In 2023, forward interest rates decreased resulting in a negative EU IAS 39 carve out adjustment of EUR

-3,147 million (2022: EUR 8,451 million positive). The impact of the adjustment is mainly reflected in line

item 'Valuation results and net trading income' in the statement of profit or loss. A reconciliation between

IFRS-EU and IFRS-IASB is included below.

Both IFRS-EU and IFRS-IASB differ in several areas from accounting principles generally accepted in the

United States of America (US GAAP).


Reconciliation net result under IFRS-EU and IFRS-IASB
in EUR million	2023	2022	2021
In accordance with IFRS-EU (attributable to the shareholders of the parent)	7,287	3,674	4,776
Adjustment of the EU IAS 39 carve-out	-4,455	11,856	1,603
Tax effect of the adjustment 1	1,308	-3,405	-429
Effect of adjustment after tax	-3,147	8,451	1,174
In accordance with IFRS-IASB (attributable to the shareholders of the parent)	4,140	12,126	5,951


Reconciliation shareholders’ equity under IFRS-EU and IFRS-IASB
in EUR million	2023	2022	2021
In accordance with IFRS-EU (attributable to the shareholders of the parent)	51,240	49,909	53,919
Adjustment of the EU IAS 39 carve-out	4,902	9,357	-2,490
Tax effect of the adjustment 1	-1,457	-2,765	637
Effect of adjustment after tax	3,444	6,592	-1,853
In accordance with IFRS-IASB Shareholders’ equity	54,684	56,500	52,066

1.3 Changes to accounting policies and presentation

ING Group has consistently applied its accounting policies to all periods presented in these Consolidated

financial statements.

In 2023, ING Group updated the presentation in Note 13 'Customer deposits' to improve consistency and

comparability. Comparative figures for 2022 have been updated accordingly.

1.3.1 Changes in IFRS effective in 2023

ING Group had the following changes in accounting policies in the current reporting period:

IFRS 17 ‘Insurance Contracts’

IFRS 17, a new accounting standard for insurance contracts covering recognition and measurement,

presentation and disclosure requirements, became effective on 1 January 2023. IFRS 17 replaces IFRS 4

‘Insurance Contracts’, which allowed diversity in accounting practices for insurance contracts. IFRS 17

includes an optional scope exclusion for loans with death waivers.

ING Group does not have an insurance business, but on a limited basis sells insurance products as a broker

where it does not run the insurance risk, hence such contracts are not in scope of IFRS 17. However, ING

Group has a portfolio of loans with death waivers in the Netherlands with a net carrying amount of EUR 743

million at 1 January 2023. While IFRS 4 allowed separation of such contracts into two components in the

past (a loan in scope of IFRS 9 ‘Financial Instruments’ measured at amortised cost and an insurance contract

for the death waiver feature in scope of IFRS 4), IFRS 17 no longer allows such separation and requires such

instruments to be accounted for in their entirety using either IFRS 9 or IFRS 17.

ING Group chooses to apply IFRS 9 ’Financial Instruments’ to such loans with death waivers. As a result, this

portfolio no longer meets the ‘solely payments of principal and interest’ (SPPI) criterion. This causes the

portfolio to be measured at fair value through profit or loss instead of amortised cost from 1 January 2023.

This reclassification led to EUR -13 million impact on the opening total equity at 1 January 2023. Therefore,

the financial impact of IFRS 17 on ING Group is limited.

Accounting treatment of non-financial guarantees

ING Group changed its accounting policy for non-financial guarantees that are subject to contractual

indemnification rights (such as performance and other non-financial guarantees as well as letters of credit)

from IAS 37 principles to loan commitment accounting under IFRS 9. The re-scoping was triggered by the

introduction of IFRS 17 Insurance contracts and results in reliable and more relevant information,

particularly when credit risk is elevated as IFRS 9 expected credit losses model captures that risk earlier than

IAS 37. This voluntary policy change had a limited impact on ING’s opening total equity of EUR -33 million.

Other changes in IFRS effective in 2023

The following amendments to IFRS became effective in the current reporting period with no significant

impact for ING:

•Amendments to IAS 1 ‘Presentation of Financial Statements’: Disclosure of Accounting Policies (issued in

February 2021).

•Amendments to IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’: Definition of

Accounting Estimates (issued in February 2021).

•Amendments to IAS 12 ‘Income Taxes’: Deferred Tax Related to Assets and Liabilities Arising From a

Single Transaction (issued in May 2021).

•Amendments to IAS 12 'Income Taxes': International Tax Reform - Pillar Two Model Rules. These

amendments allow ING Group to scope out Pillar Two model rules from the deferred tax recognition and

related disclosure requirements. More information on ING Group’s exposure to Pillar Two model rules is

included in Note 31 ‘Information on geographical areas'.

1.3.2 Upcoming changes in IFRS after 2023

The following published amendments are not mandatory for 2023 and have not been early adopted by ING

Group. The implementation of these amendments is expected to have no significant impact on ING Group's

Consolidated financial statements when they become effective.

Effective in 2024:

•Amendments to IFRS 16 'Leases': Lease Liability in a Sale and Leaseback (issued in September 2022).

•Amendments to IAS 1 ‘Presentation of Financial Statements’: Classification of Liabilities as Current or

Non-current (issued in January 2020).

•Amendments to IAS 7 'Statement of Cash flows' and IFRS 7 'Financial Instruments: Disclosures': Supplier

Finance Arrangements (issued in May 2023).

Effective in 2025:

•Amendments to IAS 21 'The Effects of Changes in Foreign Exchange Rates': Lack of Exchangeability

(issued in August 2023).

1.4 Significant judgements and critical accounting estimates and assumptions

The preparation of the Consolidated financial statements requires management to make judgements in the

process of applying its accounting policies and to use estimates and assumptions. The estimates and

assumptions affect the reported amounts of the assets and liabilities and the amounts of the contingent

assets and contingent liabilities at the balance sheet date, as well as reported income and expenses for the

year. The actual outcome may differ from these estimates. The process of setting assumptions is subject to

internal control procedures and approvals.

ING Group has identified areas that require management to make significant judgements and use critical

accounting estimates and assumptions based on the information and financial data that may or may not

change in future periods. These areas are:

•Loan loss provisions (financial assets) (refer to Note 1.5.6 ‘Impairment of financial assets');

•The determination of the fair values of financial assets and liabilities (refer to Note 1.5.3 for ‘Fair values of

financial assets and liabilities’);

•Investment in associate - assessment of additional impairment losses or reversal of previous impairment

losses (refer to Note 1.10 ‘Investments in associates and joint ventures);

•Provisions (refer to Note 1.15 ‘Provisions, contingent liabilities and contingent assets’); and

•Accounting for Targeted Longer-Term Refinancing Operations (TLTRO) (refer to Note 1.5.8 ‘Accounting for

Targeted Longer-Term Refinancing Operations (TLTRO)').

1.5 Financial instruments

ING Group applies IFRS 9 ‘Financial Instruments’ to the recognition, classification and measurement, and

derecognition of financial assets and financial liabilities and the impairment of financial assets. The Group

applies the requirements of IAS 39 ‘Financial Instruments: Recognition and Measurement’ for hedge

accounting purposes.

1.5.1 Recognition and derecognition of financial instruments

Recognition of financial assets

Financial assets are recognised in the balance sheet when ING Group becomes a party to the contractual

provisions of the instrument. For a regular way purchase or sale of a financial asset, trade date and

settlement date accounting is applied depending on the classification of the financial asset.

Derecognition of financial assets

Financial assets are derecognised when the rights to receive cash flows from the financial assets have

expired or where ING Group has transferred the rights to receive the cash flows from the financial asset or

assumed an obligation to pass on the cash flows and has transferred substantially all the risks and rewards

of the asset. If ING Group neither transfers nor retains substantially all the risks and rewards of ownership of

a financial asset, it derecognises the financial asset if it no longer has control over the asset. The difference

between the carrying amount of a financial asset that has been derecognised and the consideration

received is recognised in profit or loss.

Recognition of financial liabilities

Financial liabilities are recognised on the date that the entity becomes a party to the contractual provisions

of the instrument.

Derecognition of financial liabilities

Financial liabilities are derecognised when the obligation specified in the contract is discharged, cancelled or

expired. The difference between the carrying amount of a financial liability that has been extinguished and

the consideration paid is recognised in profit or loss.

1.5.2 Classification and measurement of financial instruments

Financial assets

ING Group classifies its financial assets in the following measurement categories:

•those to be measured subsequently at fair value (either through OCI, or through profit or loss); and

•those to be measured at amortised cost (AC).

At initial recognition, ING Group measures a financial asset at its fair value plus, in the case of a financial

asset not at FVPL, transaction costs that are directly attributable to the acquisition of the financial asset.

Transaction costs of financial assets carried at fair value through profit or loss (FVPL) are expensed in the

statement of profit or loss.

Financial assets – Debt instruments

The classification depends on the entity’s business model for managing the financial assets and the

contractual terms of the cash flows at initial recognition.

Business models

Business models are classified as Hold to Collect (HtC), Hold to Collect and Sell (HtC&S) or Other depending

on how a portfolio of financial instruments as a whole is managed. ING Group’s business models are based

on the existing management structure of the bank, and refined based on an analysis of how businesses are

evaluated and reported, how their specific business risks are managed and on historic and expected future

sales. Sales are permissible in a HtC business model when these are due to an increase in credit risk, take

place close to the maturity date (where the proceeds from the sales approximate the collection of the

remaining contractual cash flows), are insignificant in value (both individually and in aggregate) or are

infrequent.

Contractual cash flows Solely Payments of Principal and Interest (SPPI)

The contractual cash flows of a financial asset are assessed to determine whether they represent SPPI.

Interest includes consideration for the time value of money, credit risk and for other basic lending risks such

as consideration for liquidity risk and costs associated with holding the financial asset for a particular period

of time. In addition, interest can include a profit margin that is consistent with a basic lending arrangement.

Financial assets with embedded derivatives are considered in their entirety when determining whether their

cash flows are SPPI.

In assessing whether the contractual cash flows are SPPI, ING Group considers the contractual terms of the

instrument. This includes assessing whether the financial asset contains a contractual term that could

change the timing or amount of contractual cash flows such that it would not meet this condition.

Based on the entity’s business model for managing the financial assets and the contractual terms of the

cash flows, there are three measurement categories into which ING Group classifies its debt instruments:

•Amortised Cost (AC):

Debt instruments that are held for collection of contractual cash flows under a HtC business model where

those cash flows represent SPPI are measured at AC. Interest income from these financial assets is

included in Interest income using the Effective Interest Rate (EIR) method. Any gain or loss arising on

derecognition is recognised directly in profit or loss. Impairment losses are presented as a separate line

item in the statement of profit or loss.

•FVOCI:

Debt instruments that are held for collection of contractual cash flows and for selling the financial assets

under a HtC&S business model, where the assets’ cash flows represent SPPI, are measured at FVOCI.

Movements in the carrying amount are recognised in OCI, except for the recognition of impairment gains

or losses, interest revenue and foreign exchange gains and losses which are recognised in profit or loss.

When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is

reclassified from equity to profit or loss and presented in Investment income or Other net income, based

on the specific characteristics of the business model. Interest income from these financial assets is

included in Interest income using the EIR method. Impairment losses are presented as a separate line

item in the statement of profit or loss.

•FVPL:

Debt instruments that do not meet the criteria for AC or FVOCI are measured at FVPL. This includes debt

instruments that are held-for-trading (presented separately as Trading assets) and all other debt

instruments that do not meet the criteria for AC or FVOCI (presented separately as Mandatorily at FVPL).

ING Group may in some cases, on initial recognition, irrevocably designate a financial asset as classified

and measured at FVPL. This is the case where doing so eliminates or significantly reduces an accounting

mismatch that would otherwise arise on assets measured at AC or FVOCI. Fair value movements on

trading securities, trading loans and deposits (mainly reverse repo’s) are presented fully within valuation

result and net trading income, this also includes interest. The interest arising on financial assets

designated as at FVPL is recognised in profit or loss and presented within Interest income or Interest

expense in the period in which it arises. The interest arising on a debt instrument that is part of a hedge

relationship, but not subject to hedge accounting, is recognised in profit or loss and presented within

Interest income or Interest expense in the period in which it arises.

ING Group reclassifies debt instruments if, and only if, its business model for managing those financial

assets changes. Such changes in business models are expected to be very infrequent. There have been no

reclassifications during the reporting period.

Financial assets – Equity instruments

All equity investments are measured at fair value. ING Group applies the fair value through OCI option to

investments which are considered strategic, consisting of investments that add value to ING Group’s core

banking activities.

There is no subsequent recycling of fair value gains and losses to profit or loss following the derecognition of

investments if elected to be classified and measured as FVOCI. However, the cumulative gain or loss is

transferred within equity to retained earnings on derecognition of such equity instruments. Dividends from

such investments continue to be recognised in profit or loss as Investment income when ING Group’s right to

receive payments is established. Impairment requirements are not applicable to equity investments

classified and measured as FVOCI.

Other remaining equity investments are measured at FVPL. All changes in the fair value are recognised in

Valuation result and Net trading income in the Consolidated statement of profit or loss.

Financial liabilities

Financial liabilities are classified and subsequently measured at AC, except for financial guarantee contracts,

derivatives and liabilities designated at FVPL. Financial liabilities classified and measured at FVPL are

presented as follows:

•the amount of change in the fair value that is attributable to changes in own credit risk of the liability

designated at FVPL is presented in OCI. Upon derecognition this Debit Valuation Adjustment (DVA) impact

does not recycle from OCI to profit or loss;

•the remaining amount of change in the fair value is presented in profit or loss in ‘Valuation results and

net trading income’. Interest on financial liabilities at FVPL is also recognised in the valuation result,

except for items voluntarily designated as FVPL for which interest is presented within ‘Interest income

(expense).

A financial guarantee contract is a contract that requires ING Group to make specified payments to

reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in

accordance with the original or modified terms of a debt instrument. Such a contract is initially recognised

at fair value and is subsequently measured at the higher of (a) the amount determined in accordance with

impairment provisions of IFRS 9 ‘Financial instruments’ (see section 'Impairment of financial assets') and (b)

the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance

with the revenue recognition principle of IFRS 15 ‘Revenue from contracts with customers’.

Repurchase transactions and reverse repurchase transactions

Securities sold subject to repurchase agreements (repos), securities lending and similar agreements

continue to be recognised in the Consolidated statement of financial position. The counterparty liability is

measured at FVPL (designated) and included in Other financial liabilities at FVPL if the asset is measured at

FVPL. Otherwise, the counterparty liability is included in Deposits from banks, Customer deposits, or Trading,

as appropriate.

Securities purchased under agreements to resell (reverse repos), securities borrowings and similar

agreements are not recognised in the Consolidated statement of financial position. The consideration paid

to purchase securities is recognised as Loans and advances to customers, Loans and advances to banks,

Other financial assets at FVPL or Trading assets, as appropriate. The difference between the sale and

repurchase price is treated as interest and amortised over the life of the agreement using the effective

interest method for instruments that are not measured at FVPL.

1.5.3 Fair values of financial assets and liabilities

All financial assets and liabilities are recognised initially at fair value. The fair value of a financial instrument

on initial recognition is generally its transaction price (that is, the fair value of the consideration given or

received). However, if there is a material difference between the transaction price and the fair value of

financial instruments whose fair value is based on a valuation technique using significant unobservable

inputs, the entire day one difference (a ‘Day One Profit or Loss’) is deferred. ING Group defers the 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 deferred Day One Profit or

Loss is recognised in the statement of profit or loss over the life of the transaction until the transaction

matures, or until the significant unobservable inputs become observable, or until the significant

unobservable inputs become non-significant. In all other cases, ING Group recognises the difference as a

gain or loss at inception.

Subsequently, except for financial assets and financial liabilities measured at amortised cost, all the other

financial assets and liabilities are measured at fair value.

Fair value is defined as 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 assumes that market

participants would use and take into account the characteristics of the asset or liability when pricing the

asset or liability. Fair values of financial assets and liabilities are based on unadjusted quoted market prices

where available. Such quoted market prices are primarily obtained from exchange prices for listed financial

instruments. Where an exchange price is not available, quoted prices in an active market may be obtained

from independent market vendors, brokers, or market makers. In general, positions are valued at the bid

price for a long position and at the offer price for a short position or are valued at the price within the bid-

offer spread that is most representative of fair value in the circumstances. In some cases where positions

are marked at mid-market prices, a fair value adjustment is calculated.

For certain financial assets and liabilities, quoted market prices are not available. For such instruments, fair

value is determined using valuation techniques. These range from discounting of cash flows to various

valuation models, where relevant pricing factors including the market price of underlying reference

instruments, market parameters (volatilities, correlations and credit ratings), and customer behaviour are

taken into account. ING Group maximises the use of market observable inputs and minimises the use of

unobservable inputs in determining the fair value. It can be subjective dependent on the significance of the

unobservable input to the overall valuation. All valuation techniques used are subject to internal review and

approval. Most data used in these valuation techniques are validated on a daily basis when possible.

When a group of financial assets and liabilities are managed on the basis of their net risk exposures, the fair

value of a group of financial assets and liabilities are measured on a net portfolio level.

To include credit risk in fair value, ING Group applies both Credit and Debit Valuation Adjustments (CVA, DVA,

also known as Bilateral Valuation Adjustments or BVA). Own issued debt and structured notes that are

designated at FVPL are adjusted for ING Group’s own credit risk by means of a DVA. To include the funding

risk, ING Group applies an additional ‘Funding Valuation Adjustment’ (FVA) to the uncollateralised derivatives

based on the market price of funding liquidity.ING Group also applies to certain positions other valuation

adjustments to arrive at the fair value: Bid-Offer adjustments, Model Risk Adjustments and Collateral

Valuation Adjustments (CollVA).


Significant judgements and critical accounting estimates and assumptions: •Even if market prices are available, when markets are less liquid there may be a range of prices for the same security from different price sources. Selecting the most appropriate price requires judgement and could result in different estimates of fair value. •Valuation techniques are subjective in nature and significant judgement is involved in establishing fair values for certain financial assets and liabilities. Valuation techniques involve various assumptions regarding pricing factors. The use of different valuation techniques and assumptions could produce significantly different estimates of fair value. •Price testing is performed to assess whether the process of valuation has led to an appropriate fair value of the position and to minimise the potential risks of economic losses due to incorrect or misused models. •Assessing whether a market is active, and whether an input is observable and significant, requires judgement. ING Group categorises its financial instruments that are either measured in the statement of financial position at fair value or of which the fair value is disclosed, into a three-level hierarchy based on the observability and significance of the valuation inputs. The use of different approaches to assess whether a market is active, whether an input is observable, and whether an unobservable input is significant could produce different classification within the fair value hierarchy as well as potentially different deferral of the Day One Profit or Loss. •Reference is made to Note 35 'Fair value of assets and liabilities ' and to the ‘Market risk’ paragraph in the ‘Risk management’ section of the Annual Report for the basis of the determination of the fair value of financial instruments and related sensitivities.

1.5.4 Derivatives and hedge accounting

IFRS 9 includes an accounting policy choice to defer the adoption of IFRS 9 hedge accounting and to

continue with hedge accounting under IAS 39. ING Group decided to exercise this accounting policy choice

and did not adopt IFRS 9 hedge accounting as of 1 January 2018.

Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into

and are subsequently measured at fair value. Fair values are obtained from quoted market prices in active

markets, including market transactions and valuation techniques (such as discounted cash flow models and

option pricing models), as appropriate. All derivatives are carried as assets when their fair value is positive

and as liabilities when their fair value is negative. Fair value movements on derivatives are presented in

profit or loss in Valuation result and net trading income, except for derivatives in either a formal hedge

relationship and so-called economic hedges that are not in a formal hedge accounting relationship where a

component is presented separately in interest result in line with ING Group’s risk management strategy.

Embedded derivatives are separated from financial liabilities and other non-financial contracts and

accounted for as a derivative if, and only if:

1.the economic characteristics and risks of the embedded derivative are not closely related to the

economic characteristics and risks of the host contract;

2.a separate instrument with the same terms as the embedded derivative would meet the definition of a

derivative; and

3.the combined instrument is not measured at fair value with changes in fair value reported in profit or

loss.

If an embedded derivative is separated, the host contract is accounted for as a similar free-standing

contract.

The method of recognising the resulting fair value gain or loss depends on whether the derivative is

designated as a hedging instrument, and if so, the nature of the item being hedged. ING Group designates

certain derivatives as hedges of the fair value of recognised assets or liabilities or firm commitments (fair

value hedge), hedges of highly probable future cash flows attributable to a recognised asset or liability or a

forecast transaction (cash flow hedge), or hedges of a net investment in a foreign operation. Hedge

accounting is used for derivatives designated in this way provided certain criteria are met.

At the inception of the transaction, ING Group documents the relationship between hedging instruments

and hedged items, its risk management objective, together with the methods selected to assess hedge

effectiveness. ING Group also documents its assessment, both at hedge inception and on an ongoing basis,

of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in

fair values or cash flows of the hedged items.

Fair value hedges

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised

in the statement of profit or loss, together with fair value adjustments to the hedged item attributable to

the hedged risk. If the hedge relationship no longer meets the criteria for hedge accounting, the cumulative

adjustment of the hedged item is, in the case of interest bearing instruments, amortised through the

statement of profit or loss over the remaining term of the original hedge or recognised directly when the

hedged item is derecognised. For non-interest bearing instruments, the cumulative adjustment of the

hedged item is recognised in the statement of profit or loss only when the hedged item is derecognised.

Cash flow hedges

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow

hedges are recognised in the Other Comprehensive Income. The gain or loss relating to the ineffective

portion is recognised immediately in the statement of profit or loss. Amounts accumulated in the Other

Comprehensive Income are recycled to the statement of profit or loss in the periods in which the hedged

item affects net result. When a hedging instrument expires or is sold, or when a hedge no longer meets the

criteria for hedge accounting, any cumulative gain or loss existing in the Other Comprehensive Income at

that time remains in the Other Comprehensive Income and is recognised when the forecast transaction is

ultimately recognised in the statement of profit or loss. When a forecast transaction is no longer expected

to occur, the cumulative gain or loss that was reported in the Other Comprehensive Income is transferred

immediately to the statement of profit or loss.

Net investment hedges

Hedges of net investments in foreign operations are accounted for in a similar way to cash flow hedges. Any

gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in the

Other Comprehensive Income and the gain or loss relating to the ineffective portion is recognised

immediately in the statement of profit or loss. Gains and losses accumulated in the Other Comprehensive

Income are included in the statement of profit or loss when the foreign operation is disposed.

IBOR Transition – specific policies for hedges directly affected by IBOR reform

As explained in the ‘IBOR Transition’ paragraph of the ‘Risk management’ section, a fundamental review of

important interest rates benchmarks has been carried out, and it is still in process for some of them (for

instance, WIBOR).

Given that IBOR reform may have various accounting implications, the International Accounting Standards

Board (IASB) has undertaken a two-phase project. Phase 1 addresses those issues that affect financial

reporting before the replacement of an existing benchmark. Phase 1 amendments to IFRS were issued by

the IASB in 2019. Phase 2 focuses on issues that may affect financial reporting when the existing benchmark

rate is reformed or replaced. Phase 2 amendments to IFRS were issued by the IASB in 2020.

Phase 1 amendments to IFRS allow ING Group to apply a set of temporary exceptions to continue hedge

accounting even when there is uncertainty about contractual cash flows arising from the reform. Under

these temporary exceptions, interbank offered rates are assumed to continue unaltered for the purposes of

hedge accounting until such time as the uncertainty is resolved.

More specifically, the following temporary reliefs are part of the Phase 1 amendments:

•Highly probable requirement for cash flow hedges

When determining whether a forecast transaction is highly probable, it is assumed that the interest rate

benchmark on which the hedged cash flows are based is not altered as a result of the reform.

•Prospective assessment of hedge effectiveness

When performing the prospective assessment it is assumed that the interest rate benchmark on which

the hedged cash flows are based is not altered as a result of the reform.

•Retrospective assessment of hedge effectiveness

When performing the retrospective assessment hedges are allowed to pass the assessment even if

actual results are outside the 80-125% range, during the period of uncertainty arising from the IBOR

reform.

•Designation of a component of an item as a hedged item

For hedges of the benchmark component of interest rate risk affected by the reform, the separately

identifiable requirement only needs to be demonstrated at the inception of such hedging relationships.

The amendments are relevant given that ING Group hedges and applies hedge accounting to benchmark

interest rate exposure part of IBOR reform. ING Group hedges are being progressively amended, where

necessary, to incorporate the new benchmark rates. Temporary exceptions under Phase 1 continued to be

relevant for ING Group as at 31 December 2023 (mainly for WIBOR hedges).

ING Group will completely cease to apply the amendments when this uncertainty is no longer present or

when the hedging relationship is discontinued. Refer to note ‘Risk management/ IBOR Transition’ for the

disclosures relating to the application of the amendments as part of Phase 1 and for more information

regarding the end of Phase 1 reliefs for ING Group’s hedging relationships.

Phase 2 amendments require that hedge accounting continues on transition to risk free rates provided that

the modifications made to financial instruments are those necessary to implement the IBOR Reform and

that the new basis for calculating cash flows is ‘economically equivalent’ to the previous basis. Particularly,

Phase 2 amendments allow the continuation of hedging relationships, subject to amending their

documentation to reflect changes in hedged instruments, hedging instruments, hedged risk, and/or the

method for measuring effectiveness during the transition to the new benchmark rates. During 2023, Phase 2

continued to be relevant for ING Group when ING actually transitioned its financial instruments (designated

in hedge accounting relationships) to the new benchmark rates (mainly, USD LIBOR).

More specifically, the following temporary reliefs are part of the Phase 2 amendments:

Relief from discontinuing hedging relationships

•Amendments in the hedge documentation as a consequence of changes required by the IBOR reform do

not result in the discontinuation of the hedge relationship nor the designation of a new hedge

relationship. The changes can be in form of designating an alternative benchmark rate as a hedged risk,

the description of the hedging instrument, the description of the hedged item, or the method to measure

the effectiveness.

•When the hedged item is amended as a consequence of the IBOR reform (or if the hedge has previously

been discontinued), amounts accumulated in the cash flow hedge reserve are deemed to be based on

the Risk-Free Rate (RFR). This results in the release of the cash flow hedge reserve to profit or loss in the

same period or periods in which the hedged cash flows that are now based on the RFR affect profit or

loss.

•When the items within a designated group of hedged items are amended as a consequence of the IBOR

reform, the hedging strategy remains and is not discontinued. As items within the hedged group

transition at different times from IBORs to RFRs, they are transferred to sub-groups of instruments that

reference RFRs as the hedged risk. The existing IBORs remain designated as the hedged risk for the other

sub-group of hedged items, until they are also updated to reference the new RFR. The usual hedge

accounting requirements are applied to the hedge relationship in its entirety.

•For the assessment of retrospective hedge effectiveness, the cumulative fair value changes may be reset

to zero when the exception to the retrospective assessment of the Phase 1 reliefs ends. This election is

made separately for each hedging relationship (i.e., on a hedge-by-hedge basis).

•Temporary relief from having to meet the separately identifiable requirement: a RFR is considered a

separately identifiable risk component if it is reasonably expected to meet the separately identifiable

requirement within 24 months from the date it is first designated as a non-contractually specified risk

component (i.e. when the entity first designates the RFR as a non-contractually specified risk

component). This relief applies to each RFR on a rate-by-rate basis.

Non-trading derivatives that do not qualify for hedge accounting

Derivative instruments that are used by ING Group as part of its risk management strategies, but which do

not qualify for hedge accounting under ING Group’s accounting policies, are presented as non-trading

derivatives. Non-trading derivatives are measured at fair value with changes in the fair value taken to the

statement of profit or loss.

1.5.5 Offsetting of financial assets and financial liabilities

Financial assets and financial liabilities are offset, and the net amount is reported in the statement of

financial position when ING Group has a current legally enforceable right to set off the recognised amounts

and intends to either settle on a net basis or to realise the asset and settle the liability simultaneously.

Offsetting is applied to certain derivatives for which the services of a central clearing house or broker are

used.

1.5.6 Impairment of financial assets

An Expected Credit Loss (ECL) model is applied to financial assets accounted for at AC or FVOCI such as

loans, debt securities and lease receivables, as well as off-balance sheet items such as undrawn loan

commitments, certain financial guarantees issued, and undrawn committed revolving credit facilities. Under

the ECL model, ING Group calculates the expected credit losses (ECL) by considering on a discounted basis

the cash shortfall it would incur in case of a default and multiplying the shortfall by the probability of a

default occurring. The ECL is the sum of the probability-weighted outcomes. The ECL estimates are unbiased

and include reasonable and supportable information about past events, current conditions, and forecasts of

future economic conditions. ING Group’s approach leverages the Advanced Internal Ratings Based (AIRB)

models that are used for regulatory purposes. Adjustments are applied to make these models suitable for

determining ECL. ECL is recognised on the balance sheet as loan loss provisions (LLP).

Three-stage approach

Financial assets are classified in one of the below three stages at each reporting date. A financial asset can

move between stages during its lifetime. The stages are based on changes in credit quality since initial

recognition and defined as follows:

•Stage 1

Financial assets that have not had a significant increase in credit risk since initial recognition (i.e. no

Stage 2 or 3 triggers apply). Assets are classified as Stage 1 upon initial recognition (with the exception of

purchased or originated credit impaired (POCI) assets) and ECL is determined by the probability that a

default occurs in the next 12 months (12 months ECL);

•Stage 2

Financial assets showing a significant increase in credit risk since initial recognition. For assets in Stage 2

ECL reflects an estimate on the credit losses over the remaining maturity of the asset (lifetime ECL); or

•Stage 3

Financial assets that are credit-impaired. Also for these assets ECL is determined over the remaining

maturity of the asset.

Significant increase in credit risk

ING Group established a framework, incorporating quantitative and qualitative indicators, to identify and

assess significant increases in credit risk (SICR). This is used to determine the appropriate ECL Stage for each

financial asset.

The main determinate of SICR is a quantitative test, whereby the lifetime Probability of Default (PD) of an

asset at each reporting date is compared against its lifetime PD determined at the date of initial recognition.

If the delta is above pre-defined absolute or relative thresholds the item is considered to have experienced a

SICR. Furthermore, any facility which shows an increase of 200% between the PD at the date of initial

recognition and the lifetime PD at the reporting date (i.e. threefold increase in PD) must be classified as

Stage 2. This is considered a backstop within the quantitative assessment of SICR. Refer to ‘Criteria for

identifying a significant increase in credit risk’ in the ‘Risk Management’ section of the Annual Report for

more details on relative and absolute PD thresholds, including quantitative disclosures on those thresholds.

Consequently, if the above quantitative SICR thresholds are exceeded, the item moves from Stage 1 to Stage

2 (unless the item is credit-impaired). In these instances, items are no longer assigned a 12-month ECL and

instead are assigned a lifetime ECL. Items can return to Stage 1 if there is sufficient evidence that there is no

longer a significant increase in credit risk.

ING Group also relies on a number of qualitative indicators to identify and assess SICR. These include:

•Forbearance status;

•Watch List status;

•Intensive care management;

•Collective SICR assessment;

•Substandard Internal rating; and

•Arrears status (including 30 days past due used as a backstop).

An asset that is in Stage 2 will move back to Stage 1 when none of the above criteria are in place anymore.

However, if the asset was moved to Stage 2 based on the forbearance status, then the asset stays in Stage

2 for at least 24 months. If the asset was classified as Stage 2 due to 30 days past due trigger, then the

asset is moved back to Stage 1 only after three months from when the trigger no longer applies.

Credit-impaired financial assets (Stage 3)

Financial assets are assessed for credit-impairment at each reporting date and more frequently when

circumstances warrant further assessment. Evidence of credit-impairment includes arrears of over 90 days

on any material credit obligation, indications that the borrower is experiencing significant financial difficulty,

a breach of contract, bankruptcy or distressed restructuring. The definition of credit-impaired under IFRS 9

(Stage 3) is aligned with the definition of default used by ING Group for internal risk management purposes,

which is also the definition used for regulatory purposes.

An asset (other than a POCI asset) that is in Stage 3 will move back to Stage 2 when, as at the reporting

date, it is no longer considered to be credit-impaired subject to certain probation periods. The asset will

migrate back to Stage 1 when its credit risk at the reporting date is no longer considered to have increased

significantly since initial recognition.

Macroeconomic scenarios

ING Group has established a quarterly process whereby forward-looking macroeconomics scenarios and

probability weightings are developed for the purpose of ECL. ING Group applies data predominantly from a

leading service provider enriched with the internal ING Group view. A baseline, up-scenario and a down-

scenario are determined to reflect an unbiased and probability-weighted ECL amount. As a baseline

scenario, ING Group applies the market-neutral view combining consensus forecasts for economic variables

such as unemployment rates, GDP growth, house prices, commodity prices, and short-term interest rates.

Applying market consensus in the baseline scenario ensures unbiased estimates of the expected credit

losses.

The alternative scenarios are based on observed forecast errors in the past, adjusted for the risks affecting

the economy today and the forecast horizon. The probabilities assigned are based on the likelihoods of

observing the three scenarios and are derived from confidence intervals on a probability distribution. The

forecasts for the economic variables are adjusted on a quarterly basis.

The probability weights applied to each of the three scenarios

ING Group uses three macroeconomic scenarios when determining IFRS 9 ECL (baseline, upside and

downside). Management approach used to determine the weights of each scenario and in selecting the

parts of the distribution of forecast errors from which the weights are derived and disclosed in the

‘Alternative scenarios and probability weights’ and the sensitivity analysis in the ‘Risk Management’ section

of the Annual Report.

Measurement of ECL

ING Group applies a collective assessment method to measure ECL for Stage 1, Stage 2, and certain Stage 3

assets. Other credit-impaired assets subject to ECL measurement apply the individual assessment method.

Collectively assessed assets (Stages 1 to 3)

For collective assessed assets, ING Group applies a model-based approach. ECL is determined by, expressed

simplistically, multiplying the probability of default (PD) with the loss given default (LGD) and exposure at

default (EAD), adjusted for the time value of money. Assets that are collectively assessed are grouped on

the basis of similar credit risk characteristics, taking into account loan type, industry, geographic location,

collateral type, past due status and other relevant factors. These characteristics are relevant to the

estimation of future cash flows for groups of such assets by being indicative of the debtors’ ability to pay all

amounts due according to the contractual terms of the assets being evaluated and the loss in case the

debtor is not able to pay all amounts due.

For Stage 3 assets the PD equals 100% and the LGD and EAD represent a lifetime view of the losses based on

characteristics of defaulted facilities.

For the purpose of ECL, ING Group’s expected credit loss models (PD, LGD, EAD) used for regulatory purposes

have been adjusted. These adjustments include removing embedded prudential conservatism (such as

floors) and converted through-the-cycle estimates to point-in-time estimates. The models assess ECL on the

basis of forward-looking macroeconomic forecasts and other inputs. For most financial assets, the expected

life is limited to the remaining maturity. For overdrafts and certain revolving credit facilities, such as credit

cards, the maturity is estimated based on historical data as these do not have a fixed term or repayment

schedule.

Individually assessed assets (Stage 3)

ING Group estimates ECL for individually significant credit-impaired financial assets within Stage 3 on an

individual basis. ECL for these Individually assessed assets are determined using the discounted expected

future cash flow method. To determine expected future cash flows, one or more scenarios are used. Each

scenario is analysed based on the probability of occurrence and includes forward looking information.

In determining the scenarios, all relevant factors impacting the future cash flows are taken into account.

These include expected developments in credit quality, business and economic forecasts, and estimates of

if/when recoveries will occur taking into account ING Group’s restructuring/recovery strategy.

The best estimate of ECL is calculated as the weighted-average of the shortfall (gross carrying amount

minus discounted expected future cash flow using the original EIR) per scenario, based on best estimates of

expected future cash flows. Recoveries can arise from, among others, repayment of the loan, collateral

recovery and the sale of the asset. Cash flows from collateral and other credit enhancements are included in

the measurement of ECL of the related financial asset when it is part of or integral to the contractual terms

of the financial asset and the credit enhancement is not recognised separately. For the individual

assessment, with granular (company or asset-specific) scenarios, specific factors can have a larger impact

on the future cash flows than macroeconomic factors.

When a financial asset is credit-impaired, interest is no longer recognised based on the accrual income

based on the gross carrying amount of the asset. Rather, interest income is calculated by applying the

original EIR to the AC of the asset, which is the gross carrying amount less the related loan loss provision.

Purchased or Originated Credit Impaired (POCI) assets

POCI assets are financial assets that are credit-impaired on initial recognition. Impairment on a POCI asset is

determined based on lifetime ECL from initial recognition. POCI assets are recognised initially at an amount

net of ECL and are measured at AC using a credit-adjusted effective interest rate. In subsequent periods any

changes to the estimated lifetime ECL are recognised in profit or loss. Favourable changes are recognised as

an impairment gain even if the lifetime ECL at the reporting date is lower than the estimated lifetime ECL at

origination.

Write-off and debt forgiveness

Loans and debt securities are written off (either partially or in full) when there is no reasonable expectation

of recovery and/or collectability of amounts due. The following events can lead to a write-off:

•After a restructuring has been completed and there is a high improbability of recovery of part of the

remaining loan exposure (including partial debt forgiveness);

•In a bankruptcy liquidation scenario;

•After divestment or sale of a credit facility at a discount; and

•Specific fraud cases with no recourse options.

When a loan is uncollectable, it is written off against the related loan loss provision. Subsequent recoveries

of amounts previously written off are recognised in ‘Addition to loan loss provisions’ in the Consolidated

statement of profit or loss.

Debt forgiveness (or debt settlement) involves write-off but additionally involves the forgiveness of a legal

obligation, in whole or in part. This means that ING Group forfeits the legal right to recover the debt. As a

result, the financial asset needs to be derecognised.

Presentation of ECL

ECL for financial assets measured at AC are deducted from the gross carrying amount of the assets. For

debt instruments at FVOCI, the ECL is recognised in OCI, instead of deducted the carrying amount of the

asset. ECL also reflects any credit losses related to the portion of the loan commitment that is expected to

be drawn down over the remaining life of the instrument. The ECL on issued financial guarantee contracts,

in scope of IFRS 9 and not measured at FVPL, are recognised as liabilities and presented in Other provisions.

ECL are presented in profit or loss in Addition to loan loss provision.


Significant judgements and critical accounting estimates and assumptions: The calculation of ECL requires a number of judgements and estimates. In particular: •ING Group makes various assumptions about the risk of default, the credit loss rates in case of a default and expected future cash flows. For collective provisions, ING Group applies significant judgement when estimating modelled parameters such as PD, LGD and EAD, including the selection and calibration of relevant models. For Stage 3 individual provisioning, the determination and probabilities of restructuring and recovery scenarios as well as the amount and timing of expected future cash flows may be particularly subjective. •Forward-looking macroeconomic scenarios used in impairment assessments are uncertain in nature. The use of alternate forward-looking macroeconomic scenarios can produce significantly different estimates of ECL. This is demonstrated in the sensitivity analysis in the ‘Risk Management’ section of the Annual Report, where the un-weighted ECL under each of the three scenarios for some significant portfolios is disclosed.


•When determining whether the credit risk on a financial asset has increased significantly (criteria for identifying a significant increase in credit risk), ING Group considers reasonable and supportable information to compare the risk of default occurring at reporting date with the risk of a default occurring at initial recognition of the financial asset. Whilst judgement is required in applying a PD rating to each financial asset, there is significant judgement used in determining the Stage allocation PD banding thresholds. The process of comparing a financial asset’s PD with the PD banding thresholds determines its ECL Stage. Assets in Stage 1 are allocated a 12-month ECL, and those in Stage 2 are allocated a lifetime ECL, and the difference is often significant. As such, the judgement made in assigning financial asset PDs and the PD banding thresholds constitute a significant judgement. Analysis of the sensitivity associated with the assessment of significant increase in credit risk is presented in the ‘Risk Management’ section of the Annual Report. •Judgement is exercised in management’s evaluation of whether there is objective evidence that exposures are credit-impaired. •To reflect the risks that are not properly captured by the ECL models, a number of management adjustments to the model-based ECL were necessary as at 31 December 2023, which required significant judgement. Reference is made to the ‘Management adjustments applied this year’ paragraph in the ‘Risk management’ section of the Annual Report.

1.5.7 Modification of financial instruments

In certain circumstances ING Group grants borrowers postponement, reduction of loan principal and/or

interest payments on a temporary period of time to maximise collection opportunities, and if possible, avoid

default, foreclosure, or repossession. When such postponement, reduction of loan principal and/or interest

payments is executed based on credit concerns it is also referred to as forbearance (refer to the ‘Risk

Management’ section of the Annual Report for more details) and requires analysis on whether the

contractual terms have been substantially modified or not. A similar assessment is needed when

contractual terms are modified for other reasons than forbearance.

ING Group determines whether there has been a substantial modification using both quantitative and

qualitative factors. If the modification results in a substantial modification of the terms of the loan, the

original loan is derecognised and a new loan is recognised at fair value at the modification date. In case of a

non-substantial modification, a modification gain or loss is recognised in profit or loss.

1.5.8 Accounting for Targeted Longer-Term Refinancing Operations (TLTRO)

ING Group participates in Targeted Longer-Term Refinancing Operations (TLTRO III). ING Group considers

TLTRO funding provided by the ECB to banks to be on market terms on the basis that the ECB has

established a separate market with TLTRO programmes. They have specific terms which are different from

other sources of funding available to banks, including those provided by the ECB. Consequently, the rate

under TLTRO is considered to be a market conforming rate and TLTRO funding is recognised fully as a

financial liability.

ING Group interprets the whole rate set by the ECB under TLTRO as a floating rate on the financial liability,

being the market rate for each specific period in time. This results in discrete rates for discrete interest

periods over the life of TLTRO. The change in the applicable rate between interest periods is seen as a

change in the floating rate and is accounted for prospectively. Similarly, if the ECB announces changes in

the rate for the amounts already drawn under the existing TLTRO, then such changes also represent a

change in a floating rate. Following this, such changes lead to the recognition of an increased/decreased

interest in the relevant period of life of the exposure, rather than by the recognition of an immediate

modification gain or loss at the moment of the change of terms by the ECB. If the change relates to the

periods already passed, the impact for those past periods is recognised in profit or loss immediately.

Furthermore, the change in the TLTRO rate driven by changes in expectations of meeting the targets

impacts interest income. As a result, interest income which relates to the period that already passed until

the moment when the change in expectations occurs, is recognised as a catch up adjustment in

Consolidated statement of profit or loss. This change occurs only when ING Group has a reasonable

expectation that the lending targets will be met.

ING Group views ‘reasonable expectation’ in case of TLTRO funding as a high hurdle. This is the moment

when it becomes highly probable, i.e. the probability of meeting the lending targets is substantially greater

than the probability that it will not. As a result, if interest income is recognised during the period based on

the expectation of meeting the targets, there should only be a limited possibility that the interest may need

to be reversed in future reporting periods.. Reference is made to note 12 ‘Deposits from banks’ and to note

20 ‘Net interest income’ for the presentation of ING Group’s participation in TLTRO programmes.


Significant judgements: Significant management judgement is exercised in determining the accounting treatment of TLTRO transactions. In particular, ING Group applied judgement in: •assessing and concluding that in ING Group’s view the rate under TLTRO is considered to be a market conforming rate and, hence, accounting for TLTRO in accordance with IFRS 9; •selecting accounting policies regarding the calculation of the effective interest rate under TLTRO.

1.6 Consolidation

ING Group comprises ING Groep N.V. (the Parent Company), ING Bank N.V. and all other subsidiaries.

Subsidiaries are entities controlled by ING Groep N.V. Control exists if ING Groep N.V. is exposed to or has

rights to variable returns and has the ability to affect those returns through the power over the subsidiary.

For interests in structured entities, the existence of control requires judgement as these entities are

designed so that voting or similar rights are not the dominant factor in deciding who controls the entity. This

judgement includes, for example, the involvement in the design of the structured entity, contractual

arrangements that give rights to direct the structured entities relevant activities and commitment to ensure

that the structured entity operates as designed.

Transactions between ING Groep N.V. and its subsidiaries are eliminated on consolidation. Reference is

made to Note 44 'Principal subsidiaries, investments in associates and joint ventures' for a list of principal

subsidiaries and their statutory place of incorporation and a description of ING's activities involving

structured entities is included in Note 45 'Structured entities'.

A list containing the information referred to in Section 379 (1), Book 2 of the Dutch Civil Code has been filed

with the office of the Commercial Register of Amsterdam, in accordance with Section 379 (5), Book 2 of the

Dutch Civil Code.

ING Groep N.V. and its Dutch group companies are subject to legal restrictions regarding the amount of

dividends they can pay to their shareholders. The Dutch Civil Code contains the restriction that dividends

can only be paid up to an amount equal to the excess of the company’s own funds over the sum of the

paid-up capital and reserves required by law. Certain Group companies are also subject to other restrictions

in certain countries, in addition to the restrictions on the amount of funds that may be transferred in the

form of dividends, or otherwise, to the parent company.

Furthermore, in addition to the restrictions in respect of minimum capital requirements that are imposed by

industry regulators in the countries in which the subsidiaries operate, other limitations exist in certain

countries.

1.7 Segment reporting

An operating segment is a distinguishable component of ING Group, engaged in providing products or

services, whose operating results are regularly reviewed by the Executive Board of ING Group and the

Management Board Banking (together the Chief Operating Decision Maker (CODM)) to make decisions about

resources to be allocated to the segments and assess its performance. A geographical area is a

distinguishable component of ING Group engaged in providing products or services within a particular

economic environment that is subject to risks and returns that differ from those of segments operating in

other economic environments.

The CODM reviews and assesses ING Group's performance primarily by line of business. As a result, ING

identified five operating segments which are also disclosed as reportable segments. Additionally, the CODM

receives information by geographical area based on the location of the office from which transactions are

originated.

1.8 Hyperinflation accounting

Since the second quarter of 2022, Türkiye has been considered a hyperinflationary economy for accounting

purposes. As ING Group has a subsidiary in Türkiye, ING Group has applied IAS 29 ‘Financial Reporting in

Hyperinflationary Economies’ to its operations since 2022 as if the economy in Türkiye had always been

hyperinflationary. Given that ING Group presents its results in EUR, comparatives do not get restated. As a

result, 2021 comparatives were not impacted by IAS 29, while 2022 comparatives show the impact of the

first-time application of IAS 29, as well as the effect for 2022. IAS 29 continued to be relevant for ING’s

operations in Türkiye in 2023. Under IAS 29, the results of the operations in Türkiye should be stated in

terms of the current purchasing power at the reporting date. For that, the consumer price index (CPI) as

determined by the Turkish Statistical Institute was used. The CPI for Türkiye (2003=100) at 31 December

2023 was 1,859.38 and at 31 December 2022 was 1,128.45 (movement 2023: 64.77%; movement 2022:

64.27%). The effect of such restatement for inflation in the current period of the statement of

comprehensive income and the balance sheet has been recognised in the statement of profit or loss within

‘Other net income’ as a ‘Net monetary gain or loss’. The net monetary loss for the period represents the loss

of purchasing power by the net monetary position (monetary assets exceeding monetary liabilities) of ING

Türkiye.

After the application of the above restatement procedures in Turkish Lira under IAS 29, the financial position

and the results for the period of ING Türkiye are translated and presented in EUR at the exchange rate on 31

December 2023. For the statement of comprehensive income this is in contrast with the usual translation

procedures where items of comprehensive income are translated at the exchange rate at the date of

transaction. Furthermore, ING Group selected to present both the restatement effect resulting from

restating ING Group’s interest in the equity of ING Türkiye as required by IAS 29, and the translation effect

from translating at a closing rate that differs from the previous closing rate, in the Currency translation

reserve.

1.9 Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each of ING Group’s entities are measured using the currency

of the primary economic environment in which the entity operates (the functional currency). The

Consolidated financial statements are presented in euros, which is ING Group’s presentation currency.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rate prevailing

at the date of the transactions. Exchange rate differences resulting from the settlement of such

transactions and from the translation at year-end exchange rates of monetary assets and liabilities

denominated in foreign currencies are recognised in the statement of profit or loss, except when deferred in

equity as part of qualifying cash flow hedges or qualifying net investment hedges.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using

the exchange rate at the date of the transaction.

Exchange rate differences on non-monetary items, measured at fair value through profit or loss, are

reported as part of the fair value gain or loss. Non-monetary items are retranslated at the date the fair

value is determined. Exchange rate differences on non-monetary items measured at fair value through

other comprehensive income are included in other comprehensive income and get accumulated in the

revaluation reserve in equity.

Exchange rate differences in the statement of profit or loss are generally included in ‘Valuation results and

net trading income’. Reference is made to Note 22 ‘Valuation results and net trading income’, which

discloses the amounts included in the statement of profit or loss. Exchange rate differences relating to the

disposal of debt and FVPL equity securities are considered to be an inherent part of the capital gains and

losses recognised in Investment income. As mentioned below, in Group companies relating to the disposals

of group companies, any exchange rate difference deferred in equity is recognised in the statement of profit

or loss in ‘Result on disposal of group companies’. Reference is also made to Note 19 ‘Equity’, which discloses

the amounts included in the statement of profit or loss.

Group companies

The results and financial positions of all group companies that have a functional currency different from the

presentation currency are translated into the presentation currency as follows:

•Assets and liabilities are translated at the closing rate at the date of the statement of financial position;

•Income and expenses are translated at average exchange rates (unless this average is not a reasonable

approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case

income and expenses are translated at the dates of the transactions). However, under hyperinflation

accounting, income and expenses of ING Türkiye are translated at the closing rate; and

•All resulting exchange rate differences are recognised in a separate component of equity.

On consolidation, exchange rate differences arising from the translation of a monetary item that forms part

of the net investment in a foreign operation, and of borrowings and other instruments designated as

hedges of such investments, are taken to shareholders’ equity. When a foreign operation is sold, the

corresponding exchange rate differences are recognised in the statement of profit or loss as part of the gain

or loss on sale.

Goodwill and fair value adjustments arising from the acquisition of a foreign operation are treated as assets

and liabilities of the foreign operation and translated at the exchange rate prevailing at the balance sheet

date.

1.10 Investments in associates and joint ventures

Associates are all entities over which ING Group has significant influence but not control. Significant

influence is the ability to participate in the financial and operating policies of the investee. It generally

results from a shareholding of between 20% and 50% of the voting rights or through situations including,

but not limited to one or more of the following:

•Representation on the board of directors;

•Participation in the policymaking process; and

•Interchange of managerial personnel.

Joint ventures are entities over which ING Group has joint control.

Investments in associates and joint ventures are initially recognised at cost and subsequently accounted for

using the equity method of accounting.

ING Group’s investment in associates and joint ventures (net of any accumulated impairment loss) includes

goodwill identified on acquisition. ING Group’s share of its associates and joint ventures post-acquisition

profits or losses is recognised in the statement of profit or loss, and its share of post-acquisition changes in

reserves is recognised in equity. The cumulative post-acquisition changes are adjusted against the carrying

amount of the investment. When ING Group’s share of losses in an associate or joint venture equals or

exceeds its interest in the associate or joint venture, including any long-term interests in the associate like

uncollateralised loans that are neither planned nor likely to be settled in the foreseeable future, ING Group

does not recognise further losses, unless it has incurred obligations or made payments on behalf of the

associate or joint venture.

Unrealised gains on transactions between ING Group and its associates and joint ventures are eliminated to

the extent of ING Group’s interest in the associates and joint ventures. Unrealised losses are also eliminated

unless they provide evidence of an impairment of the asset transferred. Accounting policies of associates

and joint ventures have been changed where necessary to ensure consistency with the policies adopted by

ING Group.

The recoverable amount, being the higher of fair value less cost of disposal and value in use, of the

investment in associate and joint venture is determined when there is an indication of potential (reversal of)

impairment. An impairment loss is recognised when the carrying amount of the investment exceeds its

recoverable amount. Goodwill on acquisitions of interests in associates and joint ventures is not tested

separately for impairment, but is assessed as part of the carrying amount of the investment. An impairment

loss is subsequently reversed if there is indication of a reversal and there is a change in the estimates used

to determine the recoverable amount. An impairment loss is reversed to the extent that the recoverable

amount exceeds its carrying amount, but cannot exceed the original impairment loss.

The reporting dates of certain associates and joint ventures can differ from the reporting date of the Group,

but by no more than three months..


Significant judgements and critical accounting estimates and assumptions: Identification of impairment indicators as well as indicators of potential reversal of previous impairments of ING Group’s investment in TMBThanachart Bank Public Company Limited (hereafter: TTB), an associate, requires significant judgement. When there is objective evidence of impairment or indicators that prior period impairment losses no longer exist or may have decreased, value in use (VIU) needs to be determined. Estimation of VIU involves significant estimates and management assumptions. Please refer to note 8 ‘Investments in associates and joint ventures’.

1.11 Property and equipment

Property in own use

Land and buildings held for own use are stated at fair value at the balance sheet date. Depreciation is

recognised on a straight-line basis over the estimated useful life (in general 20–50 years ). On disposal, the

related revaluation reserve is transferred to retained earnings.

Equipment

Equipment is stated at cost less accumulated depreciation and any impairment losses. The cost of the

assets is depreciated on a straight line basis over their estimated useful lives, which are generally as follows:

for data processing equipment two years to five years, and four years to ten years for fixtures and fittings.

Disposals of property and equipment

The difference between the proceeds on disposal and net carrying value is recognised in the statement of

profit or loss under Other net income.

Right-of-use assets

ING Group as the lessee

A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset

and a corresponding liability representing its obligation to make lease payments at the date at which the

leased asset is available for use by ING Group. Each lease payment is allocated between the repayment of

the liability and finance cost. The finance costs are charged to profit or loss over the lease period so as to

produce a constant periodic rate of interest on the remaining balance of the liability for each period. The

right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-

line basis.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities

include the net present value of the following lease payments:

•Fixed payments (including in-substance fixed payments), less any lease incentives receivable;

•Variable lease payments that are based on an index or a rate;

•Amounts expected to be payable by the lessee under residual value guarantees;

•The exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and

•Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that

option.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily

determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to

pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment

with similar terms and conditions.

Right-of-use assets are measured at cost comprising the amount of the initial measurement of the lease

liability, any lease payments made at or before the commencement date less any lease incentives received

and any initial direct costs and restoration costs.

The right-of-use asset is included in the statement of financial position line-item ‘Property and equipment’,

the lease liability is included in the statement of financial position line-item ‘Other liabilities’. Refer to Note 9

‘Property and equipment’ and to Note 16 ‘Other liabilities’.

Subsequent to initial recognition, the right-of-use asset amortises using a straight-line method to the

income statement over the life of the lease. The lease liability increases for the accrual of interest and

decrease when payments are made. Any remeasurement of the lease liability due to a lease modification

or other reassessment results in a corresponding adjustment to the carrying amount of the right-of-use

asset.

1.12 ING Group as lessor

When ING Group acts as a lessor, a distinction should be made between finance leases and operating leases.

For ING Group as a lessor these are mainly finance leases and are therefore not included in 'Property and

equipment'. Instead, the present value of the lease payments is recognised as a receivable under Loans and

advances to customers or Loans and advances to banks. The difference between the gross receivable and

the present value of the receivable is unearned finance lease income. Lease income is recognised over the

term of the lease using the net investment method (before tax), which reflects a constant periodic rate of

return.

1.13 Goodwill and other intangible assets

Impairment of goodwill and other non-financial assets

ING Group assesses at each reporting period, whether there is an indication that a non-financial asset may

be impaired. Irrespective of whether there is an indication of impairment, intangible assets with an indefinite

useful life, including goodwill acquired in a business combination, and intangible assets not yet available for

use, are tested annually for impairment. Goodwill is allocated to groups of cash generating units (CGUs) for

the purpose of impairment testing. These groups of CGUs represent the lowest level at which goodwill is

monitored for internal management purposes. Goodwill is tested for impairment by comparing the carrying

value of the group of CGUs to the recoverable amount of that group of CGUs. Impairment of goodwill, if

applicable, is included in the statement of profit or loss in Other operating expenses and is not subsequently

reversed.

Computer software

Computer software that has been purchased or generated internally for own use is stated at cost less

amortisation and any impairment losses. Amortisation is calculated on a straight-line basis over its useful

life which generally does not exceed five years. Amortisation is included in Other operating expenses.

1.14 Taxation

Income tax on the result for the year consists of current and deferred tax. Income tax is recognised in the

statement of profit or loss but it is recognised directly in equity if the tax relates to items that are recognised

directly in equity.

Uncertain tax positions are assessed continually by ING Group and in case it is probable that there will be a

cash outflow, a current tax liability is recognised.

Deferred income tax

Deferred income tax is provided in full, using the liability method, for temporary differences arising between

the tax basis of assets and liabilities and their carrying amounts in the Consolidated statement of financial

position. Deferred income tax is determined using tax rates (and laws) that have been enacted or

substantively enacted at the balance sheet date and are expected to apply when the related deferred

income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets and liabilities

are not discounted.

Deferred tax assets are recognised when it is probable that future taxable profit will be available against

which the temporary differences can be utilised. Deferred income tax is provided for temporary differences

arising from investments in subsidiaries and associates, except where the timing of the reversal of the

temporary difference is controlled by ING Group and it is probable that the difference will not reverse in the

foreseeable future. The tax effects of income tax losses available for carry forward are recognised as an

asset where it is probable that future taxable profits will be available against which these losses can be

utilised.

Fair value remeasurements of debt and equity instruments measured at FVOCI and cash flow hedges are

recognised directly in equity. Deferred tax related to this fair value remeasurement is also recognised

directly in equity and is subsequently recognised in the statement of profit or loss together with the

deferred gain or loss.

1.15 Provisions, contingent liabilities and contingent assets

A provision is a present obligation arising from past events, the settlement of which is expected to result in

an outflow of resources embodying economic benefits, however the timing or the amount is uncertain.

Provisions are discounted when the effect of the time value of money is significant using a pre-tax discount

rate.

Reorganisation provisions include employee termination benefits when ING Group is demonstrably

committed to either terminate the employment of current employees according to a detailed formal plan

without possibility of withdrawal, or providing termination benefits as a result of an offer made to

encourage voluntary redundancy.

A liability is recognised for a levy when the activity that triggers payment, as identified by the relevant

legislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the liability is recognised

only upon reaching the specified minimum threshold.

A contingent liability is a possible obligation that arises from past events and whose existence will be

confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly

within the control of ING Group; or a present obligation that arises from past events but is not recognised

because it is either not probable that an outflow of economic benefits will be required to settle the

obligation or the amount of the obligation cannot be measured reliably. Contingent liabilities are not

recognised in the statement of financial position, but are rather disclosed in the notes unless the possibility

of the outflow of economic benefits is remote.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed

only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the

control of ING Group. Contingent assets are recognised in the statement of financial position only when

realisation of the income that arises from such an asset is virtually certain. Contingent assets are disclosed

in the notes when an inflow of economic benefits is probable.


Significant judgements and critical accounting estimates and assumptions: The recognition and measurement of provisions is an inherently uncertain process involving using judgement to determine when a present obligation exists and estimates regarding probability, amounts and timing of cash flows. ING Group may become involved in governmental, regulatory, arbitration and legal proceedings and investigations and may be subject to third party claims. With or without reference to the above, ING Group may also offer compensation to certain of its customers. Judgement is required to assess whether a present obligation exists and to estimate the probability of an unfavourable outcome and the amount of potential loss. The degree of uncertainty and the method of making the accounting estimate depends on the individual case, its nature and complexity. Such cases are usually one of a kind. For the assessment of related provisions ING Group consults with internal and external legal experts. Even taking into consideration legal experts’ advice, the probability of an outflow of economic benefits can still be uncertain and the provision recognised can remain sensitive to the assumptions used. Reference is made to Note 15 'Provisions'. For proceedings where it is not possible to make a reliable estimate of the expected financial effect, that could result from the ultimate resolution of the proceedings, no provision is recognised, however disclosure is included in the financial statements, where relevant. Reference is made to Note 42 'Legal proceedings'. Critical accounting estimates and assumptions for the reorganisation provision are in estimating the amounts and timing of cash flows as the announced transformation initiatives are implemented over a period of several years. Reference is made to Note 15 'Provisions'.

1.16 Irrevocable Payment Commitments on contributions to SRF and DGS

ING makes contributions to the Single Resolution Fund (SRF) and Deposit Guarantee Schemes (DGS). The

annual contributions are paid in cash or, in some cases, partly using Irrevocable Payment Commitments

(IPCs) that become payable if and when called. Cash contributions are accounted for as levies as described

in section 1.15 above while IPCs are disclosed as contingent liabilities in Note 41 Contingent liabilities and

commitments. Cash collateral posted on IPCs to the SRF is accounted for as an interest bearing financial

asset at amortised cost. Government bonds posted as collateral on IPCs to DGS continue to be recognised as

assets of ING as securities at amortised cost.

1.17 Other liabilities

Defined benefit plans

The net defined benefit asset or liability recognised in the statement of financial position in respect of

defined benefit pension plans is the fair value of the plan assets less the present value of the defined benefit

obligation at the balance sheet date.

Changes in plan assets include mainly:

•Return on plan assets are recognised as staff costs in the statement of profit or loss. It is determined

using a high quality corporate bond rate (identical to the discount rate used in determining the defined

benefit obligation) at the start of the reporting period; and

•Remeasurements which are recognised in Other comprehensive income.

The defined benefit obligation is calculated by internal and external independent qualified actuaries through

actuarial models and calculations using the projected unit credit method. This method considers expected

future payments required to settle the obligation resulting from employee service in the current and prior

periods, discounted using a high quality corporate bond rate. Inherent in these actuarial models are

assumptions including discount rates, rates of increase in future salary and benefit levels, mortality rates,

consumer price index and the expected level of indexation. The assumptions are based on available market

data as well as management expectations and are updated regularly.

Changes in the defined benefit obligation include mainly:

•Service cost which is recognised as staff costs in the statement of profit or loss;

•Interest expenses are recognised as staff costs in the Statement of profit or loss. It is determined using a

high quality corporate bond rate at the start of the period;

•Remeasurements which are recognised in Other comprehensive income (equity) and not recycled to the

Statement of profit or loss;

•Any past service cost relating to a plan amendment is recognised in profit or loss in the period of the plan

amendment; and

•Gains and losses on curtailments and settlements are recognised in the Statement of profit or loss when

the curtailment or settlement occurs.

The recognition of a net defined benefit asset in the Consolidated statement of financial position is limited

to the present value of any economic benefits available in the form of refunds from the plans or reductions

in future contributions to the plans.

Defined contribution plans

For defined contribution plans, ING Group pays contributions to publicly or privately administered pension

insurance plans on a mandatory, contractual or voluntary basis. ING Group has no further payment

obligations once the contributions have been paid. The contributions are recognised as staff expenses in the

profit or loss when they are due. Prepaid contributions are recognised as an asset to the extent that a cash

refund or a reduction in the future payments is available.