20-F 1 ing20f2020.htm FORM 20-F ing20f2020
 
 
 
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 2020
 
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)
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
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.
 
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
 
 
 
 
3.900.668.
6
35
 
 
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 193
 
 
 
 
 
 
 
 
 
 
 
 
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 whether the registrant has filed a report on and attestation
 
to its management’s
assessment of the effectiveness of its internal control
 
over financial reporting under Section 404(b) of the
Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting
 
firm that prepared or issued its audit
report.
 
 
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
 
 
 
ing20f2020p3i0.gif ing20f2020p3i1.gif
ING GROUP
Annual Report 2020 on Form 20-F
 
 
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 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.
 
 
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 2020 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.
 
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.
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
6
 
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, including changes affecting currency exchange
 
rates,
 
the effects of the COVID-19 pandemic and related response
 
measures, including lockdowns and
travel restrictions, on economic conditions in countries in which ING operates,
 
on ING’s business
and operations and on ING’s employees, customers
 
and counterparties,
 
changes affecting interest
 
rate levels,
 
 
any default of a major market participant and related
 
market disruption,
 
changes in performance of financial markets, including in Europe and developing markets,
 
 
political instability and fiscal uncertainty in Europe and the United States,
 
discontinuation of or changes in ‘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,
 
 
failures of banks falling under the scope of state
 
compensation schemes,
 
non-compliance with or changes in laws and regulations, including those financial services and
tax laws, and the interpretation
 
and application thereof,
 
geopolitical risks, political instabilities and policies and actions of governmental and regulatory
authorities,
 
 
legal and regulatory risks in certain countries with less developed legal
 
and regulatory
frameworks,
 
prudential supervision and regulations, including in relation to stress tests and regulatory
restrictions on dividends and distributions, (also among members of the group),
 
regulatory consequences of the United Kingdom’s
 
withdrawal from the European Union,
including authorizations and equivalence decisions,
 
ING’s ability to meet minimum capital
 
and other prudential regulatory requirements,
 
changes in regulation of US commodities and derivatives businesses of ING and its customers,
 
application of bank recovery and resolution regimes, including write-down and conversion
powers in relation to our securities,
 
outcome of current and future litigation, enforcement
 
proceedings, investigations or other
regulatory actions, including claims by customers who feel mislead and other conduct issues,
 
changes in tax laws and regulations and risks of non-compliance or investigation
 
in connection
with tax laws, including FATCA,
 
operational risks, such as system disruptions or failures,
 
breaches of security, cyber-attacks,
human error,
 
changes in operational practices or inadequate controls including in respect
 
of
third parties with which we do business,
 
risks and challenges 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, including ability to
 
increase or maintain market share,
 
the inability to protect our intellectual property and infringement claims by third parties,
 
inability of counterparties to meet financial obligations or ability to enforce rights against
 
such
counterparties,
 
changes in credit ratings,
 
business, operational, regulatory,
 
reputation and other risks and challenges in connection with
climate change,
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
7
 
 
inability to attract and retain key
 
personnel,
 
future liabilities under defined benefit retirement plans,
 
failure to manage business risks, including in connection with use of models, use of derivatives,
or maintaining appropriate policies and guidelines,
 
changes in capital and credit markets, including interbank funding, as well as customer deposits,
which provide the liquidity and capital required to fund our operations, and,
 
the other risks and uncertainties detailed in the most recent annual report of ING Groep N.V.
(including the Risk Factors contained therein) and ING’s
 
more recent disclosures, including press
releases, which are available on www.ING.com
 
.
 
This annual report contains inactive textual addresses to internet
 
websites operated by us and third parties.
Reference to such websites is made for
 
information purposes only, and information
 
found at such websites is not
incorporated by reference
 
into this annual report. ING does not make any representation
 
or warranty with
respect to the accuracy or completeness of,
 
or take any responsibility for,
 
any information found at any
 
websites
operated by third parties. ING specifically disclaims any liability with respect to any information
 
found at
websites operated by third parties. ING cannot guarantee
 
that websites operated by third parties remain
available following the filing of this annual report or that any information
 
found at such websites will not change
following the filing of this annual report. Many of those factors are
 
beyond ING’s control.
 
 
Any forward looking statements
 
made by or on behalf of ING speak only as of the date they are made, and ING
assumes no obligation to publicly update or revise any forward
 
-looking statements, whether as a result of new
information or for any other reason.
 
 
This document does not constitute an offer to sell, or a solicitation of an offer
 
to purchase, any securities in the
United States or any other jurisdiction.
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
8
 
PART
 
I
 
 
Item 1.
 
I
dentity 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
 
Not applicable.
 
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
 
 
Summary of Risk factors
The following is a summary of the principal risk factors that could have a material
 
adverse effect on the business
activities, financial condition, results and prospects of ING. Please carefully consider all of the information
discussed in this Item 3.D “Risk Factors” for a detailed description of these risks.
 
Risks related to financial conditions, market
 
environment and general economic trends
 
Our revenues and earnings are affected by the volatility
 
and strength of the economic, business,
liquidity, funding and capital markets
 
environments of the various geographic regions in which we
conduct business, as well as by changes in customer behaviour in these regions, and an adverse change
in any one region could have an impact on our business, results and financial condition.
 
ING’s business, results and financial condition have
 
been, and likely will continue to be, adversely
affected by the Covid-19 pandemic.
 
Interest rate volatility
 
and other interest rate changes may
 
adversely affect our business, results and
financial condition.
 
The default of a major market participant could disrupt the markets
 
and may have an adverse effect
 
on
our business, results and financial condition.
 
Continued risk of political instability and fiscal uncertainty in Europe and the United States,
 
as well as
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.
 
Discontinuation of or changes to ‘benchmark’ indices may negatively 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.
 
We may incur losses due to failures of banks falling
 
under the scope of state compensation schemes.
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
9
 
 
Risks related to the regulation and supervision of the Group
 
Non-compliance with laws and/or regulations concerning financial services or financial institutions,
including with respect to financial economic crimes, could result in fines and other liabilities, penalties or
consequences for us, which could materially affect our business and reduce our profitability.
 
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 additional legal and regulatory risk in certain
 
countries where we operate with less
developed or predictable legal and regulatory frameworks.
 
We are subject to the regulatory supervision of the ECB and other regulators
 
with extensive supervisory
and investigatory powers.
 
The regulatory consequences of the United Kingdom’s withdrawal
 
from the European Union may have
adverse effects on our business, results and financial condition.
 
 
Failure to meet minimum capital and other prudential regulatory requirements
 
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.
 
Our US commodities and derivatives business is subject to CFTC and SEC regulation under the Dodd-
Frank Act.
 
We are subject to 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.
 
Risks related to litigation, enforcement
 
proceedings and investigations and to
 
changes in tax
laws
 
We may be subject to litigation, enforcement
 
proceedings, investigations or other regulatory actions,
and adverse publicity.
 
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.
 
We may be subject to withholding tax if we fail to
 
comply with the Foreign Account Tax
 
Compliance Act
(“FATCA”)
 
and other US withholding tax regulations
 
ING is exposed to the risk of claims from customers who feel misled or treated
 
unfairly because of advice
or information received.
 
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 are subject to increasing risks related
 
to cybercrime and compliance with cybersecurity regulation.
 
Because we operate in highly competitive markets,
 
including our home market, we may not be able to
increase or maintain our market share, which may have
 
an adverse effect on our results.
 
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.
 
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.
 
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.
 
We may be exposed to business, operational, regulatory,
 
reputational and other risks in connection with
climate change.
 
An inability to retain or attract key
 
personnel may affect our business and results.
 
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 actual
results and underlying actuarial assumptions and models.
 
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 may be unable to manage our risks successfully through derivatives.
 
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.
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
10
 
 
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.
 
Additional risks relating to ownership of ING shares
 
Holders of ING shares may experience dilution of their holdings.
 
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.
 
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 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.
 
Although the most material risk factors have been presented
 
first within each category,
 
the order in which the
remaining risk factors are presented is not necessarily an indication
 
of the likelihood of the risks actually
materialising, of the potential significance of the risks or of the scope of any potential negative impact to
 
our
business, results, financial condition and prospects.
 
Risks related to financial conditions, market
 
environment and general economic trends
 
Our revenues and earnings are affected by
 
the volatility and strength of the economic, business,
liquidity, funding and capital markets
 
environments of the various geographic
 
regions in which
we conduct business, as well as by changes in customer behaviour in these
 
regions, and an
adverse change in any one region could have
 
an impact on our business, results and financial
condition.
 
Because ING is a multinational banking and financial services corporation, with a global presence and serving
around 39.3 million customers, corporate
 
clients and financial institutions in over 40 countries, ING’s business,
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 Banking markets. In Wholesale
Banking, we provide specialised lending, tailored corporate finance, debt and equity market
 
solutions, payments
& cash management, trade and treasury services. As a result, negative developments
 
in financial markets and/or
countries 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 customer behaviour,
 
business investment, real estate values
 
and private equity valuations,
government spending, inflation or deflation, the volatility and strength of the capital
 
markets, political events
and trends, terrorism, pandemics and epidemics (such as Covid-19, as described in greater detail below under the
heading “– ING’s business, results and financial condition have
 
been, and likely will continue to be adversely
affected by the Covid-19 pandemic”) 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
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
11
 
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”.
 
All of these are factors in local and regional economies as well as in the global
economy,
 
and we may be affected by changes in any one of these factors
 
in any one country or region, and more
if more of these factors occur simultaneously and/or in multiple countries or regions
 
or on a global scale.
 
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 ING may need
to increase its reserves and provisions, each of which may result in overall lower
 
earnings. The impact of the
Covid-19 pandemic, as an example of an economic downturn, as well as the substantial monetary and
government measures, are still materialising and expected
 
to continue to affect our business. For more
information, refer to the risk factor
 
described under heading “–ING’s business, results and financial condition
have been, and likely will continue to be adversely affected
 
by the Covid-19 pandemic”. 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
 
.
 
ING’s business, results and financial condition have
 
been, and likely will continue to be,
adversely affected by the Covid-19 pandemic.
 
The Covid-19 pandemic and the related response measures introduced by various national and
 
local
governmental authorities aimed at preventing the further spread of the disease (such as bans on public events
with over a certain number of attendees, closures of places where larger groups
 
of people gather such as schools,
sports facilities, bars and restaurants, lockdowns,
 
border controls and travel and other restrictions)
 
have
disrupted the normal flow of business operations in those countries and regions where we and our customers
and counterparties operate (such as, among others, Benelux, Germany,
 
France, Italy,
 
Spain, the U.K. and the
U.S.). This disruption has adversely affected, and will likely
 
continue to adversely affect, global economic growth,
supply chains, manufacturing, tourism, consumer spending, asset prices and unemployment levels, and has
resulted in volatility and uncertainty across the global economy and financial markets.
 
 
In addition to the measures aimed at preventing the further spread of Covid-19, governments and central
 
banks
around the world have also introduced measures aimed at mitigating
 
the economic consequences of the
pandemic and related response measures, such as guarantee schemes, compensation
 
schemes and cutting
interest rates. For example,
 
the Dutch government has implemented economic measures aimed at protecting
jobs, households’ wages and companies, e.g., by way of tax payment holidays,
 
guarantee schemes and a
compensation scheme for heavily affected sectors
 
in the economy. These announced measures and any
additional measures, including any payment holidays with respect to mortgages
 
or other loans, have had and
may continue to have a significant impact on our customers
 
and other counterparties.
 
Governments, regulators and central
 
banks (including the ECB), have also announced that they are taking or
considering measures seeking to safeguard the stability of the financial sector,
 
to prevent lending to the business
sector from being jeopardised and to ensure the payment system
 
continues to function properly.
 
The ECB
currently allows banks to operate below the level
 
of capital required by the Pillar 2 Guidance, capital
conservation buffer and the liquidity coverage ratio,
 
and banks are also permitted to use a portion of their capital
instruments that do not qualify as CET1 capital to meet the Pillar 2 Requirements. Several
 
countries also released
or reduced countercyclical buffers
 
(CCyB). The ECB has also issued a recommendation to the banks that it
supervises that such banks should exercise extreme prudence when deciding on or paying out dividends or
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
12
 
performing share buy-backs until September 30, 2021. However,
 
it is not certain whether these or future
measures will be extended or maintained for a sufficient period of time, or whether such measures will be
successful in mitigating the economic consequences of the pandemic and related response measures. If the
pandemic is prolonged or the actions are unsuccessful, additional actions by governments and central banks may
follow and the adverse impact on the global economy will deepen, and our business, results and financial
condition may be materially adversely affected.
 
In 2020, the Covid-19 pandemic affected all of our businesses, including lower or negative interest
 
rates, lower oil
prices and credit deterioration of loans to ING’s
 
customers. These effects have
 
also resulted in an increase in the
allowance for credit losses and impairments on non-financial assets, and reduced net interest
 
income due to
lower interest rates. While these effects
 
were partly offset by resilient fee
 
and commission income in 2020, this
level of activity may not persist in future periods. With Covid-19 infection rates
 
having recently increased,
especially in some European countries, and further lockdowns measures having been reintroduced,
 
this may
result in changes in government responses and further downside risk towards macro-economic
 
developments,
with possibly a deeper risk aversion and a delayed recovery.
 
These developments may result in further negative
impact on our business, results and financial condition.
 
In 2020, ING also took certain measures to support customers impacted by the Covid-19 pandemic, including
payment holidays, offering credit
 
facilities to business customers under government guarantee
 
schemes and
providing liquidity under credit facilities to large corporate
 
customers. Although, following supervisory guidelines,
payment holidays do not automatically trigger an immediate classification
 
of the loans as in default or as
forborne, the credit quality of these loans will be monitored for future transitions into
 
Stage 2 and could result in
increased risk costs and additional risk weighted assets in future periods. As of December 31, 2020, in line with
the European Banking Association (EBA) moratoria guidelines, ING has a total amount of €19.4 billion of payment
holidays or 2.6% of total credit outstandings, granted
 
to approximately 196,000 customers. While these
customers are located across nearly all countries
 
in which ING operates, over 55% of these customers are in the
Netherlands and Belgium. ING also recorded €2,675 million of net additions to loan loss provisions in 2020
compared with €1,120 million in 2019. The 2020 risk costs were severely impacted by a combination of increased
collective provisioning reflecting the worsened macro
 
-economic indicators due to the Covid-19 pandemic, higher
Individual Stage 3 provisions, and negative rating
 
migration. Should these global economic conditions be
prolonged or worsen, or should the pandemic lead to additional market disruptions, we may
 
experience more
customer defaults and further additions to loan loss provisions. In these circumstances, we
 
may also experience
reduced customer activity and demand for its products and services, increased utilization of lending
commitments and higher credit and valuation adjustments on financial assets. In addition, persistently
 
low
interest rates for
 
a longer period, as well as a potential further decline in interest rates
 
might result in further
decreases in net interest income. These factors
 
and other consequences of the Covid-19 pandemic may
materially adversely affect our business, results and financial condition.
 
Our capital and liquidity position may also be adversely impacted by the Covid-19 pandemic and related response
measures, including as a result of changes in future levels of savings and deposits from customers, changes
 
in
asset quality, and the effects
 
of government or regulatory responses to the pandemic, and may require
 
changes
to our funding structure, impact our ability to comply with regulatory capital requirements
 
and adversely affect
our cost of capital and credit rating. Any of the foregoing
 
developments may have a material adverse
 
impact on
our business, results and financial condition.
 
As of December 31, 2020, most of our staff continue to work from home. Since May 2020, staff
 
in various
countries have started rotation
 
schemes to return to work in the office in a controlled manner,
 
taking into
account local circumstances and any applicable government
 
measures (including with respect to social
distancing). This controlled office opening process is expected to
 
allow for essential face-to-face meetings.
However,
 
with Covid-19 infection rates having recently
 
increased, we expect that more staff will again
 
work from
home. Due to the uncertainties relating to the future development of the Covid-19 pandemic, it is not certain
when our employees may be generally expected or permitted
 
to return to the offices. If due to illness, technical
limitations or other restrictions in connection with the pandemic, employees are unable to work or are not able
to operate as effectively
 
and efficiently as in the office, this may adversely affect
 
our business, results and
financial condition.
 
In addition, a situation in which most or some of our employees continue working from home may raise
operational risks, including with respect to information security,
 
data protection, availability of key
 
systems and
infrastructure integrity.
 
There is also a risk that we will not be effective in implementing regulatory or strategic
change programs in the current environment.
 
The Covid-19 pandemic has led to new banking behaviour from
customers. There has been an increase in the digital behaviour of our customers
 
leading to reduced traffic in
branches. Over 80% of our customers now interact
 
with us via digital channels only. Criminals are also taking
advantage of the Covid-19 pandemic to carry out financial fraud and exploitation
 
scams, with examples including
advertising and trafficking in counterfeit medicines, offering
 
fraudulent investment opportunities, fundraising for
fake charities and engaging in phishing schemes that prey on virus-related
 
fears. National authorities and
international bodies (including the Financial Action Task
 
Force) warn citizens and businesses on impostor,
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
13
 
investment and product scams. Although we have organized
 
a Covid-19 taskforce to identify and analyse new
behavioural patterns, leading to new cases of unusual transactions being reported
 
to the relevant authorities,
new banking behaviours may result in additional Know Your
 
Customer (KYC) risks. If any of these risks were to
materialize that may adversely affect
 
our business, results and financial condition.
 
The duration of the pandemic and the impact of measures taken in response by governmental
 
authorities,
central banks and other third parties, whether direct or indirect, such as by increasing sovereign
 
debt of certain
countries which may result in increased volatility and widening credit spreads, remain
 
uncertain. Therefore, it is
difficult to predict the extent to which our business, results and financial condition, as well as our ability to access
capital and liquidity on financial terms acceptable for us, may be materially adversely
 
affected.
 
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,
 
and in some situations negative 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 the Dutch
Central Bank’s (“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 to earn interest on our assets (including reserves). In addition, we have, and may
 
continue to,
earn negative interest on certain of our assets (including cash balances, loans and bonds), while still paying
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 interest to ING to hold cash deposits, some depositors
 
may choose
to withdraw their deposits rather than pay interest
 
to ING, which would have an adverse effect on our
reputation, business, results and financial condition. For example, in March
 
2020, the U.S. Federal Reserve has
cut the benchmark U.S. interest rate in response to
 
the Covid-19 pandemic and related impacts on the economy
and financial markets. On 1 January 2021, ING announced that it will charge negative interest
 
to customers on
current and deposit accounts exceeding €250,000 (such negative
 
interest rate will only apply to the amount by
which the current or deposit account exceeds €250,000 ). Such declines in interest rates
 
in the United States or
other markets in which ING and its customers and counterparties operate
 
may have a significant adverse effect
on our business and operations.
 
Alternatively,
 
any period of rapidly increasing interest rates
 
may result in:
 
a decrease in the demand for loans;
 
higher interest rates to be paid on customer
 
deposits and on debt securities that we have issued or may
issue on the financial markets from time to time to finance our operations, which would increase our
interest expenses and reduce our results;
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
14
 
 
higher interest rates which can lead to
 
lower investments prices and 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, results 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. Also 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. In addition, ING may also be faced with additional open market risk for which hedging
or mitigation strategies may not be available
 
or effective (either by hedges eliminated by defaulting
counterparties, or reduce market liquidity). 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, 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 addition, geopolitical issues, including trade tensions between the US and China, increasing
protectionism between key countries,
 
and issues 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, temporary decrease in 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. 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
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
15
 
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.
 
Discontinuation of or changes to ‘benchmark’ indices may negatively
 
affect our business, results
and financial condition.
 
Financial markets
 
have historically relied on Interbank Offered
 
Rates (‘IBORs’) benchmarks, such as the London
Interbank Offered Rate (‘LIBOR’), the Euro
 
OverNight Index Average (‘EONIA’)
 
and the Euro Interbank Offered
Rate (‘EURIBOR’). These interest rate
 
‘benchmarks’ have been the subject of ongoing national and international
regulatory reform. For example,
 
ICE Benchmark Administration (IBA), as the administrator of LIBOR, issued a
consultation with respect to its plans for the cessation for most
 
LIBOR rates at the end of 2021, with an 18 month
extension proposed for USD LIBOR, one of the most widely used LIBOR rates. EONIA
 
will cease to be published by
1 January 2022 and the European Money Markets Institute (EONIA’s
 
administrator) has indicated that EONIA
cannot be used in any contracts that may be outstanding as of 1 January 2022. Following the implementation
 
of
such 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 such benchmarks
 
may cease to exist entirely,
 
or there could be other
consequences which cannot be predicted.
 
Public authorities have initiated industry working groups in various jurisdictions to develop
 
and recommend
alternative rates that could serve as replacements
 
when such rates cease to exist or materially change. This is
commonly referred to as a fallback rate.
 
The US Federal Reserve’s
 
Alternative Reference Rates
 
Committee
(commonly referred to as ‘ARRC’)
 
has recommended adoption of the Secured Overnight Financing Rate
(commonly referred to as ‘SOFR’) as an alternative to
 
USD LIBOR, and the limited extension announced by the
IBA has eased the timeline for the transition of existing contracts referencing
 
USD LIBOR. For EURIBOR, the
Working Group on Euro Risk-Free
 
Rates is continuing its work on developing recommended fallback rates
 
based
on the “euro short-term rate”
 
(€STR). €STR is being published and is now widely used, and calculation of the
EONIA benchmark described above has been modified to refer to the €STR benchmark until the EONIA
benchmark is discontinued.
 
Public authorities have also recognised that certain LIBOR contracts do not contain
 
any alternatives, contain
inappropriate alternatives, or cannot be renegotiated
 
or amended prior to the expected cessation of LIBOR. In
response to this challenge the FCA, as the supervisor of LIBOR, plans to make use of the proposed powers
granted to them to enable continued publication of a “synthetic”
 
LIBOR using a different methodology and
inputs, which may help reduce disruption to holders of tough legacy contracts.
 
However,
 
there is no certainty as
to whether the FCA will exercise these powers or what
 
form the revised methodology would take, and the FCA
has consequently encouraged users of LIBOR to renegotiate
 
or amend as many contracts as possible before the
relevant LIBOR ceases.
 
In response, the European Commission has announced various legislative fixes, that most
notably reduce the scope for potential conflict with the solutions proposed by other jurisdictions. However,
 
there
is no guarantee that regulators will implement
 
measures to address such legacy contracts, or that such measures
will be effective in avoiding business disruption or contractual
 
disputes.
 
The potential discontinuation of interest rate
 
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
customers, and the financial services industry more widely. These risks
 
include legal risks in relation to changes
required to documentation for new and existing
 
transactions. 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
processes, or in relation to communications with clients or other parties and engagement during the transition
period. In addition to the heightened conduct and operational risks, the process of adopting new reference
 
rates
may expose the Group to an increased level of financial risk, such as potential earnings volatility resulting
 
from
contract modifications and changes in hedge accounting relationships.
 
It is not currently possible to determine
the full impact of such changes on the Group, and the implementation of alternative benchmark rates
 
may have
a material adverse effect on our business, results and financial condition
.
 
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
16
 
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:
 
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. Also see above under the heading “–ING’s business, results and
financial condition have been, and likely will continue to be adversely affected
 
by the Covid-19 pandemic”.
 
As set
out there, we expect to be affected by
 
the Covid-19 pandemic through its impact on, among others, the financial
condition of our customers or other counterparties.
 
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, 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.
 
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
17
 
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 2020, 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 regulation and supervision of the Group
 
Non-compliance with laws and/or regulations concerning financial services or financial
institutions,
 
including with respect to financial economic crimes, could result in fines and other
liabilities, penalties or consequences for us, which could materially affect our business and
reduce our profitability.
 
ING has 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 45
‘Legal proceedings’ to the consolidated financial statements.
 
There are a number of risks in areas where
applicable regulations may be unclear,
 
subject to multiple interpretations or under development, or where
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.
 
Furthermore, as a financial institution, we are exposed to the risk of unintentional involvement
 
in criminal
activity in connection with the commission of financial economic crimes, including with respect to money
laundering and the funding of terrorist and other criminal activities. The failure or perceived failure
 
by us to
comply with legal and regulatory requirements with respect to
 
financial economic crimes may result in adverse
publicity, claims and allegations, litigation
 
and regulatory investigations and sanctions, which may have
 
a material
adverse effect on our business, results, financial condition and/or
 
prospects in any given period. For further
discussion of the impact of litigation, enforcement proceedings, investigations
 
or other regulatory actions with
respect to financial economic crimes, see “– We may be subject to litigation,
 
enforcement proceedings,
investigations or other regulatory actions, and adverse
 
publicity” below.
 
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 financial 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 supervisory scrutiny.
 
Compliance with applicable and new laws and regulations is resources-
intensive, and may materially increase our operating
 
costs. Moreover,
 
these regulations intended to protect our
customers, markets and society as a whole can limit our activities, among others, through stricter
 
net capital,
 
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
18
 
market conduct and transparency requirements
 
and restrictions on the businesses in which we can operate or
invest.
 
Our revenues and profitability and those of our industry 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 effective. 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 prudential supervisor in the EU, the ECB has extensive supervisory and investigatory
powers, including the ability to issue requests for information,
 
to conduct regulatory investigations
 
and on-site
inspections, and to impose monetary and other sanctions. For example, under the Single Supervisory Mechanism
(SSM), the regulators with jurisdiction over the Group, including the ECB, may
 
conduct stress tests and have
discretion to impose capital surcharges on financial institutions for
 
risks that are not otherwise recognised in risk-
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 authorities may also, if the
Group fails to comply with regulatory requirements,
 
in particular with supervisory actions, 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 prudential or
conduct regulations could have a material adverse
 
effect on the Group’s
 
business, results and financial condition.
 
The regulatory consequences of the United Kingdom’s
 
withdrawal from the European Union may
have adverse effects on our business, results
 
and financial condition.
 
On 24 December 2020, the United Kingdom and the EU agreed to the EU-UK Trade
 
and Cooperation Agreement
(the “TCA”) in connection with the departure of the UK from the EU (commonly referred to
 
as ‘Brexit’). However,
the financial services provisions of the TCA are very limited and , as a result, UK-based financial services providers
lost EU passporting rights as of 1 January 2021 and EU-UK financial services are now subject to unilateral
equivalence decisions. EU and UK regulators have, however,
 
taken certain measures to address overall
 
financial
stability risks, such as the temporary extension by the EU of equivalence recognition to
 
UK-based central
counterparties (UK CCPs) through to 30 June 2022. There is, however,
 
no guarantee that such equivalence
decisions will be issued by the EU or the UK in the future, or that any extensions or renewals of temporary
equivalence decisions or similar transitional arrangements will be made by the EU or the UK in the future. The
absence of such equivalence decisions for financial services could have a negative impact on ING’s
 
activities, with
 
the absence of future UK CCPs recognition expected to increase costs
 
for both ING and its financial markets
customers. In addition, Brexit has required and will require
 
other changes to ING’s business and operations,
including requiring ING to apply for a third country branch banking licenses in the UK for which ECB conditions
and PRA & FCA authorisation decisions remain pending. ING is also progressing the move of certain financial
markets activities from London to Amsterdam in light
 
of ECB’s supervisory expectations on booking models as a
result of Brexit. The regulatory impact of Brexit continues to
 
present material risks and uncertainties, particularly
as to how regulations may diverge between the EU and the UK, which could materially
 
increase ING’s compliance
costs and have a material adverse effect
 
on ING’s business, results and financial condition.
 
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
19
 
Failure to meet minimum capital and other prudential regulatory
 
requirements 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.
 
ING is subject to a variety of 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. In
addition, such 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,
 
or to adapt to changes in such requirements, may have a material
adverse effect on our business, results and financial condition, and may require
 
us to seek additional capital.
Failures to meet minimum capital or other prudential requirements
 
may also result in ING being prohibited from
making payments on certain of our securities. 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.
 
For further discussion of the impact of minimum capital and other prudential regulatory requirements on ING,
see “Item 4. Information on the Company—Regulation and Supervision—Regulatory
 
Developments—Basel III and
European Union Standards as currently applied by ING Group.”
 
Our US commodities and derivatives business is subject to CFTC
 
and SEC regulation under the
Dodd-Frank Act.
 
Our affiliate ING Capital Markets LLC is registered
 
with the Commodity Futures Trading Commission (“CFTC”) as a
swap dealer and is subject to CFTC regulation of the off-exchange
 
derivatives market pursuant to Title VII of the
U.S. Dodd-Frank Wall Street Reform
 
and Consumer Protection Act
 
(“Dodd-Frank”).
 
Operating as a swap dealer
requires compliance with CFTC regulatory requirements,
 
which may be burdensome, impose additional
compliance costs and could adversely affect
 
the profitability of this business, as well as exposing ING to the risk
of non-compliance with these regulations.
 
ING Capital Markets LLC is also expected to register
 
with the SEC as a security-based swap dealer pursuant to
Dodd-Frank and SEC regulations enacted thereunder effective
 
1 November 2021. SEC registration may increase
ING Capital Markets LLC’s operational
 
costs as a result of compliance, margin, capital and other requirements,
and result in a substantial portion or all of ING’s security-based
 
swap activities with U.S. persons being conducted
through ING Capital Markets LLC. These registration
 
and related requirements may also reduce trading
 
activity,
reduce market liquidity and increase volatility in the relevant
 
markets.
 
In addition, new position limits under Dodd-Frank applicable to the derivatives market generally
 
for uncleared
swaps referencing any of twenty
 
-five commodity futures contracts could limit ING’s
 
position sizes in these swaps
and similarly limit the ability of counterparties to utilize certain of our products to the extent
 
hedging exemptions
from the position limits are unavailable. Such regulation of the derivative
 
markets and market participants will
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. The
imposition of these regulatory restrictions and requirements, could also result in reduced
 
market liquidity,
 
which
could in turn increase market volatility and the risks and costs of hedging and other trading
 
activities.
 
Any of the foregoing factors, and any
 
further regulatory developments with respect to commodities and
derivatives, could have a material impact on our business, results and financial condition.
 
For further discussion of the impact of regulation of commodities and derivatives on ING, see “Item 4.
Information on the Company—Regulation and Supervision—Regulatory Developments
 
—Dodd-Frank Act and
other US Regulations.”
 
We are subject to 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 ‘Bank Recovery and Resolution Directive’ (‘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 SRM applies to banks that are supervised by the ECB under the SSM, with the aim
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
20
 
of ensuring an orderly resolution of failing banks at minimum costs for taxpayers
 
and the real economy. The
BRRD establishes a common framework for the recovery
 
and resolution for banks within the European Union,
with the aim of providing 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. In addition, 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 serious and immediate threat to
the stability of the financial system. Any application of statutory
 
write-down and conversion or other powers
would not be expected to constitute an event of default
 
under our securities entitling holders to seek repayment.
If any of these powers were to be exercised
 
in respect of ING, there could be a material adverse effect
 
on both
ING and on holders of ING 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 litigation, enforcement
 
proceedings and investigations and to
 
changes in tax
laws
 
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 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.
 
In addition, 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.
 
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
21
 
We may be subject to withholding tax
 
if we fail to comply with the Foreign Account Tax
Compliance Act (“FATCA”)
 
and other US withholding tax regulations
 
Due to the nature of its business, ING is subject to various provisions of US tax law.
 
These include FATCA,
 
which
requires ING to provide certain information
 
for the US Internal Revenue Service (“IRS”) and the Qualified
Intermediary (“QI”) requirements, which require withholding tax
 
on certain non US-source payments. 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 45 ‘Legal proceedings’ to the consolidated financial statements.
 
For further
discussion of FATCA
 
and QI requirements with respect to ING, see “Item 4. Information on the Company—
Regulation and Supervision—Regulatory Developments—Bank Recovery
 
and Resolution Directive.”
 
ING is exposed to the risk of claims from customers
 
who feel misled or treated unfairly because
of advice or information received.
 
Our products and services, including 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 and distribution 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 may 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 45 ‘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 and
report 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 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
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
22
 
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, which is a specific risk to ING as a result of its strategic focus
 
on
technology and innovation, 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. Also see above under the heading “–ING’s business,
results and financial condition have been, and likely will continue to be adversely
 
affected by the Covid-19
pandemic”. As set
 
out there, we expect to be affected by the Covid-19 pandemic through
 
its impact on, among
others, our employees. We also face physical
 
risks, including natural disasters as a direct result
 
of climate change,
such as extreme weather events or rising water levels,
 
which could have a material adverse effect
 
on our
operations, particularly where our headquarters may be impacted. For further description of the risks associated
herewith, see “–We may be exposed to business, operational,
 
regulatory,
 
reputational and other risks in
connection with climate change’ below. 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, which is a
specific risk to ING as a result of its strategic focus on technology and innovation. 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 particular,
 
ING is regularly subject to DDoS attacks, which are becoming increasingly
sophisticated. For example, in 2020 ING experienced DDoS attacks
 
in Turkey and Belgium. However,
 
to date ING
has not experienced a material loss of money or data due to cybercrime.
 
Cybersecurity, customer
 
data and data privacy have become the subject of increasing legislative and
 
regulatory
focus. The EU’s second Payment
 
Services Directive (‘PSD2’) 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 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
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
23
 
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 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 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 have an payment obligations to
 
ING, or obligations to return 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.
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
24
 
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 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. They
 
can also have lower risk
appetite for our debt notes, leading to lower purchases of (newly issued) debt notes. 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.
 
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
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
25
 
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 rating agencies
may take, or what actions we may
 
take in response to the actions of rating agencies.
 
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.
 
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.
 
For a description of the physical risks to our business resulting from natural
 
disasters as a result of 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 (binding) vote on ING’s
 
Executive
Board remuneration policy and Supervisory Board remuneration policy at
 
least every four years. Furthermore the
shareholders have an advisory vote on ING’s
 
remuneration report annually.
 
This may restrict our ability to offer
competitive compensation compared with companies (financial and/or non-financial) that are
 
not subject to such
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.
 
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 actual results and underlying actuarial assumptions and models.
 
ING Group companies operate various defined benefit retirement
 
plans covering the post-employment benefits
of a number of our employees. The liability recognised in our consolidated balance sheet in respect of our
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 and consumer price index. These assumptions are based on available
 
market data 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 and costs associated
 
with our defined benefit
plans.
 
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
26
 
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. As noted there,
 
regulation of the industries in
which we operates is becoming increasingly more extensive and complex,
 
while also attracting supervisory
scrutiny. Compliance failures
 
may lead to changes in the laws and regulations governing the risk management
practices and materially increase our operating costs.
 
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 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.
 
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
27
 
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.
 
We need liquidity to fund new and recurring business, 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. Also see under the heading “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”.
 
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 remain 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.
 
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
28
 
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 to its shareholders and to
 
fund all payments on its obligations,
including debt service obligations.
 
 
ING Groep N.V.’s
 
ability to obtain funds to meet its obligations depends on legal and regulatory restrictions
applicable to ING Groep N.V.’s
 
subsidiaries. Many of ING Groep N.V.’s
 
direct and indirect subsidiaries, including
certain subsidiaries of ING Bank N.V.,
 
may be subject to laws that restrict dividend payments, as well as
requirements with respect to capital and liquidity levels. For example,
 
certain local governments and regulators
have taken steps and may
 
take further steps to “ring fence” or impose minimum internal
 
total loss-absorbing
capacity on the local affiliates of a foreign financial institution in order to protect
 
clients and creditors of such
affiliates in the event of financial difficulties involving such affiliates
 
or the broader banking group. Increased
local regulation and supervision have therefore limited and may
 
in the future further limit the ability to move
capital and liquidity among affiliated entities and between ING Groep N.V.
 
and its direct and indirect subsidiaries,
limit the flexibility to structure intercompany and
 
external activities of ING as otherwise deemed most
operationally efficient, and increase in the overall level
 
of capital and liquidity required by ING on a consolidated
basis.
 
Lower earnings of a local entity may also reduce the ability of such local entity to make
 
dividends and
distributions to ING Groep N.V.
 
Other restrictions, such as restrictions on payments from subsidiaries or
limitations on the use of funds in client accounts, may also apply to distributions to ING Groep N.V.
 
from its
subsidiaries.
 
 
ING Groep N.V.
 
has also in the past and may in the future continue to guarantee the payment
 
obligations of
some of its subsidiaries, including ING Bank N.V.
 
Any such guarantees may require
 
ING Groep N.V.
 
to provide
substantial funds or assets to its subsidiaries or the creditors or counterparties
 
of these subsidiaries at a time
when the guaranteed subsidiary is in need of liquidity to fund their own obligations.
 
Finally, ING Groep N.V.,
 
as the resolution entity of ING, has an obligation to remove impediments to resolution
and to improve resolvability.
 
Regulatory authorities have required and may
 
continue to require ING to increase
capital or liquidity levels at the level of the resolution entity or at particular subsidiaries. This may result in,
among other things, the issuance of additional long-term debt issuance at the level of ING Groep N.V.
 
or
particular subsidiaries.
 
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 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
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
29
 
awards) in civil and commercial matters.
 
Therefore, a final judgment for the payment of money rendered
 
by any
federal or state court in the United
 
States based on civil liability,
 
whether or not predicated solely upon the U.S.
federal securities laws, would not be enforceable
 
in the Netherlands unless the underlying claim is re-litigated
before a Dutch court. However,
 
under current practice, the courts of the Netherlands may be expected to render
a judgment in accordance with the judgment of the relevant U.S. court, provided
 
that such judgment (i) is a final
judgment and has been rendered by a court which has established its jurisdiction on the basis of internationally
accepted grounds of jurisdictions, (ii) has not been rendered in violation of elementary principles of fair trial, (iii)
is not contrary to the public policy of the Netherlands, and (iv) is not incompatible with (a) a prior judgment of a
Netherlands court rendered in a dispute between the same parties, or (b) a prior judgment of a foreign court
rendered in a dispute between the same parties, concerning the same subject matter and based on the same
cause of action, provided that such prior judgment is not capable of being recognized in the Netherlands. It is
uncertain whether this practice extends to default judgments
 
as well.
 
Based on the foregoing, there can be no assurance that U.S. investors
 
will be able to enforce against us or
members of our board of directors, officers or certain experts
 
named herein who are
 
residents of the
Netherlands or countries other than the United States any judgments obtained
 
in U.S. courts in civil and
commercial matters, including judgments under the U.S. federal
 
securities laws.
 
In addition, there is doubt as to whether a Dutch court would impose civil liability on us, the members of our
board of directors, our officers or certain experts
 
named herein in an original action predicated solely upon the
U.S. federal securities laws brought in a court
 
of competent jurisdiction in the Netherlands against us or such
members, officers or experts, respectively.
 
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
30
 
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:
 
ING Groep N.V.
Bijlmerdreef 106
1102 CT
 
Amsterdam
P.O.
 
Box 1800,
 
1000 BV Amsterdam
The Netherlands
Telephone +31 20 563 9111
 
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 Financial Holdings Corporation
 
1133 Avenue of the Americas
 
New York, NY 10036
United States of America
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 46 ‘Consolidated
companies and businesses acquired and divested’.
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
31
 
Our strategy
ING’s Think Forward
 
strategy is as relevant
 
as ever.
 
With our data-driven digital
and mobile-first approach we’re
 
continuing to empower people to stay
 
a step
ahead in life and in business – also at a time of social and economic disruption.
The global coronavirus pandemic has illustrated
 
just how digital society has
become, reinforcing trends
 
like the shift to mobile banking and contactless
payments.
 
Delivering on our strategy is about living up to our customer promise to be clear and easy,
 
anytime, anywhere,
empowering and keep getting better
 
.
 
Digitalisation remains central to this and we’re adapting
 
our processes and
service models to make banking even safer,
 
more personal, easier and smarter.
 
Combined with mastering data,
it’s how we can stand out as a bank that truly knows its customers
 
and anticipates their evolving needs, finding
innovative ways to add value
 
,
 
both within and beyond banking.
 
 
We’re doing all of this while striving to live up to the highest
 
possible standards of integrity.
 
Being a safe, secure
and compliant bank remains a top priority for ING. Our Orange Code of values and behaviours
 
places integrity
above all else.
 
Factors influencing our business in 2020
The spread of Covid-19, and the global measures to contain it, affected
 
ING in a number of ways in 2020,
impacting our customers, our employees and our communities. However,
 
it was not the only factor influencing
our business. The negative interest rate
 
environment in the eurozone and low interest
 
rates elsewhere, have
posed a significant challenge to banks’ business models since 2016, eroding margins on customer deposits and
putting pressure on net interest income. Until 2020, we
 
were able to counter the effects of this mainly through
profitable lending growth and a presence in non-eurozone countries.
 
However,
 
the pandemic made these levers less effective in 2020, resulting in a decrease of net interest
 
income,
as loan demand weakened in a number of markets due to strong
 
direct government support, while the inflow of
customer deposits accelerated and interest
 
rates in non-eurozone countries significantly
 
reduced. In response to
the pressure on net interest income we introduced
 
negative interest rates
 
on deposits for retail customers in
some markets and amplified our focus on income diversification through
 
fee income growth, particularly in retail
investment products.
 
That said, the impact of the global pandemic is still reverberating through societies worldwide. The second wave
that surged through Europe and the US in the autumn continued to pile pressure on consumers,
 
businesses,
communities and economies. It has fundamentally changed the way people work, travel,
 
shop and socialise and
the expected economic consequences will be felt for some time yet. We
 
are considering various post-coronavirus
scenarios focused on the next two to five years that take
 
account of the severity of the economic downturn and
level of global cooperation in the recovery period.
 
Universal digital bank
The coronavirus crisis has accelerated the urgency of implementing end-to-end digitalisation,
 
both to meet the
growing demand for mobile banking and to enhance operational excellence. Operational
 
excellence in particular
helps to ensure that our customers are able to do their daily banking without disruption, even during global
lockdowns, and makes it possible for employees to
 
work safely and securely from home.
 
 
Now we’re taking steps to deliver
 
on our strategic priorities, not least to keep
 
pace with society’s accelerated
adoption of digital resources during the coronavirus. We’ve
 
been working on transforming our organisation to
become a mobile-first digital platform, offering
 
all of our 39.3 million customers a harmonised customer
experience everywhere. But there’s
 
still work to do to become the leading data-driven digital bank we aspire to
be.
 
 
Building on what we’ve learnt and achieved over the past five years,
 
we took steps in 2020 to further consolidate
our business and reinforce alignment. This includes uniting all our Retail operations
 
– including the Business
Banking segment serving small and medium-sized businesses and mid-corporate clients – under one global
management team with one consistent unified approach.
 
Their focus will be on operational excellence through
increased digitalisation,
 
using our technology foundation globally – this includes shared data lakes, cloud and
modular IT building blocks – and rolling out global digital product offerings.
 
 
At the same time, the challenging external environment reconfirm
 
s
 
the importance of scrutinising costs and
looking for new ways to grow our fee
 
income and diversify our revenues in areas beyond traditional banking.
 
 
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
32
 
We need to be flexible in dealing with these challenges, and with changing customer behaviour,
 
continually
weigh up benefits versus costs, apply our learnings and focus our activities. For Wholesale Banking this means
deepening our relationship with our core clients, reducing our geographic footprint
 
in Asia and closing our offices
in South America. In Retail Banking it means stopping the Maggie transformation programme
 
(to standardise the
customer experience and product offering in four
 
Challengers Markets) and instead focusing on using and reusing
existing apps and modular components to drive scaling and speed of delivery.
 
 
Recognising the need to move even faster if we
 
want to stay a step ahead of the changes and evolutions
 
in the
world, we announced in 2020 that we are combining all our innovation activities into a dedicated
 
business area
called ING Neo. This will help sharpen our focus and create more impact, ultimately deepening our relationships
with our customers as their primary bank for financial and other needs.
 
 
The introduction in 2020 of our first global tagline ‘do your thing’ moved the ING brand another step
 
closer to
looking, sounding and feeling the same everywhere. It articulates ING’s purpose. We
 
want to make banking
frictionless, removing barriers to progress and giving people confidence in their ability to move
 
forward.
 
 
Think Forward
ING’s purpose is empowering people to stay
 
a step ahead in life and in business. Our Think Forward strategy
promises customers we’ll make banking clear and easy,
 
anytime anywhere, empower them to make informed
financial decisions and keep getting better.
 
Where our purpose guides us, the strategic priorities set out in our
Think Forward strategy help us to focus
 
on the elements we need to be successful.
 
These strategic priorities are:
 
earning the primary relationship, mastering data, being innovative to serve
changing customer needs, and developing new services and business models beyond banking. We achieve this by
simplifying and standardising our products and processes, being operationally excellent,
 
enhancing our
performance culture and expanding our lending capabilities. These are the strategic
 
enablers for executing on
our strategy.
 
See the graphics in this chapter for more information about our strategic
 
priorities and enablers.
 
Platform approach
While many businesses struggled in 2020 to survive global lockdowns, many Big Tech
 
companies thrived on
society’s growing reliance on technology and the online economy.
 
ING’s competitive landscape is also
increasingly shaped by these companies, which offer an engaging digital experience on an open platform
 
that
meets a range of needs in one go-to digital ecosystem.
 
 
We believe platform providers
 
are all about customer experience. They use data to pinpoint what customers
need and partner with third parties to ensure there is always a fitting product
 
or service to meet this. Platforms
are empowering. To
 
remain relevant, ING has to be where our (future)
 
customers are, on the platforms they’re
on, while maintaining the highest possible standard of integrity.
 
In an age of disruption and changing customer expectations we have to keep
 
adapting our banking services to
become clearer,
 
easier and more accessible while empowering our growing global customer base to stay
 
a step
ahead in life and in business. Open banking creates opportunities for ING to
 
add value for customers by connecting to the products
 
and services of others, both within and beyond banking.
 
When it comes to platforms, we are developing our own solutions. We’re
 
building digital channels on top of our
technology platform,
 
like ING’s mobile OneApp, which is used by customers
 
in the Netherlands, Belgium and
Germany. We’re
 
investing in independent initiatives such as Spanish finance app Fintonic, and we’re
 
connecting
to third-party platforms offering relevant
 
products and services. Among these are initiatives that have evolved
into stand-alone platforms such as smart money app Yolt
 
and corporate multibank platform Cobase.
 
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
33
 
Touchpoint platform
 
Supporting our ambition to be the leading data-driven digital bank, we’re using a modular technology foundation
to create business-wide propositions that are globally scalable. This includes an open technology platform
 
called
Touchpoint. The Touchpoint
 
platform provides ready-made solutions, modular components and reusable
services the business and IT can use to build and run scalable business services and global value propositions.
They can also distribute these to a large third-party ecosystem.
 
In this way we can share innovations,
 
use and re-
use standardised components, and bring new products to customers
 
faster and in more countries.
 
 
Through the Touchpoint
 
platform,
 
new and existing ING business initiatives have access to 25.2 million customers
(around 65 percent of our customer base) in an internal and third-party ecosystem.
 
It is enabling scalable
business solutions that aim to harmonise the customer experience. And it connects ING to third parties through
common architecture and shared application programming
 
interfaces (APIs). The Amazon partnership was made
possible by using Touchpoint
 
to integrate fintech Lendico’s
 
lending platform for small and medium-sized
businesses with ING in Germany.
 
 
ing20f2020p34i0.gif ing20f2020p34i1.gif ing20f2020p34i2.gif ing20f2020p34i3.gif
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
34
 
Strategic priorities
Earning the
primary
relationship
By this we mean increasing the number of customers who have multiple ING products (including a current
account into which a recurring income, such as a salary,
 
is paid) or Wholesale Banking clients with anchor
products such as lending and transaction services. It’s closely linked to customer experience
 
and satisfaction:
the more satisfied customers are, the more likely
 
they’ll choose ING for additional products and services. Over
the past five years we’ve consistently
 
increased the number of primary customers.
Material topics:
 
financial performance, usability
and accessibility of our products
Using our
advanced data
capabilities to
understand our
customers
better
Having the right data at our fingertips will enable us to achieve many
 
of our strategic priorities. We use data
 
to
personalise our customer interactions and gain insights to deliver
 
a differentiating experience. It also helps us
make sound business decisions and drives innovation. At the same time, we want
 
to protect people’s data
 
and
their privacy and are committed to handling data safely
 
and being open about how we use it.
Material topics:
 
customer privacy,
 
culture, ethics
and integrity, digitalisation
 
and interconnectivity,
cyber resilience
Increase the pace
of innovation to
serve changing
customer needs
New technologies enable new ways to do things and disrupt the status quo. To
 
stay relevant it’s
 
essential that
we evolve too. This means coming up with disruptive products, services and experiences that support our
strategic ambitions and keep ING a step ahead.
Material topics:
 
innovation, usability and
accessibility of our products, digitalisation and
interconnectivity
Thinking beyond
traditional banking
to develop new
services and business
models
Persistent low/negative
 
interest rates offer
 
savers little incentive, challenging our traditional business model.
Digital platforms are an opportunity to become relevant
 
to customers by providing new products and services,
also in areas beyond banking, which offer new revenue streams for
 
ING and provide a better customer
experience.
Material topics:
 
innovation, digitalisation and
interconnectivity,
 
customer privacy,
 
culture, ethics
and integrity
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
35
 
Mastering data
Data is the lifeblood of organisations like
 
ING. We use data to personalise our customer interactions
 
and gain
insights to deliver a differentiating experience. It helps us make
 
better business decisions, while being mindful of
using our data responsibly and in line with people’s expectations
 
.
 
We rely on data-driven models to manage our
capital and risk-weighted assets and improve
 
risk management. Data on customers
 
and their transactions is also
essential in the fight against money laundering and other financial economic crime. Not least, data drives
innovation. It is the main ingredient for artificial intelligence and robotics
 
solutions.
 
However,
 
to make data meaningful it needs to be sorted, harmonised and put into context.
 
The accuracy of our
models relies heavily on the quality of the data that’s used to develop them. It’s
 
essential to have one common
approach for using and storing data. ING’s
 
data management strategy includes standardised
 
data definitions (ING
Esperanto) and data models (Esperanto Warehouse
 
Model), which contribute to the availability,
 
quality,
integrity, usability,
 
control and governance of our data.
 
Ethics and privacy
We acknowledge the need to protect people’s
 
privacy and are committed to handling our data safely
 
and being
honest about how it’s used. This means we inform our customers
 
and employees about how we use their data
and respect their privacy when processing it.
 
Analytics and building our data capabilities
Becoming a truly data-driven organisation requires stepping
 
up our analytics capabilities. This means promoting
data fluency among our employees and strengthening our analytics delivery.
 
ING’s Analytics Unit is responsible
for coordinating these activities globally and aligning them with our business strategy,
 
as well as building one
analytics and data community. To
 
enhance our data science capabilities – which we have identified as one of the
‘Big 6’ capabilities ING needs to succeed –
 
we have an Analytics Academy,
 
we’ve added an analytics track to our
International Talent
 
Programme for graduates, and we
 
collaborate with academic institutions like Dutch
 
Delft
University of Technology
 
(TU Delft) on artificial intelligence research.
 
 
Our analytics delivery is focused on solutions in nine areas: customer interactions, customer dialogue, risk and
pricing, financial crime and regulatory technology (Regtech), intelligent
 
operations, innovation and beyond
banking, people and finance, and Wholesale Banking. In 2020, we further accelerated our advanced analytics
capabilities and delivered solutions to different domains.
 
For example, in the Regtech space, we’re
 
using analytics solutions to identify potentially risky shell companies in
corresponding networks. In the retail domain, we developed and implemented
 
machine learning interest rate
optimisation models for better-priced mortgages in Germany,
 
Italy and the Netherlands. In risk management we
built more topic detection models for the early warning signals (EWS) monitoring tool, which should ultimately
help reduce risk costs. We’re also using analytics to develop acceptance
 
models for consumer and business
lending in Austria,
 
Belgium, the Netherlands and Spain, which help lower risk costs and increase acceptance
rates. New collections models for the Netherlands and Italy help us identify clients in financial difficulty and that
need our support at an early stage.
 
In addition, we stepped up our experiments and experience with chatbots and are creat
 
ing value and scale. The
benefits for customers include 24/7 contact, fewer
 
human errors and a simpler user experience. In the
Philippines, we launched a virtual assistant that directs
 
customers to their needed answers. Similar initiatives
have been or will be rolled out to other countries. In Germany,
 
ING’s virtual assistant ING answered
 
7.3 million
customer questions in 2020, recognising 94 percent of queries on current accounts
 
(the best chatbot out of 22
tested in various industry sectors),
 
while our Turkish chatbot INGo not only answered customers
 
questions, but
also approved 547.6 million lira worth of personal loans (89 million lira in 2019).
 
 
 
ing20f2020p36i0.jpg
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
36
 
Innovating to stay a step ahead
Innovation at ING is about creating a differentiating
 
experience for customers. As such, it’s at
 
the heart of our
Think Forward strategy.
 
We rely on innovation to remain relevant
 
to our customers and live up to our purpose.
Developing truly disruptive products, services and experiences is also a prerequisite for realising our
 
platform
ambitions and moving beyond banking.
 
So far,
 
our innovation focus has allowed us to turn great ideas into products
 
and services that customers really
need. Smart money app Yolt now has more than 1.6
 
million registered users.
 
Blockchain solutions in trade
finance are helping to make trades faster
 
and simpler, for
 
example by reducing the processing time for letters
 
of
credit from around 10 days to under 24 hours.
 
When the coronavirus crisis first hit, our focus shifted towards adjusting
 
our operations to accommodate the
new, more
 
digital environment. Radical innovation moved
 
down the priority list and certain projects were
shelved: for example,
 
an initiative to digitalise aircraft financing. Other initiatives benefitted
 
from the growing
demand for digital solutions, such as the trade finance tools of our co-owned blockchain-based software
company Komgo.
 
With the creation of ING Neo we’re aiming to increase the speed and impact of our innovation by bringing
together initiatives in Wholesale Banking, Retail Banking (platforms and beyond banking activities), the Chief
Innovation Office and our venture capital vehicle, ING Ventures.
 
 
ING was recognised by Global Finance magazine as the most innovative bank in Western
 
Europe at its Innovators
2020 awards. Our home-grown innovations in cash management
 
(Zero Knowledge Proof Notary on Corda), the
corporate finance category (CoorpID) and payments
 
(FINN Banking of Things) also won individual awards.
 
 
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
37
 
How we innovate
Innovative ideas come from inside and outside ING. All our employees are encouraged
 
to think creatively and
come up with ways of doing things faster,
 
better and more efficiently.
 
We stimulate their ideas through our bank-
wide
Innovation Bootcamp
 
and local innovation ambassadors. For Innovation Bootcamp
 
2020, we received 444
ideas in four areas: how to disrupt lending before others do; empowering
 
customers to strengthen their financial
health; delivering a unique digital customer experience; and creating a world-class employee experience.
 
The
winning idea was ImpactING, which aims to make it easy for customers
 
to have a positive impact on the planet
via a sustainable bank account that allows them to contribute to
 
a good cause with every transaction.
 
In November,
 
we hosted the first Innovation Summit for all employees.
 
The three-day digital event explored
ING’s impact on the lives of customers
 
and employees, shed light on global digital trends and showcased our
latest innovations. It was streamed to
 
over 30 ING countries and reached approximately 1,500 unique users.
 
ING’s customised innovation
 
methodology, PACE
 
,
 
combines lean start-up, design thinking and agile scrum. Its key
feature is customer validation. This ensures we
 
develop only what customers really want. More
 
than 10,000
employees have been trained in PACE
 
to date.
 
 
In 2020, the
ING Innovation Fund
 
allocated €25 million to accelerate innovation across
 
the bank. Funding is
available to any employee who wants to
 
turn a breakthrough idea into reality.
 
External collaboration
Nobody knows what the future looks like or the technologies that may emerge
 
.
 
We recognise we
 
don’t have all the skills and knowledge in-house and we’re open to investing,
 
partnering and building with others.
 
 
ING Ventures
 
is our €300 million fund investing in early-stage companies. It targets
 
disruptive technologies that
ensures customers and clients get access to best-in-class services. It also helps entrepreneurs
 
with hands-on
support, know-how and access to ING’s distribution network.
 
We currently have 34 investments,
 
including
WeLab (automated consumer loans in China and Hong Kong), Fintonic (Spanish finance app), Cobase (multi-
banking platform for corporate
 
clients), Ascent (regulatory compliance platform) and Axyon (AI-powered
 
asset
manager).
 
ING partners with those who look at banking from a different perspective.
 
Companies like Scalable Capital in
Germany, a robo-advisor,
 
which attracted a billion euros in assets under management in its first
 
2.5 years. Or
Eigen, a natural language processing fintech that offers
 
ING a strategic capability in the intelligent operations
domain. Deployed in use cases across retail and wholesale banking, Eigen is contributing to ING’s
 
digital
transformation, creating tangible value
 
for customers and employees by applying machine learning in areas such
as corporate lending and SME banking.
 
 
Currently, ING has more
 
than 200 partnerships.
 
Not all our collaborations lead to new products or services,
however,
 
and we’ve ended over 110 so far,
 
mostly after unsuccessful or unsatisfactory proofs of concept
 
.
 
 
In November 2020, in light of the impact of Covid-19 on the economy,
 
which required us to reprioritise and
reassess our programmes, we decided to stop our activities for
Cumulus Park Studios
. Part of the Cumulus Park
innovation district in Amsterdam,
 
where several ING buildings are located, Cumulus Park Studios is a
collaborative initiative with local government
 
and educational institutions to drive innovation and co-creation
around the themes of urbanisation and digital identity.
 
We remain committed to further developing
 
the
innovation district and will continue to collaborate
 
with our district partners on a lower ambition level.
 
ING Labs
 
is our incubator for potential scale-ups. Here we work with external
 
experts, combining corporate
innovation and entrepreneurial experience. We
 
believe this contributes to a higher success rate and greater
impact than either could achieve alone. We have four Labs worldwide,
 
each with its own specific value space that
matches local expertise and ecosystems.
 
These are trade (Singapore), property,
 
real estate and regulatory
processes (London), creating minimum viable companies that are ready to scale (Amsterdam)
 
and proofs
 
of
concept with fintechs to bring new tech solutions to market faster
 
(Brussels, formerly Fintech Village).
 
 
 
ing20f2020p38i0.gif ing20f2020p38i1.gif ing20f2020p38i2.gif ing20f2020p38i3.gif
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
38
 
Strategic enablers
Simplify and streamline
Standardised products, systems and processes, shared
 
services, one IT infrastructure and one Way of Working
 
lay the
foundation for the superior digital experience we strive
 
to deliver.
 
We believe this allows us to respond more quickly to
changing customer needs and low-cost competitors by becoming
 
more cost-effective, cost
 
-efficient and agile, and by
bringing new products and services to market faster.
Material topics:
 
usability and accessibility of our products
Operational excellence
ING promises customers we’ll keep getting
 
better.
 
This includes accelerating the digitalisation of end-to-end processes for a
frictionless customer experience and greater efficiency.
 
It’s also about ensuring safe and secure operations, stable
 
IT
systems and platforms and the highest standards
 
of data security.
Material topics:
 
IT systems and platforms, cyber resilience
Performance culture
Delivering a differentiating customer experience
 
requires engaged employees who are motivated
 
to go the extra mile.
That’s why we strive to create
 
a great employee experience and develop great leaders who can enhance performance
 
and
inspire our people to deliver on our strategy.
 
Diversity and inclusion contribute to this – people perform better
 
when they
are free to be themselves. ING does not tolerate discrimination in any
 
form. We are guided in everything we do by the
values and behaviours in our Orange Code and global Code of Conduct.
Material topics:
 
culture,
 
ethics and integrity
Lending capabilities
We are seeking opportunities to broaden and diversify our retail
 
lending capabilities in the Business Banking and consumer
lending segments. In Wholesale Banking we continue to build on our lending capabilities in our markets,
 
combined with our
sector lending franchises and product capabilities, to build primary relationships to be able to diversity
 
our income by
generating more fees. ING is considered a pioneer in sustainable
 
finance, having introduced the first sustainability-linked
loan and a made-to-measure sustainability improvement loan.
Material topics:
 
financial performance, climate resilience
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
39
 
Transformation
To deliver a differentiating
 
customer experience globally we are streamlining our products and processes,
enhancing operational excellence and harmonising our customer engagement
 
platforms, supported by a global
technology foundation.
 
This foundation includes shared data lakes, cloud solutions and modular IT building
blocks. It’s also about monitoring and executing regulatory
 
programmes globally that aim to ensure ING is a safe,
secure and compliant bank.
 
To accelerate
 
the execution of our Think Forward journey,
 
we launched a series of transformation programmes in
2016 to unite similar businesses and bring us closer to one mobile-first digital platform offering
 
one ING
experience everywhere. These included:
 
Unite be+nl
 
to combine the respective strengths of the Netherlands and Belgium.
 
Maggie
 
(formerly Model Bank) to standardise the customer experience and product
 
offering in four
Challengers markets - Czech Republic,
 
France, Italy and Spain.
 
 
Welcome
 
to digitalise ING in Germany,
 
which was completed in 2019.
 
WTOM
 
to optimise,
 
digitalise and standardise our Wholesale Banking offering in all countries.
 
 
Unite be+nl involved,
 
among other things, the large-scale integration of 600,000 Record
 
Bank customers in
Belgium in 2018, and the replacement of many existing IT systems
 
with one digital platform. Integrating the back-
end systems turned out to be more complicated.
 
Yet despite the challenges and adjustments
 
to the programme
in response to changing circumstances,
 
all our Belgian retail customers now use the same internet banking
environment as the Netherlands (OneWeb) and 90 percent have
 
migrated to the mobile OneApp used in the
Netherlands and Germany. Unite be+nl runs until 1H
 
2021.
 
Given the coronavirus-related economic headwinds and our learnings from the
 
complexities and costs of cross-
border systems and product integration,
 
we decided to refocus our activities in 2020 to ensure faster
 
customer
delivery and a continuously improving end-to-end digital customer experience.
 
 
This underpinned our decision in 2020 to stop Maggie as a programme.
 
Launched in 2016 to integrate our
product offering and provide a standardised
 
easy, personal
 
and smart digital experience for customers in four
Challengers markets, Maggie delivered various customer
 
experience building blocks and sales and services
journeys.
 
To further develop
 
our universal digital bank, we’ll focus instead on using our global technology foundation,
reusing already developed mobile app components,
 
and rolling out global digital product offerings in the areas of
insurance, investments and consumer lending. When identifying areas to build cross-border
 
capabilities we’ll
weigh up impact versus complexity,
 
always with the aim of increasing scalability and delivery speed. In this way
we only need to develop once for multiple countries and can create a sustainable
 
competitive advantage,
accelerating customer engagement and business impact. Updating legacy
 
IT systems with new technology
standards and global solutions will also contribute to greater
 
efficiency as we move towards becoming a global
digital bank.
 
The creation in 2020 of one global retail management team was the next step
 
in our journey to unify and
harmonise our retail approach in all our markets. This will further reinforce
 
alignment, improve prioritisation and
drive a consistent retail strategy
 
that aims to accelerate digitalisation,
 
use our global technology foundation to
enhance operational efficiency and excellence, and roll out global digital
 
product offerings in areas such as
insurance, investment and consumer lending.
 
The Wholesale Target
 
Operating Model (WTOM) programme has come to
 
a natural conclusion as it achieved
cost, risk and income benefits for the Wholesale Banking franchise globally,
 
the result of extensive work over the
last years to replace legacy systems,
 
applications with target solutions, and create a range
 
of shared operational
services. We have now decided to end WTOM and commence with digitalisation-orientated
 
programmes in our
Transaction Services, Lending and Financial Markets
 
businesses.
 
Laying the foundation
Building a universal digital bank requires a strong foundation
 
that’s the same everywhere: the
 
same approach to data, the same processes, same systems
 
and infrastructure and the same way
 
of working.
 
 
At the heart of this is our IT strategy.
 
ING is building a technology platform to facilitate our journey from a
traditional bank to a data-driven digital bank. It is designed to create
 
speed, scale and security as well as cost
efficiency through programmes like
 
ING Private Cloud, Touchpoint,
 
the data lake foundation and OnePipeline.
This last programme supports the engineering journey from idea to working code that underlies our digital
services and can easily be reused by other engineers worldwide. We continuously adjust and improve
 
IT projects
and programmes based on new insights, lessons learnt and the impact of developments such as the coronavirus.
For example, at the start of the outbreak we had
 
to increase our network capacity by 365 percent to facilitate
 
the
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
40
 
large numbers of users connecting
 
from home: daily remote connections have grown by 285 percent
 
since
March.
 
We changed the top structure of the Tech
 
organisation in January 2021, to better align with ING’s
 
digital and
data-driven ambitions. This has brought all the assets belonging to the banking technology platform under one
senior management line, helping to further the consumption and delivery of the features of the banking
technology platform and improve impact.
 
 
Related to this, the
ING Private Cloud
 
(IPC) is the target platform standardising our IT infrastructure.
 
It’s where
we store and process data and IT services such as our mobile phone apps to give customers
 
a consistent
experience in a secure and reliable way.
 
Unlike traditional infrastructure,
 
cloud computing enables pay-as-you-go
usage, elasticity and full management by the user.
 
To keep
 
up with global usage, scalability, availability
 
and
delivery speed, ING is adding public cloud computing to our infrastructure offering. By end-2020, IPC was
 
used in
15 countries.
 
Around a quarter of global infrastructure now runs on IPC, up from 15 percent
 
at the end of 2019.
 
 
Data lakes
 
serve as digital repositories for all the internal and external data
 
we collect, making it easier to share it
across the company.
 
Having one ‘home’ for data is in line with our strategy of simplifying our banking systems.
Aggregating our data allows us to exchange
 
information and knowledge with each other more easily.
 
To enable
this data exchange we’ve created
 
a universal data language called
ING Esperanto
. Translating local data
 
of all ING
entities is a significant challenge as it requires both subject matter expertise of local businesses and regulations
and knowledge of ING Esperanto to be able to create and benefit from
 
aggregated data in a governed way.
 
 
ING Business Shared Services BV (IBSS) is a fully-owned service company employing around 10 percent of ING
colleagues globally. Its
shared service centres
 
in Bratislava, Manila, Katowice,
 
Warsaw and Bucharest contribute
to ING’s digital transformation
 
and cross-border scalability by centralising operational and IT support tasks
 
in
areas such as global data management, Tech
 
services, non-financial risk and compliance, KYC, data analytics and
modelling.
 
Recognising the need for a strong engineering culture to achieve
 
our Think Forward ambitions, we strive to
develop and grow a global workforce of highly skilled engineers. We
 
run global performance days, where we
assess and calibrate engineers based on one engineering profile.
 
The ING Tech Academy
 
keeps engineers
updated on the latest technology.
 
We are pursuing initiatives to improve
 
diversity in our teams.
 
These include
the ING Women in Engineering days and the Sparks community at ING in Australia
 
,
 
which aims to inspire and
empower women in technology.
 
 
ING’s one Way
 
of Working (WoW) is based on agile, purpose-driven teams and allows us to
 
respond quickly to
changing customer demands and feedback. We’ve implemented
 
ING’s WoW
 
in all retail countries as well as in
Wholesale Banking and in many of our business support activities. Uniting so many different cultures requires
 
a
behavioural shift, guided by our Orange Code, and is supported by WoW ambassadors,
 
bootcamps and training
programmes. The coronavirus pandemic has made it necessary to adapt to new ways
 
of working and
collaborating remotely.
 
Government measures to curb the spread of Covid-19 in ING countries required us to
 
adapt quickly to extended
remote working. This accelerated certain IT programmes,
 
such as the roll-out of cloud-based tools, enabling
online collaboration and meetings. Remote working brings certain increased
 
operational risks with respect to
information security,
 
data protection, the availability of key
 
systems and infrastructure
 
integrity. In 2020, ING
continued to focus strongly on managing exposure to
 
these risks and took steps to increase the efficiency and
effectiveness of our IT infrastructure to
 
ensure the continuity of our business from outside the office.
 
 
We also have preventative
 
measures in place that continuously test our resilience against cyberattacks
 
and
attempts to gain unauthorised access to our systems.
 
These include a dedicated cybercrime expertise and
response team and ‘ethical’ hackers.
 
When and how our employees return to the office remains hard to predict and largely
 
depends on the situation
in each country. When it is safe
 
to do so, there are rotation schemes to allow a controlled
 
return to the office.
We will also pilot global principles that will guide our future way of working in the post-coronavirus
 
world. These
are based on feedback from employees and aim to balance the advantages
 
of working from home and working
from the office. We’re taking
 
a step-by-step approach that
 
provides a degree of flexibility for local
implementation and respects local labour laws.
 
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
41
 
B. Business overview
Market trends like
 
the shift to mobile and online banking confirm ING’s mobile-
first digital approach. Building on this, we adapted our processes
 
and service
models to make banking safer,
 
easier and always accessible to customers
 
in a
time of social distancing,
 
and put measures in place to help them deal with the
impact of the coronavirus pandemic on their finances.
 
These included contactless payments, more flexibility on loan and mortgage
 
repayments, financial advice and
partnering with business clients big and small to support them in the most appropriate way.
 
We also strived to
provide uninterrupted access to our banking services.
 
In 2020, weighted system availability
 
for Retail Banking
customers in the Netherlands and Belgium was 99.6 percent and for Wholesale Banking clients worldwide system
availability was 99.9 percent.
 
Reduced economic activity during the year meant demand for consumer and business loans was lower in a
number of markets, and the ongoing low/negative interest
 
rate environment pushed our net interest
 
income
down. Yet our results remained
 
resilient throughout the year.
 
Demand for mortgages remained healthy and we
were able to grow our fee income as considerably more
 
customers chose ING’s accessible digital
 
retail
investment products. We ended the year
 
with improving cost control and a strong capital
 
position, contributing
to a full-year result before tax
 
of €3,399 million in accordance with IFRS-IASB.
 
Recognising the growing demand for digital and platform services, we took
 
steps in 2020 to increase the pace of
end-to-end digitalisation across our business and make our products and processes
 
even easier,
 
smarter and
more efficient, from onboarding new customers
 
to instant payments.
 
 
At the same time, to provide our 39.3 million customers with a differentiating
 
and engaging experience
everywhere and to move closer to becoming a universal data-driven digital
 
leader, we aligned our Retail
organisation under one management team with shared global priorities aimed at harmonising customer
engagement and selected products on cross-border platforms.
 
We also centralised innovation,
 
introduced ‘do your thing’ - ING’s
 
first global tagline – and harmonised our
activities for small and medium enterprises (SMEs) and mid-corporate clients in seven countries
 
in a new
Business Banking segment.
 
In Wholesale Banking we deepened our focus on core clients, supported by steps to build differentiating
 
value
propositions to meet their needs. This also supports our strategy to diversify income by generating
 
more fee-
based business. We continued to focus on digitalising our processes and st
 
reamlining our organisation to deliver
faster and better to clients. As part of the focus
 
on core clients, we announced measures to simplify our
geographical footprint, withdrawing from
 
South America and selected Asia markets while continuing to serve the
needs of clients in those markets from our regional hubs.
 
 
Our markets
 
ING serves over 39.3 million individual customers as well as small and medium-sized businesses up to
multinational corporations and financial institutions.
 
 
Our Retail Banking business line offers private
 
individuals a full range of products and services covering
payments, savings, insurance, investments
 
and secured and unsecured lending. This segment also includes self-
employed entrepreneurs, micro businesses, small-to-medium enterprises
 
(SMEs) and mid-corporate companies
who are served by our Business Banking proposition in several European countries. These business customers
earn revenues of up to €250 million and our goal is to help them manage and accelerate their business.
Wholesale Banking offers corporate clients
 
advisory value propositions such as specialised lending, tailored
corporate finance, green structuring and debt and equity-market
 
solutions. It also serves their daily banking
needs with payments and cash management, trade and treasury services.
 
ing20f2020p42i0.gif ing20f2020p42i1.gif ing20f2020p42i2.gif
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
42
 
Our markets
Market Leaders
Netherlands, Belgium, Luxembourg
 
 
Leading retail and wholesale banks
 
Cross-border customer interaction platform
 
with mobile-first customer
experience and cost efficiency
Challengers
Australia, Austria, Czech Republic, France,
 
Germany, Italy,
 
Spain
 
Digital bank with uniform, mobile-first customer experience
 
Broadening product capabilities
Growth Markets
Poland, Romania, Turkey,
 
the Philippines and our stakes in Asia
 
Universal banks in economies with high growth potential
 
Developing differentiating customer experience
 
based on
 
mobile-first approach
Wholesale Banking
International network and global franchises
 
Active in more than 40 countries
 
Extensive international client base across all regions
 
Sector-focused client business in lending, capital structuring and advisory,
transaction services and financial markets.
We offer:
 
Payments, savings, insurance, investments
 
and lending products and
services to individuals, SMEs and mid-corporate clients
 
Daily banking and strategic finance and advisory propositions to corporate
clients
Our customers
 
39.3 million
(year-end 2020)
 
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
43
 
Supporting customers in crisis
The Covid-19 crisis impacted our customers in many ways. Across
 
our business we took action to help them
navigate the economic headwinds and stay in control
 
of their finances during this turbulent time. ING’s support
began with the basics: aiming to provide
 
uninterrupted access to our mobile and digital channels when
customers need them most and making their lives easier with digital tools such as contactless payments.
 
 
To ensure
 
the continuity of services our Wholesale Banking clients rely on, certain business-critical operations
such as Financial Markets, Treasury,
 
and Payments, were split across different
 
locations during
 
global lockdowns.
 
 
In the Netherlands, 85 percent of all card payments in 2020 were contactless
 
via plastic cards and third-party
services like Apple Pay,
 
as well as our own Android solution in the banking app, which is now also available in
Australia, Poland, Romania, Germany,
 
France, the UK (via Yolt), Italy
 
and Spain. Driven by accelerating digital
behaviour of our customers, the use of mobile payments increased rapidly
 
against a backdrop of lockdowns and
other Covid-19 measures, both as a share of total card payments and total
 
contactless payments. Customers
appreciate not having to enter their pin code on a terminal.
 
 
In countries such as the Netherlands, Spain, Belgium, Germany and Turkey,
 
we increased the daily limit for
contactless payments so customers could use this option more
 
often and made it free to withdraw cash from
ATMs (in some countries this is already a free
 
service). Customers in Poland can use their mobile phones to make
contactless ATM
 
transactions. Also in Poland,
 
it’s now possible to open a new account from home using just a
mobile phone and an ID card.
 
 
New mortgage customers in Australia can
 
now validate their identity by video; video calls to advise customers on
investments and other matters replaced
 
face-to-face contact in Belgium and the Netherlands. For primary
customers in Australia, ING maintained a higher savings
 
interest rate even
 
when they did not reach the salary
deposit requirement.
 
 
In some countries, a limited number of branches remained open for customers
 
who wanted in-person advice. In
our branches we took precautions to ensure the safety
 
of customers and employees, such as installing plexiglass
screens, making hand sanitisers available, splitting teams and limiting visits to by appointment
 
only.
 
Payment holidays
 
Customers in all retail countries were offered
 
mortgage holidays and deferrals
 
on loans and credit card
repayments. We granted
 
196,000 customers payment holidays totalling
 
€19.4 billion since government measures
were introduced in various countries to protect
 
people impacted by job losses and loss of income during the
lockdowns.
 
Of these, 55 percent were for customers in the Netherlands and Belgium. By
 
the end of the year, 93%
of payment holidays had expired.
 
We also provided around €1.5 billion of government-guaranteed
 
facilities to
support our business clients.
 
In addition, ING worked closely with business clients to understand the direct impact on their individual
situations. Some industries, such as travel, hospitality and transport, were
 
more severely affected than others. In
the most heavily affected sectors governments
 
also stepped in to protect companies and jobs with measures
such as tax payment holidays and compensation schemes. Between March
 
and May we collected feedback from
over 18,000 businesses in six countries through regular pulse checks to gain insight into
 
their needs.
 
 
While it is impossible to predict how the pandemic will develop, additional lockdowns across Europe in the
autumn and the phasing out of related payment holiday schemes and other support measures could potentially
lead to more business insolvencies and unemployment. This could lead to more customers getting
 
into financial
difficulties and to higher levels of default.
 
 
More information on the impact of Covid-19 on ING as well on the related risk measures taken
 
to address it can
be found in the ‘Risk Management’ section.
 
Short-term liquidity
 
In times of crisis, companies need to be able to make swift decisions and want a financial partner they can trust
to be there for them. For many businesses, their most urgent
 
initial need was support with liquidity, particularly
when markets are as volatile
 
as today.
 
 
In Turkey,
 
ING worked with the World Bank and Turk
 
Eximbank on a €380 million loan to support exporters with
financing during the crisis.
 
 
In the Netherlands, we dedicated €1.1 billion for loans to SMEs. Part of these funds will be guaranteed
 
by the
European Investment Bank and €702 million of these loans will be sold against a favourable
 
interest rate.
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
44
 
 
ING proactively contacted Wholesale Banking and Business Banking clients to discuss ways
 
to ease the impact on
their businesses, which in some cases was significant. By monitoring the business landscape to better understand
which industries are most impacted we can tailor our support and solutions to specific industries and determine
who needs our help the most.
 
These tailored solutions included ways of easing their short-term liquidity needs with funding set apart for Covid-
19 facilities. ING’s capital
 
markets teams placed €39 billion of bonds via active bookrunner roles for corporates
and financial institutions and approved around 70 new liquidity facilities for top-segmented
 
clients. By converting
Covid-19 facilities into capital market mandates
 
we believe we helped clients secure longer term funding more
easily while lessening the risks for our bank by shifting exposure to the institutional market.
 
In May, ING collaborated
 
with French bond issuer Caisse Francaise de Financement Local (CAFFIL) on Europe’s
first Covid-19-related bond to raise financing for
 
French public hospitals.
 
Financial health
Managing money is one of the leading causes of stress for people around the world as many struggle to meet
their day-to-day needs or plan for their future. This was amplified during the Covid-19 pandemic. ING offered
budgeting and debt relief advice and guidance to customers in financial difficulty in partnership with
organisations like the Dutch ‘Geldfit’ website,
 
and financial counselling services in Australia and Romania.
 
 
Using our knowledge of innovation and digitalisation,
 
we put insights about people and money into products,
tools, research and education that help contribute to a financially healthy
 
society. We
 
believe that the right
information at the right time can help people make better
 
financial decisions. We are delivering that through
forecasting tools, such as ‘Kijk Vooruit’ which gives Dutch customers
 
an overview of upcoming payments. With
Everyday Roundup,
 
available in Australia, Poland and Romania, we
 
help customers save while they spend (see
‘differentiating
 
customer experience’
 
below). In Belgium, we’ve partnered with fintech Minna to manage
customer subscriptions (see ‘Platform thinking’ below).
 
As a result of our financial empowerment activities, 27.8 million people (71 percent of our customer base) felt
financially empowered by ING in 2020. In 2019, this was 25.9 million or 67 percent. Our ambition for 2022 is for
30.2 million customers to feel financially empowered by ING.
 
Achieving our business goals
We still have a lot to do to become the
 
leading data-driven digital bank we aspire to be, but we also have to
remain flexible in dealing with the impact of the coronavirus pandemic, changing customer behaviour,
persistently low/negative interest
 
rates and increasing regulation. That means continually weighing up benefits
versus costs, consistently using what we have
 
already developed, quickly applying learnings and best practices,
and taking decisions to focus our activities to ensure we deliver on our strategic
 
priorities.
 
These considerations informed the decision to reduce the geographical
 
footprint of our Wholesale Banking
business and to stop Maggie,
 
our transformation programme to
 
simplify and harmonise the product offering and
experience of retail customers in four Challengers
 
markets.
 
Instead,
 
as we develop our universal digital bank, we
will focus on the global use of ING’s technology foundation
 
to build scalable cross-border products and a
consistent end-to-end digital customer experience in all our markets.
 
 
Global priorities
The accelerated shift to mobile and online banking in 2020 increased the urgency of stepping up the end-to-end
digitalisation of our products and services. Linked to this is the need for good quality data to
 
drive the engaging
and personalised customer experience we are aiming for.
 
 
Building on what we’ve learnt and achieved over the past years, we
 
adapted our Retail organisation in 2020 to
increase alignment around key priorities that will contribute
 
to our ambition to become one global digital bank.
Led by the new global Retail Banking management team, we will focus on rolling
 
out global digital propositions
converging towards a common engagement
 
platform. And we are looking for new ways
 
to be relevant to our
customers and generate alternate
 
revenue sources.
 
 
Innovation is essential here. To
 
increase the impact of our innovation and speed up execution, ING has created a
new dedicated business area,
 
ING Neo, which combines all of our initiatives and activities in this area.
 
Of course, keeping our bank safe, secure and compliant
 
remains a priority for ING. Customers trust us to protect
their money and their data. That trust is our licence to operate.
 
 
 
ing20f2020p45i0.jpg
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
45
 
Unleashing sector potential
 
In 2020, we remained focused on providing our corporate clients
 
with relevant advice, data-driven insights and
customised, integrated solutions that make
 
their day-to-day banking more efficient and support their business
ambitions. This is in line with the revised Wholesale Banking strategy we introduced in 2018 to enable us to
adapt to and overcome a challenging and complex market
 
environment, as well as increased regulatory
requirements, evolving technology,
 
greater competition and our clients’ changing needs. Addressing these
challenges, amplified by the effects of Covid-19, required us to accelerate
 
our priorities and refocus our activities
to ensure we deliver to our customers faster
 
and continuously improve the end-to-end digital experience.
 
 
We further developed our sectors strategy
 
over the year,
 
pairing local and global insight with sector knowledge
and financial expertise,
 
and we enhanced our client segmentation model, which helps us tailor our daily banking
and advisory value propositions to clients specific needs. Based on similar considerations of aligning with our
core client base and deepening our relationship, we made the decision to withdraw from a number of countries
in South America and Asia. We’ll continue serving the international needs of our clients in these countries from
regional hubs. We will stay focused
 
on improving client service delivery and streamline our operating model by
clustering similar activities and know-how in existing centres of expertise.
 
Several deals in 2020 reflect this sector focus.
 
These included a €1.6 billion debt financing package for Swedish
sustainable battery producer Northvolt to finance Europe's
 
first home-grown gigafactory for
 
lithium-ion
batteries. ING co-led the lending consortium.
 
ING was also involved in the largest green loan to date
 
in Asia-
Pacific in the commercial and industrial (C&I) renewables sector,
 
a US$75 million loan to Singapore-based
Cleantech Solar.
 
We work with our Wholesale Banking clients to finance and facilitate
 
their transition to low-carbon technologies.
We’ve developed a comprehensive
 
suite of sustainability products and services to help them, including green
loans and green bonds.
 
In July, we announced that due to Brexit
 
we will move some Financial Markets activities from London to
Amsterdam.
 
Here we already have a relatively large
 
Financial Institutions/Financial Markets risk organisation,
which can be effectively used during and after the transfer
 
of the operations. The move does not impact our
clients or client coverage.
 
 
 
 
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
46
 
A differentiating customer experience
More and more people are discovering how easy and efficient it is to
 
do their banking online, with the number of
digital interactions growing to 5.3 billion in 2020 from 4.5 billion in 2019. Of these, 87 percent are
 
mobile
interactions, with a growing number of Retail customers
 
only interacting with ING via their mobile phone: 40
percent versus just 12 percent in 2016.
 
 
This digital connectivity yields data and insights that contribute to a more personalised
 
and empowering
experience, giving customers even more reasons to interact
 
with us. This is how we can become an essential part
of people’s digital lives.
 
To provide
 
customers
 
with an even more personal, easy and smart experience, we held our first
 
fully virtual
customer experience (CX) day in October 2020. More than 2,000 colleagues from Belgium and the Netherlands
attended. They made small changes that can have a big impact, resulting in 291 customer
 
experience
improvements.
 
Among the new mobile features introduced in 2020 is a single sign-on that allows customers
 
in the Netherlands
to seamlessly switch between their mobile app and online banking, and we made it easier for them to block,
unblock and replace their bank cards themselves. In Belgium, customers can use their bank app to manage
subscriptions via third party Minna and send payment requests through Payconiq.
 
And we extended ‘magician
mode’ to Germany,
 
which hides customers’ account information when they swipe their hand in front
 
of their
phone camera while using the app in public.
 
For visually impaired customers, ING is the first bank in the Netherlands to provide
 
a bank card with a notch in
the side so they can easily recognise it and insert it correctly into an ATM.
 
In the Philippines, ING’s newest mobile-only retail
 
market, the ING app has been installed more than two million
times since its launch in November 2018. The introduction in the Philippines of ING Pay in November 2020 led to
over 60,000 new daily accounts in its first month.
 
With customers looking for alternatives to savings
 
accounts in the low/negative interest
 
rate environment, we’re
empowering them with smart digital investment tools like
 
My Money Coach in Spain, Coach Epargne in France
and Easy Invest in the Netherlands. In 2020, our retail investment
 
products in Germany and Spain reached €56
billion and €12.3 billion in assets under management respectively.
 
In Germany, ING is the first
 
bank to offer
securities savings
 
plans that allow all customers to invest small amounts (from
 
€1) in shares, exchange traded
funds (ETFs) or mutual funds. With savings plans available for more than 1,800 securities, including more than
200 funds and ETFs without purchasing costs,
 
it’s a low-threshold entry into investing
 
.
 
 
ING’s Everyday
 
Roundup (ERU) product is helping to make saving simpler.
 
First introduced in Poland,
 
then in
Australia and Germany,
 
it is now also available in Romania. More countries will follow in 2021. By rounding
 
up
every transaction and transferring the difference
 
to the customer’s savings account, it makes
 
saving frictionless
at a time when customers may be financially vulnerable (due to the corona
 
virus crisis). ING in Germany launched
a 'donate to Unicef' option for rounding up and ING in Australia has a roundup
 
option for mortgages. The next
step will be investments.
 
There are 850,000 active ERU users,
 
of which almost half are in Poland and Australia,
while users in Germany rose to 156,000.
 
 
Our Yolt smart money app introduced a similar feature
 
in 2020 called Money Jar.
 
It too allows users to save while
they spend by rounding up purchases to the nearest pound or euro and offering cashback
 
from selected retailers.
The money jar feature also offers handy tips and reminders
 
for users to increase their savings. It's trained to
recognise and save refunds, salary raises and even bonuses.
 
Through ING’s bancassurance
 
partnership with AXA, customers can create their own personalised insurance
cover in a clear and easy way using their ING mobile app or the ING website.
 
For example, customers in Italy only
have to answer three
 
questions to get building and contents insurance compared to
 
60+ previously – something
they appreciate, rating the service with a 4.5 out of five for advice and satisfaction.
 
The bancassurance offering is
now available in five countries through 11 insurance products
 
delivering banking linked to lending and home/life
protection.
 
A further two propositions for mobility and wellness are being built to provide full lifestyle
 
protection
for customers through ING’s
 
five billion digital engagements.
 
 
In the Business Banking segment, we are digitalising our proposition for SMEs, micro businesses, mid-corporate
 
s
and self-employed customers using the Touchpoint
 
platform. This will enable us to standardise our offering for
over 1.5 million businesses in Belgium, Luxembourg, the Netherlands, Poland, Romania, Germany and Turkey,
avoiding duplication and unlocking synergies between the countries.
Our call-centre platform,
 
developed as part of the Unite be+nl programme, is providing a harmonised customer
contact experience across multiple customer interaction
 
channels in eight countries. Because it is cloud-based,
customers receive the same services everywhere and it makes it easier for
 
ING to share and adopt innovations
and adjust to changing customer needs.
 
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
47
 
 
One brand
The introduction in 2020 of ING’s new global ‘do
 
your thing’ tagline in the Netherlands, Belgium, Romania,
Poland and Wholesale Banking brings a common brand direction to the bank that will be extended to the other
ING countries over time. We launched advertising campaigns that included
 
new brand elements like a new style of photography,
 
a sound logo and always signing off with
 
‘do your thing’.
 
The tagline articulates ING’s empowering purpose and encourag
 
es people to do more of the things that move
them or their business. It is about people being free to focus on what matters most
 
to them knowing that,
whether in their private or professional lives, they can make
 
their world a little better
 
for it.
 
In Wholesale Banking, do your thing is linked to ‘changemakers’
 
– companies and people that ignite and lead
sustainable change in a responsible way.
 
 
Instant payments
Open banking has changed the way people pay,
 
giving consumers more options and opening up this service to
non-traditional providers. To
 
keep up with payment trends, ING has introduced instant
 
payments executed in
real time 24/7, 365 days a year.
 
In 2020, the service was extended,
 
enabling payments instantly from the
Netherlands to the rest of Europe. ING is also working with major retailers in the Netherlands to extend
 
peer-to-
peer payments (apps that enable users to request and receive payments
 
instantly) so merchants can send their
customers a mobile payment request on delivery
 
of goods.
 
 
Following a successful pilot in 2019, ING now uses SWIFT gpi in nine ING countries to make international
transfers quicker
 
and easier. With
 
SWIFT gpi around 80 percent of international money transfers
 
are done on the
same day, compared
 
with three to five days previously.
 
For Business Banking customers, ING added a bulk payment functionality to its payment initiation
 
application
programme interface (API), making it possible to pay
 
up to 5,000 recipients simultaneously. In addition,
 
it
supports multiple strong customer authentication,
 
that allows all types of payments requiring two or more
authorisations.
 
Making life easier for commuters on the go, ING is piloting Invisible Tickets,
 
a Dutch initiative that allows them to
seamlessly pay for public transport using mobile phone sensors. It is aimed at countries where the use of public
transport is high, such as Germany,
 
France, Italy,
 
the UK and the Netherlands.
 
Platform thinking
The power of platforms is that they are open, borderless, scalable, empowering and generate
 
large amounts of
data through frequent user interactions
 
that can in turn be used to improve users’ experience. To
 
remain
relevant to our customers we need to
 
be on the digital platforms where they are spending their time shopping,
socialising and working.
 
 
ING is exploring various platform business solutions. We are
 
building our own platforms.
 
Some of these have
evolved into stand-alone platforms.
 
Smart money app Yolt, mobile payments
 
app Payconiq and corporate
multibank platform Cobase are three examples.
 
 
Yolt, which now has over 1.6 million registered
 
users in the UK, Italy and France,
 
added new features in 2020,
such as Money Jar, which helps customers
 
save while they spend. Yolt
 
Pay,
 
currently in beta, uses open banking
APIs to initiate money transfers between
 
users’ accounts and to pay others. The app also links to partners
 
like
MoneySuperMarket, PensionBee and Wealthify so they can
 
invest, save on household bills and grow their
savings. In 2020, Yolt was named the best
 
personal finance app at the Wealth and Finance Fintech Awards.
 
 
ING can also add value for our customers by connecting to relevant
 
products and services on third-party
platforms. In 2020, we strengthened our SME offering
 
as the first bank in Germany to offer loans through
Amazon’s sellers
 
platform, which is mainly used by SME companies. ING’s banking platform
 
offers these clients
access to the digital lending solution of fintech Lendico, which provides
 
loan approvals within 48 hours.
 
 
In Belgium, we partnered with Minna Technologies
 
on a subscription service for customers. Using the ING app,
customers can keep track
 
of and manage their subscriptions, and even cancel unused subscriptions or switch to
better alternatives through an automated process,
 
helping them save money and time.
 
 
The integration of international payments
 
platform Payvision strengthens
 
ING’s digital payments
 
business,
especially in e-commerce.
 
Payvision is a subsidiary of ING that facilitates more
 
than 80 payment methods in 150
currencies. Its combined e-commerce and in-store solution helps merchants to
 
offer their shoppers a seamless
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
48
 
checkout experience across all channels. Since acquiring Payvision in 2018, ING is exiting Payvision
 
clients that no
longer fit our risk profile.
 
Open banking
The introduction of the European Payment Service Directive 2 (PSD2) in 2019 is reshaping the banking industry.
 
It
requires banks to rethink traditional products and services and create
 
new customer experiences that stand out
in a competitive landscape. At the same time, open banking allows us to connect to other providers
 
and integrate
products and services to add value for our customers. Our open banking platform
 
provides the key capabilities
that allow ING to open up by establishing secure, scalable, compliant and uniform connectivity with external
parties via application programming interfaces (APIs).
 
We believe open banking and APIs are a great way
 
to foster innovation, accelerate
 
digitalisation and integrate
and co-create with others. Open banking propositions powered by API technology include the Lendico
 
SME
lending platform in Germany and the Minna Technologies
 
subscription management app in Belgium. In daily
banking, APIs boost treasury departments by delivering real-time cash and liquidity management.
 
 
Yolt Technology
 
Services (YTS), the business-to-business arm of the smart money app, facilitates open banking
for businesses across Europe by providing them with access to bank APIs that connect them to users’ bank
accounts to initiate payments.
 
In 2020, YTS surpassed one billion API calls – single uses of its API. In the
Netherlands, France and the UK, it offers businesses API coverage
 
to over 90 percent of bank accounts and its API
infrastructure can connect to 80 percent
 
of bank accounts in Belgium, Italy and Spain.
 
 
In Poland, ING introduced the first aggregator
 
service that allows customers to manage multiple bank accounts
from their ING Moje account. The new service is available through ING’s
 
online banking channel and the mobile
app.
 
 
We also use APIs to connect to our insurance partner AXA on ING’s
 
first multi-country product platform.
 
 
Cross-border customer engagement
 
Internally, we
 
are working to harmonise our customer experience where it’s possible and beneficial on truly
cross-border platforms, giving ING the same face in different
 
markets and the same banking interface with the
same look and feel everywhere.
 
One such example is InsideBusiness – ING’s digital banking portal
 
that provides Wholesale Banking clients with a
single point of access to a growing range of products and services around the globe. It is accessible anytime and
anywhere via web, mobile app and tablet. In 2020, there was rapid growth in the adoption of the InsideBusiness
app: user numbers doubled from around 2,500 to nearly 6,000 unique users,
 
while usage went up by 96 percent.
We also doubled the number of self-service processes clients can initiate from
 
InsideBusiness.
 
 
Given the complexities and costs of cross-border system
 
and product integration, and in light of
 
coronavirus-
related economic headwinds, we announced in November 2020 that we will stop the Maggie transformation
programme. Launched in 2016, Maggie aimed to integrate our product
 
offering and provide a standardised
experience for retail customers in four
 
Challengers markets.
 
We will instead focus on using ING’s
 
global
technology foundation – shared data lakes, cloud and modular IT building blocks – to
 
further develop our
universal digital bank and the rollout of global digital product offerings in insurance,
 
investments and consumer
lending. We will continue to focus on implementing global solutions locally as a way
 
to harmonise and
standardise the customer experience.
 
In the Netherlands and Belgium, where ING is already a market leader,
 
we are uniting our respective strengths to
deliver an even better and more consistent
 
experience across all channels for our combined 11 million
customers. In the second quarter,
 
customers in Belgium were migrated to the OneWeb
 
banking environment
shared with our Dutch customers. They also now use the same OneApp mobile environment as in the
Netherlands and Germany,
 
bringing us a step closer towards our ambition to provide customers
 
everywhere with
the same easy, smart and personal experience.
 
Around 1.8 million customers in Belgium are now using OneApp
and OneWeb for online banking. In the Netherlands around five million customers
 
use the app. New features
were introduced in 2020 to empower customers
 
to take charge of their own banking affairs
 
via their mobile
phone, for example to block a lost card or change their daily withdrawal
 
limit, cutting back on the need to
contact customer service.
 
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
49
 
Beyond banking services
Thinking beyond traditional banking is crucial to find new ways to be relevant
 
to customers and create new
revenue streams for ING. It strengthens
 
our core businesses by engaging customers early,
 
increasing the
customer lifetime value and contributing to a more sustainable
 
banking business model.
 
 
We can introduce new and complementary services through platforms.
 
Shopping services can use our scale to
provide better deals or cashbacks to customers.
 
The DealWise shopping platform gathers cashback deals and
discounts in one place. Users can save on their daily spending while merchants gain insights that
 
help them
better understand, acquire, develop
 
and maintain customers. It is now available in Romania,
 
with plans to enter
Germany next.
 
 
Similarly, ING+Deals in Belgium and ING Punten in the Netherlands are shopping platforms
 
offering customers
exclusive deals in partnership with various A-brands.
 
In addition to promoting customer loyalty,
 
these shopping
platforms help to increase interactions with ING’s
 
own digital channels. ING+Deals, with over 200,000 users
generated more than €5 million revenue for our merchants
 
in 2020, while ING Punten delivered a turnover of
€45 million from the sale of 1.4 million products.
 
In the know your customer (KYC) space, CoorpID provides a digital vault where
 
corporate clients can securely
store and share the KYC documentation
 
required by multiple financial institutions. CoorpID was connected to
ING’s KYC organisation
 
in 2020.
 
 
ING moved steadfastly on its housing strategy
 
across Dutch and German markets with disruptive concepts like
Scoperty and Makelaarsland. The near-term objective
 
is to independently grow these and invest in synergistic
business models. Makelaarsland is a property platform empowering people in the Netherlands
 
to buy and sell
their homes online themselves or with the support of a local agent.
 
 
In Germany, ING partnered
 
with Sprengnetter on Scoperty,
 
a real-estate platform connecting buyers
 
and sellers
of more than 35 million properties. The pre-qualification process for mortgages
 
is aligned with that of Interhyp,
ING’s independent mortgage brokerage
 
platform in Germany and Austria. Interhyp offers
 
buyers access to 400
mortgage lenders. In 2020 its market share rose to
 
10 percent in Germany (nine percent in 2019).
 
Earning the primary relationship
Customer numbers grew in 2020, especially the number of primary customers. These are Retail
 
customers with
multiple active products, including a current account with recurrent income, such as a salary.
 
In Wholesale
Banking these are clients lending and daily banking products and at least one other product generating recurring
revenues.
 
 
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 want our
customers to do more than just some of their banking with us; we want to be their first
 
partner, where
 
they
deposit their salary, handle their payments and do most
 
of their other banking business.
 
 
In 2020, the number of primary customers increased by 578,000 to 13.9 million. Across retail segments
 
,
 
this
comprises 5.8 million for Market Leaders,
 
4.9 million for the Challengers Markets – where primary customers
 
in
Germany grew by 330,000, a record 56 percent in net growth
 
versus 2019
 
– and 3.2 million for Growth Markets.
 
Retail markets
 
NPS
 
Number 1 in
6 out of 14
markets
Wholesale Banking NPS
 
13% above
industry
average
Measuring customer satisfaction
 
One of the ways we measure our progress is through the Net Promoter
 
Score (NPS), which indicates customer
satisfaction and loyalty (whether they would recommend ING to
 
others). The score is calculated as the difference
 
ing20f2020p50i0.jpg
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
50
 
between the percentage of promoters
 
(who rate ING as 9 or 10 out of 10) and detractors (those scoring ING
below a 6). Our aim is to achieve a number one NPS ranking in all our retail markets, with a 10-point lead over
our main competitors.
 
 
Based on a rolling average of our NPS scores in 2020, ING ranked
 
number one in six of our 14 retail markets:
Australia, Germany,
 
Poland, Romania, Spain and the Philippines. In four of these we are more than 10 points
ahead of our nearest competitor.
 
ING also has a top-three position in a further six markets. The introduction of
current account fees in Germany in February 2020 led to a downward
 
dip in our NPS score here, but overall we
retained our number one position in Germany in all four quarters. In France,
 
more innovative competitors
overtook ING in the number one position.
 
In the Business Banking segment, we measure NPS in four markets. These are the Netherlands, Belgium, Poland
and Romania. The NPS for mid-corporate clients in the Netherlands improved
 
to +18.4
 
(from +12.4 in 4Q 2019),
well above our competitors (-23.3), based on feedback from
 
clients who do business with multiple banks. Clients
appreciate our sector knowledge combined with regional presence, with satisfaction
 
highest in the services,
industry and transport and logistics sectors. However,
 
there is room for improvement to make
 
the digital
customer experience easier and more personal, especially for Dutch SMEs and self-employed
 
clients, where our
NPS among both client groups declined to -26 from -20 and -18 respectively.
 
In Poland, the combined NPS for
SME and mid-corporate clients improved to +43 (from
 
+30 in 4Q 2019). As we revised our methodology in
Belgium we don’t have comparable figures for 2020. Although slightly lower than
 
in 2019, the NPS for micro
clients and SMEs in Romania is still a high +43 and +54 for mid-corporates.
The NPS programme also runs in 26 Wholesale Banking markets. In addition, we introduced a transactional
 
NPS
to measure client satisfaction on service requests for daily banking. In 2020, the customer
 
satisfaction exceeded
8.5 (scale 1-10). The overall NPS rating reached +56.3 (on a scale of -100 to +100), up from a score
 
of +49.6 in
2019, and 13 percent ahead of the industry average of +49.8. The response rate
 
also increased to 60 percent
compared with 50 percent in 2019, showing higher client engagement with ING. The scores are based on
thousands of responses from clients representing more than 50 percent of Wholesale Banking revenue.
 
The NPS
of Platinum and Gold clients showed an even higher year-on-year increase of 33 percent and 21 percent,
respectively. All sectors
 
also registered stronger NPS, with Energy achieving an exceptionally
 
high score of +71.3,
a 26 percent increase year-on-year.
 
The higher scores suggest that clients appreciate our approach (see
‘Unleashing sector potential’ above) and that Wholesale Banking is succeeding in its strategy to focus
 
on core
clients, with as a result more resources allocated to a smaller group of clients
 
and higher client satisfaction.
 
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
51
 
External recognition
 
Recognising our efforts, Global Finance magazine named ING as the best consumer digital bank in Germany
 
while
Euromoney named us the best digital bank in Central and Eastern Europe,
 
as well as best bank in the Netherlands
and in Poland.
 
 
For the 14th year,
 
German consumers voted ING their preferred bank in €uro
 
magazine’s annual survey.
 
In
Australia, ING was named ‘Best Bank’ by financial comparison sites Mozo and Canstar
 
.
 
ING was also Canstar’s
Bank of the Year and ‘Most Trusted
 
Financial Institution’ at the Australian Banking Innovation Awards. In the
Forbes list of the world’s best
 
banks, ING ranked among the top five in seven count
 
ries in 2020.
 
Global Finance also named ING as the most innovative bank in Western Europe.
 
Three ING innovations also won
Innovators 2020 Awards: Zero
 
Knowledge Proof Notary (cash management category), CoorpID (corporate
 
finance
sector) and FINN – Banking of things (payments sector).
 
 
In Wholesale Banking, ING was recognised as Western Europe’s
 
best bank for transaction services (Euromoney)
and the best investment bank and best trade finance provider in the Netherlands (Global Finance).
 
Continuing to innovate
 
Since the introduction of direct banking in 1997, ING is still finding new ways to improve the
 
banking experience
for our customers. Many of these advances stem from
 
twinning the latest technologies with data insights.
Growing demand for digital solutions is also spurring new ideas.
Initiatives that have benefitted from
 
this include the trade finance tools of the blockchain-based software
company Komgo, which grew out of ING’s
 
Innovation Bootcamp (see ‘Distributed ledger technology and
blockchain’ below). Also in trade finance, ING teamed up in 2020 with AI-driven trade platform Tradeteq,
 
the first
electronic platform that allows banks and institutional investors
 
to transact trade assets. Tradeteq
 
uses advanced
analytics and artificial intelligence to derive more accurate risk scores,
 
helping investors to better
 
evaluate
opportunities and offers an end-to-end solution covering portfolio management,
 
risk analytics and securitisation-
as-a-service.
 
At the ING Labs in Amsterdam, Brussels, London and Singapore, over 20
 
initiatives are currently in development
to make disruptive impact in the value spaces of trade, lending, safety and compliance, financial health,
 
and
housing. Examples are Blacksmith, Loan Optics and Stemly.
 
Blacksmith, which ING has started using for
Wholesale Banking clients in Asia, provides banks with a single platform for digitally managing KYC
 
requirements,
connecting to trusted data sources, generat
 
ing tailored KYC files for its clients and quickly implementing
regulatory changes. Loan Optics is a platform for digitally-native
 
loans. It reduces operational costs by
streamlining the primary and secondary loan implementation processes. Stemly is creating an autonomous
decision system for supply chain and finance processes.
 
In Wholesale Banking Advanced Analytics we’re building artificial intelligence-powered products
 
to better
understand and serve our clients. These include improved monitoring and analysis activities for client
 
-facing
departments and Hunter,
 
a tool that accelerates the detection and investigation
 
of money laundering schemes,
reducing the workload for our KYC colleagues. Domino is a tool that gives us a ‘360
 
view’ of mid-corporate and
corporate clients to ensure we’re
 
having the right conversations at the right time to meet
 
their needs. In
addition, in 2020, we delivered a proof of concept to gain insight into how
 
mid-corporate clients are dealing with
the coronavirus crisis so we can help them where they need it most. It provides insights that go beyond
 
our
traditional knowledge of real-time client situations such as whether the client is receiving government
 
support or
needs support with tax payments.
 
Distributed ledger technology and blockchain
 
When it comes to distributed ledger technology (DLT),
 
ING is considered an industry leader.
 
For the second
consecutive year,
 
Forbes ranked ING as one of the top $50 billion companies embracing blockchain
 
technology.
Cryptoground, a blockchain and cryptocurrency hub, named ING among the best blockchain stocks
 
investments
in 2020.
 
Easy Trading
 
Connect (now Komgo.io) was one of the first to reinvent
 
commodities trade financing in 2017.
Komgo,
 
co-owned by ING, offers products that streamline
 
trade finance, optimise liquidity, manage risk and
verify customers. It recently created
 
a new feature, TRAKK, that uses DLT
 
to create provenance and immutability,
allowing traders to ensure the documents are genuine and are not used for
 
pledges to other parties. New DLT
initiatives currently in the execution phase include solutions for digital assets safekeeping,
 
tokenisation and
issuance of a structured finance loan for institutional investors, and an intra
 
-bank settlements utility token,
among others.
 
In October 2020, Contour went live. Co-founded by ING in a consortium with other major global banks, Contour
connects buyers, suppliers and banks across a decentralised digital
 
platform to bring transparency and trust into
trade financing. In its testing phase, Contour reduced the processing time for letters
 
of credit (LCs) from an
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
52
 
average of 10 days to under 24 hours.
 
Another ING initiative is securities lending platform HQLAx, which uses DLT
to facilitate trades in high-quality liquid assets, serving as an additional liquidity pool. It was commercially
launched in December 2020.
 
ING’s zero-knowledge
 
proof notary service, a solution aimed at improving the privacy and security of DLT
 
-based
transactions, received an Innovators 2020 Award
 
from Global Finance magazine in the cash management
category. Built
 
specifically to address the privacy requirements of R3’s
 
Corda platform, the capability is our latest
development in this field of cryptography,
 
following a suite of open-source privacy tools released in previous
years.
 
We amplify our DLT
 
impact by addressing how ING’s solutions can solve key
 
problems in the finance industry.
Our DLT research
 
team is constantly producing knowledge assets that can serve and influence the wider
community: from reflecting on the challenges and benefits of digital assets, to collaborating
 
with the Global
Blockchain Business Council and the World
 
Economic Forum on the creation of blockchain standards.
 
Fintech partnerships
ING entered into several fintech
 
partnerships this year that help our businesses execute our strategy.
 
Through
our investment arm, ING Ventures
 
,
 
we invest in companies with a strategic relevance
 
for ING. These are start-ups
with disruptive technologies that have the potential to improve
 
the customer experience or ING’s operati
 
onal
efficiency.
 
 
A number of partnerships are focused on enhancing our data analytics capabilities. One example is London-based
Eigen Technologies, which is working on natural
 
language processing (NLP) models tailored to the financial
industry’s need for data extraction.
 
The partnership is applying NLP and machine learning in areas such as
corporate lending, trade finance and SME banking to automate processes and reduce
 
risk and cost.
 
 
For our Business Banking clients we have a number of partnerships. Funding Options helps British and Dutch
SMEs find the right loan for their business. FinCompare gives German corporate customers
 
a quick and
independent overview of their financing options. TransferMate
 
provides SME customers and corporate
 
clients
with faster,
 
cheaper and easier payment solutions. We are also exploring new business models. Countingup, a
mobile banking app for self-employed entrepreneurs
 
and freelancers, combines accounting and banking features
into one seamless solution, greatly reducing operating complexity
 
and cost.
 
 
On the topics of aggregation, PSD2 and open banking, ING is working with an ING-initiated company,
 
Cobase,
which is making it easier and more efficient for international corporate
 
clients to work with multiple banks from
one cloud-based platform.
 
 
In the area of operational excellence, we’re
 
working with fintech Duco on a reconciliation solution that strongly
improves time to market in building reconciliations
 
and lowers the cost of carrying these out.
 
In the Philippines, ING teamed up with the UNICEF Innovation Office to support fintech start-ups working on
financial inclusion challenges (www.fintechforimpact.com
 
). The Fintech for Impact initiative will provide financial
support and mentoring for five projects: an app to bring affordable
 
healthcare to rural communities; a tool to
help migrant workers manage their finances; a platform
 
connecting farmers and fishermen directly to buyers; an
app connecting students to education loans; and an AI-enabled platform to deliver grassroots
 
insurance to low-
income families.
 
 
ing20f2020p53i0.jpg
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
53
 
 
Responsible finance
As a bank, we are committed to contributing to a low-carbon
 
and financially healthy society, both through
 
our
own efforts and by helping our clients to be more sustainable. We
 
make the most impact through our financing,
via the loans we provide to clients. That’s why we
 
are committed to steering our €600 billion lending portfolio
towards meeting the well-below two-degree goal of the Paris Agreement.
 
We call our approach to measuring and
steering, Terra.
 
 
Terra
 
approach
ING’s Terra
 
sets out our approach for aligning our lending portfolio with the Paris climate goals in the nine
sectors most responsible for climate change. Since 2019, we have
 
made significant progress in further
developing, refining and applying the Terra
 
approach. In October 2020, we released our second progress report
on Terra.
 
It included quantitative results and targets for
 
all of these nine sectors, fulfilling the commitment we
made the previous year.
 
 
The report’s Climate Alignment Dashboard tracks
 
our performance, showing the CO2 intensity per sector of our
portfolio compared to the market and the relevant
 
climate scenario. The portfolios for power generation,
shipping, cement and steel are ‘on track’ for
 
climate alignment, while residential real estate,
 
automotive and
aviation are ‘close to being on track’.
 
For the remaining two sectors we cannot yet benchmark our performance.
For upstream oil and gas this is because the 2019 portfolio is our starting point and we
 
will need to see
movement relative to the scenario pathway,
 
starting next year,
 
before indicator status can
 
be given. For
commercial real estate we still lack complete
 
and up-to-date market data.
 
 
ING’s power generation
 
portfolio continues to outperform the market
 
and both the International Energy
Agency’s sustainable development scenario (SDS) and the OECD scenario. In the 12 months measured in the
Terra
 
report, ING reduced
 
its direct exposure to coal-fired power plants by 43 percent
 
(in line with our
commitment to reduce it to close to zero by
 
the end of 2025) and increased financing for renewable energy
generation by €1.19 billion. Other sectors face more challenges, such as the residential
 
mortgage sector.
 
There
we encounter a shortage of accurate
 
data to measure progress and a general lack of homeowner action. Read
the full Terra
 
report on ing.com, and see ‘Greener homes’ below for more information
 
about making our
mortgage portfolio energy positive by 2050.
 
 
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
54
 
One of the targets included in the report is our aim to reduce financing to upstream oil and gas by
 
19 percent by
2040 from 2019 levels. We’ll align this portfolio both by decreasing exposure
 
and engaging with clients to help
them shift to low-carbon technology.
 
The measurement is based on three indicators: emission intensity,
 
an
absolute reduction in financing and a relative transition of the financing mix from high-carbon to low-carbon
 
and
renewable energy.
 
This target is also aligned with the SDS scenario, which is not static. If more or quicker action
is needed and this scenario is adjusted, our target will adjust accordingly.
 
 
Terra’s
 
sector-based approach respects the fact that each sector has its own transition
 
pathway for it to
contribute to a low-carbon, below-two-degree
 
world. We therefore
 
use the most appropriate methodology per
sector.
 
One example is PACTA
 
for Banks, which was co-developed by ING and non-profit think tank the 2°
Investing Initiative (2DII). The methodology-specific application was
 
further refined with more banks and
published as an open-source methodology for all banks to use in 2020.
 
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.
 
 
We believe that working together to achieve
 
an industry-wide standard will increase transparency and
 
ultimately
help the entire financial sector to make a bigger impact. We
 
also believe in an inclusive approach to climate
alignment, as we work with our clients to facilitate
 
and finance their shift to low-carbon technology.
 
 
We will continue to monitor and report on our progress, engaging
 
with clients and other stakeholders to advance
on the journey to combat climate change. We conduct strategic
 
dialogues with clients on how we can help them
align their business with the Paris Agreement goals, for example by
 
advising them on how to structure their
financing and gain access to funding. We also contribute to policymaking to influence change
 
on a larger scale.
For example, we’re working
 
with the European Investment Bank on the implementation of the European Green
Deal and we’re providing input for proposals by the Network
 
for Greening the Financial System on sustainable
stress testing to assess the resilience of the financial system
 
to climate-related shocks.
 
 
Our efforts in this area are being recognised. In 2020, we were ranked
 
as ‘climate action leader’ by
 
the leading global environmental disclosure platform CDP for
 
the seventh consecutive year.
 
We also ranked first
in our market-cap group by Sustainalytics and MSCI upgraded ING’s
 
rating to ‘AA’,
 
which underscores sound
corporate governance and our strengths
 
in financing environmental impact, among others.
 
Facilitating change
Sustainability is about planet and people. We believe we can make
 
more impact with what we do finance than
what we don’t. So when it comes to people, we aim to increase our social impact finance portfolio by lending to
projects that lead to, for example,
 
basic infrastructure improvements, community development
 
or essential
services. And we’re working on making a positive contribution to human rights as financier,
 
employer,
 
taxpayer
and driver of progress and prosperity.
 
This is also in line with the United Nations’ Principles for Responsible
Banking, of which ING was a founding signatory
 
in 2019.
 
We have an inclusive approach to driving sustainable
 
business. We work with our clients to facilitate
 
and finance
the shift to low-carbon technology.
 
This includes environmental, social and governance (ESG) checks to ensure
that our financing is in line with our own sustainability goals. Read more about our environmental
 
and social risk
policy framework at www.ing.com/Sustainability/Sustainable
 
-business/Environmental-and-social-risk-
policies.htm
 
ING is considered a pioneer in sustainable finance, having introduced the first sustainability
 
-linked loan and a
made-to-measure sustainability improvement loan. We
 
offer various financial instruments such as green loans,
sustainability improvement loans, green bonds and advisory services.
 
 
In 2020, we saw a visible softening of lending demand due to the impact of Covid-19 on economic activity. Our
climate finance portfolio decreased by 12 percent in 2020 to €16.5 billion (from €18.7 billion in 2019), mainly due
to lower lending volumes in renewable energy and sustainable buildings. Social impact financing for projects
 
that
lead to, for example, basic infrastructure
 
improvements, community development or essential services,
decreased by 29 percent to €533 million.
 
Despite the decline in demand, we continued to shape sustainable finance in 2020 with the introduction of an
innovative financing method to make inland shipping in the Netherlands more sustainable. A pay
 
-per-use
financing structure for renewable battery containers
 
makes it easier for ship owners to transition from diesel-
powered barges to electrical power without the need for a large
 
up-front investment. ING and partners formed
 
a
new company called Zero Emissions Services (ZES) to facilitate
 
the transformation. The Dutch transport sector is
responsible for 21 percent of the country’s CO2
 
emissions; ZES is moving it a step closer towards the Paris
Agreement goals.
 
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
55
 
In 2020, we started to link the circular economy even more
 
closely with our green finance products. The ZES
transaction is an example of how ING is exploring circular financial business models with various partners. The
circular economy offers a systematic
 
response to the climate crisis. It’s about rethinking our use of raw materials
and resources to reduce waste and emissions, shifting from ‘take,
 
make and waste’ to ‘reduce, reuse, recycle’.
Companies like ZES stimulate other use models for depleted battery
 
packs once they are exchanged to give them
a second or even third lifecycle.
 
ING issued 36 sustainability improvement loans and 20 green loans. Among these was the largest green
 
loan yet
in the Asia-Pacific commercial and industrial renewables sector.
 
The $75 million financing for Cleantech Solar will
support more than 500 megawatts of solar power projects across
 
Southeast Asia.
 
 
In addition to lending, ING supported 60 mandates for clients through green, social and sustainability bonds. In
September,
 
ING was involved in Ireland’s
 
first-ever green bond issued by AIB bank. The €1 billion will be used to
finance renewable energy projects and green buildings in Ireland and Britain.
 
 
ING broke new ground with Europe’s
 
first Covid-19-related bond, which raised financing for French
 
public
hospitals. ING was the joint bookrunner in the €1 billion deal with French bond issuer Caisse Francaise de
Financement Local (CAFFIL). Issued in May,
 
it was the first negative yield bond launch since the end of February
when the pandemic triggered a global sell-off and closed the primary market. ING’s previous
 
collaboration with
CAFFIL on the first French social covered bond was a winner at Environmental
 
Finance’s Bond Awards 2020.
 
 
ING subsequently supported a further three issuers with Covid-19-related bonds, helping them to overcome
 
the
impact of the crisis. We acted as bookrunner in the €500 million social bond for Korea Housing Finance
Corporation; as joint bookrunner in the €1 billion social bond for CaixaBank; and joint lead manager on the €500
million bond for the Export-Import Bank of Korea (KEXIM).
 
Greener
 
homes
A significant part of our loan book consists of residential mortgages, and houses generally account
 
for about 22
percent of direct and indirect CO2 emissions in the EU. We’re
 
working with clients to improve the energy
consumption of the houses we finance as a way of achieving our Paris alignment goals. Our long-term vision is to
have an energy-positive mortgage portfolio
 
by 2050. This means that the houses in our portfolio will collectively
generate more energy than they consume.
 
 
Our current carbon intensity measurement covers
 
our Dutch and German mortgage portfolio,
 
with a combined
outstanding lending amount of roughly €180 billion (60 percent of total mortgage
 
outstandings) and more than
one million financed homes. See the latest Terra
 
report on ing.com for information on the underlying
measurement.
 
We are developing retail products,
 
tools and services to help homeowners make their houses more sustainable.
Customers can use these products to finance solar panels, for example,
 
or insulate their homes. In Germany,
 
we
provide green mortgages through development bank KfW.
 
 
In addition to financial solutions, we help to raise awareness on the topic. Consumers in the Netherlands, for
example, can check the energy profile of their homes on our website, as well as the options and financing
available to improve in this area. And we provide
 
d
 
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.
 
 
However,
 
the number of homeowners taking up this offer remains low.
 
This likely reflects the cumbersome
process of gathering data for an energy label upgrade.
 
And although an up-to-date energy label is required when
selling a home, only a small percentage of properties in our portfolio are sold each year.
 
Sustainable investment services
ING offers sustainable investment
 
(SI) services to its Retail Banking customers in the Netherlands, Belgium,
Luxembourg and Germany.
 
In 2020, ING’s retail brokerage
 
division recorded €13.2 billion in sustainability assets
under management, up from €9.3 billion in 2019. This underlines our clients’ appetite for products and services
that integrate sustainability criteria
 
.
 
Competition
ING is a global financial institution with a strong European base, offering retail and wholesale banking services to
customers in over 40 countries. The purpose of ING is empowering people to stay
 
a step ahead in life and in
business.
 
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
56
 
ING’s Retail business serves 39 million customers,
 
from individuals to small and medium-sized businesses and
mid-corporate clients. In most of our Retail markets
 
we offer a full range of banking products and services,
covering payments, savings, mortgages, 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. These 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.
 
This competition is most pronounced in our more mature markets of the Netherlands, Belgium, the rest
 
of
Western Europe and Australia.
 
Our largest market is the Netherlands, where our main competitors
 
are ABN
AMRO and Rabobank. In recent years, competition has increased in emerging markets
 
such as Asia and Central
and Eastern Europe. Financial services companies from more developed countries see these markets
 
as offering
higher growth potential, while local institutions have become more sophisticated
 
and competitive and have
proceeded to form alliances, mergers or strategic
 
relationships with our competitors.
 
However,
 
our competitive landscape is transforming as society becomes increasingly digitalised and ever
 
more
reliant on technology and the online economy – a trend amplified during the Covid-19 pandemic, which
accelerated the shift to mobile banking and contactless payments. Our main competitors
 
are no longer just other
banks. The big winners in 2020 were the tech companies that offer
 
an engaging digital experience on an open
platform that meets a range of needs in one go-to digital ecosystem.
 
Platform providers are all about customer experience.
 
They use data and advanced analytics to pinpoint what
people need and partner with third parties to meet this with a fitting product or service, ensuring customers
come back for more. This ability to meet people’s primary needs in a way
 
that is easily accessed on mobile
devices is what defines their success. Banking, by contrast, is a facilitator and not a primary need. The choice for
banks is to challenge their existing business models and disrupt themselves, or risk being eliminated as an
intermediary and relegated to the status
 
of white label facilitator of others’ platforms.
 
In this environment, the
digital customer experience is the key differentiator,
 
shaped by customer expectations based on their
interactions online and on their smartphones: easy,
 
smart and personal.
 
The opening up of the European payments market under the PSD2 directive is a significant competitive
development. It is creating a more crowded, uneven playing
 
field as new providers enter this lucrative
 
area once
dominated by banks. Newcomers include third party mobile and online payment platforms
 
like ApplePay and
Alipay, as well as fintechs
 
and other non-banks. These new entrant have operating models that
 
are not burdened
with potentially costly legacy operations. They are less regulated
 
than banks and use technologies like
blockchain, robotics and artificial intelligence and advanced data and analytic tools to lower
 
cost to serve and
speed up processes.
 
 
Advances in technology are accelerating the use of new business models, for example
 
in retail payments, peer-
to-peer lending, foreign exchange and low-cost
 
investment advisory services. New solutions offered by rapidly
evolving incumbents, challengers and new entrants, especially with respect to
 
payment services and products,
are disrupting the financial services sector and leading to the emergence of disintermediation. To
 
remain
competitive, 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 mobilise a large
 
customer base to attract
partners to their platforms.
 
 
Successful platforms take the effort
 
out of managing finances, offering personalised, real-time advice and
products and services for all financial and other relevant needs. Open banking offers
 
opportunities to add value
by connecting to the products and services of others, also in areas beyond banking. 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.
 
 
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
57
 
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.
 
European Regulatory framework
The Single Supervisory Mechanism (“SSM”) – the first pillar of the Banking Union – was launched on 4 November
2014. Since that date, the European Central Bank (ECB) assumed responsibility for a
 
significant part of the
prudential supervision of banking groups in the Eurozone, including ING Group and ING Bank. Under the SSM, the
ECB has become ING Group’s and ING Bank’s
 
principal prudential supervisor. The
 
ECB is amongst others
responsible for tasks such as market access, compliance with capital
 
and liquidity requirements and governance
arrangements. National supervisors, 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.
 
 
Another significant change in the regulatory environment is the setting up of the Single Resolution Mechanism
(“SRM”). It is the second pillar of the Banking Union. The SRM comprises the Single Resolution Board (“SRB”) and
the national resolution authorities and is fully responsible for the resolution of banks within the Eurozone as of 1
January 2016. ING has been engaging already with the Dutch national resolution authorities and the SRB for a
few years with the aim to support in the draw up of a resolution plan for
 
ING and will continue to collaborate
with the resolution authorities. The rules underpinning the SRM could have a significant impact on business
models and capital structure of financial groups in order to become resolvable.
 
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.
 
 
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
58
 
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 as the Federal Reserve. ING Bank also has a subsidiary in the United States, ING
Financial Holdings Corporation, which through several operating subsidiaries (one of which is registered
 
with the
CFTC as a swap dealer and another of which is registered with the U.S. Securities and Exchange
 
Commission as a
securities broker-dealer) offers various
 
financial products, including lending, and financial markets products.
These entities do not accept deposits in the United States on their own behalf or on behalf of ING Bank N.V.
 
 
Dodd-Frank Act, which became law on 21 July 2010, represented a significant overhaul
 
in the regulation of U.S.
financial institutions and markets. The primary impact on ING is through the establishment of a regulatory regime
for the off-exchange
 
derivatives market, pursuant to
 
Title VII of the Dodd-Frank Act.
 
 
Among other things, the Dodd-Frank Act and regulations enacted thereunder require swap
 
dealers to register
with the CFTC, the primary swaps regulator in the U.S.) as ‘swap
 
dealers’ and be subject to CFTC regulation and
oversight. The ING subsidiary,
 
ING Capital Markets LLC, is registered
 
as a swap dealer.
 
As a registered entity,
 
it is
subject to business conduct, record-keeping and reporting requirements,
 
as well as margin requirements and
capital requirements, which will become effective
 
in late 2021. In addition to the obligations imposed on
registrants (such as swap dealers), other requirements
 
relating to reporting, clearing, and on-facility trading have
been imposed for much of the off-exchange derivatives
 
market. It is possible that registration, execution,
clearing, margin, capital and business conduct compliance requirements will increase the costs of and restrict
participation in the derivative markets. These rules could therefore
 
restrict trading activity,
 
reducing trading
opportunities and market liquidity,
 
potentially increasing the cost of hedging transactions and the volatility of the
relevant markets. This could adversely
 
affect the business of ING in these markets.
 
The Dodd-Frank Act and SEC regulations enacted thereunder,
 
effective 1 November 2021, also require security-
based swap dealers to register with the SEC. The SEC has adopted
 
regulations, among others, establishing
registration, reporting, risk management, business conduct, and margin and capital
 
requirements for security-
based swaps. ING Capital Markets is expected to be registered
 
with the SEC as a security-based swap dealer.
Registration could increase ING Capital Markets
 
LLC’s operational costs, reduce trading activity
 
and market
liquidity, and increase volatility of the relevant
 
markets. It will also result in a substantial portion or all of ING’s
security-based swap activities with U.S. persons being conducted through ING Capital Markets
 
LLC.
 
 
In addition, new position limits requirements for uncleared swaps referencing
 
any of twenty-five commodity
futures contracts for market
 
participants could limit ING’s position sizes in these swaps
 
referencing specified
physical commodities and similarly limit the ability of counterparties to utilize certain
 
of our products to the
extent hedging exemptions from the position limits are unavailable.
 
 
The Dodd-Frank Act also impacts U.S. banks and non-U.S. banks with branches or agencies in the United States,
primarily through the Volcker Rule and the enhanced prudential standards
 
of Section 165 of the Dodd-Frank Act.
Because ING Bank does not have a U.S. banking presence, these provisions do not currently apply to ING.
 
The Dodd-Frank Act also created a new agency,
 
the Financial Stability Oversight Council (“FSOC”), an inter-agency
body that is responsible for monitoring the activities of the U.S. financial system, designating systemically
significant financial services firms and recommending a framework for substantially
 
increased regulation of such
firms, including systemically important non-bank financial companies that could consist
 
of securities firms,
insurance companies and other providers of financial services, including non-U.S. companies. ING has not been
designated a systemically significant non-bank financial company by
 
FSOC and such a designation currently is
unlikely.
 
 
Dodd-Frank continues to impose significant requirements on us, some of which may
 
have a material impact on
our operations and results, as discussed further under “Item 3. Key Information
 
— Risk Factors—We operate
 
in
highly regulated industries. Changes in laws and/or regulations governing
 
financial services or financial
institutions or the application of such laws and/or regulations governing our business may
 
reduce our
profitability”.
 
 
 
 
 
 
 
 
 
ING Group Annual Report 2020 on Form 20-F
59
 
Basel III and European Union Standards as currently applied by ING Bank
DNB, our principal home country supervisor until the ECB took over that position in November 2014, has given
ING permission to use the most sophisticated approaches for solvency reporting
 
under the Financial Supervision