Risk management
Containing risk and adding value to the business
2007 was characterised by a great deal of turbulence in the financial markets, beginning with concerns over US subprime mortgages in early 2007 and then widening into a general banking liquidity crisis. The turmoil put a spotlight on risk management across the financial sector. The crisis had only limited impact on the profit and loss account through ING’s investments in pressurised assets classes.
Pre-tax P&L impact directly related to credit and liquidity crisis
| in EUR million | 3Q | 4Q | 3Q+4Q |
|---|---|---|---|
| US subprime RMBS | –17 | –47 | –64 |
| Alt-A RMBS | 0 | 0 | 0 |
| CDOs/CLOs | –15 | –36 | –51 |
| Monolines | 0 | –66 | –66 |
| Investments in SIVs, ABCP | 0 | –45 | –45 |
| Leveraged Finance | –29 | 0 | –29 |
| Total | –61 | –194 | –255 |
US subprime RMBS, Alt-A RMBS and CDO/CLO exposures
and revaluations at year-end 2007
| Amortised cost* EUR billion |
Market value EUR billion |
Fair value in % |
Pre-tax revaluation via equity EUR million |
|
|---|---|---|---|---|
| US Subprime RMBS | 3.1 | 2.8 | 90.1% | –307 |
| Alt-A RMBS | 28.4 | 27.5 | 96.7% | –936 |
| CDO/CLO | 2.0 | 1.9 | 93.4% | –134 |
| Total | –1,377 |
* Purchase price +/- amortisations – cumulative impairments.
Economic Capital break-down by risk category ING Bank
| in EUR billions | 2007 | 2006 |
|---|---|---|
| Credit risk (including Transfer risk) | 7,503 | 7,557 |
| Market risk | 7,407 | 4,816 |
| Non-financial risk * | 3,017 | 3,503 |
| Total Banking operations | 17,927 | 15,876 |
* Non-financial risk includes operational risk as well as business risk.
Economic Capital break-down by risk category ING Insurance
| in EUR billions | 2007 | 2006 |
|---|---|---|
| Credit risk (including Transfer risk) | 1,021 | 1,411 |
| Market risk | 15,258 | 14,555 |
| Insurance risk | 3,293 | 3,110 |
| Non-financial risk * | 3,627 | 3,334 |
| Total Insurance operations | 23,199 | 22,410 |
* Non-financial risk includes operational risk as well as business risk.
