Cover	Partially 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	50,672
Total Bank	853,930

In 2020, the collateralisation level of the portfolio slightly decreased as a result of an increase in unsecured Central Bank reserves which are included in Business lending. Excluding the pre-settlement portfolio,50.4% of ING’s outstandings were fully collateralised in 2020 (2019: 53.5%). Since investments traditionally do not require covers, the percentage for ‘no covers’ in this portfolio is above 90%. However, 99% of the investment outstanding is investment grade. Improved economic conditions in ING’s main markets contributed to improved collateral valuations, observed in consumer lending.

ING Group Annual Report 2020 on Form 20-F174

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk

Consumer lending portfolio (*)

The consumer lending portfolio accounts for 37.3% of ING’s total outstanding, primarily consisting of residential mortgage loans and other consumer lending loans, which mainly comprise term loans, revolvers and personal loans to consumers. As a result, most of the collateral consists of mortgages. The mortgage values are collected in an internal central database and in most cases external data is used to index the market value (e.g. mortgage values for the Netherlands are updated on a quarterly basis using the NVM/CBS house price index).

A significant part of ING’s residential mortgage portfolio is in the Netherlands (36.6%), followed by Germany (25.9%), Belgium and Luxembourg (13.4%) and Australia (10.7%). Given the size of the Dutch mortgage portfolio, the valuation methodology to determine the cover values for Dutch 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).

ING Group Annual Report 2020 on Form 20-F175

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk

Consumer lending portfolio – cover values (*)

The below tables show the values of different covers and the VTL split between performing and non-performing loans.| Cover values including guarantees received - Consumer lending portfolio (*) | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| in EUR million | | | | Cover type | | | | | Value to Loan | | | |
| 2020 | | | | Financial | | | | | | | | |
| | | Outstandings | Mortgages | Collateral | Guarantees | Other covers | No Cover | >0% - 25% | >25%-50% | >50% - 75% | >75% - <100% | ≥ 100% |
| Performing | | | | | | | | | | | | |
| Residential Mortgages (Private Individuals) | | 294,642 | 594,073 | 5,147 | 23,210 | 30,927 | | | 0.1% | 0.7% | 7.3% | 92.0% |
| Residential Mortgages (SME) | 1 | 5,681 | 9,010 | 151 | 126 | 1,532 | | 0.3% | 0.7% | 1.4% | 6.1% | 91.5% |
| Other Consumer Lending | | 25,780 | 197 | 861 | 2,619 | 4,336 | 81.5% | 0.3% | 0.1% | 0.2% | 0.3% | 17.6% |
| Total Performing | | 326,103 | 603,281 | 6,160 | 25,955 | 36,795 | 6.4% | 0.0% | 0.1% | 0.7% | 6.7% | 86.1% |

Non-performing
Residential Mortgages (Private Individuals)		3,698	6,379	45	141	1,414	0.2%	0.1%	0.4%	1.2%	5.9%	92.2%
Residential Mortgages (SME)	1	184	301	0	9	54	0.1%	0.2%	0.5%	1.8%	7.7%	89.7%
Other Consumer Lending		1,303	6	4	12	175	91.8%	0.3%	0.2%	0.3%	0.6%	6.7%
Total Non-performing		5,185	6,686	49	162	1,643	23.2%	0.1%	0.3%	1.0%	4.6%	70.6%

Total Consumer Lending331,288609,9676,20826,11738,4386.7%0.0%0.1%0.7%6.7%85.8%

1 Consists mainly of residential mortgages to small one man business clients

ING Group Annual Report 2020 on Form 20-F176

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk| Cover values including guarantees received - Consumer lending portfolio (*) | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| in EUR million | | | Cover type | | | | | Value to Loan | | | |
| 2019 | | | Financial | | | | | | | | |
| | Outstandings | Mortgages | Collateral | Guarantees | Other covers | No 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% | 0.0% | 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%0.0%0.1%0.8%6.7%85.5%

1 Consists mainly of residential mortgages to small one man business clients

The collateralisation levels of the consumer lending portfolio continued to improve during 2020. The rise inBusiness lending portfolio (*) collateralisation levels was due to rising housing prices observed in different mortgage markets, specificallyBusiness lending accounts for 43.8% of ING’s total outstanding (44.3% in 2019). In line with our objective to give noticeable in the Netherlands.stakeholders insight into the portfolio, we present the business lending portfolio per industry breakdown in
accordance with the NAICS definition and per region and main market. Business lending presented in this section ING’s residential mortgage outstanding increased mainly in Germany (4.9%), Spain (7.4%) and Poland (10.3%). Indoes not include pre-settlement, investment and money market exposures, which are outlined in the next 2019 the increases where respectively 3.1%, 14.8% and 23.2%. Mortgage outstanding in the Netherlandssections.

decreased slightly (2.3%). For the residential mortgages portfolio, the cover type guarantees relate to mortgages covered by governmental insurers under the Dutch national mortgage guarantee (NHG) scheme in the Netherlands. The NHG guarantees the repayment of a loan in case of a forced property sale.

ING Group Annual Report 2020 on Form 20-F177

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk| in EUR million | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2020 | | | Cover type | | | | | Value to Loan | | | |
| | | | Financial | | | | | | | | |
| Industry | Outstandings | Mortgages | Collateral | Guarantees | Other covers | No Cover | >0% - 25% | >25%-50% | >50% - 75% | >75% - <100% | ≥ 100% |
| Central Banks | 79,464 | | 23 | | | 100.0% | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% |
| Real Estate | 52,743 | 99,824 | 1,176 | 6,644 | 28,378 | 3.3% | 0.7% | 2.1% | 1.5% | 7.4% | 85.1% |
| Natural Resources | 43,209 | 1,453 | 2,192 | 23,503 | 35,739 | 24.5% | 14.4% | 13.0% | 7.2% | 15.9% | 25.0% |
| Transportation & Logistics | 27,395 | 7,251 | 182 | 7,487 | 37,220 | 18.2% | 5.1% | 2.4% | 3.9% | 11.7% | 58.8% |
| Non-Bank Financial Institutions | 22,225 | 1,139 | 10,771 | 3,766 | 46,286 | 42.9% | 3.5% | 2.3% | 3.6% | 4.6% | 43.2% |
| Food, Beverages & Personal Care | 20,594 | 8,346 | 430 | 9,473 | 33,918 | 25.0% | 5.1% | 5.9% | 9.6% | 14.0% | 40.3% |
| Services | 19,632 | 10,623 | 1,855 | 8,394 | 23,917 | 27.9% | 5.8% | 7.0% | 5.3% | 7.2% | 46.9% |
| Commercial Banks | 17,931 | 313 | 107 | 1,546 | 3,868 | 74.8% | 1.0% | 3.4% | 1.7% | 8.2% | 10.8% |
| Utilities | 16,948 | 185 | 1,011 | 4,464 | 9,723 | 42.3% | 19.1% | 5.2% | 4.3% | 3.0% | 26.0% |
| General Industries | 16,417 | 5,563 | 241 | 5,736 | 20,781 | 31.5% | 4.0% | 5.7% | 9.6% | 9.9% | 39.3% |
| Chemicals, Health & Pharmaceuticals | 14,120 | 7,558 | 194 | 4,391 | 12,332 | 26.0% | 5.7% | 3.6% | 7.7% | 13.6% | 43.5% |
| Builders & Contractors | 13,895 | 7,583 | 309 | 4,490 | 15,711 | 26.3% | 6.2% | 6.4% | 8.9% | 10.4% | 41.7% |
| Others1 | 43,696 | 11,635 | 1,938 | 15,020 | 34,484 | 40.0% | 5.1% | 4.3% | 6.1% | 10.5% | 34.1% |

Total Business Lending	388,270	161,474	20,431	94,913	302,357	43.1%	4.9%	4.2%	4.2%	7.9%	35.7%
of which Total Non-performing	8,261	3,027	230	3,803	6,915	29.1%	5.2%	5.0%	8.5%	14.2%	38.1%

1 ‘Others’ comprises industries with outstandings lower than €10 billion.

ING Group Annual Report 2020 on Form 20-F178

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk| in EUR million | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2019 | | | Cover type | | | | | Value to Loan | | | |
| | | | 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 | 53,564 | 98,238 | 1,589 | 6,869 | 20,353 | 4.0% | 0.6% | 2.1% | 1.8% | 8.7% | 82.9% |
| Central Banks | 42,087 | | 7 | | | 100.0% | | | | | |
| Non-Bank Financial Institutions | 22,593 | 1,434 | 11,339 | 5,638 | 41,084 | 30.9% | 3.7% | 5.1% | 6.5% | 7.1% | 46.6% |
| Transportation & Logistics | 29,303 | 3,293 | 169 | 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 | 130 | 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% |
| Others2 | 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 The prior period outstandings by economic sector (industry) have been updated reflecting improved classification of clients.
2 ‘Others’ comprises industries with outstandings lower than €10 billion.

ING Group Annual Report 2020 on Form 20-F179

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk| Cover values including guarantees received - Business lending portfolio (*) | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2020 | | | | Cover type | | | | | Value to Loan | | | |
| | | | | Financial | | | | | | | | |
| Region | | Outstandings | Mortgages | Collateral | Guarantees | Other covers | No Cover | >0% - 25% | >25%-50% | >50% - 75% | >75% - <100% | ≥ 100% |
| | Netherlands | 100,918 | 61,180 | 3,298 | 9,245 | 59,268 | 51.6% | 1.6% | 2.5% | 3.9% | 8.6% | 31.8% |
| | Belgium | 50,245 | 36,071 | 1,174 | 22,424 | 53,041 | 24.8% | 1.6% | 3.0% | 3.1% | 6.9% | 60.7% |
| | Germany | 35,069 | 3,233 | 118 | 2,711 | 4,788 | 80.4% | 4.0% | 2.1% | 1.4% | 1.2% | 10.9% |
| | Luxembourg | 16,332 | 8,403 | 1,671 | 2,849 | 29,875 | 46.4% | 1.5% | 6.0% | 1.5% | 3.4% | 41.1% |
| Europe | Poland | 16,176 | 9,414 | 168 | 3,720 | 25,652 | 28.3% | 4.5% | 3.8% | 7.9% | 11.3% | 44.2% |
| | United Kingdom | 13,864 | 4,659 | 1,971 | 4,028 | 9,906 | 44.6% | 16.1% | 7.2% | 3.0% | 8.3% | 20.8% |
| | Switzerland | 9,544 | 46 | 684 | 3,540 | 6,980 | 27.2% | 21.7% | 16.6% | 7.1% | 7.2% | 20.3% |
| | France | 9,513 | 7,543 | 150 | 2,021 | 4,096 | 39.2% | 5.1% | 4.1% | 2.7% | 2.0% | 46.8% |
| | Rest of Europe | 46,302 | 13,817 | 2,460 | 18,446 | 41,326 | 35.4% | 7.7% | 4.6% | 4.7% | 9.1% | 38.5% |
| America | | 40,800 | 5,967 | 6,872 | 7,442 | 40,815 | 38.3% | 7.3% | 6.0% | 5.4% | 10.2% | 32.7% |
| Asia | | 37,435 | 978 | 1,728 | 15,174 | 23,607 | 40.6% | 5.0% | 5.5% | 6.6% | 11.9% | 30.5% |
| Australia | | 10,019 | 10,153 | 83 | 1,650 | 2,273 | 26.4% | 7.7% | 2.1% | 2.4% | 4.7% | 56.8% |
| Africa | | 2,053 | 10 | 53 | 1,661 | 730 | 8.0% | 6.6% | 3.0% | 19.9% | 26.8% | 35.7% |

Total Business Lending	388,270	161,474	20,431	94,913	302,357	43.1%	4.9%	4.2%	4.2%	7.9%	35.7%
of which Non-performing	8,261	3,027	230	3,803	6,915	29.1%	5.2%	5.0%	8.5%	14.2%	38.1%

ING Group Annual Report 2020 on Form 20-F180

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk| Cover values including guarantees received - Business lending portfolio (*) | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2019 | | | | Cover type | | | | | Value to Loan | | | |
| | | | | 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%

The tables above describe the collateralisation of ING’s business lending portfolio. Breakdowns are provided by industry as well as by geographical region or market, based on the residence of the borrowers.

Broken down by industry, the largest increase in outstanding is attributable to Central Banks (€37.4 billion, 88.8%) followed by Utilities (€1.0 billion, 6.2%). The largest decrease in outstanding was observed in Natural Resources (€10.6 billion), where the total cover percentage increased.

The proportion of the business lending portfolio in Australia and Switzerland with no cover decreased substantially year-on-year, respectively from 37.3% to 26.4% and from 35.7% to 27.2% in 2019. Most industry types experienced an increase in total covers. The largest increases in outstanding in absolute figures were seen in the Netherlands (23.9%) and Germany (90.9%). The increase in Germany (€16.7 billion) was primarily due to increases in regulatory reserve deposits and nostro accounts. As these deposits and nostro accounts are not collateralised, this increase had only a small impact on total cover amounts.

ING Group Annual Report 2020 on Form 20-F181

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk

Within Retail Banking Benelux the private individuals outstanding increase accounted for €+0.7 billion, mainly

Credit quality (*)driven by the introduction of the new definition of default for mortgages. while for retail business this was €+0.4

billion in Builders & Contractors and the Services sectors. Within Retail Challengers & Growth Markets the

increase was seen for private individuals. This was mainly driven by mortgages forbearance measures granted to

Credit risk categories (*)
Non-clients in the form of payment holidays not in scope of the European Banking Association (EBA) moratoria RegularWatch ListRestructuring1 performing1guidelines and classified as in default, as well as the implementation of new definition of default for secured
Possible ratings1–191–1911–2020-22consumer lending.
Typical ratings1–1415–1718–2020-22

Deterioration in riskNot significantSignificantSignificantSignificant

Past due obligations (*) Significant interventionNot requiredNot requiredRequiredRequired
Account OwnershipFront OfficeFront OfficeFront OfficeFront OfficeRetail Banking continuously measures its portfolio in terms of payment arrears and on a monthly basis

CreditCreditdetermines if there are any significant changes in the level of arrears. This methodology is principally extended to Credit Risk ManagementRegularRegular RestructuringRestructuringloans to private individuals, such as residential mortgage loans, car loans and other consumer loans, as well as
CreditCredit Primary ManagerFront OfficeFront Officebusiness lending. An obligation is considered ‘past due’ if a payment of interest or principal is more than one day RestructuringRestructuring
Accounting provisioningStage 1/2Stage 1/2Stage 2/3Stage 3late. ING aims to help its customers as soon as they are past due by communicating to remind them of their

payment obligations. In its contact with the customers, ING aims to solve the (potential) financial difficulties by

1 More information on the Restructuring and Non-performing categories can be found in the Credit restructuring section.offering a range of measures (e.g. payment arrangements, restructuring). If the issues cannot be cured, for

example because the customer is unable or unwilling to pay, the contract is sent to the recovery unit. The facility

is downgraded to risk rating 20 (non-performing) when the facility or obligor – depending on the level at which

Credit quality outstandings (*)the non-performing status is applied - is more than 90 days past due and to risk rating 21 or 22 when the contract

in EUR million20202019is terminated.

Neither past due nor non-performing863,506831,340| Business lending past due but performing (1–90 days) | | 7,831 | 7,747 | ING has aligned the regulatory concept of non-performing with that of the definition of default. Hence, in |
| --- | --- | --- | --- | --- |
| Consumer lending past due but performing (1–90 days) | | 2,619 | 3,367 | Wholesale Banking, obligors are classified as non-performing when a default trigger occurs: |
| Non-performing | 1 | 13,497 | 11,477 | ◾ING believes the borrower is unlikely to pay; the borrower has evidenced significant financial difficulty, |
| Total | | 887,454 | 853,930 | to the extent that it will have a negative impact on the future cash flows of the financial asset. The |

following events could be seen as indicators of financial difficulty:
1 Based on lending and investment activities ◾The borrower (or third party) has started insolvency proceedings;

◾A group company/co-borrower has NPL status ;

◾Indication of fraud (affecting the company’s ability to service its debt);
Total group outstanding increased by 4% (€+33.5 billion), mainly visible in the Investment grade rating class
◾There is doubt as to the borrower’s ability to generate stable and sufficient cash flows to service (€+59.3 billion) partly offset by the decrease in the non-investment grade rating class outstanding (€-28 billion).
its debt;
Business lending past due but performing remained stable at €7.8 billion, whereas consumer lending past due
◾Restructuring of debt.
but performing decreased by 22% (€-0.7 billion). The €2.0 billion non-performing outstanding increase was

distributed as follows; Retail Benelux (€+1.1 billion) and Retail Challengers & Growth Markets (€+0.9 billion).

ING Group Annual Report 2020 on Form 20-F182

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk| ◾ING has granted concessions relating to the borrower’s financial difficulty, the effect of which is a | | | | Ageing analysis (past due but performing): Consumer lending portfolio by geographic area, outstandings | | | | 1() | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| reduction in expected future cash flows of the financial asset below current carrying amount . | | | | in EUR million | | | | 2020 | |
| ◾The obligor has failed in the payment of principal, interest or fees, the total past due amount is above | | | | Region | | Residential | Other retail | Total | |
| the materiality threshold and this remains the case for more than 90 consecutive days . | | | | | | Mortgages | | | |
| | | | | | Netherlands | 713 | 12 | 725 | |
| | | | | | Belgium | 469 | 107 | 576 | |
| Further, Wholesale Banking has an individual name approach, using early warnings indicators to signal possible | | | | | Germany | 359 | 71 | 430 | |
| future issues in debt service. | | | | | Poland | 84 | 62 | 146 | |
| | | | | Europe | Spain | 24 | 30 | | 55 |
| Ageing analysis (past due but performing): Consumer lending portfolio, outstandings | 1() | | | | Luxemburg | 7 | 18 | | 25 |
| in EUR million | | 2020 | 2019 | | France | 1 | 7 | | 7 |
| Past due for 1–30 days | | 2,129 | 2,564 | | United Kingdom | 2 | 0 | | 2 |
| Past due for 31–60 days | | 402 | 639 | | Rest of Europe | 136 | 119 | 255 | |
| Past due for 61–90 days | | 88 | 163 | America | | 0 | 0 | | 1 |
| Total | | 2,619 | 3,367 | Asia | | 4 | 0 | | 4 |
| | | | | Australia | | 388 | 6 | 394 | |
| significant. | | | | Total | | 2,186 | 433 | 2,619** | |

1 Based on consumer lending. The amount of past due but performing financial assets in respect of non-lending activities was not significant.

ING Group Annual Report 2020 on Form 20-F183

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk

Ageing analysis (past due but performing): Consumer lending portfolio by geographic area, outstandings1()Ageing analysis (past due but performing): Business lending, outstandings ()**

in EUR million2019in EUR million20202019| Region | | Residential | Other retail | Total | Past due for 1–30 days | 7,038 | 6,681 |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | | Mortgages | | | Past due for 31–60 days | 712 | 658 |
| | Netherlands | 829 | 11 | 840 | Past due for 61–90 days | 82 | 408 |
| | Belgium | 733 | 166 | 899 | Total | 7,831 | 7,747 |
| | Germany | 372 | 104 | 476 | | | |

Poland14590236| Europe | Spain | 21 | 36 | 56 | Ageing analysis (past due but performing): Business lending portfolio by geographic area, | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | Luxemburg | 3 | 24 | 27 | outstandings (*) | | | |
| | France | 2 | 10 | 13 | in EUR million | | 2020 | 2019 |
| | United Kingdom | 3 | | 3 | Region | | Total | Total |
| | Rest of Europe | 195 | 290 | 484 | | Netherlands | 770 | 751 |
| America | | 3 | | 3 | | Belgium | 912 | 1,028 |
| Asia | | 3 | | 3 | | Germany | 204 | 385 |
| Australia | | 310 | 18 | 328 | | United Kingdom | 959 | 820 |

Total	2,619	749	3,367	Europe	Spain	339	688
					France	106	639

1 Based on consumer lending. The amount of past due but performing financial assets in respect of non-lending activities was not	Luxemburg	301	340
significant.	Poland	206	279
	Rest of Europe	1,214	1,445

America2,5381,159| The consumer lending decrease in past due but performing was distributed as follows; Retail Benelux (€-0.4 | Asia | 151 | 187 |
| --- | --- | --- | --- |
| billion) and Retail Challengers & Growth Markets (€-0.3 billion). Within Retail Benelux the decrease was | Australia | 128 | 23 |
| noticeable in the 1-30 days bucket for Belgium (€-0.2 billion) mainly driven by the implementation of the new | Africa | 3 | 2 |
| | Total | 7,831 | 7,747 |

defaults, as well as the Covid-19 related payment holidays granted after which days past due counting stops, and

the Netherlands (€-0.1 billion), due to the good payment behaviour of our clients which is facilitated by strict Total past due but performing outstanding remained stable for business loans. Although, there was a similar
underwriting rules, low interest rates, low unemployment and low bankruptcy, as well as the financial aid sized but opposite difference visible in the 1-30 days bucket (€+0.4 billion) and the 61-90 days bucket (€-0.3
measures granted by the Dutch government to employees and employers because of the Covid-19 pandemic.
billion). The largest contributors in the 1-30 days bucket were seen in America (€+1.3 billion), Bermuda (€+0.2
Within Retail Challengers & Growth Markets the largest decrease was mainly witnessed in the 31-60 days bucket billion) on some larger client names. This was partially offset by the decreases witnessed in France (€-0.5 billion),
for Germany (€-0.1 billion).
Spain (€-0.3 billion) and Belgium (€-0.3 billion). The largest contributors to the decrease in the 61-90 days bucket

were Sweden (€-0.1 billion) and America (€-0.1 billion).

ING Group Annual Report 2020 on Form 20-F184

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk

Credit restructuring ()Forbearance ()**

Global Credit Restructuring (GCR) is the dedicated and independent department that deals with non-performingForbearance occurs when a client is unable to meet their financial commitments due to financial difficulties it loans and loans that hold a reasonable probability that ING will end up with a loss, if no specific action is taken.faces or is about to face and ING grants concessions towards this client. Forborne assets are assets in respect of GCR handles accounts or portfolios requiring an active approach, which may include renegotiation of terms andwhich forbearance measures have been granted.
conditions and business or financial restructuring. The loans are managed by GCR or by units in the various regions and business units.Forbearance may enable clients experiencing financial difficulties to continue repaying their debt.

ING uses three distinct statuses to categorise the management of clients with (perceived) deteriorating credit riskFor business customers, ING mainly applies forbearance measures to support clients with fundamentally sound profiles, i.e. there is increasing doubt as to the performance and the collectability of the client’s contractualbusiness models that are experiencing temporary difficulties with the aim of maximising the client’s repayment obligations:ability and therewith avoiding a default situation or helping the client to return to a performing situation.
◾Watch List: Usually, a client is first classified as Watch List when there are concerns of any potential or material deterioration in credit risk profile that may affect the ability of the client to adhere to its debtFor ING retail units, clear criteria have been established to determine whether a client is eligible for the service obligations or to refinance its existing loans. Watch List status requires more than usualforbearance process. Specific approval mandates are in place to approve the measures, as well as procedures to attention, increased monitoring and quarterly reviews. Some clients with a Watch List status maymanage, monitor and report the forbearance activities.
develop into a Restructuring status or even a Recovery status.
◾Restructuring: A client is classified in Restructuring when there are concerns about the client’s financialING reviews the performance of forborne exposures at least quarterly, either on a case-by-case (business) or on a stability, credit worthiness, and/or ability to repay, but where the situation does not require the recall orportfolio (retail) basis.
acceleration of facilities or the liquidation of collateral. ING’s actions aim to maintain the going concern status of the client by:All exposures are eligible for forbearance measures, i.e. both performing (Risk Ratings 1-19) and non-performing ◾Restoring the client’s financial stability;(Risk Ratings 20-22) exposures. ING uses specific criteria to move forborne exposures from non-performing to ◾Supporting the client’s turnaround;performing or to remove the forbearance statuses that are consistent with the corresponding EBA standards. An ◾Restoring the balance between debt and equity; andexposure is reported as forborne for a minimum of two years. An additional one-year probation period is ◾Restructuring the debt to a sustainable situation.observed for forborne exposures that move from non-performing back to performing.
◾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 toDuring 2020, ING supported clients affected by the Covid-19 pandemic among others by providing payment enter into bankruptcy. ING will prefer an amicable exit, but will enforce and liquidate the collateral orholidays. In line with European Banking Authority (EBA) Guidelines, exposures subject to these payment holidays claim under the guarantees if deemed necessary.are not classified as forborne. Refer to ‘Payment holidays’ below for more information on payment holidays.

Watch List, Restructuring and Recovery accounts are reviewed at least quarterly by the front office, GCR and the relevant credit risk management executives .

ING Group Annual Report 2020 on Form 20-F185

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk| Summary Forborne portfolio (*) | | 1 | | | | | | | | Wholesale Banking: Forborne portfolio by geographical area (*) | | | | 1 | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| in EUR million | | | 2020 | | | | 2019 | | | in EUR million | | | 2020 | | | | 2019 | |
| | | Of which: | Of which: non- | % of total | | Of which: | Of which: non- | | % of total | | | | Of which: | Of which: non- | | Of which: | Of which: non- | |
| Business Line | Outstandings | performing | performing | portfolio | Outstandings | performing | | performing | portfolio | Region | | Outstandings | performing | performing | Outstandings | performing | | performing |
| Wholesale Banking | 10,176 | 7,849 | | 2,327 | 3.2% | 4,632 | 2,699 | 1,932 | 1.7% | | Netherlands | 842 | | 700 | 142 | 822 | 410 | 412 |
| Retail Banking | 9,640 | 6,341 | | 3,299 | 2.0% | 4,861 | 2,686 | 2,175 | 1.1% | | Belgium | 255 | | 175 | 81 | 41 | 16 | 25 |
| Total | 19,816 | 14,190 | | 5,626 | 2.5% | 9,492 | 5,385 | 4,107 | 1.3% | | Germany | 845 | | 676 | 170 | 246 | 182 | 63 |
| | | | | | | | | | | | United Kingdom | 1,738 | 1,606 | | 132 | 332 | 251 | 81 |
| 1 Undrawn commitments are excluded. | | | | | | | | | | Europe | Italy | 353 | | 317 | 36 | 197 | 115 | 83 |
| | | | | | | | | | | | Ukraine | | 88 | 5 | 82 | 169 | 77 | 93 |
| | | | | | | | | | | | Norway | | 78 | 32 | 47 | 151 | 124 | 27 |
| Summary Forborne portfolio by forbearance type (*) | | | | 1 | | | | | | | Poland | 199 | | 101 | 98 | 134 | 31 | 103 |
| in EUR million | | | 2020 | | | | 2019 | | | | Rest of Europe | 2,317 | 2,144 | | 173 | 502 | 322 | 180 |
| | | Of which: | Of which: non- | % of total | | Of which: | Of which: non- | | % of total | America | | 2,338 | 1,541 | | 796 | 1,315 | 759 | 556 |
| Forbearance type | Outstandings | performing | performing | portfolio | Outstandings | performing | | performing | portfolio | Asia | | 555 | | 194 | 362 | 316 | 206 | 109 |
| Loan modification | 17,877 | 12,937 | | 4,940 | 2.3% | 8,285 | 4,800 | 3,485 | 1.1% | Australia | | 365 | | 251 | 113 | 214 | 85 | 129 |
| Refinancing | 1,939 | 1,252 | | 686 | 0.2% | 1,208 | 585 | 622 | 0.2% | Africa | | 202 | | 109 | 94 | 192 | 122 | 71 |
| Total | 19,816 | 14,190 | | 5,626 | 2.5% | 9,492 | 5,385 | 4,107 | 1.3% | Total | | 10,176 | 7,849 | | 2,327 | 4,632 | 2,699 | 1,932 |

1 Undrawn commitments are excluded.1 Undrawn commitments are excluded.

As per December 2020 ING’s total forborne assets increased by €10.3 billion (108.8%) against December 2019 to €19.8 billion, largely as a result of the Covid-19 crisis, driven by both Wholesale and Retail Banking.

Wholesale Banking (*)

As per December 2020, Wholesale Banking forborne assets amounted to €10.2 billion, which represented 3.2% of the total Wholesale Banking portfolio.

ING Group Annual Report 2020 on Form 20-F186

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk

Wholesale Banking: Forborne portfolio by economic sector ()1, 2Wholesale Banking forborne assets were mainly concentrated in Natural Resources, Food Beverages & Personal| in EUR million | | 2020 | | | 2019 | | | Care- and Transportation & Logistics. Together they accounted for 52% of the total Wholesale Banking forborne |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | Of which: | Of which: non- | | Of which: | Of which: non- | | assets and 62% of the total Wholesale Banking non-performing forborne assets. Back in 2019, the main |
| Industry* | Outstandings | performing | performing | Outstandings | performing | performing | | concentration was witnessed in Natural Resources, Transportation & Logistics and General Industries with 58% of |
| Natural Resources | 2,370 | 1,397 | | 973 | 1,587 | 909 | 678 | the total Wholesale Banking forborne. A significant increase in forborne assets was visible in the Food, Beverages |
| Transportation & Logistics | 1,453 | 1,253 | | 201 | 674 | 362 | 313 | & Personal Care industry (€+1.1 billion) during 2020, followed by Transportation & Logistics (€+0.8 billion) and |
| General Industries | 661 | 605 | | 55 | 427 | 286 | 142 | |
| Food, Beverages & Personal Care | 1,475 | 1,216 | | 260 | 375 | 227 | 148 | Natural Resources (€+0.8). |

Real Estate	529	365	165	392	217	175
Chemicals, Health & Pharmaceuticals	394	364	30	212	209	3	Retail Banking (*)

Builders & Contractors	449	370	78	195	79	116	As per year-end 2020, Retail Banking forborne assets amounted to a total of €9.6 billion, which represented 2.0%
Utilities	290	141	149	188	55	133	of the total Retail Banking portfolio.
Services	750	643	106	129	69	60

Retail	346	296	49	114	92	22	Retail Banking: Forborne portfolio by geographical area (*)			1
Automotive	768	714	54	108	72	36	in EUR million			2020			2019
Other	691	485	206	230	124	106				Of which:	Of which: non-		Of which:	Of which: non-
Total	10,176	7,849	2,327	4,632	2,699	1,932	Region		Outstandings	performing	performing	Outstandings	performing	performing
								Netherlands	4,415	3,447		968	2,212	1,367	845
1 Undrawn commitments are excluded.								Belgium	2,672	1,621	1,051		1,149	435	714
2 The prior period outstandings by economic sectors (industry) have been updated reflecting improved classification of clients.								Germany	578	410		168	425	294	131

Turkey30721889314184130

EuropePoland349112237209101109

The main concentration of forborne assets in a single country was in the United Kingdom with 17% (2019: 7%) ofRomania11459551015546

the total Wholesale Banking forborne assets and 6% (2019: 4%) of the total non-performing forborne assets.Italy491337251312

Spain221012251312| Wholesale Banking forborne assets increased by €5.5 billion compared to 2019, of which the performing | | Rest of Europe | 80 | 42 | 37 | 43 | 22 | 22 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| forborne assets increased by €5.1 billion. The increase of the performing forborne assets was visible across all | America | | 10 | 9 | 1 | 2 | 1 | 1 |
| industries and locations, as a result of the pandemic outbreak. | Asia | | 3 | 1 | 2 | 1 | | 1 |
| | Australia | | 1,041 | 399 | 643 | 354 | 201 | 153 |

Total9,6406,3413,2994,8612,6862,175

1 Undrawn commitments are excluded.

ING Group Annual Report 2020 on Form 20-F187

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk

The main concentration of forborne assets in a single country was in the Netherlands with 46% (2019: 46%) ofthe guidelines, the granting of these payment holidays did not lead to forbearance classifications. Therefore, it the total Retail Banking forborne assets and 29% (2019: 39%) of the non-performing forborne assets. Belgiumdid not automatically trigger recognition of lifetime Expected Credit Loss (ECL) either. A small number of payment followed with 28% (2019: 24%) of the total Retail Banking forborne assets.holidays were granted outside this scheme and were flagged as forborne. ING followed the EBA guidelines and when a payment holiday was provided to a customer as part of a “general payment moratorium”, ING did not Payment holidaysconsider this measure to classifiable as forbearance. EBA further extended these guidelines in the first week of Globally, 2020 has been dominated by the Covid-19 pandemic and the distressing human and economic costDecember 2020, valid until 31 March 2021, with certain extra conditions. ING decided not to make use of the thereof. The shutdown of various businesses immediately affected banking customers and as such variousextension of these guidelines and has taken a prudent decision to treat all payment holiday requests under new measures have been and continue to be implemented in order to minimise short- and long-term economic andor extended schemes (after September 2020) as stage 2 or sta ge 3 exposures.
customer impacts. In many countries, governments have adopted economic support programs (such as tax

Non-performing loans (*) advantages, unemployment regulations or guarantees) that we believe will assist ING clients in potential financial difficulty to manage through these extraordinary times. In addition, various initiatives have been taken by ING toING’s loan portfolio is under constant review. Loans to obligors that are considered more than 90 days past due grant payment holidays, (guaranteed) new money facilities etc.on material exposure are reclassified as non-performing. For commercial lending portfolios, there generally are reasons for declaring a loan non-performing prior to the obligor being 90 days past due. These reasons include, Governments in almost all Retail Banking countries have adopted measures providing for payment holidays. As ofbut are not limited to, ING’s assessment of the customer’s perceived inability to meet its financial obligations, or end-December, in line with the European Banking Association (EBA) moratoria guidelines, approximately 196,000the customer filing for bankruptcy or bankruptcy protection.
customers had been granted payment holidays under schemes that were eligible under the EBA moratoria guidelines. The total exposure of loans for which a payment holiday was granted amounts to €19.4 billion, ofThe table below represents the breakdown by industry of credit risk outstandings for lending and investment which over 55% were for customers located in the Netherlands and Belgium. At the end of 2020, 93% of grantedpositions that have been classified as non-performing.
payment holidays had expired.

The payment holiday schemes offered in the various countries differ in terms of scope, benefit duration and key conditions. Generally, underlying conditions differ per country in terms of tenor, deferment of principal and interest payments. The payment holidays are applied to business lending, mortgages and consumer loans.

The modification of contractual terms of loans subject to payment holiday arrangements does not automatically result in derecognition of the financial assets. Where applicable, the carrying amount of the financial asset has been recalculated as the present value of the renegotiated or modified contractual cash flows, discounted at the original effective interest rate and a gain or loss was recognised.

The various measures by governments and ING to alleviate the impact of Covid-19 also impact the loan classification in terms of forbearance and consequently IFRS 9 staging. In light of this, the EBA has provided guidelines that expired on 30 September 2020, which defined eligibility criteria for a payment holiday arrangement offered to a large group of customers to be classified as a “general payment moratorium”. Based on

ING Group Annual Report 2020 on Form 20-F188

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk| Non-performing Loans: outstandings by economic sector and business lines () | | | | | 1, 2 | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| in EUR million | | | | Retail Challengers | | | | |
| | Wholesale Banking | | Retail Benelux | & Growth Markets | | Corporate Line | | Total |
| Industry | 2020 | 2019 | 20202019 | 2020 | 2019 | 2020 | 20192020* | 2019 |
| Private Individuals | | 2,879 | 2,173 | 2,480 | 1,573 | | 5,359 | 3,746 |
| Natural Resources | 1,434 | 1,108 | 63 | 35 | 3653 | | 1,533 | 1,196 |
| Food, Beverages & Personal | 668 | 599 | 420 | 351138 | 168 | | 1,226 | 1,119 |
| Transportation & Logistics | 786 | 651 | 201 | 96 | 4440 | | 1,031 | 787 |
| Services | 313 | 320 | 474 | 357 | 5860 | | | 844737 |
| Builders & Contractors | 148 | 265 | 398 | 258133 | 168 | | | 680691 |
| Real Estate | 217 | 312 | 416 | 329 | 21 | 9 | | 655649 |
| General Industries | 138 | 248 | 232 | 204133 | 153 | | | 502605 |
| Non-Bank Financial Institutions | 18 | 426 | 26 | 16 | 3 | 2 | | 47444 |
| Retail | 85 | 89 | 170 | 172 | 5463 | | | 309325 |
| Other3 | 579 | 467 | 335 | 326103 | 110 | 295 | 2751,312 | 1,178 |
| Total | 4,386 | 4,487*5,614* | 4,316 | 3,203 | 2,399 | 295 | 275*13,497* | 11,477** |

1 Based on Lending and Investment outstandings.
2 The prior period outstandings by economic sector (industry) have been updated reflecting improved classification of clients.
3 Economic sectors not specified in above overview are grouped in Other.

ING Group Annual Report 2020 on Form 20-F189

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk| Non-performing Loans: outstandings by economic sectors and geographical area (*) | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| in EUR million | Region | | | | | | | | | | | | | | | | Total | |
| Industry | Netherlands | | Belgium | Germany | Poland | | Spain | United Kingdom | France | Luxemburg | Rest of Europe | America | | Asia | Australia | Africa | | 2020 |
| Private Individuals | | 1,040 | 1,760 | 712 | | 214 | 239 | | 7 | 18 | 38 | 555 | 5 | 4 | 766 | | 1 | 5,359 |
| Natural Resources | | 75 | 48 | | 0 | 20 | | | 25 | 0 | 0 | 171 | 659 | 394 | 93 | | 49 | 1,533 |
| Food, Beverages & Personal | | 324 | 165 | 80 | | 114 | 15 | | 11 | 68 | 1 | 76 | 240 | 132 | | 1 | 0 | 1,226 |
| Transportation & Logistics | | 346 | 54 | | 1 | 42 | 47 | | 18 | 0 | 3 | 110 | 40 | 352 | 18 | | 0 | 1,031 |
| Services | | 190 | 495 | | 0 | 42 | 5 | | 0 | 1 | 4 | 28 | 73 | 6 | | | 0 | 844 |
| Builders & Contractors | | 66 | 361 | | 1 | 93 | | | 0 | 0 | 4 | 107 | 47 | | | 0 | 0 | 680 |
| Real Estate | | 144 | 255 | | | 86 | 15 | | 80 | 15 | 17 | 26 | | | 16 | | | 655 |
| General Industries | | 111 | 161 | | 7 | 91 | | | 0 | 5 | 0 | 93 | 32 | 1 | | 1 | 0 | 502 |
| Non-Bank Financial | | 9 | 13 | | | 3 | | | 0 | 0 | 4 | 13 | 4 | | | 1 | | 47 |
| Institutions | | | | | | | | | | | | | | | | | | |
| Retail | | 66 | 140 | | 0 | 41 | | | 3 | 6 | 1 | 36 | | 13 | | 3 | 0 | 309 |
| Other1 | | 427 | 259 | 138 | | 116 | 0 | | 12 | 14 | 8 | 143 | 120 | 23 | | 7 | 45 | 1,312 |
| Total | | 2,799 | 3,710 | 939 | | 862 | 320 | | 156 | 126 | 81 | 1,359 | 1,220 | 925 | 905 | | 95 | 13,497 |

1 Economic sectors not specified in above overview are grouped in Other.

ING Group Annual Report 2020 on Form 20-F190

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk| Non-performing Loans: outstandings by economic sectors and geographical area (*) | | | | | | 1 | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| in EUR million | Region | | | | | | | | | | | | | | | | Total | |
| Industry | Netherlands | Belgium | | Germany | Poland | | Spain | United Kingdom | France | Luxemburg | Rest of Europe | America | | Asia | Australia | Africa | | 2019 |
| Private Individuals | | 840 | 1,271 | 585 | | 134 | 195 | | 4 | 14 | 24 | 411 | 4 | 3 | 261 | | 1 | 3,746 |
| Natural Resources | | 83 | 21 | | | 28 | | | 63 | | | 254 | 533 | 84 | 111 | | 20 | 1,196 |
| Food, Beverages & Personal | | 315 | 153 | 63 | | 117 | 1 | | 12 | 68 | 1 | 109 | 254 | 26 | | | | 1,119 |
| Transportation & Logistics | | 432 | 48 | | 1 | 31 | 47 | | 49 | | 3 | 88 | 32 | 10 | 46 | | | 787 |
| Services | | 224 | 377 | | | 36 | | | | | 3 | 49 | 42 | 6 | | | | 737 |
| Builders & Contractors | | 88 | 226 | | 1 | 103 | 1 | | | | 3 | 230 | 39 | | | | | 691 |
| Real Estate | | 237 | 225 | | | 96 | 19 | | | 7 | 28 | 27 | 8 | | | 4 | | 649 |
| General Industries | | 176 | 148 | 12 | | 89 | | | 3 | | 1 | 127 | 48 | 1 | | | | 605 |
| Non-Bank Financial | | 35 | 8 | | | 3 | 7 | | | | 5 | 14 | 107 | | 264 | | | 444 |
| Institutions | | | | | | | | | | | | | | | | | | |
| Retail | | 74 | 147 | | | 40 | | | 4 | 7 | 1 | 52 | | | | | | 325 |
| Other2 | | 464 | 239 | 44 | | 130 | | | 10 | 1 | 9 | 173 | 34 | 23 | | | 51 | 1,178 |
| Total | | 2,968 | 2,864 | 705 | | 805 | 270 | | 144 | 96 | 79 | 1,534 | 1,099 | 154 | 686 | | 71 | 11,477 |

1 The prior period outstandings by economic sector (industry) have been updated reflecting improved classification of clients.
2 Economic sectors not specified in above overview are grouped in Other.

The non-performing portfolio increased in 2020, as a result of ING’s introduction of a new definition of default (€1.0 billion) and due to developments with respect to certain large individual files. The increase is visible in all businesses and also in almost all the sectors. More specifically in Retail Benelux and in Retail Challengers & Growth, the increase is explained by private individuals, whereas in Wholesale the main increase is visible in the sector Natural Resources, in Transportation and Logistics, and in Other.

ING Group Annual Report 2020 on Form 20-F191

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk

Loan loss provisioning (*)

Since 1 January 2018, ING has recognised loss allowances based on the expected credit loss model (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 other comprehensive income (FVOCI), such as loans, debt securities and lease receivables, as well as off-balance sheet items such as undrawn loan commitments, certain financial guarantees, and undrawn committed revolving credit facilities.

IFRS 9 models (*)

The IFRS 9 models leverage the advanced internal rating -based (AIRB) models (PD, LGD, EAD), which include certain required conservatism. In order to include IFRS 9 requirements, such regulatory conservatism is removed from the ECL parameters (PD, LGD and EAD). The IFRS 9 models apply two types of adjustments to the ECL parameters: (1) to economic outlook and (2) for stage 2 and stage 3 assets only, to the lifetime horizon. The IFRS 9 model parameters are estimated based on statistical techniques and supported by expert judgement.

ING has aligned the definition of default for regulatory purposes with the definition of ‘credit -impaired’ financial assets under IFRS 9 (Stage 3). To comply with the new regulatory technical standards (RTS) and EBA guidelines, ING updated its definition of default in the first quarter of 2020. Consequently, ING updated this definition also for IFRS 9 purposes. More information can be found in section 1.6 of the Consolidated Financial Statements.

Portfolio quality (*)

The table below describes the portfolio composition over the different IFRS 9 stages and rating classes. The Stage 1 portfolio represents 91.8% (2019: 94.0%) of the total gross carrying amounts, mainly composed of investment grade, while Stage 2 makes up 6.8% (2019: 4.7%) and Stage 3 makes up 1.5% (2019: 1.3%) total gross carrying amounts, respectively.

ING Group Annual Report 2020 on Form 20-F192

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk| Gross carrying amount per IFRS 9 stage and rating class (*) | 1,2,3 | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| in EUR million | | | 12-month ECL (Stage 1) | | Lifetime ECL not credit | | Lifetime ECL credit impaired | | Total | |
| 2020 | | | | | impaired (Stage 2) | | (Stage 3) | | | |
| | | | Gross | | Gross | | Gross | | Gross | |
| Rating class | | | Carrying | Provisions | Carrying | Provisions | Carrying | Provisions | Carrying | Provisions |
| | | | Amount | | Amount | | Amount | | Amount | |
| | | 1 (AAA) | 109,734 | 3 | 46 | 0 | | | 109,780 | 3 |
| Investment grade | | 2-4 (AA) | 108,776 | 6 | 646 | 0 | | | 109,422 | 6 |
| | | 5-7 (A) | 137,901 | 27 | 797 | 1 | | | 138,698 | 28 |
| | | 8-10 (BBB) | 294,923 | 88 | 7,418 | 12 | | | 302,341 | 100 |
| | | 11-13 (BB) | 159,076 | 239 | 18,513 | 133 | | | 177,588 | 372 |
| Non-Investment grade | | 14-16 (B) | 28,335 | 208 | 23,742 | 570 | | | 52,077 | 777 |
| | | 17 (CCC) | 2,817 | 9 | 5,113 | 259 | | | 7,930 | 269 |
| Substandard grade | | 18 (CC) | | | 3,384 | 248 | | | 3,384 | 248 |
| | | 19 (C) | | | 2,323 | 254 | | | 2,323 | 254 |
| NPL grade | | 20-22 (D) | | | | | 13,398 | 3,797 | 13,398 | 3,797 |
| Total | | | 841,562 | 581 | 61,981 | 1,476 | 13,398 | 3,797 | 916,942 | 5,854 |

1 Compared to the credit risk portfolio, the differences are mainly undrawn committed amounts (€118.4 billion) not included in Credit outstandings and non-IFRS 9 eligible assets (€89.1 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’.
3 IAS 37 provisions (€74.8 million) are excluded.

ING Group Annual Report 2020 on Form 20-F193

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk| Gross carrying amount per IFRS 9 stage and rating class (*) | 1,2,3 | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| in EUR million | | | 12-month ECL (Stage 1) | | Lifetime ECL not credit | | Lifetime ECL credit impaired | | Total | |
| 2019 | | | | | impaired (Stage 2) | | (Stage 3) | | | |
| | | | Gross | | Gross | | Gross | | Gross | |
| Rating class | | | Carrying | Provisions | Carrying | Provisions | Carrying | Provisions | Carrying | Provisions |
| | | | Amount | | Amount | | Amount | | Amount | |
| | | 1 (AAA) | 75,144 | 1 | | | | | 75,144 | 1 |
| Investment grade | | 2-4 (AA) | 82,992 | 3 | 28 | | | | 83,020 | 3 |
| | | 5-7 (A) | 131,931 | 11 | 273 | | | | 132,204 | 11 |
| | | 8-10 (BBB) | 295,449 | 55 | 4,905 | 6 | | | 300,353 | 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 |
| Substandard grade | | 18 (CC) | | | 3,253 | 160 | | | 3,253 | 160 |
| | | 19 (C) | | | 2,216 | 148 | | | 2,216 | 148 |
| NPL grade | | 20-22 (D) | | | | | 10,955 | 3,275 | 10,955 | 3,275 |
| Total | | | 817,247 | 490 | 41,082 | 881 | 10,955 | 3,275 | 869,284 | 4,646 |

1 Compared to the credit risk portfolio, the differences are mainly undrawn committed amounts (€115 billion) not included in Credit outstandings and non-IFRS 9 eligible assets (€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’.
3 IAS 37 provisions (€93.3 million) are excluded.

Changes in gross carrying amounts and loan loss provisions (*)◾Stage 3 gross carrying amount increased by €2.4 billion from €11.0 billion as per 31 December 2019
The table below provides a reconciliation by stage of the gross carrying/nominal amount and allowances formainly as a result of ING’s introduction of a new definition of default (€1.0 billion) and due to
loans and advances to banks and customers, including loan commitments and financial guarantees. The transfersdevelopments with respect to certain large individual files in the first half of 2020. For further
of financial instruments represent the impact of stage transfers upon the gross carrying/nominal amount andbackground on implementation of the new definition of default, please refer to section 1.6 of the
associated allowance for ECL. This includes the net-remeasurement of ECL arising from stage transfers, forConsolidated Financial Statements;
example, moving from a 12-month (stage 1) to a lifetime (stage 2) ECL measurement basis.◾Stage 2 gross carrying amount increased by €20.9 billion from €41.1 billion as per 31 December 2019.

This is mainly caused by the Watch List trigger (€10.2 billion) and the forbearance trigger (€9.5 billion)
The net remeasurement line represents the changes in provisions for facilities that remain in the same stage.and to a lesser extent to other triggers such as 30 Days Past Due and the significant lifetime PD trigger, primarily in Wholesale Banking and Retail Market Leaders;

Please note the following comments with respect to the movements observed in the table below:

ING Group Annual Report 2020 on Form 20-F194

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk

◾Transportation & Logistics, Services, Real Estate and Food, Beverages & Personal Care were the sectors

particularly impacted by the Covid-19 pandemic, with an increase in stage 2 amounts of €4.5 billion, €3.7 billion, €3.7 billion and €2.2 billion respectively. These sectors represent 10%, 11%, 10% and 9% of the total stage 2 gross carrying amounts respectively;
◾The net re-measurement of loan loss provisions in stage 1 and stage 2 of €109 million and €450 million respectively and the transfer into lifetime ECL not credit impaired of €651 million were significantly impacted by the worsened macroeconomic outlook, including management adjustments of €269 million to reflect the risks in payment holidays and the impact of oil price decrease on the upstream Reserve Based Lending book in the US and €394m overlays to address for the delay in observed defaults as a result of the Government support measures.

Additional information on macroeconomic scenarios is included in the section “Macro-economic scenarios and sensitivity analysis of key sources of estimation uncertainty”.

ING Group Annual Report 2020 on Form 20-F195

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk| Changes in gross carrying amounts and loan loss provisions (*) | 1,2,3 | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| in EUR million | | 12-month ECL (Stage 1) | | Lifetime ECL not credit | | Lifetime ECL credit impaired | | Total | |
| | | | | impaired (Stage 2) | | (Stage 3) | | | |
| | | Gross | | Gross | | Gross | | Gross | |
| 2020 | | carrying | | carrying | | carrying | | carrying | |
| | | amount | Provisions | amount | Provisions | amount | Provisions | amount | Provisions |
| Opening balance | | 817,247 | 490 | 41,082 | 881 | 10,955 | 3,275 | 869,284 | 4,646 |
| Transfer into 12-month ECL (Stage 1) | | 9,139 | 24 | -8,899 | -200 | -240 | -18 | 0 | -194 |
| Transfer into lifetime ECL not credit impaired (Stage 2) | | -39,093 | -76 | 39,601 | 651 | -509 | -57 | 0 | 518 |
| Transfer into lifetime ECL credit impaired (Stage 3) | | -3,592 | -30 | -1,879 | -163 | 5,471 | 1,518 | 0 | 1,325 |
| Net remeasurement of loan loss provisions | | | 109 | | 450 | | 700 | | 1,259 |
| New financial assets originated or purchased | | 161,333 | 178 | | | | | 161,333 | 178 |
| Financial assets that have been derecognised | | -116,035 | -85 | -6,987 | -107 | -897 | -236 | -123,919 | -428 |
| Net drawdowns and repayments | | 12,563 | | -938 | | -181 | | 11,444 | |
| Changes in models/risk parameters | | | | | 7 | | | | 7 |
| Increase in loan loss provisions | | | 119 | | 638 | | 1,908 | | 2,666 |
| Write-offs | | | | | | -1,200 | -1,200 | -1,200 | -1,200 |
| Recoveries of amounts previously written off | | | | | | | 39 | | 39 |
| Foreign exchange and other movements | | | -28 | | -42 | | -226 | | -297 |
| Closing balance | | 841,562 | 581 | 61,981 | 1,476 | 13,398 | 3,797 | 916,942 | 5,854 |

1 At the end of December 2020, the gross carrying amounts included loans and advances to central banks (€109.2 billion), loans and advances to banks (€25.4 billion), financial assets at FVOCI (€34.0 billion), securities at amortised cost (€50.6 billion), loans and advances to customers (€599.7 billion) and contingent liabilities (credit replacements) in scope of IFRS 9 (€118.4 billion) and excludes receivables related to securities in reverse repurchase transaction (€-6.4 billion), cash collateral in respect of derivatives (€-8.3 billion), the value adjustment hedged items (€-1.0 billion), a receivable that is offset by a liquidity facility (€-2.2 billion), on-demand bank balances (€-2.2 billion) and other differences amounting to €-0.3 billion.
2 Stage 3 Lifetime credit impaired includes €3 million Purchased or Originated Credit Impaired.
3 At the end of December 2020, the stock of provisions included provisions for loans and advances to central banks (€3 million), loans and advances to banks (€23 million), financial assets at FVOCI (€14 million), securities at amortised cost (€17 million), provisions for loans and advances to customers (€ 5,779 million) and provisions for contingent liabilities (credit replacements) recorded under Provisions (€17 million).

ING Group Annual Report 2020 on Form 20-F196

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk| Changes in gross carrying amounts and loan loss provisions () | 1,2,3 | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| in EUR million | | 12-month ECL (Stage 1) | | Lifetime ECL not credit | | | Lifetime ECL credit impaired | | | Total | |
| | | | | impaired (Stage 2) | | | (Stage 3) | | | | |
| | | Gross | | | Gross | | Gross | | | Gross | |
| 2019 | | carrying | | | carrying | | carrying | | | 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 | 0 | -246 |
| Transfer into lifetime ECL not credit impaired (Stage 2) | | -21,577 | | -73 | 22,382 | 474 | -805 | | -81 | 0 | 320 |
| Transfer into lifetime ECL credit impaired (Stage 3) | | -2,210 | | -6 | -1,753 | -135 | 3,964 | 1,113 | | 0 | 972 |
| Net remeasurement of loan loss provisions | | | 0 | -77 | 0 | 36 | | 0 | 283 | 0 | 242 |
| New financial assets originated or purchased | | 180,605 | | 205 | 0 | 0 | | 0 | 0 | 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 | | 0 | -4,807 | 0 | | 1 | 0 | -19,686 | 0 |
| Changes in models/risk parameters | | | 0 | 15 | 0 | 2 | | 0 | -8 | 0 | 9 |
| Increase in loan loss provisions | | | 0 | -9 | 0 | -39 | | 01,147 | | 0 | 1,099 |
| Write-offs | | -1 | | -1 | -2 | -2 | -1,027 | -1,028 | | -1,030 | -1,031 |
| Recoveries of amounts previously written off | | | 0 | 0 | 0 | 0 | | 0 | 55 | 0 | 55 |
| Foreign exchange and other movements | | | 0 | -1 | 0 | -3 | | 0 | -41 | 0 | -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 (€51.2 billion), loans and advances to banks (€35.1 billion), financial assets at FVOCI (€32.2 billion), securities at amortised cost (€46.1 billion), loans and advances to customers (€612.6 billion) and contingent liabilities (credit replacements) in scope of IFRS 9 (€115.7 billion) and excludes receivables related to securities in reverse repurchase transaction (€-9.9 billion), cash collateral in respect of derivatives (€-10.2 billion), the value adjustment hedged items (€0.0 billion), a receivable that is offset by a liquidity facility (€-1.3 billion), on-demand bank balances (€-1.8 billion) and other differences amounting to €-0.3 billion.
2 Stage 3 Lifetime credit impaired includes €1 million Purchased or Originated Credit Impaired.
3 At the end of December 2019, the stock of provisions included provisions for loans and advances to central banks (€1 million), loans and advances to banks (€9 million), financial assets at FVOCI (€10 million), securities at amortised cost (€10 million), provisions for loans and advances to customers (€4,590 million) and provisions for contingent liabilities (credit replacements) recorded under Provisions (€25 million).

ING Group Annual Report 2020 on Form 20-F197

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk| Financial assets modified (*) | | | for some countries - unemployment), to generate alternative scenarios, to convert annual consensus information |
| --- | --- | --- | --- |
| in EUR million | 2020 | 2019 | to a quarterly frequency and to ensure general consistency of the scenarios. As the baseline scenario is consistent |
| Financial assets modified during the period | | | with the consensus view it can be considered as free from any bias. |
| Amortised cost before modification | 2,840 | 1,510 | |
| Net modification results | -144 | -35 | The relevance and selection of macroeconomic variables is defined by the ECL models under credit risk model |
| Financial assets modified since initial recognition | | | experts from Global Markets Research and risk and modelling specialists, while the second panel consists of |
| Gross carrying amount at 31 December of financial assets for which loss allowance has changed to 12- | 312 | 689 | relevant senior managers. |
| month measurement during the period | | | |

The prior period has been updated to improve consistency and comparability.

Alternative scenarios and probability weights (*)
Modifications that have been provided in 2020 under general payment moratoria (payment holidays) are notTwo alternative scenarios are taken into account; an upside and a downside scenario. The alternative scenarios included in this analysis. For details refer to the section ‘payment holidays’.
have, to a large extent, a technical character as these are based on the forecast errors of the OEGEM.

To understand the baseline level of uncertainty around any forecast, Oxford Economics keeps track of all its Macroeconomic scenarios and sensitivity analysis of key sources of estimation uncertainty (*) forecast errors of the past 20 years. The distribution of forecast errors for GDP, unemployment, house prices and
Methodology (*)share prices is applied to the baseline forecast creating a broad range of alternative outcomes. In addition, to
Our methodology in relation to the adoption and generation of macroeconomic scenarios is described in thisunderstand the balance of risks facing the economy in an unbiased way, Oxford Economics runs a survey with
section. We continue to follow this methodology in generating our probability-weighted ECL, with considerationrespondents from around the world and across a broad range of industries. In this survey the respondents put
of alternative scenarios and management adjustments supplementing this ECL where, in management's opinion,forward their views of key risks. Following the survey results, the distribution of forecast errors (that is being
the consensus forecast does not fully capture the extent of recent credit or economic events. Theused for determining the scenarios) may be skewed.

macroeconomic scenarios are applicable to the whole ING portfolio in the scope of IFRS 9 ECLs.
For the downside scenario, ING has chosen for the 90th percentile of that distribution because this corresponds
The introduction of IFRS 9, with its inherent complexities and potential impact on the carrying amounts of ourwith the way risk management earnings-at-risk is defined within the Group. The upside scenario is represented assets and liabilities, represents a key source of estimation uncertainty. In particular, ING’s reportable ECLby the 10th percentile of the distribution. The applicable percentiles of the distribution imply a 20% probability numbers are most sensitive to the forward -looking macroeconomic forecasts used as model inputs, thefor each alternative scenario. Consequently, the baseline scenario has a 60% probability weighting. Please note probability-weights applied to each of the three scenarios, and the criteria for identifying a significant increase inthat, given their technical nature, the downside and upside scenarios are not based on an explicit specific credit risk. As such, these crucial components require consultation and management judgement, and are subjectnarrative.
to extensive governance.

ING Group Annual Report 2020 on Form 20-F198

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk

Macroeconomic scenarios applied (*)uncertainty around the degree to which government support schemes will continue to limit the increase in

The provisions are based on the December consensus forecasts.unemployment. And while there is positive news about the efficacy of a vaccine, many logistical and production

challenges lie ahead.

Baseline assumptions (*)

To reflect the heightened uncertainty, the dispersion of the forward-looking distributions – from which the The December 2020 consensus anticipates global output (ING definition), after declining sharply in 2020 by 3.6%,
alternative scenarios are being derived – has been increased while maintaining a downward skew following on to bounce back to 5.0% growth in 2021 and 3.8% in 2022. The consensus reflects that near-term economic
from the outcomes of Oxford Economics’ Global Risk Survey. Specifically, the forecast bandwidths projected for weakness - resulting from a re-imposition of restrictions on mobility and firms, in order to prevent a further
the end of the forecast horizon have now been applied to the near term as well.
spread of the coronavirus – will be followed by an economic recovery underpinned by the start of a vaccination

program in many parts of the world enabling a lifting of lockdowns. This could bring world real GDP back to pre- The upside scenario – though technical in nature - implies a quick return of output to its pre-coronavirus baseline crisis levels by mid-2021. China is in the lead with the economy touching pre-crisis levels again already in the forecast and more positive medium-term prospects than envisaged in the baseline scenario. In this scenario, second half of 2020. But the US economy may not reach that level before the third quarter of 2021 and the unemployment rates quickly fall back from their peaks in 2020. In spirit it is a scenario where medical advances eurozone not before the second quarter of 2022. Lagging the economic recovery, unemployment in a number of allow for a more rapid easing of lockdowns. A faster restoration of confidence among business and households countries may continue to increase up to the third quarter of 2021 as government policy measures to preserve would result in private spending and business activity accelerating more markedly in 2021 and beyond.
jobs may end. Most countries are expected to end the forecast period with higher unemployment rates than

observed before the outbreak of the coronavirus pandemic. Further out in the forecast horizon, the The downside scenario, while being equally technical in nature, represents an even more pronounced near-term unemployment rate is generally expected to fall back as the economic recovery continues (3.8% growth of world global downturn than expected in the baseline scenario. The downside scenario reflects the risk of the output in 2022).
coronavirus pandemic not only posing significant risks to the near-term outlook but also having longer-lasting

negative effects on economic growth (e.g. because of faster de-leveraging and weaker productivity growth).
When compared to the June 2020 consensus forecast, used for the second quarter interim reporting, the

December forecast assumes a smaller shrink in 2020 global GDP (-3.6% compared to -4.8%) following a generally

Management adjustments applied this year (*) stronger than expected economic rebound. The fourth quarter re-imposition of lockdown measures to contain

the spread of the coronavirus results, compared to June, in a less strong global recovery in 2021 (5.0% versusIn times of volatility and uncertainty where portfolio quality and the economic environment are changing rapidly,

5.1%) but the likely roll-out of an effective vaccine brightens the outlook further out (global growth in 2022 3.8%models alone may not be able to accurately predict losses. In these cases management adjustments can be

versus 3.2% in June).applied to appropriately reflect ECL. Management adjustments can also be applied where the impact of the

updated macroeconomic scenarios is over- or under-estimated by the IFRS 9 models.

When compared to the consensus forecast used for the final 2019 reporting, the current outlook is substantially

different as at that time no assumptions with respect to the possible consequences of the spread of theAn overlay of €394 million was taken in December 2020 because of time lags in defaults occurring in this crisis, as

coronavirus have been incorporated. The baseline scenario at the time assumed continued world economica result of support programmes, while GDP growth forecasts were improving as 2020 is now over and more

growth close to 2.5% per year in 2020-2022.favourable 2021 GDP growth forecasts (and subsequent years) are now being taken into account in the models.

As it is expected that additional defaults as a result of the crisis will still come in, the overlay was taken which was

Alternative scenarios and risks (*)calculated using a scenario with a time lag between GDP growth forecasts deteriorating and defaults occurring.

Uncertainty around the base case is high as new cases of Covid-19 remain high in many countries and restrictions

to mobility have been tightened again, increasing the risk that the economic recovery falls back. There is also

ING Group Annual Report 2020 on Form 20-F199

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk

As mentioned above, per the guidance from EBA, Covid-19 related payment holidays granted until SeptemberIn the table below the Real GDP is presented in percentage year-on-year change, the unemployment in 2020 have not automatically been classified as forbearance, and hence, have not automatically triggeredpercentage of total labour force and the house price index (HPI) in percentage year-on year change.
recognition of lifetime ECL in stage 2. Looking forward, it is expected that the phasing out of the support measures in the course of 2021 could lead to more business insolvencies and unemployment. This could lead toWhile the table does give a high-level indication of the sensitivity of the outputs to the different scenarios, it does more clients that have currently taken payment holidays getting into financial difficulties and to higher levels ofnot provide insight into the interdependencies and correlations between different macroeconomic variable defaults. To the extent ING believes that this elevated risk is not yet covered in the IFRS 9 models, a managementinputs. On total ING level, the unweighted ECL for all collective provisioned clients in the upside scenario was adjustment has been recognised.€2,770 million, in the baseline scenario €3,082 million and in the downside scenario €4,362 million compared to

€3,276 reportable collective provisions currently accounted for (including time lag overlay, excluding other This management adjustment has been recognised for SME and mid-corporate portfolios as these portfolios aremanagement adjustments).
considered to be most at risk and have the highest percentage of customers requesting payment holidays compared to other portfolios. ING has recognised a management adjustment of €85 million in the NetherlandsWhen compared to the sensitivity analysis of 2019 the macroeconomic inputs are substantially different , as at and €131 million in Belgium as they are the largest SME portfolios and not significantly impacted bythat time no assumptions with respect to the possible consequences of the spread of the coronavirus had been macroeconomic forecasts updates. Furthermore, a management adjustment of €28 million has been recognisedincorporated. The macroeconomic inputs used in the 2020 sensitivity analysis reflect that, after declining sharply in Australia for the mortgage portfolio which is also a portfolio where relative many payment holidays arein 2020, a bounce back in Real GDP is expected in 2021 and 2022. Furthermore the downside scenario has an granted and which is considered at risk.increased downward skew, reflecting the continuing uncertainty related to the impact of Covid-19.

In addition, as the oil price remains volatile, as well as exposed to the impact of the Covid-19 crisis and subject to political decisions, ING recognised a management adjustment for the upstream oil book of €25 million.

Analysis on sensitivity (*)

The table below presents the analysis on the sensitivity of key forward -looking macroeconomic inputs used in the ECL collective-assessment modelling process and the probability-weights applied to each of the three scenarios.
The countries included in the analysis are the most significant geographic regions, in terms of both gross contribution to reportable ECL, and sensitivity of ECL to forward -looking macroeconomics. Accordingly, ING considers these portfolios to present the most significant risk of resulting in a material adjustment to the carrying amount of financial assets within the next financial year. ING also observes that, in general, the Wholesale Banking business is more sensitive to the impact of forward-looking macroeconomic scenarios.

The purpose of the sensitivity analysis is to enable the reader to understand the extent of the impact on model based reportable ECL from the upside and downside scenario. The table does not include any management adjustments, except for the overlay for time lag in defaults of €394 million as at 31 December 2020.

ING Group Annual Report 2020 on Form 20-F200

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk

Sensitivity analysis as at December 2020 ()| | | 2021 | 2022 | 2023Un-weighted | Probability- | Reportable ECL | | Sensitivity analysis as at December 2019 () | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | ECL (Eur mln) | weighting | (Eur mln) | 1 | | | | | Un-weighted | Probability- | Reportable ECL | |
| Netherlands | Real GDP | 5.3 | 3.3 | 2.8 | | | | | | 2020 | 2021 | 2022*ECL (Eur mln)* | weighting | (Eur mln) | 1 |
| | Unemployment | 5.1 | 3.9 | 3.0 | 383 | 20% | | Netherlands | Real GDP | 2.3 | 3.5 | 3.2 | | | |
| Upside scenario | HPI | 8.1 | 6.3 | 4.7 | | | | | Unemployment | 2.8 | 2.4 | 2.3 | 370 | 20% | |
| | Real GDP | 2.8 | 2.9 | 1.9 | | | | Upside scenario | HPI | 14.1 | 11.3 | 2.9 | | | |
| Baseline Scenario | Unemployment | 5.8 | 5.2 | 4.7 | 441 | 60% | 468 | | Real GDP | 1.4 | 1.5 | 1.6 | | | |
| | HPI | -1.9 | -1.6 | 4.5 | | | | Baseline Scenario | Unemployment | 3.6 | 3.9 | 4.2 | 416 | 60% | 428 |
| | Real GDP | -4.9 | 4.8 | 1.4 | | | | | HPI | 3.3 | 2.9 | 2.8 | | | |
| Downside scenario | Unemployment | 7.7 | 7.8 | 7.9 | 636 | 20% | | | Real GDP | -0.7 | -0.9 | 0.5 | | | |
| | HPI | -12.3 | -11.0 | 4.3 | | | | Downside scenario | Unemployment | 5.0 | 6.3 | 7.1 | 520 | 20% | |
| Germany | Real GDP | 7.6 | 3.3 | 1.5 | | | | | HPI | -7.5 | -7.0 | 2.7 | | | |
| | Unemployment | 3.0 | 2.2 | 1.8 | 504 | 20% | | Germany | Real GDP | 2.6 | 2.8 | 1.8 | | | |
| Upside scenario | HPI | 3.5 | 8.3 | 6.6 | | | | | Unemployment | 2.4 | 1.7 | 1.4 | 458 | 20% | |
| | Real GDP | 3.9 | 3.4 | 1.6 | | | | Upside scenario | HPI | 9.7 | 7.0 | 6.4 | | | |
| Baseline Scenario | Unemployment | 4.1 | 3.5 | 3.5 | 541 | 60% | 558 | | Real GDP | 0.8 | 1.1 | 1.3 | | | |
| | HPI | 0.4 | 4.8 | 3.1 | | | | Baseline Scenario | Unemployment | 3.2 | 3.2 | 3.3 | 495 | 60% | 502 |
| | Real GDP | -2.4 | 3.5 | 1.3 | | | | | HPI | 6.1 | 3.5 | 2.9 | | | |
| Downside scenario | Unemployment | 5.6 | 5.3 | 5.6 | 662 | 20% | | | Real GDP | -1.2 | -1.7 | 0.5 | | | |
| | HPI | -3.5 | 0.8 | -0.9 | | | | Downside scenario | Unemployment | 4.3 | 4.8 | 5.2 | 567 | 20% | |
| Belgium | Real GDP | 6.9 | 3.3 | 2.4 | | | | | HPI | 2.5 | -0.3 | -1.1 | | | |
| | Unemployment | 7.3 | 6.2 | 5.8 | 494 | 20% | | Belgium | Real GDP | 2.3 | 2.6 | 2.0 | | | |
| Upside scenario | HPI | -0.2 | 4.2 | 4.8 | | | | | Unemployment | 5.5 | 5.4 | 5.3 | 323 | 20% | |
| | Real GDP | 4.5 | 3.3 | 2.3 | | | | Upside scenario | HPI | 5.1 | 4.2 | 4.3 | | | |
| Baseline Scenario | Unemployment | 7.5 | 6.3 | 6.3 | 540 | 60% | 559 | | Real GDP | 1.1 | 1.2 | 1.3 | | | |
| | HPI | -1.7 | 3.5 | 3.8 | | | | Baseline Scenario | Unemployment | 5.8 | 5.9 | 6.1 | 350 | 60% | 357 |
| | Real GDP | -0.4 | 4.0 | 2.2 | | | | | HPI | 3.5 | 3.4 | 3.4 | | | |
| Downside scenario | Unemployment | 9.4 | 9.1 | 8.8 | 681 | 20% | | | Real GDP | -0.4 | -0.2 | 1.0 | | | |
| | HPI | -3.6 | 2.5 | 2.9 | | | | Downside scenario | Unemployment | 7.5 | 8.4 | 8.4 | 411 | 20% | |
| United States | Real GDP | 5.6 | 4.1 | 3.8 | | | | | HPI | 1.5 | 2.6 | 2.4 | | | |
| | Unemployment | 5.0 | 3.0 | 1.9 | 93 | 20% | | United States** | Real GDP | 2.6 | 4.1 | 3.8 | | | |
| Upside scenario | HPI | 6.2 | 9.4 | 9.3 | | | | | Unemployment | 2.6 | 1.7 | 1.5 | 74 | 20% | |
| | Real GDP | 4.0 | 3.2 | 2.5 | | | | Upside scenario | HPI | 5.0 | 8.0 | 8.1 | | | |
| Baseline Scenario | Unemployment | 6.0 | 4.7 | 4.1 | 134 | 60% | 189 | | Real GDP | 1.8 | 1.8 | 1.9 | | | |
| | HPI | 4.3 | 4.1 | 4.0 | | | | Baseline Scenario | Unemployment | 3.7 | 3.7 | 3.8 | 127 | 60% | 144 |
| | Real GDP | -6.3 | 6.8 | 1.9 | | | | | HPI | 2.6 | 2.6 | 2.8 | | | |
| Downside scenario | Unemployment | 8.5 | 7.9 | 7.6 | 448 | 20% | | | Real GDP | -0.6 | -0.5 | 0.3 | | | |
| | HPI | 1.2 | -1.9 | -2.3 | | | | Downside scenario | Unemployment | 5.2 | 6.5 | 7.1 | 267 | 20% | |
| 1 Sensitivity does only include the effect of time lag overlay, other management adjustments are excluded. | | | | | | | | | HPI | 0.1 | -3.1 | -3.4 | | | |

1 Excluding management adjustments.

ING Group Annual Report 2020 on Form 20-F201

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Credit risk

The setting of PD threshold bandings requires management judgement, and is a key source of estimation uncertainty. To demonstrate the sensitivity of the ECL to these PD thresholds bandings, analysis was run on all Criteria for identifying a significant increase in credit risk (*)collectively-assessed assets, which assumed all assets (stage 1 and 2) were below the threshold, and apportioned
All assets and off-balance sheet items that are in scope of IFRS 9 impairment and which are subject to collectivea 12-month ECL. On the same asset base, analysis was run which assumed all performing assets were above the ECL assessment are allocated a 12-month ECL if deemed to belong in stage 1, or a lifetime ECL if deemed tothreshold, and apportioned a lifetime ECL. This gave rise to hypothetical collective-assessment ECLs of €1,242 belong in stages 2 and 3. An asset belongs in stage 2 if it is considered to have experienced a significant increasemillion (2019: €866 million) and €3,552 million (2019: €2,665 million) respectively. Please note that in this in credit risk since initial origination or purchase. The stage allocation process involves an asset’s derived scenarioanalysis all other ECL risk parameters (except for the stage) were kept equal.
weighted average PD being assessed against a set of PD threshold bandings, which determines the appropriate staging and ECL. Stage 2 is triggered when either a threshold for absolute change in lifetime PD or relative changeIt should be noted that the lifetime PD thresholds are not the only drivers of stage allocation. An asset can in lifetime PD is hit. The thresholds for the absolute change in lifetime PD vary between 75bps for Retailchange stages as a result of being in arrears, being on a Watch List or being forborne, among other triggers. Refer portfolios, 100bps for Wholesale and 250bps for SMEs, based on the characteristics of the specific portfolio. Weto section 1.7.8 of Note 1 ‘Basis of preparation and accounting policies’ for an exhaustive list. Furthermore, this are however in a transition phase to determine this on a portfolio level, which has been implemented for a fewanalysis is rudimentary in that other parameters would change when an asset changes stages.

Turkish and Polish models which already have deviating lifetime PD thresholds. The threshold for the relative change in lifetime PD is inversely correlated with the PD at origination; the higher the PD at origination, the lower the threshold. Despite this, the relative threshold is punitive for investment grade assets while the absolute threshold primarily affects speculative grade assets. On ING Group level, the total ECL collective-assessment for performing assets is €1,678 million (2019: €1,291 million) (without taking management adjustments into account).

ING Group Annual Report 2020 on Form 20-F202

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Market risk

Market riskGovernance (*)

Introduction (*)A governance framework has been established defining specific roles and responsibilities of business management units, market risk management units, and internal approval bodies per activity.
Market risk is the risk that movements in market variables, such as interest rates, equity prices, foreign exchange

rates, credit spreads and real estate prices negatively impact the bank’s earnings, capital, market value or Supervision of market risk falls under the responsibility of the MBB and is delegated to the ALCO function, where
liquidity position. Market risk either arises through positions in banking books or trading books. The banking ALCO Bank is the highest approval authority and sets the market risk appetite. ALCO Bank monitors ING’s
book positions are intended to be held for the long term (or until maturity) or for the purpose of hedging other adherence to the risk appetite for market risk and sets additional limits where appropriate. These limits are
banking book positions. The trading book positions are typically held with the intention of short-term trading or cascaded through the organisation through lower level ALCOs. This ALCO structure facilitates top -down risk
in order to hedge other positions in the trading book. This means that financial instruments in the trading books management, limit setting, and the monitoring and control of market risk.
should be free of trade restrictions. Policies and processes are in place to monitor the inclusion of positions in

either the trading or banking book as well as to monitor the transfer of risk between the trading and banking The monitoring and control of market risk is the responsibility of the Financial Risk (FR) department and Financial
books.
Institutions – Financial Markets (FI-FM) Risk. FR and FI-FM Risk are the designated departments of the second line

of defence that report to the CRO function and are responsible for the design and execution of the bank’s market
ING recognises the importance of sound market risk management and bases its market risk management risk and counterparty credit risk management functions in support of the ALCO function. FR focuses on the
framework on the need to identify, assess, control and manage market risks. The approach consists of a cycle of market risks in the banking books, whereas FI-FM Risk is responsible for counterparty credit risk and market risks
five recurring activities: risk identification, risk assessment, risk control, risk monitoring and risk reporting.
resulting from the Financial Markets trading books. FR and FI-FM Risk are responsible for determining adequate

policies and procedures for actively managing market risk in the banking and trading books and for monitoring (*)
ING’s compliance with these guidelines.
◾Risk identification is a joint effort of the first and second lines of defence. The goal of risk identification is

to detect potential new risks and any changes in known risks. See ‘Risk Governance’ for more on our FR and FI-FM Risk also maintain a limit framework in line with ING’s Risk Appetite Framework. The businesses are
‘three lines of defence’ governance model;
responsible for adhering to limits that are ultimately approved by the ALCO Bank. Limit excesses are reported to
◾Identified risks are assessed and measured by means of various risk metrics to determine the importance senior management on a timely basis and the business is required to take appropriate actions based on
of the risk to ING and subsequently to identify the control measures needed;
management decisions. To adhere to the established limit framework, ING implements hedging and risk
◾Risk control measures used by ING include policies, procedures, minimum standards, limit frameworks, mitigation strategies that range from the use of traditional market instruments, such as interest rate swaps, to
buffers and stress tests;
more sophisticated hedging strategies to address a combination of risk factors arising at the portfolio level.
◾Risk monitoring occurs to check if the implemented risk controls are executed, complied with across the

organisation, and are effective; and The organisational structure facilitates top-down risk management by recognising that risk taking and risk
◾Market risk management results and findings are reported to the necessary governing departments and management to a large extent occur at the regional/local level. Bottom-up reporting from regional/local units to
approval bodies.
head office units allows each management level to fully assess the market risks relevant at the respective levels.

ING Group Annual Report 2020 on Form 20-F203

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Market risk

Several committees govern communicati on between the parties involved in market risk management , such asTo arrive at the economic capital for market risk, a simulation-based model is used which includes scaling to the MRMC and CTRC. These committees have a functional reporting line to ALCO Bank. The Market Risk Modelrequired confidence level and holding period. In determining this scaling factor, other factors are also taken into Committee (MRMC) is the dedicated authority within ING for the approval of all trading and banking risk models,account like the occurrence of large market movements (events).
methodologies and parameters related to market risk. The Trading Pricing Model Committee (TPMC) approves pricing models for trading and banking books. Financial Risk and FI-FM Risk departments provide systematic riskEmbedded options, e.g. the prepayment option and offered rate option in mortgages in the banking books, result reporting to the EB and MBB, the ALCO Bank and the senior executive management of related business functions.in non-linear interest rate risk in the banking books. Embedded options are economically hedged using a delta-

hedging methodology, leaving the mortgage portfolio exposed to convexity risk, volatility risk and model risk. For The FI-FM risk management framework governs the boundary between trading books and banking books. Itthe calculation of economic capital for this non-linear interest rate risk, ING performs a Monte Carlo simulation.
defines the activities ING considers to be trading according to a regulatory definition and for own funds requirement purposes. Trading activity is systematically reviewed and positions are assessed against theReal estate price risk includes the market risks in both the real estate investment and the development portfolio mandates jointly by the first and second lines of defence. As specified in the framework, the transfer of risk orof the ING Wholesale Banking business line. The economic capital for real estate price risk is calculated by the transfer of positions between banking and trading books is in principle not allowed. In exceptional casesstressing the underlying market variables.
when a re-designation is deemed necessary, the re-designation should be approved by senior management.
While aggregating the different economic capital market risk figures for the different portfolios, diversification The following sections elaborate on the various elements of the risk management framework for:benefits (based on stressed correlations) are taken into account as it is not expected that all extreme market ◾Market risk economic capital (trading and banking books);movements will appear at the same moment.
◾Market risks in banking books; and ◾Market risks in trading books.Market risk in banking books (*)

ING makes a distinction between the trading and banking (non-trading) books. Positions in banking books

Market risk economic capital (trading and banking books) originate from the market risks inherent in commercial products that are sold to clients, Group Treasury Economic capital for market risk is the economic capital necessary to withstand unexpected value movementsexposures, and from the investment of our own funds (core capital). Both the commercial products and the due to changes in market variables and model risk.products used to hedge market risk exposures in these products are intended to be held until maturity, or at

least for the long term.
Economic capital for market risk is calculated for exposures both in trading portfolios and banking portfolios and includes interest rate risk, credit spread risk, equity price risk, foreign exchange rate risk, customer behaviourRisk transfer (*) risk, real estate risk, model risks and pension risk. Economic capital for market risk is calculated using internallyAn important element of the management of market risks in the banking book is the risk transfer process. In this developed methodologies with a 99.9% confidence level and a horizon of one year.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 For the trading books and the linear interest rate risk and equity investments in the banking books, the Value atmanagement process of market risks in the banking books:
Risk (VaR) is taken as a starting point for the economic capital calculations for market risk. The VaR is measured at a 99% confidence level with a one-day holding period.

ING Group Annual Report 2020 on Form 20-F204

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Market risk

Risk measurement (*)
(*)The main concepts and metrics used for measuring market risk in the banking book are described below per risk

Risk transfer type.

Interest rate risk in banking book (*)

Interest rate risk in the banking book is defined as the exposure of a bank’s earnings, capital, and market value to adverse movements in interest rates originated from positions in the banking book.

Governance (*)

The management of interest rate risk follows the Interest Rate Risk in the Banking Book (IRRBB) framework as approved by ALCO Bank. This framework describes roles, responsibilities, risk metrics, and the policies and procedures related to interest rate risk management. Furthermore ALCO Bank sets the risk appetite for interest rate risk, which is then translated into limits for the interest rate risk metrics.

As a result of this framework, ING centralises interest rate risk management from commercial books (that capture the products sold to clients) to globally managed interest rate risk books. This enables a clear demarcation between commercial business results and results based on unhedged interest rate positions.

ING distinguishes between three types of activities that generate interest rate risk in the banking book:
◾Investment of own funds;
◾Commercial business; and ◾Group Treasury exposures including strategic interest rate positions.

Below the three activities are described in more detail:

Group Treasury is responsible for managing the investment of own funds (core capital). Capital is invested for longer periods to keep earnings stable. The main objective is to maximise the economic value of the book and to generate adequate and stable annual earnings within the risk appetite boundaries set by ALCO Bank.

Commercial activities can result in linear interest rate risk, for example, when re-pricing causes the tenors of assets to differ from those of liabilities. Also, interest rate risk can arise from customer behaviour and/or convexity risk, depending on the nature of the underlying product characteristics. customer behaviour risk is ING Group Annual Report 2020 on Form 20-F205

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Market risk

defined as the potential future value loss due to deviations in the actual behaviour of clients versus the modelledLinear risk transfers take place from commercial business books to the treasury book (Group Treasury), if behaviour towards the embedded options in commercial products. General sources of customer behaviour risk,necessary, by using estimations of customer behaviour. The originating commercial business is ultimately amongst others, include the state of the economy, competition, changes in regulation, legislation and tax regime,responsible for estimating customer behaviour, leaving convexity risk and (unexpected) customer behaviour risk and developments in the housing market. Since these risk factors cannot be (fully) mitigated, ING holds capital towith the commercial business. Risk measurement and the risk transfer process take place on a monthly basis.
be able to absorb possible losses as a result of unforeseen customer behaviour.However, if deemed necessary additional risk transfers can take place, for instance due to volatile markets .

From an interest rate risk perspective, commercial activities can typically be divided into three main productThe commercial business manages the convexity risk that is the result of products that contain embedded types: savings and demand deposits, mortgages, and loans.options, like mortgages. Here the convexity risk is defined as the optionality effects in the value due to interest ◾Savings and demand deposits are generally invested so as to hedge their value and minimise therate changes, excluding the first -order effects. In some cases, convexity risk is transferred from the commercial sensitivity of the margin to market interest rates. Interest rate risk can arise when there is a lag betweenbooks to treasury books using cap/floor contracts.
savings rate adjustments and the adjustments experienced through market rates or when market rate changes cannot be passed on to clients. Interest rate risk is modelled based on the stability of theIn the following sections, the interest rate risk exposures in the banking books are presented. ING uses risk deposit and the pass-through rate. This takes into account different elements, such as pricing strategies,measures based on both an earnings and a value perspective. Net interest income (NII)-at-risk is used to provide volume developments and the level and shape of the yield curve. Savings volumes are typically assumedthe earnings perspective and the net present value (NPV)-at-risk and basis point value (BPV) figures provide the to be relatively stable and not sensitive to rate changes;value perspective. Please note that corrective management actions are not taken into account in these figures ◾Interest rate risk for mortgages arises through prepayment behaviour. In modelling this risk, bothalthough price adjustments are included in the earnings risk measure.
interest rate dependent pre -payments and constant prepayments are considered. Next to the dependence on interest rates, modelled prepayments may include other effects such as loan-to-value,During 2020, the following refinements to the risk measurement for IRRBB were made:
seasonality and the reset date of the loan. In addition, the interest sensitivity of embedded offered rate◾Review of the risk appetite for IRRBB;
options is considered; and◾Further insights in sub-risk types such as vega optionality risk, tenor basis risk and a client behaviour risk ◾Wholesale Banking loans typically do not experience interest rate dependent prepayment behaviour;earnings and value metrics these portfolios are matched-funded taking the constant prepayment model into account. They typically◾Annual review of the interest rates scenarios used for calculating NII-at-Risk and NPV-at-Risk;
do not contain significant convexity risk. Wholesale banking loans can have an all-in rate floor or a floor◾Savings/ current account model updates and prepayment model updates for market developments; and on a reference rate .◾Specific Covid-19 related stress test.

Customer behaviour in relation to mortgages, loans, savings and demand deposits is modelled, based onNet interest income (NII) at Risk (*) extensive research. Per business unit and product type, exposures are typically segmented into differentNII-at-Risk measures the impact of changing interest rates on net interest income (before tax) of the banking portfolios based on expected client behaviour. For each of the segments, model parameters for example for thebook with a time horizon of one year (expanding to a horizon of three years). This excludes credit spread pass-through rate and customer behaviour are determined based on historical data and expert opinion. Modelssensitivity and fees. The NII-at-Risk figures in the tables below reflect a parallel interest rate shock under the are backtested and updated when deemed necessary in an annual procedure. Model parameters and theassumption of the balance sheet development in line with the dynamic plan with a time horizon of one year. As resulting risk measures are approved by (local) ALCO.well as parallel scenarios, IRRBB monitoring and management includes the impact of non-parallel scenarios and
the impact over a longer horizon. NII-at-Risk asymmetry between the downward and upward ramped scenarios is

ING Group Annual Report 2020 on Form 20-F206

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Market risk

primarily caused by the asymmetry between pricing behaviour of mortgages and savings products due toYear-on-year variance analysis (*)

embedded options and pricing constraints.The change in NII-at-Risk is primarily visible for Retail Challengers & Growth Markets and Wholesale Banking. This

is driven by balance sheet developments, the low interest rate environment and savings model updates for

NII-at-Risk banking books per business - year one ()market developments mainly in ING Germany, ING Spain and ING Poland. The annual update of the interest rate
in EUR million20202019* scenarios also led to a limited increase in the NII-at-Risk for year one.
Ramped, unflooredRamped, unfloored

parallel▼parallel▲parallel▼parallel▲

Net Present Value (NPV) at Risk (*)

By business

Wholesale Banking135-83-1212NPV-at-Risk measures the impact of changing interest rates on value. The NPV-at-Risk is defined as the outcome

Retail Banking Benelux-114105-9140of an instantaneous increase and decrease in interest rates from applying currency-specific scenarios. The NPV-

Retail Challengers & Growth Markets-52-14-3-3at-Risk asymmetry between the downward and upward shock is mainly caused by convexity risk in the mortgage

Corporate Line Banking-5252-3030and savings portfolio. The NPV-at-Risk figures are also calculated using the updated interest rate scenarios.

Total-8360-13679

EUR ramped is at +/- 100bps in 1 year The full value impact cannot be directly linked to the financial position or profit or loss account, as fair value USD ramped is at +/- 120bps in 1 year movements in banking books are not necessarily reported through the profit or loss 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 rat es throughout the remaining maturity of the portfolio.
The NII-at-Risk is primarily driven by the difference in sensitivity of client liabilities, mainly savings, versus the

sensitivity of client assets and investments to rate changes. The investment of own funds only impacts the earnings sensitivity marginally, as only a relatively small part has to be (re)invested within the one-year horizon.NPV-at-Risk banking books per business () in EUR million20202019| NII-at-Risk banking book per currency - year one () | | | | | | unfloored | | unfloored | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| in EUR million | | 2020 | | 2019 | | parallel▼ | parallel▲ | parallel▼ | parallel▲ |
| | Ramped, unfloored | | Ramped, unfloored | | By business | | | | |
| | parallel▼ | parallel▲ | parallel▼ | parallel▲ | Wholesale Banking | -68 | 171 | 182 | 400 |
| By currency | | | | | Retail Banking Benelux | -1,425 | 541 | -1,431 | 268 |
| Euro | -146 | 120 | -134 | 65 | Retail Challengers & Growth Markets | -506 | -17 | -259 | -452 |
| US Dollar | 41 | -36 | 25 | -24 | Corporate Line Banking | 1,946 | -1,820 | 1,819 | -1,731 |
| Other | 23 | -25 | -27 | 39 | Total | -54 | -1,125 | 310 | -1,514 |
| Total | -83 | 60 | -136 | 79** | The prior period has been updated to improve consistency and comparability. | | | | |
| EUR ramped is at +/- 100bps in 1 year | | | | | EUR +/- 100bp shock scenario | | | | |
| USD ramped is at +/- 120bps in 1 year | | | | | USD +/- 120bp shock scenario | | | | |

ING Group Annual Report 2020 on Form 20-F207

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Market risk

Year-on-year variance analysis(*)The ICE Benchmark Administration, as the administrator of LIBOR, issued a consultation with respect to its plans

The change in NPV-at-Risk is primarily visible for Retail Challengers & Growth Markets and Wholesale Banking.for the cessation for most LIBOR rates at the end of 2021, with an 18 month extended period of publication for

This is driven by balance sheet developments, the low interest rate environment and savings model updates forUSD LIBOR to support legacy products. ING is in the process of amending or preparing to amend contractual

market developments mainly in ING Germany, ING Spain and ING Poland. Main sensitivity can be attributed toterms in response to this, and there is still some uncertainty over the timing and the methods of transition. ING is

Corporate Line, in which core capital is represented in line with the regulations, assuming a zero duration.proactively reaching out to industry participants, counterparties and clients to create awareness and offer

Corporate Line Banking has been included retroactively in the measurement of NPV-at-Risk since 2019 for bettersupport on the ongoing transition.

alignment with regulatory IRRBB measurements.

During 2020 the financial sector issued a number of interim targets, guidance papers and other initiatives to help

IBOR transition (*)phase in key components of this transition. For example significant progress was made to address deficiencies in

existing derivative fallback clauses. ISDA issued an IBOR fallbacks supplement that sets out how the transition to Interbank offered rates, such as EURIBOR and LIBOR, are widely used as benchmarks to set interest rates across a alternative benchmark rates (e.g. SOFR, SONIA) will be accomplished. The effect of the supplement is to create broad range of financial products and contracts. In line with recommendations from the Financial Stability Board, clear fallback rates that will apply on the permanent discontinuation of certain key IBORs. From the effective date a fundamental review and reform of the major interest rates benchmarks has been undertaken. For the of 25 January 2021, all new derivatives that reference these ISDA definitions include these robust fallbacks. The eurozone, this led to a reform of the EURIBOR benchmark rate and development of €STR as the recommended Group and many other parties have also adhered to a protocol to implement these fallbacks into derivative new nearly risk-free-rate (RFR) to replace EONIA. For LIBOR benchmarks, the reform will include replacing current contracts that were entered into before the effective date. If both counterparties adhere to the protocol, these LIBOR rates with alternative, nearly risk-free rates. For example RFR Working Groups in the US and UK have new fallbacks will be automatically implemented into existing derivative contracts. For loans, various recommended to replace USD LIBOR and GBP LIBOR with SOFR and SONIA respectively when these LIBOR rates recommendations have been made to help drive consistent use of robust fallbacks for new contracts. These cease to exist. This process is at different stages, and is progressing at different speeds, across several major industry recommendations are incorporated into our contract templates used for new lending.
currencies.

Public authorities have also recognised that certain LIBOR contracts do not contain any alternatives, contain The reform of EURIBOR was completed in 2019 and consisted of a change to the underlying calculation inappropriate alternatives, or cannot be renegotiated or amended prior to the expected cessation of LIBOR. In methodology. The Belgian Financial Services and Markets Authority granted authorisation with respect to response, the European Commission announced that it intends to implement legislation that gives market EURIBOR under the EU Benchmarks Regulation. This allows market participants to continue to use EURIBOR after participants the confidence to transition these ‘tough legacy’ contracts to the recommended benchmark 1 January 2020 for both existing and new contracts. ING expects that EURIBOR will continue to exist as a replacement without the fear of legal repercussions. In addition, the UK government announced that it would benchmark rate for the foreseeable future. In addition, the Working Group on Euro Risk-Free Rates is continuing grant powers to the FCA to enable continued publication of a ‘’synthetic’’ LIBOR using a different methodology its work on developing recommended fallback rates based on the €STR for EURIBOR contracts.
and inputs, and therefore could reduce disruption to any holders of these tough legacy contracts. However, there

is no certainty as to whether the FCA will exercise these powers or what form the revised methodology would EONIA will cease to be published by 3 January 2022 and the European Money Markets Institute (EONIA’s take, and the FCA has consequently encouraged users of LIBOR to renegotiate or amend as many contracts as administrator) has indicated that EONIA cannot be used in any contracts that may be outstanding as of 1 January possible before the relevant LIBOR. There is no guarantee that regulators will implement measures to address 2022. The transition of existing contracts and products that still rely on EONIA is ongoing. As both EONIA and such legacy contracts, or that such measures will be effective in avoiding business disruption or contractual €STR are overnight rates and the spread between them was established in 2019 this transition is considered less disputes.
complex than that for LIBOR.

ING Group Annual Report 2020 on Form 20-F208

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Market risk

ING Group has significant exposures to IBORs on its financial instruments that will be reformed as part of thisNon derivative Financial instruments to transition to alternative benchmarks

market-wide initiative. The potential discontinuation of interest rate benchmarks, or changes in the methodology Financial Liabilities non-derivative in EUR millionFinancial Assets non-derivative or manner of administration of any benchmark, could result in a number of risks for ING Group, its customers,
Carrying valueCarrying value and the financial services industry more widely. These risks include legal risks in relation to changes required to 2020(in EUR mln)(in EUR mln)
documentation for new and existing transactions that may be required. Financial risks (predominantly limited toBy benchmark rate
interest rate risk) may also arise from any changes in the valuation of financial instruments linked to benchmarkGBP LIBOR6,912259

rates, and changes to benchmark indices could impact pricing mechanisms on some instruments. Changes inUSD LIBOR42,2795,188

valuation, methodology or documentation may also result into complaints or litigation. The Group may also beCHF LIBOR34542| exposed to operational risks or incur additional costs due to the potential requirement to adapt IT systems, trade | JPY LIBOR | 225 | 41 |
| --- | --- | --- | --- |
| reporting infrastructure and operational processes, or in relation to communications with clients or other parties | EUR LIBOR | 422 | 8 |
| and engagement during the transition period. Particularly, one of the main risks to which the Group is exposed as | EONIA | 100 | 728 |
| a result of IBOR reform is operational. For example, the renegotiation of loan contracts through bilateral | Total | 50,283 | 6,265 |

negotiation with customers, updating of contractual terms, updating of systems that use IBOR and revision of

operational controls related to the reform.

Derivative Financial instruments to transition to alternative benchmarks| The ING IBOR programme has a robust governance in place, with progress being tracked by business line steering | 2020 | | Nominal value (in EUR mln) | |
| --- | --- | --- | --- | --- |
| committees reporting into a central IBOR steering committee. The programme assesses and coordinates the | By benchmark rate | 1 | | |
| actions necessary to manage the required changes to internal processes and systems, including pricing, risk | GBP LIBOR | | | 26,851 |
| | USD LIBOR | | | 474,457 |
| management, legal documentation, hedge arrangements, as well as the impact on our customers. ING continues | CHF LIBOR | | | 9,710 |
| to monitoring market developments, and the outcome of several remaining uncertainties such as the availability | JPY LIBOR | | | 60,592 |

of term rates, to anticipate the impact on the program , our customers and any related risks.EONIA28,592

Total600,203

As at 31 December 2020 the following financial instruments have yet to transition to alternative benchmark

rates, summarised by significant benchmark rate . The table below excludes exposures that will expire before1.For cross currency swaps all legs of the swap are included that are linked to a main IBOR that is significant to ING Group.

transition is required. For all rates this has been taken as 31 December 2021, despite some recent developments The table above does not include EURIBOR exposures as the reformed EURIBOR is compliant with the EU that indicate that USD LIBOR will be available until mid-2023. The table below also excludes off-balance sheet Benchmarks Regulation and there are no plans to discontinue.
commitments.

ING Group also has exposure to interest rate benchmark reform in respect of its cash collateral balances across

some of its Credit Support Annex agreements. This exposure is not included within the table above.

ING Group Annual Report 2020 on Form 20-F209

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Market risk

Given that IBOR reform may have various accounting implications, the International Accounting Standards BoardGovernance – FX translation result (*)

(IASB) has undertaken a two phase project. Phase 1 addresses those issues that affect financial reporting beforeING’s strategy is to keep the target CET1 ratio within a certain range when FX rates fluctuate, while limiting
the replacement of an existing benchmark. Phase 1 amendments to IFRS were issued by the IASB in 2019. Phasevolatility in the profit and loss account due to this CET1 hedging. Therefore, hedge accounting is applied to the
2 focuses on issues that may affect financial reporting when the existing benchmark rate is reformed or replaced.largest extent possible. Taking this into account, the CET1 ratio hedge can be achieved by deliberately taking
Phase 2 amendments to IFRS were issued by the IASB in 2020. In 2019, ING early adopted the Phase 1foreign currency positions equal to certain target positions, such that the target CET1 capital and risk-weighted
amendments to IFRS which allowed ING to apply a set of temporary exceptions to continue hedge accountingassets are equally sensitive in relative terms to changing FX rates. For a selection of emerging market currencies
even when there is uncertainty about contractual cash flows arising from the reform. Under these temporaryING decided not to enter into foreign currency hedges as allowed under the policy.
exceptions, interbank offered rates are assumed to continue unaltered for the purposes of hedge accounting

until such time as the uncertainty is resolved. Refer to Note 39 ‘Derivatives and hedge accounting’ for theRisk profile – FX translation result (*)
disclosures relating to the application of the amendments as part of Phase 1.
The following table presents the currency exposures in the banking books for the most important currencies for

the FX translation result. Positive figures indicate long positions in the respective currency. As a result of the The Phase 2 amendments to IFRS relating mainly to accounting for changes in the basis for determining the strategy to hedge the CET1 ratio an open structural FX exposure exists.
contractual cash flows of financial assets and liabilities due to the IBOR reform and impact on hedge accounting

when an existing benchmark rate is reformed or replaced with an alternative risk free rate. The Phase 2 In order to measure the sensitivity of the target CET1 ratio against FX rate fluctuations, an historical Value -at-Risk amendments are effective for annual reporting periods beginning on or after 1 January 2021, with early approach is used. It measures the drop in the CET1 ratio based on historical FX rates. The impact is taken into application permitted. ING did not early adopt Phase 2 amendments in 2020. Refer to section 1.4.2 of Note 1 account under the solvency RAS.
‘Basis of preparation and accounting policies’ of the financial statements.| Foreign exchange (FX) risk in banking books (*) | Foreign currency exposures banking books (*) | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | in EUR million | | Foreign Investments | | | Hedges | Net exposures | |
| FX exposures in banking books result from core banking business activities (business units doing business in | | | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| currencies other than their base currency), foreign currency investments in subsidiaries (including realised net | US Dollar1 | | 7,126 | 8,031 | -10 | -11 | 7,117 | 8,020 |
| profit and loss), and strategic equity stakes in foreign currencies. The policy regarding these exposures is briefly | Pound Sterling | 2 | 1,285 | -22 | | | 1,285 | -22 |
| explained below. | Polish Zloty | | 2,631 | 2,522 | -369 | -278 | 2,262 | 2,244 |
| | Australian Dollar | | 3,544 | 3,565 | -2,269 | -2,033 | 1,275 | 1,532 |
| Governance – Core banking business (*) | Turkish Lira | | 1,078 | 1,337 | | | 1,078 | 1,337 |
| | Chinese Yuan | | 1,912 | 2,255 | | | 1,912 | 2,255 |
| Every business unit hedges the FX risk resulting from core banking business activities into its base currency. | Russian Rouble | | 344 | 540 | -126 | -85 | 218 | 455 |
| Consequently, assets and liabilities are matched in terms of currency. | Other currency | | 5,992 | 4,742 | -3,456 | -1,834 | 2,536 | 2,907 |

Total23,91322,969-6,231-4,24217,68318,727

1 US Dollar net exposure move is mainly driven by EURUSD FX rate.
2 The net exposure move in Pound Sterling is related to capital injection in UK Branch.

ING Group Annual Report 2020 on Form 20-F210

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Market risk

Equity price risk in banking books ()Real estate price risk in banking books ()**

Real estate price risk arises from the possibility that real estate prices fluctuate. This affects both the value of real

Governance (*)estate assets and the earnings related to real estate activities.

ING maintains a strategic portfolio with substantial equity exposure in its banking books. Local offices are

Governance (*) responsible for the management of the equity investment positions. Financial Risk is responsible for monitoring

the regulatory capital for equity investments on a monthly basis and acts independently from ING / localReal estate is a run-off business consisting of real estate development and real estate investment management

management when monitoring these positions.activities which are being wound down by sale of assets, strict execution of contract maturity, or through

portfolio sales.

Risk Profile(*)

Market risk in trading books (*) Equity price risk arises from the possibility that an equity security’s price will fluctuate, affecting the values of the

equity security itself as well as other instruments whose value react similarly to the particular security, a definedWithin the trading portfolios, positions are maintained in the financial markets. These positions are often a result
basket of securities, or a securities index. ING’s equity exposure mainly consists of the investments in associatesof transactions with clients and may benefit from short-term price movements. In 2020, ING continued its
and joint ventures of EUR 1,475 million (2019: EUR 1,790 million) and equity securities held at fair value throughstrategy of undertaking trading activities to develop its client -driven franchise and deliver a differentiating
other comprehensive income (FVOCI) of EUR 1,862 million (2019: EUR 2,306 million). The value of equityexperience by offering multiple market and trading products.
securities held at FVOCI is directly linked to equity security prices with increases/decreases being recogni sed in

the revaluation reserve. Investments in associates and joint ventures are measured in accordance with the equity

Governance (*) method of accounting and the balance sheet value is therefore not directly linked to equity security prices.
The Financial Markets Risk Committee (FMRC) is the market risk committee that, within the risk appetite set by

Year-on-year variance analysis (*)ALCO Bank, sets market risk limits both on an aggregated level and on a desk level, and approves new products.
FI-FM Risk advises both FMRC and ALCO Bank on the market risk appetite of trading activities.
The revaluation reserve relating to equity securities at FVOCI moved from EUR 1,580 million per year-end 2019 to

EUR 1,181 million per year-end 2020. In 2020 the securities at FVOCI decreased by EUR 443 million. This was With respect to the trading portfolios, FI-FM Risk focuses on the management of market risks of Wholesale mainly due to the revaluation of shares in Bank of Beijing (EUR -339 million).
Banking (mainly Financial Markets) as this is the only business line within ING where trading activities take place.| Revaluation reserve equity securities at fair value through other comprehensive income (*) | | | Trading activities include facilitation of client business and market making. FI-FM Risk is responsible for the |
| --- | --- | --- | --- |
| in EUR million | 2020 | 2019 | development and implementation of trading risk policies and risk measurement methodologies, and for reporting |
| Positive re-measurement | 1,201 | 1,582 | and monitoring risk exposures against approved trading limits. FI-FM Risk also reviews trading mandates and |
| Negative re-measurement | -20 | -2 | limits, and performs the gatekeeper role in the product review process. The management of market risk in |
| Total | 1,181 | 1,580 | trading portfolios is performed at various organisational levels. The FI-FM Risk Management Framework defines |

and positions against the mandates are assessed jointly by the first and second lines of defence .

ING Group Annual Report 2020 on Form 20-F211

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Market risk

Risk measurement ()Backtesting ()**

Backtesting is a technique for the ongoing monitoring of the plausibility of the HVaR model in use. Although ING uses a comprehensive set of methodologies and techniques to measure market risk in trading books: Value
HVaR models estimate potential future trading results, estimates are based on historical market data. In a at Risk (VaR) and Stressed Value at Risk (SVaR), Incremental Risk Charge (IRC), and Event Risk (stress testing).
backtest, the actual daily trading result (excluding fees and commissions) is compared with the one-day HVaR. In Systematic validation processes are in place to validate the accuracy and internal consistency of data and
addition to using actual results for backtesting, ING also uses hypothetical results, which exclude the effects of parameters used for the internal models and modelling processes.
intraday trading, fees, and commissions. When an actual or a hypothetical loss exceeds the HVaR, an ‘outlier’

occurs. Based on ING’s one-sided confidence level of 99%, an outlier is expected once in every 100 business days.

Value at Risk (*) On an overall level in 2020 there were four outliers for hypothetical P&L and five outliers for actual P&L.
FI-FM Risk uses the historical simulation VaR methodology (HVaR) as its primary risk measure. The HVaR for Following the approval of ECB, the March 2020 backtest outliers caused by market volatility of Covid-19 has been market risk quantifies, with a one-sided confidence level of 99%, the maximum overnight loss that could occur in excluded from capital multiplier calculations as of 30 June 2020. This applies to four hypothetical and four actual the trading portfolio of ING due to changes in risk factors (e.g. interest rates, equity prices, foreign exchange outliers for ING Group. ING reports backtesting results on a quarterly basis to the ECB.
rates, credit spreads, implied volatilities) if positions remain unchanged for a time period of one day. Next to

general market movements in these risk factors, HVaR also takes into account market data movements for

Stressed HVaR (*) specific moves in e.g. the underlying issuer of securities. A single model that diversifies general and specific risk is
The Stressed HVaR (SVaR) is intended to replicate the HVaR calculation that would be generated on the bank’s used. In general, a full revaluation approach is applied, and for a limited number of linear trading positions and
current portfolio with inputs calibrated to the historical data from a continuous 12-month period of significant risk factors in commodity and equity risk classes a sensitivity-based approach is applied. The potential impact of
financial stress relevant to the bank’s portfolio. To calculate SVaR, ING uses the same model that is used for historical market movements on today’s portfolio is estimated, based on equally weighted observed market
1DHVaR, with a ten-day horizon. The data for the historical stress period used currently includes the height of the movements of the previous year (260 days). When simulating potential movements in risk factors, depending on
credit crisis around the fall of Lehman Brothers, and this choice is reviewed regularly. The historical data period is the risk factor type, either an absolute or a relative shift is used. The data used in the computations is updated
chosen so that it gives the worst scenario loss estimates for the current portfolio. The same SVaR model is used daily. ING uses HVaR with a one-day horizon for internal risk measurement, management control, and
for management purposes and for regulatory purposes. The same SVaR model is used for all legal entities within backtesting, and HVaR with a ten-day horizon for determining regulatory capital. To compute HVaR with a ten- ING with market risk exposure in the trading portfolio.
day horizon the one-day risk factor shifts are scaled by the square root of ten and then used as an input for the

revaluation. The same model is used for all legal entities within ING with market risk exposure in the trading

Incremental risk charge (*) portfolio.

The Incremental risk charge (IRC) for ING is an estimate of the default and migration risks for credit products

Limitations (*)(excluding securitisations) in the trading book, over a one-year capital horizon, with a 99.9% confidence level. The

same IRC model is used for all legal entities within ING with market risk exposure in the trading portfolio. Trading HVaR has some limitations: HVaR uses historical data to forecast future price behaviour, but future price
positions (excluding securitisations) of ING, which are subject to specific interest rate risk included in the internal behaviour could differ substantially from past behaviour. Moreover, the use of a one-day holding period (or ten
model approach for market risk regulatory capital, are in scope of the IRC model. By model choice, equity is days for regulatory capital calculations) assumes that all positions in the portfolio can be liquidated or hedged in
excluded from the model. For the calculation of IRC, ING performs a Monte-Carlo simulation based on a Gaussian one day. In periods of illiquidity or market events, this assumption may not hold. Also, the use of a 99%
copula model. The asset correlations used in the Gaussian copula model are determined using the IRB correlation confidence level means that HVaR does not take into account any losses that occur beyond this confidence level.
formula. The rating change is simulated for all issuers over the different liquidity horizons (i.e. time required to

liquidate the position or hedge all significant risks) within one year. Movements across different rating categories

and probabilities of default are governed by a credit-rating transition matrix. An external transition matrix is

ING Group Annual Report 2020 on Form 20-F212

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Market risk

obtained from Standard & Poor’s (S&P). The financial impact is then determined for the simulated migration to default, or for the simulated migration to a different rating category, based on LGD or credit spread changes,Other trading controls respectively.HVaR and event risk limits are the most important limits to control the trading portfolios. Additionally, limits have
been set on SVaR and IRC. Furthermore, ING uses a variety of other controls to supplement these limits. Position The liquidity horizon has been set to the regulatory minimum of three months for all positions in scope. INGand sensitivity limits are used to prevent large concentrations in specific issuers, sectors, or countries. Moreover, reviews the liquidity horizons regularly based on a structured assessment of the time it takes to liquidate theother risk limits are set with respect to the activities in complex derivatives trading. The market risk of these positions in the trading portfolio.products is controlled by product-specific limits and constraints .

ING periodically assesses the compliance of the IRC model with regulatory requirements by performing gap analyses, substantiating the modelling choices, and quantifying the impact of alternative approaches .

Stress testing and event risk (*)

Stress testing and event risk are valuable risk management tools. In addition to the bank-wide stress test framework as described in the stress-testing section, FI-FM Risk performs additional assessments, specific to the Trading Book, with various frequencies: sensitivity analyses (single-risk factor and multi-risk factor), ad-hoc stress tests (e.g. Covid-19 scenarios) and structured stressed scenario tests under the event risk framework - to monitor market risks under extreme market conditions. Event risk is calculated because HVaR in general does not produce an estimate of the potential losses that can occur as a result of extreme market movements, i.e. beyond the confidence level. Event risk evaluates the bank’s financial stability under severe but plausible stress scenarios and assists in decision-making aimed at maintaining a financially healthy going-concern institution after a severe event occurs. Event risk is based on historical as well as hypothetical extreme scenarios. The result is an estimate of the profit and loss caused by a potential event and its worldwide impact for ING. The event risk number for ING trading activity is generated on a weekly basis. As with HVaR, the risk appetite for event risk is limited by ALCO Bank.

ING’s event risk policy is based on a large set of possible stress scenarios per risk type. In stress scenarios, shocks are applied to prices (credit spreads, interest rates, equity, commodities, and fx rates) and volatilities. Depending on the type of the stress test, additional scenario assumptions can be made, for example on correlations, dividends, or recovery rates. For equity products, for example, both a crisis scenario (prices decrease) as well as a bull scenario (prices increase) are assumed. Scenarios are calculated based on events happening independently, jointly by region, or in all countries simultaneously. This way, for each risk type, a large set of scenarios is calculated. The worst scenarios per market are combined across markets by assessing both independent events per market, and the worst events happening in all markets at the same time.

ING Group Annual Report 2020 on Form 20-F213

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Market risk| Risk profile | 1d VaR for Internal Model Approach trading portfolios | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| The following chart shows the development of the overnight HVaR under a 99% confidence level and a one-day | in EUR million | | Minimum | | Maximum | | Average | | Year end | |
| horizon versus actual and hypothetical daily trading profits and losses. In calculation of the hypothetical daily | | | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| profit and loss, the trading position is kept constant and only the market movement is taken into account. The | Interest rate | 1 | 12 | 3 | 42 | 13 | 26 | 6 | 15 | 12 |
| | Equity and commodity | | 1 | 1 | 14 | 7 | 3 | 2 | 3 | 1 |
| overnight HVaR is presented for the ING trading portfolio from 2015 to 2020. In the graph below, it can be seen | Foreign exchange | | 1 | 1 | 7 | 11 | 3 | 2 | 2 | 1 |
| that the market volatility in March 2020 lead to a sharply increased HVaR as the new scenarios entered the 1 | Credit spread | | 4 | 4 | 32 | 7 | 15 | 6 | 7 | 5 |
| year history. In addition it shows significant P&L volatility with the largest loss coming from a significant increase | Diversification | 2 | | | | | -17 | -6 | -4 | -6 |
| in Valuation Adjustments booked end of March 2020. | Total VaR | 2 | 12 | 6 | 52 | 15 | 29 | 10 | 22 | 13 |

1 For calculation of HVaR per risk class the full valuation is performed according to HVaR methodology using a set of scenario EU MR4: Consolidated trading HVaR1changes for the risk factors for the particular risk class, while risk factors for all other risk classes are kept unchanged.
2 The total HVaR for the columns Minimum and Maximum cannot be calculated by taking the sum of the individual components since the minimum/maximum observations for both the individual markets as well as for total HVaR may occur on different dates.
Therefore, diversification is not calculated for the minimum and maximum categories.

3 CVA risk is not included in VaR.

Average 1D/10D HVaR, 10D SVaR over 2020 increased compared to 2019, due to the increase in market volatility, while IRC remained in line with 2019. The average for interest rate and credit spread increased compared to 2019, both driven mainly by market movements. The VaR at the period end of 2020 increased to 22 mln from 13 mln at period end of 2019, the main driver of the move was the increased market volatility throughout 2020. The main components of the risk were interest rate and credit spread.

1 CVA risk is not included in VaR.

The risk figures in the backtesting graph above and in the table below relate to all trading books for which the internal model approach is applied, i.e. all trading books, including Credit Exposure Management books.

ING Group Annual Report 2020 on Form 20-F214

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Market risk| EU MR3: Internal Model Approach values for trading portfolios | | | standardised approach with fixed risk weights. ING does not have a correlation trading portfolio or any other |
| --- | --- | --- | --- |
| in EUR million | 2020 | 2019 | securitisations in the trading book. |
| VaR (10 day 99%) | | | |
| 1 Maximum value | 161 | 42 | Standardised approach |

2 Average value8327| 3 Minimum value | 31 | 16 | EU MR1: Market risk under Standardised Approach | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| 4 Period end | 60 | 33 | in EUR million | | 2020 | | 2019 |
| Stressed VaR (10 day 99%) | | | | | Capital | | Capital |
| | | | | requiremen | | requiremen | |
| 5 Maximum value | 304 | 126 | | RWA | ts | RWA | ts |
| 6 Average value | 116 | 72 | Outright products | | | | |
| 7 Minimum value | 72 | 47 | 1 Interest rate risk (general and specific) | 2 | 0 | 14 | 1 |
| 8 Period end | 83 | 76 | 2 Equity risk (general and specific) | | | | |
| Incremental Risk Charge (99.9%) | | | 3 Foreign exchange risk | | | | |
| | | | 4 Commodity risk | | | | |
| 9 Maximum value | 134 | 169 | Options | | | | |
| 10 Average value | 74 | 76 | 5 Simplified approach | | | | |
| 11 Minimum value | 38 | 42 | 6 Delta-plus method | | | | |
| 12 Period end | 89 | 64 | 7 Scenario approach | | | | |
| Comprehensive Risk capital charge (99.9%) | | | 8 Securitization (specific risk) | | | | |
| 13 Maximum value | n/a | n/a | 9Total | 2 | 0 | 14 | 1 |

14 Average valuen/an/a

15 Minimum valuen/an/a The MRWA under standardised approach slightly decreased compared to end of 2019. The FX exposure
16 Period endn/an/a continued to be lower than the 2% own funds threshold. According to Art. 351 CRR, in such a case, the

calculation of Market Risk regulatory capital is not required. As of the third quarter of 2020, collective investment undertakings are capitalised in market risk under standardised approach under interest rate risk and foreign Regulatory capitalexchange risk.

According to the Capital Requirements Regulation (CRR/CRD IV), regulatory capital (own funds requirements) for

Internal model approach market risk can be calculated using the standardised approach or an internal model approach. ING received regulatory approval to use an internal model to determine the regulatory capital for the market risk in all tradingMarket risk regulatory capital increased during 2020 compared to 2019. The increase is driven by an increase in books of ING. Market risk capital of trading books is calculated according to the CRR, using internal HVaR, SVaR,HVaR and SVaR due to increased market volatility as a result of the Covid-19 pandemic, while IRC slightly and IRC models, where diversification is taken into account. Capital for foreign exchange risk from the bankingdecreased.
books and for collective investment undertakings (CIUs) exposures in trading books are calculated using the

ING Group Annual Report 2020 on Form 20-F215

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Market risk| EU MR2-A: Market risk under Internal Model Approach | | | | | The following tables show the five largest trading positions in terms of sensitivities to foreign exchange, interest |
| --- | --- | --- | --- | --- | --- |
| in EUR million | | 2020 | | 2019 | rate and credit spread risk factor movements. These largest exposures also reflect concentrations of risk in FX risk |
| | | Capital | | Capital | per currency, interest rate risk per currency, and credit spread risk per country, rating and sector. Due to the |
| | RWArequirements | | RWArequirements | | nature of the trading portfolios, positions in the portfolios can change significantly from day to day, and |
| 1HVaR (higher of values a and b) | 3,214 | 2571,261 | | 101 | |

(b) Average of the daily VaR (Article 365(1)) on each of the preceding sixty business	3,214	2571,261	101	Most important foreign exchange year-end trading positions (*)
days (VaRavg) x multiplication factor ((mc) in accordance with Article 366)				in EUR million	2020	2019
2SVaR (higher of values a and b)	4,419	3543,011	241	Foreign exchange	Foreign exchange
(sVaRavg) x multiplication factor (ms) (Article 366)				Japanese Yen	-44South Korean Won	20
3Incremental risk charge -IRC (higher of values a and b)	1,113	891,278	102	British Pound	-37Brazilian Real	-15
calculated in accordance with Section 3 articles 370/371)

4 Comprehensive Risk Measure – CRM (higher of values a, b and c)

(a) Most recent risk number for the correlation trading portfolio (article 377)

(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))

Other18014

5Total8,9257145,550444

Sensitivities (*)

As part of the risk monitoring framework, FI-FM Risk actively monitors the daily changes of sensitivities of the

trading portfolios. Sensitivities measure the impact of movements in individual market risk factors (foreign

exchange rates, interest rates, credit spreads, equity, and commodity prices) on profit and loss results of the

trading positions and portfolios.

ING Group Annual Report 2020 on Form 20-F216

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Market risk| Most important interest rate and credit spread sensitivities at year-end (*) | | | | | Credit spread sensitivities per risk class and sector at year-end (*) | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| in EUR thousand | | 2020 | | 2019 | | | | 2020 | | 2019 |
| Interest Rate (BPV) | 1 | Interest Rate (BPV) | 1 | | in EUR thousand | | Corporate | Financial | Corporate | Financial |
| Euro | | -787Euro | | -740 | | | | Institutions | | Institutions |
| | | | | | Credit Spread (CSO1) | 1 | | | | |
| US Dollar | | -319US Dollar | | -325 | Risk classes | | | | | |

British Pound-120Russian Ruble-1051 (AAA)4-41-1| Russian Ruble | -86British Pound | -68 | 2–4 (AA) | 2 | -120 | -15 | -63 |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Australian Dollar | -64Australian Dollar | -31 | 5–7 (A) | 80 | -14 | 143 | 32 |
| | | | 8–10 (BBB) | 301 | -14 | 273 | 1 |

Credit Spread (CSO1)	2	Credit Spread (CSO1)	2		11–13 (BB)	55		148	9
					14–16 (B)	18	-6	51	1
Germany		134United States		360	17–22 (CCC and NPL)	2		26
Republic of Korea		-129Germany		163	Not rated	1

United States118France117Total462-158626-21| Belgium | 115Russian Federation | 73 | |
| --- | --- | --- | --- |
| Netherlands | 50United Kingdom | 72 | 1 Credit Spread Sensitivity (CS01) measures the impact on value of a 1 basis point increase in credit spreads. |

1 Basis Point Value (BPV) measures the impact on value of a 1 basis point increase in interest rates. The figures include commodity risk in banking books.
2 Credit Spread Sensitivity (CS01) measures the impact on value of a 1 basis point increase in credit spreads. Exposures to supranational institutions are not assigned to a specific country.

ING Group Annual Report 2020 on Form 20-F217

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Funding & liquidity risk

Funding and liquidity risk (*)(*)

Funding and liquidity framework

Introduction (*)

Funding and liquidity (F&L) risk is the risk that ING or one of its subsidiaries cannot meet its financial liabilities when they are due at reasonable cost and in a timely manner. ING incorporates funding and liquidity management in its business strategy and has established a funding and liquidity risk framework to manage risks within pre-defined boundaries.

A high-level overview of the F&L framework is provided in the next figure.

ING Group Annual Report 2020 on Form 20-F218

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Funding & liquidity risk

Governance ()Funding and liquidity management strategy and objectives ()**

Funding and liquidity risk management within ING falls under the supervision of the ALCO Bank function thatThe main objective of ING’s funding and liquidity risk management is to maintain sufficient liquidity to fund the approves the funding and liquidity risk appetite and subsequently cascades it throughout the organisation. ALCOcommercial activities of ING both under normal and stressed market circumstances across various geographies, Bank has delegated the responsibilities concerning the Internal Capital and Liquidity Adequacy Assessmentcurrencies and tenors. This requires a diversified funding structure considering relevant opportunities and Process (ICLAAP) and documents, as per the ICLAAP framework of ING, to the ICLAAP Committee. The ICLAAPconstraints.
Committee therefore focuses on technical liquidity documents and oversees business processes and deliverables concerning ILAAP. The EB, MBB, staff departments from the CRO and CFO domain as well as Group Treasury haveING’s funding consists mainly of retail and corporate deposits contributing around 50 percent and 20 percent of oversight of and are responsible for managing funding and liquidity risks.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.
ING’s funding and liquidity risk governance is based on the three lines of defence structure to ensure a clearGroup Treasury manages the professional funding in line with the F&L risk appetite to ensure a sufficiently division of responsibilities as well as an independent risk control challenging process.diversified and stable funding base.| Group Treasury and the business lines have the first line of defence functions. Group Treasury’s main | Funding mix | 1(*) | | |
| --- | --- | --- | --- | --- |
| responsibility is to manage ING’s (regulatory) liquidity and funding position by executing ING’s funding plan, | | | 2020 | 2019 |
| maintaining access to both the short- and the long-term professional funding markets and managing the liquidity | Funding type | | | |
| buffer. Business lines are responsible for managing the funding and liquidity positions from the originated | Customer deposits (retail) | | 52% | 51% |
| business, a large part of which is replicated with Group Treasury. | Customer deposits (corporate) | | 20% | 21% |
| | Interbank | | 9% | 5% |
| At the second line of defence, Financial Risk is responsible for developing and maintaining ING’s policies, | Lending/repurchase agreement | | 6% | 5% |
| | CD/CP | | 2% | 5% |
| standards and guidelines on F&L risk management as well as for setting the F&L risk appetite. Furthermore, the | Long-term senior debt | | 9% | 11% |
| Financial Risk function measures funding and liquidity risks, executes stress testing, provides management | Subordinated debt | | 2% | 2% |
| information and controls the liquidity and funding requirements on commercial products. The Finance function is | Total | | 100% | 100% |
| responsible for management information and regulatory reporting related to funding and liquidity risk | 1 Liabilities excluding trading securities and IFRS equity | | | |
| management. | | | | |

For the third line of defence Corporate Audit Services is responsible for independently assessing the design,ING’s long-term professional funding is well diversified across maturities and currencies. The main part of it is effectiveness and implementation of the funding and liquidity framework .EUR and USD denominated which is in line with the currency composition of customer lending. The increase in ‘Interbank’ funding type is related to ING's participation in the TLTRO III.

ING Group Annual Report 2020 on Form 20-F219

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Funding & liquidity risk| ING Group long-term debt maturity profile by currency () | | | | | | | | | ING assesses its F&L adequacy through three lenses – stress, sustainability and regulatory: |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| in EUR billion (nominal amounts) | 2021 | 2022 | 2023 | 2024 | 2025 | 2026Beyond | | Total | |
| | | | | | | | 2026 | | ◾ING evaluates its ability to withstand a period of prolonged F&L stress (idiosyncratic, market-wide, |
| Currency | | | | | | | | | combined idiosyncratic and market-wide) which is characterised by customer deposit outflows, |
| EUR | 8 | 7 | 5 | 1 | 4 | 5 | 24 | 54 | |
| USD | 2 | 4 | 3 | 1 | 0 | 2 | 10 | 21 | deterioration of funding markets access and lower liquidity value of the counterbalancing capacity; |
| Other | 2 | 1 | 1 | 1 | | 1 | 1 | 8 | ◾ING assesses the extent to which its customers, professional counterparties and investors are comfortable |
| Total | 13 | 12 | 9 | 3 | 4 | 8 | 35 | 83* | with extending funding in tenors, currencies and instruments necessary to sustainably fund ING under a |
| | | | | | | | | | going-concern situation; |
| | | | | | | | | | ◾ING ascertains that it is in a position to meet both current and future regulatory requirements. |

ING Group long-term debt maturity profile by currency at year-end 2019 (*)									For each lens, ING has established a related set of risk appetite statements which define ING’s risk appetite
in EUR billion (nominal amounts)	2020	2021	2022	2023	2024	2025Beyond		Total	commensurate with the principles of liquidity adequacy. These risk appetite statements are summarised in the
							2026		next graph.
Currency
EUR	9	9	8	5	1	4	26	62
USD	3	2	4	4	1		8	22
Other	1	2	1	1	1		2	10
Total	13	14	13	10	3	4	37	94

Funding and liquidity adequacy and risk appetite (*)

ING distinguishes between several key drivers of future liquidity and funding needs:
◾Refinancing needs resulting from maturing debt and asset growth;
◾Current and future regulatory requirements;
◾Risk appetite statements set by ING’s funding and liquidity risk function;
◾The outcomes of various stress tests;
◾Ability to distribute and transfer liquidity across the Group .

Taking into consideration the abovementioned factors, ING regularly assesses its current and future liquidity adequacy and, if deemed necessary, takes steps to further improve ING’s liquidity position and to ensure sufficient counterbalancing capacity. A liquidity adequacy statement is formulated at least quarterly to substantiate and reflect the management’s view on the current funding and liquidity position as well as the potential future challenges. The quarterly adequacy statement is an important part of ING’s ILAAP process.

ING Group Annual Report 2020 on Form 20-F220

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Funding & liquidity risk

()The LCR compares the volume of available high-quality liquid assets (HQLA) to net outflows (outflows minus Funding and liquidity adequacy*inflows) over a 30-day stress scenario defined by the regulator. ING’s liquidity buffer forms a part of the counterbalancing capacity which serves as a liquidity cushion under normal and stressed conditions.

The liquidity buffer consists mainly of Level 1 assets such as 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 internal risk appetite limits as well as by regulatory requirements.

The macroeconomic and market environment are also important considerations in ING’s funding and liquidity framework.
The macroeconomic environment comprises various exogenous factors over which ING has no control but which may have a material impact on ING’s 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;
◾Monetary policy with a focus on the unconventional monetary measures employed by central banks in

recent years including the measures taken since the start of the Covid-19 crisis; and ◾Regulatory requirements: e.g. understanding the changing regulatory landscape as well as the impact of ING’s actions on existing regulatory boundaries.

The F&L risk appetite statements are translated into a number of metrics with appropriate boundaries andThe strategic ambitions of ING, together with the design and execution of the funding plan, are assessed under instruments which are used to measure and manage ING’s funding and liquidity risk.both current and projected market conditions. Key emphasis is placed on understanding overall market trends

and developments, credit rating changes and peer comparison.
The risk appetite with respect to the stress lens is set to ensure there is sufficient counterbalancing capacity
under various internally defined stress scenarios. Regarding the sustainability perspective, an internally definedLiquidity stress testing (*)
stable funding to loans (SFL) ratio (supplemented by other metrics) is used to ensure a diversified funding base Funding and liquidity stress testing forms part of the overall F&L framework. It allows ING to examine the effects and to prevent overreliance on professional funding. Finally, the liquidity coverage ratio (LCR) and the net stable of exceptional but plausible future events on ING’s liquidity position and provides insight into which entities, funding ratio (NSFR) regulatory metrics are monitored in terms of both ING’s risk appetite and regulatory business lines or portfolios are vulnerable to which types of risk or scenarios.
requirements.

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 ING Group Annual Report 2020 on Form 20-F221

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Funding & liquidity risk

position and time-to-survive are the two main stress-testing measures. Both measures may be impacted◾Risk Appetite Framework (through risk appetite statements);
differently under specific F&L stress scenarios and parameterisation.◾risk identification and assessment;
◾monitoring the liquidity and funding position;
The stress-testing framework considers idiosyncratic, market-wide and combined (idiosyncratic plus market-◾business actions (if needed);
wide) stress scenarios. Moreover, it differentiates between stress events that develop in a gradual and in a fast◾contingency funding plan; and manner. The design of the framework is based on empirical evidence supplemented by expert judgment. The◾early warning indicators.
framework can be extended to additional ad hoc scenarios. For example, it can be used as input for firm-wide stress testing and reverse stress testing.The funding and liquidity stress-testing framework is also subject to regular internal validation.

In response to the Covid-19 crisis, ING has developed a dedicated corona liquidity stress-test framework thatIn line with supervisory expectations, ING’s liquidity position is stress tested at least monthly using scenarios that focuses on the key vulnerabilities of the crisis and their potential impact on ING’s net liquidity position and LCR.form part of the F&L risk appetite statement. In addition, the results of all internal stress scenarios are monitored The current framework calculates the impact of severe macroeconomic stress combined with turmoil on financialand assessed on a regular basis. They also serve as input in the decision on additional contingency measures.

markets due to a prolonged lockdown.
Contingent F&L risks are addressed in the contingency funding plan with a focus on early warning indicators as The outcomes of the stress testing are taken into account in all the key aspects of ING’s F&L risk framework andwell as organisation and planning of liquidity management in times of stress. The contingency funding measures F&L risk management:are developed in conjunction with the ING Recovery Plan and are tested on a regular basis.

ING Group Annual Report 2020 on Form 20-F222

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Environmental, social and governance risk

Environmental, social and governance risk

During 2020, ING has also cooperated with other banks and the Equator Principles (EP) working groups on the

Introduction implementation of the EP 4, which brings a new set of requirements related to human rights, climate change,
Regulatory changes in relation to environmental, social and governance (ESG) risk practices have continued at anbiodiversity and impacts on Indigenous Peoples.
accelerated pace since the UN Paris Agreement and the United Nations Sustainable Development Goals (UN

The ESR Framework SDGs) were signed by world leaders in 2015. The G20 Taskforce on Climate-related Financial Disclosures (TCFD)
Working Group has outlined a set of principles for financial entities, while the European Commission released an ING’s ESR policy framework helps us make transparent choices about how, where and with whom we do Action Plan for Financing Sustainable Growth and most recently, the new Green Deal, which provides an action business. In 2019 we released the updated ESR Framework based on input from internal as well as external plan to boost the efficient use of resources by moving to a clean, circular economy, restoring biodiversity and stakeholders while during 2020 we also made several updates, which are briefly summarised in the next section.
cutting pollution. Since the introduction of the United Nations Guiding Principles and the OECD Guidelines for Through these regular updates we keep abreast of social norms and regulation relating to sustainability and Multinational Enterprises there is a clear shift towards a more regulated environment and impact management challenge our own increasingly strong commitments on the topics of human rights and climate change.
on social risks. Legislation aimed at preventing human rights violations along the supply chain is being introduced
in several countries, including a proposal at EU level for mandatory human rights due diligence.ESR in practice in 2020

The ESR policy framework includes standards and best practice guidance for ESR-sensitive sectors. It includes Other key developments in the regulatory landscape include the latest EU Taxonomy Regulation that requires explicit restrictions on activities not in line with ING’s values and harmful to people or the environment (for compliance to minimum social and governance safeguards and the EBA consultation on ESG risks launched example companies involved in clearance of primary forest), which we do not finance.
recently which aims to incorporate ESG risks into the governance, risk management and supervision of credit
institutions and investment firms. The effects of the recent pandemic also bring a renewed focus on the The next table gives insight into the ESR policies that are part of the ESR framework and where they are applied.
importance of health and safety measures on the ground for the projects we finance as well as for the workforce
of our clients.
Credit risk portfolio per economic sector and application of ESR framework in percentage 2020 outstandings Conduct and ethics Human rights Environmental compliance Defence Equator principles Forestry and Agrocommodities Mining and Metals Tobacco1 Infrastructure Generic engineering1 Manufacturing Chemicals Energy2 Fisheries1

Since 2017, ING has been communicating its progress on climate risks and opportunities according to the TCFD in its Annual Report. Further, ING has set its climate risk management ambition based on other relevant materials, such as the ECB’s recent Guide on Climate -related and Environmental risks. This includes integrating climate change as part of our risk appetite framework. We plan to commence integrating this progressively in the second half of 2021.

Meanwhile, the Dutch Banking Sector Agreement on Human Rights (DBA) was successfully completed in 2019.
ING updated its human rights policy to reflect its commitment to the United Nations Guiding Principles, and improved transparency through regular human rights reporting. We continue to work within the framework of this agreement; we are currently in the process of developing a tool that will help assess portfolio and client exposure to salient human rights issues, enabling identification of issues and client engagement. The tool is expected to be launched in 2021.

ING Group Annual Report 2020 on Form 20-F223

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Environmental, social and governance risk

their environmental and social impact. A simplified version of the ESR policy framework, following the same

rationale and principles, applies to ING’s mid-corporate and small medium enterprise client segments. The ESR

framework minimum requirements are also included in ING’s procurement policy and apply to the screening of

suppliers of ING’s global procurement activities.

The ESR policy framework is incorporated in ING’s KYC policy framework, meaning the ESR client assessment is

part of regular client on-boarding and review. The ESR policy framework also triggers a dedicated ESR transaction

assessment to corporate clients which will indicate if such transaction is categorised as ‘ESR high risk’, and thus Consumer lending31,5%● require a separate in-depth advice from the ESR team .
Financial institutions23,86%●

Governments7,29%● While we have a strong ESR policy framework and made progress in enhancing the automation of the checks and Other2,37%● controls in the ESR assessment processes, we acknowledge that we need to further improve our processes in Corporates35,02%●●●
order to ensure accuracy and completeness of the data.
Real estate6,13%●●●●

Natural resources5,14%●●●●●●

Transportation & logistics3,30%●●●●●●Of all Wholesale Banking engagements in scope of the ESR policy framework in 2020, 83 percent were considered

Services4,18%●●●●●●●ESR low-risk, 8 percent ESR medium-risk and 9 percent ESR high-risk. ESR high-risk cases require specialised

Food, beverages & personal care2,82%●●●●●●●●●advice from the global ESR team. The team now consists of 11 dedicated ESR advisors, 10 of whom are in

General industries2,86%●●●●●●●Amsterdam and one in Geneva. The ESR advice assesses the specific product offered and environmental and
Builders & contractors1,75%●●●●●social impacts associated with it, the sector, operating context and geography of the engagement and other
Chemicals, health & pharmaceuticals1,80%●●●●●●● relevant factors. Based on this in-depth research, a binding advice is given that can only be overruled at Global Other sectors0,36%●●●● Credit Committee level. Of the 292 ESR advices given in 2020, which are related to new requests, 60 percent Utilities2,09%●●●●● were positive, 25 percent positive subject to conditions and 15 percent negative. Conditions can play an Media and telecom1,38%●●●●●● important role in helping clients transition towards improved environmental and social performance on the Retail1,33%●●●●
ground.
Automotive1,04%●●●●●●

Technology0,85%●●●●●●●

1 Fully or partially excluded activitiesThe ESR team mainly focuses on policy development and transaction advisory. However the team also provides

2 Includes policies on Oil and Gas, Coal, Nuclear Energy and Power Generationtraining (both in-person and via webinars) to hundreds of colleagues around the world every year in risk, front-

office, KYC and compliance teams, so that ESR knowledge is built on and spread.

The way the ESR Framework is applied in practice differs per product type. The largest potential environmentalKey updates to the ESR framework

and social impacts come from large corporates within our Wholesale Banking (WB) segment. WB is therefore the The renewed ESR framework incorporates the updates that took place in December 2019 and July 2020, primary focus of our assessments and where we promote active ESR dialogue and knowledge sharing. We have respectively. The new release, includes the following updates in the policy:
been working with wholesale clients for more than 15 years to support them in understanding and managing

ING Group Annual Report 2020 on Form 20-F224

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Environmental, social and governance risk

◾ESR restriction on small arms and light weapons (SALW) was strengthened. For more information pleaseguidance note to provide practical guidelines for both Equator Principle financial institutions and clients see the ESR framework published on the corporate website ing.com.on how to manage Covid-19 related risks to EP compliance.
◾Equator Principles: We have adopted EP4 in line with the new updated EP guidelines.
◾Dutch Banking Sector Agreement: The Dutch multi-stakeholder platform to implement the Dutch In 2020, the ESR team, together with the retail business, started the implementation of a new ESR self-Banking Sector Agreement on International Responsible Business Conduct Regarding Human Rights declaration approach for business banking. The concept is already approved by GCTP and it entails an alternativeformally came to an end in December 2019. The agreement was in place for three years and was ESR client assessment implementation for business banking clients where lending and pre -settlement limitsfinalised with a conclusive report published in August 2020 and a closing statement confirming that all exceed €1 million and where the client is active in any of the pre-identified sectors (e.g. employment agencies).agreed deliverables were completed. During the period covered by the agreement, we updated our Such clients will be required to confirm their compliance with specific statements related to safeguarding labourhuman rights policy and published ING’s first human rights report in 2018. In 2019, we issued an update rights and/or environmental regulations that are specific for that sector. The implementation of this initiative isof the report, highlighting the pilot on proactive client engagement carried out and the actions resulting expected to be finalised in 2021.from this pilot. In 2020, a follow-up of the 2019 human rights report was shared, providing an update of

the client engagement model presented in 2019 and the current human rights landscape.
Following any key ESR policy updates on restrictions, we engage with affected existing clients and provide them with the opportunity to reduce their exposure to the new restrictions; in case a reduction is not feasible, we◾Thun Group: ING participates in the Thun Group, an informal group of banking representatives focusing implement an exit strategy.on human rights. The group was initially established in 2011 to support the integration of the UN Guiding Principles on Business and Human Rights into banking activities, and is now further evolving as a formal Developing international best practice and stakeholder engagementgroup promoting human rights and sharing best practices among its participant members.

Our ESR approach helps us and our clients to gradually enhance the implementation of key standards like the UN ◾OECD: ING’s active role in promoting and integrating human rights is reflected in our participation as a Guiding Principles on Business and Human Rights and the Organisation for Economic Cooperation and formal advisory member to the OECD Working Party on responsible business conduct in our sector. In Development (OECD) Guidelines for Multinational Enterprises. But beyond stimulating better environmental and 2020 we started to develop the third and final OECD due-diligence guidance documentation for asset social performance in our own portfolio, ING actively collaborates with other institutions, peers and regulators to based finance transactions. This guidance is expected to be finalised in 2021. We also participated in the address the environmental, social and human rights challenges we face:
Export Credit Agencies annual meetings for practitioners from financial institutions where we actively
promoted ING’s ESR framework and due-diligence process with export credit agencies, EP financial ◾ING and the Equator Principles (EPs):The EPs are an environmental and social risk management institutions, commercial banks, and development institutions.
framework adopted by 110 financial institutions worldwide. The EPs were updated in 2019, and the new
version (EP4) became effective in October 2020. EP4 contains new and stronger commitments on human By taking part in the above-mentioned initiatives, we aim to contribute our viewpoint and those of our clients, rights, climate change, Indigenous Peoples and biodiversity, as well as an increased scope. ING is active employees and other stakeholders to help form a consensus and develop clear guidelines that can serve as a in several EP working groups covering social risks, climate change and scope. ING also co-leads the standard for our industry.
capacity building and training workgroup, which is focussing on updating the EP learning tool with the
changes included in EP4.

◾The Covid-19 pandemichas also had material implications for our clients and peers to continually meet the environmental and social requirements of the EPs. ING participated in the development of a ING Group Annual Report 2020 on Form 20-F225

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Environmental, social and governance risk

Task Force on Climate-Related Financial Disclosures (TCFD)Risk management

ING endorses the recommendations of the Financial Stability Board’s (FSB) Task Force on Climate-RelatedAt ING we already have several processes in place to identify and assess climate-related risks. An example is our

Financial Disclosures. This voluntary disclosure outlines the progress made to date. To further strengthen ourenvironmental and social risk (ESR) framework, including its climate change policy, reviewing risk on a client and

understanding and adoption of the TCFD recommendations, ING is part of the UNEP FI TCFD project.transaction basis. We also monitor sector-specific developments associated with the energy transition. For

upstream oil and gas, our credit assessments include a strong focus on production costs. By focusing on low-cost

Governanceproduction, we work with our clients to ensure their businesses are resilient to the risk of stranded assets.

ING’s Climate Change Committee (CCC) is mandated to oversee and set priorities for the implementation of the In the course of 2020, we worked on further identifying climate risk within our portfolio. We use scenarios to TCFD recommendations and other strategic climate -related topics that impact the group. For details please refer understand the various climate pathways that can potentially affect sectors. In addition, ING conducted an to our approach to climate governance (Sustainability governance ) published on our corporate website ing.com.
internal firm-wide stress test, including the assessment of both physical and transition risk. To better understand

the potential impact across sectors we developed an initial transition risk heatmap. We also started to conduct

Strategy pilots for specific portfolios, for instance on our global mortgages portfolio with the aim to identify potential

Climate change impacts companies and companies have an impact on climate change. As banks, we need to exposure towards physical risks. These types of investigations can inform our approach towards incorporating

understand the risk climate change poses for our clients and be ready to safeguard our business by taking the climate risk in our risk management framework. For details please refer to our stand-alone ‘Climate Risk Report

implications of climate change into account in our risk processes. We also have a role to play in financing the 2020’ published on our corporate website ing.com.

transition to a low-carbon, climate-resilient economy. At ING, we have chosen an integrated strategy that allows

us to translate the risks associated with climate change into opportunities.

Metrics and targets

We have set climate-related targets in our lending portfolio. This includes exiting thermal coal by 2025 and In 2017, we started to develop in-house energy transition scenarios based on the drivers of policy and steering our portfolio towards meeting the Paris Agreement’s well-below two degree goal (Terra approach).
technology. These scenarios formed the basis for the energy transition assessment we undertook for particularly Under Terra, we set one target per sector for each of the nine sectors. For details on the approach refer to our sensitive sectors within the Transportation, Industrials, Power and Real Estate sectors. ING is committed to ‘2020 Terra Progress Report’ and for our approach to setting opportunity-related metrics and targets please refer continuously reviewing and monitoring its policies and strategies as climate -related risks and opportunities to ‘Climate Finance’ both published on our corporate website ing.com. Within the UNEP FI TCFD project we emerge. As a result of transition risk ING further refined its coal policy in 2017, targeting near-zero coal exposure worked towards methodologies to translate the impact of climate change on financial rations.
by 2025.

Next steps In 2020, we published our second Terra Progress Report that provided an update on how we steer our lending

portfolio in line with the goals of the Paris Agreement for all nice sectors in scope, including quantitative results.In 2021, we aim to further progress with our efforts regarding climate-related risks and opportunities by refining

For an overview of how we capitalise on climate-related opportunities, please refer to Responsible Financeour methodologies, working towards standard setting and expanding the scope. For instance, we aim to expand

(section ‘Our performance and strategy’).the scope of our physical risk assessment for real estate and investigate the impact of transition risk on various

sectors.

ING Group Annual Report 2020 on Form 20-F226

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Non-financial risk

Non-financial risk◾Processing riskis the risk of financial loss, regulatory sanctions or reputational damage due to failed
(transaction) processing (input, execution, output) or failing process management;

Introduction ◾Unauthorised activity riskis the risk of financial loss, regulatory sanctions or reputational damage due to
Non-financial risk (NFR) is defined as the risk of financial loss, legal or regulatory sanctions, or reputationalemployees performing outside the normal course of their business, intentionally giving unauthorised
damage due to inadequate or failing internal processes, people and systems; a failure to comply with laws,approvals or overstepping their authority;
regulations and standards; or external events. The NFR function encompasses Operational Risk Management◾Personal and physical security riskis the risk of financial loss, regulatory sanctions or reputational
(ORM), Information Risk Management (IRM), the Independent Validation Unit (IVU), Professional Practice Unitdamage due to criminal and environmental threats that might endanger the security or safety of ING
(ERM PPU) and Corporate Security & Investigations (CSI).personnel at work, people in ING locations, ING assets or assets entrusted to ING, people at ING event locations, or might have an impact on ING organisation's confidentiality, integrity or availability;
◾Employment practice riskis the risk of financial loss, regulatory sanctions or reputational damage due to

Governance acts that are inconsistent with employment, health and/or safety laws, regulations or agreements, from The head of Corporate ORM, Corporate IRM, IVU, CSI, ERM PPU and NFR Strategy, Central Services & payment of personal injury claims, or from diversity/discrimination events; and Digitalisation Unit report to the global head of NFR, who directly reports to the chief risk officer. The global head ◾Fraudis the deliberate abuse of procedures, systems, assets, data, products and/or services of ING by of NFR is responsible for developing the framework of NFR policies and standards within ING, and for monitoring those who intend to deceitfully or unlawfully benefit themselves and/or others. This definition of fraud is the quality of non-financial risk management in the ING entities.

specified in the following two categories of fraud:
Internal fraud: acts of fraud which involves at least one internal party performed by or in collusion with

Non-Financial risk measurement an ING employee or agent with the consequence of financial loss, regulatory fines, litigation loss, ING uses an internal model in line with the Advanced Measurement Approach (AMA) to determine the regulatorybusiness disruption and/or reputational damage for ING.
and economic capital amounts that are necessary to cover potential losses as a result of non-financial risks. ThisExternal fraud: acts of fraud or scams by individuals and/or parties excluding ING staff (including model predicts non-financial risk losses by combining a forward-looking and a backward-looking view on non-contractors), with the consequence of financial loss, regulatory fines, litigation loss, business disruption financial risk events. ING reports the outcome of its AMA model on a quarterly basis.and/or reputational damage for ING.

Risk categories

ING categorises non-financial risks in a number of areas:

◾Information (technology)riskis the risk of financial loss, regulatory sanctions or reputational damage due

to breaches of confidentiality, integrity or availability within business processes, the supporting IT systems, of information or lack of information quality;
◾Continuity riskis the risk of financial loss, regulatory sanctions or reputational damage due to business disruptions (loss of people, processes, systems, data, premises);
◾Control riskis the risks of financial loss, regulatory sanctions or reputational damage due to ineffective organisational structures and governance procedures (including unclear roles and responsibilities and inadequate reporting structure);

ING Group Annual Report 2020 on Form 20-F227

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Non-financial risk

Main developments in 2020The further digitalisation of banking services, increasing electronic exchange of information via different

consumer channels, use of and dependency on third-party vendors for services, and the implementation of PSD2

Covid-19 are likely to present ongoing cybercrime resilience, fraud management and IT-security challenges; both in the From the start of the global outbreak of the Covid-19 virus in January 2020, ING’s priority has been to protect its short- and medium-term as criminal actors target financial and sensitive (payment) data, such as customer user employees and their families and to continue servicing its customers as before , and put extra effort into credentials outside the traditional banking environment. Sensitive (payment) or personal data can be obtained by supporting them in difficult times. To ensure this ING employees have put immediate focus on ensuring the criminals via social forums such as WhatsApp and by screen scraping user credentials when a fallback procedure bank’s operational resilience and continuity. ING has mobilised a global crisis management organisation – within PSD2 is allowed. In 2020, these challenges have further increased due to Covid-19, which resulted in more engaging with all ING entities worldwide – to monitor and manage Covid-19 related operational, health and sophisticated phishing attempts, improved social engineering fraud attempts, an increased risk of external fraud safety challenges. In the first weeks of 2020 the bank was able to transfer around 80% of its employees, including in the lending portfolio and people working from home.
external employees, to a working-from-home (WFH) environment. Throughout the year, ING continued to

monitor developments in employee well-being and local BCM threat levels and aimed to identify, monitor and Dealing with current and emerging fraud threats, especially given the ever-increasing use of digital and on-line
manage Covid-19 related risks through specific risk assessments. In addition to internally focused risk banking, effectively requires continuous improvement of fraud management capabilities such as real-time
assessments, risk assessments were also performed on critical suppliers of ING. The financial health of these transaction monitoring and response capabilities. In addition, better alignment and standardisation of crosssuppliers has been monitored throughout the entire year.
border fraud management across ING and related platforms as well as exchanging data cross border. With

legislation such as EBA PSD2 and the continuing emphasis on duty of care, financial institutions are potentially

Cybercrime and fraud becoming more and more responsible for losses incurred by clients, and taking on more of the burden of

Controls and monitoring continue to be embedded in the organisation as part of the overall internal controlreclaiming those losses.

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 informs this process as does the closer alignmentData risk management

between IT security and fraud teams. In addition, ING continues to strengthen its global cybercrime and fraud The drivers for ING’s data management come from the Think Forward strategy, where data management is one
resilience through collaboration with financial industry peers, law enforcement authorities, government (e.g.
of the key enablers, and from the increasing regulatory focus on data.
National Cybersecurity Centre) and internet service providers (ISPs).
ING has the enterprise data lake in place (part of the target infrastructure) and is implementing data

management capabilities including data definitions, data quality, data governance and data ethics, for use by ING
General concerns over the potential impact of insider threats continues to increase. However the impact of entities, to support, amongst others, statutory and regulatory reporting. ING is continuously improving its data
external instances or trends remain limited in the financial industry where collaboration within the sector is governance, the execution of its data quality framework controls at a consistent level across the bank and
improving.
prioritising the implementation of the target infrastructure to further simplify, standardise and modernise its

activities.

ING Group Annual Report 2020 on Form 20-F228

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Non-financial risk

In 2020, the Global Data Committee was established as a key Management Board Banking committee, to providePersonal data protection

guidance to the global data function, comprising the chief data management officer and the data managementAs per 25 May 2018, the European General Data Protection Regulation (GDPR) became effective. ING is bound by
organisations of all entities. Its purpose is consistent with BCBS239’s stipulation of ‘strong governance’ (Principlethe GDPR that affords greater protection to individuals and requires more control on data and transparency
1) as well as ING’s own ambition of being a data-driven bank. The Global Data Committee, chaired by the CRO,regarding the use of data by companies. In 2020, ING continued working on structural solutions to support
oversees the global data function and its contribution to wider society by providing decisions, endorsements andfurther enhancing the data protection of our clients and employees.
priorities for ING’s data management strategy and data-related initiatives.

Sourcing Risk

Enterprise risk management In 2019, a renewed sourcing policy became effective, outlining the inherent critical and high risks that can The enterprise risk management (‘ERM’) framework is the overarching risk management framework. ERM materialise during the sourcing life-cycle. In addition, a sourcing guideline was issued to support updated assembles common risk principles for all risk types and domains: financial, non-financial (including compliance requirements, issued by EBA in 2019. The controls defined in the support control framework (SCF) sourcing have and model risks) and strategic risks. It aims to ensure standardisation of all risk frameworks and applies to all been implemented and tested. The scope of sourcing encompasses outsourcing to external providers as well as businesses lines and entities across ING.
intra-group sourcing.

In 2020, the ERM Professional Practice Unit (PPU) was established to set standards for the management and

BCBS 239 implementation of the ERM framework and to assure consistent use of the policy governance and risk library for In January 2013 the Basel Committee on Banking Supervision published the Principles for Effective Risk Data all risk domains within ING. The PPU is introducing ING’s global documentation governance by providing Aggregation and Risk Reporting (BCBS 239), which is adopted by the ECB and became effective for all Global definitions and guidance for global policy documentation and global policy development, update and approval Systemically Important Banks (G-SIBs) as of January 2016 and for all D-SIBs depending on the date of designation.
processes.
In 2020, ING continued with the extension of scope, continuous implementation improvements and further

embedding into business as usual.

User access management (UAM)

UAM is one of the focus areas of ING and an important element in our control framework to mitigate the risk of

unauthorised and / or inappropriate access to systems, processes and the data and information contained

therein. Consequently, the UAM processes, controls and practices are periodically reviewed, tested, adapted and

improved by a dedicated UAM team to address ongoing developments both within and outside ING. In 2020, ING

continued to mature, with attention to tooling, standardisation and harmonisation of processes and workflows

and further automation of UAM controls. This will continue in 2021.

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Compliance risk

Compliance riskand stimulating a sound compliance risk culture. The scope of the compliance risks is outlined in the ING

Compliance Risk Charter.

Introduction

Compliance risk is defined as a threat posed to ING’s standing resulting from failure to act in line with applicableCompliance is headed by the chief compliance officer (CCO) who reports directly to the CRO. The CCO has direct
laws and regulations, internal rules (including ING’s Orange Code and global Code of Conduct) and/or societalaccess to the Risk Committee of the Supervisory Board. The CCO and the chairman of the Risk Committee had
expectations. A failure to adequately mitigate compliance risk may lead to damage to ING’s reputation and/orregular bilateral consultations in 2020.

legal/regulatory sanctions, and/or financial loss.

Update on key compliance matters

The mission of Compliance is to support ING in conducting its business activities in line with applicable laws andStrengthening the compliance function
regulations, taking into account ING’s internal code of conduct and societal expectations. Compliance wants to In 2020 ING introduced measures to strengthen the compliance function. These measures were implemented as drive compliance risk management by desire and design throughout the organisation, unleashing the power of part of a multi-year, global compliance strategy and transformation programme that started in October 2019.
our data, risk expertise, and people to keep the bank safe and sound, and help drive new and sustainable ways of The programme encompasses the whole compliance function and particularly aims at enhancing and integrating doing business.
governance, an end-to-end framework and monitoring capabilities of the compliance function. As we operate in

a dynamic and challenging environment we are continuously learning and improving while getting to a more Within ING, compliance risks are defined as those risks that are within the scope of the ING Compliance Risk sustainable and mature level within the compliance function.
Catalogue. The following three risk categories apply:

◾Financial crime risk refers to the risks of the bank’s products and services being abused for illicit purpose

Financial economic crime generating or disguising financial and/or economic crimes (FEC).
Knowing who we do business with helps us to prevent the financial system from being misused, and is an ◾Conduct risk refers to the compliance risks arising from potential or perceived misconduct by ING or its important obligation to help gain trust in the financial markets. As gatekeepers of the financial system we have employees towards its customers, market integrity, business partners and other stakeholders.
an obligation to prevent criminals from misusing it or detect and respond when it is being misused. We believe ◾Organisational risk refers to the compliance risks arising from actual, potential or perceived flaws in the we can be even more effective in safeguarding the financial system if we join forces and work with other banks way that ING is organised and structured including its regulatory and reporting framework.
and with national, European and global authorities and law enforcement agencies to tackle financial economic

Governance roles and responsibilitiescrime. In 2020, ING continued to execute and update policies and procedures to further enhance our know your customer (KYC) activities. In addition, ING set up a special taskforce to monitor transactions for financial The Compliance organisation (comprised of four roles: Group Compliance, business segment compliance, economic crime related to Covid-19.
geographical compliance and country compliance) is part of ING’s second line of defence refer to ‘Risk ING is continuously working to strengthen its implementation of KYC and build sustainable KYC practices. One of Governance’. Group Compliance together with business segment compliance set the priorities, standards and the ways we do this is through our global KYC enhancement programme which aims to:
boundaries for the business segments (Retail and Wholesale Banking). Geographical compliance (Challengers & ◾Improve customer due diligence, perform on-going transaction monitoring and report on unusual Growth Markets / Wholesale Banking / Market Leaders) together with the functional lines in the countries are activities should these be identified.
responsible for the execution of these priorities, standards and control framework, within the boundaries set.
◾Make structural improvements in five areas: policy and risk appetite statements, digital tooling, Compliance is tasked with instructing, advising, challenging and having oversight of the first line of defence in governance, monitoring and screening, and KYC knowledge and behaviour.
their management of compliance risks as well as raising awareness (via training and communication), influencing

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It is important to continuously enhance our FEC controls framework given the dynamic nature of the threats andRisk culture regulations. In 2020, the FEC controls maturity program me (FCMP) was initiated in order to further mature the framework over time.

Risk culture

Essential risk culture components At ING we attach great importance to a sound risk culture. ING’s risk culture determines the way in whichRisk awareness employees identify, understand, discuss and act on the risks we are confronted with and the risks we take. In•Clear view of risks 2019, ING initiated a global risk culture project to understand and measure where our level on the mentioned•Recognition of risks aspects is. The Management Board Banking and Supervisory Board are closely involved in this project and areLeadership as•Common understanding of risk strongly committed to safeguarding a sound risk culture for ING. Key characteristics of ING’s risk culture are:mediating driverRisk judgement •Tone from the top/•Balanced decision-making, alternate views ◾Our Orange Code and global Code of Conduct define the most essential conduct principles expectedLeading by example•Effective challenge and feedback from ING employees in their daily activities; (see ‘Conduct risk’)•Learning from experiences•Ownership of risk ◾Our leadership plays an active role in offering an environment of open communication and challenge;•Clear consequencesEscalation & follow-up ◾Having a robust risk management framework is key;•Speak up and effective escalation ◾Managing non-financial risk is as important as managing financial risk;•Follow up on issues raised ◾We take time to learn from best practices and incidents from the past;•Reflective conversation ◾We all are accountable for sound risk management and take time to actively educate ourselves; and ◾Our reward and remuneration system reflects our ING values and our desired risk culture.

The project includes specific enhancement assignments in areas such as monitoring risk culture, our escalation
culture and further linking non-financial risk related topics to our purpose and strategy .

RegTech

The large number of regulations impacting financial institutions shows no sign of slowing down, leading to an increasing need within the compliance function for innovative solutions to support our business processes. A notable area of interest is horizon scanning, covering the timely spotting of rules and regulations, identifying risks and obligations resulting from these regulations, and creating policies to support the organisation on being compliant. A wide range of innovative tooling (such as Ascent, SparQ, Corlytics) is being assessed for horizon scanning and interoperability of solutions is a key factor in our consideration.

Regulators are showing a growing recognition of the value of RegTech solutions to manage Compliance Risk. In response, ING is running a diverse portfolio of RegTech initiatives. This ranges from making investments (e.g.
Ascent, Eigen), close collaboration on solutions (e.g. Privitar, DuCo, Regtek Solutions) and creation of home-

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grown solutions (e.g. CoorpID). Our focus is on RegTech solutions that create positive impact on complianceThe KYC policy framework is mandatory and applies to all ING entities (i.e. all branches and majority- owned

effectiveness and cost.subsidiaries of ING Groep N.V. (including ING Bank N.V.) or where ING exercises control), their corporate

functions and their branches, including outsourcing partners to whom ING entities have sourced KYC -related

Financial crime risk and know your customerresponsibilities. The KYC policy framework also reflects relevant national and international laws, regulations and

industry standards related to business partners and overarching requirements with regards to record retention, Financial crime risk refers to the risk of the bank’s products and services being abused for an illicit purpose; either training and awareness. ING entities have local procedures in place, aimed at enabling them to comply with local generating or disguising FEC. Keeping ING safe, secure and compliant is a top priority. Know your customer (KYC)
laws and regulations and the KYC policy framework. Where local laws and regulations are more stringent, these and financial crime compliance play a major role and aim to ensure we only engage and do business with people have to be applied.
and companies that meet regulatory requirements and are within our risk appetite. This is important, not only for

ING but for wider society, with governments around the globe having identified financial crime as a major As a result of frequent evaluation of the businesses from economic, strategic and risk perspectives, ING continues concern in modern society.
to believe that for business reasons doing business involving certain specified countries should be discontinued.

In that respect, ING has a policy not to enter into new relationships with clients from these countries and Fighting financial crime in a constantly changing environment requires ongoing updates to regulations and processes remain in place to discontinue existing relationships involving these countries. At present, these requirements to keep banking safe. However, according to the European Banking Authority, increased countries are Cuba, Iran, North Korea, Sudan, Syria and Crimea region.
regulations and scrutiny can also have unintended consequences, with some customers and clients no longer

being able to get their financial needs met.

KYC enhancement programme

KYC policy frameworkING is continuously working to strengthen its implementation of KYC and build sustainable KYC practices. One of

the ways we do this is through our global KYC enhancement programme which aims to:
ING strives to play its part in safeguarding the integrity of the financial system by combatting financial crime ◾Improve customer due diligence files (documentation, data and identity verification), assess selected through utilisation of an overarching policy and control framework which is continuously enhanced. The KYC past transactions and report on unusual activities should these be identified.
policy and related control standards (the KYC policy framework) set the minimum requirements and control ◾Make structural improvements in five areas: policy and risk appetite statements, digital tooling, objectives for all ING entities to guard against involvement in financial crime activity. The KYC policy Framework governance, monitoring and screening, and KYC knowledge and behaviour.
reflects relevant national and international laws, regulations, guidance documents and guidelines from national,

European and international authorities, (supra)national risk assessments, and industry standards related to:

Global approach

◾financial economic crime, covering money laundering, terrorist financing, bribery and corruption, exportING updated its KYC policy in line with external regulatory developments in anti-money laundering and financial

trade controls, proliferation financing, sanctions (economic, financial and trade), countries designated bysanctions. We also updated our ESR framework to incorporate new policies on human rights, climate change and

ING as ultra-high-risk countries (UHRC)financing infrastructure projects. This framework updates and standardises our policies by expanding the list of

◾customer tax compliance, covering customer tax integrity (CTI), FATCA, CRS, mandatory disclosurerestricted activities ING will not finance. It also clarifies roles, responsibilities as well as the products and clients in

requirements (MDR)scope.

◾environmental and social risk (ESR) client assessment, specifically the initial customer screening for

environmental and social risk. For more information see the Credit risk chapter.In addition, we refreshed and further enhanced our systematic integrated risk analysis (SIRA). This allows us to

measure and monitor adherence to our KYC risk appetite and ensures consistent KYC integrity risk assessments

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across the bank. Our risk appetite statements (RAS) which incorporate ING’s risk appetite and tolerance towardsIn Germany, ING joined the public-private partnership Anti-Financial Crime Alliance (AFCA) to foster mutual

KYC integrity risks were also updated .exchange of information within the financial system. The alliance consists of 30 members, amongst them public

authorities, the largest financial institutions as well as representatives from the real estate sector.

We changed the structure of our global KYC organisation introducing three pillars that oversee customer due

diligence, transaction monitoring and screening. Each pillar has a dedicated team with expert leads. This bringsDigitalisation and innovation

greater focus, strengthens steering and ensures end-to-end responsibility.Criminals are harnessing technologies like artificial intelligence and machine learning to become ever more

sophisticated. These same technologies can also help us to counter this threat. For example, Hunter is an AI- We also continued to introduce uniform global transaction monitoring solutions in 2020. These includepowered anti-money laundering tool that has the predictive capability to detect (emerging) suspicious patterns standardised transaction monitoring tooling, supported by risk-based scenarios, handling alerts and reportingand entities. It helps identify clients with a high concentration of suspicious behaviour and points out hidden suspicious activities where required. The countries in scope have been connected to our global pre -transactionrelationships, delivering on the promise to always be a step ahead. And we’ve developed a centralised digital screening tool. Our adverse media screening tool is now available in most of the countries and will be availablevault where corporate clients can store and share their KYC documentation in a secure way. Similarly, the ING across the network of countries in early 2021. This allows us to continuously screen customers against newsLab in Singapore is working on a tool to help banks that serve other financial institutions eradicate the intelligence related to financial and economic crime. We implemented continuous name screening in severalduplication of KYC documentation.
countries. Substituting local tools with centralised global tools enables us to further improve the way we

onboard, monitor and screen customers using a consistent approach across the world.Knowledge and behaviour

Increasing our knowledge of KYC, providing training and carrying out behavioural risk assessments aimed at We have also established a financial economic crime Covid-19 taskforce within ING aimed at identifying potential detecting impeding behavioural patterns and intervening where necessary is also key.
criminal schemes and assessing if the coronavirus pandemic influenced payment patterns or created new

channels for money laundering. The taskforce worked with other parts of the bank to protect customers from A global KYC academy was set up last year to equip employees with the skills and knowledge they need to fraud and further strengthen cybersecurity, during the pandemic. It also identified and analysed new behavioural effectively protect customers, the bank and society against financial economic crimes. This year, the academy patterns of customers in the Netherlands, which resulted in new cases of unusual transactions being reported.
partnered with ACAMS (Association of Certified Anti-Money Laundering Specialists) and developed learning These findings are used to determine if similar patterns exist in other ING countries.
modules for employees working on KYC to raise their KYC awareness. Almost 8,000 employees enrolled for these

modules. Trainings on sanctions also took place.
In 2020, five Dutch banks, including ING, proceeded with Transaction Monitoring Netherlands (TMNL), following

a successful proof of concept that explored the feasibility and effectiveness of joint transaction monitoring.
Behavioural risk assessments were carried out to identify impeding behavioural patterns and their drivers and Monitoring transactions with a combined database provides greater insights into potential criminal money flows give direction to any necessary interventions. Since 2018, several KYC teams in various business lines have been and networks, which will further boost monitoring and alert detection.
assessed.

Similarly, we are working with four banks and payment provider Isabel Group in Belgium to use the blockchain Leadership labs (workshops with senior leaders) were organised in APAC, EMEA and Americas to address application KUBE to share corporate data as part of the KYC process. KUBE is currently being built and is expected impeding behavioural patterns identified in the assessments and develop the right conditions to manage risks.
to be operational next year, and will help streamline the verification and maintenance of corporate identities.

We also conducted two Nudge Labs this year for Wholesale Banking globally, developing subtle triggers that

encourage desired behaviours to further strengthen our KYC processes and execution. Co-created by our

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Wholesale Banking and behavioural risk experts, the Nudge Labs are another follow-up from our KYC behaviouralorganising and integrating all regulatory developments and activities in the area of financial crime compliance risk assessments.within our regular controls framework.

Staying safe, secure and compliantBribery and corruption

Fighting financial economic crime is a challenge the financial industry faces globally. The scope of the problemCorruption curbs economic growth and impedes the development of peaceful and sustainable societies. It was illustrated in media reports in September 2020, in which several banks, including ING, were mentioned inundermines business confidence and corporate integrity, impedes fair business competition and harms respect of SARs filed some years ago.international trade. It can also severely damage the reputation of companies and thus erode both public trust

and investor confidence. We take these risks seriously and take steps in our organisation to identify and to As a gatekeeper to the financial system, we have an important role in the collective fight against financialminimise the risk of being involved in or associated with bribery or corruption.
economic crimes. By performing customer due diligence and monitoring transactions we aim to detect and prevent the financial system from being misused in criminal activities, including money laundering and terroristWe expect all ING employees at every level of the organisation to always do business in accordance with the financing, for the safety and security of our customers and society. We take this responsibility extremelyvalues and behaviours of our Orange Code. We have a zero-tolerance approach when it comes to bribery and seriously. As part of our ongoing anti-money laundering efforts, we assess relationships with customers andcorruption. Our zero tolerance statement and more information regarding our anti -bribery and corruption screen transactions. Potentially unusual/suspicious transactions are reviewed and, where applicable, reported to(AB&C) policy can be found on our website.
the relevant authorities. Over the past few years, we have increasingly discontinued customer relationships which do not fit our risk profile. This approach is also applied to acquisitions such as Payvision. ING was awareBribery and corruption risks are part of our non-financial risk framework, are included in the client and thirdwhen it acquired Payvision that its customer base partly did not meet ING’s desired risk profile. Hence,party due diligence and monitoring measures in our KYC framework and will be integrated into our systematic arrangements were made during the acquisition to exit customers in the ‘adult’ entertainment and gamblingintegrity risk analysis alongside our KYC and other integrity risks in 2021. An enhancement programme to further segments. Steps were also needed to better align Payvision with ING’s risk profile, strengthening Payvision’simprove our AB&C risk assessment, controls and reporting is in progress.
governance, policies and processes. For example, Payvision’s risk and compliance functions were reinforced, its chief risk officer is now a member of its board and there is a formal programme in place, including governance, toOur people receive training which includes how to recognise warning signs of bribery and corruption and in order ensure that Payvision’s compliance meets requirements. The programme involves a series of initiatives, includingto ensure they understand our zero -tolerance approach and the mandatory control measures in place. Our working on various structural improvements in compliance, tooling, monitoring, governance, knowledge andtraining framework will be enhanced to provide more targeted and specialist training on bribery and corruption conduct.risks from 2021 onwards. We encourage employees to speak up if they have concerns relating to bribery and corruption.
In September 2020, Banca d’Italia announced that the ban on onboarding new customers at ING in Italy, imposed in March 2019 was removed. The decision followed comprehensive steps undertaken by ING in Italy to5th EU AML Directive strengthen its processes and management of KYC compliance risks. Following an inspection by Banca d’Italia,The 5th AML Directive was implemented in the Dutch Anti-Money Laundering and Anti-Terrorist Financing Act which identified shortcomings in AML processes, ING in Italy was banned from taking on new customers in March(Wwft) in May 2020. Furthermore, in the battle against financial economic crime, including money laundering, 2019. Existing customers in Italy continued to be fully served throughout the period of the ban.the Dutch UBO-(ultimate beneficial owner) register went live in September 2020. These developments have been incorporated in ING’s KYC policy framework.
Keeping banking safe and secure for the longer term, requires staying ahead in the area of financial economic crime compliance. Hence, we are building on the foundation of our global KYC enhancement programme by

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Looking ahead, ING keeps abreast and takes relevant action on other external developments. In this context,Tax risk

reference is made, among other things, to the 6th AML Directive, as well as regulatory proposals from theTax policies, procedures and a tax control framework have been implemented to support management in
European Commission following from its action plan for a comprehensive union policy on preventing moneymitigating potential tax risks in a prudent manner. Internal monitoring, control and reporting of tax-related risks
laundering and terrorism financing. Moreover, the execution of the Dutch action plan for the prevention oftake place on a continuous basis with regular reporting to various stakeholders. For 404/SOX purposes (section
money laundering through the Dutch financial system and for tracking and prosecuting criminals and their404 of the Sarbanes-Oxley Act), an ‘effectiveness of internal control statement’ with respect to tax controls has
enablers is in progress. This action plan was presented by the Dutch Minister of Justice and Security and Ministerbeen provided. Tax risk management is subject to Corporate Audit testing and evaluation. In the Netherlands and
of Finance. Anticipating regulatory developments in this area, ING and four other Dutch banks establishedalso in other countries, ING’s position is to be cooperatively tax compliant, this implies to have transparency
Transaction Monitoring Netherlands (TMNL) in the collective fight against money laundering and the financing ofabout and disclosure of relevant tax risks towards tax authorities. Tax risks not only refer to ING’s own tax
terrorism. This organisation is a first of its kind: it is anticipated that within TMNL transactions of those banks areposition, but also to the risks in relation to the tax positions of our customers. In this respect, we have integrated
jointly monitored with advanced analytics techniques like network analytics and anomaly detection.a tax integrity assessment in our overall customer risk assessment process .

Common Reporting Standard (CRS)Conduct risk

Similarly, the Organisation for Economic Cooperation and Development (OECD) has developed a Common

Culture and ethics Reporting Standard (CRS) and model competent authority agreement to enable the multilateral and automatic
A sound risk culture is paramount at ING as it determines the way in which employees identify, understand, exchange of financial account information. CRS requires financial institutions to identify and report the tax
discuss, and act on the risks we are confronted with and the risks we take. In 2020, ING conducted a selfresidency and account details of non-resident customers to the relevant authorities in CRS-compliant
assessment of our risk culture and are working on developing the key characteristics of ING’s risk culture.
jurisdictions. As of 29 September 2020, 109 jurisdictions (‘signatory countries’), including the Netherlands, have
To further enhance our risk management in the area of risk culture, ING added culture and ethics risk to its signed a multilateral competent authority agreement to automatically exchange information pursuant to CRS.
compliance conduct risk scope. The proper embedding of our global Code of Conduct, Orange Code and the The majority of countries where ING has a presence have committed to CRS. The EU has made CRS mandatory for
whistle-blower policy are key to managing our culture and ethics risk.
all its member states.

Orange code and the global Code of Conduct The OECD has also introduced two additional new measures to tackle global tax avoidance/evasion:

◾Mandatory Disclosure Rules for Addressing CRS Avoidance Arrangements and Opaque OffshoreIn February 2020, ING launched a new global Code of Conduct, clarifying the link between the existing Orange

StructuresCode and our main policies. The global Code of Conduct further defines the most essential conduct principles

◾Preventing Abuse of Residence by Investment (RBI) and Citizenship by Investment (CBI) Schemes toexpected from ING employees in their daily activities. It provides additional risk awareness and helps to better

Circumvent the CRS.meet expectations stated in external rules and guidelines. To enhance monitoring on the global Code of Conduct,

this code will be linked (like the Orange Code) to the employees’ performance management cycle to ensure a

These measures are in the process of being implemented in local laws. With regard to the mandatory disclosurecontinuous attention and dialogue on how to apply the global Code of Conduct in the daily work practice of our

rules for EU jurisdictions, this was done via the amendment to Directive 2011/16 (DAC6).employees.

To preserve risk awareness in the area of risk culture, ING continued its efforts towards embedding the Orange

Code decision making model (introduced in 2017) that supports ethical and well-balanced decision-making

throughout ING. This included frequent training by Compliance towards the first line. In 2020 the model was also

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further embedded in ING’s governance by adding the model to the Global Product Approval (PARP) Policy andsoundings for small and medium-sized enterprises. Furthermore, a full-fledged review of the 2016 market abuse the local PARP processes.policy was also conducted.

Conflict of InterestTreating custo mers fairly

Compliance will cover the risk of running deals and operations in a way where personal or organisationalUnder conduct risk, ING includes the risk related to treating customers unfairly and not having their best interests prevail over the interest of the client (e.g. when related to personal account dealing).interests in mind throughout the product life cycle (from design to advice and claims In 2020 our existing conflict of interest policy was revised in alignment with the standards as defined byhandling).
enterprise risk management. The policy incorporates key requirements for both personal and organisational conflicts of interests in line with the EBA Guidelines on Internal Governance. Controls are defined in controlOur focus in 2020 was on strengthening compliance with the Markets in Financial Services Directive (MiFID). New standards owned by the first line of defence.key controls were rolled out throughout ING’s EU entities and an extensive assessment was carried out to further align the implementation of MiFID rules in all locations and to enhance training and guidelines. INGs global Client Market conduct riskProtection and Product Approval Committee (CPAC) oversees the embedding and monitoring of ING’s global Market conduct risk is defined as running deals and operations not in line with good capital markets functioningstandards and risk appetite when offering investment services to our customers. Local and/or regional CPAC s along the product/service life cycle (i.e., pre-trade, execution and post-execution). A smooth functioning ofhave been setup across the footprint representing Retail- and Wholesale Banking and allowing for a global markets and public confidence in markets are crucial for economic growth and wealth. The 2016 market abuseframework that can be monitored and steered accordingly. 2020 also saw a big emphasis on the improvement of policy was revised to incorporate EU Regulation 2019/2115, which changed the requirements on markettransaction reporting activities in order to fully align them with regulatory expectations.

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Model risk

Model risk

Models governance (*)

Introduction The growing complexity and number of models created and utilised every year for decision-making makes it Model risk is the risk that the financial or reputational position of ING is negatively impacted as a consequence of important to manage and control the associated model risk accordingly. Within ING the overarching the use of models. Model risk can arise from errors in the development, implementation, use or interpretation of responsibility for this risk type lies within Model Risk Management (MoRM) department. The MoRM, is models, or from incomplete or wrong data etc., leading to inaccurate, noncompliant or misinterpreted model responsible for identifying, assessing, monitoring and reporting global model risk exposure at the aggregated outputs.
level. The department sets and maintains a model risk management framework containing: (1) model

governance, (2) model risk appetite, (3) model risk management policies and standards, and (4) the global model
A model is defined as:
inventory tool. MoRM is responsible for providing independent validation of models in use within ING. For that
a quantitative method, system, or approach that applies statistical, economic, financial, or mathematical purpose, the department has four specialised dedicated teams, each focusing on different family of models,
theories, techniques, and assumptions to process input data into quantitative estimates or whose inputs are namely: Credit Risk Model Validation, Banking Book Risk Model Validation, Trading Book Risk Model Validation
partially or wholly qualitative or based on expert judgement.
and Data Science Model Validation.

A tool or solution (a candidate model) is considered a model when:
The Model Risk Management Committee (MoRMC) is in place to align the overall model strategy and approve the
◾it covers quantitative approaches whose inputs are partially or wholly qualitative or based on expert model risk appetite, model risk management policies and methodologies. MoRMC is mandated by the MBB and
judgement, provided that the output is quantitative in nature ;
chaired by the CRO of ING, the MoRMC meets monthly.
◾it is used multiple times without changing or reconsidering the assumptions, model parameters or

weighting factors; and

Model lines of defence (*) ◾the outcome is used for decision-making.
ING’s model risk and control structure is based on the three model lines of defence (MLoD) approach. This

Covid-19 impactapproach 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.
The outcome of models depends directly on the data that is used as input. As described throughout this report

many sectors have been hit hard by the consequences of the pandemic and governments have taken

extraordinary support measures to counteract the negative economic circumstances these sectors are

experiencing. The same measures also cloud to a certain extent the reliability of the data that currently is being

used as input for models. The support measures interfere with normal economic circumstances meaning that

data currently used may not reflect the true nature of economic circumstances and may be positively biased. The

increased model risk that is associated with this phenomenon has been acknowledged and is being managed by a

range of management actions, such as management overlays, and close monitoring of portfolio developments.

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In terms of composition and main activities within three model lines of defence (MLoD):
Model lines of defence (*)◾The 1stMLoD is composed of the model owners, model users, data management and model

development, and is accountable for, among others, the development, implementation and use of the models as well as monitoring the effectiveness of models’ performance;
◾The 2ndMLoD is composed of model validation and model risk oversight, which owns the model risk management framework, proposes the model risk appetite and provides an independent validation of models used within ING;
◾The 3rdMLoD is the internal audit, reviewing the quality of model risk management execution in all lines of defence and 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 2ndLoD), e.g. for bank-wide stress testing, or by the audit service (normally a 3rdLoD), e.g. to support prioritisation of their audits. In that case, both domains (risk or audit service) become 1stMLOD.

Model Risk Appetite (Model RAS) (*)

The model risk appetite is designed to determine the level of model risk ING is willing to accept in pursuit of its strategic objectives. The initial iteration of Model RAS was introduced in 2020 and it will be monitored and evaluated in 2021.

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 related to applying models in various business processes.

Model risk management is to be executed for each individual model through the model life cycle via processes such as: model classification, model risk identification and assessment, and model validation. On an aggregated level model risk is monitored via analysis of data from the global model inventory. The insights, from aggregated data analysis, are reported to the MoRMC and to the MBB for senior management to take well-informed decisions on acceptance or further mitigation of model risk.

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Model lifecycle (*)becomes available (for example the Fintech models), new or upcoming supervisory regulations or ongoing
The next figure provides a schematic overview of the model lifecycle, where orange represents the activities oftechnical developments.
the 1stMLoD, grey represents the 2ndMLoD and light grey is the 3rd. The objectives of the different processes are outlined below (reference).Data collectionis the process of defining and collecting data that meets the defined data quality requirements

for model development. The process includes the definition of the data needed, assessment of data availability and quality, assumptions and limitations, as well as the gathering of the data needed for the analyses, impact study and testing during the model development process.

Model developmentis a structured process that leads to a model that is ready for validation and subsequent use. Depending on the development approach these first stages can be separate or integrated. An example of the latter is data science based application development.

Pre-approval validationis the independent confirmation that the model is valid for its intended use, before the new or changed model is submitted for use approval. To ensure objectivity and effective challenge, the model validator is independent from other model parties such as the model developer, model owner or model approver. Model validation applies equally to in-house developed and third-party models.

The objective of themodel approvalstage is approval for use. The model owner submits the model for formal consent by the internal approver before being deployed and used. The recommendations and validation report prepared by the model validator are key inputs for approval for use.

During theimplementationstage, the model is realised, tested and made available in a production environment.

In themodel usestage the model is applied by the users for the specific purpose it was designed for. The model can only be used after formal validation and approval for use of the model.

The objective of modelperformance monitoringis to regularly check if the model is performing as intended, also

after possible changes in the commercial, organisational or legal environment. Model performance monitoring begins when model use has started and continues until the model has officially been decommissioned.
Initiation or change: The initiation of the development of a new model or change of an existing model can be triggered by different factors. These may be (i) internal, such as the introduction of a new product that cannot be handled by the existing models, a change in ING’s organisation, financial or commercial strategy or findings and issues by an auditor, validator or based on monitoring; or (ii) external, such as innovation/new technology that

ING Group Annual Report 2020 on Form 20-F239

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Model risk

Periodic validation:During the life time of a model its ongoing validity must be safeguarded. This is done by

periodical independent (re)validation that assesses whether the model 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 model, the business or financial instruments etc. The actual frequency of periodic validation depends on the model risk, model type and applicable regulation.

A model that is / will no longer be used must be decommissioned.Decommissioningdisables the model. It can,

for example, be triggered because (1) the product, organisation or risk the model is made for has changed considerably or no longer exists, (2) the model is outdated, underperforming or better alternatives are available, (3) the model became obsolete due to standardisation or (4) the external approver withdraws its approval for the model.

Continuous model inventory and reporting: Keeping an inventory of all models and their status during their

lifecycle is a continuous process. It supports management and control of the models in scope, both per individual model and the overarching management of all ING’s models. Periodic model risk reporting provides the relevant internal and external stakeholders with an overview of the models in use and the associated model risk given the defined model risk appetite.

ING Group Annual Report 2020 on Form 20-F240

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Business risk

Business risk

Introduction

Business risk for ING has been defined as the exposure to value loss due to fluctuations in volumes/margins, net fee and commission income as well as expenses. It is the risk inherent to strategy decisions, internal efficiency and the business environment. Business risk capital is calculated via the variance-covariance methodology for these risks, covering the risk that volume/margins, net fee and commission income and operating expenses will deviate from the expected expenses over the horizon of the relevant activities.

Governance and risk management

ING applies an explicit risk appetite statement regarding business risk, focusing on earnings stability and diversification of the business mix. 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 environment for certain markets and products. Furthermore, the underlying risk types (expense risk, volume-margin risk, and net fee and commission income risk) are mitigated and managed differently. Expense risk is monitored and managed via the financial performance of the bank and the local units, whereby the reported expense numbers are compared 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.

ING Group Annual Report 2020 on Form 20-F241

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Selected statistical information on banking operations

Selected Statistical Information on Banking

ASSETS
OperationsInterest-earning assets

202020192018| | | Average | Interest | Average | Average | Interest | Average | Average | Interest | Average |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | balance | income | yield % | balance | income | yield % | balance | income | yield % |
| Reference is made to Note 1 ‘ Accounting Policies’ of the Consolidated financial statements for information on | | (EUR millions) | | | (EUR millions) | | | (EUR millions) | | |
| Changes in accounting principles, estimates and presentation of the consolidated financial statements and | Time deposits with banks | | | | | | | | | |
| | domestic | | 3,495 | 39 | 1.14,516 | 49 | 1.1 | 3,418 | 41 | 1.2 |
| related notes. | foreign | | 4,788 | 57 | 1.24,433 | 121 | 2.7 | 4,199 | 201 | 4.8 |
| | Loans and advances | | | | | | | | | |
| The information in this section sets forth selected statistical information regarding the Group’s operations. | domestic | 187,189 | 4,831 | | 2.6190,118 | 5,673 | 3.0 | 186,629 | 5,889 | 3.1 |
| Information for 2020, 2019 and 2018 is set forth under IFRS-IASB. Unless otherwise indicated, average balances, | foreign | 431,665 | 10,606 | | 2.5428,646 | 12,825 | 3.0 | 407,495 | 12,683 | 3.1 |
| when used, are calculated from monthly data and the distinction between domestic and foreign is based on the | Securities purchased with | | | | | | | | | |
| | agreements to resell | | | | | | | | | |
| location of the office where the assets and liabilities are booked, as opposed to the domicile of the customer. | domestic | | 5,242 | 3 | 0.13,722 | 52 | 1.4 | 789 | 4 | 0.5 |
| However, the Company believes that the presentation of these amounts based upon the domicile of the | foreign | 55,682 | | 573 | 1.063,337 | 1,939 | 3.1 | 74,788 | 1,670 | 2.2 |
| customer would not result in material differences in the amounts presented in this section. | Interest-earning securities | 1 | | | | | | | | |
| | domestic | 33,400 | | 313 | 0.929,892 | 347 | 1.2 | 29,454 | 336 | 1.1 |
| Average balances and interest rates | foreign | 54,542 | | 708 | 1.350,156 | 917 | 1.8 | 50,699 | 1,055 | 2.1 |
| | Other interest-earning assets | | | | | | | | | |
| The following tables show the Group’s operations, average interest -earning assets and average interest-bearing | domestic | 43,417 | | 27 | 0.130,659 | 56 | 0.2 | 36,898 | 34 | 0.1 |
| liabilities, together with average rates, for the periods indicated. The interest income, interest expense and | foreign | 48,453 | | 44 | 0.124,978 | 66 | 0.3 | 30,224 | 80 | 0.3 |
| average yield figures do not reflect interest income and expense on derivatives and other interest income and | Total | 867,875 | 17,201 | | 2.0830,456 | 22,047 | 2.7 | 824,594 | 21,994 | 2.7 |
| | Non-interest earning assets | 48,761 | | | 54,459 | | | 59,345 | | |
| expense not considered to be directly related to interest -bearing assets and liabilities. These items are reflected | Derivatives assets | 29,423 | | | 25,322 | | | 27,432 | | |
| in the corresponding interest income, interest expense and net interest income figures in the consolidated | Total assets | 946,059 | | | 910,238 | | | 911,370 | | |

financial statements. A reconciliation of the interest income, interest expense and net interest income figures to Percentage of assets the corresponding line items in the consolidated financial statements is provided hereunder.
applicable to foreign operations69.7%70.0%70.2%

Interest income on derivatives4,5465,4995,556

Other812617579

Total interest income22,55928,16328,129

1 Substantially all interest-earning securities held by the banking operations of the Company are taxable securities.

ING Group Annual Report 2020 on Form 20-F242

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Selected statistical information on banking operations| | | | | | | | | | | | Non-interest bearing | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | LIABILITIES | | | | | | liabilities | 31,711 | | 35,010 | | 22,527 | |
| | | | | | Interest-bearing liabilities | | | | | | Derivatives liabilities | 27,232 | | 24,376 | | 25,927 | |
| | | | 2020 | | | 2019 | | | 2018 | | Total Liabilities | 893,707 | | 859,461 | | 862,734 | |
| | | Average | Interest | Average | Average | Interest | Average | Average | Interest | Average | Group Capital | 52,353 | | 50,777 | | 48,635 | |
| | | balance | expense | yield | balance | expense | yield | balance | expense | yield | Total liabilities and capital | 946,059 | | 910,238 | | 911,369 | |
| | | (EUR millions) | | % | (EUR millions) | | % | (EUR millions) | | % | Percentage of liabilities | | | | | | |
| Time deposits from banks | | | | | | | | | | | applicable to foreign | | | | | | |
| domestic | | 35,079 | 10 | 0.0 | 17,673 | 28 | 0.2 | 17,805 | 22 | 0.1 | operations | | 62.3% | | 63.5% | | 65.2% |
| foreign | | 18,888 | 123 | 0.7 | 14,270 | 200 | 1.4 | 15,262 | 210 | 1.4 | Other interest expense: | | | | | | |
| Demand deposits | | | | | | | | | | | Interest expenses on | | | | | | |
| domestic | | 82,639 | 121 | 0.1 | 66,667 | 498 | 0.7 | 60,679 | 289 | 0.5 | derivatives | | 4,227 | | 5,925 | | 6,212 |
| foreign | | 124,337 | 12 | 0.0 | 108,193 | 32 | 0.0 | 95,977 | 29 | – | other | | 622 | | 654 | | 114 |
| Time deposits | 1 | | | | | | | | | | Total interest expense | | 9,007 | | 14,353 | | 14,169 |
| domestic | | 11,798 | 129 | 1.1 | 14,019 | 336 | 2.4 | 21,746 | 391 | 1.8 | Total net interest result | | 13,552 | | 13,811 | | 13,960 |
| foreign | | 9,538 | 132 | 1.4 | 14,114 | 300 | 2.1 | 14,607 | 259 | 1.8 | | | | | | | |
| Savings deposits | | | | | | | | | | | | | | | | | |
| domestic | | 95,455 | 77 | 0.1 | 93,911 | 114 | 0.1 | 92,203 | 121 | 0.1 | 1 These captions do not include deposits from banks. | | | | | | |
| foreign | | 267,713 | 627 | 0.2 | 266,470 | 1,301 | 0.5 | 261,398 | 1,257 | 0.5 | | | | | | | |
| Securities sold under | | | | | | | | | | | | | | | | | |
| agreements to repurchase | | | | | | | | | | | | | | | | | |
| domestic | | | 0 | | 36 | 33 | 92.8 | 450 | 6 | 1.3 | | | | | | | |
| foreign | | 46,225 | 317 | 0.7 | 52,158 | 1,429 | 2.7 | 86,191 | 1,344 | 1.6 | | | | | | | |
| Commercial paper | | | | | | | | | | | | | | | | | |
| domestic | | 10,127 | 12 | 0.1 | 13,554 | 21 | 0.2 | 13,746 | 22 | 0.2 | | | | | | | |
| foreign | | 13,360 | 163 | 1.2 | 14,143 | 350 | 2.5 | 20,006 | 436 | 2.2 | | | | | | | |
| Short term debt | | | | | | | | | | | | | | | | | |
| domestic | | 8,995 | 97 | 1.1 | 9,005 | 159 | 1.8 | 4,507 | 73 | 1.6 | | | | | | | |
| foreign | | 3,389 | 28 | 0.8 | 3,784 | 55 | 1.5 | 11,515 | 116 | 1.0 | | | | | | | |
| Long term debt | | | | | | | | | | | | | | | | | |
| domestic | | 64,418 | 1,387 | 2.2 | 72,012 | 1,700 | 2.4 | 55,080 | 1,548 | 2.8 | | | | | | | |
| foreign | | 14,994 | 234 | 1.6 | 14,110 | 317 | 2.2 | 12,765 | 781 | 6.1 | | | | | | | |
| Subordinated liabilities | | | | | | | | | | | | | | | | | |
| domestic | | 16,676 | 616 | 3.7 | 15,304 | 664 | 4.3 | 16,444 | 721 | 4.4 | | | | | | | |
| foreign | | –0 | | | 77 | 3 | 4.3 | 81 | 3 | 4.1 | | | | | | | |
| Other interest | ‑bearing | | | | | | | | | | | | | | | | |
| liabilities | | | | | | | | | | | | | | | | | |
| domestic | | 2,960 | 31 | 1.1 | 1,472 | 113 | 7.6 | 3,777 | 94 | 2.5 | | | | | | | |
| foreign | | 8,173 | 44 | 0.5 | 9,101 | 121 | 1.3 | 10,040 | 119 | 1.2 | | | | | | | |
| Total | | 834,764 | 4,159 | 0.5 | 800,076 | 7,773 | 0.8 | 814,280 | 7,842 | 0.8 | | | | | | | |

ING Group Annual Report 2020 on Form 20-F243

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Selected statistical information on banking operations| Analysis of changes in net interest income | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| The following table allocates changes in the Group’s operations’ interest income and expense and net interest | | | 2020 over 2019 | | | 2019 over 2018 | | |
| | | Increase (decrease) | | | | Increase (decrease) | | |
| result between changes in average balances and rates for the periods indicated. Changes due to a combination of | | due to changes in | | | | due to changes in | | |
| volume and rate have been allocated to changes in average volume. The net changes in interest income, interest | | Average | Average | Net | Average | Average | | Net |
| expense and net interest result, as calculated in this table, have been reconciled to the changes in interest | | volume | rate | change | volume | | rate | change |
| income, interest expense and net interest result in the consolidated financial statements. See introduction to | | | (EUR millions) | | | (EUR millions) | | |
| | Interest-earning assets | | | | | | | |
| “Average Balances and Interest Rates” for a discussion of the differences between interest income, interest | Time deposits to banks | | | | | | | |
| expense and net interest result as calculated in the following table and as set forth in the consolidated financial | domestic | –11 | | 1 | –10 | 13 | –5 | 8 |
| statements. | foreign | 10 | –74 | | –64 | 11 | –91 | –80 |
| | Loans and advances | | | | | | | |
| | domestic | –78 | –764 | | –842 | 122 | –337 | –216 |
| | foreign | 96 | –2,316 | –2,220 | | 682 | –540 | 142 |
| | Securities purchased with agreements to | | | | | | | |
| | resell | | | | | | | |
| | Domestic | 21 | –69 | | –48 | 15 | 32 | 47 |
| | foreign | –234 | –1,132 | –1,366 | | –256 | 525 | 269 |
| | Interest-earning securities | | | | | | | |
| | Domestic | 41 | –75 | | –35 | 5 | 7 | 12 |
| | foreign | 80 | –290 | | –210 | –11 | –127 | –138 |
| | Other interest-earning assets | | | | | | | |
| | domestic | 23 | –52 | | –29 | –6 | 28 | 22 |
| | foreign | 62 | –84 | | –22 | –14 | –1 | –15 |
| | Interest income | | | | | | | |
| | domestic | –4 | –960 | | –964 | 149 | –275 | –126 |
| | foreign | 14 | –3,895 | –3,882 | | 412 | –233 | 179 |
| | Total | 9 | –4,855 | –4,846 | | 561 | –508 | 53 |
| | Other interest income | | | | –759 | | | –18 |
| | Total interest income | | | –5,604 | | | | 35 |

ING Group Annual Report 2020 on Form 20-F244

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Selected statistical information on banking operations

Interest expense

2020 over 20192019 over 2018domestic44–1,230–1,18632850378| Increase (decrease) | Increase (decrease) | foreign | –205 | –2,224 | –2,428 | –659 | 212 | –447 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| due to changes in | due to changes in | Total | –161 | –3,454 | –3,615 | –331 | 262 | –69 |

	Average	Average	Net	Average	Average	Net		Other interest expense			–1,731			253
	volume	rate	change	volume	rate	change		Total interest expense			–5,345			184
		(EUR millions)			(EUR millions)			Net interest
Interest-bearing liabilities								domestic	–48	270	222	–179	–325	–504
Time deposits from banks								foreign	218	–1,672	–1,454	1,071	–445	626
domestic	28	–46	–18	–0		7	7	Net interest	170	–1,402	–1,231	893	–770	122
foreign	65	–142	–77	–14		4	–9	Other net interest result			972			–271
Demand deposits								Net interest result			–259			–149

domestic119–496–37729180209

foreign5–24–204–13The following table shows the interest spread and net interest margin for the past two years.
Time deposits

domestic–53–154–207–13984–55| foreign | –97 | –70 | –167 | –9 | 49 | 40 | | 2020 | 2019 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Savings deposits | | | | | | | | Average rate | Average rate |
| domestic | 2 | –39 | –37 | 2 | –10 | –8 | | % | % |
| foreign | 6 | –680 | –674 | 25 | 18 | 44 | Interest spread | | |
| Short term debt | | | | | | | Domestic | 1.1 | 1.2 |
| domestic | –0 | –62 | –62 | 73 | 13 | 86 | Foreign | 1.7 | 2.0 |
| foreign | –6 | –22 | –27 | –78 | 17 | –61 | Total | 1.5 | 1.7 |
| Securities sold under agreements to | | | | | | | Net interest margin | | |
| repurchase | | | | | | | | | |
| domestic | –41 | 8 | –33 | –6 | 33 | 27 | Domestic | 1.0 | 1.0 |
| foreign | –162 | –950 | –1,113 | –531 | 616 | 85 | Foreign | 1.7 | 2.1 |
| Commercial paper | | | | | | | Total | 1.5 | 1.7 |

domestic–5–4–10–0–1–1

foreign–19–168–187–12841–87

Long term debt

domestic–179–134–313476–323152

foreign20–103–8382–547–464

Subordinated liabilities

domestic59–107–47–50–8–58

foreign–30–3–000

Other interest-bearing liabilities

domestic114–195–81–577619

foreign–12–64–77–11132

ING Group Annual Report 2020 on Form 20-F245

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Selected statistical information on banking operations

Investments in debt securities

Loan Portfolio The following tables show the weighted average yield of ING’s investments on debt securities measured at amortised cost and fair value through other comprehensive income. The weighted average yield is calculated as follows:Loans and advances to banks and customers| | | | | | facilities to corporate and private customers encompass among others, loans, overdrafts and finance lease |
| --- | --- | --- | --- | --- | --- |
| Weighted average yield | | | | | receivables. |
| | | Between | Between 5 | | |
| | 1 year or | 1 and 5 | and 10 | Over 10 | Maturities and sensitivity of loans to changes in interest rates |
| 2020 | less | years | years | years | |
| Fair value through other comprehensive income | | | | | The following table analyses loans and advances to banks and customers by time remaining until maturity as of |
| Government bonds | 1.90% | 2.19% | 0.98% | 3.07% | 31 December 2020. |
| Sub-sovereign, Supranationals and Agencies | 2.61% | 1.79% | 1.03% | 0.82% | |
| Covered bonds | 0.72% | 0.44% | 0.30% | | |
| Corporate bonds | 2.03% | 0.98% | 0.13% | | |
| Financial institutions bonds | 0.11% | 1.21% | 0.06% | | |
| ABS portfolio | | | 0.13% | 0.02% | |

(1) Since substantially all investment securities held by the banking operations of the Company are taxable securities, the yields are on taxequivalent basis.| Weighted average yield | | | | |
| --- | --- | --- | --- | --- |
| | | Between | Between 5 | |
| | 1 year or | 1 and 5 | and 10 | Over 10 |
| 2020 | less | years | years | years |
| Securities at amortised cost | | | | |
| Government bonds | 3.37% | 2.17% | 1.29% | 4.27% |
| Sub-sovereign, Supranationals and Agencies | 2.08% | 1.33% | 0.53% | 0.14% |
| Covered bonds | 2.18% | 0.67% | 0.24% | |
| Corporate bonds | 0.26% | 0.06% | 0.08% | |
| Financial institutions bonds | 0.25% | 0.94% | 2.06% | |
| ABS portfolio | | | 0.16% | 0.65% |

(1) Since substantially all investment securities held by the banking operations of the Company are taxable securities, the yields are on taxequivalent basis.

ING Group Annual Report 2020 on Form 20-F246

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Selected statistical information on banking operations

(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

5 yearsinterest rates”.

1 year1 yearthrough 15After 15

2020or lessto 5 yearsyearsyearsTotalAllowance for credit losses| By domestic offices: | | | | | | The following table presents the movements in allocation of the provision for loan losses on loans accounted for |
| --- | --- | --- | --- | --- | --- | --- |
| Loans guaranteed by public authorities | 1,758 | 2,229 | 19,998 | 307 | 24,292 | as loans and advances to banks and customers for 2020, 2019 and 2018 under IFRS-IASB. |
| Loans secured by mortgages | 6,207 | 16,436 | 88,339 | 4,194 | 115,176 | |

Loans guaranteed by credit institutions	7,091	568	87		7,747	Movements in allocation of the provision for loan losses on loans
Other private lending	1,256	902	861		3,019		2020	2019	2018
Other corporate lending	21,828	12,206	3,366	194	37,594	Balance on 1 January	4,645	4,568	4,521
Total domestic offices	38,140	32,341	112,652	4,695	187,827	Effect of changes in accounting policy			795

By foreign offices:						Change in the composition of the Group
Loans guaranteed by public authorities	4,205	6,145	5,828	1,032	17,210	Write-offs	-1,200	-1,030	-1,044
Loans secured by mortgages	24,891	61,006	115,900	35,157	236,954	Recoveries	39	55	53
Loans guaranteed by credit institutions	16,604	3,236	2,981	14	22,836	Net write-offs	-1,160	-975	-992
Other private lending	6,931	12,346	5,042	456	24,776	Additions and other adjustments (included in value Adjustments to receivables of the Banking
Other corporate lending	52,432	65,760	16,625	711	135,527	operations)	2,369	1,052	244
						Balance on 31 December	5,854	4,645	4,568

Total foreign offices105,064148,493146,37637,370437,303Average loans and advances to banks and customers645,134644,139616,140

Total gross loans and advances to banks and customers143,204180,834259,02842,065625,130Ratio of net charge‑offs to average loans and advances to banks and customers0.18%0.15%0.16%

Ratio of allowance for credit losses to total loans and advances to banks and customers

The following table analyzes loans and advances to banks and customers by interest rate sensitivity by maturityoutstanding0.94%0.72%0.73%

as of 31 December 2020.

The Covid-19 pandemic has affected all of ING’s businesses. These effects have included increased volatility,

widening of credit spreads, and credit deterioration of loans to ING’s customers. The 2020 risk costs were

Floating orimpacted by a combination of increased collective provisioning reflecting the worsened macro-economic| | Predetermined | adjustable interest | | indicators and uncertainty, higher Individual Stage 3 provisions, negative rating migration and manual overlays to |
| --- | --- | --- | --- | --- |
| | interest rates | | rates(1) | address the risk on payment holidays and for the delay in potential credit losses as a result of the Government |
| Loans guaranteed by public authorities | 26,314 | | 9,225 | support measures. Reference is made to Note 1 ‘Accounting policies’ and ‘Additional information – Risk |
| Loans secured by mortgages | 219,225 | 101,829 | | Management’ for detailed information on loan loss provisioning. |
| Loans guaranteed by credit institutions | 3,318 | | 3,547 | |

Other private lending15,9683,640

Other corporate lending20,28578,577Deposits

Total285,109196,817 Reference is made to ‘Additional information – Average balances and interest rates’ for detailed information on

average amount of and the average rate paid on deposit categories.

ING Group Annual Report 2020 on Form 20-F247

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Selected statistical information on banking operations

For the years ended 31 December 2020, 2019 and 2018 the aggregate amount of deposits by foreign depositors| in domestic offices was EUR27,850 million EUR 27,649 million and EUR 27,586 million, respectively. | | Time deposits in excess on | | Other uninsured | |
| --- | --- | --- | --- | --- | --- |
| | | deposit insurance regime | | Time deposits | |
| Uninsured deposits | | (EUR millions) | | (EUR millions) | |
| For the years ended 31 December 2020 and 2019 the amount of uninsured deposits, which were not covered by | 3 months or less | | 2,352 | | 11,754 |
| DGS, was EUR 171,802 million and EUR 164,793 million, respectively. | 6 months or less but over 3 months | | 523 | | 2,401 |
| | 12 months or less but over 6 months | | 406 | | 914 |
| Deposit guarantee schemes (DGS) reimburse a limited amount to compensate depositors whose bank has failed. | Over 12 months | | 804 | | 64,900 |
| A fundamental principle underlying DGS is that they are funded entirely by banks, and that no taxpayer funds are | Total | | 4,085 | | 79,969 |

used. Under EU rules, the Deposit Guarantee Scheme (DGS) guarantees deposits up to a maximum of EURFor further detailed information on deposits reference is made to Note 12 ‘Deposits from banks’ and Note 13 ‘
100,000 per depositor in case of a bank failure.Customer deposits’ of the consolidated financial statements.

On 31 December 2020, the amount of time deposits in excess of (local) deposit insurance regime and time

deposits which are otherwise uninsured is as follows:

ING Group Annual Report 2020 on Form 20-F248

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Contents| Report of Independent Registered Public Accounting Firm | | F- 251 | 15 | Provisions | F-299 |
| --- | --- | --- | --- | --- | --- |
| | | | 16 | Other liabilities | F-300 |
| Consolidated financial statements | | | 17 | Debt securities in issue | F-300 |
| | | | 18 | Subordinated loans | F-301 |
| Consolidated statement of financial position | | F-253 | 19 | Equity | F-302 |
| Consolidated statement of profit or loss | | F-254 | | | |
| Consolidated statement of comprehensive income | | F-255 | Notes to the consolidated statement of profit or loss | | |
| Consolidated statement of changes in equity | | F-256 | | | |
| Consolidated statement of cash flows | | F-259 | 20 | Net interest income | F-308 |
| | | | 21 | Net fee and commision income | F-309 |
| Notes to the consolidated financial statements | | | 22 | Valuation results and net trading income | F-309 |
| | | | 23 | Investment income | F-310 |
| 1 | Basis of preparation and accounting policies | F-261 | 24 | Result on disposal of group companies | F-311 |
| | | | 25 | Net result on derecognition of financial assets measured at amortised | |
| Notes to the consolidated statement of financial position | | | | cost | F-311 |
| | | | 26 | Other income | F-311 |
| 2 | Cash and balances with central banks | F-286 | 27 | Staff expenses | F-311 |
| 3 | Loans and advances to banks | F-286 | 28 | Other operating expenses | F-313 |
| 4 | Financial assets at fair value through profit or loss | F-286 | 29 | Earnings per ordinary share | F-315 |
| 5 | Financial assets at fair value through other comprehensive income | F-288 | 30 | Dividend per ordinary share | F-315 |
| 6 | Securities at amortised cost | F-290 | | | |
| 7 | Loans and advances to customers | F-290 | Notes to the consolidated statement of cashflows | | |
| 8 | Investments in associates and joint ventures | F-291 | | | |
| 9 | Property and equipment | F-293 | 31 | Net cash flow from operating activities | F-316 |
| 10 | Intangible assets | F-295 | 32 | Changes in liabilities arising from financing activities | F-316 |
| 11 | Other assets | F-297 | 33 | Cash and cash equivalents | F-316 |
| 12 | Deposits from banks | F-297 | | | |
| 13 | Customer deposits | F-298 | | | |
| 14 | Financial liabilities at fair value through profit or loss | F-298 | | | |

ING Group Annual Report 2020 on Form 20-FF -249

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Segment reporting| 34 | Segments | F-317 |
| --- | --- | --- |
| 35 | Information on geographical areas | F-324 |

Additional notes to the consolidated financial statements| 36 | Pension and other post-employment benefits | F-326 |
| --- | --- | --- |
| 37 | Taxation | F-329 |
| 38 | Fair value of assets and liabilities | F-332 |
| 39 | Derivatives and hedge accounting | F-344 |
| 40 | Assets by contractual maturity | F-352 |

41	Liabilities and off-balance sheet commitments by maturity	F-354
42	Transfer of financial assets, assets pledged and received as	F-357
	collateral

43	Offsetting financial assets and liabilities	F-358
44	Contingent liabilities and commitments	F-363
45	Legal proceedings	F-364
46	Consolidated companies and businesses acquired and	F-367
	divested
47	Principal subsidiaries	F-367
48	Structured entities	F-368
49	Related parties	F-370
50	Subsequent events	F-373
51	Capital management	F-373

ING Group Annual Report 2020 on Form 20-FF -250

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

To the Shareholders and the Supervisory Board

ING Groep N.V.:

Opinion on the Consolidated Financial Statementsrespond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used We have audited the accompanying consolidated statements of financial position of ING Groep N.V. and subsidiariesand significant estimates made by management, as well as evaluating the overall presentation of the consolidated
(‘the Company’) as of December 31, 2020 and 2019, the related consolidated statements of profit or loss, comprehensivefinancial statements. We believe that our audits provide a reasonable basis for our opinion.
income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and
the related notesand specific disclosures described in Note 1 of the consolidated financial statements as being part of the

Critical Audit Matters consolidated financial statements(collectively: ‘the consolidated financial statements’). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020The Critical Audit Matters communicated below are matters arising from the current period audit of the consolidated
and 2019, and the results of its operations and its cash flows for each of the years in the three-year period endedfinancial statements that were communicated or required to be communicated to the Audit Committee and that: (1) relate
December 31, 2020, in conformity with International Financial Reporting Standards as issued by the Internationalto accounts or disclosures that are material to the consolidated financial statements, and (2) involved our especially
Accounting Standards Board.challenging, subjective, or complex judgements. The communication of Critical Audit Matters does not alter in any way
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (Unitedour opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the Critical Audit Matters below, providing separate opinions on the Critical Audit Matters or on the accounts or disclosures to which States) (‘PCAOB’), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria
established inInternal Control – Integrated Framework (2013)issued by the Committee of Sponsoring Organizations ofthey relate.
the Treadway Commission, and our report dated March 8, 2021 expressed an unqualified opinion on the effectiveness ofAssessment of Expected Credit Losses on loans and advances to customers and banks
the Company’s internal control over financial reporting.
As discussed in the Credit Risk section of the annual report and in Note 3 and Note 7 to the consolidated financial
statements, the loans and advances to customers and loans and advances to banks amounts areEUR 594 billion and

Changes in Accounting Principle EUR 25 billion, respectively, as at December 31, 2020. Management considers the uncertainties of Covid-19 in the
TheCompanychanged its method of accounting for leases and financial instruments due to the adoption of Internationalestimate of Expected Credit Losses (‘ECL’), specifically regarding macroeconomic forecasts and behaviour of borrowers
Financial Reporting Standard 16, ‘Leases’ in 2019, the early adoption of the amendments to IAS 39 ‘Financialsubject to payment holidays and government stimulus plans. These loans and advances are measured at amortised cost,
Instruments: Recognition and Measurement’ and IFRS 7 ‘Financial Instruments: Disclosures’ in relation to the Interestless ECL of EUR 5.8 billion.
Rate Benchmark Reform in 2019.We identified the assessment of ECL on loans and advances to customers and banks as a Critical Audit Matter.
Significant and complex auditor judgement and specialised skills and knowledge were required to evaluate the following
Basis for Opinionelements of the overall estimate:

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to—The judgements used to develop the probability of defaults (‘PD’), the loss given default (‘LGD’), and the exposure at
express an opinion on these consolidated financial statements based on our audits. We are a public accounting firmdefault (‘EAD’), including model or manually determined expected future recovery cash flows.
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
—Use of forward-looking macroeconomic forecasts in the ECL, including GDP, unemployment, and house pricing index.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.—Criteria for identifying significant increase in credit risk (‘SICR’).

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and—Calculation ofmanagement overlays to the ECL due to the increased uncertainty in the forecast of future economic perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of materialconditions and to calculate the default ratio of borrowers with payment holidays.
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that

ING Group Annual Report 2020 on Form 20-FF -251

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

The following are the primary procedures we performed to address this Critical Audit Matter:

—We evaluated the design and tested the operating effectiveness of certain internal controls related to the ECL-process—We involved valuation professionals with specialised skills and knowledge who assisted in:
for loans and advances to customers and banks. This included controls related to the assumptions (including
macroeconomic forecasts, PD, LGD and EAD), review of model outputs, governance and monitoring of the ECL,•evaluating the mathematical accuracy of the model by recalculation of the discount rates and terminal value calculations included in the model and assessment of the consistency of applied formulas;
determination of credit risk ratings, the estimated future recovery cash flows of individual loan provisions and
management overlays recorded to ECL.•assessing the reasonableness of certain assumptions applied in the model including capital ratios (by comparing
with analyst consensus data for comparable entities), terminal growth rates (by comparing per country the —We involved credit risk professionals with specialised skills and knowledge who assisted in evaluating the terminal growth rates applied to long term inflation) and discount rates (by independently deriving the risk fee rate assumptions to determine the PD, LGD, and EAD parameters in models used by the Company to determine the for cost of equity per country based on observable market data).
collective provisions, and assessing management overlays recorded to the ECL, including payment holiday and time
lag overlays. This included reperforming back testing of certain models to evaluate current model performance. We/s/ KPMG Accountants N.V.
considered the impact these overlays have on model calculations and results when reaching our conclusions.
We have served as the Company’s auditor since 2016.
—We involved economic professionals with specialised skills and knowledge who assisted in assessing the Company’s
methodology to determine the macroeconomic forecasts used in the ECL. We tested the reasonableness ofAmstelveen, The Netherlands
management’s forecasts against other external benchmarks and our own internal forecasts.March 8, 2021

—We involved corporate finance professionals with specialised skills and knowledge who assisted in examining the methodologies, cash flows and collateral values used in expected future recovery cash flow assessments of individual loan provisions for impaired loans. We challenged management’s use of recovery scenarios and expected cash flows considering industry trends and comparable benchmarks, and recalculated recovery amounts.

—We evaluated the identification of significant increase in credit risk in loans by challenging the scope of management’s criteria used in staging assessments, the thresholds applied within each criterion, and the ability of staging criteria to identify SICR prior to loans being credit impaired.

Assessment of goodwill impairment

As discussed in Note 10 to the consolidated financial statements, goodwill was EUR 533 million as at December 31, 2020. Management conducts an impairment test annually in accordance with IAS 36, and whenever events or changes in circumstances indicate that the carrying value of a Cash Generating Unit (‘CGU’) may exceed its recoverable amount. As a result of the negative developments in the macroeconomic outlook in the context of the Covid-19 pandemic, the recoverable amount of goodwill has declined. The recoverable amount is estimated as the higher of fair value less cost of disposal and value in use (‘VIU’) of each CGU based on management’s dividend discount model.

We identified the assessment of goodwill impairment as a Critical Audit Matter. There was a high degree of estimation uncertainty due to the sensitivity of assumptions used in the VIU-calculations and in identifying events or changes in circumstances that could be an indicator of impairment requiring complex auditor judgement. Specifically, forecasts, terminal growth rates, discount rates and capital ratios were challenging to test as minor changes to those assumptions had a significant effect on the Company’s assessment of the recoverable amount. We performed sensitivity analyses to determine the significant assumptions used, which required challenging auditor judgement. Additionally, the audit effort associated with this estimate required specialised skills and knowledge.

The following are the primary procedures we performed to address this Critical Audit Matter:

—We identifiedevents or changes in circumstances andtestedmanagement’s process for determining the recoverable amount of each CGU.

—We evaluated the reasonableness of the Company’s forecasts and cashflows for the individual CGUs by challenging the forecasts and comparing the assumptions to historical performance.

ING Group Annual Report 2020 on Form 20-FF -252

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Consolidated statement of financial position

As at 31 December| in EUR million | | | | | | 2020 | 2019 | | | | 2020 | 2019 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Assets | | | | | | | | Liabilities | | | | |
| Cash and balances with central banks | | | 2 | | | 111,087 | 53,202 | Deposits from banks | 12 | | 78,098 | 34,826 |
| Loans and advances to banks | | 3 | | | | 25,364 | 35,136 | Customer deposits | 13 | | 609,517 | 574,355 |
| Financial assets at fair value through profit or loss | | | | 4 | | | | Financial liabilities at fair value through profit or loss | | 14 | | |
| – Trading assets | | | | | | 51,356 | 49,254 | – Trading liabilities | | | 32,709 | 28,042 |
| – Non-trading derivatives | | | | | | 3,583 | 2,257 | – Non-trading derivatives | | | 1,629 | 2,215 |
| – Designated as at fair value through profit or loss | | | | | | 4,126 | 3,076 | – Designated as at fair value through profit or loss | | | 48,444 | 47,684 |
| – Mandatorily at fair value through profit or loss | | | | | | 44,305 | 41,600 | Current tax liabilities | | | 342 | 554 |
| Financial assets at fair value through other comprehensive income | | | | | 5 | 35,895 | 34,468 | Deferred tax liabilities | 37 | | 343 | 322 |
| Securities at amortised cost | | 6 | | | | 50,587 | 46,108 | Provisions15 | | | 691 | 688 |
| Loans and advances to customers | | 7 | | | | 593,970 | 608,029 | Other liabilities | 16 | | 11,609 | 12,829 |
| Investments in associates and joint ventures | | | 8 | | | 1,475 | 1,790 | Debt securities in issue | 17 | | 82,065 | 118,528 |
| Property and equipment | | 9 | | | | 2,841 | 3,172 | Subordinated loans | 18 | | 15,805 | 16,588 |
| Intangible assets | 10 | | | | | 1,394 | 1,916 | Total liabilities | | | 881,250 | 836,631 |
| Current tax assets | | | | | | 419 | 251 | | | | | |
| Deferred tax assets | 37 | | | | | 1,596 | 1,242 | Equity19 | | | | |
| Other assets | 11 | | | | | 5,893 | 7,018 | Share capital and share premium | | | 17,128 | 17,117 |
| | | | | | | | | Other reserves | | | 2,342 | 4,013 |
| | | | | | | | | Retained earnings | | | 32,149 | 29,866 |
| | | | | | | | | Shareholders’ equity (parent) | | | 51,619 | 50,996 |
| | | | | | | | | Non-controlling interests | | | 1,022 | 893 |
| | | | | | | | | Total equity | | | 52,640 | 51,889 |

Total assets933,891888,520Total liabilities and equity933,891888,520

References relate to the accompanying notes. These are an integral part of the Consolidated financial

statements.

ING Group Annual Report 2020 on Form 20-FF -253

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Consolidated statement of profit or loss

for the years ended 31 December| in EUR million | | 2020 | 2019 | 2018 | | | | 2020 | 2019 | 2018 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Continuing operations | | | | | | | | | | |
| Interest income using effective interest rate method | | 20,715 | 25,056 | 25,249 | Addition to loan loss provisions | | 7 | 2,675 | 1,120 | 656 |
| Other interest income | | 1,843 | 3,107 | 2,880 | Staff expenses | 27 | | 5,812 | 5,755 | 5,420 |
| Total interest income | | 22,559 | 28,163 | 28,129 | Other operating expenses | | 28 | 5,341 | 4,598 | 5,262 |
| | | | | | Total expenses | | | 13,828 | 11,472 | 11,338 |
| Interest expense using effective interest rate method | | -7,402 | -11,268 | -11,171 | | | | | | |
| Other interest expense | | -1,605 | -3,084 | -2,997 | Result before tax from continuing operations | | | 3,399 | 5,653 | 6,986 |
| Total interest expense | | -9,007 | -14,353 | -14,169 | | | | | | |
| | | | | | Taxation37 | | | 1,070 | 1,652 | 2,116 |
| Net interest income | 20 | 13,552 | 13,811 | 13,960 | Net result from continuing operations | | | 2,329 | 4,001 | 4,869 |

Fee and commission income		4,514	4,439	4,240	Net result (before non-controlling interests)	2,329	4,001	4,869
Fee and commission expense		-1,503	-1,571	-1,442	Net result attributable to Non-controlling interests	78	99	108
Net fee and commission income	21	3,011	2,868	2,798	Net result attributable to shareholders of the parent	2,250	3,903	4,761

Valuation results and net trading income		22			474	-159	1,227	in EUR
								Earnings per ordinary share	29
Investment income	23				152	188	183	Basic earnings per ordinary share			0.58	1.00	1.22
Share of result from associates and joint ventures			8		66	82	146	Diluted earnings per ordinary share			0.58	1.00	1.22
Impairment of associates and joint ventures		8			-235	-34	-3
Result on disposal of group companies		24			-3	117	-123	Earnings per ordinary share from continuing operations		29
Net result on derecognition of financial assets measured at amortised cost				25	189	38	18	Basic earnings per ordinary share from continuing operations			0.58	1.00	1.22
Other income	26				20	214	118	Diluted earnings per ordinary share from continuing operations			0.58	1.00	1.22
Total income					17,227	17,125	18,324
								Dividend per ordinary share	30		0.12	0.24	0.68

References relate to the accompanying notes. These are an integral part of the Consolidated financial statements.

ING Group Annual Report 2020 on Form 20-FF -254

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Consolidated statement of comprehensive income| | | | | References relate to the accompanying notes. These are an integral part of the Consolidated financial |
| --- | --- | --- | --- | --- |
| in EUR million | 2020 | 2019 | 2018 | statements. |
| Net result (before non-controlling interests) | 2,329 | 4,001 | 4,869 | |

Items that will not be reclassified to the statement of profit or loss:					made to Note 37 ‘Taxation’.
Realised and unrealised revaluations property in own use		-7	58	1
Remeasurement of the net defined benefit asset/liability	36	28	58	6
Net change in fair value of equity instruments at FVOCI		-335	139	-461
Change in fair value of own credit risk of financial liabilities at FVPL		-19	-116	199

Items that may subsequently be reclassified to the statement of profit or loss:
Net change in fair value of debt instruments at FVOCI	25	-42	-177
Realised gains/losses on debt instruments at FVOCI reclassified to the statement of profit or	-34	-34	-56
Changes in cash flow hedge reserve	355	640	382
Exchange rate differences	-1,620	-29	-396
Share of other comprehensive income of associates and joint ventures and other income	6		14
Total comprehensive income	728	4,674	4,381

Comprehensive income attributable to:
Non-controlling interests	133	142	132
Equity holders of the parent	595	4,532	4,250
	728	4,674	4,381

ING Group Annual Report 2020 on Form 20-FF -255

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Consolidated statement of changes in equity

For the years ended 31 December

Share capitalNonand shareOtherRetainedShareholders'controllingTotal in EUR millionpremiumreservesearningsequity (parent)interestsequity Balance as at 31 December 201917,1174,01329,86650,99689351,889| Net change in fair value of equity instruments at fair value through other comprehensive income | -399 | 62 | -337 | 2 | -335 |
| --- | --- | --- | --- | --- | --- |
| Net change in fair value of debt instruments at fair value through other comprehensive income | 20 | | 20 | 5 | 25 |
| 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		242		242	112	355
Realised and unrealised revaluations property in own use		-33	26	-7	-0	-7
Remeasurement of the net defined benefit asset/liability	36	28		28		28
Exchange rate differences and other		-1,557		-1,557	-63	-1,620
Share of other comprehensive income of associates and joint ventures and other income		-37	43	6		6
Change in fair value of own credit risk of financial liabilities at fair value through profit or loss		-3	-16	-19		-19
Total amount recognised directly in other comprehensive income net of tax		-1,770	114	-1,656	55	-1,601
Net result		94	2,156	2,250	78	2,329
Total comprehensive income net of tax		-1,676	2,271	595	133	728

Dividends	30					-3	-3
Changes in treasury shares			5		5		5
Employee stock option and share plans		11		11	22	0	22
Changes in the composition of the group and other changes						-1	-1
Balance as at 31 December 2020		17,128	2,342	32,149	51,619	1,022	52,640

References relate to the accompanying notes. These are an integral part of the Consolidated financial statements.
Changes in individual Reserve components are presented in Note 19 ‘Equity’.

ING Group Annual Report 2020 on Form 20-FF -256

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Consolidated statement of changes in equity - continued

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 and joint ventures and other income		69	-69
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	30			-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

ING Group Annual Report 2020 on Form 20-FF -257

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Consolidated statement of changes in equity - continued

For the years ended 31 December| | Share capital | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | and share | Other | Retained | Shareholders' | Non-controlling | | Total |
| in EUR million | premium | reserves | earnings | equity (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	30				-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.

ING Group Annual Report 2020 on Form 20-FF -258

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Consolidated statement of cash flows

for the years ended 31 December| in EUR million | | 2020 | 2019 | 2018 | | | | 2020 | 2019 | 2018 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Cash flows from operating activities | 31 | | | | Disposals and redemptions: | – Associates and joint ventures | | 24 | 67 | 116 |
| Result before tax | | 3,399 | 5,653 | 6,986 | | – Disposal of subsidiaries, net of cash disposed | | -3 | | |
| Adjusted for: | – Depreciation and amortisation | 829 | 789 | 520 | | - Financial assets at fair value through other | | 14,571 | 13,390 | 15,657 |
| | | | | | | comprehensive income | | | | |
| | – Addition to loan loss provisions | 2,675 | 1,120 | 656 | | - Securities at amortised cost | | 31,918 | 13,001 | 18,709 |
| | – Other non-cash items in Result before tax | 1,671 | 1,213 | -1,763 | | – Property and equipment | | 75 | 81 | 17 |
| Taxation paid | | -1,734 | -2,345 | -1,602 | | – Loans sold | | | 744 | 206 |
| Changes in: | – Net change in Loans and advances to/from banks, not | 53,078 | -3,911 | -211 | | – Other investments | | 12 | 34 | |
| | available/payable on demand | | | | | | | | | |
| | – Net change in Trading assets and Trading liabilities | 2,566 | -2,568 | 9,910 | Net cash flow from/(used in) investing activities | | | -8,487 | -2,495 | 5,451 |
| | – Loans and advances to customers | 2,876 | -16,687 | -31,356 | | | | | | |
| | – Customer deposits | 39,740 | 18,040 | 19,709 | Cash flows from financing activities | | | | | |
| | – Other31 | -3,856 | 11,752 | 4,067 | Proceeds from debt securities | | | 65,308 | 90,793 | 152,543 |
| Net cash flow from/(used in) operating activities | | 101,243 | 13,055 | 6,915 | Repayments of debt securities | | | -99,212 | -94,497 | -131,170 |
| | | | | | Proceeds from issuance of subordinated loans | | | 2,165 | 3,429 | 1,859 |
| Cash flows from investing activities | | | | | Repayments of subordinated loans | | | -2,786 | -933 | -4,646 |
| Investments and advances: | - Acquisition of subsidiaries, net of cash acquired | | -17 | -111 | Repayments of principal portion of lease liabilities | | 1 | -273 | -271 | n/a |
| | - Associates and joint ventures | -24 | -507 | -97 | Purchase/sale of treasury shares | | | 5 | 1 | 4 |
| | - Financial assets at fair value through other comprehensive | -16,949 | -16,270 | -10,517 | Dividends paid | | | -3 | -2,679 | -2,607 |
| | income | | | | | | | | | |
| | - Securities at amortised cost | -37,522 | -12,268 | -17,985 | Other financing | | | -1 | 2 | |
| | – Property and equipment | -287 | -355 | -286 | Net cash flow from/(used in) financing activities | | | -34,796 | -4,154 | 15,983 |
| | – Other investments | -300 | -395 | -258 | | | | | | |
| | | | | | Net cash flow | | | 57,960 | 6,406 | 28,349 |

Cash and cash equivalents at beginning of year	33	54,031	47,529	18,977
Effect of exchange rate changes on cash and cash equivalents		-425	95	204
Cash and cash equivalents at end of year	33	111,566	54,031	47,529

1 The amounts for the period ended 31 December 2020 and 2019 have been prepared in accordance with IFRS 16. 2018 period amounts have not been restated.

ING Group Annual Report 2020 on Form 20-FF -259

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

Consolidated statement of cash flows - continued

As at 31 December 2020, Cash and cash equivalents includes cash and balances with central banks of EUR 1 Includes dividends received as recognized within Investment Income, from equity securities included in the Financial assets at fair value 111,087 million (2019: EUR 53,202 million; 2018: EUR 49,987 million). The increase in cash and balances withthrough profit or loss, Financial assets at fair value through OCI, and from Investments in associates and joint ventures. Dividend paid and
central banks was mainly driven by ING’s participation of EUR 59.5 billion in the targeted longer-term refinancingreceived from trading positions have been included.

operations (TLTRO III) in 2020, which was mainly placed on deposit with the ECB as at 31 December and by increased customer deposits. Reference is made to Note 33 ‘Cash and cash equivalents’.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 References relate to the accompanying notes. These are an integral part of the Consolidated financialflow.
statements.

The table below presents the Interest and dividend received and paid.| | 2020 | 2019 | 2018 |
| --- | --- | --- | --- |
| Interest received | 23,352 | 28,957 | 28,722 |
| Interest paid | -9,672 | -14,550 | -14,948 |
| | 13,680 | 14,407 | 13,774 |

Dividend received	1	144	219	183
Dividend paid		-3-2,679	-2,607

ING Group Annual Report 2020 on Form 20-FF -260

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

1 Basis of preparation and accounting policies

Notes to the Consolidated financial statements

1 Basis of preparation and accounting policies

1.2.1 Presentation of Risk management disclosures

1.1 Reporting entity and authorisation of the Consolidated financial statementsTo improve transparency, reduce duplication and present related information in one place, certain disclosures

of the nature and extent of risks related to financial instruments required by IFRS 7 ‘Financial instruments:
ING Groep N.V. is a company domiciled in Amsterdam, the Netherlands. Commercial Register of Amsterdam,
Disclosures’ are included in the ‘Risk management’ section of the Annual Report.
number 33231073. These Consolidated financial statements, as at and for the year ended 31 December 2020,

comprise ING Groep N.V. (the Parent company) and its subsidiaries, together referred to as ING Group. ING These disclosures are an integral part of ING Group Consolidated financial statements and are indicated in the Group is a global financial institution with a strong European base, offering a wide range of retail and ‘Risk management’ section by the symbol (*). Chapters, paragraphs, graphs or tables within the risk wholesale banking services to customers in over 40 countries.
management section that are indicated with this symbol in the respective headings or table header are

considered to be an integral part of the consolidated financial statements.
The ING Group Consolidated financial statements, as at and for the year ended 31 December 2020, were

authorised for issue in accordance with a resolution of the Executive Board on 8 March 2021.

1.2.2 Reconciliation between IFRS-EU and IFRS-IASB

1.2 Basis of preparation of the Consolidated financial statementsThe published 2020 Annual Accounts of ING Group are prepared in accordance with IFRS-EU. IFRS -EU refers to

International Financial Reporting Standards (‘IFRS’) as adopted by the European Union (EU), including the The ING Group Consolidated financial statements have been prepared in accordance with International
decisions ING Group made with regard to the options available under IFRS as adopted by the EU. IFRS-EU Financial Reporting Standards as issued by the International Accounting Standards Board for purposes of
differs from IFRS-IASB in respect of certain paragraphs in IAS 39 ‘Financial Instruments: Recognition and reporting with the U.S. Securities and Exchange Commission (SEC), including financial information contained in
Measurement’ regarding hedge accounting for portfolio hedges of interest rate risk.
this Annual report on Form 20-F. The term ‘IFRS-IASB’ is used to refer to International Financial Reporting

Standards as issued by the International Accounting Standards Board, including the decisions ING Group made Under IFRS-EU, ING Group applies fair value hedge accounting for portfolio hedges of interest rate risk (fair with regard to the options available under IFRS-IASB.
value macro hedges) in accordance with the EU carve-out version of IAS 39. Under the EU IAS 39 carve-out,

hedge accounting may be applied, in respect of fair value macro hedges, to core deposits and hedge The ING Group Consolidated financial statements have been prepared on a going concern basis and there are
ineffectiveness is only recognised when the revised estimate of the amount of cash flows in scheduled time no significant doubts about the ability of ING Group to continue as a going concern. In 2020 ING Group’s capital
buckets falls below the original designated amount of that bucket and is not recognised when the revised and liquidity position remained strong despite the Covid-19 impact and ING Group has sufficient buffers to
amount of cash flows in scheduled time buckets is more than the original designated amount. Under IFRS-IASB, withstand certain adverse scenarios without breaching currently applicable and likely future requirements.
hedge accounting for fair value macro hedges cannot be applied to core deposits and ineffectiveness arises

whenever the revised estimate of the amount of cash flows in scheduled time buckets is either more or less The consolidated financial statements are presented in euros and rounded to the nearest million, unless stated
than the original designated amount of that bucket.
otherwise. Amounts may not add up due to rounding.

ING Group Annual Report 2020 on Form 20-FF -261

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

1 Basis of preparation and accounting policies| out’ version of IAS 39. Financial information under IFRS-IASB accordingly does not take account of the | | | Total Equity | |
| --- | --- | --- | --- | --- |
| possibility that had ING Group applied IFRS-IASB as its primary accounting framework it might have applied | | 2020 | 2019 | 2018 |
| alternative hedge strategies where those alternative hedge strategies could have qualified for IFRS-IASB | In accordance with IFRS-EU (attributable to the shareholders of the parent) | 54,637 | 53,769 | 50,932 |
| compliant hedge accounting. These decisions could have resulted in different shareholders’ equity and net | Adjustment of the EU IAS 39 carve-out | -4,081 | -3,658 | -2,460 |
| result amounts compared to those indicated in this Annual Report on Form 20-F. | Tax effect of the adjustment | 1,063 | 885 | 577 |
| | Effect of adjustment after tax | -3,018 | -2,773 | -1,883 |

A reconciliation between IFRS-EU and IFRS-IASB is included below.	Shareholders’ equity	51,619	50,996	49,049
Both IFRS-EU and IFRS-IASB differ in several areas from accounting principles generally accepted in the United	Non-controlling interests	1,022	893	803
States of America (US GAAP).	In accordance with IFRS-IASB Total Equity	52,640	51,889	49,851

			Net result		1.3 Impact of Covid-19
		2020	2019	2018	After the outbreak of the Covid-19 pandemic, various governments issued programs offering guarantee
In accordance with IFRS-EU (attributable to the shareholders of the parent)		2,485	4,781	4,703
Adjustment of the EU IAS 39 carve-out		-410	-1,181	148	schemes for borrowers impacted by Covid-19. As at 31 December 2020 ING Group provided approximately EUR
Tax effect of the adjustment	1)	176	303	-90	1.5 billion of loans under these programs.
Effect of adjustment after tax		-234	-878	58

In accordance with IFRS-IASB (attributable to the shareholders of the parent)	2,250	3,903	4,761	In Wholesale Banking the main schemes are being offered in the Netherlands (Corporate Finance Guarantee
Non-controlling interests	78	99	108	Scheme (“GO-C”)), in France (state-guarantee scheme Bpifrance) and Germany (guaranteed by KWF).
In accordance with IFRS-IASB Total net result	2,329	4,001	4,869
1)includes the effect of changes in tax rate.				In Retail Banking these facilities include in the Netherlands the SME Credit Guarantee Scheme (“BMKB-C”) and

the small credit facility (“Klein Krediet Corona” or KKC) for self-employed individuals. Similar facilities are offered by ING Group in other countries, mainly in Belgium and Poland. ING Belgium provided in 2020 loans under the state guarantee scheme GS1 which establishes risk sharing between banks and the government. It applies to new loans to non-financial companies, SME and self-employed persons under certain conditions. ING Bank Poland signed an agreement with BGK (Polish State Development Bank) to support clients with individual guarantee schemes, provided by BGK as a collateral (equivalent to a state guarantee).

Loans that have been originated under the above programs have been recognized on the consolidated statement of financial position of ING Group. Depending on the scheme, the guarantees received are either integral or non-integral to the origination of these loans. Following this, the guarantees are either reflected in the expected credit losses (ECL) associated with these loans or as separate reimbursement asset, respectively.

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In either case, such guarantees have a similar impact on the statement of profit or loss and both reduce theOver the course of 2020 the European Central Bank (ECB) decided on a number of modifications to the terms

amount presented as ‘addition to loan loss provisions’.and conditions of its Targeted Longer-term Refinancing Operations (TLTRO III) in order to support further the

provision of credit to households and firms in the face of the current economic disruption and heightened

In November 2020 ING Group announced an initiative with European Investment Bank to lend nearly EUR 800uncertainty caused by the Covid-19 pandemic. ING Group has borrowed EUR 59.5 billion under the TLTRO III

million on favorable terms to Dutch small and medium-sized enterprises that are affected by the economicprogram during 2020. Reference is made to paragraph 1.6 ‘Other Developments’.

impact of Covid-19. Loans originated under this program will be recognized on the statement of financial

position of ING Group as from 2021.1.4 Changes to accounting policies and presentation

ING Group has consistently applied its accounting policies to all periods presented in these Consolidated Governments in almost all countries where ING Retail bank is active have adopted measures providing forfinancial statements, except for changes due to the introduction of IFRS 16 ‘Leases’ in 2019. Comparatives payment holidays to private individuals and small business loans. As of the end of December, approximatelywere not restated when applying IFRS 16.
196 thousand customers were granted payment holidays in the context of the Covid-19 pandemic. The total

exposure of loans for which a payment holiday is granted amounts to EUR 19.4 billion as at 31 December 2020.Furthermore, ING Group has already early adopted in 2019 the Interest Rate Benchmark Reform (Phase 1)

amendments to IAS 39 ‘Financial Instruments: Recognition and Measurement’ and IFRS 7 ‘Financial
The modification of contractual terms of loans subject to payment holiday arrangements does notInstruments: Disclosures’. These amendments have been adopted retrospectively to hedging relationships that
automatically result in derecognition of the financial assets. Where applicable, the carrying amount of theexisted at the start of 2019 or were designated thereafter. The amendments provide temporary relief from
financial asset has been recalculated as the present value of the renegotiated or modified contractual cashapplying specific hedge accounting requirements to hedging relationships directly affected by IBOR reform. The
flows, discounted at the original effective interest rate and a gain or loss was recognized. This did not have aamendments require certain additional disclosures and have no further impact. Refer ence is made to
material impact on the profit or loss statement of ING Group.paragraph 1.7.4 ‘Derivatives and hedge accounting’ of this note and to note 39 ‘Derivatives and hedge

accounting’ for more information on the adoption of these amendments.
The various measures by governments and ING Group to alleviate the impact of Covid-19 also impacts the

classification of assets as forborne. Based on European Banking Authority (EBA) Guidelines, assets that wereIn 2020 ING Group presented separately on the face of the Statement of Profit or Loss the following two lines
subject to Covid-19 payment holidays granted before 30 September 2020 were not classified as forborne. As a(including comparatives): ‘Impairment of associates and joint ventures’ and ‘Net result on derecognition of
result, these payment holidays did not automatically trigger recognition of lifetime Expected Credit Loss (ECL).financial assets measured at amortised cost’. These lines were not presented separately in prior years given the
Payment holidays granted that were outside the scope of these Guidelines or granted after 30 September 2020size of the amounts, but were included in ‘Share of result from associates and joint ventures’ and ‘Other
did trigger the recognition of lifetime ECL. Reference is made to the ‘Credit risk’ paragraph of the ‘Riskincome’ respectively.
management’ section.

1.4.1 Changes in IFRS effective in 2020
As a result of the economic effects of Covid-19 estimation uncertainty and level of management judgement The changes in IFRS that became effective in 2020 did not have a significant impact on ING Group’s accounting increased in 2020 in the areas of impairment assessment of loan loss provisions (including the need for policies, ING Group’s results or financial position:
management adjustments), non-financial assets and associated companies, and the determination of the fair ●Amendments to IFRS 3 ‘Business Combinations’: Definition of a Business (issued in October 2018);
values of financial assets and liabilities. Reference is made to paragraph 1.5 ‘Significant judgements and critical ●Amendments to IAS 1 and IAS 8: ‘Definition of Material’ (issued in October 2018); and accounting estimates and assumptions’ for further explanation.
●Amendments to References to the Conceptual Framework in IFRS Standards (issued in March 2018).

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ING Group has not early adopted any other standard, interpretation or amendment in 2020 which has beenitems and hedging instruments as a consequence of IBOR reform that would otherwise be required in the

issued, but is not yet effective.absence of Phase 2 amendments. When ING Group applies Phase 2 amendments, certain additional disclosures

will need to be provided.

1.4.2 Upcoming changes in IFRS after 2020

The following published amendments are not mandatory for 2020 and have not been early adopted by INGThe Phase 2 amendments are effective for annual reporting periods beginning on or after 1 January 2021, with
Group. ING Group is still currently assessing the detailed impact of these amendments. However, theearly application permitted.

implementation of these amendments is expected to have no significant impact on ING Group’s Consolidated financial statements, apart from IBOR Phase 2 amendments, the impact of which is explained below.ING Group did not early adopt Phase 2 amendments in 2020 as Phase 2 reliefs were largely not yet relevant for ING Group. During 2021, ING Group commenced the process of amending contracts which reference LIBORs

The list of upcoming changes to IFRS, which are applicable for ING Group:that are at risk, with a focus on those being decommissioned by 31 December 2021 with alternative benchmark
rates. This is the period when Phase 2 amendments will become relevant (and mandatorily effective) for ING

Effective in 2021:Group.

In May 2020 the IASB issued amendments to IFRS 16 ‘Leases’: ‘Covid-19-Related Rent Concessions’ to provide lessees with an exemption from assessing whether a Covid-19-related rent concession is a lease modification.Effective in 2022:
The amendments are effective for annual reporting periods beginning on or after 1 June 2020, with early●Amendments to IFRS 3 ‘Business Combinations’: Reference to the Conceptual Framework (issued in May application permitted. Once they become effective for ING Group in 2021, the amendments will not have2020).
material impact on ING Group’s accounting policies, ING Group’s results or financial position. In 2020 ING●Amendments to IAS 16 ‘Property, Plant and Equipment’: Proceeds before Intended Use (issued in May Group did not receive rent concessions as a lessee. This is why the amendments were not relevant and, hence,2020).
not early adopted by ING Group in 2020.●Amendments to IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’: Onerous Contracts — Cost of Fulfilling a Contract (issued in May 2020).

In August 2020, the IASB issued amendments to IFRS 9 ‘Financial Instruments’, IAS 39 ‘Financial Instruments:●Annual improvements to IFRS Standards 2018-2020 Cycle: Amendments to IFRS 1 ‘First-time Adoption of
Recognition and Measurement’, IFRS 16 ‘Leases’, IFRS 4 ‘Insurance Contracts’ and IFRS 7 ‘Financial Instruments:International Financial Reporting Standard’, amendments to IFRS 9 ‘Financial Instruments’ and amendments
Disclosures’: ‘IBOR Reform and its Effects on Financial Reporting – Phase 2’. Phase 2 amendments relate mainlyto IFRS 16 ‘Leases’ (issued in May 2020).

to accounting for changes in the basis for determining the contractual cash flows of financial assets and
liabilities due to the IBOR reform and impact on hedge accounting when an existing benchmark rate isAlthough ING Group is currently assessing the detailed impact of the above amendments, it is expected that
reformed or replaced with an alternative risk free rate. Specifically, for ING Group, the main elements of thethey will not have a significant impact on ING Group’s accounting policies, ING Group’s results or financial
Phase 2 amendments are that the effective interest rate on debt financial instruments will be adjusted, andposition.

hedge accounting will continue on transition to risk free rates, but only to the extent that the modifications
made to financial instruments are those necessary to implement IBOR Reform and that the new basis forEffective in 2023:
calculating cash flows is ‘economically equivalent’ to the previous basis. When ING Group applies these●Amendments to IAS 1 ‘Presentation of Financial Statements’: Classification of Liabilities as Current or Nonamendments, ING Group would avoid recognising modification gains and losses on debt instruments thatcurrent (issued in January 2020).
would otherwise be required in the absence of Phase 2 amendments. In addition, when ING Group applies●Amendments to IAS 1 ‘Presentation of Financial Statements’: Disclosure of Accounting Policies (issued in
Phase 2 amendments, ING Group will avoid hedge accounting discontinuations when modifying both hedgedFebruary 2021).

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●Amendments to IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’: Definition ofbecame more sensitive; and ‘Impairment assessment of an investment in associate’ where impairment indicators arose for the first time. In addition, ING Group’s participation in 2020 in a new series of Targeted Accounting Estimates (issued in February 2021).
Longer-Term Refinancing Operations (TLTRO III) also led to a new area of significant judgements. Recognition
and measurement of provisions remained an area of significant judgement and estimation uncertainty in 2020 Although ING Group is currently assessing the detailed impact of the above amendments, it is expected that consistent with prior years.
they will not have a significant impact on ING Group’s accounting policies, ING Group’s results or financial

position.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 1.7 ‘Financial instruments’ (specifically 1.7.3 for
The IASB has also issued IFRS 17 ‘Insurance Contracts’. The original effective date of IFRS 17 was 1 January‘Fair values of financial assets and liabilities’ and 1.7.8 ‘Impairment of financial assets’), 1.11 ‘Investments in
2021, but in June 2020 the IASB has published an Amendment confirming 1 January 2023 as the new effectiveassociates and joint ventures’, 1.13 ‘Acquisitions, goodwill and other intangible assets’, 1.17 ‘Provisions,
date. ING Group is currently assessing the detailed impact of IFRS 17.contingent liabilities and contingent assets’ of this note, section 1.6 ‘Other developments’, ‘Accounting for

Targeted Longer-Term Refinancing Operations (TLTRO)’ and the applicable notes to the Consolidated financial
1.5 Significant judgements and critical accounting estimates and assumptionsstatements.

The preparation of the consolidated financial statements requires management to make judgements in the process of applying its accounting policies and to use estimates and assumptions. The estimates and1.6 Other developments

assumptions affect the reported amounts of the assets and liabilities and the amounts of the contingent assetsDefinition of Default
and contingent liabilities at the balance sheet date, as well as reported income and expenses for the year. TheING Group has historically aligned the Definition of Default for regulatory purposes with the definition of
actual outcome may differ from these estimates. The process of setting assumptions is subject to internal‘credit-impaired’ financial assets under IFRS 9 (Stage 3). To comply with new regulatory technical standards
control procedures and approvals.(RTS) and EBA guidelines ING Group updated its Definition of Default in 1Q 2020. Consequently, ING Group

updated this definition also for IFRS 9 purposes. From an accounting perspective, this represents a change in ING Group has identified areas that require management to make significant judgements and use criticalaccounting estimate that is applied prospectively. This change had no material impact on ING Group’s accounting estimates and assumptions based on the information and financial data that may change in futureexpectation for credit losses, but impacted the classification of assets mainly between Stage 2 and Stage 3 periods. These areas are:resulting in an increase in Stage 3 assets (and mostly a decrease of Stage 2 assets) of approximately EUR 1 ◾Loan loss provisions (financial assets);billion at the time of updating the definition.
◾The determination of the fair values of financial assets and liabilities;

◾Impairment assessment of non-financial assets;Accounting for Targeted Longer-Term Refinancing Operations (TLTRO)
◾Impairment assessment of an investment in associate;In 2020 ING Group participated in a new series of Targeted Longer-Term Refinancing Operations (TLTRO III) and
◾Provisions; andrepaid outstanding amounts under TLTRO II, reference is made to Note 12 ‘Deposits from banks’.
◾Accounting for Targeted Longer-Term Refinancing Operations (TLTRO ).

ING Group considers TLTRO funding provided by the ECB to banks to be on market terms on the basis that the In light of Covid-19 the estimation uncertainty and level of management judgement to determine the loan loss ECB has established a separate market with TLTRO programmes. They have specific terms which are different provisions and the fair values of financial assets and liabilities further increased in 2020.
from other sources of funding available to banks, including those provided by the ECB. Consequently, the rate

The negative effects of Covid-19 gave rise to new significant judgements and critical accounting estimates andunder TLTRO is considered to be a market conforming rate and TLTRO funding is recognized fully as a financial
assumptions in 2020: ‘Impairment assessment of non-financial assets’ where estimates and judgementsliability.

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●defining the moment when ING has a reasonable expectation of meeting the targets;
ING Group interprets the whole rate set by the ECB under TLTRO as a floating rate on the financial liability,●estimating future expected lending growth, which includes estimations around client behaviour. Changes being the market rate for each specific period in time. This results in discrete rates for discrete interest periodsin these estimations may lead to changes in the amount of interest recognized on TLTRO transactions.
over the life of TLTRO. The change in the applicable rate between interest periods is seen as a change in the floating rate and is accounted for prospectively. Similarly, if the ECB announces changes in the rate for theING Group continuously monitors the actual and forecasted development of eligible loans under TLTRO amounts already drawn under the existing TLTRO, then such changes also represent a change in a floating rate.programmes to assess the appropriate interest recognition in the statement of profit or loss and to minimise Following this, such changes lead to the recognition of an increased interest in the relevant period of life of thethe risk of potential interest reversals due to the use of outdated or incorrect assumptions.
exposure, rather than by the recognition of an immediate modification gain or loss at the moment of the change of terms by the ECB.1.7 Financial instruments

1.7.1 Recognition and derecognition of financial instruments Furthermore, the change in the TLTRO rate driven by changes in expectations of meeting the targets is also

Recognition of financial assets seen as a change in the floating rate. However, in this case, the effective interest rate is updated not only Financial assets are recognised in the balance sheet when ING Group becomes a party to the contractual prospectively, but also partially retrospectively. As a result, the effect of the revised effective interest rate for provisions of the instrument. For a regular way purchase or sale of a financial asset, trade date and settlement the period that already passed until the moment when the change in expectations occurs, is recognised as a date accounting is applied depending on the classification of the financial asset.
catch up adjustment in Profit or Loss. This change occurs only when ING Group has a reasonable expectation
that the lending targets will be met.

Derecognition of financial assets

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired ING Group views ‘reasonable expectation’ in case of TLTRO funding as a high hurdle. This is the moment when
or where ING Group has transferred substantially all risks and rewards of ownership. If ING Group neither it becomes highly probable, i.e. the probability of meeting the lending targets is substantially greater than the
transfers nor retains substantially all the risks and rewards of ownership of a financial asset, it derecognises the probability that it will not. As a result, if interest income is recognised during the period based on the
financial asset if it no longer has control over the asset. The difference between the carrying amount of a expectation of meeting the targets, there should only be a limited possibility that the interest may need to be
financial asset that has been extinguished and the consideration received is recognised in profit or loss.
reversed in future periods.

Recognition of financial liabilities Reference is made to note 12 ‘Deposits from banks’ and to note 20 ‘Net interest income’ for the presentation
of ING Group’s participation in TLTRO programmes.Financial liabilities are recognised on the date that the entity becomes a party to the contractual provisions of
the instrument.

Significant judgements and critical accounting estimates and assumptions: Significant management judgement is exercised in determining the accounting treatment of TLTRODerecognition of financial liabilities transactions. In particular, ING Group applied judgement in:Financial liabilities are derecognised when the obligation specified in the contract is discharged, cancelled or ●assessing and concluding that in ING Group’s view the rate under TLTRO is considered to be a marketexpired. The difference between the carrying amount of a financial liability that has been extinguished and the conforming rate and, hence, accounting for TLTRO in accordance with IFRS 9;consideration paid is recognised in profit or loss.
●selecting accounting policies regarding the calculation of the effective interest rate under TLTRO, including treatment of changes in expectations of meeting the lending targets;

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1.7.2 Classification and measurement of financial instrumentsIn assessing whether the contractual cash flows are SPPI, ING Group considers the contractual terms of the

Financial assetsinstrument. This includes assessing whether the financial asset contains a contractual term that could change
the timing or amount of contractual cash flows such that it would not meet this condition. In making the ING Group classifies its financial assets in the following measurement categories:
assessment, terms such as the following are considered, with an example of an SPPI failure for each ◾those to be measured subsequently at fair value (either through OCI, or through profit or loss); and consideration:
◾those to be measured at amortised cost (AC).
◾prepayment terms. For example a prepayment of an outstanding principal amount plus a penalty

which is not capped to three or six months of interest;
At initial recognition, ING Group measures a financial asset at its fair value plus, in the case of a financial asset ◾leverage features, which increase the variability of the contractual cash flows with the result that they not at FVPL, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction do not have the economic characteristics of interest. An example is a Libor contract with a multiplier;
costs of financial assets carried at fair value through profit or loss (FVPL) are expensed in the statement of ◾terms that limit ING Group’s claim to cash flows from specified assets - e.g. non-recourse asset profit or loss.
arrangements. This could be the case if payments of principal and interest are met solely by the cash

flows generated by the underlying asset, for example instances in real estate, shipping and aviation

Financial assets - Debt instruments financing; and
The classification depends on the entity’s business model for managing the financial assets and the contractual ◾features that modify consideration of the time value of money. These are contracts with for example terms of the cash flows at initial recognition.
an interest rate which is reset every month to a one-year rate. ING Group performs either a qualitative

or quantitative benchmark test on a financial asset with a modified time value of money element. A

Business models

qualitative test is performed when it is clear with little or no analysis whether the contractual cash Business models are classified as Hold to Collect (HtC), Hold to Collect and Sell (HtC&S) or Other depending onflows solely represent SPPI.
how a portfolio of financial instruments as a whole is managed. ING Group’s business models are based on the

existing management structure of the bank, and refined based on an analysis of how businesses are evaluatedBased on the entity’s business model for managing the financial assets and the contractual terms of the cash
and reported, how their specific business risks are managed and on historic and expected future sales. Salesflows, there are three measurement categories into which ING Group classifies its debt instruments:
are permissible in a HtC business model when these are due to an increase in credit risk, take place close to the

maturity date (where the proceeds from the sales approximate the collection of the remaining contractual cash◾Amortised Cost (AC):
flows), are insignificant in value (both individually and in aggregate) or are infrequent.Debt instruments that are held for collection of contractual cash flows under a HtC business model where

those cash flows represent SPPI are measured at AC. Interest income from these financial assets is
Contractual cash flows Solely Payments of Principal and Interest (SPPI)included in Interest income using the EIR method. Any gain or loss arising on derecognition is recognised

The contractual cash flows of a financial asset are assessed to determine whether they represent SPPI. Interestdirectly in profit or loss. Impairment losses are presented as a separate line item in the Consolidated

includes consideration for the time value of money, credit risk and also consideration for liquidity risk and costsstatement of profit or loss.

associated with holding the financial asset for a particular period of time. In addition, interest can include a◾FVOCI:
profit margin that is consistent with a basic lending arrangement. Financial assets with embedded derivativesDebt instruments that are held for collection of contractual cash flows and for selling the financial assets

are considered in their entirety when determining whether their cash flows are SPPI.under a HtC&S business model, where the assets’ cash flows represent SPPI, are measured at FVOCI.

Movements in the carrying amount are recognised in OCI, except for the recognition of impairment gains

or losses, interest revenue and foreign exchange gains and losses which are recognised in profit or loss.

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When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI isreceive payments is established. Impairment requirements are not applicable to equity investments classified

reclassified from equity to profit or loss and presented in Investment income or Other income, based onand measured as FVOCI.

the specific characteristics of the business model. Interest income from these financial assets is included

in Interest income using the EIR method. Impairment losses are presented as a separate line item in theOther remaining equity investments are measured at FVPL. All changes in the fair value are recognised in

Consolidated statement of profit or loss.Valuation result and Net trading income in the Consolidated statement of profit or loss.

◾FVPL:

Debt instruments that do not meet the criteria for AC or FVOCI are measured at FVPL. This includes debtFinancial liabilities

instruments that are held-for-trading (presented separately as Trading assets) and all other debtFinancial liabilities are classified and subsequently measured at AC, except for financial guarantee contracts,
instruments that do not meet the criteria for AC or FVOCI (presented separately as Mandatorily at FVPL).derivatives and liabilities designated at FVPL. Financial liabilities classified and measured at FVPL are presented
ING Group may in some cases, on initial recognition, irrevocably designate a financial asset as classifiedas follows:
and measured at FVPL. This is the case where doing so eliminates or significantly reduces an accounting◾the amount of change in the fair value that is attributable to changes in own credit risk of the liability
mismatch that would otherwise arise on assets measured at AC or FVOCI. Fair value movements ondesignated at FVPL is presented in OCI. Upon derecognition this Debit Valuation Adjustment (DVA)
trading securities, trading loans and deposits (mainly reverse repo’s) are presented fully within valuationimpact does not recycle from OCI to profit or loss; and
result and net trading income, this also includes interest. The interest arising on financial assets◾the remaining amount of change in the fair value is presented in profit or loss in ‘Valuation results and
designated as at FVPL is recognised in profit or loss and presented within Interest income or Interestnet trading income’. Interest on financial liabilities at FVPL is also recognised in the valuation result,
expense in the period in which it arises. The interest arising on a debt instrument that is part of a hedgeexcept for items voluntarily designated as FVPL for which interest is presented within ‘Other interest
relationship, but not subject to hedge accounting, is recognised in profit or loss and presented withinincome (expense).
Interest income or Interest expense in the period in which it arises.

A financial guarantee contract is a contract that requires ING Group to make specified payments to reimburse
ING Group reclassifies debt investments when, and only when, its business model for managing those assetsthe holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with
changes. Such changes in business models are expected to be very infrequent. There have been nothe original or modified terms of a debt instrument. Such a contract is initially recognised at fair value and is
reclassifications during the reporting period.subsequently measured at the higher of (a) the amount determined in accordance with impairment provisions

of IFRS 9 ‘Financial instruments’ (see section “Impairment of financial assets”) and (b) the amount initially

Financial assets - Equity instruments recognised less, when appropriate, cumulative amortisation recognised in accordance with the revenue

All equity investments are measured at fair value. ING Group applies the fair value through OCI option torecognition principle of IFRS 15 ‘Revenue from contracts with customers’.

investments which are considered strategic, consisting of investments that add value to ING Group’s core

banking activities.1.7.3 Fair values of financial assets and liabilities

All financial assets and liabilities are recognised initially at fair value. The fair value of a financial instrument on
There is no subsequent recycling of fair value gains and losses to profit or loss following the derecognition ofinitial recognition is generally its transaction price (that is, the fair value of the consideration given or received).
investments if elected to be classified and measured as FVOCI. However, the cumulative gain or loss isHowever, if there is a difference between the transaction price and the fair value of financial instruments
transferred within equity to retained earnings on derecognition of such equity instruments. Dividends fromwhose fair value is based on a valuation technique that uses significant unobservable inputs, the entire day one
such investments continue to be recognised in profit or loss as Investment income when ING Group’s right todifference (a ‘Day One profit or loss’) is deferred and recognised in the statement of profit or loss over the life

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of the transaction until the transaction matures or until the observability changes. In all other cases, ING Groupon the counterparty (CVA) as well as the credit risk on ING Group (DVA) are included in the adjustment. All recognises the difference as a gain or loss at inception.input data that is used in the determination of the BVA is based on market implied data. Additionally, wrongway risk (when exposure to a counterparty is increasing and the credit quality of that counterparty Subsequently, except for financial assets and financial liabilities measured at amortised cost, all the otherdeteriorates) and right-way risk (when exposure to a counterparty is increasing and the credit quality of that financial assets and liabilities are measured at fair value.counterparty improves) are taken into account in the measurement of the valuation adjustment.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in anTo include the funding risk, ING Group applies an additional ‘Funding Valuation Adjustment’ (FVA) to the orderly transaction between market participants at the measurement date. It assumes that market participantsuncollateralised derivatives based on the market price of funding liquidity.
would use and take into account the characteristics of the asset or liability when pricing the asset or liability.
Fair values of financial assets and liabilities are based on unadjusted quoted market prices where available.ING Group also applies to certain positions other valuation adjustments to arrive at the fair value: Bid-Offer Such quoted market prices are primarily obtained from exchange prices for listed financial instruments. Whereadjustments, Model Risk Adjustments and Collateral Valuation Adjustments (CollVA).
an exchange price is not available, quoted prices in an active market may be obtained from independent market vendors, brokers, or market makers. In general, positions are valued at the bid price for a long positionSignificant judgements and critical accounting estimates and assumptions: and at the offer price for a short position or are valued at the price within the bid-offer spread that is mostEven if market prices are available, when markets are less liquid there may be a range of prices for the same representative of fair value in the circumstances. In some cases where positions are marked at mid-marketsecurity from different price sources. Selecting the most appropriate price requires judgement and could result prices, a fair value adjustment is calculated.in different estimates of fair value.

For certain financial assets and liabilities, quoted market prices are not available. For such instruments, fairValuation techniques are subjective in nature and significant judgement is involved in establishing fair values value is determined using valuation techniques. These range from discounting of cash flows to variousfor certain financial assets and liabilities. Valuation techniques involve various assumptions regarding pricing valuation models, where relevant pricing factors including the market price of underlying referencefactors. The use of different valuation techniques and assumptions could produce significantly different instruments, market parameters (volatilities, correlations and credit ratings), and customer behaviour areestimates of fair value.
taken into account. ING Group maximises the use of market observable inputs and minimises the use of unobservable inputs in determining the fair value. It can be subjective dependent on the significance of thePrice testing is performed to assess whether the process of valuation has led to an appropriate fair value of the unobservable input to the overall valuation. All valuation techniques used are subject to internal review andposition and to an appropriate reflection of these valuations in the statement of profit or loss. Price testing is approval. Most data used in these valuation techniques are validated on a daily basis when possible.performed to minimise the potential risks for economic losses due to incorrect or misused models.

When a group of financial assets and liabilities are managed on the basis of their net risk exposures, the fairThe Covid-19 pandemic impacted the global financial markets in 2020. In the beginning of 2020, ING Group value of a group of financial assets and liabilities are measured on a net portfolio level.observed large volatility in the market resulting in widened spreads, markets distortion and illiquidity in some specific markets which has stressed ING Group’s valuation processes and movements in level classifications.
To include credit risk in fair value, ING Group applies both Credit and Debit Valuation Adjustments (CVA, DVA,The volatility in the market has stabilised in the course of 2020 and has largely returned to pre-pandemic also known as Bilateral Valuation Adjustments or BVA). Own issued debt and structured notes that arelevels. Financial Assets and Liabilities, including Level 3, continued to be valued using agreed methodologies designated at FVPL are adjusted for ING Group’s own credit risk by means of a DVA. Additionally, derivativesand ING Group continued to limit the unobservable input to arrive at the most appropriate Fair Market value.
valued at fair value are adjusted for credit risk by a BVA. The BVA is of a bilateral nature as both the credit risk

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Reference is made to note 38 ‘Fair value of assets and liabilities’ and to the ‘Market risk’ paragraph in the ‘Riskeffectiveness. ING Group also documents its assessment, both at hedge inception and on an ongoing basis, of management’ section of the Annual Report for the basis of the determination of the fair value of financialwhether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair instruments and related sensitivities.values or cash flows of the hedged items.

1.7.4 Derivatives and hedge accountingING Group applies also macro cash flow hedge accounting to hedge the variability in future cash flows of non- Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into andtrading assets and liabilities due to the interest rate risk and foreign currency exchange rate risk. The are subsequently measured at fair value. Fair values are obtained from quoted market prices in active markets,designated hedged items are floating rated assets or liabilities, such as floating rate mortgages and corporate including market transactions and valuation techniques (such as discounted cash flow models and optionloans. The effective portion of changes in the fair value of the derivatives are recognised in the Other pricing models), as appropriate. All derivatives are carried as assets when their fair value is positive and asComprehensive Income.
liabilities when their fair value is negative. Fair value movements on derivatives are presented in profit or loss

Fair value hedges in Valuation result and net trading income, except for derivatives in either a formal hedge relationship and socalled economic hedges that are not in a formal hedge accounting relationship where a component isChanges in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in presented separately in interest result in line with ING Group’s risk management strategy.the statement of profit or loss, together with fair value adjustments to the hedged item attributable to the hedged risk. If the hedge relationship no longer meets the criteria for hedge accounting, the cumulative Embedded derivatives are separated from financial liabilities and other non-financial contracts and accountedadjustment of the hedged item is, in the case of interest bearing instruments, amortised through the for as a derivative if, and only if:statement of profit or loss over the remaining term of the original hedge or recognised directly when the a)the economic characteristics and risks of the embedded derivative are not closely related to the economichedged item is derecognised. For non-interest bearing instruments, the cumulative adjustment of the hedged characteristics and risks of the host contract;item is recognised in the statement of profit or loss only when the hedged item is derecognised.
b)a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; andCash flow hedges c)the combined instrument is not measured at fair value with changes in fair value reported in profit or loss.The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow

hedges are recognised in the Other Comprehensive Income. The gain or loss relating to the ineffective portion If an embedded derivative is separated, the host contract is accounted for as a similar free-standing contract.is recognised immediately in the statement of profit or loss. Amounts accumulated in the Other
Comprehensive Income are recycled to the statement of profit or loss in the periods in which the hedged item The method of recognising the resulting fair value gain or loss depends on whether the derivative is designatedaffects net result. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria as a hedging instrument, and if so, the nature of the item being hedged. ING Group designates certainfor hedge accounting, any cumulative gain or loss existing in the Other Comprehensive Income at that time derivatives as hedges of the fair value of recognised assets or liabilities or firm commitments (fair value hedge),remains in the Other Comprehensive Income and is recognised when the forecast transaction is ultimately hedges of highly probable future cash flows attributable to a recognised asset or liability or a forecastrecognised in the statement of profit or loss. When a forecast transaction is no longer expected to occur, the transaction (cash flow hedge), or hedges of a net investment in a foreign operation. Hedge accounting is usedcumulative gain or loss that was reported in the Other Comprehensive Income is transferred immediately to for derivatives designated in this way provided certain criteria are met.the statement of profit or loss.

At the inception of the transaction ING Group documents the relationship between hedging instruments and hedged items, its risk management objective, together with the methods selected to assess hedge

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Net investment hedgesWhen performing the retrospective assessment hedges are allowed to pass the assessment even if
Hedges of net investments in foreign operations are accounted for in a similar way to cash flow hedges. Anyactual results are outside the 80-125% range, during the period of uncertainty arising from the IBOR gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in the Otherreform.
Comprehensive Income and the gain or loss relating to the ineffective portion is recognised immediately in the◾Designation of a component of an item as a hedged item statement of profit or loss. Gains and losses accumulated in the Other Comprehensive Income are included inFor hedges of the benchmark component of interest rate risk affected by the reform, the separately the statement of profit or loss when the foreign operation is disposed.identifiable requirement only needs to be demonstrated at the inception of such hedging relationships (including macro hedges).

IBOR Transition - specific policies applicable from 1 January 2019 for hedges directly affected

by IBOR reformThe amendments are relevant given that ING Group hedges and applies hedge accounting to benchmark
As further explained in the ‘IBOR Transition’ paragraph of the ‘Risk management’ section, the financial marketsinterest rate exposure part of IBOR reform. Hedging instruments and most of hedged items continue to be
are going through a significant reform of interbank offered rates (IBOR) and financial institutions are obligatedindexed by the IBOR benchmark rates. Therefore, there is still uncertainty in 2020 over the timing and the
to implement a replacement of major interest rate reference rates. This process is at different stages, and isamount of the replacement rate cash flows and, thus, temporary exceptions under Phase 1 continued to be
progressing at different speeds, across several major currencies.relevant for ING Group in 2020. ING Group will cease to apply the amendments when this uncertainty is no

longer present or when the hedging relationship is discontinued. Refer to Note 39 ‘Derivatives and hedge Given that IBOR reform may have various accounting implications, the International Accounting Standardsaccounting’ for the disclosures relating to the application of the amendments as part of Phase 1.
Board (IASB) has undertaken a two phase project. Phase 1 addresses those issues that affect financial reporting before the replacement of an existing benchmark (Phase 1 amendments to IFRS were issued by the IASB inIn 2020 ING Group did not early adopt Phase 2 amendments. Reference is made to paragraph 1.4.2 ‘Upcoming 2019). Phase 2 focuses on issues that may affect financial reporting when the existing benchmark rate ischanges in IFRS after 2020’ of this note.
reformed or replaced Phase 2 amendments to IFRS were issued by the IASB in 2020.

Non-trading derivatives that do not qualify for hedge accounting

In 2019, ING Group early adopted the Phase 1 amendments to IFRS which allowed ING Group to apply a set ofDerivative instruments that are used by ING Group as part of its risk management strategies, but which do not
temporary exceptions to continue hedge accounting even when there is uncertainty about contractual cashqualify for hedge accounting under ING Group’s accounting policies, are presented as non-trading derivatives.
flows arising from the reform. Under these temporary exceptions, interbank offered rates are assumed toNon-trading derivatives are measured at fair value with changes in the fair value taken to the statement of
continue unaltered for the purposes of hedge accounting until such time as the uncertainty is resolved.profit or loss.

More specifically, the following temporary reliefs are part of the Phase 1 amendments:1.7.5 Offsetting of financial assets and financial liabilities
◾Highly probable requirement for cash flow hedges Financial assets and financial liabilities are offset, and the net amount reported, in the statement of financial
When determining whether a forecast transaction is highly probable, it is assumed that the interest position when ING Group has a current legally enforceable right to set off the recognised amounts and intends
rate benchmark on which the hedged cash flows are based is not altered as a result of the reform.
to either settle on a net basis or to realise the asset and settle the liability simultaneously. Offsetting is applied
◾Prospective assessment of hedge effectiveness to certain interest rate swaps for which the services of a central clearing house are used.

When performing the prospective assessment it is assumed that the interest rate benchmark on which the hedged cash flows are based is not altered as a result of the reform.
◾Retrospective assessment of hedge effectiveness

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1.7.6 Repurchase transactions and reverse repurchase transactions1.7.8Impairment of financial assets

Securities sold subject to repurchase agreements (repos), securities lending and similar agreements continueAn Expected Credit Loss (ECL) model is applied to financial assets accounted for at AC or FVOCI such as loans, to be recognised in the consolidated statement of financial position. The counterparty liability is measured atdebt securities and lease receivables, as well as off-balance sheet items such as undrawn loan commitments, FVPL (designated) and included in Other financial liabilities at FVPL if the asset is measured at FVPL. Otherwise,certain financial guarantees, and undrawn committed revolving credit facilities. Under the ECL model ING the counterparty liability is included in Deposits from banks, Customer deposits, or Trading, as appropriate.Group calculates the expected credit losses (ECL) by considering on a discounted basis the cash shortfall it would incur in case of a default and multiplying the shortfall by the probability of a default occurring. The ECL is Securities purchased under agreements to resell (reverse repos), securities borrowings and similar agreementsthe sum of the probability-weighted outcomes. The ECL estimates are unbiased and include reasonable and are not recognised in the consolidated statement of financial position. The consideration paid to purchasesupportable information about past events, current conditions, and forecasts of future economic conditions.
securities is recognised as Loans and advances to customers, Loans and advances to banks, Other financialING Group’s approach leverages the Advanced Internal Ratings Based (AIRB) models that are used for assets at FVPL or Trading assets, as appropriate. The difference between the sale and repurchase price isregulatory purposes. Adjustments are applied to make these models suitable for determining ECL. ECL is treated as interest and amortised over the life of the agreement using the effective interest method forrecognised on the balance sheet as loan loss provisions (LLP).

instruments that are not measured at FVPL.

Three stage approach 1.7.7 Credit risk management classification and maximum credit risk exposure Financial assets are classified in one of the below three Stages at each reporting date. A financial asset can Credit risk management disclosures are provided in the ‘Credit risk’ paragraph ‘Credit risk categories’ of themove between Stages during its lifetime. The Stages are based on changes in credit quality since initial ‘Risk management’ section in the Annual Report.recognition and defined as follows:
◾Stage 1 The maximum credit risk exposure for items in the statement of financial position is generally the carryingFinancial assets that have not had a significant increase in credit risk since initial recognition (i.e. no value for the relevant financial assets. For the off-balance sheet items the maximum credit exposure is theStage 2 or 3 triggers apply). Assets are classified as Stage 1 upon initial recognition (with the exception maximum amount that could be required to be paid. Reference is made to Note 44 ‘Contingent liabilities andof purchased or originated credit impaired (POCI) assets) and ECL is determined by the probability that commitments’ for these off-balance sheet items. Collateral received is not taken into account whena default occurs in the next 12 months (12 months ECL);
determining the maximum credit risk exposure.◾Stage 2 Financial assets showing a significant increase in credit risk since initial recognition. For assets in Stage The manner in which ING Group manages credit risk and determines credit risk exposures for that purpose is2 ECL reflects an estimate on the credit losses over the remaining maturity of the asset (lifetime ECL);
explained in the Credit risk paragraph ‘Credit Risk Appetite and Concentration Risk Framework’ of the ‘Riskor management’ section in the Annual Report.◾Stage 3 Financial assets that are credit-impaired. Also for these assets ECL is determined over the remaining maturity of the asset.

Significant increase in credit risk ING Group established a framework, incorporating quantitative and qualitative indicators, to identify and assess significant increases in credit risk (SICR). This is used to determine the appropriate ECL Stage for each financial asset.

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a baseline scenario, ING Group applies the market-neutral view combining consensus forecasts for economic The main determinate of SICR is a quantitative test, whereby the lifetime Probability of Default (PD) of an assetvariables such as unemployment rates, GDP growth, house prices, commodity prices, and short-term interest at each reporting date is compared against its lifetime PD determined at the date of initial recognition. If therates. Applying market consensus in the baseline scenario ensures unbiased estimates of the expected credit delta is above pre-defined absolute or relative thresholds the item is considered to have experienced a SICR.losses.
Consequently, the item moves from Stage 1 to Stage 2 (unless the item is credit-impaired). In these instances, items are no longer assigned a 12 month ECL and instead are assigned a lifetime ECL. Items can return to StageThe alternative scenarios are based on observed forecast errors in the past, adjusted for the risks affecting the 1 if there is sufficient evidence that there is no longer a significant increase in credit risk.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 ING Group also relies on a number of qualitative indicators to identify and assess SICR. These include:the economic variables are adjusted on a quarterly basis.
◾Forbearance status;
◾Watch List status. Loans on the Watch List are individually assessed for Stage 2 classification;Measurement of ECL ◾Intensive care management;ING Group applies a collective assessment method to measure ECL for Stage 1, Stage 2, and certain Stage 3 ◾Substandard Internal rating; andassets. Other credit-impaired assets subject to ECL measurement apply the individual assessment method.
◾Arrears status.
Collectively assessed assets (Stages 1 to 3)

Credit-impaired financial assets (Stage 3) For collective assessed assets, ING Group applies a model-based approach. ECL is determined by, expressed Financial assets are assessed for credit-impairment at each reporting date and more frequently whensimplistically, multiplying the probability of default (PD) with the loss given default (LGD) and exposure at circumstances warrant further assessment. Evidence of credit-impairment includes arrears of over 90 days ondefault (EAD), adjusted for the time value of money. Assets that are collectively assessed are grouped on the any material credit obligation, indications that the borrower is experiencing significant financial difficulty, abasis of similar credit risk characteristics, taking into account loan type, industry, geographic location, collateral breach of contract, bankruptcy or distressed restructuring.type, past due status and other relevant factors. These characteristics are relevant to the estimation of future
cash flows for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according An asset (other than a POCI asset) that is in Stage 3 will move back to Stage 2 when, as at the reporting date, itto the contractual terms of the assets being evaluated and the loss in case the debtor is not able to pay all is no longer considered to be credit-impaired. The asset will migrate back to Stage 1 when its credit risk at theamounts due.
reporting date is no longer considered to have increased significantly since initial recognition.

For Stage 3 assets the PD equals 100% and the LGD and EAD represent a lifetime view of the losses based on
The definition of credit-impaired under IFRS 9 (Stage 3) is aligned with the definition of default used by INGcharacteristics of defaulted facilities.

Group for internal risk management purposes, which is also the definition used for regulatory purposes.
For the purpose of ECL, ING Group’s expected credit loss models (PD, LGD, EAD) used for regulatory purposes Macroeconomic scenarioshave been adjusted. These adjustments include removing embedded prudential conservatism (such as floors)
ING Group has established a quarterly process whereby forward -looking macroeconomics scenarios andand converted through-the-cycle estimates to point-in-time estimates. The models assess ECL on the basis of probability weightings are developed for the purpose of ECL. ING Group applies data predominantly from aforward-looking macroeconomic forecasts and other inputs. For most financial assets, the expected life is leading service provider (Oxford Economics (OE)) enriched with the internal ING Group view. A baseline, up-limited to the remaining maturity. For overdrafts and certain revolving credit facilities, such as credit cards, the scenario and a down-scenario are determined to reflect an unbiased and probability-weighted ECL amount. Asmaturity is estimated based on historical data as these do not have a fixed term or repayment schedule.

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Modifications Individually assessed assets (Stage 3)In certain circumstances ING Group grants borrowers postponement, reduction of loan principal and/or ING Group estimates ECL for individually significant credit-impaired financial assets within Stage 3 on aninterest payments on a temporary period of time to maximise collection opportunities, and if possible, avoid individual basis. ECL for these Individually assessed assets are determined using the discounted expecteddefault, foreclosure, or repossession. When such postponement, reduction of loan principal and/or interest future cash flow method. To determine expected future cash flows, one or more scenarios are used. Eachpayments is executed based on credit concerns it is also referred to as forbearance (refer to the ‘Risk scenario is analysed based on the probability of occurrence and include forward looking information.Management’ section of the Annual Report for more details). In such cases, the net present value of the postponement, reduction of loan principal and/or interest payments is taken into account in the determination In determining the scenarios, all relevant factors impacting the future cash flows are taken into account. Theseof the appropriate level of ECL. If the forbearance results in a substantial modification of the terms of the loan, include expected developments in credit quality, business and economic forecasts, and estimates of if/whenthe original loan is derecognised and a new loan is recognised at fair value at the modification date. ING Group recoveries will occur taking into account ING Group’s restructuring/recovery strategy.determines whether there has been a substantial modification using both quantitative and qualitative factors.

The best estimate of ECL is calculated as the weighted -average of the shortfall (gross carrying amount minusWrite-off and debt forgiveness
discounted expected future cash flow using the original EIR) per scenario, based on best estimates of expected If there is no reasonable expectation of recovery and/or collectability of amounts due a write-off can occur.
future cash flows. Recoveries can arise from, among others, repayment of the loan, collateral recovery and the The following events can lead to a write-off:
sale of the asset. Cash flows from collateral and other credit enhancements are included in the measurement ◾After a restructuring has been completed and there is a high improbability of recovery of part of the of ECL of the related financial asset when it is part of or integral to the contractual terms of the financial asset remaining loan exposure (including partial debt forgiveness);
and the credit enhancement is not recognised separately. For the individual assessment, with granular ◾In a bankruptcy liquidation scenario;
(company or asset-specific) scenarios, specific factors can have a larger impact on the future cash flows than ◾After divestment or sale of a credit facility at a discount;
macroeconomic factors.
◾Upon conversion of a credit facility into equity; or
◾ING Group releases a legal (monetary) claim it has on its customer.
When a financial asset is credit-impaired, interest is no longer recognised based on the accrual income based
on the gross carrying amount of the asset. Rather, interest income is calculated by applying the original EIR to When a loan is uncollectable, it is written off against the related loan loss provision. Subsequent recoveries of the AC of the asset, which is the gross carrying amount less the related loan loss provision.
amounts previously written off are recognised in the statement of profit or loss.

Purchased or Originated Credit Impaired (POCI) assets Debt forgiveness (or debt settlement) involves write-off but additionally involves the forgiveness of a legal POCI assets are financial assets that are credit-impaired on initial recognition. Impairment on a POCI asset isobligation, in whole or in part. This means that ING Group forfeits the legal right to recover the debt. As a determined based on lifetime ECL from initial recognition. POCI assets are recognised initially at an amount netresult, the financial asset needs to be derecognised. Distinction is made in situations where ING Group ends of LLP and are measured at AC using a credit-adjusted effective interest rate. In subsequent periods anythe relationship with the client and situations where ING Group (partially) continues the financing of the client.
changes to the estimated lifetime ECL are recognised in profit or loss. Favourable changes are recognised as an impairment gain even if the lifetime ECL at the reporting date is lower than the estimated lifetime ECL atPresentation of ECL origination.ECL for financial assets measured at AC are deducted from the gross carrying amount of the assets. For debt instruments at FVOCI, the ECL is recognised in OCI, instead of deducted the carrying amount of the asset. ECL also reflects any credit losses related to the portion of the loan commitment that is expected to be drawn

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down over the remaining life of the instrument. The ECL on issued financial guarantee contracts, in scope ofThis is a management judgement that ultimately requires estimation and consideration of the range of IFRS 9 and not measured at FVPL, are recognised as liabilities and presented in Other provisions. ECL arepossibilities. This ensures a consensus view on the likelihood of each scenario materialising is appropriately presented in profit or loss in Addition to loan loss provision.reflected in the weights applied by ING Group for collectively assessed ECL. The sensitivity analysis in the ‘Risk

Management’ section of the Annual Report discloses these weights used.

Significant judgements and critical accounting estimates and assumptions: Considerable management judgement is exercised in determining the amount of LLP for financial assetsThe criteria for identifying a significant increase in credit risk assessed on both a collective and an individual basis. The need for management judgement has increased evenWhen determining whether the credit risk on a financial asset has increased significantly, ING Group considers further due to the Covid-19 pandemic. In particular, this judgement requires ING Group to make variousreasonable and supportable information to compare the risk of default occurring at reporting date with the risk assumptions about the risk of default, the credit loss rates in case of a default and expected future cash flows.of a default occurring at initial recognition of the financial asset. Whilst judgement is required in applying a PD These assumptions are based on a combination of ING Group’s past history, existing market conditions andrating to each financial asset, there is significant judgement used in determining the Stage allocation PD forward-looking estimates at the end of each reporting period. Changes in these assumptions may lead tobanding thresholds. The process of comparing a financial asset’s PD with the PD banding thresholds determines changes in the LLP over time. Given they are subjective and complex in nature, and because the LLP and theits ECL Stage. Assets in Stage 1 are allocated a 12 month ECL, and those in Stage 2 are allocated a lifetime ECL, underlying exposures subject to ECL are material, these assumptions are considered critical accountingand the difference is often significant. As such, the judgement made in assigning financial asset PDs and the PD assumptions. The sensitivity of these assumptions is assessed in the credit risk section of the ‘Riskbanding thresholds constitute a significant judgement. Analysis of the Management’ section in the Annual Report.sensitivity associated with the assessment of significant increase in credit risk is presented in the ‘Risk Management’ section of the Annual Report. During 2020 ING Group provided many customers with payment The use of forward-looking macroeconomic scenarios in both collective and individual impairment assessmentsholidays. Traditional risk drivers in models used to determine LLP that are based on customers’ payment Forward-looking macroeconomic scenarios are uncertain in nature. The process ING Group follows involvesbehaviour may be ineffective for these assets, because customers with payment holidays are not required to two internal groups, the Macroeconomics Scenarios Team and the Macroeconomics Scenarios Expert Panel.make regular material payment and limited (if any) additional information is available. Hence, judgement was The latter team consists of senior management representatives from the Business, Risk and Finance. Theserequired to appropriately reflect the effect of payment holidays on LLP.
groups review inputs obtained from a third party provider and subject these to internal expert challenge to ensure the inputs used in the models reflect ING Group’s view on the macro economy. The use of alternateThe definition of default forward-looking macroeconomic scenarios can produce significantly different estimates of ECL. This isJudgement is exercised in management’s evaluation of whether there is objective evidence that larger demonstrated in the sensitivity analysis in the ‘Risk Management’ section of the Annual Report, where the un-exposures are credit-impaired. Management judgement is required in assessing evidence of credit-impairment.
weighted ECL under each of the three scenarios for some significant portfolios is disclosed. The uncertainty around the expected macroeconomic recovery once Covid-19 induced lockdowns are lifted increased theImpact from Covid-19 – management overlays and management adjustments judgement necessary in using macroeconomic scenarios. Furthermore, the specific nature of the Covid-19The increased uncertainty around ECL arising from Covid-19 in the use of forward-looking macroeconomic crisis, which leads to a time lag between the effects of macroeconomic outlooks on model produced ECL andscenarios and determining significant increases in credit risk resulted in Covid-19related management overlays observed defaults, has further increased the judgements required in the use of forward -lookingand adjustments to the model-based ECL. The management adjustment related to payment holidays and macroeconomic scenarios in 2020.management overlay related to time lag in expected defaults are EUR 638 million in total. Reference is made to the ‘Credit risk’ paragraph in the ‘Risk management’ section of the Annual Report.
The probability weights applied to each of the three scenarios

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1.8 Consolidation
ING Group comprises ING Groep N.V. (the Parent Company), ING Bank N.V. and all other subsidiaries.All intercompany transactions, balances and unrealised surpluses and deficits on transactions between group Subsidiaries are entities controlled by ING Groep N.V. Control exists if ING Groep N.V. is exposed or has rightscompanies are eliminated. Where necessary, the accounting policies used by subsidiaries are changed to to variable returns and has the ability to affect those returns through the power over the investee. Control isensure consistency with group policies. In general, the reporting dates of subsidiaries are the same as the usually achieved through situations including, but not limited to:reporting date of ING Groep N.V.
◾Ownership, directly or indirectly, of more than half of the voting power;
◾Ability to appoint or remove the majority of the board of directors;ING Groep N.V. and its Dutch group companies are subject to legal restrictions regarding the amount of ◾Power to govern operating and financial policies under statute or agreement; anddividends they can pay to their shareholders. The Dutch Civil Code contains the restriction that dividends can ◾Power over more than half of the voting rights through an agreement with other investors.only be paid up to an amount equal to the excess of the company’s own funds over the sum of the paid-up capital and reserves required by law. Certain Group companies are also subject to other restrictions in certain
The existence and effect of potential voting rights that are currently exercisable or convertible are consideredcountries, in addition to the restrictions on the amount of funds that may be transfer red in the form of in assessing whether Group controls another entity.dividends, or otherwise, to the parent company.

For interests in structured entities, the existence of control requires judgement as these entities are designedFurthermore, in addition to the restrictions in respect of minimum capital requirements that are imposed by so that voting or similar rights are not the dominant factor in deciding who controls the entity. This judgementindustry regulators in the countries in which the subsidiaries operate, other limitations exist in certain includes, for example, the involvement in the design of the structured entity, contractual arrangements thatcountries.
give rights to direct the structured entities relevant activities and commitment to ensure that the structured

1.9 Segment reporting

entity operates as designed.
An operating segment is a distinguishable component of ING Group, engaged in providing products or services, A list of principal subsidiaries is included in Note 47 ‘Principal subsidiaries’.whose operating results are regularly reviewed by the Executive Board of ING Group and the Management Board Banking (together the Chief Operating Decision Maker (CODM)) to make decisions about resources to be A list containing the information referred to in Section 379 (1), Book 2 of the Dutch Civil Code has been filedallocated to the segments and assess its performance. A geographical area is a distinguishable component of with the office of the Commercial Register of Amsterdam, in accordance with Section 379 (5), Book 2 of theING Group engaged in providing products or services within a particular economic environment that is subject Dutch Civil Code.to risks and returns that are different from those of segments operating in other economic environments.

The results of the operations and the net assets of subsidiaries are included in the statement of profit or lossThe CODM examines ING Group’s performance both by line of business and geographic perspective and has and the statement of financial position from the date control is obtained until the date control is lost. Onidentified five reportable segments by line of business and six by geographical area. The geographical analyses disposal, the difference between the sales proceeds, net of directly attributable transaction costs, and the netare based on the location of the office from which the transactions are originated.
assets is included in net result.

A subsidiary which ING Group has agreed to sell but is still legally owned by ING Group may still be controlled by ING Group at the balance sheet date and therefore, still be included in the consolidation. Such a subsidiary may be presented as a held for sale disposal group if certain conditions are met.

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1.10 Foreign currency translationGroup companies

Functional and presentation currencyThe results and financial positions of all group companies that have a functional currency different from the
Items included in the financial statements of each of ING Group’s entities are measured using the currency ofpresentation currency are translated into the presentation currency as follows:
the primary economic environment in which the entity operates (the functional currency). The Consolidated◾Assets and liabilities included in each statement of financial position are translated at the closing rate at
financial statements are presented in euros, which is Group’s presentation currency.the date of that statement of financial position;
◾Income and expenses included in each statement of profit or loss are translated at average exchange rates
Transactions and balances(unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions);
Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at and the date of the transactions. Exchange rate differences resulting from the settlement of such transactions and ◾All resulting exchange rate differences are recognised in a separate component of equity.
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 On consolidation, exchange rate differences arising from the translation of a monetary item that forms part of qualifying cash flow hedges or qualifying net investment hedges.
the net investment in a foreign operation, and of borrowings and other instruments designated as hedges of
such investments, are taken to shareholders’ equity. When a foreign operation is sold, the corresponding Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate differences are recognised in the statement of profit or loss as part of the gain or loss on sale.
exchange rate at the date of the transaction.

Goodwill and fair value adjustments arising from the acquisition of a foreign operation are treated as assets Exchange rate differences on non-monetary items, measured at fair value through profit or loss, are reported and liabilities of the foreign operation and translated at the exchange rate prevailing at the balance sheet date.
as part of the fair value gain or loss. Non-monetary items are retranslated at the date the fair value is
determined. Exchange rate differences on non-monetary items measured at fair value through other

1.11 Investments in associates and joint ventures

comprehensive income are included in other comprehensive income and get accumulated in the revaluation reserve in equity.Associates are all entities over which ING Group has significant influence but not control. Significant influence is the ability to participate in the financial and operating policies of the investee. It generally results from a Exchange rate differences in the statement of profit or loss are generally included in ‘Valuation results and netshareholding of between 20% and 50% of the voting rights or through situations including, but not limited to trading income’. Reference is made to Note 22 ‘Valuation results and net trading income’, which discloses theone or more of the following:
amounts included in the statement of profit or loss. Exchange rate differences relating to the disposal of debt◾Representation on the board of directors;
and FVPL equity securities are considered to be an inherent part of the capital gains and losses recognised in◾Participation in the policymaking process; and Investment income. As mentioned below, in Group companies relating to the disposals of group companies,◾Interchange of managerial personnel.
any exchange rate difference deferred in equity is recognised in the statement of profit or loss in ‘Result on disposal of group companies’. Reference is also made to Note 19 ‘Equity’, which discloses the amountsJoint ventures are entities over which ING Group has joint control. Joint control is the contractually agreed included in the statement of profit or loss.sharing of control over an arrangement or entity, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. Joint control means that no party to the agreement is able to act unilaterally to control the activity of the entity. The parties to the agreement must act together to control the entity and therefore exercise the joint control.

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to be withheld in order for TMB to meet target regulatory requirements over the forecast period. Both of these Investments in associates and joint ventures are initially recognised at cost and subsequently accounted forfactors are subject to a high degree of uncertainty.

using the equity method of accounting.
Key assumptions used in estimating TMB’s value in use and the sensitivity of the value in use calculations to ING Group’s investment in associates and joint ventures (net of any accumulated impairment loss) includesdifferent assumptions are described in note 8 ‘Investments in associates and joint ventures’.

goodwill identified on acquisition. ING Group’s share of its associates and joint ventures post-acquisition profits or losses is recognised in the statement of profit or loss, and its share of post-acquisition changes in reserves is recognised in equity. The cumulative post-acquisition changes are adjusted against the carrying amount of the1.12 Property and equipment investment. When ING Group’s share of losses in an associate or joint venture equals or exceeds its interest in the associate or joint venture, including any long-term interests in the associate like uncollateralised loans thatProperty in own use are neither planned nor likely to be settled in the foreseeable future, ING Group does not recognise furtherLand and buildings held for own use are stated at fair value at the balance sheet date. Increases in the carrying losses, unless it has incurred obligations or made payments on behalf of the associate or joint venture.amount arising on revaluation of land and buildings held for own use are credited to the revaluation reserve in
shareholders’ equity. Decreases in the carrying amount that offset previous increases of the same asset are Unrealised gains on transactions between ING Group and its associates and joint ventures are eliminated to thecharged against the revaluation reserve directly in equity; all other decreases are charged to the statement of extent of ING Group’s interest in the associates and joint ventures. Unrealised losses are also eliminated unlessprofit or loss. Increases that reverse a revaluation decrease on the same asset previously recognised in net they provide evidence of an impairment of the asset transferred. Accounting policies of associates and jointresult are recognised in the statement of profit or loss. Depreciation is recognised based on the fair value and ventures have been changed where necessary to ensure consistency with the policies adopted by ING Group.the estimated useful life (in general 20–50 years). Depreciation is calculated on a straight-line basis. On
disposal, the related revaluation reserve is transferred to retained earnings.
Investments in associates and joint ventures are assessed at each reporting date and tested for impairment when there is an indication that the investment may be impaired. Goodwill on acquisitions of interests inThe fair values of land and buildings are based on regular appraisals performed by independent qualified associates and joint ventures is not tested separately for impairment, but is assessed as part of the carryingvaluers or by internal valuers. Subsequent expenditure is included in the asset’s carrying amount when it is amount of the investment. Reversal of impairment is considered when the indicators of impairment no longerprobable that future economic benefits associated with the item will flow to ING Group and the cost of the exist and the recoverable amount has improved above the carrying amount. The reversal of impairment cannotitem can be measured reliably.
exceed the original impairment loss.

Equipment

Significant judgements and critical accounting estimates and assumptions: Equipment is stated at cost less accumulated depreciation and any impairment losses. The cost of the assets is The most significant estimates and assumptions relate to the assessment of impairment of the investment in depreciated on a straight line basis over their estimated useful lives, which are generally as follows: for data TMB which involves estimations of value in use.
processing equipment two to five years, and four to ten years for fixtures and fittings. Expenditure incurred on
maintenance and repairs is recognised in the statement of profit or loss as incurred. Expenditure incurred on Management’s best estimate of TMB’s expected future earnings are based on forecasts derived from broker major improvements is capitalised and depreciated.
consensus over the short to medium term and TMB observable targets for steady state earnings into
perpetuity. A capital maintenance charge is applied, which is management’s forecast of the earnings that need

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Disposals of property and equipmentRight-of-use assets are measured at cost comprising the amount of the initial measurement of the lease

The difference between the proceeds on disposal and net carrying value is recognised in the statement ofliability, any lease payments made at or before the commencement date less any lease incentives received and
profit or loss under Other income.any initial direct costs and restoration costs.

Right-of-use assetsPayments 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- IFRS 16 ‘Leases’ – Accounting policies applied from 1 January 2019
value assets comprise mainly IT-equipment (for example mobile phones or laptops) and small items of office

ING Group as the lessee
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
The right-of-use asset is included in the statement of financial position line-item ‘Property and equipment’, the leased asset is available for use by ING Group. Each lease payment is allocated between the repayment of the
lease liability is included in the statement of financial position line-item ‘Other liabilities’. Refer to note 9 liability and finance cost. The finance costs are charged to profit or loss over the lease period so as to produce a
‘Property and equipment’ and to note 16 ‘Other liabilities’.
constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use

asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
Subsequent to initial recognition, the right-of-use asset amortises using a straight -line method to the income

statement over the life of the lease. The lease liability increases for the accrual of interest and decrease when Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include
payments are made. Any remeasurement of the lease liability due to a lease modification or other the net present value of the following lease payments:
reassessment results 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.
◾The exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and For ING Group as a lessor these are mainly finance leases. The present value of the lease payments is ◾Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that recognised as a receivable under Loans and advances to customers or Loans and advances to banks. The option.
difference between the gross receivable and the present value of the receivable is unearned finance lease

income. Lease income is recognised over the term of the lease using the net investment method (before tax), The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily
which reflects a constant periodic rate of return.
determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay

to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with

Operating leases for lessees prior to 1 January 2019 under IAS 17 similar terms and conditions. This rate is approximated by using the risk free rate applicable to the lease term,
The comparative figures presented for 2018 are accounted for using the previous Standard, IAS 17 ‘Leases’.
the currency of the lease payment and jurisdiction, with the Fund Transfer Pricing (FTP) rate as an add-on. The
Under this Standard a distinction was made between finance leases and operating leases for both lessees and FTP rate is used to transfer interest rate risk and funding and liquidity risk positions between the ING Group
lessors. A lease was considered a finance lease if it transfers substantially all risks and rewards of the business and treasury departments. It is determined by either ING Group or Local Asset and Liability
ownership of the asset. All other leases were considered to be operating leases.
Committee (ALCO).

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Leases entered into by ING Group as a lessee were primarily operating leases and therefore not recognised onacquired assets and liabilities, that are identified within one year after acquisition are recognised as an the balance sheet. The total payments under operating leases were recognised in the statement of profit oradjustment to goodwill; any subsequent adjustment is recognised as income or expense. On disposal of group loss on a straight-line basis over the period of the lease.companies where control is lost, the difference between the sale proceeds and carrying value (including goodwill) and the unrealised results (including the currency translation reserve in equity) is included in the 1.13 Acquisitions, goodwill and other intangible assetsstatement of profit or loss.

Acquisitions and goodwill

Impairment of goodwill and other non-financial assets ING Group’s acquisitions are accounted for using the acquisition method of accounting. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given,ING Group assesses at each reporting period, whether there is an indication that an intangible asset may be liabilities incurred or assumed, and equity instruments issued in exchange for control of the acquiree. Goodwill,impaired. Irrespective of whether there is an indication of impairment, intangible assets with an indefinite being the difference between the cost of the acquisition (including assumed debt) and the Group’s interest inuseful life, including goodwill acquired in a business combination, and intangible assets not yet available for the fair value of the acquired assets, liabilities and contingent liabilities as at the date of acquisition, isuse, are tested annually for impairment. Goodwill is allocated to groups of CGUs (that is, the group of cash capitalised as an intangible asset. Goodwill is only recognised separately on acquisitions. The results of thegenerating units or CGUs) for the purpose of impairment testing. These groups of CGUs represent the lowest operations of the acquired companies are included in the statement of profit or loss from the date control islevel at which goodwill is monitored for internal management purposes. Goodwill is tested for impairment by obtained.comparing the carrying value of the group of CGUs to the recoverable amount of that group of CGUs. The carrying value is determined as the IFRS net asset value including goodwill. In compliance with IAS 36
Where applicable, the consideration for the acquisition includes any asset or liability resulting from a‘Impairment of assets’, the carrying value is determined on a basis that is consistent with the way in which the contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fairrecoverable amount of the CGU is determined. When the carrying values need to be allocated between Retail value. Contingent consideration arrangements classified as an asset or a liability, are subsequently measured atand Wholesale solvency (risk-weighted assets) are used as a basis. The recoverable amount is estimated as the fair value and the changes in fair value will be recognised in the statement of profit or loss. Changes in the fairhigher of fair value less costs of disposal and value in use. Several methodologies are applied to arrive at the value of the contingent consideration classified as equity, are not recognised.best estimate of the recoverable amount. Impairment of goodwill, if applicable, is included in the statement of profit or loss in Other operating expenses.

Where a business combination is achieved in stages, ING Group’s previously held interests in the assets and

Computer software liabilities of the acquired entity are remeasured to fair value at the acquisition date (i.e. the date ING Group obtains control) and the resulting gain or loss, if any, is recognised in the statement of profit or loss. AmountsComputer software that has been purchased or generated internally for own use is stated at cost less arising from interests in the acquiree prior to the acquisition date that have previously been recognised inamortisation and any impairment losses. Amortisation is calculated on a straight -line basis over its useful life.
other comprehensive income are reclassified to the statement of profit or loss, where such treatment wouldThis period will generally not exceed five years. Amortisation is included in Other operating expenses.
be appropriate if that interest were disposed of. Acquisition related costs are recognised in the statement of profit or loss as incurred and presented in the statement of profit or loss as Other operating expenses.Other intangible assets

Other intangible assets are capitalised and amortised over their expected economic life, which is generally
The initial accounting for the fair value of the net assets of the companies acquired during the year may bebetween three and ten years. Intangible assets with an indefinite life are not amortised.

determined only provisionally as the determination of the fair value can be complex and the time between the acquisition and the preparation of the Financial statements can be limited. The initial accounting shall be completed within a year after acquisition. Adjustments to the fair value as at the date of acquisition of

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Significant judgements and critical accounting estimates and assumptions:future. The tax effects of income tax losses available for carry forward are recognised as an asset where it is Impairment test of non-financial assets, mainly related to the assessment for potential impairment of goodwillprobable that future taxable profits will be ava ilable against which these losses can be utilised.
and intangible assets, largely software, involves estimation of their recoverable amounts. The review of impairment of non-financial assets reflects management’s best estimate of the future cash flows of the CGUsFair value remeasurements of debt and equity instruments measured at FVOCI and cash flow hedges are and the rates used to discount these cash flows, both of which are subject to uncertain factors.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 The future cash flows of the CGUs are sensitive to the cash flows projected for the periods for which forecastsloss.
are available and to assumptions regarding the long-term pattern of sustainable cash flows thereafter. The accuracy of the forecasted cash flows is subject to a high degree of uncertainty.Uncertain tax positions are assessed continually by ING Group and in case it is probable that there will be a cash outflow; a current tax liability is recognised.
The rates used to discount future expected cash flows can have a significant effect on their valuation and are based on the costs of capital assigned to individual CGUs. Cost of capital is subject to fluctuations in external1.15 Other assets market rates and economic conditions beyond management’s control.Investment property

Investment properties are recognised at fair value at the balance sheet date. Changes in the carrying amount Key assumptions used in estimating goodwill and software impairment are described in Note 10 ‘Intangible resulting from revaluations are recognised in the statement of profit or loss. On disposal, the difference assets’.
between the sale proceeds and carrying value is recognised in the statement of profit or loss.

1.14 Taxation

Property obtained from foreclosures
Income tax on the result for the year consists of current and deferred tax. Income tax is recognised in the Property obtained from foreclosures is stated at the lower of cost and net realisable value. Net realisable value statement of profit or loss but it is recognised directly in equity if the tax relates to items that are recognised is the estimated selling price, less applicable variable selling expenses. Property obtained from foreclosures is directly in equity.
included in Other assets - Property development and obtained from foreclosures.

Deferred income tax

Property development
Deferred income tax is provided in full, using the liability method, for temporary differences arising between Property developed and under development is included in Other assets – Property development and obtained the tax basis of assets and liabilities and their carrying amounts in the consolidated financial statements.
from foreclosures. Depending on the intention of ING Group after completion of the development, the Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted property is measured as follows:
at the balance sheet date and are expected to apply when the related deferred income tax asset is realised or ◾Intention to sell: at the lower of cost and net realisable value;
the deferred income tax liability is settled. Deferred tax assets and liabilities are not discounted.
◾Intention to use as a real estate investment: at fair value.

Deferred tax assets are recognised when it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided for temporary differences arising from investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by ING Group and it is probable that the difference will not reverse in the foreseeable

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1.16 Disposal groups held for sale and discontinued operations1.17 Provisions, contingent liabilities and contingent assets

Disposal groups (and groups of non-current assets) are classified as held for sale if their carrying amount will beA provision is a present obligation arising from past events, the settlement of which is expected to result in an recovered principally through a sale transaction rather than through continuing use. This is only the case whenoutflow of resources embodying economic benefits, however the timing or the amount is uncertain. Provisions the sale is highly probable and the disposal group (or group of assets) is available for immediate sale in itsare discounted when the effect of the time value of money is significant using a pre-tax discount rate.

present condition; management must be committed to the sale, which is expected to occur within one year from the date of classification as held for sale.Reorganisation provisions include employee termination benefits when ING Group is demonstrably committed to either terminate the employment of current employees according to a detailed formal plan without Upon classification as held for sale, the disposal group is measured at the lower of its carrying amount and fairpossibility of withdrawal, or providing termination benefits as a result of an offer made to encourage voluntary value less costs to sell, except where specifically exempt from IFRS 5 ‘Non-current Assets Held for Sale andredundancy.
Discontinued Operations. An impairment loss is recognised for any initial or subsequent write-down of the disposal group to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value lessA liability is recognised for a levy when the activity that triggers payment, as identified by the relevant costs to sell of the disposal group, but not in excess of any cumulative impairment loss previously recognised. Alegislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the liability is recognised gain or loss not previously recognised by the date of the sale of the disposal group is recognised at the date ofonly upon reaching the specified minimum threshold.
derecognition. Assets within the disposal group are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held forA contingent liability is a possible obligation that arises from past events and whose existence will be sale continue to be recognised. The assets of the disposal group classified as held for sale are presentedconfirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within separately from the other assets in the balance sheet. The liabilities of a disposal group classified as held forthe control of ING Group; or a present obligation that arises from past events but is not recognised because it sale are presented separately from other liabilities in the balance sheet.is either not probable that an outflow of economic benefits will be required to settle the obligation or the amount of the obligation cannot be measured reliably. Contingent liabilities are not recognised in the When a group of assets that is classified as held for sale represents a major line of business or geographicalstatement of financial position, but are rather disclosed in the notes unless the possibility of the outflow of area the disposal group is classified as discontinued operations. Upon classification of a business as held foreconomic benefits is remote.
sale and discontinued operations the individual income and expenses are presented within the Total net result from discontinued operations instead of being presented in the usual line items in the Consolidated statementA contingent asset is a possible asset that arises from past events and whose existence will be confirmed only of profit or loss. All comparative years in the Consolidated statement of profit or loss are restated andby the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of presented as discontinued operations for all periods presented. Furthermore, the individual assets andING Group. Contingent assets are recognised in the statement of financial position only when realisation of the liabilities are presented in the Consolidated statement of financial position as Assets and liabilities held for saleincome that arises from such an asset is virtually certain. Contingent assets are disclosed in the notes when an and are no longer included in the usual line items in the Consolidated statement of financial position. Changesinflow of economic benefits is probable.
in assets and liabilities as a result of classification as held for sale are included in the notes in the line ‘Changes in composition of the group and other changes’.Significant judgements and critical accounting estimates and assumptions: The recognition and measurement of provisions is an inherently uncertain process involving using judgement to determine when a present obligation exists and estimates regarding probability, amounts and timing of cash flows.

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ING Group may become involved in governmental, regulatory, arbitration and legal proceedings andto settle the obligation resulting from employee service in the current and prior periods, discounted using a investigations. The degree of uncertainty and the method of making the accounting estimate depends on thehigh quality corporate bond rate. Inherent in these actuarial models are assumptions including discount rates, individual case, its nature and complexity. Such cases are usually one of a kind. Judgement is required to assessrates of increase in future salary and benefit levels, mortality rates, consumer price index and the expected whether a present obligation exists and to estimate the probability of an unfavourable outcome and thelevel of indexation. The assumptions are based on available market data as well as management expectations amount of potential loss. For the assessment of related provisions ING Group consults with internal andand are updated regularly. The actuarial assumptions may differ significantly from the actual results due to external legal experts. Even taking into consideration legal experts’ advice, the probability of an outflow ofchanges in market conditions, economic and mortality trends, and other assumptions. Any changes in these economic benefits can still be uncertain and the provision recognised can remain sensitive to the assumptionsassumptions could have a significant impact on the defined benefit plan obligation and future pension costs.
used. Reference is made to note 15 ‘Provisions’. For proceedings where it is not possible to make a reliable estimate of the expected financial effect, that could result from the ultimate resolution of the proceedings, noChanges in the defined benefit obligation that effects Shareholders’ equity and/or Net result, include mainly:
provision is recognised, however disclosure is included in the financial statements. Reference is made to note◾Service cost which are recognised as staff costs in the statement of profit or loss;
45 ‘Legal proceedings’.◾Interest expenses using a high quality corporate bond rate at the start of the period which are recognised

as staff costs in the Statement of profit or loss; and Critical accounting estimates and assumptions for the reorganisation provision are in estimating the amounts◾Remeasurements which are recognised in Other comprehensive income (equity).
and timing of cash flows as the announced transformation initiatives are implemented over a period of several years. Reference is made to note 15 ‘Provisions’.Remeasurements recognised in other comprehensive income are not recycled to profit or loss. Any past service cost relating to a plan amendment is recognised in profit or loss in the period of the plan amendment. Gains 1.18 Other liabilitiesand losses on curtailments and settlements are recognised in the statement of profit or loss when the Defined benefit planscurtailment or settlement occurs.
The net defined benefit asset or liability recognised in the statement of financial position in respect of defined The recognition of a net defined benefit asset in the Consolidated statement of financial position is limited to benefit pension plans is the fair value of the plan assets less the present value of the defined benefit obligation the present value of any economic benefits available in the form of refunds from the plans or reductions in at the balance sheet date.
future contributions to the plans.

Plan assets are measured at fair value at the balance sheet date. For determining the pension expense, the

Defined contribution plans

return on plan assets is determined using a high quality corporate bond rate identical to the discount rate used in determining the defined benefit obligation.For defined contribution plans, ING Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. ING Group has no further payment obligations
Changes in plan assets that effect Shareholders’ equity and/or Net result, include mainly:once the contributions have been paid. The contributions are recognised as staff expenses in the profit or loss ◾Return on plan assets using a high quality corporate bond rate at the start of the reporting period whichwhen they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a are recognised as staff costs in the statement of profit or loss; andreduction in the future payments is available.
◾Remeasurements which are recognised in Other comprehensive income.

Other post-employment obligations
The defined benefit obligation is calculated by internal and external actuaries through actuarial models andSome group companies provide other post-employment benefits to former employees. The entitlement to calculations using the projected unit credit method. This method considers expected future payments requiredthese benefits is usually conditional on the employee remaining in service up to retirement age and the

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completion of a minimum service period. The expected costs of these benefits are accrued over the period ofparticipating in the negotiation of, a transaction for a third party – such as the arrangement of the acquisition
employment using an accounting methodology similar to that for defined benefit pension plans.of shares or other securities or the purchase or sale of businesses – are recognised on completion of the
underlying transaction. Portfolio and other management advisory and service fees are recognised based on the
1.19 Income recognitionapplicable service contracts as the service is provided. Asset management fees related to investment funds and
Interestinvestment contract fees are recognised on a pro-rata basis over the period the service is provided. The same principle is applied for wealth management, financial planning and custody services that are continuously Interest income and expense are recognised in the statement of profit or loss using the effective interest provided over an extended period of time. Fees received and paid between banks for payment services are method. The effective interest method is a method of calculating the amortised cost of a financial asset or a classified as commission income and expenses.
financial liability and of allocating the interest income or interest expense over the relevant period. The
effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the

Lease income expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of
the financial asset or financial liability. When calculating the effective interest rate, ING Group estimates cashThe proceeds from leasing out assets under operating leases are recognised on a straight -line basis over the life
flows considering all contractual terms of the financial instrument (for example, prepayment options) but doesof the lease agreement. Lease payments received in respect of finance leases when ING Group is the lessor are
not consider future credit losses.divided into an interest component (recognised as interest income) and a repayment component based on a pattern reflecting a constant periodic rate of return on the lessor’s net investment in the lease.

The calculation includes all fees and points paid or received between parties to the contract that are an integral

1.20 Expense recognition part of the effective interest rate, transaction costs and all other premiums or discounts. Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest incomeExpenses are recognised in the statement of profit or loss as incurred or when a decrease in future economic is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring thebenefits related to a decrease in an asset or an increase in a liability has arisen that can be measured reliably.
impairment loss.Fee and commission expenses are generally a result from a contract with ING service providers in order to

perform the service for ING Group’s customers. Costs are generally presented as ‘Commission expenses’ if they Interest results on instruments classified at Amortised Cost, assets measured at FVOCI and derivatives in aare specific, incremental, directly attributable and identifiable to generate commission income.
formal hedge accounting relationship is presented in ‘Interest income (expense) using effective interest rate method’. Interest result on financial assets and liabilities voluntarily designated as at FVPL and derivatives in soShare-based payments called economic hedges and instruments designated at fair value are presented in ‘Other interest incomeING Group only engages in share-based payment transactions with its staff and directors. Share-based payment (expense)’. Interest result on all other financial assets and liabilities at FVTPL is recognised in ‘Valuation resultsexpenses are recognised as a staff expense over the vesting period. A corresponding increase in equity is and net trading income’.recognised for equity-settled share-based payment transactions. A liability is recognised for cash-settled sharebased payment transactions. The fair value of equity-settled share-based payment transactions are measured

Fees and commissions at the grant date, and the fair value of cash-settled share-based payment transactions are measured at each Fees and commissions are generally recognised as the service is provided. Loan commitment fees for loans thatbalance sheet date. Rights granted will remain valid until the expiry date, even if the share based payment are likely to be drawn down are deferred (together with related direct costs) and recognised as an adjustmentscheme is discontinued. The rights are subject to certain conditions, including a pre-determined continuous to the effective interest rate on the loan. Loan syndication fees are recognised as income when the syndicationperiod of service.
has been completed and ING Group has retained no part of the loan package for itself or has retained a part at the same effective interest rate as the other participants. Commission and fees arising from negotiating, or

ING Group Annual Report 2020 on Form 20-FF -284

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

1 Basis of preparation and accounting policies

1.21 Earnings per ordinary share1.22 Statement of cash flows

Earnings per ordinary share is calculated on the basis of the weighted average number of ordinary sharesThe statement of cash flows is prepared in accordance with the indirect method, distinguishing cash flows from outstanding. In calculating the weighted average number of ordinary shares outstanding:operating, investing and financing activities. In the net cash flow from operating activities, the result before tax ◾Own shares held by group companies are deducted from the total number of ordinary shares in issue;is adjusted for those items in the statement of profit or loss and changes in items per the statement of financial ◾The computation is based on daily averages; andposition, which do not result in actual cash flows during the year.
◾In case of exercised warrants, the exercise date is taken into consideration.
For the purposes of the statement of cash flows, Cash and cash equivalents comprise balances with less than Diluted earnings per share data are computed as if all convertible instruments outstanding at year-end werethree months’ maturity from the date of acquisition, including cash and balances with central banks, treasury exercised at the beginning of the period. It is also assumed that ING Group uses the assumed proceeds thusbills and other eligible bills, amounts due from other banks, and deposits from banks. Investments qualify as a received to buy its own shares against the average market price in the financial year. The net increase in thecash equivalent if they are readily convertible to a known amount of cash and are subject to an insignificant number of shares resulting from the exercise is added to the average number of shares used to calculaterisk of changes in value.

diluted earnings per share.
Cash flows arising from foreign currency transactions are translated into the functional currency using the Share options with fixed or determinable terms are treated as options in the calculation of diluted earnings perexchange rates at the date of the cash flows.
share, even though they may be contingent on vesting. They are treated as outstanding on the grant date.
Performance-based employee share options are treated as contingently issuable shares because their issue isThe net cash flow shown in respect of Loans and advances to customers relates only to transactions involving contingent upon satisfying specified conditions in addition to the passage of time.actual payments or receipts. The Addition to loan loss provision which is deducted from the item Loans and advances to customers in the statement of financial position has been adjusted accordingly from the result before tax and is shown separately in the statement of cash flows.

The difference between the Net cash flow in accordance with the statement of cash flows and the change between the opening and closing balance of Cash and cash equivalents in the statement of financial position is due to exchange rate differences and is presented separately in the cash flow statement.

Liabilities arising from financing activities are debt securities and subordinated loans.

ING Group Annual Report 2020 on Form 20-FF -285

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

2 Cash and balances with central bank

Notes to the Consolidated statement of financial position

2 Cash and balances with central bank| Cash and balances with central banks | | | Loans include balances (mainly short-term deposits) with central banks amounting to EUR 2,519 million (2019: |
| --- | --- | --- | --- |
| | 2020 | 2019 | EUR 3,185 million). |
| Amounts held at central banks | 109,237 | 51,178 | |
| Cash and bank balances | 1,851 | 2,024 | As at 31 December 2020, Loans include receivables related to finance lease contracts amounting to EUR 6 million |
| | 111,087 | 53,202 | (2019: EUR 24 million). Reference is made to Note 7 ‘Loans and advances to customers’ for information on |
| | | | finance lease receivables. |

The movement in Cash and balances with central banks reflects ING’s active liquidity management. INGAs at 31 December 2020, all loans and advances to banks are non-subordinated.

participated in a series of Targeted Longer-Term Refinancing Operations (TLTRO III) for EUR 4.5 billion in March 2020, EUR 55.0 billion in June 2020 and repaid EUR 17.7 billion on previous TLTRO. Further details are reported in4 Financial assets at fair value through profit or loss Note 12 ‘Deposits from Banks’ and in the consolidated statement of Cash Flow.| Amounts held at central banks reflect on demand balances. | | 2020 | 2019 |
| --- | --- | --- | --- |
| | Trading assets | 51,356 | 49,254 |
| Reference is made to Note 42 ‘Transfer of financial assets, assets pledged and received as collateral’ for | Non-trading derivatives | 3,583 | 2,257 |
| restrictions on Cash balances with central banks. | Designated at fair value through profit or loss | 4,126 | 3,076 |
| | Mandatorily measured at fair value through profit or loss | 44,305 | 41,600 |
| 3 Loans and advances to banks | | 103,370 | 96,187 |

Loans and advances to banks
	Netherlands		Rest of the world			Total	(Reverse) repurchase transactions
	2020	2019	2020	2019	2020	2019
Loans	7,442	13,641	17,939	21,499	25,381	35,140	Financial assets at fair value through profit or loss includes securities lending and sales and repurchase
Cash advances, overdrafts and other balances	0	0	6	4	6	5	transactions which were not derecognised, because ING Group continues to be exposed to substantially all risks
	7,442	13,641	17,945	21,504	25,387	35,145	and rewards of the transferred financial asset. For repurchase agreements the gross amount of trading assets
Loan loss provisions	-10	-6	-13	-3	-23	-9	must be considered together with the gross amount of related trading liabilities, which are presented separately
	7,432	13,635	17,933	21,501	25,364	35,136	on the statement of financial position since IFRS does not always allow netting of these positions in the
							statement of financial position.

ING Group Annual Report 2020 on Form 20-FF -286

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

4 Financial assets at fair value through profit or loss

ING Group’s exposure to (reverse) repurchase transactions is included in the following lines in the statement ofTrading assets

financial position:| | | | Trading assets by type | | |
| --- | --- | --- | --- | --- | --- |
| Exposure to (reverse) repurchase agreements | | | | 2020 | 2019 |
| | 2020 | 2019 | Equity securities | 7,809 | 8,499 |
| Reverse repurchase transactions | | | Debt securities | 5,183 | 6,256 |
| Loans and advances to banks | 4,869 | 8,943 | Derivatives | 27,238 | 21,694 |
| Loans and advances to customers | 624 | 180 | Loans and receivables | 11,126 | 12,806 |
| Trading assets, loans and receivables | 10,947 | 11,969 | | 51,356 | 49,254 |
| Loans and receivables measured at mandatorily measured at fair value through profit or loss | 41,735 | 38,985 | | | |

	58,175	60,077
Repurchase transactions			Trading assets include assets that are classified under IFRS as Trading, but are closely related to servicing the
Deposits from banks	1,971	205	needs of the clients of ING Group. ING offers institutional clients, corporate clients, and governments, products
Trading liabilities, funds on deposit	5,787	4,556	that are traded on the financial markets. A significant part of the derivatives in the trading portfolio is related to
Funds entrusted measured at designated at fair value through profit or loss	41,177	38,492	servicing corporate clients in their risk management to hedge for example currency or interest rate exposures. In
	48,935	43,253	addition, ING provides its customers access to equity and debt markets for issuing their own equity or debt

securities (securities underwriting).

Securities purchased under agreements to resell (reverse repos), securities borrowings and similar agreementsReference is made to Note 14 ‘Financial liabilities at fair value through profit or loss’ for information on trading
are not recognised in the consolidated statement of financial position. Based on the business model assessmentliabilities.
and counterparty, the consideration paid to purchase securities is recognised as Loans and advances to

customers, Loans and advances to banks, Other financial assets at FVPL or Trading assets.Non-trading derivatives| Securities sold subject to repurchase agreements (repos), securities lending and similar agreements continue to | Non-trading derivatives by type | | |
| --- | --- | --- | --- |
| be recognised in the consolidated statement of financial position. The counterparty liability is measured at FVPL | | 2020 | 2019 |
| (designated) and included in Other financial liabilities at FVPL if the asset is measured at FVPL. Otherwise, the | Derivatives used in | | |
| counterparty liability is included in Deposits from banks, Customer deposits, or Trading, as appropriate. | - fair value hedges | 486 | 524 |
| | - cash flow hedges | 1,376 | 677 |
| Reference is made to Note 42 ‘Transfer of financial assets, assets pledged and received as collateral’ for | - hedges of net investments in foreign operations | 69 | 23 |
| information on transferred assets which were not derecognised. | Other non-trading derivatives | 1,653 | 1,033 |
| | | 3,583 | 2,257 |

Reference is made to Note 39 ‘Derivatives and hedge accounting’ for information on derivatives used in hedge

accounting.

ING Group Annual Report 2020 on Form 20-FF -287

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

5 Financial assets at fair value through other comprehensive income

Mandatorily at fair value through profit or loss| | | | | 2020 | 2019 |
| --- | --- | --- | --- | --- | --- |
| Designated at fair value through profit or loss | | | Equity securities | 228 | 159 |
| | | | Debt securities | 787 | 733 |
| Designated at fair value through profit or loss by type | | | Loans and receivables | 43,290 | 40,708 |
| | 2020 | 2019 | | 44,305 | 41,600 |
| Debt securities | 3,544 | 2,334 | | | |
| Loans and receivables | 582 | 742 | | | |
| | 4,126 | 3,076 | None of the equity securities are individually significant for ING Group. | | |

For details on ING Group’s total exposure to debt securities reference is made to Note 6 ‘Securities at amortised ‘Financial assets designated at fair value through profit or loss’ is partly economically hedged by creditcost’.
derivatives. The hedges do not meet the criteria for hedge accounting and the loans are recorded at fair value to| assets designated at fair value through profit or loss’ approximates its carrying value. The cumulative change in | Financial assets at fair value through other comprehensive income by type | | | |
| --- | --- | --- | --- | --- |
| fair value of the loans attributable to changes in credit risk is not significant. | | | 2020 | 2019 |
| The notional value of the related credit derivatives is EUR 1,077 million (2019: EUR 1,672 million). The cumulative | Equity securities | | 1,862 | 2,306 |
| | Debt securities | 1 | 32,977 | 30,483 |
| change in fair value of the credit derivatives attributable to changes in credit risk since the financial assets were | Loans and advances | 1 | 1,056 | 1,680 |
| first designated, amounts to EUR -16 million (2019: EUR 29 million) and the change for the current year amounts | | | 35,895 | 34,468 |
| to EUR -45 million (2019: EUR -52 million). | | | | |

1 Debt securities include an amount of EUR -12 million (2019: EUR -7 million) and the Loans and advances includes EUR -2 million (2019:
These have been calculated by determining the changes in credit spread implicit in the fair value of bonds issued EUR -3 million) of Loan loss provisions.
by entities with similar credit characteristics.

ING Group Annual Report 2020 on Form 20-FF -288

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

5 Financial assets at fair value through other comprehensive income

Exposure to equity securitiesChanges in fair value through other comprehensive income financial assets| | | | | | | | | FVOCI debt instruments | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Equity securities designated as at fair value through other comprehensive income | | | | | | | FVOCI equity securities | | | 1 | | Total |
| | Carrying | Carrying | Dividend | Dividend | | | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| | value | value | income | income | Opening balance as at 1 January | | 2,306 | 3,228 | 32,163 | 27,995 | 34,468 | 31,223 |
| | 2020 | 2019 | 2020 | 2019 | Additions | | 13 | 11 | 16,936 | 16,259 | 16,949 | 16,270 |
| Investment in Bank of Beijing | 1,662 | 2,001 | 95 | 93 | Amortisation | | | | -9 | -12 | -9 | -12 |
| Other Investments | 200 | 305 | 12 | 18 | Transfers and reclassifications | | -107 | 3 | 0 | -0 | -107 | 3 |
| | 1,862 | 2,306 | 107 | 111 | Changes in unrealised revaluations | 2 | -283 | 139 | 520 | 258 | 237 | 397 |
| | | | | | Impairments | | | | -2 | -2 | -2 | -2 |
| | | | | | Reversals of impairments | | | | -4 | 1 | -4 | 1 |
| For strategic equity securities, ING decided to apply the option to irrevocably designate these investments at fair | | | | | Disposals and redemptions | | -13 | -1,091 | -14,557 | -12,298 | -14,571 | -13,389 |
| value through other comprehensive income, instead of the IFRS 9 default measurement of fair value through | | | | | Exchange rate differences | | -53 | 15 | -1,017 | -40 | -1,070 | -25 |
| | | | | | Changes in the composition of the group and other | | | | | | | |
| profit or loss. | | | | | changes | | -0 | 0 | 2 | 2 | 2 | 3 |
| | | | | | Closing balance | | 1,862 | 2,306 | 34,033 | 32,163 | 35,895 | 34,468 |

As at 31 December 2020 ING holds approximately 13% (2019: 13%) of the shares of Bank of Beijing, a bank listed

on the stock exchange of Shanghai. As per regulatory requirements set by China Banking and Insurance

Regulatory Commission, ING, as a shareholder holding more than 5% or more of the shares, is required to supply 1 Fair value through other comprehensive income debt instruments includes both debt securities and loans and advances.
additional capital when necessary. No request for additional capital was received in 2020 (2019: nil).2 Changes in unrealised revaluations of FVOCI debt instruments include changes on hedged items which are recognised in the statement of
profit or loss. Reference is made to Note 19 ‘Equity’ for details on the changes in revaluation reserve.

Changes in fair value through other comprehensive income
In 2020, changes in unrealised revaluations of equity securities decreased mainly related to negative revaluation The following table presents changes in financial assets at fair value through other comprehensive income.
of the stake in Bank of Bejing following a decline in share price (EUR -339 million).

In 2020, transfers and reclassifications of EUR -107 million mainly relates to ING’s investment in Visa preference

series C shares (EUR -116 million) that have been reclassified from equity at fair value through other

comprehensive income to debt securities at mandatorily fair value through profit or loss' based on variable

conversion rate.

In the first quarter of 2019, ING sold its last tranche of shares in India’s Kotak Mahindra Bank (Kotak) for EUR 880

million. The transaction, for a stake of 3.07%, concluded the divestment process and was the main driver for the

‘disposal’ line in 2019.

ING Group Annual Report 2020 on Form 20-FF -289

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

6 Securities at amortised cost| Reference is made to Note 6 ‘Securities at amortised cost’ for details on ING Group’s total exposure to debt | | | Debt securities by type of exposure | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| securities. | | | | Debt Securities | | Debt Securities | | Debt Securities | | | |
| | | | | | at FVPL | | at FVOCI | | at AC | | Total |
| 6 Securities at amortised cost | | | | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| | | | Government bonds | 48 | 408 | 22,448 | 20,300 | 26,801 | 25,627 | 49,296 | 46,334 |
| Securities at amortised cost fully consist of Debt securities. | | | Sub-sovereign, Supranationals | | | | | | | | |
| ING Group’s exposure to debt securities is included in the following lines in the statement of financial position: | | | and Agencies | 2,331 | 505 | 7,510 | 6,606 | 14,858 | 10,689 | 24,699 | 17,801 |
| | | | Covered bonds | | | 1,821 | 1,734 | 5,965 | 6,960 | 7,786 | 8,693 |
| Exposure to debt securities | | | Corporate bonds | 26 | | 207 | 476 | 131 | 143 | 364 | 619 |
| | 2020 | 2019 | Financial institutions' bonds | 1,143 | 1,440 | 523 | 332 | 1,956 | 1,536 | 3,622 | 3,308 |
| Debt securities at fair value through other comprehensive income | 32,977 | 30,483 | ABS portfolio | 726 | 714 | 480 | 1,043 | 894 | 1,163 | 2,100 | 2,920 |
| Debt securities at amortised cost | 50,587 | 46,108 | | 4,274 | 3,067 | 32,990 | 30,491 | 50,604 | 46,118 | 87,868 | 79,676 |
| Debt securities at fair value through other comprehensive income and amortised cost | 83,564 | 76,592 | Loan loss provisions | | | -12 | -7 | -17 | -10 | -29 | -17 |
| | | | Bond portfolio | 4,274 | 3,067 | 32,977 | 30,483 | 50,587 | 46,108 | 87,838 | 79,659 |
| Trading assets | 5,183 | 6,256 | | | | | | | | | |
| Debt securities at fair value through profit or loss | 4,274 | 3,067 | | | | | | | | | |
| Total debt securities at fair value through profit or loss | 9,457 | 9,323 | Approximately ##D<20F_Note_Securities_at_amortised_cost_var_2_CY>% (2019:90%) of the exposure in the | | | | | | | | |
| | 93,022 | 85,914 | ABS portfolio is externally rated AAA, AA or A, and the remaining positions are largely unrated. There are no | | | | | | | | |
| | | | borrowed debt securities recognised in the statement of financial position. | | | | | | | | |

ING Group’s total exposure to debt securities (excluding debt securities held in the trading portfolio) of EUR

7 Loans and advances to customers 87,838 million (31 December 2019: EUR 79,659 million) is specified as follows:| Loans and advances to customers by type | | | | | | |
| --- | --- | --- | --- | --- | --- | --- |
| | Netherlands | | Rest of the world | | Total | |
| | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| Loans to, or guaranteed by, public authorities | 24,292 | 25,340 | 17,210 | 16,849 | 41,502 | 42,190 |
| Loans secured by mortgages | 115,176 | 117,199 | 236,954 | 231,327 | 352,130 | 348,526 |
| Loans guaranteed by credit institutions | 305 | 206 | 4,896 | 3,569 | 5,201 | 3,775 |
| Personal lending | 3,019 | 3,482 | 24,776 | 24,768 | 27,794 | 28,250 |
| Corporate loans | 37,594 | 39,645 | 135,527 | 150,233 | 173,121 | 189,878 |
| | 180,385 | 185,873 | 419,364 | 426,746 | 599,749 | 612,619 |

Loan loss provisions	-1,286	-1,193	-4,493	-3,398	-5,779	-4,590
	179,099	184,680	414,871	423,349	593,970	608,029

ING Group Annual Report 2020 on Form 20-FF -290

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

8 Investment in associates and joint ventures

For details on credit quality and loan loss provisioning, refer to ‘Risk management – Credit risk’ paragraph ‘CreditThe finance lease receivables mainly relate to the financing of equipment and are part of corporate loans. To a

quality’.lesser extent, the finance lease receivables relate to real estate for third parties, where ING is the lessor. These| Loans and advances to customers by subordination | | | finance lease receivables are part of loans secured by mortgages. Interest income in 2020 on Finance lease |
| --- | --- | --- | --- |
| | 2020 | 2019 | receivables amounts to EUR 229 million (2019: EUR 251 million). |
| Non-subordinated | 593,871 | 607,908 | |

Subordinated	99	121	Expected credit losses for uncollectable finance lease receivables of EUR 164 million as at 31 December 2020
	593,970	608,029	(2019: EUR 136 million) is included in the loan loss provision. The loan loss provision for finance lease receivables

is classified into the following loan loss provision stages; stage 1: EUR 8 million (2019: EUR 2 million), stage 2: EUR

25 million (2019: EUR 6 million), and stage 3: EUR 131 million (2019: EUR 128 million).
No individual loan or advance has terms and conditions that significantly affect the amount, timing or certainty of

the consolidated cash flows of the Group.
No individual finance lease receivable has terms and conditions that significantly affect the amount, timing or

certainty of the consolidated cash flows of the Group.
Loans and advances to customers and Loans and advances to banks include finance lease receivables and are

detailed as follows:8 Investment in associates and joint ventures| Finance lease receivables | | | Investments in associates and joint ventures | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | 2020 | 20191 | | | Fair value | | | | | |
| Maturities of gross investment in finance lease receivables | | | | | of listed | Balance | | | | |
| - within 1 year | 3,175 | 3,116 | | Interest | invest- | sheet | Total | Total | Total | Total |
| - between 1-2 years | 2,212 | 2,250 | 2020 | held (%) | ments | value | assets | liabilities | income | expenses |
| - between 2-3 years | 1,722 | 1,753 | TMB Public Company Limited | 23 | 653 | 1,202 | 50,123 | 44,597 | 1,388 | 1,093 |
| - between 3-4 years | 1,166 | 1,229 | Other investments in associates and joint | | | 273 | | | | |
| | | | ventures | | | | | | | |
| - between 4-5 years | 711 | 732 | | | | 1,475 | | | | |
| - more than 5 years | 1,487 | 1,511 | | | | | | | | |

10,47310,591

Unearned future finance income on finance leases-508-580Investments in associates and joint ventures| Net investment in finance leases | 9,965 | 10,011 | | | Fair value | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | of listed | Balance | | | | |
| Included in Loans and advances to banks | 6 | 24 | | Interest | invest- | sheet | Total | Total | Total | Total |
| Included in Loans and advances to customers | 9,958 | 9,987 | 2019 | held (%) | ments | value | assets | liabilities | income | expenses |
| | 9,965 | 10,011 | TMB Public Company Limited | 23 | 1,109 | 1,509 | 55,804 | 49,974 | 1,145 | 891 |
| | | | Other investments in associates and joint | | | 281 | | | | |
| | | | ventures | | | | | | | |

1 The prior period has been updated to improve consistency and comparability of the amounts per maturity of finance lease receivables.1,790

ING Group Annual Report 2020 on Form 20-FF -291

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

8 Investment in associates and joint ventures

Key assumptions used in the VIU calculation as at 31 December 2020 (and as at 30 September 2020 resulting in The reporting dates of certain associates and joint ventures can differ from the reporting date of the Group, butimpairment) by no more than three months.The value in use is determined using a valuation model which is subject to multiple management assumptions.
The key assumptions, i.e. those to which the overall result is most sensitive to, are the following:
TMB Bank Public Company LimitedExpected future earnings of TMB: based on forecasts derived from broker consensus over the short to ING Group has a 23% investment in TMB Bank Public Company Limited (hereafter: TMB), a bank listed on themedium term and TMB observable targets for steady state earnings into perpetuity. A capital maintenance Stock Exchange of Thailand. TMB is providing products and services to Wholesale, Small and Medium Enterprisecharge is applied, which is management’s forecast of the earnings that need to be withheld in order for TMB (SME), and Retail customers. In December 2019 TMB merged with Thanachart Bank and became Thailand’s sixthto meet target regulatory requirements over the forecast period;
largest bank.Terminal growth rate: 1.6% for periods after 2024, consistent with current long term government bond yield in Thailand as a proxy for a risk-free rate (30 September 2020: 3.0% consistent with long term forecasts of TMB is accounted for as an investment in associate based on the size of ING shareholding and representation onGDP growth in Thailand);
the Board. IFRS requires to test its investment in TMB for impairment when there is an indication thatDiscount rate (cost of equity): 8.49%, based on the capital asset pricing model (CAPM) calculated for TMB, impairment might exist.using current market data (30 September 2020: 9.8%).

Impairment testingThe terminal growth rate and the discount rate are interdependent. Following the use of the long term In 2020, the fair value of ING’s investment in TMB significantly declined below the purchase cost. This indicatorgovernment bond yield as a basis for terminal growth rate at year-end, cost of equity was adjusted accordingly triggered ING to perform an impairment test on the recoverability of the investment of TMB. The impairment(reducing cost of equity). This change did not have a significant impact on value in use as at 31 December 2020.
test performed led to an impairment at 30 September 2020 of EUR 230 million, as the recoverable amount ofFurthermore, following the approval of vaccines and improvement in the share price of TMB observed in the last EUR 1,181 million, as determined by a Value in Use calculation, was below the carrying amount of EUR 1,411quarter of the year, in line with the general market, the level of confidence in the forecasted cash flows of TMB million at that point in time. The impairment test at year end resulted in no further impairments.increased compared to 30 September 2020. This allowed ING to remove the additional forecasting risk factor from cost of equity at year-end compared to 30 September 2020. Even if the additional forecasting risk factor Methodologyremained in the cost of equity as at 31 December 2020, this would not have resulted in impairment at year -end The recoverable amount is determined as the higher of the fair value less costs of disposal and Value in Usein addition to the impairment already recognised at 30 September 2020.
(‘VIU’). Fair value less costs of disposal is based on observable share price. The VIU calculation uses discounted cash flow projections based on management’s best estimates. VIU is derived using a Dividend Discount ModelAt year end 2020 the model was tested for reasonably possible changes to key assumptions in the model. This (DDM) where distributable equity, i.e. future earnings available to ordinary shareholders, is used as a proxy forreflects the sensitivity of the VIU to each key assumption on its own and it is possible that more than one future cash flows. The valuation looks at expected cash flows into perpetuity resulting in two main componentsfavourable and/or unfavourable change may occur at the same time. Holding the other key assumptions to the VIU calculation:constant, a reduction in all of the forecasted annual cashflows, including terminal value, of 17.6% would reduce i) the estimation of future earnings over a 5 year forecast period; andthe recoverable amount to the carrying amount. A 589bps decrease in long term growth rate or a 153bps ii) the terminal value being the extrapolation of earnings into perpetuity applying a long term growthincrease in the discount rate would cause the VIU to equal the carrying amount.
rate. The earnings that are used for extrapolation represent the stable long term financial results and position of TMB, i.e. a steady state. The terminal value comprises the majority of the total VIU.

ING Group Annual Report 2020 on Form 20-FF -292

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

9 Property and equipment

Other investments in associates and joint ventures‘Share of results from associates and joint ventures’ and ‘impairments of associates and joint ventures’ are Included in Other investments in associates and joint ventures are mainly financial services and financialpresented separately in the face of the consolidated statement of profit or loss. In 2020 impairments is technology funds or vehicles operating predominantly in Europe.predominantly attributable to TMB.

Other investments in associates and joint ventures represents a number of associates and joint ventures that are9 Property and equipment
individually not significant to ING Group.| Significant influence for associates in which the interest held is below 20%, is based on the combination of ING | Property and equipment by type | | |
| --- | --- | --- | --- |
| | | 2020 | 2019 |
| Group’s financial interest and other arrangements, such as participation in the Board of Directors. | Property in own use | 745 | 757 |
| | Equipment | 842 | 940 |
| The associates and joint ventures of ING are subject to legal and regulatory restrictions regarding the amount of | Right- of- use assets | 1,255 | 1,476 |
| dividends it can pay to ING. These restrictions are for example dependent on the laws in the country of | | 2,841 | 3,172 |

incorporation for declaring dividends or as a result of minimum capital requirements that are imposed by industry regulators in the countries in which the associates and joint ventures operate. In addition, the associates and joint ventures also consider other factors in determining the appropriate levels of equity needed. These factors and limitations include, but are not limited to, rating agency and regulatory views, which can change over time.| | 2020 | 2019 |
| --- | --- | --- |
| Opening balance | 1,790 | 1,203 |
| Additions | 24 | 507 |
| Revaluations | -3 | -18 |
| Share of results | 66 | 82 |
| Dividends received | -12 | -58 |
| Disposals | -12 | -10 |
| Impairments | -235 | -34 |
| Exchange rate differences | -144 | 113 |
| Other | 0 | 4 |
| Closing balance | 1,475 | 1,790 |

Share of results from associates and joint ventures of EUR 66 million (2019: EUR 82 million) as included in the table above is mainly attributable to results of TMB of EUR 70 million (2019: EUR 77 million).

ING Group Annual Report 2020 on Form 20-FF -293

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

9 Property and equipment| Changes in property in own use | | | Changes in equipment | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | 2020 | 2019 | | Data processing | Fixtures and fittings | | | | |
| Opening balance | 757 | 780 | | equipment | and other equipment | | | | Total |
| Additions | 10 | 5 | | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| Transfers to and from Other Assets | 57 | -1 | Opening balance | 307 | 290 | 633 | 589 | 940 | 879 |
| - Depreciation | -12 | -11 | Additions | 134 | 149 | 143 | 200 | 277 | 349 |
| - Impairments | -8 | -2 | Disposals | -3 | -1 | -9 | -8 | -12 | -9 |
| - Reversal of impairments | 9 | 6 | Depreciation | -145 | -136 | -147 | -142 | -291 | -278 |
| Amounts recognised in the statement of profit or loss for the year | -12 | -7 | Impairments | -1 | -0 | -7 | -1 | -9 | -1 |
| Revaluations recognised in equity during the year | 20 | 58 | Exchange rate differences | -10 | 1 | -11 | 1 | -22 | 2 |
| Disposals | -63 | -72 | Changes in the composition of the group | -1 | 3 | -41 | -5 | -42 | -3 |
| Exchange rate differences | -24 | -7 | and other changes | | | | | | |
| Closing balance | 745 | 757 | Closing balance | 281 | 307 | 561 | 633 | 842 | 940 |

			Gross carrying amount as at 31 December	1,489	1,479	2,297	2,408	3,786	3,886
Gross carrying amount as at 31 December	1,258	1,279	Accumulated depreciation as at 31 December	-1,207	-1,171	-1,734	-1,774	-2,940	-2,946
Accumulated depreciation as at 31 December	-378	-385	Accumulated impairments as at 31 December	-2	-1	-3	-1	-5	-1
Accumulated impairments as at 31 December	-135	-137	Net carrying value as at 31 December	281	307	561	633	842	940
Net carrying value as at 31 December	745	757
Revaluation surplus
Opening balance	339	280
Change in the year	-30	59

Closing balance310339

ING considers valuations from third party experts in determining the fair values of property in own use.

The purchase costs amounted to EUR 948 million (2019: EUR 940 million). Cost or the purchase price less

accumulated depreciation and impairments would have been EUR 435 million (2019: EUR 417 million) had

property in own use been valued at cost instead of at fair value.

ING Group Annual Report 2020 on Form 20-FF -294

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

10 Intangible assets

Changes in Right-of-use assets10 Intangible assets| | Property | | | Cars | Other leases | | | Total | Changes in intangible assets | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | | | Goodwill | | Software | | Other | | Total |
| Opening balance | 1,323 | n/a | 96 | n/a | 57 | n/a1,476 | | n/a | | | 2020 | 20192020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| Effect of changes in accounting policy due to | | | | | | | | | Opening balance | | 907 | 918 | 958868 | | 5253 | 1,916 | 1,839 |
| the implementation of IFRS 16 | | 1,138 | | 70 | | 72 | 1,280 | | Additions | | | 17 | 86 | 94 | | 87 | 111 |
| Additions | 94 | 381 | 37 | 65 | 3 | -2 | 134 | 444 | Capitalised expenses | | | | 213285 | | | 213 | 285 |
| Depreciation | -213 | -211 | -43 | -40 | -19 | -12-275 | -262 | | | | | | | | | | |
| Impairments | -35 | | | | | | -35 | | Amortisation | | | -249 | -235 | | -2 | -2-251 | -237 |
| Remeasurements | 8 | 29 | | 1 | | | 8 | 30 | Impairments | 1 | -310 | -167 | | -61-35 | | -513 | -61 |
| Disposals | -13 | -18 | -1 | | -1 | | -14 | -19 | Exchange rate differences | | -63 | -28 | -6 | | | -69 | -28 |
| Exchange rate differences | -32 | 8 | -1 | | -2 | -1 | -35 | 7 | Disposals | | | | -9 | -1 | | -9 | -1 |
| Changes in the composition of the group and | | | | | | | | | Changes in the composition of the group and other | | | | 19 | 8 | | 119 | 9 |
| other changes | -4 | -4 | | | | | -4 | -4 | changes | | | | | | | | |
| Closing balance | 1,129 | 1,323 | 89 | 96 | 38 | 571,255 | 1,476 | | Closing balance | | 533 | 907 | 846958 | | 1552 | 1,394 | 1,916 |

								Gross carrying amount as at 31 December	843907	2,642	2,608	6061	3,545	3,575
Gross carrying amount as at 31 December	1,519	1,503	152	135	65	691,737	1,707	Accumulated amortisation as at 31 December		-1,621-1,641		-9	-7-1,630	-1,648

Accumulated depreciation as at 31 December-399-213-64-40-28-12-492-265Accumulated impairments as at 31 December-310-175-9-37-2-522-11

Accumulated impairments as at 31 December-36-36Net carrying value as at 31 December53390784695815521,3941,916

Accumulated remeasurement as at 4433114534 31 December

Accumulated exchange rate diffrences as at1 Impairments of intangible assets are presented within Other operating expenses in the statement of Profit or Loss.

31 December

Net carrying value as at 31 December1,1291,323899638571,2551,476Goodwill

Goodwill is allocated to groups of cash generating units (CGUs) as follows:

Goodwill allocation to group of CGUs
Right-of-use assets relate to leased land and buildings, cars, data-processing equipment and other leases.Method used forTerminal growth
Discount rateGoodwillGoodwill recoverable amountrate

The reported impairment losses of EUR 35 million result from change in use of right-of-use property and theGroup of CGU’s20202019| anticipation of a change in the post-pandemic way of working. | Retail Netherlands | Values in use | 8.59% | 0.00% | 30 | 30 |
| --- | --- | --- | --- | --- | --- | --- |
| | Retail Belgium | Values in use | 9.48% | 0.00% | | 50 |

Retail GermanyValues in use8.57%0.00%349349

Retail Growth Markets1Values in use13.09%3.80%153209

Wholesale Banking1Values in use9.58%0.75%268

533907

ING Group Annual Report 2020 on Form 20-FF -295

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

10 Intangible assets

1 Goodwill from acquisition related to Growth Countries is allocated across two groups of CGUs, EUR 153 million to Retail Growth MarketsMethodology

and EUR 0 million to Wholesale Banking (2019: EUR 209 million to Retail Growth Markets and EUR 61 million to Wholesale Banking).
In line with IFRS, the recoverable amount is determined as the higher of the fair value less costs of disposal and

Value in Use (VIU). The VIU calculation is based on a Dividend Discount model using three year management

Impairment testing approved plans, updated for the expected impact of Covid-19. When estimating the VIU of a CGU, local Goodwill is tested for impairment annually in the fourth quarter by comparing the recoverable amount of each conditions and requirements determine the capital requirements, discount rates, and terminal growth rates .
goodwill-carrying CGU with its carrying amount. The key assumptions used in the calculation of the recoverable These local conditions and requirements determine the ability to upstream excess capital and profits to ING amounts are included in the table above. In addition ING Group tests goodwill whenever a triggering event is Group. The discount rate calculation includes other inputs such as equity market premium, country risk premium, identified.
and long term inflation which are based on market sources and management’s judgement. The long term growth

rate for EU-countries is based on long term risk-free rate by reference to the yield of a composite index consisting Covid-19 has resulted in adverse changes in the market and economic environment. Due to the impact of the of Euro generic government bonds, with a maturity of 30 years. For other countries, the growth rate includes significant deterioration in the economic environment on the cash flow outlook of our businesses, we also long term inflation rate obtained from market sources.
completed a goodwill impairment review across ING Group in the second quarter of 2020.

Sensitivity of key assumptions Goodwill impairment test performed in the second quarter resulted in the recognition of goodwill impairments Key assumptions in the goodwill impairment test model are the projected locally available cash flows (based on on the CGU Retail Belgium of EUR 50 million (of which EUR 43 million is reported in Retail Belgium segment and local capital requirements and projected profits), discount rates (cost of equity), and long term growth rates.
EUR 8 million in Corporate Line segment) and on the CGU Wholesale Banking of EUR 260 million (fully reported in

the Wholesale Banking segment).
The recoverable amounts of the unimpaired CGUs are sensitive to the above key assumptions.

A decrease in the available cash flows of 10%, an increase in the discount rate of 1 percent point or a reduction of For both CGUs the impairment resulted from the negative developments in the macro-economic outlook in the
future growth rate to zero are considered reasonably possible changes in key assumptions. If the aforementioned context of the Covid-19 pandemic. In addition, the applicable discount rate is also affected by the deteriorated
changes occur to the above key assumptions holding the other key assumptions constant, goodwill of the economic and risk environment. The discount rate used to estimate the value in use of the CGU Belgium as at 30
remaining CGUs will continue to be recoverable and no impairment will occur.
June 2020 was 9.54 % (31 December 2019: 6.94 %). The discount rate used to estimate the value in use of CGU

Wholesale Banking, which is based on the weighted average of the discount rates of various local businesses as

Other changes Wholesale Banking is a global business line, was at 30 June 9.38% (31 December 2019: 7.29%). The terminal

growth rate used to estimate the value in use of the CGU Belgium was 0.00% at 30 June 2020 and it was notOther changes in goodwill in 2020 relate to changes in currency exchange rates of CGUs Wholesale Banking and

changed compared to Q4 2019 (31 December 2019: 0.00 %). The terminal growth rate used to estimate the valueRetail Growth Markets goodwill.

in use of CGU Wholesale Banking was at 30 June 0.85% (31 December 2019: 0.69%).

For each of the other groups of CGUs the recoverable amount exceeds the carrying value of the CGUs as at 31

December 2020 and therefore no impairment is required.

ING Group Annual Report 2020 on Form 20-FF -296

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

11 Other assets

Software

12 Deposits from banks Software, includes internally developed software amounting to EUR 688 million (2019: EUR 741 million).| 2020, primarily related to capitalised software development costs. In addition, an impairment of EUR 19 million | Deposits from banks by type | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| with regards software in the payments and cash management business was recogni sed. The rest of the software | | Netherlands | | Rest of the world | | | Total |
| impairment relates to various, individually immaterial items. | | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| | Non-interest bearing | 596 | 107 | 196 | 73 | 792 | 180 |
| Other intangible assets | Interest bearing | 49,336 | 17,544 | 27,971 | 17,101 | 77,306 | 34,646 |
| In 2020 an impairment of an indefinite useful life asset of EUR 14 million was recognised, related to brand names | | 49,931 | 17,651 | 28,166 | 17,175 | 78,098 | 34,826 |

(2019: nil) and additional EUR 20 million was recognised related to intangible assets from a previous acquisition

(customer relationships), following a re-evaluation of the business plan.
Deposits from banks includes ING’s participation in the Targeted Longer-Term Refinancing Operations of EUR

59.5 billion (2019: EUR 17.7 billion). ING participated in a new series of Targeted Longer-Term Refinancing

11 Other assets
Operations (TLTRO III) for EUR 4.5 billion in March 2020, EUR 55.0 billion in June 2020 and repaid EUR 17.7 billion| | 2020 | 2019 | |
| --- | --- | --- | --- |
| Net defined benefit assets | 725 | 709 | The TLTRO III funding is granted for a period of three years with an early repayment option after one year with |
| Investment properties | 20 | 46 | the earliest date of September 2021. The three new participation windows introduced by the ECB press release in |
| Property development and obtained from foreclosures | 72 | 98 | |
| Accrued assets | 781 | 783 | December 2020, can be repaid quarterly from June 2022. Interest under TLTRO III will be settled on maturity of |
| Amounts to be settled | 2,215 | 2,835 | each TLTRO III operation or on early repayment. The interest rate on TLTRO III depends on the lending volumes |
| Other | 2,079 | 2,546 | granted to corporates (excluding financial institutions) and households (excluding mortgages). |
| | 5,893 | 7,018 | |

Under the conditions of the program, interest rate s can be as favorable as 50 basis points below the average

interest rate on the Deposit Facility rate, but in any case not higher than -1%. Such a rate would apply to all
Disclosures in respect of Net defined benefit assets are provided in Note 36 ‘Pension and other post-employment TLTRO III operations outstanding over the discrete periods between 24 June 2020 and 23 June 2021 (special
benefits’.
interest period 1), and between 24 June 2021 and 23 June 2022 (special interest period 2), for banks that show

growth in lending volumes equal to or above 0% between 1 March 2020 and 31 March 2021 (observation period
Amounts to be settled include primarily transactions not settled at the balance sheet date. The nature of these 1) and 1 October 2020 and 31 December 2021 (observation period 2), respectively. In case lending growth targets
transaction is short term and are expected to settle shortly after the closing date of the balance sheet.
are not met, the interest rate during the special interest periods can in a worst case scenario be at 50 basis points

below the average Main Refinancing Operations rate over the same period. In the period preceding and following

Other relates to various receivables in the normal course of business, amongst others, short term receivablesthe special interest periods the interest will be in a corridor between the Deposit Facility and Main Refinancing

relating to mortgage issuance and other amounts receivable from customers.Operations rates, depending to what extent ING meets the lending growth conditions of the TLTRO III program.

ING Group Annual Report 2020 on Form 20-FF -297

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

13 Customer deposits

Special interest period 2 was announced by the ECB in its press release in December 2020 and confirmed in14 Financial liabilities at fair value through profit or loss
January 2021.| | Financial liabilities at fair value through profit or loss | | |
| --- | --- | --- | --- |
| The amount of interest income recognised during the period on the TLTRO III depends on a reasonable | | 2020 | 2019 |
| expectation of whether the conditions will be met. Interest income on ING’s participation in TLTRO III of EUR 164 | Trading liabilities | 32,709 | 28,042 |
| million was recognised in the statement of profit and loss (please refer to Note 20 Net interest income). Interest | Non-trading derivatives | 1,629 | 2,215 |
| income recognised in 2020 for TLTRO III is based on -50 bps (the Main Refinancing Operations rate minus 50 bps), | Designated at fair value through profit or loss | 48,444 | 47,684 |
| which is in substance an unconditional rate during June 2020 – June 2021 and does not depend on whether the | | 82,781 | 77,942 |
| targets will be met. Any conditional benefit from TLTRO III has not been included yet. | Trading liabilities | | |

			Trading liabilities by type
Customer deposits				2020	2019
	2020	2019	Equity securities	191	193
Savings accounts	336,392	326,864	Debt securities	577	1,201
Credit balances on customer accounts	256,636	224,022	Funds on deposit	6,204	5,322
Corporate deposits	15,941	22,329	Derivatives	25,737	21,325
Other	548	1,140		32,709	28,042
	609,517	574,355

Customer deposits by type
	Netherlands		Rest of the world			Total	Non-trading derivatives by type
	2020	2019	2020	2019	2020	2019		2020	2019
Non-interest bearing	24,206	19,030	42,211	24,782	66,417	43,812	Derivatives used in:
Interest bearing	174,641	159,546	368,459	370,997	543,100	530,543	- fair value hedges	444	873
	198,847	178,576	410,671	395,779	609,517	574,355	- cash flow hedges	230	339
							- hedges of net investments in foreign operations	98	51
							Other non-trading derivatives	857	953
Savings accounts relate to the balances on savings accounts, savings books, savings deposits, and time deposits of								1,629	2,215
private individuals.

Reference is made to Note 39 ‘Derivatives and hedge accounting’ for information on derivatives used for hedge accounting.

ING Group Annual Report 2020 on Form 20-FF -298

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

15 Provisions

Changes in reorganisation provisions

Other non-trading derivatives mainly includes interest rate swaps and foreign currency swaps for hedging20202019| purposes, but for which no hedge accounting is applied. | Opening balance | 385 | 613 |
| --- | --- | --- | --- |
| | Additions | 165 | 56 |

Designated at fair value through profit or loss	Releases	-16	-49
	Utilised	-152	-234

Exchange rate differences-10

Designated at fair value through profit or loss by typeClosing balance381385

20202019

Debt securities6,2768,053| Funds entrusted | 41,911 | 39,386 | In 2020, the addition to the reorganisation provision is mainly attributable to refocusing of our activities in |
| --- | --- | --- | --- |
| Subordinated liabilities | 258 | 246 | Wholesale Banking and decision on the Maggie project, as well as additional restructuring costs in Retail Benelux |
| | 48,444 | 47,684 | |

the estimate of the reorganisation provisions is inherently uncertain.

As at 31 December 2020, the change in the fair value of financial liabilities designated at fair value through profit The addition to the reorganisation provision in 2019 is mainly related to ING’s closure of branches in the or loss attributable to changes in credit risk is EUR 141 million (2019: EUR 139 million) on a cumulative basis. This Netherlands and updates in existing reorganisation provisions following the digital transformation programmes change has been determined as the amount of change in fair value of the financial liability that is not attributable of ING Bank.
to changes in market conditions that gave rise to market risk (i.e. mainly interest rate risk based on yield curves).

The amount that ING Group is contractually required to pay at maturity to the holders of financial liabilities

Changes in other provisions designated at fair value through profit or loss excluding repurchase agreements is EUR 6,682 million (2019:
LitigationOtherTotal EUR 8,634 million).

202020192020201920202019| | Opening balance | 102 | 165 | 201 | 234 | 303 | 399 |
| --- | --- | --- | --- | --- | --- | --- | --- |
| 15 Provisions | Effect of change in accounting policies | | | | 7 | | 7 |

Additions4674324678120| Provisions by type | | | Interest | | | -1 | -5 | -1 | -5 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | 2020 | 2019 | Releases | -25 | -31 | -13 | -38 | -38 | -68 |
| Reorganisation provisions | 381 | 385 | Utilised | -16 | -104 | -13 | -12 | -29 | -116 |
| Other provisions | 310 | 303 | Exchange rate differences | -3 | -1 | -5 | -0 | -8 | -1 |
| | 691 | 688 | Other changes | 0 | -0 | 4 | -31 | 4 | -31 |
| | | | Closing balance | 105 | 102 | 205 | 201 | 310 | 303 |

Reference is made to Note 45 ‘Legal proceedings’ for developments in litigation provisions.

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ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

16 Other liabilities

Costs payable relates to costs attributable to 2020, which will be paid in subsequent periods.
In 2020, Other provisions – other includes provisions of EUR 17 million (2019: EUR 25 million) that relate to credit replacement facilities and EUR 75 million (2019: EUR 93 million) that relate to non-credit replacement off balanceAmounts to be settled includes primarily transactions not settled at the balance sheet date. The nature of these facilities.transactions is short term and these are expected to settle shortly after the closing date of the balance sheet.

As at 31 December 2020, amounts expected to be settled within twelve months amount to EUR 139 millionLease liabilities includes primarily liabilities relating to Right of use assets. Reference is made to Note 9 ‘Property (2019: EUR 146 million). The amounts included in Other provisions are based on best estimates with regard toand Equipment’.

amounts and timing of cash flows required to settle the obligation.
The total cash outflow for leases in 2020 was EUR 273 million (2019: EUR 271 million).
Further reference is made to Note 28 ‘Other operating expenses’.
Other relates mainly to balances on margin accounts or amounts payable to customers.

16 Other liabilities

17 Debt securities in issue| Other liabilities by type | | | Debt securities in issue relates to debentures and other issued debt securities with either fixed interest rates or |
| --- | --- | --- | --- |
| | 2020 | 2019 | interest rates based on floating interest rate levels, such as certificates of deposit and accepted bills issued by |
| Net defined benefit liability | 350 | 483 | ING Group, except for subordinated items. Debt securities in issue does not include debt securities presented as |
| Other post-employment benefits | 83 | 84 | Financial liabilities at fair value through profit or loss. ING Group does not have debt securities that are issued on |
| Other staff-related liabilities | 490 | 526 | terms other than those available in the normal course of business. The maturities of the debt securities are as |
| Share-based payment plan liabilities | 2 | 6 | follows: |
| Other taxation and social security contributions | 435 | 442 | |
| Rents received in advance | 15 | 9 | |
| Costs payable | 2,018 | 2,111 | |
| Amounts to be settled | 4,877 | 4,741 | |
| Lease liabilities | 1,339 | 1,507 | |
| Other | 1,999 | 2,921 | |
| | 11,609 | 12,829 | |

Disclosures in respect of Net defined benefit liabilities are provided in Note 36 ‘Pension and other postemployment benefits’.

Other staff-related liabilities includes vacation leave provisions, variable compensation provisions, jubilee provisions, and disability/illness provisions.

ING Group Annual Report 2020 on Form 20-FF -300

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

18 Subordinated loans| Debt securities in issue – maturities | | | Subordinated loans issued by ING Groep N.V. include bonds issued to raise Tier 1 and Tier 2 (CRD IV eligible) | | |
| --- | --- | --- | --- | --- | --- |
| | 2020 | 2019 | capital for ING Bank N.V. Under IFRS these bonds are classified as liabilities and for regulatory purposes, they are | | |
| Fixed rate debt securities | | | considered capital. Subordinated loans issued by ING Group companies comprise, for the most part, | | |
| Within 1 year | 18,315 | 26,871 | subordinated loans which are subordinated to all current and future liabilities of ING Bank N.V. | | |
| More than 1 year but less than 2 years | 8,339 | 10,358 | | | |
| More than 2 years but less than 3 years | 6,193 | 9,527 | | | |
| More than 3 years but less than 4 years | 2,731 | 6,321 | Changes in subordinated loans | | |
| More than 4 years but less than 5 years | 3,685 | 2,836 | | 2020 | 2019 |
| More than 5 years | 28,706 | 29,007 | Opening balance | 16,588 | 13,724 |
| Total fixed rate debt securities | 67,969 | 84,920 | New issuances | 2,165 | 3,429 |
| | | | Repayments | -2,786 | -933 |
| Floating rate debt securities | | | Exchange rate differences and other | -163 | 367 |
| Within 1 year | 8,699 | 24,938 | Closing balance | 15,805 | 16,588 |
| More than 1 year but less than 2 years | 3,050 | 3,126 | | | |
| More than 2 years but less than 3 years | 1,526 | 3,041 | | | |
| More than 3 years but less than 4 years | 138 | 1,541 | | | |
| More than 4 years but less than 5 years | 91 | 144 | In 2020 ING Groep N.V. issued in February USD 750 million 4.875% Perpetual Additional Tier 1 Contingent | | |
| More than 5 years | 592 | 816 | Convertible Capital Securities and in May EUR 1.5 billion 2.125% Subordinated Tier 2 Notes. | | |
| Total floating rate debt securities | 14,095 | 33,608 | | | |

In 2020 ING Bank N.V. bought back USD 1 billion in February and USD 190 million in December 5.800% Tier 2

Total debt securities82,065118,528 securities via a tender. ING Groep N.V. redeemed USD 1 billion 6.000% Perpetual Additional Tier 1 Contingent

Convertible Capital Securities and USD 700 million 6.125% Perpetual Debt Securities in April.

In 2020 Debt securities in issue decreased by EUR 36.5 billion because of lower funding needs driven by increased The average interest rate on subordinated loans is 3.73% (2019: 4.38%). The interest expense during the year TLTRO funding and the strong growth of customer deposits. This decrease is mainly explained by a reduction of 2020 was EUR 612 million (2019: EUR 660 million).
EUR 18.2 billion in commercial paper, a reduction of EUR 8.1 billion in certificates of deposits, a reduction of EUR

8.6 billion in matured long term bonds and a reduction of EUR 2.1 billion in matured covered bonds.

18 Subordinated loans| | 2020 | 2019 |
| --- | --- | --- |
| ING Groep N.V. | 13,150 | 13,069 |
| ING Group companies | 2,654 | 3,519 |
| | 15,805 | 16,588 |

ING Group Annual Report 2020 on Form 20-FF -301

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

19 Equity

19 EquityShare capital and share premium

Share capital| Total equity | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | 2020 | 2019 | 2018 | Share capital | | | | | | | |
| Share capital and share premium | | | | | | | | Ordinary shares (par value EUR 0.01) | | | |
| - Share capital | 39 | 39 | 39 | | | | Number x 1,000 | | | | Amount |
| - Share premium | 17,089 | 17,078 | 17,050 | | 2020 | 2019 | | 2018 | 2020 | 2019 | 2018 |
| | 17,128 | 17,117 | 17,088 | Authorised share capital | 14,729,000 | 14,729,000 | 14,729,000 | | 147 | 147 | 147 |
| | | | | Unissued share capital | 10,828,331 | 10,832,266 | 10,837,272 | | 108 | 108 | 108 |
| Other reserves | | | | Issued share capital | 3,900,669 | 3,896,734 | 3,891,728 | | 39 | 39 | 39 |
| - Revaluation reserve: Equity securities at FVOCI | 1,181 | 1,580 | 1,914 | | | | | | | | |
| - Revaluation reserve: Debt instruments at FVOCI | 309 | 322 | 398 | | | | | | | | |
| - Revaluation reserve: Cash flow hedge | 1,450 | 1,208 | 604 | Changes in issued share capital | | | | | | | |
| - Revaluation reserve: Credit liability | -117 | -114 | 8 | | | | | | | Ordinary shares | |
| - Revaluation reserve: Property in own use | 221 | 253 | 204 | | | | | | | (par value EUR 0.01) | |
| - Net defined benefit asset/liability remeasurement reserve | -307 | -336 | -394 | | | | | | | | |
| - Currency translation reserve | -3,636 | -2,079 | -2,043 | | | | | | Number x 1,000 | | Amount |
| - Share of associates and joint ventures and other reserves | 3,246 | 3,189 | 2,940 | Issued share capital as at 1 January 2018 | | | | | 3,885,790 | | 39 |
| - Treasury shares | -4 | -10 | -11 | Issue of shares | | | | | 5,938 | | |
| | 2,342 | 4,013 | 3,621 | Issued share capital as at 31 December 2018 | | | | | 3,891,728 | | 39 |
| | | | | Issue of shares | | | | | 5,006 | | |
| Retained earnings | 32,149 | 29,866 | 28,339 | Issued share capital as at 31 December 2019 | | | | | 3,896,734 | | 39 |
| Shareholders’ equity (parent) | 51,619 | 50,996 | 49,049 | Issue of shares | | | | | 3,934 | | |
| Non-controlling interests | 1,022 | 893 | 803 | Issued share capital as at 31 December 2020 | | | | | 3,900,669 | | 39 |
| Total equity | 52,640 | 51,889 | 49,851 | | | | | | | | |

In 2020, ING Groep N.V. issued 3.9 million ordinary shares (2019: 5.0 million ordinary shares, 2018: 5.9 million).
These issues were made in order to fund obligations arising from share-based employee incentive programmes.

In 2020, 2019 and 2018 respectively, ING Groep N.V. issued USD 750 million, USD 2,750 million 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 83 million ordinary shares (2019:
306 million ordinary shares). Reference is made to Note 18 ‘Subordinated loans’.

ING Group Annual Report 2020 on Form 20-FF -302

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

19 Equity

Ordinary shares All ordinary shares are registered. No share certificates have been issued. The par value of ordinary shares is EUR 0.01. The authorised ordinary share capital of ING Groep N.V. currently consists of 14,729 million ordinary shares.
As at 31 December 2020, 3,901 million ordinary shares were issued and fully paid.

Ordinary shares held by ING Group (Treasury shares) As at 31 December 2020, 0.6 million ordinary shares (2019: 0.9 million and 2018: 1.1 million) of ING Groep N.V.
with a par value of EUR 0.01 are held by ING Groep N.V. or its subsidiaries. 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.

Share premium| Share premium | | | |
| --- | --- | --- | --- |
| | 2020 | 2019 | 2018 |
| Opening balance | 17,078 | 17,050 | 17,006 |
| Issue of shares | 11 | 28 | 44 |
| Closing balance | 17,089 | 17,078 | 17,050 |

The increase in share premium, is a result of the issuance of ordinary shares related to share -based employee incentive programmes.

ING Group Annual Report 2020 on Form 20-FF -303

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

19 Equity

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 | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 |
| Opening balance | 1,580 | 1,914 | n/a | 322 | 398 | n/a | n/a | n/a3,447 | 1,208 | | 604 | 263-114 | | 8 | n/a | 253 | 204 | 203 |
| Effect of change in accounting policy due to the implementation of IFRS 9 | | | 2,432 | | | 629 | | -3,447 | | | | | | -190 | | | | |
| Changes in credit liability reserve | | | | | | | | | | | | | -19-116 | | 199 | | | |
| Unrealised revaluations | -337 | 137 | -461 | 20 | -43-177 | | | | | 242 | 604 | 342 | | | | -7 | 58 | 3 |
| Realised gains/losses transferred to the statement of profit or loss | | | | -33 | -33 | -54 | | | | | | | | | | | | |
| Realised revaluations transferred to retained earnings | -1 | -472 | -56 | | | | | | | | | | 16 | -6 | | -26 | -9 | -2 |
| Other changes | -62 | | | | | | | | | | | | | | | | | |
| Closing balance | 1,181 | 1,580 | 1,914 | 309 | 322 | 398 | n/a | n/a | n/a1,450 | 1,208 | | 604-117 | -114 | | 8 | 221 | 253 | 204 |

Equity securities at FVOCIAvailable-for-sale and other In 2020, the unrealised revaluations of EUR -337 million includes revaluation of shares in Bank of Beijing for EUR -As from 2018, due to implementation of IFRS 9, the revaluation results of Available-for-sale and other are 339 million. Other changes of EUR -62 million is related to prior years revaluations of Visa shares, which arereported in the FVOCI reserve.
reclassified to Financial assets at fair value through profit or loss and for which the unrealized revaluation up until 2019 is transferred to retained earnings. Reference is made to note 5 ‘Financial assets at fair value through otherCash flow hedge comprehensive income’.ING mainly hedges floating rate lending with interest rate swaps. Due to decrease in interest rate yield curve in

2020 the interest rate swaps had a positive revaluation of EUR 242 million which is recognised in cash flow hedge In 2019, the unrealised revaluations of EUR 137 million are due to the revaluation of shares in Bank of Beijingreserve.
EUR 35 million and shares in EquensWorldLine EUR 101 million. The EUR -472 million transfer of revaluation reserve to retained earnings is mainly related to the sale of shares in Kotak Mahindra Bank EUR -320 million andNet defined benefit asset/liability remeasurement reserve EquensWorldLine EUR -149 million.
Reference is made to Note 36 ‘Pension and other post -employment benefits’.

In 2018, the Equity securities at FVOCI revaluation reserve decreased by EUR 517 million, mainly 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.

ING Group Annual Report 2020 on Form 20-FF -304

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

19 Equity

Currency translation reserveTreasury shares| Changes in currency translation reserve | | | | Changes in treasury shares | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | 2020 | 2019 | 2018 | | | Amount | | | Number | |
| Opening balance | -2,079 | -2,043 | -1,663 | | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 |
| Unrealised revaluations | 106 | -134 | 71 | Opening balance | -10 | -11 | -15919,387 | 1,137,701 | 944,257 | |
| Realised gains/losses transferred to the statement of profit or loss | -1 | -138 | | Purchased/sold | 5 | 1 | 4-347,716 | -218,314 | 193,444 | |
| Exchange rate differences | -1,662 | 236 | -451 | Closing balance | -4 | -10 | -11571,671 | 919,387 | 1,137,701 | |
| Closing balance | -3,636 | -2,079 | -2,043 | | | | | | | |

Retained earnings Unrealised revaluations relates to changes in the value of hedging instruments that are designated as net| investment hedges. The hedging strategy is to hedge the CET1 ratio. The net decrease of unrealized revaluations | | | | Changes in retained earnings | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| and Exchange rate differences of EUR -1,557 million is related to several currencies including USD (EUR -536 | | | | | 2020 | 2019 | 2018 |
| million), TRY (EUR -406 million) PLN (EUR -137 million) and RUB (EUR -104 million). | | | | Opening balance | 29,866 | 28,339 | 27,022 |
| In 2019 realised gains/losses transferred to the statement of profit or loss is related to the sale of shares in Kotak | | | | Effect of change in accounting policy due to the implementation of IFRS 9 | | | -390 |
| Mahindra Bank (EUR -119 million) and the effect of the merger transaction of TMB (EUR -18 million). | | | | Transfer to/from other reserves | 108 | 418 | -211 |
| | | | | Result for the year | 2,156 | 3,723 | 4,601 |
| Share of associates and joint ventures and other reserves | | | | Dividend | | -2,650 | -2,607 |
| | | | | Employee stock options and share plans | 11 | 13 | 19 |
| Changes in share of associates, joint ventures and other reserves | | | | Changes in composition of the group and other changes | 6 | 23 | -96 |
| | 2020 | 2019 | 2018 | Closing balance | 32,149 | 29,866 | 28,339 |
| Opening balance | 3,189 | 2,940 | 2,527 | | | | |
| Effect of change in accounting policy due to the implementation of IFRS 9 | | | -28 | | | | |
| Result for the year | 94 | 180 | 160 | Changes in the composition of the group | | | |
| Transfer to/from retained earnings | -37 | 69 | 280 | Changes in the composition of the group mainly relate to Payvision. In 2018 ING Bank obtained control over | | | |
| Closing balance | 3,246 | 3,189 | 2,940 | Payvision Holding B.V. (Payvision) by acquiring 75% of its 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 option led to the recognition of a financial liability with initial recognition through shareholders’ The Share of associates, joint ventures and other reserves includes non-distributable profits from associates and equity of EUR 87 million related to Payvision.
joint ventures of EUR 644 million (2019: EUR 624 million). Other reserves includes a statutory reserve of EUR

1,912 million (2019: EUR 1,818 million) related to the former Stichting Regio Bank and the former Stichting In November 2019 ING Bank agreed to purchase the remaining 25% shares in three tranches between November Vakbondsspaarbank SPN and a legal reserve of EUR 688 million (2019: EUR 736 million) related to own developed 2019 and April 2020 for a total consideration of EUR 90 million. Given that ING already had control over software.

ING Group Annual Report 2020 on Form 20-FF -305

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

19 Equity

Payvision, the acquisition of 23% of the shares in 2019 and 2% in 2020 represents a shareholder transaction andNon-distributable reserves

resulted in a transfer between Non-controlling interest and Shareholders equity of EUR 24 million in 2019 and202020192018

EUR 2 million in 2020.ING Bank9,8298,3977,603

Other2097

Non-distributable reserves9,8318,3987,700

Dividend

In 2020, a cash dividend of nil (2019: EUR 2,650 million and 2018: EUR 2,607 million) was paid to the

shareholders of ING Group.
In addition to the legal and regulatory restrictions on distributing dividends from subsidiaries, associates and joint For further information, reference is made to Note 30 ‘Dividend per ordinary share’.
ventures to ING Groep N.V. there are various other considerations and limitations that are taken into account in

determining the appropriate levels of equity in the Group’s subsidiaries, associates and joint ventures. These Ordinary shares - Restrictions with respect to dividend and repayment of capital considerations and limitations include, but are not restricted to, minimum capital requirements that are imposed The following equity components cannot be freely distributed: Revaluation reserves, Net defined benefit by industry regulators in the countries in which the subsidiaries, associates and joint ventures operate, or other asset/liability remeasurement reserve, Currency translation reserve, Share of associates and joint ventures limitations which may exist in certain countries and may or may not be temporary in nature. It is not possible to reserve and Other reserves including the part related to the former Stichting Regio Bank and the former Stichting disclose a reliable quantification of these limitations. For an overview of the minimal capital requirements of ING Vakbondsspaarbank SPN.
Group refer to the ‘Capital Management’ section.

As at 31 December 2020, an amount of EUR 1,912 million (2019: EUR 1,818 million; 2018: EUR 1,638 million)
Without prejudice to the authority of the Executive Board to allocate profits to reserves and to the fact that the related to the former Stichting Regio Bank and the former Stichting Vakbondsspaarbank SPN is included.
ordinary shares are the most junior securities issued by ING Groep N.V., no specific dividend payment restrictions

with respect to ordinary shares exist. The European Central Bank has recommended banks in December 2020 to ING Groep N.V. is subject to legal restrictions regarding the amount of dividends it can pay to the holders of its limit dividend distributions out of cumulative 2019 and 2020 profits, given the persisting uncertainty over the ordinary shares. Pursuant to the Dutch Civil Code, dividends can only be paid up to an amount equal to the economic impact the Covid-19 pandemic.
excess of the company’s own funds over the sum of the paid-up capital and reserves required by law.
Refer to ‘Capital Management’ section for further details.

Moreover, ING Groep N.V.’s ability to pay dividends is dependent on the dividend payment ability of its Furthermore, ING Groep N.V. is subject to legal restrictions with respect to repayment of capital to holders of subsidiaries, associates and joint ventures. ING Groep N.V. is legally required to create a non-distributable ordinary shares. Pursuant to the Dutch Civil Code, capital may only be repaid if none of ING Groep N.V.’s reserve insofar as profits of its subsidiaries, associates and joint ventures are subject to dividend payment creditors opposes such a repayment within two months following the announcement of a resolution to that restrictions which apply to those subsidiaries, associates and joint ventures themselves.
effect.

Non distributable reserves, determined in accordance with the financial reporting requirements included in Part

9 of Book 2 of the Dutch Civil Code, from ING Group’s subsidiaries, associates and joint ventures are as follows:

ING Group Annual Report 2020 on Form 20-FF -306

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

19 Equity

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 short-term rate (€STR) as calculated by the European Central Bank during the financial year for which the distribution is made; this percentage being weighted on the basis of the number of days for which it applies, and increased by 2.585 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.

ING Group Annual Report 2020 on Form 20-FF -307

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

20 Net interest income

Notes to the Consolidated statement of profit or loss

20 Net interest income| Net interest income | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | 2020 | 2019 | 2018 | | 2020 | 2019 | 2018 |
| Interest income on loans | 15,624 | 19,028 | 18,966 | Interest expense on deposits from banks | 177 | 361 | 362 |
| Interest income on financial assets at fair value through OCI | 512 | 615 | 554 | Interest expense on customer deposits | 1,331 | 2,934 | 2,607 |
| Interest income on debt securities at amortised cost | 508 | 673 | 780 | Interest expense on debt securities in issue | 1,732 | 2,350 | 2,254 |
| Interest income on non-trading derivatives (hedge accounting) | 3,392 | 4,319 | 4,497 | Interest expense on subordinated loans | 612 | 660 | 711 |
| Negative interest on liabilities | 678 | 422 | 453 | Negative interest on assets | 353 | 349 | 412 |
| Total interest income using effective interest rate method | 20,715 | 25,056 | 25,249 | Interest expense on non-trading derivatives (hedge accounting) | 3,198 | 4,615 | 4,826 |
| | | | | Total interest expense using effective interest rate method | 7,402 | 11,268 | 11,171 |
| Interest income on financial assets at fair value through profit or loss | 658 | 1,897 | 1,795 | | | | |
| Interest income on non-trading derivatives (no hedge accounting) | 1,154 | 1,181 | 1,059 | Interest expense on financial liabilities at fair value through profit or loss | 514 | 1,695 | 1,578 |
| Interest income other | 32 | 30 | 25 | Interest expense on non-trading derivatives (no hedge accounting) | 1,029 | 1,311 | 1,387 |
| Total other interest income | 1,843 | 3,107 | 2,880 | Interest expense on lease liabilities | 18 | 25 | n/a |
| Total inter est income | 22,559 | 28,163 | 28,129 | Interest expense other | 44 | 54 | 33 |
| | | | | Total other interest expense | 1,605 | 3,084 | 2,997 |
| | | | | Total interest expense | 9,007 | 14,353 | 14,169 |

Net interest income13,55213,81113,960

Total net interest income amounts to EUR 13,552 million (2019: EUR 13,811 million). The decrease is mainly caused by continued margin pressure on customer deposits on both savings and current accounts due to lower reinvestment yields. In addition, average liability volumes increased over the year whereas customer lending volumes decreased. Negative interest on liabilities in 2020, amounting to EUR 678 million (2019: EUR 422 million)
includes interest income on ING’s participation in TLTRO III of EUR 164 million and TLTRO II of EUR 24 million (2019: TLTRO II EUR 57 million). Any conditional benefit from TLTRO III on net interest income has not been included yet.

ING Group Annual Report 2020 on Form 20-FF -308

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

21 Net fee and commission income

21 Net fee and commission income22 Valuation results and net trading income| Fee and commission income | | | | Valuation results and net trading income | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | 2020 | 2019 | 2018 | | | | 2020 | 2019 | 2018 |
| Funds transfer | 1,428 | 1,513 | 1,394 | Securities trading results | | | -500 | 974 | -722 |
| Securities business | 805 | 603 | 618 | Derivatives trading results | | | 701 | -998 | 540 |
| Insurance broking | 200 | 191 | 173 | Other trading results | | | 72 | 117 | 116 |
| Asset management fees | 244 | 205 | 170 | Change in fair value of derivatives relating to | | | | | |
| Brokerage and advisory fees | 658 | 611 | 584 | – fair value hedges | 1 | | 538 | 507 | 185 |
| Other | 1,180 | 1,317 | 1,302 | – cash flow hedges (ineffective portion) | | | -5 | 47 | -19 |
| | 4,514 | 4,439 | 4,240 | – other non-trading derivatives | | 1 | -90 | -732 | 868 |
| | | | | Change in fair value of assets and liabilities (hedged items) | | | -541 | -518 | -176 |
| | | | | Valuation results on assets and liabilities designated at FVPL (excluding trading) | | | -123 | -358 | 366 |
| Other fee and commission income mainly consists of commission fees in respect of bank guarantees of EUR 187 | | | | Foreign exchange transactions results | | | 422 | 801 | 69 |
| million (2019: EUR 202 million; 2018: EUR 207 million), in respect of underwriting syndication loans of EUR 16 | | | | | | | 474 | -159 | 1,227 |

Fee and commission expenses				equity securities, corporate debt securities, money-market instruments, and interest rate derivatives such as
	2020	2019	2018	swaps, options, futures, and forward contracts.
Funds transfer	601	659	597
Securities business	147	140	170	The portion of trading gains and losses relating to trading securities still held as at 31 December 2020 amounts to
Insurance broking	4	2	2	EUR -690 million (2019: EUR -82 million; 2018: EUR 396 million).
Asset management fees	9	8	4
Brokerage and advisory fees	330	282	220	The majority of the risks involved in security and currency trading is economically hedged with derivatives. The
Other	413	481	448	securities trading results are partly offset by results on these derivatives. The result of these derivatives is
	1,503	1,571	1,442	included in Derivatives trading results.

Other trading results include the results of trading loans and funds entrusted.
Reference is made to Note 34 ‘Segments’ which includes net fee and commission income, as reported to the
Executive Board and the Management Board Banking, disaggregated by line of business and by geographical Foreign exchange transactions results include gains and losses from spot and forward contracts, options, futures, segment.
and translated foreign currency assets and liabilities. The result on currency trading is included in foreign
exchange transactions results.

ING Group Annual Report 2020 on Form 20-FF -309

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

23 Investment income

‘Valuation results on assets and liabilities designated at fair value through profit or loss’ include fair value Net trading income relates to trading assets and trading liabilities which include assets and liabilities that arechanges on financial liabilities driven by changed market conditions as disclosed in Note 14 ‘Financial liabilities at classified under IFRS as Trading but are closely related to servicing the needs of the clients of ING. ING offersfair value through profit or loss’.
products that are traded on the financial markets to institutional clients, corporate clients, and governments. ING Group’s trading books are managed based on internal limits and comprise a mix of products with results whichIn 2020, Valuation results on assets and liabilities designated at fair value through profit or loss (excluding could be offset. A significant part of the derivatives in the trading portfolio are related to servicing corporatetrading) include fair value adjustments on own issued notes amounting to EUR -1 million (2019: EUR -424 million;
clients in their risk management to hedge for example currency or interest rate exposures. From a risk2018: EUR 302 million).
perspective, the gross amount of trading assets must be considered together with the gross amount of trading liabilities, which are presented separately on the statement of financial position. However, IFRS does not alwaysInterest income from trading assets in 2020 amounted to EUR 13,412 million (2019: EUR 15,187 million; 2018:
allow netting of these positions in the statement of financial position. Reference is made to Note 4 ‘Financial13,924 million). Interest expense from trading liabilities in 2020 amounted to EUR 13,052 million (2019: EUR assets at fair value through profit or loss’ and Note 14 ‘Financial liabilities at fair value through profit or loss’ for14,922 million; 2018: 13,976 million).| accounting and economically hedging exposures) as well as the changes in the fair value of assets and liabilities | Investment income | | | |
| --- | --- | --- | --- | --- |
| included in hedging relationships as hedged items. Reference is made to Note 39 ‘Derivatives and hedge | | 2020 | 2019 | 2018 |
| accounting’ for information on derivatives used for hedge accounting. | Dividend income | 107 | 115 | 102 |
| | Realised gains/losses on disposal of debt instruments measured at FVOCI | 44 | 46 | 77 |
| In general, the fair value movements are influenced by changes in the market conditions, such as stock prices, | Income from and fair value gains/losses on investment properties | 1 | 27 | 4 |
| credit spreads, interest rates and currency exchange rates. Following the increased concerns about the Covid-19 | Investment income | 152 | 188 | 183 |
| stabilised during the second half of 2020 and volatility has largely returned to pre-pandemic levels. | In 2020, 2019 and 2018 dividend income mainly consists of dividend received from ING’s equity stake in Bank of | | | |
| | Beijing. | | | |
| half of 2020 and spreads tightened, the fair value changes decreased again. | | | | |

In 2020, Derivatives trading results include EUR 17 million CVA/DVA adjustments on trading derivatives (2019:
EUR 39 million; 2018: EUR -20 million).

ING Group Annual Report 2020 on Form 20-FF -310

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

24 Result on disposal of group companies

24 Result on disposal of group companiesIn 2020, driven by exceptional market circumstances in the first quarter, ING realised a profit on the sale of debt

securities at amortised cost of EUR 186 million.

Result on disposal of group companies

26 Other income

202020192018| ING Lease Italy | | -2 | -123 | In 2020, Other income of EUR 20 million (2019: EUR 214 million; 2018: EUR 118 million) includes the positive |
| --- | --- | --- | --- | --- |
| ING Mauritius | | 119 | | recovery of defaulted receivables of EUR 27 million (2019: EUR 32 million). In addition, Other income is impacted |
| Cel Data Services | -3 | | | by positive and negative non-recurring results, including a loss of EUR 58 million following a settlement with the |
| | -3 | 117 | -123 | Australian Tax Authorities related to former insurance activities, that were fully indemnified by NN Group. This |

was offset by a tax profit for the same amount resulting from the release of the provision for uncertain tax

positions in current tax liabilities. In 2019, Other income also included the recognition of EUR 79 million In 2020 ING realized a EUR -3 million loss on the sale of Cel Data Services N.V. against net assets disposed of EUR receivable related to the insolvency of a financial institution.
4 million. Cel Data Services N.V. is active in ATM services including cash loading and ICT managed services for

ING’s Belgian retail branche s, other Belgian financial institutions and retail shops.

27 Staff Expenses

In 2019 the Result on disposal of group companies is mainly impacted by the sale of ING’s stake in Kotak| Mahindra Bank by ING Mauritius during 1Q 2019. ING Mauritius is in the process of being liquidated and | Staff expenses | | | |
| --- | --- | --- | --- | --- |
| consequently, the release of the currency translation reserve (CTA) and the release of the Net Investment | | 2020 | 2019 | 2018 |
| Foreign Entities reserve resulted in a one-off gain of EUR 119 million. | Salaries | 3,751 | 3,572 | 3,287 |
| | Pension costs and other staff-related benefit costs | 395 | 366 | 385 |

The Result on disposal of group companies includes the result (fair value less cost to sell) on the sale of part of	Social security costs	538	530	509
	Share-based compensation arrangements	19	41	49
the ING Lease Italy business amounting to EUR -123 million, which was recognised in 2018 and a final result of	External employees	881	974	901
EUR -2 million recognised in 2019.	Education	43	64	87

	Other staff costs	186	208	202
25 Net result on derecognition of financial assets measured at amortised cost		5,812	5,755	5,420

Net result on derecognition of financial assets measured at amortised cost				Share-based compensation arrangements include EUR 17 million (2019: EUR 38 million; 2018: EUR 46 million)
	2020	20191	20181
Loans at amortised cost	4	13	17	relating to equity-settled share-based payment arrangements and EUR 2 million (2019: EUR 3 million; 2018: EUR

Securities at amortised cost1852403 million) relating to cash-settled share-based payment arrangements.

Net result on derecognition of financial assets measured at amortised cost1893818

1 Net result on derecognition of financial assets measured at amortised cost was included in note 26 Other income in prior years.

ING Group Annual Report 2020 on Form 20-FF -311

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

27 Staff Expenses| Number of employees | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | Netherlands | | | Rest of the world | | | | Total | The share awards granted in 2020 relate to the performance year 2019. In 2020, 63,837 share awards (2019: 0; |
| | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 2018:31,743) were granted to the members of the Executive Board of ING Groep N.V., and 122,338 share awards |
| Total average number | | | | | | | | | | (2019: 2,837; 2018: 80,036) were granted to the Management Board Banking. To senior management and other |
| of internal employees at full time | | | | | | | | | | employees 3,678,776 share awards (2019: 2,167,817; 2018: 3,989,214) were granted. |
| equivalent basis | 15,201 | 14,415 | 13,600 | 40,701 | 39,016 | 38,633 | 55,901 | 53,431 | 52,233 | |

In 2010, the Group Executive Board decided not to continue the option scheme as from 2011. The existing option

schemes have run off during the year as the option rights have expired.

Remuneration of senior management, Executive Board and Supervisory Board

Reference is made to Note 49 ‘Related parties’.The obligations with regard to share plans are funded by newly issued shares at the discretion of ING Group.

Changes in share awards
Weighted average grant date fair Stock option and share plansShare awards (in numbers)
values (in euros)
ING Groep N.V. has granted option rights on ING Groep N.V. shares and conditional rights on shares to a number202020192018202020192018

of senior executives (members of the Executive Board, general managers and other officers nominated by theOpening balance3,857,0485,854,9997,222,27911.1411.6211.46

Executive Board), and to a considerable number of employees of ING Group. The purpose of the option and shareGranted3,864,9512,170,6544,100,9935.1210.0412.50| schemes, apart from promoting a lasting growth of ING Group, is to attract, retain and motivate senior executives | Performance effect | | | 341,623 | | 11.12 | 11.65 |
| --- | --- | --- | --- | --- | --- | --- | --- |
| and staff. | Vested | -3,690,340 | -3,945,020 | -5,565,093 | 9.01 | 11.23 | 12.05 |
| | Forfeited | -153,440 | -223,585 | -244,803 | 8.55 | 11.39 | 11.52 |

Closing balance3,878,2193,857,0485,854,9997.2511.1411.62 ING grants various types of share awards, namely deferred shares, performance shares and upfront shares, which

form part of the variable remuneration offering via the Long-term Sustainable Performance Plan (LSPP). The

entitlement to the LSPP share awards is granted conditionally. If the participant remains in employment for an
As at 31 December 2020 the share awards consists of 3,326,457 share awards (2019: 3,346,004; 2018: 5,211,339)
uninterrupted period between the grant date and the vesting date, the entitlement becomes unconditional, with
relating to equity-settled share-based payment arrangements and 551,762 share awards (2019: 511,044; 2018:
the exception of the upfront shares which are immediately vested upon grant. Additionally, a condition before
643,660) relating to cash-settled share-based payment arrangements.
vesting is 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 as well as
The fair value of share awards granted is recognised as an expense under Staff expenses and is allocated over the identified staff, have a retention obligation that must be adhered to upon vesting, typically a minimum retention
vesting period of the share awards. The fair value calculation takes into account the current stock prices, of 12 months applies. ING has the authority to apply a holdback to awarded but unvested shares and a clawback
expected volatilities and the dividend yield of ING shares.
to vested shares.

As at 31 December 2020, total unrecognised compensation costs related to share awards amount to EUR 10 In addition to the LSPP share awards, ING paid a number of senior employees fixed shares. The number of shares
million (2019: EUR 15 million; 2018: EUR 29 million). These costs are expected to be recognised over a weighted were determined each month from a cash value that forms part of the employee fixed remuneration. The shares
average period of 1.6 years (2019: 1.4 years; 2018: 1.4 years).
were immediately vested to the employee, but had a minimum holding requirement of two years before the

employee can dispose of the shares. The fixed shares are not subject to holdback or clawback.

ING Group Annual Report 2020 on Form 20-FF -312

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

28 Other operating expenses| Changes in option rights outstanding | | | | | | | Regulatory costs |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | | Options outstanding | | Weighted average exercise price | | | Regulatory costs represent contributions to the Deposit Guarantee Schemes (DGS), The Single Resolution Fund |
| | | | (in numbers) | | (in euros) | | (SRF), local bank taxes and local resolution funds. Included in Regulatory costs for 2020, are contributions to DGS |
| | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | of EUR 413 million (2019: EUR 362 million; 2018: EUR 364 million) mainly related to the Netherlands, Germany, |
| Opening balance | 2,356,343 | 5,123,853 | 15,141,980 | 7.35 | 5.69 | 12.36 | |
| Exercised | -679,471 | -2,186,316 | -827,755 | 7.34 | 4.40 | 5.91 | Belgium, Poland, and Spain and contributions to the SRF and local resolution funds of EUR 277 million (2019: EUR |
| Forfeited | -2,490 | -45,852 | -89,816 | 7.35 | 7.01 | 8.09 | 239 million; 2018: EUR 208 million). |
| Expired | -1,674,382 | -535,342 | -9,100,556 | 7.36 | 3.51 | 16.75 | In 2020 local bank taxes decreased by EUR 6 million from EUR 420 million in 2019 to EUR 414 million (2018: EUR |
| Closing balance | 0 | 2,356,343 | 5,123,853 | | 7.35 | 5.69 | 375 million). This was caused by a decrease of EUR 10 million in Romania following abolishment of its bank tax in |

1. Excluding this effect, total bank taxes increased with EUR 4 million.

The weighted average share price at the date of exercise for options exercised during 2020 is EUR 5.73 (2019:Audit and non-audit services

EUR 10.89; 2018: 13.65). All option rights are vested.Total audit and non-audit services include the following fees for services provided by the Group’s auditor.| 28 Other operating expenses | | | | | Fees of Group’s auditors | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Other operating expenses | | | | | | 2020 | 2019 | 2018 |
| | | 2020 | 2019 | 2018 | Audit fees | 25 | 21 | 19 |
| Regulatory costs | | 1,105 | 1,021 | 947 | Audit related fees | 1 | 2 | 1 |
| Audit and non-audit services | | 29 | 30 | 26 | Total1 | 26 | 23 | 20 |
| IT related expenses | | 812 | 759 | 779 | | | | |
| Advertising and public relations | | 335 | 391 | 402 | 1 The Group’s auditors did not provide any non-audit services. | | | |
| External advisory fees | | 418 | 416 | 358 | | | | |
| Office expenses | | 320 | 325 | 564 | | | | |
| Travel and accommodation expenses | | 68 | 140 | 179 | Fees as disclosed in the table above relate to the network of the Group’s auditors and are the amounts related to | | | |
| Contributions and subscriptions | | 110 | 108 | 91 | the respective years, i.e. on an accrual basis. The increase in audit fees 2020 follow from the re-appointment of | | | |
| Postal charges | | 38 | 46 | 54 | the current auditor that also triggered a revision of the audit fees. In 2019, the increase primarily relates to audit | | | |
| Depreciation of property and equipment | 1 | 578 | 551 | 312 | activities for the implementation of IFRS 16, new statutory audits and new IT systems in scope. | | | |
| Amortisation of intangible assets | | 251 | 237 | 209 | | | | |
| Impairments and reversals of impairments of tangible and intangible assets | | 558 | 59 | 19 | | | | |
| Addition to / (unused amounts reversed of) provision for reorganisations | | 149 | 6 | 4 | | | | |
| Addition to / (unused amounts reversed of) other provisions | | 39 | 29 | -13 | | | | |
| Other | | 532 | 477 | 1,332 | | | | |
| | | 5,341 | 4,598 | 5,262 | | | | |

1 Includes depreciation expenses of right-of-use assets as recognised under IFRS 16 in 2020 and 2019.

ING Group Annual Report 2020 on Form 20-FF -313

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

28 Other operating expenses| Impairments and reversals of impairments of tangible and intangible assets | | | | | | | | Included in Addition to / (unused amounts reversed of) provision for reorganisations in 2020 are increases due to |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | Impairment losses | | Reversals of impairments | | | Total | | refocusing of ING’s activities in Wholesale Banking and decisions on the Maggie project, as well as additional |
| | 20202019 | 2018 | 2020 | 20192018 | 2020 | 2019 | 2018 | restructuring costs in Retail Benelux and Other Challengers & Growth Markets. Reference is made to Note 15 |
| Property and equipment | 52 | 4 | 9-9 | -6 | -17 | 43 | -3-8 | |
| Property development | 2 | 115 | | | | 2 | 115 | ‘Provisions’. |
| Goodwill | 310 | | | | 310 | | | |
| Software and other intangible assets | 202 | 6112 | | | 202 | 61 | 12 | Addition to / (unused amounts reversed of) other provisions |
| | 567 | 6635 | -9 | -7 | -17558 | 59 | 19 | Included in Addition to / (unused amounts reversed of) other provisions in 2020 are movements mainly in the |

litigation provision and the general provision for cybercrime in the Netherlands. Reference is made to Note 15
‘Provisions’ and Note 45 ‘Legal proceedings’.
Impairment losses on property and equipment in 2020 follow from the changes in intended use of right-of-use
property due to the changes in the future way of working post-pandemic.Other
In 2018, impairment losses on property development mainly relate to impairments in Spain and Italy due to In 2018 Other operating expenses - Other included, amongst others, the settlement with the Dutch Public lower expected net realisable values.
Prosecution Service of EUR 775 million. The settlement related to previously disclosed investigations regarding
various requirements for client on-boarding and the prevention of money laundering and corrupt practices.
The reversals of impairments on property and equipment in 2018 relate to impairments previously recognised in Reference is made to Note 45 ‘Legal proceedings’.
the statement of profit or loss and mainly include impairments on property in own use that were reversed
following the sale of office buildings.

Goodwill impairment test performed in the second quarter of 2020 resulted in goodwill impairment losses for EUR 310 million in the CGUs Retail Belgium and Wholesale Banking.

Impairment losses on software and other intangible assets in 2020 mainly include software that was impaired for an amount of EUR 141 million following the decision to discontinue Project Maggie (previously called Model Bank). This is primarily related to capitalised software development costs . In addition, impairment losses of EUR 19 million were recognised related to purchased software and of EUR 35 million related to intangible assets in the payments and cash management business.

2019 and 2018 impairment losses on software and intangible assets relate to rescoping of IT transformation programs.

Reference is made to Note 9 ‘Property and equipment ’ and Note 10 ‘Intangible assets’ .

ING Group Annual Report 2020 on Form 20-FF -314

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

29 Earnings per ordinary share

29 Earnings per ordinary share30 Dividend per ordinary share| Earnings per ordinary share | | | | | | | | | | Dividends to shareholders of the parent | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | Weighted average | | | | | | Per | |
| | | | | | number of ordinary | | | | | | ordinary | Total |
| | | | | | shares outstanding | | | | | | share | (in EUR |
| | | Amount | | | during the period | | Per ordinary share | | | | (in EUR) | million) |
| | | (in EUR million) | | | (in millions) | | | (in EUR) | | Dividends on ordinary shares: | | |
| | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 2020 | 20192018 | | In respect of 2018 | | |
| Basic earnings | 2,250 | 3,903 | 4,761 | 3,898.9 | 3,894.8 | 3,888.9 | 0.58 | 1.00 | 1.22 | - Interim dividend, paid in cash in August 2018 | 0.24 | 934 |
| Basic earnings from continuing | | | | | | | | | | - Final dividend, paid in cash in May 2019 | 0.44 | 1,714 |
| operations | 2,250 | 3,903 | 4,761 | | | | 0.58 | 1.00 | 1.22 | Total dividend in respect of 2018 | 0.68 | 2,648 |
| | | | | | | | | | | In respect of 2019 | | |

Effect of dilutive instruments:				- Interim dividend, paid in cash in August 2019	0.24	935
Stock option and share plans	2.2	0.5	1.5	- Final dividend		0
	2.2	0.5	1.5	Total dividend in respect of 2019	0.24	935
				In respect of 2020

Diluted earnings	2,250	3,903	4,761	3,901.1	3,895.3	3,890.4	0.58	1.00	1.22	- Interim dividend, paid in February 2021	0.12	468
Diluted earnings from continuing										Total dividend in respect of 2020	0.12	468
operations	2,250	3,903	4,761				0.58	1.001.22

ING Groep N.V. is required to withhold tax of 15% on dividends paid.
Dilutive instrumentsIn March 2020, ING Group announced that it will suspend any payment of dividends until 1 October 2020

Diluted earnings per share is calculated as if the stock options and share plans outstanding at the end of thefollowing an industry wide recommendation of the ECB. The ECB subsequently updated their recommendation,

period had been exercised at the beginning of the period and assuming that the cash received from exercisedlastly in December 2020, extending the timeframe to 1 October 2021. Final dividend 2019 was therefore not paid

stock options and share plans is used to buy own shares against the average market price during the period. Thein 2020.

net increase in the number of shares resulting from exercising stock options and share plans is added to theING paid in February 2021 a cash-only interim dividend of EUR 468 million (EUR 0.12 per share). This amount is

average number of shares used for the calculation of diluted earnings per share .equal to 15% of adjusted net profit for 2020, in line with the ECB recommendation of 15 December 2020, which

included a definition of adjusted net profit.

Refer to note 51 Capital Management for more information about the change in ING’s dividend policy and the

ECB recommendations regarding dividend payments

ING Group Annual Report 2020 on Form 20-FF -315

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

31 Net cash flow from operating activities

31 Net cash flow 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 issue | | Subordinated Loans | | Lease liabilities | | Total Liabilities from | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | 2020 | 2019 | 2018 | | | | | | | | financing activities | |
| Cash flows from operating activities | | | | | | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| Result before tax | | 3,399 | 5,653 | 6,986 | Opening balance | 118,528 | 119,751 | 16,588 | 13,724 | 1,507 | n/a136,622 | | 133,475 |
| Adjusted for: | - Depreciation and amortisation | 829 | 789 | 520 | Effect of change in accounting | | | | | | | | |
| | - Addition to loan loss provisions | 2,675 | 1,120 | 656 | policy due to the | | | | | | | | |
| | - Other non-cash items included in result before tax | 1,671 | 1,213 | -1,763 | implementation of IFRS 16 | | | | | | 1,301 | | 1,301 |
| Taxation paid | | -1,734 | -2,345 | -1,602 | Cashflows: | | | | | | | | |
| Changes in: | – Loans and advances to banks, not available on demand | 10,033 | -1,338 | -777 | Additions | 65,308 | 90,793 | 2,165 | 3,429 | 0 | 0 | 67,472 | 94,222 |
| | – Deposits from banks, not payable on demand | 43,044 | -2,574 | 566 | Redemptions / Disposals | -99,212 | -94,497 | -2,786 | -933 | -273 | -271-102,270 | | -95,700 |
| | Net change in loans and advances to/ from banks, not available/ payable on | | | | Non cash changes: | | | | | | | | |
| | demand | 53,078 | -3,911 | -211 | Amortisation | 68 | 135 | 5 | 1 | 18 | 25 | 92 | 161 |
| | – Trading assets | -2,101 | 605 | 16,928 | Other | -105 | 21 | -20 | 26 | 118 | 443 | -6 | 490 |
| | – Trading liabilities | 4,667 | -3,173 | -7,018 | Changes in FV | 880 | 1,018 | 397 | 201 | 0 | 0 | 1,277 | 1,220 |
| | Net change in Trading assets and Trading liabilities | 2,566 | -2,568 | 9,910 | Foreign exchange movement | -3,403 | 1,306 | -545 | 140 | -31 | 8 | -3,980 | 1,454 |
| | Loans and advances to customers | 2,876 | -16,687 | -31,356 | Closing balance | 82,065 | 118,528 | 15,805 | 16,588 | 1,339 | 1,507 | 99,208 | 136,622 |

Customer deposits39,74018,04019,709

– Non–trading derivatives-1,4401,072-215

– Assets designated at fair value through profit or loss-1,369-7-72533 Cash and cash equivalents

– Assets mandatorily at fair value through profit or loss-1,96323,343-6,968

– Other assets1,0821,363684Cash and cash equivalents

– Other financial liabilities at fair value through profit or loss1,189-12,23510,522202020192018

– Provisions and other liabilities-1,355-1,784769Treasury bills and other eligible bills043159

Other-3,85611,7524,067Deposits from banks/Loans and advances to banks478786-2,617

Net cash flow from/(used in) operating activities101,24313,0556,915Cash and balances with central banks111,08753,20249,987

Cash and cash equivalents at end of year111,56654,03147,529

Treasury bills and other eligible bills included in cash and cash equivalents

202020192018

Treasury bills and other eligible bills included in trading assets0017

Treasury bills and other eligible bills included in securities at AC43142

043159

ING Group Annual Report 2020 on Form 20-FF -316

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

34 Segments

Deposits from banks/Loans and advances to banksSegment reporting

202020192018
Included in cash and cash equivalents:34 Segments

– Deposits from banks-8,788-8,519-8,520| – Loans and advances to banks | 9,266 | 9,304 | 5,903 | ING Group’s segments are based on the internal reporting structures by lines of business. |
| --- | --- | --- | --- | --- |
| | 478 | 786 | -2,617 | |

Not included in cash and cash equivalents:
– Deposits from banks	-69,310	-26,307	-28,811	The Executive Board of ING Group and the Management Board Banking set the performance targets, approve
– Loans and advances to banks	16,098	25,832	24,519	and monitor the budgets prepared by the business lines. Business lines formulate strategic, commercial, and
	-53,212	-476	-4,292	financial plans in conformity with the strategy and performance targets set by the Executive Board of ING Group

Total as included in the statement of financial position:and the Management Board Banking.

– Deposits from banks-78,098-34,826-37,330| – Loans and advances to banks | 25,364 | 35,136 | 30,422 | The following table specifies the segments by line of business and main sources of income of each of the |
| --- | --- | --- | --- | --- |
| | -52,733 | 310 | -6,909 | segments: |

Cash and cash equivalents includes deposits from banks and loans and advances to banks that are on demand.
Specification of the main sources of income of each of the segments by line of business

Segments by line of businessMain source of income
Included in Cash and cash equivalents, are minimum mandatory reserve deposits to be held with various centralIncome from retail and private banking activities in the Netherlands, including the
banks. Reference is made to Note 42 ‘Transfer of financial assets, assets pledged and received as collateral’ forSME and mid-corporate segments, and the Real Estate Finance portfolio related to Retail Netherlands Dutch domestic mid-corporates. The main products offered are current and savings restrictions on Cash and balances with central banks.(Market Leaders)
accounts, business lending, mortgages and other consumer lending in the
Netherlands.

Income from retail and private banking activities in Belgium (including Retail Belgium Luxembourg), including the SME and mid-corporate segments. The main products (Market Leaders)
offered are similar to those in the Netherlands.

Income from retail and private banking activities in Germany (including Austria). The Retail Germany main products offered are current and savings accounts, mortgages and other (Challengers and Growth Markets)
customer lending.

Income from retail banking activities in the rest of the world, including the SME and Retail Other mid-corporate segments in specific countries. The main products offered are similar (Challengers and Growth Markets)
to those in the Netherlands.

Income from wholesale banking activities. The main products are: lending, debt Wholesale Bankingcapital markets, working capital solutions, export finance, daily banking solutions, treasury and risk solutions, and corporate finance.

ING Group Annual Report 2020 on Form 20-FF -317

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

34 Segments

The segment reporting in the annual report on Form 20-F has been prepared in accordance with International Specification of geographical split of the segmentsFinancial Reporting Standards as issued by the EU (IFRS-EU) and reconciled to International Financial Reporting Geographical segmentsMain countriesStandards as issued by the International Accounting Standards Board (IFRS-IASB) for consistency with the other The Netherlandsfinancial information contained in this report. The difference between the accounting standards is reflected in BelgiumIncluding Luxembourgthe Wholesale Banking segment, and in the geographical split of the segments in the Netherlands, Belgium, GermanyIncluding AustriaGermany and Other Challengers.
Other ChallengersAustralia, Czech Republic, France, Italy, Spain, Portugal, Other Growth MarketsPoland, Romania, Turkey, Philippines and Asian stakesReference is made to Note 1 ‘Basis of preparation and accounting policies’ for a reconciliation between IFRS-EU Wholesale Banking Rest of WorldUK, Americas, Asia and other countries in Central and Eastern Europeand IFRS-IASB. Corporate expenses are allocated to business lines based on time spent by head office personnel, OtherCorporate Line and the run-off portfolio of Real Estatethe relative number of staff, or on the basis of income, expenses and/or assets of the segment.

ING Group reconciles the total segment results to the total result using Corporate Line. The Corporate Line is a
ING Group monitors and evaluates the performance of ING Group at a consolidated level and by segment usingreflection of capital management activities and certain income and expenses that are not allocated to the results based on figures according to IFRS as adopted by the European Union (IFRS-EU). The Executive Board andbanking businesses, including the recognition of value-added tax (VAT) refunds in the Netherlands (recorded the Management Board Banking consider this measure to be relevant to an understanding of the Group’sunder expenses). In 2020, net interest income on the Corporate Line sharply declined, mainly due to lower financial performance, because it allows investors to understand the primary method used by management tointerest results from foreign currency hedging due to lower interest rate differentials. In 2019, a EUR 119 million evaluate the Group’s operating performance and make decisions about allocating resource s.gain from the release of a currency translation reserve following the sale of ING’s stake in Kotak Mahindra Bank was included, and the recognition of a EUR 79 million receivable related to the insolvency of a financial
In addition, ING Group believes that the presentation of results in accordance with IFRS-EU helps investorsinstitution (both recorded under income). In 2018, the EUR 775 million settlement agreement with the Dutch compare its segment performance on a meaningful basis by highlighting result before tax attributable to ongoingauthorities on regulatory issues was included, as well as a EUR 90 million net result from the former Insurance operations and the profitability of the segment businesses. IFRS-EU result is derived by including the impact ofactivities. Furthermore, the Corporate Line includes the isolated legacy costs (mainly negative interest results)
the IFRS-EU ‘IAS 39 carve out’ adjustment.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 The IFRS-EU ‘IAS 39 carve-out’ adjustment relates to fair value portfolio hedge accounting strategies for theresults of business units globally, irrespective of the business units’ book equity and the currency they operate in.
mortgage and savings portfolios in the Benelux, Germany and Other Challengers that are not eligible under IFRS- IASB. As no hedge accounting is applied to these mortgage and savings portfolios under IFRS-IASB, the fair value changes of the derivatives are not offset by fair val ue changes of the hedge items (mortgages and savings).

ING Group Annual Report 2020 on Form 20-FF -318

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

34 Segments

As from the financial year 2020 the information presented to the executive Board is no longer based on underlying results but on IFRS as endorsed by the EU. Previously monitoring and evaluation of ING Group’s segments was based on a non-GAAP financial performance measure called underlying. Underlying result was derived by excluding the impact of the IFRS-EU ‘IAS 39 carve-out’ adjustment, special items, divestments and results from former insurance related activities from the IFRS-EU results. In 2020 and 2019 no special items, divestments or results from former insurance related activities were recorded anymore. 2018 included a special item of EUR 775 million special item related to the settlement agreement with the Dutch authorities on regulatory issues, as well as a EUR 90 million net result from the former Insurance activities.

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.

ING Group Annual Report 2020 on Form 20-FF -319

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

34 Segments

Reconciliation between IFRS-IASB and IFRS-EU income, expense and net result

2020201920184

Non-Non-Noncontrollingcontrollingcontrolling IncomeExpensesTaxationinterestsNet result1IncomeExpensesTaxationinterestsNet result1IncomeExpensesTaxationinterestsNet result1

Net result IFRS-IASB attributable to equity holder of the17,22713,8281,070782,25017,12511,4721,652993,90318,32411,3382,1161084,761

parent| Remove impact of: | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Adjustment of the EU 'IAS 39 carve out' | | 2 | 410 | | 176 | | 234 | 1,181 | | 303 | | 878 | -148 | | -90 | | -58 |
| Result IFRS-EU | 3 | | 17,637 | 13,828 | 1,246 | 78 | 2,485 | 18,306 | 11,472 | 1,955 | 99 | 4,781 | 18,176 | 11,338 | 2,027 | 108 | 4,703 |

1. Net result, after tax and non-controlling interests.
2. ING prepares the Form 20-F in accordance with IFRS-IASB. This information is prepared by reversing the hedge accounting impacts that applied under the EU 'carve-out' version of IAS 39. For the IFRS-EU result, the impact of the carve-out is re-instated as this is the measure at which management monitors the business.
3. IFRS-EU figures are derived from figures according to IFRS-IASB by excluding the impact of adjustment of the EU 'IAS 39 carve-out'.
4. As from 2020 results of former Insurance activities are included in Corporate Line; prior period figures have been adjusted.

ING Group Annual Report 2020 on Form 20-FF -320

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

34 Segments

ING Group Total

202020192018| | ING | | Total ING | ING | | Total ING | ING | | Total ING |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | Bank N.V. | Other1 | Group | Bank N.V. | Other1 | Group | Bank N.V. | Other1 | Group |
| Income | | | | | | | | | |
| – Net interest income | 13,600 | 3 | 13,604 | 14,074 | 4 | 14,079 | 13,949 | -34 | 13,916 |
| – Net fee and commission income | 3,011 | -0 | 3,011 | 2,868 | -0 | 2,868 | 2,803 | -5 | 2,798 |
| – Total investment and other income | 1,034 | -12 | 1,022 | 1,352 | 8 | 1,360 | 1,350 | 112 | 1,462 |
| Total income | 17,645 | -9 | 17,637 | 18,295 | 12 | 18,306 | 18,102 | 74 | 18,176 |

Expenditure
– Operating expenses	11,160	-811,153	10,343	910,353	10,695	-1310,682
– Addition to loan loss provisions	2,675	-02,675	1,120	01,120	656	0	656
Total expenses	13,835	-813,828	11,463	911,472	11,351	-1311,338

Result before taxation	3,810	-1	3,809	6,831	3	6,834	6,751	876,838
Taxation	1,317	-71	1,246	1,889	66	1,955	2,036	-92,027
Non-controlling interests	78		78	99		99	108		108
Net result IFRS-EU	2,415	70	2,485	4,843	-63	4,781	4,607	964,703
Adjustment of the EU 'IAS 39 carve out'	-234		-234	-878		-878	58		58
Net result IFRS-IASB attributable to equity holder of the parent	2,180	70	2,250	3,966	-63	3,903	4,665	964,761

1 Comprises for the most part the funding charges of ING Groep N.V. (Holding). In 2018, Other also includes former Insurance activities result of EUR 90 million (2020 and 2019: nil).

ING Group Annual Report 2020 on Form 20-FF -321

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

34 Segments| Segments by line of business | 1 | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | 2020 | | | | | | 2019 | | | | | | | 2018 | | | | | | |
| | | Retail | | Retail | | | | | Retail | | Retail | | | | Retail | | Retail | | | | |
| | | Nether- | Retail | Ger- | RetailWholesale | | Corporate | Nether- | | Retail | Ger-Retail | Wholesale | Corporate | | Nether- | Retail | Ger- | RetailWholesale | | Corporate | |
| | | lands | Belgium | many | Other | Banking | Line | Total | landsBelgium | | manyOther | Banking | | LineTotal | lands | Belgium | many | Other | Banking | Line2 | Total |
| Income | | | | | | | | | | | | | | | | | | | | | |
| – Net interest income | | 3,511 | 1,816 | 1,587 | 2,760 | 3,718 | 212 | 13,604 | 3,541 | 1,9071,579 | 2,787 | | 3,794 | 47014,079 | 3,749 | 1,830 | 1,671 | 2,690 | 3,686 | 290 | 13,916 |
| – Net fee and commission income | | 681 | 413 | 437 | 412 | 1,069 | -1 | 3,011 | 674 | 374 | 268 | 423 | 1,135 | -62,868 | 664 | 371 | 225 | 395 | 1,152 | -8 | 2,798 |
| – Total investment and other income | | 279 | 145 | 93 | 89 | 609 | -192 | 1,022 | 290 | 161 | 138 | 298 | 369 | 1031,360 | 335 | 169 | 76 | 230 | 673 | -20 | 1,462 |
| Total income | | 4,471 | 2,373 | 2,1173,261 | | 5,396 | 18 | 17,637 | 4,5052,442 | 1,985 | 3,509 | | 5,298 | 56818,306 | 4,747 | 2,369 | 1,9723,315 | | 5,510 | 262 | 18,176 |

Expenditure
– Operating expenses	2,236	1,7371,110	2,469	3,218	38311,153	2,210	1,6091,080	2,210	2,937	30710,353	2,220	1,6101,027	2,033	2,771	1,02210,682
– Additions to loan loss provision	157	514	57593	1,351	22,675	91	186	-53364	532	-01,120	-41	164	-27350	210	-1	656
Total expenses	2,3932,251	1,167	3,063	4,568	38513,828	2,3011,794	1,027	2,574	3,469	30711,472	2,1791,774	1,000	2,383	2,981	1,02111,338

Result before taxation	2,078	122950	199	827	-3673,809	2,204	647	957	935	1,830	2616,834	2,568	595	972	932	2,529	-7596,838
Taxation	523	51331	105	295	-581,246		558192	328	234	464	1791,955	626	199	324	200	633	462,027
Non-controlling interests	-1	0	455	20	-0	78	-0	03	82	14	-0	99	-0	63	80	19	-0	108
Net result IFRS-EU	1,556	71615	39	512	-3082,485	1,646	455	627	619	1,352	824,781	1,942	390	646	652	1,877	-8044,703
Adjustment of the EU 'IAS 39 carve out'				-234		-234				-878	-878					58		58
Net result IFRS-IASB	1,556	71615	39	278	-3082,250	1,646	455	627	619	474	823,903	1,942	390	646	652	1,935	-8044,761

1. As of 2020 consolidated results of ING Group are based on IFRS as adopted by the European Union (IFRS-EU), and not on underlying results anymore; prior period figures have been adjusted to confirm to current year reporting.
2. As from 2020 reporting, results of former Insurance activities are included in Corporate Line; prior period figures have been adjusted.

ING Group Annual Report 2020 on Form 20-FF -322

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

34 Segments| Geographical split of the segments | 1 | | | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | 2020 | | | | | | | 2019 | | | | | | | 2018 | | | | | | | |
| | | | | | Wholesa | | | | | | | | Wholesa | | | | | | | Wholesa | | |
| | | | | | | le | | | | | | | le | | | | | | | | le | |
| | | | | Other | Banking | | | | | | Other | | Banking | | | | | Other | | Banking | | |
| | Nether- | | Ger-Challeng | Growth | Rest of | | | Nether- | | | Ger-Challeng | Growth | Rest of | | Nether- | | | Ger-Challeng | Growth | Rest of | | |
| | lands | Belgium | many | ersMarkets | | WorldOther | | Totallands | Belgium | many | | ersMarkets | 2World2 | Other | Total | landsBelgium | many | | ersMarkets | 2World | 2Other | 3Total |
| Income | | | | | | | | | | | | | | | | | | | | | | |
| – Net interest income | 4,178 | 2,116 | 2,090 | 1,781 | 1,5781,654 | | 20813,604 | 4,213 | 2,233 | 2,122 | 1,808 | 1,610 | 1,633 | 46114,079 | 4,374 | 2,137 | 2,200 | 1,732 | 1,637 | 1,550 | 285 | 13,916 |
| – Net fee and commission | 981 | 583 | 468 | 276 | 286 | 418 | -13,011 | | 994 | 533315 | 283 | 304 | 446 | -7 | 2,868 | 980 | 520273 | 254 | | 293486 | -8 | 2,798 |
| income | | | | | | | | | | | | | | | | | | | | | | |
| – Total investment and | 398 | 196 | 127 | 27 | 215 | 243 | -1841,022 | | 119 | 233169 | | 16420 | 292 | 111 | 1,360 | 509 | 379 | 99 | -92 | 328249 | -11 | 1,462 |
| other income | | | | | | | | | | | | | | | | | | | | | | |
| Total income | 5,557 | 2,896 | 2,6842,084 | | 2,0782,315 | | 2317,637 | 5,325 | 2,999 | 2,606 | 2,107 | 2,334 | 2,370 | 56618,306 | 5,863 | 3,037 | 2,572 | 1,895 | 2,258 | 2,285 | 266 | 18,176 |

Expenditure
– Operating expenses	3,347	2,037	1,2701,566	1,272	1,273	38711,153	2,994	1,925	1,2371,318	1,277	1,293	30810,353	2,929	1,932	1,1711,217	1,160	1,236	1,03810,682
– Additions to loan loss	421	589	267	298	412684	22,675	146	268	-40	171	271303	-01,120	-65	153	6	163	274126	-1	656
provision
Total expenses	3,769	2,6271,537	1,864	1,684	1,957	39013,828	3,140	2,1941,197	1,489	1,548	1,596	30811,472	2,863	2,0851,176	1,380	1,435	1,362	1,03711,338

Result before taxation	1,788	2691,146	220	395357	-367	3,8092,185		8051,409	618	785	774	2586,834	3,000	952	1,396	515	824923	-7716,838
Retail Banking	2,078	122950	-27	225		3,348	2,204	647	957307	628		4,744	2,568	595	972	285	647	5,067
Wholesale Banking	-290	147197	247	169357	-0	827	-19	158	451311	157	774	-31,830	432	357	424	229	177923	-132,529
Corporate Line					-367	-367						261	261					-759-759
Result before taxation	1,788	2691,146	220	395357	-367	3,8092,185		8051,409	618	785	774	2586,834	3,000	952	1,396	515	824923	-7716,838
Taxation	518	89381	91	141	85-59	1,246	549	247	476207	159	144	1731,955	741	291	459	178	141175	422,027
Non-controlling interests	-1	0	4	75	-0	78	-0	0	3		96	-0	99	1	63		98	-0	108
Net result IFRS-EU	1,271	180761	129	178273	-308	2,4851,637		558	929411	530	630	854,781	2,258	655	935	337	584748	-8134,703
Adjustment of the EU 'IAS	-177	27-115	30			-234	-273	-372-232		-0		-878	106	22	-72	2			58
39 carve out'
Net result IFRS	1,094	207647	159	178273	-308	2,2501,363		186	697411	530	630	853,903	2,364	677	863	339	584748	-8134,761

1 As of 2020 consolidated results of ING Group are based on IFRS as adopted by the European Union (IFRS-EU), and not on underlying results anymore; prior period figures have been adjusted to confirm to current year reporting.
2 As from 2020 financials of Philippines are reported in Growth Markets, while previously Wholesale Banking in Philippines was reported in WB Rest of World; prior period figures have been adjusted.
3 As from 2020, results of former Insurance activities are included in geographical segment Other (Corporate Line); prior period figures have been adjusted.

ING Group Annual Report 2020 on Form 20-FF -323

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

35 Information on geographical areas

35 Information on geographical areas

In order to increase ING Group’s tax transparency, additional financial information on a per country basis has ING Group’s business lines operate in seven main geographical areas: the Netherlands, Belgium, Rest of Europe, been included in this disclosure: Tax paid represents all income tax paid to and/or received from tax authorities North America, Latin America, Asia and Australia. A geographical area is a distinguishable component of the in the current year, irrespective of the fiscal year to which these payments or refunds relate.
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 The table below provide additional information, for the years 2020, 2019 and 2018 respectively, on names of geographical analyses are based on the location of the office from which the transactions are originated and do principal subsidiaries and branches, nature of main activities and average number of employees on a full time not include countries where ING only has representation offices. The Netherlands is ING Group’s country of equivalent basis by country/tax jurisdiction.
domicile.| Additional information by country | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Geographical | Country/Tax | Name of principal subsidiary | Main (banking) | Average number of employees at | | | | | | | | | | | | | | | |
| area | jurisdiction | | activity | full time equivalent basis | | | | Total Income | | | Total assets | | Result before tax | | | Taxation | | | Tax paid |
| | | | | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 20202019 | 2018 | 2020 | 20192018 | 2020 | 2019 | 2018 |
| Netherlands | Netherlands | ING Bank N.V. | Wholesale / Retail | 15,201 | 14,415 | 13,600 | 5,1005,198 | 6,130 | 283,664 | 267,368 | 259,387 | | 6121,397 | 1,973 | 285 | 437738 | 588 | 684 | 528 |
| Belgium | Belgium | ING België N.V. | Wholesale / Retail | 7,397 | 7,694 | 8,248 | 2,6372,277 | 2,838 | 133,269 | 121,813 | 120,287 | | 212291 | 898 | 75 | 142285 | 66 | 258 | 71 |
| | Luxemburg | ING Luxembourg S.A. | Wholesale / Retail | 855 | 841 | 791 | 279 | 292315 | 15,290 | 16,608 | | 13,310 | 100123 | 199 | 25 | 29 | 5024 | 17 | 23 |
| Rest of Europe | Poland | ING Bank Slaski S.A | Wholesale / Retail | 9,425 | 8,968 | 8,829 | 1,3991,344 | 1,229 | 40,928 | 37,220 | | 33,040 | 438533 | 525 | 131 | 141128 | 232 | 166 | 169 |
| | Germany | ING DiBa A.G. | Wholesale / Retail | 5,059 | 4,639 | 4,625 | 2,3762,141 | 2,315 | 162,539 | 147,642 | 144,861 | | 8961,032 | 1,203 | 310 | 355397 | 409 | 460 | 368 |
| | Romania | Branch of ING Bank N.V. | Wholesale / Retail | 3,049 | 2,575 | 2,269 | 456 | 457403 | 8,526 | | 7,424 | 7,112 | 141221 | 183 | 20 | 34 | 2524 | 34 | 22 |
| | Spain | Branch of ING Bank N.V. | Wholesale / Retail | 1,228 | 1,233 | 1,201 | 679 | 706600 | 29,899 | 26,118 | | 23,757 | 104249 | 195 | 37 | 72 | 7152 | 90 | 61 |
| | Italy | Branch of ING Bank N.V. | Wholesale / Retail | 1,025 | 959 | 911 | 337 | 269231 | 13,747 | 15,726 | | 16,991 | 44-39 | -101 | 24 | 4-24 | | 24 | 3 |
| | UK | Branch of ING Bank N.V. | Wholesale | 709 | 692 | 672 | 546 | 594505 | 64,676 | 61,088 | | 64,016 | 97214 | 180 | 15 | 52 | 4432 | 40 | 61 |
| | France1 | Branch of ING Bank N.V. | Wholesale / Retail | 737 | 659 | 620 | 239 | 308323 | 11,555 | 12,058 | | 12,063 | -71 | 70111 | -17 | 35 | 45 | 948 | 25 |
| | Russia | ING Bank (Eurasia) Z.A.O. | Wholesale | 297 | 293 | 277 | 51 | 93 | 821,035 | | 1,499 | 1,449 | 3 | 6825 | 0 | 22 | 3-3 | 49 | 13 |
| | Czech Republic | Branch of ING Bank N.V. | Wholesale / Retail | 355 | 339 | 306 | 146 | 88106 | 3,848 | | 4,494 | 6,278 | 59 | 1039 | 12 | 2 | 10 | 45 | 6 |
| | Hungary | Branch of ING Bank N.V. | Wholesale | 131 | 138 | 141 | 43 | 24 | 401,092 | | 1,299 | 1,227 | 6 | -7 | 52 | 2 | 3 | 12 | 2 |
| | Slovakia | Branch of ING Bank N.V. | Wholesale | 878 | 703 | 571 | 18 | 14 | 14 | 385 | 587 | 487 | 7 | 2 | 03 | 0 | 1 | 1-1 | 1 |
| | Ukraine | PJSC ING Bank Ukraine | Wholesale | 108 | 111 | 109 | 26 | 43 | 36 | 335 | 481 | 368 | 16 | 3122 | 3 | 9 | 3 | 36 | 4 |
| | Austria | Branch of ING DiBa A.G. | Wholesale / Retail | 332 | 279 | 235 | 75 | 80 | 851,840 | | 1,441 | 753 | 0 | 018 | -5 | 1 | 6-14 | 1 | -12 |
| | Bulgaria | Branch of ING Bank N.V. | Wholesale | 65 | 68 | 69 | 13 | 12 | 9 | 406 | 358 | 360 | 2 | 2 | 00 | 0 | 0 | 00 | 0 |
| | Ireland | Branch of ING Bank N.V. | Wholesale | 50 | 48 | 47 | 72 | 71 | 682,051 | | 2,575 | 2,868 | 66 | 5865 | 8 | 8 | 8 | 87 | 6 |
| | Portugal | Branch of ING Bank N.V. | Wholesale | 13 | 12 | 11 | 16 | 18 | 18 | 790 | 899 | 905 | 11 | 1413 | 7 | 4 | 4 | 45 | 2 |
| | Switzerland | Branch of ING Bank N.V. | Wholesale | 256 | 257 | 244 | 187 | 234257 | 7,939 | | 8,577 | 8,266 | 88126 | 169 | 13 | -36 | 3514 | 22 | 6 |

1 Public subsidies received, as defined in article 89 of the CRD IV, amounts to EUR 0.3 million (2019: EUR 0.3 million; 2018: EUR 0.5 million).

ING Group Annual Report 2020 on Form 20-FF -324

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

35 Information on geographical areas| Additional information by country (continued) | | | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Geographical | Country/Tax | Name of principal subsidiary | Main (banking) | Average number of employees at | | | | | | | | | | | | | | | |
| area | jurisdiction | | activity | full time equivalent basis | | | | Total Income | | | Total assets | | Result before tax | | | Taxation | | | Tax paid |
| | | | | 2020 | 2019 | 2018 | 20202019 | 2018 | 2020 | | 2019 | 2018 | 20202019 | 2018 | 2020 | 20192018 | 2020 | 2019 | 2018 |
| North America | Canada | Payvision Canada Services Ltd. | Wholesale | 1 | 1 | 1 | 3 | 3 | 3 | 0 | 1 | 2 | 0 | 0 | 00 | 0 | 0 | 0 | 00 |
| | USA | ING Financial Holdings Corp. | Wholesale | 600 | 626 | 617 | 720 | 813736 | 48,205 | 45,521 | | 61,440 | 39 | 366343 | 16 | 118 | 61 | 38130 | 67 |
| Latin America | Brazil | Branch of ING Bank N.V. | Wholesale | 89 | 89 | 88 | 30 | 43 | 351,813 | | 2,921 | 1,974 | 3 | 2716 | 19 | 6 | 9 | 4 | 73 |
| | Colombia | ING Capital Colombia S.A.S. | Wholesale | 3 | 3 | 3 | 1 | 1 | 1 | 2 | 2 | 2 | 0 | 0 | 00 | 0 | 0 | 0 | 00 |
| | Mexico | ING Consulting, S.A. de C.V. | Wholesale | 7 | 8 | 8 | 1 | 1 | 1 | 2 | 2 | 2 | -1 | -2 | -20 | 0 | 0 | 0 | 00 |
| Asia | China | Branch of ING Bank N.V. | Wholesale | 90 | 89 | 86 | 26 | 35 | 371,598 | | 2,031 | 2,107 | -2 | 7 | 31 | -1 | 7 | -5 | 017 |
| | Japan | Branch of ING Bank N.V. | Wholesale | 32 | 33 | 32 | 29 | 31 | 363,104 | | 5,109 | 2,300 | -1 | 2219 | -1 | 8 | 5 | 210 | 3 |
| | Singapore | Branch of ING Bank N.V. | Wholesale | 608 | 592 | 546 | 353 | 349340 | 24,498 | 27,982 | | 32,222 | 42 | 76176 | 8 | 13 | 21 | 722 | 12 |
| | Macau | Payvision Macau Ltd. | Wholesale | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 00 | 0 | 0 | 0 | 00 |
| | Hong Kong | Branch of ING Bank N.V. | Wholesale | 122 | 128 | 122 | 92 | 96110 | 7,030 | | 7,350 | 6,975 | -9 | 3852 | -1 | 7 | 8 | 15 | 212 |
| | Philippines | Branch of ING Bank N.V. | Wholesale/ Retail | 1,857 | 1,420 | 878 | 13 | 25 | 17 | 497 | 412 | 395 | -26 | -11 | 06 | -5 | 3 | 2 | 21 |
| | South Korea | Branch of ING Bank N.V. | Wholesale | 77 | 79 | 80 | 66 | 60 | 556,692 | | 5,457 | 4,299 | 18 | 2514 | 4 | 7 | 3 | 10 | 36 |
| | Taiwan | Branch of ING Bank N.V. | Wholesale | 34 | 34 | 33 | 36 | 26 | 233,160 | | 2,873 | 2,839 | 19 | 10 | 74 | 0 | 0 | 1 | 3-2 |
| | Indonesia | PT ING Securities Indonesia | In liquidation | 0 | 0 | 3 | 0 | 0 | 0 | 5 | 6 | 6 | 0 | 0 | 00 | 0 | 0 | 0 | 00 |
| | Malaysia | Branch of ING Bank N.V. | Wholesale | 6 | 5 | 5 | 1 | 1 | 1 | 141 | 166 | 139 | -1 | 0 | 00 | 0 | 0 | 0 | 00 |
| | India | Branch of ING Bank N.V. | Wholesale | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 0 | 0 | 00 | 0 | 0 | 0 | 00 |
| | Turkey | ING Bank A.S. | Wholesale / Retail | 3,724 | 4,074 | 4,709 | 420 | 677678 | 7,316 | | 9,927 | 11,521 | 125 | 304245 | 27 | 66 | 50 | 2592 | 11 |
| | United Arabic | Branch of ING Bank N.V. | Wholesale | 10 | 11 | 11 | 0 | -1 | 0 | 1 | 0 | 0 | -2 | -2 | -10 | 0 | 0 | 0 | 00 |
| | Emirates | | | | | | | | | | | | | | | | | | |
| Australia | Australia | ING Bank (Australia) Ltd. | Wholesale / Retail | 1,472 | 1,319 | 1,234 | 740 | 701647 | 46,014 | 43,482 | | 39,673 | 362 | 400389 | 40 | 121 | 118181 | 177 | 113 |
| Other | Mauritius | ING Mauritius Ltd. | In liquidation | 0 | 0 | 0 | 0 | 0 | 1 | 0 | 1 | 920 | 0 | 0 | 10 | 0 | 0 | 0 | 00 |
| Total | | | | 55,901 | 53,431 | 52,23317,227 | 17,125 | 18,324 | 933,891 | 888,520 | 884,603 | 3,399 | 5,653 | 6,986 | 1,070 | 1,6522,116 | 1,734 | 2,345 | 1,602 |

ING Group Annual Report 2020 on Form 20-FF -325

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

36 Pensions and other post-employment benefits

Additional notes to the Consolidated financial statements

2020
The higher tax charge of 47% in the Netherlands (compared to the statutory rate of 25%) is mainly caused by

36 Pensions and other post-employment benefits

the non-deductible Dutch bank tax (EUR 169 million) and the non-deductible impairments regarding goodwill (EUR 266 million) and TMB (EUR 230 million).Most group companies sponsor defined contribution pension plans. The assets of all ING Group’s defined contribution plans are held in independently administered funds. Contributions are generally determined as a The lower tax charge in Australia is caused by a release of a tax provision after concluding a settlement withpercentage of remuneration. Contributions, including the defined contribution plan in the Netherlands, are the Australian Tax Authorities on an issue related to former Insurance activities, which issue was fullyprincipally determined as a percentage of renumeration. These plans do not give rise to provisions in the indemnified by NN Group.statement of financial position, other than relating to short-term timing differences included in other assets/liabilities.

The higher tax charges in Brazil and the Philippines are mainly caused by the de-recognition of tax benefits for
incurred tax losses due to expected insufficient future taxable profits.ING Group maintains defined benefit retirement plans in some countries. These plans provide benefits that are

related to the remuneration and service of employees upon retirement. The benefits in some of these plans The higher tax charges in Poland and Belgium are mainly caused by non-deductible regulatory- and other costs.are subject to various forms of indexation. The indexation is, in some cases, at the discretion of management;
in other cases it is dependent upon the sufficiency of plan assets.

2019 Annual contributions are paid to the funds at a rate necessary to adequately finance the accrued liabilities of The relatively high tax charge of 31% in the Netherlands (compared to statutory rate of 25%) is mainly caused the plans calculated in accordance with local legal requirements. Plans in all countries are designed to comply by the non-deductible Dutch bank tax (EUR 177 million) and the non-deductible AT1 interest expenses (EUR with applicable local regulations governing investments and funding levels.
276 million).

ING Group provides other post-employment benefits to certain former employees. These are primarily The relatively low tax charge in Switzerland is caused by a deferred tax benefit following a tax rate reduction in discounts on ING products.
2019.

2018 The relatively high tax charge of 37% in the Netherlands (compared to statutory rate of 25%) is mainly caused by non-deductible expenses of EUR 775 million upon the settlement agreement reached with the Dutch authorities on regulatory issues.

ING Group Annual Report 2020 on Form 20-FF -326

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

36 Pensions and other post-employment benefits| | | | | | | | | 2020 | 2019 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Plan assets and defined benefit obligation per country | | | | | | | Opening balance | 3,377 | 3,019 |
| | | | Defined benefit | | | | Interest income | 50 | 70 |
| | Plan assets | | obligation | | Funded Status | | Remeasurements: Return on plan assets excluding amounts included in interest income | 246 | 274 |
| | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | Employer's contribution | 170 | 34 |
| The Netherlands | 469 | 454 | 643 | 634 | -174 | -180 | Participants contributions | 2 | 2 |
| United States | 311 | 277 | 291 | 275 | 20 | 3 | Benefits paid | -128 | -126 |
| United Kingdom | 1,896 | 1,887 | 1,199 | 1,184 | 696 | 703 | Exchange rate differences | -134 | 104 |
| Belgium | 591 | 590 | 681 | 676 | -90 | -85 | Closing balance | 3,583 | 3,377 |
| Other countries | 316 | 168 | 393 | 383 | -77 | -214 | | | |
| Funded status (Net defined benefit asset/liability) | 3,583 | 3,377 | 3,208 | 3,151 | 375 | 226 | Actual return on the plan assets | 296 | 344 |

Presented as:
- Other assets	725	709
- Other liabilities	-350	-483	As at 31 December 2020 the various defined benefit plans did not hold any direct investments in ING Groep
	375	226	N.V. (2019: nil). During 2020 and 2019 there were no purchases or sales of assets between ING and the pension
			funds.

The most recent (actuarial) valuations of the plan assets and the present value of the defined benefit obligationING does not manage the pension funds and thus receives no compensation for fund management. The were carried out as at 31 December 2020. The present value of the defined benefit obligation, and the relatedpension funds have not engaged ING in any swap or derivative transactions to manage the risk of the pension current service cost and past service cost, were determined using the projected unit credit method.funds.

Changes in the fair value of plan assets for the period were as follows:No plan assets are expected to be returned to ING Group during 2021.

Although Covid-19 has had an impact on most investment markets in 2020, the effect on the fair value of ING Group’s plan assets was limited as a large majority of our plan assets is invested in liquid asset categories which mark to market frequently.

Changes in the present value of the defined benefit obligation and other post-employment benefits for the period were as follows:

ING Group Annual Report 2020 on Form 20-FF -327

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

36 Pensions and other post-employment benefits

Changes in defined benefit obligation and other post-employment benefitsThe EUR -190 million actuarial losses arising from changes in financial assumptions in the calculation of the

defined benefit obligation are mainly due to a decrease in discount rates.| | Defined benefit | Other post-employment | | | |
| --- | --- | --- | --- | --- | --- |
| | obligation | | benefits | | The accumulated amount of remeasurements recognised directly in Other comprehensive income is EUR -343 |
| | 2020 | 2019 | 2020 | 2019 | million (EUR -307 million after tax) as at 31 December 2020 (2019: EUR -378 million; EUR -336 million after tax). |
| Opening balance | 3,151 | 2,913 | 84 | 76 | |

Current service cost3128-2-1

Interest cost446523Amounts recognised in the statement of profit or loss related to pension and other staff related benefits are as

Remeasurements: Actuarial gains and losses arising from changes in demographicfollows:
4-6 assumptions| Remeasurements: Actuarial gains and losses arising from changes in financial | 190 | 206 | 7 | 7 | Pension and other staff-related benefit costs | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| assumptions | | | | | | Net defined benefit | | Other post-employment | | | | | | |
| Participants’ contributions | 2 | 2 | 0 | 1 | | asset/liability | | | benefits | | Other | | Total | |
| Benefits paid | -132 | -130 | -1 | -1 | | 20202019 | 2018 | 2020 | 20192018 | 2020 | 20192018 | 2020 | 20192018 | |
| Past service cost | 2 | -0 | | | Current service cost | 31 | 2839 | -2 | -1 | -412 | 122 | 41 | 2957 | |
| Exchange rate differences | -85 | 73 | -8 | 1 | Past service cost | 2 | -00 | | | | | 2 | -0 | 0 |
| Closing balance | 3,208 | 3,151 | 83 | 84 | | | | | | | | | | |
| | | | | | Net Interest cost | -6 | -5-4 | 2 | 3 | 20 | 0 | 0-3 | -2 | -2 |

	Effect of curtailment or	0	-10	-1
	settlement
Amounts recognised directly in Other comprehensive income were as follows:	Other

Defined benefit plans27233502-112221402654

Changes in the net defined benefit assets/liability remeasurement reserve| | 2020 | 2019 | Defined contribution plans | 356340 | 331 |
| --- | --- | --- | --- | --- | --- |
| Opening balance | -336 | -394 | | 395366 | 385 |

Remeasurement of plan assets246274

Actuarial gains and losses arising from changes in demographic assumptions-46

Actuarial gains and losses arising from changes in financial assumptions-190-206Determination of the net defined benefit asset/liability| Taxation and Exchange rate differences | -24 | -15 | The net defined benefit asset/liability is reviewed and adjusted annually. The assumptions used in the |
| --- | --- | --- | --- |
| Total Other comprehensive income movement for the year | 28 | 58 | determination of the net defined benefit asset/liability and the Other post-employment benefits include |

discount rates, mortality rates, expected rates of salary increases (excluding promotion increases), and Closing balance-307-336

indexation. The rates used for salary developments, interest discount factors, and other adjustments reflect

country-specific conditions.

In 2020, EUR 246 million remeasurement of plan assets that is recognised as a gain in other comprehensive

The key assumption in the determination of the net defined benefit asset/liability is the discount rate. The income is driven by higher yields on investments.

discount rate is the weighted average of the discount rates that are applied in different regions where ING

ING Group Annual Report 2020 on Form 20-FF -328

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

37 Taxation

Group has defined benefit pension plans (weighted by the defined benefit obligation). The discount rate isThe benefit payments for defined benefit and other post-employment benefits expected to be made by the

based on a methodology that uses market yields on high quality corporate bonds of the specific regions withplan between 2021-2025 are estimated to be between EUR 110 million and EUR 138 million per year. From

durations matching the pension liabilities as key input. Market yields of high quality corporate bonds reflect2026 to 2030 the total payments made by the plan are expected to be EUR 724 million.

the yield on corporate bonds with an AA rating for durations where such yields are available. An extrapolation

is applied in order to determine the yield to the longer durations for which no AA-rated corporate bonds are

available. As a result of the limited availability of long-duration AA-rated corporate bonds, extrapolation is an37 Taxation

important element of the determination of the discount rate. The weighted average discount rate applied for

Statement of financial position – Deferred tax net defined benefit asset/liability for 2020 was 1.0% (2019: 1.5%) based on the pension plan in the
Deferred taxes are recognised on all temporary differences under the liability method using tax rates applicable Netherlands, Germany, Belgium, The United States of America, and the United Kingdom. The average discount in the jurisdictions in which ING Group is subject to taxation.
rate applied for Other post-employment benefits was 2.7% (2019: 3.3%).

Sensitivity analysis of key assumptionsChanges in deferred tax

ING performs sensitivity analysis on the most significant assumptions: discount rates, mortality, expected rateChanges
Net liability (-)in the composiof salary increase, and indexation. The sensitivity analysis has been carried out under the assumption that the Net asset (+)ChangeChangeExchangetion of theNet liability (-)
changes occurred at the end of the reporting period.openingthroughthroughrategroup andNet asset (+)
2020balanceequitynet resultdifferencesother changesending balance| The sensitivity analysis calculates the financial impact on the defined benefit obligation of an increase or | Financial assets at FVOCI | -107 | 10 | -10 | 0 | | -108 |
| --- | --- | --- | --- | --- | --- | --- | --- |
| decrease of the weighted averages of each significant actuarial assumption, all other assumptions held | Investment properties | -7 | | 3 | 0 | 5 | 2 |
| constant. In practice, this is unlikely to occur, and some changes of the assumptions may be correlated. | Financial assets and liabilities at FVPL | 947 | | 246 | 10 | | 1,202 |
| | Depreciation | -19 | | 6 | 2 | | -10 |
| Changes to mortality, expected rate of salary increase, and indexation would have no material impact on the | Cash flow hedges | -337 | -23 | | 0 | | -360 |
| defined benefit obligation. The most significant impact would be from a change in the discount rate. An | Pension and post-employment benefits | 42 | -8 | -5 | 7 | -0 | 36 |

increase or decrease in the discount rate of 1% creates an impact on the defined benefit obligation of EUR-461Other provisions6-4-70-5| million and EUR 586 million, respectively. | Loans and advances | 490 | -1 | 42 | -15 | 0 | 517 |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | Unused tax losses carried forward | 61 | | 7 | -5 | | 63 |

Expected cash flows	Other	-156	62	16	-1	-5	-83
		920	40	301	-9	0	1,253

the plans calculated in accordance with local supervisory requirements. Plans in all countries are designed to	Presented in the statement of financial
comply with applicable local regulations governing investments and funding levels. ING Group’s subsidiaries	position as:
should fund the cost of the entitlements expected to be earned on a yearly basis.	– Deferred tax liabilities	-322	-343
	– Deferred tax assets	1,242	1,596

9201,253 For 2021 the expected contributions to defined benefit pension plans are EUR 31 million.

ING Group Annual Report 2020 on Form 20-FF -329

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

37 Taxation

The above table shows netted deferred tax amounts related to right-of-use assets and lease liabilities included in the row ‘Other’ a deferred tax amount for right-of-use assets of EUR 306 million (2019: EUR 370 million) andFinancial assets and liabilities FVPL changes through net result in 2019 relates to the increase in fair value of a deferred tax amount for lease liabilities of EUR -326 million (2019: EUR -376 million).derivatives due to decreased interest yield curves.| Financial assets and liabilities FVPL changes through net result in 2020 relates to the increase in fair value of | | | | | | | | | Deferred tax in connection with unused tax losses carried forward | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| derivatives due to decreased interest yield curves. | | | | | | | | | | | | 2020 | 2019 |
| | | | | | | | | | Total unused tax losses carried forward | | | 1,675 | 1,685 |
| Changes in deferred tax | | | | | | | | | Unused tax losses carried forward not recognised as a deferred tax asset | | | 903 | 922 |
| | | | | | | | | | Unused tax losses carried forward recognised as a deferred tax asset | | | 772 | 764 |
| | | | | | Changes in | | | | | | | | |
| | Net liability (-) | | | | the composi- | | | | Average tax rate | | | 22.0% | 21.4% |
| | Net asset (+) | Change | Change | Exchange | tion of the | | Net liability (-) | | Deferred tax asset | | | 170 | 163 |
| | opening | through | through | | rate | group and | Net asset (+) | | | | | | |
| 2019 | balance | equity | net result | differences | other changes | | ending balance | | | | | | |
| Financial assets at FVOCI | -118 | | 23 | -11 | -1 | | -107 | | | | | | |
| Investment properties | | -6 | | -1 | -0 | | | -7 | Total unused tax losses carried forward analysed by expiry terms | | | | |
| Financial assets and liabilities at FVPL | 632 | | | 314 | 2 | -2 | | 947 | | No deferred tax | | Deferred tax | |
| Depreciation | -23 | | | 5 | -0 | | | -19 | | asset recognised | | asset recognised | |
| Cash flow hedges | -140 | | -199 | | 2 | | -337 | | | 2020 | 2019 | 2020 | 2019 |
| Pension and post-employment benefits | | 59 | -14 | 2 | -5 | | | 42 | Within 1 year | 1 | 1 | | |
| Other provisions | | 10 | | -1 | -3 | 0 | | 6 | More than 1 year but less than 5 years | 4 | 4 | 57 | 17 |
| Loans and advances | 474 | | -1 | 18 | 0 | 0 | | 490 | More than 5 years but less than 10 years | 92 | 92 | 8 | 0 |
| Unused tax losses carried forward | | 51 | | 5 | 5 | -0 | | 61 | Unlimited | 806 | 824 | 707 | 746 |
| Other | -160 | | 16 | -13 | 1 | -0 | -156 | | | 903 | 922 | 772 | 764 |
| Total | 778 | | -176 | 318 | 2 | -2 | | 920 | | | | | |

Presented in the statement of financial			The above mentioned deferred tax of EUR 170 million (2019: EUR 163 million) and the related unused tax
position as:
– deferred tax liabilities	-180	-322	losses carried forward exclude the deferred tax liability recorded in the Netherlands with respect to the
– deferred tax assets	958	1,242	recapture of previously deducted UK tax losses in the Netherlands for the amount of EUR -107 million (2019:
	778	920	EUR -102 million).

Deferred tax assets are recognised for temporary deductible differences, for tax losses carried forward and
IFRS 16 Leases (implemented per 1 January 2019) requires lessees to recognise right-of-use assets and leaseunused tax credits only to the extent that realisation of the related tax benefit is probable.

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).

ING Group Annual Report 2020 on Form 20-FF -330

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

37 Taxation| Breakdown of certain net deferred tax asset positions by jurisdiction | | | Reconciliation of the weighted average statutory income tax rate to ING Group’s effective income tax rate | | | |
| --- | --- | --- | --- | --- | --- | --- |
| | 2020 | 2019 | | 2020 | 2019 | 2018 |
| Italy | 86 | 181 | Result before tax from continuing operations | 3,399 | 5,653 | 6,986 |
| France | 28 | | Weighted average statutory tax rate | 25.2% | 25.8% | 25.8% |
| Philippines | | 7 | Weighted average statutory tax amount | 856 | 1,459 | 1,803 |
| Slovakia | | 1 | | | | |
| | 114 | 189 | Participation exemption | -46 | -49 | -77 |
| | | | Other income not subject to tax | -6 | -76 | -70 |
| | | | Expenses not deductible for tax purposes | 320 | 237 | 346 |
| The table above includes a breakdown of certain net deferred tax asset positions by jurisdiction for which the | | | Impact on deferred tax from change in tax rates | -47 | -57 | 50 |
| | | | Deferred tax benefit from previously unrecognised amounts | -6 | | |
| utilisation of the deferred tax asset is dependent on future taxable profits in excess of the profits arising from | | | Current tax from previously unrecognised amounts | 17 | 48 | 28 |
| the reversal of existing taxable temporary differences whilst the related entities have incurred losses in either | | | Write-off/reversal of deferred tax assets | 24 | 2 | 4 |
| the current or the preceding year. | | | State and local taxes | 44 | 72 | 25 |
| | | | Adjustments to prior periods | -85 | 16 | 7 |
| Recognition is based on the fact that it is probable that the entity will have taxable profits and/or can utilise tax | | | Effective tax amount | 1,070 | 1,652 | 2,116 |

planning opportunities before expiration of the deferred tax assets. Changes in circumstances in future periodsEffective tax rate31.5%29.2%30.3%
may adversely impact the assessment of the recoverability. The uncertainty of the recoverability is taken into

account in establishing the deferred tax assets.

The weighted average statutory tax rate in 2020 (25.2%) is comparable to that of 2019.
As at 31 December 2020 and 31 December 2019, ING Groep N.V. had no significant temporary differences

associated with the parent company’s investments in subsidiaries as any economic benefit from thoseThe effective tax rate of 31.5% in 2020 is significantly higher than the weighted average statutory tax rate. This
investments will not be taxable at parent company level.is mainly caused by a high amount of expenses non-deductible for tax purposes like the non-deductible bank

tax and non-deductible losses with respect to goodwill impairments and impairments on associates in the
Statement of profit or loss – TaxationNetherlands and in some other European countries.| Taxation by type | | | | | | | | | | Included in “Adjustments to prior periods” is a release of a tax provision of EUR -68 million after concluding a |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | Netherlands | | | Rest of the world | | | | Total | settlement with the Australian tax authorities on an issue related to former insurance activities, which issue |
| | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | was fully indemnified by NN Group. |
| Current taxation | 355 | 488 | 587 | 1,016 | 1,481 | 1,264 | 1,371 | 1,970 | 1,851 | |
| Deferred taxation | -72 | -51 | 151 | -230 | -267 | 114 | -301 | -318 | 265 | The weighted average statutory tax rate in 2019 was equal to the rate of 25.8% in 2018. |
| | 284 | 437 | 738 | 786 | 1,214 | 1,379 | 1,070 | 1,652 | 2,116 | |

The effective tax rate of 29.2% in 2019 was higher than the weighted average statutory tax rate. This was

mainly caused by a high amount of expenses non-deductible for tax purposes with respect to interest on

ING Group Annual Report 2020 on Form 20-FF -331

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

38 Fair value of assets and liabilities

additional Tier 1 securities and non-deductible bank tax in the Netherlands and regulatory expenses non-38 Fair value of assets and liabilities

deductible for tax purposes in some other European countries.

a) Valuation Methods The effective tax rate of 30.3% in 2018 was significantly higher than the weighted average statutory tax rate.
The estimated fair values represent the price that would be received to sell an asset or paid to transfer a This was mainly caused by a high amount of expenses non-deductible for tax purposes (tax amount: EUR 346 liability in an orderly transaction between market participants at the measurement date. It is a market-based million).
measurement, which is based on assumptions that market participants would use and takes into account the This relatively high amount of non-deductible expenses is caused by the EUR 775 million characteristics of the asset or liability that market participants would take into account when pricing the asset settlement agreement reached with the Dutch Public Prosecution Service (tax amount: EUR 194 or liability.
million).

Equity – Other comprehensive incomeFair values of financial assets and liabilities are based on quoted prices in active market where available. When
such quoted prices are not available, the fair value is determined by using valuation techniques. The fair value| Income tax related to components of other comprehensive income | | | | hierarchy consists of three levels, depending upon whether fair values were determined based on (unadjusted) |
| --- | --- | --- | --- | --- |
| | 2020 | 2019 | 2018 | quoted prices in an active market (Level 1), valuation techniques with observable inputs (Level 2) or valuation |
| Unrealised revaluations financial assets at fair value through other comprehensive income and | | | | techniques that incorporate inputs which are unobservable and which have a more than insignificant impact on |
| other revaluations | -1 | 11 | 90 | the fair value of the instrument (Level 3). |

Realised gains/losses transferred to the statement of profit or loss 101223 (reclassifications from equity to profit or loss)The Covid-19 pandemic impacted the global financial markets in 2020. In the beginning of 2020, ING observed| Changes in cash flow hedge reserve | -23 | -199 | -76 | large volatility in the market resulting in widened spreads, markets distortion and illiquidity in some specific |
| --- | --- | --- | --- | --- |
| Remeasurement of the net defined benefit asset/liability | -8 | -14 | -12 | markets which has stressed ING’s valuation processes and movements in level classifications. The volatility in |
| Changes in fair value of own credit risk of financial liabilities at fair value through | -1 | 7 | -33 | the market has stabilised in the course of 2020 and has largely returned to pre-pandemic levels. In 2020, |
| profit or loss | | | | Financial Assets and Liabilities, including Level 3, continued to be valued using agreed methodologies and ING |
| Exchange rate differences and other | 62 | 7 | -18 | |
| Total income tax related to components of other comprehensive income | 40 | -176 | -25 | continued to limit the unobservable input to arrive at the most appropriate Fair Market value. |

Tax Contingency

The contingent liability (also disclosed in note 44 ‘Contingent liabilities’) in connection with taxation in the

Netherlands refers to a possible obligation arising from the deduction from Dutch taxable profit of losses

incurred by ING Bank in the United Kingdom in previous years. The existence of this obligation will be

confirmed only by the occurrence of future profits in the United Kingdom.

ING Group Annual Report 2020 on Form 20-FF -332

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

38 Fair value of assets and liabilities

b) Valuation Control frameworkc) Valuation Adjustments

The valuation control framework covers the product approval process (PARP), pricing, independent priceValuation adjustments are an integral part of the fair value. They are included as part of the fair value to verification (IPV), valuation adjustments including prudent valuation, and model use. Valuation processes areprovide better estimation of market exit value on measurement date. ING considers various valuation governed by various governance bodies, including Local Parameter Committees (LPC), Global Price Testing andadjustments to arrive at the fair value including Bid-Offer adjustments, Model Risk adjustments, Credit Impairment Committee (GP&IC), Market Data Committee (MDC), Trading Pricing Model Committee (TPMC)Valuation Adjustments (CVA), Debt valuation Adjustments (DVA), including DVA on derivatives and own issued and Model Risk Management Committee (MRMC). All relevant committees meet on a regular basisliabilities and Collateral Valuation Adjustment (CollVA) and Funding Valuation Adjustment (FVA)'.| outcome of impairments (other than loan loss provisions) and valuation processes. It oversees the quality and | Valuation adjustment on financial assets and liabilities | | |
| --- | --- | --- | --- |
| coherence of valuation methodologies and performance. The TMPC is responsible for the approval of validating | as at 31 December | 2020 | 2019 |
| pricing and fair value models. The MRMC is responsible for the approval of the validated prudent valuation | Bid/Offer | -121 | -140 |
| adjustment models and the Local Parameter Committee monitor the appropriateness of (quoted) pricing, any | Model Risk | -25 | -214 |
| other relevant market info, as well as the appropriateness of pricing models themselves related to the fair | CVA | -238 | -223 |
| | DVA | -124 | -118 |
| valued positions to which they are applied. The LPC executes valuation methodology and processes at a local | CollVA | -16 | -23 |
| level. The Market Data Committee approves and reviews all pricing inputs for the calculation of market | FVA | -111 | -76 |
| parameters. | Total Valuation Adjustments | -634 | -794 |

Financial instruments measured by internal models where one or more unobservable market inputs are significant for valuation, a difference between the transaction price and the theoretical price resulting from theBid-Offer Adjustment internal model can occur. ING defers the Day One profit and loss relating to financial instruments reported withBid-Offer adjustments are required to adjust mid-market values to appropriate bid or offer value in order to significant unobservable valuation parameters, including positions classified as Level 3 in the Fair Valuebest represent the exit value, and therefore fair value. It is applicable to financial assets and liabilities that are Hierarchy and trades related to CVA with material unobservable input but not necessarily classified as Level 3valued at mid-price initially. In practice this adjustment accounts for the difference in valuation from mid to bid in the Fair Value Hierarchy. The Day One profit and loss is amortised over the life of the instrument or until theand mid to offer for long and short exposures respectively. In principle assets are valued at the bid prices and observability changes. The impact on the profit and loss per year end 2020 is deemed to be immaterial. No Dayliabilities are valued at the offer price. For certain assets or liabilities, where a market quoted price is not one Profit and loss has been reserved for prior years. The Day one Profit and loss reserve is expected to growavailable, the price used is the fair value that is most representative within the bid-offer spread.

over the coming years when new trades requiring a Day one Profit are reported.

Model Risk Adjustment Model risk adjustments addresses the risk of possible financial losses resulting from the use of a mis-specified, misapplied, or incorrect implementation of a model.

ING Group Annual Report 2020 on Form 20-FF -333

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

38 Fair value of assets and liabilities

Credit Valuation Adjustment (CVA)d) Fair value hierarchy

Credit Valuation Adjustment (CVA) is the adjustment on the fair value of a derivative trade to account for theING Group has categorised its financial instruments that are either measured in the statement of financial possibility that a counterparty can go into default. In other words, it is the market value of counterparty creditposition at fair value or of which the fair value is disclosed, into a three level hierarchy based on the risk. On the contrary, Debit Valuation Adjustment (DVA) reflects the credit risk of ING for its counterparty. CVAobservability of the valuation inputs from (unadjusted) quoted prices. Highest priority is retained to and DVA combinedly are regarded as the Bilateral Valuation Adjustment (BVA). The calculation of CVA is based(unadjusted) quoted prices in active markets for identical assets or liabilities and the lowest priority to on the estimation of the expected exposure, the counterparties’ risk of default, and taking into account thevaluation techniques supported by unobservable inputs.
collateral agreements as well as netting agreements. The counterparties’ risk of default is measured by probability of default and expected loss given default, which is based on market information including creditTransfers into and transfers out of fair value hierarchy levels are made on a quarterly basis at the end of the default swap (CDS) spread. Where counterparty CDS spreads are not available, relevant proxy spreads arereporting period.
used. Additionally, wrong-way risk (when exposure to a counterparty is increasing and the credit quality of that counterparty deteriorates) and right -way risk (when exposure to a counterparty is increasing and the creditLevel 1 – (Unadjusted) quoted prices in active markets quality of that counterparty improves) are included in the adjustmentThis category includes financial instruments whose fair value is determined directly by reference to
(unadjusted) quoted prices in an active market. A financial instrument is regarded as quoted in an active Debit Valuation Adjustment (DVA)market if quoted prices are readily and regularly available from an exchange, dealer markets, brokered ING recognises two types of Debit Valuation Adjustments, namely DVA on derivatives, as aforementioned andmarkets, or principal to principal markets. Those prices represent actual and regularly occurring market DVA on own issued financial liabilities. The application of DVA on own issued financial liabilities are measuredtransactions with sufficient frequency and volume to provide pricing information on an ongoing basis.
at fair value through profit or loss, if the credit risk component has not been included in the prices. In this DVATransfers out of Level 1 into Level 2 or Level 3 occur when ING Group establishes that markets are no longer calculation, the default probability of the institution are estimated based on the ING Funding spread.active and therefore (unadjusted) quoted prices no longer provide reliable pricing information.

Collateral Valuation Adjustment (CollVA)Level 2 – Valuation technique supported by observable inputs
Collateral Valuation Adjustment is a derivative valuation adjustment capturing specific features of CSA (CreditThis category includes financial instruments whose fair value is based on market observables other than
Support Annex) with a counterparty that the regular valuation framework does not capture. Non-standard CSA(unadjusted) quoted prices. The fair value for financial instruments in this category can be determined by
features may include deviations in relation to the currency in which ING posts or receives collateral, deviationsreference to quoted prices for similar instruments in active markets, but for which the prices are modified
in remuneration rate on collateral which may pay lower or higher rate than overnight rate or even no interestbased on other market observable external data or reference to quoted prices for identical or similar
at all. Other deviations can be posting securities rather than cash as collateral.instruments in markets that are not active. These prices can be obtained from a third party pricing service. ING

analyses how the prices are derived and determines whether the prices are liquid tradable prices or model Funding Valuation Adjustment (FVA)based consensus prices taking various data as inputs.
ING applies an additional ‘Funding Valuation Adjustment’ (FVA) to address the funding costs associated with thecollateral funding asymmetry on uncollateralized or partially collateralized derivatives in the portfolio. ThisFor financial instruments that do not have a reference price available, fair value is determined using a valuation adjustment is based on the expected exposure profiles of the uncollateralized or partially collateralized OTCtechnique (e.g. a model), where inputs in the model are taken from an active market or are observable, such as derivatives and market-based funding spreads.interest rates and yield curves observable at commonly quoted intervals, implied volatilities, and credit spreads.

ING Group Annual Report 2020 on Form 20-FF -334

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

38 Fair value of assets and liabilities| Instruments, where inputs are unobservable are classified in this category, provided that the impact of those | Methods applied in determining fair values of financial assets and liabilities (carried at fair value) | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| unobservable inputs on the overall valuation is insignificant. The notion of significant is particularly relevant for | | | Level 1 | | Level 2 | | Level 3 | | Total |
| the distinction between Level 2 and Level 3 assets and liabilities. ING Group has chosen to align the definition | | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| of significance with the 90% confidence range as captured in the prudent value definition by EBA where | Financial Assets | | | | | | | | |
| possible. The same 90% confidence range is applied to model uncertainty. If the combined change in asset | Financial assets at fair value | | | | | | | | |
| | through profit or loss | | | | | | | | |
| value resulting from the shift of the unobservable parameters and the model uncertainty exceeds the | - Equity securities | 7,897 | 8,508 | 2 | 2 | 138 | 148 | 8,037 | 8,657 |
| threshold, the asset is classified as Level 3. A value change below the threshold results in a Level 2 | - Debt securities | 3,378 | 4,963 | 4,867 | 3,441 | 1,269 | 919 | 9,514 | 9,323 |
| classification. | - Derivatives | 1 | | 30,623 | 23,797 | 197 | 154 | 30,821 | 23,951 |

• Loans and receivables-053,73352,6681,2651,58854,99854,256| Level 3 – Valuation technique supported by unobservable inputs | | 11,276 | 13,471 | 89,225 | 79,909 | 2,870 | 2,807103,370 | | 96,187 |
  | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
  | This category includes financial instruments whose fair value is determined using a valuation technique (e.g. a | Financial assets at fair value | | | | | | | | |
  | model), for a significant part of the overall valuation is unobservable, or is determined by reference to price | through other comprehensive | | | | | | | | |
  | | income | | | | | | | | |
  | quotes where the market is considered inactive. Unobservable inputs are inputs which are based on the | - Equity securities | 1,687 | 2,024 | | | 176 | 281 | 1,862 | 2,306 |
  | Group’s own assumptions about the factors that market participants would use in pricing an asset or liability, | - Debt securities | 31,592 | 30,141 | 1,385 | 343 | | | 32,977 | 30,483 |

developed based on the best information available in the market. Unobservable inputs may include volatility,	- Loans and receivables					1,056	1,680	1,056	1,680
correlation, spreads to discount rates, default rates and recovery rates, prepayment rates, and certain credit		33,279	32,165	1,385	343	1,231	1,961	35,895	34,468
spreads. Transfers into and transfers out of fair value hierarchy levels are made on a quarterl y basis.	Financial liabilities
	Financial liabilities at fair value
	through profit or loss
Financial instruments at fair value	– Debt securities	1,124	1,081	5,231	7,034	180	184	6,534	8,299
The fair values of the financial instruments were determined as follows:	– Deposits	1		48,111	44,707	2		48,114	44,707
	– Trading securities	699	1,388	70	7	0	-0	768	1,395
	– Derivatives	55	58	27,094	23,176	217	305	27,365	23,540
		1,879	2,527	80,505	74,924	398	490	82,781	77,942

ING Group Annual Report 2020 on Form 20-FF -335

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

38 Fair value of assets and liabilities

The following methods and assumptions were used by ING Group to estimate the fair value of the financialDerivatives instruments:Instrument description:Derivatives contracts can either be exchange -traded or over the counter (OTC).
Derivatives include interest rate derivatives, FX derivatives, Credit derivatives, Equity derivatives and Equity securitiescommodity derivatives.
Instrument description:Equity securities include stocks and shares, corporate investments and private equityValuation:The fair value of exchange-traded derivatives is determined using quoted market prices in an active investments.market and are classified as Level 1 of the fair value hierarchy. For instruments that are not actively traded, fair Valuation:If available, the fair values of publicly traded equity securities and private equity securities arevalues are estimated based on valuation techniques. OTC derivatives and derivatives trading in an inactive based on quoted market prices. In absence of active markets, fair values are estimated by analysing themarket are valued using valuation techniques. The valuation techniques and inputs depend on the type of investee’s financial position, result, risk profile, prospect, price, earnings comparisons and revenue multiples.derivatives and the nature of the underlying instruments. The principal techniques used to value these Additionally, reference is made to valuations of peer entities where quoted prices in active markets areinstruments are based on (amongst others) discounted cash flows option pricing models and Monte Carlo available. For equity securities best market practice will be applied using the most relevant valuation method.simulations. These valuation models calculate the present value of expected future cash flows, based on ‘no- All non-listed equity investments, including investments in private equity funds, are subject to a standardarbitrage’ principles. The models are commonly used in the financial industry and inputs to the validation review framework which ensures that valuations reflect the fair values.models are determined from observable market data where possible. Certain inputs may not be observable in Fair value hierarchy:The majority of equity securities are publicly traded and quoted prices are readily andthe market, but can be determined from observable prices via valuation model calibration procedures. These regularly available. Hence, these securities are classified as Level 1. Equity securities which are not traded ininputs include prices available from exchanges, dealers, brokers or providers of pricing, yield curves, credit active markets mainly include corporate investments, fund investments and other equity securities and arespreads, default rates, recovery rates, dividend rates, volatility of underlying interest rates, equity prices, and classified as Level 3.foreign currency exchange rates and reference is made to quoted prices, recently executed trades, independent market quotes and consensus data, where available.
Debt securitiesFor uncollateralised OTC derivatives, ING applies Credit Valuation Adjustment to correctly reflect the Instrument description:Debt securities include government bonds, financial institutions bonds and Asset-counterparty credit risk in the valuation. See section DVA/BVA in section b) Valuation Adjustments for more backed securities (ABS).details regarding the calculation.
Valuation:Where available, fair values for debt securities are generally based on quoted market prices.Fair value hierarchy:The majority of the derivatives are classified as Level 2. Derivatives for which the input Quoted market prices are obtained from an exchange market, dealer, broker, industry group, pricing service, orcannot be implied from observable market data are classified as Level 3.
regulatory service. The quoted prices from non-exchange sources are reviewed on their tradability of market prices. If quoted prices in an active market are not available, fair value is based on an analysis of availableLoans and receivables market inputs, which includes consensus prices obtained from one or more pricing services. Furthermore, fairInstrument description:Loans and receivables are non-derivative financial assets with fixed or determinable values are determined by valuation techniques discounting expected future cash flows using a market interestpayments that are not quoted in an active market. Loans and receivables carried at fair value includes trading rate curves, referenced credit spreads, maturity of the investment, and estimated prepayment rates whereloans, being securities lending and similar agreement comparable to collateralised lending, syndicated loans, applicable.loans expected to be sold and receivables with regards to reverse repurchase transactions.
Fair value hierarchy:Government bonds and financial institutions bonds are generally traded in activeValuation:The fair value of loans and receivables are generally based on quoted market prices. The fair value markets, where quoted prices are readily and regularly available and are hence, classified as Level 1. Theof other loans is estimated by discounting expected future cash flows using a discount rate that reflects credit remaining positions are classified as Level 2 or Level 3. Asset backed securities for which no active market isrisk, liquidity, and other current market conditions. The fair value of mortgage loans is estimated by taking into available and a wide discrepancy in quoted prices exists, are classified as Level 3.account prepayment behaviour.

ING Group Annual Report 2020 on Form 20-FF -336

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

38 Fair value of assets and liabilities

Fair value hierarchy:Loans and receivables are predominantly classified as Level 2. Loans and receivables forbeing 52.6%) is based on unadjusted quoted prices in inactive markets. As ING does not generally adjust

which current market information about similar assets to use as observable, corroborated data for allquoted prices using its own inputs, there is no significant sensitivity to ING’s own unobservable inputs.

significant inputs into a valuation model is not available are classified as Level 3 and are expected to be sold as

Level 3.Furthermore, Level 3 financial assets includes approximately EUR 0.9 billion (31 December 2019: EUR 1.3

billion) which relates to financial assets that are part of structures that are designed to be fully neutral in terms

Financial liabilities at fair value through profit and lossof market risk. Such structures include various financial assets and liabilities for which the overall sensitivity to

Instrument description:Financial liabilities at fair value through profit and loss include debt securities, debtmarket risk is insignificant. Whereas the fair value of individual components of these structures may be
instruments, primarily comprised of structured notes, which are held at fair value under the fair value option.determined using different techniques and the fair value of each of the components of these structures may be
Besides that, it includes derivative contracts and repurchase agreements .sensitive to unobservable inputs, the overall sensitivity is by design not significant.

Valuation:The fair values of securities in the trading portfolio and other liabilities at fair value through profit or
loss are based on quoted market prices, where available. For those securities not actively traded, fair valuesThe remaining EUR 1.1 billion (31 December 2019: EUR 1.0 billion) of the fair value classified in Level 3 financial
are estimated based on internal discounted cash flow valuation techniques using interest rates and creditassets is established using valuation techniques that incorporates certain inputs that are unobservable.

spreads that apply to similar instruments.
Fair value hierarchy:The majority of the derivatives are classified as Level 2. Derivatives for which the inputOf the total amount of financial liabilities classified as Level 3 as at 31 December 2020 of EUR 0.4 billion (31 cannot be derived from observable market data are classified as Level 3.December 2019: EUR 0.5 billion), an amount of EUR 0.1 billion (34.6%) (31 December 2019: EUR 0.2 billion, being 39.3%) is based on unadjusted quoted prices in inactive markets. As ING does not generally adjust

e) Transfers between Level 1 and 2quoted prices using its own inputs, there is no significant sensitivity to ING’s own unobservable inputs.

No significant transfers between Level 1 and 2 and no significant changes in the valuation techniques were Furthermore, Level 3 financial liabilities includes approximately EUR 0.1 billion (31 December 2019: EUR 0.1 recorded in the reporting period 2020.
billion) which relates to financial liabilities that are part of structures that are designed to be fully neutral in

terms of market risk. As explained above, the fair value of each of the components of these structures may be

f) Level 3: Valuation techniques and inputs used sensitive to unobservable inputs, but the overall sensitivity is by design not significant.
Financial assets and liabilities in Level 3 include both assets and liabilities for which the fair value was

determined using (i) valuation techniques that incorporate unobservable inputs as well as (ii) quoted prices The remaining EUR 0.2 billion (31 December 2019: EUR 0.2 billion) of the fair value classified in Level 3 financial
which have been adjusted to reflect that the market was not actively trading at or around the balance sheet liabilities is established using valuation techniques that incorporates certain inputs that are unobservable.
date. Unobservable inputs are inputs which are based on ING’s own assumptions about the factors that market The table below provides a summary of the valuation techniques, key unobservable inputs and the lower and
participants would use in pricing an asset or liability, developed based on the best information available in the upper range of such unobservable inputs, by type of Level 3 asset/liability. The lower and upper range
circumstances. Unobservable inputs may include volatility, correlation, spreads to discount rates, default rates mentioned in the overview represent the lowest and highest variance of the respective valuation input as
and recovery rates, prepayment rates, and certain credit spreads. Valuation techniques that incorporate actually used in the valuation of the different financial instruments. Amounts and percentages stated are
unobservable inputs are sensitive to the inputs used.
unweighted. The range can vary from period to period subject to market movements and change in Level 3

position. Lower and upper bounds reflect the variability of Level 3 positions and their underlying valuation Of the total amount of financial assets classified as Level 3 as at 31 December 2020 of EUR 4.1 billion (31 inputs in the portfolio, but do not adequately reflect their level of valuation uncertainty. For valuation December 2019: EUR 4.8 billion), an amount of EUR 2.1 billion ( 52.3%) (31 December 2019: EUR 2.5 billion, uncertainty assessment, reference is made to section Sensitivity analysis of unobservable inputs (Level 3).

ING Group Annual Report 2020 on Form 20-FF -337

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

38 Fair value of assets and liabilities| Valuation techniques and range of unobservable inputs (Level 3) | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | Assets | Liabilities | Valuation techniques | Significant unobservable inputs | Lower range | | Upper range | |
| | 2020 | 2019 | 2020 | 2019 | | 2020 | 2019 | 2020 | 2019 |
| At fair value through profit or loss | | | | | | | | | |
| Debt securities | 1,269 | 919 | | Price based | Price (%) | 0% | 0% | 107% | 121% |
| Equity securities | 137 | 146 | 1 | 1Price based | Price | 0 | 0 | 5,475 | 5,475 |
| Loans and advances | 1,090 | 1,577 | 2 | Price based | Price (%) | 0% | 0% | 101% | 104% |
| | | | | Present value techniques | Credit spread (bps) | 0 | 1 | 250 | 250 |
| (Reverse) repo's | 176 | 3 | | 1Present value techniques | Interest rate (%) | 3% | 4% | 4% | 4% |
| Structured notes | | | 180 | 184Price based | Price (%) | 74% | 83% | 109% | 124% |
| | | | | Option pricing model | Equity volatility (%) | 14% | 13% | 25% | 20% |
| | | | | | Equity/Equity correlation | 0.6 | 0.6 | 0.9 | 0.8 |
| | | | | | Equity/FX correlation | -0.7 | -0.5 | 0.3 | 0.3 |
| | | | | | Dividend yield (%) | 0% | 2% | 5% | 4% |
| Derivatives | | | | | | | | | |
| – Rates | 2 | 13 | 38 | 68Option pricing model | Interest rate volatility (bps) | 12 | 17 | 70 | 137 |
| | | | | Present value techniques | Reset spread (%) | 2% | 2% | 2% | 2% |
| – FX | | 1 | | Option pricing model | FX volatility (bps) | 6 | 5 | 10 | 8 |
| – Credit | 168 | 102 | 154 | 183Present value techniques | Credit spread (bps) | 2 | 2 | 1,403 | 11,054 |
| | | | | | Jump rate (%) | n/a | 12% | n/a | 12% |
| | | | | Price based | Price (%) | 99% | n/a | 107% | n/a |
| – Equity | 24 | 42 | 20 | 50Option pricing model | Equity volatility (%) | 5% | 4% | 64% | 84% |
| | | | | | Equity/Equity correlation | 0.5 | n/a | 0.9 | n/a |
| | | | | | Equity/FX correlation | -0.6 | -0.6 | 0.1 | 0.6 |
| | | | | | Dividend yield (%) | 0% | 0% | 34% | 13% |
| | | | | Price based | Price (%) | 3% | n/a | 3% | n/a |
| – Other | 3 | 3 | 3 | 3Option pricing model | Commodity volatility (%) | 18% | 11% | 55% | 53% |
| | | | | | Com/Com correlation | n/a | 0.3 | n/a | 0.9 |
| | | | | | Com/FX correlation | -0.5 | -0.5 | -0.3 | -0.3 |
| At fair value through other comprehensive income | | | | | | | | | |
| – Loans and advances | 1,056 | 1,680 | | Present value techniques | Prepayment rate (%) | 9% | 6% | 9% | 6% |
| | | | | Price based | Price (%) | 99% | n/a | 99% | n/a |
| – Equity | 176 | 282 | | Present value techniques | Credit spread (bps) | 2 | n/a | 2 | n/a |
| | | | | | Interest rate (%) | 3% | 3% | 3% | 3% |
| | | | | Price based | Price | n/a | 1 | n/a | 187 |
| | | | | | Other | 63 | n/a | 80 | n/a |
| Total | 4,101 | 4,768 | 398 | 490 | | | | | |

ING Group Annual Report 2020 on Form 20-FF -338

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

38 Fair value of assets and liabilities

PriceInflation rate For securities where market prices are not available fair value is measured by comparison with observable pricingInflation rate is a key input to inflation linked instruments. Inflation linked instruments protect against price data from similar instruments. Prices of 0% are distressed to the point that no recovery is expected, while pricesinflation and are denominated and indexed to investment units. Interest payments would be based on the significantly in excess of 100% or par are expected to pay a yield above current market rates.inflation index and nominal rate in order to receive/pay the real rate of return. A rise in nominal coupon

payments is a result of an increase in inflation expectations, real rates, or both. As markets for these inflation Credit spreadslinked derivatives are illiquid, the valuation parameters become unobservable.
Credit spread is the premium above a benchmark interest rate, typically LIBOR or relevant Treasury instrument, required by the market participant to accept a lower credit quality. Higher credit spreads indicate lower creditDividend yield quality and a lower value of an asset.Dividend yield is an important input for equity option pricing models showing how much dividends a company is expected to pay out each year relative to its share price. Dividend yields are generally expressed as an annualised Volatilitypercentage of share price.
Volatility is a measure for variation of the price of a financial instrument or other valuation input over time.
Volatility is one of the key inputs in option pricing models. Typically, the higher the volatility, the higher value ofJump rate the option. Volatility varies by the underlying reference (equity, commodity, foreign currency and interest rates),Jump rates simulate abrupt changes in valuation models. The rate is an added component to the discount rate in by strike, and maturity of the option. The minimum level of volatility is 0% and there is no theoretical maximum.the model to include default risks.

CorrelationPrepayment rate Correlation is a measure of dependence between two underlying references which is relevant for valuingPrepayment rate is a key input to mortgage and loan valuation. Prepayment rate is the estimated rate at which derivatives and other instruments having more than one underlying reference. High positive correlation (close tomortgage borrowers will repay their mortgages early, e.g. 5% per year. Prepayment rate and reset spread are key 1) indicates strong positive (statistical) relationship, where underliers move, everything else equal, move into theinputs to mortgage linked prepayment swaps valuation same direction. The same holds for a high negative correlation.

Reset spread Reset spreads are key inputs to mortgage linked prepayment swaps valuation. Reset spread is the future spread at which mortgages will re-price at interest rate reset dates.

ING Group Annual Report 2020 on Form 20-FF -339

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

38 Fair value of assets and liabilities

Level 3: Changes during the period| 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 |
| | | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| Opening balance | | 174 | 494 | 8 | 27 | 1,381 | 1,042 | 1,244 | 1,075 | 1,961 | 2,749 | 4,768 | 5,387 |
| Realised gain/loss recognised in the statement of profit or loss during the period | 1 | –61 | 40 | –1 | –21 | –104 | –63 | –198 | –6 | –19 | –15 | –383 | –66 |
| Revaluation recognised in other comprehensive income during the period | 2 | | | | | | | | | –46 | 155 | –46 | 155 |
| Purchase of assets | | 453 | 28 | 3 | 0 | 1,180 | 1,494 | 212 | 360 | 39 | 11 | 1,887 | 1,893 |
| Sale of assets | | –73 | –53 | –8 | –3 | –973 | –832 | –270 | –212 | –419 | –680 | –1,743 | –1,780 |
| Maturity/settlement | | –39 | –11 | –1 | | –83 | –461 | –57 | –35 | –175 | –212 | –354 | –719 |
| Reclassifications | | | –279 | | | 330 | 279 | | | -105 | 3 | 224 | 4 |
| Transfers into Level 3 | | 517 | 26 | | 4 | 6 | 9 | 1 | 63 | –1 | | 523 | 103 |
| Transfers out of Level 3 | | –90 | –72 | 0 | | –528 | –88 | –138 | | | –53 | –755 | –214 |
| Exchange rate differences | | | 1 | | | -24 | –1 | | | –4 | 1 | –27 | 1 |
| Changes in the composition of the group and other changes | | | | | | 5 | 2 | | | 1 | 1 | 6 | 3 |
| Closing balance | | 882 | 174 | 1 | 8 | 1,191 | 1,381 | 796 | 1,244 | 1,231 | 1,961 | 4,101 | 4,768 |

1 Net gains/losses were recorded as ‘Valuation results and net trading income’ in the statement of profit or loss. The total amounts In 2019 the amounts reported on the line reclassifications relate to syndicated loans reclassed from trading

includes EUR 312 million (2019: 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 valueassets to financial assets mandatory at FVPL.
through other comprehensive income’.

In 2020, the transfer into Level 3 assets is mainly driven by debt securities that are part of a structure transferred into level 3 due to market illiquidity which decreased observability for an input.

Transfers out of Level 3 is mainly related to debt obligations due to the valuation no longer being significantly impacted by unobservable inputs.

In 2020, reclassification relate to a re-review of the general terms of a portfolio of securitization loans, the underlying pools of assets are exposed to residual value risk. Consequently, the portfolio of EUR 0.3 billion, which is classified at Level 3, was incorrectly measured at amortised cost and therefore reclassified to mandatorily fair value through profit or loss. Furthermore, it relates to ING’s investment in Visa preference series C shares, reference is made to Note 5 ‘Financial assets at fair value through other comprehensive income’.

ING Group Annual Report 2020 on Form 20-FF -340

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

38 Fair value of assets and liabilities| Changes in Level 3 Financial liabilities | | | | | | | | | | h) Level 3: Sensitivity analysis of unobservable inputs |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | Financial liabilities | | | | Where the fair value of a financial instrument is determined using inputs which are unobservable and which have |
| | | | | | designated as at fair | | | | | |
| | | | | | value through profit or | | | | | a more than insignificant impact on the fair value of the instrument, the actual value of those inputs at the |
| | | Trading liabilities | Non-trading derivatives | | | | loss | | Total | balance date may be drawn from a range of reasonably possible alternatives. In line with market practice the |
| | | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | upper and lower bounds of the range of alternative input values reflect a 90% level of valuation certainty. The |
| Opening balance | | 195 | 122 | 110 | 80 | 184 | 708 | 490 | 910 | actual levels chosen for the unobservable inputs in preparing the financial statements are consistent with the |
| Realised gain/loss recognised in | | | | | | | | | | valuation methodology used for fair valued financial instruments. |
| the statement of profit or loss | | -2 | 102 | 20 | -16 | -22 | 32 | -4 | 118 | |
| during the period | 1 | | | | | | | | | |
| Additions | | 55 | 72 | 19 | 46 | 662 | 35 | 736 | 154 | In practice valuation uncertainty is measured and managed per exposure to individual valuation inputs (i.e. risk |
| Redemptions | | -116 | -30 | -45 | -0 | -90 | -10 | -250 | -40 | factors) at portfolio level across different product categories. Where the disclosure looks at individual Level 3 |
| Maturity/settlement | | -11 | -32 | -52 | | -83 | -479 | -146 | -511 | inputs the actual valuation adjustments may also reflect the benefits of portfolio offsets. |
| Transfers into Level 3 | | 170 | 13 | 8 | | 267 | 49 | 445 | 62 | |
| Transfers out of Level 3 | | -111 | -52 | -23 | | -738 | -150 | -873 | -202 | |
| Closing balance | | 180 | 195 | 39 | 110 | 180 | 184 | 398 | 490 | This disclosure does not attempt to indicate or predict future fair value movement. The numbers in isolation give |

instruments (for example as a hedge) that are classified as Level 2.
1 Net gains/losses were recorded as ‘Valuation results and net trading income’ in the statement of profit or loss. The total amount includes EUR -4 million (2019: EUR 115 million) of unrealised gains and losses recognised in the statement of profit or loss.
The valuation uncertainty in the table below is broken down by related risk class rather than by product. The

possible impact of a change of unobservable inputs in the fair value o of financial instruments where In 2020, the transfers into level 3 mainly consisted of structured notes, measured designated as at fair value
unobservable inputs are significant to the valuation is as follows:
through profit or loss, which were transferred into Level 3 due to market illiquidity as a result of the Covid-19

pandemic. This caused the valuation being significantly impacted by unobservable inputs.

In 2019 and 2020, financial liabilities mainly (long term) repurchase transactions were transferred out of Level 3Sensitivity analysis of Level 3 instruments

mainly due to the valuation not being significantly impacted by unobservable inputs.Positive fair valueNegative fair value movements frommovements from using reasonableusing reasonable g) Recognition of unrealised gains and losses in Level 3possible alternativespossible alternatives
Amounts recognised in the statement of profit or loss relating to unrealised gains and losses during the year that2020201920202019| relates to Level 3 assets and liabilities are included in the line item ‘Valuation results and net trading income’ in | Equity (equity derivatives, structured notes) | 33 | 35 | -14 |
| --- | --- | --- | --- | --- |
| the statement of profit or loss. | Interest rates (Rates derivatives, FX derivatives) | 20 | 40 | -1 |
| | Credit (Debt securities, Loans, structured notes, credit derivatives) | 43 | 10 | -27 |
| In 2019 and 2020, unrealised gains and losses that relate to ‘Financial assets at fair value through | | 96 | 85 | -42 |

other comprehensive income or Debt Instruments at fair value through other comprehensive income.

ING Group Annual Report 2020 on Form 20-FF -341

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

38 Fair value of assets and liabilities

i) Financial instruments not measured at fair value The following table presents the estimated The fair values of the financial instruments not measured at fair value in the statement of financial position. The aggregation of the fair values presented below does not represent, and should not be construed as representing, the underlying value of ING Group.

ING Group Annual Report 2020 on Form 20-FF -342

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

38 Fair value of assets and liabilities

Methods applied in determining fair values of financial assets and liabilities (carried at amortised cost)

Carrying amount Carrying AmountLevel 1Level 2Level 3Total fair value approximates fair value| | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Financial Assets | | | | | | | | | | | | |
| Loans and advances to banks | 25,364 | 35,136 | 2,165 | 2,367 | 0 | 728 | 7,763 | 11,469 | 15,611 | 20,570 | 25,539 | 35,133 |
| Loans and advances to customers | 593,970 | 608,029 | 17,486 | 20,343 | 0 | 165 | 14,595 | 12,622 | 576,659 | 588,063 | 608,740 | 621,194 |
| Securities at amortised cost | 50,587 | 46,108 | 0 | –0 | 49,109 | 43,784 | 2,550 | 2,304 | 622 | 840 | 52,281 | 46,928 |
| | 669,921 | 689,273 | 19,651 | 22,710 | 49,109 | 44,677 | 24,908 | 26,395 | 592,892 | 609,473 | 686,560 | 703,255 |

Financial liabilities
Deposits from banks		78,098	34,826	3,918	4,596		0	68,473	23,900	6,014	6,589	78,405	35,086
Customer deposits	1	609,517	574,355	580,262	530,626		0	14,007	19,802	15,704	24,626	609,972	575,055
Debt securities in issue		82,065	118,528	–0		51,906	57,563	24,005	42,638	6,449	18,642	82,360	118,844
Subordinated loans		15,805	16,588	–0	–0	15,013	14,552	1,161	2,701			16,174	17,253
		785,484	744,297	584,180	535,222	66,919	72,116	107,645	89,042	28,167	49,858	786,911	746,239

1 The prior period has been updated to improve consistency and comparability of customer deposits

Deposits from banks The following methods and assumptions were used by ING Group to estimate the fair value of the financialThe fair values of payables to banks are generally based on quoted market prices or, if not available, on estimates instruments not measured at fair value .based on discounting future cash flows using available market interest rates and credit spreads for payables to banks with similar characteristics.

Loans and advances to banks

The fair values of receivables from banks are generally based on quoted market prices or, if unquoted, onCustomer deposits
estimates based on discounting future cash flows using available market interest rates including appropriateThe carrying values of customer deposits with an immediate on demand features approximate their fair values.
spreads offered for receivables with similar characteristics, similar to Loans and advances to customers describedThe fair values of deposits with fixed contractual terms have been estimated based on discounting future cash
below.flows using the interest rates currently applicable to deposits of similar maturities.

Loans and advances to customersDebt securities in issue For loans and advances that are repriced frequently and have had no significant changes in credit risk, carryingThe fair value of debt securities in issue is generally based on quoted market prices, or if not available, on amounts represent a reasonable estimate of the fair value. The fair value of other loans is estimated byestimated prices by discounting expected future cash flows using a current market interest rate and credit discounting expected future cash flows using a discount rate that reflects credit risk, liquidity, and other currentspreads applicable to the yield, credit quality and maturity.
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.

ING Group Annual Report 2020 on Form 20-FF -343

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

39 Derivatives and hedge accounting

Subordinated loansImpact of Brexit

The fair value of publicly traded subordinated loans are based on quoted market prices when available. WhereAs a result of Brexit and the associated uncertainty of the ability of United Kingdom based clearing houses to

no quoted market prices are available, fair value of the subordinated loans is estimated using discounted cashoffer clearing services to European clients such as ING, ING has reduced its exposure to UK based clearing houses.

flows based on interest rates and credit spreads that apply to similar instruments.In 2020 ING Group transferred part of the derivative exposures to an European Union based clearing house,

which resulted in de-designation and re-designation of hedge accounting relationships.

39 Derivatives and hedge accounting

ING Group migrated various portfolios of interest rate swaps , which were partly designated in macro cash flow

Use of derivatives hedges. For discontinued cash flow hedges, the fair value changes accumulated in the cash flow hedge reserve of ING Group uses derivatives for economic hedging purposes to manage its asset and liability portfolios and EUR 884 million remains in Other Comprehensive Income and is recycled to the statement of profit or loss in the structural risk positions. The primary objective of ING Group’s hedging activities is to manage the risks which periods in which the hedged item affects profit or loss. The de-designation and re-designation of these hedge arises from structural imbalances in the duration and other profiles of its assets and liabilities. The objective of accounting relationships did not result in material impact in the statement of profit or loss of 2020.
economic hedging is to enter into positions with an opposite risk profile to an identified risk exposure to reduce

that exposure. The main risks which are being hedged are interest rate risk and foreign currency exchange rate

IBOR transition risk. These risks are primarily hedged with interest rate swaps, cross currency swaps and foreign exchange Following the decision by global regulators to seek alternatives for current critical benchmarks in use in various forwards/swaps.
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.
ING Group uses credit derivatives to manage its economic exposure to credit risk, including total return swaps

and credit default swaps, to sell or buy protection for credit risk exposures in the loan, investment, and trading Reference is made to note Risk management/ IBOR Transition for more information on to what rates ING is portfolios. Hedge accounting is not applied in relation to these credit derivatives.
exposed and on how ING is managing the transition to alternative benchmark rates.

At the reporting date, ING Group assessed the extent to which hedge relationships are subject to uncertainties

Hedge accounting driven by the IBOR reform.
Derivatives that qualify for hedge accounting under IFRS are classified and accounted for in accordance with the ING applies fair value and cash flow hedge accounting in accordance with IAS 39, and interest rate and foreign nature of the instrument hedged and the type of IFRS hedge model that is applicable. The three models currency risks are designated as hedged risks in various micro and macro models.
applicable under IFRS are: fair value hedge accounting, cash flow hedge accounting, and hedge accounting of a Except for EONIA and EUR LIBOR all IBOR’s in scope of ING’s program are a component of either hedging net investment in a foreign operation. How and to what extent these models are applied are described under the instrument and/or hedged item where the interest rate and/or foreign currency risk are the designated hedged relevant headings below. The company’s detailed accounting policies for these three hedge models are set out in risk. The hedged exposures are mainly loan portfolios, issued debt securities and purchased debt instruments.
paragraph 1.7 ‘Financial instruments’ of Note 1 ‘Basis of preparation and accounting policies’.

ING Group early adopted the amendments to IAS 39 issued in September 2019 to these hedging relationships

Impact of Covid-19 directly affected by IBOR reform (Phase 1). This excludes EURIBOR hedges as EURIBOR is Benchmarks Regulation

The impact of Covid-19 on timing or amount of cash flows of our products that are designated as hedged items incompliant.

hedge accounting programs did not result in hedge ineffectiveness during the reporting period.

ING Group Annual Report 2020 on Form 20-FF -344

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

39 Derivatives and hedge accounting

LIBOR indexed fair value and cash flow hedges are expected to be directly affected by the uncertainties arisingFair value hedge accounting

from the IBOR reform. In particular, uncertainties over the timing and amount of the replacement rate mayING Group’s fair value hedges principally consist of interest rate swaps that are used to protect against changes
impact the effectiveness and highly probable assessment.in the fair value of fixed-rate instruments due to movements in market interest rates. ING Group’s approach to

manage market risk, including interest rate risk, is discussed in ‘Risk management –Market risk’. ING Group’s For these affected fair value and cash flow hedge relationships ING Group assumes that the LIBOR based cashexposure to interest rate risk is disclosed in paragraph ‘Interest rate risk in banking book’.
flows from the hedging instrument and hedged item will remain unaffected.

The same assumption is used while assessing the likelihood of occurrence of the forecast transactions that areBy using derivative financial instruments to hedge exposures to changes in interest rates, ING Group also exposes
subject to cash flow hedges. The cash flow hedges directly impacted by the IBOR reform still meet the highlyitself to credit risk of the derivative counterparty, which is not offset by the hedged item. ING Group minimises
probable requirement assuming the respective LIBOR benchmark on which the hedged cash flows are based arecounterparty credit risk in derivative instruments by clearing most of the derivatives through Central Clearing
not altered as a result of the reform.Counterparties. In addition ING Group only enters 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 that

are used in the Group's hedge accounting relationships for which the Phase 1 amendments to IAS39 wereING Group applies fair value hedge accounting on micro level in which one hedged item is hedged with one or
applied:multiple hedging instruments. Micro fair value hedge accounting is mainly applied on issued debt securities and| Notional amounts of Hedging instruments in EUR as at 31 December | | | |
| --- | --- | --- | --- |
| Benchmark | 2020 | 2019 | Before fair value hedge accounting is applied by ING Group, ING Group determines whether an economic |
| USD LIBOR | 41,020 | 45,496 | relationship between the hedged item and the hedging instrument exists based on an evaluation of the |
| GBP LIBOR | 1,500 | 2,184 | quantitative characteristics of these items and the hedged risk that is supported by quantitative analysis. ING |
| JPY LIBOR | 410 | 2,922 | |
| CHF LIBOR | 315 | 313 | Group considers whether the critical terms of the hedged item and hedging instrument closely align when |

item and the hedging instrument respond similarly to similar risks. In addition ING is mainly using regression

analysis to assess whether the hedging instrument is expected to be and has been highly effective in offsetting Approximately 85% (31 December 2019: 68%) of the above notional amounts have a maturity date beyond 2021.
changes in the fair value of the hedged item.
In addition, approximately 63% of the above notional amounts for USD LIBOR have a maturity date beyond June

2023.
ING Group uses the following derivative financial instruments in a fair value hedge accounting relationship:

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 did not early adopt Phase 2 amendments in 2020. Refer to sections 1.4.2 and 1.7.4. of Note 1 ‘Basis of

preparation and accounting policies’ for more information on the Phase 2 amendments.

ING Group Annual Report 2020 on Form 20-FF -345

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

39 Derivatives and hedge accounting

Gross carrying value of derivatives designated under fair value hedge accounting

AssetsLiabilitiesAssetsLiabilitiesMaturity derivatives designated in fair value hedging

2020202020192019| As at 31 December | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Hedging instrument on interest rate risk | | | | | | Less than | 1 to 3 | 3 to 12 | 1 to 2 | 2 to 3 | 3 to 4 | 4 to 5 | |
| – Interest rate swaps | 4,895 | 2,050 | 5,133 | 5,486 | As at 31 December 2020 | 1 month | months | months | year | years | years | years>5 years | Total |
| – Other interest derivatives | 44 | 110 | 87 | 70 | Hedging instrument on | | | | | | | | |
| | | | | | interest rate risk | | | | | | | | |

	– Interest rate swaps	151,153	1,263	6,704	6,170	4,281	4,347	16,548	40,481
	– Other interest derivatives	-1	-68	-283	-434	-370	-302	-315	394-1,378
The derivatives used for fair value hedge accounting are included in the statement of financial position line-item	As at 31 December 2019
‘Financial assets at fair value through profit or loss – Non-trading derivatives’ for EUR 486 million (2019: EUR 524	Hedging instrument on
million) respectively ‘Financial liabilities at fair value through profit or loss – Non-trading derivatives’ EUR 444	interest rate risk
million (2019: EUR 873 million). The remaining derivatives are offset with other derivatives and collaterals paid or	- Interest rate swaps	-59	6126,394	12,936	7,637	7,195	3,266	16,494	54,475
received.	– Other interest derivatives	-20	-22	58	-242	-404	-290	-441,075		110

For our main currencies the average fixed rate for interest rate swaps used in fair value hedge accounting are Gains and losses on derivatives designated under fair value hedge accounting are recognised in the statement of 2.79% (2019: 2.98%)for EUR and 3.76% (2019: 3.55%) for USD.
profit or loss. The effective portion of the fair value change on the hedged item is also recognised in the

statement of profit or loss. As a result, only the net accounting ineffectiveness has an impact on the net result.
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.

ING Group Annual Report 2020 on Form 20-FF -346

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

39 Derivatives and hedge accounting

Hedged items included in a fair value hedging relationship

Change in fair valueHedge ineffectiveness Accumulated amount of fair value hedgeused for measuringrecognised in the adjustment on the hedged item included inineffectiveness for theChange in fair valuestatement of profit or Carrying amount of the hedged itemsthe carrying amount of the hedged itemperiodhedge instrumentsloss gain (+) / loss (-)

AssetsLiabilitiesAssetsLiabilities| – Amounts due from banks | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| – Debt securities at fair value through other comprehensive income | 20,164 | | n/a | | 552 | | |
| – Loans at FVOCI | | | n/a | | -0 | | |
| – Loans and advances to customers | 876 | | 121 | | 25 | | |
| – Debt instruments at amortised cost | 4,222 | | 501 | | 170 | | |
| – Debt securities in issue | | 54,043 | | 3,443 | -878 | | |
| – Subordinated loans | | 13,309 | | 510 | -397 | | |
| – Amounts due to banks | | | | | -5 | | |
| – Customer deposits and other funds on deposit | | 54 | | 0 | -9 | | |
| – Discontinued hedges | | | 561 | 2 | | | |
| Total | 25,262 | 67,406 | 1,183 | 3,956 | -541 | 538 | -4 |
| As at 31 December 2019 | | | | | | | |
| Interest rate risk | | | | | | | |
| – 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 |

The main sources of ineffectiveness are:
◾differences in maturities of the hedged item(s) and hedging instrument(s);There were no other sources of ineffectiveness in these hedging relationships.
◾different interest rate curves applied to discount the hedged item(s) and hedging instrument(s);
◾differences in timing of cash flows of the hedged item(s) and hedging instrument(s).

ING Group Annual Report 2020 on Form 20-FF -347

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

39 Derivatives and hedge accounting

Cash flow hedge accountingING Group determines an economic relationship between the cash flows of the hedged item and the hedging

ING Group’s cash flow hedges mainly consist of interest rate swaps and cross-currency swaps that are used toinstrument based on an evaluation of the quantitative characteristics of these items and the hedged risk that is
protect against the exposure to variability in future cash flows on non-trading assets and liabilities that bearsupported by quantitative analysis. ING Group considers whether the critical terms of the hedged item and
interest at variable rates or are expected to be refunded or reinvested in the future. The amounts and timing ofhedging instrument closely align when assessing the presence of an economic relationship. ING Group evaluates
future cash flows, representing both principal and interest flows, are projected for each portfolio of financialwhether the cash flows of the hedged item and the hedging instrument respond similarly to the hedged risk, such
assets and liabilities, based on contractual terms and other variables including estimates of prepayments. Theseas the benchmark interest rate of foreign currency. In addition (for macro FX hedging relationships) a regression
projected cash flows form the basis for identifying the notional amount subject to interest rate risk or foreignanalysis is performed to assess whether the hedging instrument is expected to be and has been highly effective in
currency exchange rate risk that is designated under cash flow hedge accounting.offsetting changes in the fair value of the hedged item.

ING Group’s approach to manage market risk, including interest rate risk and foreign currency exchange rate risk,ING Group uses the following derivative financial instruments in a cash flow hedge accounting relationship:| exposures to which it applies hedge accounting by assessing the potential impact of changes in interest rates and | Gross carrying value of derivatives used for cash flow hedge accounting | | | | |
| --- | --- | --- | --- | --- | --- |
| foreign currency exchange rates on the future cash flows from its floating-rate assets and liabilities. This | | AssetsLiabilities | | AssetsLiabilities | |
| assessment is performed using analytical techniques. | | 2020 | 2020 | 2019 | 2019 |
| | As at 31 December | | | | |
| As noted above for fair value hedges, by using derivative financial instruments to hedge exposures to changes in | Hedging instrument on interest rate risk | | | | |
| interest rates and foreign currency exchange rates, ING Group exposes itself to credit risk of the derivative | – Interest rate swaps | 2,271 | 545 | 2,615 | 2,848 |
| counterparty, which is not offset by the hedged items. This exposure is managed similarly to that for fair value | Hedging instrument on combined interest and FX rate risk | | | | |
| | – Cross currency interest rate derivatives | 774 | 21 | 358 | 158 |
| hedges. | | | | | |

Gains and losses on the effective portions of derivatives designated under cash flow hedge accounting are The derivatives used for cash flow hedge accounting are included in the statement of financial position line-item
recognised in Other Comprehensive Income. Interest cash flows on these derivatives are recognised in the ‘Financial assets at fair value through profit or loss – Non-trading derivatives’ EUR 1,376 million (2019: EUR 677
statement of profit or loss in ‘Net interest income’ consistent with the manner in which the forecasted cash flows million) respectively ‘Financial liabilities at fair value through profit or loss – Non-trading derivatives’ EUR 230
affect net result. The gains and losses on ineffective portions of such derivatives are recognised immediately in million (2019: EUR 339 million). The remaining derivatives are offset with other derivatives and collaterals paid
the statement of profit or loss in ‘Valuation results and net trading income’.
or received.

For the main currencies the average fixed rate for interest rate swaps used in cash flow hedge accounting are -

0.15% (2019: 0.54%) for EUR, 1.74% (2019: 2.38%) for PLN, 2.31% (2019: 2.51%) for USD and 0.82% (2019: 1.50%)

for AUD. The average currency exchange rates for cross currency swaps used in cash flow hedge accounting is for

EUR/USD 0.95 (2019: 1.11) and for EUR/AUD 1.60 (2019: 1.55).

ING Group Annual Report 2020 on Form 20-FF -348

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

39 Derivatives and hedge accounting

The following table shows the net notional amount of derivatives designated in cash flow hedging split into the maturity of the instruments. The net notional amounts presented in the table are a combination of payer (+) andThe following table shows the cash flow hedge accounting impact on profit or loss and comprehensive income:
receiver (-) swaps.

Maturity derivatives designated in cash flow hedging

As at 31 DecemberLess than 11 to 33 to 123 to 4 2020monthmonthsmonths1 to 2 year2 to 3 yearsyears4 to 5 years>5 yearsTotal Hedging instrument on interest rate risk

– Interest rate swaps-248-92-2,061-4,896-1,832-5,772-3,466-19,537-37,904

Hedging instrument on combined interest and FX rate risk| – Cross currency | -160 | -1,666 | -2,828 | -2,446 | -3,493 | -1,324 | 194 | -210-11,934 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| interest rate | | | | | | | | |
| derivatives | | | | | | | | |

As at 31 December

2019

Hedging instrument on interest rate risk

– Interest rate swaps-401580-2,591-6,512-5,541-5,788-5,364-23,009-48,627| and FX rate risk | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| – Cross currency | | | | | | | |
| interest rate | -1,098 | -2,068 | -5,044 | -2,509 | -1,473 | 3104 | -12,086 |
| derivatives | | | | | | | |

ING Group Annual Report 2020 on Form 20-FF -349

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

39 Derivatives and hedge accounting

Cash flow hedging – impact of hedging instruments on the statement of profit or loss and other comprehensive income

Change in value used forCarrying amountHedge ineffectiveness calculating hedgecash flow hedgeAmount reclassified fromCash flow is noChange in value ofrecognised in the ineffectiveness for thereserve at the end ofCFH reserve to profit orlonger expectedhedging instrumentstatement of profit or periodthe reporting period1lossto occurrecognised in OCIloss, gain (+) / loss (-)| Interest rate risk on; | | | | | |
| --- | --- | --- | --- | --- | --- |
| – Floating rate lending | -784 | 1,310 | -97 | | |
| – Floating rate borrowing | 136 | -306 | 33 | | |
| – Other | -107 | 36 | 19 | | |
| – Discontinued hedges | | 1,037 | -236 | | |
| Total interest rate risk | -755 | 2,077 | -281 | 830 | -6 |
| Combined interest and FX rate risk on; | | | | | |
| – Floating rate lending | -26 | -35 | -256 | | |
| – Floating rate borrowing | 29 | -42 | -10 | | |
| – Other | -0 | -0 | -3 | | |
| – Discontinued hedges | | | -26 | | |
| Total combined interest and Fx | 3 | -78 | -295 | 263 | 1 |
| Total cash flow hedge | -753 | 1,999 | -576 | 1,093 | -5 |

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

1 The carrying amount is the gross amount, excluding tax adjustments.differences in timing of cash flows of the hedged item(s) and hedging instrument(s);
mismatches in reset frequency between hedged item and hedging instrument.

The main sources of ineffectiveness for cash flow hedges are:

ING Group Annual Report 2020 on Form 20-FF -350

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

39 Derivatives and hedge accounting

As a result of interest rate developments in 2019 ING Group de-designated cash flow hedge accounting portfoliosThe derivatives used for net investment hedge accounting are included in the statement of financial position line-

with a total notional value of approximately EUR 25 billion.item ‘Financial assets at fair value through profit or loss – Non-trading derivatives’ EUR 69 million (2019: EUR 23

million) respectively ‘Financial liabilities at fair value through profit or loss – Non trading derivatives’ EUR 98

Hedges of net investments in foreign operationsmillion (2019: EUR 51 million). The remaining derivatives are offset with other derivatives and collaterals paid or

A foreign currency exposure arises from a net investment in subsidiaries that have a different functional currencyreceived.

from the presentation currency of ING Group. The risk arises from the fluctuation in spot exchange rates
between the functional currency of the subsidiaries and ING Group’s presentation currency, which causes theFor ING Group’s main currencies the average exchange rates used in net investment hedge accounting for 2020
amount of the net investment to vary in the consolidated financial statements of ING Group. This risk may have aare EUR/USD 1.14 (2019: 1.12), EUR/PLN 4.45 (2019: 4.30), EUR/AUD 1.65 (2019: 1.61) and EUR/THB 35.71
significant impact on ING Group’s financial statements. ING Group’s policy is to hedge these exposures only when(2019: 34.79).

not doing so it is expected to have a significant impact on the regulatory capital ratios of ING Group and its subsidiaries.The following table shows the notional amount of derivatives designated in net investment hedging split into the maturity of the instruments:

ING Group’s net investment hedges principally consist of derivatives (including currency forwards and swaps) and

Maturity derivatives designated in net investment hedging non-derivative financial instruments such as foreign currency denominated funding. When the hedging| instrument is foreign currency denominated debt, ING Group assesses effectiveness by comparing past changes | As at 31 December | Less than | 1 to 3 | 3 to 12 | | 2 to 3 | 3 to 4 | 4 to 5 | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| in the carrying amount of the debt that are attributable to a change in the spot rate with past changes in the | 2020 | 1 month | months | months1 to 2 year | | years | years | years>5 years | Total |
| investment in the foreign operation due to movement in the spot rate (the offset method). | – FX forwards and | | | | | | | | |
| | cross currency | -3,825 | -375 | | -580 | | | | -4,780 |
| | swaps | | | | | | | | |
| Gains and losses on the effective portions of derivatives designated under net investment hedge accounting are | – Other FX | | | | | | | | |
| recognised in Other Comprehensive Income. The balance in equity is recognised in the statement of profit or loss | derivatives | -8 | | | | | | | -8 |

when the related foreign subsidiary is disposed. The gains and losses on ineffective portions are recognised
immediately in the statement of profit or loss.As at 31 December

2019
– FX forwards and ING Group has the following derivative financial instruments used for net investment hedging;
Cross currency-3,179-999-54-4,232| Gross carrying value of derivatives used for net investment hedging | | | | |
| --- | --- | --- | --- | --- |
| | Assets | Liabilities | Assets | Liabilities |
| | 2020 | 2020 | 2019 | 2019 |
| As at 31 December | | | | |
| – FX forwards and Cross currency swaps | 69 | 98 | 23 | 51 |

ING Group Annual Report 2020 on Form 20-FF -351

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

40 Assets by contractual maturity

The effect of the net investment hedge accounting in the statement of profit or loss and other comprehensive1 The carrying amount is the gross amount, excluding tax adjustments.
income is as follows:

40 Assets by contractual maturity Net investment hedge accounting – Impact on statement of profit or loss and other comprehensive income| | | | | | | | | Amounts presented in these tables by contractual maturity are the amounts as presented in the statement of |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | Change in value | | | | | | Hedge | financial position and are discounted cash flows. Reference is made to ‘Risk Management – Funding and liquidity |
| | used for | Carrying amount | | | Change in value | ineffectiveness | | risk’. |
| | calculating | net investment | Hedged item | | of hedging | recognised in the | | |
| | hedge | hedge reserve at | | affected | instrument | statement of | | |
| | ineffectiveness | the end of the | statement of | | recognised in | profit or loss, | | |
| As at 31 December 2020 | for the period | reporting period | 1profit or loss | | OCI | gain(+) / Loss(-) | | |
| Investment in foreign operations | | -122 | 553 | -11 | | 121 | 1 | |
| Discontinued hedges | | | -210 | | | | | |
| As at 31 December 2019 | | | | | | | | |
| Investment in foreign operations | | 134 | 440 | 44 | | -134 | 0 | |
| Discontinued hedges | | | -210 | | | | | |

ING Group Annual Report 2020 on Form 20-FF -352

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

40 Assets by contractual maturity| Assets by contractual maturity | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2020 | | Less than 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 | | | 111,087 | | | | | | | 111,087 |
| Loans and advances to banks | | | 15,786 | 2,796 | 3,419 | 3,093 | 270 | | | 25,364 |
| Financial assets at fair value through profit or loss | | | | | | | | | | |
| – Trading assets | | | 12,100 | 6,567 | 9,206 | 10,206 | 13,277 | | | 51,356 |
| – Non-trading derivatives | | | 495 | 446 | 644 | 1,252 | 746 | | | 3,583 |
| – Mandatorily at fair value through profit or loss | | | 26,854 | 11,376 | 3,472 | 1,153 | 1,222 | | 228 | 44,305 |
| – Designated as at fair value through profit or loss | | | 248 | 26 | 631 | 657 | 2,564 | | | 4,126 |
| Financial assets at fair value through other comprehensive income | | | | | | | | | | |
| – Equity securities | | | | | | | | | 1,862 | 1,862 |
| – Debt securities | | | 841 | 985 | 5,175 | 11,576 | 14,400 | | | 32,977 |
| – Loans and advances | | | 32 | 34 | 73 | 407 | 509 | | | 1,056 |
| Securities at amortised cost | | | 2,104 | 2,444 | 3,943 | 24,298 | 17,798 | | | 50,587 |
| Loans and advances to customers | | | 50,293 | 19,788 | 48,261 | 176,047 | 299,581 | | | 593,970 |
| Other assets | 2 | | 3,797 | 312 | 1,148 | 1,934 | 1,283 | | 5,142 | 13,617 |
| Total assets | | | 223,636 | 44,775 | 75,973 | 230,625 | 351,649 | | 7,232 | 933,891 |
| 2019 | | | | | | | | | | |
| 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 |
| Financial assets at fair value through 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 |
| Other assets | | | 4,618 | 369 | 1,176 | 1,683 | 1,251 | | 6,292 | 15,389 |
| Total assets | | | 172,793 | 43,842 | 71,460 | 236,784 | 354,885 | | 8,756 | 888,520 |

1 Includes assets on demand.
2 Includes other financial assets such as assets held for sale, current and deferred tax assets as presented in the consolidated statement of the financial position. Additionally, non-financial assets are included in that position where maturities are not applicable as property and equipment and investments in associates and joint ventures. Due to their nature non-financial assets consist mainly of assets expected to be recovered after more than 12 months

ING Group Annual Report 2020 on Form 20-FF -353

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

41 Liabilities and off-balance sheet commitments by maturity

41 Liabilities and off-balance sheet commitments by maturity

The tables below include all liabilities and off-balance sheet commitments by maturity based on contractual, undiscounted cash flows. These balances are included in the maturity analysis as follows:
Perpetual liabilities are included in column ‘Maturity not applicable’.
Derivative liabilities are included on a net basis if cash flows are settled net. For other derivative liabilities the contractual gross cash flow payable is included.
Undiscounted future coupon interest on financial liabilities payable is included in a separate line and in the relevant maturity bucket.
Non-financial liabilities are included based on a breakdown of the amounts per statement of financial position, per expected maturity.
Loans and other credit-related commitments are classified on the basis of the earliest date they can be drawn down.

ING Group’s expected cash flows on some financial liabilities vary significantly from contractual cash flows.
Principal differences are in demand deposits from customers that are expected to remain stable or increase and in unrecognised loan commitments that are not all expected to be drawn down immediately. Reference is made to the liquidity risk paragraph in ‘Risk Management – Funding and liquidity risk’ for a description on how liquidity risk is managed.

ING Group Annual Report 2020 on Form 20-FF -354

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

41 Liabilities and off-balance sheet commitments by maturity| Liabilities and off-balance sheet commitments by maturity | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | Maturity not | | | |
| 2020 | | Less than 1 month | 1 | 1–3 months | 3–12 months | 1–5 years | Over 5 years | applicable | Adjustment | 2 | Total |
| Deposits from banks | | | 11,080 | 537 | 772 | 64,147 | 1,722 | | -161 | | 78,098 |
| Customer deposits | | | 587,137 | 9,662 | 8,208 | 2,169 | 2,207 | | 134 | | 609,517 |
| Financial liabilities at fair value through profit or loss | | | | | | | | | | | |
| – Other trading liabilities | | | 4,940 | 1,197 | 204 | 268 | 323 | | 39 | | 6,972 |
| – Trading derivatives | | | 2,179 | 2,297 | 4,250 | 9,589 | 7,794 | | -373 | | 25,737 |
| – Non-trading derivatives | | | 283 | 178 | 204 | 468 | 454 | | 41 | | 1,629 |
| – Designated at fair value through profit or loss | | | 32,540 | 8,506 | 1,330 | 2,181 | 3,247 | 11 | 631 | | 48,444 |
| Debt securities in issue | | | 5,144 | 8,428 | 13,441 | 25,752 | 25,430 | | 3,868 | | 82,065 |
| Subordinated loans | | | | | | 661 | 8,815 | 5,670 | 659 | | 15,805 |
| Lease liabilities | | | 17 | 42 | 166 | 611 | 520 | | -18 | | 1,339 |
| Financial liabilities | | | 643,321 | 30,848 | 28,576 | 105,846 | 50,512 | 5,680 | 4,821 | | 869,605 |
| Other liabilities | 3 | | 6,830 | 568 | 2,681 | 765 | 802 | | | | 11,646 |

Total liabilities650,15031,41631,257106,61151,3155,6804,821881,250

Coupon interest due on financial liabilities2294901,1553,7323,2492929,147| – Discounted bills | | | | | |
| --- | --- | --- | --- | --- | --- |
| – Guarantees | 22,836 | | | 550 | 23,386 |
| – Irrevocable letters of credit | 14,016 | | | | 14,016 |
| – other | 50 | | 47 | | 97 |
| Guarantees issued by ING Groep N.V. | 292 | | | | 292 |
| Irrevocable facilities | 124,991 | 0 | | | 124,991 |
| | 162,186 | 0 | 47 | 550 | 162,782 |

1 Includes liabilities on demand.
2 This column reconciles the contractual undiscounted cash flows on financial liabilities to the statement of financial position values. The adjustments mainly relate to the impact of discounting and fair value hedge adjustments, and for derivatives, to the fact that the contractual cash flows are presented on a gross basis (unless the cash flows are actually settled net).
3 Includes Other liabilities, Current and deferred tax liabilities, and Provisions as presented in the Consolidated statement of financial position.

ING Group Annual Report 2020 on Form 20-FF -355

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

41 Liabilities and off-balance sheet commitments by maturity| Liabilities and off-balance sheet commitments by maturity | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2019 | 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 | | 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 liabilities37,9168202,3617281,06112,886

Total liabilities594,67741,57370,01765,88852,9706,9484,557836,631

Coupon interest due on financial liabilities5746921,4825,7904,35537913,271| – Discounted bills | | | | |
| --- | --- | --- | --- | --- |
| – Guarantees | 26,952 | | 550 | 27,502 |
| – Irrevocable letters of credit | 16,340 | | | 16,340 |
| – other | 57 | 75 | | 131 |
| Guarantees issued by ING Groep N.V. | 319 | | | 319 |
| Irrevocable facilities | 120,002 | | | 120,002 |
| | 163,670 | 75 | 550 | 164,296 |

1 Includes liabilities on demand.
2 This column reconciles the contractual undiscounted cash flows on financial liabilities to the statement of financial position values. The adjustments mainly relate to the impact of discounting and fair value hedge adjustments, and for derivatives, to the fact that the contractual cash flows are presented on a gross basis (unless the cash flows are actually settled net).
3 Includes Other liabilities, Current and deferred tax liabilities, and Provisions as presented in the Consolidated statement of financial position.
4 The prior period has been updated to improve consistency and comparability of the amounts per maturity of contingent liabilities.

ING Group Annual Report 2020 on Form 20-FF -356

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

42 Transfer of financial assets, assets pledged and received as collateral

42 Transfer of financial assets, assets pledged and received as collateralFinancial assets received as collateral

The financial assets received as collateral that can be sold or repledged in absence of default by the owner of the

Financial assets pledged as collateralcollateral consists of securities obtained through reverse repurchase transactions and securities borrowing
transactions.
The financial assets pledged as collateral consist primarily of Loans and advances to customers pledged to secure These transactions are generally conducted under standard market terms for most repurchase transactions and Debt securities in issue, deposits from the Dutch Central Bank and other banks, as well as debt securities used in the recipient of the collateral has unrestricted right to sell or repledge it, provided that the collateral (or securities lending or sale and repurchase transactions. They serve to secure margin accounts and are used for equivalent collateral) is returned to the counterparty at term.
other purposes required by law. Pledges are generally conducted under terms that are usual and customary for| collateralised transactions including standard sale and repurchase agreements, securities lending and borrowing | | | | | |
| --- | --- | --- | --- | --- | --- |
| and derivatives margining. The financial assets pledged are as follows: | | | Financial assets received as collateral | | |
| | | | | 2020 | 2019 |
| | | | Total received collateral available for sale or repledge at fair value | | |
| Financial assets pledged as collateral | | | – equity securities | 20,018 | 17,919 |
| | 2020 | 2019 | – debt securities | 79,670 | 94,772 |
| Banks | | | | | |
| – Cash and balances with central banks | 1,377 | 1,382 | of which sold or repledged at fair value | | |
| – Loans and advances to banks | 3,833 | 6,337 | – equity securities | 16,365 | 15,654 |
| Financial assets at fair value through profit or loss | 14,772 | 16,350 | – debt securities | 60,384 | 67,194 |
| Financial assets at fair value through OCI | 2,377 | 440 | | | |
| Securities at amortised cost | 7,023 | 1,118 | | | |
| Loans and advances to customers | 115,194 | 75,755 | Transfer of financial assets | | |
| Other assets | 761 | 908 | | | |
| | 145,338 | 102,290 | The majority of ING's financial assets that have been transferred, but do not qualify for derecognition are debt | | |

instruments used in securities lending or sale and repurchase transactions.

In addition, in some jurisdictions ING Bank N.V. has an obligation to maintain a reserve with central banks. As at

31 December 2020, the minimum mandatory reserve deposits with various central banks amount to EUR 10,573

million (2019: EUR 9,975 million).

Loans and advances to customers that have been pledged as collateral for Debt securities in issue and for

liquidity purposes, amount in The Netherlands to EUR 67,067 million (2019: EUR 45,530 million), in Germany to

EUR 12,512 million (2019: EUR 13,222 million), in Belgium EUR 23,060 million (2019: EUR 11,298 million), in

Australia to EUR 5,572 million (2019: EUR 4,150 million) and in the United States to EUR 1,742 million (2019: EUR

1,010 million) and the remaining amount in other countries.

ING Group Annual Report 2020 on Form 20-FF -357

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

43 Offsetting financial assets and liabilities| Transfer of financial assets not qualifying for derecognition | | | | | | 43 Offsetting financial assets and liabilities |
| --- | --- | --- | --- | --- | --- | --- |
| | | Securities lending | | Sale and repurchase | | The following tables include information about rights to offset and the related arrangements. The amounts |
| | Equity | | Debt | Equity | Debt | included consist of all recognised financial instruments that are presented net in the statement of financial |
| | 20202019 | 2020 | 20192020 | 2019 | 20202019 | position under the IFRS netting criteria (legal right to offset and intention to net settle or to realise the asset and |

						to enforceable master netting arrangements or similar arrangement s.
Financial assets at fair value through profit or loss	3,1512,542	1,974	2,0781,682	8,6199,538
Financial assets at fair value through other						At ING Group amounts that are offset mainly relate to derivatives transactions, sale and repurchase agreements,
comprehensive income		56193		2,120	6	securities lending agreements and cash pooling arrangements. A significant portion of offsetting is applied to OTC
Loans and advances to customers						derivatives which are cleared through central clearing parties.
Securities at amortised cost		470195		6,281	734

Related amounts not set off in the statement of financial position include transactions where:| Associated liabilities at carrying amount | 1 | | | | | | ◾The counterparty has an offsetting exposure and a master netting or similar arrangement is in place with |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Deposits from banks | | n/an/a | n/an/a | 0 | 0 | 00 | a right to set off only in the event of default, insolvency or bankruptcy, or the offsetting criteria are |
| Customer deposits | | n/an/a | n/an/a | 0 | 0 | 00 | otherwise not satisfied, and |
| Financial liabilities at fair value through profit or loss | | | | | | | ◾In the case of derivatives and securities lending or sale and repurchase agreements, cash and non-cash |
| | | n/an/a | n/an/a | 2,0181,619 | 4,190 | 3,805 | collateral has been received or pledged to cover net exposure in the event of a default or other |

predetermined events. The effect of over-collateralisation is excluded.

1 The table includes the associated liabilities which are reported after offsetting, compared to the gross positions of the encumbered assets.The net amounts resulting after setoff are not intended to represent ING’s actual exposure to counterparty risk, as risk management employs a number of credit risk mitigation strategies in addition to netting and collateral

The table above does not include assets transferred to consolidated securitisation entities as the related assetsarrangements. Reference is made to the Risk Management section on Credit risk.

remain recognised in the consolidated statement of financial position.

Transferred financial assets that are derecognised in their entirety are mentioned in note 48 Structured Entities.

ING Group Annual Report 2020 on Form 20-FF -358

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

43 Offsetting financial assets and liabilities

Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements Gross amounts ofNet amounts ofRelated amounts not offset recognised financialfinancial assetsin the statement of financial positionAmounts not subject Gross amounts ofliabilities offset in thepresented in theCash and financialto enforceableStatement of recognised financialstatement of financialstatement of financialinstruments receivednettingfinancial position 2020assetspositionpositionFinancial instrumentsas collateralNet amountarrangementstotal1

Statement of financial position

line itemFinancial instrument| Loans and advances to banks | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | Reverse repurchase, securities | | 1,911 | 0 | 1,911 | 0 | 1,907 | 4 | 2,958 | 4,869 |
| | | borrowing and similar agreements | | | | | | | | | |
| | | Cash pools | 2 | 2 | -2 | 0 | 0 | 0 | 0 | | 0 |
| | | | | 1,913 | -2 | 1,911 | 0 | 1,907 | 4 | 2,958 | 4,869 |
| Financial assets at fair value through profit or loss | | | | | | | | | | | |
| Trading and Non-trading | | | | | | | | | | | |
| | | Reverse repurchase, securities | | 48,487 | -14,823 | 33,664 | 245 | 33,343 | 77 | 19,018 | 52,682 |
| | | borrowing and similar agreements | | | | | | | | | |
| Trading and Non-trading | | Derivatives | | 73,142 | -52,561 | 20,581 | 12,520 | 5,350 | 2,710 | 10,240 | 30,821 |
| | | | | 121,629 | -67,384 | 54,245 | 12,765 | 38,693 | 2,787 | 29,258 | 83,503 |
| Loans and advances to customers | | | | | | | | | | | |
| | | Reverse repurchase, securities | | 2,845 | -2,359 | 486 | 0 | 486 | 0 | 138 | 624 |
| | | borrowing and similar agreements | | | | | | | | | |
| | | Cash pools | 3 | 168,461 | -165,815 | 2,646 | 1,729 | 628 | 289 | | 2,646 |
| | | | | 171,306 | -168,174 | 3,132 | 1,729 | 1,113 | 289 | 138 | 3,270 |
| Other items where offsetting is applied in the | | | | | | | | | | | |
| statement of financial position | 4 | | | 8,558 | -7,752 | 806 | 10 | 0 | 796 | | 806 |

Total financial assets303,406-243,31260,09514,50541,7143,87632,35492,449

1 ‘The statement of financial position total’ is the sum of ‘Net amounts of financial assets presented in the statement of financial position’ and ’Amounts not subject to enforceable master netting arrangements’.
2 At 31 December 2020, the total amount of ‘Loans and advances to banks’ excluding repurchase agreements is EUR 20,495 million which is not subject to offsetting.
3 At 31 December 2020, the total amount of ‘Loans and advances to customers’ excluding repurchase agreements is EUR 593,345 million of which EUR 2,646 million is subject to offsetting.
4 Other items mainly include amounts to be settled with Central Clearing Counterparties regarding securities and derivatives transactions and is included in ‘Other Assets – Amounts to be settled’ for EUR 2,215 million in the statement of financial position of which EUR 806 million is subject to offsetting as at 31 December 2020.

ING Group Annual Report 2020 on Form 20-FF -359

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

43 Offsetting financial assets and liabilities| Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | Related amounts not offset | | | | | | | |
| | | | | Gross amounts of | Net amounts of | | in the statement of financial position | | | | | | | |
| | | | recognised financial | | financial assets | | | | | | Amounts not subject | | | |
| | | Gross amounts of | liabilities offset in the | | presented in the | | | Cash and financial | | | to enforceable | | Statement of | |
| | | recognised financial | statement of financial | | statement of financial | | | instruments received | | | | netting | financial position | |
| 2019 | | | assets | position | | positionFinancial instruments | | | as collateral | Net amount | arrangements | | | total1 |
| Statement of financial position line item | Financial instrument | | | | | | | | | | | | | |
| Loans and advances to banks | Reverse repurchase, securities | | | | | | | | | | | | | |
| | borrowing and similar agreements | | 868 | | | 868 | | 21 | 738 | 109 | | 8,075 | | 8,943 |

868868217381098,0758,943

Financial assets at fair value through profit or loss

Trading and non-trading Reverse repurchase, securities 57,328-20,54536,7835036,55318114,17150,954 borrowing and similar agreements| Trading and non-trading | Derivatives | 74,454 | -57,172 | 17,282 | 10,510 | 3,968 | 2,805 | 6,669 | 23,951 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | 131,782 | -77,717 | 54,066 | 10,559 | 40,520 | 2,986 | 20,839 | 74,905 |
| Loans and advances to customers | Reverse repurchase, securities | | | | | | | | |
| | borrowing and similar agreements | | | | | | | 180 | 180 |

		Cash pools	2	169,313	-166,624	2,689	1,422	813	454		2,689
				169,313	-166,624	2,689	1,422	813	454	180	2,869
Other items where offsetting is applied in the				9,787	-9,423	364	15		349		364
statement of financial position	3

Total financial assets311,750-253,76457,98612,01642,0723,89829,09487,080

1 ‘The statement of financial position total’ is the sum of ‘Net amounts of financial assets presented in the statement of financial position’ and ’Amounts not subject to enforceable master netting arrangements’.
2 At 31 December 2019, the total amount of ‘Loans and advances to customers’ excluding repurchase agreements is EUR 607,849 million of which EUR 2,689 million is subject to offsetting.
3 Other items mainly include amounts to be settled with Central Clearing Counterparties regarding securities and derivatives transactions and is included in ‘Other Assets – Amounts to be settled’ for EUR 2,835 million in the statement of financial position of which EUR 364 million is subject to offsetting as at 31 December 2019.

ING Group Annual Report 2020 on Form 20-FF -360

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

43 Offsetting financial assets and liabilities

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 | | Net amounts of | | | | | | Amounts not | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | recognised financial | | financial liabilities | | | | | | subject to | Statement of | |
| | | | Gross amounts of | | assets offset in the | | presented in the | | Cash and financial | | | | enforceable | financial position | |
| | | | recognised financial | | statement of financial | | statement of financial | | instruments pledged | | | | netting | | total |
| 2020 | | | | liabilities | | position | | positionFinancial instruments | | as collateral | Net amount | | arrangements | | 1 |
| Statement of financial position line item | Financial instrument | | | | | | | | | | | | | | |
| Deposits from banks | Repurchase, securities lending and | | | 167 | | 0 | | 167 | 0 | 166 | | 1 | 1,804 | | 1,971 |
| | similar agreements | | | | | | | | | | | | | | |
| | Cash pools | 2 | | 3 | | -2 | | 2 | 0 | | 0 | 2 | | | 2 |
| | | | | 170 | | -2 | | 169 | 0 | 166 | | 3 | 1,804 | | 1,973 |
| Customer deposits | Repurchase, securities lending and | | | 2,354 | | -2,354 | | 0 | 0 | | 0 | 0 | | 0 | 0 |
| | similar agreements | | | | | | | | | | | | | | |
| | Cash pools | 3 | | 184,490 | | -165,815 | | 18,675 | 1,702 | | 0 | 16,973 | | | 18,675 |
| | | | | 186,844 | | -168,169 | | 18,675 | 1,702 | | 0 | 16,973 | | 0 | 18,675 |
| Financial liabilities at fair value through profit or loss | | | | | | | | | | | | | | | |

Trading and Non-trading	Repurchase, securities lending and	53,520	-14,827	38,693	245	38,447	0	8,271	46,964
	similar agreements
Trading and Non-trading	Derivatives	73,215	-52,626	20,589	12,521	6,742	1,326	6,777	27,366
		126,735	-67,453	59,282	12,766	45,189	1,326	15,048	74,330

Other items where offsetting is applied in the statement of

8,552-7,687865360829865

financial position4

Total financial liabilities322,303-243,31278,99114,50545,35619,13116,85295,843

1 ‘The statement of financial position total’ is the sum of ‘Net amounts of financial assets presented in the statement of financial position’ and ’Amounts not subject to enforceable master netting arrangements’.
2 At 31 December 2020, the total amount of ‘Deposits from banks’ excluding repurchase agreements is EUR 76,127 million of which EUR 2 million is subject to offsetting.
3 At 31 December 2020, the total amount of ‘Customers deposits’ excluding repurchase agreements is EUR 609,517 million of which EUR 18,675 million is subject to offsetting.
4 Other items mainly include amounts to be settled with Central Clearing Counterparties regarding securities and derivatives transactions and is included in ‘Other Liabilities – Amounts to be settled’ for EUR 4,877 million in the statement of financial position of which EUR 865 million is subject to offsetting as at 31 December 2020.

ING Group Annual Report 2020 on Form 20-FF -361

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

43 Offsetting financial assets and liabilities

Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements Related amounts not offset in the statement of financial position

Gross amounts ofNet amounts ofAmounts not recognised financialfinancialsubject toStatement of Gross amounts ofassets offset in theliabilities presented inCash and financialenforceablefinancial position recognisedstatement of financialthe statement ofinstruments pledgednettingtotal 2019financial liabilitiespositionfinancial positionFinancial instrumentsas collateral1Net amountarrangements2

Statement of financial position line itemFinancial instrument| Deposits from banks | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | Repurchase, securities lending and | | 26 | | 26 | 26 | | 179 | 205 |
| | similar agreements | | | | | | | | |
| | | | 26 | | 26 | 26 | | 179 | 205 |
| Customer deposits | Cash pools | 3 | 181,273 | -166,624 | 14,649 | 1,419 | 13,230 | | 14,649 |
| | | | 181,273 | -166,624 | 14,649 | 1,419 | 13,230 | | 14,649 |
| Financial liabilities at fair value through profit or loss | | | | | | | | | |

Trading and Non-trading
	Repurchase, securities lending and	56,818	-20,545	36,273	50	35,808	436	6,776	43,049
	similar agreements
Trading and Non-trading	Derivatives	76,129	-57,665	18,464	10,511	7,817	137	5,076	23,540
		132,946	-78,210	54,737	10,560	43,625	573	11,852	66,589

Other items where offsetting is applied in the statement of

9,200-8,93026911258269

financial position4

Total financial liabilities323,445-253,76469,68112,01643,62514,04012,03181,712

1 The amounts pledged as collateral for ‘Deposits from Banks – Repurchase agreements’ and ‘financial liabilities at fair value through profit or loss – Repurchase agreements’ have been updated to improve consistency and comparability.
2 ‘The statement of financial position total’ is the sum of ‘Net amounts of financial assets presented in the statement of financial position’ and ’Amounts not subject to enforceable master netting arrangements’.
3 At 31 December 2019, the total amount of 'Customer Deposits' excluding repurchase agreements is EUR 574,355 million of which EUR 14,649 million is subject to offsetting.
4 Other items mainly include amounts to be settled with Central Clearing Counterparties regarding securities and derivatives transactions and is included in ‘Other Liabilities – Amounts to be settled’ for EUR 4,741 million in the statement of financial position of which EUR 269 million is subject to offsetting as at 31 December 2019.

ING Group Annual Report 2020 on Form 20-FF -362

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

44 Contingent liabilities and commitments

44 Contingent liabilities and commitments| Contingent liabilities and commitments | | | to be issued by governments and private issuers. |
| --- | --- | --- | --- |
| | 2020 | 2019 | |
| Contingent liabilities in respect of | | | As at 31 December 2020, ING Groep N.V. guarantees various US dollar debentures (that mature between 2023 |
| – Guarantees | 23,386 | 27,502 | and 2036) which were issued by a subsidiary of Voya Financial Inc. In the Shareholder’s agreement between ING |
| – Irrevocable letters of credit | 14,016 | 16,340 | Groep N.V. and Voya Financial Inc. it was agreed that the aggregate outstanding principal amount of the |
| – other | 97 | 131 | debentures shall be reduced to nil at 31 December 2019. In accordance with the Shareholder’s agreement, the |
| | 37,499 | 43,974 | net exposure of ING Groep N.V. as at 31 December 2020 was nil, as the outstanding principal amount of the US |
| Guarantees issued by ING Groep N.V. | 292 | 319 | dollar debentures was fully covered with collateral of EUR 304 million (2019: EUR 331 million) pledged by Voya |
| | | | Financial Inc. |

Irrevocable facilities	124,991	120,002
	162,782	164,296	In addition to the items included in contingent liabilities, ING Group has issued certain guarantees as participant

in collective arrangements of national banking funds and as a participant in required collective guarantee schemes which apply in different countries. For example, ING Bank N.V. provided a guarantee to the German Guarantees relate both to credit and non-credit substitute guarantees. Credit substitute guarantees areDeposit Guarantee Fund (‘Einlagensicherungsfonds’ or ESF) under section 5 (10) of the by-laws of this fund, guarantees given by ING Group in respect of credit granted to customers by a third party. Many of them arewhere ING Bank N.V. indemnifies the Association of German Banks Berlin against any losses it might incur as expected to expire without being drawn on and therefore do not necessarily represent future cash outflows.result of actions taken with respect to ING Germany. The ESF is a voluntary collective guarantee scheme for retail savings and deposits in excess of EUR 100,000.

Irrevocable letters of credit mainly secure payments to third parties for a customer’s foreign and domestic trade transactions in order to finance a shipment of goods. ING Group’s credit risk in these transactions is limited since these transactions are collateralised by the commodity shipped and are of a short duration.

Other contingent liabilities include acceptances of bills and are of a short-term nature. Other contingent liabilities also include contingent liabilities resulting from the operations of the Real Estate business including obligations under development and construction contracts. Furthermore other contingent liabilities include a contingent liability in connection with a possible Dutch tax obligation that relates to the deduction from Dutch taxable profit for losses incurred by ING Bank in the United Kingdom in previous years. The existence of this obligation will be confirmed only by the occurrence of future profits in the United Kingdom.

ING Group Annual Report 2020 on Form 20-FF -363

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

45 Legal proceedings

45 Legal proceedingsFindings regarding AML processes: As previously disclosed, after its September 2018 settlement with Dutch

authorities concerning anti-money laundering matters, and in the context of significantly increased attention on

the prevention of financial economic crime, ING has experienced heightened scrutiny by authorities in various ING Group and its consolidated subsidiaries are involved in governmental, regulatory, arbitration and legal countries. The interactions with such regulatory and judicial authorities have included, and can be expected to proceedings and investigations in the Netherlands and in a number of foreign jurisdictions, including the U.S., continue to include, onsite visits, information requests, investigations and other enquiries. Such interactions, as involving claims by and against them which arise in the ordinary course of their businesses, including in well as ING’s internal assessments in connection with its global enhancement programme, have in some cases connection with their activities as lenders, broker-dealers, underwriters, issuers of securities and investors and resulted in satisfactory outcomes, and also have resulted in, and may continue to result in, findings, or other their position as employers and taxpayers. In certain of such proceedings, very large or indeterminate amounts conclusions which may require appropriate remedial actions by ING, or may have other consequences. ING are sought, including punitive and other damages. While it is not feasible to predict or determine the ultimate intends to continue to work in close cooperation with authorities as it seeks to improve its management of nonoutcome of all pending or threatened governmental, regulatory, arbitration and legal proceedings and financial risks in terms of policies, tooling, monitoring, governance, knowledge and behaviour.
investigations, ING is of the opinion that some of the proceedings and investigations set out below may have or

have in the recent past had a significant effect on the financial position, profitability or reputation of ING and/or Also as previously disclosed in March 2019, ING Italy was informed by the Banca d’Italia of their report containing ING and its consolidated subsidiaries.
their conclusions regarding shortcomings in AML processes at ING Italy, which was prepared based on an

inspection conducted from October 2018 until January 2019. ING Italy has been engaged in discussions with Settlement agreement: On 4 September 2018, ING announced that it had entered into a settlement agreement Banca d’Italia and Italian judiciary authorities. In February 2020, the Court of Milan confirmed and approved a with the Dutch Public Prosecution Service relating to previously disclosed investigations regarding various plea bargain agreement with the Italian judiciary authorities. As a consequence, ING Italy has paid an requirements for client on-boarding and the prevention of money laundering and corrupt practices. Following administrative fine and disgorgement of profit. In addition, in February 2020 the Banca d’Italia imposed an the entry into the settlement agreement, ING has experienced heightened scrutiny from authorities in various administrative fine on ING Italy. Both amounts were already provisioned for in 2019.
countries. ING is also aware, including as a result of media reports, that other parties may, among other things,

seek to commence legal proceedings against ING in connection with the subject matter of the settlement, have In September 2020, the Banca d’Italia announced that the ban on onboarding new customers at ING Italy, filed or may file requests for disciplinary proceedings against ING employees based on the Dutch “Banker’s oath”, imposed in March 2019 has been removed. The decision follows the comprehensive steps undertaken by ING and/or have filed requests with the Court of Appeal in The Netherlands to reconsider the prosecutor’s decision to Italy to strengthen its processes and management of KYC compliance risks.
enter into the settlement agreement with ING and not to prosecute ING or (former) ING employees. In December

2020, the Court of Appeal issued its final ruling. In this ruling the prosecutors' decision to enter into the ING continues to take steps to enhance its management of compliance risks and embed stronger awareness settlement agreement with ING was upheld, making the settlement final. However, in a separate ruling, the across the whole organisation. These steps are part of the global KYC programme and set of initiatives, which Court ordered the prosecution of ING’s former CEO.
includes enhancing KYC files and working on various structural improvements in compliance policies, tooling,

monitoring, governance, knowledge and behaviour.

Tax cases: Because of the geographic spread of its business, the Issuer may be subject to tax audits,

investigations and procedures in numerous jurisdictions at any point in time. Although the Issuer believes that it

has adequately provided for all its tax positions, the ultimate resolution of these audits, investigations and

procedures is uncertain and may result in liabilities which are materially different from the amounts recognised.

ING Group Annual Report 2020 on Form 20-FF -364

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

45 Legal proceedings

Litigation regarding products of a former subsidiary in Mexico: Proceedings in which ING is involved includeInterest rate derivatives claims: ING is involved in several legal proceedings in the Netherlands with respect to complaints and lawsuits concerning the performance of certain interest sensitive products that were sold by ainterest rate derivatives that were sold to clients in connection with floating interest rate loans in order to hedge former subsidiary of ING in Mexico. A provision has been taken in the past.the interest rate risk of the loans. These proceedings are based on several legal grounds, depending on the facts and circumstances of each specific case, inter alia alleged breach of duty of care, insufficient information SIBOR – SOR litigation:In July 2016, investors in derivatives tied to the Singapore Interbank Offer Rate (“SIBOR”)provided to the clients on the product and its risks and other elements related to the interest rate derivatives filed a U.S. class action complaint in the New York District Court alleging that several banks, including ING,that were sold to clients. In some cases, the court has ruled in favour of the claimants and awarded damages, conspired to rig the prices of derivatives tied to SIBOR and the Singapore Swap Offer Rate (“SOR”). The lawsuitannulled the interest rate derivative or ordered repayment of certain amounts to the claimants. The total refers to investigations by the Monetary Authority of Singapore (“MAS”) and other regulators, including the U.S.amounts that need to be repaid or compensated in some cases still need to be determined. ING may decide to Commodity Futures Trading Commission (“CFTC”), in relation to rigging prices of SIBOR- and SOR basedappeal against adverse rulings. Although the outcome of the pending litigation and similar cases that may be derivatives. In October 2018, the New York District Court issued a decision dismissing all claims against INGbrought in the future is uncertain, it is possible that the courts may ultimately rule in favour of the claimants in Group and ING Capital Markets LLC, but leaving ING Bank, together with several other banks, in the case, andsome or all of such cases. Where appropriate a provision has been taken. The aggregate financial impact of the directing plaintiffs to file an amended complaint consistent with the Court's rulings. In October 2018, plaintiffscurrent and future litigation could become material.
filed such amended complaint, which asserts claims against a number of defendants but none against ING Bank (or any other ING entity), effectively dismissing ING Bank from the case. In December 2018, plaintiffs soughtAs requested by the AFM, ING has reviewed a significant part of the files of clients who bought interest rate permission from the Court to file a further amended complaint that names ING Bank as a defendant. In July 2019,derivatives. In December 2015, the AFM concluded that Dutch banks may have to re-assess certain client files, the New York District Court granted the defendants’ motion to dismiss and denied leave to further amend thepotentially including certain derivative contracts that were terminated prior to April 2014 or other client files. As complaint, effectively dismissing all remaining claims against ING Bank. In November 2019, plaintiffs filed anadvised by the AFM, the Minister of Finance appointed a Committee of independent experts (the “Committee”)
appeal against this judgment.which has established a uniform recovery 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 Claims regarding accounts with predecessors of ING Bank Turkey:ING Bank Turkey has received numerousadditional provision for the financial consequences of the recovery framework. In 2017, ING has informed the claims from (former) customers of legal predecessors of ING Bank Turkey. The claims are based on offshoremajority of the relevant clients whether they are in scope of the recovery framework, and thus eligible for accounts held with these banks, which banks were seized by the Savings Deposit Insurance Fund (“SDIF”) prior tocompensation, or not. Because implementation by ING of the uniform recovery framework encountered delay, the acquisition of ING Bank Turkey in 2007 from OYAK. SDIF has also filed various lawsuits against ING BankING has previously offered advance payments to customers out of the existing provision. As of December 2018, Turkey to claim compensation from ING Bank Turkey, with respect to amounts paid out to offshore accountall customers in scope of the uniform recovery framework have received an offer of compensation from ING holders so far. At this moment it is not possible to assess the outcome of these procedures nor to provide an(including offers of no compensation). In June 2020, the independent derivative dispute committee rejected all estimate of the (potential) financial effect of these claims.claims by the client against ING in ING’s last open file under the uniform recovery framework. The last open file has been closed at the end of June 2020.

ING Group Annual Report 2020 on Form 20-FF -365

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

45 Legal proceedings

Interest surcharges claims:ING received complaints and was involved in litigation with certain individuals in theMortgage expenses claims: ING Spain has received claims and is involved in procedures with customers Netherlands regarding increases in interest surcharges with respect to several credit products, including but notregarding reimbursement of expenses associated with the formalisation of mortgages. In most court proceedings limited to commercial property. ING has reviewed the relevant product portfolio. The provision previously takenin first instance the expense clause of the relevant mortgage contract has been declared null and ING Spain has has been reversed for certain of these complaints. All claims are dealt with individually. Thus far, the courts havebeen ordered to reimburse all or part of the applicable expenses. The courts in first instance have applied in their ruled in favour of ING in each case, ruling that ING was allowed to increase the interest surcharge based upon therulings different criteria regarding the reimbursement of expenses. A provision has been taken and ING Spain has essential obligations in the contract. In a relevant case the Dutch Supreme Court ruled in favor of another Dutchfiled an appeal against a number of these court decisions. Since 2018, the Spanish Supreme Court and the bank, addressing the question whether or not a bank is allowed to increase interest surcharges unilaterally. TheEuropean Court of Justice have issued rulings setting out which party should bear notary, registration, agency, Supreme Court ruled affirmative. ING will continue to deal with all claims individually.and stamp duty costs. In January 2021, the Spanish Supreme Court ruled that valuation costs of mortgages, signed prior to June 16, 2019, the date the new mortgage law entered into force, should be borne by the bank.
Criminal proceedings regarding cash company financing:In June 2017, a Belgian criminal court ruled that INGThe impact on ING was analysed and the provision mentioned above was adjusted. ING Spain has also been Luxembourg assisted third parties in 2000 to commit a tax fraud in the context of the purchase of the shares of aincluded, together with other Spanish banks, in three class actions filed by customer associations. In one of the cash company. The court convicted ING Luxembourg, among others, and ordered ING to pay a penal fine of EURclass actions an agreement was reached with the association. In another class action ING filed an appeal asking 120,000 (suspended for half of the total amount). The court also ordered ING Luxembourg jointly and severallythe Spanish Court of Appeal to determine that the ruling of the court of first instance is only applicable to the with other parties, to pay EUR 31.48 million (together with any interest payable under applicable law) to theconsumers that were part of the case.
bankruptcy trustee of the cash company. In July 2017, ING Luxembourg filed an appeal against this judgment. A settlement with all the civil parties involved was reached in mid-2018. However, this settlement does not applyImtech claim:In January 2018, ING Bank received a claim from Stichting ImtechClaim.nl and Imtech Shareholders to the criminal conviction of ING Luxembourg. In January 2020, the Court of Appeal of Antwerp reformed the firstAction Group B.V. on behalf of certain (former) shareholders of Imtech N.V. (“Imtech”). Furthermore, on 28 judgment: ING Luxemburg benefitted from an "opschorting van de uitspraak/suspension du prononcé" whichMarch 2018, ING Bank received another claim on the same subject matter from the Dutch Association of means that the conviction has been upheld, but no penal sanction has been pronounced (penalties suspended).Stockholders (Vereniging van Effectenbezitters, “VEB”). Each of the claimants allege inter alia that shareholders The judgment is now final.were misled by the prospectus of the rights issues of Imtech in July 2013 and October 2014. ING Bank, being one

of the underwriters of the rights issues, is held liable by the claimants for the damages that investors in Imtech would have suffered. ING Bank responded to the claimants denying any and all responsibility in relation to the allegations made in the relevant letters. In September 2018, the trustees in the bankruptcy of Imtech claimed from various financing parties, including ING, payment of what the security agent has collected following bankruptcy or intends to collect, repayment of all that was repaid to the financing parties, as well as compensation for the repayment of the bridge financing. At this moment it is not possible to assess the outcome of these claims nor to provide an estimate of the (potential) effect of these claims.

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46 Consolidated companies and businesses acquired and divested

Mexican Government Bond litigation:A class action complaint was filed adding ING Bank N.V., ING Groep N.V.,Divestments ING Bank Mexico S.A. and ING Financial Markets LLC (“ING”) as defendants to a complaint that had previouslyThere were no significant divestments in 2020 been filed against multiple other financial institutions. The complaint alleges that the defendants conspired to fix the prices of Mexican Government Bonds. ING is defending itself against the allegations. Currently, it is notIn July 2019 ING completed the sale of part of the ING Lease Italy business. The settlement price amounted to possible to provide an estimate of the (potential) financial effect of this claim. On 30 September 2019, theEUR 1,162 million, consisted of a EUR 368 million cash settlement, a EUR 20 million Deferred Purchase Price and relevant court dismissed the antitrust complaint, finding that the plaintiffs had failed to identify any facts thata EUR 774 million Senior Loan facility for the portfolio of lease receivables. The deferred purchase price is linked links each defendant to the alleged conspiracy. On 9 December 2019, the plaintiffs filed an amended complaintto the performance of the sold portfolio and is reported under the financial assets mandatorily measured at fair removing all ING entities as defendants on the condition that the ING entities enter into a tolling agreement forvalue through profit and loss. The additional loss in 2019 amounted EUR -2 million (2018: EUR -123 million). The the duration of two years. The relevant ING entities subsequently entered into a tolling agreement, whichItalian lease business was reported as Assets Held for Sale as at 31 December 2018 and previously included in the provides that the statute of limitations will not be tolled for the two-year duration of the agreement. Should thebusiness line segment Wholesale Banking and geographical segment Other Challengers.
plaintiffs discover any evidence of potential involvement by ING in the activities alleged in the complaint, ING could be brought back into the litigation.Reference is made to Note 24 ‘Result on the disposal of group companies’.

46 Consolidated companies and businesses acquired and divested47 Principal subsidiaries, investments in associates and joint ventures

Acquisitions For the majority of ING’s principal subsidiaries, ING Groep N.V. has control because it either directly or indirectly
There were no significant acquisitions in 2020.owns more than half of the voting power. For subsidiaries in which the interest held is below 50%, control exists

based on the combination of ING’s financial interest and its rights from other contractual arrangements which In May 2019 ING acquired 80% of the shares of Intersoftware Group B.V., Findata Access B.V. and Unitrust B.V.result in control over the operating and financial policies of the entity.
(ISW Group) for a total consideration of EUR 18 million. The acquisition of ISW Group resulted in the recognition of goodwill of EUR 17 million.For each of the subsidiaries listed, the voting rights held equal the proportion of ownership interest and consolidation by ING is based on the majority of ownership.
In 2018 ING Bank obtained control over Payvision Holding B.V. (Payvision) by acquiring 75% of its shares. The share purchase agreement included a put option exercisable by the original shareholders and a call optionFor the principal investments in associates and joint ventures ING Group has significant influence but not control.
exercisable by ING for the remaining 25% shares. The put and call option led to the recognition of a financialSignificant influence generally results from a shareholding of between 20% and 50% of the voting rights, but also liability with initial recognition through shareholders’ equity of EUR 87 million. In November 2019 ING Bankthe ability to participate in the financial and operating policies through situations including, but not limited to agreed to purchase the remaining 25% shares in three tranches between November 2019 and April 2020 for aone or more of the following:
total consideration of EUR 90 million. This resulted in the remeasurement of the financial liability to EUR 90◾Representation on the board of directors;
million. A stake of 23% was purchased in 2019 which reduced the outstanding financial liability and on 30 April◾Participation in the policymaking process; and 2020 ING purchased the remaining stake of 2%. As at 31 December 2020 the ownership interest of ING Bank was◾Interchange of managerial personnel.
100%. Given that ING Bank already had control over Payvision, the acquisition of the shares in 2020 represents a shareholder transaction and resulted in a transfer between Non-controlling interest and Shareholders equity ofThe principal subsidiaries, investments in associates and joint ventures of ING Groep N.V. and their statutory EUR 1 million.place of incorporation or primary place of business are as follows:

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48 Structured entities

Principal subsidiaries, investments in associates and joint ventures48 Structured entities

Proportion of ownership ING Group’s activities involve transactions with various structured entities (SE) in the normal course of its and interest held business. A structured entity is an entity that has been designed so that voting or similar rights are not the by the group dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks

20202019 only and the relevant activities are directed by means of contractual arrangements. ING Group’s involvement in| Subsidiary | | Statutory place of Incorporation | Country of operation | | | these entities varies and includes both debt financing and equity financing of these entities as well as other |
| --- | --- | --- | --- | --- | --- | --- |
| ING Bank N.V. | | Amsterdam | the Netherlands | 100% | 100% | relationships. Based on its accounting policies, as disclosed in the section Principles of valuation and |
| Bank Mendes Gans N.V. | | Amsterdam | the Netherlands | 100% | 100% | determination of results of these financial statements, ING establishes whether these involvements result in no |
| ING Belgium S.A./N.V. | | Brussels | Belgium | 100% | 100% | significant influence, significant influence, joint control or control over the structured entity. |
| ING Luxembourg S.A. | | Luxembourg City | Luxembourg | 100% | 100% | |
| ING-DiBa AG | | Frankfurt am Main | Germany | 100% | 100% | The structured entities over which ING can exercise control are consolidated. ING may provide support to these |
| ING Bank Slaski S.A. | 1 | Katowice | Poland | 75% | 75% | |
| ING Financial Holdings Corporation | | Delaware | United States of America | 100% | 100% | consolidated structured entities as and when appropriate. However, this is fully reflected in the consolidated |
| ING Bank A.S. | | Istanbul | Turkey | 100% | 100% | financial statements of ING Group as all assets and liabilities of these entities are included and off-balance sheet |
| ING Bank (Australia) Ltd | | Sydney | Australia | 100% | 100% | commitments are disclosed. |
| ING Commercial Finance B.V. | | Amsterdam | the Netherlands | 100% | 100% | |
| ING Groenbank N.V. | | Amsterdam | the Netherlands | 100% | 100% | ING’s activities involving structured entities are explained below in the following categories: |

1.Consolidated ING originated securitisation programmes;

Investments in associates and joint
ventures2.Consolidated ING originated Covered bond programme (CBC);
TMB Bank Public Company Ltd2BangkokThailand23%23%3.Consolidated ING sponsored Securitisation programme (Mont Blanc);
4.Unconsolidated Securitisation programme; and

5.Other structured entities.

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.1. Consolidated ING originated securitisation programmes 2 Reference is made to Note 8 Investments in Associates and Joint Ventures.
ING Group enters into liquidity management securitisation programmes in order to obtain funding and improve

liquidity. Within the programme ING Group sells ING originated assets to a structured entity. The underlying

exposures include residential mortgages in the Netherlands, Belgium, Spain, Italy and Australia and SME Loans in

Belgium.

The structured entity issues securitised notes (traditional securitisations) which are eligible collateral for central

bank liquidity purposes. In most programmes ING Group acts as investor of the securitised notes. ING Group

continues to consolidate these structured entities if it is deemed to control the entities.

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48 Structured entities

The structured entity issues securitisation notes in two or more tranches, of which the senior tranche obtains aCovered bond programme
high rating (AAA or AA) by a rating agency. The tranche can subsequently be used by ING Group as collateral inFair value pledged mortgage loans the money market for secured borrowings.

20202019 Dutch Covered Bond Companies20,15724,297 ING Group originated various securitisations, as at 31 December 2020, these consisted of approximately EUR 66

20,15724,297 billion (2019: EUR 57 billion) of senior and subordinated notes, of which approximately EUR 2 billion (2019: EUR 4
billion) were issued externally. The underlying exposures are residential mortgages and SME loans. Apart from
the third party funding, these securitisations did not impact ING Group’s Consolidated statement of financialIn addition, subsidiaries of ING in Germany, Belgium and Australia also issued covered bonds with pledged
position and profit or loss.mortgages loans of approximately EUR 21 billion (2019: EUR 16 billion) in total.

In 2020, there are no non-controlling interests as part of the securitisation structured entities that are significantIn general, the third-party investors in securities issued by the structured entity have recourse only to the assets to ING Group. ING Group for the majority of the securitisation vehicles provides the funding for the entity exceptof the entity and not to the assets of ING Group.

for EUR 2 billion (2019: EUR 4 billion).

3. Consolidated ING sponsored Securitisation programme (Mont Blanc) In addition ING Group originated various securitisations for liquidity management optimisation purposes. As atIn the normal course of business, ING Group structures financing transactions for its clients by assisting them in 31 December 2020, these consisted of approximately EUR 2 billion (2019: EUR 3 billion) of senior securedobtaining sources of liquidity by selling the clients’ receivables or other financial assets to a Special Purpose portfolio loans, which have been issued to ING subsidiaries in Germany. The underlying exposures are seniorVehicle (SPV). The senior positions in these transactions may be funded by the ING administered multi seller loans to large corporations and financial institutions, and real estate finance loans, mainly in the Netherlands.Asset Backed Commercial Paper (ABCP) conduit Mont Blanc Capital Corp. (rated A-1/P-1). Mont Blanc Capital These securitisations did not impact ING Group’s consolidated statement of financial position and profit or loss.Corp. funds itself externally in the ABCP markets.

2. Consolidated ING originated Covered bond programme (CBC) In its role as administrative agent, ING Group facilitates these transactions by acting as administrative agent, ING Group has entered into a covered bond programme. Under the covered bond programme ING issues bonds.swap counterparty and liquidity provider to Mont Blanc Capital Corp. ING Group also provides support facilities The payment of interest and principal is guaranteed by the ING administered structured entities, ING Covered(i.e. liquidity) backing the transactions funded by the conduit. The types of asset currently in the Mont Blanc Bond Company B.V., and ING SB Covered Bond Company B.V. In order for these entities to fulfil their guarantee,conduit include trade receivables, consumer finance receivables, car leases and residential mortgages.

ING legally transfers mainly Dutch mortgage loans originated by ING. Furthermore ING offers protection against deterioration of the mortgage loans. The entities are consolidated by ING Group.ING Group supports the commercial paper programmes by providing Mont Blanc Capital Corp. with short-term liquidity facilities. Once drawn these facilities bear normal credit risk.

The liquidity facilities, provided to Mont Blanc are EUR 2,793 million (2019: EUR 1,631 million). The drawn liquidity amount is nil as at 31 December 2020 (2019: nil).

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49 Related parties

The standby liquidity facilities are reported under irrevocable facilities. All facilities, which vary in risk profile, are49 Related parties

granted to the Mont Blanc Capital Corp. subject to normal ING Group credit and liquidity risk analysis procedures.
In the normal course of business, ING Group enters into various transactions with related parties. Parties are The fees received for services provided and for facilities are charged subject to market conditions.
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

4. Unconsolidated Securitisation programme subsidiaries, associates, joint ventures, key management personnel, and various defined benefit and contribution
In 2013 ING transferred financial assets (mortgage loans) for an amount of approximately EUR 2 billion to aplans. For post-employment benefit plans, reference is made to Note 36 ‘Pension and other postemployment
special purpose vehicle (SPV). The transaction resulted in full derecognition of the financial assets from ING’sbenefits’. Transactions between related parties include rendering or receiving of services, leases, transfers under
statement of financial position. Following this transfer ING continues to have two types of on-going involvementfinance arrangements and provisions of guarantees or collateral. All transactions with related parties took place
in the transferred assets: as counterparty to the SPE of a non-standard interest rate swap and as servicer of theat conditions customary in the market. There are no significant provisions for doubtful debts or individually
transferred assets. ING has an option to unwind the transaction by redeeming all notes at their principalsignificant bad debt expenses recognised on outstanding balances with related parties.
outstanding amount, in the unlikely event of changes in accounting and/or regulatory requirements that| EUR -34 million (2019: EUR -45 million); fair value changes on this swap recognised in the statement of profit or | Transactions with ING Groep N.V.'s main subsidiaries | | |
| --- | --- | --- | --- |
| loss in 2020 were EUR 11 million (2019: EUR 12 million). Service fee income recognised, for the role as | | 2020 | 2019 |
| administrative agent, in the statement of profit or loss in 2020 amounted to EUR 1 million (2019: EUR 2 million). | Assets | 45,625 | 44,242 |
| The cumulative income recognised in profit or loss since derecognition amounts to EUR 16 million (2019: EUR 15 | Liabilities | 134 | 163 |
| million). | | | |
| | Income received | 1,122 | 1,103 |
| 5. Other structured entities | Expenses paid | 9 | 9 |

In the normal course of business, ING Group enters into transactions with structured entities as counterparty.

Predominantly in its structured finance operations, ING can be instrumental in facilitating the creation of these

structured entity counterparties. These entities are generally not included in the consolidated financial Transactions between ING Groep N.V. and its subsidiaries are eliminated on consolidation. Reference is made to statements of ING Group, as ING facilitates these transactions as administrative agent by providing structuring, Note 47 ‘Principal subsidiaries’ for a list of principal subsidiaries and their statutory place of incorporation.
accounting, funding, lending, and operation services.

Assets from ING’s subsidiaries mainly comprise long-term funding. Liabilities to ING’s subsidiaries mainly ING Group offers various investment fund products to its clients. ING Group does not invest in these investment comprise short-term deposits.
funds for its own account nor acts as the fund manager.

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49 Related parties

Associates and joint venturesKey management personnel compensation (Executive Board and Management Board Banking)| | | | | | 2020 | | Executive Board | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Transactions with ING Group’s main associates and joint ventures | | | | | in EUR thousands | | of ING Groep N.V. | | Management | | |
| | Associates | | Joint ventures | | | | | 3Board Banking | | 1.4 | Total |
| | 2020 | 2019 | 2020 | 2019 | Fixed Compensation | | | | | | |
| Assets | 100 | 96 | | 0 | – Base salary | | | 3,609 | 4,170 | | 7,779 |
| Liabilities | 239 | 97 | 1 | 6 | – Collective fixed allowances | 2 | | 898 | 1,009 | | 1,907 |
| Off-balance sheet commitments | 10 | 29 | | 0 | – Pension costs | | | 58 | 93 | | 151 |
| | | | | | – Severance benefits | 4 | | | 667 | | 667 |
| Income received | 14 | 11 | | | Variable compensation | | | | | | |
| | | | | | – Upfront cash | | | | 305 | | 305 |
| | | | | | – Upfront shares | | | | 305 | | 305 |
| Assets, liabilities, commitments, and income related to Associates and joint ventures result from transactions | | | | | – Deferred cash | | | | 457 | | 457 |
| which are executed as part of the normal Banking business. | | | | | – Deferred shares | | | | 457 | | 457 |
| | | | | | – Other emoluments | 5 | | 652 | 814 | | 1,466 |
| Key management personnel compensation | | | | | Total compensation | | | 5,217 | 8,277 | | 13,494 |

The Executive Board of ING Groep N.V., the Management Board Banking and the Supervisory Board are
considered Key Management personnel of ING Group. In 2020 and 2019, the three members of the Executive1 Excluding members of the Management Board Banking that are also members of the Executive Board of ING Groep N.V.
Board of ING Groep N.V. were also members of the Management Board Banking.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 salary in excess of EUR 110,111.
Transactions with key management personnel, including their compensation are included in the tables below.3 In 2020 one member of the Executive Board left ING during the year. The table includes compensation earned in the capacity as board member.
4 One member of the Management Board Banking left ING at the end of the year. In line with applicable regulation a severance payment was granted.
5 Other emoluments include reimbursement of costs related to home/work commute, costs relating to tax and financial planning services, costs associated with a company car and for expats, the costs associated with housing and schooling and costs related to reimbursement of Directors and Officers indemnity

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ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

49 Related parties| Key management personnel compensation (Executive Board and Management Board Banking) | | | | | | The table below shows the total of fixed remuneration, expense allowances and attendance fees for the | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | Supervisory Board in 2020 and 2019. | | | | | | |
| | | Executive | Management | | | | | | | | | |
| 2019 | | Board of ING | Board Banking | | | | | | | | | |
| in EUR thousands | | Groep N.V. | 31,4 | | Total | | | | | | | |
| Fixed Compensation | | | | | | Key management personnel compensation (Supervisory Board) | | | | | | |
| – Base salary | | 4,587 | | 3,847 | 8,434 | in EUR thousands | | | | | 2020 | 2019 |
| – Collective fixed allowances | 2 | 1,167 | | 937 | 2,104 | Total compensation | | | | | 1,042 | 1,045 |
| – Pension costs | | | 78 | 94 | 172 | | | | | | | |
| – Severance benefits | | | | | | | | | | | | |
| Variable compensation | | | | | | Balances outstanding with key management personnel were as follows: | | | | | | |
| – Upfront cash | | | | 361 | 361 | | | | | | | |
| – Upfront shares | | 247 | | 378 | 625 | | | | | | | |
| – Deferred cash | | | | 541 | 541 | Loans and advances to key management personnel | | | | | | |
| – Deferred shares | | 371 | | 566 | 937 | | Amount outstanding | | Weighted average | | | |
| – Other emoluments | 5 | 281 | | 536 | 817 | | 31 December | | interest rate | | Repayments | |
| Total compensation | | 6,731 | | 7,260 | 13,991 | in EUR thousands | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| | | | | | | Executive Board members | | 2,402 | | 1.4% | | 97 |
| | | | | | | Management Board Banking | 350 | 350 | 2.6% | 2.6% | | |

Supervisory Board members
1 Excluding members that are also members of the Executive Board of ING Groep N.V. One Management Board Banking member wasTotal3502,75297 appointed to the Executive Board during the year.
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 salary in excess of EUR 107,539.The loans and advances mentioned in the table above (1) were made in the ordinary course of business, (2) were 3 In 2019 one member of the Executive Board left and one member joined. The table includes their compensation earned in the capacity as granted on conditions that are comparable to those of loans and advances granted to all employees and (3) did board member and in addition an advisor fee for the period in which the activities were transferred to the successor.
4 One member left ING during the year. The table includes compensation earned in the capacity as board member.not involve more than the normal risk of collectability or present other unfavourable features. Loans and 5 The prior period has been updated to improve consistency and comparability.advances to members of the Executive Board and Management Board Banking are compliant with the standards set out in the DNB guidelines for loans to officers and directors of a regulated entity, such as ING.

Key management personnel compensation is generally included in Staff expenses in the statement of profit orAs at 31 December 2020 Deposits outstanding from key management personnel amounted to EUR 12.5 million
loss. The total remuneration of the Executive Board and Management Board Banking is disclosed in the table(31 December 2019: EUR 12.4 million). Total interest paid in 2020 on these deposits amounted to EUR 14
above. Under IFRS, certain components of variable remuneration are not recognised in the statement of profit orthousand (2019: EUR 13 thousand).
loss directly, but are allocated over the vesting period of the award. The comparable amount recognised in Staff

expenses in 2020 relating to the fixed expenses of 2020 and the vesting of variable remuneration of earlier

performance years, is EUR 12 million in 2020 (2019: EUR 11 million).

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50 Subsequent events

Number of ING Groep N.V. shares and stock options to key management personnel51 Capital management
Stock options on
ING Groep N.V. sharesING Groep N.V. sharesObjectives| in numbers | 2020 | 2019 | 2020 | 2019 | Group Treasury (“GT”) Balance Sheet & Capital Management, is responsible for maintaining the adequate |
| --- | --- | --- | --- | --- | --- |
| Executive Board members | 88,741 | 172,523 | 46,198 | | capitalisation of ING Group and ING Bank entities, to manage the risk associated with ING’s business activities. |
| Management Board Banking | 254,052 | 147,713 | | | This involves not only managing, planning and allocating capital within ING Group, ING Bank and its various |
| Supervisory Board members | 5,295 | 54,065 | | | |
| Total number of shares and stock options | 348,088 | 374,301 | 46,198 | | entities, but also helping to execute necessary capital market transactions, term (capital) funding and risk |

relation to its risk profile and operating environment. This means GT Balance Sheet & Capital Management takes

50 Subsequent eventsinto account both regulatory and internal, economic based metrics and requirements as well as the interests of

key stakeholders such as shareholders and rating agencies.
On 18 February 2021 ING announced that it intends to withdraw from the retail banking market in the Czech

Republic. Raiffeisenbank Czech Republic has agreed to prepare a welcome offer for ING’s retail customers in the ING applies the following main capital definitions:
Czech Republic.In March, customers will receive an invitation from Raiffeisenbank to move to this bank over the Common equity Tier 1 capital (CET1) - is defined as shareholders’ equity less regulatory adjustments.
coming months. The ambition is for ING to stop all its retail activities in this market by the end of 2021. ING will CET1 capital divided by risk-weighted assets equals the CET1 ratio.
remain active in the Czech Republic as a provider of wholesale banking products and services.The agreement Tier 1 capital – is defined as CET1 capital plus Additional Tier 1 (hybrid) securities and other regulatory
with Raiffeisenbank has been secured to ensure ING’s customers in the Czech Republic can continue to meet adjustments. Tier 1 capital divided by risk-weighted assets equals the Tier 1 capital ratio.
their banking needs. ING customers will receive the option to move their savings and investments to Total capital – is Tier 1 capital plus subordinated Tier 2 liabilities and regulatory adjustments. Total
Raiffeisenbank at preferential conditions. The agreement between ING Czech Republic and Raiffeisenbank Czech capital divided by risk-weighted assets equals the Total capital ratio.
Republic is pending regulatory approval.
Common equity Tier 1 ratio ambition – is built on the CET1 requirements specified for ING, uncertainty

of expected regulatory RWA inflation, potential increase in the regulatory requirement of the ING announced on 2 March 2021 that it is reviewing the strategic options for its Retail Banking operations in Countercyclical Buffer and the potential impact of a standardised and pre-determined 1-in-10-year stress Austria with the aim of exiting this market by the end of 2021. The scope of the review focuses solely on ING’s event (i.e. at a 90% confidence level with a 1-year horizon).
retail business. ING will continue its Wholesale Banking activities in Austria.
Leverage ratio (LR) – is defined as Tier 1 capital divided by the leverage exposure.
As a first step, in June 2021, ING will discontinue its savings-only offering for customers in Austria. As it exits the

local retail banking market, ING will make sure its customers are fully supported throughout.

Capital developments

Our capital position remained strong despite the higher risk costs due to Covid-19. At both the consolidated and

entity level, ING has sufficient buffers to withstand certain adverse scenarios without breaching regulatory

requirements in a forward looking scenario.

In 2020, ING has changed its CET1 ambition from around 13.5% to around 12.5%, reflecting among others a

structural reduction of capital requirements and increased visibility of expected regulatory RWA inflation. This

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51 Capital management| new ambition level is still comfortably above the current Maximum Distributable Amount (MDA) level of 10.51%, | ING Group capital position according to CRR II / CRD V | | | | |
| --- | --- | --- | --- | --- | --- |
| implying a management buffer of ~200 basis points. | in EUR million | | | 2020 | 2019 |
| | Shareholders’ equity | 4 | | 54,637 | 53,769 |
| ING’s capital ratios at the end of the year improved compared to 2019 primarily due to lower risk-weighted | - Reserved profit not included in CET1 capital | | 1 | -3,266 | -1,754 |
| assets, mainly driven by lower volumes, FX movements and improved lending book quality. On the latter, | - Other adjustments | | | -4,037 | -4,464 |
| downward rating adjustments were more than offset by higher and additional collateral value. ING continues to | Regulatory adjustments | | | -7,303 | -6,217 |
| maintain a strong and high quality capital level. | Available common equity Tier 1 capital | | | 47,333 | 47,552 |

ING Groep N.V. has a Common equity Tier 1 ratio of 15.5% as at 31 December 2020 versus an overall CRR II / CRD	Additional Tier 1 securities	2	5,643	6,916
V solvency requirement (including buffer requirements) of 10.51%. The Group’s Tier 1 ratio (including	Regulatory adjustments additional Tier 1		48	51
grandfathered securities) increased to 17.3%. The Total capital ratio (including grandfathered securities)	Available Tier 1 capital		53,024	54,519
increased from 19.1% to 20.1% compared to last year.	Supplementary capital Tier 2 bonds	3	9,359	8,943
	Regulatory adjustments Tier 2		-846	-1,158
	Available Total capital		61,537	62,303

Risk weighted assets306,324326,414| Common equity Tier 1 ratio | 15.45% | 14.57% |
| --- | --- | --- |
| Tier 1 ratio | 17.31% | 16.70% |
| Total capital ratio | 20.09% | 19.09% |

1. The reserved profit not included in CET1 capital ING Group as per 31 December 2020 was EUR 3,266 million, of which EUR 1,512 million relates to the result of 2020 and EUR 1,754 million relates to the result of 2019.
2. Including EUR 4,660 million which is CRR-compliant (2019: EUR 5,312 million) and EUR 983 million to be replaced as capital recognition is subject to CRR grandfathering rules (2019: EUR 1,604 million).
3. Including EUR 9,206 million which is CRR-compliant (2019: EUR 8,789 million), and EUR 153 million to be replaced as capital recognition is subject to CRR grandfathering rules (2019: EUR 153 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.

ING Group Annual Report 2020 on Form 20-FF -374

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

51 Capital management

DividendAdverse planning and stress testing, which reflect the outcomes of the annual risk assessment, are integral
In the third quarter of 2020, ING announced a change in its distribution policy from a progressive dividend to acomponents of ING’s risk and capital management framework. It allows us to (i) identify and assess potential pay-out ratio of 50% of resilient net profit and additional return of structural excess capital. The latter to bevulnerabilities in our businesses, business model, portfolios or operating environment; (ii) understand the considered periodically, taking into account alternative opportunities as well as macroeconomic circumstancessensitivities of the core assumptions used in our strategic and capital plans; and (iii) improve decision-making and and the outcome of our capital planning. Resilient net profit is defined as net profit adjusted for significant itemsbusiness steering through balancing risk and return following a forward looking and prudent management not linked to the normal course of business. The 50% pay-out may be in the form of cash or a combination ofapproach.
cash and share repurchases.

Regulatory requirements

For 2020, the resilient net profit amounts to EUR 3,025 million of which EUR 1,512 million is reserved forCapital adequacy and the use of required regulatory capital are based on the guidelines developed by the Basel distribution outside of CET1 capital. The resilient net profit includes EUR 540 million of positive P&L adjustmentsCommittee on Banking Supervision (The Basel Committee) and the European Union Directives, as implemented to the IFRS-EU net result related to impairments on goodwill (EUR 310 million) and the TMB stake (EUR 230by the Dutch Central Bank (Dutch Central Bank until 3 November 2014, the ECB thereafter) for supervisory million). In February 2021, ING paid a cash-only interim dividend of EUR 468 million (EUR 0.12 per share). Thispurposes. In 2010, the Basel Committee issued new solvency and liquidity requirements that superseded Basel II, amount is equal to 15% of adjusted net profit for 2020, in line with the ECB recommendation of 15 Decemberimplemented in the EU via CRR / CRD. In accordance with the CRR the minimum Pillar 1 capital requirements 2020, which included a definition of adjusted net profit. At the end of 2020 and including the final 2019 dividend,applicable to ING Group are: a CET1 ratio of 4.5%, a Tier 1 ratio of 6% and a Total capital ratio of 8% of risk- ING has reserved EUR 3,266 million for distribution. This includes EUR 468 million of cash-only 2020 interimweighted assets.

dividend and the remainder, subject to prevailing ECB recommendation, for distribution after September 2021.
In 2020, as a reaction to the Covid-19 pandemic, relevant regulators introduced a number of changes to the Processes for managing capitalregulatory capital requirements applicable to ING, including structural reductions. The structural reductions of
GT Balance Sheet & Capital Management ensures adherence to the set limits and targets by planning andcapital requirements reflect the application of Art.104a in CRD V, which allowed ING to replace CET1 capital with executing capital management transactions. The ongoing assessment and monitoring of capital adequacy isadditional Tier 1 / Tier 2 securities to meet the Pillar II requirement, and a reduction in the overall systemic buffer embedded in the capital planning process within the ICAAP framework. As part of the dynamic business planning(i.e. the Systemic Risk Buffer plus the highest of the O-SII and G-SII buffer) by the Dutch National Bank from 3% to process, ING prepares a capital and funding plan on a regular basis for all its material businesses and assesses2.5%. Similarly, various competent authorities changed or removed their Countercyclical Buffer (CCyB)
continuously the timing, need and feasibility for capital management actions in scope of its execution strategy.requirements reducing the CCyB for ING from 24 basis points to 3 basis points.
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 capital plan. These limits are cascaded to the differentAs a consequence, the overall CET1 requirement (including buffer requirements) for ING Group at a consolidated businesses in line with our risk management framework. Contingency capital measures and early warninglevel was 10.51% in 2020. This requirement is the sum of a 4.5% Pillar I requirement, a 0.98% Pillar II indicators are in place in conjunction with ING’s recovery plan to support the strategy in times of stress.requirement, a 2.5% Capital Conservation Buffer (CCB), a 0.03% Countercyclical Buffer (CCyB) (based on December 2020 positions) and a 2.5% O-SII buffer that is set separately for Dutch systemic banks by the Dutch Central Bank (De Nederlandsche Bank). This requirement excludes the Pillar II guidance, which is not disclosed.

ING Group Annual Report 2020 on Form 20-FF -375

ContentsPart IPart IIPart IIIAdditional informationFinancial Statements

51 Capital management

The Maximum Distributable Amount (MDA) trigger level stood at 10.51% in 2020 for CET1, 12.33% for Tier 1 Capital and 14.77% for Total Capital (after the application of Art.104a of the CRD V), based on stable Pillar II capital requirements. In the event that ING Group breaches the MDA level, ING may face restrictions on dividend payments, AT1 instruments coupons and payment of variable remuneration.

Ratings

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.

Main credit ratings of ING at 31 December 2020 Standard & Poor’sMoody’sFitch RatingOutlookRatingOutlookRatingOutlook

ING Groep N.V. Long-termA-NegativeBaa1StableA+Negative

ING Bank N.V. Long-termA+StableAa3StableAA-Negative Short-termA-1P-1F1+

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.

ING Group Annual Report 2020 on Form 20-FF -376