Company Quick10K Filing
ING Group
20-F 2019-12-31 Filed 2020-03-06
20-F 2018-12-31 Filed 2019-03-08
20-F 2017-12-31 Filed 2018-03-08
20-F 2016-12-31 Filed 2017-03-16
20-F 2015-12-31 Filed 2016-03-02
20-F 2013-12-31 Filed 2014-03-21
20-F 2012-12-31 Filed 2013-03-22
20-F 2011-12-31 Filed 2012-03-21
20-F 2010-12-31 Filed 2011-03-17
20-F 2009-12-31 Filed 2010-03-18

ING 20F Annual Report

Item 17
Item 18
Part I
Part II
Part III
Item 6. Directors, Senior Management and Employees
Item 7.
Part III
Item 8.
Item 9.
Part III
Item 10. Additional Information
Item 11. Quantitative and Qualitative
Part III
Item 12. Description of Securities Other Than Equity
Note 2 Cash and Balances with Central Banks
Note 3 Loans and Advances To Banks
Note 4 Financial Assets At Fair Value Through Profit or Loss
Note 5 Financial Assets At Fair Value Through Other Comprehensive
Note 7 Loans and Advances To Customers
Note 45 Contingent Liabilities and Commitments
Note 4 Financial Assets At Fair Value Through Profit or Loss
Note 5 Financial Assets At Fair Value Through Other Comprehensive
Note 6 Securities At Amortised Cost
Note 2 Cash and Balances with Central Banks
Note 3 Loans and Advances To Banks
Note 7 Loans and Advances To Customers
Note 4 Financial Assets At Fair Value Through Profit or Loss
Note 15 Financial Liabilities At Fair Value Through Profit or Loss
Note 44 Offsetting Financial
Note 4 Financial Assets At Fair Value Through Profit or Loss
Note 11 Other Assets
Note 15 Financial Liabilities At Fair Value Through Profit or Loss
Note 17 Other Liabilities
Part III
Note 7 ‘Loans and Advances To Customers' for Information on Finance Lease Receivables.
EX-2.1 exhibit21.htm
EX-8 exhibit82019.htm
EX-12.1 exhibit121.htm
EX-12.2 exhibit122.htm
EX-13.1 exhibit131.htm
EX-13.2 exhibit132.htm
EX-15.1 exhibit151.htm

ING Group Earnings 2019-12-31

Balance SheetIncome StatementCash Flow

20-F 1 form20f2019landscapeh.htm FORM 20-F Document
 
 
 
 
2019 ING Group Annual Report on Form 20-F
 
1
 
 
UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
 
WASHINGTON,
 
D.C. 20549
 
FORM 20-F
 
(Mark One)
 
REGISTRATION
 
STATEMENT
 
PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE
 
ACT OF
1934
OR
 
ANNUAL REPORT PURSUANT TO
 
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended 31 December 2019
 
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
 
ACT OF 1934
OR
 
SHELL COMPANY REPORT
 
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
 
ACT OF 1934
Commission File Number: 001-14642
ING GROEP N.V.
 
(Exact name of Registrant as specified in its charter)
 
 
ING GROUP
 
(Translation
 
of Registrant’s name into English)
 
 
The Netherlands
 
(Jurisdiction of incorporation or organization)
 
 
ING Groep N.V.
 
Bijlmerdreef 106
 
1102 CT Amsterdam
 
P.O.
 
Box 1800, 1000 BV Amsterdam
 
The Netherlands
 
(Address of principal executive offices)
 
 
Erwin Olijslager
 
Telephone: +31 20 564 7705
 
E-mail: Erwin.Olijslager@ing.com
 
Bijlmerdreef 106
 
1102 CT Amsterdam
 
The Netherlands
 
(Name, Telephone, E-mail and/or
 
Facsimile number and Address of Company
 
Contact Person)
 
Securities registered or to
 
be registered pursuant to
 
Section 12(b) of the Act.
 
 
Title of each class
Trading symbols
Name of each exchange on which registered
American Depositary Shares
ING
New York Stock Exchange
Ordinary shares
New York Stock Exchange
(i)
6.125% ING Perpetual Debt Securities
ISG
New York Stock Exchange
3.150% Fixed Rate Senior Notes due 2022
ING22
New York Stock Exchange
3.950% Fixed Rate Senior Notes due 2027
ING27
New York Stock Exchange
Floating Rate Senior Notes due 2022
ING22A
New York Stock Exchange
Floating Rate Senior Notes due 2023
ING23A
New York Stock Exchange
4.100% Fixed Rate Senior Notes due 2023
ING23
New York Stock Exchange
4.550% Fixed Rate Senior Notes due 2028
ING28
New York Stock Exchange
3.550% Fixed Rate Senior Notes due 2024
4.05% Fixed Rate Senior Notes due 2029
4.05% Fixed Rate Senior Notes due 2029
ING24
New York Stock Exchange
4.050% Fixed Rate Senior Notes due 2029
ING29
New York Stock Exchange
 
 
(i)
 
Not for trading, but only in connection with the registration of American Depositary Shares
representing such ordinary shares,
 
pursuant to the requirements of the Securities and
Exchange Commission.
 
 
2019 ING Group Annual Report on Form 20-F
 
2
 
 
Securities registered or to
 
be registered pursuant to Section
 
12(g) of the Act.
 
None
 
Securities for which there is a reporting
 
obligation pursuant to Section 15(d) of the Act.
 
None
 
 
Indicate the number of outstanding shares
 
of each of the issuer’s classes of capital or common stock as of the close of
 
the period covered
by the annual report.
 
Ordinary Shares, nominal value
 
EUR 0.01 per Ordinary Share
3.896.734.271
 
 
Indicate by check mark if the registrant
 
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
 
 
 
Yes
 
No
 
If this report is an annual or transition report,
 
indicate by check mark if the registrant
 
is not required to file reports pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934.
 
 
 
Yes
 
No
 
 
Note — Checking the box above will
 
not relieve any registrant
 
required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 from their obligations under
 
those Sections.
 
 
Indicate by check mark whether the registrant
 
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12
 
months (or for such shorter period that the registrant
 
was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
 
 
 
Yes
 
No
 
Indicate by check mark whether the registrant
 
has submitted electronically every
 
Interactive Data File required
 
to be submitted pursuant
to Rule 405 of Regulation S-T
 
(§232.405 of this chapter) during the preceding 12
 
months (or for such shorter period that the registrant
was required to submit
 
and post such files).
 
 
Yes
 
No
 
 
Indicate by check mark whether the registrant
 
is a large accelerated
 
filer, an accelerated filer, a non-accelerated filer, or an emerging
growth company. See definition of “large accelerated
 
filer,” accelerated filer,” and “emerging growth company”
 
in Rule 12b-2 of the
Exchange Act.
 
Large accelerated
 
filer
 
Accelerated filer
 
Non-accelerated filer
 
Emerging growth company
 
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.
 
 
The term “new or revised financial accounting standard”
 
refers to any update issued by the Financial
 
Accounting Standards Board
to its Accounting Standards Codification after April 5, 2012.
 
Indicate by check mark which basis of accounting the
 
registrant has used to prepare
 
the financial statements included in this filing:
 
U.S. GAAP
 
International Financial Reporting Standards
 
as issued
by the International Accounting Standards
 
Board
 
Other
 
 
If “Other” has been checked in response to the previous
 
question, indicate by check mark which financial statement item the registrant
has elected to follow.
 
Item 17
 
Item 18
 
 
If this is an annual report, indicate by check mark whether the registrant
 
is a shell company (as defined in Rule 12b-2 of the Exchange
Act).
 
Yes
 
No
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
imagep3i0.gif image0.jpg imagep3i1.gif
 
2019 ING Group Annual Report on Form 20-F
 
3
 
 
 
 
 
 
 
ING Group
 
Filed with the United States Securities and Exchange Commission for the year ended December 31st, 2019
 
Annual Report 2019 on Form 20-F
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Contents
 
|
Part I
 
|
 
Part II
|
 
Part III
|
 
Additional Information
 
|
 
Financial Statements
 
 
 
2019 ING Group Annual Report on Form 20-F
 
4
 
 
Contents
PART
 
I
PRESENTATION
 
OF INFORMATION
5
CAUTIONARY STATEME
 
NT WITH RESPECT TO FORWARD
 
-LOOKING STATEMENTS
7
1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
9
2.
OFFER STATISTICS
 
AND EXPECTED TIMETABLE
9
3.
KEY INFORMATION
9
4.
INFORMATION ON THE COMPANY
33
4A.
UNRESOLVED
 
STAFF COMMENTS
66
5.
OPERATING
 
AND FINANCIAL REVIEW AND PROSPECTS
 
66
6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
91
7.
MAJOR SHAREHOLDERS AND RELATED PARTY
 
TRANSACTIONS
130
8.
FINANCIAL INFORMATION
132
9.
THE OFFER AND LISTING
133
10.
ADDITIONAL INFORMAT ION
136
11.
QUANTITATIVE AND QUALITATIVE
 
DISCLOSURE ABOUT MARKET RISK
140
12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
141
 
PART
 
II
13.
DEFAULTS,
 
DIVIDEND ARREARAGES AND DELINQUENCIES
144
14.
MATERIAL MODIFICATIONS
 
TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS
144
15.
CONTROLS AND PROCEDURES
144
16A.
AUDIT COMMITTEE FINANCIAL EXPERT
146
16B.
CODE OF ETHICS
146
16C.
PRINCIPAL ACCOUNTANT
 
FEES AND SERVICES
147
16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR
 
AUDIT COMMITTEES
148
16E.
PURCHASES OF REGISTERED EQUITY SERVICES BY THE ISSUER AND AFFILIATED
PURCHASERS
148
16F.
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
149
16G.
CORPORATE GOVERNANCE
149
16H.
MINE SAFETY DISCLOSURE
151
 
PART
 
III
17.
FINANCIAL STATEMENTS
152
18.
FINANCIAL STATEMENT
 
S
152
19
EXHIBITS
153
 
ADDITIONAL INFORMATION
RISK MANAGEMENT
156
SELECTED STATISTICAL
 
INFORMATION ON BANKING OPERATIONS
239
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Contents
 
|
 
I
 
|
 
 
II
|
 
 
|
 
Additional Information
 
|
 
Financial Statements
 
 
 
2019 ING Group Annual Report on Form 20-F
 
5
 
 
PRESENTATION
 
OF INFORMATION
In this Annual Report, and unless otherwise stated or the context otherwise dictates, references to
"ING Groep N.V.",
 
"ING Groep" and "ING Group" refer
 
to ING Groep N.V.
 
and references to "ING", the
"Company", the "Group", "we" and "us" refer to ING Groep
 
N.V.
 
and its consolidated subsidiaries.
ING Groep N.V.'s
 
primary
 
banking subsidiary is ING Bank N.V.
 
(together with its consolidated
subsidiaries, "ING Bank"). References to "Executive Board"
 
and "Supervisory Board" refer to the
Executive Board or Supervisory Board of ING Groep
 
N.V.,
 
respectively.
 
ING presents its consolidated financial statements in euros, the currency of the European Economic
and Monetary Union. Unless otherwise specified
 
or the context otherwise requires, references
 
to
“$”, “US$” and “Dollars” are to the United States dollars and references to “EUR” are
 
to euros.
 
 
Solely for the convenience of the reader, this Annual Report contains translations of certain euro
amounts into U.S. dollars at specified rates. These translations should not be construed as
representations that the translated
 
amounts actually represent such dollar or euro amounts, as
the case may be, or could be converted into U.S. dollars or euros, as the case may be, at the rates
indicated or at any other rate. Therefore,
 
unless otherwise stated, the translations of euros into U.S.
dollars have been made at the rate of EUR 1.00 = U.S. $ 1.0855, the noon buying rate in New York
City for cable transfers in euros as certified for customs purposes by the Federal Reserve Bank of
New York
 
(the “Noon Buying Rate”) on 21 February 2020.
 
 
ING prepares financial information in accordance with International Financial Reporting Standards
as issued by the International Accounting Standards Board (“IFRS-IASB”) for purposes of reporting
with the U.S. Securities and Exchange Commission (“SEC”), including financial information
contained in this Annual Report on Form 20-F.
 
ING Group’s accounting policies and its use of various
options under IFRS-IASB are described under ‘Principles of valuation and determination of results’ in
the consolidated financial
 
statements. In this document the term “IFRS-IASB” is used to refer to
IFRS-IASB as applied by ING Group.
 
The published 2019 Annual Accounts of ING Group, however, are
 
prepared in accordance
 
with IFRS-
EU. IFRS-EU refers to International Financial Reporting Standards (“IFRS”) as adopted by the
European Union (“EU”), including the decisions ING Group made with regard
 
to the options available
under IFRS as adopted by the EU (IFRS-EU).
 
IFRS-EU differs from IFRS-IASB, in respect of certain paragraphs in IAS 39 ‘Financial Instruments:
Recognition and Measurement’ regarding
 
hedge accounting for portfolio hedges of interest rate
risk. Under IFRS-EU, ING Group applies fair value hedge accounting for portfolio hedges of interest
rate risk (fair value macro
 
hedges) in accordance with the EU “carve-out” version of IAS 39. Under
the EU “IAS 39 carve-out”, hedge accounting may be applied, in respect of fair value macro hedges,
to core deposits and hedge ineffectiveness is only recognised when the revised estimate of the
amount of cash flows in scheduled time buckets falls below the original designated amount
 
of that
bucket, and is not recognised when the revised amount of cash flows in scheduled time buckets is
more than the original designated amount. Under IFRS-IASB, hedge accounting for fair value macro
hedges cannot be applied to core deposits and hedge ineffectiveness arises whenever the revised
estimate of the amount of cash flows in scheduled time buckets is either
 
more or less than the
original designated amount of that bucket. IFRS-IASB financial
 
information is prepared by reversing
the hedge accounting impacts that are applied under the EU “carve-out”’ version of IAS 39.
Financial information under IFRS-IASB accordingly does not take account of the possibility that, had
ING Group applied IFRS-IASB as its primary accounting framework, it might have applied alternative
hedge strategies where those alternative hedge strategies could
 
have qualified for IFRS-IASB
compliant hedge accounting. These decisions could have resulted
 
in different shareholders’ equity
and net result amounts compared to those indicated in this Annual Report on Form 20-F.
 
Other than for the purpose of SEC reporting, ING Group intends to continue to prepare
 
its Annual
Accounts under IFRS-EU. A reconciliation between IFRS-EU and IFRS-IASB for shareholders’
 
equity
and net result is included in Note 1 ‘accounting policies’ to the consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
Contents
 
|
 
I
 
|
 
 
II
|
 
 
|
 
Additional Information
 
|
 
Financial Statements
 
 
 
2019 ING Group Annual Report on Form 20-F
 
6
 
 
 
In addition to the consolidated financial
 
statements, which are prepared
 
in accordance with IFRS-
IASB, this Annual Report on Form 20-F contains certain measures that are not defined by generally
accepted accounting principles (GAAP) such as IFRS. Our management uses these financial
measures, along with the most directly comparable GAAP financial measures, in evaluating
segment performance and allocating resources. We
 
believe that presentation of this information,
along with comparable GAAP measures, is useful to investors because it allows investors to
understand the primary method used by management to evaluate performance on a meaningful
basis. Non-GAAP financial
 
measures should not be considered in isolation from, or as a substitute
for, financial information presented in compliance with GAAP, including the consolidated financial
statements. Non-GAAP financial
 
measures as defined by us may not be comparable with similarly
titled measures used by other companies.
 
 
Certain amounts set forth herein, such as percentages, may not sum due to rounding.
 
This Annual Report on Form 20-F contains inactive textual addresses to Internet websites operated
by us and third parties. Reference to such websites is made for information purposes only, and
information found at such websites is not incorporated by reference
 
into this Annual Report on
Form 20-F.
 
 
 
 
 
 
 
 
 
 
 
 
 
Contents
 
|
 
I
 
|
 
 
II
|
 
 
|
 
Additional Information
 
|
 
Financial Statements
 
 
 
2019 ING Group Annual Report on Form 20-F
 
7
 
 
CAUTIONARY STATEMENT
 
WITH RESPECT TO
 
FORWARD
 
-LOOKING
 
STATEMENTS
Certain
 
of
 
the
 
statements
 
contained
 
herein
 
are
 
not
 
historical
 
facts,
 
including,
 
without
 
limitation,
certain
 
statements
 
made
 
of
 
future
 
expectations
 
and
 
other
 
forward-looking
 
statements
 
that
 
are
based on management’s current views and assumptions and involve known and unknown risks and
uncertainties that could cause actual results,
 
performance or events
 
to differ materially from
 
those
expressed or implied
 
in such
 
statements. Actual
 
results, performance or
 
events may differ
 
materially
from those in such statements due to a number of factors, including, without limitation,
 
changes
 
in
 
general
 
economic
 
conditions,
 
in
 
particular
 
economic
 
conditions
 
in
 
ING’s
 
core
markets;
 
changes affecting interest rate levels;
 
 
changes in performance of financial markets,
 
including developing markets;
 
changes
 
in
 
the
 
fiscal position
 
and
 
the
 
future
 
economic
 
performance
 
of
 
the
 
US
 
including
potential consequences
 
of a
 
downgrade of
 
the sovereign credit
 
rating of
 
the US
 
government;
 
consequences of the United Kingdom’s withdrawal from the European
 
Union;
 
introduction of, changes in or discontinuation of ‘benchmark’ indices;
 
inflation
 
and
 
deflation
 
in
 
our
 
principal
 
markets;
 
changes
 
in
 
conditions
 
in
 
the
 
credit
 
and
capital
 
markets
 
generally,
 
including
 
changes
 
in
 
borrower
 
and
 
counterparty
creditworthiness;
 
changes
 
in
 
laws
 
and
 
regulations,
 
including
 
those
 
governing
 
financial services
 
or
 
financial
institutions, and the interpretation and application thereof;
 
changes in compliance obligations;
 
geopolitical
 
risks,
 
political
 
instability
 
and
 
policies
 
and
 
actions
 
of
 
governmental
 
and
regulatory authorities;
 
 
ING’s ability to meet minimum capital and other prudential regulatory requirements;
 
the outcome of current and future legal and regulatory proceedings;
 
changes in tax laws;
 
operational risks, such
 
as system
 
disruptions or
 
failures, breaches of security,
 
cyber-attacks,
human error,
 
changes in
 
operational practices,
 
inadequate controls
 
including in
 
respect of
third
 
parties
 
with
 
which
 
we
 
do
 
business,
 
natural
 
disasters
 
or
 
outbreaks
 
of
 
communicable
diseases;
 
risks and changes related to cybercrime including the effects
 
of cyber-attacks and changes
in legislation and regulation related to cybersecurity and data privacy;
 
changes in general competitive factors;
 
 
the inability to protect our intellectual property and infringement claims by third parties;
 
changes in credit ratings;
 
 
business, operational,
 
regulatory,
 
reputation
 
and other
 
risks and
 
challenges in
 
connection
with climate change;
 
 
the inability to attract and retain key personnel;
 
conclusions with
 
regard to purchase
 
accounting assumptions
 
and methodologies,
 
and other
changes in
 
accounting
 
assumptions and
 
methodologies including
 
changes in
 
valuation
 
of
issued securities and credit market exposure;
 
 
changes in investor and customer behavior;
 
 
changes
 
in
 
the
 
availability
 
of,
 
and
 
costs
 
associated
 
with,
 
sources
 
of
 
liquidity
 
such
 
as
interbank funding;
 
 
 
 
 
 
 
 
 
 
 
 
 
Contents
 
|
 
I
 
|
 
 
II
|
 
 
|
 
Additional Information
 
|
 
Financial Statements
 
 
 
2019 ING Group Annual Report on Form 20-F
 
8
 
 
 
changes affecting currency exchange rate;
 
changes in ownership
 
that could affect
 
the future availability to
 
us of net
 
operating loss, net
capital and built-in loss carry forwards;
 
 
ING’s ability
 
to achieve
 
its strategy,
 
including projected
 
operational
 
synergies
 
and change
programmes, and
 
 
the other risks
 
and uncertainties
 
detailed in the
 
most recent annual
 
report of ING
 
Groep N.V.
(including the
 
Risk Factors
 
contained therein)
 
and ING’s
 
more
 
recent
 
disclosures,
 
including
press releases, which are
 
available on www.ING.com.
 
This annual report contains inactive textual addresses to internet websites operated by us and third
parties. Reference to such websites is made for information purposes only, and information found
at such websites is not incorporated by reference
 
into this annual report. ING does not make any
representation or warranty
 
with respect to the accuracy or completeness of, or take any
responsibility for, any information found at any websites operated by third
 
parties. ING specifically
disclaims any liability with respect to any information found at websites operated by third parties.
ING cannot guarantee that websites operated by third
 
parties remain available following the filing
of this annual report or that any information found at such websites will not change following the
filing of this annual
 
report. Many of those factors are beyond ING’s control.
 
 
Any forward looking statements made by or on behalf of ING speak only as of the date they are
made, and ING assumes no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information or for any other reason.
 
 
This document does not constitute an offer to sell, or a solicitation of an offer
 
to purchase, any
securities in the United States or any other jurisdiction.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Contents
 
|
 
I
 
|
 
 
II
|
 
 
|
 
Additional Information
 
|
 
Financial Statements
 
 
 
2019 ING Group Annual Report on Form 20-F
 
9
 
 
PART
 
I
 
Item
 
1.
 
Identity
 
of Directors,
 
Senior
 
Management
 
And Advisors
 
Not Applicable.
 
Item
 
2.
 
Offer
 
Statistics
 
and Expected
 
Timetable
 
Not Applicable.
 
Item
 
3.
 
Key Information
 
A.
 
Selected financial data
 
The selected consolidated financial
 
information data is derived from the IFRS-IASB consolidated
financial statements
 
of ING Group.
 
 
The following information should be read in conjunction with, and is qualified by reference to the
Group’s consolidated financial statements and other financial
 
information included elsewhere
herein.
 
IFRS-IASB Consolidated Income Statement
Data
for the years ended 31 December
2019
2019
2018
2017
2016
2015
In millions except amounts per share
US$
EUR
EUR
EUR
EUR
EUR
Continuing operations
Interest income
30,571
28,163
28,129
43,890
44,182
46,321
Interest expense
15,580
14,353
14,169
30,243
30,941
33,760
Net interest result
14,992
13,811
13,960
13,647
13,241
12,561
Net fee and commission income
3,113
2,868
2,798
2,710
2,433
2,318
Other income
485
446
1,566
2,233
2,228
3,128
Total
 
income
18,589
17,125
18,324
18,590
17,902
18,007
Addition to loan loss provision
1,215
1,120
656
676
974
1,347
Operating expenses
11,238
10,353
10,682
9,829
10,614
9,326
Total
 
expenses
12,453
11,472
11,338
10,505
11,588
10,673
Result before tax
 
from continuing operations
6,136
5,653
6,986
8,085
6,314
7,334
Taxation
1,793
1,652
2,116
2,539
1,705
1,924
Net result from continuing operations
4,344
4,001
4,869
5,546
4,609
5,410
Net result from discontinued operations
0
0
0
0
441
–76
Net result attributable to Non-controlling
interests
107
99
108
82
75
408
Net result ING Group
 
IFRS-IASB attributable to
Equityholders of the parent
4,236
3,903
4,761
5,464
4,975
4,926
Addition to shareholders’ equity
1,318
1,214
2,115
2,861
2,415
2,411
Dividend
2,919
2,689
2,646
2,603
2,560
2,515
Basic earnings per Ordinary Share
1.09
1.00
1.22
1.41
1.28
1.27
Diluted earnings per Ordinary Share
1.09
1.00
1.22
1.41
1.28
1.27
Dividend per Ordinary Share
0.75
0.69
0.68
0.67
0.66
0.65
Number of Ordinary Shares outstanding in the
market (in millions)
3,896.7
3,896.7
3,891.7
3,884.8
3,877.9
3,868.7
 
Euro amounts have been translated
 
into U.S. dollars at the exchange rate of $ 1.0855 to EUR 1.00,
the Noon Buying Rate in New York
 
City on 21 February 2020 for cable transfers in euros
 
as certified
for customs purposes by the Federal Reserve
 
Bank of New York.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Contents
 
|
 
I
 
|
 
 
II
|
 
 
|
 
Additional Information
 
|
 
Financial Statements
 
 
 
2019 ING Group Annual Report on Form 20-F
 
10
 
 
 
Reference is made to Note 1 'Accounting policies' for information on Changes in accounting
principles, estimates and presentation of the consolidated financial
 
statements and related notes.
 
 
Dividend reported is the amount declared over the year.
 
Basic earnings per share amounts have been calculated based on the weighted average number of
ordinary shares of ING Groep
 
N.V.
 
(“Ordinary Shares”) outstanding during the relevant
 
period. For
purposes of this calculation, Ordinary Shares held by Group companies are
 
deducted from the total
number of Ordinary Shares in issue. The effect of dilutive securities is also adjusted.
 
IFRS-IASB Consolidated Balance Sheet Data
as at 31 December
2019
2019
2018
2017
2016
2015
In billions except amounts per share or otherwise
indicated
US$
EUR
EUR
EUR
EUR
EUR
Total
 
assets
964.5
888.5
884.6
843.9
842.2
1,002.3
Financial assets at fair value through profit or
loss
104.4
96.2
120.5
123.2
122.1
138.0
Loans and advances to customers
660.0
608.0
589.7
571.9
560.2
696.9
 
Savings accounts
354.6
326.7
322.7
319.7
315.7
305.9
 
Other deposits and funds
268.8
247.7
233.0
220.1
207.2
358.3
Customer deposits
623.5
574.4
555.7
539.8
522.9
664.2
Deposits from banks
37.8
34.8
37.3
36.8
32.0
33.8
Shareholders' equity
55.4
51.0
49.0
48.4
47.3
45.0
Non-voting equity securities
Shareholders' equity per Ordinary Share
 
oustanding
14.21
13.09
12.61
12.47
12.19
11.62
Number of Ordinary shares outstanding (in millions)
3,895.8
3,895.8
3,890.6
3,885.8
3,878.5
3,870.2
 
Euro amounts have been translated
 
into U.S. dollars at the exchange rate of $ 1.0855 to EUR 1.00,
the Noon Buying Rate in New York
 
City on 21 February 2020 for cable transfers in euros
 
as certified
for customs purposes by the Federal Reserve
 
Bank of New York.
 
 
ING has changed its accounting policy for the netting of cash pooling arrangements in the second
quarter of 2016. Loans and advances to customers and Customer deposits, as at 31 December
2015, are adjusted as a result.
 
The amounts for the period ended 31 December 2019 and 31 December 2018 have been prepared
in accordance with IFRS 9. ING Group has applied the classification, measurement, and impairment
requirements of IFRS 9 retrospectively
 
as of 1 January 2018 by adjusting the opening balance sheet
and opening equity at 1 January 2018. ING Group decided not to restate comparative periods as
permitted by IFRS 9. Reference is made to Note 1 'Accounting policies' for information on Changes
in accounting principles, estimates and presentation of the consolidated financial statements
 
and
related
 
notes.
 
Shareholders’ equity per ordinary share amounts have been calculated based on the number of
Ordinary Shares outstanding at the end of the respective periods.
B.
 
Capitalization and indebtedness
 
This item does not apply to annual reports on Form 20-F.
C.
 
Reasons for the offer
 
and use of proceeds
 
This item does not apply to annual reports on Form 20-F.
D.
 
Risk Factors
Any of the risks described below could have a material adverse effect on the business activities,
financial condition,
 
results and prospects of ING. ING may face a number of the risks described
below simultaneously and some risks described below may be interdependent. While the risk
factors below have been divided into categories, some risk factors could belong in more than one
category and investors should carefully consider all of the risk factors set out in this section.
Additional risks of which the Company is not presently aware, or that are
 
currently viewed as
immaterial, could also affect the business operations of ING and have a material adverse effect on
 
 
 
 
 
 
 
 
 
 
 
 
 
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ING’s business activities, financial
 
condition, results and prospects. The market price of ING shares
or other securities could decline due to any of those risks including the risks described below, and
investors could lose all or part of their investments.
Risks related to financial conditions,
 
market environment
 
and general economic
trends
Because we are a financial services company conducting business
 
on a global basis,
our revenues
 
and earnings are affected by the volatility
 
and strength of the
economic, business, liquidity, funding and capital
 
markets environments
 
of the
various geographic regions
 
in which we conduct business, and an adverse
 
change in
any one region could have
 
an impact on our business, results and financial condition.
 
Because ING is a multinational banking and financial
 
services corporation, with a global presence
and serving around 38.4 million customers, corporate clients and financial institutions in over 40
countries, ING’s business, results and financial condition may be significantly
 
impacted by turmoil
and volatility in the worldwide financial
 
markets or in the particular geographic areas in which we
operate. In Retail Banking, our products include savings, payments, investments, loans and
mortgages in most of our retail markets. In Wholesale Banking, we provide specialised lending,
tailored corporate finance, debt and equity market solutions, payments & cash management and
trade and treasury services. As a result,
 
negative developments in financial markets and/or regions
in which we operate have in the past had and may in the future have a material adverse impact on
our business, results and financial condition, including as a result of the potential consequences
listed below.
 
Factors such as interest rates, securities prices, credit
 
spreads, liquidity spreads, exchange rates,
consumer spending, changes in client 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 and trends, terrorism, pandemics and epidemics (such as
COVID-19) or other widespread health emergencies all impact the business and economic
environment and, ultimately, our solvency, liquidity and the amount and profitability of business
we conduct in a specific
 
geographic region. Certain of these risks are
 
often experienced globally as
well as in specific geographic regions and are described in greater detail below under the headings
“–Interest rate volatility and other interest
 
rate changes may adversely affect our business, results
and financial condition”, “–Inflation
 
and deflation may negatively affect
 
our business, results and
financial condition”, “–Market conditions, including those observed over the past few years and the
application of IFRS 9 may increase the risk of loans being impaired and have a negative effect on
our results and financial condition” and “–Continued risk of political instability and fiscal uncertainty
in Europe and the United States, as well as ongoing volatility in the financial markets and the
economy generally have adversely affected, and may continue to adversely affect, our business,
results and financial condition”.
 
 
In case one or more of the factors mentioned above adversely affects the profitability of our
business, this might also result, among other things, in the following:
 
reserve and provisions inadequacies, which could ultimately be realised
 
through profit and loss
and shareholders’ equity;
 
the write-down of tax assets impacting net results and/or equity;
 
impairment expenses related to goodwill and other intangible assets, impacting net result;
and/or
 
movements in risk weighted assets for the determination of required capital.
 
In particular, we are exposed to financial, economic, market and political conditions
 
in the Benelux
countries and Germany, from which we derive a significant portion of our revenues in both Retail
Banking and Wholesale Banking, and which present risks of economic downturn. Though less
material, we also derive substantial revenues in the following geographic regions:
 
Turkey, Eastern
Europe (primarily Poland among others), Southern Europe
 
(primarily Spain among others), East
Asia (primarily Singapore among others) and Australia which also present risks of economic
downturn. In an economic downturn, we expect that higher unemployment, lower family income,
lower corporate earnings, higher corporate and private
 
debt defaults, lower business investments
and lower consumer spending would adversely affect the demand for banking products, and that
 
 
 
 
 
 
 
 
 
 
 
 
 
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ING may need to increase its reserves and provisions,
 
each of which may result in overall
 
lower
earnings. Securities prices, real estate values and private equity valuations may also be adversely
impacted, and any such losses would be realised through profit and loss and shareholders’ equity.
We also offer a number of financial products that expose
 
us to risks associated with fluctuations
 
in
interest rates, securities prices, corporate
 
and private default rates, the value of real
 
estate assets,
exchange rates and credit spreads.
 
For further information on ING’s exposure to particular geographic areas, see Note 35 ‘Information
on geographic areas’ to the consolidated financial statements.
Interest rate
 
volatility and other interest
 
rate changes may adversely
 
affect our
business, results and financial condition.
 
Changes in prevailing interest
 
rates may negatively affect our business, including the level of net
interest revenue
 
we earn, and the levels of deposits and the demand for loans. A sustained
increase in the inflation rate in our principal markets may also negatively affect
 
our business,
results and financial condition. For example, a sustained increase in the inflation rate may result in
an increase in nominal market interest rates. A failure
 
to accurately anticipate higher inflation and
factor it into our product pricing assumptions may result in mispricing of our products, which could
materially and adversely impact our results. On the other hand, recent concerns regarding
negative interest rates and the low level
 
of interest rates generally
 
may negatively impact our net
interest income, which may have an adverse impact on our profitability.
 
A prolonged period of low interest rates has resulted
 
in, and may continue to result in:
 
lower earnings over time on investments, as reinvestments will earn lower
 
rates;
 
increased prepayment or redemption of mortgages and fixed maturity securities in our
investment portfolios, as well as increased prepayments of corporate
 
loans. This as borrowers
seek to borrow at lower interest
 
rates potentially combined with lower credit spreads.
Consequently, we may be required to reinvest
 
the proceeds into assets at lower interest rates;
 
lower profitability as the result of a decrease in the spread between
 
client rates earned on assets
and client rates paid on savings, current account
 
and other liabilities;
 
higher costs for certain derivative instruments that may be used to hedge certain of our product
risks;
 
lower profitability since we may not be able to fully track the decline in interest rates in our
savings rates;
 
lower profitability since we may not always be entitled to impose surcharges to customers to
compensate for the decline in interest rates;
 
lower profitability since we may have to pay a higher premium for the defined contribution
scheme in the Netherlands for which the premium paid is dependent on interest rate
developments and DNB’s methodology for determining the ultimate forward rate;
 
lower interest rates
 
may cause asset margins to decrease thereby lowering our results.
 
This may
for example be the consequence of increased competition for investments as result
 
of the low
rates, thereby driving margins
 
down; and/or
 
 
(depending on the position) a significant
 
collateral posting requirement
 
associated with our
interest rate hedge programs,
 
which could materially and adversely affect liquidity and our
profitability.
 
The foregoing impacts have been and may be further amplified
 
in a negative interest rate
environment, since we may not be able earn interest on our assets (including reserves), or may be
forced to pay negative interest
 
on our assets, while still paying a positive interest or no interest to
others to hold our liabilities, resulting in an adverse impact on our credit spread and lowering of our
net interest income. Furthermore,
 
in the event that a negative interest rate
 
environment results
 
in
ING’s depositors being forced to pay a premium to ING to hold cash deposits, some depositors may
choose to withdraw their deposits in lieu of making such payments to ING, which would have an
adverse effect on our reputation, business, results and financial condition.
 
Alternatively, any period of rapidly increasing
 
interest rates may result
 
in:
 
a decrease in the demand for loans;
 
 
 
 
 
 
 
 
 
 
 
 
 
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higher interest rates to be paid on debt securities that we have issued or may issue on the
financial markets
 
from time to time to finance our operations and on savings, which would
increase our interest expenses and reduce
 
our results;
 
higher interest rates can lead to lower investments
 
prices reduce the revaluation reserves,
thereby lowering IFRS equity and the capital ratios. Also the lower
 
securities value leads to a loss
of liquidity generating capacity which needs to be compensated by attracting new liquidity
generating capacity which reduces our results;
 
prepayment losses if prepayment rates are
 
lower than expected or if interest rates increase
 
too
rapidly to adjust the accompanying hedges; and/or
 
(depending on the position) a significant
 
collateral posting requirement
 
associated with our
interest rate hedge program.
The default of a major market
 
participant could disrupt the markets and may have
an adverse effect on our business, resu
 
lts and financial condition.
 
Within the financial
 
services industry, the severe distress or default
 
of any one institution (including
sovereigns and central
 
counterparties (CCPs)) could lead to defaults by, or the severe distress of,
other market participants. While prudential regulation may reduce the probability of a default by a
major financial
 
institution, the actual occurrence of such a default could have a material adverse
impact on ING. Such distress of, or default by, a major financial institution
 
could disrupt markets or
clearance and settlement systems and lead to a chain of defaults by other financial institutions,
since the commercial and financial soundness of many financial
 
institutions may be closely related
as a result of credit, trading,
 
clearing or other relationships. Even the perceived
 
lack of
creditworthiness of a sovereign
 
or a major financial
 
institution (or a default by any such entity)
may lead to market-wide liquidity problems and losses or defaults by us or by other institutions.
This risk is sometimes referred to as ‘systemic risk’ and may adversely affect financial
intermediaries, such as clearing agencies, clearing houses, banks, securities firms
 
and exchanges
with whom we interact on a daily basis and financial
 
instruments of sovereigns in which we invest.
Systemic risk could impact ING directly, by exposing it to material credit losses on transactions with
defaulting counterparties or indirectly by significantly
 
reducing the available market liquidity on
which ING and its lending
 
customers depend to fund their operations and/or leading to a write
down of loans or securities held by ING. Systemic risk could have a material adverse effect on our
ability to raise new funding and on our business, results and financial condition. In addition, such
distress or failure could
 
impact future product sales as a potential result of reduced confidence in
the financial services
 
industry.
Continued risk of political instability and
 
fiscal uncertainty in Europe
 
and the United
States, as well as ongoing volatility
 
in the financial markets and the economy
generally have adversely
 
affected, and may continue to adversely
 
affect, our
business, results and financial condition.
 
 
Our global business and results are materially affected by conditions in the global capital markets
and the economy generally. In Europe,
 
there are continuing concerns over
 
weaker economic
conditions, as well as concerns in relation to European
 
sovereign debt, the uncertain outcome of
the negotiations between the UK and the EU following the Brexit decisions in UK parliament,
increasing political instability, levels of unemployment, the availability and cost of credit, credit
spreads, and the impact of continued quantitative easing within the Eurozone through bond
repurchases and the ECB’s targeted
 
longer-term refinancing operation (‘TLTRO’). In the United
States, political uncertainty, US national debt levels and changes in US trade and foreign
investment policies (including tensions with China and Eurozone) may result
 
in adverse economic
developments. In addition, geopolitical issues, including with respect to the Middle East,
Russia/Ukraine and North 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, decreased liquidity, increased
price volatility, credit downgrade events,
 
and increased probability of default for fixed income
securities. Moreover, there
 
is a risk that an adverse credit event at one or more European
 
sovereign
debtors (including a credit rating downgrade or a default) could
 
trigger a broader economic
downturn in Europe and elsewhere.
 
In addition, the confluence of these and
 
other factors has
resulted in volatile foreign
 
exchange markets. Securities that are less liquid are more difficult to
 
 
 
 
 
 
 
 
 
 
 
 
 
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value and may be hard to dispose of.
 
International equity markets have also continued to
experience heightened volatility and turmoil, with issuers, including ourselves, that have exposure
to the real estate, mortgage, private equity and credit markets particularly affected. These events,
market upheavals and continuing risks, including high levels of volatility, have had and may
continue to have an adverse effect on our results, in part because we have a large investment
portfolio.
 
There is also continued uncertainty over the long-term outlook for the tax, spending and borrowing
policies of the US, the future economic performance of the US within the global economy and any
potential future budgetary restrictions in the US, with a potential impact on a future sovereign
credit ratings downgrade
 
of the US government, including the rating of US Treasury
 
securities. A
downgrade of US Treasury
 
securities could also impact the ratings and perceived creditworthiness
of instruments issued, insured or guaranteed by institutions, agencies or instrumentalities directly
linked to the US government. US Treasury
 
securities and other US government-linked securities are
key assets on the balance sheets of many financial
 
institutions and are widely used as collateral by
financial institutions
 
to meet their day-to-day cash flows in the short-term
 
debt market. The
impact of any further downgrades to the sovereign credit rating
 
of the US government or a default
by the US government on its debt obligations would create broader financial turmoil and
uncertainty, which would weigh heavily on the global financial
 
system and could consequently
result in a significant adverse impact to the Group’s business and operations.
 
In many cases, the markets for investments and instruments have been and remain illiquid, and
issues relating to counterparty credit ratings and other factors have exacerbated pricing and
valuation uncertainties. Valuation of such investments and instruments is a complex process
involving the consideration of market transactions, pricing models, management judgment and
other factors, and is also impacted by external factors, such as
 
underlying mortgage default rates,
interest rates, rating
 
agency actions and property valuations. Historically these factors have
resulted in, among other things, valuation and impairment issues in connection with our exposures
to European sovereign
 
debt and other investments.
 
Any of these general developments in global financial and political conditions could negatively
impact to our business, results and financial condition
 
in future periods.
The uncertainty surrounding the
 
United Kingdom’s withdrawal
 
from the European
Union may have adverse effects on our
 
business, results and financial condition.
 
Although the UK is not a member state of the Eurozone, the departure of the UK from the
 
EU
(commonly referred to as ‘Brexit’)
 
remains a major political and economic event whose
consequences are not fully known or understood and may further destabilize the Eurozone.
 
The UK
withdrew from the EU on January 31, 2020, though the relationship between
 
the UK and the EU
remains uncertain during the ongoing transition period, which largely maintains current
arrangements and provides time for the UK and the EU to negotiate the details of their future
relationship. The transition period is currently
 
expected to end on December 31, 2020, and, if no
agreement is reached, the default scenario would be
 
a non-negotiated Brexit. In the event of a
non-negotiated Brexit, the UK will depart the EU with no agreements in place beyond any
temporary arrangements which have been or may be put in place by the EU or individual EU
Member States, and the UK as part of no-deal contingency efforts
 
and those conferred by mutual
membership of the World Trade
 
Organization. Accordingly, there
 
continues to be uncertainty with
respect to the process surrounding Brexit
 
and the outcome of the ongoing Brexit negotiations,
including any related regulatory changes, and over the future
 
economic relationship between the
UK and the rest of the world (including the EU). Any of these developments could have an adverse
effect on economic and financial
 
conditions in the UK, the EU or globally. Although ING has
continued to take further steps throughout 2019 to prepare for known risks related
 
to Brexit, such
as substantially progressing applications for a Third Country
 
Branch banking licence in the UK,
taking actions for contract continuity and working to establish alternatives in the EU for those euro
clearing activities that may be expected to move from London following Brexit, the possible
economic and operational impacts of Brexit on the Group and its counterparties remain uncertain.
 
Given ING’s significant pre-existing EU-licensed banking network and the various scenario analyses
performed by ING on its Brexit sensitive clients and sectors, ING believes that it is positioned to
largely avoid, or has taken significant steps to mitigate, potential direct adverse effects of Brexit.
 
 
 
 
 
 
 
 
 
 
 
 
 
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However, 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.
Discontinuation of or changes to ‘benchmark’ indices
 
may negatively affect our
business, results and financial condition.
 
The London Interbank Offered Rate (‘LIBOR’), the Euro
 
OverNight Index Average
 
(‘EONIA’), the Euro
Interbank Offered Rate (‘EURIBOR’) and other interest rates or other types of rates
 
and indices
which are deemed to be ‘benchmarks’ are the subject of ongoing national and international
regulatory reform. Following
 
the implementation of any such potential reforms, the manner of
administration of benchmarks may change, with the result that they may perform or be calculated
differently than in the past, or benchmarks could cease to exist entirely, or there could be other
consequences which cannot be predicted. Although the UK Financial Conduct Authority (‘FCA’) has
authorized ICE Benchmark Administration as administrator of LIBOR, on 27 July 2017 the FCA
announced that it will no longer persuade or compel banks to submit rates for the calculation of
the LIBOR benchmark after 2021. The announcement indicates that the continuation
 
of the LIBOR
on the current basis cannot and will not be guaranteed after 2021. In addition, as of October 2019,
the new euro risk-free rate
 
euro short-term rate (€STR) is being published and the EONIA
benchmark was reformed, making it dependant to the €STR benchmark. The reformed EONIA
benchmark will cease to exist by 1 January 2022 and therefore the European Money Markets
Institute (EONIA’s administrator) has indicated that EONIA cannot be used in any contracts that will
be outstanding as of 1 January 2022. Public authorities have initiated industry working groups in
various jurisdictions to search for and recommend alternative risk-free rates
 
that could serve
alternatives if current benchmarks like LIBOR and EONIA cease to exist or materially change. The
work of these working groups is still ongoing, though certain such organizations have advanced
proposals for benchmark replacements. For example,
 
the US Federal Reserve’s
 
Alternative
Reference Rates
 
Committee (commonly referred
 
to as ‘ARRC’) has recommended adoption of the
Secured Overnight Financing Rate (commonly referred
 
to as ‘SOFR’) as an alternative to US dollar
LIBOR.
 
The potential discontinuation of the LIBOR and EONIA benchmarks or any other benchmark, or
changes in the methodology or manner of administration of any benchmark, could result in a
number of risks for the Group, its clients, and the financial services industry
 
more widely. These
risks include legal risks in relation to changes required to documentation for new and existing
transactions may be required. Financial risks may also arise from
 
any changes in the valuation of
financial instruments
 
linked to benchmark rates, and changes to benchmark indices could impact
pricing mechanisms on some instruments. Changes in valuation, methodology or documentation
may also result into complaints or litigation. The Group may also be exposed to operational risks or
incur additional costs due to the potential requirement to adapt IT systems, trade reporting
infrastructure and operational processes, or in relation
 
to communications with clients or other
parties and engagement during the transition period.
 
Except for EONIA, the replacement of benchmarks together with the timetable and mechanisms for
implementation have not yet been confirmed
 
by central banks. Accordingly, it is not currently
possible to determine whether, or to what extent, any such changes would affect
 
the Group.
However, the implementation of alternative benchmark rates may have a material adverse effect
on our business, results and financial condition.
Inflation and deflation may negatively affect our business, results and financial
condition.
 
A sustained increase in the inflation rate in our principal markets would have multiple impacts on
us and may negatively affect our business, results and financial
 
condition. For example, a sustained
increase in the inflation rate may result in an increase in market interest rates,
 
which may:
 
decrease the estimated fair value of certain fixed income securities that we hold in our
investment portfolios, resulting in:
 
 
 
 
 
 
 
 
 
 
 
 
 
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reduced levels of unrealised
 
capital gains available to us, which could negatively impact our
solvency position and net income, and/or
 
a decrease in collateral values,
 
result
 
in increased withdrawal of certain savings products, particularly those with fixed rates
below market rates,
 
require us, as an issuer of securities, to pay higher interest rates
 
on debt securities that we issue
in the financial markets
 
from time to time to finance our operations, which would increase our
interest expenses and reduce our results.
 
A significant and sustained increase in inflation
 
has historically also been associated with
decreased prices for equity securities and sluggish performance of equity markets generally. A
sustained decline in equity markets may:
 
result in impairment charges to equity securities that we hold in our investment portfolios and
reduced levels of unrealised
 
capital gains available to us which would reduce our net income,
 
and
 
lower the value of our equity investments impacting our capital position.
 
In addition, a failure to accurately anticipate higher inflation and factor it into our product pricing
may result in a systemic mispricing of our products, which would negatively impact our results.
 
On the other hand, deflation
 
experienced in our principal markets may also adversely affect
 
our
financial performance. In recent years, the risk of low inflation
 
and even deflation (i.e., a continued
period with negative 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.
Market conditions, including those
 
observed over the past few
 
years, and the
application of IFRS 9 may increase
 
the risk of loans being impaired and have
 
a
negative effect on our results
 
and financial condition.
 
We are
 
exposed to the risk that our borrowers (including sovereigns) may not repay
 
their loans
according to their contractual terms and that the collateral securing the payment of these loans
may be insufficient.
 
We may see adverse changes in the credit
 
quality of our borrowers and
counterparties, for example, as a result of their inability to refinance their indebtedness, with
increasing delinquencies, defaults and insolvencies across a range
 
of sectors. This may lead to
impairment charges on loans and other assets, higher costs and additions to loan loss provisions. A
significant increase in the size of our provision for loan losses could have a material adverse effect
on our business, results and financial condition.
 
IFRS 9 ‘Financial Instruments’ became effective as per 1 January 2018 and
 
results in loan loss
provisions that may be recognized earlier, on a more
 
forward looking basis and on a broader scope
of financial instruments
 
than was previously the case under IAS 39. ING has applied the
classification, measurement, and impairment requirements retrospectively by adjusting the
opening balance sheet and opening equity as at 1 January 2018. As a result of applying IFRS 9
going forward, a shift in the forward looking consensus view of economic conditions may materially
impact the models used to calculate loan loss provisions under IFRS 9 and cause more volatility in,
or higher levels of, loan loss provisions, any of which could adversely affect the Group’s results,
financial condition
 
or regulatory capital position.
 
Economic and other factors could lead to contraction in the residential mortgage and commercial
lending market and to decreases in residential and commercial property prices, which could
generate substantial increases in impairment losses. Additionally, continuing low oil prices could
have an influence on the repayment capacity of certain corporate borrowers active in the oil and oil
related services industries.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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We may incur
 
losses due to failures
 
of banks falling under the scope of state
compensation schemes.
 
While prudential regulation is intended to minimize the risk of bank failures, in the event such a
failure occurs, given our size, we may incur significant compensation payments to be made under
the Dutch Deposit Guarantee Scheme (DGS), which we may be unable to recover from
 
the bankrupt
estate, and therefore the consequences of any future
 
failure of such a bank could be significant to
ING. Such costs and the associated costs to be borne by us may have a material adverse effect
 
on
our results and financial condition.
 
On the basis of the EU Directive on deposit guarantee schemes,
ING pays quarterly risk-weighted contributions into a DGS-fund.
 
The DGS-fund is to grow to a
target size of 0.8% of all deposits guaranteed under the DGS, which is expected to be reached in
July 2024. In case of failure of a Dutch bank, depositor
 
compensation is paid from the DGS-fund. If
the available financial means of the
 
fund are insufficient,
 
Dutch banks, including ING, may be
required pay to extraordinary
 
ex-post contributions not exceeding 0.5% of their covered deposits
per calendar year.
 
In exceptional circumstances and with the consent of the competent authority,
higher contributions may be required. However,
 
extraordinary ex-post contributions may be
temporarily deferred if, and for so long as, they would
 
jeopardise the solvency or liquidity of a bank.
Depending on the size of the failed bank, the available financial
 
means in the fund, and the required
additional financial
 
means, the impact of the extraordinary ex-post contributions on ING may be
material.
 
Since 2015, the EU has been discussing the introduction of a pan-European deposit guarantee
scheme (‘EDIS’), (partly) replacing or complementing national compensation schemes in two or
three phases. Proposals contain elements of (re)insurance,
 
mutual lending and mutualisation of
funds. The new model is intended to be ‘overall cost-neutral’. Discussions have continued in 2019,
but it remains uncertain when EDIS will be introduced and, if introduced, what impact EDIS would
have on ING’s business and operations.
 
Risks related to the regul
 
ation and supervision of the Group
Non-compliance with laws and/or
 
regulations concerning financial services or
financial institutions could result in fines and other liabilities,
 
penalties or
consequences for us, which
 
could materially affect our business and reduce
 
our
profitability.
 
Despite our efforts to maintain effective
 
compliance procedures and to comply with applicable laws
and regulations, we have faced, and in the future
 
may continue to face, the risk of consequences in
connection with non-compliance with applicable laws and regulations. For additional information
on legal proceedings, see Note 46 ‘Legal proceedings’
 
to the consolidated financial
 
statements.
There are a number of risks in areas where
 
applicable regulations may be unclear, subject to
multiple interpretations or under development, or where regulations
 
may conflict with one
another, or where regulators revise
 
their previous guidance or courts overturn previous rulings,
which could result in our failure
 
to meet applicable standards. Regulators and other authorities
have the power to bring administrative or judicial proceedings against us, which could result,
among other things, in suspension or revocation of our licenses, cease and desist orders, fines, civil
penalties, criminal penalties or other disciplinary action,
 
which could materially harm our results
and financial condition.
 
If we fail to address, or appear to fail to address, any of these matters
appropriately, our reputation could be harmed and we could be subject to additional legal risk,
which could, in turn, increase the size and number of claims and damages brought against us or
subject us to enforcement actions, fines
 
and penalties.
Changes in laws and/or
 
regulations governing
 
financial services or financial
institutions or the application of such laws
 
and/or regulations
 
may increase our
operating costs and limit our
 
activities.
 
We are
 
subject to detailed banking laws and government regulation in the jurisdictions in which we
conduct business.
 
Regulation of the industries in which we operate is becoming increasingly more
extensive and complex, while also attracting scrutiny from regulators. Compliance with applicable
 
 
 
 
 
 
 
 
 
 
 
 
 
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and new laws and regulations is resources
 
-intensive, and may materially increase our operating
costs. Moreover, these regulations can limit our activities, among others, through stricter net
capital, customer protection and market conduct requirements and restrictions on the businesses
in which we can operate or invest.
 
Our revenues and profitability and those of our competitors have been and will continue to be
impacted by requirements relating to capital, additional loss-absorbing capacity, leverage,
minimum liquidity and long-term funding levels, requirements related to resolution
 
and recovery
planning, derivatives clearing and margin rules and levels of regulatory
 
oversight, as well as
limitations on which and, if permitted, how certain business activities may be
 
carried out by
financial institutions.
We are
 
subject to additional legal and regulatory
 
risk in certain countries where
 
we
operate with less developed
 
or predictable legal and regulatory
 
frameworks.
 
In certain countries in which we operate, judiciary and dispute resolution systems may be less
developed. As a result, in case of a breach
 
of contract, we may have difficulties
 
in making and
enforcing claims against contractual counterparties and, if claims are made against us, we might
encounter difficulties
 
in mounting a defence against such allegations. If we become party to legal
proceedings in a market with an insufficiently
 
developed judicial system, it could have an adverse
effect on our operations and net results.
 
In addition, as a result of our operations in certain countries, we are subject to risks of possible
nationalisation, expropriation, price controls, exchange controls and other restrictive
 
government
actions, as well as the outbreak of hostilities and or war, in these markets. Furthermore, the current
economic environment in certain countries in which we operate may increase the likelihood
 
for
regulatory initiatives to enhance consumer protection or to protect homeowners from foreclosures.
Any such regulatory initiative could have an adverse impact on our ability to protect our economic
interest, for instance in the event of defaults
 
on residential mortgages.
 
We are
 
subject to the regulatory supervision of the ECB and other
 
regulators with
extensive supervisory and investigatory
 
powers.
 
In its capacity as principal bank 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 SSM, the regulators with jurisdiction over the Group, including the ECB, may conduct
stress tests and have discretion to impose capital surcharges
 
on financial institutions
 
for risks that
are not otherwise recognised in risk-weighted assets or other surcharges
 
depending on the
individual situation of the bank and take or require other measures, such as restrictions on or
changes to the Group’s business. Competent regulators may also, if the Group fails to comply with
regulatory requirements,
 
in particular with minimum capital requirements (including buffer
requirements) or with liquidity requirements, or if there
 
are shortcomings in its governance and risk
management processes, prohibit the Group from
 
making dividend payments to shareholders or
distributions to holders of its regulatory capital instruments. Generally, a failure to comply with the
new quantitative and qualitative regulatory requirements
 
could have a material adverse effect on
the Group’s business, results and financial condition.
Failure
 
to meet minimum capital and other prudential
 
regulatory requir
 
ements as
applicable to us from time to
 
time may have a material adverse
 
effect on our
business, results and financial condition and on our
 
ability to make payments on
certain of our securities.
 
We are
 
subject to regulations that require us to comply with minimum requirements
 
for capital
(own funds) and additional loss absorbing capacity, as well as for liquidity, and to comply with
leverage restrictions. These are
 
developed or enacted by various organisations such as the Basel
Committee on Banking Supervision (‘BCBS’), the Financial Stability Board (‘FSB’) and the European
Union (‘EU’). The main pieces of legislation in this field
 
that apply to us are the EU’s Capital
Requirements Directive (‘CRD’) and Capital Requirements
 
Regulation (‘CRR’), and the Bank Recovery
 
 
 
 
 
 
 
 
 
 
 
 
 
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and Resolution Directive, all as amended from time to time and as implemented in national law
where required.
 
 
The capital and liquidity requirements and leverage
 
restrictions that apply to us result in various
minimum capital ratios (of capital to risk-weighted assets) and liquidity ratios that we must
maintain, and in a minimum leverage ratio
 
(based on unweighted assets). A key capital ratio is the
Common Equity Tier 1 ratio or CET1 ratio,
 
which is the ratio of common equity tier 1 capital to the
total risk exposure amount (‘TREA’, often referred to as risk-weighted assets or ‘RWA’).
 
In addition
to the capital requirements, we must maintain at all times a sufficient aggregate amount of own
funds and ‘eligible liabilities’ (that is, liabilities that may be bailed in using the bail-in tool),
 
known as
the minimum requirements for own funds and eligible liabilities (‘MREL’).
 
 
Capital, liquidity and leverage requirements
 
and their application and interpretation may change.
Any changes may require us to maintain more capital or to raise
 
a different type of capital by
disqualifying existing capital instruments from continued inclusion in regulatory capital, requiring
replacement with new capital instruments that meet the new criteria. Sometimes changes are
introduced subject to a transitional period during which the new requirements are
 
being phased in,
gradually progressing to a fully
 
phased-in, or fully-loaded, application of the requirements.
 
 
Any failure to comply with these requirements
 
may have a material adverse effect on our business,
results and financial condition, and may require us to seek additional capital. It may also prohibit us
from making payments on certain of our securities. Our business, results and financial condition
may also be adversely affected if these requirements change, which may also require us to seek
additional capital or a different type of capital. Because implementation phases and transposition
into EU or national regulation where required
 
may often involve a lengthy period, the impact of
changes in capital, liquidity and leverage regulations on our business, results
 
and financial
condition, and on our ability to make payments on certain of our securities, is often
 
unclear.
 
Our US commodities and derivatives
 
business is subject to CFTC and SEC regulation
under the Dodd-Frank
 
Act.
 
Title VII of Dodd-Frank created
 
a new framework for regulation
 
of the over-the-counter derivatives
markets and certain market participants which has affected
 
and could continue to affect various
activities of the Group and its subsidiaries. ING Capital Markets LLC, a wholly-owned indirect
subsidiary of ING Bank N.V.,
 
has registered with the US Commodity Futures
 
Trading
 
Commission
(‘CFTC’) as a swap dealer and intends to register with the SEC as a securities-based swap dealer.
 
The
SEC has adopted regulations, among others, establishing registration, reporting, risk management,
business conduct, and margin and capital requirements for security-based swaps. Such regulations
are expected to be effective on or around September 1, 2021.Additionally, the CFTC recently re-
proposed, and is expected to adopt, capital requirements for swap dealers, although the specific
requirements, and any available exemptions, have not been finalized. If these requirements are
applicable to ING, and no exemptions are available, it is possible that these requirements will be
difficult
 
for ING to comply with and may, as a result, materially and adversely impact ING’s ability
to operate as a swap dealer in the US. Other CFTC regulatory requirements,
 
already implemented,
include registration of swap dealers, business conduct rules imposed on swap dealers,
requirements that some categories of swaps be centrally executed
 
on regulated trading facilities
and cleared through regulated
 
clearing houses, and initial and variation margin requirements for
uncleared swaps. In addition, new position limits requirements for market participants that have
been proposed and may be contained in final regulations to be adopted by the CFTC could limit
ING’s position sizes in swaps referencing specified physical commodities and similarly limit the
ability of counterparties to utilize certain of our products by narrowing the scope of hedging
exemptions from position limits for commercial end users and the trading activity of speculators.
All of the foregoing areas of regulation
 
of the derivative markets and market participants will likely
result in increased cost of hedging and other trading activities, both for ING and its customers,
which could expose our business to greater risk and could reduce the size and profitability of our
customer business. In addition, the imposition of these regulatory restrictions and requirements,
could result in reduced
 
market liquidity, which could in turn increase market volatility and the risks
and costs of hedging and other trading activities.
 
 
 
 
 
 
 
 
 
 
 
 
 
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We are
 
subject to the ‘Bank Recovery
 
and Resolution Directive’
 
(‘BRRD’) among
several
 
other bank recovery
 
and resolution regimes
 
that include statutory write
down and conversion
 
as well as other powers, which remains
 
subject to significant
uncertainties as to scope and impact on us.
 
We are
 
subject to several recovery
 
and resolution regimes, including the Single Resolution
Mechanism (‘SRM’), the BRRD as implemented in national legislation, and the Dutch ‘Intervention
Act’ (Wet bijzondere maatregelen
 
financiële
 
ondernemingen. as implemented in the Dutch
Financial Supervision Act). The aim of the BRRD is to provide supervisory authorities and resolution
authorities with common tools and powers to address banking crises pre-emptively in order to
safeguard financial stability and minimise taxpayers’ exposure to losses.
 
 
The powers granted to authorities include, among others, a statutory ‘write-down and conversion
power’ and a ‘bail-in’ power, which gives the resolution authority the power to, as a resolution
action or when the resolution authority determines that otherwise we would no longer be viable,
inter alia, (i) reduce or cancel existing shares, (ii) convert relevant
 
capital instruments or eligible
liabilities or bail-inable liabilities into shares or other instruments of ownership of the relevant entity
and/or (iii) write down relevant
 
capital instruments or eligible liabilities or reduce or cancel the
principal amount of, or interest on, certain unsecured liabilities (which could include certain
securities that have been or will be issued by us), whether in whole or in part and whether or not on
a permanent basis.
 
 
In addition to the ‘write-down and conversion power’ and the ‘bail-in’ power, the powers granted to
the resolution authority include the power to (i) sell and transfer a banking group or all or part of its
business on commercial terms without requiring the consent of the shareholders or complying with
the procedural requirements
 
that would otherwise apply, (ii) transfer a banking group or all or part
of its business to a ‘bridge institution’ (a publicly controlled entity) and (iii) separate and transfer all
or part of a banking group’s business to an asset management vehicle (a publicly controlled entity)
to allow them to be managed over time.
In addition, among the broader powers granted to the resolution authority, the BRRD provides
powers to the resolution authority to amend the maturity date and/or any interest payment date
of, or the interest amount payable under, debt instruments or other bail-inable liabilities, including
by suspending payment for a temporary period.
 
 
The Intervention Act confers wide-ranging powers to the Dutch Minister of Finance, including,
among other things, in relation to shares and other securities issued by us or with our cooperation
or other claims on us (including, without limitation, expropriation thereof)
 
if there is a grave and
immediate threat to the stability of the financial system.
 
 
None of these actions would be expected to constitute an event of default under our securities
entitling holders to seek repayment. If these powers were to be exercised in
 
respect of us, there
could be a material adverse effect on us and on holders of our securities,
 
including through a
material adverse effect on credit ratings and/or the price of our securities. Investors in our securities
may lose their investment if resolution measures are taken under current
 
or future regimes.
 
For further discussion of the impact of bank recovery and resolution regimes
 
on ING, see “Item 4.
Information on the Company—Regulation and Supervision—Regulatory Developments—Bank
recovery and resolution
 
directive.”
Risks related to changes
 
in laws of general application, litigation,
 
enforcement
proceedings and investigations
We may be subject to
 
litigation, enforcement
 
proceedings, investigations
 
or other
regulatory actions, and adverse
 
publicity.
 
We are
 
involved in governmental, regulatory,
 
arbitration and legal proceedings and investigations
involving claims by and against us which arise in the ordinary course of our businesses, including in
connection with our activities as financial
 
services provider, employer, investor and taxpayer.
 
As a
financial institution,
 
we are subject to specific laws and regulations governing financial
 
services or
 
 
 
 
 
 
 
 
 
 
 
 
 
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financial institutions.
 
See “– Changes in laws and/or regulations governing
 
financial services or
financial institutions
 
or the application of such laws and/or regulations may increase
 
our operating
costs and limit our activities” above. Financial reporting irregularities involving other large
 
and well-
known companies, possible findings
 
of government authorities in various jurisdictions which are
investigating several rate
 
-setting processes, notifications made by whistleblowers, increasing
regulatory and law enforcement scrutiny of ‘know your customer’ anti-money laundering, tax
evasion, prohibited transactions with countries or persons subject to sanctions, and bribery or other
anti-corruption measures and anti-terrorist-financing procedures and their effectiveness,
regulatory investigations of the banking industry, and litigation that arises from the failure or
perceived failure
 
by us to comply with legal, regulatory, tax and compliance requirements could
result in adverse publicity and reputational harm, lead to increased regulatory
 
supervision, affect
our ability to attract and retain customers and maintain access to the capital markets, result in
cease and desist orders, claims, enforcement actions, fines and civil and criminal penalties,
 
other
disciplinary action or have other material adverse effects
 
on us in ways that are not predictable.
Some claims and allegations may be brought by or on behalf of a class and claimants may seek
large or indeterminate amounts of damages, including compensatory, liquidated, treble and
punitive damages. Our reserves for litigation liabilities may prove to be inadequate.
 
Claims and
allegations, should they become public, need not be well founded, true or successful to have a
negative impact on our reputation. In addition, press reports and other public statements that
assert some form of wrongdoing could result in inquiries or investigations by regulators, legislators
and law enforcement officials, and
 
responding to these inquiries and investigations, regardless of
their ultimate outcome, is time consuming and expensive. Adverse publicity, claims and
allegations, litigation and regulatory investigations and sanctions may have a material adverse
effect on our business, results, financial
 
condition and/or prospects in any given period.
 
 
We are
 
subject to different tax regulations
 
in each of the jurisdictions where we
conduct business, and are exposed
 
to changes in tax laws, and risks of non-
compliance with or proceedings
 
or investigations with respect to,
 
tax laws.
 
Changes in tax laws (including case law) could increase our taxes and our effective tax rates and
could materially impact our tax receivables and liabilities as well as deferred tax assets and
deferred tax liabilities, which could have a material adverse effect on our business, results and
financial condition.
 
Changes in tax laws could also make certain ING products less attractive, which
could have adverse consequences for our businesses and results. Because of the geographic
 
spread
of its business, ING may be subject to tax audits, investigations and procedures in numerous
jurisdictions at any point in time. Although we believe that we have adequately provided for all our
tax positions, the ultimate resolution of these audits, investigations and procedures
 
may result in
liabilities which are different from the amounts recognized.
 
Increased bank taxes in countries where the Group
 
is active result in increased taxes on ING’s
banking operations, which could negatively impact our operations, financial condition and liquidity.
 
We may be subject to
 
withholding tax if we fail
 
to comply with the Foreign
 
Account
Tax
 
Compliance Act and other US withholding
 
tax regulations
 
Under provisions of US tax law commonly referred
 
to as FATCA,
 
non-US financial institutions
 
are
required to provide
 
to the US Internal Revenue Service (‘IRS’) certain information about financial
accounts held by US taxpayers or by foreign entities in which US taxpayers hold a substantial
ownership interest. Every
 
three years, certain ING branches and subsidiaries are required
 
to certify
their compliance with FATCA
 
requirements to the IRS. If the IRS determines that any such branches
and/or subsidiaries are not in compliance with the FATCA
 
requirements, then the FATCA
 
regulations
would impose a 30 percent penalty tax on all US-source payments (e.g.,
 
interest and dividends)
made to the branch/subsidiary, regardless
 
of whether the branch/subsidiary is the beneficial owner
of such payment or is acting as an intermediary for customers/payees.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Under provisions of other US tax law concerning withholding
 
tax, non-US financial
 
institutions
acting as intermediaries are required to withhold tax on US-source
 
payments to payees and remit
the tax to the IRS. Every three years, certain ING branches and subsidiaries are
 
required to certify
their compliance with such Qualified
 
Intermediary (‘QI’) requirements to the IRS. If the IRS
determines that any such branches and/or subsidiaries are not in compliance with
 
the QI
requirements, then it would not be commercially
 
feasible for ING to offer certain products to
customers.
 
Failure to comply with FATCA
 
and/or QI requirements
 
and regulations could also harm our
reputation and could subject the Group to enforcement
 
actions, fines
 
and penalties, which could
have a material adverse effect on our business, reputation, revenues, results, financial condition
and prospects. For additional information with respect to specific proceedings, see Note 46 ‘Legal
proceedings’ to the consolidated financial statements.
ING is exposed to the risk of claims from
 
customers who feel
 
misled or treated
unfairly because of advice or information
 
received.
 
Our banking products and advice services for third-party products are exposed to claims from
customers who might allege that they have received misleading advice or other information from
advisers (both internal and external) as to which products were most appropriate for them, or that
the terms and conditions of the products, the nature of the products or the circumstances under
which the products were sold, were
 
misrepresented to them. When new financial products are
brought to the market, ING engages in a multidisciplinary product approval process
 
in connection
with the development of such products, including production of appropriate marketing and
communication materials. Notwithstanding these processes, customers may make claims against
ING if the products do not meet their expectations. Customer protection regulations, as well as
changes in interpretation and perception by both the public at large and governmental authorities
of acceptable
 
market practices, influence customer expectations.
 
Products distributed through person-to-person sales forces have a higher exposure to such claims
as the sales forces provide
 
face-to-face financial planning and
 
advisory services. Complaints may
also arise if customers feel that they have not been treated reasonably or fairly, or that the duty of
care has not been complied with. While a considerable amount of time and resources
 
have been
invested in reviewing and assessing historical sales practices and products that were
 
sold in the
past, and in the maintenance of risk management, legal and compliance procedures to monitor
current sales practices, there can be no assurance
 
that all of the issues associated with current and
historical sales practices have been or will be identified, nor that any issues
 
already identified will
not be more widespread than presently estimated.
 
The negative publicity associated with any sales practices, any compensation payable in respect of
any such issues and regulatory changes resulting from such issues, has had and could have a
material adverse effect on our reputation, business, results, financial condition and
 
prospects. For
additional information regarding legal proceedings or claims, see Note 46 ‘Legal
 
proceedings’ to the
consolidated financial statements.
 
Risks related to the Group’s
 
business and operations
Operational risks, such as
 
systems disruptions or failures,
 
breaches of security,
cyber attacks, human error,
 
changes in operational practices, inadequate
 
controls
including in respect of third parties with which
 
we do business, natural
 
disasters or
outbreaks of communicable diseases
 
may adversely impact our reputation, business
and results.
 
We face the risk that the design and operating effectiveness of our controls and procedures
 
may
prove to be inadequate. Operational
 
risks are inherent to our business. Our businesses depend on
the ability to process a large number of transactions efficiently and accurately. In addition, we
routinely transmit, receive
 
and store personal, confidential and proprietary information by email
and other electronic means. Although we endeavour to safeguard our systems and processes,
losses can result from inadequately trained
 
or skilled personnel, IT failures (including due to a
 
 
 
 
 
 
 
 
 
 
 
 
 
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computer virus or a failure to anticipate or prevent
 
cyber attacks or other attempts to gain
unauthorised access to digital systems for purposes of misappropriating assets or sensitive
information, corrupting data, or impairing operational performance, or security breaches by third
parties), inadequate or failed internal control processes and systems, regulatory breaches,
 
human
errors, employee misconduct, including fraud, or from natural disasters or other external events
that interrupt normal business operations. Such losses may adversely affect our reputation,
business and results. We depend on the secure
 
processing, storage and transmission of
confidential and other information in
 
our computer systems and networks. The equipment and
software used in our computer systems and networks may not always be capable of processing,
storing or transmitting information as expected. Despite our business continuity plans and
procedures, certain of our computer systems and networks may have insufficient recovery
capabilities in the event of a malfunction or loss of data. As part of our Accelerated Think Forward
strategy, we are consistently managing and monitoring our IT risk profile globally. ING is subject to
increasing regulatory requirements
 
including EU General Data Protection Regulation (‘GDPR’) and
EU Payment Services Directive (‘PSD2’). Failure
 
to appropriately manage and monitor our IT risk
profile could affect
 
our ability to comply with these regulatory requirements, to securely
 
and
efficiently
 
serve our clients or to timely, completely or accurately process, store
 
and transmit
information, and may adversely impact our reputation, business and results. For further description
of the particular risks associated with cybercrime, see “–We are subject to increasing risks related
to cybercrime and compliance with cybersecurity regulation”
 
below.
 
Widespread outbreaks of communicable diseases may impact the health of our employees,
increasing absenteeism, or may cause a significant increase in the utilisation of health benefits
offered to our employees, either or both of which could adversely impact our business. We also
face physical risks, including as a direct result of climate change, such as extreme weather events
or rising water levels, which could have a material adverse effect on our operations, particularly
where our headquarters may be impacted.
 
In addition, other events including unforeseeable
and/or catastrophic
 
events can lead to an abrupt interruption of activities, and our operations may
be subject to losses resulting from such disruptions. Losses can result
 
from destruction or
impairment of property, financial assets,
 
trading positions, and the loss of key personnel. If our
business continuity plans are not able to be implemented, are not effective or do not sufficiently
take such events into account, losses may increase further.
We are
 
subject to increasing risks related
 
to cybercrime and compliance
 
with
cybersecurity regulation.
 
 
Like other financial
 
institutions and global companies, we are regularly the target
 
of cyber attacks.
In particular, threats from Distributed Denial of Service (‘DDoS’), targeted attacks (also called
Advanced Persistent Threats) and Ransomware
 
intensify worldwide, and attempts to gain
unauthorised access and the techniques used for such attacks are increasingly sophisticated. We
have faced, and expect to continue to face, an increasing number of cyber attacks (both successful
and unsuccessful) as we have further digitalized. This includes the continuing expansion of our
mobile- and other internet-based products and services, as well as our usage and reliance on cloud
technology. In 2019 we experienced continuous DDoS attacks, of which one DDoS attack breached
our DDoS defences (compared to two attacks in 2018). This DDoS attack caused an outage of
approximately four-hours, which affected customers of ING in Romania. In addition, ING Philippines
experienced one virus infection on a vendor-supplied server for two hours, which had no customer
impact. Furthermore, due to our reliance on national critical infrastructure and interconnectivity
with third-party vendors, exchanges, clearing houses, financial institutions
 
and other third parties,
we could be adversely impacted if any of them is subject to a successful cyber attack or other
information security event.
 
Cybersecurity, customer data and data privacy have become the subject of increasing legislative
and regulatory focus. The EU’s second Payment Services Directive (‘PSD2’), implemented in 2019,
and GDPR are examples of such regulations. In certain locations where ING is active, there
 
are
additional local regulatory requirements and legislation on top of EU regulations
 
that must be
followed for business conducted in that jurisdiction. Some of these legislations and regulations may
be conflicting
 
due to local regulatory interpretations. We
 
may become subject to new EU and local
legislation or regulation concerning cybersecurity, security of customer data in general or the
privacy of information we may store or maintain. Compliance with such new legislation or
 
 
 
 
 
 
 
 
 
 
 
 
 
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regulation could increase
 
the Group’s compliance cost. Failure
 
to comply with new and existing
legislation or regulation could harm our reputation and could subject the Group to enforcement
actions, fines
 
and penalties.
 
ING may be exposed to the risks of misappropriation, unauthorised access, computer viruses or
other malicious code, cyber attacks and other external attacks or internal breaches that could have
a security impact. These events could also jeopardise our confidential information or that of our
clients or our counterparties and this could be exacerbated by the increase in data protection
requirements as a result
 
of GDPR. These events can potentially result in financial loss and harm to
our reputation, hinder our operational effectiveness, result in regulatory censure,
 
compensation
costs or fines resulting from regulatory investigations and could have a material adverse effect on
our business, reputation, revenues, results,
 
financial condition and prospects.
 
Even when we are
successful in defending against cyber attacks, such defence may consume significant resources or
impose significant
 
additional costs on ING.
Because we operate
 
in highly competitive markets,
 
including our home market, we
may not be able to increase or
 
maintain our market share,
 
which may have an
adverse effect on our results.
 
There is substantial competition in the Netherlands and the other countries in which we do
business for the types of wholesale banking, retail banking, investment banking and other products
and services we provide. Customer loyalty and retention can
 
be influenced by a number
 
of factors,
including brand recognition, reputation, relative
 
service levels, the prices and attributes of products
and services, scope of distribution, credit ratings and actions taken by existing or new competitors
(including non-bank or financial
 
technology competitors). A decline in our competitive position as
to one or more of these factors could adversely impact our ability to maintain or further increase
our market share, which would adversely affect our results. Such competition is most pronounced
in our more mature markets of the Netherlands, Belgium, the rest of Western
 
Europe and Australia.
In recent years, however, competition in emerging
 
markets, such as Latin America, Asia and
Central and Eastern Europe,
 
has also increased as large financial services companies from more
developed countries have sought to establish themselves in markets which are perceived
 
to offer
higher growth potential, and as local institutions have become more sophisticated and competitive
and proceeded to form alliances, mergers or strategic
 
relationships with our competitors. The
Netherlands is our largest market. Our main competitors in the banking sector in the Netherlands
are ABN AMRO Bank and Rabobank.
 
Competition could also increase due to new entrants
 
(including non-bank and financial
 
technology
competitors) in the markets that may have new operating models that are not burdened by
potentially costly legacy operations and that are subject to reduced regulation. New
 
entrants may
rely on new technologies, advanced data and analytic tools, lower cost to serve, reduced
regulatory burden and/or
 
faster processes in order to challenge traditional
 
banks. Developments in
technology has also accelerated the use of new business models, and ING may not be successful in
adapting to this pace of change or may incur significant
 
costs in adapting its business and
operations to meet such changes. For example, new business models have been observed in retail
payments, consumer and commercial lending (such as peer-to-peer lending), foreign exchange
and low-cost investment advisory services. In particular, the emergence of disintermediation in the
financial sector
 
resulting from new banking, lending and payment solutions offered by rapidly
evolving incumbents, challengers and new entrants, in particular with respect to payment services
and products, and the introduction of disruptive technology may impede our ability to grow or
retain our market share and impact our revenues
 
and profitability.
 
Increasing competition in the markets in which we operate (including from non-banks and financial
technology competitors) may significantly
 
impact our results if we are unable to match the
products and services offered by our competitors. Future economic turmoil may accelerate
additional consolidation activity. Over time, certain sectors
 
of the financial services industry have
become more concentrated,
 
as institutions involved in a broad range
 
of financial
 
services have
been acquired by or merged into other firms or have declared bankruptcy. These developments
could result in our competitors gaining greater access to capital
 
and liquidity, expanding their
ranges of products and services, or gaining geographic diversity. We
 
may experience pricing
 
 
 
 
 
 
 
 
 
 
 
 
 
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pressures as a result
 
of these factors in the event that some of our competitors seek to increase
market share by reducing
 
prices.
We may not
 
always be able to protect our intellectual
 
property developed
 
in our
products and services and may be subject to infringement claims,
 
which could
adversely impact our core business,
 
inhibit efforts to monetize our internal
innovations and restrict our
 
ability to capitalize on future
 
opportunities.
 
In the conduct of our business, we rely on a combination of contractual rights with third parties and
copyright, trademark, trade name, patent and trade secret
 
laws to establish and protect our
intellectual property, which we develop in connection with our products and services. Third parties
may infringe or misappropriate our intellectual property. We may have to litigate to enforce
 
and
protect our copyrights, trademarks, trade names, patents,
 
trade secrets and know-how
 
or to
determine their scope, validity or enforceability. In that event, we may be required
 
to incur
significant costs, and
 
our efforts may not prove successful. The inability to secure or protect our
intellectual property assets could have an adverse effect on our core business and our ability to
compete, including through the monetization of our internal innovations.
 
We may also be subject to claims made by third parties for (1) patent, trademark or copyright
infringement, (2) breach of copyright, trademark or licence usage rights, or (3) misappropriation of
trade secrets. Any such claims and any resulting litigation could
 
result in significant expense and
liability for damages. If we were found to have infringed or misappropriated a third
 
-party patent or
other intellectual property right, we could in some circumstances be enjoined from providing
certain products or services to our customers or from utilizing and benefiting
 
from certain methods,
processes, copyrights, trademarks, trade
 
secrets or licences. Alternatively, we could be required
 
to
enter into costly licensing arrangements with third parties or to implement a costly workaround.
Any of these scenarios could have a material adverse effect on our business and results and could
restrict our ability to pursue future business opportunities.
The inability of counterparties to meet their financial obligations
 
or our inability to
fully enforce our
 
rights against counterparties could have
 
a material adverse effect
on our results.
 
Third parties that owe us money, securities or other assets may not pay or perform under their
obligations. These parties include the issuers and guarantors (including sovereigns) of securities we
hold, borrowers under loans originated, reinsurers,
 
customers, trading counterparties, securities
lending and repurchase counterparties, counterparties under swaps, credit default and other
derivative contracts, clearing agents, exchanges, clearing houses and other financial
intermediaries. Defaults by one or more of these parties on their obligations to us due to
bankruptcy, lack of liquidity, downturns in the economy or real estate values, continuing low oil or
other commodity prices, operational failure or other factors, or even rumours about potential
defaults by one or more of these parties or regarding a severe
 
distress of the financial services
industry generally, could have a material adverse effect on our results, financial condition and
liquidity. Given the high level of interdependence between financial institutions, we are and will
continue to be subject to the risk of deterioration of the commercial and financial soundness,
 
or
perceived soundness, of sovereigns
 
and other financial
 
services institutions. This is particularly
relevant to our franchise
 
as an important and large counterparty in equity, fixed
 
income and
foreign exchange markets, including related derivatives.
 
We routinely
 
execute a high volume of transactions, such as unsecured debt instruments,
derivative transactions and equity investments with counterparties and customers in the financial
services industry, including brokers and dealers, commercial and investment banks, mutual and
hedge funds, insurance companies, institutional clients, futures clearing merchants, swap dealers,
and other institutions, resulting in large periodic settlement amounts, which may result in our
having significant credit exposure to one or more of such counterparties or customers. As a result,
we could face concentration risk with respect to liabilities or amounts we expect to collect from
specific counterparties
 
and customers. We are exposed to increased counterparty risk as a result
 
of
recent financial institution failures and weakness and will continue to be exposed to the risk of loss
if counterparty financial
 
institutions fail or are otherwise unable to meet their obligations. A default
 
 
 
 
 
 
 
 
 
 
 
 
 
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by, or even concerns about the creditworthiness of, one or more
 
of these counterparties or
customers or other financial
 
services institutions could therefore have
 
an adverse effect on our
results or liquidity.
 
With respect to secured transactions, our credit risk may be exacerbated when the collateral held
by us cannot be or is liquidated at prices not sufficient
 
to recover the full amount of the loan or
derivative exposure due to us. We
 
also have exposure to a number of financial institutions
 
in the
form of unsecured debt instruments, derivative transactions and equity investments. For example,
we hold certain hybrid regulatory capital instruments issued by financial institutions
 
which permit
the issuer to cancel coupon payments on the occurrence of certain events or at their option. The EC
has indicated that, in certain circumstances, it may require
 
these financial
 
institutions to cancel
payment. If this were to happen, we expect that such instruments may experience ratings
downgrades and/or
 
a drop in value and we may have to treat
 
them as impaired, which could result
in significant losses.
 
There is no assurance that losses on, or impairments to the carrying value of,
these assets would not materially and adversely affect our business, results or financial
 
condition.
 
In addition, we are subject to the risk that our rights against third parties may not be enforceable in
all circumstances. The deterioration or perceived
 
deterioration in the credit quality of third parties
whose securities or obligations we hold could result in losses and/ or adversely affect our ability to
rehypothecate or otherwise use those securities or obligations for liquidity purposes. A significant
downgrade in the credit ratings
 
of our counterparties could also have a negative impact on our
income and risk weighting, leading to increased capital requirements. While in many cases we are
permitted to require additional collateral
 
from counterparties that experience financial difficulty,
disputes may arise as to the amount of collateral we are entitled to receive
 
and the value of
pledged assets. Also in this case, our credit risk may also be exacerbated when the collateral we
hold cannot be liquidated at prices sufficient
 
to recover the full amount of the loan or derivative
exposure due to us, which is most likely to occur during periods of illiquidity and depressed asset
valuations, such as those experienced during the financial
 
crisis of 2008. The termination of
contracts and the foreclosure on collateral
 
may subject us to claims. Bankruptcies, downgrades
and disputes with counterparties as to the valuation of collateral tend to increase in times of
market stress and illiquidity. Any of these developments or losses could materially and adversely
affect our business, results, financial
 
condition, and/or prospects.
Ratings are important to our
 
business for a number of reasons,
 
and a downgrade or
a potential downgrade in our
 
credit ratings could
 
have an adverse impact on our
results and net results.
 
Credit ratings represent
 
the opinions of rating agencies regarding an entity’s ability to repay its
indebtedness. Our credit ratings are important to our ability to raise capital and funding through
the issuance of debt and to the cost of such financing.
 
In the event of a downgrade, the cost of
issuing debt will increase, having an adverse effect on our net results. Certain institutional investors
may also be obliged to withdraw their deposits from ING following a downgrade, which could have
an adverse effect on our liquidity. We have credit ratings from
 
S&P, Moody’s Investor Service and
Fitch Ratings. Each of the rating
 
agencies reviews its ratings and rating
 
methodologies on a
recurring basis and may decide on a downgrade at any time.
 
Furthermore, ING Bank’s assets are risk-weighted. Downgrades
 
of these assets could result in a
higher risk-weighting, which may result in higher capital requirements. This may impact net
earnings and the return on capital, and may have an adverse impact on our competitive position.
 
As rating agencies continue to evaluate the financial services industry, it is possible that rating
agencies will heighten the level of scrutiny that they apply to financial
 
institutions, increase the
frequency and scope of their credit reviews,
 
request additional information from the companies
that they rate and potentially adjust upward the capital and other requirements
 
employed in the
rating agency models for maintenance of certain ratings levels. It is possible that the outcome of
any such review of us would have
 
additional adverse ratings consequences, which could have a
material adverse effect on our results and financial
 
condition. We may need to take actions in
response to changing standards or capital requirements
 
set by any of the rating agencies, which
could cause our business and operations to suffer.
 
We cannot predict what additional actions
 
 
 
 
 
 
 
 
 
 
 
 
 
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rating agencies may take, or what actions we may take in response to the actions of rating
agencies.
We may be exposed
 
to business, operational, regulatory,
 
reputational and other
risks in connection with climate change.
 
Climate change is an area of significant focus for governments and regulators, investors and ING’s
customers, and developments with respect to climate change topics may expose ING to significant
risks. The perception of 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 restricting CO2 emissions, such as the Paris
agreement, may also result in financial institutions coming under 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 lending portfolio
with its climate-related goals, see “Item 4. – Information on the Company – Business Overview –
Responsible finance” below.
 
Additionally, rising climate change concerns may lead to additional
regulation that could increase our operating
 
costs or negatively impact the profitability of our
investments and lending activities, including those involving the natural resources sector.
 
ING may
incur substantial costs in complying with current or future laws and regulations relating
 
to climate
change, including with respect to international actions regulating or restricting CO2 emissions or
changes in capital requirements regulations
 
in response to climate change. In addition, ING is
exposed to transition risks related to climate change, which result from
 
changes in the behaviour of
economic and financial actors
 
in response to the implementation of energy policies or
technological changes. Any of these risks may result in changes in our business activities or other
liabilities or costs, including exposure to reputational risks, any of which may have a material and
adverse impact on our business, results or financial condition.
 
For a description of the physical risks to our business resulting from climate change, see “–
Operational risks, such as systems disruptions or failures, breaches of security, cyber attacks,
human error, changes in operational practices, inadequate controls including in respect of third
parties with which we do business, natural disasters or outbreaks of communicable diseases may
adversely impact our reputation, business and results” above.
An inability to retain or attract
 
key personnel may affect our business
 
and results.
 
ING Group relies to a considerable
 
extent on the quality of its senior management, such as
members of the executive committee, and management in the jurisdictions which are material to
ING’s business and operations. The success of ING Group’s operations is dependent, among other
things, on its ability to attract and retain highly qualified personnel. Competition for key personnel
in most countries in which ING Group operates, and globally for senior management, is intense. ING
Group’s ability to attract and retain key personnel, in senior management and in particular areas
such as technology and operational management, client relationship management, finance,
 
risk
and product development, is dependent on a number of factors, including prevailing market
conditions and compensation packages offered by companies competing for the same talent.
 
The (increasing) restrictions on remuneration, plus the public and political scrutiny especially in the
Netherlands, will continue to have an impact on existing ING Group remuneration policies and
individual remuneration packages for personnel. For example,
 
under the EU’s amended
Shareholder Rights Directive, known as ‘SRD II’, which came into effect on June 10, 2019, ING is
required to hold a shareholder
 
advisory vote
 
on ING’s remuneration policy for directors (including
members of the executive board and the supervisory board) and on the annual remuneration
report for such directors. This may restrict our ability to offer competitive compensation compared
with companies (financial and/or non-financial)
 
that are not subject to such restrictions and it could
adversely affect ING Group’s ability to retain or attract key personnel, which, in turn, may affect our
business and results.
 
 
 
 
 
 
 
 
 
 
 
 
 
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We may incur
 
further liabilities in respect of our defined benefit retirement
 
plans if
the value of plan assets is not sufficient to cover
 
potential obligations, including as a
result of differences
 
between results and underlying actuarial assumptions
 
and
models.
 
ING Group companies operate various defined benefit
 
retirement plans covering
 
a number of our
employees. The liability recognised in our consolidated balance sheet in respect of our defined
benefit plans is the
 
present value of the defined benefit
 
obligations at the balance sheet date, less
the fair value of each plan’s assets, together with adjustments for unrecognised actuarial gains and
losses and unrecognised past service costs. We determine our defined benefit
 
plan obligations
based on internal and external actuarial models and calculations using the projected unit credit
method. Inherent in these actuarial models are assumptions, including discount rates, rates of
increase in future salary and benefit levels, mortality rates, trend rates in health care
 
costs,
consumer price index, and the expected return on plan assets. These assumptions are based on
available market data and the historical performance of plan assets, and are updated annually.
Nevertheless, the actuarial assumptions may differ significantly
 
from actual results due to changes
in market conditions, economic and mortality trends and other assumptions. Any changes in these
assumptions could have a significant impact
 
on our present and future liabilities to and costs
associated with our defined
 
benefit retirement plans.
Risks related to the Group’s
 
risk management practices
Risks relating to our use
 
of quantitative models or assumptions to
 
model client
behaviour for the purposes of our market
 
calculations may adversely impact our
reputation or results.
 
We use quantitative methods, systems or approaches that apply statistical, economic financial, or
mathematical theories, techniques and assumptions to process input data into quantitative
estimates. Errors in the development, implementation, use or interpretation of such models, or
from incomplete or incorrect data, can lead to inaccurate, noncompliant or misinterpreted
 
model
outputs, which may adversely impact our reputation and results. In addition, we use assumptions
in order to model client behaviour for the risk calculations in our banking books. Assumptions are
used to determine the interest rate risk profile of savings and current accounts and to estimate the
embedded option risk in the mortgage and investment portfolios. Assumptions
 
based on past client
behaviour may not always be a reliable indicator of future behaviour.
 
The realisation or use of
different assumptions to determine client behaviour could have a material adverse effect on the
calculated risk figures and, ultimately, our future results or reputation. Furthermore,
 
we may be
subject to risks related to changes in the laws and regulations governing the risk management
practices of financial institutions. For further information, see “Risks related to the regulation and
supervision of the Group – Changes in laws and/or regulations governing
 
financial services or
financial institutions
 
or the application of such laws and/or regulations may increase
 
our operating
costs and limit our activities” above.
We may be unable
 
to manage our risks successfully through
 
derivatives.
 
We employ various economic hedging strategies with the objective of mitigating the market risks
that are inherent in our business and operations. These risks include currency fluctuations, changes
in the fair value of our investments, the impact of interest rates, equity markets and credit spread
changes, the occurrence of credit defaults and changes in client behaviour.
 
We seek to control
these risks by, among other things, entering into a number of derivative instruments, such as
swaps, options, futures and forward contracts, including, from
 
time to time, macro hedges for parts
of our business, either directly as a counterparty or as a credit support provider to affiliate
counterparties. Developing an effective strategy for dealing with these risks is complex, and no
strategy can completely insulate us from risks associated with those fluctuations. Our hedging
strategies also rely on assumptions and projections regarding
 
our assets, liabilities, general market
factors and the creditworthiness of our counterparties that may prove to be incorrect or prove
 
to
be inadequate. Accordingly, our hedging activities may not have the desired beneficial impact on
our results or financial condition. Poorly designed strategies or improperly executed transactions
could actually increase our risks and losses. Hedging strategies involve transaction costs and other
costs, and if we terminate a hedging arrangement, we may also be required to pay additional
 
 
 
 
 
 
 
 
 
 
 
 
 
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costs, such as transaction fees or breakage costs. There have been periods in the past, and it is
likely that there will be periods in the future, during which we have incurred
 
or may incur losses on
transactions, possibly significant, after
 
taking into account our hedging strategies. Further, the
nature and timing of our hedging transactions could actually increase our risk and losses. Hedging
instruments we use to manage product and other risks might not perform as intended or expected,
which could result in higher (un)realised losses, such as credit
 
value adjustment risks or unexpected
P&L effects, and unanticipated cash needs to collateralise or settle such transactions. Adverse
market conditions can limit the availability and increase the costs of hedging instruments, and
such costs may not be recovered
 
in the pricing of the underlying products being hedged. In
addition, hedging counterparties may fail to perform their obligations, resulting in unhedged
exposures and losses on positions that are not collateralised. As such, our hedging strategies and
the derivatives that we use or may use may not adequately mitigate or offset the risks they intend
to cover, and our hedging transactions may result in losses.
 
Our hedging strategy additionally relies on the assumption that hedging counterparties remain
able and willing to provide the hedges required by our strategy.
 
Increased regulation, market
shocks, worsening market conditions (whether due to the ongoing euro crisis or otherwise), and/or
other factors that affect or are perceived to affect the financial
 
condition, liquidity and
creditworthiness of ING may reduce the ability and/or
 
willingness of such counterparties to engage
in hedging contracts with us and/or other parties, affecting our overall ability to hedge our risks and
adversely affecting our business, results and financial
 
condition.
Our risk management policies and guidelines may prove
 
inadequate for the risks
 
we
face.
 
[We have developed
 
risk management policies and procedures and will continue to review
 
and
develop these in the future. Nonetheless, our policies and procedures
 
to identify, monitor and
manage risks may not be fully effective, particularly during
 
extremely turbulent times. The
methods we use to manage, estimate and measure risk are partly based on historic market
behaviour.
 
The methods may, therefore, prove
 
to be inadequate for predicting future risk exposure,
which may be different than suggested by historical experience. For instance, these methods may
not predict the losses seen in the stressed conditions in recent periods, and may also not
adequately allow prediction of circumstances arising due to government interventions and
stimulus packages, which increase the difficulty
 
of evaluating risks. Other methods for risk
management are based on evaluation of information regarding
 
markets, customers, catastrophic
occurrence or other information that is publicly known or otherwise available to us. Such
information may not always be accurate, complete, updated or properly evaluated.
 
Management
of operational, compliance, legal and regulatory risks requires,
 
among other things, policies and
procedures to record
 
and verify large numbers of transactions and events. These policies and
procedures may not be fully effective, resulting in a material and adverse impact on our
competitive position, reputation, business, results and financial condition.
Risks related to the Group’s
 
liquidity and financing activities
We depend
 
on the capital and credit markets,
 
as well as customer deposits, to
provide the liquidity and capital
 
required
 
to fund our operations, and adverse
conditions in the capital and credit
 
markets, or significant withdrawals
 
of customer
deposits, may impact our liquidity, borrowing and
 
capital positions, as well as the
cost of liquidity, borrowings
 
and capital.
 
Adverse capital market conditions have in the past affected, and may in the future affect,
 
our cost
of borrowed funds and our ability to borrow on a secured
 
and unsecured basis, thereby impacting
our ability to support and/or grow our businesses. Furthermore,
 
although interest rates are
 
at or
near historically low levels, since the recent financial crisis, we have experienced increased funding
costs due in part to the withdrawal of perceived government support of such institutions in the
event of future financial crises. In addition, liquidity in the financial
 
markets has also been
negatively impacted as market participants and market
 
practices and structures adjust to new
regulations.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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We need liquidity to pay our operating expenses, interest on our debt and dividends on our capital
stock, maintain our securities lending activities and replace certain maturing liabilities. Without
sufficient
 
liquidity, we will be forced to curtail our operations and our business will suffer.
 
The
principal sources of our funding include a variety of short-and long-term instruments, including
deposit fund, repurchase agreements, commercial
 
paper, medium- and long-term debt,
subordinated debt securities, capital securities and shareholders’ equity.
 
In addition, because we rely on customer deposits to fund our business and operations, the
confidence of customers in
 
financial institutions
 
may be tested in a manner that may adversely
impact our liquidity and capital position. Consumer confidence
 
in financial
 
institutions may, for
example, decrease due to our or our competitors’ failure to communicate to customers the terms
of, and the benefits
 
to customers of, complex or high-fee financial
 
products. Reduced confidence
could have an adverse effect on our liquidity and capital position through withdrawal of deposits, in
addition to our revenues and results. Because
 
a significant percentage of our customer deposit
base is originated via Internet banking, a loss of customer confidence
 
may result in a rapid
withdrawal of deposits over the Internet.
 
In the event that our current resources
 
do not satisfy our needs, we may need to seek additional
financing. The availability of additional
 
financing will
 
depend on a variety of factors, such as market
conditions, the general availability of credit, the volume of trading
 
activities, the overall availability
of credit to the financial services industry, our credit ratings and credit capacity, as well as the
possibility that customers or lenders could develop a negative perception of our long- or short-term
financial prospects. Similarly, our access
 
to funds may be limited if regulatory authorities or rating
agencies take negative actions against us. If our internal sources of liquidity prove to be insufficient,
there is a risk that we may not be able to successfully obtain additional financing on favourable
terms, or at all. Any actions we might take to access financing
 
may, in turn, cause rating agencies
to re-evaluate our ratings.
 
Disruptions, uncertainty or volatility in the capital and credit markets may also limit our access to
capital. Such market conditions may in the future limit our ability to raise additional capital to
support business growth, or to counterbalance the consequences of losses or increased regulatory
capital and rating agency capital requirements. This could
 
force us to (i) delay raising capital,
 
(ii)
reduce, cancel or postpone payment of dividends on our shares, (iii) reduce, cancel or postpone
interest payments on our other securities, (iv) issue capital of different types or under different
terms than we would otherwise, or (v) incur a higher cost of capital than in a more stable market
environment. This would have the potential to decrease both our profitability and our financial
flexibility. Our results, financial
 
condition, cash flows, regulatory capital and rating agency capital
position could be materially adversely affected by disruptions
 
in the financial markets.
 
Furthermore, regulatory
 
liquidity requirements in certain jurisdictions in which we operate are
becoming more stringent, undermining our efforts to maintain centralised management of our
liquidity. These developments may cause trapped pools of liquidity and capital, resulting in
inefficiencies
 
in the cost of managing our liquidity and solvency, and hinder our efforts to
 
integrate
our balance sheet. An example of such trapped liquidity includes our operations in Germany where
German regulations impose separate liquidity requirements
 
that restrict ING’s ability to move a
liquidity surplus out of the German subsidiary.
As a holding company, ING Groep
 
N.V.
 
is dependent for liquidity on payments
 
from
its subsidiaries, many of which are subject to regulatory
 
and other restrictions on
their ability to transact with affiliates.
 
ING Groep N.V.
 
is a holding company and, therefore, depends on dividends, distributions and other
payments from its subsidiaries to fund dividend payments and to fund all payments on its
obligations, including debt obligations. Many of our subsidiaries, including our bank subsidiaries,
 
are
subject to laws that restrict dividend payments or authorize regulatory bodies to block or reduce
the flow of funds from those subsidiaries to ING Groep N.V.
 
In addition, our bank subsidiaries are subject to restrictions on their ability to lend or transact with
affiliates
 
and to minimum regulatory capital and other requirements, as well as restrictions on their
ability to use client funds deposited with them to fund their businesses. Additional
 
restrictions on
 
 
 
 
 
 
 
 
 
 
 
 
 
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related-party transactions, increased capital and liquidity requirements and additional limitations
on the use of funds in client accounts, as well as lower earnings, can reduce the amount of funds
available to meet the obligations of ING Groep N.V.,
 
and even require
 
ING Groep N.V.
 
to provide
additional funding to such subsidiaries. Restrictions or regulatory action of that kind could impede
access to funds that ING Groep N.V.
 
needs to make payments on its obligations, including debt
obligations, or dividend payments. In addition ING Groep N.V.’s
 
right to participate in a distribution
of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the
subsidiary’s creditors.
 
There is a trend towards
 
increased regulation and supervision of our subsidiaries by the
governments and regulators in the countries in which those subsidiaries are located or do business.
Concerns about protecting clients and creditors of financial institutions that are controlled by
persons or entities located outside of the country in which such entities are located or do business
have caused or may cause a number of governments and regulators to take additional steps to
“ring fence” or maintain internal total loss-absorbing capacity at such entities in order to protect
clients and creditors of such entities in the event of financial difficulties
 
involving such entities. The
result has been and may continue to be additional limitations on our ability to efficiently
 
move
capital and liquidity among our affiliated
 
entities, thereby increasing the overall
 
level of capital and
liquidity required by ING on a consolidated basis.
 
Furthermore, ING Groep N.V.
 
has in the past and may in the future guarantee the payment
obligations of certain of its subsidiaries, including ING Bank N.V.,
 
subject to certain exceptions. Any
such guarantee may require
 
ING Groep N.V.
 
to provide substantial funds or assets to its subsidiaries
or their creditors or counterparties at a time when ING Groep N.V.
 
or its subsidiaries are in need of
liquidity to fund their own obligations.
 
The requirements for ING Groep
 
N.V.
 
to develop and submit recovery and resolution
 
plans to
regulators, and the incorporation of feedback received
 
from regulators, may require
 
us to increase
capital or liquidity levels or issue additional long-term debt at ING Groep N.V.
 
or particular
subsidiaries or otherwise incur additional or duplicative operational or other costs at multiple
entities, and may reduce our ability to provide ING Groep N.V.
 
guarantees for the obligations of our
subsidiaries or raise debt at ING Groep N.V.
 
Resolution planning may also impair our ability to
structure our intercompany and external activities in a manner that we may otherwise deem most
operationally efficient.
 
Furthermore, arrangements to facilitate
 
our resolution planning may cause
us to be subject to additional costs such as resolution planning related taxes and funds. Any such
limitations or requirements would be in addition to the legal and regulatory restrictions described
above on our ability to engage in capital actions or make intercompany dividends or payments.
Additional risks relating to
 
ownership of ING shares
Holders of ING shares may experience
 
dilution of their holdings.
 
ING’s AT1 Securities may, under certain circumstances, convert into equity securities, and such
conversion would dilute the ownership interests of existing holders of ING shares and such dilution
could be substantial. Additionally, any conversion, or the anticipation of the possibility of a
conversion, could depress the market price of ING shares. Furthermore,
 
we may undertake future
equity offerings with or without subscription rights. In case of equity offerings
 
with subscription
rights, holders of ING shares in certain jurisdictions, however, may not be entitled to exercise such
rights unless the rights and the related shares are registered
 
or qualified
 
for sale under the relevant
legislation or regulatory framework. Holders of ING shares in these jurisdictions may suffer dilution
of their shareholding should they not be permitted to, or otherwise chose not to, participate in
future equity offerings with subscription rights.
Because we are incorporated
 
under the laws of the Netherlands and many of the
members of our Supervisory and Executive
 
Board and our officers reside outside
 
of
the United States, it may be difficult to enforce
 
judgments against ING or the
members of our Supervisory and Executive
 
Boards or our officers.
 
Most of our Supervisory Board members, our Executive Board members and some of the experts
named in this Annual Report, as well as many of our officers
 
are persons who are not residents of
 
 
 
 
 
 
 
 
 
 
 
 
 
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2019 ING Group Annual Report on Form 20-F
 
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the United States, and most of our and their assets are located outside the United States. As a
result, investors may not be able to serve process
 
on those persons within the United States or to
enforce in the United States judgments obtained in US courts against us or those persons based on
the civil liability provisions of the US securities laws.
 
Investors also may not be able to enforce judgments of US courts under the US federal securities
laws in courts outside the United States, including the Netherlands. The United States and the
Netherlands do not currently have a treaty providing
 
for the reciprocal recognition
 
and
enforcement of judgments (other than arbitration awards) in civil and commercial
 
matters.
Therefore, we
 
may not be able to enforce in the Netherlands a final judgment
 
for the payment of
money rendered by any US federal
 
or state court based on civil liability, even if the judgment is not
based only on the US federal securities laws, unless a competent court in the Netherlands gives
binding effect to the judgment.
 
Therefore, a final judgment for the payment of money rendered by any federal or state court in the
United States based on civil liability, whether or not predicated solely upon the U.S. federal
securities laws, would not be enforceable in the Netherlands unless the underlying claim is 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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Item
 
4.
 
Information
 
on the
 
Company
 
A.
 
History
 
and development
 
of the
 
company
 
General
 
ING Groep N.V.
 
was established as a Naamloze Vennootschap (a Dutch public limited liability
company) on March 4, 1991. ING Groep N.V.
 
is incorporated under the laws of the Netherlands.
 
The corporate site of ING, www.ing.com,
 
provides news, investor relations
 
and general information
about the company.
 
ING is required to file certain documents and information with the United States Securities and
Exchange Commission (SEC). These filings relate primarily to periodic reporting requirements
applicable to issuers of securities, as well as to beneficial
 
ownership reporting requirements as a
holder of securities. The most common filings
 
we submit to the SEC are Forms 6-K and 20-F
(periodic reporting requirements) 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:
 
The name and address of ING
Group’s agent for service of process
in the United States in connection
with ING’s registration statement on
Form F-3 is:
ING Groep N.V.
 
Bijlmerdreef 106
 
1102 CT
 
Amsterdam
 
P.O.
 
Box 1800,
 
1000 BV Amsterdam
 
The Netherlands
ING Financial Holdings Corporation
 
1133 Avenue of the Americas
 
New York, NY
 
10036
United States of America
Telephone
 
+31 20 563 9111
Telephone
 
+1 646 424 6000
 
Changes in the composition of the Group
For information on changes in the composition of the Group, reference
 
is made to Note 47
‘Consolidated companies and businesses acquired and divested’.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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2019 ING Group Annual Report on Form 20-F
 
34
 
 
Our strategy
 
and how we create
 
value
ING’s
 
Think
 
Forward
 
strategy
 
continued
 
to
 
guide
 
us
 
during
 
2019.
 
It
was
 
a year
 
of
 
rapid
 
transformation
 
in
 
the
 
competitive
 
landscape,
regu
 
lation,
 
customer
 
preferences
 
and
 
the
 
economic
 
context.
 
It
was
 
marked
 
as
 
well
 
by
 
the
 
growing
 
threat
 
of
 
climate
 
change.
These
 
developments
 
present
 
both
 
challenges
 
and
 
opportunities
 
.
 
There were numerous
 
developments in 2019 with important implications for financial
 
services
providers and their future strategic
 
direction. Digitalisation increased,
 
with a growing percentage of
customers doing their banking with mobile devices. Big Tech platforms continued to leverage
 
their
expertise in the digital customer experience to encroach on banks’ market share by targeting
lucrative parts of their traditional value chains, such as payments.
 
Competition was further spurred by implementation in 2019 of the EU’s PSD2 directive opening the
payments market to non-bank competitors. Persistently low interest rates in Europe
 
edged still
lower, pressuring banks’ interest income and profits. And the growing threat of climate change
intensified the debate about
 
the role business can and should play to promote a sustainable future.
Think Forward
Our Think Forward strategy
 
– with its purpose to empower people to stay a step ahead in life and in
business – continued to guide our strategic response to the challenges and opportunities these
developments present. Chief among these is how banks can master the digital customer
experience and tap into its opportunities.
 
The strategic priorities that are the focus of the Think Forward
 
strategy aim to create a
differentiated customer experience. They do that by deepening the relationship with the customer,
by providing us with tools to know our customers better and to anticipate their evolving needs, and
by fostering an innovation culture that will ensure we
 
are able to continuously adapt our offerings
and business model to anticipate and meet those needs in future.
 
And the Customer Promise –
clear and easy, anytime anywhere, empower, and keep getting better – forms the basis of the
customer experience we aim for.
 
In concrete terms, this translates into a focus on primary relationships. These are
 
relationships
where we serve multiple banking or other needs of retail customers and wholesale banking clients
and which allow us to know these customers and their needs better so we can add value for them
and grow the relationship. To
 
do this, we aim to master data management and analytics skills,
including artificial
 
intelligence. To
 
provide for future
 
needs, we promote a culture of innovation
within ING and partner with fintechs
 
and other innovative partners to develop interesting
propositions, both in financial services and beyond banking
 
that can add value for our customers
and others.
Platform approach
The competitive landscape that banks face is increasingly being shaped by Big Tech
 
companies.
They offer customers a superior digital experience through an open platform approach that delivers
a range of their primary needs in a go-to digital ecosystem. This ability to provide for primary
needs, with both proprietary and third-party offerings that are easily accessed through mobile
devices, 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, to disrupt themselves, or risk being
disintermediated and relegated to a status of white label facilitators of others’ platforms.
 
 
 
 
 
 
 
 
 
 
 
 
 
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2019 ING Group Annual Report on Form 20-F
 
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ING chooses to pursue its own platform approach. It aims to create a go-to financial services
platform offering one customer experience wherever we operate and one that’s mobile-first in
keeping with ING’s clear and easy, anytime anywhere Customer Promise. To
 
support this ambition,
we’re evolving to a single global modular technological foundation that can be easily scaled up to
accommodate growth, and one that’s open so it’s ready to connect to other platforms and offers
users relevant third
 
-party products and services.
Innovation and transformation
To
 
pursue this aim, we are converging businesses with similar customer propositions. The Unite
be+nl initiative is combining the Netherlands and Belgium. The Maggie (formerly Model Bank)
transformation programme is standardising
 
our approach in four European markets -
 
Czech
Republic, France,
 
Italy and Spain - similar to our successful digital approach in Germany based on a
standardised omnichannel customer experience across mobile devices and web. We
 
pursue a plug-
and-play approach to product development to ensure we can share
 
innovations quickly across our
businesses. Examples of this in practice include the One App now active in Belgium, Germany and
the Netherlands, offering one mobile customer experience in those markets.
 
And we’re evolving
toward a uniform approach
 
to data and its management, to processes and to one way of working
to support this transformation and accelerate innovation.
 
Increasing the pace of innovation is a strategic priority and core
 
to ensuring we remain relevant to
our customers and can live up to our purpose to empower people to stay a step ahead in life and in
business. And it is a prerequisite for realising
 
our platform ambitions. We do this by fostering an
internal culture of innovation through
 
customised methodologies and by providing resources
 
to our
business through the ING Innovation Fund.
 
And we collaborate with a wide range of fintechs and
other external parties to accelerate the development of innovative solutions for customers.
 
To
 
spur this collaboration, ING in 2019 opened the Cumulus Park innovation district in Amsterdam
Zuidoost, an initiative together with local government and educational institutions offering
businesses, academics and innovators workspaces designed to co-create, learn, research
 
and
inspire in a collaborative atmosphere
 
around the themes of urbanisation and digital identity.
 
And through ING Labs in Amsterdam,
 
Brussels, London and Singapore we’re
 
also collaborating with
fintechs and others
 
on disruptive innovations in value spaces that best match the expertise and
ecosystems in those locations.
Examples of collaborative innovations
 
include beyond banking initiatives for retail customers. In
2019 we launched the first
 
protection products as part of the global insurance partnership with
AXA, distributed primarily through our mobile app. Examples in Wholesale Banking include Cobase,
a platform that enables companies to manage accounts at multiple banks through one interface,
and blockchain solutions in areas like trade finance that drastically reduce the time and complexity
of trades.
 
In 2019, resources were
 
devoted to improving our capabilities in the areas
 
of know your customer
and fighting financial
 
economic crime, causing some reprioritisation related to the pace of
implementation of innovation and transformation goals. However, our strategy
 
and priorities in
these areas remains unchanged.
Promoting
 
a sustainable society
ING’s empowerment purpose is not limited to our own customers. In striving to help people to stay
a step ahead in life and in business, we see a key role for ING in promoting a sustainable society, as
well as important opportunities both for us and our customers.
To
 
promote people’s financial health, we focus on giving them the knowledge and tools
 
to make
informed decisions, and we support initiatives that are developing awareness about the drivers
behind how people arrive at financial decisions
 
so better methods and tools can be developed in
the future. And through our financing we seek to positively influence society’s
 
transition to a more
sustainable, low-carbon economy. One of the important ways we do that is through our Terra
approach to steer the impact of our lending portfolio to support the Paris Climate Agreement’s goal
to limit the rise of global temperatures to well below two
 
degrees Celsius.
 
 
 
 
 
 
 
 
 
 
 
 
 
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2019 ING Group Annual Report on Form 20-F
 
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Elements of our strategy
Our Think Forward strategy
 
was launched in 2014 and guides everything we do. It was visionary
then and today is ever more relevant
 
to our success. This section describes the strategy and
includes references to examples and additional information on how our strategy
 
links to the
material topics identified
 
by our stakeholders.
Strategic
 
priorities
 
To
 
deliver on our Customer Promise and create a differentiating customer experience, we have
identified four strategic priorities:
1. Earn the primary relationship
Earning the primary relationship is a strategic priority for ING as it leads to deeper relationships,
greater customer satisfaction and, ultimately, customers choosing us for more of their financial
needs. In Retail Banking we define primary customers
 
as those with multiple active ING products, at
least one of which is a current account where they deposit a regular income such as a salary. For
Wholesale Banking these are active clients with lending and daily banking products and at least
one extra product generating recurring revenues
 
over the last 12 months.
2. Develop data analytics
With the further digitalisation of banking, data is an important asset
 
that helps us improve the
customer experience and earn the strategically important primary relationship. We rely
 
on data to
understand what customers want and need. We use these insights to personalise our interactions
with customers and empower them to make their own financial
 
decisions. Data skills are also
essential to know our customers from a regulatory and risk perspective, to prevent fraud,
 
improve
operational processes and generate
 
services that go beyond traditional banking. At ING, we
recognise that excelling at data management is a core competency if we are
 
to realise our
ambition to create a personal digital experience for customers. We are
 
on course to implement one
global approach to data management to ensure we maximise the potential of this key resource.
Discussions in society about data privacy and the tightening of data privacy legislation and
regulations, as embodied in the EU’s General Data Protection Regulation (GDPR), are
 
raising
awareness of this important issue. At ING, we are
 
committed to handling customer data safely and
being open about how we use it.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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2019 ING Group Annual Report on Form 20-F
 
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3. Increase the pace of innovatio
 
n
 
to serve changing customer needs
Evolving customer expectations, new technologies and new competitors are transforming banking.
Innovation is at the heart of the Think Forward strategy
 
and essential to develop the beyond
banking and disruptive products, services and experiences that support our platform ambitions. We
promote innovation internally through ING's own PACE
 
innovation methodology and by
earmarking funds to support businesses with innovative initiatives. To speed up the pace of
innovation, we also partner with outside parties, including fintechs.
4. Think beyond traditional banking to
 
develop new services and business
 
models
Persistent low interest rates
 
and disruption from the rise of new non-bank entrants in the financial
services sector are challenging banks’ traditional business models. Thinking beyond traditional
banking is crucial if we are to find new ways to be relevant to our customers. Here, open banking
offers opportunities. By partnering
 
with others or developing our own digital platforms, we can offer
customers new and complementary services that go beyond banking – and create new revenue
streams for ING.
 
Enablers
 
Four strategic enablers support the implementation of our strategy: simplifying and streamlining
our organisation, operational excellence, enhancing our performance culture
 
and diversifying our
lending capabilities.
1. Simplify and streamline
Simplify and streamline refers to ING’s aim to become a more effective, cost-efficient and
 
agile
organisation with the flexibility to respond to fast-changing customer needs and low-cost
competitors. To
 
support our ambition to evolve into one, scalable, mobile-first
 
digital platform that
offers a uniform and superior customer experience we are building a global foundation with the
same approach to data, IT infrastructure, and processes. This will feature
 
simplified
 
and
standardised products and systems and by modular architecture, integrated
 
and scalable IT
systems and shared services. We also apply one Way
 
of Working (WoW),
 
based on agile principles,
across many areas of ING to speed up the pace of innovation and bring new customer solutions to
market faster, as well as to enable global collaboration and knowledge sharing.
 
2. Operational excellence
Operational excellence requires
 
continuous focus. We need to ensure
 
that ING’s operations provide
a seamless and flawless customer
 
experience and that our operations remain safe and secure so
we can play our important role as gatekeepers to the financial system.
 
We invest to provide
 
stable
IT systems and platforms so we are there for our customers when they need us and to provide
them with the highest standards of data security. As part of our know your customer (KYC)
enhancement programme we are
 
developing a global approach to how we deal with customer due
diligence and transaction monitoring, supported by standardised tools, a uniform approach to data
and clear governance.
3. Performance
 
culture
We believe
 
there are strong
 
links between employee engagement, customer engagement and
business performance. We aim to continually improve
 
our performance culture by creating a
differentiating employee experience and enhancing the capabilities of our leaders.
 
By focusing on
delivering a great employee experience and by stepping up our leadership capabilities we develop
our employees’ engagement and ability to deliver on our purpose and strategy.
 
 
ING’s Think Forward Leadership
 
Programme (TFLP) aims to develop greater
 
leaders and better
managers who can engage staff and enhance team performance. Introduced for senior leaders in
2017, it was extended later that year to people managers globally as the TFL Experience (TFLE), a
four-day programme with follow-up learning activities. The first phase of the programmes focused
on the Orange Code, individual purpose and the Think Forward
 
strategy. Phase 2, launched for TFLP
in 2018, focused on high sustainable performance, talent management and performance
transparency. It will be extended to the TFLE in 2020.
 
We expect every ING employee to ensure we are
 
a bank people can trust and that we can be proud
of. This starts at the top as leaders should create the right conditions for our employees to
 
 
 
 
 
 
 
 
 
 
 
 
 
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2019 ING Group Annual Report on Form 20-F
 
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safeguard the bank and society from financial economic crime. In 2019, we developed a new global
e-learning module that will be rolled out in early 2020 to all employees to enhance their KYC
awareness. And a global code of conduct was rolled out in the first quarter of 2020 that builds on
the Orange Code and gives employees worldwide concrete
 
examples of how to put the ING values
into practice.
 
We promote
 
a more diverse and inclusive workforce
 
by aiming for ‘mixed teams’. We have adopted
the 70 percent principle, which gives managers a basis for building mixed teams around
appropriate dimensions of diversity (with a focus on gender, nationality and age group) and strives
for a minimum 30 percent difference in team make-up. In 2019, we worked to further this aim by
deep-diving into diversity dimensions ING-wide and setting up dashboards to help different areas of
the business monitor their progress. Like many other financial organisations, getting the right mix
of people remains a challenge in parts of the business and there is more to be done to redress
imbalances that still exist.
4. Lending capabilities
 
Broadening and diversifying our lending capabilities to continue to grow client franchises is our
fourth strategic enabler.
 
To
 
do so, we are seeking opportunities in Retail, SME and Consumer
Lending segments, as well as focusing on Wholesale Banking lending growth in our businesses in
Challengers & Growth (C&G) markets and in our sector lending franchises. ING is also considered
one of the pioneers in sustainable finance,
 
having introduced the first sustainability ESG-linked
loan and a made-to-measure sustainability improvement loan. In 2019, ING continued to shape
this sector and open up new markets by developing sustainability improvement concepts and
financial products. In 2019, we continued to grow at resilient interest margins, with net core
 
lending
growth of €17.2 billion, or 2.9 percent, mainly realised in our Retail
 
markets. Our ambition is to
continue to grow profitably within our risk appetite, but given market dynamics we expect growth
at Wholesale Banking to be slightly lower than in Retail Banking.
 
B.
 
Business
 
overview
 
Corporate Organisation
ING Group’s segments are based on the internal reporting structure by lines of business. For more
information see ‘Item 5 Operating and Financial Review and Prospects”.
Our business
We
 
achieved
 
good
 
results
 
in
 
2019
 
with
 
solid
 
profitability
 
and
healthy
 
growth
 
in
 
both
 
lending
 
and
 
deposits.
 
Net
 
core
 
lending
grew
 
by
 
€17.2
 
billion
 
over
 
the
 
year,
 
with
 
net
 
inflow
 
of
 
customer
deposit
 
s
 
growing
 
by
 
€23.4
 
billion.
 
We
 
added
 
more
 
than
 
830,000
primary
 
customers,
 
which
 
shows
 
that
 
our
 
customer
 
experience
continues
 
to
 
be
 
differentiating
 
and
 
drives
 
growth.
 
With
 
digital
disruption
 
changing
 
customer
 
expectations
 
we’re
 
looking
 
for
 
new
ways
 
to
 
stand
 
out
 
from
 
the
 
crowd.
Our markets
ING’s retail business serves 38.8 million customers. In most of our retail markets we offer a full
range of banking products and services, covering payments, savings, insurance, investments and
secured and unsecured lending. Our wholesale banking business offers clients advisory value
propositions such as specialised lending, tailored corporate finance and debt and equity-market
solutions. Our clients range from large companies to multinational corporations and financial
institutions.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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2019 ING Group Annual Report on Form 20-F
 
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Our
Market Leaders
 
are Belgium, the Netherlands and Luxembourg.
 
These are mature businesses
where we have strong positions in retail
 
and wholesale banking. We’re investing in digital
leadership to deliver a uniform customer experience with one customer interaction platform and a
harmonised business model.
 
In 2019 the Market leader highlights were the following:
 
 
Launched Payconiq in the Netherlands: customers can pay with their smartphone in stores and
online
 
Apple Pay introduced for customers in the Netherlands
 
Customers in Belgium can now use voice activated Google assistant to look up information on
ING
 
 
In Belgium, customers can now start the mortgage process online
 
We offer large mid-corporates in
 
the Netherlands a scalable self-service digital marketplace
called Invoice Trader
 
where they can trade their receivables
 
to external investors
 
Our
Challengers
markets are Australia, Austria, Czech Republic, France,
 
Germany, Italy and Spain.
Here we’re
 
aiming for a full retail and wholesale relationship, digitally distributed through low-cost
retail platforms. We
 
also aim to use our direct-banking experience to grow consumer and SME
lending, and our strong savings franchises to fund the expansion of wholesale banking in these
markets.
 
In 2019 the highlights for the Challenger Markets were the following:
 
 
In Austria, we expanded our product range to include mortgages in cooperation with ING owned
mortgage broker Interhyp
 
We help customers in Germany to better manage their money by notifying them of upcoming
payments
 
Introduced
 
Apple Pay for customers in Spain. The use of mobile contactless payments in
Germany rose after the launch of Google and Apple Pay in Germany
 
Australia and Spain achieved #1 NPS rankings, demonstrating
 
the value of our Think Forward
strategy
Our
Growth Markets
 
are universal banks with a full range of retail
 
and wholesale banking services
in countries whose economies have high growth potential. These include Poland, Romania and
Turkey. In these markets we’re
 
investing to achieve sustainable franchises and will focus on digital
leadership by converging to a mobile-first model and prioritising innovation. Our newest Growth
Market is ING in the Philippines, where we launched an all-digital retail
 
bank in November 2018.
 
In 2019 the highlights for the Growth market were the following:
 
 
Apple Pay introduced for
 
customers in Romania
 
In Poland, customers can add their Visa debit card to their Apple Wallet using the Moje ING app
 
ING customers in Poland can now use voice-activated Google assistant - without logging in -
 
to
check their balances or to make transfers between accounts
 
To
 
help customers In Poland better manage their money we now offer features notifying them of
upcoming payments
 
In a first for ING countries business
 
customers in Poland
 
can use Garmin Pay and Apple Pay,
contributing to a further increase in mobile contactless payments there
 
In Turkey, we
 
can see in real time when customers have a problem at our ATMs
 
and proactively
call them to try and solve it
 
Wholesale Banking
 
is an important and integral contributor to ING's commercial performance.
With a local presence in more than 40 countries, ours is a sector-focused client business providing
corporate clients and financial institutions with advisory
 
value propositions,
 
such as specialised
lending, tailored corporate finance and debt and equity market solutions. We also serve their daily
banking needs with payments and cash management, trade and treasury services.
 
 
In 2019 the following highlights were achieved within Wholesale Banking:
 
 
Supported 62 green, social and sustainability bonds and 61 sustainable improvement loans
 
 
 
 
 
 
 
 
 
 
 
 
 
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We issued the largest green
 
Schuldschein to date with Porsche
 
Blockchain-based trade finance platform Contour, co-founded by ING Ventures, launched into
the $18 trillion global trade finance market
 
We introduced
 
the first sustainable
 
improvement derivative to market
 
We provided
 
a centralized digital vault for corporate
 
customers to store their KYC docs and
enhanced transaction monitoring tooling for our KYC purposes
 
PSD2 APIs live on the open banking Developer portal
Achieving our business goals
Banks are operating in a fast-changing environment marked by new competitors, new customer
expectations, increased regulation and higher capital requirements. At
 
the same time, persistently
low interest rates put pressure
 
on our savings business model. We are finding new ways to be
relevant to our customers.
 
To
 
achieve our business goal of creating a superior customer experience, we focus on four strategic
priorities: earning the primary relationship; thinking beyond traditional banking to develop new
services and business models; using our advanced data capabilities to understand our customers
better and meet their changing needs, and innovating faster.
 
Earning the primary relationship
Earning the primary relationship is a strategic priority for ING as it leads to deeper relationships,
greater customer satisfaction and ultimately customers choosing us for more of their banking
needs.
 
We don’t only want our customers to do some of their banking with us, we want to be their first
partner, where they deposit their salary, handle their payments and do most of their other banking
business. At the moment, ING has 13.3 million primary relationships, and the target is to grow this
to over 16.5 million by 2022.
 
 
In Retail Banking, we define primary customers as
 
those with multiple active ING products, of which
one is a current account where they deposit a regular
 
income such as a salary. For Wholesale
Banking, a primary client is an active client with lending and daily banking
 
products, and at least
one extra product generating recurring revenues
 
over the last 12 months.
 
Customer numbers continued to grow in 2019. Primary customer growth across Retail
 
segments in
2019 included 63,000 for the Benelux, 526,000 for the Challenger markets, and 242,000 for Growth
Markets. In Wholesale Banking, the number of primary customers grew by three percent as we
deepened our relationships, particularly in the daily banking space with existing lending-only
clients in the US and EMEA.
 
Customer promise
 
Banking doesn’t have to be difficult
 
and time consuming. Clear products, plain language, fair prices
and simple processes save customers time and money. ING promises to make banking clear and
easy, to provide services anytime anywhere, and to keep getting better.
 
 
We are
 
driven by our purpose to empower people to stay a step ahead in life and in business. We
do this by constantly innovating to deliver a differentiating customer experience that aims to be
smart, personal and easy.
 
 
 
 
 
 
 
 
 
 
 
 
 
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Across ING, digital channels are accounting for an increased number of contacts with Retail
customers. For example, a growing
 
share of retail customers only interacts with ING on their mobile
device, up from 12 percent
 
in 2016 to 37 percent in 2019. The number of interactions grew by 80
percent since 2016, reaching 4.5 bln interactions in 2019, with mobile interactions increasing
 
to 82
percent in 2019, versus 52 percent in 2016.
 
Given the rise of digitalisation, and growing competition from disruptive newcomers
 
to our sector,
we want to do more than just live up to our Customer Promise.
 
We want to surpass people’s
expectations.
 
We want to use the insights from our 4.5 billion customer interactions to offer a personalised and
empowering experience, giving them even more reasons to interact
 
with us. This is how we can
differentiate ING from other banks and become an essential part of people’s digital lives.
 
One of the ways we measure our progress
 
is the Net Promoter Score (NPS), which measures
customer satisfaction and loyalty (whether they would recommend ING to others). The score is
calculated as the difference between the percentage of promoters
 
(who rate ING as 9 or 10 out of
10) and detractors (those scoring ING below 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 2019, ING ranked number one in seven out of our 14 Retail markets.
 
In Wholesale Banking, the overall NPS score improved
 
by 11 percent year on year to 49.6 (on a
scale of -100 to +100), outperforming the industry benchmark. This suggests clients appreciate our
new approach (see ‘Unleashing sector potential’ below). The number of surveys sent increased by
28 percent year on year, and the response rate increased
 
from 46.6 percent to 50.6 percent.
 
The
NPS growth for Platinum clients decreased year on year but the NPS of all the other segments
increased. Overall level
 
of satisfaction went up from 8.4 to 8.5. We now have NPS scores
 
from WB
clients generating 42 percent of our revenues.
 
We added a further five countries to the NPS programme in 2019, which is now running in 26
Wholesale Banking markets. In 2019, NPS played an even more prominent role in gauging client
satisfaction in Wholesale Banking, with clearly defined
 
KPIs applied across all parts of the business
and a more active
 
feedback process.
Unleashing sector potential
 
In 2019, we remained focused on servicing 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.
 
We developed
 
our sector strategy over the year, pairing local and global insight with sector
knowledge and financial expertise.
 
‘Commercial passports’ give us insight into what services we
provide to each client and the regions where
 
we serve them, while our uniform client segmentation
framework helps us tailor our daily banking and advisory value propositions to their specific needs.
 
 
Several deals in 2019 reflect this sector focus. In the telecom, media and technology space, ING
acted as financial
 
advisor for global asset management company DWS in the merger of leading
Dutch data centres NLDC (DWS's infrastructure business acquired
 
NLDC from Dutch telco KPN in
2019), and The Datacenter Group (TDCG) group.
 
By advising DWS, ING enabled it to make its
maiden investment in the telecom infrastructure sector and created the largest player in the Dutch
market. In the food and agribusiness sector, ING coordinated the largest-ever sustainability
improvement loan in commodity trading for China’s multinational leading food and agri company,
COFCO International. The $2.1 billion loan links COFCO International’s interest
 
rate to its
sustainability performance and rating. And in the sustainable finance space, ING added another
 
 
 
 
 
 
 
 
 
 
 
 
 
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first to its growing sustainable finance
 
deal portfolio in Asia/Pacific. We provided a subsidiary of
Sunseap Group, a Singapore-based renewable energy
 
company, with $37 million to build rooftop
solar projects in Singapore.
 
In Transaction
 
Services, we optimised our client-facing model, streamlining our products and
services and increasing efficiency
 
in sales support. We also brought together various client trading
activities scattered across Financial Markets into one team and further embedded the FM business
into our client organisation with a new sales model that is fully aligned with the rest of Wholesale
Banking. This will help to maximise cross-buy opportunities and improve our client-service delivery
with consistent products and a one-client approach everywhere.
Platform thinking
ING’s purpose is to empower people to stay a step ahead in life and in business. To continue doing
this in a world that is changing quicker than ever before, we need to be where our customers are –
on digital platforms.
 
 
Thinking beyond traditional banking is crucial to find
 
new ways to be relevant to customers. Here,
open banking offers opportunities.
 
By partnering with others or developing our own digital
platforms, we can offer customers new and complementary services that go beyond banking – and
create new revenue
 
streams for ING.
 
 
Platforms empower customers by providing them with a range of primary needs in one place.
Through frequent user interactions, platforms also generate
 
large amounts of data. By mastering
data skills, platforms get to know their customers and their needs increasingly well, enhancing the
platform’s value, and that of its users.
 
The other advantage with platforms is that they are scalable, open and borderless, offering their
users the same experience everywhere. With little to differentiate one bank’s products from
another, we believe it is customer experience that will set ING apart.
 
 
ING has different faces in different markets and different banking interfaces, each with its own look
and feel. By uniting our platforms, processes and products we can provide
 
a consistent customer
experience in every country. This is driven by a growing desire
 
for similar online experiences in an
increasingly digital world.
 
 
We are
 
making progress in achieving this in a number of ways, including by working internally to
establish a truly cross-border banking platform that aims to provide
 
one unique, uniform customer
experience that is best in class and leverages scale, and by pursuing strategic platform initiatives.
 
This was the year that Unite be+nl became a reality for our customers in the Netherlands and
Belgium, with the introduction of common digital channels in these countries. Unite be+nl is one of
several programmes
 
we are rolling out to build ‘one ING’ and is an important step towards a global
platform. Maggie (formerly Model Bank) is our transformation programme uniting our retail
strategy and capabilities in Spain, Italy, France
 
and the Czech Republic. Its emphasis is on
increasing our digital interaction with customers, improving customer satisfaction and boosting
sales.
 
Platform initiatives
Our Yolt aggregator
 
app was named Personal Finance App of the Year
 
at the 7th Annual Payments
Awards in the
 
UK. We extended the app with Yolt
 
Pay, a new feature that enables users to move
money between their accounts and make payments to friends and family from supported banks.
 
In 2019, we increased our stake in international payments platform Payvision to make it a wholly
owned subsidiary. This is an important step towards becoming the preferred platform
 
for business
customers and strengthens ING’s digital payments business, especially in e-commerce. Payvision
facilitates more than 80 payment methods in 150 currencies. In 2019, Payvision and ING
introduced the omnichannel (eCom + in-store) proposition for
 
corporate clients. The ING and
Payvision combined commerce solutions proposition helps merchants offer our clients’ shoppers a
seamless checkout experience across all channels.
 
 
 
 
 
 
 
 
 
 
 
 
 
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Through ING Ventures,
 
we are continuing to invest in fintechs, focusing on collaborations that
support our strategy of creating a differentiating customer experience. In 2019, we made a further
multi-million euro investment in Spanish-based fintech Fintonic. Fintonic is the leading finance
 
app
in Spain. It provides financing and savings solutions that help users
 
manage their personal finances
more effectively.
 
 
We’ve invested
 
in Flowcast, a tool we hope to use to benefit Wholesale
 
Banking clients The fintech
start-up uses machine learning algorithms to improve the credit decision process. Its predictive
models reduce risk and unlock credit to businesses. The investment is a boost to ING’s AI
capabilities.
 
We also invested in multibank platform Cobase,
 
which makes it easier and more efficient
 
for
international corporate clients to work with multiple banks. As a cloud solution, Cobase minimises
the IT effort for clients and does not require investments or long-term contracts for licences or
hardware.
Beyond banking platforms
In 2019, we introduced the first products resulting from our collaboration with insurer
 
AXA, offering
customers personalised insurance services in a clear and easy way via the ING mobile app.
Targeting
 
six of our Challengers markets, the partnership aims to provide insurance products and
related services through a central
 
digital insurance platform. We
 
launched seven products in four
countries: Italy, Australia, Germany and France,
 
and grew the team in our central Paris office,
working closely with all our markets. The first
 
product, instant travel insurance through
 
a mobile
phone, was launched in Italy. Geo-localised travel insurance can be activated with just a few clicks
on a smartphone from the airport or country of destination.
 
 
In Australia, we widened our digital insurance portfolio by adding motor and travel insurance
 
to our
existing home insurance offer.
 
The motor insurance coverage
 
has been particularly successful with
more than 1,000 new customers a week now covered
 
following its launch in May 2019. And in
Germany, ING customers can now secure the repayment of their mortgage in the event of death.
 
We built on our beyond banking proposition with third
 
-party offerings such as ING+Deals in Belgium
and ING Punten in the Netherlands. ING+Deals, launched in 4Q 2018, is a cashback platform for
customers, made possible by exclusive deals ING has negotiated with various A-brands (40+ brands
offering over 45 deals a month). It has 150,000 users who to date have received more than
€400,000 cash back, generating €2 million for the participating brands. In addition, participating
customers increased their interactions with ING’s online channels by more than 20 percent. ING
Punten, a shopping platform for customers in the Netherlands to increase loyalty and drive digital
interactions, is also partnering with trusted A-brands. In 2019, 1.1 million products were sold,
delivering a turnover of €31 million.
 
 
Following our 2018 acquisition of a 90 percent stake in Dutch digital real
 
-estate platform
Makelaarsland, which allows people to buy or sell homes online independently or with support
 
of a
local Makelaarsland agent, we achieved a number of milestones in 2019. These include successfully
launching a home
 
buying proposition, expanding the agent network to 20 agents – now covering
half of the Netherlands – and creating strong links between ING’s mortgage advisors and
Makelaarsland’s agents.
 
 
In the fourth quarter, ING launched real-estate marketplace Scoperty across Germany, a joint
venture with Pricehubble and Sprengnetter, which aims to bring transparency
 
to the German
housing market. Based on high-quality data and machine learning, the Munich-based
 
proptech
company aims to show all 40 million properties in Germany and to connect potential buyers and
sellers. Scoperty was initially piloted in Nuremberg with more than 100,000 properties, before
expanding nationwide by the end of 2019. More transparency in the German residential housing
market can mean a broader offering of properties for consumers. The team is working on pre-
qualifying potential homeowners by aligning with Interhyp’s mortgage process. Interhyp is ING’s
independent mortgage brokerage platform in Germany and Austria. For sellers and real-estate
brokers this pre-qualification has important value in their choice of accepting offers from buyers. As
 
 
 
 
 
 
 
 
 
 
 
 
 
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part of the network effect, pre-qualified
 
buyers may even benefit from three days access to new
home listings. Interhyp, which offers access to 500 mortgage lenders, had a
 
record year in 2019,
with €24.5 billion in new residential mortgages, and 9.0 percent market share in Germany.
 
Differentiating customer
 
experience
 
Understanding our customers better and meeting their changing needs is core to what we do. In
2019, we continued to innovate to improve
 
the banking experience for our customers, while helping
them transition to a more efficient and
 
more sustainable economy. ING’s ambition is to be a leader
in terms of the digital banking experience, offering our customers everywhere the same
empowering and differentiating experience and making banking frictionless. In addition to uniting
several of our Retail businesses on digital platforms that will provide
 
the same customer experience
everywhere, for the first time we also have a shared brand direction and our first global tagline. The
‘do your thing’ tagline articulates ING’s purpose and our customer promise. It encourages people to
do more of the things that move them or their business. It’s not about irresponsible behaviour, but
about people being free to live the life they want to live, knowing they are making their world a
little better for it.
 
 
Launched in the Netherlands in January 2020, the new brand direction and tagline will be rolled out
across ING during the year and used in all our business units to bring our customer experience to
life.
 
 
Our advanced data capabilities are an important asset in helping us improve the customer
experience and earn the strategically important primary relationship. We
 
rely on data to
understand what customers want and need. We use these insights to personalise our interactions
with customers and empower them to make their own financial
 
decisions.
 
 
Our customer-facing platforms offer multiple touch points to interact with customers and collect
data that we use to define customer
 
journeys; for example when and where they choose to do
their banking, the device they use and the services they prefer.
 
We test these insights with
feedback from customers to continuously improve
 
our services.
 
One of the ways we’re working to enhance the customer experience is through our transformation
to a customer-focused organisation. The benefits of introducing one Way of Working (WoW)
 
across
ING include transparency, wider alignment, increased speed and predictability in product delivery
and, most importantly, putting the customer first.
 
More examples of how we’re
 
providing a differentiating customer experience come from Poland,
where Wholesale Banking clients can now sign credit documentation electronically, and Belgium,
where customers are able to begin the mortgage process online.
 
In November 2019, we held our first global customer experience (CX) day.
 
The focus was on making
banking frictionless through many small improvements that make it more personal, easy and
smart, and by working to eliminate or minimise any compromises to the experience resulting from
backlogs or other priorities.
 
 
For example, in Poland one result
 
of CX day was an improvement to Moje ING that improves
 
the
communication process for entrepreneurs
 
applying for a loan, making it clearer and more timely.
ING in Romania introduced biometrics to authorise customers to do payments. Colleagues in Spain
found a better way to track their customers' experience and also developed functionality on their
banking app to allow them to easily schedule branch appointments. In the Netherlands and
Belgium, 2,000 participants made 565 improvements for our clients.
 
We’re
 
on the right track. Among other achievements, ING topped Forbes’ inaugural World’s
 
Best
Banks list in 2019. The survey asked 40,000 customers in almost 24 countries about their opinions
on the banks they use. ING was placed among the best-performing banks for customer-centricity in
Australia, Austria, Belgium, France,
 
Germany, Italy, Poland, and Spain. And we topped the rankings
on both trust and digital services.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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In Australia, new research
 
in 2019 found ING had the highest customer satisfaction among retail
banks, scoring well above the industry average.
 
The 2019 Australia Retail Banking Satisfaction
study by JD Power measured the satisfaction of nearly 5,000 banking customers.
Know your customer
Just as we need to know our customers better to deliver better products and services, we also need
this knowledge to ensure we do not accept people or institutions who misuse the financial
 
system.
We are
 
making ongoing progress strengthening our global KYC organisation
 
and activities
throughout ING. We are
 
using technology and our innovation skills to make improvements and
rolling out global KYC solutions that all countries can connect to.
 
 
ING continues to work on the global KYC enhancement programme, which emphasises regulatory
compliance as the key priority. This is a sizeable operation as we have activities in over 40 countries
and have more than 38 million customers. The programme encompasses all client segments in all
ING business units.
 
We are
 
also working with local authorities, law enforcement agencies and other financial
institutions to fight
 
financial and economic crime. In 2019, ING was one of five
 
banks in the
Netherlands to join forces in the fight against money laundering. The ambition
 
is to investigate the
set-up of a cross-bank organisation that will monitor payment transactions: Transaction
 
Monitoring
Netherlands (TMNL). Together with the Dutch Banking Association (NVB), we are involved
 
in a
feasibility study into the technical and legal challenges involved. In the proposed new plans, we are
collectively looking for cooperation with Dutch authorities, including the Financial Intelligence Unit
(FIU), the Public Prosecution Service, Fiscal Information and Investigation Service (FIOD) and relevant
ministries.
Continuing to innovate
In 2019, we continued to innovate to improve
 
the banking experience for our customers,
introducing several
 
innovations that make banking faster and more secure for our clients.
 
Our cutting-edge AI tool Katana – named
 
as an Innovator 2019 by Global Finance magazine – helps
to improve decision-making in bond trading. In 4Q, Katana
 
was spun out into an independent
London-based company called Katana Labs,
 
with backing from ING Ventures
 
and other investors.
This is in line with ING’s strategy to create innovative
 
fintech solutions
 
and then support them in
becoming independent companies.
 
 
The advanced analytics platform can aggregate vast amounts of data from multiple sources
 
to
predict the price and identify the most promising trades. The results
 
show traders using Katana win
20 percent more trades
 
and their prices are 20 percent sharper.
 
At the same time, it helps
investment managers to make faster, better informed, data-driven investment decisions.
 
 
We participated in the launch of instant payments in the Netherlands and Belgium by the Dutch
Payments Association and the Belgian Banking Federation. Funds now get credited
 
to the
beneficiary account within five
 
seconds, giving customers immediate access to their funds and
helping them optimise cash flows. We will extend this to the rest of Europe from
 
2020.
 
Wholesale Banking clients were able to initiate and receive instant payments in Hungary as of July
2019. Instant payments are now processed within five seconds, with a maximum amount of HUF
10 million. Instant payments make it possible to make payments 24/7,
 
365 days a year.
 
There is no
difference between ‘working days’ and ‘non-working days’.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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In another exciting payments innovation, ING is collaborating with Dutch retailer Albert Heijn, which
is piloting a fully digital supermarket. This physical store is packed with convenience-boosting and
time-saving technological innovations. ING helped to develop these in our FABlab
 
(fabrication
laboratory), which focuses on cross-industry collaborative innovation. Shoppers use their bank
cards to gain entry to the store. The items they select from the shelves are
 
registered
automatically. Payment, processed by ING, happens automatically when they leave.
We aim to ‘wow’ our customers with improvements
 
to their service experience. In Turkey, we can
now immediately identify when customers are having a problem at one of our ATMs; we
 
call them
at that moment to try and solve it. We also use our app to help customers in Turkey
 
who are more
than one kilometre away from an ING ATM
 
by granting them the right to use other banks’ ATMs
free of charge.
 
Together
 
with UniCredit, we invested in Axyon AI, an Italian company that helps banks offer better
and faster advice to their clients by using artificial
 
intelligence to, for example, identify investors
most likely to participate in a syndicated loan.
 
Our open-source software ‘FINN – Banking of Things’ was created within ING Labs
 
and enables
smart devices to pay for their own usage, such as allowing a car to pay for the car wash. We offer
this software to our business clients, who can use it to ‘wow’ their own customers.
 
In Wholesale Banking, highlights in innovation in the digitalisation space include two KYC initiatives:
Domino and CoorpID. Using advanced algorithms, Domino collects and connects payments, lending
and financing
 
data to provide insights that would not normally be readily available. The platform is
live in several departments and used by approximately 800 retail
 
and WB colleagues, of which 50
serve around 20 percent of ING’s Dutch corporate
 
clients. CoorpID provides a centralised
 
digital
vault for corporate customers to store and share
 
all their KYC documentation in a secure way. It
enables clients to manage their own KYC data and easily share it with other banks, insurance
companies, or auditors.
 
Blockchain and distributed ledger
 
technology (DLT)
 
ING is considered an industry leader in the distributed ledger technology (DLT) space.
 
In 2019,
Forbes ranked us fifth among global listed companies with high blockchain potential,
 
recognising
the pioneering work we’ve done in this area to improve
 
our product offering and make banking
even easier for our clients.
This includes breakthroughs in improving data privacy
 
within distributed or shared ledgers using
our open-source zero-knowledge range
 
proof
 
codes. Bulletproofs builds on these earlier codes,
making them even faster, safer and easier to use, while our zero-knowledge proof
 
notary service
improves the privacy and security of transactions on the Corda
 
blockchain platform. It evaluates
the validity of a blockchain transaction without revealing anything about it, except that it’s valid –
like a notary whose job is to witness the signing of documents to validate them.
 
Blockchain is reinventing commodity trading, making it quicker, easier and more efficient. ING’s
Easy Trading
 
Connect platform was one of the first to digitalise
 
commodity trade financing.
Building on its success, we’ve tested a number of successful experiments on the platform. These
include Vakt, announced in 2017, which manages physical energy transactions from
 
trade entry to
final settlement and
 
Komgo, the blockchain-based platform that transmits commodity
transactions in a secure environment. In August, we successfully executed
 
our first oil trade on
Komgo, which has evolved into a venture
 
with 15 corporates and financial institutions. The deal
was executed by the Commodity Trade
 
Finance branch in Geneva with a letter of credit
 
issued on
behalf of Mercuria Energy Trading
 
S.A.
 
 
We also teamed up with commodity companies and financial institutions to
 
launch Forcefield, a
blockchain-based inventory management system that makes post-trade commodity transaction
processing cheaper, safer, and more efficient. It manages commodities throughout their entire
supply chain life cycle and reduces the risks and costs of handling physical inventory.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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And we joined forces with other global banks to create a digital coin that can be used to settle
international money transfers instantly. This is a new step in the development of the Utility
Settlement Coin (USC) project, set up in 2015 by Swiss bank UBS to develop a blockchain-powered
payment mechanism to make transactions more efficient.
 
A digital version of existing currencies,
USC will cut out intermediaries, reduce exchange-rate risks, making the payments and settlements
process faster and lowering transaction costs.
 
In Q4, blockchain-based trade finance platform Contour, co-founded by ING Ventures, launched in
Singapore into the USD 18 trillion global trade finance market. Contour was co-created by ING and
seven other banks in 2018 to simplify letters of credit, reducing the amount of time needed to
process them from five to 10 days to under 24 hours. The launch follows a series of live pilots in 14
countries and a global trial with more than 50 banks and corporates. Ninety-six percent of
participants said Contour would accelerate their letters of credit process,
 
improve efficiencies and
reduce costs.
Open banking
 
We strive at all times to protect customer data and privacy in line with the new European
regulations. Customers’ needs and expectations are changing rapidly and companies have no
option but to embrace this shift and adapt. At the same time, open banking requires banks to
rethink traditional products and services, and go beyond traditional banking territory in creating
new customer experiences.
 
 
We’ve chosen a strategic
 
approach towards the revised
 
Payments Services Directive (PSD2) and
open banking. We invest in building one global platform serving all of our 38 million Retail
customers, and corporate and institutional clients, in more than 15 countries. This helps us to
become a global platform bank, scalable, open and borderless, with one user experience, one API
(application programming interface) solution and one developer portal to efficiently and
seamlessly connect and interact with customers and partners.
 
Open Banking is a key enabler for new open business propositions and strategic platform strategies
across all client segments. Since September 2019, all banks in Europe must implement PSD2. We
have three PSD2 APIs available to external parties on our developer portal. These give customers
the choice to use third-party apps to manage their money or make online payments. For business
clients in the Netherlands we launched a payment request API that enables them to enhance their
end-consumer experience by adding a convenient, simple payment functionality into their own
app.
Partnerships are becoming more and more important to the delivery of optimal client experiences.
APIs are essential for enabling digital businesses, as they are the de facto standard for integration
and co-creation with our partners. With open banking, we are laying the foundation for the bank of
the future. We
 
provide the key capabilities that allow ING to open up by establishing secure,
scalable, compliant and uniform connectivity with external parties via APIs.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Our digitalisation journey
Digital banking, innovation and transformation are in
 
our DNA. ING’s aim is to be the next
generation digital bank, offering a single digital platform or ‘ecosystem’ where customers can find
solutions to all of their financial
 
and finance-related needs.
 
 
Digitalisation guides our investments and transformation efforts. Our ambition is to offer customers
everywhere the same empowering and differentiating experience. We
 
are going about this in
several ways.
 
In 2019, we continued to innovate to improve
 
the digital customer experience and to strengthen
our mobile-first approach. The number of mobile
 
card transactions increased six-fold in 2019 from
2018, boosted by the integration of third-party services like Apple Pay and Google Pay. The overall
share of customers who only interact with us on their mobile device increased to 37 percent in
2019 from 26 percent in 2018. The adoption of mobile payments will grow exponentially in coming
years, which is expected to boost mobile even further.
 
We are
 
digitalising more processes to make them convenient and time-saving for customers. For
example, in 2019, with Apple Pay, we enhanced the experience of our mobile app users in the
Netherlands, Germany, Romania and Spain. In Germany and Poland, we now offer features that
help customers to better manage their money by notifying them of upcoming payments,
 
similar to
the ‘Kijk Vooruit’ feature
 
in the Netherlands. We also made Google Pay available in Germany and
Poland.
 
Another highlight was the launch of our mobile-only bank offering
 
in the Philippines. ING has been
operating in the Philippines for nearly 30 years, but only moved into retail banking with the official
launch of our first all-digital
 
savings product in November 2018. It is the first bank savings
 
product
that allows transactions to be conducted solely on ING’s mobile app. creating an account is free.
Users only have to download the ING app and make sure they meet a number of requirements,
including being at least 18 years old and having one of three government-issued IDs. Since the
launch, there have been around one million app installations, we have signed up more than
100,000 customers and the app scores an average 4.2 rating.
 
 
In the Netherlands and Germany, Wholesale Banking clients can now easily open an account
digitally and directly from their
 
ERP via e-Bank Account Management, using a SWIFT standard. In
developing this, we enable clients to standardise the process for account
 
openings and later
mandate changes to be able to create the basis for digital lifecycle management.
 
 
In 2019, we saw increased uptake of our
Virtual Cash Management
 
solution, enabling treasurers to
manage their cash position via a single master account, while keeping local accounts across Europe
for local operations without the burden of managing all those accounts individually.
 
 
Our digital portal,
InsideBusiness
, is a key enabler of our ‘digital first’
 
philosophy in Wholesale
Banking. Our main interactive channel for business clients, it offers a single point of access to a
growing range of corporate
 
banking services, online and through a mobile app. It provides all the
touch points that business clients need, through a single sign-on, giving them real-time insights
and a single source to manage all their financial transactions at any
 
time, and on any device. We
launched InsideBusiness in 2015 and it now has around 18,000 companies using it, with 57,000
active users, 6,000 of whom use the mobile app. Large corporates
 
make up 32 percent of users,
with the rest being mid-corporates. Our goal is to have all our corporate clients using it
 
– and we’re
gradually closing in on that target.
 
 
A recent improvement
 
was the launch of Corporate Administrator.
 
This allows clients to decide for
themselves which employees can do certain things in their account. Clients can appoint one or two
of their own corporate administrators who can grant
 
access rights. Already, around 40 percent
 
of
our corporate clients are using Corporate
 
Administrator, which is ahead of our targets.
 
 
Another enhancement is the addition of a breakthrough feature called
M-Token
. This addresses the
priority we place on security combined with convenience. It replaces the previous
 
card-and-reader
access, which became increasingly inconvenient for our customers. M-Token,
 
via the InsideBusiness
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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app, makes access a lot easier.
 
Now, to gain access, clients can simply launch the mobile app and
scan a QR code on the login page.
 
New-look branches
 
While banking is becoming increasingly digital, our branches still have an important role to play in
providing more complex, personal advice to customers.
 
 
This is driving ING to change its branches, making them even more personal, while equipping them
to meet today’s digital needs. The idea is to make customers feel at home. Some branches have a
big table, where customers can settle down, have a cup of coffee or do some work. There are
separate booths to get personal advice. There’s also a kid’s corner and a fully equipped ‘digi-corner’
for online banking or learn-how activities.
 
 
In time, all of ING’s branches will adopt this new, home-like concept. Some have already opened in
Turkey, Poland,
 
Spain, Romania, Belgium, the Netherlands, Italy, Austria and Luxembourg.
SME & Mid-Corp
The SME & Mid-Corp segment aims to empower people to manage and accelerate their business.
No matter how big or small, businesses everywhere are increasingly digitalised and expect their
bank to be connected and integrated into their world. They want digital solutions that are smart,
personal and easy. To meet these needs and deliver an exceptional experience for
 
these
customers, we’re transforming our current
 
service model and building digital capabilities to offer
compelling end-to-end digital customer journeys supported by a common infrastructure.
 
 
This includes enabling merchants in Turkey to accept
 
payments more easily via their smartphones
rather than expensive point-of-sale terminals; an online banking platform that gives businesses a
single access point to all their financial
 
products and services; and instant loans for entrepreneurs
in Germany through our acquisition of fintech Lendico. In November 2019, new loan utilisation
increased from €1 million to €14.4 million.
 
In Poland, ING’s online banking platform for business customers was named by Global Finance
Magazine as the world’s best Integrated Corporate Banking site for 2019. It currently
 
provides
around 65,000 SME and mid-corporate clients with a single access point for all their banking
products and services and handles more than 70 million transfer orders a year.
 
In Romania, the
business platform processed its first one million payments
 
in 3Q 2019.
 
 
Also in Poland, ING is the first bank to launch its own payment gateway – imoje – that provides
merchants with a unique ‘buy now, pay within 21 days’ payment option. Co-created with Czech
fintech Twisto, 1,500 shops are now using the payment gateway and 580,000 transactions have
been carried out on imoje since April 2018.
 
 
Responsible finance
ING is 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. As a bank, we make the most impact
through our financing, via the loans we provide to clients. This is why we announced in September
last year that we would steer our €600 billion lending portfolio towards meeting the well-below
two-degree goal of the Paris Climate Agreement.
 
Our strategy to get there is called the
Terra
 
approach.
 
 
One year later, we published our first
 
progress report
 
on Terra,
 
providing a status update on the
alignment of our lending portfolio with the pathway to the goal. The report presented our climate
alignment performance, targets, challenges and next steps for five of the nine sectors
 
with the
biggest influence on greenhouse gas emissions: power generation, automotive, commercial real
estate, residential real estate and cement.
 
 
For the remaining four in scope, fossil
 
fuels, shipping, aviation and steel, we provided an update on
progress to date, initiatives and next steps. Quantitative results
 
for these four sectors are expected
to be disclosed in 2020.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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The report’s centrepiece, the Climate Alignment Dashboard (CAD), discloses quantitative results
 
on
the climate alignment of our lending portfolio. It shows the CO2e intensity per sector of our
portfolio compared to the market and the relevant below two
 
-degrees climate scenario. It also
displays the climate alignment target per sector and ING’s intended decarbonisation pathway per
sector to converge towards
 
the target.
 
 
While Terra
 
is supporting our responsible finance business
 
and will guide ING towards new
opportunities to support our clients, Terra will also help us to build a more climate-resilient portfolio
as it guides our strategies towards two
 
-degree alignment. Terra,
 
therefore, forms part of our
alignment with the Taskforce
 
for Climate-related Financial Disclosures (TCFD)
 
recommendations.
 
 
As each sector requires a custom approach, Terra
 
draws upon more than one methodology for
target-setting. Currently, we focus on the Paris
 
Alignment Capital Transition
 
Assessment (PACTA)
for corporate lending, and the Science Based Targets
 
Initiative’s Sectoral Decarbonisation Approach
(SBTi SDA).
 
 
PACTA
 
was co-developed with the 2˚ Investing Initiative (2˚ii), a global think-tank developing
climate metrics in financial
 
markets. It looks at the technology shift that’s needed
 
across certain
sectors to slow global warming and then measures this against the actual technology clients are
using – or plan on using in the future. The SBTi SDA sets out sector-specific decarbonisation
pathways designed so as to be in line with the science-based scenarios using intensity metrics.
Both methodologies use science-based scenarios developed by independent organisations like the
International Energy Agency and inform us what needs to shift, by how much and by when. This is
where financing comes in – and ING can have an impact.
 
 
The client data underlying the Terra
 
approach is obtained from global databases that track public
and private asset level and company data worldwide in the sectors in scope. This is easier for
clients, as they are not required
 
to provide any additional data themselves.
 
In December 2018, the global banks BBVA,
 
BNP Paribas, Société Générale, and Standard Chartered
joined ING in making the Katowice Commitment to align their loan portfolios with global climate
goals using a similar approach. We have
 
also personally and individually engaged with more than
40 banks interested in the work ING is doing and the positive results are
 
visible.
 
 
Since its launch at ING’s offices
 
in London in February 2019, more
 
than 17 systemically important
banks, including ING, have joined the 2˚ii PACTA
 
pilot for banks. ING was also among the first
signatories of the UNEP-FI Principles for Responsible Banking (PRB). In addition, ING co-chaired the
sub-group that developed the PRB Collective Commitment on Climate Action which took ING’s
Katowice Commitment initiative as its foundation.
 
 
The Terra
 
approach is complemented by the other ways we work to drive sustainable business. We
have committed to reducing our
thermal coal exposure
 
to close to zero by 2025 and support our
clients globally to transition to a low-carbon and self-reliant society. We
 
do this through various
financial instruments,
 
including green loans, sustainable improvement loans, bonds and advisory
services.
 
 
We were
 
well on track in 2019. Climate finance increased 13 percent to €18.7 billion, and lending to
industry ESG leaders grew slightly by 0.1 percent to €7.1 billion. Although social impact financing
decreased 3 percent to €750 million due to repayments, we remain
 
committed by lending to
projects that lead to, for example, basic infrastructure improvements,
 
community development or
essential services.
 
In addition to lending, we supported 62 mandates for clients through green, social and
sustainability bonds. ING increased its bonds business by 68 percent year-on-year to €5.6 billion,
outpacing the total euro denominated bond market growth.
ING is considered one of the pioneers in sustainable finance, having introduced the first
sustainability ESG-linked loan and a made-to-measure sustainability improvement loan. In 2019,
ING continued to shape this sector and open up new markets by developing sustainability
improvement concepts and financial products.
 
 
 
 
 
 
 
 
 
 
 
 
 
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In 2019, we introduced the first sustainability-linked Schuldschein, together
 
with machinery and
plant manufacturer Dürr.
 
ING jointly arranged and structured the transaction.
 
 
In the second quarter, we announced the world’s first
 
sustainability improvement derivative (SID)
provided to SBM Offshore, a global company that supplies floating production units to the offshore
energy industry. The SID is an interest rate
 
swap that hedges the interest rate risk of the
construction of one of SBM Offshore’s floating
 
production, storage and offloading facilities. It’s the
world’s first derivative with a price linked to the company’s sustainability performance, as well as
trading risk, capital require
 
ments and profit. The credit spread of the SID can increase or decrease
based on SBM Offshore’s ESG performance, as scored by Sustainalytics, an independent provider of
ESG research and ratings.
 
In October, we launched another product aimed at encouraging companies to get measured on
ESG goals. Our sustainability improvement capital call facility for Singapore-based Quadria Capital
Management is the first
 
in the world to link the interest rate of the private equity fund to the
sustainability performance of its portfolios. The USD 65 million three-year revolving capital call
facility is the first of
 
its kind in the global fund finance industry,
 
which is currently worth USD 400
billion.
 
We continued to deepen our market credentials with sustainable finance products that support our
corporate clients in achieving better sustainability performance.
 
 
We issued 61 sustainability improvement
 
loans and supported 62 green loans and social and
sustainability bonds in 2019. These include green finance
 
frameworks and green
 
loans for Italo,
Europe’s leading high-speed rail passenger operator,
 
and Itochu, a Japanese trading company, as
well as a sustainability-linked loan for Chinese-owned trading firm COFCO. ING also closed its first
sustainability improvement loan in the US, structured by ING’s sustainable finance Americas team.
 
Alongside the growing number of green loans and bonds, there were
 
a number of sustainability
firsts in 2019. ING issued
 
the largest green Schuldschein with Porsche for €1 billion, and the first
green bond framework in the telecom sector with UK telecoms company Vodafone.
 
The Porsche
transaction is also the first of its kind
 
by a car manufacturer, and the huge demand resulted in the
original order book volume having to be increased. ING acted as the green advisor on the project.
ING also issued its first-ever green covered bond. In October, ING Bank Hipoteczny in Poland
launched a PLN 400 million (USD 93 million) five-year
 
green covered
 
bond on the back of strong
investor interest.
 
ING was also the sole green structuring advisor for the Norwegian bank SR-Boligkreditt’s €500
million first green covered bond, helping to draft a green bond framework that stipulates
investments in green buildings, renewable
 
energy and clean transportation.
 
Almost half of our loan book consists of mortgages. Our ambition is to make our mortgage
 
portfolio
energy-positive by 2050. This means the homes in this portfolio will collectively produce more
energy than they consume.
 
 
To
 
this end, we are developing retail
 
products, tools and services to help homeowners make their
houses more sustainable. As houses generally account for about 20 percent
 
of CO
2
 
emissions, we
believe this could have a meaningful impact in the fight against climate change. At the same time
it will help our customers to lower their CO
2
footprint and energy bill. We have already
 
provided
green mortgages in Germany through development bank KfW.
 
Customers can use the new
products to finance solar panels,
 
for example, or insulate their homes. In the Netherlands and
Belgium, we also offer a consumer loan with a reduced interest rate to help customers pay for
green refurbishments.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Besides these financial
 
solutions, we also 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
 
available to improve in this area. We
 
also provide Dutch homeowners
who want to invest in upgrading their energy label with a free
 
rating as we know how insights can
help people to take the first steps towards a more sustainable home.
 
ING offers sustainable investment (SI) services to its retail banking customers in the Netherlands,
Belgium, Luxembourg
 
and Germany. In 2019, our retail customers in these countries invested a
combined € 9.3 billion using ING’s SI services, up from € 6.3 billion in 2018. SI services represented
seven percent of ING’s total retail
 
banking customer investments in 2019. We have the ambition to
grow our SI services.
 
 
To
 
take sustainable finance further
 
in the business we have set up regional sustainable finance
teams in the Americas and Asia to support our clients in these regions.
 
 
Our efforts in this area are being recognised. In 2019, we were
 
ranked as ‘climate action leader’ by
the leading global environmental disclosure platform CDP for the fifth year.
Financial health
As a result of our financial empowerment activities, 25.9
 
million people (67 percent of our customer
base) felt financially empowered in 2019. In 2018, this was 25 million or 65 percent. Our ambition
for 2022 is for 32 million customers to feel financially
 
empowered by ING.
Information
We believe
 
that the right information at the right time can help people make better financial
decisions. For example:
 
 
In the Netherlands the
’Kijk Vooruit’
 
forecasting tool gives customers an overview of their
planned and predicted transactions, allowing them to gain more control over
 
their finances.
 
 
Also in the Netherlands, we launched the
'Digitaal vooruit'
 
initiative where Digicoaches are
available in pop-up stores at several
 
locations to answer any digital
 
questions people may have.
 
 
In Austria and Romania, we offer customers access to
EmpowerCamp
– a five-week programme
to help customers understand their financial
 
profile and take steps to improve their finances.
 
 
In Poland, our
YouTube
 
videos
 
providing people with financial insights have had over 100 million
views.
Innovation
Products and services are similar across banks. We
 
differentiate ourselves by going a step further
and innovating to create tools that help customers make better financial decisions. For example:
 
 
 
In the Netherlands, we introduced our new
voice-activated ATMs
in branches of Albert Heijn and
at Schiphol Airport. The speech function
 
on the cash machines makes it easier for people who
have difficulty
 
reading or who are visually impaired to withdraw
 
money themselves.
 
 
In Australia,
Everyday Roundup
 
makes saving money and paying off your home
 
loan easier and
more convenient for customers in Australia. ING customers saved AUD 81 million via 70 million
transactions by having ERU enabled on almost 300.000 accounts. The average saving was AUD
1.16 per transaction and
 
AUD
 
284.41 per account in 2019.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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In Spain and France, our digital investment
 
advisors
My Money Coach
 
and
Coach Epargne
 
continued to offer customers precise and intelligent investment solutions.
 
 
We also partnered with others to accelerate
 
innovation like
Minna
, which helps people keep track
of and manage their subscriptions.
Involvement
Our involvement in both the communities we operate in and in developing countries also
contributes to financial health.
 
For example:
 
 
 
Globally, we continued our
Power for Youth
 
partnership with UNICEF
 
to empower adolescents
with financial, entrepreneurial, and civic leadership skills. Since 2015 the partnership
 
has directly
empowered more than 500,000 adolescents,
 
benefiting
 
more than 11 million indirectly.
 
 
Also globally, hundreds of ING colleagues took part in
Global Money Week
, volunteering in
classrooms across the Netherlands, Spain, Czech Republic, Luxembourg,
 
Philippines, and Turkey
to teach young people about money management.
 
 
In the Netherlands we support the
Youth Perspective Fund
, which helps young people aged 18 to
27 to manage their debts. The initiative supports around 150 youngsters a year.
 
Also in the Netherlands we’re a founding partner in the debt-prevention programme
Nederlandse Schuldhulproute
, along with several other banks and the Dutch Banking
Association. This unique public-private collaboration aims to prevent and solve problematic
 
debt.
 
 
Lastly in the Netherlands, we offered more
 
than 250,000 lessons on
digital skills for students
 
in
collaboration with organisations such as Bomberbot and DesignWeek@School.
 
 
In Romania, we supported
Banometru
 
to help adults with financial difficulties
 
to access financial
planning and counselling.
 
 
Competition
 
ING is a global financial
 
institution with a strong European base, offering retail and wholesale
banking services to customers around the globe. The purpose of ING is empowering people to stay
a step ahead in life and in business.
 
ING’s Retail business serves 38.8 million customers. In most of our Retail markets we offer a full
range of banking products and services, covering payments, savings, insurance, investments and
secured and unsecured lending. Our Wholesale Banking business offers clients advisory value
propositions such as specialised lending, tailored corporate finance and debt and equity-market
solutions. Our clients range from large companies to multinational corporations and financial
institutions.
 
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.
 
Such competition is most pronounced in our more mature markets of the Netherlands, Belgium,
the rest of Western Europe
 
and Australia. In recent years, however,
 
competition in emerging
markets, such as Latin America, Asia and Central and Eastern
 
Europe, has also increased as large
financial services
 
companies from more developed countries have
 
sought to establish themselves
in markets which are perceived to offer higher growth potential, and as local institutions have
become more sophisticated and competitive and proceeded to form alliances, mergers
 
or strategic
relationships with our competitors. The Netherlands is our largest market. Our main competitors in
the banking sector in the Netherlands are ABN AMRO Bank and Rabobank.
 
Competition is coming from new market entrants (including non-bank and financial technology
competitors) with new operating models that are not burdened by potentially costly legacy
operations and that are subject to reduced regulation.
 
New entrants rely on new technologies,
 
 
 
 
 
 
 
 
 
 
 
 
 
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advanced data and analytic tools, lower cost to serve, reduced regulatory
 
burden and/or
 
faster
processes in order to challenge traditional banks.
 
The competitive landscape that banks face is increasingly being shaped by Big Tech
 
companies.
They offer customers a superior digital experience through an open platform approach that delivers
a range of their primary needs in a go-to digital ecosystem. This ability to provide for primary
needs, both with proprietary and third-party offerings that are easily accessed through mobile
devices, 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, to disrupt themselves, or risk being
disintermediated and relegated to a status of white label facilitators of others’ platforms.
 
The digital customer experience is now the key differentiator, and our main competitors are no
longer just other banks. They are also Big Tech
 
digital leaders like Apple, Google and Tencent who
are increasingly moving into financial services. The content, offerings and digital savvy of these
 
go-
to platforms cater to a wide range of customers’ primary needs with a personal, instant, relevant
and seamless experience.
 
To
 
compete in this new environment, banks have to think beyond banking and develop their own
platforms. Winners will be those with a superior digital experience, a strong trusted brand, and the
ability to leverage a large
 
customer base to attract partners to their platforms. The successful
platforms take the effort out of managing finances,
 
offering personalised, real-time advice and a
suite of products and services to cover all financial and other relevant needs.
 
Developments in technology have also accelerated the use of new business models. Examples are
new business models in retail payments, consumer and commercial lending (such as peer-to-peer
lending), foreign exchange and low-cost investment advisory services. A significant competitive
development is the emergence of disintermediation in the financial sector
 
resulting from new
banking, lending and payment solutions offered by rapidly evolving incumbents, challengers and
new entrants, especially with respect to payment services and products, and the introduction of
disruptive technology.
 
An important example of this is the newly enacted PSD2 European directive opening the payments
market to non-bank entrants. This is causing banks to face an unlevel playing field when competing
with new, mainly less regulated, market entrants in a lucrative
 
area that in the past was dominated
by banks and other financial
 
services providers.
 
 
Statements regarding ING’s competitive position reflect the assessment of ING’s management
about the general competitive landscape in which ING operates.
Regulation and Supervision
 
 
The banking and broker-dealer businesses of ING are subject to detailed and comprehensive
supervision in all of the jurisdictions in which ING conducts
 
business.
 
 
Regulatory agencies and supervisors have broad administrative power
 
and enforcement
capabilities over many aspects of our business, which may include liquidity, capital adequacy,
permitted investments, ethical issues, money laundering, anti-terrorism measures, privacy,
recordkeeping, product and sale suitability, marketing and sales practices, remuneration
 
policies,
personal conduct and our own internal governance practices. Also, regulators and other
supervisory authorities in the EU, the US and elsewhere continue to scrutinise payment processing
and other transactions and activities of the financial
 
services industry through laws and regulations
governing such matters as money laundering, anti-terrorism financing, tax evasion, prohibited
transactions with countries or persons subject to sanctions,
 
and bribery or other anti-corruption
measures.
 
As discussed under “Item 3. Key Information — Risk Factors”, as a large multinational financial
institution we are subject to reputational and other risks in connection with regulatory and
compliance matters
 
involving these countries.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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European
 
Regulatory framework
 
In November 2014 the European Central
 
Bank (ECB) assumed responsibility, conferred on it by the
Single Supervisory Mechanism (“SSM”),
 
for a significant part of the prudential
 
supervision of euro
area banking groups in the Eurozone,
 
including ING Group and ING Bank. Now that the ECB
assumed responsibility for the supervision of the banking groups in the Eurozone, it
 
has become
ING Group’s and ING Bank’s main supervisor.
 
The ECB is amongst others responsible for tasks such
as market access, compliance with capital and liquidity requirements and governance
arrangements. National regulators,
 
including the Dutch Central Bank for ING Group and ING Bank,
remain responsible for supervision of tasks that have not been transferred
 
to the ECB such as
financial crime and
 
payment supervision.
 
 
ING expects to benefit
 
from the harmonization of supervision resulting from the SSM but at the
same time does not expect such harmonization to be fully in place in the short to mid-term.
 
ING
expects that the Dutch Central bank will continue to play a significant role in the supervision of ING
Group and ING Bank.
 
 
Another significant
 
change in the regulatory environment is the setting up of the Single Resolution
Mechanism (“SRM”), which 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 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 but at this stage it is not fully
 
clear what the impact on ING will be.
 
As a third pillar to the Banking Union, the EU aims at further harmonizing regulations for Deposit
Guarantee Schemes (DGS).
 
Main elements are the creation of ex-ante funded DGS funds, financed
by risk-weighted contributions from banks.
 
As a next step, the EU is discussing a pan-European (or
pan-banking union) DGS (the European Deposit Insurance Scheme (EDIS)), (partly) replacing or
complementing national compensation schemes. The progress on the EDIS proposal is slower than
expected; this proposal as well as certain accompanying risk reduction measures are still being
discussed in the European Parliament and in the Council.
Dutch Regulatory
 
Framework
The Dutch regulatory system for financial supervision consists of prudential supervision
 
monitoring the soundness of financial
 
institutions and the financial
 
sector, and conduct-of-business
supervision – regulating institutions’ conduct in the markets. As far as prudential supervision has
not been transferred to the ECB, it is exercised
 
by the Dutch Central Bank (De Nederlandsche Bank
or “DNB”), while conduct-of-business supervision is performed by the Dutch
 
Authority for the
Financial Markets (Autoriteit Financiële Markten or “AFM”). DNB
 
is in the lead with regard to
macroprudential
 
supervision.
 
Global Regulatory Environment
There is a variety of proposals for laws and regulations
 
that could impact ING globally, in particular
those made by the Financial Stability Board and the Basel Committee on Banking Supervision at the
transnational level and an expanding series of supranational directives and national legislation in
the European Union (see “Item 3. Key
 
Information — Risk Factors — We operate
 
in highly regulated
industries. Changes in laws and/or regulations governing financial services or financial
 
institutions
or the application of such laws and/or regulations governing our business may reduce
 
our
profitability). The aggregated impact and possible interaction of all of these proposals are hard to
determine, and it may be difficult
 
to reconcile them where they are
 
not aligned. The financial
industry has also taken initiatives by means of guidelines and self-regulatory initiatives.
 
Dodd-Frank
 
Act and other US Regulations
ING Bank has a limited direct presence in the United States through the ING Bank Representative
Offices
 
in New York and Dallas, Texas.
 
Although the offices’
 
activities are strictly limited to
essentially that of a marketing agent of bank products and services and a facilitator (i.e. the offices
may not take deposits or execute any transactions), the offices
 
are subject to the regulation of the
State of New York Department of Financial Services and the Texas
 
Department of Banking, as well