Fair value of assets and liabilities	6 Months Ended
Jun. 30, 2022
Fair value of assets and liabilities [abstract]
Fair value of assets and liabilities	19 Fair value of assets and liabilities Valuation Methods The estimated fair values represent the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It is a market-based measurement, which is based on assumptions that market participants would use and takes into account the characteristics of the asset or liability that market participants would take into account when pricing the asset or liability. Fair values of financial assets and liabilities are based on quoted prices in active market where available. When such quoted prices are not available, the fair value is determined by using valuation techniques. A comprehensive description of ING’s valuation methods and framework is reported in Note 39 ‘Fair value of assets and liabilities’ of the 2021 Annual Report on Form 20-F of ING Group. This chapter of the Interim financial report should be read in conjunction with the 2021 Annual Report on Form 20-F of ING Group. Valuation Adjustments Valuation adjustments are an integral part of the fair value. They are included as part of the fair value to provide better estimation of market exit value on measurement date. ING considers various valuation adjustments to arrive at the fair value including Bid-Offer adjustments, Model Risk adjustments, Credit Valuation Adjustments (CVA), Debit valuation Adjustments (DVA), including DVA on derivatives and own issued liabilities, Collateral Valuation Adjustment (CollVA) and Funding Valuation Adjustment (FVA). For financial instruments measured by internal models where one or more unobservable market inputs are significant for valuation, a difference between the transaction price and the theoretical price resulting from the internal model can occur. ING defers material Day One profit or loss relating to financial instruments classified as Level 3 and financial instruments with material unobservable inputs into CVA which are not necessarily classified as Level 3. The Day One profit or loss is amortised over the life of the instrument or until the observability improves. Both the impact on the profit and loss for the first six months of 2022 and the Day One profit or loss reserve in the balance sheet as per 30 June 2022 are deemed to be immaterial. The following table presents the models reserves for financial assets and liabilities: Valuation adjustment on financial assets and liabilities 30 June 2022 31 December 2021 Bid/Offer -210 -143 Model Risk -8 -11 CVA -227 -159 DVA 252 -66 CollVA -9 -8 FVA -44 -95 Total Valuation Adjustments -247 -482 Financial instruments at fair value The fair values of the financial instruments were determined as follows: Methods applied in determining fair values of financial assets and liabilities (carried at fair value) Level 1 Level 2 Level 3 Total 30 June 2022 31 December 2021 30 June 2022 31 December 2021 30 June 2022 31 December 2021 30 June 2022 31 December 2021 Financial Assets Financial assets at fair value through profit or loss - Equity securities 10,908 17,591 2 2 120 134 11,030 17,727 - Debt securities 2,452 2,317 6,623 7,016 3,282 2,643 12,357 11,976 - Derivatives 14 6 35,066 21,154 389 140 35,469 21,299 - Loans and receivables 77,706 48,706 2,065 2,248 79,771 50,954 13,373 19,914 119,398 76,877 5,856 5,165 138,628 101,956 Financial assets at fair value through other comprehensive income - Equity securities 1,822 2,232 242 225 2,065 2,457 - Debt securities 23,552 21,753 4,324 5,587 27,876 27,340 - Loans and receivables 805 838 805 838 25,374 23,984 4,324 5,587 1,047 1,063 30,745 30,635 Financial liabilities Financial liabilities at fair value through profit or loss – Debt securities 752 827 4,817 5,333 121 135 5,690 6,295 – Deposits 64,483 43,026 64,483 43,026 – Trading securities 1,536 955 152 120 8 0 1,695 1,075 – Derivatives 63 63 35,635 20,388 416 195 36,114 20,646 2,351 1,844 105,086 68,867 545 330 107,982 71,041 The following methods and assumptions were used by ING Group to estimate the fair value of the financial instruments: Equity securities Instrument description: Equity securities include stocks and shares, corporate investments and private equity investments. Valuation: If available, the fair values of publicly traded equity securities and private equity securities are based on quoted market prices. In absence of active markets, fair values are estimated by analysing the investee’s financial position, result, risk profile, prospect, price, earnings comparisons and revenue multiples. Additionally, reference is made to valuations of peer entities where quoted prices in active markets are available. For equity securities best market practice will be applied using the most relevant valuation method. All non-listed equity investments, including investments in private equity funds, are subject to a standard review framework which ensures that valuations reflect the fair values. Fair value hierarchy: The majority of equity securities are publicly traded and quoted prices are readily and regularly available. Hence, these securities are classified as Level 1. Equity securities which are not traded in active markets mainly include corporate investments, fund investments and other equity securities and are classified as Level 3. Debt securities Instrument description: Debt securities include government bonds, financial institutions bonds and Asset-backed securities (ABS). Valuation: Where available, fair values for debt securities are generally based on quoted market prices. Quoted market prices are obtained from an exchange market, dealer, broker, industry group, pricing service, or regulatory service. The quoted prices from non-exchange sources are reviewed on their tradability of market prices. If quoted prices in an active market are not available, fair value is based on an analysis of available market inputs, which includes consensus prices obtained from one or more pricing services. Furthermore, fair values are determined by valuation techniques discounting expected future cash flows using a market interest rate curves, referenced credit spreads, maturity of the investment, and estimated prepayment rates where applicable. Fair value hierarchy: Government bonds and financial institutions bonds are generally traded in active markets, where quoted prices are readily and regularly available and are hence, classified as Level 1. The remaining positions are classified as Level 2 or Level 3. Asset backed securities for which no active market is available and a wide discrepancy in quoted prices exists, are classified as Level 3. Derivatives Instrument description: Derivatives contracts can either be exchange -traded or over the counter (OTC). Derivatives include interest rate derivatives, FX derivatives, Credit derivatives, Equity derivatives and commodity derivatives. Valuation: The fair value of exchange-traded derivatives is determined using quoted market prices in an active market and are classified as Level 1 of the fair value hierarchy. For instruments that are not actively traded, fair values are estimated based on valuation techniques. OTC derivatives and derivatives trading in an inactive market are valued using valuation techniques. The valuation techniques and inputs depend on the type of derivatives and the nature of the underlying instruments. The principal techniques used to value these instruments are based on (amongst others) discounted cash flows option pricing models and Monte Carlo simulations. These valuation models calculate the present value of expected future cash flows, based on ‘no- arbitrage’ principles. The models are commonly used in the financial industry and inputs to the validation models are determined from observable market data where possible. Certain inputs may not be observable in the market, but can be determined from observable prices via valuation model calibration procedures. These inputs include prices available from exchanges, dealers, brokers or providers of pricing, yield curves, credit spreads, default rates, recovery rates, dividend rates, volatility of underlying interest rates, equity prices, and foreign currency exchange rates and reference is made to quoted prices, recently executed trades, independent market quotes and consensus data, where available. For uncollateralised OTC derivatives, ING applies Credit Valuation Adjustment to correctly reflect the counterparty credit risk in the valuation and Debit Valuation Adjustments to reflect the credit risk of ING for its counterparty. See sections CVA/DVA in section c) Valuation Adjustments for more details regarding the calculation. Fair value hierarchy: The majority of the derivatives are priced using observable inputs and are classified as Level 2. Derivatives for which the input cannot be implied from observable market data are classified as Level 3. Loans and receivables Instrument description: Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables carried at fair value includes trading loans, being securities lending and similar agreement comparable to collateralised lending, syndicated loans, loans expected to be sold and receivables with regards to reverse repurchase transactions. Valuation: The fair value of loans and receivables are generally based on quoted market prices. The fair value of other loans is estimated by discounting expected future cash flows using a discount rate that reflects credit risk, liquidity, and other current market conditions. The fair value of mortgage loans is estimated by taking into account prepayment behaviour. Fair value hierarchy: Loans and receivables are predominantly classified as Level 2. Loans and receivables for which current market information about similar assets to use as observable, corroborated data for all significant inputs into a valuation model is not available are classified as Level 3. Financial liabilities at fair value through profit and loss Instrument description: Financial liabilities at fair value through profit and loss include debt securities, debt instruments, primarily comprised of structured notes, which are held at fair value under the fair value option. Besides that, it includes derivative contracts and repurchase agreements . Valuation: The fair values of securities in the trading portfolio and other liabilities at fair value through profit or loss are based on quoted market prices, where available. For those securities not actively traded, fair values are estimated based on internal discounted cash flow valuation techniques using interest rates and credit spreads that apply to similar instruments. Fair value hierarchy: The majority of the derivatives are classified as Level 2. Derivatives for which the input cannot be derived from observable market data are classified as Level 3. Transfers between Level 1 and 2 No significant transfers from Level 2 to Level 1 were recorded in the reporting period 2022. Level 3: Valuation techniques and inputs used Financial assets and liabilities in Level 3 include both assets and liabilities for which the fair value was determined using (i) valuation techniques that incorporate unobservable inputs as well as (ii) quoted prices which have been adjusted to reflect that the market was not actively trading at or around the balance sheet date. Unobservable inputs are inputs which are based on ING’s own assumptions about the factors that market participants would use in pricing an asset or liability, developed based on the best information available in the circumstances. Unobservable inputs may include volatility, correlation, spreads to discount rates, default rates and recovery rates, prepayment rates, and certain credit spreads. Valuation techniques that incorporate unobservable inputs are sensitive to the inputs used. Of the total amount of financial assets classified as Level 3 as at 30 June 2022 of EUR 6.9 billion (31 December 2021: EUR 6.2 billion), an amount of EUR 2.0 billion ( 28.4 %) (31 December 2021: EUR 2.0 billion, being 32.5 %) is based on unadjusted quoted prices in inactive markets. As ING does not generally adjust quoted prices using its own inputs, there is no significant sensitivity to ING’s own unobservable inputs. Furthermore, Level 3 financial assets includes approximately EUR 3.6 billion (31 December 2021: EUR 2.9 billion) which relates to financial assets that are part of structures that are designed to be fully neutral in terms of market risk. Such structures include various financial assets and liabilities for which the overall sensitivity to market risk is insignificant. Whereas the fair value of individual components of these structures may be determined using different techniques and the fair value of each of the components of these structures may be sensitive to unobservable inputs, the overall sensitivity is by design not significant. The remaining EUR 1.4 billion (31 December 2021: EUR 1.3 billion) of the fair value classified in Level 3 financial assets is established using valuation techniques that incorporates certain inputs that are unobservable. Of the total amount of financial liabilities classified as Level 3 as at 30 June 2022 of EUR 0.5 billion (31 December 2021: EUR 0.3 billion), an amount of EUR 0.0 billion ( 5.4 %) (31 December 2021: EUR 0.1 billion, being 42.0 %) is based on unadjusted quoted prices in inactive markets. As ING does not generally adjust quoted prices using its own inputs, there is no significant sensitivity to ING’s own unobservable inputs. Furthermore, Level 3 financial liabilities includes approximately EUR 0.2 billion (31 December 2021: EUR 0.1 billion) which relates to financial liabilities that are part of structures that are designed to be fully neutral in terms of market risk. As explained above, the fair value of each of the components of these structures may be sensitive to unobservable inputs, but the overall sensitivity is by design not significant. The remaining EUR 0.3 billion (31 December 2021: EUR 0.1 billion) of the fair value classified in Level 3 financial liabilities is established using valuation techniques that incorporates certain inputs that are unobservable. The table below provides a summary of the valuation techniques, key unobservable inputs and the lower and upper range of such unobservable inputs, by type of Level 3 asset/liability. The lower and upper range mentioned in the overview represent the lowest and highest variance of the respective valuation input as actually used in the valuation of the different financial instruments. Amounts and percentages stated are unweighted. The range can vary from period to period subject to market movements and change in Level 3 position. Lower and upper bounds reflect the variability of Level 3 positions and their underlying valuation inputs in the portfolio, but do not adequately reflect their level of valuation uncertainty. For valuation uncertainty assessment, reference is made to section Sensitivity analysis of unobservable inputs (Level 3). Valuation techniques and range of unobservable inputs (Level 3) Assets Liabilities Valuation techniques Significant unobservable inputs Lower range Upper range In EUR million 30 June 2022 31 December 2021 30 June 2022 31 December 2021 30 June 2022 31 December 2021 30 June 2022 31 December 2021 At fair value through profit or loss Debt securities 3,282 2,643 8 Price based Price (%) 0% 0% 122% 121% Equity securities 120 134 Price based Price (price per share) 0 0 5,475 5,475 Loans and advances 1,826 1,598 Price based Price (%) 1% 0% 100% 100% Present value techniques Credit spread (bps) 1 0 240 250 (Reverse) repo's 239 650 Present value techniques Interest rate (%) 0% 0% 3% 1% Structured notes 121 135 Price based Price (%) 83% 84% 110% 125% Option pricing model Equity volatility (%) 15% 13% 33% 30% Equity/Equity correlation 0.6 n.a. 1.0 n.a. Equity/FX correlation -0.6 0 0.6 0 Dividend yield (%) 0% 3% 6% 4% Present value techniques Credit spread (bps) 94 94 Derivatives – Rates 286 5 229 35 Option pricing model Interest rate volatility (bps) 51 43 144 82 Present value techniques Reset spread (%) 2% 2% 2% 2% Prepayment rate (%) 5% 12% – FX 98 27 95 30 Option pricing model Implied volatility (%) 1% 1% 32% 16% – Credit 4 75 108 94 Present value techniques Credit spread (bps) 6 1 885 359 Price based Price (%) 0% 0% 0% 100% – Equity 30 –17 27 Option pricing model Equity volatility (%) 16% 11% 115% 119% Equity/Equity correlation 0.5 0.5 1.0 0.8 Equity/FX correlation -0.7 -0.7 0.1 0.1 Dividend yield (%) 0% 0% 50% 18% – Other 1 3 9 Option pricing model Commodity volatility (%) 16% 20% 48% 89% At fair value through other comprehensive income – Loans and advances 805 838 Present value techniques Prepayment rate (%) 6% 9% 6% 9% Price based Price (%) 83% 99% 99% 100% – Equity 242 225 Present value techniques Credit spread (bps) 6.9 2 6.9 2 Interest rate (%) 3% 3% 3% 3% Price based Price (%) 122% 1% 122% 1% Price based Other (EUR) 70 63 90 80 Total 6,903 6,228 545 330 Price For securities where market prices are not available fair value is measured by comparison with observable pricing data from similar instruments. Prices of 0 % are distressed to the point that no recovery is expected, while prices significantly in excess of 100 % or par are expected to pay a yield above current market rates. Credit spreads Credit spread is the premium above a benchmark interest rate required by the market participant to accept a lower credit quality. Higher credit spreads indicate lower credit quality and a lower value of an asset. Volatility Volatility is a measure for variation of the price of a financial instrument or other valuation input over time. Volatility is one of the key inputs in option pricing models. Typically, the higher the volatility, the higher value of the option. Volatility varies by the underlying reference (equity, commodity, foreign currency and interest rates), by strike, and maturity of the option. The minimum level of volatility is 0 % and there is no theoretical maximum. Correlation Correlation is a measure of dependence between two underlying references which is relevant for valuing derivatives and other instruments having more than one underlying reference. High positive correlation (close to 1) indicates strong positive (statistical) relationship, where underliers move, everything else equal, into the same direction. The same holds for a high negative correlation. Reset spread Reset spreads are key inputs to mortgage linked prepayment swaps valuation. Reset spread is the future spread at which mortgages will re-price at interest rate reset dates. Inflation rate Inflation rate is a key input to inflation linked instruments. Inflation linked instruments protect against price inflation and are denominated and indexed to investment units. Interest payments would be based on the inflation index and nominal rate in order to receive/pay the real rate of return. A rise in nominal coupon payments is a result of an increase in inflation expectations, real rates, or both. Dividend yield Dividend yield is an important input for equity option pricing models showing how much dividends a company is expected to pay out each year relative to its share price. Dividend yields are generally expressed as an annualised percentage of share price. Jump rate Jump rates simulate abrupt changes in valuation models. The rate is an added component to the discount rate in the model to include default risks. Prepayment rate Prepayment rate is a key input to mortgage and loan valuation. Prepayment rate is the estimated rate at which mortgage borrowers will repay their mortgages early, e.g. 5 % per year. Prepayment rate and reset spread are key inputs to mortgage linked prepayment swaps valuation Level 3: Changes during the period Changes in Level 3 Financial assets Trading assets Non-trading derivatives Financial assets mandatorily at FVPL Financial assets designated at FVPL Financial assets at FVOCI Total 30 June 2022 31 December 2021 30 June 2022 31 December 2021 30 June 2022 31 December 2021 30 June 2022 31 December 2021 30 June 2022 31 December 2021 30 June 2022 31 December 2021 Opening balance 822 882 1 1 1,862 1,191 2,480 796 1,063 1,231 6,228 4,101 Realised gain/loss recognised in the statement of profit or loss during the period 1 –83 22 1 –8 32 172 –80 9 –12 90 –37 Revaluation recognised in other comprehensive income during the period 2 –61 22 –61 22 Purchase of assets 64 453 4 3 567 1,496 581 1,919 180 165 1,396 4,036 Sale of assets – 5 – 48 – 3 – 246 – 612 – 196 – 141 – 121 – 234 – 568 – 1,037 Maturity/settlement – 335 – 14 – 282 – 163 – 13 – 36 – 109 – 653 – 299 Reclassifications –5 –5 –6 –5 –11 Transfers into Level 3 232 43 280 4 –1 409 –45 –1 881 42 Transfers out of Level 3 – 434 – 517 – 1 – 95 – 98 – 529 – 615 Exchange rate differences 34 0 23 20 8 57 9 122 29 Changes in the composition of the group and other changes 0 –2 –2 Closing balance 295 822 285 1 1,822 1,862 3,454 2,480 1,047 1,063 6,903 6,228 1 Net gains/losses were recorded as ‘Valuation results and net trading income’ in the statement of profit or loss. The total amounts includes EUR -75 million (31 December 2021: EUR 50 million) of unrealised gains and losses recognised in the statement of profit or loss. 2 Revaluation recognised in other comprehensive income is included on the line ‘Net change in fair value of debt instruments at fair value through other comprehensive income’. In 2022, the transfers into level 3 mainly consisted of structured notes, measured designated as at fair value through profit or loss, which were transferred into Level 3 due to market illiquidity. This caused the valuation being significantly impacted by unobservable inputs. In 2022, the non-trading derivatives were transferred to Level 3 as a result of the valuation being significantly impacted by unobservable inputs. Changes in Level 3 Financial liabilities Financial liabilities designated as at fair value through profit or loss Trading liabilities Non-trading derivatives Total 30 June 2022 31 December 2021 30 June 2022 31 December 2021 30 June 2022 31 December 2021 30 June 2022 31 December 2021 Opening balance 160 180 35 39 135 180 330 398 Realised gain/loss recognised in the statement of profit or loss during the period 1 41 101 11 -5 13 47 113 Additions 42 58 8 3 6 52 56 113 Redemptions -7 -10 -3 -140 -7 -153 Maturity/settlement -103 -44 -71 -1 -174 -45 Transfers into Level 3 92 48 175 122 233 389 282 Transfers out of Level 3 -35 -173 -3 -65 -203 -100 -378 Exchange rate differences 5 0 0 0 0 0 5 0 Closing balance 195 160 229 35 121 135 545 330 1 Net gains/losses were recorded as ‘Valuation results and net trading income’ in the statement of profit or loss. The total amount includes EUR 47 million (2021: EUR 113 million) of unrealised gains and losses recognised in the statement of profit or loss. In 2022, the transfers into level 3 mainly consisted of structured notes, measured designated as at fair value through profit or loss, which were transferred into Level 3 due to market illiquidity. This caused the valuation being significantly impacted by unobservable inputs. In 2022, the non-trading derivatives were transferred to Level 3 as a result of the valuation being significantly impacted by unobservable inputs. Recognition of unrealised gains and losses in Level 3 Amounts recognised in the statement of profit or loss relating to unrealised gains and losses during the year that relates to Level 3 assets and liabilities are included in the line item ‘Valuation results and net trading income’ in the statement of profit or loss. In 2021 and 2022, unrealised gains and losses that relate to ‘Financial assets at fair value through other comprehensive income’ are included in the Revaluation reserve – Equity securities at fair value through other comprehensive income or Debt Instruments at fair value through other comprehensive income. Level 3: Sensitivity analysis of unobservable inputs Where the fair value of a financial instrument is determined using inputs which are unobservable and which have a more than insignificant impact on the fair value of the instrument, the actual value of those inputs at the balance date may be drawn from a range of reasonably possible alternatives. In line with market practice the upper and lower bounds of the range of alternative input values reflect a 90 % level of valuation certainty. The actual levels chosen for the unobservable inputs in preparing the financial statements are consistent with the valuation methodology used for fair valued financial instruments. In practice valuation uncertainty is measured and managed per exposure to individual valuation inputs (i.e. risk factors) at portfolio level across different product categories. Where the disclosure looks at individual Level 3 inputs the actual valuation adjustments may also reflect the benefits of portfolio offsets. This disclosure does not attempt to indicate or predict future fair value movement. The numbers in isolation give limited information as in most cases these Level 3 assets and liabilities should be seen in combination with other instruments (for example as a hedge) that are classified as Level 2. The valuation uncertainty in the table below is broken down by related risk class rather than by product. The possible impact of a change of unobservable inputs in the fair value o of financial instruments where unobservable inputs are significant to the valuation is as follows: Sensitivity analysis of Level 3 instruments Positive fair value movements from using reasonable possible alternatives Negative fair value movements from using reasonable possible alternatives 30 June 2022 31 December 2021 30 June 2022 31 December 2021 Equity (equity derivatives, structured notes) 27 3 -19 -27 Interest rates (Rates derivatives, FX derivatives) 12 15 -1 Credit (Debt securities, Loans, structured notes, credit derivatives) 28 27 -7 -2 68 45 -26 –30 Financial instruments not measured at fair value The following table presents the estimated fair values of the financial instruments not measured at fair value in the statement of financial position. The aggregation of the fair values presented below does not represent, and should not be construed as representing, the underlying value of ING Group. Methods applied in determining fair values of financial assets and liabilities (carried at amortised cost) Carrying Amount Total fair value 30 June 2022 31 December 2021 30 June 2022 31 December 2021 Financial Assets Loans and advances to banks 22,966 23,592 22,845 23,635 Loans and advances to customers 643,478 625,122 619,738 635,657 Securities at amortised cost 48,371 48,319 45,601 48,323 714,815 697,032 688,184 707,614 Financial liabilities Deposits from banks 90,513 85,092 90,719 86,035 Customer deposits 642,455 617,400 641,837 617,641 Debt securities in issue 93,123 91,784 93,224 93,085 Subordinated loans 15,473 16,715 14,913 17,203 841,564 810,990 840,693 813,964

19 Fair value of assets and liabilities

Valuation Methods

The estimated fair values represent the price that would be received to sell an asset or paid to transfer a liability

in an orderly transaction between market participants at the measurement date. It is a market-based

measurement, which is based on assumptions that market participants would use and takes into account the

characteristics of the asset or liability that market participants would take into account when pricing the asset or

liability.

Fair values of financial assets and liabilities are based on quoted prices in active market where available. When

such quoted prices are not available, the fair value is determined by using valuation techniques.

A comprehensive description of ING’s valuation

methods and framework is reported in Note 39 ‘Fair value

assets and liabilities’ of the 2021 Annual Report on Form 20-F of ING Group. This chapter of the Interim financial

report should be read in conjunction with the 2021 Annual Report on Form 20-F of ING Group.

Valuation Adjustments

Valuation adjustments are

an integral part of the fair value. They are included as part of the fair value

to provide

better estimation of market exit

value on measurement date. ING considers various valuation

adjustments to

arrive at the fair value including Bid-Offer adjustments,

Model Risk adjustments, Credit Valuation Adjustments

(CVA), Debit valuation Adjustments (DVA),

including DVA on derivatives and own issued liabilities, Collateral

Valuation Adjustment (CollVA)

and Funding Valuation Adjustment (FVA).

For financial instruments measured by internal models where one or more unobservable market

inputs are

significant for valuation, a difference between

the transaction price and the theoretical price resulting from the

internal model can occur.

ING defers material Day One profit or loss relating

to financial instruments classified as

Level 3 and financial instruments with material unobservable inputs into CVA

which are not necessarily classified

as Level 3. The Day One profit or loss is amortised over the life of the instrument or until the observability

improves. Both the impact on the profit and loss for the first six months of 2022 and the Day

One profit or loss

reserve in the balance sheet as per 30 June 2022 are deemed to be immaterial.

Methods applied in determining fair values of financial assets and liabilities (carried at fair value)

Level 1

Level 2

Level 3

Total

June

2022

December

2021

June

2022

December

2021

June

2022

December

2021

June

2022

December

2021

Financial Assets

Financial assets at fair value

through profit or loss

- Equity securities

10,908

17,591

120

134

11,030

17,727

- Debt securities

2,452

2,317

6,623

7,016

3,282

2,643

12,357

11,976

- Derivatives

35,066

21,154

389

140

35,469

21,299

- Loans and receivables

77,706

48,706

2,065

2,248

79,771

50,954

13,373

19,914

119,398

76,877

5,856

5,165

138,628

101,956

Financial assets at fair value

through other

comprehensive income

- Equity securities

1,822

2,232

242

225

2,065

2,457

- Debt securities

23,552

21,753

4,324

5,587

27,876

27,340

- Loans and receivables

805

838

805

838

25,374

23,984

4,324

5,587

1,047

1,063

30,745

30,635

Financial liabilities

Financial liabilities at fair

value through profit or loss

–

Debt securities

752

827

4,817

5,333

121

135

5,690

6,295

–

Deposits

64,483

43,026

64,483

43,026

–

Trading securities

1,536

955

152

120

1,695

1,075

–

Derivatives

35,635

20,388

416

195

36,114

20,646

2,351

1,844

105,086

68,867

545

330

107,982

71,041

The following methods and assumptions were used by ING Group to estimate

the fair value of the financial

instruments:

Equity securities

Instrument description:

Equity securities include stocks

and shares, corporate investments

and private equity

investments.

Valuation:

If available, the fair values of publicly traded equity securities and private equity securities are

based

on quoted market prices. In absence of active markets, fair

values are estimated by analysing the investee’s

financial position, result, risk profile, prospect, price, earnings comparisons and revenue multiples. Additionally,

reference is made to valuations of peer entities where quoted

prices in active markets are available. For equity

securities best market practice will be applied using the most relevant

valuation method.

All non-listed equity

investments, including investments

in private equity funds, are subject to a standard review

framework which

ensures that valuations

reflect the fair values.

Fair value hierarchy:

The majority of equity securities are publicly traded and quoted prices are readily and

regularly available.

Hence, these securities are classified as Level 1.

Equity securities which are not traded in

active markets mainly include corporate investments,

fund investments and other equity securities and are

classified as Level 3.

Debt securities

Instrument description:

Debt securities include government bonds, financial institutions bonds and Asset-backed

securities (ABS).

Valuation:

Where available, fair values for debt securities are

generally based on quoted market prices. Quoted

market prices are obtained from an exchange

market, dealer,

broker,

industry group, pricing service, or

regulatory service. The quoted prices from non-exchange sources are

reviewed on their tradability of market

prices. If quoted prices in an active market are not available, fair value

is based on an analysis of available market

inputs, which includes consensus prices obtained from

one or more pricing services. Furthermore, fair values are

determined by valuation techniques discounting expected future

cash flows using a market interest rate

curves,

referenced credit spreads, maturity

of the investment, and estimated prepayment

rates

where applicable.

Fair value hierarchy:

Government bonds and financial institutions bonds are generally traded in active

markets,

where quoted prices are readily and regularly available and are

hence, classified as Level 1. The remaining

positions are classified as Level 2 or Level 3.

Asset backed securities for which no active market is available

and a

wide discrepancy in quoted prices exists, are classified as Level 3.

Derivatives

Instrument description:

Derivatives contracts can either be exchange

-traded or over the counter (OTC).

Derivatives include interest rate

derivatives, FX derivatives, Credit derivatives,

Equity derivatives and commodity

derivatives.

Valuation:

The fair value of exchange-traded derivatives

is determined using quoted market prices in an active

market and are classified as Level 1 of the fair value hierarchy.

For instruments that are not actively traded, fair

values are estimated based on valuation techniques. OTC

derivatives and derivatives trading in an inactive

market are valued using valuation techniques. The valuation

techniques and inputs depend on the type of

derivatives

and the nature of the underlying instruments. The principal techniques used to value these

instruments are based on (amongst others) discounted cash flows option pricing models and Monte

Carlo

simulations. These valuation models calculate the present value of expected

future cash flows, based on ‘no-

arbitrage’ principles. The models are commonly used in the financial industry and inputs to the validation models

are determined from observable market data

where possible. Certain inputs may not be observable in the

market, but can be determined from observable prices via valuation model calibration

procedures. These inputs

include prices available from exchanges, dealers, brokers

or providers of pricing, yield curves, credit spreads,

default rates, recovery

rates, dividend rates, volatility of underlying interest

rates, equity prices, and foreign

currency exchange rates

and reference is made to quoted prices, recently executed

trades, independent market

quotes and consensus data, where available.

For uncollateralised OTC

derivatives, ING applies Credit Valuation

Adjustment to correctly reflect the

counterparty credit risk in the valuation and Debit Valuation

Adjustments to reflect the credit risk of ING for its

counterparty.

See sections CVA/DVA

in section c) Valuation Adjustments for more

details regarding the

calculation.

Fair value hierarchy:

The majority of the derivatives are priced using observable inputs and are classified as Level

2. Derivatives for which the input cannot be implied from observable market

data are classified as Level 3.

Loans and receivables

Instrument description:

Loans and receivables are non-derivative financial assets with fixed or determinable

payments that are not quoted in an active market.

Loans and receivables carried at fair value includes trading

loans, being securities lending and similar agreement comparable to collateralised lending, syndicated

loans,

loans expected to be sold and receivables with regards to

reverse repurchase transactions.

Valuation:

The fair value of loans and receivables are generally based on quoted market

prices. The fair value of

other loans is estimated by discounting expected future cash flows using a discount

rate that reflects credit risk,

liquidity, and other current

market conditions. The fair value of mortgage loans is estimated

by taking into

account prepayment behaviour.

Fair value hierarchy:

Loans and receivables are predominantly classified as Level 2. Loans and receivables for

which current market information about similar assets to use as observable,

corroborated data for

all significant

inputs into a valuation model is not available are classified as Level 3.

Financial liabilities at fair value through profit and loss

Instrument description:

Financial liabilities at fair value through profit and loss include debt securities, debt

instruments, primarily comprised of structured notes, which are held at fair value

under the fair value option.

Besides that, it includes derivative contracts and repurchase agreements

Valuation:

The fair values of securities in the trading portfolio and other liabilities at fair value through

profit or

loss are based on quoted market prices, where available. For

those securities not actively traded, fair values are

estimated based on internal discounted cash flow valuation techniques

using interest rates and credit spreads

that apply to similar instruments.

Fair value hierarchy:

The majority of the derivatives are classified as Level 2. Derivatives for

which the input

cannot be derived from observable market data are

classified as Level 3.

Level 3: Valuation techniques

and inputs used

Financial assets and liabilities in Level 3 include both assets and liabilities for which the fair value was determined

using (i) valuation techniques that incorporate unobservable inputs as well as

(ii) quoted prices which have been

adjusted to reflect that the market

was not actively trading at or around the balance sheet date. Unobservable

inputs are inputs which are based on ING’s own assumptions about the factors

that market participants would

use in pricing an asset or liability, developed based on the best information

available in the circumstances.

Unobservable inputs may include volatility,

correlation, spreads to discount rates,

default rates and recovery

rates, prepayment rates,

and certain credit spreads. Valuation techniques

that incorporate unobservable inputs

are sensitive to the inputs used.

Of the total amount of financial assets classified as Level 3 as at 30 June 2022 of EUR

6.9

billion (31 December

2021: EUR

6.2

billion), an amount of EUR

2.0

billion (

28.4

%) (31 December 2021: EUR

2.0

billion, being

32.5

%) is

based on unadjusted quoted prices in inactive markets. As ING does not generally adjust quoted prices using its

own inputs, there is no significant sensitivity to ING’s own unobservable

inputs.

Furthermore, Level 3 financial assets includes approximately EUR

3.6

billion (31 December 2021: EUR

2.9

billion)

which relates to financial assets that are part of structures that are

designed to be fully neutral in terms of

market risk. Such structures include various financial assets and liabilities for which the overall

sensitivity to

market risk is insignificant. Whereas the fair value of individual components of these structures

may be

determined using different techniques and the fair value

of each of the components of these structures may be

sensitive to unobservable inputs, the overall sensitivity is by design not significant.

The remaining EUR

1.4

billion (31 December 2021: EUR

1.3

billion) of the fair value classified in Level 3 financial

assets is established using valuation techniques that incorporates

certain inputs that are unobservable.

Of the total amount of financial liabilities classified as Level 3 as at

30 June 2022 of EUR

0.5

billion (31 December

2021: EUR

0.3

billion), an amount of EUR

0.0

billion (

5.4

%) (31 December 2021: EUR

0.1

billion, being

42.0

%) is

based on unadjusted quoted prices in inactive markets. As ING does not generally adjust quoted prices using its

own inputs, there is no significant sensitivity to ING’s own unobservable

inputs.

Furthermore, Level 3 financial liabilities includes approximately EUR

0.2

billion (31 December 2021: EUR

0.1

billion) which relates to financial liabilities that are part of structures that are designed to

be fully neutral in

terms of market risk. As explained above, the fair value of each of the components of

these structures may be

sensitive to unobservable inputs, but the overall sensitivity is by design not significant.

The remaining EUR

0.3

billion (31 December 2021: EUR

0.1

billion) of the fair value classified in Level 3 financial

liabilities is established using valuation techniques that incorporates

certain inputs that are unobservable.

The table below provides a summary of the valuation techniques, key unobservable inputs and the lower and

upper range of such unobservable inputs, by type of Level 3 asset/liability.

The lower and upper range mentioned

in the overview represent the lowest and highest variance of the respective

valuation input as actually used in

the valuation of the different financial instruments. Amounts

and percentages stated are unweighted.

The range

can vary from period to period subject to market movements

and change in Level 3 position. Lower and upper

bounds reflect the variability of Level 3 positions and their underlying valuation inputs in the portfolio, but do not

adequately reflect their level of valuation uncertainty.

For valuation uncertainty assessment, reference

is made

to section Sensitivity analysis of unobservable inputs (Level 3).

Valuation techniques and range of unobservable

inputs (Level 3)

Assets

Liabilities

Valuation techniques

Significant unobservable inputs

Lower range

Upper range

In EUR million

June

2022

December

2021

June

2022

December

2021

June

2022

December

2021

June

2022

December

2021

At fair value through profit or loss

Debt securities

3,282

2,643

Price based

Price (%)

122%

121%

Equity securities

120

134

Price based

Price (price per share)

5,475

Loans and advances

1,826

1,598

Price based

Price (%)

100%

Present value techniques

Credit spread (bps)

240

250

(Reverse) repo's

239

650

Present value techniques

Interest rate (%)

Structured notes

121

135

Price based

Price (%)

83%

84%

110%

125%

Option pricing model

Equity volatility (%)

15%

13%

33%

30%

Equity/Equity correlation

0.6

n.a.

1.0

n.a.

Equity/FX correlation

-0.6

0.6

Dividend yield (%)

Present value techniques

Credit spread (bps)

Derivatives

–

Rates

286

229

Option pricing model

Interest rate volatility (bps)

144

Present value techniques

Reset spread (%)

Prepayment rate (%)

12%

–

Option pricing model

Implied volatility (%)

32%

16%

–

Credit

108

Present value techniques

Credit spread (bps)

885

359

Price based

Price (%)

100%

–

Equity

–17

Option pricing model

Equity volatility (%)

16%

11%

115%

119%

Equity/Equity correlation

0.5

1.0

0.8

Equity/FX correlation

-0.7

0.1

Dividend yield (%)

50%

18%

–

Other

Option pricing model

Commodity volatility (%)

16%

20%

48%

89%

At fair value through other comprehensive income

–

Loans and advances

805

838

Present value techniques

Prepayment rate (%)

Price based

Price (%)

83%

99%

100%

–

Equity

242

225

Present value techniques

Credit spread (bps)

6.9

Interest rate (%)

Price based

Price (%)

122%

Price based

Other (EUR)

Total

6,903

6,228

545

330

Price

For securities where market prices are not available

fair value is measured by comparison with observable pricing

data from similar instruments. Prices of

% are distressed to the point that no recovery is expected,

while prices

significantly in excess of

100

% or par are expected to pay a yield above current market

rates.

Credit spreads

Credit spread is the premium above a benchmark interest rate

required by the market participant to accept a

lower credit quality. Higher credit spreads

indicate lower credit quality and a lower value of an asset.

Volatility

Volatility is a measure for variation

of the price of a financial instrument or other valuation input over time.

Volatility is one of the key inputs in option pricing models. Typically,

the higher the volatility, the higher value of

the option. Volatility varies by the underlying reference

(equity, commodity,

foreign currency and interest rates),

by strike, and maturity of the option. The minimum level of volatility is

% and there is no theoretical maximum.

Correlation

Correlation is a measure of dependence between two underlying references which is relevant

for valuing

derivatives and other instruments having more than one underlying reference.

High positive correlation (close to

1) indicates strong positive (statistical)

relationship, where underliers move, everything else equal, into the same

direction. The same holds for a high negative correlation.

Reset spread

Reset spreads are key inputs to mortgage linked prepayment swaps valuation. Reset spread is the future spread

at which mortgages will re-price at interest rate reset dates.

Inflation rate

Inflation rate is a key input to inflation

linked instruments. Inflation linked instruments

protect against price

inflation and are denominated and indexed to investment

units. Interest payments would be based on the

inflation index and nominal rate in order to receive/pay

the real rate of return. A rise in nominal coupon

payments is a result of an increase in inflation expectations, real

rates, or both.

Dividend yield

Dividend yield is an important input for equity option pricing models showing how much dividends a company is

expected to pay out each year relative to

its share price. Dividend yields are generally expressed as an annualised

percentage of share price.

Jump rate

Jump rates simulate abrupt changes in valuation models. The rate

is an added component to the discount rate in

the model to include default risks.

Prepayment rate

Prepayment rate is a key

input to mortgage and loan valuation. Prepayment rate

is the estimated rate at which

mortgage borrowers will repay

their mortgages early, e.g.

% per year.

Prepayment rate and reset spread

are key

inputs to mortgage linked prepayment

swaps valuation

Changes in Level 3 Financial assets

Trading assets

Non-trading

derivatives

Financial assets

mandatorily at FVPL

Financial assets

designated at FVPL

Financial assets

at FVOCI

Total

June

2022

December

2021

June

2022

December

2021

June

2022

December

2021

June

2022

December

2021

June

2022

December

2021

June

2022

December

2021

Opening balance

822

882

1,862

1,191

2,480

796

1,063

1,231

6,228

4,101

Realised gain/loss

recognised in the statement of profit or loss during the period

–83

–8

172

–80

–12

–37

Revaluation recognised in other comprehensive income during the

period

–61

Purchase of assets

453

567

1,496

581

1,919

180

165

1,396

4,036

Sale of assets

–

246

–

612

–

196

–

141

–

121

–

234

–

568

–

1,037

Maturity/settlement

–

335

–

282

–

163

–

109

–

653

–

299

Reclassifications

–5

–6

–5

–11

Transfers

into Level 3

232

280

–1

409

–45

–1

881

Transfers

out of Level 3

–

434

–

517

–

529

–

615

Exchange rate differences

122

Changes in the composition of the group and other changes

–2

Closing balance

295

822

285

1,822

1,862

3,454

2,480

1,047

1,063

6,903

6,228

Net gains/losses were recorded as ‘Valuation results and net trading income’ in the statement

of profit or loss. The total amounts

includes EUR

-75

million (31 December 2021: EUR

million) of unrealised gains and losses recognised in the statement of profit or loss.

Revaluation recognised in other comprehensive income is included on the line ‘Net change in fair value of debt instruments at fair value

through other comprehensive income’.

In 2022, the transfers into level

3 mainly consisted of structured notes, measured designated as at fair

value

through profit or loss, which were transferred

into Level 3 due to market illiquidity.

This caused the valuation

being significantly impacted by unobservable inputs.

In 2022, the non-trading derivatives were transferred

to Level 3 as a result of the valuation being significantly

impacted by unobservable inputs.

Changes in Level 3 Financial liabilities

Financial liabilities

designated as at fair

value through profit or

loss

Trading liabilities

Non-trading

derivatives

Total

June

2022

December

2021

June

2022

December

2021

June

2022

December

2021

June

2022

December

2021

Opening balance

160

180

135

180

330

398

Realised gain/loss recognised in

the statement of profit or loss

during the period

101

-5

113

Additions

113

Redemptions

-7

-10

-3

-140

-7

-153

Maturity/settlement

-103

-44

-71

-1

-174

-45

Transfers

into Level 3

175

122

233

389

282

Transfers

out of Level 3

-35

-173

-3

-65

-203

-100

-378

Exchange rate differences

Closing balance

195

160

229

121

135

545

330

Net gains/losses were recorded as ‘Valuation results and net trading income’ in the statement

of profit or loss. The total amount includes

EUR

million (2021: EUR

113

million) of unrealised gains and losses recognised in the statement of profit or loss.

In 2022, the transfers into level

3 mainly consisted of structured notes, measured designated as at fair

value

through profit or loss, which were transferred

into Level 3 due to market illiquidity.

This caused the valuation

being significantly impacted by unobservable inputs.

In 2022, the non-trading derivatives were transferred

to Level 3 as a result of the valuation being significantly

impacted by unobservable inputs.

In 2021 and 2022, unrealised gains and losses that relate to ‘Financial assets at fair value

through other

comprehensive income’ are included in the Revaluation

reserve – Equity securities at fair value through other

comprehensive income or Debt

Instruments at fair value through other comprehensive income.

Level 3: Sensitivity analysis of unobservable inputs

Where the fair value of a financial instrument is determined using inputs which are unobservable and which have

a more than insignificant impact on the fair value of the instrument, the actual value of those inputs at the

balance date may be drawn from a range

of reasonably possible alternatives. In line with market practice the

upper and lower bounds of the range of alternative input values reflect a

% level of valuation certainty.

The

actual levels chosen for the unobservable inputs in preparing the financial statements are consistent

with the

valuation methodology used for fair valued financial instruments.

In practice valuation uncertainty is measured and managed per exposure to

individual valuation inputs (i.e. risk

factors) at portfolio level across different

product categories. Where the disclosure looks at individual Level

inputs the actual valuation adjustments may also reflect the benefits of portfolio offsets.

This disclosure does not attempt to indicate or predict future

fair value movement. The numbers in isolation give

limited information as in most cases these Level 3 assets and liabilities should be seen in combination with other

instruments (for example as a hedge) that are classified as Level 2.

The valuation uncertainty in the table below is broken

down by related risk class rather than by product.

The

possible impact of a change of unobservable inputs in the fair value o of financial instruments where

unobservable inputs are significant to the valuation is as follows:

Methods applied in determining fair values of financial assets and liabilities (carried at amortised cost)

Carrying Amount

Total fair

value

June

2022

December

2021

June

2022

December

2021

Financial Assets

Loans and advances to banks

22,966

23,592

22,845

23,635

Loans and advances to customers

643,478

625,122

619,738

635,657

Securities at amortised cost

48,371

48,319

45,601

48,323

714,815

697,032

688,184

707,614

Financial liabilities

Deposits from banks

90,513

85,092

90,719

86,035

Customer deposits

642,455

617,400

641,837

617,641

Debt securities in issue

93,123

91,784

93,224

93,085

Subordinated loans

15,473

16,715

14,913

17,203

841,564

810,990

840,693

813,964