Capital management
REGULATORY REQUIREMENTS
ING Bank
Capital adequacy and the use of regulatory required capital are based on the guidelines developed by the Basel Committee on Banking Supervision (The Basel Committee) and the European Union Directives, as implemented by the Dutch Central Bank (DNB) for supervisory purposes. The minimum Tier-1 ratio is 4% and the minimum total capital ratio (known as the BIS ratio) is 8% of all risk-weighted assets including off-balance sheet items and market risk associated with trading portfolios.
Capital position of ING Bank
| 2007 | 2006 | |
|---|---|---|
| Shareholders’ equity (parent) | 25,511 | 21,298 |
| Minority interests | 1,514 | 1,204 |
| Subordinated loans qualifying as Tier-1 capital(1) | 6,397 | 5,726 |
| Goodwill and intangibles deductible from Tier-1 | –1,428 | –136 |
| Minority interest Record Bank | 154 | 162 |
| Deductions Tier-1 (as of 2007) | –93 | |
| Revaluation reserve(2) | –2,283 | –2,470 |
| Core capital – Tier-1 | 29,772 | 25,784 |
| Supplementary capital – Tier-2 | 14,199 | 12,367 |
| Available Tier-3 funds | 329 | |
| Deductions | –2,407 | –1,251 |
| Qualifying capital | 41,564 | 37,229 |
| Risk-weighted assets | 402,727 | 337,926 |
| Tier-1 | 7.39% | 7.63% |
| BIS ratio | 10.32% | 11.02% |
(1) Subordinated loans qualifying as Tier-1 capital have been placed by ING Groep N.V. with ING Bank N.V.
(2) Revaluation reserve is deducted as it is not part of Tier-1 capital (included in Tier-2) and includes the cumulative revaluations on real estate investments.
ING Insurance
European Union directives require insurance companies established in member states of the European Union to maintain minimum capital positions. The capital position of ING Insurance has been measured on the basis of this European Union requirement.
Capital position of ING Insurance
| 2007 | 2006 | |
|---|---|---|
| Available capital | 22,965 | 25,505 |
| Required capital | 9,405 | 9,296 |
| Surplus capital | 13,560 | 16,209 |
| Ratio of available versus required capital | 244% | 274% |
ING Group
According to an agreement between the Dutch Central Bank and the former Pension and Insurance Board regarding the supervision of financial conglomerates, ING Group is required to have an amount of capital, reserves and subordinated loans which are at least equal to the sum of:
- the required capital for the banking activities; and
- the required capital for the insurance activities
Certain subordinated loans of ING Bank N.V. and ING Verzekeringen N.V. qualifying as capital for regulatory purposes are included in the capital base of ING Group. The financial conglomerates agreement (‘protocol’) is applicable as from 1 January 2007.
Regulatory required capital ING Group
| 2007 | 2006 | |
|---|---|---|
| Shareholders’ equity (parent) | 37,208 | 38,266 |
| Excluding: Revaluation reserves | 1,457 | –3,066 |
| Preference shares | 21 | 215 |
| Preference shares issued by group companies | 1,019 | 1,138 |
| Goodwill and intangibles deductible from Tier-1 | –2,420 | –286 |
| Subordinated loans | 7,580 | 6,253 |
| Capital base ING Group | 44,865 | 42,520 |
| Subordinated loans ING Bank N.V. (included in Tier-2) | 11,154 | 11,110 |
| Subordinated loans ING Verzekeringen N.V. | 2,250 | 2,250 |
| Capital base including subordinated loans | 58,269 | 55,880 |
| Required capital banking operations | 32,218 | 27,034 |
| Required capital insurance operations | 9,405 | 9,296 |
| Surplus capital | 16,646 | 19,550 |
Capital adequacy and ratios
Quantitative disclosures on capital measures and ratios
| 2007 | Group 2006 |
2007 | Insurance 2006 |
2007 | Bank 2006 |
|
|---|---|---|---|---|---|---|
| Capital | ||||||
| Available Financial Resources (AFR) | 49,715 | 48,774 | 22,710 | 27,200 | 31,733 | 25,784 |
| Required Economic Capital (EC) | 36,000 | 35,500 | 23,199 | 22,410 | 17,927 | 15,876 |
| Ratio EC vs. AFR | 138% | 137% | 98% | 121% | 177% | 162% |
| Target Ratio EC vs. AFR | 120% | 120% | 100% | 100% | 100% | 100% |
| Tier-1 ratio (Bank) | ||||||
| Year-end actual Tier-1 ratio | 7.39 | 7.63 | ||||
| Regulatory minimum Tier-1 ratio | 4.00 | 4.00 | ||||
| Target Tier-1 ratio | 7.20 | 7.20 | ||||
| BIS ratio (Bank) | ||||||
| Year-end actual BIS ratio | 10.32 | 11.02 | ||||
| Regulatory minimum BIS ratio | 8.00 | 8.00 | ||||
| Target BIS ratio | 10.80 | 10.80 | ||||
| EU Solvency ratio (Insurance) | ||||||
| Year-end actual EU Solvency ratio | 244 | 274 | ||||
| Regulatory minimum EU Solvency ratio | 100 | 100 | ||||
| Target EU Solvency ratio | 150 | 150 | ||||
| Debt/Equity ratio | ||||||
| Debt/Equity ratio | 9.53 | 9.01 | 13.63 | 14.15 | ||
| Target Debt/Equity ratio | 10.00 | 10.00 | 15.00 | 15.00 |
Main credit ratings of ING (1)
| Standard & Poor’s | Moody’s | Fitch | |
|---|---|---|---|
| ING Group | AA– | Aa2 | AA– |
| ING Insurance | |||
| – short term | A-1+ | P-1 | |
| – long term | AA– | Aa3 | AA– |
| ING Bank | |||
| – short term | A-1+ | P-1 | F1+ |
| – long term | AA | Aa1 | AA |
| – financial strength | B | ||
(1) The Standard & Poor’s, Moody’s and Fitch ratings all have a stable outlook.
ING’s long-term credit ratings are shown in the table above. Each of these ratings reflects only the view of the applicable rating agency at the time the rating was issued, and any explanation of the significance of a rating may be obtained only from the rating agency.
A security rating is not a recommendation to buy, sell or hold securities and each rating should be evaluated independently of any other rating. There is no assurance that any credit rating will remain in effect for any given period of time or that a rating will not be lowered, suspended or withdrawn entirely by the rating agency if, in the rating agency’s judgment, circumstances so warrant. ING accepts no responsibility for the accuracy or reliability of the ratings.
