ING Group Annual Report

2010
Shaping our future
> ING posts 2010 underlying
net profit of EUR 3,893 million

> Operational separation Bank

and Insurer effectuated in 2010

> Main priorities: creation of strong

businesses and repayment of the
Dutch State when prudent
and possible

> Base case scenario: divestment

of Insurance through two IPOs

> Steering on sound financial

performance, increased customer
focus, operational excellence and
good corporate citizenship

2 ING Group Annual Report 2010

Contents
1 Who we are
Key figures 4
ING at a glance 6
Chairman’s statement 8
ING share 10

2 Report of the Executive Board

ING and the financial environment 12
Strategy 16
Corporate responsibility 19
Capital management 22
Risk management 23
Human resources 24
Banking overview 26
–Retail Banking 29
–Commercial Banking 37
Insurance overview 41
–Insurance 43
–Investment management 52

3 Corporate governance
Report of the Supervisory Board 55
Corporate governance 59
Report of ING Trust Office 71
Report of ING Continuity Foundation 74
Conformity statement 75
Section 404 Sarbanes-Oxley Act 76
Remuneration report 78
Works councils 86

4 Consolidated annual accounts

Consolidated balance sheet 88
Consolidated profit and loss account 89
Consolidated statement of comprehensive income 90
Consolidated statement of cash flows 91
Consolidated statement of changes in equity 92
Accounting policies for the consolidated annual accounts 94
Notes to the consolidated annual accounts 112
Risk management 203
Capital management 249
Subsequent events 255

5 Parent company annual accounts

Parent company balance sheet 256
Parent company profit and loss account 257
Parent company statement of changes in equity 258
Accounting policies for the parent company annual accounts 259
Notes to the parent company annual accounts 260

6 Other information
Independent auditor’s report 266
Proposed appropriation of result and Subsequent events 267

7 Additional information
Risk factors 268
Financial glossary 282
General information 289

ING Group Annual Report 2010 3

1 Who we are

Key figures
ING Group
in accordance with IFRS-EU
in EUR million unless otherwise indicated 2010 2009 2008 2007 2006
Income
Banking operations 17,734 12,293 11,662 14,602 14,195
Insurance operations 37,488 35,808 54,920 62,208 59,642
Intercompany eliminations 335 336 291 223 216
Total 54,887 47,765 66,291 76,586 73,621

Staff expenses and operating expenses

Banking operations 10,153 10,158 10,122 9,970 9,070
Insurance operations 4,341 4,387 5,449 5,498 5,269
Total 14,494 14,545 15,571 15,468 14,339

Addition to loan loss provision Banking operations 1,751 2,973 1,280 125 103

Result
Banking result before taxation 5,830 –838 106 4,510 5,005
Insurance result before taxation –1,353 –687 –1,593 6,533 4,935
Result before taxation 4,477 –1,525 –1,487 11,043 9,940
Taxation 1,152 –472 –721 1,535 1,907
Minority interests 105 –118 –37 267 341
Net result 3,220 –935 –729 9,242 7,692

Figures per ordinary share (in EUR)

Basic earnings (1) 0.73 –0.57 –0.27 3.31 2.74
Dividend – – 0.74 1.48 1.32
Shareholders’ equity (in parent) 10.99 8.95 8.55 17.73 17.78

Balance sheet (in EUR billion)

Total assets per 31 December 1,247 1,164 1,332 1,313 1,226
Total equity per 31 December 47 40 29 40 41
Shareholders’ equity (in parent) per 31 December 42 34 17 37 38
Core Tier 1 securities per 31 December 5 5 10
(1)
See note 49 in the Annual Accounts.

FTEs and Market capitalisation

2010 2009 2008 2007 2006
Employees (FTEs, per 31 December) 107,106 107,173 124,661 124,634 119,801
Market capitalisation (in EUR billion) 28 26 15 60 74

ING Group evaluates the results of its businesses using a non-GAAP financial performance measure called underlying result. Underlying result is derived
from the result in accordance with IFRS-EU by excluding the impact of divestments and special items. Historic results have been restated for divestments
in order to create a comparable sequence (i.e. 2010, 2009 and 2008 results exclude the results of a divestment which was completed in 2010). See note
51 in the consolidated annual accounts for a reconciliation between IFRS and underlying result.

Underlying net result, Underlying Return on Equity and Debt/equity ratio

2010 2009 % change 2008
Banking operations 4,322 1,194 262 776
Insurance operations –429 –220 n.a. –1,002
Underlying net result (in EUR million) 3,893 974 300 –226

Underlying Return on Equity based on IFRS-EU equity 9.7% 4.2% –0.8%

Debt/equity ratio per 31 December (2) 13.3% 12.4% 13.5%
(2)
ING Group evaluates its debt/equity ratio on the basis of ‘core debt’ and ‘adjusted equity’.
Further information is provided in the section ‘Capital management’ in the consolidated annual accounts.

4 ING Group Annual Report 2010

 Who we are 1

Key figures continued

Banking operations
in EUR million unless otherwise indicated 2010 2009 % Change 2008
Total underlying income 17,298 13,483 28 11,631
Underlying net interest result 13,450 12,507 8 11,062
Underlying operating expenses 9,685 9,263 5 9,803
Underlying addition to loan loss provision 1,751 2,859 –39 1,235
Underlying result before tax 5,862 1.361 331 593
Underlying net result 4,322 1,194 262 776
Balance sheet total ING Bank N.V. per 31 December (in EUR billion) 933 882 6 1,035
Core Tier 1 capital ING Bank N.V. per 31 December 30,894 25,958 19 24,934
Bank core Tier 1 ratio per 31 December (1) 9.6% 7.8% 7.3%
Risk-weighted assets per 31 December (in EUR billion) (1) 321 330 –3 343
Client balances per 31 December (in EUR billion) 1,168 1,108 5 1,074
Net production client balances (in EUR billion) 49 21 133 89
Interest margin 1.42% 1.32% 1.07%
Underlying Return on Equity based on 7.5% core Tier 1 17.6% 5.0% 3.4%
Underlying cost/income ratio 56.0% 68.7% 84.3%
Underlying cost/income ratio, excl. market impacts 54.2% 54.3% 65.8%
Employees (FTEs, per 31 December adjusted for divestments) 72,343 70,312 3 74,249
(1)
Adjusted for divestments.

Insurance operations
in EUR million unless otherwise indicated 2010 2009 % Change 2008
Total underlying income 37,466 35,119 7 47,838
Investment margin 1,481 1,196 24 1,662
Fees and premium-based revenues 4,903 4,362 12 4,723
Technical margin 780 902 –14 776
Income non-modelled life business 136 123 11 163
Operating income (Life/IM) 7,300 6,583 11 7,324
Total operating result 1,743 1,434 22 1,953
Underlying result before tax –519 –202 –1,355
Underlying net result –429 –220 –1,002
Shareholders’ equity ING Verzekeringen N.V. per 31 December 20,811 15,887 31 11,892
Client balances per 31 December (in EUR billion) 454 408 11 382
Net production client balances (in EUR billion) –6 –9 6
Investment spread (basis points) 93 83 116
New sales (APE) 4,877 4,426 10 5,917
Administrative expenses 3,698 3,431 8 3,783
Administrative expenses/operating income 43.9% 44.3% 44.2%
Underlying Return on Equity based on IFRS-EU equity –1.8% –0.9% –6.3%
Insurance Group Directive Solvency ratio 250% 247% n.a.
Employees (FTEs, per 31 December, adjusted for divestments) 34,763 35,445 –2 40,460

ING Group Annual Report 2010 5

 1 Who we are

ING at a glance

INCOME NET RESULT

€54,887m €3,220m
2009: €47,765m 2009: €–935m

OUR MISSION OUR CUSTOMERS

ING aims to deliver its financial products and services in ING serves a broad customer base, comprising individuals, families,
the way its customers want them delivered: with exemplary small businesses, large corporations, institutions and governments.
service, convenience and at competitive prices. This is
reflected in our mission statement: to set the standard OUR STAKEHOLDERS
in helping our customers manage their financial future. ING conducts business on the basis of clearly defined business
principles. In all our activities, we carefully weigh the interests of
OUR PROFILE our various stakeholders: customers, employees, business relations
ING is a global financial institution of Dutch origin, currently and suppliers, society at large and shareholders. ING strives to be
offering banking, investments, life insurance and retirement a good corporate citizen.
services to meet the needs of a broad customer base.
Going forward, we will concentrate on our position as an OUR CORPORATE RESPONSIBILITY
international retail, direct and commercial bank, while creating ING wants to build its future on sustainable profit based on sound
an optimal base for an independent future for our insurance business ethics and respect for its stakeholders and be a good
operations (including investment management). corporate citizen. For only by acting with professionalism and
integrity, will we be able to maintain our stakeholders’ trust and
OUR STRATEGY preserve our reputation. Our Business Principles prescribe the
To serve the interests of our stakeholders, increase management corporate values we pursue and the responsibilities we have
focus and create value for our shareholders, ING is moving towards towards society and the environment: we act with integrity,
separation of its banking and insurance operations. We believe we are open and clear, we respect each other and we are
the widespread demand for greater simplicity, reliability and socially and environmentally responsible.
transparency makes this the best course of action. In the future,
ING Bank will build on its global presence and international WWW.ING.COM
network and capitalise on its leadership position in gathering
savings, multi-channel distribution, simple propositions and
marketing. ING Insurance has a strong position as a global provider
of life insurance and retirement services. While moving towards
the public offerings of a Europe-led and a US-focused business,
ING Insurance will initially concentrate on further improving its
operational performance. Both the Bank and the Insurer will focus
on earning our customers’ trust through transparent products,
value for money and superior service. This reflects ING’s universal
customer ideal: saving and investing for the future should be easier.

COMPOSITION OF THE BOARDS* SUPERVISORY BOARD

on 31 December 2010 Peter A.F.W. Elverding(1) (62), chairman
Jeroen van der Veer (63), vice-chairman
J.P. (Tineke) Bahlmann (60)
EXECUTIVE BOARD Henk W. Breukink(1) (60)
Jan H.M. Hommen (67), CEO and chairman Claus Dieter Hoffmann(2) (68)
Patrick G. Flynn (50), CFO Piet C. Klaver (65)
J.V. (Koos) Timmermans(1) (50), CRO Godfried J.A. van der Lugt(3) (70)
Aman Mehta (64)
(1)
Nominated for reappointment as of 9 May 2011. Joan E. Spero (66)
Jackson P. Tai(4) (60)
Lodewijk J. de Waal (60)
(1)
Nominated for reappointment as of 9 May 2011.
(2)
Retirement as of 9 May 2011.
(3)
Resigned on 24 January 2011.
(4)
Resigned on 6 January 2011.

6 ING Group Annual Report 2010

 Who we are 1

ING at a glance continued

BANKING INSURANCE
UNDERLYING INCOME UNDERLYING NET RESULT UNDERLYING INCOME UNDERLYING NET RESULT

€17,298m €4,322m €37,466m €–429m

2009: €13,483m 2009: €1,194m 2009: €35,119m 2009: €–220m

RETAIL BANKING INSURANCE BENELUX

Retail Banking provides retail and private banking services to individuals Insurance Benelux includes ING’s life and non-life insurance, investment
and small and medium-sized enterprises in the Netherlands, Belgium, and pension businesses in the Netherlands, Belgium and Luxembourg.
Luxembourg, Poland, Romania, Turkey, India, Thailand and China Insurance Benelux, already a leading player in the industry, aims to
(through a stake in Bank of Beijing) with a multi-product, multi-channel become the most efficient large insurer in the region.
distribution approach. In mature markets, we focus on wealth
INSURANCE CENTRAL & REST OF EUROPE
accumulation, savings and mortgages, with an emphasis on operational
Insurance Central & Rest of Europe consists of ING’s life insurance and
excellence, cost leadership and customer satisfaction. In developing
pensions operations in nine countries which include Poland, the Czech
markets we aim to become a prominent local player by offering simple
Republic, Slovakia, Hungary, Romania, Greece and Spain as well
but high quality products. ING Direct offers direct banking services
as greenfield operations in Bulgaria and Turkey.
in Canada, Spain, Australia, France, the US, Italy, Germany, the UK
and Austria. ING Direct’s focus is on offering five simple and transparent INSURANCE US (EXCLUDING US CLOSED BLOCK VA)
retail banking products at very low cost: savings, mortgages, payment Insurance US includes ING’s retirement services and life insurance
accounts, investment products and consumer lending. operations in the US. In the US, ING is the third-largest provider
of defined contribution retirement plans in terms of assets under
COMMERCIAL BANKING
management and administration.
Commercial Banking offers core banking services such as lending,
payments and cash management in more than 40 countries. It provides US CLOSED BLOCK VA
clients with tailored solutions in areas including corporate finance, US Closed Block VA consists of ING’s Closed Block Variable Annuity
structured finance, commercial finance, equity markets, financial business in the US, which has been closed to new business since
markets and leasing. Clients are corporations – ranging from early 2010 and which is now being managed in run-off.
medium-sized and large companies to major multinationals –
INSURANCE LATIN AMERICA
as well as governments and financial institutions.
Insurance Latin America includes ING’s pension, insurance and
investment businesses in the region and is present in six countries
including Mexico, Chile, Peru, Colombia, Uruguay, and Brazil through
its joint venture in SulAmérica, the leading independent wealth
management and insurance company in the country. In Latin America,
ING is the second largest provider of mandatory pensions.
INSURANCE ASIA/PACIFIC
Insurance Asia/Pacific is one of the major foreign life insurance
companies in the region and is present in seven countries including
Japan, Malaysia, South Korea, Thailand, China, Hong Kong and India.
It offers life insurance, investment and retirement services products
and services to a broad range of retail, corporate and institutional clients.
ING INVESTMENT MANAGEMENT
ING Investment Management (ING IM) is a leading global asset manager
and is the principal investment manager of ING Group. It has operations
in 33 countries across the Americas, Asia-Pacific, Europe and the
Middle East. ING IM provides retail and institutional clients with
access to domestic, regional and global investment solutions.

COMMITTEES OF THE SUPERVISORY BOARD**

on 31 December 2010

Audit Committee Remuneration Committee Corporate Governance Committee

Jackson Tai, chairman Jeroen van der Veer, chairman Peter Elverding, chairman
Tineke Bahlmann Peter Elverding Henk Breukink
Henk Breukink Piet Klaver Claus Dieter Hoffmann
Godfried van der Lugt Joan Spero Aman Mehta
Jeroen van der Veer Lodewijk de Waal Lodewijk de Waal

Risk Committee Nomination Committee * You can find more information on the members
Peter Elverding, chairman Peter Elverding, chairman of the Executive Board on page 65 and on the
Tineke Bahlmann Piet Klaver members of the Supervisory Board on pages
Claus Dieter Hoffmann Joan Spero 68–69. The names of the nominated candidates
Piet Klaver Jeroen van der Veer for appointment at the General Meeting on
Godfried van der Lugt Lodewijk de Waal 9 May 2011 can be found on page 57.
Jackson Tai ** The current composition of the Supervisory
Board Committees can be found on the
Company’s website (www.ing.com).

ING Group Annual Report 2010 7

1 Who we are

Chairman’s statement

The customer is the vital

axis around which all our
activities revolve
Jan Hommen, chairman

Dear stakeholder, After three challenging years during which the global financial crisis
Looking back on 2010, we can conclude had its impact on the company, 2010 marked a significant turning
point for ING. In particular, I am very grateful for the continued
that ING closed a remarkable year in the trust and loyalty of our customers.
history of the company. It was a real
transition year. Throughout those A number of achievements and key priorities stood out in 2010.
12 months we worked hard at shaping First of all, the Group’s business performance in 2010 was strong.
Although the economic recovery remains fragile, and financial
our future. We took important steps to markets continue to be volatile, ING posted an underlying
create strong stand-alone companies in net profit of EUR 3,893 million in 2010, up from EUR 974 million
preparation for the final separation of a year earlier.
our Banking and Insurance/Investment
The operational separation of the bank and insurer was
Management businesses. The Bank will effectuated at year-end, with arm’s-length agreements in place
continue as one integrated banking between the two businesses for all commercial cooperation and
organisation with one management shared infrastructure. The focus for 2011 will be on preparing the
team and one balance sheet. For our insurance company for two IPOs so we will be ready to move
forward when market conditions are favourable.
Insurance/Investment Management
activities we plan to have two initial The measures taken under the Back to Basics programme, which
public offerings (IPOs). was completed in 2010, to reduce risks, decrease costs, deleverage
and reduce the size of the balance sheet, enabled us to quickly
restore a healthy profitability profile. We substantially reduced our
leverage and risk, actively managed our sovereign portfolio and set
clear future performance targets for our banking and insurance
businesses. A number of divestments were carried out. ING also
comfortably passed the stress test conducted by the Committee of
European Banking Supervisors. In addition, we repaid 50% of the
Dutch State aid in December 2009. In May 2011, we intend to
repay another 20%. Provided that the strong capital generation
continues, we intend to repay the final 30% by May 2012.

In 2010, we were faced with changes in the regulatory environment

which will have an impact on the business models of both our
banking and insurance businesses and the way we manage our
company. Proposals were made by the regulatory authorities to
increase capital, liquidity and risk requirements for banks and
insurance companies (Basel III, Solvency II). ING spent much effort
to prepare for these changes in the regulatory environment.

8 ING Group Annual Report 2010

 Who we are 1

The requirements proposed by the Basel Committee will demand and over 20,000 ING employees were involved. We raised
stronger capital reserves and liquidity buffers to protect banks EUR 927,000. You can read more about this and many other
during economic downturns. Most of the requirements will not initiatives in the chapter on Corporate responsibility.
come into force until 2013, but ING is relatively well positioned to
meet them. Our employees are our human capital. Engaged and motivated
employees are central to our success as they are the main point
Also with regard to our remuneration policy we take into account of contact with our customers.
the globally changing views on remuneration policies as well as
the guidelines proposed by regulators and authorities. We are In 2010, ING continued to work towards being a top employer,
well aware that remuneration is subject to ongoing public debate to attract and retain employees and to enhance employee
and we have taken steps to ensure that our remuneration policy engagement. Our 2010 Winning Performance Culture Survey
strikes a balance between the interests of our customers, showed that throughout the ING Group employee engagement
employees, shareholders and society at large, and supports the had risen. Most people say they like their job and are proud to
long-term objectives of our company. ING formulated a new work for the company. I am very pleased with the outcome of the
moderate and sustainable remuneration policy – with both survey because it was not an easy year for our people given all the
individual and group objectives – for the Executive Board with changes the company went through.
an increased focus on long-term value creation and performance
measurement based on non-financial indicators. This new policy In January 2011, Godfried van der Lugt and Jackson Tai both
was approved by the AGM in April 2010. The general principles of resigned from the Supervisory Board. In 2011, Claus Dieter Hoffmann
the new policy have also been applied to the remuneration of the will retire from the Supervisory Board after the General Meeting.
members of the Management Boards and other senior managers On behalf of my colleagues in the Executive Board and Supervisory
throughout the organisation. Board, I would like to take this opportunity to express my sincere
gratitude and appreciation for the contribution they have made to
Our strong results are the outcome of the hard work and ING. Godfried van der Lugt witnessed the beginning of ING and as
dedication of all our employees who even in the most difficult a former chairman of the Executive Board of ING Group and as a
periods of the crisis continued to focus on servicing our customers. member of the Supervisory Board he has played a very valuable
Customer satisfaction is central to everything ING does. role in the development of the company which has greatly
The customer is the vital axis around which all our activities benefited from his expertise.
revolve and we will continue to take customer needs as the
starting point for everything we do, whether it is developing We also announced changes in the structure and composition
new products, fine-tuning processes or anything else. of the Management Boards for Banking and Insurance/Investment
Over the year we achieved a great deal in this area but much more Management. On 1 January 2011, Lard Friese and Gilbert Van Hassel
remains to be done. We use the Net Promoter Score to measure joined the Management Board Insurance. At the end of 2010,
what customers think of us and whether they would recommend Tom McInerney stepped down as Insurance/Investment
ING to others, and then use the feedback to make further Management chief operating officer. William Connelly has
improvements to our processes and products. been appointed CEO of Commercial Banking and joined the
Management Board Banking, succeeding Eric Boyer who from
Deepening relationships with all our stakeholders was a key priority 1 January 2011 has concentrated solely on his role as
in 2010. It is vital to engage in dialogue with all stakeholders and vice-chairman of the Bank.
to be more transparent and open for feedback about the way we
operate. Gathering their views has proved valuable and, where As I stated, 2010 was a year of real transition for ING. We have
possible, we have incorporated feedback into our products gone through a lot of change and reshaped our businesses.
and services. We know there are more challenges and opportunities ahead
and we stand ready to meet them.
As a major international company, ING has a responsibility to make
a positive contribution to society through its commercial activities Being a major player in the financial sector puts us constantly in
and by being a good corporate citizen. For example, our personal the spotlight. Regaining the trust of all our stakeholders following
financial services help people to be better at managing their the global financial crisis is a key priority for us. Our achievements
money. We have a Corporate Responsibility (CR) programme in the past year lead us to believe that the business is on a solid
through which we ran many initiatives in 2010, one of which was footing and has excellent growth prospects. We therefore look
a series of workshops for entrepreneurs advising them how to run forward to the future with confidence and optimism.
their businesses in a more environmentally sustainable way.
Jan Hommen
Improving financial and other types of education is an important chairman of the Executive Board
part of our CR strategy. We are proud of our Chances for Children
programme through which we provide underprivileged children
with quality education to give them a real chance of a better future.
I was especially pleased with the 2010 Chances for Children Global
Challenge. Staff and management throughout the company rolled
up their sleeves to volunteer and raise funds for children and
education-related projects in what has become a great annual
tradition at ING. 38 countries took part in 2010’s Global Challenge

ING Group Annual Report 2010 9

1 Who we are

ING share
PROFIT RETENTION AND DISTRIBUTION POLICY Authorised and issued capital
ING Group’s profit retention and distribution policy is determined Year-end Year-end
in EUR million 2010 2009
by its internal requirements and its growth opportunities on the
Ordinary shares
one hand and the capital providers’ dividend expectations on
– authorised 1,080 1,080
the other. ING Group’s internal needs are determined by statutory
– issued 919 919
solvency requirements and capital ratios, in excess of which ING
Cumulative preference shares
Group needs to maintain healthy buffers. An important
– authorised 1,080 1,080
determinant are the credit ratings which are of utmost importance
– issued – –
to ING Group, because they directly affect the company’s financing
costs and hence profitability. For their part, the capital providers
Shares in issue and shares outstanding in the market
expect a dividend which reflects ING Group’s financial results
Year-end Year-end
and is relatively predictable. in millions 2010 2009
(Depositary receipts for) ordinary shares
ING’s policy is to pay dividends in relation to the long-term of EUR 0.24 nominal value 3,831.6 3,831.6
underlying development of cash earnings. Dividends will only (Depositary receipts for) own ordinary shares
be paid when the Executive Board considers such a dividend held by ING Group and its subsidiaries 51.3 47.1
appropriate. Given the uncertain financial environment, (Depositary receipts for) ordinary shares
outstanding in the market 3,780.3 3,784.5
increasing regulatory requirements and ING’s priority to
repurchase the remaining outstanding core Tier 1 securities,
Prices depositary receipts for ordinary shares*
the Executive Board will not propose to pay a dividend
Euronext Amsterdam by NYSE Euronext
over 2010 at the annual General Meeting. in EUR 2010 2009 2008
Price – high 8.16 9.64 26.21
CORE TIER 1 SECURITIES Price – low 5.52 1.92 5.33
In October 2008, to support its capital position, ING Group Price – year-end 7.28 6.90 7.33
made use of the previously announced capital support facilities Price/earnings ratio** 8.6 *** ***
by the Dutch Government by issuing EUR 10 billion of core
* 2009 prices were adjusted for the increase in the number of shares
Tier 1 securities to the Dutch State with a coupon of 8.5%. due to the rights issue, while 2008 was not adjusted.
The core Tier 1 securities are pari passu with common equity. ** Based on the share price at year-end and net profit per ordinary
share for the financial year.
*** Not applicable.
In December 2009, ING repurchased the first half of the core Tier 1
securities of EUR 5 billion plus a total premium of EUR 605 million. Dividend history
Furthermore, at the next coupon reset date on 13 May 2011, ING
in EUR 2010 2009 2008
intends to exercise its option for early repurchase of EUR 2 billion
Interim dividend – – 0.74
of the remaining core Tier 1 securities. The total payment in
Final dividend – – –
May 2011 will amount to EUR 3 billion and includes a 50%
Total – – 0.74
repurchase premium. ING will fund this repurchase from retained
earnings. Provided that the strong capital generation continues,
ING intends to repurchase the remaining EUR 3 billion of the core Geographical distribution of ING shares*
Tier 1 securities ultimately by May 2012 from retained earnings.
The final decision on repurchase of these core Tier 1 securities in percentages
will be made before the envisaged repayment date and will be United States 38
conditional upon there having been no material changes Netherlands 25
regarding ING’s capital requirements and/or ING’s outlook United Kingdom 17
on external market circumstances. Switzerland 7
Belgium 5
LISTINGS Luxembourg 3
Depositary receipts for ING Group ordinary shares are listed on Other 5
the stock exchanges of Amsterdam, Brussels and New York (NYSE). Total 100
Options on ING Group ordinary shares (or the depositary receipts * Year-end 2010 figures, estimated on information provided by several
therefor) are traded on the NYSE Euronext Amsterdam Derivative large custodians.
Markets and the Chicago Board Options Exchange.

SHAREHOLDERS AND DEPOSITARY-RECEIPT HOLDERS

WITH STAKES OF 5% OR MORE
To the best of our knowledge, as at 31 December 2010, there
were no shareholders or holders of depositary receipts for shares
who reported to hold an interest of 5% or more as mentioned
in the Dutch Financial Supervision Act, other than Stichting ING
Aandelen (ING Trust Office) and Stichting Continuïteit ING
(ING Continuity Foundation).

10 ING Group Annual Report 2010

 Who we are 1

ING share continued

INVESTOR RELATIONS IMPORTANT DATES IN 2011*

To be kept informed of press releases and other ING news, you can Publication results 1Q 2011
subscribe to the email service through our Investor Relations section Thursday, 5 May 2011, 7:30 a.m.
at www.ing.com.
Annual General Meeting
INVESTORS AND FINANCIAL ANALYSTS MAY CONTACT: Monday, 9 May 2011
ING Group
Investor Relations (IH 07.362) Publication results 2Q 2011
P.O. Box 810 Thursday, 4 August 2011, 7:30 a.m.
1000 AV Amsterdam
The Netherlands Publication results 3Q 2011
Telephone: +31 20 541 5460 Thursday, 3 November 2011, 7:30 a.m.
Fax: +31 20 541 8551
Email: [email protected] * All dates shown are provisional.

Main credit ratings of ING*

Standard
& Poor’s Moody’s Fitch
ING GROUP** A A1 A
ING BANK***
– short term A-1 Prime-1 F1+
– long term A+ Aa3 A+
– financial strength C+
ING INSURANCE****
– short term A-2 Prime-2 F2
– long term A– Baa1 A–

* Still valid on 14 March 2011, the date of this Annual Report.

** All ratings on ING Group have a stable outlook.
*** All Bank long-term ratings have a stable outlook.
**** All Insurance long-term ratings have a negative outlook.

ING’s long-term credit ratings are shown in the table above.

Each of these ratings reflects only the view of the applicable rating agency at
the time the rating was issued, and any explanation of the significance of a
rating may be obtained only from the rating agency. A security rating is not a
recommendation to buy, sell or hold securities and each rating should be
evaluated independently of any other rating. There is no assurance that any
credit rating will remain in effect for any given period of time or that a rating
will not be lowered, suspended or withdrawn entirely by the rating agency if,
in the rating agency’s judgement, circumstances so warrant. ING accepts no
responsibility for the accuracy or reliability of the ratings.

One-year price development ING depositary receipts for shares

Index 31 December 2009 = 100
in EUR

140

130

120

110

100

90

80

70
01/10 03/10 05/10 07/10 09/10 11/10 01/11

ING FTSE 300 Banks FTSE 300 Life Ins

ING Group Annual Report 2010 11

2 Report of the Executive Board

ING and the financial environment

2010 marked by continued external challenges Although economic conditions broadly improved, risks remained
significant due to eurozone sovereign risk fears and a continued
> Economic recovery remains fragile weak performance of the US economy. The financial sector was
> Far-reaching changes in also confronted with proposed changes in the regulatory
environment, as authorities launched proposals to increase
regulation and supervision capital, liquidity and risk requirements for banks and insurers.
> CEBS stress test passed
Throughout 2010, work continued on the operational separation,
> Streamlining process continued which was successfully effectuated by the end of the year. A new
> Strong business performance governance structure was successfully put in place in order to
ensure that the to-be separated units operate at arm’s-length.
In July, the CEBS stress test confirmed ING’s ability to endure
a stressful economic scenario. ING’s commercial results further
improved in 2010, as it continued along the path of reducing
complexity and increasing focus, by divesting a number of
non-core activities.

ECONOMIC RECOVERY REMAINS FRAGILE

Macroeconomic conditions broadly improved in 2010,
but the downside risks in the markets remained considerable.
Manufacturing and global trade rose significantly, supported by
increased stock building and a surge in fixed investments. However,
in many advanced economies, household consumption remained
low, reflecting continuously weak levels of consumer confidence
due to a prolonged decline in household incomes and private
wealth accumulation. In contrast, in many emerging economies,
household spending and corporate investments remained at
elevated levels and thus fuelled job creation. This was not enough,
however, to quell fears of a further widening of global imbalances.

The continued weak performance of the US economy in

particular contrasted sharply with economic growth rates achieved
in developing markets like China, India and Brazil. Moreover, rising
concerns on eurozone sovereign risks caused renewed distress in
financial markets. As a result, market volatility remained high and,
across the board, investor confidence did not significantly improve.
In the second half of the year, however, financial conditions started
to slightly improve, partly thanks to unprecedented European policy
initiatives and unconventional monetary easing in the US.

Looking ahead, most developed economies and a few emerging

markets continue to face challenging economic circumstances,
in addition to which underlying sovereign risks and financial system
vulnerabilities remain a significant concern. The outlook for the
global economy in 2011 therefore continues to be uncertain.

DEVELOPMENTS IN SUPERVISION AND REGULATION

In 2010, agreement was reached at EU level on the introduction
of a new supervisory structure for the financial sector. The new
European architecture consists of the existing national authorities
and the newly created European Systemic Risk Board (ESRB) and
the following three European Authorities: Banking (EBA), Insurance
and Occupational Pensions (EIOPA) and Securities and Markets
(ESMA). These institutions are in place since 1 January 2011.
Operational day-to-day supervision continues to be with
national supervisors.

In September 2010, the Basel Committee on Banking

Supervision announced a substantial strengthening of existing
capital requirements and the introduction of two international
liquidity standards. The proposed Basel III framework covers both
micro-prudential and macro-prudential elements. The framework
sets out rules for higher and better-quality capital, better risk

12 ING Group Annual Report 2010

 Report of the Executive Board 2

ING and the financial environment continued

coverage, the introduction of a leverage ratio as a backstop to Solvency II may require fundamental shifts in product offerings,
the risk-based requirements, measures to promote the build up pricing and investment portfolio allocation, e.g. by making it
of capital that can be drawn down in periods of stress, and the far less advantageous to offer long-term investment guarantees.
introduction of two liquidity standards. The Committee’s package Whereas ING has always been, and remains supportive of the
of reforms will gradually increase the minimum common equity Solvency II framework, a number of issues have arisen during
requirement from 2% to 4.5% as from 1 January 2013 (transition 2010 with regard to the development of the detailed implementing
period from 1 January 2013 until 1 January 2017). In addition, measures. To safeguard the (financial) stability of the insurance
banks will be required to hold a capital conservation buffer of industry, the volatility of the Market Value Balance Sheet needs
2.5% to withstand future periods of stress, bringing the total to be sufficiently recognised and addressed. Also, to ensure an
common equity requirements to a minimum of 7%. international level-playing field, differences between solvency
regimes need to be taken into account, e.g. by finding a solution
Furthermore, to avoid periods of excess aggregate credit growth, for the treatment of third countries in Solvency II. Finally, rules
a countercyclical buffer within a range of 0% – 2.5% of common originally designed for banking should not be automatically
equity or other fully loss-absorbing capital, according to national applied to the insurance industry.
circumstances, has been proposed. These capital requirements
are supplemented by a non-risk-based minimum Tier 1 leverage What is more, in a white paper published in July 2010, the
ratio of 3%. European Commission concluded that the existing differences
between national Insurance Guarantee Schemes across the
The Basel Committee’s reforms have introduced two international EU create insufficient and uneven levels of protection for
minimum standards for liquidity risk supervision with the aim of insurance policyholders. Therefore, the Commission has suggested
ensuring banks have an adequate liquidity buffer to absorb liquidity a minimum harmonisation directive requiring the establishment of
shocks. The first one is the liquidity coverage ratio (LCR; to be an Insurance Guarantee Scheme as a last-resort mechanism in
introduced on 1 January 2015), which is a test to promote short- each Member State. Legislative proposals are expected in the
term resilience of a bank’s liquidity risk profile by ensuring that it second half of 2011.
has sufficiently high-quality liquid assets to survive a significant
stress scenario lasting for 30 days. The second one is a net stable Moreover, it is noted that a number of relevant changes in
funding ratio (NSFR; to be introduced on 1 January 2018), which accounting regulations are being considered by the accounting
is a test to promote resilience over a longer period by creating standards bodies. These include proposed changes to accounting
additional incentives for banks to fund their activities with more for financial instruments, loan loss provisions, hedges, insurance
stable funding on an ongoing basis. The NSFR test is similar to the contracts, leasing and others. These changes may, both individually
LCR except the period over which it is tested is one year. and collectively, be very important to banking and insurance
companies, including ING. ING generally supports the efforts to
Furthermore, in parallel to the workstream at international level, the improve and simplify the accounting regulations as well as the
European Commission is proposing a European Crisis Management objective of international convergence.
Framework. In this framework different issues will be addressed,
such as prevention tools and early intervention and final APPEAL AGAINST EC DECISION
resolution mechanisms. In January 2010, ING lodged an appeal with the General Court of
the European Union against specific elements of the European
ING generally supports the Basel Committee and European Commission’s decision of 18 November 2009. ING has requested
Commission reform programmes to strengthen the global the Court to annul the decision of the European Commission,
capital and liquidity regulations and reduce market volatility. insofar as it qualifies the core Tier 1 amendment (i.e. the agreement
Notwithstanding, a number of proposals may hamper traditional between ING and the Dutch State concerning a reduction of the
retail-oriented institutions in their intermediary function, and thus repayment premium for the first EUR 5 billion tranche of core Tier 1
reduce their ability to play their important role in the European securities) as additional state aid (of EUR 2 billion), requires price
economy. Further, the new rules still allow national regulators a leadership bans and imposes disproportional restructuring
measure of autonomy. For instance, the liquidity requirements measures. The Dutch State also lodged an appeal with the General
assign relatively large powers to national regulators, which may Court to contest the EC decision insofar as it qualifies the core
affect the level playing field in the European Internal Market. Tier 1 amendment as additional state aid.
Hence, the biggest challenge for policy makers and supervisors
is to take a coordinated and unified approach. It is essential ING believes it is in the interest of all its stakeholders to use the
that supervisors and regulators across the globe adopt a more opportunities provided by law to let the General Court review these
consistent and coordinated approach (e.g. while Europe is already elements of the EC’s decision. However, the appeal does not alter
introducing Basel III, Basel II is not yet fully applied in the US). ING’s commitment to execute its restructuring plan as announced
on 26 October 2009 and stands firmly behind its strategic decision
The regulatory agenda for insurance companies was dominated to separate its banking and insurance operations and divest the
by the further development of Solvency II, which aims to introduce latter. A Court decision is expected in 2011.
a modernised risk framework for insurance companies. Solvency II
adopts a broad three pillar supervisory structure similar to Basel II, ING PASSES STRESS TEST CEBS
but with a fundamental difference in that a full Market Value Together with 90 other EU-based financial institutions, ING was
Balance Sheet (MVBS) approach and a full economic risk subject to the 2010 EU-wide stress testing exercise coordinated
approach to measuring required capital (Economic Capital) by the Committee of European Banking Supervisors (CEBS),
have been proposed. in cooperation with the European Central Bank, and

ING Group Annual Report 2010 13

2 Report of the Executive Board

ING and the financial environment continued

De Nederlandsche Bank. The objective of the 2010 EU-wide stress sell insurance/investment management products, and the insurer/
test was to assess the overall resilience of the EU banking sector investment manager will continue to use bank services. Terms and
and the banks’ ability to absorb further possible shocks from credit conditions of this cooperation have been formalised and brought
and market risks, including sovereign risks. at arm’s length.

The stress test complemented the risk management procedures Over the course of 2010, the vast majority of support functions
and regular stress testing programmes set up in ING under the were moved to the bank and the insurer/investment manager
Pillar 2 framework of the Basel II and Capital Requirements respectively. The activities that will remain at Group level until the
Directive (CRD) requirements. The results, announced in July 2010, completion of the separation process are those that relate to our
confirmed that ING’s focus on the strengthening of its Bank’s responsibilities to shareholders. These include support functions
balance sheet since the spring of 2009 has given it sufficient which are vital to comply with material legal and regulatory
resilience to endure a stressful economic scenario. requirements, and/or to ensure effective and efficient execution
of Group control. Consequently, both businesses have their own
OPERATIONAL SEPARATION OF ING BANK AND ING head office, with their own corporate support functions from
INSURANCE 1 January 2011.
Throughout 2009 and 2010, ING worked towards a self-imposed
deadline to separate its banking and insurance/investment With the operational separation thus formalised, our attention has
management businesses at an operational level before the end of shifted to the next step: how to actually separate our businesses
2010. Project teams around the world were established to ensure and execute the divestment process. Building on an analysis of
an orderly separation process. The total separation costs incurred market and regulatory conditions, we formulated a base case
in 2010 amounted to EUR 85 million after tax. For 2011, these costs scenario. While the option of one initial public offering (IPO)
are estimated at around EUR 200 million after tax (excluding costs remains open, ING will prepare itself for a base case of two IPOs:
for rebranding). one Europe-led IPO (including our activities in Asia) and one
separate US-focused IPO. Hence, ING will in 2011 proceed with
In the first quarter of 2010, the separation process was the operational disentanglement of its US and European/Asian
kicked-off with a global inventory exercise. During this phase it Insurance/Investment Management operations.
was confirmed that the most challenges lay in Europe, in particular
in the Netherlands. The most complicated issues related to IT, More information on this matter and the envisaged end-state of
human resources, distribution and commercial agreements, as well the businesses after completion of the divestment process is
as our capital structure. To facilitate the disentanglement process, included in the Strategy section.
all shared services, contracts, arrangements, co-ownerships,
cross-directorships, and all services provided and received STRONG PERFORMANCE DESPITE CHALLENGING OPERATING
(including  those delivered by third parties) had to be analysed ENVIRONMENT
and either fully separated or covered in temporary or long-term Overall, the Group’s business performance in 2010 was satisfactory,
service agreements. thanks to a strong performance of the Bank, which more than
offset the effects of impairments, write-downs and assumption
By the end of 2010 a solution was created for most of the changes in the Insurer. Throughout the entire organisation – i.e. in
disentanglement projects. Consequently, from 1 January 2011, both our banking and insurance businesses – concerted efforts
ING’s bank and insurance/investment management businesses were made to enhance customer centricity. This included initiatives
became operationally separate under the ING umbrella. Where an to more pro-actively and systematically measure and monitor
interim solution has been put in place, such as critical IT or HR customer satisfaction. The Group also started an evaluation of its
services, a degree of interrelationship remains, which is mitigated entire product portfolio and product approval procedures based on
through (signed) contracts and ring-fencing measures. In a limited sharpened criteria for good customer care.
number of instances, where these measures were not feasible due
to high costs or time constraints, a documented exception was More information on the business developments within the bank
formalised. By the end of 2011, most interim solutions and and the insurer/investment manager and on the business
documented exceptions that enabled operational separation will performance of the Group and its various business lines is given
be replaced by permanent solutions; thus turning the operational in the Banking and Insurance sections of this Annual Report.
separation into a full separation.
DIVESTED BUSINESSES AND STRATEGIC STAKES IN 2010
Where the resolution of a specific disentanglement project is Throughout 2010, ING continued along the path set out in its
expected after 2011 a long-term service agreement will be put in Back to Basics programme launched in 2009 – the aim of which
place. The outcome of a small number of projects depends on the was to reduce complexity and increase focus, by divesting a
details of the actual transaction(s). Hence, the implementation of number of non-core activities. In the first quarter of 2010, ING
these projects will be delayed until such details are available. The closed the sale of three of its U.S. independent retail broker-dealer
implementation of local end-state solutions as well as both the units, which comprised three-quarters of ING Advisors Network,
local temporary and long-term service agreements will be managed to Lightyear Capital LLC.
by the respective business units. Throughout ING, a new
governance structure has been inaugurated to ensure that the Also in the first quarter of 2010, ING completed the sale of its
to-be separated units operate at arm’s-length. Asian Private Banking business to Oversea-Chinese Banking
Corporation Limited (OCBC Bank). This transaction was in line
ING Bank and Insurance/Investment Management will continue to with the objective to focus on fewer franchises and reduce the
work together for commercial purposes. The bank will continue to complexity of the Group. It generated a net profit for ING of a

14 ING Group Annual Report 2010

 Report of the Executive Board 2

ING and the financial environment continued

EUR 332 million. Accordingly, ING completed the sale of its Swiss ING Group’s net result for the full-year 2010 was EUR 3,220 million
Private Banking business to Julius Baer. This transaction generated compared to a net loss in 2009 of EUR 935 million. The 2010 net
an estimated net profit for ING of EUR 73 million. result includes a EUR 513 million goodwill write-down in the US
in the third quarter of 2010 and a EUR 634 million write-down of
Furthermore, we sold our 5% stake in Fubon Financial Holding to deferred acquisition costs (DAC) in the fourth quarter as part of
institutional investors, in line with our stated objective to reduce the measures to improve transparency and address the reserve
complexity and divest non-core assets, for an amount equal to adequacy of the US Closed Block Variable Annuity (VA) business
EUR 395 million. The transaction resulted in a pre-tax profit of in the US.
EUR 189 million at ING Bank. In addition, to reduce our exposure to
real estate, we sold our 50% stake in ING Summit Industrial Underlying net result was EUR 3,893 million for the full-year 2010,
Fund LP, a Canadian light industrial property portfolio, to a joint up 300% from EUR 974 million a year earlier. Underlying net result
venture between KingSett Capital Inc. and its affiliates and certain is derived from total net result by excluding the impact from
clients of Alberta Investment Management Corporation. divestments and special items. Divestments recorded in 2010
The transaction value for 100% of Summit was approximately totalled EUR 394 million, mainly reflecting the EUR 405 million
CAD 2.0 billion and included assumed debt. profit on the sale of Private Banking Switzerland and Asia.
Special items in 2010 were EUR –1,068 million, reflecting
In the third quarter of 2010, ING decided to sell its 3% financial expenses for various restructuring programmes, separation costs
investment stake in Kotak Mahindra Bank in India. The sale was and the already mentioned EUR 513 million goodwill write-down
in line with the strategic objective to increase focus and divest in the US. The separation costs were EUR 85 million for the full-year
non-core activities. 2010. Divestments recorded in 2009 totalled EUR –150 million.
Special items were EUR –1,759 million and included a one-time
Lastly, in December 2010, we announced the sale of ING charge due to an accrual for additional future payments to the
Investment Management Philippines to the Bank of the Philippine Dutch State of EUR 930 million and a EUR 554 million restructuring
Islands (BPI). This decision resulted from the strategic decision to provision, which was predominantly related to headcount reduction
split the bank and the insurer/investment manager. For in the for ING’s Back to Basics programme.
Philippines, trust and investment management businesses must
operate under a trust licence. As a consequence of the strategic ING’s capital position remained strong, supported by the
split, ING can no longer conduct investment management activities EUR 5.9 billion of core Tier 1 capital surplus generation from the
in the Philippines through ING Bank Manila, as it did in the past. bank in 2010. ING Bank’s core Tier 1 ratio increased to 9.6% at
The Philippine investment management activities were therefore year-end 2010 from 7.8% at year-end 2009.
divested to another licensed bank (BPI).
Shareholders’ equity increased EUR 7.7 billion from EUR 33.9
ING Group results 2010 (1) billion at the end of 2009 to EUR 41.6 billion at year-end 2010.
in EUR million 2010 2009 This increase was caused by a positive change in revaluation
Commercial performance Banking (2) 7,814 7,266 reserves, positive exchange rate differences and the addition
Operating result Insurance (3) 1,743 1,434 of the net profit.
Total market impacts Banking –201 –3,046
Total market and other impacts Insurance (4) –2,262 –1,636 Shareholders’ equity per share was EUR 10.99 at year-end
Risk costs –1,751 –2,859 2010 versus EUR 8.95 at year-end 2009.
Underlying result before tax 5,343 1,159
of which: The Bank’s underlying result before tax was robust in 2010 at
– Banking 5,862 1,361 EUR 5,862 million, a fourfold increase from the previous year.
– Insurance –519 –202 This strong improvement was driven by volume growth,
Taxation 1,352 91 strengthening of the interest margin, significant lower negative
Minority interests 98 95 market-related impacts and a more normalised level of risk costs.
Underlying net result 3,893 974 Banking’s commercial performance, i.e. underlying result before tax
Divestments 394 –150 excluding market-related impacts and risk costs, was up 8% to
Special items after tax –1,067 –1,759 EUR 7,814 million from EUR 7,266 million in 2009.
Net result 3,220 –935
(1)
Numbers may not add up due to rounding. At ING Insurance, the 2010 underlying loss before tax of EUR 519
(2)
Commercial performance Banking is underlying result before tax excluding
market impacts and risk costs. million was heavily impacted by adverse market and other impacts
(3)
Operating result Insurance is underlying result before tax excluding market totalling EUR 2,262 million in 2010, an increase of EUR 626 million
and other impacts. from EUR 1,636 million in 2009. The operating profit of Insurance,
(4)
Market and other impacts Insurance include gains/losses and impairments,
revaluations, and market and other impacts. i.e. underlying result before tax excluding market and other
impacts, improved 22% from EUR 1,434 million in 2009 to
FINANCIAL DEVELOPMENTS EUR 1,743 million in 2010. This improvement was driven by a
The operating environment continued to improve gradually during significant improvement of the investment margin as well as higher
the year, although the global economic recovery remained fragile fee and premium-based revenues. These factors were in part offset
and market volatility persisted. Nevertheless, ING Group’s results by rising administrative expenses.
showed a strong improvement compared with the previous year.

ING Group Annual Report 2010 15

2 Report of the Executive Board

Strategy
Earning trust with more agile and ING reached an important milestone in 2010 by formalising the
customer-centric businesses operational separation of its banking and insurance/investment
management operations in preparation for a full split of both
> Create strong businesses and ensure businesses. The Group is concentrating on creating strong
stand-alone businesses and repurchasing the remainder of the
repayment of the Dutch State when core Tier 1 securities issued to the Dutch State when prudent
prudent and possible and possible. At the heart of the strategic redirection lies a strong
resolve to earn trust. ING therefore aims at building sustainable,
> Bank and Insurer operationally separate, long-lasting client relationships based on operational excellence,
building own culture and strategy sound business ethics and good corporate citizenship.
> Earning trust through sound financial
ING Bank will build on its global presence and international
performance, increased customer focus, network and capitalise on its leadership position in gathering
operational excellence and good savings, multi-channel distribution, simple propositions and
corporate citizenship marketing. It will focus on customer centricity, operational
excellence, and top employment practices. Although the option
> Base case scenario: divestment of of a single initial public offering (IPO) remains open, we intend
Insurance through two IPOs to realise the divestment of our insurance and investment
management operations through two IPOs. The Europe-led
insurance business (including our activities in Asia) will combine
the cash generation ability of the Benelux with the attractive
growth markets of Central Europe and Asia. The US-focused
business will build on its Retirement Services and Life Insurance
franchises. We are still exploring strategic options to determine
the future of the insurance business in Latin America.

ING GROUP’S PRIORITIES: CREATE STRONG BUSINESSES AND

ENSURE REPAYMENT OF THE DUTCH STATE
2010 marked a significant turning point for ING. After two difficult
years during which the global financial crisis had its impact on the
company, we managed to structurally improve our operating and
commercial performance while successfully executing the
disentanglement of our banking and insurance/investment
management operations. As the operational separation of the
bank and the insurer/investment manager has been formalised
(as of 1 January 2011), they now operate at arm’s-length from each
other. We have thus achieved a first important milestone in the
implementation of the Group’s strategic decision to move towards
a complete separation of both businesses, which was announced in
October 2009 in recognition of the need to regain trust through
increased transparency and simplicity.

Going forward, ING Group strives to create strong independent

businesses and make certain that the interests of all ING businesses
are equally served. In addition, assuming favourable economic
conditions and availability of excess capital, the Group will
concentrate on repurchasing the remaining core Tier 1 securities
issued to the Dutch State. Moreover, in 2010, we determined a
base case divestment scenario for the insurance and investment
management operations, which is further outlined below.

In future, the bank and the insurer/investment manager will

continue to work together for commercial purposes on an arm’s-
length basis. Hence, on the one hand, ING Bank will continue to
sell ING Insurance/Investment Management products and, on the
other hand, ING Insurance will continue to use ING Bank services.
The bank and the insurer/investment manager will, however,
develop their own organisations, building on their own culture and
strategy. The strategic direction of the individual businesses is
further explained below. We are striving to ultimately complete the
divestment process before the end of 2013, and sooner whenever
market circumstances are appropriate, and conduct it with the
utmost diligence to protect stakeholders’ interests and optimise
shareholder value.
16 ING Group Annual Report 2010
 Report of the Executive Board 2

Strategy continued

EARNING TRUST AND INCREASING CUSTOMER CENTRICITY COMPLETING THE SEPARATION OF THE BANK AND THE
IN BOTH BANKING AND INSURANCE INSURER/INVESTMENT MANAGER
The financial crisis has demonstrated that the licence to operate for The operational separation of ING Bank and ING Insurance/
any financial institution is to be trusted by its stakeholders, in Investment Management under the ING Group umbrella has
particular its customers. At the heart of the strategic redirection of been finalised (see ‘ING and the financial environment’ for further
ING Group thus lies our strong resolve to earn trust. By separating details). With the operational separation in place, ING is ready to
our banking and insurance operations, we will build more agile, move towards the next phase, including the full preparation for
simple and customer-centric businesses. Obviously, earning and one or more transactions.
maintaining trust is a challenging task at any time, but this is even
more difficult in the current environment. After all, the financial Although the option of a single public offering remains on the
crisis has fuelled a demand for greater simplicity and transparency. table, we have determined the base case divestment scenario for
In addition, prudential supervision and regulation are being our insurance and investment management operations as follows:
tightened. Meanwhile, competition in financial markets continues • One separate public offering of our combined insurance
to be strong, so efficiency remains imperative. operations in Europe and Asia, which rely on our solid
cash-generation ability in the Benelux, and attractive growth
In earning the trust of our customers, our employees are a very opportunities in Central Europe and Asia.
valuable asset. ING is therefore encouraging its employees to build • One separate public offering of our leading US franchise in
sustainable, long-lasting client relationships based on operational life insurance and retirement services.
excellence, sound business ethics and good corporate citizenship
(see ‘Human Resources’ for more information on these efforts). The We are still exploring strategic options to determine the future of
operating leverage in this is obvious. For only a company pursuing a the insurance business in Latin America. The preference for two
strategy focused on winning the hearts and minds of its customers, public offerings is driven by a number of factors. Firstly, such a
employees and other stakeholders, will achieve satisfactory financial scenario would facilitate optimal alignment of the timing and order
performance for its shareholders. of execution with the market environment in Europe and the US
respectively. In addition to this increased flexibility, our preference
Therefore, our Business Principles clearly prescribe the corporate for a two-IPO scenario relates to the uncertainty caused by the
values we pursue and the responsibilities we have towards society divergence in solvency regulations in the EU and the US, which will
and the environment: we act with integrity, we are open and clear, likely place European insurance companies with a presence in the
we respect each other and we are socially and environmentally US at a disadvantage vis-à-vis local US competitors. Lastly, a
responsible. In addition, we have decided to increasingly embed separate public offering of the US insurance operations is expected
two-way stakeholder exchange as an integral part of the overall to improve the overall proceeds of the divestments, as US investors
strategy of both our banking and our insurance businesses. are generally more familiar than European investors with the
This means that we actively seek a continuous dialogue with our US business (including variable annuities) and its valuation than
customers and other stakeholders on their demands regarding European investors, given the existence of listed companies with
our products, services, business performance and/or other issues. similar business profiles in the US. The actual timing of the
This also includes efforts to more pro-actively and systematically anticipated transactions will depend on market conditions
measure and monitor customer satisfaction, as we want our and commercial performance.
customers to recommend ING to their friends, family, colleagues
and peers. Hence, we are introducing Net Promoter Score in all SHAPING THE FUTURE OF OUR BANKING BUSINESS
our businesses across the globe. ING Bank aims to build a leading international retail, direct and
commercial bank serving a broad customer base, comprising
Furthermore, we have taken significant steps to ensure that every individuals, families, small businesses, large corporations,
customer gets the right products and services, via the right institutions and governments. It will build on its global presence
distribution channels, and at the right prices or returns. Therefore, and international network and capitalise on its leadership position
we are evaluating our entire product portfolio and product in gathering savings, multi-channel distribution, simple propositions
approval procedures based on sharpened criteria for good and marketing. The banking strategy has been developed with the
customer care. Importantly, financial education – an essential changing regulatory environment in mind (see ‘ING and the
pillar of our corporate responsibility – is embedded in our business financial environment’ for further details).
strategy through tools and initiatives to improve the financial
capabilities of our customers. The bank will remain based in the Benelux and predominantly
focused on Europe with key positions in selected growth markets in
All in all, we are convinced that the changes we have set in motion Central Europe, Turkey and Asia. The bank is starting from a good
will make us a stronger company and partner for our stakeholders base. It is one of the largest retail savings banks in the world with
that is better able to anticipate and address emerging issues. With a a strong funding base; its direct service model is low-cost and
clearer focus on customer needs as the anchor of our business internationally renowned and it has an extensive international
operations, we are not only building businesses that are financially network, especially for globally operating clients. In the future, ING
sound and viable, but that also have the potential to become the will serve consumers, corporate clients and institutions with one
supplier of choice for our customers. balance sheet, one consistent brand, one management structure
and one support organisation.

ING Group Annual Report 2010 17

 2 Report of the Executive Board

Strategy continued

The bank will focus on customer centricity, operational excellence, REPAYMENT OF THE DUTCH STATE
and top employment practices, while fully integrating its various In December 2009, ING repurchased the first half of the core Tier 1
banking business lines. We have developed a prudent approach securities of EUR 5 billion plus a total premium of EUR 605 million.
for resource allocation, which will not only result in a smaller Furthermore, at the next coupon reset date on 13 May 2011, ING
balance sheet, but also envisages boosting profit and reducing risk. intends to exercise its option for early repurchase of EUR 2 billion
To achieve this, a number of priorities have been defined. In order of the remaining core Tier 1 securities. The total payment in
to ensure a stable deposit base and increase cross-sell and May 2011 will amount to EUR 3 billion and includes a 50%
cross-buy opportunities, the bank will concentrate on becoming repurchase premium. ING will fund this repurchase from retained
the preferred bank for its customers. This means that we want earnings. Provided that the strong capital generation continues,
our customers and potential customers to consider ING first for ING intends to repurchase the remaining EUR 3 billion of the core
all their financial requirements. Tier 1 securities ultimately by May 2012 from retained earnings.
The final decision on repurchase of these core Tier 1 securities
We will increasingly bring loan growth in line with deposit will be made before the envisaged repayment date and will be
growth, particularly focusing on deposits with attractive liquidity conditional upon there having been no material changes
characteristics (e.g. term deposits and savings accounts) and an regarding ING’s capital requirements and/or ING’s outlook
increased weighting on long-term public debt. Mortgage growth on external market circumstances.
will be managed in the context of the bank’s objectives with regard
to deposit growth, and strengthening client relationships. In CONCLUSIONS AND AMBITIONS
addition, the bank will seek to raise fee and commission income With the operational separation of the banking and insurance/
and originate higher yielding lending assets (e.g. consumer finance investment management operations completed in 2010, ING Group
and mid-corporate lending), while reducing low yielding is now able to focus on creating more agile and customer-centric
investments. This will include a diversification of asset classes in businesses and repaying the Dutch State. To earn trust, we will
some regions, and efforts to further build commercial capabilities. build the future of our businesses on sustainable profit based on
Lastly, given regulatory changes and the desire to strengthen the sound business ethics and good corporate citizenship. We will
funding base, the bank will adapt its asset-only strategies (e.g. in continue along the path of intensifying our dialogue with our
businesses like Structured Finance, Real Estate Finance, Lease) and customers and other stakeholders on our products, services,
mono-client businesses. business performance and/or other issues, as we consider it our
responsibility to provide every customer with the right products
SHAPING THE FUTURE OF OUR INSURANCE BUSINESS and services, via the right distribution channels, and at the right
As already mentioned, the future independence of ING Insurance/ prices or returns.
Investment Management is to be realised through two public
offerings: a Europe-led IPO with solid cash flow combined with ING has the ambition to repay the Dutch State in full as soon as
strong growth positions in developing markets; and a US-focused possible and intends to realise the divestment of its insurance and
IPO with a leading franchise in retirement services. investment management operations through two public offerings.
Looking at the future, ING Bank has a promising starting position
The Europe-led business will combine the cash generation ability as a leading retail, direct and commercial bank. It aims to become
of the Benelux with the attractive growth markets of Central the preferred bank for its customers and will focus on customer
Europe and Asia. It will thus have an attractive growth profile in centricity, operational excellence, and top employment practices.
comparison with its life insurance peers. The US-focused business While moving towards the public offerings of a Europe-led and
will build on its strong Retirement Services and Life Insurance a US-focused business, ING Insurance will initially concentrate on
franchises, focus on the run-off of the closed variable annuities further improving its operational performance.
block, and restore profitability.

In preparing for the public offerings, ING Insurance will concentrate

on further improving operational performance and building strong
management teams. Moreover, it intends to sharpen its strategic
direction, strengthen the capital base, improve investment results
and review IT and procurement procedures. The product portfolio
will be managed in an integrated way with a particular focus on
capital consumption, e.g. through significantly reduced sales of
variable annuities products and improved hedging capabilities.
To enhance commercial performance, we will strengthen and
further diversify our distribution capabilities (including tied agents,
bank distribution, and direct distribution). The three key elements
in improving performance include improving margins, containing
costs and pursuing select growth opportunities to create strong
global Insurance businesses, ready for IPOs ultimately by 2013.

18 ING Group Annual Report 2010

 Report of the Executive Board 2

Corporate responsibility
Being a responsible financial services provider ING believes that the increasing social, economic and environmental
and a good corporate citizen challenges – such as demographic, ethical and value change, food
scarcity, climate change and energy tensions, require businesses
> Social, ethical and environmental objectives worldwide to critically review and adapt their business models.

used as a measure of performance in the It is our conviction that our business decisions must be in line
remuneration policy for the Executive Board with the expectations and interests of those to whom we owe
our licence to operate – our stakeholders. We also believe that
and senior management an innovative sustainable strategy and sound business ethics will
> 93% of our employees indicate that living result in more comprehensive risk management, proud employees,
up to the Business Principles is important a greater attraction for talented people and new business
opportunities. That is why ING aspires to play a prominent role
> Sustainable assets under management in sustainable business development. ING is committed to creating
increased by 5% more sustainability in the value chain and we strive to help our
> 20% employee participation in customers with shifting to a more sustainable way of doing
business. As part of our commitment to society, ING has developed
ING Global Challenge community development programmes that focus on children and
education, financial education and protecting the environment.

READY FOR THE OPERATIONAL SPLIT BY YEAR-END 2010

Corporate responsibility has continued to play an important role
in building strong stand-alone businesses. As a result of
the separation of our organisation, we will review our current
sustainability strategy and, based on the foundations laid in the
past, further embed sustainability in the core business of our
banking and insurance operations.

CLEAR CORPORATE RESPONSIBILITY VISION

The essence of ING’s corporate responsibility (CR) strategy is that
we pursue profit on the basis of sound business ethics and respect
for our stakeholders. We therefore have a clear vision on ethical,
social and environmental issues, for both our banking and
insurance operations.

This vision can be summarised as follows:

• Being a responsible financial service provider means that
we provide high quality products and services that meet the
needs and expectations of our customers. It also means that
we do not want to use our money for illegal, harmful or
unethical purposes.
• Being a good corporate citizen means that we want to
contribute to positive change in society. We are focused on
finding innovative solutions that address the local and global
challenges our customers face, like climate change, poverty or
ageing of the population. We also empower our employees to
make a positive contribution to society through our community
investment programmes.

We have been measuring, tracking and monitoring our

performance in the social and environmental field since 1995.
We have identified ten key performance indicators which directly
relate to the focus areas of our strategy.

PROGRESS IN 2010
While the business environment continued to be challenging in
2010, our results are a testament to the hard work and improved
teamwork in the field of corporate responsibility throughout
the organisation.

ING Group Annual Report 2010 19

 2 Report of the Executive Board

Corporate responsibility continued

REMUNERATION worldwide. Training customer-facing colleagues helps us ensure

To ensure that corporate responsibility is an integral part of our such risks are considered alongside more traditional business risks
corporate strategy, our social, ethical and environmental objectives when lending decisions are made.
were used as a measure of performance in the remuneration policy
for the Executive Board and senior management in 2010. CONTRIBUTING TO POSITIVE CHANGE
We team up with our clients to truly understand their business.
ING BUSINESS PRINCIPLES This enables us to create products that take into account both
The ING Business Principles prescribe our core values of integrity, business and sustainability objectives. In close cooperation with
transparency, respect and social and environmental responsibility. our clients we continue to create new and meaningful sustainable
To ensure that every employee in every part of the organisation products and services. Examples are sustainable investment funds,
understands how his/her actions and behaviours can help earn and such as so-called thematic funds which enable clients to invest their
retain customer and stakeholder trust, ING implemented an money in microfinance projects, renewable energy or in projects
innovative training and awareness programme. According to our contributing to a sustainable use of water. ING’s sustainable assets
2010 employee engagement survey, 93% of our employees under management increased by 5% from EUR 2,028 million in
indicated that living up to the Business Principles is important. 2009 to EUR 2,120 million in 2010.
81% of our employees feel that the principles guide them in
their everyday decisions at work. Following our clients increased appetite for the renewable sector,
ING’s investment in energy projects related to renewable sources
HELPING OUR CUSTOMERS MANAGE THEIR increased exponentially from 2005 to 2010.
FINANCIAL FUTURE
We have taken significant steps to ensure that every customer gets Investment in energy projects
the right products and services, via the right distribution channels, 2010 (%) 2005 (%)
and at the right returns. Therefore, we are evaluating our entire Wind 33 2
product portfolio and product approval procedures based on Solar 3 –
sharpened criteria for good customer care. Importantly, financial Coal 14 29
education – an essential pillar of our corporate responsibility – is Diesel – 2
embedded in our business strategy through tools and initiatives Combined-cycle gas turbine 47 67
that empower customers to be good at money. Other 3 –

Where do customers go for financial advice? The internet, We are also committed to mobilise our knowledge network to
a professional advisor or your family, friends and colleagues? accelerate change towards a more sustainable society. Our
Unfortunately, the majority of consumers don’t know where Economics Department published a number of research papers in
to begin finding trustworthy, easy-to-understand financial the field of sustainability that help our customers and ING to
information. While some rely on family and friends, only a small further develop sustainable efforts.
percentage of people actually seek professional advice. In fact,
research conducted by ING shows the questions consumers have ‘Luz Verde’ (Green Light), an ING partnered project in Mexico,
are very basic, such as “how do I start saving?” and “why do has been awarded the Carbon finance deal of the year 2010 by
I need life insurance?” Environmental Finance magazine. The pilot project of the
Luz Verde programme exchanged 1 million environmentally
That’s why ING launched ‘Be Good at Money’ (internet access unfriendly, incandescent light bulbs with energy-efficient CFLs
required), an online area that allows consumers to access for free, with families in the Puebla region of Mexico. For 40%
easy-to-understand financial information and regain control of these families, the annual savings on their energy bills amounts
over their finances. to the equivalent of a week’s wages. The idea for this project
originated in an Australian company – Cool nrg –, which
estimated that the large reduction in CO2 emissions from millions
FINANCING AND INVESTING RESPONSIBLY of Mexican families switching to energy-efficient bulbs translates
Assessing the risk of any financial transaction is essential for into money. As per the Kyoto Protocol each tonne of greenhouse
all financial institutions. ING has a long-standing commitment to gas emissions reduced by projects in developing countries can be
managing environmental and social risks that may be associated sold as an emission reduction ‘credit’ to governments or
with its business activities. We support our customers to further companies in industrialised countries who can then use the
improve their working practices. If, however, they do not meet our credits to meet their CO2 reduction obligations under the
minimum social, ethical and environmental standards, we cease to Protocol. The success of the project was clinched by the
do business with them. This process is led by our environmental financing that made this project possible.
and social risk policy desk and firmly embedded in the overall risk
management procedures.
ING has been a carbon neutral company since 2007. We strive to
Over the years we have built an extensive framework of minimise carbon emissions that are a direct consequence of our
environmental and social risk policies. These policies translate operations around the globe. In addition, we have formulated the
our vision on social and environmental risks and issues into company-wide ambition to minimise our carbon footprint by 30%
practical guidelines. by 2012. We aim to realise this by using resources more efficiently,
applying sustainable means and sources for procurement and
In 2010 we continued to focus on raising the awareness of encouraging employees to be mindful of the environmental impact
environmental and social risk issues among our colleagues

20 ING Group Annual Report 2010

 Report of the Executive Board 2

Corporate responsibility continued

of their activities. We measure our remaining emissions and LOOKING FORWARD

compensate for them by investing in renewable energy projects. In 2011, both ING Bank and ING Insurance will further build their
CR strategy on the foundations established in previous years.
Direct environmental footprint*
2010 2009 The strategy for ING Bank will take into account growing customer
Energy use in kWh per FTE** 7.79 7.73 awareness and the increasing demand for sustainable solutions.
Business travel by air in km per FTE 2,536 2,030 A strong and transparent framework of environmental and social
Paper consumption in kg per FTE*** 48.79 53.77 risk policies, financial education and community development
*
More details including coverage of data can be found in the ING Corporate programmes will remain important building blocks of this strategy.
Responsibility Report 2010, available on www.ing.com. We report on energy
and paper use and business travel as this contributes to 99% of ING’s direct
environmental footprint. The CR strategy for ING Insurance will focus on financial education
**
This includes brown and green energy, natural gas, fuel oil and and community development. With regard to investment
district heating.
***
This includes eco-labelled paper and non eco-labelled paper. management, environmental and social risk policies will continue
to play an important role.
INVESTING IN THE COMMUNITY
In line with our ambition to make a positive contribution to society, KEY PERFORMANCE INDICATORS 2010
ING has launched community investment programmes in both ING has identified 10 KPIs for its CR reporting. These KPIs relate
developed and developing communities. Our employees are directly to the ING CR strategy and are used by ING to measure
essential to make these programmes a success. They are committed CR performance within ING.
to donate money or do voluntary work – for our global campaigns
Key Performance Indicators (1)
or for one of the many programmes that have been developed by
Year-end Year-end
our local branches. 2010 2009
Equator Principles
Number of projects reviewed 74 77
As part of the global ING Chances for Children programme, we
Sustainable assets under management (2)
organise an annual initiative featuring employee volunteering and (in EUR million) 2,120 2,028 (5)
fundraising initiatives for children and education-related projects. Customer satisfaction index (3) 69.1% 69.1%
Called Global Challenge, it is held on or around 20 November, Economic value (in EUR million)
the day the United Nations adopted the Convention on the Rights Total assets 1,247,110 1,163,643
of the Child. A record 38 countries took part in this year’s Global Shareholders’ equity 41,555 33,863
Challenge, up from 33 last year, and we succeeded in meeting Total income 54,887 47,765
our target of 20% staff participation – which means that a Result before tax 4,477 –1,525
massive 20,000 ING employees were involved! A total of Net result 3,220 –935
EUR 927,569.33 was raised for projects aimed at Personnel expenses: salaries 5,501 5,076
children’s education. Personnel expenses: other 2,270 2,262
Employee engagement index (4) 75% 71%
Diversity
STAKEHOLDER ENGAGEMENT Percentage of women in the international
We work hard to understand our stakeholders and address management council 14.9% 12.8%
their needs in a way that is sustainable for our businesses and ING Chances for Children
Number of children provided with access
society. Stakeholder management has always been an important to education 125,175 107,575
element of ING’s overall strategy. However, the financial crisis Green energy
fuelled the need for an intensification of our stakeholder MWh (in thousands) of electricity purchased by
management activities, in particular given the shifting demands ING that is derived from renewable resources 332,843 330,582
and increased expectations of various stakeholder groups. Dow Jones Sustainability Index (6) 72 75
Therefore, we stepped up our efforts to actively seek and maintain FTSE4Good Index Included Included
(1)
an ongoing dialogue with our customers and other stakeholders The audit firm Ernst & Young has audited the KPIs for reasonable assurance.
(2)
For a detailed overview, see the 2010 Corporate Responsibility Report.
about ING’s role in society. (3)
Satisfaction scores are based on the American Customer Satisfaction Index
(ACSI) methodology, adapted for the financial services market and based on a
combination of questions related to overall satisfaction, customer delight and
In 2010, ING introduced a number of round-table discussions with ideal provider. This score is not weighted by market. The selection of countries
sustainable and social entrepreneurs. These were not only changes every year mainly due to strategic decisions of ING (e.g. investments
organised to listen, learn from and respond to our stakeholders, and divestments). However, this does not have a significant impact on the
overall customer satisfaction index score. The customer satisfaction scores of
but also to establish a working partnership with these ING Direct are not included. ING Direct has a different way of measuring
entrepreneurs. ING is keen to stimulate sustainable innovation. customer satisfaction.
(4)
Thereby, it also critically reviews its own role in this field. The percentages only refer to the percentages of ING employees that have
indicated that they are proud to work for ING - one of the elements surveyed -
The intensified dialogue with sustainable entrepreneurs also and do not reflect ING’s overall employee engagement score, which was 69%
boosted internal developments within ING. For instance, the in 2010. The research was carried out by Kenexa.
(5)
knowledge network was extended thanks to an increased focus The 2009 figure does not reconcile with the 2009 Annual and CR Reports
because of divestments in Australia.
on the subject within ING’s Economics Department. This enabled (6)
ING company score in the underlying SAM’s corporate sustainability
ING to produce and publish a number of in-depth research assessment (1-100).
papers on sustainability issues.
More information on Corporate Responsibility at ING can be found
on www.ingforsomethingbetter.com

ING Group Annual Report 2010 21

 2 Report of the Executive Board

Capital management
ING’s Group Capital Management department allocated to ING’s different businesses. Capital Management takes
(Capital Management) is responsible for ensuring sufficient an active role in investing ING’s capital prudently and managing
capitalisation of ING Group entities at all times in order to manage foreign exchange risks in such a way that the solvency impact of
the risk associated with ING’s business activities. This involves the currency movements is limited as much as possible, without causing
management, planning and allocation of capital within ING Group. volatility on the profit and loss account. The main objective in
ING’s Corporate Treasury is part of Capital Management. managing the corporate lines is to reduce expenses as much
It executes capital market transactions, term (capital) funding as possible, without increasing ING’s overall risk profile.
and risk management transactions. Capital Management monitors
and plans capital adequacy on a consolidated basis at three levels: PREPARING FOR THE FULL SEPARATION OF
ING Group, ING Insurance and ING Bank. Capital Management ING BANK AND INSURANCE
takes into account the metrics and requirements of regulators Finally, Capital Management plays an important role in ensuring
(EU Solvency, Tier 1 and BIS ratios and limits for hybrid capital), the creation of strong stand-alone companies in preparation for
rating agencies (leverage ratios, Adjusted Equity) and internal the full separation of the Group’s banking and insurance/investment
models such as the economic capital and market value management operations. Until completion of the restructuring
balance sheets approach for ING Insurance including process, all operating entities need to remain adequately
Available Financial Resources (AFR). capitalised according to all prevalent regulatory and rating agency
requirements. Another important priority for the department is to
BALANCING DIFFERING REQUIREMENTS WHILE reduce interdependencies to a minimum, as the various entities of
ENSURING SUFFICIENT CAPITALISATION the Group should be able to independently access capital markets.
ING’s capital position cannot be seen in isolation, but has to be
assessed in the context of the overall balance sheet development DEVELOPMENTS IN 2010
as well as the possibilities provided by the capital markets. Hence, In 2010, ING’s capital position improved, driven mainly by strong
an important challenge for Capital Management, especially in the capital generation at ING Bank and favourable currency effects.
current environment, is to balance the differing requirements of A more detailed section in the annual accounts provides insight
regulators, rating agencies and shareholders. into the capital management practices and the development of the
capital position of ING Group and its various business lines in 2010.
As Capital Management is organised as a Group function,
it is able to bring together capital requirements from both the
Bank as well as the Insurer and helps to safeguard the fungibility
of capital throughout the Group. Another key objective for
Capital Management is to create financial flexibility for ING in
the context of forthcoming regulatory changes and the need
to generate sufficient capital to repurchase the remaining core
Tier 1 securities issued to the Dutch State.

The strategic planning process takes into account both available

capital and the requirements from the different parts of the Group.
Capital Management continuously monitors and analyses ING’s
capital position, taking into consideration the potential impact of
changes in the regulatory environment and assessments of ING’s
capital targets in comparison with the rest of the industry.
The department also advises the Executive Board and Supervisory
Board on ING’s dividend policy.

MAINTAINING A WELL-DIVERSIFIED FUNDING BASE

Capital Management is also responsible for ING’s strategy towards
long-term funding and other capital markets transactions. In order
to achieve a well-diversified funding base, these transactions can
take place in several currencies, jurisdictions, maturities and formats
(subordinated, senior unsecured, etc.) with either fixed or floating
interest rates. Other transactions include hybrid capital and,
if expedient, the issuance of contingent capital.

Moreover, Capital Management is involved in securitisations

executed for the corporate account with the purpose of
improving ING’s capital and liquidity position. In addition, Capital
Management manages the transactions with the Dutch State, such
as the core Tier 1 securities and the Illiquid Assets Back-up Facility.

Furthermore, Capital Management manages the different

corporate lines of Bank and Insurance. Within these corporate
lines, shareholders’ expenses are recorded that cannot be directly

22 ING Group Annual Report 2010

 Report of the Executive Board 2

Risk management
Taking measured risks is part of ING’s business. As a financial Our product offering has grown over the years to meet our
services company, ING is naturally exposed to a variety of risks. customers’ increased demands and expectations, as a result of
To ensure measured risk-taking ING has integrated risk which it has become even more important to know them well
management in its daily business activities and strategic planning. and understand their needs. We have invested in sales suitability
programs over the last few years to ensure that customers receive
ING plays an important role as a financial intermediator in society. the appropriate products and services.
The essence of our business is transformation, which takes many
forms and serves various customer needs. In our retail banking ING operates in financial markets that have become increasingly
operations, for example, we transform on-demand entrusted interconnected as a result of globalisation. ING has a risk appetite
deposits into long dated mortgage loans. Through our payments framework that captures and restricts the different dimensions
and cash management operations we make money available when along which adverse markets impact ING’s capital and liquidity
and where customers need it. Our insurance business is all about position. In addition, ING increasingly conducts company-wide
transformation through time by converting uncertain future cash stress tests as a supplementary tool to assess resilience.
flows into fixed flows, whether they are in the form of life
insurance contracts or pensions. Geographic transformation Financial regulation and accounting standards are in a state of flux,
takes place through our international commercial banking and ING is following the developments closely. Over the past year,
network when we help corporate customers fund their our Insurance business has been preparing to implement the
international business plans. requirements of the Solvency II directive, the new capital
framework for European insurers. Meanwhile, the Bank has
THREE LINES OF DEFENCE started to prepare for the improved regulatory capital and liquidity
The key objective of risk management at ING is to make sure that framework for banks, commonly referred to as Basel III. ING is well
all risks are managed in the best possible way for all relevant positioned to operate under these new regulatory frameworks
stakeholders. We adopt a ‘three lines of defence’ governance once they are in force.
model for risk management, whereby ownership for risk is taken
at all levels in the Group. A more detailed section in the annual accounts provides further
insight into the risk management practices and exposures for
The commercial departments form the first line of defence. ING Group.
They originate loans, deposits and other products, they know our
customers well and are best placed to act in both the customer’s
and ING’s best interest. The second line of defence consists of the
risk management organisation, headed by the chief risk officer
(CRO), and the corporate legal function. The presence of the CRO
on the Bank and Insurance boards ensures that risk management
issues are heard and discussed at the highest level, thus establishing
the appropriate tone at the top. The CRO steers a functional,
independent risk organisation, which supports the commercial
departments in their decision-making, but which also has sufficient
countervailing power to avoid risk concentrations. The third line of
defence is the corporate audit function, which oversees and
assesses the functioning and effectiveness of the first two lines.

ADAPTING TO CHANGE
The transformational role of banks and insurers is
long-established, but the world in which they operate
is changing rapidly. Risk management at ING is all about
anticipating and adapting to this change.

Distribution and communication channels are becoming

more direct and internet based. This is increasing the speed at
which funds can be deposited and withdrawn and this can have
meaningful consequences for liquidity management. Also, ING
is committed to delivering this customer convenience through
e-services without sacrificing security standards.

Customer behaviour and demographics have an important bearing

on risk management of both our banking and insurance products.
Life expectancy, people’s propensity to move from one place to
another, tax changes and many other factors impact the pricing
and hedging of products such as mortgages and annuity contracts.
We therefore update lapse assumptions, prepayment assumptions
and all other relevant metrics regularly.

ING Group Annual Report 2010 23

 2 Report of the Executive Board

Human resources
Putting people first in a changing environment HOW TO ATTRACT, DEVELOP, ASSESS AND RETAIN TALENT
Graduate recruitment
> Ready for the operational split by ING recognises the importance of attracting, developing, assessing
year-end 2010; Building two strong and retaining talent in a competitive market. Graduate Recruitment
helped the business recruit 52 young talents for future leadership
stand-alone organisations positions in 2010. ING’s career website ranks 15th among the top
> Key succession plans and programmes in place 30 corporate career websites in Europe for attracting young talent
online. In its fifth year, ING’s International Graduate Programme
to attract, develop, assess and retain talent (IIGP) continued its work on early career and talent development.
> Finger on the pulse of the organisation IIGP trained more than 650 participants.

Furthermore, ING Netherlands was again ranked as one of the

ING values its human capital highly and therefore ING’s Group top employers in 2010 based on criteria such as good employment
Human Resources (HR) continued to play a key role in attracting, conditions, training facilities and internal promotion opportunities.
developing, assessing and retaining employees and new talent.
HR also helped in shaping the separate Banking and Insurance/ Talents
Investment Management organisations for the future. ING’s Executive Board invests time in personal interaction with
HR continued to support the business, leaders and employees as high-potential talents at all levels of the organisation. Networking
well as local HR divisions to prepare for the operational split of the opportunities include regular, lunch meetings with the
company. It provided appropriate back-up networks for employees CEO and Executive Board members. ING’s executive leadership
who were made redundant. HR helped Insurance build the new also engage with high-potential talents at larger-scale events
stand-alone organisation and assisted business leaders with such as ING’s Management Conference and as part of leadership
changes, redefining roles and changing responsibilities. development programmes such as ING’s Inclusive Leadership
Journey programme and the IIGP.
ING realises that its human capital is key to the business as
motivated and engaged employees are essential to enhance Diversity
customer satisfaction and, therefore, our success. ING wants to The focus in 2010 was on stimulating diversity throughout the
offer its people a stimulating working environment in which organisation and strengthening a diverse workforce. ING’s ambition
teamwork is high on the agenda. By providing ample learning is for women to account for 33% of the positions at the Leadership
opportunities, HR plays a key role in helping our employees to Council (LC) and Management Council (MC) levels of the
reach their full potential. organisation by 2015. While there is still some way to go, ING made
progress in 2010. At year-end, approximately 15% of the LC and
MC members were female.

ING continues to build an inclusive and diverse culture and develop

sustainable leadership skills. One of the many leadership courses
offered by ING’s Business School (IBS) is the Inclusive Leadership
Journey, targeting senior women leaders.

Leadership development & training

Increasing the visibility of talented male and female leaders,
enhancing peer-to-peer knowledge exchange, and further
embedding innovative thinking, continues to drive IBS’s
programmes. Added to this, the IBS expanded its regular
development and training opportunities to 3,242 employees
worldwide by offering online programmes.

HR supports ING in shaping the organisation and developing

socially responsible leaders, as illustrated by ING’s Corporate
Responsibility’s ‘Leadership Development Programme in India’.
In addition, ING launched the Promoting Integrity Programme (PIP)
– a global change programme to help all ING employees
understand how their behaviour can earn and strengthen the trust
of all stakeholders. HR Insurance/Investment Management (IM)
worked closely with the business to strengthen the new
organisation and assess and develop leaders. Insurance/IM senior
leadership teams implemented a comprehensive talent review to
benchmark against external standards.

24 ING Group Annual Report 2010

 Report of the Executive Board 2

Human Resources continued

Becoming a top employer Additional ‘How-to-deal-with-Change’ courses were implemented

HR Insurance/IM and Banking continue to partner with business in response to organisational restructuring programmes, in the
leaders to shape the organisation for the future in terms of culture, Netherlands, the US, Asia/Pacific and Latin America. The courses
performance and engagement. ING’s annual engagement survey, helped employees deal with the consequences of changes, whether
the Winning Performance Culture (WPC) Survey, provided HR with to settle into a new job at ING or find a new external opportunity.
important employee feedback on what will make ING an even
better place to work. This feedback is already helping to shape one FINGER ON THE PULSE OF THE ORGANISATION
of the Bank’s key strategic objectives: becoming a top employer. HR rolled out the annual global engagement (WPC) survey reaching
Sponsored by the Executive Board, a project team has been 107,000 employees, helping ING to keep the finger on the pulse of
established to further develop and implement the Top Employer the organisation. Survey results are used as the starting point for
programme for the Bank. The programme brings together business a dialogue between employees and managers. This helps ING
and HR leaders across the business globally. Likewise, ING, assisted establish what we are doing well and what we can do better in
by HR Insurance/IM, places a strong focus on talent, engagement terms of customer satisfaction, operational excellence, leadership
and culture in building the new Insurance organisation. It is a strong behaviours and our internal and external brand value. 74% of our
illustration of ING’s commitment to listening and responding to employees worldwide completed the survey.
employee opinions – and ultimately making the organisation
a better place to work for current and new employees. Survey results reveal several areas where we have made significant
progress – one of the most important trends is overall employee
Performance Management engagement, which was up 4% at 69%. This is driven by a higher
Increased attention by external stakeholders confirmed the decision number of employees who reported being proud to work for ING
to embed culture, engagement, performance management and and increase in job satisfaction in 2010 versus 2009. Trust in our
succession planning deeper in the organisation. ING focuses on senior leaders was one of the most significant increases – up 8%
the role of leadership behaviours in achieving business results from 2009. Opportunities for improvement were also identified and
by embedding financial and non-financial targets as well as form the basis of action plans being executed throughout the
behavioural targets in ING’s performance management approach company. While the survey results show us that the strategic
for senior executives. HR further strengthened the online direction of ING is clearer to our employees, events of the past few
performance management system. years have negatively impacted our employees’ personal confidence
in their own job security, and therefore efforts must be made to
Compensation strengthen this. In addition, employee engagement has also been
The link to national and international compensation standards is included as a key performance indicator in the annual appraisal
examined closely in relation to and aligned with ING’s performance objectives of senior management. Overall, good progress has been
management approach. Although ING has traditionally adopted a made and we are continuing the dialogue with our employees to
conservative and responsible approach to the remuneration of its address their concerns and areas for improvement.
management and employees, as evidenced by the fact that it has
always aimed for compensation levels at the median level in the CONCLUSIONS AND AMBITIONS
relevant markets, the new remuneration structure provides for a Throughout 2010, HR played a significant role in managing the
number of key amendments. More information can be found in complex operational unbundling of the Bank and Insurance/IM
the Remuneration section of this report. organisations with diligence and care for all employees involved.
ING realises that the organisational changes can only be achieved
PREPARING FOR THE OPERATIONAL SPLIT with fully engaged employees, who are instrumental to the
HR continued to work closely with the business throughout the company’s success. Becoming a Top Employer is one of ING Bank’s
change process and is helping to build two strong, stand-alone ambitions for the coming years. Building the new Bank is about
organisations. It played a decisive role in designing various roles at aligning our financial and business strategies with culture.
head-office level for the Bank and the Insurer that are aligned with
current and emerging business priorities as well as regulatory HR Insurance/IM continues to shape the HR 2011 strategy in
expectations. HR advised on and recruited talents for leadership support of the Insurer’s business objectives with a focus on
positions at head office during the change process. performance management, talents, culture, engagement and
diversity. It is about creating robust and coherent cultures to
The operational separation resulted in substantial employee distinguish the uniqueness of the Bank and the Insurer as well as
movements in the support functions and, unfortunately, also ensuring the strength of leadership positions. In 2011, ING will
some redundancies. ING followed the Social Plan in preparing for continue to focus on attracting, retaining, engaging and
the split. ING used Mobility Centres in the Netherlands, managed assessing talent and will track management performance carefully.
by HR, which supported employees in their search for new jobs, at
ING or externally. Last but not least, ING will focus on competitive remuneration
linked to performance within the CRD III (Capital Requirements
ING’s global people database proved instrumental in managing Directive III) framework.
employee movements as ING implemented the operational split.
It was, among other things, invaluable when ING had to draft
new legal employment letters for 32,551 employees in 
the Netherlands.

ING Group Annual Report 2010 25

 2 Report of the Executive Board

Overview
Banking
Management Board Banking ING Bank is a large international player with an extensive global
on 31 December 2010
network in over 40 countries. It has strong established positions
Jan Hommen in the Netherlands, Belgium and Luxemburg and key positions
chief executive officer in Poland, Romania and Turkey, the largest Central and Eastern
Europe markets. ING holds strong positions in Germany, France,
Eric Boyer de la Giroday Italy, Spain, the UK and the US. ING has also profitable businesses
vice-chairman in Canada and Asia/Pacific. ING Bank has an extensive international
network to service and support its corporate clients. From 1 January
Patrick Flynn 2011, ING Bank began operating as a stand-alone company.
chief financial officer
FINANCIAL DEVELOPMENTS
Koos Timmermans Underlying result before tax (excluding the impact of divestments
chief risk officer and special items) increased more than fourfold to EUR 5,862
million from EUR 1,361 million in 2009. This strong improvement
William Connelly (from 1 January 2011) was driven by volume growth, strengthening of the interest margin,
CEO Commercial Banking lower negative market-related impacts and a more normalised level
of risk costs. Almost all business segments contributed to the
Eli Leenaars increase. ING Direct and ING Real Estate benefited from the signs
CEO Retail Banking Direct and International of stabilisation in the property markets: ING Direct posted an
underlying result before tax of EUR 1,450 million after a loss in
Hans van der Noordaa 2009, while ING Real Estate reduced its loss by EUR 925 million
CEO Retail Banking Benelux to EUR 63 million in 2010.

The total result before tax from banking operations rose to

EUR 5,830 million in 2010 compared with a loss of EUR 838 million
Financial overview* in 2009. The loss in 2009 included EUR –1,726 million of special
in EUR million 2010 2009 items, mainly related to additional payments on the Illiquid Assets
Total underlying income 17,298 13,483 Back-up Facility and charges for the merger of the retail banking
Underlying operating expenses 9,685 9,263 activities in the Netherlands, and EUR –473 million of operating
Underlying additions to loan loss provisions 1,751 2,859 pre-tax results from divested units. In 2010, the divestment of the
Underlying result before tax 5,862 1,361 Swiss and Asian Private Banking activities and the sale of Summit
Underlying cost/income ratio 56.0% 68.7% in Canada resulted in a pre-tax gain of EUR 389 million, while the
Underlying cost/income ratio operating pre-tax results from these units amounted to EUR 35
(excl. market impacts) 54.2% 54.3%
million. Special items in 2010 were EUR –456 million, mainly related
Client balances (EUR billion) 1,168 1,108
to various restructuring programmes, including the merger of the
Net production client balances (EUR billion) 49 21
Dutch retail banking activities, and costs related to the separation
Risk-weighted assets (EUR billion) 321 330
of Banking and Insurance.
Underlying Return on Equity** 17.6% 5.0%
Underlying Economic Capital (EUR billion) 27 22
Underlying income rose 28.3% to EUR 17,298 million. The interest
* Underlying numbers are derived from IFRS-EU numbers, excluding the impact
of divestments and special items. result increased 7.5%, driven by higher volumes and margins.
** Underlying after tax return divided by average equity based on 7.5% core In 2010, total client balances rose by EUR 60 billion to EUR 1,168
Tier 1 ratio. billion. The total interest margin improved to 1.42% from 1.32%
Underlying income in 2009, mainly in Retail Banking. Commission income increased
in EUR million 2010 2009 3.6% driven by higher Structured Finance fees. Investment and
Retail Banking 11,431 8,763 other income was EUR 1,218 million compared with EUR –1,561
Commercial Banking 5,811 5,097 million in 2009, as impairments on debt securities and negative
Corporate line banking 55 –377 revaluations on real estate diminished combined with higher
Total 17,298 13,483 capital gains.

Underlying result before tax Underlying operating expenses increased by 4.6% to EUR 9,685
in EUR million 2010 2009
million, reflecting higher staff costs, increased marketing expenses
Retail Banking 3,625 905 and deposit guarantee scheme costs as well as higher IT project
Commercial Banking 2,316 1,118 costs. The underlying cost/income ratio improved to 56.0% from
Corporate line banking –79 –662 68.7% in 2009, driven by higher income. Excluding market-related
Total 5,862 1,361 impacts, the cost/income ratio was 54.2% in 2010.

The underlying net addition to the provision for loan losses declined
to EUR 1,751 million from EUR 2,859 million in 2009. Risk costs in
2010 were 53 basis points of average risk-weighted assets
compared with 85 basis points in 2009.

26 ING Group Annual Report 2010

 Report of the Executive Board 2

Banking continued

WHERE WE OPERATE
ING Bank builds on its international network, capitalising on its leadership position in gathering savings,
multi-channel distribution, simple propositions, cost leadership and marketing.

Retail Banking is #2 bank in

the Netherlands and #4 bank
in Belgium; also active in
Central and Eastern Europe

ING Direct is active Retail Banking

in the US and Canada is active in China,
India and Thailand

Commercial Banking has an

international network in 40 ING Direct
countries, with key positions in in Australia
Structured Finance and ING Direct is active in Austria,
Financial Markets France, Germany, Italy, Spain
and the UK

BUSINESS DEVELOPMENTS environment’) require us to follow a prudent approach to optimise

ING Bank reported its best ever results in 2010 helped by improving our limited resources.
market conditions. Risk costs began to revert to a lower level than
originally envisaged as macroeconomic conditions started to Throughout 2009 and 2010 ING worked towards a separation
improve. Competition overall was less intense than in 2009, of its banking and insurance/investment management businesses
improving returns on savings. However, volume growth remained in preparation for the eventual divestment of the latter in 2013 at
subdued in lending to mid-corporates and SMEs. the latest (see the chapters ‘ING and the financial environment’
and ‘Strategy’).
ING Bank delivered on all of the Back to Basics objectives set
in early 2009 and achieved significant commercial success in 2010. In 2010, all banking operations were integrated into one banking
It increased the number of clients, launched new products and organisation and from 1 January 2011 ING Bank began to operate
completed important deals. as a stand-alone company. A separate Management Board Banking
was installed and balance sheet integration is well under way.
ING actively participated in developing the new Banking Code Balance sheet integration will play a major role in improving profit
established by the Dutch Banking Association (NVB). The Code is and loss and adapting to the changing regulatory requirements,
based on the ‘Restoring Trust’ report published by the Advisory particularly those relating to solvency, liquidity and balance sheet
Committee of the Future of Banks set up by the NVB (see for more leverage. ING Bank’s prudent approach will include a continued
information the publication ‘Application of the Dutch Banking Code focus on cost containment, a strong capital position in line with
by ING Bank N.V.’ on the website of ING: www.ing.com). market expectations and a further reduction of risk.

ING closely monitors external trends that are likely to have a high Now that the bank has been operationally separated it will
impact on its business. The new Basel III framework announced concentrate on building a more agile and customer-centric
in 2010 will affect our leverage, capital, funding and liquidity. business. ING Bank will serve consumers, corporate clients and
The world economy remains challenging and there are continuing institutions with one balance sheet, one consistent brand, one
concerns about the stability of the eurozone. Economic power management structure and one support organisation. It will
is shifting to the East and emerging markets where growth is follow a selective approach to growth by bringing loan growth
stronger. Liquidity is scarce, capital markets remain volatile and in line with deposit growth.
risk appetite is limited. Competition will be increasingly fought on
price and service quality. Relationships between banks and their PREFERRED BANK FOR OUR CUSTOMERS
customers are changing, with customers wanting easier access During the year ING Bank made significant progress in many areas.
to services and products, and more transparency. Customer centricity was enhanced by introducing a number of new
products, services and initiatives. This included initiatives to more
ING Bank has assessed these trends and synthesised the pro-actively and systematically measure and monitor customer
implications for its business model. The external environment and satisfaction. Furthermore, ING has taken steps to ensure that
constraints related to ING’s restructuring plan submitted to the every customer gets the right products and services, via the
European Commission, and the repayment of Dutch State aid (for right distribution channels, and at the right returns or costs.
more information see the chapter ‘ING and the financial All our employees’ efforts are focused on deepening
customer relationships.

ING Group Annual Report 2010 27

2 Report of the Executive Board

Banking continued

ING Bank’s ambition is ‘to be the preferred bank for our customers’. ING Bank made good progress in 2010 on its ambitions for 2013.
This means that we want our customers to consider ING first for all Underlying income increased by 28.3% to EUR 17,298 million.
their financial requirements. To achieve that we will concentrate on Excluding market-related impacts, underlying income rose 7.4%.
three shared priorities: customer centricity, operational excellence The underlying cost/income ratio improved to 56.0% (or 54.2%
and be a top employer. excluding market-related impacts). The underlying return on
equity, based on 7.5% of RWA, was up to 17.6% compared with
Each banking business made tangible progress in these areas 5.0% in 2009.
during the year. For example, we introduced a Customer Suitability
programme which checks whether products should be adjusted With regard to new capital requirements proposed by Basel III,
to better meet customer needs. We introduced TIM in the ING is well prepared to meet them.
Netherlands, an online budgeting tool that allows customers to
categorise their transactions in their online accounts and more CONCLUSIONS
easily keep track of their finances. We launched a service for ING Bank aims to be a leading retail, direct and commercial bank,
start-up companies to open a business account, including a based in the Benelux and predominantly focused on Europe, with
debit card, pin and online banking, in just 20 minutes. This was key positions in attractive growth markets in Central Europe, Turkey
developed in response to requests to reduce red tape and time and selected markets throughout Asia.
spent on non-essentials.
The bank starts from a strong base: it is one of the largest savings
ING Belgium developed an online consumer loans tool to give banks in the world with a strong funding base; its direct service
customers quick decisions on loan requests. ING-DiBa in Germany model is internationally renowned and ensures low-cost
launched a financial advice portal which gives customers answers distribution; and it has an extensive international network,
to common questions on private finance. Commercial Banking especially for globally operating clients. This unique combination of
improved its international network to deliver better customer capabilities and geographic footprint ensures that ING Bank is well
service. The Net Promoter Score (NPS) has been adopted by all positioned for the future.
parts of the business to measure and improve customer centricity.

Significant enhancements in operational excellence have been

achieved. Payments and Cash Management, for example, improved
its processes, client interaction and IT set-up. All business lines
shared best practices to reduce costs and accelerate projects.
ING Direct USA won a top award for its mobile banking
application, which provides quick and easy ways for users to
transfer money and manage their investment portfolios.

The third priority is to become a global top employer. Engaged

employees are the key to success as they are the main point of
contact for customers. In 2010, ING Bank therefore continued to
put a lot of effort into attracting and retaining staff and to enhance
employee engagement. For example, staff are encouraged to move
between different between business lines, developing and sharing
their skills and broadening their career opportunities.

AMBITION 2013
In November 2009, ING outlined ING Bank’s financial goals for
2013 under the existing regulatory and fiscal regime. They are
as follows:
• 5% top line growth, with balance sheet growth on average
of 5% per year
• Cost/income ratio of 50%
• Return on equity of 13–15% (equity based on 7.5% of risk-
weighted assets (RWA)
• Core Tier 1 ratio at a minimum level of 7.5%
• Balance sheet leverage ratio of less than 30%
• A loan-to-deposit ratio of less than 1.2

28 ING Group Annual Report 2010

 Report of the Executive Board 2

Banking
Retail Banking

Working towards becoming the preferred bank Retail Banking has established strong positions in the mature
for our customers markets of the Benelux, Western Europe, the US, Canada and
Australia, and is well placed to capture growth opportunities in
> Strong improvement in overall Retail Banking the high-growth markets of Central Europe and Asia. The good
performance of 2010 was driven by a healthy increase in the
result, driven by all units but especially ING margins we make on savings accounts and mortgages in the
Direct and Retail Netherlands Netherlands, the lower risk costs and impairments at ING Direct,
and volume growth in emerging markets. Retail Banking is
> Increased focus on customer centricity and developing into a leader in providing ‘direct if possible, advice
on the ‘direct if possible, advice when needed’ when needed’ services. Customer centricity remains a key focus
business model across the business. In 2010, the Net Promoter Score methodology
was rolled out in India, Poland, Romania, Luxembourg and Turkey
> All Retail units now apply the Net Promoter and is now ‘live’ across the entire retail organisation, except for
Score methodology ING’s joint ventures in China and Thailand.

FINANCIAL DEVELOPMENTS
Retail Banking’s underlying result before tax rose fourfold to
EUR 3,625 million from EUR 905 million in 2009 driven by higher
volumes and interest margins, combined with lower impairments
and risk costs, mainly in the US. Net production in client balances
was EUR 37 billion, bringing the total to EUR 890 billion at
year-end 2010.
Financial overview*
in EUR million 2010 2009 Total underlying income increased by 30.4% to EUR 11,431 million.
Total underlying income 11,431 8,763 The interest result rose 13.6%, mainly driven by higher margins
Underlying operating expenses 6,552 6,209 and volumes, particularly in the Netherlands and at ING Direct.
Underlying additions to loan loss provisions 1,254 1,649 The interest results of Retail Belgium and Retail Central Europe
Underlying result before tax 3,625 905 were almost flat, while they increased in Asia. Commission income
Underlying cost/income ratio 57.3% 70.9% remained flat, as small declines in the Benelux and at ING Direct
Underlying cost/income ratio were offset by increases in Asia and Central Europe. Investment
(excl. market impacts) 56.8% 61.0%
and other income improved significantly, mainly due to lower
Client balances (EUR billion) 890 852
impairments on debt securities at ING Direct USA.
Net production client balances (EUR billion) 37 45
Risk-weighted assets (EUR billion) 176 167
The underlying operating expenses were up 5.5% to EUR 6,552
Underlying Return on Equity** 19.9% 6.6%
million due to increased staff costs, higher marketing spending
* Underlying numbers are derived from IFRS-EU numbers, excluding the impact
of divestments and special items. across most business units, the introduction of new products and
** Underlying after tax return divided by average equity based on 7.5% core investments in IT platforms and higher deposit guarantee scheme
Tier 1 ratio. costs. The underlying cost/income ratio improved to 57.3% from
70.9% in 2009.
Underlying income
in EUR million 2010 2009
The addition to the loan loss provisions declined 24.0%
Retail Netherlands 4,333 3,882
to EUR 1,254 million in 2010, or 70 basis points of average
Retail Belgium 2,054 2,062
risk-weighted assets, compared with 101 basis points in 2009.
ING Direct 3,782 1,762
This decline was mainly caused by lower risk costs at ING Direct
Retail Central Europe 977 861
USA. Risk costs for the mid-corporate and SME segments
Retail Asia 285 197
remained elevated.
Total Retail Banking 11,431 8,763

The return on equity, based on a 7.5% core Tier 1 ratio, rose

Underlying result before tax to 19.9% from 6.6% in 2009, driven by the improved results.
in EUR million 2010 2009 In 2010, total risk-weighted assets increased by 5.5% to
Retail Netherlands 1,395 883 EUR 176 billion at year-end, mainly outside the Benelux.
Retail Belgium 545 578
ING Direct 1,450 –666 RETAIL NETHERLANDS
Retail Central Europe 155 85 FINANCIAL DEVELOPMENTS
Retail Asia 80 26 The underlying result before tax of Retail Netherlands increased
Total Retail Banking 3,625 905 58.0% to EUR 1,395 million in 2010 from EUR 883 million in 2009,
driven by higher income and lower expenses, despite an increase
in risk costs. Underlying income rose 11.6% to EUR 4,333 million
in 2010. This increase was fully attributable to a 15.8% higher
interest result, mainly driven by higher interest margins on savings
and mortgages. Net production in residential mortgages was
EUR 5.5 billion, while volumes in business lending decreased
by EUR 1.1 billion due to low demand.

ING Group Annual Report 2010 29

 2 Report of the Executive Board

Retail Banking continued

Funds entrusted increased by a modest EUR 0.4 billion. Operating In addition, as part of a Retail-wide initiative, Retail NL is
expenses declined 3.8% to EUR 2,376 million in 2010, driven by the establishing a framework for sharing and managing knowledge
cost containment programme started in 2009 and efficiency across the retail network to reduce costs and speed up projects.
improvements related to the merger of ING Bank and Postbank. The efficiency and effectiveness of our IT systems, both internally
Risk costs increased 6.0% to EUR 561 million, or 108 basis points and externally, was improved to enhance the customer experience.
of average risk-weighted assets, as economic recovery in the
Netherlands remained fragile. Some of our operational improvements have created environmental
benefits. For example, we give customers the option of receiving
BUSINESS DEVELOPMENTS paper or digital bank statements. As a result, some 450,000 kilos
Retail Netherlands (Retail NL) delivered a solid performance, of paper are saved in the Benelux area every year.
recovering strongly from 2009. It has a strong Top 3 overall market
position in retail banking in the country, serving nearly 8.2 million Customer centricity
retail customers and around 600,000 business customers. It is well Building a customer-centric organisation was a main priority in
positioned to capture market opportunities. 2010, so that our products, services and processes meet our
customers’ needs and profiles. A Customer Suitability programme
The mortgage market share was up to 16.6% in 2010 (monthly was launched, which checks whether products should be adjusted
new production), with net production in residential mortgages at to benefit customers. We have taken significant steps to ensure
EUR 5.5 billion. Funds entrusted increased by a modest EUR 0.4 that every customer gets the right products and services, through
billion, while volumes in lending decreased due to low demand. the right distribution channels, and at the right prices or returns.
We are evaluating our product portfolio and product approval
Strategy procedures, based on sharpened criteria for good customer care.
Retail NL’s strategy is part of ING Bank’s overall strategy to This has resulted in, for example, a further reduction in the number
build a leading retail and commercial bank, where all the banking of different types of savings accounts from around 70 to 25 savings
business units are fully integrated. In common with the other accounts by the end of 2010. Furthermore, branch office opening
banking units, Retail NL has been working to become the hours have been more closely aligned with shop opening hours.
preferred bank for its customers, a goal that will be realised
through operational excellence, customer centricity and being a Some innovative products were introduced in 2010. One of these
top employer. Closely linked to this ambition is our aim to create was TIM, an online budgeting tool that allows customers to
long-term value for all our stakeholder groups: customers, categorise their transactions in their online accounts and keep track
employees, business relations and suppliers, society at large of their finances more easily. By the year-end, 125,000 customers
and shareholders. had registered to use the tool.

Stakeholder trust In early December, ING also introduced the Spaarrente Wekker – a
Enhancing its reputation and regaining trust among stakeholders change in interest rate notification, which informs customers three
was one of Retail NL’s priorities in 2010. This involved several days ahead of time by e-mail of any changes in the variable interest
initiatives, one of which was to continue with the Financial rate on their ING savings accounts. This service is also available to
Information Evenings, which enable customers to meet ING Board non-customers. At year-end, 170,000 consumers had registered for
members and managers of ING Netherlands. During these this new service.
meetings, customers also receive tips on how to manage their
daily expenditure, home ownership finances, pensions and savings. At the core of Retail Banking’s long-term strategy is the focus on
the ‘direct if possible, advice when needed’ model, introduced in
ING also organised several Stakeholder Dialogues to get a better 2009 following changing market conditions and customer
understanding of what stakeholders expect from us in the new behaviour. To this end, in the Netherlands a new distribution model
financial environment. We invited policymakers, investors, was set up in 2009 and by year-end 2010, 250 branches had been
regulators, journalists, non-governmental organisations, academics converted to support the new multi-channel service concept, which
and private and corporate clients to participate in discussions offers customers the option of banking from home via the internet,
centred on themes such as customer centricity and corporate social telephone or e-mail, or by visiting branches for face-to-face advice.
responsibility. The dialogues have been well received and will This initiative is progressing well: in 2010, the customer base
therefore continue into 2011. increased by 0.9%, mainly as a result of the so-called Overstap
service – a newly introduced, hassle free package to switch bank.
Another initiative involved executives visiting various customers in
the Netherlands, the objective being to build customer relationships Retail NL now has over five million online customers.
and hear their feedback on different issues. This programme of
visits will continue in 2011. ING has not only improved its retail banking systems and products,
but has also enhanced value for money. A survey by the Dutch
Operational excellence consumers’ association Consumentenbond showed that ING offers
All business units focus on improving timely, flawless and efficient better value for money with its basic payment package than any
execution of customer services. The merger of Postbank and ING other Dutch bank.
Bank in 2009 has greatly improved operations and customer
service. By the end of 2010, the large majority of all retail customers As part of its commitment to transparency, ING gives a full
had been transferred to a single ING Bank platform. The process is overview of all its retail and corporate products and prices on its
expected to be completed by June 2011. www.ing.nl web site. In 2010, ing.nl was for the third consecutive

30 ING Group Annual Report 2010

 Report of the Executive Board 2

Retail Banking continued

year named the best provider of online savings products in the renamed to WestlandUtrecht Bank and is now commercially
Netherlands by research company WUA. independent, but still part of ING. The ‘new’ bank was introduced
to the Dutch public via a comprehensive multimedia campaign on
Customer feedback TV, billboards and the internet and in 2010 it launched an online
The Net Promoter Score (NPS) – a customer loyalty metric – was savings product called SpaarOnline Rekening.
launched by Retail NL in December 2009. Both the overall customer
experience and the product experience were surveyed among Business Banking/Mid-corporates
customers. Their feedback is used to improve our services and the Retail NL provides services to small and medium-sized businesses
product range. To this end, a programme was started in 2010, through relationship managers who work closely with product
Enthousiaste Klanten (enthusiastic customers), entailing a number specialists to build a strategic partnership with our customers.
of new initiatives based on customer feedback. A new service model was started in 2009 and was further
developed in 2010. ING has a high penetration in the business
In 2010, for example, ING introduced a service for start-up banking market, helped by the fact that it has its own international
companies to open a business account, including a debit card, pin network. Its ambitions are to continue lending to private individuals
and online banking, in just 20 minutes. This product was developed and businesses as it considers that as one of its core tasks.
following customer feedback on account activation time and in
response to their needs to reduce red tape and to spend as much Private Banking
time as possible focusing on their businesses. Retail NL also provides private banking services in the Netherlands
to wealthy individual customers. The intention is to create a strong
The first results show that more customers than in 2009 would private banking franchise. In 2010, Private Banking introduced a
now recommend us to family and friends. ING is committed to single IT system for its fixed mutual-fund activities.
further improving its NPS score through more work to lift the
customer experience. It also centralised its advice services, so that investment decisions
are now taken at a central level and then implemented by local
Top employer investment advisers.
The third and final priority in ING’s banking strategy is to become
a top employer. Motivated and engaged employees are essential RETAIL BELGIUM
for enhancing customer satisfaction and, therefore, our success. FINANCIAL DEVELOPMENTS
Retail NL is developing a new human resources strategy, which The underlying result before tax of Retail Belgium declined 5.7%
includes redefining our Employee Value Proposition to clarify to compared to 2009, as expenses increased and income remained
staff what the bank stands for and what staff can expect from the almost flat. Underlying income slipped 0.4% to EUR 2,054 million.
bank and vice versa. In 2011, action plans will be rolled out globally The interest result declined slightly, following lower margins on
and local business units and countries will be assisted in setting savings and current accounts, which were largely offset by higher
local objectives. margins on mortgages and other lending. Net production in
mortgages was EUR 2.8 billion in 2010, while other lending
Results from the 2010 WPC Survey – ING’s global annual employee increased by EUR 1.4 billion. The net production in funds entrusted
engagement survey – show that the employee engagement level at was EUR 2.2 billion, driven by the success of the Orange Book
Retail NL was up from 64% in 2009 to 75% in 2010. We have used savings product which compensated for outflows in current
the results to identify priority areas to work on. accounts. Operating expenses increased 5.1% to EUR 1,349 million,
These include improving co-operation and work processes across mainly driven by additional costs for the national deposit guarantee
the organisation, improving leadership and creating stronger career scheme in 2010. Risk costs declined 20.0% to EUR 160 million,
prospects. or 83 basis points of average risk-weighted assets.

ING continues to improve opportunities for women at the BUSINESS DEVELOPMENTS

highest levels. The number of female executives in the general Retail Belgium is the fourth biggest bank in the country, serving
management of ING Netherlands rose from two to three in 2010. over two million customers. It has a strong brand position and has
shown a solid commercial and financial performance for several
ING has been acknowledged as one of the three best years in a row, despite fierce overall competition in 2010.
ICT employers in the Netherlands by independent research
company, CRF. Retail Belgium’s market share in mortgages recovered in 2010 and
is back to the previous year’s level of around 12%. Net production
WestlandUtrecht Bank in mortgages was EUR 2.8 billion, while other lending increased by
In 2009, ING and the European Commission agreed that, as a result EUR 1.4 billion. The bank increased savings volumes, driven by the
of the state aid ING had received, it would have to separate some launch of an online savings product, Orange Book, aimed at
business units. Part of the agreement was that ING would create a retaining existing customers. It also introduced a third-party fund
new company in the Dutch retail market out of part of its current for the retail segment, which was well received by the market:
operations, by combining the Interadvies banking division (including third-party mutual funds represented EUR 932 million (or 32%)
WestlandUtrecht and the mortgage activities of Nationale- of the entire mutual-fund production.
Nederlanden) and the existing consumer lending portfolio of ING
Retail. This business, WestlandUtrecht, would – once separated Like all other banking business units, Retail Belgium’s goal is to
– be hived off (the so-called carve-out) as a competing bank, build the preferred bank for its customers, which will be realised by
offering a wider range of products, including savings accounts. concentrating on three priorities: operational excellence, customer
By mid-November 2010, WestlandUtrecht Hypotheekbank was centricity and being a top employer.

ING Group Annual Report 2010 31

2 Report of the Executive Board

Retail Banking continued

Operational excellence which will be further developed in 2011. ING wants to become a
Retail Belgium’s focus is on the ‘direct if possible, advice when global top employer with enthusiastic and ambitious employees,
needed’ business model. To support this strategy, it is improving who want to share in the bank’s success. Specific areas of focus
operations in areas such as bank guarantees, mid-corporate include profiles, training, career development and pay and benefits.
lending, IT workplace services, account opening and mandates.
Record Bank
Both Belgium and Luxembourg (see below) operate under an Retail Belgium includes Record Bank, the third largest retail savings
integrated universal bank business model with the operating and bank in the country, with close to 800,000 customers. Its strength
IT platform being shared across all client segments (Retail, SME, is the personal approach by its 1,500-strong network of agents,
Private Banking, Corporates and Financial Institutions). credit brokers and vendors, who offer customer-centric products in
savings, savings bonds, mortgages and consumer loans.
Customer centricity
Retail Belgium continued to improve customer centricity in 2010. ING Luxembourg
It launched an Online Consumer Loans tool to provide customers ING Luxembourg, whose results are reported under Retail Belgium,
with quick decisions on loan requests, without increasing the is a full-service bank with three business lines: domestic retail
bank’s exposure to credit risk. banking, private banking and commercial banking. It serves private
individuals, SMEs, large companies and institutions.
It also continued with its branch transformation programme, which
places a greater emphasis on direct banking and aims to improve Much energy has been devoted to developing local business in
operational efficiency and service quality. By the end of 2010, 381 Luxembourg, an approach which has proved successful and will
traditional branches had been converted to ‘proximity’ outlets with be continued in the coming years.
self-service cash facilities and online banking access. The objective
is to bring the total number of converted branches to 477 by ING Luxembourg embraced the Net Promoter Score metric in
year-end 2011. The bank has around 383 full-service branches, early November 2010.
giving Retail Belgium around 800 points of sale.
Private Banking
The branch transformation programme was largely responsible Retail Belgium provides Private Banking services in Belgium and
for adding some 53,000 new clients in 2010, bringing the total to Luxemburg to wealthy individuals. ING is creating a strong private
over two million. Total number of sales online products amounted banking franchise in both countries and it is considered to be a
to nearly 300,000. growth driver.

Retail Belgium has over 1.2 million online customers. Private Banking has a top 3 position (16% market share) in Belgium.
It serves over 18,000 individual customers with more than
Plans for 2011 include further developing the internet channel EUR 1,000,000 in assets with ING. Assets under management
and the product offering and continuing with the branch amounted to EUR 15.7 billion (Belgium) and EUR 7.5 billion
transformation programme, which will be extended across the (Luxembourg) at year-end, totalling EUR 23.2 billion
whole bank. Another task will be to upgrade IT and Operations to
enhance the customer experience. Private Banking in Luxembourg contributed favourably to the
overall results, despite an adverse economic climate.
Customer feedback
Retail Belgium embraced the Net Promoter Score (NPS) ING DIRECT
methodology in August 2009. NPS is a recognised measure of FINANCIAL DEVELOPMENTS
customer satisfaction. It also helps to improve customer centricity. ING Direct delivered strong results in 2010 with an underlying profit
We seek and act on feedback to improve the customer experience before tax of EUR 1,450 million, compared with a loss of EUR 666
by analysing the results and identifying areas for improvement. million in 2009. This major improvement was driven by lower
impairments on the investment portfolio, a higher interest result
Retail Belgium conducted NPS surveys on both a ‘transactional’ and lower additions to the loan loss provisions. Underlying income
(e.g. opening an ING Lion Deposit online savings account) and more than doubled, as impairments (mainly on the Alt-A RMBS
‘relationship’ level (e.g. overall customer experience personal portfolio in the US) declined to EUR 107 million compared to
banking). On average, 6% of the respondents have been EUR 1,394 million in 2009. The interest result was up 20.3%, or
recontacted by the regional directors since they raised a specific EUR 638 million, driven by higher volumes and increased margins
question or issue when completing the questionnaire. At the same on savings and mortgages. The interest result in the US benefited
time the surveys allow us to identify opportunities for general from the IFRS treatment on previously impaired bonds, which had a
improvements, such as optimising the online communication (ING positive impact of EUR 230 million in 2010 up from EUR 99 million
Lion Deposit), expanding target audiences for Investment in 2009. Operating expenses increased 13.4%, primarily reflecting
Conferences (Personal Banking) or planning initiatives on educating higher marketing costs, the roll-out of payment accounts and
the branch employees on how to assist professional clients when increased staff costs. The addition to the loan loss provisioning
contacting the Business Credit Centre via the branch. decreased to EUR 446 million, or 59 basis points of average
risk-weighted assets from EUR 765 million in 2009 (or 112 basis
Top employer points), supported by signs of stabilisation in the US housing market
In addition to the standard integrated human resources practices, and US unemployment rate as well as diminishing delinquencies.
the business has been developing a new human capital approach,

32 ING Group Annual Report 2010

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BUSINESS DEVELOPMENTS In Spain, the new ‘Easy Mortgage’ process conducted online makes
ING Direct offers a range of focused, easy-to-understand financial it easier for payment account customers to apply for a mortgage,
products – savings, mortgages, retail investment products, as few personal details are required in addition to the ones the
payment accounts and consumer lending products – primarily bank already has. The main additional information requested is a
through direct channels. Its business model is based on low-cost, valuation on the property, but other details such as salary are not
simplicity, transparency and offering a superior customer service. needed if the bank already has them.
It has 23.6 million customers, and leading market positions in most
markets in which it operates – Canada, Spain, Australia, France, ING Direct UK continued to improve the savings account opening
the US, Italy, Germany, Austria and the UK. process in 2010. The process was redesigned and reduced from
seven to only five steps in 2009, and in 2010 customers were able
In Germany, ING-DiBa marked new record volumes in all five ING to credit their account electronically using their debit card, thereby
Direct core products. The numbers were boosted by a successful reducing the amount of time needed to activate the account.
new marketing campaign, which was launched in September.
Savings volume net growth was strong due to an attractive bonus ING Direct Italy launched a customer acquisition campaign in
rate for new customers and ING-DiBa’s leading service levels which new customers received a free smartphone when opening
becoming more and more known. In terms of investment products a payment account. This was done in preparation for offering
ING-DiBa accelerated the growth speed despite being already Italians mobile access to ING Direct’s website by the end of 2010.
No.1 in most key areas. Consumer loans were pushed strongly by In the early stages of the campaign 24,000 accounts were
changed legislation in Germany due to an EU Directive which opened in one weekend.
makes interest rates for loans more comparable for customers
which is in favour of ING-DiBa. Customer centricity
All ING Direct units constantly look to see how how they can best
In 2010, ING Direct moved further towards becoming a more meet customers’ needs. The bank encourages customer feedback
complete retail bank, while maintaining a different approach from which it then uses to update and improve the customer experience.
its competitors. This requires, among other things, widening the In 2010, ING Direct Australia received an award for the most
product base to achieve greater income diversification, developing trusted banking brand.
its distribution channels and more investment in cross-selling.
ING Direct became active in social media in 2010, especially in the
In Canada, payment accounts were introduced to expand ING US, Canada and Italy. Consequently, ING was voted ‘Best Bank on
Direct’s product line. ING Direct now offers payment accounts in Facebook’ by an Italian strategic consultancy that surveyed over
all countries except the UK. There were initiatives in several 200 banks.
countries to increase the number of savings account customers
who also hold a payment account, which has proven to increase In Germany, ING-DiBa launched a price comparison engine,
customer loyalty. As a result, the number of payment account ‘BankLupe’, which allows customers easily to compare banks’ retail
clients increased significantly in 2010. products and prices, and demonstrates the bank’s commitment to
transparency. ING-DiBa also introduced a simple-to-use financial
In Spain, ING Direct enhanced its distribution channels by opening advice portal, the ‘finanzversteher.de’, for customers to manage
two physical bank outlets. This is part of our strategy to provide their personal finances. ING Direct France launched a website called
customers with predominantly direct services and face-to-face ‘monnaietime’, which helps consumers with their personal finances.
advice when needed. We expect to open another 25 outlets across It quickly became France’s third most-visited finance portal.
the country in 2011.
Top employer
ING Direct’s ambition is to become the customer’s preferred bank, Engaged employees are essential to our success. Everyone knows
through operational excellence, customer centricity and being a they have a role to play in contributing to ING’s vision and strategy,
top employer. In 2010, ING Direct again ranked first (meaning and know they can make a real difference. Results from the 2010
‘most recommended’) or second in all nine countries on the Net WPC Survey (ING’s global annual employee engagement survey)
Promoter Score. NPS is a recognised measure for customer show that employee engagement level at ING Direct rose to 76% in
satisfaction in the financial services industry. 2010, up from 72% in 2009. However, at some business units the
engagement level was lower. At ING Direct France, for example, the
Operational excellence engagement score was down 2% at 52%. An area identified for
All of ING’s business units focus on timely, efficient and flawless improvement by staff was ‘leadership’, which will be addressed in
execution of customer services. Making banking easier for 2011. And at ING Direct Italy, the score was up 2% at 61%, with a
customers and constantly looking at new distribution channels and clear priority to work on ‘accountability’, which will be an area for
innovation are important principles. In 2010, ING Direct completed improvement this year. The employee engagement result in North
its 2008 initiative to deploy an end-to-end review of all customer America was 83%, well above the overall result.
services and processes.

In the US, a new mobile banking application was launched, which Human resources (HR) departments across the organisation are
provides users with quick and easy ways to transfer money, pay bills working on ‘Top Employer’ initiatives, including programmes on
and make purchases from their mobile phone. The application management development, Workplace Dynamics Surveys (US),
scooped the ‘Superstar’ prize in the 2010 Mobile Star Awards™, talent programmes for early and mid-career high potentials (UK),
organised by the online news portal MobileVillage.com to reward innovative health management programmes (Germany) and using
excellence in wireless and mobile technology.

ING Group Annual Report 2010 33

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social media to recruit staff (France). All ING Direct units train Customer centricity
people in international roles, through long-term and short-term In 2010, ING Bank Slaski continued to modernise its branch
assignments, which not only develops their career skills but network and optimise customer services by closer integration
improves our strategic manpower allocation. between its call centre, internet and branches.

In 2010, ING Direct Canada and ING-DiBa Germany were both In Romania, ING has achieved its ambition to become the country’s
recognised as one of the best employers in the countries in which most preferred bank, serving over one million customers. ING Bank
they operate. ING Direct Australia continued its run of HR awards Romania made further progress in internet banking, in which it is a
by winning the top place in the FEMA (Fairfax Employment leader in terms of transaction numbers. It was voted the ‘most
Marketing Awards) Best Corporate or Onsite HR Team (2009). popular online brand’ in the financial sector.

ING Direct USA Turkey is an important growth market for us, and ING Bank Turkey
The agreement signed in 2009 with the European Commission on completed various initiatives throughout 2010 to support its
ING’s Restructuring Plan requires that ING Direct USA be sold by ambition to be the preferred bank for Turkish consumers. With 1.2
2013. ING appealed against certain elements of the EC’s decision in million customers, the bank is concentrating on improving customer
2009 (see also ING and the financial environment), but in the service and offering ‘smart products’ serving specific customer
meantime will continue to execute the agreed restructuring plan. needs that differentiate us from our rivals. To this end, the bank
ING is managing ING Direct USA as though it were the long-term strengthened its call centre and internet offering and launched a
owner, supporting the business when it is attractive and can be factoring and leasing company in 2010. It also commenced
supported by the capital and management of the business. international payment and cash management activities, and
introduced a new mortgage product. An ‘ING Exclusive Banking’
RETAIL CENTRAL EUROPE service was introduced for a selection of customers who fit special
FINANCIAL DEVELOPMENTS deposit requirements. At the year-end, 5 Exclusive Banking
The underlying result before tax of Retail Central Europe rose branches had been opened and around 20 Exclusive Banking
82.4% to EUR 155 million, driven by higher results in Poland ‘corners’ opened inside ordinary branches. Finally, ING Bank Turkey
and Romania, while results in Turkey declined from the strong opened a European Business Desk to better serve the needs of
performance in 2009. Underlying income in Central Europe rose small and medium-sized enterprises (SME) engaged in
13.5% supported by higher volumes in all countries and improved international business.
interest margins in Poland and Romania. In Turkey, margins declined
due to increased competition, while income was impacted by In 2011, ING Bank Turkey aims to build more scale by widening
negative fair value changes on derivatives (not eligible for hedge its product range and distribution network and providing the
accounting). Operating expenses were up 15.5% reflecting business necessary capital and sharing best practices with other ING units.
growth and increased staff costs. Risk costs declined to EUR 61 It will launch the first variable savings account in the country,
million, or 28 basis points of average risk-weighted assets, from the Orange Account, to build on the success of the ING Direct
EUR 116 million (or 61 basis points) in 2009. The decline in risk savings account.
costs was mainly in Turkey and Romania supported by releases of
specific provisions and improved data quality. The Net Promoter Score methodology was introduced in Poland
(mid-November), Romania (early September) and late December
BUSINESS DEVELOPMENTS in Turkey. The surveys focus on transactional levels, for example
Retail Central Europe has a leading presence in Poland and strong account activation, complaints and loan applications. From the
positions in Romania and Turkey. It operates full-service banks in all customer feedback, we learn what we need to improve and the
three, combining retail and commercial banking products and businesses act on this accordingly.
services for its customers.
Top employer
The business units in the region are moving towards the ‘direct Retail CE placed a big emphasis on developing employee
if possible, advice when needed’ business model. They are also relations in 2010. In Romania the bank aims to become one of the
striving to become the customer’s preferred bank through Top 5 universal bank employers in the country and in Poland the
operational excellence, customer centricity and being a bank is succeeding in attracting high calibre students and
top employer. young professionals.

Operational excellence In Turkey we built on the success of our Performance Evaluation

Amongst banks that operate branches in Poland, ING Bank Slaski is Process, and in Poland and Romania we moved closer to the One
the most internet-oriented, serving almost three million customers. Bank ideal by integrating HR activities for the universal bank.
A Newsweek survey in September 2010 showed that ING Bank HR processes such as talent management and compensation &
Slaski was voted second best in the ‘Bank for Internet users’ benefits management were made more efficient, contributing
category. It was also voted best full-service bank in 2010 for its towards ING’s top employer goal.
solid profitability and solvency levels by Rzeczpospolita,
a financial newspaper. ING Bank Slaski was ranked among the 15 best employers in
Poland in 2010 and ING Bank Romania ranked third within the
Banking and Financial sector. ING Bank Slaski also took the sixth

34 ING Group Annual Report 2010

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Retail Banking continued

place in ‘Pracodawca Roku 2009’ (Employer of the Year, 2009) Customer centricity
and was the only bank among the top 10 ‘Most Desired In 2010, ING Vysya Bank launched ‘ING Online Shopping’, which
Employers’ listing. allows customers to shop online for a wide choice of services and
goods with various merchant/service portals including rail, bus and
Results from the 2010 WPC Survey (ING’s global annual employee air tickets, electronic goods and gifts.
engagement survey) in Retail Central Europe show that the
employee engagement levels in 2010 were 73% in Poland and It also developed ‘ING Inwards’ – an electronic funds transfer
75% in Romania. At ING Bank Turkey, the score was up 2% at solution, developed for Corporate Banking clients. It improves the
58%. HR is facilitating a number of working groups within the speed of cash flows, inventory management, risk management and
bank, in order to act on the results of the 2010 survey, as this was receivables reconciliation.
an area identified for improvement.
Thailand-based TMB Bank launched several online, low-cost,
RETAIL ASIA innovative financial products, which were all market ‘firsts’ and
FINANCIAL DEVELOPMENTS all well received as they made banking easier for customers.
Retail Asia’s underlying result before tax tripled to EUR 80 million They included the TMB No Fee Deposit, UP & UP Term Deposit
from EUR 26 million in 2009. The strong improvement was mainly and the No Limit Debit Card.
attributable to higher results from ING Vysya Bank in India, driven
by higher volumes and margins, a one-off gain on the sale of an ING Vysya Bank introduced the Net Promoter Score methodology
investment and lower risk costs. This was partly offset by higher early in October, with a number of transactional areas surveyed,
expenses due to further investments in business growth and including mortgage loan disbursals, online financial transactions
increased staff costs, including additional pension provisions. The and exiting a savings account. First results show that many
result in Asia was supported by the increased profit contribution customers are extremely likely to recommend ING to family or
from ING Bank’s share in the result of TMB in Thailand and higher friends, but that they are still very critical about us in the open
dividends from Bank of Beijing and Kookmin Bank. comment questions. The bank acts promptly on feedback received.

BUSINESS DEVELOPMENTS Top employer

Retail Banking is well positioned in the important Asian markets In addition to standard integrated HR practices, HR embarked on
of India, China and Thailand. several initiatives to strengthen its function. It integrated its
activities in Retail Banking and Commercial Banking into one,
ING Vysya, in which ING has a 44% stake, serves over two million cohesive department for the region. It now takes an integrated
customers and is increasing its market share in the rapidly growing approach to talent management and leadership development.
Indian banking market. TMB Bank, in which ING has a 30% stake, These efforts are starting to show results. ING Vysya Bank, for
has strongly advanced in its turnaround process and is gaining example, is increasingly seen as an employer of choice among job
growth momentum in both its Retail and Commercial candidates, whether they are experienced or new to the
banking businesses. employment market. The bank’s fair and ethical work practices and
a healthy mix of old and new also make it an attractive place to
Bank of Beijing (BoB) – in which ING has the largest single work, as the job offer-to-acceptance ratio of 80% demonstrates.
shareholding (16.7%) – is continuing its rapid growth in volumes ING Vysya Bank’s other HR initiatives during the year included the
and profits. BoB is the largest city commercial bank in China. creation of a talent management process and defined career
In 2010, ING decided to renew the strategic alliance with BoB for progression paths.
a further five years (until 2015). As an extension to its strategic
partnership, ING and BoB also signed a second five-year ING Vysya Bank’s employee engagement score in the WPC survey
Technical Assistance Agreement in 2010. was up from 66% in 2009 to 71% in 2010.

As with all other banking business units, Retail Asia is working TMB Bank held an Employee Engagement Survey, organised by
hard to become the customer’s preferred bank by focusing on Gallup. Engagement levels rose from 20% to 49% because of the
operational excellence, customer centricity and being a introduction of a clear organisational structure, better defined job
top employer. descriptions and a more transparent performance evaluation and
recognition system. It also set up a TMB Employee Service Centre
Operational excellence for staff to give their feedback.
In India, ING Vysya Bank was awarded – for the second year in a
row – the C10 100 Innovation Award by India’s CIO magazine for Results from the 2010 WPC Survey (ING’s global annual employee
developing another customer-centric IT innovation, ‘Mobile Voice engagement survey) in Retail Asia overall show that the employee
Recording Solution’. It allows customers to conduct investment and engagement level was 71% in 2010, up from 65% in 2009.
trade transactions with the bank’s relationship manager, who can
now record the transactions with a handheld device instead of the HR Asia will continue to work on a new human capital approach.
customer having to sign every transaction. Focal points of improvement in 2011 include to provide career
opportunities to staff to advance their careers and to create a
TMB Bank is transferring many of its operational processes back ‘good-place-to-work’ environment.
from its relationship managers to centralised control in order to
allow relationship managers devote more time to serving customers
and acquiring new ones. Its aim is to become the leading
Thai bank, with world-class financial solutions.

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CONCLUSIONS AND AMBITIONS

All retail units will continue to work towards the overall ING Bank
ambition of building a leading international, retail, direct and
commercial bank, as well as becoming the preferred bank for its
customers. Customer centricity will remain a focal point across the
organisation, and the Customer Suitability programme will be
further embedded in 2011.

Across the Retail organisation, the focus will remain on further

developing the ‘direct if possible, advice when needed’ business
model. The Net Promoter Score methodology, which is ‘live’
across the entire retail organisation, will be further embedded
across the business.

A key priority for Retail NL was to regain stakeholder trust and

this will remain a priority in 2011. Retail NL will also continue with
its Financial Information Evenings, the business customer visits and
the Stakeholder Dialogues.

Retail Belgium continued its domestic branch transformation

programme and aims to bring the number of converted branches
to 477 by the end of 2011.

In 2011, ING Direct will continue to work towards becoming a

more complete retail bank, with a different approach from its
competitors. Retail Central Europe will continue to implement the
‘direct if possibile, advice when needed’ model. ING Bank Turkey
plans to launch the Orange Account, the first variable savings
account in the country. Retail Asia will improve the customer
experience by launching customer-centric products and will
continue to build the brand.

36 ING Group Annual Report 2010

 Report of the Executive Board 2

Banking
Commercial Banking

Continued focus on customer centricity 2010 was an excellent year for Commercial Banking despite the
in all activities challenging environment. Although critical investment expenses were
up, risk costs dropped significantly. Commercial Banking made good
> Strong commercial performance progress in realising its goals and achieving leading market positions
in selected geographies and products. It continued on its course to
> Significant decrease in risk costs become a leading European commercial bank with selective growth
> Collaboration across units for benefit of clients options in other regions.
> Landmark deals for clients FINANCIAL DEVELOPMENTS (INCLUDING REAL ESTATE)
> League tables underline strong market positions The underlying result before tax of Commercial Banking doubled to
> Real Estate exposure steadily reduced EUR 2,316 million from EUR 1,118 million in 2009. ING Real Estate
recorded a loss before tax of EUR 63 million compared with a loss
of EUR 988 million in 2009. The underlying result before tax of
Commercial Banking excluding Real Estate increased 12.9% to
EUR 2,379 million.

The increased result of Commercial Banking excluding Real Estate

was largely attributable to Structured Finance, which result
increased threefold to EUR 938 million thanks to higher volumes
and improved margins, combined with lower risk costs. Underlying
result before tax from Financial Markets declined 28.7% to EUR 919
million as a result of lower income in the client business following
Financial overview* the normalisation of the markets, as well as higher expenses partly
in EUR million 2010 2009 caused by an accrual adjustment related to the deferral of incentive
Total underlying income 5,811 5,097 compensation in 2009. The results of General Lending & Payments
Underlying operating expenses 2,998 2,768 and Cash Management (PCM) increased by 6.8%, as lower
Underlying additions to loan loss provisions 497 1,210 commission income and somewhat higher expenses were more
Underlying result before tax 2,316 1,118 than offset by significantly lower risk costs. Result before tax in
Underlying cost/income ratio 51.6% 54.3% Leasing & Factoring doubled to EUR 133 million, driven by the
Underlying cost/income ratio strong improvement in the second-hand car market.
(excl. market impacts) 44.9% 38.4%
Client balances (EUR billion) 278 257
ING Real Estate reported an underlying loss before tax of EUR 63
Net production client balances (EUR billion) 12 –24
million compared with a loss of EUR 988 million in 2009. This was
Risk-weighted assets (EUR billion) 142 158
mainly due to the gradual stabilisation in market conditions, which
Underlying Return on Equity** 15.8% 7.4%
even led to ING Real Estate showing a profit in the last quarter of
* Underlying numbers are derived from IFRS-EU numbers, excluding the
impact of divestments and special items. 2010. Negative fair value changes on the direct and indirect real
** Underlying after tax return divided by average equity based on 7.5% estate investments as well as impairments on real estate
core Tier 1 ratio. development projects declined to EUR 434 million in 2010,
compared with EUR 1,213 million in 2009. Excluding revaluations
Underlying income
and impairments, underlying result before tax increased to EUR 371
in EUR million 2010 2009
million in 2010 from EUR 224 million in 2009, mainly driven by
Commercial Banking excl. ING Real Estate 4,949 4,957
improved operational results within Real Estate Finance business
– General Lending & PCM 1,159 1,235
due to lower risk costs.
– Structured Finance 1,440 1,122
– Leasing & Factoring 454 403
In 2010, net production of client balances was EUR 12 billion
– Financial Markets 1,700 1,923
bringing the total to EUR 278 billion at year-end. The net
– Other Products 195 275
production was largely realised in funds entrusted. The net
ING Real Estate 862 140
production in lending was EUR 3 billion driven by the increased
Total Commercial Banking 5,811 5,097
demand for Structured Finance loans in the last quarter of 2010.

Underlying result before tax Total underlying income increased 14.0% to EUR 5,811 million
in EUR million 2010 2009 driven mainly by ING Real Estate and Structured Finance as well
Commercial Banking excl. ING Real Estate 2,379 2,107 as Leasing & Factoring. This more than offset the decline at
– General Lending & PCM 455 426 Financial Markets and General Lending & PCM. Underlying
– Structured Finance 938 287 operating expenses increased 8.3% to EUR 2,998 million partly
– Leasing & Factoring 133 67 caused by an accrual adjustment related to the deferral of incentive
– Financial Markets 919 1,289 compensation in 2009 and despite lower impairments on real
– Other Products –65 37 estate development projects. The underlying cost/income ratio
ING Real Estate –63 –988 improved to 51.6% from 54.3% in 2009. Excluding ING Real
Total Commercial Banking 2,316 1,118 Estate, the cost/income ratio was 44.0% compared with
37.9% in 2009.

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Commercial Banking continued

Risk costs decreased significantly to EUR 497 million compared with According to Greenwich Associates research January 2011, PCM is
EUR 1,210 million in 2009. As the economic environment started perceived to have a strong position in the Netherlands, Belgium and
to stabilise, the number of significant files declined, particularly Central and Eastern Europe. In the Netherlands, ING Commercial
within Structured Finance, but also in ING Real Estate and General Finance is market leader, while General Lease and Car Lease rank
Lending. Risk costs in basis points of average risk-weighted assets No.3. In Belgium, ING Lease is the second largest leasing company.
(RWA) declined to 33 basis points in 2010 from 71 basis points
in 2009. ING Structured Finance achieved its aim to be a Top 10 player
globally by ranking in the Top 10 in various locations in the
The return on equity, based on a 7.5% core Tier 1 ratio, improved category MLA by number of deals. ING maintained its No.1
to 15.8% from 7.3% in 2009, driven by the increased results. position from Q1 through Q4 in key tables such as MLA and
In 2010, total RWA declined by 10.3% to EUR 142 billion at bookrunner for syndicated loans in the Netherlands by volume and
year-end as a result of model updates and reduced market RWA. bookrunner for syndicated loans in the Benelux by volume.

BUSINESS DEVELOPMENTS Commercial Banking took steps to becoming more client centric
Commercial Banking plays an integral role within ING Bank. The during the year. For example, PCM set policy guidelines for a global
essence of ING’s business is to collect deposits and redeploy them payments mandate and the client organisation was strengthened
in various forms and types of financial investments in the economy. by introducing a stronger European sector approach. ING board
Commercial Banking plays an important part in this by being an members are linking up more regularly with board members
important originator of assets and a source of skills and expertise of clients. The second wave of the Balance Sheet Optimisation
for our clients. campaign was rolled out in the Netherlands and Belgium, the
aim being to help clients balance short-term financial needs with
Commercial Banking offers core banking services such as lending, long-term goals. A campaign was launched to optimise clients’
payments and cash management in more than 40 countries. international financial management, based on a detailed
It provides clients with tailored solutions in areas including understanding of clients’ businesses and what they need to support
corporate finance, structured finance, commercial finance, equity their operations outside their home countries. An International
markets, financial markets and leasing. Clients are corporations Business Support Centre was set up to streamline processes to
– ranging from medium-sized and large companies to major ensure consistently excellent service to clients.
multinationals – as well as governments and financial institutions.
In September, the Bottom Line initiative was launched in Central
From Fitter, Focused, Further… and Eastern Europe. This stresses that Commercial Banking is
Throughout 2010, Commercial Banking focused investments and aligned internally to deliver relevant solutions to clients and
resources on achieving its Fitter, Focused, Further strategic goals: emphasises ING’s commitment to becoming a leading commercial
namely, to develop key market and product positions, improve bank in Central and Eastern Europe.
client satisfaction by implementing client-centric initiatives, reduce
costs and enhance operational excellence. Operational excellence was another key priority. PCM, for instance,
improved its processes, client communications and IT set-up and
We maintained our position as No.1 bank in the Benelux. Illustrative governance. Financial Markets established a new centre in
of this is the fact that ING was No.1 ECM (Equity Capital Market) Singapore for its front office system which provides foreign
bookrunner in the Benelux by volume, No.1 bookrunner for exchange and money market services to clients globally.
syndicated loans in the Benelux by volume and No.2 M&A advisor
in the Benelux by volume, in 2010. Also in the corporate bond Finally, the Fitter, Focused, Further strategy feeds into the
market we made good progress ending No.5 bookrunner in development of the concept of a total banking approach.
Benelux by volume. In 2010, ING Retail Banking Benelux, ING Retail Banking Direct &
International and Commercial Banking worked together to align
We maintained our position as Top 5 bank in our core Central and themselves more closely with each other and leverage their
Eastern Europe markets. Illustrative of this in 2010, ING was No.1 strengths across all banking operations (see chapter on ‘Strategy’).
MLA (Mandated Lead Arranger) for CEE syndicated loans by
volume, No.4 ECM bookrunner in CEE and No.1 in Poland by Major deals
volume. Furthermore, we ended up No.4 M&A advisor in Poland by The world economy gradually recovered in 2010 from the recession
volume. Also in the bond markets we maintained our position of 2009. Tensions remained, however, including fiscal tightening,
ending up No.5 bookrunner in CEE sovereign bonds by volume and a fluctuating euro and debt concerns within the eurozone,
No.8 bookrunner in CEE corporate bonds by volume. continued credit tightness and intensified competition. At national
and international levels there were discussions about the best ways
We have a leading and highly profitable financial markets franchise to restore financial stability. Stricter regulations for banking
both in the developed and emerging markets. It is our stated were implemented.
ambition to be a Top 3 Financial Markets player in the Benelux.
Illustrative of this in 2010, ING was No.5 bookrunner in Benelux Managing risk and costs remained key priorities for Commercial
corporate bonds by volume. Banking. Risk costs fell significantly as a result of a resilient quality
portfolio and better risk management. We continued to manage
We aim to become the preferred bank for European customers exposure and concentration in our portfolio to achieve the right
regarding PCM business. In 2010, PCM ranked at a Top 2 position risk-reward balance. Our exposure to real estate was also
by volume in EBA Clearing (Euro Banking Association Clearing). steadily reduced.

38 ING Group Annual Report 2010

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Commercial Banking continued

Despite the subdued market conditions, Commercial Banking STRUCTURED FINANCE

continued to win some transformational mandates. These Structured Finance (SF) is a specialist commercial lending business,
transactions show that cross-selling is an integral part of the client providing loans across the globe to support capital intensive
offering and that businesses worked closely together to deliver investment and working capital. It is managed in three groups:
these highly tailored solutions for clients. Energy, Transport and Infrastructure Group; Specialised Financing
Group; and International Trade and Export Finance.
An example was ING’s joint bookrunner role in Deutsche Bank’s
EUR 10.2 billion rights issue, the largest German financials’ rights The SF business continued to grow in 2010. Revenues were
issue ever and the largest European equity issue to date. Its success supported by relatively high margins on business originated in
was the result of close cooperation between several banking 2008 and 2009. In trade and commodity finance there were sharp
businesses, including Equity Capital Markets, Financial Institutions, increases in both volumes and margins as a result of our consistent
Event Finance and ING-DiBa, all forming an integral part of the approach to the market over many years. Trade and commodity
transaction team. finance, with its transactional lending approach, is attractive to
many banks and we expect increased competition, evidenced by
Commercial Banking also acted as mandated lead arranger the high levels of support for our commodity clients in the
and bookrunner on a EUR 1.2 billion syndicated facility for syndicated loan market, particularly in Asia.
French mobile phone company SFR; Commercial Banking and
ING Direct joined forces to share the final take of EUR 135 million. In the oil and gas offshore business there is demand for increasingly
The Deutsche Bank and SFR deals illustrate what the total bank large and sophisticated equipment; our infrastructure business is
approach can achieve. seeing new proposals around the world as the public sector turns
to public-private partnerships to finance necessary expenditure.
GENERAL LENDING & PCM In the power sector we have provided long-term finance to support
General Lending (GL) remains the anchor product for client the development of wind and solar power projects across Europe
relationships and the basis for cross-selling. Cross-selling improved and in North America. The cash flow lending business in Structured
in 2010 which improved market positions and increased overall Acquisition Finance and Telecom and Media Finance was affected
return on client relationships. There was a shift in the market from in previous years by the slowdown of business activity during the
lending to debt capital market finance. The need for bridge facilities economic crisis, but in nearly all cases the businesses have
with a role in debt capital market take-outs increased. recovered to a sounder footing, and the year saw a rise in
new transaction flow in our core markets of the Benelux and
Credit margins began returning to normal levels during the year Central and Eastern Europe.
after reaching a peak in 2009. Volumes remained under pressure in
2010. Demand was low as companies continued deleveraging SF maintained its public profile by doing well in awards and
across key geographic and business markets. Investment and league tables during the year. The carbon emissions team won
M&A activity stayed subdued. the Carbon Finance Deal of the Year award for ‘Luz Verde’
(Green Light), a pilot project for a mass scale household energy
GL places great importance on the safe and profitable deployment efficiency programme that will reduce CO2 emissions in Mexico.
of loan assets. It has a client-centric focus on cross-selling, leading The structured metals and  energy finance team was recognised as
market positions and best-in-class execution. By improving the Best Trade Bank in Metals and Mining by leading industry
processes GL aims to reduce its cost/income ratio. The business magazine Trade & Forfaiting Review.
continued to invest in the quality of processes and staff to ensure
seamless execution with expert staff who see themselves as LEASING & FACTORING
business partners to clients. The Leasing and Factoring (L&F) product line provides financial and
operational leasing services for a wide range of equipment as well
Payments and cash management services are a prerequisite for as receivables financing and other factoring solutions to ING’s
customer acquisition and retention and are especially important corporate clients, mid-corporate and SME customers. L&F’s
in times of scarce liquidity in the market. ING is market leader in principal distribution channel is through the network of ING Bank’s
payments processing in the Netherlands and a large player retail and commercial branches with additional sales via direct,
in Belgium. intermediary, vendor and internet channels. Although the overall
European leasing market has shrunk by around 30% from 2008 to
To meet the needs of clients, PCM has been expanding its 2010 due to the economic downturn, L&F has maintained its
international payments offering. In May 2010, ING Turkey was fully market position in its core markets. L&F’s 2010 results showed a
connected to the international PCM network. International clients strong improvement on 2009, driven by a combination of stable
are now able to open current accounts at ING Turkey and manage volumes overall, higher margins, reduced risk costs and an excellent
them using their existing ING electronic banking channels. performance by ING Car Lease, which benefited from a sustained
recovery in the second-hand car markets and an increasing order
PCM saw a large increase in outstanding balances in 2010, but the book from major corporate customers.
benefits were offset to some degree by lower margins due to low
market interest rates. During 2010 ING Commercial Finance launched its reverse factoring
product Supply Chain Finance which provides mutual benefits to
Other significant developments during the year included: an the Bank’s clients and their suppliers through the use of factoring
increase in payment transactions compared to the previous year; techniques. L&F also commenced both leasing and factoring
PCM’s participation in the Net Promoter Score pilot which tracks operations in Turkey in conjunction with ING Bank Turkey.
customer feedback and an increase in cross- and deep-selling.

ING Group Annual Report 2010 39

 2 Report of the Executive Board

Commercial Banking continued

L&F’s capabilities in the specialist field of asset-based finance was ING continues to deliver on its strategic objectives of reducing
recognised during the year with ING Commercial Finance being exposure to real estate, simplifying the company and further
ranked as the No.1 Factoring Company in the Netherlands by strengthening its capital base.
MT Finance business magazine while ING Lease UK was named
Lessor of the Year for the third successive year by the NACFB ING Real Estate Finance and ING Real Estate Development are
trade association. not impacted by the transactions and will continue to be part
of ING Bank.
FINANCIAL MARKETS
The Financial Markets (FM) business units make up the global ING Real Estate Finance (REF) successfully weathered the adverse
business that manages ING’s financial markets trading and non- environment following prudent property financing for the last
trading business lines. FM is managed along two business lines: five years.
ALCO & Strategic Trading Platform, the primary proprietary risk-
taking units, and Clients and Products, the primary customer trading REF has a Top 10 position in Europe for property financing.
and sales business line. In 2010, REF was fully integrated into Commercial Banking and is in
a good position to tap into synergies across the business.
FM continues to bring in sizeable and profitable business for
Commercial Banking. After a record year in 2009, income in 2010 REF has set up a new account management system for its global
normalised but it was still FM’s second best year. FM faced several clients to better serve its clients and to enhance cross-border
uncertainties during the year: the market environment, changes in relationship. It continued optimising its portfolio and clients in order
financial regulation, liquidity, funding and deleveraging concerns. to take advantage of opportunities for future profit growth.
Although client flows remained buoyant, margins fell to lower levels.
Revenues in developed markets were negatively impacted due to ING Real Estate Development (RED) continued to reduce its risk and
the sovereign debt crisis and the weaker client flows that the capital exposure. RED will concentrate on its core markets in the
crisis caused. coming years and gradually reduce its development portfolios in
non-core markets. Its asset management company in Spain,
FM increased profitability against reduced risk. Value-at-Risk has Auxideico, was sold in the third quarter.
progressively been reduced since 2007, while both trading and client
income has increased substantially. Investments have been focused CONCLUSIONS AND AMBITIONS
on increased FM capacity in the emerging markets and to improve Commercial Banking has the right capabilities in place: strong
service for Financial Institutions. Three top priority initiatives were established relationships with clients, client and sector expertise, a
expanding the FX Options Platform, increasing the Commodities very strong position in the Benelux and Central and Eastern Europe,
Product Offering and improving alignment with risk management to a well-sized international branch network and an international
ensure the success of product and client initiatives in emerging product offering. It has a leading position in specialised business
markets. Cross-selling programmes for clients in emerging markets and good risk management skills.
were initiated.
Customer centricity and cross-selling were intensified during the
Flow trading was significantly down, due to lower volatility and the year. Commercial Banking closed several landmark deals and
negative impact of the sovereign debt crisis. Sales commissions earned notable rankings in league tables across Europe proving that
declined due to lower volumes and narrowed spreads. its performance is being recognised.

ALCO had a strong performance in 2010 helped by capital gains. Within the overall banking organisation Commercial Banking
There was a strong proprietary trading performance in Brussels and intends to develop its winning formula to help ING Bank realise its
New York. ambition to become the preferred bank for customers. It will do
this by taking a number of operational and strategic measures,
ING REAL ESTATE including enhancing its international network and increasing its
ING Real Estate includes the Finance, Development and Investment focus on customers, employees and operational excellence.
Management businesses. ING continued to steadily reduce its
exposure to real estate, including an evaluation of the position of Real
Estate Investment Management (REIM) within the banking business.

REIM continued actively to manage its portfolio and to reduce risk

by selling its non-strategic assets. ING Group sold its 50% stake in
ING Summit Industrial Fund LP and the manager of Summit, ING
Real Estate Canada, to a joint venture between KingSett Capital
and Alberta Investment Management Corporation.

In February 2011, ING announced that it has reached an agreement

to sell the majority of its REIM businesses in two separate
transactions for a combined price of approximately USD 1.0 billion
(EUR 770 million). In addition, as part of the overall transactions,
ING has also agreed to sell approximately USD 100 million of its
equity interest in existing ING REIM funds. With these transactions

40 ING Group Annual Report 2010

 Report of the Executive Board 2

Overview
Insurance
Management Board Insurance 2010 was a year of steady improvement in operations at
on 31 December 2010
ING Insurance/Investment Management (IM). The economic
Jan Hommen environment remained challenging throughout the year and
chief executive officer was marked by continued low interest rates and market volatility.
Insurance/IM worked on improving performance in preparation
Patrick Flynn for future IPOs while working simultaneously to separate the
chief financial officer business from Banking before the end of the year.
Solid progress was made on both fronts.
Koos Timmermans
chief risk officer FINANCIAL DEVELOPMENTS
Although business fundamentals improved, the underlying loss
Matthew Rider before tax of Insurance/IM was EUR 519 million compared with
chief administrative officer a loss of EUR 202 million in 2009. Market conditions continued to
improve in 2010, although at a relatively slow pace given the depth
Lard Friese (from 1 January 2011) of the financial crisis in 2008 and 2009. The operating result of
Insurance/IM increased to EUR 1,743 million from EUR 1,434 million
Gilbert Van Hassel (from 1 January 2011) in 2009, mostly driven by higher investment margins and increased
fees and premium-based revenues in life insurance and the
Tom McInerney (until 1 January 2011) investment management business. The investment spread on life
general account assets increased 10 basis points to 93 basis points
in 2010, after cautious re-risking of the investment portfolios.
Financial overview* The increase in operating income was partly offset by higher
in EUR million 2010 2009 expenses. Operating results improved in nearly every business line,
Total operating result 1,743 1,434 with the exception of Central and Rest of Europe given the
Gains/losses and impairments –505 –544 harsh economic conditions; and in Investment Management
Revaluations 601 –346 following higher expenses related to the build-up of its
Market and other impacts –2,359 –746 global investment capabilities.
Underlying result before tax –519 –202
The increase in the operating result and significantly better
Gross premium income 27,947 30,170 revaluations of investments were more than offset by higher
New sales 4,877 4,426 negative market impacts, mostly related to the closed variable
Administrative expenses/operating income 43.9% 44.3% annuity blocks in the US and Japan. Hence, underlying results per
Life general account assets (in EUR billion) 165 143 business line diverged, with strong result recoveries in the Benelux,
Client balances (in EUR billion) 454 408 Latin America, and Asia/Pacific (excluding Japan variable annuities),
Administrative expenses (total) 3,698 3,431 compared with lower results in Central and Rest of Europe and
Underlying Return on IFRS-EU Equity –1.8% –0.9% the US.
* Underlying numbers are derived from IFRS-EU numbers, excluding the impact
of divestments and special items.
Despite the 7.8% increase in administrative expenses,
Underlying result before tax partly driven by the weakening of the euro against most
in EUR million 2010 2009 major international currencies, the life/IM administrative
Benelux 775 290 expense ratio improved slightly to 43.9% for the full year.
Central and Rest of Europe 254 291 Especially in the Benelux, significant progress was made
United States (excl. US Closed Block VA) 308 356 in containing expenses through the integration of the
US Closed Block VA –1,793 –654 Dutch businesses.
Latin America 342 273
Asia/Pacific 516 383 New life sales (APE) held up well in 2010, although the increase
ING Investment Management 173 169 against 2009 was mostly due to the weakening of the euro. Higher
Corporate Line insurance –1,093 –1,309 sales in the US, Latin America and Asia/Pacific were compensated
Total –519 –202 by a significant sales decline in the Benelux, partly due to the low
interest rate environment.
Operating result **
in EUR million 2010 2009 In the US, the closed block variable annuity business was reported
Benelux 677 623 as a separate business line as of the fourth quarter of 2010. The
Central and Rest of Europe 292 336 split of the US insurance business into two business lines, triggered
United States (excl. US Closed Block VA) 559 568 a EUR 975 million write-down of deferred acquisition costs related
US Closed Block VA 49 23 to the closed variable annuity business, bringing the reserve
Latin America 283 211 adequacy on this block to well above 50%.
Asia/Pacific 472 365
ING Investment Management 166 201 BUSINESS DEVELOPMENTS
Corporate Line insurance –754 –893 Insurance sales were higher in 2010, assisted largely by strong
Total 1,743 1,434 Corporate-Owned Life Insurance (COLI) sales in Japan, but also by
** Operating result is underlying result before tax excluding market and stronger sales elsewhere in Asia/Pacific and higher mandatory
other impacts. pension sales in Latin America.

ING Group Annual Report 2010 41

 2 Report of the Executive Board

Insurance continued

WHERE WE OPERATE
ING Insurance/IM has a strong position as a provider of life insurance and retirement services and is well
positioned to capitalise on socio-economic trends.

#1 Life insurer in the

Netherlands

#3 in US Retirement
Services Major foreign Life
insurer in Asia

#2 Pensions company
in Latin America

Major Life & Pensions

provider in Central Europe

Throughout most of 2010, the Insurance/IM businesses worked establish a platform for future growth. In Latin America, the
towards a base case scenario of either one or two IPOs. Towards roll-out of a wealth management strategy in Mexico, Peru and
the end of the year, ING Group decided that Insurance/IM would Colombia, following its successful launch in Chile in 2009, resulted
opt for two IPOs, one Europe-led IPO and one US-focused IPO, in a significant increase in new sales and inflows.
while keeping the option of one IPO open. The Europe-led
company will have solid cash flow and strong growth positions In the Asia/Pacific region, new product initiatives, particularly in
in developing markets, while the US-focused company will have Japan and Hong Kong, and a strong focus on bancassurance
a leading franchise in retirement services and life insurance. delivered strong sales growth.

The decision to opt for two IPOs was taken because of differences Initiatives to rejuvenate tied agency channels in Central and Rest
in valuation methods of insurance companies in different markets, of Europe, Latin America and Asia/Pacific began through the Tied
particularly in the US; to provide more flexibility in timing and Agency Overhaul programme. These initiatives are expected
execution of the IPOs; and to better deal with the competitive to deliver greater productivity and a lower lapse rate in the future.
challenges that the new European Solvency II regime will pose
in the US. Insurance US began to implement a programme to narrow the
strategic focus of the US business to life and retirement services
In preparing for two IPOs, ING Insurance/IM implemented a while reducing annual expenses by EUR 100 million from 2011.
number of measures to increase transparency and bring US
Insurance accounting and hedging in line with US peers. AMBITION 2013
Central to these measures was the creation of a separate By 2013, Insurance/IM intends to lift investment margins to 105
business line, US Closed Block VA within ING Insurance/IM. basis points on 4% growth per annum in general account assets.
The changes will improve reserve adequacy, allow the company to The business also plans to reduce life/IM administrative expenses as
better hedge interest rate risk, and reduce earnings volatility. a ratio of operating income to 35% and to grow sales by 10% per
(See Financial Developments above and the ‘US Closed Block VA’ annum and to achieve a return on equity in excess of 10%.
section for details of these changes and their financial impact.)
CONCLUSIONS AND AMBITIONS
In 2010, ING IM focused on enhancing its global investment The twin priorities for Insurance/IM in 2010 were to improve
capabilities by establishing a skills-based multi-boutique structure. operating performance and to achieve the separation of
Insurance/IM from Banking at the operational level so they could
In the Benelux, which is the largest cash generator for ING function as stand-alone companies within ING Group by the
Insurance/IM, costs have been successfully reduced by 25% over beginning of 2011.
the past two years through restructuring and cost reduction
initiatives. Nationale-Nederlanden regained its position as market Having achieved the operational separation of Insurance/IM from
leader in the group life market (which includes business and Banking at the end of 2010, ING Insurance/IM is working towards
corporate pensions) in the Netherlands. two successful IPOs of the business by sharpening its strategic
direction, strengthening the capital base, and improving
In emerging markets, where ING Insurance/IM has strong market investment results.
positions, initiatives were taken to stimulate new sales and to

42 ING Group Annual Report 2010

 Report of the Executive Board 2

Insurance

INSURANCE BENELUX Sales of insurance products to retail customers were under pressure
during the year due to the low interest rate environment and fierce
> Leading regional player competition from bank annuity products. Corporate sales
in insurance and pensions maintained their momentum.

> Wide transformation of business Insurance Benelux focused on improving its performance in 2010
under way in the Netherlands by continuing to reduce costs and capturing existing growth
opportunities in the Netherlands by transforming its key insurance
> Focus on improving efficiency and business there, and building on the success of the bancassurance
pursuing selective growth opportunities model in Belgium and Luxembourg.

Insurance Benelux continued to make solid progress in the The transformation of Nationale-Nederlanden
transformation of the Dutch insurance businesses. The integration The business’s ambition is to be the most efficient and the most
of the Dutch insurance businesses into Nationale-Nederlanden customer-centric large insurance company in the Benelux. The
and the revitalisation of the NN brand dominated business transformation of Nationale-Nederlanden under the One
activity during the year. programme is a key part of this strategy and a major business
initiative in 2010, containing many activities.
FINANCIAL DEVELOPMENTS
The underlying result before tax in the Benelux increased by Nationale-Nederlanden, RVS and ING Verzekeren Retail (formerly
167.3%, reflecting a higher operating result (EUR 53 million), Postbank Verzekeren) are being combined into one customer-
lower negative real estate revaluations (EUR 379 million) as well focused organisation under the Nationale-Nederlanden brand to
as lower negative realised gains on real estate (EUR 57 million). simplify the business and to reduce costs. As well as integrating all
After a period of strongly declining real estate values, the ING three under NN, three new business units dedicated to retail clients
Insurance Real Estate Portfolio benefited from both the (NN Retail), to small and medium sized enterprises (NN SME) and to
continuing recovery in the UK real estate market and corporate clients (NN Corporate) were established.
stabilising yields in Continental Europe.
In addition to the integration of the insurance businesses and the
Operating result before tax increased 8.5%, as a higher investment creation of new client-focused business units, the Dutch insurance
margin and lower expenses more than compensated for a lower businesses prepared a roadmap with a view to optimising its
technical margin as well as a lower non-life result. The higher existing distribution channels so that customers can better choose
investment margin (EUR 89 million or 24.1% increase) reflected how (Click-Call-Face) and where they buy products. The network of
a higher fixed income result as cash balances were reinvested independent brokers continued to play an important role.
over the course of 2010. The non-life result was EUR 156 million
compared to EUR 248 million in 2009. This was due to the In April, the key initiative that spearheaded the transformation of
inclusion of favourable one-off items in the 2009 result. Nationale Nederlanden – the revitalisation of the NN brand – was
Furthermore, adverse claims development in the disability successfully launched. The campaign featured a revitalised logo and
business and a few large fire claims in 2010 contributed website, and three new product campaigns, which resulted in a
to the decline in the non-life result. marked increase in recognition of the NN brand values.

The technical margin was EUR 243 million versus EUR 286 million In October, NN Retail received the Keurmerk Klantgericht
in 2009 because the second quarter of 2009 included a favourable Verzekeren (quality recognition for customer-focused insurance)
one-off item, being the release of EUR 54 million in morbidity from the Stichting Toetsing Verzekeraars, rewarding efforts to
provisions. Life expenses declined by 8.1% because of lower improve customer focus. In addition, customer-focused initiatives
administrative expenses mainly reflecting lower FTE levels paid off with an internal survey finding that customers rated 9 out
(7,551 at the end of 2010 compared to 8,555 at the end of 2009). of 10 their satisfaction with NN’s handling of a cross-section of
claims, and with 80% of customers requests being settled within
New sales were 20.1% lower than in 2009. The company five working days.
continues to prioritise value creation over volume growth.
In addition, a change was made in the recognition of premiums In other One programme achievements, overall costs in Insurance
in the Netherlands which had a favourable impact of Benelux were reduced by 25% over the past two years and a survey
EUR 55 million on APE in 2009. of employees showed that 90% of employees were motivated by
the transformation strategy.
BUSINESS DEVELOPMENTS
The mild economic recovery in Europe continued in 2010, Although the retail insurance market remained subdued, NN was
despite the debt crisis in southern Europe and Ireland casting a particularly active and successful in the corporate market, winning
shadow over economic activity. Sentiment improved, the level of many major new high-profile corporate clients, including TomTom
unemployment began to fall and capacity utilisation was on the and Accenture.
rise. In the Benelux, economic conditions improved. After GDP
fell 3.9% and 2.7% per cent respectively in the Netherlands and Three major campaigns were launched, aimed at NN’s business and
Belgium in 2009, economic growth was 1.7% in the Netherlands corporate pension clients. A corporate pension product that
and 2.0% in Belgium in 2010. featured in one of the campaigns ‘NN Prestatiepensioen’ was
chosen by Moneyview magazine as the most flexible pension
product in the Netherlands.

ING Group Annual Report 2010 43

2 Report of the Executive Board

Insurance continued

According to the most recent DNB (the Dutch central bank) market INSURANCE CENTRAL AND REST OF EUROPE
share figures released in 2010, NN won back its market leader
position in group life insurance (excluding health insurance) in the > Positioned well in life insurance with
Netherlands in 2009, which included the SME and corporate strong market positions
pension businesses.
> Working towards greater efficiency in
Within the combined company, the Dutch insurance businesses operations and more effectiveness
began work on creating a dedicated business unit to provide
services to clients who bought insurance policies that are currently
in tied agent network
no longer sold: NN Services. This will further optimise customer > Life sales in most markets higher than in 2009
service and efficiency in dealing with the ‘closed books’ while at
the same time creating more room for innovation and product ING has leading market positions and a solid reputation in the
development elsewhere in the organisation. region. This provides the company with further opportunities to
broaden its distribution base. However, economic headwinds and
Bancassurance the impact of unfavourable regulatory change in pensions in some
NN has had a bancassurance partnership with ING Bank for many countries continued to make business conditions challenging in
years. Given the upcoming split of insurance and banking, NN and 2010, following a tough year in 2009. Despite this environment,
the insurance business in Luxembourg secured a ten-year exclusive the outlook for ING’s businesses in the region remains positive.
distribution contract with ING Bank in October, which came into Operating profit before tax was solid given the economic
effect 1 January 2011. circumstances and regulatory change. Headway was made in
the transformation towards operating with lower costs-per-policy
ING Life in Belgium undertook several major initiatives to stimulate and more professional advice to customers.
cross-sales with ING Bank. It launched a new sales process for
traditional insurance products through the Business Credit Centre FINANCIAL DEVELOPMENTS
of ING Bank. In 2011, a new variable annuity will be launched to be The underlying result before tax of Insurance Central and
sold through the Bank. Rest of Europe decreased by 12.7% to EUR 254 million from
EUR 291 million in 2009. Gains and Losses on sales of
In Luxembourg, the insurance business in conjunction with securities and impairments were EUR –29 million in 2010
ING Bank recorded its best sales month ever in June. The business compared to EUR –45 million in 2009, mainly as a result of
rated highly in an ING Bank distribution survey and sales volumes EUR 10 million lower impairments in Spain. Market and other
confirmed the strong and positive trend in sales since the inception impacts were EUR –10 million as a result of the EUR 10 million
of the new commercial support model in late 2009. There was prepaid capitalised commission write-off in the pension
much work done to find a new European distribution partner and fund in Hungary.
new account managers were employed to help achieve this.
The operating result fell by 13.1% to EUR 292 million. The result
CONCLUSIONS AND AMBITIONS was largely driven by a EUR 26 million lower technical margin and
Much has been achieved in the past two years when the EUR 20 million lower fees and premium-based revenues. The EUR
transformation of the Dutch insurance business began. The One 26 million lower technical margin was largely driven by a release in
programme has succeeded in significantly reducing costs and the provision for rider reserves in Poland and Hungary in 2009 of
increasing efficiency. The business transformation plans are EUR 23 million and to a lesser extent by a lower realised result on
on track and earnings have improved on the core surrenders. Lower fees and premium-based revenues of EUR 20
business fundamentals. million were largely driven by lower revenues in both the pension
fund in Poland and the life company in the Czech Republic.
Insurance Benelux’s ability to contain expenses, increase efficiency
and standardise products and operations will help it continue to Administrative expenses were stable at EUR 266 million in 2010
grow the business. There is a further need to reduce expenses in from EUR 265 million in 2009, despite a EUR 16 million tax on
the coming year and to capture growth opportunities, particularly financial institutions in Hungary and a EUR 7 million currency
in corporate pensions due to market and regulation changes, impact. Excluding both items, administrative expenses were
as the business prepares for a European-based IPO of ING’s EUR 22 million lower on a comparable basis.
insurance operations.
New sales (APE) decreased by EUR 40 million to EUR 352 million
in 2010 from EUR 392 million in 2009, largely caused by a
EUR 34 million reduction in APE in Greece, particularly in the
Greek bancassurance channel.

BUSINESS DEVELOPMENTS
Insurance Central and Rest of Europe presents solid growth
opportunities with a market of approximately 220 million people
and relatively low penetration rates for life insurance and pensions.
It operates in Poland, Hungary, the Czech Republic, Slovakia,
Romania, Bulgaria, Greece, Turkey and Spain.

44 ING Group Annual Report 2010

 Report of the Executive Board 2

Insurance continued

The macroeconomic environment in 2010 was an improvement on Regulatory change

2009. However, it was still challenging for business, with a lingering Some governments in the region remain under severe budgetary
recession and severe public debt problems in some countries, pressure and this has resulted in changes to the local regulatory
resulting in subdued growth across the region. environment for mandatory pensions, due to the demands of the
deficit and debt definitions of the Maastricht Treaty.
Regulatory changes in several of ING’s key markets had a marked
dampening impact on some ING pension funds in 2010, especially In Hungary at the end of 2010, Parliament agreed upon some very
in Poland and Hungary. In Life, Slovakia, Bulgaria and especially unfavourable changes in the pension system, which amount to
Greece faced difficult conditions, yet companies in our key markets quasi-nationalising mandatory pensions. As a first step, for the
were able to grow their sales compared to 2009. Poland and period until January 2012, employee contributions to pension
Hungary had double-digit sales growth in Life. There were reduced saving accounts will be used by the State to finance the Hungarian
bancassurance activities in some countries, especially in single national deficit by being directed into the State pay-as-you-go
premium unit-linked business. Lapses and surrenders, although system. As a second step, mandatory pension fund members had
lower than in 2009, still remained relatively high. to declare by 31 January 2011 if they wanted to maintain
membership of their fund. If they do maintain membership, they
The focus in 2010 continued to be on preparing for future growth, will not accumulate future pension rights in the State’s pay-as-you-
managing costs carefully and further improving sales processes. go pension system. In this way most of the accumulated assets of
the pension funds will be used to meet the budget deficit targets.
In the region the operations of ING Insurance and ING Bank were In addition, in early 2010 in Poland, caps were introduced on the
very much intertwined in several countries. Much work was done level of commissions Pillar II pension funds can earn. The prospect
across the region to achieve their operational separation by of further regulatory change in the region is a concern for ING.
1 January 2011 in line with ING Group’s plans to separate its
banking and insurance operations. Despite this, ING’s Polish pension fund became the country’s
largest in terms of assets under management. It was already the
Growth strategy largest in terms of number of customers. Uncertainties about
With competition increasing, new distribution channels opening mandatory savings regulations could lead to extra demand for
and changing regulations, it remains ING’s goal to continue to be voluntary pensions, life insurance, savings and investments.
a competitive, market-leading company that offers customers the It could offer ING, with its strong retail distribution base,
best professional advice and value for money. In 2010, ING worked opportunities to further increase sales.
on several major initiatives to achieve this. These included the
introduction of new products and entering new business segments Awards
– for example the introduction of Group Life in Poland. Also, a Tied During the year, several awards were won and there were also
Agency Overhaul programme began in Spain and will be rolled out some special mentions. ING Insurance Poland came first in the
gradually across the rest of the region. In Turkey, a life insurance Insurance Companies Ranking by Gazeta Bankowa monthly – a
licence was obtained. leading banking and insurance magazine in Poland. The ranking
awarded the most customer-orientated insurance companies that
Broadening the distribution base and developing more multi- excel in post-sales service. In Hungary ING was ranked among the
channel capacity was also a key goal in 2010. Tied agents are still country’s best life insurers at a brokers’ national conference. This
the dominant distribution channel, but bancassurance and brokers was significant, given that ING Life Hungary established the broker
are increasing in number and importance. The introduction of channel relatively recently and had no long-standing broker
credit life, a life insurance product attached to new loans and partnerships prior to this. In Romania, ING Pensions became
mortgages of ING Bank Turkey, and introduced especially for the Company of the Year for its outstanding results achieved in a tough
bancassurance channel, was very successful, selling 100,000 year. ING Life Romania won the award in the Quality Services
policies within six months. category. ING Insurance Czech Republic and Slovakia both won
several awards for their products (such as pensions and investment
Towards a region-wide operating model products). A committee of independent professionals considered
In 2010, Insurance Central and Rest of Europe continued to work them the best in the industry.
on creating a more region-wide operating model. The model will
include, among other things, a regional general ledger, a regional CONCLUSIONS AND AMBITIONS
product framework and a centralised, regional IT platform. Most economies in the region are expected to experience above
Intensified regional cooperation creates more economies of scale to average eurozone GDP growth rates in 2011. In time, standards of
provide a solid foundation for future growth. living in the region are likely to increase gradually to West European
standards. Recent changes to regulations for pensions remain a
In the Tied Agent Overhaul programme, initiatives were taken to concern, and could constrain growth in the short term.
further improve ING’s value proposition for customers and to However, Insurance Central and Rest of Europe has strong market
continue professionalising its sales forces by, for example, improving positions in life and pensions and is well positioned to capitalise on
agent productivity. The aim is to have smaller, but more effective economic recovery. ING has a strong reputation in the marketplace,
sales forces. There will be more emphasis on enhanced recruiting, well-regarded management teams in place and a solid customer
training and coaching of new agents and activity management. The base. The businesses are well situated to make a substantial
Tied Agent Overhaul programme began in Spain in 2010 and has contribution to the Europe-based IPO of ING Insurance/IM.
already proved successful. It was rolled out in Romania from
January 2011, with other countries to follow.

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Insurance continued

INSURANCE US (EXCLUDING US CLOSED BUSINESS DEVELOPMENTS

BLOCK VA) Insurance US is a market leader in providing retirement services and
pension products. It currently operates three core businesses:
> Sharpened focus on Retirement Services Retirement Services, Individual Retirement and Individual Life.
and Life Insurance businesses
The Retirement Services unit is the third largest provider of defined
> Simple rollover mutual funds target retirees contribution (DC) retirement plans in the US based on assets under
> Separate business line created for management and administration, the second largest based on the
number of plan participants and the largest based on the number
Closed Block Variable Annuity (VA) of retirement plans managed.

The challenging state of the US economy, including the high level The Individual Retirement unit was formed in 2010 to focus on
of unemployment and low interest rates, was a significant meeting the financial and retirement needs of individuals.
headwind for the businesses in 2010. Despite these external
factors, overall sales and operating profit were higher than in 2009, The Life Insurance unit is a Top 5 writer of individual term life
thanks to a continued focus on cost reduction, a variety of new insurance and a top writer of permanent life insurance. Its group
sales initiatives and efforts to improve the investment margin. unit is a major writer of large-case group life and disability
insurance and a Top 5 writer of employer stop-loss insurance.
ING took a number of measures to improve the clarity of reported
results of Insurance US, and to address reserve inadequacy and Insurance US concentrated its efforts in 2010 on preparing the
earnings volatility in the Closed Block VA business. A separate business for a US-focused IPO by strengthening the operating
business line within ING Insurance/IM was created for the performance of its businesses through cost reduction, top-line
US Closed Block VA business to help achieve this, ahead of the growth, margin improvement and leveraging the company’s talent.
proposed IPO of the US Insurance business. (See ‘Insurance
Overview’ and the ‘US Closed Block VA’ sections.) In 2010, all businesses continued to concentrate on providing
customer-focused products, competitive returns and quality service.
FINANCIAL DEVELOPMENTS
The underlying result before tax of Insurance US in 2010 decreased Retirement Readiness strategy
to EUR 308 million from EUR 356 million in 2009. The impact of Insurance US continued to build on its strong market positions and
non-operating items in 2010 of EUR –251 million was greater than reputation in retirement services, despite a sluggish US economy.
the impact in 2009 of EUR –212 million as the higher favourable The Retirement Readiness strategy, which intends to establish ING
result from revaluations was more than offset by lower results from as the best provider of retirement products and services in the
deferred acquisition costs (DAC) and reserve adjustments, primarily minds of retirement customers, became the key initiative for
related to Fixed Annuities. Insurance US. The ageing of the US population creates significant
long-term growth opportunities as those aged 45 or more control
The operating result decreased slightly to EUR 559 million in more than two-thirds of the approximately USD 30 trillion of
2010 from EUR 568 million in 2009. Higher operating income financial assets in the country. The impending retirement of ‘baby
was more than offset by higher administrative expenses and boomers’ and the recent financial turmoil have increased attention
DAC amortisation and trail commissions. on being financially prepared for retirement.

The rise in operating income was driven by a higher investment In Retirement Services, ING serves the full spectrum of the US
margin mainly from lower interest rate swap expenses and market from full-service plans to recordkeeping services only.
reinvestments into (longer duration) fixed income securities, and The business is positioned to serve all sizes and employer
also from higher fees and premium-based revenues, as a result of segments of the market – including corporate, education,
higher assets under management. government and healthcare.

Administrative expenses increased to EUR 904 million from EUR During the year, ING Retirement Plans was selected by important
791 million in 2009. The comparison with 2009 is impacted by plan sponsors as the sole provider of services, including managing
accrual adjustments which lowered expenses in 2009 as well as the deferred compensation plan for the City of Austin, Texas, as
currency effects. DAC amortisation and trail commissions increased well as recordkeeping, education and marketing for the
to EUR 620 million from EUR 489 million in 2009 due to higher Commonwealth of Kentucky’s retirement plans, which represent
operating income and higher assets under management levels, USD 1.6 billion in 457(b) and 401(k) assets from 75,000
resulting in higher trail commissions. participants. In the government market, ING currently services
retirement plans for more than 4,100 state and local governments.

For the seventh consecutive year, ING maintained a No. 1 ranking in

sales in the kindergarten to 12th grade 403(b) education market
and a Top 5 sales position in the small corporate 401(k) market.

The integration of CitiStreet, a recordkeeping business that ING

acquired in 2008, entered its final stage. As part of the drive
to control expenses and improve margins, staffing levels across
Retirement Services were reduced in 2010.

46 ING Group Annual Report 2010

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Insurance continued

Communicating clearly with customers remained a high priority in CONCLUSIONS AND AMBITIONS
2010. ING’s efforts in the field were rewarded with US Retirement To prepare for a successful US-focused IPO, Insurance US will
Marketing winning 28 communications awards. At the Pensions & continue to concentrate on three key priorities: sales growth,
Investments Eddy awards ceremony, which acknowledges expense management and improving investment margins.
excellence in providing investment education to plan participants, Management is implementing a plan to reduce annual expenses
ING was given five, first-place and three, second-place awards. by EUR 100 million a year, as it sharpens the focus on the
retirement and life businesses.
The Rollover opportunity
As part of Insurance US’s strategy to be the leader in helping Insurance US has leading franchises in retirement services and life
individuals and institutions to grow and protect their wealth, insurance, and remains strongly committed to its Retirement
Individual Retirement offers a variety of products, including rollover Readiness strategy to become the premier franchise in the US
annuities that are part of broad suite of lower cost, lower risk industry and to expand its rollover strategy. The business will
investment vehicles. remain focused on customers’ needs and providing retirement and
life insurance products through a broad set of distribution channels.
During the year, Individual Retirement offered for the first time a
number of lower cost rollover annuity products targeted primarily US CLOSED BLOCK VA
at current participants exiting ING-managed retirement plans.
These included two fixed index annuities (ING Select Multi-index 5 > Became a separate business line
and ING Select Multi-Index 7), a registered fixed annuity and a within ING Insurance
mutual fund individual retirement product.
> Resulted in a DAC write-down
Individual Retirement also provides Rollover IRA (Individual of EUR 975 million
Retirement Accounts) products, essentially individually established
defined contribution retirement funds, which are expected to be
> This improved reserve adequacy
the fastest-growing segment of the US retirement market. These > Moved towards fair value accounting
products are aimed at capturing the growth opportunity that lies on GMWB reserves
within the rapidly expanding market for retirees and people
changing jobs. This creates a need for the ‘rollover’ of plan assets From 1 October, ING implemented a number of key changes with
into an individual retirement product or solution. regard to the US Closed Block VA business to increase transparency,
improve reserve adequacy, reduce earnings volatility, and to bring
Individual Life accounting and hedging more into line with US peers as the
Individual Life continued to focus on competitive product company prepares for a potential US-focused IPO. As part of these
manufacturing, effective distribution and efficient operations. It has changes, ING began to report the US Closed Block VA business as a
one of the broadest market reaches in the industry and one of the separate business line within ING Insurance/IM to improve
most complete product portfolios. Individual Life insurance transparency for both the Closed Block and ongoing businesses.
manufactures a range of products from low-cost term in the middle
market up through high-end universal life (UL) sales in the affluent FINANCIAL DEVELOPMENTS
markets. The business has a strong multi-channel sales team with The underlying loss before tax was EUR 1,793 million in 2010
the capacity to reach every licensed life insurance agent in the US. It compared to an underlying loss of EUR 654 million in 2009. The
has over 80,000 independent producers and more than 1,500 negative underlying result was driven by reductions in the deferred
intermediaries under contract or appointment. Its distribution acquisition cost (DAC) balance. In the second quarter of the year,
organisation has a best-in-class sales support and illustration the DAC balance was reduced as a result of an 11.9% decline in the
system. This model has allowed Individual Life to create significant S&P 500 during the quarter. In the fourth quarter, the DAC balance
scale, to become a Top 5 writer of individual term life insurance, was further reduced mainly due to a non-recurring DAC write-
and develop into a major writer of permanent life insurance. down of EUR 975 million. This DAC write-down, triggered by
making the VA business a separate business line, was implemented
Overall sales in the Individual Life industry remained under pressure to improve the reserve adequacy to the 50% confidence level for
in 2010 as a result of the challenging economic environment. the business on a stand-alone basis.
However, in the first half of the year the business undertook a
series of initiatives to spur growth. These included making revisions Excluding these non-operating items, the operating result improved
to the term product portfolio, as well as introducing a new global by EUR 26 million to EUR 49 million in 2010 from EUR 23 million in
indexed product and re-pricing of the guaranteed death-benefit 2009, as lower expenses more than offset the decrease in
universal-life market. operating income.

In October, Individual Life also re-priced its term product suite with Life operating income fell EUR 94 million to EUR 119 million from
the goal of further strengthening its market position while EUR 213 million in 2009. The investment margin decreased by
maintaining profitability. ING ranked as a Top 5 player in the term EUR 32 million to EUR –11 million primarily reflecting higher
life insurance market in the US in 2010. balances in short-term investments and the impact of lower interest
rates. Fees and premium based revenues decreased by EUR 46
million to EUR 121 million as higher fee income was more than
offset by higher hedging costs. The decrease in the technical

ING Group Annual Report 2010 47

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Insurance continued

margin of EUR 16 million was mainly attributable to non-recurring INSURANCE LATIN AMERICA
negative reserve developments in the fourth quarter 2010.
> Leading position as the second largest
Total life expenses decreased to EUR 70 million in 2010 from pension provider in the region
EUR 191 million in 2009 mainly due to lower DAC amortisation,
resulting from lower operating income. Administrative expenses in > Wealth Management business launched
2010 were lower compared with 2009 as product distribution and in several countries
support teams were reduced or redeployed following the strategic
decision to cease sales of variable annuity products effective 2010 marked the third consecutive year of profit growth for
31 March, 2010. This decision was a part of the overall global Insurance Latin America. The business used its position as the
strategy and risk reduction plan. region’s second largest pensions provider to develop its wealth
management business in major markets as part of a strategy to
New sales (APE) of EUR 57 million was EUR 164 million lower than broaden and strengthen its operations in the region.
2009 APE of EUR 221 million, as no new products were sold from
31 March 2010 and the APE only represents additional payments FINANCIAL DEVELOPMENTS
on existing policies. Insurance Latin Americas posted an underlying result before tax of
EUR 342 million in 2010, a 25.3% rise on the 2009 underlying
BUSINESS DEVELOPMENTS result of EUR 273 million. The increase was impacted by lower
The US Closed Block VA business includes ING’s Closed Block revaluations (EUR 52 million in 2010 compared to EUR 59 million in
Variable Annuity business in the US, which has been closed to new 2009), which were in part mitigated by higher realised capital gains
business since early 2010 and which is now being managed in (EUR 7 million in 2010 versus EUR 3 million in 2009).
run-off. There are more than 500,000 contract holders and more
than USD 46 billion in assets under management. Approximately The operating result rose markedly by 34.1% to EUR 283 million
two-thirds of the policies contain a guaranteed living benefit. compared to EUR 211 million in 2009, mainly driven by higher fees
from pension funds and to a lesser extent by increased investment
As stated above, from 1 October, ING began to report the US and technical margins.
Closed Block VA business as a separate business line to improve
transparency for both the Closed Block and ongoing businesses. The increase in fees and premium-based revenues (EUR 419 million
in 2010 compared to EUR 311 million in 2009) included a currency
This separation triggered a write-down of the business’s DAC impact of EUR 46 million. The remaining EUR 62 million of the
balance of EUR 975 million before tax, under ING’s existing increase was due to higher fee income in Mexico associated with
accounting policies. This brought reserve adequacy on the US positive pension fund growth, which more than offset a decrease
Closed Block VA business line to the 50% level. in fee levels which were agreed with the regulator. Higher fee
income in Chile and Peru as a result of economic growth and wage
Further, ING moved towards fair value accounting policies on inflation also contributed to the increase.
reserves for the Guaranteed Minimum Withdrawal benefit (GMWB)
as of 1 January 2011 to better reflect the economic value of these Administrative expenses increased by 10.9% on a constant currency
guarantees. This enabled ING to substantially increase hedging of basis which was primarily attributable to investments to roll out
interest rates on the US Closed Block VA book without causing wealth management projects throughout the region.
significant earnings volatility, because results from hedging
derivatives would largely be mirrored in fair-value changes of the New sales (APE) climbed by 52.1% to EUR 683 million in 2010 from
guarantees. With increased hedging, interest rate risk would be EUR 449 million in 2009. This growth is mainly related to higher
significantly reduced. volumes in mandatory pension sales in Mexico and the inclusion
of tax-favoured voluntary pension sales in Colombia and mutual
The combined effect of these actions is to strengthen reserves, fund sales in Chile.
reduce earnings volatility, increase future profitability and to
decrease risk. BUSINESS DEVELOPMENTS
Latin America surged ahead in 2010 with economic growth rates
The long-term IFRS earnings outlook has been improved by generally exceeding those of most countries in Europe as well as
reducing the DAC balance and the overall amortisation rate, as well the US.
as improving IFRS reserve adequacy on the US Closed Block VA
business to well above the 50% confidence level. The region has very attractive macroeconomic and demographic
fundamentals. The population is large and relatively young
Although actions in relation to the US Closed Block VA business compared to the US and Europe, inflation is largely under control
had a negative impact on underlying earnings in 2010, ING believes and country credit ratings are positive and stable.
that the right steps are being taken to effectively manage this
business going forward. ING operates the second largest pension business in Latin America
and has leading positions in the region’s most attractive pension,
insurance and asset management markets. In Peru, ING is ranked
No.2 in mandatory pensions with a 30.5% market share, in
Uruguay, the second largest; in Mexico and Chile, the third largest;
and in Colombia, the company ranks among the Top 5
mandatory pension providers.

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Insurance continued

ING in Latin America continued to successfully take advantage of The company with strong cash reserves is positioned to continue
powerful demographic trends and strong economic tailwinds in delivering solid earnings growth in the booming Brazilian market.
the region, delivering solid earnings for the third consecutive year, ING holds a 36% shareholding in the company.
despite the worldwide financial crisis and its lingering aftermath.
CONCLUSIONS AND AMBITIONS
The five businesses together have 9.4 million customers and Insurance Latin America is committed to building on its position as
EUR 35 billion in assets under management. ING’s strong market the second largest pensions provider in the region by developing a
positions in life and pension businesses across the region enabled significant position in the voluntary savings market. The wealth
the company to continue to post solid top- and bottom-line management strategy, designed to achieve this, will continue to be
growth in 2010. geared to capturing a larger share of the affluent market.

The businesses in the region continued to develop wealth Although growth in the mandatory pensions market has been
management strategies, concentrating on mandatory and positive, the market is maturing, and so the business will focus,
voluntary retirement savings plans. in particular, on sharpening its customer retention strategies for
this business.
During the year, the priorities for the business were to improve
operational efficiency and contain costs as well as to expand sales Insurance Latin America will continue to pursue operational
through the roll out of a wealth management business across the efficiency by the sharing of best management practices, a
region. Customer retention strategies for the mandatory pension disciplined approach to expense control largely through regional
business were refined. procurement initiatives and the search for synergies in the
businesses in the region.
Wealth Management
The Wealth Management platform successfully established in The business commands a substantial presence in the region and
Chile in 2009 as a means of capturing a larger share of the has very attractive business fundamentals. ING is exploring strategic
affluent market continued to perform well, making a significant options to determine the future of the insurance business in Latin
contribution to net inflows. During 2010, ING rolled out the America.
platform in other countries in the region such as Peru, Colombia
and Mexico. INSURANCE ASIA/PACIFIC
The new wealth management business includes a variety of savings > A year of strong growth across the region
and investment products such as mutual funds and life insurance, > Distribution boosted through bancassurance
personalised financial advisory services, and an ‘easy-service’
administration platform, which are all geared towards helping and tied agents
customers reach their medium and long-term financial goals. > Success with joint ventures
The high net-worth segment in the region is an important market Insurance Asia/Pacific performed very well in 2010, recording strong
with an estimated 12 million potential customer households with growth in new sales and profitability. Strong sales in Japan, new
total income of EUR 356 billion. products in Malaysia and Hong Kong and robust bank distribution
sales all contributed to the result. The business focused on boosting
A strategic marketing campaign to support the wealth commercial momentum by continuing to develop and strengthen
management launch was built on ING Insurance US’s successful bancassurance relationships and lifting tied agent productivity.
‘Your Number’ campaign, which prompted people to think about
how much they might need in retirement and to work towards FINANCIAL DEVELOPMENTS
achieving it. The campaign in Latin America invited potential Insurance Asia/Pacific posted an underlying result before tax of
customers to experience an innovative goal-based advisory EUR 516 million in 2010, up 34.7% or 15.8% excluding currency
programme, which helps customers quantify their savings objective effects compared to EUR 383 million in 2009. The result was
and to create a plan to reach it. achieved by improved operating results in most countries in 2010.
Market-related items and other impacts contributed EUR 44 million
Cross-selling voluntary savings products to existing clients is one of to the result compared to EUR 18 million in 2009.
the major drivers that will help boost earnings to an expected 15%
growth rate a year. In addition, early results from Chile show there The operating result of EUR 472 million in 2010 rose by 29.3% or
was higher than 30% productivity from sales and lower distribution 11.6% excluding currency effects from EUR 365 million in 2009,
costs, as a result of the wealth management initiatives, which lifted driven by higher operating income, partly offset by moderate
ING to the largest provider in the tax incentive voluntary savings growth in expenses.
market with 21.7% market share.
The life operating income increased 20.6% or 6.2% excluding
SulAmérica currency effects to EUR 1,618 million in 2010 from EUR 1,342
ING’s joint venture in SulAmérica is expected to contribute to million in 2009. The increase was attributable to higher fees and
growth at Insurance Latin America. SulAmérica is the largest premium-based revenues driven by volume growth in most
countries as well as an ongoing improvement in the investment
independent multi-line insurance company in Brazil by total margin reflecting increased investment income, growth in general
premiums and market capitalisation, and has posted strong account assets and reinvestment of cash in longer-duration assets.
earnings growth since its listing as a public company in 2007.

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Insurance continued

Life administrative expenses increased by a modest 7.8% but fell by 5,000 independent agencies and, on the bancassurance front,
3.6% excluding currency effects as a result of focus on cost ING’s products and services are sold through 1,802 branches.
discipline throughout the region. The life administrative expense
ratio improved to 27.3% from 30.5% in 2009. Deferred Acquisition In South Korea, Japan and Malaysia, ING holds key market positions
Cost (DAC) amortisation and trail commissions grew by 24.3% or and in 2010 worked to strengthen them further.
9.7% excluding currency effects from the previous year reflecting
currency impacts and business growth. Total life expenses grew by South Korea remains a key ING stronghold in Asia. ING Life Korea
17.4% or 4.2% excluding currency effects to EUR 1,151 million is the fourth largest insurer and the largest foreign insurer in the
versus EUR 980 million in 2009. country. It retained a AAA credit rating from Korea Ratings for the
fourth year in a row. In 2010, initial steps were taken to improve
New sales (APE) rose to EUR 1,389 million, up 35.6% or 20.6% tied agent productivity through new recruitment campaigns,
excluding currency effects from EUR 1,024 million in 2009. Sales enhanced training and more active management of agents, after
growth was driven by strong contributions from new products and sales had been under pressure for some time. In other business
bank distribution sales. developments, ING’s insurance joint venture with KB Financial
Group, KB Life, continued to grow strongly in 2010 and
BUSINESS DEVELOPMENTS bancassurance partnerships were strengthened.
Most of Asia recorded strong economic growth in 2010. Robust
domestic demand and trade within Asia boosted consumer ING’s Malaysian operations continued to perform well, where it
confidence, which in turn buoyed investor sentiment and led to leads the market in the employee benefits product line and is the
strong stock market growth. Despite some concerns about the third largest insurer in the individual life insurance segment. The
impact of economic restraint measures in China earlier in the business recorded strong growth in the number of tied agents, and
year, overseas funds continued to find a home in Asia’s the bancassurance partnership with Public Bank continued to reap
emerging markets. many benefits. New products were launched and bank distribution
was strengthened which helped boost sales. ING also successfully
Asian investor sentiment as measured by the ING Investor partnered with Public Bank to gain a Takaful licence. Takaful
Dashboard Survey was substantially more buoyant in 2010 when achieves similar objectives to those of conventional life insurance,
compared to the first half of 2009. By the third quarter of 2010, the but does so in a manner that is compliant with Islamic law. The
Survey’s Pan-Asia index was up 100% on the financial crisis low in Takaful business is expected to begin operations in the first half of
the fourth quarter of 2008. 2011, and is expected to have bright growth prospects. Asia is
home to 1.2 billion Muslims (68% of the global Muslim
ING was well-positioned to benefit as the life insurance and population) and in Malaysia, there are 15 million Muslims who
pensions sectors regained momentum. make up 60% of the population.

Insurance Asia/Pacific is one of the largest foreign insurers in Asia ING Life Japan continued to build on the success of its COLI
with nine insurance companies in seven countries: China, Hong (Corporate Owned Life Insurance) business. It has consistently
Kong, South Korea, Japan, Malaysia, India and Thailand. maintained a market-leading position with a strong product line-up
and extensive network of distribution partners. Sales were very
2010 was a year of robust commercial momentum for Insurance strong in 2010 and were boosted early in the year with the launch
Asia/Pacific driven by brisk sales in Japan, Hong Kong, Malaysia, of a new COLI cancer product and further supported by a new
and from KB Life in Korea and ING-BoB Life in China. This was COLI increasing term product in the fourth quarter. ING will explore
driven by the introduction of new products and successful opportunities to expand its product offering in this market and
bancassurance partnerships. plans to revive distribution relationships with a selected number of
Japanese financial institutions to boost sales.
ING concentrates on markets expected to show strong growth.
Growth in the region is based on higher levels of income and Strong performance in Hong Kong was driven by robust new sales
greater demand for wealth protection. Changing demographics is of endowment products Easy Grow and Easy Builder, both
also a major growth driver where the rising number of middle age launched during the first half of 2010, coupled with success in the
and retired people are expected to boost demand for savings, bancassurance channel. New sales were up 51% year on year,
retirement and health products and services. excluding FX, and the bank distribution channel contributed 41%
of new sales compared with 23% in the previous year.
Capturing growth
In 2010, ING focused on capturing growth by strengthening Greenfields in Rest of Asia
preferred banking partnerships, enhancing tied agency productivity In Thailand, ING’s bancassurance relationship with TMB Bank
and diversifying its product mix through new sales campaigns and remained the key driver of growth. Further work was done to
product innovation. improve productivity in the tied agency channel.

In Asia/Pacific, ING sells insurance and wealth management ING Life in India continued to strengthen its partnership with
products mainly through its extensive tied agency force, but also ING Vysya Bank to benefit from the bank’s rapid branch expansion.
has access to customers through a number of preferred bank ING is most active in the four southern states of India.
partnerships. Sales are also made through direct marketing and
independent agents. There are 20,371 tied agents, more than In China, ING focused on its insurance joint venture with
Beijing Capital Group, ING Capital Life, after a strategic review of its

50 ING Group Annual Report 2010

 Report of the Executive Board 2

Insurance continued

operations in the country in 2009. The joint venture sells individual

and group life insurance to residents of Liaoning, Anhui, Henan and
Shandong provinces and the Beijing municipality. The business
continued to show high-growth potential, especially in retirement
services and education savings products. On 1 July, Bank of Beijing
replaced Beijing Capital Group as ING’s joint venture partner by
acquiring a 50% stake and the joint venture was renamed
ING - BoB Life. Through this business, ING seeks to strengthen
its presence in the insurance business in China.

CONCLUSIONS AND AMBITIONS

Insurance Asia/Pacific has an extensive presence in life insurance
and retirement services in the region. The company is committed
to maintaining commercial momentum with a view to being a part
of a successful European-led IPO of ING’s insurance businesses
by 2013.

The business will continue to seek growth through its preferred

banking partnerships and by further professionalising the agency
force to become the tied agency company of choice for agents.

ING Group Annual Report 2010 51

2 Report of the Executive Board

Investment management
> AuM of EUR 387 billion, making ING IM one FINANCIAL DEVELOPMENTS
of the top-25 asset managers in the world Assets under management (AuM) increased by 12.8% or
EUR 43.8 billion to EUR 387 billion at year-end 2010. Foreign
> 72% of AuM performed above benchmark exchange impact and market performance were responsible for
> Moved to skills-based multi-boutique structure EUR 23.1 billion and EUR 24.6 billion of the increase respectively.
There was a net outflow of EUR 3.7 billion as a result of
In 2010, ING Investment Management (ING IM) continued to EUR 125.5 billion of outflows and EUR 121.8 billion of inflows.
enhance its investment capabilities and pursued business
development opportunities by operating as a globally coordinated At year-end 2010, assets managed for retail clients increased
business. There was a continued focus on cost control, but the slightly to 39% from 37% of total AuM at year-end 2009.
emphasis remained on growing revenues and improving investment General account assets (proprietary) increased to 37% of total
performance. The business moved to pool its investment expertise AuM while the institutional clients segment decreased to 24%.
around the world and boost investment performance by The composition of fixed income, equity and money market
implementing a skills-based multi-boutique structure. Performance investments was 64%, 31% and 5% respectively of total AuM.
was strong with all asset classes (equity, fixed income, multi assets)
outperforming their respective aggregated benchmarks over the Underlying result before tax increased by EUR 4 million to
past 12 months. EUR 173 million in 2010 as a result of a EUR 30 million reduction
in negative revaluations in private equity investments and the
reversal of an impairment on assets in India (EUR 8 million),
which were offset by a EUR 35 million lower operating result.

The operating result fell by 17.4% to EUR 166 million as a

result of a EUR 174 million rise in administrative expenses and
a EUR 14 million reduction in the investment margin, which was
in total largely offset by EUR 153 million in higher fees and
premium-based revenues.

Fees and premium-based revenues increased by 20.6% or 15.8%

excluding currency effects to EUR 895 million. The 12.8% increase
in AuM was the main driver for these higher revenues, further
assisted by the introduction of a fixed service fee in the third
quarter which related to the transfer of funds to the Luxembourg
platform. As of the third quarter of 2010, expenses of these funds
were no longer recorded as negative fee income.

Administrative expenses grew by 31.2% from EUR 557 million

in the previous year. Comparisons with 2009 were impacted by
accrual adjustments, which reduced the expense level in the
fourth quarter of 2009 by EUR 33 million. Excluding these accrual
adjustments and currency effects, expenses rose 19.2% compared
with 2009. This increase was mainly due to the introduction of a
fixed service fee (EUR 17 million) and higher staff costs.

During 2010, ING IM continued to improve its investment

performance. The percentage of AuM performing above
benchmark on a one-year basis was 72% compared with 67%
at year-end 2009. With 75% of rated mutual funds awarded three
stars or more by ratings agency Morningstar, ING IM exceeded the
market standard of 68%. Over the last 12 months, all asset classes
(equity, fixed income, multi assets) outperformed their respective
aggregated benchmark.

BUSINESS DEVELOPMENTS
ING IM is the principal investment manager of ING Group. It helps
ING Group deliver on its strategy of helping customers to manage
their financial future. ING IM’s wide distribution reach and strong
and unique emerging markets presence, together with its scale in
fixed income, strong brand recognition and access to a global
network of ING channels continued to position ING IM well in
gaining new business as markets continued to recover in a volatile
year, marked by intense competition. All three regions – Europe,
Americas and Asia/Pacific – focused on delivering a wide range of

52 ING Group Annual Report 2010

 Report of the Executive Board 2

Investment management continued

investment strategies and services to ING’s global network On the retail front, ABN AMRO in the Netherlands began to
of businesses and third-party clients. distribute nine ING IM mutual funds. The former Fortis Bank
Nederland, now integrated with ABN AMRO, has offered
ING IM’s performance was very strong in all client categories: ING IM products for some time.
general account (ING Insurance), affiliated distribution
(business sold via ING channels) and third-party retail and As announced in 2009, ING IM outsourced the funds
institutional. For ING Insurance, ING IM contributed to an administration, custody and transfer agent functions of its
investment spread of 93 basis points based on a four-quarter Luxembourg fund range to Brown Brothers Harriman (BBH) in
rolling average compared to 83 basis points for the previous year. order to offer its unit holders a-best-in-class operational service.

FOCUS ON PERFORMANCE In 2010, ING IM took many initiatives to offer its clients a broad,
2010 marked the first year that the ING IM business was managed balanced and competitive fund range. The transition to BBH allows
as a separate business within ING Insurance/IM, recognising the ING IM to add other major benefits, including a fixed service fee,
importance of a strong local presence in regions and markets in shorter trading and settlement cycles, and the provision of more
Europe, the Americas and Asia/Pacific. hedged-share classes.

Combining all three businesses allowed for an enhanced, unified ING IM AMERICAS
strategy across the three regions and provided further synergy In 2010 ING IM Americas saw a successful transition to arm’s-
opportunities in distribution and sales as well as in manufacturing, length pricing for the ING Insurance General Account, along with
operations and administration. a deepening of the partnership with Insurance clients in managing
their portfolios, capital and liquidity needs.
ING IM concentrated mainly on improving performance across all
asset classes, delivering superior client service, enhancing risk The partnership with ING’s US Retirement business was further
management, exploiting synergies between the regional ING IM strengthened, highlighted by a tripling of Stable Value product
businesses, and upgrading systems and infrastructure. sales to USD 3.6 billion through the third quarter of the year.
There was also improved performance and growth in the ING IM
It strengthened partnerships with ING businesses and developed managed Target Date funds.
third-party business opportunities. The emphasis was on
accelerating the growth in revenues and assets under management, The strong track record in investment performance in US equities
working more cost efficiently and building a common culture and and fixed income continued. In fixed income, a new investment
set of values within the business. team, put in place in 2009, achieved a strong recovery in
performance, after a decline in 2008. In US equities, it was the sixth
In 2010, ING IM further sharpened its investment performance by consecutive year of good investment performance.
implementing a skills-based multi-boutique structure. Boutiques
pool the investment talent and skills of different regions into an A special distribution division was created to focus on capturing a
internationally coordinated investment team. This structure has larger share of fund business from ING affiliate businesses,
helped to deliver strong investment performance over the last one reflecting the importance of this business. Investments were made
and-a-half to two years. to enhance retail and institutional distribution and marketing teams.
ING IM Americas launched the ING Infrastructure, Industrials and
Various funds were launched for global sales. These funds included Materials Fund, a closed end fund, in January 2010.
the ING (L) Invest Renta Fund Europe High Yield (produced by the
Global Credit boutique), the ING (L) Invest Commodity Enhanced Latin America recorded another strong year of performance,
Fund and the ING (L) Invest Brazil Focus Fund. extending its solid track record in the mandatory pension market.
ING IM partnered ING’s insurance and pension businesses in the
In addition, ING IM established a single research platform, bringing roll-out of a wealth management platform. The global
together internal and external research and leveraging the best attractiveness of the region was reflected in the successful launch
research capabilities from across the regional businesses. of a new Latin America fund at ING IM Taiwan.

Fund ratings agency Morningstar awarded the ING Global ING IM ASIA/PACIFIC
Opportunities Fund the best worldwide large cap equity fund in six Despite ongoing global economic uncertainty, ING IM Asia/Pacific
countries: France, Austria, Spain, Singapore Hong Kong and the managed to book significant new and prestigious business. On the
Netherlands. The fund also won ‘Best global equity fund over a institutional side, numerous mandates were won by IM’s offices in
three-year period’ at the Thomson Reuter Lipper 2010 awards. Korea, Taiwan, Japan, Malaysia and Australia. Japan garnered an
Emerging Market Debt sub-advisor mandate of more than USD
ING IM EUROPE 1 billion from a major financial institution. On the retail front,
ING IM’s Institutional clients Netherlands division adjusted its sales Taiwan successfully launched a high yield bond fund of funds as well
focus in acknowledgement of the shift in the market from Defined as a Brazil fund, achieving USD 200 million and USD 150 million
Benefit to Defined Contribution pension funds, the consolidation of respectively during the initial funding period. India was very
pension funds and the shift from mandate-driven to solutions- successful in growing its Portfolio Management Service (PMS) book.
driven business.

ING Group Annual Report 2010 53

 2 Report of the Executive Board

Investment management continued

ING IM recorded a strong increase in the number of funds Report of the Executive Board
registered. There were 21 new funds registered in Korea. Four new The Corporate governance section starting on page 78 and the
funds were registered each in Hong Kong and Taiwan, and three paragraphs of the Remuneration report ‘Remuneration policy
were registered in Singapore. In 2010, many awards were won. for senior management’ and ‘Senior management remuneration
These included the AsianInvestor 2010 Investment Performance structure 2011’ on page 81 are incorporated by reference in this
Awards for institutional funds management in the category of Asia Report of the Executive Board.
fixed income; the Asia Asset Management Institutional Fund House
Taiwan 2009 Award; the ASEAN Most Innovative Investment AMSTERDAM, 14 MARCH 2011
Manager title in Malaysia – and the Asset Manager of the Year THE EXECUTIVE BOARD
2010 award in the Philippines by The Asset magazine.

In December, ING announced it had reached an agreement to sell

its investment management activities in the Philippines to The Bank
of the Philippine Islands (BPI). It is anticipated this will be completed
during the first quarter of 2011.

CONCLUSIONS AND AMBITIONS

ING IM is committed to becoming a top-tier performing investment
management business. ING IM has solid growth opportunities both
through affiliated ING channels and through retail and institutional
third-party business.

Over the year, ING IM has focused on enhancing its investment

capabilities. A skills-based multi-boutique structure has been
established and best practices in key functional areas have been
strengthened. As a result, ING IM has delivered strong investment
performance and made significant progress in building an
investment-led winning performance culture.

In November 2010, ING Group announced a revised base case of

two IPOs for separating its Insurance/Investment Management and
Banking businesses. This entails a US-focused IPO and a Europe-led
IPO for its Insurance/IM business, while keeping other options
open. In the two IPOs scenario, the Investment Management
businesses in the US and elsewhere will continue to operate in
partnership to ensure continued commercial collaboration and cross
-selling arrangements among the regional ING IM businesses. This
will also ensure continuity in terms of product development,
distribution, investment expertise and performance.

During this period of change, ING’s investment businesses will

remain focused on exceeding client expectations and on generating
superior returns for its clients.

54 ING Group Annual Report 2010

 Corporate governance 3

Report of the Supervisory Board

The Supervisory Board and the Executive Board met regularly in GENERAL
2010. The implications of the Restructuring Plan of the European SUPERVISORY BOARD MEETINGS
Commission as well as the strategy for the bank and the insurance/ The Supervisory Board met eight times in 2010. On average,
investment management operations following the separation were 95% of the Supervisory Board members were present. Apart from
important topics on the agenda. Committees of the Supervisory closely monitoring the financial results in 2010, the Supervisory
Board discussed a range of subjects on which the Supervisory Board also frequently discussed the preparation and progress of the
Board received advice, the main ones being the quarterly results, separation of the banking and the insurance operations as well as
risk management, corporate governance, the new remuneration the future repayment of the Dutch State. The strategy of banking
policy and human resources. and insurance and the development of the insurance business in
the US were also important topics on the agenda.

The Supervisory Board visited the main ING data centre during
its annual Supervisory Board Knowledge Day in January 2010.
The objective was to update the Supervisory Board members on
new technologies as well as the development and the future
strategic direction of the ING data centres. During the Knowledge
Day, the Supervisory Board was also updated on developments
concerning IFRS for financial instruments. In addition to the annual
Knowledge Day an Audit Committee Knowledge session took place
in March 2010. The Dutch central bank gave a presentation on
banking supervision during the Audit Committee Knowledge
session. Furthermore, several educational presentations on specific
topics were given to the Supervisory Board during the year.

Also in January 2010, the Supervisory Board held its annual full-day
meeting on ING’s strategy and the 2010 Financial Plan, including
the related risks. The Supervisory Board extensively discussed the
possible strategies for the coming three years focusing on customer
centricity, preparing for the separation of the banking and
insurance operations and on generating capital and cash flow to
repay the Dutch State. The ambitions for the new banking and
insurance organisation were also discussed as well as the Dutch
Banking Code. The Supervisory Board approved the 2010 Financial
Plan and ING’s strategic direction. The opportunity for appeal
against the decision of the European Commission regarding certain
elements in the Restructuring Plan was discussed and supported by
the Supervisory Board.

The 4Q 2009 and the 2009 annual figures were discussed in

February 2010, including the related reports from the internal and
external auditors and the assessment of the Executive Board of the
adequacy and effectiveness of ING’s risk management and control
systems. The Supervisory Board was informed about ING’s exposure
to the sovereign debt of Southern European countries and was
updated on management’s vision of ING’s real estate exposure. The
draft agenda of the annual General Meeting was discussed and
approved. An important topic was the discussion on the ING Trust
Office. The Supervisory Board took note of investor feedback on
ING’s performance over 2009.

The successive quarterly figures of 2010 were discussed in May,

August and November, respectively. The Annual Accounts and the
SOX 404 sign-off were approved in March. The 2010 General
Meeting was evaluated in May. The Supervisory Board was updated
on the status of the separation of the banking and insurance
operations, including the most complex separation issues and the
costs of separation, in almost every meeting. Various scenarios to
pay back the Dutch State in the future were reviewed. In line with
the regular review programme TMB Bank, Santander pension and
annuity business in Latin America, Citistreet as well as Interhyp AG,

ING Group Annual Report 2010 55

3 Corporate governance

Report of the Supervisory Board continued

were reviewed in the year as three years had passed since Board made several suggestions regarding strategic discussions,
acquisition of these entities. the earlier distribution of financial information and educational
topics. The Supervisory Board also discussed the functioning of
In May, the Supervisory Board was updated on the development the Executive and Management Boards.
of the bank strategy following separation and discussed the
five-year financial plan for insurance. Taking into account the AUDIT COMMITTEE MEETINGS
uncertain outlook for the real estate market the Supervisory Board In 2010, the Audit Committee met five times, with no absentees,
reviewed possible measures regarding ING’s real estate exposure. to discuss the annual and quarterly results and the annual US GAAP
results. The development of the insurance results, the real estate
In June, the turbulence in the eurozone was tabled for the exposure and cost development within ING, as well as
Supervisory Board meeting and possible consequences for ING in a management actions concerned, were discussed several times
number of potential scenarios were discussed. Group HR presented during the year.
an update of Leadership development within ING. Several senior
managers and talents were introduced to the Supervisory Board In the second half of the year, the exposure of ING in Greece and
during a number of dinners with the Supervisory Board, other Southern European countries, including Spain, was a topic of
the Executive Board and the Management Boards frequent debate. The Audit Committee was regularly updated on
Banking and Insurance. the capital position of the bank and insurance business as well as
on the developments regarding the Solvency II and Basel III
In August, the Supervisory Board was informed in detail about the regulations. After the summer an extensive discussion took place
developments of the insurance business in the US including possible on the development of the insurance business in the US, focusing
measures to be taken. A discussion took place on ING’s corporate on the Variable Annuities business and the accounting method for
responsibility policy and the implementation of ING’s Business insurance in the US. In November a number of measures to mitigate
Principles within the business also in light of the Corporate the issues at ING Insurance US were presented to the Audit
Governance Code. The Supervisory Board was updated on the Committee. Other topics discussed in the meetings were capital
effect of the new Basel III regulation on the core Tier 1 ratio management, internal control and regulatory matters.
and on the implementation of the Solvency II regulations.
RISK COMMITTEE MEETINGS
In September, the Supervisory Board visited ING Belgium in The Risk Committee met four times with no absentees. In each Risk
Brussels. During this visit the Supervisory Board was informed Committee meeting the financial risk reports for Banking, Insurance
extensively on the activities of ING in Belgium and exchanged ideas and Group and the non-financial risk reports for banking and
on ING Belgium in a joint meeting with the Supervisory Board of insurance were discussed. Management reported on the outcome
ING Belgium. Furthermore the Supervisory Board was updated on of stress tests for banking and insurance. In May an extensive
the performance of the insurance business and on the discussion took place on the eurozone turmoil and the possible
developments regarding the Basel III and Solvency II risks for ING. The Risk Committee closely monitored the effect of
regulations and the implementation within ING. the non-financial risk mitigating activities during the year. Each
meeting ended with a general discussion on possible future risks.
Given the underlying result of ING Insurance US over the third
quarter which was affected by various non-operating impacts, NOMINATION COMMITTEE MEETINGS
management presented several measures to the Supervisory Board The Nomination Committee met once with one absentee in 2010,
in November to mitigate the issues in the US. Furthermore, the to discuss the future composition of the Supervisory Board and its
Supervisory Board supported the choice of a divestment strategy committees as well as the succession planning of the Executive
base case of a European-led IPO and a US-focused IPO. In Board and the Management Boards. The Nomination Committee
November, the implementation of the strategy for the bank was advised positively on a number of Supervisory Board candidates for
presented to the Supervisory Board as well as the implementation appointment in the 2011 annual General Meeting. The Nomination
of the Dutch Banking Code. Committee discussed various appointments in the Management
Boards Banking and Insurance which were publicly announced
During the internal meetings of the Supervisory Board (Supervisory in November.
Board meetings in most cases with the CEO present), the
Supervisory Board approved the proposed new remuneration policy REMUNERATION COMMITTEE MEETINGS
on the basis of the Dutch Banking Code. The Executive Board 2009 The Remuneration Committee met four times in 2010.
performance assessments and performance objectives for 2010 Two members were absent once at the Remuneration Committee
were also approved. The possible consequences of the new EU meetings. The first two meetings focused on finalising the new
Capital Requirements Directive (CRD III) for the new ING remuneration policy based on the Dutch Banking Code.
compensation policy were a topic of discussion later in the year. An independent external adviser assisted the Remuneration
The succession planning for the Executive Board positions was also Committee in assessing the new remuneration policy. In February,
discussed in a number of internal Supervisory Board meetings. In the 2009 performance of the individual Executive Board and
November, the Supervisory Board discussed the proposed Management Board members was discussed on the basis of
candidates for the Management Board Insurance and the the Group performance criteria and the individual targets.
Management Board Banking as well as the compensation proposals The proposed 2010 performance objectives for the Executive Board
for these candidates. The outcome of the annual Supervisory Board and the Management Boards were decided upon as well. In April,
self-assessment through a questionnaire was reviewed by the the Remuneration Committee advised positively on the adjusted
Supervisory Board in a meeting with only the Supervisory Board remuneration policy for senior management. In November,
members present. To improve its functioning, the Supervisory the Remuneration Committee discussed the possible impact of

56 ING Group Annual Report 2010

 Corporate governance 3

Report of the Supervisory Board continued

the new EU Capital Requirements Directive for the Resignation of Jackson Tai

ING Executive Board remuneration policy which was
approved in the 2010 annual General Meeting. Jackson Tai was appointed to the Supervisory Board on 22 April
2008. He became chairman of the Audit Committee as of May
CORPORATE GOVERNANCE COMMITTEE MEETINGS 2009. Jackson stepped down from the Supervisory Board in order
The Corporate Governance Committee met three times and one to avoid any conflicts of interest given the proposal by Bank of
member was absent once. The Corporate Governance Committee China to appoint Jackson Tai as one of its non-executive directors.
discussed the implementation of the Dutch Banking Code in
January and the agenda for the 2010 annual General Meeting, Jackson’s chairmanship of the Audit Committee has been a big
including the request for approval of the implementation of the benefit to ING. His extensive experience in the financial industry
revised Dutch Corporate Governance Code in February. as well as his international perspective was of great importance
The Committee continued its discussions on the position of the during his chairmanship. His financial expertise is outstanding and
ING Trust Office. In November, the governance of to-be-divested the members of the Supervisory Board and the Management
units, in the context of the Restructuring Plan of the European Boards valued his opinion very much. They would like to thank
Commission and the implementation of the Dutch Banking Code him for his large commitment and contribution to ING during
were tabled for discussion. the past years.

COMPOSITION OF THE EXECUTIVE BOARD AND THE Resignation of Godfried van der Lugt
MANAGEMENT BOARDS
In mid-2009, separate Banking and Insurance Boards were Godfried van der Lugt joined the Supervisory Board in 2001. He
introduced to simplify the governance structure and to further became a member of the Audit Committee in November 2005
increase business focus. Jan Hommen, Patrick Flynn and and a member of the Risk Committee in August 2009. He was
Koos Timmermans remained members of the Executive Board scheduled to retire from the Supervisory Board after the annual
while also becoming members of the Management Boards Banking General Meeting in May, having agreed to stay on for one more
and Insurance. Eric Boyer de la Giroday, Eli Leenaars and Hans van year at the request of ING, considering his banking experience
der Noordaa became members of the Management Board Banking. and ING background as well as the requirements of the Dutch
Tom McInerney and Matthew Rider (as of 1 January 2010) became Banking Code. For personal reasons Godfried van der Lugt
members of the Management Board Insurance. As of 1 January resigned from the Supervisory Board as of 24 January 2011.
2011, William Connelly was appointed as CEO of Commercial
Banking and member of the Management Board Banking, With his background, Godfried van der Lugt made an important
succeeding Eric Boyer who continued in his role as vice-chairman of contribution to the discussions in the Supervisory Board, the Audit
the Management Board Banking. As of 1 January 2011, Lard Friese Committee and the Risk Committee. His extensive experience in
was appointed to the Management Board Insurance with the financial industry and his awareness of the historic perspective
responsibility for the Benelux, Central and Rest of Europe and were of great value. The members of the Supervisory Board, the
Asia/Pacific. Gilbert Van Hassel was appointed to the Management Executive Board and the Management Boards greatly valued his
Board Insurance as of 1 January 2011 with responsibility for ING opinion in the decision-making and would like to thank him for
Investment Management. In light of the developments described his strong personal contribution.
above, Tom McInerney stepped down from his positions as chief
operating officer Insurance and member of the Management Retirement of Claus Dieter Hoffmann
Board Insurance as of 1 January 2011.
Upon his request, Claus Dieter Hoffmann will not be nominated
COMPOSITION OF THE SUPERVISORY BOARD for reappointment taking into account that he will reach the age of
Piet Hoogendoorn, Harish Manwani and Karel Vuursteen did not 70 in 2012. Claus Dieter Hoffmann was appointed as a member of
apply for reappointment and retired from the Supervisory Board the Supervisory Board and the Audit Committee in 2003. He
and the relevant Supervisory Board committees following the stepped down from the Audit Committee and joined the
General Meeting in April 2010. No new members were appointed Corporate Governance Committee in January 2008 and became a
to the Supervisory Board in 2010. Jackson Tai resigned from the member of the Risk Committee in August 2009.
Supervisory Board as of 6 January 2011. Godfried van der Lugt
resigned from the Supervisory Board as of 24 January 2011. The Claus Dieter Hoffmann contributed substantially to the Supervisory
composition of the Supervisory Board committees did not change Board, the Audit Committee and later to the Corporate
other than mentioned. Governance Committee and the Risk Committee because of
his knowledge of fundamental management and business topics.
Claus Dieter Hoffmann will not apply for reappointment for one His insight into German and European matters has been of great
year and will retire from the Supervisory Board after the annual value to ING. The members of the Supervisory Board, the
General Meeting in May 2011. The Supervisory Board has Executive Board and the Management Boards would like to thank
nominated three candidates for appointment: Sjoerd van Keulen, him for his large commitment to ING during the past eight years.
Joost Kuiper and Luc Vandewalle. For the proposed appointments
approval has been obtained from the Dutch central bank.

Information on the members of the Supervisory Board is

provided on page 68–69.

ING Group Annual Report 2010 57

3 Corporate governance

Report of the Supervisory Board continued

ANNUAL ACCOUNTS AND DIVIDEND

The Executive Board has prepared the annual accounts and
discussed these with the Supervisory Board. The annual accounts
will be submitted for adoption at the 2011 General Meeting as part
of the Annual Report. ING will not propose to pay a dividend over
2010 at the annual General Meeting.

APPRECIATION FOR THE EXECUTIVE BOARD

AND ING EMPLOYEES
The Supervisory Board would like to thank the members of the
Executive Board and the two Management Boards for their
continuing hard work in 2010. Next to improving the results for the
banking and the insurance businesses, the work of the Executive
Board and the two Management Boards also focused on improving
the image of ING within society, improving the services to clients,
developing the new strategy and preparation of the operational
separation of the banking and insurance organisation. The
Supervisory Board would also like to thank all employees of ING
who have continued to serve the interests of the customers, the
shareholders and other stakeholders of ING, and have shown
continued commitment in the past year.

ADDITIONAL INFORMATION
For additional information, see the section on Corporate
governance (pages 59–70) and the Remuneration report (pages
78–85), which are deemed to be incorporated by reference here.

AMSTERDAM, 14 MARCH 2011

THE SUPERVISORY BOARD

58 ING Group Annual Report 2010

 Corporate governance 3

Corporate governance
This section discusses the application by ING Groep N.V. RECENT DEVELOPMENTS
(‘ING Group’) of the Dutch Corporate Governance Code effective LEGISLATIVE AND REGULATORY DEVELOPMENTS
as from 1 January 2009 (‘Corporate Governance Code’) and On 1 January 2010, the Dutch Banking Code (Code Banken)
provides information on the share capital and control, the became effective. For more information, please refer to the
Executive Board, the Supervisory Board and the external auditor. paragraph ‘Corporate Governance Codes’ below.
This section, including the parts of this Annual Report incorporated
by reference, together with the separate publication ‘ING’s On 1 July 2010, the bill on shareholders’ rights
implementation of the Dutch Corporate Governance Code’ dated (wet aandeelhoudersrechten) came into force. The relevant
April 2010, on the website of the Company (www.ing.com), also provisions of this bill will apply for the first time at the 2011
serves as the ‘corporate governance statement’ referred to in annual General Meeting.
section 2a of the Decree with respect to the contents of the annual
report (Besluit tot vaststelling van nadere voorschriften omtrent In addition, several legislative proposals are under discussion in or
de inhoud van het jaarverslag)(1). were adopted in 2010 by the Lower House of the Dutch Parliament,
or are under discussion in the Upper House of the Dutch
Parliament. It concerns, among other things, the bill on revision and
claw back of executive bonuses and profit-sharing of directors
(wetsvoorstel aanpassing en terugvordering van bonussen en
winstdelingen van bestuurders en dagelijks beleidsbepalers en
deskundigheidstoetsing van commissarissen) and the bill on
management and supervision (wetsvoorstel aanpassing regels over
bestuur en toezicht in naamloze en besloten vennootschappen).
If enacted, these legislative proposals may affect ING Group.

TRANSACTIONS WITH THE DUTCH STATE

On 12 November 2008, ING Group issued one billion core
Tier 1 securities (‘Securities) for a total consideration of EUR 10
billion to the Dutch State. Following the repurchase of 500 million
Securities on 21 December 2009, another 500 million of Securities
representing EUR 5 billion remain outstanding. The Securities do
not form part of ING Group’s share capital; accordingly they do
not carry voting rights in the General Meeting. The financial
entitlements of the Securities are described in note 33 to the
consolidated annual accounts.

On 26 January 2009, ING Group reached an agreement with the

Dutch State regarding the Illiquid Assets Back-up Facility (‘IABF’),
as further described in note 33 to the consolidated annual
accounts. During 2009, ING Bank N.V. issued various series of
debt instruments under the 2008 Credit Guarantee Scheme of
the Dutch State (‘Bonds’), for the first time on 30 January 2009.

As part of these transactions, certain arrangements with respect

to corporate governance and remuneration were agreed with the
Dutch State which will remain in place as long as the Dutch State
owns at least 250 million Securities, as long as the IABF remains in
place or any of the Bonds is outstanding (whichever expires last).

These arrangements entail that the Dutch State may recommend

two candidates (‘State Nominees’) for appointment to the
Supervisory Board. Certain decisions of the Supervisory Board
require approval of the State Nominees (these decisions are
specified in the section on the Supervisory Board on page 66).
Furthermore, in line with these arrangements a sustainable
remuneration policy for the Executive Board and Senior
Management was introduced in 2010, which continues certain
specific arrangements in relation to the remuneration of members
of the Executive Board.

For more information on the State Nominees, please refer to the

section on the Supervisory Board; for more information on ING’s
remuneration policy, please refer to the Remuneration report,
starting on page 78.
(1)
Dutch Bulletin of Acts (Staatsblad) 2009, 154.

ING Group Annual Report 2010 59

3 Corporate governance

Corporate governance continued

SHAREHOLDER PARTICIPATION AND POSITION OF ING DIFFERENCES BETWEEN DUTCH AND US CORPORATE
TRUST OFFICE (STICHTING ING AANDELEN) GOVERNANCE PRACTICES
During the years 2007–2010, participation of shareholders, In conformity with regulation from the US Securities and Exchange
excluding the ING Trust Office, and depositary-receipt holders in Commission, ING Group as a foreign private issuer whose securities
annual General Meetings consistently increased from 36.7% to are listed on the New York Stock Exchange (‘NYSE’) must disclose in
41.3%. Only the extraordinary General Meeting of 25 November its Annual Report on Form 20-F any significant differences between
2009 showed a deviation from this trend with a markedly lower its corporate governance practices and those applicable to US
turnout of 31.1%. domestic companies under the NYSE listing standards.

In view of the above, the Executive Board and the Supervisory ING Group believes the following to be the significant differences
Board evaluated the position of the ING Trust Office and ING between its corporate governance practices and NYSE corporate
Group’s depositary-receipts structure, the outcome of which was governance rules applicable to US companies:
discussed in the 2010 annual General Meeting. On the basis of • ING Group has a two-tier board structure, in contrast to the
this evaluation, the Executive Board and the Supervisory Board one-tier board structure used by most US companies. In the
concluded that it would be premature to change or abolish ING Netherlands, a public limited liability company (naamloze
Group’s depositary-receipts structure in 2010 and that it would be vennootschap) has an Executive Board as its management body
more appropriate to reconsider this as part of a re-evaluation of and a Supervisory Board which advises and supervises the
ING Group’s entire governance structure following the current Executive Board. In general, members of the Executive Board
restructuring of ING Group and the completion of the divestments are employees of the company while members of the
approved in the 2009 extraordinary General Meeting. Supervisory Board are often former state or business leaders and
sometimes former members of the Executive Board. Members of
CORPORATE GOVERNANCE CODES the Executive Board and other officers and employees cannot
COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE simultaneously be a member of the Supervisory Board. The
For its corporate governance structure and practices, ING Group Supervisory Board must approve specified decisions of the
uses the Corporate Governance Code as reference. The Corporate Executive Board. Under the Corporate Governance Code, all
Governance Code can be downloaded from the website of the members of the Supervisory Board with the exception of not
Monitoring Commission Dutch Corporate Governance Code (www. more than one person, must be independent. All members of
commissiecorporategovernance.nl/Corporate_Governance_Code). ING Group’s Supervisory Board are independent within the
The application of the Corporate Governance Code in 2010 is meaning of the Corporate Governance Code. The definitions of
described in the publication ‘ING’s implementation of the Dutch independence under the Corporate Governance Code, however,
Corporate Governance Code’, dated April 2010, on the website of differ in their details from the definitions of independence under
the Company (www.ing.com), which is to be read in conjunction the NYSE listing standards. In some cases the Dutch
with this section and is deemed to be incorporated into this section. requirements are stricter and in other cases the NYSE listing
standards are the stricter of the two. The Audit Committee, Risk
DUTCH BANKING CODE Committee, Remuneration Committee, Nomination Committee
The Banking Code is applicable to ING Bank N.V. and not to ING and Corporate Governance Committee of ING Group are
Group. The Banking Code can be downloaded from the website of comprised of members of the Supervisory Board.
the Dutch Banking Association (www.nvb.nl). The principles of the • In contrast to the Sarbanes-Oxley Act of 2002, the Corporate
Banking Code as a whole are considered as a reference by ING Governance Code contains an ‘apply-or-explain’ principle,
Bank N.V. and their application is described in the publication offering the possibility to deviate from the Corporate
‘Application of the Dutch Banking Code by ING Bank N.V.’ on the Governance Code as long as any such deviations are explained.
website of the Company (www.ing.com). To the extent that such deviations are approved by the General
Meeting, the company is deemed to be in full compliance with
However, ING Group voluntarily applies the principles of the the Corporate Governance Code.
Banking Code regarding remuneration with respect to the • Dutch law requires that the company’s external auditors
members of its Executive Board, and considers these principles as a be appointed at the general meeting and not by the
reference for its own corporate governance. ING Group’s Audit Committee.
remuneration policy for the Executive Board and Senior • The articles of association of ING Group (‘Articles of
Management is in agreement with these principles. The remaining Association’) provide that there are no quorum requirements
principles of the Banking Code are not considered as a reference for to hold a general meeting, although certain shareholder actions
ING Group’s own corporate governance, although the application and certain resolutions may require a quorum.
thereof by ING Bank N.V. and its subsidiaries will be reflected to a • The shareholder approval requirements for equity compensation
certain extent in ING Group’s own corporate governance structure plans under Dutch law and the Corporate Governance Code
and corporate governance practices. differ from those applicable to US companies which are subject
to the NYSE’s listing rules. Under Dutch company law and the
Corporate Governance Code, shareholder approval is only
required for equity compensation plans (or changes thereto) for
members of the Executive Board and Supervisory Board, and not
for equity compensation plans for other groups of employees.

60 ING Group Annual Report 2010

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CAPITAL AND SHARES ISSUANCE OF SHARES

CAPITAL STRUCTURE, SHARES ING Group’s authorised capital is the maximum amount of capital
The authorised capital of ING Group consists of ordinary shares allowed to be issued under the terms of the Articles of Association.
and cumulative preference shares. Currently, only ordinary shares New shares in excess of this amount can only be issued if the
are issued, while a call option to acquire cumulative preference Articles of Association are amended. For reasons of flexibility,
shares has been granted to ING Continuity Foundation (Stichting ING Group seeks to set the authorised capital in the
Continuïteit ING). The acquisition of cumulative preference shares Articles of Association at the highest level permitted by
pursuant to the call option is subject to the restriction that, law again in the future.
immediately after the issue of cumulative preference shares, the
total amount of cumulative preference shares outstanding may not Share issues are to be decided by the General Meeting, which may
exceed one-third of the total issued share capital of ING Group (see also delegate its authority. Each year, the General Meeting is asked
page 74). The purpose of the call option is to protect the to delegate authority to the Executive Board to issue new ordinary
independence, the continuity and the identity of ING Group against shares or to grant rights to subscribe for new ordinary shares, both
influences which are contrary to the interests of ING Group, its with and without pre-emptive rights for existing shareholders. The
enterprise and the enterprises of its subsidiaries and all stakeholders powers delegated to the Executive Board are limited:
(including, but not limited to, hostile takeovers). The ordinary shares • in time: powers are delegated for a period of 18 months;
are used solely for funding purposes. The ordinary shares, which • by number: insofar sufficient unissued ordinary shares are
are all registered shares, are not listed on a stock exchange. available in the authorised capital, ordinary shares may be issued
up to a maximum of 10% of the issued share capital, or, in the
The Board of ING Continuity Foundation currently comprises four event of a merger or takeover, 20% of the issued capital; and
members who are independent of ING Group. No Executive Board • in terms of control: resolutions by the Executive Board to issue
members or former Executive Board members, Supervisory Board shares require the approval of the Supervisory Board.
members or former Supervisory Board members, ING Group Approval by the General Meeting would be required for any
employees or former ING Group employees or permanent advisors share issues exceeding these limits.
or former permanent advisors are on the Board of ING Continuity
Foundation. The Board of ING Continuity Foundation appoints its The purpose of this delegation of authority is to allow the Company
own members, after consultation with the Supervisory Board to respond promptly to developments in the financial markets. If
of ING Group, but without any requirement for approval by the Company wishes to issue new shares, conditions in the financial
ING Group. markets may have changed during the time needed for convening a
general meeting, especially as the statutory convocation period was
For more information on ING Continuity Foundation, see page 74. recently extended to 42 days. As a result hereof the Company may
not be in a position to take advantage of optimal conditions.
DEPOSITARY RECEIPTS Therefore, it is preferable to delegate the power to issue shares to
More than 99.9% of the issued ordinary shares are held by ING the Executive Board, subject to the approval of the Supervisory
Trust Office. In exchange for these shares, ING Trust Office has Board, as it can respond more rapidly to market developments.
issued depositary receipts in bearer form for these shares. The In view of the importance of flexibility with respect to the issue of
depositary receipts are listed on various stock exchanges (see page shares, the Executive Board and the Supervisory Board will
10 for an overview of the listings). Depositary receipts can be periodically evaluate the delegation of authority to issue shares and,
exchanged upon request of the holders of depositary receipts for if necessary, make adjusted proposals to the General Meeting.
non-listed ordinary shares, without any restriction, other than Following such an evaluation, it will be proposed to the 2011
payment of an administrative fee of one eurocent (EUR 0.01) per annual General Meeting to authorise also the issue of ordinary
depositary receipt with a minimum of twenty-five euro (EUR 25.00) shares up to 20% of the issued share capital if this is necessary
per exchange transaction. to protect or to conserve the capital position of the Company.

The holder of a depositary receipt is entitled to receive from ING TRANSFER OF SHARES AND DEPOSITARY RECEIPTS AND
Trust Office payment of dividends and other distributions TRANSFER RESTRICTIONS
corresponding to the dividends and other distributions received by Shares are transferred by means of a deed of transfer between
ING Trust Office on an ordinary share. the transferor and the transferee. To become effective, ING Group
has to acknowledge the transfer, unless ING Group itself is a party
The Board of ING Trust Office currently comprises four members to the transfer. The Articles of Association do not restrict the
who are independent of ING Group. No Executive Board members transfer of ordinary shares, whereas the transfer of cumulative
or former Executive Board members, Supervisory Board members preference shares is subject to prior approval of the Executive
or former Supervisory Board members, ING Group employees or Board. The Articles of Association and the trust conditions for
former ING Group employees or permanent advisors or former registered shares in the share capital of ING Group (‘Trust
permanent advisors are on the Board of ING Trust Office. The Conditions’) do not restrict the transfer of depositary receipts for
Board of ING Trust Office appoints its own members, without any shares. ING Group is not aware of the existence of any agreement
requirement for approval by ING Group. pursuant to which the transfer of ordinary shares or depositary
receipts for such shares is restricted.
The Board of ING Trust Office reports on its activities through an
annual report, which has been included on pages 71–73.

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REPURCHASE OF SHARES ING Group publishes a comprehensive quarterly disclosure package

ING Group may repurchase outstanding shares and depositary which includes extensive and detailed financial figures with relevant
receipts for such shares. Although the power to repurchase shares explanatory remarks. This information is discussed thoroughly
and depositary receipts for shares is vested in the Executive Board during press and analyst and investor conference calls on the day
subject to the approval of the Supervisory Board, prior of the earnings release, which are broadly accessible to interested
authorisation from the General Meeting is required for these parties. The publication dates of quarterly earnings releases are
repurchases. Under Dutch law, this authorisation lapses after announced in advance on ING Group’s corporate website
18 months. Each year, the General Meeting is asked to approve (www.ing.com).
the Executive Board’s authority to repurchase shares.
ING Group hosts one or two Investor Relations Days each year and
When repurchasing shares, the Executive Board is to observe the participates in several industry conferences. These events are
price ranges prescribed in the authorisation. For the ordinary shares announced in advance on the company website, and presentation
and depositary receipts for such shares, the authorisation currently materials are made available in real time on the website. This is in
in force stipulates a minimum price of one eurocent and a accordance with the requirement to ensure that all shareholders
maximum price equal to the highest stock price on Euronext and other market participants may have equal and simultaneous
Amsterdam by NYSE Euronext on the date on which the access to information that could potentially influence the price of
purchase agreement is concluded or on the preceding day the company’s securities. ING Group’s Investor Relations Days can
of stock market trading. be accessed by means of live webcasts or telephone conferencing.
All Investor Relations Days and conferences in which ING Group
SPECIAL RIGHTS OF CONTROL participates do not take place shortly before the publication of
No special rights of control referred to in Article 10 of the quarterly financial information.
EU Directive on takeover bids are attached to any share.
ING Group strives to maintain an open and constructive dialogue
SHAREHOLDERS’ STRUCTURE with current and potential investors, and with industry analysts.
Pursuant to the Dutch Financial Supervision Act, any person who, The scope of such bilateral communication may range from single
directly or indirectly, acquires or disposes of an interest in the voting investor queries via e-mail, to more elaborate discussions with
rights and/or the capital of ING Group as a result of which analysts or institutional investors that take place via telephone or
acquisition or disposal the percentage of his voting rights or capital face-to-face. These meetings are not announced in advance, nor
interest, whether through ownership of shares, depositary receipts, can they be followed by webcast or any other means. ING Group’s
American depositary shares, options or warrants, reaches, exceeds Investor Relations department is the main point of contact for these
or falls below 5%, 10%, 15%, 20%, 25%, 30%, 40%, 50%, 60%, communications. However, Executive Board members also
75% or 95%, is required to notify in writing the Dutch Authority participate in investor meetings. Information provided during such
for the Financial Markets (Autoriteit Financiële Markten) occasions is always limited to that which is already in the public
immediately after the acquisition or disposal of the triggering domain, and any bilateral contacts do not take place shortly before
interest in ING Group’s share capital. publication of the regular quarterly results releases.

Details of investors, if any, who have reported their interest in ING In the event that non-public price sensitive information is
Group pursuant to the Dutch Financial Supervision Act (Wet op het inadvertently disclosed during any bilateral contacts, ING Group
financieel toezicht) (or the predecessor of this legislation) are shown will publicly announce such information as soon as possible.
on page 10. ING Group is not aware of shareholders, potential
shareholders or investors with an interest of 5% or more in ING Group may decide not to accommodate or accept any request
ING Group other than the ING Trust Office and the or invitation for entering into a dialogue with (potential) investors.
ING Continuity Foundation. In considering any such invitation or request, ING Group may
request disclosure of the interests in the capital of ING Group held
INVESTOR RELATIONS AND BILATERAL CONTACTS by the person(s) seeking to enter into a dialogue with ING Group
WITH INVESTORS and a substantiation and explanation of their intentions with
ING Group encourages and recognises the importance of bilateral respect to their interests in ING Group.
communication with the investment community. Communications
with current and potential shareholders, depositary receipt holders, ING Group is actively covered by approximately 25 analysts who
bondholders, and industry analysts is actively managed by the frequently issue reports on the company. A list of these analysts
Investor Relations department. can be found within the Investor Relations section of the
company website.
ING Group strives to provide clear, accurate and timely financial
information that is in strict compliance with the applicable rules and During 2010, ING Group did not provide any form of compensation
regulations, in particular those concerning selective disclosure, price to parties that are directly or indirectly involved with the production
sensitive information and equal treatment. In addition to the annual or publication of analysts’ reports, with the exception of
General Meeting, ING Group communicates with its shareholders credit-rating agencies.
and the investment community through earnings announcements,
presentations, and meetings with analysts or investors. In 2010, ING Group hosted one Investor Day in April, and presented
at six industry conferences throughout the course of the year. In
total, there were approximately 275 meetings with institutional
investors and/or analysts, which took place in 22 different cities.
The geographical distribution of ING Group’s investor base is

62 ING Group Annual Report 2010

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diverse – an estimated 38% of shares outstanding are held in to attend the general meeting and to exercise other rights related
the US, 33% in the Benelux, 17% in the UK, 7% in Switzerland to the general meeting in question on the basis of their holding at
and 5% in the rest of the world. Please refer to the ‘ING share’ the record date, notwithstanding a subsequent sale or purchase of
chapter for more details. shares or depositary receipts for shares. The record date is
published in the notice for the general meeting. In accordance with
GENERAL MEETING US requirements, the depositary sets a record date for the
FREQUENCY, NOTICE AND AGENDA OF GENERAL MEETINGS American Depositary Shares (‘ADSs’), which date determines which
General meetings are normally held each year in April or May, ADSs are entitled to give voting instructions. This record date can
to discuss the course of business in the preceding financial year on differ from the record date set by ING Group for shareholders and
the basis of the reports prepared by the Executive Board and the holders of depositary receipts.
Supervisory Board, and to decide on the distribution of dividends or
other distributions, the appointment and/or reappointment of ATTENDING GENERAL MEETINGS
members of the Executive Board and the Supervisory Board (if any), For logistical reasons, attendance at a general meeting by
other items requiring shareholder approval under Dutch law, and shareholders and holders of depositary receipts, either in person or
any other matters proposed by the Supervisory Board, the Executive by proxy, is subject to the requirement that ING Group is notified in
Board or shareholders or holders of depositary receipts in advance. Instructions to that effect are included in the notice for
accordance with the Articles of Association. the general meeting.

Meetings are convened by public notice via the website of ING General meetings are webcasted via the Company’s website
Group (www.ing.com) no later than on the forty-second day before (www.ing.com), so that shareholders and holders of depositary
the day of the general meeting. As of the date of convening a receipts who do not attend the general meeting in person, may
general meeting, all information relevant for shareholders and nevertheless follow the course of affairs in the meeting by
holders of depositary receipts is made available to them on this internet webcast.
website and at the ING Group head office.
VOTING RIGHTS ON SHARES
This information includes the notice for the general meeting, the Each share entitles the holder to cast one vote at the general
agenda, the place and time of the meeting, the address of the meeting. The Articles of Association do not restrict the voting
website of ING Group, the verbatim text of the proposals with an rights on any class of shares. ING Group is not aware of any
explanation and instructions on how to participate in the meeting agreement pursuant to which voting rights on any class of its
(either in person or by proxy), as well as the reports of the Executive shares are restricted.
Board and the Supervisory Board. More complex proposals such as
amendments to the Articles of Association are normally not VOTING ON THE ORDINARY SHARES BY HOLDERS OF
included in the notice but are made available separately on the DEPOSITARY RECEIPTS AS PROXY OF ING TRUST OFFICE
website of ING Group and at the ING Group head office. Although the depositary receipts for shares do not formally carry
any voting rights, holders of depositary receipts, in practice, rank
PROPOSALS BY SHAREHOLDERS AND HOLDERS OF equally with shareholders with regard to voting. ING Trust Office
DEPOSITARY RECEIPTS will, subject to certain restrictions, grant a proxy to a holder of
Proposals to include items on the agenda for a general meeting depositary receipts allowing such holder, in the name of ING Trust
can be made by shareholders and holders of depositary receipts Office, to exercise the voting rights attached to the number of
representing a joint total of at least 0.1% of the share capital or ordinary shares that corresponds to the number of depositary
representing together, on the basis of the stock prices on Euronext receipts held by such holder of depositary receipts. On the basis
Amsterdam by NYSE Euronext, a share value of at least EUR 50 of such a proxy, the holder of depositary receipts may vote at his
million. Given the periods of notice required for proxy voting, or her own discretion.
proposals have to be submitted in writing at least 50 days before
the date of the meeting. Properly submitted proposals will be The following restrictions apply in respect of granting a voting
included on the agenda for the general meeting. proxy to holders of depositary receipts:
• the relevant holder of depositary receipts must have announced
DIALOGUE WITH SHAREHOLDERS AND HOLDERS OF his or her intention to attend the general meeting observing the
DEPOSITARY RECEIPTS provisions laid down in the Articles of Association; and
In 2010, shareholders and holders of depositary receipts were • the relevant holder of depositary receipts may delegate the
allowed to ask questions about items on the agenda for the powers conferred upon him or her by means of the voting proxy,
annual General Meeting and they will be allowed to do so in 2011. provided that the relevant holder of depositary receipts has
Shareholders and holders of depositary receipts can visit the announced his or her intention to do so to ING Trust Office
website of ING Group (www.ing.com) to submit their questions. observing a term before the commencement of the general
meeting, which term will be determined by ING Trust Office.
RECORD DATE
Pursuant to Dutch law, the record date for attending a general VOTING INSTRUCTIONS OF HOLDERS OF DEPOSITARY
meeting and voting on the proposals in that general meeting is the RECEIPTS TO ING TRUST OFFICE
twenty-eighth day before the day of the general meeting. Holders of depositary receipts not attending a general meeting are
Shareholders and holders of depositary receipts who hold shares entitled to give binding instructions to ING Trust Office, concerning
and/or depositary receipts for shares at the record date are entitled ING Trust Office’s exercise of the voting rights attached to the
ordinary shares. ING Trust Office will follow such instructions for
such number of ordinary shares equal to the number of depositary

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receipts for shares held by the relevant holder of depositary receipts. consequence of which ING Group or the group over which ING
ING Trust Office has made it easier for votes to be cast this way Group exercises central control ceases to engage in either insurance
by putting arrangements in place for proxy voting and e-voting. or banking activities.

VOTING ON THE ORDINARY SHARES BY ING TRUST OFFICE REPORTING

ING Trust Office has discretion to vote in respect of shares for Resolutions adopted at a general meeting shall also be published
which it has not issued voting proxies to holders of depositary on the website of ING Group (www.ing.com) within one week
receipts and has not received any voting instructions. According to after the meeting. The draft minutes of the general meeting are, in
its articles of association and the Trust Conditions, ING Trust Office accordance with the Corporate Governance Code, made available
is guided primarily by the interests of the holders of depositary to shareholders and holders of depositary receipts on the website
receipts, taking into account the interests of ING Group and its of ING Group (www.ing.com) no later than three months after the
affiliated enterprises. meeting. Shareholders and holders of depositary receipts may react
to the draft minutes in the following three months, after which the
The depositary receipts and trust office structure outlined above final minutes will be adopted by the chairman of the meeting in
would prevent a small minority, which coincidentally may form the question and by a shareholder or holder of depositary receipts
majority in a general meeting in the absence of other parties, from appointed by that meeting. The final minutes are made available on
taking decisions purely to suit themselves. the website of ING Group (www.ing.com). In deviation of the
Corporate Governance Code shareholders and holders of
PROXY VOTING FACILITIES depositary receipts will not have the opportunity to react to the
ING Group is a participant of the Shareholder Communication minutes of a general meeting if a notarial report is drawn up of the
Channel (Stichting Communicatiekanaal aandeelhouders), through meeting, as this would be in conflict with the laws applicable to
which participating holders of depositary receipts can give voting such notarial report.
instructions to ING Trust Office. ING Group provides a similar proxy
voting facility to international institutional investors. In addition, EXECUTIVE BOARD
ING Group solicits proxies from its ADS holders in line with APPOINTMENT AND DISMISSAL
common practice in the US. Members of the Executive Board are appointed by the General
Meeting from a binding list to be drawn up by the Supervisory
Proxy voting forms for shareholders and voting instruction forms Board. Pursuant to the Dutch law, this list is to mention at least two
for holders of depositary receipts who do not participate in the candidates for each vacancy, and if not, the list will be non-binding.
Shareholder Communication Channel are made available on the With respect to the second candidate, ING Group’s policy is to
website of ING Group (www.ing.com). The submission of these propose retired senior managers or other high ranking officers
forms is subject to additional conditions which are specified in the who, in view of the forthcoming abolition of this requirement, do
forms themselves. not have to meet the requirements of the Executive Board Profile.
The list will also be non-binding pursuant to a resolution of the
MAIN POWERS OF THE GENERAL MEETING General Meeting to that effect adopted by an absolute majority of
The main powers of the General Meeting are to decide on: the votes cast which majority represents more than one-third of the
• the appointment, suspension and dismissal of members of the issued share capital.
Executive Board and members of the Supervisory Board, subject
to a binding nomination or a proposal of the Supervisory Board; Candidates for appointment to the Executive Board must comply
• the adoption of the annual accounts; with the expertise and reliability requirements set out in the Dutch
• the declaration of dividends, subject to the power of the Financial Supervision Act.
Executive Board to allocate part of or all of the profits to the
reserves – with approval of the Supervisory Board – and the Members of the Executive Board may be suspended or dismissed at
declaration of other distributions, subject to a proposal by the any time by a majority resolution of the General Meeting.
Executive Board which was approved by the Supervisory Board; A resolution to suspend or dismiss members of the Executive Board
• the appointment of the external auditor; that has not been brought forward by the Supervisory Board may
• an amendment of the Articles of Association, a legal merger or only be adopted by the General Meeting by an absolute majority of
division of ING Group, and winding up ING Group, all subject to the votes cast, which majority represents more than one-third of
a proposal by the Executive Board which was approved by the the issued share capital.
Supervisory Board;
• the issue of shares or rights to subscribe for shares, the FUNCTION OF THE EXECUTIVE BOARD
restriction or exclusion of pre-emptive rights of shareholders, The Executive Board is charged with the management of ING
and delegation of these powers to the Executive Board, subject Group, which means, among other things, that it is responsible for
to a proposal by the Executive Board which was approved by the the setting and achieving of the company’s objectives, strategy and
Supervisory Board; and policies, as well as the ensuing delivery of results. It also includes
• to authorise the repurchase of outstanding shares and to the day-to-day management of ING Group. The Executive Board is
cancel shares. accountable for the performance of these duties to the Supervisory
Board and the General Meeting. The responsibility for the
Moreover, the approval of the General Meeting is required for management of ING Group is vested in the Executive Board
Executive Board decisions that are so far-reaching that they would collectively. The organisation, powers and modus operandi of the
greatly change the identity or nature of ING Group or its enterprise. Executive Board are detailed in the Executive Board Charter, which
This includes resolutions to transfer or assign otherwise all or was approved by the Supervisory Board. The Executive Board
virtually all of the enterprise of ING Group or its subsidiaries as a Charter is available on the website of ING Group (www.ing.com).

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PROFILE OF MEMBERS OF THE EXECUTIVE BOARD Resources, Corporate Development, Corporate Communications &
The Supervisory Board has drawn up a profile to be used as a basis Affairs, Public & Government Affairs and Corporate Audit Services.
for selecting members of the Executive Board. This Executive Board
profile was submitted for discussion to the General Meeting in PATRICK G. FLYNN, CHIEF FINANCIAL OFFICER
2010. It is available on the website of ING Group (www.ing.com) (Born 1960, Irish nationality, male; appointed in 2009,
and at the ING Group head office. term expires in 2013)
Patrick Flynn is a Chartered Accountant and a member of the
REMUNERATION AND SHARE OWNERSHIP Association of Corporate Treasurers in the UK. He also holds a
Details of the remuneration of members of the Executive Board, bachelor’s degree in Business Studies from Trinity College Dublin.
including shares and/or option rights granted to them, together He was appointed a member of the Executive Board of ING Group
with additional information thereto, are provided in the on 27 April 2009. From 2007 to 2009, he was the chief financial
Remuneration report, starting on page 78. Members of the officer of HSBC Insurance Holdings Ltd. Patrick Flynn is responsible
Executive Board are permitted to hold shares and depositary for ING’s finance departments.
receipts for shares in the share capital of ING Group for long-term
investment purposes. Transactions by members of the Executive J.V. (KOOS) TIMMERMANS, CHIEF RISK OFFICER
Board in these shares and these depositary receipts for shares are (Born 1960, Dutch nationality, male; appointed in 2007,
subject to the ING regulations for insiders. These regulations are term expires in 2011)
available on the website of ING Group (www.ing.com). Koos Timmermans graduated from Erasmus University Rotterdam
with a master’s degree in Economics. Until 1991 he worked at ABN
ANCILLARY POSITIONS/CONFLICTING INTERESTS AMRO in the field of derivatives and for IBM’s European treasury he
No member of the Executive Board has corporate directorships at was stationed in Ireland. Koos Timmermans joined ING in 1996.
listed companies outside ING. This is in accordance with ING He performed various roles: head of Treasury ING Insurance, head
Group’s policy to avoid conflicts of interest. of Corporate Market Risk Management and from 2006 to 2007 he
was deputy chief risk officer of ING Group, until his appointment to
TRANSACTIONS INVOLVING ACTUAL OR POTENTIAL the Executive Board. Koos Timmermans is responsible for ING’s risk
CONFLICTS OF INTEREST departments including compliance.
In accordance with the Corporate Governance Code, transactions
with members of the Executive Board in which there are significant CHANGES IN THE COMPOSITION
conflicting interests will be disclosed in the Annual Report. In In 2010 there were no changes in the composition of the
deviation of the Corporate Governance Code however, this does Executive Board.
not apply if (i) disclosure would be against the law; (ii) the
confidential, share-price sensitive or competition-sensitive character The current term of appointment of Koos Timmermans will expire
of the transaction prevents disclosure; and/or (iii) the information is at the end of the 2011 annual General Meeting. At this meeting he
so competition-sensitive that the disclosure could damage the will be nominated for reappointment.
competitive position of ING Group.
SUPERVISORY BOARD
Significant conflicting interests are considered to be absent and are APPOINTMENT AND DISMISSAL
not reported if a member of the Executive Board obtains financial Members of the Supervisory Board are appointed by the General
products and services, other than loans, which are provided by ING Meeting from a binding list to be drawn up by the Supervisory
Group subsidiaries in the ordinary course of their business on terms Board. Pursuant to Dutch law, this list is to contain at least two
that apply to all employees. In connection with the foregoing, candidates for each vacancy, and if not, the list will be non-binding.
‘loans’ does not include financial products in which the granting With respect to the second candidate, ING Group’s policy is to
of credit is of a subordinated nature, e.g. credit cards and overdrafts propose retired senior managers or other high-ranking officers
in current account, because of a lack of materiality. who, in view of the forthcoming abolition of this requirement, do
not have to meet the independency requirements of the Corporate
INFORMATION ON MEMBERS OF THE EXECUTIVE BOARD Governance Code or the requirements of the Supervisory Board
JAN H.M. HOMMEN, CHIEF EXECUTIVE OFFICER Profile. The list will also be non-binding pursuant to a resolution to
(Born 1943, Dutch nationality, male; appointed in 2009, that effect of the General Meeting adopted by an absolute majority
term expires in 2013) of the votes cast which majority represents more than one-third of
Jan Hommen graduated with a master’s degree in Business the issued share capital. Candidates for appointment to the
Economics from Tilburg University. He was appointed a member of Supervisory Board must comply with the expertise and reliability
the Executive Board on 27 April 2009. He is also CEO of ING Bank requirements set out in the Dutch Financial Supervision Act.
N.V. and CEO of ING Verzekeringen N.V. Jan Hommen was a
member of the Supervisory Board of ING Group as of 1 June 2005 Members of the Supervisory Board may be suspended or
and became chairman of the Supervisory Board of ING Group in dismissed at any time by a majority resolution of the
January 2008. Until 1 May 2005, he was vice-chairman and chief General Meeting. A resolution to suspend or dismiss members
financial officer of Koninklijke Philips Electronics N.V. From 1975 to of the Supervisory Board that has not been brought forward by
1997, he worked for Alcoa Inc. From 1978, he worked at the Alcoa the Supervisory Board may only be adopted by the General
head office in the US, becoming chief financial officer in 1991. Meeting by an absolute majority of the votes cast which majority
Jan Hommen is a member of the board of Royal Concertgebouw represents more than one-third of the issued share capital.
Orchestra. Six Group staff departments report directly to
Jan Hommen: Corporate Legal Department, Corporate Human

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In connection with the issue of the Securities to the Dutch State, Pursuant to the agreements concerning the transactions with
ING Group and the Dutch State agreed that the Dutch State may the Dutch State mentioned above, certain resolutions of the
recommend candidates for appointment to the Supervisory Board Supervisory Board are subject to the condition that no State
in such a way that upon appointment of all recommended Nominee voted against the proposal. These rights became effective
candidates by the General Meeting, the Supervisory Board would as from the 2009 annual General Meeting. These resolutions relate
comprise two State Nominees among its members. The Dutch State to the following matters:
may recommend a Supervisory Board member already in office. a. the issue or acquisition of its own shares by ING Group, other
The recommendation right of the Dutch State is subject to than related to the Securities issue (including, for the avoidance
applicable law and to corporate governance practices, generally of doubt, for the purpose of conversion or financing of a
accepted under stock exchange listing regimes applicable to repurchase of Securities), as part of regular hedging operations
ING Group and continues as long as the Dutch State holds at least or in connection with employment schemes;
250 million Securities, as long as the IABF continues or any of the b. the cooperation by ING Group in the issue of depositary receipts
Bonds is outstanding (whichever occurs last). Should the holding of for shares;
the Dutch State decrease below 250 million Securities, and both c. the application for listing on or removal from the price list of
the IABF and the Bonds have expired, the State Nominees will any stock exchange of the securities referred to in a. or b.;
remain in office and complete their term of appointment. d. the entry into or termination of lasting cooperation between
ING Group or a dependent company and another legal entity
Candidates recommended by the Dutch State will be nominated for or partnership or as general partner in a limited partnership
appointment by way of a binding nomination, unless one or more or general partnership where such cooperation or termination
specified situations would occur. These include that: thereof has material significance for ING Group, i.e. amounting
• the candidate is not fit and proper to discharge his duties to one-quarter or more of ING Group’s issued capital and
as a Supervisory Board member; reserves as disclosed in its balance sheet and notes thereto;
• upon appointment the composition of the Supervisory Board e. the acquisition by ING Group or a dependent company of a
would not be appropriate and/or not be in accordance with participating interest in the capital of another company
the Supervisory Board Profile; amounting to one-quarter or more of ING Group’s issued capital
• appointment would be incompatible with any provision of the and reserves as disclosed in its balance sheet and notes thereto
Articles of Association, the Supervisory Board Charter, any or a material increase or decrease in the magnitude of such a
principle or best-practice provision of the Corporate Governance participating interest;
Code as applied by ING Group and/or any other generally f. investments involving an amount equal to one-quarter or more
accepted corporate governance practice or requirement which is of ING Group’s issued capital and reserves as disclosed in its
applicable to ING Group as an internationally listed company; balance sheet and notes thereto;
• the relevant candidate has a structural conflict of interest g. a proposal to wind up ING Group;
with ING Group; and h. filing of a petition for bankruptcy or moratorium of ING Group;
• the Dutch central bank refuses to issue a statement of ‘no i. a proposal to reduce the issued capital of ING Group (other than
objection’ for the appointment of the relevant candidate. related to the Securities issue);
j. a proposal for merger, split-off or dissolution of ING Group;
The Dutch State recommended Lodewijk de Waal and k. a proposal to change ING Group’s remuneration policy; and
Tineke Bahlmann for appointment to the Supervisory Board, who l. appointment of the chief executive officer of the Executive Board.
were both appointed by the General Meeting on 27 April 2009.
PROFILE OF MEMBERS OF THE SUPERVISORY BOARD
FUNCTION OF THE SUPERVISORY BOARD The Supervisory Board has drawn up a profile to be used as a basis
The function of the Supervisory Board is to supervise the policy of for its composition. The profile was submitted for discussion to the
the Executive Board and the general course of events of ING Group General Meeting in 2010. It is available on the website of ING
and its business, as well as to provide advice to the Executive Board. Group (www.ing.com) and at the ING Group head office.
In line with Dutch company law, the Corporate Governance Code
and the Articles of Association, the Supervisory Board Charter In view of their experience and the valuable contribution that
requires all members of the Supervisory Board, including the State former members of the Executive Board can make to the
Nominees, to act in accordance with the interests of ING Group Supervisory Board, it has been decided, taking into account the size
and the business connected with it, taking into account the relevant of the Supervisory Board and ING’s wide range of activities that
interests of all the stakeholders of ING Group, to perform their such individuals may become members of the Supervisory Board of
duties without mandate and independent of any interest in the ING Group. There is, however, a restriction in that only one in every
business of ING Group, and to refrain from supporting one interest five other members of the Supervisory Board may be a former
without regard to the other interests involved. member of the Executive Board. In addition, this member must wait
at least one year after resigning from the Executive Board before
Certain resolutions of the Executive Board, specified in the Articles becoming eligible for appointment to the Supervisory Board.
of Association of ING Group, the Executive Board Charter and in Former members of the Executive Board are not eligible for
the Supervisory Board Charter, are subject to the approval of the appointment to the position of chairman of the Supervisory Board.
Supervisory Board.
After being appointed to the Supervisory Board, a former member
of the Executive Board may also be appointed to one of the

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Corporate governance continued

Supervisory Board’s committees. However, appointment to the Significant conflicting interests are considered to be absent in case
position of chairman of a committee is only possible if the individual of a relationship that a member of the Supervisory Board may have
in question resigned from the Executive Board at least four years with ING Group subsidiaries as an ordinary, private individual, with
prior to such appointment. the exception of any loans that may have been granted (for an
overview of loans granted to members of the Supervisory Board
TERM OF APPOINTMENT OF MEMBERS OF THE see page 85).
SUPERVISORY BOARD
A member of the Supervisory Board retires no later than at the INDEPENDENCE
end of the first general meeting held four years after his or her last Annually, the members of the Supervisory Board are requested to
appointment or reappointment. In accordance with the Corporate assess whether the criteria of dependence set out in the Corporate
Governance Code, members of the Supervisory Board may as a Governance Code do not apply to them and to confirm this in
general rule be reappointed for two additional four-year terms. writing. On the basis of these criteria, all members of the
Under special circumstances however, the Supervisory Board may Supervisory Board are to be regarded as independent on
deviate from this general rule, among others in order to maintain a 31 December 2010. Members of the Supervisory Board to whom
balanced composition of the Supervisory Board and/or to preserve the independence criteria of the Corporate Governance Code do
valuable expertise and experience. As a general rule, members of not apply, and members of the Supervisory Board to whom the
the Supervisory Board shall also resign at the end of the annual criteria do apply but who can explain why this does not undermine
general meeting in the year in which they attain the age of 70 and their independence, are deemed to be independent.
shall not be reappointed. The schedule for resignation by rotation
is available on the website of ING Group (www.ing.com). COMPANY SECRETARY
ING Group’s company secretary is Jan-Willem Vink, general counsel
ANCILLARY POSITIONS/CONFLICTING INTERESTS of ING Group.
Members of the Supervisory Board are asked to provide details on
any other directorships, paid positions and ancillary positions they COMMITTEES OF THE SUPERVISORY BOARD
may hold. Such positions may not conflict with the interests of ING On 31 December 2010, the Supervisory Board had five standing
Group. It is the responsibility of the individual member of the committees: the Audit Committee, the Risk Committee, the
Supervisory Board and the Corporate Governance Committee to Remuneration Committee, the Nomination Committee and the
ensure that the directorship duties are performed properly and are Corporate Governance Committee.
not affected by any other positions that the individual may hold
outside the Group. The organisation, powers and conduct of the Supervisory Board are
detailed in the Supervisory Board Charter. Separate charters have
In accordance with the Corporate Governance Code, members of been drawn up for the Audit Committee, Risk Committee, the
the Supervisory Board are to disclose material conflicts of interest Remuneration Committee, the Nomination Committee and the
and potential conflicts of interest and to provide all information Corporate Governance Committee. These charters are available on
relevant thereto. Thereupon the Supervisory Board – without the the website of ING Group (www.ing.com). A short description of
member concerned taking part – decides whether a conflict of the duties for the five Committees follows below.
interest exists. In special circumstances, the Supervisory Board may
deviate from this rule and decide that, notwithstanding the fact The Audit Committee assists the Supervisory Board in monitoring
that the matter would entail a conflict of interest according to the the integrity of the financial statements of ING Group, ING
Corporate Governance Code, a conflict of interest does not exist. Verzekeringen N.V. and ING Bank N.V., in monitoring the
This concerns in particular situations in which the conflict of interest compliance with legal and regulatory requirements and in
is based on a marriage that exists no longer, to allow for situations monitoring the independence and performance of ING’s internal
where there is no material family relation. and external auditors. On 31 December 2010, the members of the
Audit Committee were: Jackson Tai (chairman), Tineke Bahlmann,
In case of a conflict of interest, the relevant member of the Henk Breukink, Godfried van der Lugt and Jeroen van der Veer.
Supervisory Board, as the Corporate Governance Code
recommends, abstains from discussions and decision-making on The Supervisory Board has determined that Aman Mehta,
the topic or the transaction in relation to which he or she has a appointed to the Audit Committee per 14 February 2011, is a
conflict of interest with ING Group. financial expert as referred to in the Corporate Governance Code.
He has gathered his experience by serving as chief executive officer
TRANSACTIONS INVOLVING ACTUAL OR POTENTIAL of Hong Kong & Shanghai Banking Corporation (HSBC) in Hong
CONFLICTS OF INTEREST Kong.
In accordance with the Corporate Governance Code, transactions
with members of the Supervisory Board in which there are The Risk Committee assists and advises the Supervisory Board in
significant conflicting interests will be disclosed in the Annual monitoring the risk profile of ING Group as well as the structure
Report. In deviation of the Corporate Governance Code however, and operation of the internal risk management and control
this does not apply if (i) disclosure would be against the law; (ii) the systems. On 31 December 2010, the members of the Risk
confidential, share-price sensitive or competition-sensitive character Committee were: Peter Elverding (chairman), Tineke Bahlmann,
of the transaction prevents disclosure; and/or (iii) the information is Claus Dieter Hoffmann, Piet Klaver, Godfried van der Lugt
so competition-sensitive that disclosure could damage the and Jackson Tai.
competitive position of ING Group.

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The Remuneration Committee advises the Supervisory Board, INFORMATION ON MEMBERS OF THE SUPERVISORY BOARD
among other things, on the terms and conditions of employment PETER A.F.W. ELVERDING (CHAIRMAN)
(including remuneration) of the members of the Executive Board (Born 1948, Dutch nationality, male; appointed in 2007,
and on the policies and general principles on which the terms and term expires in 2011)
conditions of employment of the members of the Executive Board Former chairman of the Managing Board of Directors of
and of senior managers of ING and its subsidiaries are based. Koninklijke DSM N.V. Former vice-chairman of the Supervisory
On 31 December 2010, the members of the Remuneration Board of De Nederlandsche Bank N.V. (Dutch central bank).
Committee were: Jeroen van der Veer (chairman), Peter Elverding, Other business activities: chairman of the Supervisory Board of
Piet Klaver, Joan Spero and Lodewijk de Waal. The Nomination Océ N.V. (listed company). Member of the Supervisory Board of
Committee advises the Supervisory Board, among other things, SHV Holdings N.V. Chairman of the Supervisory Board of Q-Park N.V.
on the composition of the Supervisory Board and Executive Board. Member of the Supervisory Board of Koninklijke FrieslandCampina
On 31 December 2010, the members of the Nomination N.V. Chairman of the Supervisory Board of Oostwegel Holding BV.
Committee were: Peter Elverding (chairman), Piet Klaver, Joan Member of the Board of Stichting Instituut GAK.
Spero, Jeroen van der Veer and Lodewijk de Waal.
JEROEN VAN DER VEER (VICE-CHAIRMAN)
The Corporate Governance Committee assists the Supervisory (Born 1947, Dutch nationality, male; appointed in 2009,
Board in monitoring and evaluating the corporate governance of term expires in 2013)
ING as a whole and the reporting thereon in the Annual Report Former chief executive officer of Royal Dutch Shell plc.
and to the General Meeting and advises the Supervisory Board on Other business activities: vice-chairman and senior independent
improvements. On 31 December 2010, the members of the director of Unilever N.V., non-executive director of Royal Dutch
Corporate Governance Committee were: Peter Elverding (chairman), Shell plc and member of the Supervisory Board of Koninklijke
Henk Breukink, Claus Dieter Hoffmann, Aman Mehta and Philips Electronics N.V. (listed companies). Member of the
Lodewijk de Waal. Supervisory Board of Het Concertgebouw N.V. Chairman of
Platform Bètatechniek. Chairman of the Supervisory Council
The current composition of the Supervisory Board Committees of Nederlands Openluchtmuseum. Member of the Board of
can be found on the Company’s website (www.ing.com), which Nationale Toneel (theatre).
is updated on a regular basis.
J.P. (TINEKE) BAHLMANN
REMUNERATION AND SHARE OWNERSHIP (Born 1950, Dutch nationality, female; appointed in 2009,
The remuneration of the members of the Supervisory Board is term expires in 2013)
determined by the General Meeting and is not dependent on the Professor in Business Administration, University of Utrecht.
results of ING Group. Details of the remuneration are provided in Chairman of the Dutch Media Authority.
the Remuneration report on pages 84 and 85. Members of the Other business activities: vice-chairman of the Supervisory Board
Supervisory Board are permitted to hold shares and depositary of N.V. Nederlandsche Apparatenfabriek ‘Nedap’ (listed company).
receipts for shares in the share capital of ING Group for long-term Member of the Board of Maatschappelijk Verantwoord
investment purposes. Details are given on page 85. Transactions by Ondernemen Nederland (CSR). Chairman of Stichting Max Havelaar.
members of the Supervisory Board in these shares and these Member of the Board of De Baak Management Centre VNO-NCW.
depositary receipts for shares are subject to the ING regulations for Member of the Board of Toneelgroep Amsterdam (theatre).
insiders. These regulations are available on the website of ING
Group (www.ing.com). HENK W. BREUKINK
(Born 1950, Dutch nationality, male; appointed in 2007,
term expires in 2011)
Former managing director of F&C and country head for F&C
Netherlands (asset management firm).
Other business activities: non-executive/vice-chairman of VastNed
Offices/Industrial (real estate fund) and non-executive director of
F&C hedge funds, Ireland (listed companies). Non-executive director
of Brink Groep BV. Non-executive chairman of Heembouw Holding
B.V. Chairman of the Supervisory Board of Omring (health care
institution). Member of the Supervisory Board of HaagWonen
(housing corporation). Senior executive coach.

CLAUS DIETER HOFFMANN

(Born 1942, German nationality, male; appointed in 2003,
term expires in 2011)
Former chief financial officer of Robert Bosch GmbH. Managing
partner of H+H Senior Advisors, Stuttgart.
Other business activities: chairman of the Supervisory Board of
EnBW AG (listed company). Member of the Supervisory Board of
de Boer Structures Holding B.V. Member of the Supervisory Board
of C.A. Leuze GmbH & Co. KG. Chairman of the Charlottenklinik
Foundation (hospital).

68 ING Group Annual Report 2010

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Corporate governance continued

PIET C. KLAVER LODEWIJK J. DE WAAL

(Born 1945, Dutch nationality, male; appointed in 2006, (Born 1950, Dutch nationality, male; appointed in 2009,
term expires in 2014) term expires in 2013)
Former chairman of the Executive Board of SHV Holdings N.V. Former general manager of Humanitas.
Other business activities: chairman of the Supervisory Board of Other business activities: member of the Supervisory Board of
TNT N.V. (listed company). Chairman of the Supervisory Board PGGM N.V. Member of the Advisory Board of Zorgverzekeraars
of each of Dekker Hout Groep B.V., Jaarbeurs Holding B.V., Nederland. Chairman of the Supervisory Council of SNV.
Dura Vermeer Groep N.V., Blokker Holding B.V., Credit Yard Group Chairman of the Advisory Board of Stichting Nationaal Fonds
B.V. and Utrecht School of the Arts. Member of the Supervisory Kunstbezit. Member of the Netherlands’ National Contact
Board of SHV Holdings N.V. Member of the Board of the Point (NCP) of the OECD. Chairman of the Supervisory
African Parks Foundation. Council of Museum Volkenkunde.

GODFRIED J.A. VAN DER LUGT CHANGES IN THE COMPOSITION

(Born 1940, Dutch nationality, male; appointed in 2001, At the 2010 annual General Meeting Piet Klaver was reappointed as
resigned on 24 January 2011) member of the Supervisory Board. In addition, Piet Hoogendoorn,
Former chairman of the Executive Board of ING Group (retired in Harish Manwani and Karel Vuursteen retired from the Supervisory
May 2000). Board at the end of the 2010 annual General Meeting.
Other business activities: chairman of the Supervisory Board of
Stadsherstel Amsterdam N.V. Chairman of the Advisory Board of The current terms of appointment of Henk Breukink, Peter
Kasteel De Haar and R.C. Oude Armenkantoor. Member of the Elverding and Claus Dieter Hoffmann will expire at the end of the
Investment Advisory Committee of Stichting Instituut GAK. 2011 annual General Meeting. At this meeting, Henk Breukink and
Peter Elverding will be nominated for reappointment.
AMAN MEHTA
(Born 1946, Indian nationality, male; appointed in 2008, Claus Dieter Hoffmann has decided to retire from the Supervisory
term expires in 2012) Board at the end of the 2011 annual General Meeting.
Former chief executive officer of Hong Kong & Shanghai Banking
Corporation (HSBC) in Hong Kong. In view of his proposed appointment as a non-executive director of
Other business activities: non-executive director of each of Tata the Bank of China, Jackson Tai resigned as a Supervisory Board
Consultancy Services, Jet Airways Ltd., PCCW Ltd., Vedanta member, effective 6 January 2011. Godfried van der Lugt resigned
Resources Plc, Wockhardt Ltd., Godrej Consumer Products Ltd., for personal reasons as a Supervisory Board member, effective
Cairn India Ltd., Emaar MGF Land Ltd. and Max India Ltd. Member 24 January 2011.
of the governing board of Indian School of Business. Member of
the International Advisory Council of INSEAD. More information can be found in the convocation for the 2011
annual General Meeting, available on the website of ING Group
JOAN E. SPERO (www.ing.com) from 24 March 2011.
(Born 1944, American nationality, female; appointed in 2008,
term expires in 2012)
Former executive vice-president Corporate Affairs and
Communications of American Express Company. Former Under
Secretary for Economic Business & Agricultural Affairs, US State
Department. Former president Doris Duke Charitable Foundation.
Other business activities: non-executive director of IBM
Corporation. Trustee of Council on Foreign Relations, Wisconsin
Alumni Research Foundation, Morgridge Institute for Research.
Trustee Emerita of Columbia University and Amherst College.

JACKSON P. TAI
(Born 1950, American nationality, male; appointed in 2008,
resigned on 6 January 2011)
Former vice-chairman and chief executive officer of DBS Group
Holdings. Former managing director in the Investment Banking
Division of JP Morgan.
Other business activities: non-executive director of each of NYSE
Euronext, MasterCard Incorporated, CapitaLand, and Bank of
China Limited (pending regulatory approval). Non-executive
chairman and director of Brookstone, Inc. Trustee of Rensselaer
Polytechnic Institute.

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FINANCIAL REPORTING EXTERNAL AUDITOR

A description of the main features of ING Group’s internal control At the annual General Meeting held on 22 April 2008,
and risk management systems in relation to the financial reporting Ernst & Young was appointed to audit the financial statements of
process is included in the statement with respect to Section 404 ING Group for the financial years 2008 to 2011 inclusive, to report
Sarbanes-Oxley Act on page 76 which is deemed to be on the outcome of these audits to the Executive Board and the
incorporated by reference herein. Supervisory Board and to provide an audit opinion on the financial
statements of ING Group. Furthermore, Ernst & Young also audited
CHANGE OF CONTROL PROVISIONS and reported on the effectiveness of internal control over financial
LEGAL PROVISIONS reporting on 31 December 2010. In the 2012 annual General
Pursuant to the terms of the Dutch Financial Supervision Act a Meeting it will be proposed to extend the appointment of
declaration of no objection from the Dutch Minister of Finance Ernst & Young by two more years, i.e. for the financial years
must be obtained by anyone wishing to obtain or hold a 2012 and 2013.
participating interest of at least 10% in ING Group and to exercise
control attached to such a participating interest. Similarly, on the The external auditor attended the meetings of the Audit
basis of indirect change of control statutes in the various Committee and the 2010 annual General Meeting.
jurisdictions where subsidiaries of ING Group are operating,
permission from or notification to local regulatory authorities After a maximum period of five years of performing the financial
may be required for the acquisition of a substantial interest audit of ING Group or ING Verzekeringen N.V. or ING Bank N.V.,
in ING Group. the lead audit partners of the external audit firm and the audit
partners responsible for reviewing the audits, have to be replaced
CHANGE OF CONTROL CLAUSES IN MATERIAL AGREEMENTS by other partners of the external audit firm. The Audit Committee
ING Group is not a party to any material agreement that becomes provides recommendations to the Supervisory Board regarding
effective or is to be amended or terminated, in case of a change of these replacements based, among other things, on an annual
control of ING Group following a public bid as defined in section evaluation of the provided services. In line with this requirement,
5:70 of the Dutch Financial Supervision Act. ING Group subsidiaries the lead audit partner of Ernst & Young was succeeded after the
may have customary change of control arrangements included in year-end audit 2006. The rotation of other partners involved with
agreements related to various business activities, such as joint the audit of the financial statements of ING is subject to applicable
venture agreements, letters of credit and other credit facilities, independence legislation.
ISDA-agreements, hybrid capital and debt instruments, reinsurance
agreements and futures and option trading agreements. Following The external auditor may be questioned at the annual general
a change of control of ING Group (as the result of a public bid or meeting in relation to its audit opinion on the annual accounts.
otherwise), such agreements may be amended or terminated, The external auditor will therefore attend and be entitled to
leading, for example, to an obligatory transfer of the interest in the address this meeting.
joint venture, early repayment of amounts due, loss of credit
facilities or reinsurance cover and liquidation of outstanding futures The external auditor may only provide audit and non-audit services
and option trading positions. to ING Group and its subsidiaries with the permission of the Audit
Committee. The Audit Committee generally pre-approves certain
SEVERANCE PAYMENTS TO types of audit, audit-related, tax and non-audit services to be
MEMBERS OF THE EXECUTIVE BOARD provided by the external auditor on an annual basis. Services that
The employment contracts with the members of the Executive have not been generally pre-approved by the Audit Committee
Board provide for severance payments, which become due on should not be provided by the external auditor unless they are
termination of the contract in connection with a public bid as specifically pre-approved by the Audit Committee at the
defined in section 5:70 of the Dutch Financial Supervision Act. recommendation of local management.
For the amounts due, it is not relevant whether or not termination
of the contract is related to a public bid. In accordance with the The Audit Committee also sets the maximum annual amount that
terms of the issuance of the Securities, severance payments to may be spent for pre-approved services. Throughout the year the
the members of the Executive Board have been limited to a external auditor and ING monitor the amounts paid versus the
maximum of one year’s fixed salary, in line with the pre-approved amounts. The external auditor provides the Audit
Corporate Governance Code. Committee with a full overview of all services provided to ING,
including related fees, supported by sufficiently detailed
AMENDMENT OF THE ARTICLES OF ASSOCIATION information. This overview is periodically evaluated by the Audit
The General Meeting may resolve to amend the Articles of Committee during the year.
Association, provided the resolution is adopted on a proposal of
the Executive Board which has been approved by the Supervisory More information on ING Group’s policy on external auditor
Board. Such a resolution of the General Meeting requires a majority independence is available on the website of ING Group
of at least two-thirds of the votes cast in a general meeting at (www.ing.com).
which at least two-thirds of the issued share capital is represented.
An amendment has to be passed by notarial deed, and this in turn
requires a declaration of no objection to be issued by the
Minister of Justice.

70 ING Group Annual Report 2010

 Corporate governance 3

Report of ING Trust Office

The following report is issued in compliance with the provisions of OBJECT
article 15 of the trust conditions for registered shares in the share Pursuant to its articles of association (the ‘Articles of Association’),
capital of ING Groep N.V. and best-practice provision IV.2.6 of the the object of Stichting ING Aandelen, a foundation organised
Dutch Corporate Governance Code. under the laws of the Netherlands, with its registered seat in
Amsterdam (‘ING Trust Office’) is:
a. to acquire and administer for the purpose of management
registered shares in the capital of ING Groep N.V., a public
limited company with its registered office in Amsterdam
(‘ING Group’) and any bonus shares which may be distributed
thereon or shares acquired as stock dividend or by the exercise
of subscription rights and to issue exchangeable depositary
receipts for these shares, to exercise voting rights and all other
rights attaching to the shares, to exercise subscription rights and
to receive dividends and other distributions, including proceeds
of liquidation, subject to the obligation to distribute the income
to the holders of depositary receipts, save that depositary
receipts shall be issued for bonus shares, shares acquired as
stock dividend and shares acquired on behalf of holders of
depositary receipts by virtue of the exercise of subscription rights;
b. to promote the exchange of information between ING Group
on the one hand and the holders of depositary receipts and
shareholders in ING Group on the other;
c. to promote the solicitation of proxies of shareholders other
than the foundation itself and of specific proxies and/or
voting instructions of holders of depositary receipts,
and further to engage in any activity which may be related to the
foregoing in the widest sense, whereby all activities which entail
commercial risk shall be excluded from the foundation’s object.

ACTIVITIES
BOARD MEETINGS AND MEETINGS WITH ING GROUP
During the 2010 reporting year, the board of ING Trust Office
(the ‘Board’) held nine meetings.

On 2 February 2010, the Board met to discuss the appeal with the
General Court of the European Union against specific elements of
the European Commission’s decision regarding ING’s restructuring
plan. The general counsel of ING Group was invited to the meeting
to give an explanation on this subject. During the same meeting,
without presence of the general counsel, the Board discussed,
among other things, the purported class litigation filed in the
US alleging violations of the federal securities laws with respect to
disclosures made in connection with the 2007 and 2008 offerings
of ING’s Perpetual Hybrid Capital Securities, the composition of the
Board and prepared for the annual General Meeting of ING Group
of 27 April 2010 (the ‘AGM’).

On 19 February 2010, the Board held a meeting to discuss the

position of ING Trust Office in general. The general counsel of ING
Group was invited to this meeting.

On 31 March 2010 the Board met again to discuss the position

of ING Trust Office, as well as to prepare for the AGM. Prior to this
meeting the Board met with the chairmen of the Executive Board
and the Supervisory Board of ING Group. During this meeting the
Board asked for an explanation of, among other things, the
activities and performance of ING Group over 2009 on the basis
of the press release of 18 March 2010 and the 2009 figures,
the split of the banking and insurance business and several items
on the agenda of the AGM as published on 18 March 2010.

On 14 April 2010 the Board held a meeting to adopt the balance

sheet and statement of income and expenses of ING Trust Office.

ING Group Annual Report 2010 71

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Report of ING Trust Office continued

During this meeting the Board also discussed, among other things, of shares equal to the number of depositary receipts held by the
the position of ING Trust Office in general and prepared for the relevant holder of depositary receipts on the record date. During
AGM. After this meeting the Board met with the chairmen of the the AGM, ING Trust Office voted on these shares in accordance
Executive Board and the Supervisory Board of ING Group. During with the voting instructions given. A more detailed overview of
this meeting the Board asked for an explanation of, among other these voting results can be found on the website of ING Group
things, the implementation by ING Group of the revised Dutch (www.ing.com).
Corporate Governance Code.
In accordance with the Articles of Association and the Trust
On 27 April 2010, the Board convened before the AGM to discuss Conditions, ING Trust Office voted at its own discretion on the
the proxy voting results and to decide on the initial position of the shares for which it did not issue voting proxies and did not receive
Board vis-à-vis the items on the agenda of the AGM. voting instructions, representing 58.7% of the total votes that
might be cast at the AGM. In voting such shares, ING Trust Office
On 30 August 2010, the Board held a meeting to discuss, among was guided primarily by the interests of all holders of depositary
other things, the composition and profile of the Board and to receipts, taking into account the interests of ING Group and its
prepare for the meeting of holders of depositary receipts of affiliated enterprise. As a result, ING Trust Office voted on these
24 November 2010. During this meeting the Board also discussed shares in favour of all voting items on the agenda of the AGM.
the proposed amendments to the Articles of Association and the
trust conditions for registered shares in the share capital of ING ING Trust Office promotes the solicitation of proxies of shareholders
Group (the ‘Trust Conditions’). These amendments were of ING Group other than ING Trust Office itself and of specific
effectuated on 7 October 2010, as a result of which the proxies or voting instructions of holders of depositary receipts.
Articles of Association and the Trust Conditions are fully in ING Trust Office encourages the greatest possible participation of
line with the Dutch Corporate Governance Code. shareholders and holders of depositary receipts and promotes the
execution of voting rights in a transparent way. At the same time it
On 27 September 2010 the Board convened to discuss the prevents that a minority of shareholders and holders of depositary
procedure of appointment of members of the Board and to receipts could use a chance majority of votes to the disadvantage of
prepare for the meeting of holders of depositary receipts. the shareholders and holders of depositary receipts present nor
represented at a general meeting of ING Group.
On 28 October 2010 the Board met with the chairmen of the
Executive Board and the Supervisory Board of ING Group and MEETING OF HOLDERS OF DEPOSITARY RECEIPTS
asked for an explanation of, among other things, the activities According to the Trust Conditions, ING Trust Office may consult
and performance of ING Group over the first six months of 2010 holders of depositary receipts in a separate meeting if and when it
on the basis of the press release of 11 August 2010. considers this necessary or desirable. In addition, one or more
holders of depositary receipts who jointly hold at least 10% of the
On 16 November 2010, the Board held a meeting to prepare total number of depositary receipts issued by ING Trust Office,
for the meeting of holders of depositary receipts. may request the Board in writing, setting out the matters to be
considered in detail, to convene a meeting of holders of
On 8 December 2010 the Board met to discuss, among other depositary receipts.
things, the proceedings at the meeting of holders of depositary
receipts and the composition of the Board. On that same day the The Board convened a meeting of holders of depositary receipts,
Board had a meeting with the chairmen of the Executive Board and which was held on 24 November 2010. 0.07% of the total number
the Supervisory Board of ING Group. During this meeting the Board of depositary receipts issued was present or represented during this
asked for an explanation of, among other things, the activities and meeting. During the meeting a report was made on the activities of
performance of ING Group over the first nine months of 2010 on ING Trust Office in 2009 and 2010 up to the date of the meeting.
the basis of the press release of 10 November 2010. In addition, the Board answered various questions of holders of
depositary receipts attending the meeting.
ANNUAL GENERAL MEETING ING GROUP, VOTES CAST AND
VOTING BEHAVIOUR DEPOSITARY-RECEIPTS STRUCTURE
ING Trust Office attended the AGM. During this meeting ING Trust During the years 2007–2010, participation of shareholders,
Office asked the Executive Board and the Supervisory Board of ING excluding ING Trust Office, and holders of depositary receipts in
Group various questions, answered questions of shareholders and annual general meetings of ING Group continually increased from
holders of depositary receipts and made a statement on how it 36.7% to 41.3%. Only the extraordinary general meeting of
proposed to vote, where desired. 25 November 2009 deviates from this trend with a markedly lower
turnout of 31.1%.
ING Trust Office granted proxies to holders of depositary receipts
who attended the AGM in person or who were represented by a In view of the above, ING evaluated the position of ING Trust Office
third party, to vote at their own discretion on such a number of and the depositary-receipts structure, the outcome of which was
shares equal to the number of depositary receipts held by the discussed in the AGM. On the basis of this evaluation, ING
relevant holder of depositary receipts on the record date, with due concluded that it would be premature to change or abolish the
observance of the Articles of Association and the Trust Conditions. depositary-receipts structure in 2010 and that it would be more
appropriate to reconsider this as part of a re-evaluation of ING
Holders of depositary receipts who did not attend the AGM in Group’s entire governance structure following the current
person or who were not represented by a third party, were entitled restructuring and the completion of the divestments approved in
to give binding voting instructions to ING Trust Office for a number the extraordinary General Meeting in 2009.

72 ING Group Annual Report 2010

 Corporate governance 3

Report of ING Trust Office continued

OUTSTANDING DEPOSITARY RECEIPTS OTHER

On 31 December 2010, the nominal value of administered ordinary In 2010, ING Trust Office obtained external legal advice on several
shares amounted to EUR 919,254,486.48 for which 3,830,227,027 issues relevant for the performing of its activities.
depositary receipts were issued, each with a nominal value of
EUR 0.24. During the reporting year, the net number of depositary The activities involved in the administration of shares are performed
receipts decreased with 386,717. by Administratiekantoor van het Algemeen Administratie- en
Trustkantoor B.V., Amsterdam.
The decrease came about as follows:
add: CONTACT DETAILS
conversion of shares into depositary receipts 65,141 The contact details of ING Trust Office are:
less: Maartje Dapperen
conversion of depositary receipts into shares 451,858 Telephone + 31 20 5418645
E-mail: [email protected]
COMPOSITION AND REMUNERATION BOARD Website: www.ingtrustoffice.com
The members of the Board are appointed by the Board itself for a
maximum term of four years and may be reappointed two times.
Holders of depositary receipts may make recommendations to the AMSTERDAM, 14 MARCH 2011
Board on persons to be appointed as members of the Board. The BOARD OF STICHTING ING AANDELEN
Board informs them for such purpose and in good time when, for
what reason and according to which profile a vacancy must be
filled and in which manner a recommendation should take place.

The Board currently consists of Jan Veraart, chairman,

Mick den Boogert, Carel van den Driest, Paul Frentrop and
Herman Hazewinkel.

Huib Blaisse stepped down as a member of the Board as of

1 September 2010. On 11 October 2010 the Board announced
through the website of ING Trust Office that it intended to fill the
vacancy, and, with a view to a balanced spread of the succession,
to reappoint the sitting members of the Board, each for a different
term. At the same time the Board announced that the holders of
depositary receipts could make recommendations to the Board in
connection with the vacancy and the reappointments during a
period ending on 18 November 2010. The Board did not receive
any recommendations. As a result the Board decided to appoint
Mick den Boogert as a member of the Board as of 8 February 2011
for a term ending per 1 January 2015. Furthermore, Jan Veraart,
Carel van den Driest, Paul Frentrop and Herman Hazewinkel were
reappointed as members of the Board as of 1 January 2011, for
terms ending per 1 May 2013, 1 May 2012, 1 May 2014 and
1 January 2015 respectively.

A profile and an overview of relevant positions held by the

members of the Board can be found on the website of ING Trust
Office (www.ingtrustoffice.com).

All members of the Board stated that they meet the conditions
regarding independence as referred to in the Articles of Association
and in the Dutch Corporate Governance Code.

The annual remuneration for the chairman of the Board amounts

to EUR 25,000.00 and for the other members of the Board to
EUR 20,000.00.

COSTS
In 2010, the costs of the activities of ING Trust Office amounted
to EUR 503,871.36.

ING Group Annual Report 2010 73

3 Corporate governance

Report of ING Continuity Foundation

Stichting Continuïteit ING (‘ING Continuity Foundation’), A call-option agreement concluded between ING Continuity
a foundation organised under the laws of the Netherlands, Foundation and ING Groep N.V. (‘ING Group’) vests ING Continuity
established in Amsterdam, was founded on 22 January 1991. Foundation with the right to acquire cumulative preference shares
in the share capital of ING Group up to a maximum of 4.5 billion
cumulative preference shares. The acquisition of cumulative
preference shares by ING Continuity Foundation is subject to the
restriction that, immediately after the issue of cumulative
preference shares, the total amount of cumulative preference
shares may not exceed one third of the total issued share capital of
ING Group. If new shares other than cumulative preference shares
are subsequently issued, ING Continuity Foundation may again
exercise its right, subject to the provisions of the preceding
sentence. On acquisition of cumulative preference shares, at least
25% of the nominal value must be paid on said shares.

In 2010, the board of ING Continuity Foundation (the ‘Board’)

held three meetings, on 28 April, 8 December and 22 December.

The composition of the Board is currently as follows: Bas Kortmann,

chairman of the Board, who was reappointed as of 13 May 2010,
Rob van den Bergh, appointed as of 10 February 2011,
Allard Metzelaar and Wim van Vonno.

All members of the Board stated that they meet the conditions
regarding independence as referred to in the Articles of Association
of ING Continuity Foundation.

AMSTERDAM, 14 MARCH 2011

BOARD OF STICHTING CONTINUÏTEIT ING

74 ING Group Annual Report 2010

 Corporate governance 3

Conformity statement
The Executive Board is required to prepare the Annual Accounts CONFORMITY STATEMENT PURSUANT TO
and the Annual Report of ING Groep N.V. for each financial year SECTION 5:25C PARAGRAPH 2(C) OF THE
in accordance with applicable Dutch law and International Financial DUTCH FINANCIAL SUPERVISION ACT
Reporting Standards (IFRS) as adopted by the European Union. (Wet op het financieel toezicht)

The Executive Board is responsible for maintaining proper

accounting records, for safeguarding assets and for taking
reasonable steps to prevent and detect fraud and other
irregularities. It is responsible for selecting suitable accounting
policies and applying them on a consistent basis, making
judgements and estimates that are prudent and reasonable.
It is also responsible for establishing and maintaining internal
procedures which ensure that all major financial information is
known to the Executive Board, so that the timeliness, completeness
and correctness of the external financial reporting are assured.

As required by section 5:25c paragraph 2(c) of the Dutch Financial

Supervision Act, each of the signatories hereby confirms that to the
best of his or her knowledge:

• the ING Groep N.V. 2010 Annual Accounts give a true and fair
view of the assets, liabilities, financial position and profit or loss
of ING Groep N.V. and the entities included in the consolidation
taken as a whole;

• the ING Groep N.V. 2010 Annual Report gives a true and fair
view of the position at the balance sheet date, the development
and performance of the business during the financial year 2010
of ING Groep N.V. and the entities included in the consolidation
taken as a whole, together with a description of the principal
risks ING Groep N.V. is confronted with.

AMSTERDAM, 14 MARCH 2011

Jan H.M. Hommen

CEO, chairman of the Executive Board

Patrick G. Flynn
CFO, member of the Executive Board

J.V. (Koos) Timmermans

CRO, member of the Executive Board

ING Group Annual Report 2010 75

3 Corporate governance

Section 404 Sarbanes-Oxley Act

Internal control over financial reporting REPORT OF THE EXECUTIVE BOARD ON INTERNAL CONTROL
OVER FINANCIAL REPORTING
Due to the listing of ING shares on the New York Stock Exchange, The Executive Board is responsible for establishing and maintaining
ING Group is required to comply with the SEC regulations adopted adequate internal control over financial reporting. ING’s internal
pursuant to Section 404 of the Sarbanes-Oxley Act, or SOX 404. control over financial reporting is a process designed under the
These regulations require that the CEO (the chairman of the supervision of our principal executive and principal financial officers
Executive Board) and the CFO of ING Group report and certify on to provide reasonable assurance regarding the reliability of
an annual basis on the effectiveness of ING Group’s internal financial reporting and the preparation of financial statements
controls over financial reporting. Furthermore, the external auditors for external purposes in accordance with generally accepted
are required to provide an opinion on the effectiveness of ING accounting principles.
Group’s internal controls over financial reporting.
Our internal control over financial reporting includes those policies
ING Group has long-established Business Principles and a strong and procedures that:
internal control culture, which all staff must adhere to. SOX 404 • pertain to the maintenance of records that, in reasonable detail,
activities are organised along the lines of the governance structure, accurately and fairly reflect the transactions and dispositions of
and involve the participation of senior management across ING. the assets of ING;
Following the SOX 404 process, ING is in the position to publish an • provide reasonable assurance that transactions are recorded as
unqualified statement which denotes that the Company’s internal necessary to permit preparation of financial statements in
control over financial reporting is effective as of 31 December 2010. accordance with generally accepted accounting principles, and
The SOX 404 statement by the Executive Board is included below, that our receipts and expenditures are being made only in
followed by the report of the external auditor. accordance with authorisations of our management and
directors; and
• provide reasonable assurance regarding prevention or timely
detection of unauthorised acquisition, use or disposition of
our assets that could have a material effect on our
financial statements.

Because of its inherent limitations, internal control over

financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

The Executive Board assessed the effectiveness of our internal

control over financial reporting as of 31 December 2010. In making
this assessment, the Executive Board performed tests based on the
criteria of the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control – Integrated
Framework. Based on the Executive Board’s assessment and those
criteria, the Executive Board concluded that the Company’s internal
control over financial reporting is effective as of 31 December 2010.

Our independent registered public accounting firm has audited and

issued their report on ING’s internal control over financial reporting,
which appears on the following page.

AMSTERDAM, 14 MARCH 2011

Jan H.M. Hommen

CEO, chairman of the Executive Board

Patrick G. Flynn
CFO, member of the Executive Board

76 ING Group Annual Report 2010

 Corporate governance 3

Section 404 Sarbanes-Oxley Act continued

REPORT OF INDEPENDENT REGISTERED PUBLIC We also have audited, in accordance with the standards of the
ACCOUNTING FIRM Public Company Accounting Oversight Board (United States), the
consolidated balance sheet of ING Groep N.V. as of 31 December
TO THE SHAREHOLDERS, THE SUPERVISORY BOARD AND 2010, the consolidated profit and loss account, consolidated
THE EXECUTIVE BOARD OF ING GROEP N.V. statement of comprehensive income, consolidated statement of
cash flows and consolidated statement of changes in equity for the
We have audited ING Groep N.V.’s internal control over financial year then ended. Our report dated 14 March 2011 expressed an
reporting as of 31 December 2010, based on criteria established in unqualified opinion thereon.
Internal Control – Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (the
COSO criteria). ING Groep N.V.’s management is responsible for AMSTERDAM, 14 MARCH 2011
maintaining effective internal control over financial reporting, and ERNST & YOUNG ACCOUNTANTS LLP
for its assessment of the effectiveness of internal control over
financial reporting included in the accompanying Report of the
Executive Board on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the company’s internal
control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the

Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable
basis for our opinion.

A company’s internal control over financial reporting is a process

designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of
the company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are
being made only in accordance with authorisations of management
and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorised
acquisition, use or disposition of the company’s assets that could
have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial

reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

In our opinion, ING Groep N.V. maintained, in all material respects,

effective internal control over financial reporting as of 31 December
2010, based on the COSO criteria.

ING Group Annual Report 2010 77

3 Corporate governance

Remuneration report
This chapter sets out the remuneration for the Executive Board and REMUNERATION POLICY
the Supervisory Board. The remuneration policy for the Executive The primary objective of the remuneration structure is to enable
Board was adopted by the annual General Meeting (AGM) on ING to retain and recruit qualified and expert leaders, senior staff
27 April 2010. As set out on page 80, the Supervisory Board and other high-qualified employees, who have a drive for
proposes to amend the remuneration policy in order to comply excellence in serving the interests of the company’s various
with the Capital Requirements Directive III (CRD III) issued by the stakeholders. ING endeavours to match compensation of the
European Union. This amendment will be submitted to the AGM company’s leadership appropriately against a variety of factors,
on 9 May 2011. Following adoption of this amendment, the such as the complexity of functions, the scope of responsibilities,
amended remuneration policy will become effective as of the alignment of risks and rewards, and the long-term objectives of
compensation year 2011. The Remuneration report also provides an the company and its stakeholders, which is all the more important
outline of how the Remuneration Committee is applying the new given the changing international standards regarding responsible
policy in 2011. In addition, the Remuneration report provides remuneration. These factors differ for each role, line of business
information on the remuneration paid for 2010. Furthermore, and country. This is especially the case for ING with its operations in
information is included on loans and advances to the Executive over 40 countries and over 100,000 employees of whom around
Board and Supervisory Board members as well as ING depositary 73,000 are based outside the Netherlands (over 60% of senior
receipts for shares held by members of both Boards. management is non-Dutch). As much as possible for a global
financial institution of this size, ING aims to take account of all
these differences and also of the standards applied within similar
financial institutions in the various countries in which it operates.

REMUNERATION POLICY FOR THE EXECUTIVE BOARD

ADOPTED IN 2010
According to the remuneration policy of the Executive Board as
adopted by the annual General Meeting on 27 April 2010,
remuneration of Executive Board members consists of a
combination of fixed compensation (base salary) and variable
compensation (together ‘total direct compensation’), pension
arrangements and benefits as described below.

Total direct compensation: moderation and reduced

emphasis on variable remuneration
Total direct compensation levels are based on market data that
include peers both inside and outside the financial sector in the
international context in which ING operates. Total direct
compensation is benchmarked against a peer group of companies
that, in the opinion of the Supervisory Board, are comparable with
ING in terms of size and scope. In line with the foregoing, the
Supervisory Board has determined that the peer group consists
of the companies in the Dow Jones EURO STOXX 50 Index.
These are 50 companies, in a range of financial and non-financial
industries, which are based in countries within the economic
and monetary union of the European Union. In accordance with
the Dutch Banking Code, ING’s new remuneration policy for the
Executive Board aims for total direct compensation levels slightly
below market median levels for comparable positions in the
relevant markets.

In addition, the remuneration policy provides for a balanced mix

between fixed and variable compensation. Variable compensation
will not exceed 100% of fixed salary at the time of allocation. Fixed
compensation (i.e. the base salary levels) will be determined in line
with the relevant market environment as an integral part of total
direct compensation, and will be reviewed from time to time by the
Supervisory Board. The policy provides for an at target variable
compensation of 40% in cash and 40% in stock (in total 80%) of
base salary if performance criteria are met. If performance criteria
(as predetermined by the Supervisory Board) are exceeded, the
variable component can be increased from target to maximum,
not exceeding 100% of base salary at the time of allocation.

78 ING Group Annual Report 2010

 Corporate governance 3

Remuneration report continued

Increased emphasis on long-term value creation Benefits

The remuneration policy for the Executive Board combines the Executive Board members will continue to be eligible for a range
short- and long-term variable components into one structure. of additional benefits (e.g. the use of company cars, contributions
This structure intends to support both long-term value creation to company savings plans and, if applicable, expatriate allowances).
and short-term company objectives. The emphasis on long-term Executive Board members may obtain banking and insurance
performance indicators within the variable component of the services from ING Group subsidiaries in the ordinary course of their
compensation package is increased by means of deferral, business and on terms that apply to most other comparable
a reasonableness test and claw back mechanisms. employees of ING. In addition, tax and financial planning services
will be provided to ensure compliance with the relevant
The allocation of variable compensation is conditional on the legislative requirements.
achievement of a number of performance objectives. The short-
term component, at maximum 50% of total variable compensation, Tenure
is paid in cash the year following the performance year. The other The contract of employment for Executive Board members
50% of the total variable compensation is deferred. This long-term provides for an appointment for a period of four years and allows
component is allocated in stock in order to ensure alignment of the for reappointment by the General Meeting. In the case of an
Executive Board’s interests with the interests of shareholders. It also involuntary exit, Executive Board members are entitled to an
intends to serve the objective of retaining the members of the exit-arrangement limited to one year base salary.
Executive Board for a longer period of time. The value of the stock
award is set such that total variable compensation at the time that OTHER ITEMS FOR SUPERVISORY BOARD DISCRETION
the maximum number of shares to be granted is determined stays Claw back and adjustments
within the 100% limit. The Supervisory Board has the authority to reclaim variable
remuneration allocated to a member of the Executive Board based
The stock awards will vest on the third anniversary of the grant on inaccurate data and/or behaviour that led to significant harm to
date, subject to a reasonableness test by the Supervisory Board to the company. The Supervisory Board also has the authority to
determine whether application of the predetermined criteria does adjust variable remuneration if application of the predetermined
not result in undesired outcomes. Adjustments to the number of performance criteria results in undesired outcomes. Accordingly,
shares will only be considered in extraordinary circumstances. the Supervisory Board has decision authority in situations not
Executive Board members are not allowed to sell depositary addressed in the policy.
receipts obtained within a period of five years from the grant date.
However, they are allowed to sell part of their depositary receipts at Special employment conditions
the date of vesting to pay tax over the vested share award. Special employment conditions, such as commitments made to
secure the recruitment of new executives, may be used in
Increased focus on risk and non-financial performance exceptional circumstances subject to strict control by the
Variable compensation is increasingly linked to risk considerations Supervisory Board.
and non-financial performance and will take into account both
individual and company performance criteria. Performance Supervisory Board discretion to review the policy and the
measurement will account for estimated risks and costs of capital. remuneration paid
In addition to financial indicators, performance will also be assessed ING as a company is expected to go through significant changes
based on non-financial drivers, by means of a number of targets during the coming year. Moreover, the relevant international
regarding economic, environmental, customer satisfaction employment market is very much in flux. In order to ensure that
and social criteria. ING can adapt to these two uncertain factors, the Supervisory
Board will re-evaluate in 2012, or earlier should regulatory
Pensions Executive Board members developments require this, whether the new remuneration policy
Members of the Executive Board who are employed on the basis of (adopted in 2010) will be in line with the long-term objectives of
a Dutch employment contract, will participate in the new defined the company, the relevant international context, as well as the
contribution pension plans introduced in 2010 as part of the societal perception of ING as a company. Should it become clear,
remuneration policy. Individual board members participating in the after such evaluation, that the new remuneration policy has led to
pension plan that existed before the introduction of the new plans an unintended or inequitable outcome, the Supervisory Board will
were given the choice to keep their existing pension arrangement. have the discretion to correct the previously allocated variable
The existing pension arrangement, approved by the 2006 General remuneration. However, it is understood that any such correction
Meeting, is based on a defined contribution plan. Alternatively, could not lead to a deviation from the requirement that variable
they can also switch to the new arrangements. compensation cannot exceed 100% of base salary during any year,
as required under the Dutch Banking Code.
Members of the Executive Board will be required to pay a
contribution to their pension premium in line with the contributions The remuneration policy is leading in the international financial
under ING’s Collective Labour Agreement in the Netherlands. markets in terms of moderation of pay. The Supervisory Board and
the Executive Board also have an obligation to safeguard the
Members of the Executive Board working on a non-Dutch continuity of the company. The Supervisory Board will therefore
employment contract will be offered pensions in line with evaluate from time to time how these two responsibilities relate to
local practices. each other. If and when appropriate, it can make adjustments.

ING Group Annual Report 2010 79

3 Corporate governance

Remuneration report continued

PROPOSED AMENDMENTS TO REMUNERATION POLICY EXECUTIVE BOARD REMUNERATION STRUCTURE 2011

ADOPTED IN 2010 With regard to the remuneration for 2011, the Supervisory Board
In 2010 the European Union issued the Capital Requirements continues to build upon the remuneration policy adopted in 2010.
Directive III which contained significant regulations in relation to However, the policy will now include the proposed amendments
remuneration for certain categories of employees in banks and to the allocation of variable compensation effective 2011,
asset managers. The implementation date is 1 January 2011 and in as outlined above.
the Netherlands incorporation into law took place by means of a
decree. The Dutch central bank (DNB), which is responsible for the Executive Board base salary 2011
day-to-day supervision, published its final guidelines in December A market competitive analysis is conducted from time to time to
2010. Many of the specific requirements under CRD III relate to ensure market competitiveness. As outlined in the 2009 Annual
executive remuneration and therefore affect the current Executive Report, the total remuneration levels are significantly below the
Board remuneration policy. market median of the Dow Jones EURO STOXX 50. In light of the
concerns of the competitiveness of the executive compensation
In order to comply with the Capital Requirements Directive III, levels as well as internal and external developments, for 2011 the
it is proposed to amend the Executive Board remuneration policy Supervisory Board has concluded to increase the base salary levels
with respect to the allocation of variable compensation as set by 2% for the Executive Board members. The 2011 base salary for
out hereinafter. members of the Executive Board amounts to EUR 765,000 and for
the CEO to EUR 1,380,500. Total remuneration levels in 2011 will
The short-term component of total variable compensation will continue to be significantly below the relevant market median.
be reduced by 10% to a maximum of 40% (was: 50%) and will be
equally divided between cash and stock (was: cash only) and paid Executive Board variable compensation 2011
in the year following the performance year. The remaining 60% The 2011 target variable compensation of 80% of base salary
of the total variable compensation (was: 50%) will be deferred. remains the same as for 2010. The actual payout may vary between
This long-term component will also be equally divided between 0% and 125% of the target level (i.e. between 0% and 100% of
cash and stock (was: stock only) and conditionally granted in the base salary). In connection herewith, the Supervisory Board
year following the performance year. performed an analysis of various scenarios which were considered
relevant. Financial and non-financial performance indicators will be
The deferred cash and deferred stock awards will be subject to individually set for each Executive Board member and agreed by the
tiered vesting at the first, second and third anniversary of the Supervisory Board.
grant date (one-third per annum). Vesting is conditional on an
ex-post assessment by the Supervisory Board. The ex-post There will be financial parameters for each Executive Board
assessment cannot lead to an upward adjustment of the value member to measure the performance at Bank and Insurance levels.
of the cash deferred portion or the number of deferred shares. These financial parameters include for Bank: underlying net result,
underlying net ROE, cost/income ratio, risk weighted assets, core
Executive Board members are not allowed to sell depositary Tier 1 ratio, loan-to-deposit ratio; and for Insurance: underlying net
receipts obtained within a period of five years from the grant date. result, operating result, financial leverage ratio, sales, administrative
However, they are allowed to sell part of their depositary receipts expenses and net pension & asset management inflow.
at the date the stock becomes unconditionally theirs in order to The quantitative elements of the targets are considered stock
pay tax over these share awards. price sensitive and competition sensitive; accordingly these are
not disclosed.
These amendments to the current remuneration policy for the
Executive Board will be put forward for adoption at the 2011 For 2011, at least 40% of total variable compensation will be
annual General Meeting. If adopted, it will become effective as based on predefined non-financial performance indicators.
of compensation year 2011. The general principles underlying the The incorporation of non-financial indicators in the overall
adjustments to the remuneration policy for the Executive Board assessment is particularly aimed at further improving sustainable
will also be applied in the remuneration of members of the business practices within ING. These indicators depend on the
Management Boards and other senior managers throughout specific responsibilities of the individual Executive Board member.
the organisation. For each Executive Board member a number of performance
objectives are formulated relating to customer relationships,
The Capital Requirements Directive III has been implemented in improving sustainable business practices/corporate responsibility,
most European Union Members States. However, due to the short execution of the restructuring and separation plans, employee
timeframe, not everything has been clarified yet at this moment. engagement, leadership and talent.
The proposed amendments to the Executive Board remuneration
policy as set out above are based on the current interpretation of Variable compensation for members of the Executive Board will
the Directive. Should it become clear, after everything has been only be awarded as long as ING Group has a positive net
clarified that further amendments are mandatory, the policy is underlying profit in 2011. The Supervisory Board will review the
amended accordingly. remuneration paid over time, in line with the policy.

The vesting of deferred cash and deferred stock awards is

conditional and subject to an ex-post assessment by the
Supervisory Board. The ex-post assessment is based on factors such
as trailing liabilities stemming from prior decisions made by each
Board member; whether the company suffered a significant failure

80 ING Group Annual Report 2010

 Corporate governance 3

Remuneration report continued

in risk management; and/or for as long as ING has not paid back To ensure the autonomy of the individual, financial performance
the Dutch State, whether there has been a significant change in the metrics will depend on objectives determined at the divisional level
economic or regulatory capital base. (i.e. not at the level of the relevant business unit). In addition,
performance assessments will not only be determined by business
REMUNERATION POLICY FOR SENIOR MANAGEMENT unit management, but also by the functional line.
As much as possible for a global financial institution of this size,
ING aims to take account of all the differences and standards For the Management Board Insurance and senior management
applied within similar financial institutions in the various countries in ING’s insurance operations, remuneration will be in line with
in which it operates. The remuneration of members of the the general principles of the new remuneration policy for the
Management Boards and senior management will be in line with Executive Board. However, changes in the mix between fixed
the general principles of the amended remuneration structure salary and variable pay as well as the allocation of variable
for the Executive Board, taking into account international and compensation will need to be weighted in light of the different
local practices. regulatory requirements within the international insurance industry
and the separation of ING’s banking and insurance activities.
Total direct compensation
Total direct compensation levels will be based on benchmark The regulatory environment is still in development and not
data in the international context in which ING operates. everything has been clarified yet at this moment. The structure as
ING aims for compensation levels to be set at market set out above is based on information currently available. Should it
median levels. Total compensation levels will be determined become clear, after everything has been clarified, that amendments
in line with the relevant market. are necessary, ING will amend the structure as deemed appropriate.

Increased focus on long-term value creation, risk and 2010 REMUNERATION

non-financial performance REMUNERATION EXECUTIVE BOARD 2010
Variable compensation is increasingly linked to long-term value The Executive Board remuneration for 2010 is based on the
creation and risk. It is determined based on individual, business remuneration policy approved by the 2010 annual General Meeting.
and company performance criteria. Performance measurement will
increasingly account for estimated risks and costs of capital. Executive Board base salary 2010
There will be increased emphasis on long-term value creation by The base salary of all Executive Board members was set at the
means of long-term incentives, deferral and claw back mechanisms. time of the introduction of the remuneration policy in 2010.

Furthermore, and in addition to financial indicators, performance is Executive Board variable compensation 2010
also assessed based on non-financial drivers. The incorporation of The target variable compensation is set at 80% of base salary.
non-financial indicators in the overall assessment is particularly The actual payout may vary between 0% and 125% of the target
aimed at further improving sustainable business practices within level (i.e. between 0% and 100% of base salary).
ING. Therefore, a number of action targets have been formulated
regarding ING’s performance in the area of, for example, workforce For 2010, at least 40% of total variable compensation is based on
diversity, customer satisfaction, stakeholder engagement and predefined non-financial performance indicators. The incorporation
sustainable product development. of non-financial indicators in the overall assessment is particularly
aimed at improving business performances within ING. These
SENIOR MANAGEMENT REMUNERATION STRUCTURE 2011 indicators depend on the specific responsibilities of the individual
Given the differences in the regulatory requirements for banking Executive Board member. For each Executive Board member a
and insurance and the separation of ING’s banking and insurance number of performance objectives were formulated relating to
activities, the remuneration structures for senior management in customer satisfaction, improve sustainable business practices, the
ING’s banking and insurance operations were determined diversity of the workforce, employee engagement and corporate
separately in 2010. responsibility. Early in 2011, the Remuneration Committee
conducted an evaluation of each Executive Board member’s
The remuneration policy for the Executive Board will apply in full to individual and collective performance against predefined objectives.
members of the Management Board Banking. For senior Each Executive Board member was allotted a performance score,
management in Banking, a gradual shift to a more balanced mix of which was approved by the Supervisory Board. This performance
fixed and variable remuneration, in line with the remuneration score determined the payout factor. The Remuneration Committee
policy for the Executive Board, was initiated in 2010 and will concluded that 2010 was a good year in which above target
continue during the coming two years. Exceptions may exist for financial performance had been achieved. The performance overall
high value specialists and senior management working in certain was at or above target for non-financial objectives, too. In general,
divisions and/or geographical areas. all the Executive Board members performed well in their respective
areas of responsibility. The overall bottom line results were
The remuneration for a select group of employees will be reviewed well-balanced and either at or above target, which led to a payout
and amended as necessary in order to comply with the Capital of respectively 80% and 92% of base salary as shown in the table
Requirements Directive III. The amendments relate to the allocation on page 82.
of variable compensation.
The short-term component, 50% of total variable compensation, is
Moreover, compensation packages related to control functions paid in cash the year following the performance year. The other
(such as risk management functions) will be structured such that 50% of the total variable compensation will be deferred. This
they provide for a reduced emphasis on variable compensation. long-term component is allocated in stock.

ING Group Annual Report 2010 81

 3 Corporate governance

Remuneration report continued

Compensation of the individual members of the Executive Board

amounts in thousands of euros 2010 2009 2008
number of number of number of
amount shares (1) amount options/shares amount options/shares
Jan Hommen
Base salary (2) 1,353 923
Variable compensation in cash 623 0
Variable compensation in stock 623(3) 69,878 0

Patrick Flynn (4)

Base salary 750 454
Variable compensation in cash 300 0
Variable compensation in stock 300 (3) 33,671 0

Koos Timmermans
Base salary 750 665 665
Variable compensation in cash 345 0 0
Variable compensation in stock 345 (3) 38,721 0 0
(1)
The number of shares is based on the average ING stock price on the day on
which the 2010 year-end results were published. The maximum number of
shares to be granted to the Executive Board members will be tabled for
approval at the General Meeting. The shares will be awarded in May.
(2)
Jan Hommen was appointed to the Executive Board on 27 April 2009. Jan
Hommen has been remunerated as of 27 April 2009 in accordance with the
‘new’ remuneration policy adopted by the General Meeting in 2010. The
figure for 2009 reflects a partial year as Executive Board Member and was
paid in 2010 after the ‘new’ remuneration policy was adopted. Jan Hommen
did not receive variable remuneration for 2009.
(3)
This amount of variable compensation is deferred. This long-term component
is allocated in stock. These stock awards will vest on the third anniversary of
the grant date, subject to a reasonableness test by the Supervisory Board to
determine whether application of the predetermined criteria does not result in
undesired outcomes.
(4)
Patrick Flynn was appointed to the Executive Board on 27 April 2009. The
figures for this member reflect compensation earned in the capacity as
Executive Board member. Thus, the figure for 2009 reflects a partial year as
Executive Board member.

Compensation of former members of the Executive Board

amounted to nil for 2010, EUR 2,842 thousand for 2009 and
EUR 6,387 thousand for 2008.

Pension costs
The table below shows the pension costs of the individual
members of the Executive Board.

Pension costs of the individual members of the Executive Board

amounts in thousands of euros 2010 2009 2008
Jan Hommen (1) 0 0 (1)
Jan Hommen does not participate in the pension plan.
Patrick Flynn (2) 134 78 (2)
Patrick Flynn was appointed to the Executive Board on 27 April 2009. The 2009
Koos Timmermans 158 115 247 pension costs for this member reflect the partial year as Executive Board member.

Pension costs of former members of the Executive Board

amounted to nil in 2010, EUR 742 thousand in 2009 and
EUR 3,333 thousand in 2008.

82 ING Group Annual Report 2010

 Corporate governance 3

Remuneration report continued

Long-term incentives awarded in previous years

The long-term incentive plan (LTIP) at ING in place until 2010
included both stock options and performance shares. The ING
stock options have a total term of ten years and a vesting period
of three years after which they can be exercised for the
remaining seven years.

Information on the options outstanding and the movements during the financial year of options held by the members of the
Executive Board as at 31 December 2010 (1)
Outstanding as Waived or Outstanding as
at 31 December Granted Exercised in expired in at 31 December Exercise price in
number of options 2009 in 2010 2010 2010(2) 2010 euros Vesting date Expiry date
Jan Hommen 0 0 0 0
Patrick Flynn 0 0 0 0
Koos Timmermans 13,674 0 0 0 13,674 22.57 11 Mar 2005 11 Mar 2012
7,814 0 0 0 7,814 14.37 15 Mar 2007 15 Mar 2014
11,460 0 0 0 11,460 17.88 30 Mar 2008 30 Mar 2015
8,504 0 0 0 8,504 25.16 23 Mar 2009 23 Mar 2016
46,157 0 0 0 46,157 24.72 22 Mar 2010 22 Mar 2017
56,405 0 0 0 56,405 19.53 15 May 2011 15 May 2018
20,675 0 0 0 20,675 14.36 17 Sept 2011 17 Sept 2018
(1)
The number of options and the strike prices of these options reflect the
number and strike prices adjusted for the effects of the rights issue of
December 2009.
(2)
Waived at vesting date or expired at expiry date.

Performance shares were conditionally granted. The number of

ING depositary receipts that would ultimately be granted at the end
of a three-year performance period depended on ING’s Total
Shareholder Return (TSR) performance over three years (return in
the form of capital gains and reinvested dividends that shareholders
received in that period) relative to the TSR performance of a
predefined peer group.

ING’s TSR ranking within this group of companies determines the

final number of performance shares that vest at the end of the
three-year performance period. The performance shares granted in
2007 had a three-year performance period of 2007–2009 and
vested in 2010. The actual results of 43% are based upon ING’s TSR
ranking of 15th within the designated peer group. The performance
shares granted in 2008 have a three-year performance period of
2008–2010 and will vest in 2011. The actual results of 57% are
based upon ING’s TSR ranking of 14th within the designated peer
group. The results were determined by an independent third party.
ING’s external auditor has reviewed the calculations performed.

For Koos Timmermans, a number of 4,152 performance shares

vested in 2010 (43% of the 9,656 shares awarded). The value at
vesting amounted to EUR 29,894. In 2011 a number of 10,411
performance shares will vest (57% of the 18,266 shares awarded).
The number of performance shares reflects the number adjusted
for the effects of the rights issue of December 2009.

Patrick Flynn received a conditional grant of restricted stock in 2009

to a maximum of 130,230 shares. The cumulative value of the
conditional share award is capped at EUR 1.3 million. The first
vesting in the amount of 39,069 shares occurred on 27 April 2010.
The value at vesting amounted to EUR 288,329. A second vesting
of 39,069 shares will occur at the annual General Meeting in 2011,
and the remaining 52,092 shares will vest at the annual General
Meeting in 2012, subject to satisfactory performance and the
aforementioned cumulative value cap of EUR 1.3 million. The
number of shares reflects the number adjusted for the effects of
the rights issue of December 2009.

ING Group Annual Report 2010 83

 3 Corporate governance

Remuneration report continued

The Executive Board members are not allowed to sell depositary

receipts obtained within a period of five years from the grant date.
They are only allowed to sell part of their depositary receipts at the
date of vesting to pay tax over the vested performance-share
award. Depositary receipts obtained from exercised stock options
may only be sold within a period of five years from the grant date
of the options to pay tax over the exercised award.

Loans and advances to Executive Board members

The table below presents the loans and advances provided to
Executive Board members and outstanding on 31 December 2010,
2009 and 2008. These loans were concluded in the normal course
of business and on terms generally applicable to Company
personnel as a whole and were approved by the Supervisory Board.

Loans and advances to the individual members of the Executive Board

Amount Amount Amount
outstanding Average outstanding Average outstanding Average
31 December interest rate Repayments 31 December interest rate Repayments 31 December interest rate Repayments
amounts in thousands of euros 2010 2009 2008
Jan Hommen 1,588 3.4%
Koos Timmermans 380 4.6% 380 4.6% 380 4.6%

ING depositary receipts for shares held by Executive Board

members
Executive Board members are permitted to hold ING depositary
receipts for shares as a long-term investment. The table below
shows the holdings by members of the Executive Board.

ING depositary receipts for shares held by members of the

Executive Board
number of shares 2010 2009 2008
Jan Hommen 76,426 46,426
Patrick Flynn 25,793
Koos Timmermans 16,504 14,457 2,546

REMUNERATION SUPERVISORY BOARD

The annual remuneration of the Supervisory Board members as
adopted by the General Meetings in 2006 and 2008 amounts to:
chairman EUR 75,000, vice-chairman EUR 65,000, other members
EUR 45,000. In addition to the remuneration each member receives
an expense allowance. For the chairman and vice-chairman the
annual amount is EUR 6,810. For the other members the amount
is EUR 2,270.

The remuneration for the membership of committees is as follows:

chairman of the Audit Committee EUR 8,000, members of the
Audit Committee EUR 6,000, chairmen of other Supervisory Board
committees EUR 7,500 and members of other Supervisory Board
committees EUR 5,000. In addition to the fixed remuneration,
committee members receive a fee for each meeting they attend.
For the Audit Committee chairman this fee is EUR 2,000 per
meeting and for its members EUR 1,500. For the chairman and
members of other committees the attendance fee amounts to
EUR 450 per meeting.

Supervisory Board members receive an additional fee of EUR 2,000

per attended Supervisory Board or Committee meeting in the event
the meeting is held outside the country of residence of the
Supervisory Board member, or an additional amount of EUR 7,500
per attended Supervisory Board or Committee meeting if
intercontinental travel is required for attending the meeting.

84 ING Group Annual Report 2010

 Corporate governance 3

Remuneration report continued

Remuneration Supervisory Board 2010

The table below shows the remuneration, expense allowances and
attendance fees per Supervisory Board member for 2010 and
previous years.

Compensation of the members of the Supervisory Board

amounts in thousands of euros 2010 (1) 2009 (1) 2008 (1)
Peter Elverding (2) 84 79 68 (1)
In 2010, 2009 and 2008 the remuneration and attendance fees for the
Jeroen van der Veer (3) 74 35 membership of a committee have not been paid to the chairman and vice-
Tineke Bahlmann (4) 69 46 chairman of the Supervisory Board. Effective 2011, remuneration and attendance
fees for the membership of a committee will be paid to the chairman and
Henk Breukink 69 61 61 vice-chairman of the Supervisory Board.
Claus Dieter Hoffmann 74 78 67 (2)
Peter Elverding has been chairman of the Supervisory Board since April 2009.
(3)
Piet Klaver 68 65 62 Jeroen van der Veer is a member of the Supervisory Board as of July 2009. The
compensation figure for 2009 reflects the partial year as member of the
Godfried van der Lugt 69 67 70 Supervisory Board. Jeroen van der Veer has been vice-chairman of the
Aman Mehta (5) 114 113 62 Supervisory Board since October 2009.
(4)
Joan Spero (5) 104 105 55 Tineke Bahlmann is a member of the Supervisory Board as of April 2009. The
compensation figure for 2009 reflects the partial year as member of the
Jackson Tai (5) 139 152 89 Supervisory Board.
Lodewijk de Waal (6) 66 50 (5)
Aman Mehta, Joan Spero and Jackson Tai are members of the Supervisory Board
Piet Hoogendoorn (7) 20 64 70 as of April 2008. The compensation figures for 2008 reflect the partial year as
members of the Supervisory Board.
Harish Manwani (8) 40 69 51 (6)
Lodewijk de Waal is a member of the Supervisory Board as of April 2009. He has
Karel Vuursteen (9) 20 61 62 been acting as an observer in the Supervisory Board as of November 2008. The
compensation figure for 2009 reflects the partial year as member of the
Supervisory Board. Up to the appointment date Lodewijk de Waal has received
remuneration, expense allowances and attendance fees in line with the
remuneration of the Supervisory Board.
(7)
Piet Hoogendoorn retired in April 2010. The compensation figure for 2010
reflects the partial year as member of the Supervisory Board.
(8)
Harish Manwani retired in April 2010. The compensation figure for 2010 reflects
the partial year as member of the Supervisory Board.
(9)
Karel Vuursteen retired in April 2010. The compensation figure for 2010 reflects
the partial year as member of the Supervisory Board.

Compensation of former members of the Supervisory Board who

are not included in the above table amounted to nil in 2010,
EUR 83 thousand in 2009 and EUR 269 thousand in 2008.

Loans and advances to Supervisory Board members

Supervisory Board members may obtain banking and insurance
services from ING Group subsidiaries in the ordinary course of their
business and on terms that are customary in the sector. The table
below presents the loans and advances to Supervisory Board
members outstanding on 31 December 2010, 2009 and 2008.

Loans and advances to members of the Supervisory Board

Amount Amount Amount
outstanding Average outstanding Average outstanding Average
31 December interest rate Repayments 31 December interest rate Repayments 31 December interest rate Repayments
amounts in thousands of euros 2010 2009 2008
Jeroen van der Veer (1) 282 8.6% 282 8.6%
(1)
The amount reflects a housing mortgage loan granted in 1992, well before
Jeroen van der Veer’s appointment to the Supervisory Board (effective as of
1 July 2009).

ING depositary receipts for shares and options held by

Supervisory Board members
Supervisory Board members are permitted to hold ING depositary
receipts for shares as a long-term investment. The table below
shows the holdings by members of the Supervisory Board.
Supervisory Board members did not hold ING options at year-
end 2010.

ING depositary receipts for shares held by members of the Supervisory Board (1)
number of shares 2010 2009 2008
Piet Klaver 43,796 13,796 7,430 (1)
The numbers of depositary receipt for shares reflect the shares held by the
Godfried van der Lugt 24,142 24,142 members of the Supervisory Board and their partners.
(2)
Jeroen van der Veer (2) 99,469 99,469 Jeroen van der Veer is a member of the Supervisory Board as of July 2009.

ING Group Annual Report 2010 85

3 Corporate governance

Works councils
CENTRAL WORKS COUNCIL
as at 1 January 2011

Rob Eijt, chairman

Alex Hoogendoorn, secretary
Goof Bode, deputy chairman
Rudie van Doorn, deputy secretary
Hans de Boer, Wim Bruijnes, Arno Daams, Anneke Dalger,
Jeffrey Dinsbach, Erik Hoijtink, Aad Kant, Jan Krutzen,
Job van Luyken, Sjaak Muller, Hennie Post, Koos Rodenburg,
Sunil Tahloe, Henk Timmer, Cindy Uit de Bulten, Gerard Veldman,
Michel Vonk, Jelte Wiersinga, Bernard Wolters, Bert Woltheus.

EUROPEAN WORKS COUNCIL

as at 1 January 2011

Mathieu Blondeel, chairman, Belgium

Marcel Koopman, secretary, the Netherlands
Norbert Lucas, deputy chairman, Germany
Leo D Antuono, deputy secretary, Belgium
Werner Fözö, Austria
Jean-Claude Van Den Abeele, Jean Pierre Lambert, Belgium
Kaloyan Marinov, Bulgaria
Vladimir Koudela, Czech Republic
Mourad Benzaaza, France
Carolin Simonis, Germany
Nikolaos Ploumis, Greece
Csilla Dobos, Hungary
Matilde D’Alessandro, Italy
Arsène Kihm, Luxembourg
Bernard Bodt, Jeffrey Dinsbach, Robert Milewski, Gerrit Riphagen,
Havva Tasgil, Gerard Veldman, Jelte Wiersinga, the Netherlands
Mieczyslaw Bielawski, Mariusz Cieslik, Poland
Mihai Ailincai, Roxana Florescu, Romania
Miguel Angel Hernandez, Raoul Lopez, Spain
Sam Chaudhuri, Rina Goldenberg, UK.

86 ING Group Annual Report 2010

 Consolidated annual accounts 4

Contents
4 Consolidated annual accounts
Consolidated balance sheet 88
Consolidated profit and loss account 89
Consolidated statement of comprehensive income 90
Consolidated statement of cash flows 91
Consolidated statement of changes in equity 92
Accounting policies for the consolidated annual accounts 94
Notes to the consolidated annual accounts 112
Risk management 203
Capital management 249
Subsequent events 255

5 Parent company annual accounts

Parent company balance sheet 256
Parent company profit and loss account 257
Parent company statement of changes in equity 258
Accounting policies for the parent company annual accounts 259
Notes to the parent company annual accounts 260

6 Other information
Independent auditor’s report 266
Proposed appropriation of result and Subsequent events 267

7 Additional information
Risk factors 268
Financial glossary 282
General information 289

ING Group Annual Report 2010 87

4 Consolidated annual accounts

Consolidated balance sheet

of ING Group
as at 31 December

amounts in millions of euros 2010 2009

ASSETS
Cash and balances with central banks 1 13,072 15,390
Amounts due from banks 2 51,828 43,397
Financial assets at fair value through profit and loss 3
– trading assets 125,675 111,444
– investments for risk of policyholders 120,481 104,597
– non-trading derivatives 11,722 11,632
– designated as at fair value through profit and loss 6,016 5,517
Investments 4
– available-for-sale 222,547 197,703
– held-to-maturity 11,693 14,409
Loans and advances to customers 5 613,204 578,946
Reinsurance contracts 17 5,789 5,480
Investments in associates 6 3,925 3,699
Real estate investments 7 1,900 3,638
Property and equipment 8 6,132 6,119
Intangible assets 9 5,372 6,021
Deferred acquisition costs 10 10,604 11,398
Assets held for sale 11 681 5,024
Other assets 12 36,469 39,229
Total assets 1,247,110 1,163,643

EQUITY
Shareholders’ equity (parent) 13 41,555 33,863
Non-voting equity securities 13 5,000 5,000
46,555 38,863
Minority interests 729 915
Total equity 47,284 39,778

LIABILITIES
Subordinated loans 14 10,645 10,099
Debt securities in issue 15 135,604 119,981
Other borrowed funds 16 22,291 23,151
Insurance and investment contracts 17 270,582 240,858
Amounts due to banks 18 72,852 84,235
Customer deposits and other funds on deposit 19 511,362 469,508
Financial liabilities at fair value through profit
and loss 20
– trading liabilities 108,050 98,245
– non-trading derivatives 17,782 20,070
– designated as at fair value through profit and loss 12,707 11,474
Liabilities held for sale 11 424 4,890
Other liabilities 21 37,527 41,354
Total liabilities 1,199,826 1,123,865

Total equity and liabilities 1,247,110 1,163,643

References relate to the notes starting on page 112. These form an integral part of the consolidated annual accounts.

88 ING Group Annual Report 2010

 Consolidated annual accounts 4

Consolidated profit and loss account

of ING Group
for the years ended 31 December

amounts in millions of euros 2010 2010 2009 2009 2008 2008

Interest income banking operations 68,334 79,850 97,011
Interest expense banking operations –55,011 –67,475 –85,969
Interest result banking operations 35 13,323 12,375 11,042
Gross premium income 36 27,947 30,492 43,812
Investment income 37 7,563 3,342 4,664
Net result on disposals of group companies 38 310 264 17
Gross commission income 6,303 6,790 7,504
Commission expense –1,725 –2,177 –2,539
Commission income 39 4,578 4,613 4,965
Valuation results on non-trading derivatives 40 –410 –4,676 2,300
Net trading income 41 627 1,125 –749
Share of profit from associates 6 314 –461 –404
Other income 42 635 691 644
Total income 54,887 47,765 66,291

Gross underwriting expenditure 43 44,998 50,440 18,831

Investment result for risk of policyholders –10,492 –17,742 32,408
Reinsurance recoveries –1,741 –1,714 –1,754
Underwriting expenditure 43 32,765 30,984 49,485
Addition to loan loss provisions 5 1,751 2,973 1,280
Intangible amortisation and other impairments 44 1,112 568 464
Staff expenses 45 7,771 7,338 8,764
Other interest expenses 46 792 716 978
Other operating expenses 47 6,219 6,711 6,807
Total expenses 50,410 49,290 67,778

Result before tax 4,477 –1,525 –1,487

Taxation 48 1,152 –472 –721

Net result (before minority interests) 3,325 –1,053 –766

Attributable to:
Equityholders of the parent 3,220 –935 –729
Minority interests 105 –118 –37
3,325 –1,053 –766

amounts in euros 2010 2009 2008

Basic earnings per ordinary share 49 0.73 –0.57 –0.27
Diluted earnings per ordinary share 49 0.73 –0.57 –0.27
Dividend per ordinary share 50 0.00 0.00 0.74

References relate to the notes starting on page 112. These form an integral part of the consolidated annual accounts.

ING Group Annual Report 2010 89

 4 Consolidated annual accounts

Consolidated statement of comprehensive income

of ING Group
for the years ended 31 December

amounts in millions of euros 2010 2009 2008

Net result 3,325 –1,053 –766

Unrealised revaluations after taxation (1) 2,603 11,867 –18,485

Realised gains/losses transferred to profit and loss (1) 86 1,554 2,476
Changes in cash flow hedge reserve 475 –805 746
Transfer to insurance liabilities/DAC –1,644 –2,079 2,193
Exchange rate differences 2,884 59 –1,086
Other revaluations –3 –9 –23
Total amount recognised directly in equity (other comprehensive income) 4,401 10,587 –14,179

Total comprehensive income 7,726 9,534 –14,945

Comprehensive income attributable to:

Equity holders of the parent 7,634 9,665 –14,703
Minority interests 92 –131 –242
7,726 9,534 –14,945
(1)
Reference is made to Note 13 ‘Shareholders’ equity (parent)/non-voting equity securities’ for a breakdown of the individual components.

The Unrealised revaluations after taxation comprises EUR –2 million (2009: EUR 15 million; 2008: EUR 218 million) related to the share
of other comprehensive income of associates.

The Exchange rate differences comprises EUR 251 million (2009: EUR 131 million; 2008: EUR –214 million) related to the share of other
comprehensive income of associates.

Reference is made to Note 48 ‘Taxation’ for the disclosure on the income tax effects on each component of the other comprehensive income.

90 ING Group Annual Report 2010

 Consolidated annual accounts 4

Consolidated statement of cash flows

of ING Group
for the years ended 31 December

amounts in millions of euros 2010 2009 2008

Result before tax 4,477 –1,525 –1,487
Adjusted for: – depreciation 1,723 1,701 1,492
– deferred acquisition costs and value of business acquired 1,296 –1,131 –444
– increase in provisions for insurance and investment contracts 3,860 3,829 16,363
– addition to loan loss provisions 1,751 2,973 1,280
– other 3,047 6,015 6,955
Taxation paid –503 –412 –49
Changes in: – amounts due from banks, not available on demand –4,333 8,611 7,162
– trading assets –14,782 47,963 32,386
– non-trading derivatives –1,590 864 –2,020
– other financial assets at fair value through profit and loss 832 2,196 3,174
– loans and advances to customers –16,926 11,552 –76,215
– other assets 2,003 6,948 –11,847
– amounts due to banks, not payable on demand –9,831 –67,410 13,210
– customer deposits and other funds on deposit 21,202 21,073 6,831
– trading liabilities 9,804 –54,366 3,501
– other financial liabilities at fair value through profit and loss 1 –5,798 13,016
– other liabilities –6,806 –10,483 –485
Net cash flow from operating activities –4,775 –27,400 12,823

Investments and advances: – group companies –5 –1,725

– associates –165 –181 –1,034
– available-for-sale investments –163,038 –165,771 –228,291
– held-to-maturity investments –141 –314
– real estate investments –73 –130 –905
– property and equipment –527 –640 –708
– assets subject to operating leases –1,284 –1,034 –1,401
– investments for risk of policyholders –52,370 –65,362 –64,735
– other investments –372 –338 –881
Disposals and redemptions: – group companies 1,757 2,643 1,590
– associates 232 294 972
– available-for-sale investments 154,640 167,075 225,539
– held-to-maturity investments 2,620 1,675 1,640
– real estate investments 295 656 415
– property and equipment 96 82 137
– assets subject to operating leases 53 93 428
– investments for risk of policyholders 54,817 64,158 59,251
– other investments 111 24 19
Net cash flow from investing activities 53 –3,349 3,239 –10,003

Proceeds from issuance of subordinated loans 2,721

Proceeds from borrowed funds and debt securities 412,804 437,772 391,915
Repayments of borrowed funds and debt securities –405,120 –425,182 –354,015
Issuance of ordinary shares 7,276 448
Issuance of non-voting equity securities 10,000
Repayment of non-voting equity securities –5,000
Payments to acquire treasury shares –136 –101 –2,388
Sales of treasury shares 92 118 252
Dividends paid (1) –1,030 –3,207
Net cash flow from financing activities 7,640 13,853 45,726

Net cash flow 54 –484 –10,308 48,546

Cash and cash equivalents at beginning of year 20,959 31,271 –16,811

Effect of exchange rate changes on cash and cash equivalents 265 –4 –464
Cash and cash equivalents at end of year 55 20,740 20,959 31,271
(1)
2009 includes payments on non-voting equity securities (payment of the 2008 coupon of EUR 425 million, the repayment premium of EUR 346 million
and the coupon in the repayment of EUR 259 million). 2008 includes dividends paid on ordinary shares.

As at 31 December 2010 Cash and cash equivalents includes cash and balances with central banks of EUR 13,072 million
(2009: EUR 15,390 million; 2008: EUR 22,045 million). Reference is made to Note 55 ‘Cash and Cash equivalents’.

References relate to the notes starting on page 112. These form an integral part of the consolidated annual accounts.

ING Group Annual Report 2010 91

 4 Consolidated annual accounts

Consolidated statement of changes in equity

of ING Group
for the years ended 31 December

Total
shareholders’ Non-voting
equity equity Minority
amounts in millions of euros Share capital Share premium Reserves (parent) securities interests Total equity
Balance as at 1 January 2008 534 8,739 27,935 37,208 2,323 39,531

Unrealised revaluations after taxation –18,437 –18,437 –48 –18,485

Realised gains/losses transferred to profit and loss 2,476 2,476 2,476
Changes in cash flow hedge reserve 746 746 746
Transfer to insurance liabilities/DAC 2,193 2,193 2,193
Exchange rate differences –952 –952 –134 –1,086
Other revaluations –23 –23
Total amount recognised directly in equity –13,974 –13,974 –205 –14,179

Net result –729 –729 –37 –766

–14,703 –14,703 –242 –14,945

Issuance costs incurred –20 –20 –20

Employee stock option and share plans 31 31 31
Issue of non-voting equity securities 10,000 10,000
Changes in the composition of the group –455 –455
Dividends (1) –3,600 –3,600 –32 –3,632
Purchase/sale of treasury shares –44 –1,986 –2,030 –2,030
Exercise of warrants and options 5 443 448 448
Balance as at 31 December 2008 495 9,182 7,657 17,334 10,000 1,594 28,928

Unrealised revaluations after taxation 11,874 11,874 –7 11,867

Realised gains/losses transferred to profit and loss 1,554 1,554 1,554
Changes in cash flow hedge reserve –805 –805 –805
Transfer to insurance liabilities/DAC –2,079 –2,079 –2,079
Exchange rate differences 56 56 3 59
Other revaluations –9 –9
Total amount recognised directly in equity 10,600 10,600 –13 10,587

Net result –935 –935 –118 –1,053

9,665 9,665 –131 9,534

Issuance costs incurred –222 –222 –222

Employee stock option and share plans 64 64 64
Repayment of non-voting equity securities –5,000 –5,000
Changes in the composition of the group –546 –546
Dividend and repayment premium (2) –605 –605 –2 –607
Proceeds from rights issue 424 7,074 7,498 7,498
Purchase/sale of treasury shares 129 129 129
Balance as at 31 December 2009 919 16,034 16,910 33,863 5,000 915 39,778
(1)
2007 final dividend of EUR 0.82 per ordinary share, 2008 interim dividend of EUR 0.74 per ordinary share and final dividend of EUR 0.425 per non-voting equity security.
(2)
The 2009 amount of EUR 605 million includes the coupon (EUR 259 million) and repayment premium (EUR 346 million) on the repayment of EUR 5 billion
non-voting equity securities.

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Consolidated statement of changes in equity of ING Group continued

Total
shareholders’ Non-voting
Share equity equity Minority
amounts in millions of euros Share capital premium Reserves (parent) securities interests Total equity
Balance as at 1 January 2010 919 16,034 16,910 33,863 5,000 915 39,778

Unrealised revaluations after taxation 2,607 2,607 –4 2,603

Realised gains/losses transferred to profit and loss 86 86 86
Changes in cash flow hedge reserve 475 475 475
Transfer to insurance liabilities/DAC –1,644 –1,644 –1,644
Exchange rate differences 2,890 2,890 –6 2,884
Other revaluations –3 –3
Total amount recognised directly in equity 4,414 4,414 –13 4,401

Net result 3,220 3,220 105 3,325

7,634 7,634 92 7,726

Employee stock option and share plans 36 36 36

Changes in the composition of the group –272 –272
Dividend –6 –6
Purchase/sale of treasury shares 22 22 22
Balance as at 31 December 2010 919 16,034 24,602 41,555 5,000 729 47,284

Reserves include Revaluation reserve of EUR 4,752 million (2009: EUR 2,466 million; 2008: EUR –8,502 million), Currency translation
reserve of EUR 105 million (2009: EUR –2,008 million; 2008: EUR –1,918 million) and Other reserves of EUR 19,745 million (2009:
EUR 16,452 million; 2008: EUR 18,077 million). Changes in individual components are presented in Note 13 ‘Shareholders’ equity
(parent)/non-voting equity securities’.

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Accounting policies for the consolidated annual

accounts of ING Group

AUTHORISATION OF ANNUAL ACCOUNTS

The consolidated annual accounts of ING Groep N.V. (‘ING Group’) for the year ended 31 December 2010 were authorised for issue in
accordance with a resolution of the Executive Board on 14 March 2011. The Executive Board may decide to amend the annual accounts
as long as these are not adopted by the General Meeting of Shareholders. The General Meeting of Shareholders may decide not to
adopt the annual accounts, but may not amend these. ING Groep N.V. is incorporated and domiciled in Amsterdam, the Netherlands.
The principal activities of ING Group are described in the section ‘ING at a glance’ in section 1.1.

BASIS OF PRESENTATION
ING Group applies International Financial Reporting Standards as adopted by the European Union (‘EU’).

The following new or revised standards, interpretations and amendments to standards and interpretations became effective in 2010:
• Amendment to IFRS 1 ‘First-time adoption of IFRS’;
• IFRS 3 ‘Business Combinations’ (revised) and IAS 27 ‘Consolidated and Separate Financial Statements’ (amended);
• Amendment to IAS 39 ‘Financial Instruments: Recognition and Measurement – Eligible Hedged Items’;
• IFRIC 17 ‘Distributions of Non-cash Assets to Owners’;
• 2009 Annual improvements to IFRS;
• Amendment to IFRS 2 ‘Group Cash-settled Share-based Payment Transactions’;
• Amendments to IFRS 1 ‘Additional Exemptions for First-time Adopters’.

The following new or revised standards and interpretations were issued by the IASB, which become effective for ING Group as of 2011
(unless otherwise indicated) if and when endorsed by the EU:
• Classification of Rights Issues (Amendment to IAS 32);
• Amendment to IAS 24 ‘Related Party Disclosures’;
• Amendment to IFRIC 14 ’Prepayments of a Minimum Funding Requirement’;
• IFRIC 19 ‘Extinguishing Financial Liabilities with Equity Instruments’;
• Amendment to IFRS 1 ‘Limited Exemption from Comparative IFRS 7 Disclosure for First-time Adopters’;
• 2010 Annual Improvements to IFRS;
• Amendments to IFRS 7 ‘Disclosures – Transfers of Financial Assets’, effective as of 2012.

ING Group does not expect the adoption of these new or revised standards and interpretations to have a significant effect on the
consolidated financial statements.

Furthermore, in 2009 IFRS 9 ‘Financial Instruments’ was issued, which is effective as of 2013. However, this standard is not yet endorsed
by the EU and, therefore, is not yet part of IFRS-EU. Implementation of IFRS 9 – if and when endorsed by the EU – may have a significant
impact on equity and/or result of ING Group.

International Financial Reporting Standards as adopted by the EU provide several options in accounting policies. ING Group’s accounting
policies under these standards and its decision on the options available are set out in the section ‘Principles of valuation and determination
of results’ below.

In this document the term ‘IFRS-EU’ is used to refer to International Financial Reporting Standards as adopted by the EU, including the
decisions ING Group made with regard to the options available under International Financial Reporting Standards as adopted by the EU.

As explained in the section ‘Principles of valuation and determination of results’ and in Note 24 ‘Derivatives and hedge accounting’ ING
Group applies fair value hedge accounting to portfolio hedges of interest rate risk (macro hedging) under the EU ‘carve out’ of IFRS-EU.

The presentation of, and certain terms used in, the consolidated balance sheet, the consolidated profit and loss account, consolidated
statement of cash flows, consolidated statement of changes in equity and certain notes has been changed to provide additional and more
relevant information or (for changes in comparative information) to better align with the current period presentation. Operating segments
have changed in 2010 to reflect changes in internal management reporting. The impact of these changes is explained in the relevant notes
when significant.

CRITICAL ACCOUNTING POLICIES

ING Group has identified the accounting policies that are most critical to its business operations and to the understanding of its results.
These critical accounting policies are those which involve the most complex or subjective decisions or assessments, and relate to insurance
provisions, deferred acquisition costs and value of business acquired, the loan loss provision, the determination of the fair values of real estate
and financial assets and liabilities, impairments and employee benefits. In each case, the determination of these items is fundamental to the
financial condition and results of operations, and requires management to make complex judgements based on information and financial
data that may change in future periods. As a result, determinations regarding these items necessarily involve the use of assumptions and
subjective judgements as to future events and are subject to change, as the use of different assumptions or data could produce materially
different results. For a further discussion of the application of these accounting policies, reference is made to the applicable notes to the
consolidated financial statements and the information below under ‘Principles of valuation and determination of results’.

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Accounting policies for the consolidated annual accounts of ING Group continued

INSURANCE PROVISIONS, DEFERRED ACQUISITION COSTS (DAC) AND VALUE OF BUSINESS ACQUIRED (VOBA)
The establishment of insurance provisions, DAC and VOBA is an inherently uncertain process, involving assumptions about factors such as
court decisions, changes in laws, social, economic and demographic trends, inflation, investment returns, policyholder behaviour and other
factors, and, in the life insurance business, assumptions concerning mortality and morbidity trends. Specifically, significant assumptions
related to these items that could have a material impact on financial results include interest rates, mortality, morbidity, property and
casualty claims, investment yields on equity and real estate, foreign currency exchange rates and reserve adequacy assumptions.

The use of different assumptions about these factors could have a material effect on insurance provisions and underwriting expenditure.
Changes in assumptions may lead to changes in the insurance provisions over time. Furthermore, some of these assumptions can be volatile.

In addition, the adequacy of insurance provisions, net of DAC and VOBA, is evaluated regularly. The test involves comparing the
established insurance provision with current best estimate assumptions about factors such as court decisions, changes in laws, social,
economic and demographic trends, inflation, investment returns, policyholder behaviour, mortality and morbidity trends and other
factors. The use of different assumptions in this test could lead to a different outcome.

Insurance provisions also include the impact of minimum guarantees which are contained within certain variable annuity products.
This impact is dependent upon the difference between the potential minimum benefits payable and the total account balance, expected
mortality and surrender rates. The determination of the potential minimum benefits payable also involves the use of assumptions about
factors such as inflation, investment returns, policyholder behaviour, and mortality and morbidity trends. The use of different assumptions
about these factors could have a material effect on insurance provisions and underwriting expenditure.

The process of defining methodologies and assumptions for insurance provisions, DAC and VOBA is governed by ING Insurance risk
management as described in the ‘Risk management’ section.

Reference is made to the ‘Risk management’ section for a sensitivity analysis of net result and shareholders’ equity to insurance, interest
rate, equity, foreign currency and real estate risks. These sensitivities are based on changes in assumptions that management considers
reasonably likely at the balance sheet date.

LOAN LOSS PROVISIONS

Loan loss provisions are recognised based on an incurred loss model. Considerable judgement is exercised in determining the extent of
the loan loss provision (impairment) and is based on the management’s evaluation of the risk in the portfolio, current economic conditions,
loss experience in recent years and credit, industry, geographical and concentration trends. Changes in such judgements and analyses
may lead to changes in the loan loss provisions over time.

The identification of impairment and the determination of the recoverable amount are an inherently uncertain processes involving various
assumptions and factors including the financial condition of the counterparty, expected future cash flows, observable market prices and
expected net selling prices.

Future cash flows in a portfolio of financial assets that are collectively evaluated for impairment are estimated on the basis of the
contractual cash flows of the assets in the portfolio and historical loss experience for assets with credit risk characteristics similar to those
in the portfolio. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions
that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical
period that do not exist currently. Current observable data may include changes in unemployment rates, property prices and commodity
prices. The methodology and assumptions used for estimating future cash flows are reviewed regularly to reduce any differences between
loss estimates and actual loss experience.

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Accounting policies for the consolidated annual accounts of ING Group continued

FAIR VALUES OF REAL ESTATE

Real estate investments are reported at fair value; all changes in fair value are recognised directly in the profit and loss account. The fair
value of real estate investments is based on regular appraisals by independent qualified valuers. The fair values represent the estimated
amount for which the property could be exchanged on the date of valuation between a willing buyer and willing seller in an at-arm’s-
length transaction after proper marketing wherein the parties each acted knowledgeably, prudently and without compulsion. The
valuations are based on the assumption that the properties are let and sold to third parties based on the actual letting status. The
valuations are based on a discounted cash flow analysis of each property. The discounted cash flow analyses are based on calculations
of the future rental income in accordance with the terms in existing leases and estimations of the rental values when leases expire.

For each reporting period every property is valued either by an independent valuer or internally. Indexation is used when a property
is valued internally. The index is based on the results of the independent valuations carried out in that period. Market transactions and
disposals are monitored as part of the procedures to back test the indexation methodology. Valuations performed earlier in the year are
updated if necessary to reflect the situation at year end.

The valuation of real estate involves various assumptions and techniques. The use of different assumptions and techniques could produce
significantly different valuations.

FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES

Fair values of financial assets and liabilities are determined using quoted market prices where available. Such quoted market prices are
primarily obtained from exchange prices for listed instruments. Where an exchange price is not available, market prices may be obtained
from independent market vendors, brokers or market makers. In general, positions are valued taking the bid price for a long position and
the offer price for a short position. In some cases where positions are marked at mid-market prices, a fair value adjustment is calculated.

In certain markets that have become significantly less liquid or illiquid, the range of prices for the same security from different price sources
can be significant. Selecting the most appropriate price within this range requires judgement. The choice of different prices could produce
significantly different estimates of fair value.

For certain financial assets and liabilities quoted market prices are not available. For these financial assets and liabilities, fair value is
determined using valuation techniques. These valuation techniques range from discounting of cash flows to 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. All valuation techniques used are subject to internal review and approval.
Most data used in these valuation techniques are validated on a daily basis.

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 an
appropriate reflection of these valuations in the profit and loss account. Price testing is performed to minimise the potential risks for
economic losses due to materially incorrect or misused models.

Reference is made to Note 34 ‘Fair value of financial assets and liabilities’ for the basis of the determination of the fair value of financial
instruments and related sensitivities.

IMPAIRMENTS
Impairment evaluation is a complex process that inherently involves significant judgements and uncertainties that may have a significant
impact on ING Group’s consolidated financial statements. Impairments are especially relevant in two areas: Available-for-sale debt and
equity securities and Goodwill/Intangible assets.

All debt and equity securities (other than those carried at fair value through profit and loss) are subject to impairment testing every
reporting period. The carrying value is reviewed in order to determine whether an impairment loss has been incurred. Evaluation for
impairment includes both quantitative and qualitative considerations. For debt securities, such considerations include actual and estimated
incurred credit losses indicated by payment default, market data on (estimated) incurred losses and other current evidence that the issuer
may be unlikely to pay amounts when due. Equity securities are impaired when management believes that, based on (the combination of)
a significant or prolonged decline of the fair value below the acquisition price, there is sufficient reason to believe that the acquisition cost
may not be recovered. ‘Significant’ and ‘prolonged’ are interpreted on a case-by-case basis for specific equity securities. Generally 25%
and 6 months are used as triggers.

Upon impairment, the full difference between amortised cost and fair value is removed from equity and recognised in net profit and loss.
Impairments on debt securities may be reversed if there is a decrease in the amount of the impairment which can be objectively related to
an observable event. Impairments on equity securities cannot be reversed.

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Accounting policies for the consolidated annual accounts of ING Group continued

Impairments on other debt instruments (Loans and held-to-maturity investments) are part of the loan loss provision as described on the
previous page.

Impairment reviews with respect to goodwill and intangible assets are performed at least annually and more frequently if events indicate
that impairment may have occurred. Goodwill is tested for impairment by comparing the book value (including goodwill) of the reporting
unit to the best estimate of the recoverable amount of that reporting unit. The book value is determined as the IFRS-EU net asset value
including goodwill. The recoverable amount is estimated as the higher of fair value less cost to sell and value in use. Several methodologies
are applied to arrive at the best estimate of the recoverable amount. A reporting unit is the lowest level at which goodwill is monitored.
Intangible assets are tested for impairment by comparing the book value with the best estimate of the recoverable amount.

The identification of impairment is an inherently uncertain process involving various assumptions and factors, including financial condition
of the counterparty, expected future cash flows, statistical loss data, discount rates, observable market prices, etc. Estimates and
assumptions are based on management’s judgement and other information available prior to the issuance of the financial statements.
Materially different results can occur as circumstances change and additional information becomes known.

EMPLOYEE BENEFITS
Group companies operate various defined benefit retirement plans covering a significant number of ING’s employees.

The liability recognised in the balance sheet in respect of the defined benefit pension plans is the present value of the defined benefit
obligation at the balance sheet date less the fair value of the plan assets, together with adjustments for unrecognised actuarial gains
and losses, and unrecognised past service costs.

The determination of the defined benefit plan liability is based on internal and external actuarial models and calculations. The defined
benefit obligation is calculated using the projected unit credit method. Inherent in these actuarial models are assumptions including
discount rates, rates of increase in future salary and benefit levels, mortality rates, trend rates in health care costs, consumer price index,
and the expected return on plan assets. The assumptions are based on available market data and the historical performance of plan assets,
and are updated annually.

The actuarial assumptions may differ significantly from the actual results due to changes in market conditions, economic and mortality trends,
and other assumptions. Any changes in these assumptions could have a significant impact on the defined benefit plan liabilities and future
pension costs. The effects of changes in actuarial assumptions and experience adjustments are not recognised in the profit and loss account
unless the accumulated changes exceed 10% of the greater of the defined benefit obligation and the fair value of the plan assets. If such is
the case the excess is then amortised over the employees’ expected average remaining working lives. Reference is made to Note 21 ‘Other
liabilities’ for the weighted averages of basic actuarial assumptions in connection with pension and other post-employment benefits.

PRINCIPLES OF VALUATION AND DETERMINATION OF RESULTS

CONSOLIDATION
ING Group (‘the Group’) comprises ING Groep N.V. (‘the Company’), ING Verzekeringen N.V., ING Bank N.V. and all other subsidiaries.
The consolidated financial statements of ING Group comprise the accounts of ING Groep N.V. and all entities in which it either owns,
directly or indirectly, more than half of the voting power or over which it has control of their operating and financial policies through
situations including, but not limited to:
• Ability to appoint or remove the majority of the board of directors;
• Power to govern such policies under statute or agreement; and
• Power over more than half of the voting rights through an agreement with other investors.

A list of principal subsidiaries is included in Note 29 ‘Principal subsidiaries’.

The existence and effect of potential voting rights that are currently exercisable or convertible are considered in assessing whether the
Group controls another entity. For interests in investment vehicles, the existence of control is determined taking into account both ING
Group’s financial interests for own risk and its role as investment manager.

The results of the operations and the net assets of subsidiaries are included in the profit and loss account and the balance sheet from the
date control is obtained until the date control is lost. On disposal, the difference between the sales proceeds, net of directly attributable
transaction costs, and the net assets is included in net result.

A subsidiary which ING Group has agreed to sell but is still legally owned by ING Group may still be controlled by ING Group at the
balance sheet date and, therefore, still be included in the consolidation. Such a subsidiary may be presented as a held for sale disposal
group if certain conditions are met. Disposal groups (and Non-current assets) are classified as held for sale if their carrying amount will be
recovered principally through a sale transaction rather than through continuing use. This is only the case when the sale is highly probable
and the disposal group (or asset) is available for immediate sale in its present condition; management must be committed to the sale,
which should be expected to occur within one year from the date of classification as held for sale.

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Accounting policies for the consolidated annual accounts of ING Group continued

All intercompany transactions, balances and unrealised surpluses and deficits on transactions between group companies are eliminated.
Where necessary, the accounting policies used by subsidiaries are changed to ensure consistency with group policies. In general, the
reporting dates of subsidiaries are the same as the reporting date of ING Groep N.V.

ING Group’s interests in jointly controlled entities are accounted for using proportionate consolidation. ING Group proportionately
consolidates its share of the joint ventures’ individual income and expenses, assets and liabilities, and cash flows on a line-by-line basis with
similar items in ING Group’s financial statements. ING Group recognises the portion of gains or losses on the sale of assets to the joint venture
that is attributable to the other venturers. ING Group does not recognise its share of profits or losses from the joint venture that results from
the purchase of assets by ING Group from the joint venture until it resells the assets to a third party. However, if a loss on the transaction
provides evidence of a reduction in the net realisable value of current assets or an impairment loss, the loss is recognised immediately.

USE OF ESTIMATES AND ASSUMPTIONS

The preparation of the consolidated financial statements necessitates the use of estimates and assumptions. These estimates and
assumptions affect the reported amounts of the assets and liabilities and the amounts of the 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, and takes into account internal and external
studies, industry statistics, environmental factors and trends, and regulatory requirements.

SEGMENT REPORTING
An operating segment is a distinguishable component of the Group, engaged in providing products or services, subject to risks and returns
that are different from those of other operating segments. A geographical area is a distinguishable component of the Group engaged in
providing products or services within a particular economic environment that is subject to risks and returns that are different from those
of segments operating in other economic environments. The geographical analyses are based on the location of the office from which
the transactions are originated.

ANALYSIS OF INSURANCE BUSINESS

Where amounts in respect of insurance business are analysed into ‘life’ and ‘non-life’, health and disability insurance business which is
similar in nature to life insurance business is included in ‘life’.

FOREIGN CURRENCY TRANSLATION

Functional and presentation currency
Items included in the financial statements of each of the 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 functional and 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 profit and loss account, except when deferred
in equity as part of qualifying cash flow hedges or qualifying net investment hedges.

Exchange rate differences on non-monetary items, measured at fair value through profit and loss, are reported as part of the fair value
gain or loss. Non-monetary items are retranslated at the date fair value is determined. Exchange rate differences on non-monetary items
measured at fair value through the revaluation reserve are included in the revaluation reserve in equity.

Exchange rate differences in the profit and loss account are generally included in Net trading income. Reference is made to Note 41 ‘Net
trading income’, which discloses the amounts included in the profit and loss account. Exchange rate differences relating to the disposal of
Available-for-sale debt and equity securities are considered to be an inherent part of the capital gains and losses recognised in Investment
income. As mentioned in Group companies below any exchange rate difference deferred in equity is recognised in the profit and loss
account in Net result on disposals of group companies. Reference is also made to Note 13 ‘Shareholders’ equity (parent)/non-voting equity
securities’, which discloses the amounts included in the profit and loss account.

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 included in each balance sheet are translated at the closing rate at the date of that balance sheet;
• Income and expenses included in each profit and loss account 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); and
• All resulting exchange rate differences are recognised in a separate component of equity.

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Accounting policies for the consolidated annual accounts of ING Group continued

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 profit and loss account 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.

FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES

The fair value of financial instruments are based on quoted market prices at the balance sheet date where available. The quoted market
price used for financial assets held by the Group is the current bid price; the quoted market price used for financial liabilities is the current
ask price.

The fair value of financial instruments that are not traded in an active market are determined using valuation techniques. The Group uses
a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date.

Reference is made to Note 34 ‘Fair value of financial assets and liabilities’ for the basis of the determination of the fair value of financial
instruments.

FINANCIAL ASSETS
Recognition of financial assets
All purchases and sales of financial assets classified as fair value through profit and loss, held-to-maturity and available-for-sale that require
delivery within the time frame established by regulation or market convention (‘regular way’ purchases and sales) are recognised at trade
date, which is the date on which the Group commits to purchase or sell the asset. Loans and receivables are recognised at settlement date,
which is the date on which the Group receives or delivers the asset.

Derecognition of financial assets

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where the Group has
transferred substantially all risks and rewards of ownership. If the 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. In transfers where control
over the asset is retained, the Group continues to recognise the asset to the extent of its continuing involvement. The extent of continuing
involvement is determined by the extent to which the Group is exposed to changes in the value of the asset.

Realised gains and losses on investments

Realised gains and losses on investments are determined as the difference between the sale proceeds and (amortised) cost. For equity
securities, the cost is determined using a weighted average per portfolio. For debt securities, the cost is determined by specific
identification.

CLASSIFICATION OF FINANCIAL INSTRUMENTS

Financial assets at fair value through profit and loss
Financial assets at fair value through profit and loss include equity securities, debt securities, derivatives, loans and receivables and other,
and comprise the following sub-categories: trading assets, non-trading derivatives, financial assets designated at fair value through profit
and loss by management and investments for risk of policyholders.

A financial asset is classified as at fair value through profit and loss if acquired principally for the purpose of selling in the short term or if so
designated by management. Management will make this designation only if this eliminates a measurement inconsistency or if the related
assets and liabilities are managed on a fair value basis.

Investments for risk of policyholders are investments against insurance liabilities for which all changes in fair value of invested assets are
offset by similar changes in insurance liabilities. Transaction costs on initial recognition are expensed as incurred. Interest income from
debt securities and loans and receivables classified as at fair value through profit and loss is recognised in Interest income from banking
operations and Investment income in the profit and loss account, using the effective interest method.

Dividend income from equity instruments classified as at fair value through profit and loss is generally recognised in Investment income in
the profit and loss account when dividend has been declared. Investment result from investments for risk of policyholders is recognised in
investment result for risk of policyholders. For derivatives reference is made to the ‘Derivatives and hedge accounting’ section. For all other
financial assets classified as at fair value through profit and loss changes in fair value are recognised in Net trading income.

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Investments
Investments (including loans quoted in active markets) are classified either as held-to-maturity or available-for-sale and are initially
recognised at fair value plus transaction costs. Investment securities and loans quoted in active markets with fixed maturity where
management has both the intent and the ability to hold to maturity are classified as held-to-maturity. Investment securities and actively
traded loans intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in
interest rates, exchange rates or equity prices, are classified as available-for-sale.

Available-for-sale financial assets

Available-for-sale financial assets include available-for-sale debt securities and available-for-sale equity securities. Available-for-sale financial
assets are initially recognised at fair value plus transaction costs. For available-for-sale debt securities, the difference between cost and
redemption value is amortised. Interest income is recognised using the effective interest method. Available-for-sale financial assets are
subsequently measured at fair value. Interest income from debt securities classified as available-for-sale is recognised in Interest income
from banking operations and Investment income in the profit and loss account using the effective interest method. Dividend income from
equity instruments classified as available-for-sale is generally recognised in Investment income in the profit and loss account when the
dividend has been declared. Unrealised gains and losses arising from changes in the fair value are recognised in equity. When the securities
are disposed of, the related accumulated fair value adjustments are included in the profit and loss account as investment income. For
impairments of available-for-sale financial assets reference is made to the section ‘Impairments of other financial assets’. Investments in
prepayment sensitive securities such as Interest-Only and Principal-Only strips are generally classified as available-for-sale.

Held-to-maturity investments
Non-derivative financial assets with fixed or determinable payments and fixed maturity for which the Group has the positive intent and
ability to hold to maturity and which are designated by management as held-to-maturity assets are initially recognised at fair value plus
transaction costs. Subsequently, they are carried at amortised cost using the effective interest method less any impairment losses. Interest
income from debt securities classified as held-to-maturity is recognised in Interest income in the profit and loss account using the effective
interest method. Held-to-maturity investments include only debt securities.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
They are initially recognised at fair value plus transaction costs. Subsequently, they are carried at amortised cost using the effective interest
method less any impairment losses. Loans and receivables include: Cash and balances with central banks, Amounts due from banks, Loans
and advances to customers and Other assets and are reflected in these balance sheet lines. Interest income from loans and receivables is
recognised in Interest income and Investment income in the profit and loss account using the effective interest method.

Credit risk management classification

Credit risk management disclosures are provided in the section ‘Risk management’. The relationship between credit risk classifications
in that section and the consolidated balance sheet classifications above is explained below:
• Lending risk arises when ING Group grants a loan to a customer, or issues guarantees on behalf of a customer and mainly relates
to the balance sheet classification Loans and advances to customers and off balance sheet items e.g. obligations under financial
guarantees and letters of credit;
• Investment risk comprises the credit default and migration risk that is associated with ING Group’s investment portfolio and mainly
relates to the balance sheet classification Investments (available-for-sale and held-to-maturity);
• Money market risk arises when ING Group places short term deposits with a counterparty in order to manage excess liquidity and
among others relates to the balance sheet classifications Amounts due from banks and Loans and advances to customers;
• Pre-settlement risk arises when a counterparty defaults on a transaction before settlement and ING Group has to replace the contract
by a trade with another counterparty at the then prevailing (possibly unfavourable) market price. The pre-settlement risk classification
mainly relates to the balance sheet classification Financial assets at fair value through profit and loss (trading assets and non-trading
derivatives) and to securities financing;
• Settlement risk arises when there is an exchange of value (funds, instruments or commodities) for the same or different value dates
and receipt is not verified or expected until ING Group has paid or delivered its side of the trade. Settlement risk mainly relates to the
risk arising on disposal of financial instruments that are classified in the balance sheet as Financial assets at fair value through profit and
loss (trading assets and non-trading derivatives) and Investments (available-for-sale and held-to-maturity).

DERIVATIVES AND HEDGE ACCOUNTING

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 recent 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 values are negative.

Some credit protection contracts that take the legal form of a derivative, such as certain credit default swaps, are accounted for as
financial guarantees.

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Certain derivatives embedded in other contracts are measured as separate derivatives when their economic characteristics and risks
are not closely related to those of the host contract, the host contract is not carried at fair value through profit and loss, and if a separate
instrument with the same terms as the embedded derivative would meet the definition of a derivative. These embedded derivatives are
measured at fair value with changes in fair value recognised in the profit and loss account. An assessment is carried out when the Group
first becomes party to the contract. A reassessment is carried out only when there is a change in the terms of the contract that significantly
modifies the expected cash flows.

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. The 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. The 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.

ING Group applies fair value hedge accounting to portfolio hedges of interest rate risk (macro hedging) under the EU ‘carve out’ of
IFRS-EU. The EU ‘carve-out’ macro hedging enables a group of derivatives (or proportions) to be viewed in combination and jointly
designated as the hedging instrument and removes some of the limitations in fair value hedge accounting relating to hedging core
deposits and under-hedging strategies. Under the IFRS-EU ‘carve-out’, hedge accounting may be applied to core deposits and
ineffectiveness only arises when the revised estimate of the amount of cash flows in scheduled time buckets falls below the designated
amount of that bucket.

ING Group applies fair value hedge accounting for portfolio hedges of interest rate risk (macro hedging) under the EU ‘carve-out’ to
its retail operations. The net exposures of retail funding (savings and current accounts) and retail lending (mortgages) are hedged. The
hedging activities are designated under a portfolio fair value hedge on the mortgages. Changes in the fair value of the derivatives are
recognised in the profit and loss account, together with the fair value adjustment on the mortgages (hedged items) insofar as attributable
to interest rate risk (the hedged risk).

Fair value hedges

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in the profit and loss account,
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 profit and loss account 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 profit and loss
account 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
equity. The gain or loss relating to the ineffective portion is recognised immediately in the profit and loss account. Amounts accumulated
in equity are recycled to the profit and loss account 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 equity at that
time remains in equity and is recognised when the forecast transaction is ultimately recognised in the profit and loss account. When a
forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is transferred immediately to
the profit and loss account.

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 equity and the gain or loss relating to the ineffective portion is
recognised immediately in the profit and loss account. Gains and losses accumulated in equity are included in the profit and loss account
when the foreign operation is disposed.

Non-trading derivatives that do not qualify for hedge accounting

Derivative instruments that are used by the 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 profit and loss account.

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OFFSETTING OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

Financial assets and financial liabilities are offset, and the net amount reported, in the balance sheet when the 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 interest rate swaps for which the services of a central clearing house are used. Furthermore,
offsetting is also applied to certain current accounts for which the product features and internal procedures allow net presentation under
IFRS-EU.

REPURCHASE TRANSACTIONS AND REVERSE REPURCHASE TRANSACTIONS

Securities sold subject to repurchase agreements (‘repos’) are retained in the consolidated financial statements. The counterparty liability
is included in Amounts due to banks, Other borrowed funds, Customer deposits and other funds on deposit, or Trading as appropriate.

Securities purchased under agreements to resell (‘reverse repos’) are recognised as Loans and advances to customers or Amounts due
from banks, 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.

IMPAIRMENTS OF LOANS AND ADVANCES TO CUSTOMERS (LOAN LOSS PROVISIONS)

ING Group assesses periodically and at each balance sheet date whether there is objective evidence that a financial asset or group of
financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and only if,
there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, but
before the balance sheet date, (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the
financial asset or group of financial assets that can be reliably estimated. The following circumstances, among others, are considered
objective evidence that a financial asset or group of assets is impaired:
• The borrower has sought or has been placed in bankruptcy or similar protection and this leads to the avoidance of or delays in
repayment of the financial asset;
• The borrower has failed in the repayment of principal, interest or fees and the payment failure has remained unsolved for a certain period;
• The borrower has demonstrated significant financial difficulty, to the extent that it will have a negative impact on the expected future
cash flows of the financial asset;
• The credit obligation has been restructured for non-commercial reasons. ING Group has granted concessions, for economic or legal
reasons relating to the borrower’s financial difficulty, the effect of which is a reduction in the expected future cash flows of the financial
asset; and
• Historical experience, updated for current events where necessary, provides evidence that a proportion of a group of assets is impaired
although the related events that represent impairment triggers are not yet captured by the Group’s credit risk systems.

The Group does not consider events that may be expected to occur in the future as objective evidence, and consequently they are not
used as a basis for concluding that a financial asset or group of assets is impaired.

In determining the impairment, expected future cash flows are estimated on the basis of the contractual cash flows of the assets in the
portfolio and historical loss experience for assets with credit risk characteristics similar to those in the portfolio. Historical loss experience
is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which
the historical loss experience is based and to remove the effects of conditions in the historical period that do not currently exist. Losses
expected as a result of future events, no matter how likely, are not recognised.

The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant,
and then individually or collectively for financial assets that are not individually significant. If the Group determines that no objective
evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of
financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for
impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss on an asset carried at amortised cost has been incurred, the amount of the loss is
measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future
credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the
asset is reduced through the use of an allowance account (‘Loan loss provision’) and the amount of the loss is recognised in the profit and
loss account under ‘Addition to loan loss provision’. If the asset has a variable interest rate, the discount rate for measuring any impairment
loss is the current effective interest rate determined under the contract.

For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristics.
Those 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. The collective evaluation of impairment includes
the application of a ‘loss confirmation period’ to default probabilities. The loss confirmation period is a concept which recognises that
there is a period of time between the emergence of impairment triggers and the point-in-time at which those events are captured by the
Group’s credit risk systems. Accordingly, the application of the loss confirmation period ensures that impairments that are incurred but not
yet identified are adequately reflected in the Group’s loan loss provision. Although the loss confirmation periods are inherently uncertain,

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Accounting policies for the consolidated annual accounts of ING Group continued

the Group applies estimates to sub-portfolios (e.g. large corporations, small and medium size enterprises and retail portfolios) that reflect
factors such as the frequency with which customers in the sub-portfolio disclose credit risk sensitive information and the frequency with
which they are subject to review by the Group’s account managers. Generally, the frequency increases in relation to the size of the
borrower. Loss confirmation periods are based on historical experience and are validated, and revised where necessary, through regular
back-testing to ensure that they reflect recent experience and current events.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring
after the impairment was recognised (such as an improvement in the debtor’s credit rating), the previously recognised impairment loss is
reversed by adjusting the provision. The amount of the reversal is recognised in the profit and loss account.

When a loan is uncollectible, it is written off against the related loan loss provision. Such loans are written off after all the necessary
procedures have been completed and the amount of the loss has been determined. Subsequent recoveries of amounts previously written
off are recognised in the profit and loss account.

IMPAIRMENT OF OTHER FINANCIAL ASSETS

At each balance sheet date, the Group assesses whether there is objective evidence that a financial asset or a group of financial assets is
impaired. In the specific case of equity investments classified as available-for-sale, (the combination of) a significant or prolonged decline
in the fair value of the security below its cost is considered in determining whether the assets are impaired. ‘Significant’ and ‘prolonged’
are interpreted on a case-by-case basis for specific equity securities; generally 25% and 6 months are used as triggers. If any objective
evidence exists for available-for-sale debt and equity investments, the cumulative loss – measured as the difference between the
acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in net result – is removed
from equity and recognised in the profit and loss account. Impairment losses recognised on equity instruments can never be reversed.
If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively
related to an event occurring after the impairment loss was recognised in the profit and loss account, the impairment loss is reversed
through the profit and loss account.

INVESTMENTS IN ASSOCIATES
Associates are all entities over which the Group has significant influence but not control. Significant influence generally results from a
shareholding of between 20% and 50% of the voting rights, but also is the ability to participate in the financial and operating policies
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.

Investments in associates are initially recognised at cost and subsequently accounted for using the equity method of accounting.

The Group’s investment in associates (net of any accumulated impairment loss) includes goodwill identified on acquisition. The Group’s
share of its associates’ post-acquisition profits or losses is recognised in the profit and loss account, 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 the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured
receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the
associates. Unrealised losses are also eliminated unless they provide evidence of an impairment of the asset transferred. Accounting
policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. The reporting
dates of all material associates are consistent with the reporting date of the Group.

For interests in investment vehicles the existence of significant influence is determined taking into account both the Group’s financial
interests for own risk and its role as investment manager.

REAL ESTATE INVESTMENTS

Real estate investments are stated at fair value at the balance sheet date. Changes in the carrying amount resulting from revaluations are
recognised in the profit and loss account. On disposal the difference between the sale proceeds and book value is recognised in the profit
and loss account.

The fair value of real estate investments is based on regular appraisals by independent qualified valuers. Each year every property is valued
either by an independent valuer or internally. Indexation is used when a property is valued internally. The index is based on the results of
the independent valuations carried out in that period. Market transactions, and disposals made by the Group, are monitored as part of the
procedures to back test the indexation methodology. All properties are valued independently at least every five years.

The valuations are based on the assumption that the properties are let and sold to third parties based on the actual letting status.
Valuations drawn up earlier in the year are updated if necessary to reflect the situation at year end. The fair values are based on market

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values, being the estimated amount for which the property could be exchanged on the date of valuation between a willing buyer
and willing seller in an at-arm’s-length transaction after proper marketing wherein the parties each acted knowledgeably, prudently
and without compulsion. Market values are based on appraisals using valuation methods such as: comparable market transactions,
capitalisation of income methods or discounted cash flow calculations, based on calculations of the future rental income and
expenses in accordance with the terms in existing leases and estimations of the rental values when leases expire.

Any gain or loss arising from a change in fair value is recognised in the income statement. Subsequent expenditures are charged to the
asset’s carrying amount only when it is probable that future economic benefits associated with the item will flow to ING Group and the
cost of an item can be measured reliably. All other repairs and maintenance costs are charged to the income statement.

PROPERTY AND EQUIPMENT

Property in own use
Land and buildings held for own use are stated at fair value at the balance sheet date. Increases in the carrying amount arising on
revaluation of land and buildings held for own use are credited to the revaluation reserve in shareholders’ equity. Decreases in the carrying
amount that offset previous increases of the same asset are charged against the revaluation reserve directly in equity; all other decreases
are charged to the profit and loss account. Increases that reverse a revaluation decrease on the same asset previously recognised in net
result are recognised in the profit and loss account. Depreciation is recognised based on the fair value and the estimated useful life (in
general 20–50 years). Depreciation is calculated on a straight-line basis. On disposal the related revaluation reserve is transferred to
retained earnings.

The fair values of land and buildings are based on regular appraisals by independent qualified valuers or internally, similar to appraisals
of real estate investments. Subsequent expenditure is included in the asset’s carrying amount when it is probable that future economic
benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

Property obtained from foreclosures

Property obtained from foreclosures is stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price
in the ordinary course of business, less applicable variable selling expenses. Property obtained from foreclosures is included in Other assets
– Property development and obtained from foreclosures.

Property development
Property developed and under development for which ING Group has the intention to sell the property after its completion is included
in Other assets – Property development and obtained from foreclosures.

Property developed and under development for which ING Group has the intention to sell the property under development after its
completion and where there is not yet a specifically negotiated contract is measured at direct construction cost incurred up to the
balance sheet date, including borrowing costs incurred during construction and ING Group’s own directly attributable development and
supervision expenses less any impairment losses. Profit is recognised using the completed contract method (on sale date of the property).
Impairment is recognised if the estimated selling price in the ordinary course of business, less applicable variable selling expenses is lower
than bookvalue.

Property under development for which ING Group has the intention to sell the property under development after its completion and
where there is a specifically negotiated contract is valued using the percentage of completion method (pro rata profit recognition).
The stage of completion is measured by reference to costs incurred to date as percentage of total estimated costs for each contract.

Property under development is stated at fair value (with changes in fair value recognised in profit and loss) if ING Group has the intention
to recognise the property under development after completion as real estate investments.

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 to five years, and four to
ten years for fixtures and fittings. Expenditure incurred on maintenance and repairs is charged to the profit and loss account as incurred.
Expenditure incurred on major improvements is capitalised and depreciated.

Assets under operating leases

Assets leased out under operating leases in which ING Group is the lessor are stated at cost less accumulated depreciation and any impairment
losses. The cost of the assets is depreciated on a straight-line basis over the lease term. Reference is made to the section ‘Leases’.

Disposals
The difference between the proceeds on disposal and net book value is recognised in the profit and loss account under Other income.

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Borrowing costs
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete
and prepare the asset for its intended use. Borrowing costs are determined at the weighted average cost of capital of the project.

LEASES
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement at inception date.

The Group as the lessee

The leases entered into by ING Group are primarily operating leases. The total payments made under operating leases are charged to the
profit and loss account on a straight-line basis over the period of the lease.

When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of
penalty is recognised as an expense in the period in which termination takes place.

The Group as the lessor

When assets are held subject to a finance lease, the present value of the lease payments is recognised as a receivable under Loans and
advances to customers or Amounts due from banks. The difference between the gross receivable and the present value of the receivable
is unearned lease finance 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. When assets are held subject to an operating lease, the assets are included under Assets
under operating leases.

ACQUISITIONS, GOODWILL AND OTHER INTANGIBLE ASSETS

Acquisitions and goodwill
ING Group’s acquisitions are accounted for using the acquisition method of accounting. The consideration for each acquisition is measured
at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued in
exchange for control of the acquiree. Goodwill, being the difference between the cost of the acquisition (including assumed debt) and the
Group’s interest in the fair value of the acquired assets, liabilities and contingent liabilities as at the date of acquisition, is capitalised as an
intangible asset. The results of the operations of the acquired companies are included in the profit and loss account from the date control
is obtained.

Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration
arrangement, measured at its acquisition-date fair value. Subsequent changes in the fair value of contingent consideration classified
as an asset or liability are accounted for in accordance with relevant IFRSs, taking into account the initial accounting period below.
Changes in the fair value of the contingent consideration classified as equity are not recognised.

As of 2010, following changes to IFRS 3 ‘Business Combinations’, where a business combination is achieved in stages, ING Group’s
previously held interests in the assets and liabilities of the acquired entity are remeasured to fair value at the acquisition date (i.e. the
date ING Group attains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in
the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit
or loss, where such treatment would be appropriate if that interest were disposed of. Acquisition-related costs are recognised in profit
or loss as incurred and presented in the profit and loss account as Other operating expenses.

Until 2009, before IFRS 3 ‘Business Combinations’ was revised the accounting of previously held interests in the assets and liabilities
of the acquired entity were not remeasured at the acquisition date and the acquisition-related costs were considered to be part of
the total consideration.

The initial accounting for the fair value of the net assets of the companies acquired during the year may be determined only provisionally
as the determination of the fair value can be complex and the time between the acquisition and the preparation of the Annual Accounts
can be limited. The initial accounting shall be completed within a year after acquisition.

Goodwill is only capitalised on acquisitions after the implementation date of IFRS-EU (1 January 2004). Accounting for acquisitions before
that date has not been restated; goodwill and internally generated intangibles on these acquisitions were charged directly to shareholders’
equity. Goodwill is allocated to reporting units for the purpose of impairment testing. These reporting units represent the lowest level at
which goodwill is monitored for internal management purposes. This test is performed annually or more frequently if there are indicators
of impairment. Under the impairment tests, the carrying value of the reporting units (including goodwill) is compared to its recoverable
amount which is the higher of its fair value less costs to sell and its value in use.

Adjustments to the fair value as at the date of acquisition of acquired assets and liabilities that are identified within one year after acquisition are
recognised as an adjustment to goodwill; any subsequent adjustment is recognised as income or expense. On disposal of group companies, the
difference between the sale proceeds and book value (including goodwill) and the unrealised results (including the currency translation reserve
in equity) is included in the profit and loss account.

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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. This period will generally not exceed three years. Amortisation
is included in Other operating expenses.

Value of business acquired (VOBA)

VOBA is an asset that reflects the present value of estimated net cash flows embedded in the insurance contracts of an acquired company,
which existed at the time the company was acquired. It represents the difference between the fair value of insurance liabilities and their
book value. VOBA is amortised in a similar manner to the amortisation of deferred acquisition costs as described in the section ‘Deferred
acquisition costs’.

Other intangible assets

Other intangible assets are capitalised and amortised over their expected economic life, which is generally between three and ten years.
Intangible assets with an indefinite life are not amortised.

DEFERRED ACQUISITION COSTS

Deferred acquisition costs (DAC) are an asset and represent costs of acquiring insurance and investment contracts that are deferred and
amortised. The deferred costs, all of which vary with (and are primarily related to) the production of new and renewal business, consist
principally of commissions, certain underwriting and contract issuance expenses, and certain agency expenses.

For traditional life insurance contracts, certain types of flexible life insurance contracts, and non-life contracts, DAC is amortised over the
premium payment period in proportion to the premium revenue recognised.

For other types of flexible life insurance contracts DAC is amortised over the lives of the policies in relation to the emergence of estimated
gross profits. Amortisation is adjusted when estimates of current or future gross profits, to be realised from a group of products, are
revised. The estimates and the assumptions are reassessed at the end of each reporting period. For DAC on flexible insurance contracts
the approach is that in determining the estimate of future gross profits ING Group assumes the short-term and long-term separate account
growth rate assumption to be the same. Higher/lower expected profits (e.g. reflecting stock market performance or a change in the level
of assets under management) may cause a lower/higher balance of DAC due to the catch-up of amortisation in previous and future years.
This process is known as DAC unlocking. The impact of the DAC unlocking is recognised in the profit and loss account of the period in
which the unlocking occurs.

DAC is evaluated for recoverability at issue. Subsequently it is tested on a regular basis together with the provision for life insurance
liabilities and VOBA. The test for recoverability is described in the section ‘Insurance, Investment and Reinsurance Contracts’.

For certain products DAC is adjusted for the impact of unrealised results on allocated investments through equity.

TAXATION
Income tax on the net result for the year comprises current and deferred tax. Income tax is recognised in the profit and loss account
but it is charged or credited directly to equity if the tax relates to items that are credited or charged directly to equity.

Deferred income tax

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates (and laws)
that have been enacted or substantially enacted by 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 where it is probable that future taxable profit will be available against which the temporary differences
can be utilised. Deferred income tax is provided on temporary differences arising from investments in subsidiaries and associates, except
where the timing of the reversal of the temporary difference is controlled by the 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.

Deferred tax related to fair value remeasurement of available-for-sale investments and cash flow hedges, which are charged or credited
directly to equity, is also credited or charged directly to equity and is subsequently recognised in the profit and loss account together with
the deferred gain or loss.

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Accounting policies for the consolidated annual accounts of ING Group continued

FINANCIAL LIABILITIES
Financial liabilities at amortised cost
Financial liabilities at amortised cost include the following sub-categories: preference shares, other borrowed funds, debt securities in issue,
subordinated loans, amounts due to banks and customer deposits and other funds on deposit.

Borrowings are recognised initially at their issue proceeds (fair value of consideration received) net of transaction costs incurred.
Borrowings are subsequently stated at amortised cost; any difference between proceeds, net of transaction costs, and the redemption
value is recognised in the profit and loss account over the period of the borrowings using the effective interest method.

If the Group purchases its own debt, it is removed from the balance sheet, and the difference between the carrying amount of the liability
and the consideration paid is included in the profit and loss account.

Financial liabilities at fair value through profit and loss

Financial liabilities at fair value through profit and loss comprise the following sub-categories: trading liabilities, non-trading derivatives and
other financial liabilities designated at fair value through profit and loss by management. Trading liabilities include equity securities, debt
securities, funds on deposit and derivatives. Designation by management will take place only if it eliminates a measurement inconsistency
or if the related assets and liabilities are managed on a fair value basis. ING Group has designated an insignificant part of the issued debt,
related to market-making activities, at fair value through profit and loss. This issued debt consists mainly of own bonds. The designation
as fair value through profit and loss eliminates the inconsistency in the timing of the recognition of gains and losses. All other financial
liabilities are measured at amortised cost.

Financial guarantee contracts

Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs
because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument. Such financial
guarantees are initially recognised at fair value and subsequently measured at the higher of the discounted best estimate of the obligation
under the guarantee and the amount initially recognised less cumulative amortisation to reflect revenue recognition principles.

INSURANCE, INVESTMENT AND REINSURANCE CONTRACTS

Insurance contracts
Insurance policies which bear significant insurance risk and/or contain discretionary participation features are presented as insurance
contracts. Provisions for liabilities under insurance contracts represent estimates of future payouts that will be required for life and non-life
insurance claims, including expenses relating to such claims. For some insurance contracts the measurement reflects current market
assumptions. Unless indicated otherwise below all changes in the insurance provisions are recognised in profit and loss.

Provision for life insurance

The Provision for life insurance is calculated on the basis of a prudent prospective actuarial method, taking into account the conditions for
current insurance contracts. Specific methodologies may differ between business units as they may reflect local regulatory requirements
and local practices for specific product features in the local markets.

Insurance provisions on traditional life policies are calculated using various assumptions, including assumptions on mortality, morbidity,
expenses, investment returns and surrenders. Assumptions for insurance provisions on traditional life insurance contracts, including
traditional whole life and term life insurance contracts, are based on best estimate assumptions including margins for adverse deviations.
The assumptions are set initially at the policy issue date and remain constant throughout the life of the policy, except in the case of
loss recognition.

Insurance provisions for universal life, variable life and annuity contracts, unit-linked contracts, etc. are generally set equal to the balance
that accrues to the benefit of the policyholders. Certain variable annuity products contain minimum guarantees on the amounts payable
upon death and/or maturity. The insurance provisions include the impact of these minimum guarantees, taking into account the difference
between the potential minimum benefit payable and the total account balance, expected mortality and surrender rates.

The as yet unamortised interest rate rebates on periodic and single premium contracts are deducted from the Provision for life insurance.
Interest rate rebates granted during the year are capitalised and amortised in conformity with the anticipated recovery pattern and are
recognised in the profit and loss account.

In 2009, the methodology for determining the liability for insurance contracts in Japan was revised. The liability for certain guarantees
is now measured at the fair value. The impact of this change in accounting policy (at 1 January 2009 and on prior year comparatives)
was not material to shareholders’ equity and the net result of ING Group.

ING Group Annual Report 2010 107

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Accounting policies for the consolidated annual accounts of ING Group continued

Provision for unearned premiums and unexpired insurance risks

The provision is calculated in proportion to the unexpired periods of risk. For insurance policies covering a risk increasing during the term
of the policy at premium rates independent of age, this risk is taken into account when determining the provision. Further provisions are
made to cover claims under unexpired insurance contracts, which may exceed the unearned premiums and the premiums due in respect
of these contracts.

Claims provision
The Claims provision is calculated on a case-by-case basis or by approximation on the basis of experience. Provisions have also been made
for claims incurred but not reported (IBNR) and for future claims handling expenses. The adequacy of the Claims provision is evaluated
each year using standard actuarial techniques. In addition, IBNR reserves are set to recognise the estimated cost of losses that have
occurred but which have not yet been notified to the Group.

Deferred profit sharing

For insurance contracts with discretionary participation features a deferred profit sharing amount is recognised for the full amount of the
unrealised revaluation on allocated investments. Upon realisation, the profit sharing on unrealised revaluation is reversed and a deferred
profit sharing amount is recognised for the share of realised results on allocated investments that is expected to be shared with policyholders.
The deferred profit sharing amount is reduced by the actual allocation of profit sharing to individual policyholders. The change in the
deferred profit sharing amount on unrealised revaluation (net of deferred tax) is recognised in equity in the Revaluation reserve.

Provisions for life insurance for risk of policyholders

For insurance contracts for risk of policyholders the provisions are generally shown at the balance sheet value of the associated investments.

Reinsurance contracts
Reinsurance premiums, commissions and claim settlements, as well as the reinsurance element of technical provisions are accounted for
in the same way as the original contracts for which the reinsurance was concluded. If the reinsurers are unable to meet their obligations,
the Group remains liable to its policyholders for the portion reinsured. Consequently, provisions are made for receivables on reinsurance
contracts which are deemed uncollectible.

Adequacy test
The adequacy of the Provision for life insurance, net of unamortised interest rate rebates, DAC and VOBA (the net insurance liabilities),
is evaluated regularly by each business unit for the business originated in that business unit. The test considers current estimates of all
contractual and related cash flows, and future developments. It includes investment income on the same basis as it is included in the
profit and loss account.

If, for any business unit, it is determined, using a best estimate (50%) confidence level, that a shortfall exists, and there are no offsetting
amounts within other business units in the Business Line, the shortfall is recognised immediately in the profit and loss account.

If, for any business unit, the net insurance liabilities are not adequate using a prudent (90%) confidence level, but there are offsetting
amounts within other Group business units, then the business unit is allowed to take measures to strengthen the net insurance liabilities
over a period no longer than the expected life of the policies. To the extent that there are no offsetting amounts within other Group
business units, any shortfall at the 90% confidence level is recognised immediately in the profit and loss account.

If the net insurance liabilities are determined to be adequate at above the 90% confidence level, no reduction in the net insurance liabilities
is recognised.

As at 31 December 2009, the Legacy Variable Annuity business in the US was inadequate at the 90% confidence level. As there were
offsetting amounts within other Group business units, the Group remained adequate at the 90% confidence level. In line with the
above policy, specific measures were defined to mitigate the inadequacy in the Legacy Variable Annuity business in the US. These specific
measures are effective as of 2010 and result in a limitation of additions to DAC that would otherwise result from negative amortisation
and unlocking. This limitation of DAC is applied on a quarterly basis and in any year if and when a reserve inadequacy existed at the
start of the year. The impact on 2010 was EUR 610 million lower DAC and consequently lower result before tax. In addition, reserve
adequacy in Insurance US Closed Block VA improved through the DAC write-down as disclosed in Note 51 ‘Operating segments’.

Investment contracts
Insurance policies without discretionary participation features which do not bear significant insurance risk are presented as Investment
contracts. Provisions for liabilities under investment contracts are determined either at amortised cost, using the effective interest
method (including certain initial acquisition expenses) or at fair value.

108 ING Group Annual Report 2010

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Accounting policies for the consolidated annual accounts of ING Group continued

OTHER LIABILITIES
Employee benefits – pension obligations
Group companies operate various pension schemes. The schemes are generally funded through payments to insurance companies or
trustee-administered funds, determined by periodic actuarial calculations. The Group has both defined benefit and defined contribution plans.

A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually
dependent on one or more factors such as age, years of service and compensation.

The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit
obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognised actuarial gains and
losses, and unrecognised past service costs. The defined benefit obligation is calculated annually by internal and external actuaries using
the projected unit credit method.

The expected value of the assets is calculated using the expected rate of return on plan assets. Differences between the expected return
and the actual return on these plan assets and actuarial changes in the deferred benefit obligation are not recognised in the profit and loss
account, unless the accumulated differences and changes exceed 10% of the greater of the defined benefit obligation and the fair value
of the plan assets. The excess is charged or credited to the profit and loss account over employees’ remaining working lives. The corridor
was reset to nil at the date of transition to IFRS-EU.

The value of any plan asset recognised is restricted to the sum of any past service costs not yet recognised and the present value of any
economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan.

For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory,
contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are
recognised as staff expenses 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.

Other post-employment obligations

Some group companies provide post-employment healthcare and other benefits to certain employees and former employees.
The entitlement to these benefits is usually conditional on the employee remaining in service up to retirement age and the completion
of a minimum service period. The expected costs of these benefits are accrued over the period of employment using an accounting
methodology similar to that for defined benefit pension plans.

Other provisions
A provision involves a present obligation arising from past events, the settlement of which is expected to result in an outflow from the
company 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 material using a pre-tax discount rate. The determination of provisions is an inherently uncertain
process involving estimates regarding amounts and timing of cash flows.

Reorganisation provisions include employee termination benefits when the Group is demonstrably committed to either terminating 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.

INCOME RECOGNITION
Gross premium income
Premiums from life insurance policies are recognised as income when due from the policyholder. For non-life insurance policies, gross
premium income is recognised on a pro-rata basis over the term of the related policy coverage. Receipts under investment contracts are
not recognised as gross premium income.

Interest
Interest income and expense are recognised in the profit and loss account using the effective interest method. The effective interest
method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or
interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or
receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the
financial asset or financial liability. When calculating the effective interest rate, the Group estimates cash flows considering all contractual
terms of the financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation includes all
fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs
and all other premiums or discounts. Once a financial asset or a group of similar financial assets has been written down as a result of an
impairment loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of
measuring the impairment loss.

ING Group Annual Report 2010 109

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Accounting policies for the consolidated annual accounts of ING Group continued

All interest income and expenses from trading positions and non-trading derivatives are classified as interest income and interest expenses in the
profit and loss account. Changes in the ‘clean fair value’ are included in Net trading income and Valuation results on non-trading derivatives.

Fees and commissions

Fees and commissions are generally recognised as the service is provided. Loan commitment fees for loans that are likely to be drawn down
are deferred (together with related direct costs) and recognised as an adjustment to the effective interest rate on the loan. Loan syndication
fees are recognised as income when the syndication has been completed and the Group has retained no part of the loan package for itself or
has retained a part at the same effective interest rate as the other participants. Commission and fees arising from negotiating, or participating
in the negotiation of, a transaction for a third party – such as the arrangement of the acquisition of shares or other securities or the purchase
or sale of businesses – are recognised on completion of the underlying transaction. Portfolio and other management advisory and service fees
are recognised based on the applicable service contracts as the service is provided. Asset management fees related to investment funds and
investment contract fees are recognised on a pro-rata basis over the period the service is provided. The same principle is applied for wealth
management, financial planning and custody services that are continuously provided over an extended period of time. Fees received and
paid between banks for payment services are classified as commission income and expenses.

Lease income
The proceeds from leasing out assets under operating leases are recognised on a straight-line basis over the life of the lease agreement.
Lease payments received in respect of finance leases when ING Group is the lessor are divided into an interest component (recognised as
interest income) and a repayment component.

EXPENSE RECOGNITION
Expenses are recognised in the profit and loss account as incurred or when a decrease in future economic benefits related to a decrease
in an asset or an increase in a liability has arisen that can be measured reliably.

Share-based payments
Share-based payment expenses are recognised as the employees provide the service. A corresponding increase in equity is recognised
if the services are received in an equity-settled share-based payment transaction. A liability is recognised if the services are acquired in
a cash-settled share-based payment transaction. The cost of acquiring the services is expensed as a staff expense. The fair value of
equity-settled share-based payment transactions is measured at the grant date and the fair value of cash-settled share-based payment
transactions is measured at each balance sheet date.

GOVERNMENT GRANTS
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be
complied with. When the grant relates to an expense item, the grant is recognised over the period necessary to match the grant on a
systematic basis to the expense that it is intended to compensate. In such case, the grant is deducted from the related expense in the profit
and loss account.

EARNINGS PER ORDINARY SHARE

Earnings per ordinary share is calculated on the basis of the weighted average number of ordinary shares outstanding. In calculating the
weighted average number of ordinary shares outstanding:
• Own shares held by group companies are deducted from the total number of ordinary shares in issue;
• The computation is based on daily averages;
• In case of exercised warrants, the exercise date is taken into consideration.

The non-voting equity securities are not ordinary shares, because their terms and conditions (especially with regard to coupons and voting
rights) are significantly different. Therefore, the weighted average number of ordinary shares outstanding during the period is not
impacted by the non-voting equity securities.

Due to the rights issue in 2009, the 2008 earnings per share figures have been restated. Reference is made to Note 49 ‘Earnings per
ordinary share’ for a further explanation on the nature and the effect of this restatement.

Diluted earnings per share data are computed as if all convertible instruments outstanding at year-end were exercised at the beginning of
the period. It is also assumed that ING Group uses the assumed proceeds thus received to buy its own shares against the average market
price in the financial year. The net increase in the number of shares resulting from the exercise is added to the average number of shares
used to calculate diluted earnings per share.

Share options with fixed or determinable terms are treated as options in the calculation of diluted earnings per share, even though they
may be contingent on vesting. They are treated as outstanding on the grant date. Performance-based employee share options are treated
as contingently issuable shares because their issue is contingent upon satisfying specified conditions in addition to the passage of time.

110 ING Group Annual Report 2010

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Accounting policies for the consolidated annual accounts of ING Group continued

FIDUCIARY ACTIVITIES
The Group commonly acts as trustee and in other fiduciary capacities that result in the holding or placing of assets on behalf of individuals,
trusts, retirement benefit plans and other institutions. These assets and income arising thereon are excluded from these financial
statements, as they are not assets of the Group.

STATEMENT OF CASH FLOWS

The statement of cash flows has been drawn up in accordance with the indirect method, classifying cash flows as cash flows from operating,
investing and financing activities. In the net cash flow from operating activities, the result before tax is adjusted for those items in the profit
and loss account, and changes in balance sheet items, which do not result in actual cash flows during the year.

For the purposes of the statement of cash flows, Cash and cash equivalents comprise balances with less than three months’ maturity from
the date of acquisition, including cash and non-restricted balances with central banks, treasury bills and other eligible bills, amounts due
from other banks and amounts due to banks. Investments qualify as a cash equivalent if they are readily convertible to a known amount
of cash and are subject to an insignificant risk of changes in value.

Cash flows arising from foreign currency transactions are translated into the functional currency using the exchange rates at the date of
the cash flows.

The net cash flow shown in respect of Loans and advances to customers relates only to transactions involving actual payments or receipts.
The Addition to loan loss provision which is deducted from the item Loans and advances to customers in the balance sheet has been
adjusted accordingly from the result before tax and is shown separately in the statement of cash flows.

The difference between the net cash flow in accordance with the statement of cash flows and the change in Cash and cash equivalents in
the balance sheet is due to exchange rate differences and is accounted for separately as part of the reconciliation of the net cash flow and
the balance sheet change in Cash and cash equivalents.

ING Group Annual Report 2010 111

4 Consolidated annual accounts

Notes to the consolidated annual accounts

of ING Group
amounts in millions of euros, unless stated otherwise

ASSETS
1 CASH AND BALANCES WITH CENTRAL BANKS

Cash and balances with central banks

2010 2009
Amounts held at central banks 7,983 10,989
Cash and bank balances 4,264 3,965
Short term deposits insurance operations 825 436
13,072 15,390

2 AMOUNTS DUE FROM BANKS

Amounts due from banks

Netherlands International Total
2010 2009 2010 2009 2010 2009
Loans and advances to banks 14,416 9,101 34,640 30,641 49,056 39,742
Cash advances, overdrafts and other balances 1,754 2,550 1,039 1,151 2,793 3,701
16,170 11,651 35,679 31,792 51,849 43,443

Loan loss provisions –21 –46 –21 –46

16,170 11,651 35,658 31,746 51,828 43,397

As at 31 December 2010, Amounts due from banks included receivables with regard to securities which have been acquired in reverse
repurchase transactions amounting to EUR 4,621 million (2009: EUR 2,458 million) and receivables related to finance lease contracts
amounting to EUR 82 million (2009: EUR 64 million).

As at 31 December 2010, the non-subordinated receivables amounted to EUR 51,788 million (2009: EUR 43,396 million) and the
subordinated receivables amounted to EUR 40 million (2009: EUR 1 million).

No individual amount due from banks has terms and conditions that materially affect the amount, timing or certainty of consolidated
cash flows of the Group. For details on significant concentrations see ‘Risk management’ section.

3 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS

Financial assets at fair value through profit and loss

2010 2009
Trading assets 125,675 111,444
Investments for risk of policyholders 120,481 104,597
Non-trading derivatives 11,722 11,632
Designated as at fair value through profit and loss 6,016 5,517
263,894 233,190

Trading assets by type

2010 2009
Equity securities 5,861 2,732
Debt securities 27,979 25,287
Derivatives 42,390 41,450
Loans and receivables 49,445 41,975
125,675 111,444

As at 31 December 2010, the balance sheet value included equity securities which were lent or sold in repurchase transactions amounting
to EUR 69 million (2009: EUR 175 million) and nil (2009: nil), respectively. As at 31 December 2010, the balance sheet value included debt
securities which were lent or sold in repurchase transactions amounting to EUR 65 million (2009: EUR 325 million) and EUR 667 million
(2009: EUR 353 million), respectively.

As at 31 December 2010, Trading assets included receivables of EUR 47,894 million (2009: EUR 40,940 million) with regard to reverse
repurchase transactions.

112 ING Group Annual Report 2010

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Notes to the consolidated annual accounts of ING Group continued

Investments for risk of policyholders by type

2010 2009
Equity securities 109,191 93,268
Debt securities 8,944 8,215
Loans and receivables 2,346 3,114
120,481 104,597

The cost of investments for risk of policyholders as at 31 December 2010 was EUR 113,879 million (2009: EUR 106,904 million).

Investments in investment funds (with underlying investments in debt, equity securities, real estate and derivatives) are included
under equity securities.

Non-trading derivatives by type

2010 2009
Derivatives used in:
– fair value hedges 4,127 2,727
– cash flow hedges 4,440 5,521
– hedges of net investments in foreign operations 81 38
Other non-trading derivatives 3,074 3,346
11,722 11,632

Other non-trading derivatives include mainly interest rate swaps for which no hedge accounting is applied.

Designated as at fair value through profit and loss by type

2010 2009
Equity securities 392 392
Debt securities 3,672 3,478
Loans and receivables 570 524
Other 1,382 1,123
6,016 5,517

Included in the Financial assets designated as at fair value through profit and loss is a portfolio of loans and receivables which is economically
hedged by credit derivatives. The hedges do not meet the criteria for hedge accounting and the loans are recorded at fair value to avoid an
accounting mismatch. The maximum credit exposure of the loans and receivables included in Financial assets designated as at fair value
through profit and loss approximates its carrying value. The cumulative change in fair value of the loans attributable to changes in credit
risk amounts to a gain of EUR 29 million (2009: EUR 24 million) and the change for the current year is EUR 5 million (2009: nil).

The notional value of the related credit derivatives is EUR 205 million (2009: EUR 79 million). The change in fair value of the credit
derivatives attributable to changes in credit risk since the loans were first designated was nil (2009: nil) and the change for the current
year was nil (2009: nil).

The changes in fair value of the (designated) loans attributable to changes in credit risk have been calculated by determining the changes
in credit spread implicit in the fair value of bonds issued by entities with similar credit characteristics.

Other includes investments in private equity funds, hedge funds, other non-traditional investment vehicles and limited partnerships.

ING Group Annual Report 2010 113

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Notes to the consolidated annual accounts of ING Group continued

4 INVESTMENTS

Investments by type
2010 2009
Available-for-sale
– equity securities 9,754 8,853
– debt securities 212,793 188,850
222,547 197,703

Held-to-maturity
– debt securities 11,693 14,409
11,693 14,409

234,240 212,112

The fair value of the securities classified as held to maturity amounts to EUR 11,854 million as at 31 December 2010 (2009: EUR 14,809 million).

Changes in investments – available-for-sale and held-to-maturity

Available-for-sale Available-for-sale
equity securities debt securities Held-to-maturity Total
2010 2009 2010 2009 2010 2009 2010 2009
Opening balance 8,853 8,822 188,850 234,030 14,409 15,440 212,112 258,292
Additions 2,381 1,590 160,658 161,312 141 163,180 162,902
Amortisation –103 84 –13 –30 –116 54
Transfers and reclassifications 12 19 282 –29,651 –282 689 12 –28,943
Changes in the composition
of the group and other changes –5 –1,354 –23 –4,223 –28 –5,577
Changes in unrealised
revaluations 642 3,151 5,001 14,994 5,643 18,145
Impairments –75 –409 –735 –2,077 –810 –2,486
Reversals of impairments 10 2 10 2
Disposals and redemptions –2,228 –3,052 –150,569 –186,968 –2,620 –1,675 –155,417 –191,695
Exchange rate differences 174 86 9,422 1,347 58 –15 9,654 1,418
Closing balance 9,754 8,853 212,793 188,850 11,693 14,409 234,240 212,112

Included in transfers and reclassifications of available-for-sale and held-to-maturity investments

Available-for-sale Available-for-sale
equity securities debt securities Held-to-maturity Total
2010 2009 2010 2009 2010 2009 2010 2009
To/from held-to-maturity 282 –689 282 –689
To/from available-for-sale –282 689 –282 689
To/from loans and
advances to customers/
amounts due from banks 10 –28,962 –28,952
To/from Investment
in associates 12 9 12 9
12 19 282 –29,651 –282 689 12 –28,943

Held-to-maturity debt securities – sale and reclassification to available-for-sale investments (2010)

In the second quarter of 2010 EUR 51 million of Greek government bonds that were classified as held-to-maturity investments were sold.
Furthermore, EUR 282 million of Greek government bonds were reclassified from held-to-maturity to available-for-sale investments. As the
decisions to sell and reclassify were based on the significant deterioration in the issuer’s creditworthiness compared to the credit rating at
initial recognition, this sale and reclassification does not impact the intent for the remainder of the held-to-maturity investment portfolio.

Reclassifications to investments held to maturity (2009)

In 2009 ING Group reclassified EUR 689 million of available-for-sale investments to held-to-maturity. The reclassification resulted from
reduction in market liquidity for these assets; ING Group has the intent and ability to hold these assets until maturity.

Reclassifications to Loans and advances to customers and Amounts due from banks (2009 and 2008)
Reclassifications out of available-for-sale investments to loans and receivables are allowed under IFRS-EU as of the third quarter of 2008.
In the second and first quarter of 2009 and in the fourth quarter of 2008 ING Group reclassified certain financial assets from Investments
available-for-sale to Loans and advances to customers and Amounts due from banks. The Group identified assets, eligible for reclassification,
for which at the reclassification date it had an intent to hold for the foreseeable future. The table below provides information on the three

114 ING Group Annual Report 2010

 Consolidated annual accounts 4

Notes to the consolidated annual accounts of ING Group continued

reclassifications made in the fourth quarter of 2008 and the first and second quarter of 2009. Information is provided for each of the
three reclassifications (see columns) as at the date of reclassification and as at the end of the subsequent reporting periods (see rows).
This information is disclosed under IFRS-EU as long as the reclassified assets continue to be recognised in the balance sheet.

Reclassifications to Loans and advances to customers and Amounts due from banks
Q2 2009 Q1 2009 Q4 2008
As per reclassification date
Fair value 6,135 22,828 1,594
Effective interest rate (weighted average) 1.4%–24.8% 2.1%–11.7% 4.1%–21%
Expected recoverable cash flows 7,118 24,052 1,646
Unrealised fair value losses in shareholders’ equity
(before tax) –896 –1,224 –69
Recognised fair value gains (losses) in shareholders’ equity
(before tax) between the beginning of the year in which
the reclassification took place and the reclassification date 173 nil –79
Recognised impairment (before tax) between the
beginning of the year in which the reclassification took
place and the reclassification date nil nil nil

2010
Carrying value as at 31 December 6,418 16,906 857
Fair value as at 31 December 6,546 16,099 889
Unrealised fair value losses recognised in shareholders’
equity (before tax) as at 31 December –491 –633 –65
Effect on shareholders’ equity (before tax) if
reclassification had not been made 128 –807 32
Effect on result (before tax) if reclassification had not
been made nil nil nil
Effect on result (before tax) for the year (mainly interest
income) 78 467 34
Recognised impairments (before tax) nil nil nil
Recognised provision for credit losses (before tax) nil nil nil

2009
Carrying value as at 31 December 6,147 20,551 1,189
Fair value as at 31 December 6,472 20,175 1,184
Unrealised fair value losses in shareholders’ equity
(before tax) as at 31 December –734 –902 –67
Effect on shareholders’ equity (before tax) if
reclassification had not been made 325 –376 –5
Effect on result (before tax) if reclassification had not
been made nil nil nil
Effect on result (before tax) after the reclassification
until 31 December (mainly interest income) 54 629 n/a
Effect on result (before tax) for the year (mainly interest
income) n/a n/a 47
Recognised impairments (before tax) nil nil nil
Recognised provision for credit losses (before tax) nil nil nil

2008
Carrying value as at 31 December 1,592
Fair value as at 31 December 1,565
Unrealised fair value losses recognised in shareholders’
equity (before tax) as at 31 December –971 –192 –79
Effect on shareholders’ equity (before tax) if
reclassification had not been made n/a n/a –28
Effect on result (before tax) if reclassification had not
been made n/a n/a nil
Effect on result (before tax) after the reclassification
until 31 December (mainly interest income) n/a n/a 9
Recognised impairments (before tax) nil nil nil
Recognised provision for credit losses (before tax) n/a n/a nil

2007
Unrealised fair value losses recognised in shareholders’
equity (before tax) as at 31 December –20
Recognised impairments (before tax) nil

ING Group Annual Report 2010 115

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Notes to the consolidated annual accounts of ING Group continued

Derecognition of Available-for-sale debt securities – Transaction with the Dutch State (2009)
ING Group and the Dutch government (‘State’) reached an agreement on an Illiquid Assets Back-Up Facility (‘IABF’) on 26 January 2009;
the transaction closed on 31 March 2009. Under the IABF, ING has transferred 80% of the economic ownership of its Alt-A portfolio to the
Dutch State. This portfolio was included in Available-for-sale debt securities. Reference is made to Note 33 ‘Related parties’ for more details.

Available-for-sale equity securities by banking and insurance operations

Listed Unlisted Total
2010 2009 2010 2009 2010 2009
Banking operations 2,159 3,209 582 473 2,741 3,682
Insurance operations 4,438 3,257 2,575 1,914 7,013 5,171
6,597 6,466 3,157 2,387 9,754 8,853

Debt securities by banking and insurance operations

Available-for sale Held-to-maturity Total
2010 2009 2010 2009 2010 2009
Banking operations 96,459 88,500 11,693 14,409 108,152 102,909
Insurance operations 116,334 100,350 116,334 100,350
212,793 188,850 11,693 14,409 224,486 203,259

As at 31 December 2010, the balance sheet value included debt securities which were lent or sold in repurchase transactions amounting to
EUR 3,302 million (2009: EUR 6,853 million) and EUR 14,617 million (2009: EUR 20,900 million), respectively.

Investments in connection with the insurance operations with a combined carrying value of EUR 6 million (2009: EUR 26 million) did not
produce any income for the year ended 31 December 2010.

Exposure to debt securities

ING Group’s exposure to debt securities is included in the following balance sheet lines:

Debt securities
2010 2009
Available-for-sale investments 212,793 188,850
Held-to-maturity investments 11,693 14,409
Loans and advances to customers 34,251 38,391
Due from banks 8,122 8,720
Available-for-sale investments and Assets at
amortised cost 266,859 250,370

Trading assets 27,979 25,287

Investments for risk of policyholders 8,944 8,215
Designated as at fair value through profit and loss 3,672 3,477
Financial assets at fair value through profit and loss 40,595 36,979

307,454 287,349

116 ING Group Annual Report 2010

 Consolidated annual accounts 4

Notes to the consolidated annual accounts of ING Group continued

ING Group’s total exposure to debt securities included in available-for-sale investments and assets at amortised cost of EUR 266,859
million (2009: EUR 250,370 million) is specified as follows by type of exposure and by banking and insurance operations:

Debt securities by type and by banking and insurance operations

Banking operations Insurance operations Total
2010 2009 2010 2009 2010 2009
Government bonds 51,960 47,955 48,455 41,417 100,415 89,372
Covered bonds 28,947 31,986 1,327 1,605 30,274 33,591
Corporate bonds 1,066 978 38,404 29,611 39,470 30,589
Financial institution bonds 25,863 25,727 13,047 13,696 38,910 39,423
Bond portfolio (excluding ABS) 107,836 106,646 101,233 86,329 209,069 192,975

US agency RMBS 10,930 8,280 4,799 4,347 15,729 12,627

US prime RMBS 706 877 1,625 1,310 2,331 2,187
US Alt-A RMBS 2,431 2,560 358 336 2,789 2,896
US subprime RMBS 87 59 1,560 1,368 1,647 1,427
Non-US RMBS 14,677 16,836 5,174 4,569 19,851 21,405
CDO/CLO 574 575 731 936 1,305 1,511
Other ABS 4,490 5,542 2,429 2,222 6,919 7,764
CMBS 2,409 2,507 4,810 5,071 7,219 7,578
ABS portfolio 36,304 37,236 21,486 20,159 57,790 57,395

144,140 143,882 122,719 106,488 266,859 250,370

Further comments on the ABS portfolio and the Bond portfolio (excluding ABS), including pressurised ABS and pressurised Greek and Irish
Government and Financial Institution bonds, is provided in the Risk management section under ‘Impact on pressurised asset classes’.

5 LOANS AND ADVANCES TO CUSTOMERS

Loans and advances to customers by banking and insurance operations

2010 2009
Banking operations 589,039 554,682
Insurance operations 31,065 29,060
620,104 583,742

Eliminations –6,900 –4,796

613,204 578,946

Loans and advances to customers by type – banking operations

Netherlands International Total
2010 2009 2010 2009 2010 2009
Loans to, or guaranteed by, public authorities 28,671 28,149 27,282 22,933 55,953 51,082
Loans secured by mortgages 161,938 159,990 172,801 147,484 334,739 307,474
Loans guaranteed by credit institutions 308 468 5,460 6,228 5,768 6,696
Personal lending 5,125 4,972 16,618 14,988 21,743 19,960
Asset backed securities 18,605 21,831 18,605 21,831
Corporate loans 53,785 52,888 103,620 99,104 157,405 151,992
249,827 246,467 344,386 312,568 594,213 559,035

Loan loss provisions –1,932 –1,461 –3,242 –2,892 –5,174 –4,353

247,895 245,006 341,144 309,676 589,039 554,682

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Loans and advances to customers analysed by subordination – banking operations

2010 2009
Non-subordinated 583,616 554,267
Subordinated 5,423 415
589,039 554,682

Loans and advances to customers by type – insurance operations

Netherlands International Total
2010 2009 2010 2009 2010 2009
Policy loans 47 50 3,180 2,853 3,227 2,903
Loans secured by mortgages 6,594 6,700 7,169 7,368 13,763 14,068
Unsecured loans 3,046 2,228 3,137 2,072 6,183 4,300
Mortgage backed securities 6,385 6,138 6,385 6,138
Other 442 427 1,182 1,335 1,624 1,762
16,514 15,543 14,668 13,628 31,182 29,171

Loan loss provisions –71 –52 –46 –59 –117 –111

16,443 15,491 14,622 13,569 31,065 29,060

As at 31 December 2010, Loans and advances to customers included receivables with regard to securities which have been acquired
in reverse repurchase transactions related to the banking operations amounting to EUR 1,609 million (2009: EUR 2,409 million).

No individual loan or advance has terms and conditions that materially affect the amount, timing or certainty of the consolidated
cash flows of the Group. For details on significant concentrations see ‘Risk management’ section.

Loans and advances to customers and Amounts due from banks include finance lease receivables, are detailed as follows:

Finance lease receivables

2010 2009
Maturities of gross investment in finance
lease receivables
– within 1 year 5,060 5,163
– more than 1 year but less than 5 years 9,700 9,739
– more than 5 years 6,089 6,041
20,849 20,943

Unearned future finance income on finance leases –3,328 –3,783

Net investment in finance leases 17,521 17,160

Maturities of net investment in finance lease

receivables
– within 1 year 4,363 4,365
– more than 1 year but less than 5 years 8,294 8,088
– more than 5 years 4,864 4,707
17,521 17,160

Included in Amounts due from banks 82 64

Included in Loans and advances to customers 17,439 17,096
17,521 17,160

The allowance for uncollectible finance lease receivables included in the loan loss provisions amounted to EUR 177 million as at
31 December 2010 (2009: EUR 161 million).

No individual finance lease receivable has terms and conditions that materially affect the amount, timing or certainty of the consolidated
cash flows of the Group.

118 ING Group Annual Report 2010

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Loan loss provisions analysed by type – banking operations

Netherlands International Total
2010 2009 2010 2009 2010 2009
Loans to, or guaranteed by, public authorities 3 3 3 3
Loans secured by mortgages 416 290 1,183 1,066 1,599 1,356
Loans guaranteed by credit institutions 1 22 47 23 47
Personal lending 131 254 536 436 667 690
Asset backed securities 15 15
Corporate loans 1,384 917 1,519 1,371 2,903 2,288
1,932 1,461 3,263 2,938 5,195 4,399

The closing balance is included in

– Amounts due from banks 21 46 21 46
– Loans and advances to customers 1,932 1,461 3,242 2,892 5,174 4,353
1,932 1,461 3,263 2,938 5,195 4,399

Changes in loan loss provisions

Banking operations Insurance operations Total
2010 2009 2010 2009 2010 2009
Opening balance 4,399 2,611 111 59 4,510 2,670
Changes in the composition of the group –3 –3 –6
Write-offs –1,166 –1,217 –42 –13 –1,208 –1,230
Recoveries 105 148 1 1 106 149
Increase in loan loss provisions 1,751 2,973 41 67 1,792 3,040
Exchange rate differences 155 –47 6 161 –47
Other changes –49 –66 –49 –66
Closing balance 5,195 4,399 117 111 5,312 4,510

The increase in loan loss provisions relating to insurance operations is presented under Investment income. The increase in the loan loss
provisions relating to banking operations is presented under Addition to loan loss provisions on the face of the profit and loss account.

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6 INVESTMENTS IN ASSOCIATES

Investments in associates
Fair value
Interest of listed Balance Total Total Total Total
2010 held (%) investment sheet value assets liabilities income expenses
TMB Public Company Limited 30 773 565 14,055 12,826 321 262
Sul America S.A. 36 948 388 5,223 4,178 3,749 3,307
ING Dutch Retail Master Fund C.V. 15 201 1,643 267 146 34
ING Dutch Office Master Fund C.V. 16 195 1,480 268 67 24
ING Retail Property Fund Iberica LP 29 144 1,635 1,122 149 86
ING Dutch Residential Master Fund C.V. 13 111 1,004 180 52 20
ING Real Estate Asia Retail Fund 28 107 782 450 51 53
ING Dutch Office Master Fund II C.V. 16 101 755 129 45 29
ING Lionbrook Property Partnership LP 21 96 620 171 77 19
ING Vastgoed Kantoren C.V. 10 90 945 46 75 40
ING Vastgoed Winkels C.V. 10 89 900 5 90 20
Lion Properties Fund 4 86 3,412 1,428 1,606 1,150
Lion Industrial Trust 8 85 2,691 1,583 247 130
ING Industrial Fund Australia 8 81 85 1,830 756 162 86
ING Real Estate French Residential Fund C.V. 45 76 233 63 20 8
ING Property Fund Central Europe LP 25 74 806 510 66 37
Steadfast Capital Fund II LP 68 74 145 3 2
ING Retail Property Fund France Belgium C.V. 15 70 1,382 916 102 56
Lion Value Fund 30 69 341 109 53 10
ING Dutch Residential Master Fund II C.V. 13 63 612 143 22 18
ING Real Estate Nordic Property Fund FGR 15 61 940 543 81 59
ING REI Investment DOF B.V. 3 59 2,235 414 199 175
ING Retail Property Partnership Southern Europe C.V. 21 52 1,001 759 48 67
ING Real Estate European Industrial Fund C.V. 15 50 647 308 42 28
Other investments in associates 934
3,925

Other investments in associates represents a large number of associates with an individual balance sheet value of less than EUR 50 million.

Accumulated impairments of EUR 71 million (2009: EUR 59 million) have been recognised.

For the above associates in which the interest held is below 20%, significant influence exists based on the combination of ING Group’s
financial interest for own risk and its role as investment manager. For the above associates in which the interest held is above 50%, control
is held by other parties through agreements. ING Group can exercise significant influence over such investments.

The values presented in the table above could differ from the values presented in the individual annual accounts of the associates, due to
the fact that the individual values have been brought in line with ING Group’s accounting principles.

In general, the reporting dates of all material associates are consistent with the reporting date of the Group. However, for practical reasons,
the reporting dates of certain associates differ slightly from with the reporting date of the Group, but, in any case, the difference between
the reporting date of the associates and that of the Group is no more than three months.

Where the listed fair value is lower than the balance sheet value, an impairment review and an evaluation of the going concern basis
has been performed.

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Investments in associates
Fair value Balance
Interest of listed sheet Total Total Total Total
2009 held (%) investment value assets liabilities income expenses
TMB Public Company Limited 30 338 457 11,474 10,503 309 281
Sul America S.A. 36 694 288 4,714 3,904 3,360 3,138
ING Dutch Retail Master Fund C.V. 16 210 1,642 310 56 37
ING Dutch Office Master Fund C.V. 16 201 1,527 285 –12 30
ING Lionbrook Property Partnership LP 33 151 572 148 27 20
ING Retail Property Fund Iberica LP 30 140 1,635 1,156 –51 50
ING Dutch Residential Master Fund C.V. 13 111 1,019 194 –34 22
ING Retail Property Fund Australia 29 107 886 479 20 65
ING Dutch Office Master Fund II C.V. 16 104 775 129 31 27
ING Real Estate Asia Retail Fund 28 99 723 417 –46 140
ING Vastgoed Kantoren C.V. 10 89 952 44 10 33
ING Vastgoed Winkels C.V. 10 87 870 5 53 19
ING Industrial Fund Australia 8 61 78 2,265 1,343 344 387
Lion Industrial Trust 10 72 2,374 1,640 –174 729
ING Retail Property Fund France Belgium C.V. 15 71 1,381 909 2 87
ING Real Estate French Residential Fund C.V. 45 67 233 83 –1 8
ING Property Fund Central Europe LP 25 67 806 540 –25 52
ING REI Investment DOF B.V. 3 66 2,402 514 –215 266
ING Dutch Residential Master Fund II C.V. 13 65 626 141 –25 26
Lion Properties Fund 5 65 2,766 1,506 –226 1,167
ING Real Estate Nordic Property Fund FGR 16 56 940 588 –7 52
Steadfast Capital Fund II LP 68 56 83 2 6
ING Retail Property Partnership Southern Europe C.V. 21 55 1,001 745 –27 69
ING Logistics Property Fund Europe C.V. 25 51 467 263 –22 23
Other investments in associates 886
3,699

Changes in Investments in associates

2010 2009
Opening balance 3,699 4,355
Additions 165 180
Changes in the composition of the group –29 –96
Transfers to and from Investments –12 –9
Revaluations –2 19
Share of results 317 –458
Dividends received –229 –126
Disposals –232 –294
Impairments –3 –3
Exchange rate differences 251 131
Closing balance 3,925 3,699

In 2010, share of results of EUR 317 million (2009: EUR –458 million) and impairments of EUR –3 million (2009: EUR –3 million)
are presented in the profit and loss account in Share of profit from associates for EUR 314 million (2009: EUR –461 million).

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7 REAL ESTATE INVESTMENTS

Changes in real estate investments

2010 2009
Opening balance 3,638 4,300
Additions 73 130
Changes in the composition of the group –1,632 –54
Transfers to and from Property in own use 58
Transfers to and from Other assets –23 322
Fair value gains/(losses) –98 –713
Disposals –295 –656
Exchange rate differences 237 251
Closing balance 1,900 3,638

In 2010, Changes in the composition of the group comprises the sale of ING Summit Industrial Fund LP. Reference is made to Note 30
‘Companies acquired and companies disposed’.

Real estate investments by banking and insurance operations

2010 2009
Banking operations 837 2,569
Insurance operations 1,063 1,069
1,900 3,638

The total amount of rental income recognised in the profit and loss account for the year ended 31 December 2010 was EUR 304 million
(2009: EUR 345 million). The total amount of contingent rent recognised in the profit and loss account for the year ended 31 December
2010 was EUR 14 million (2009: EUR 8 million).

The total amount of direct operating expenses (including repairs and maintenance) incurred from Real estate investments that generated
rental income for the year ended 31 December 2010 was EUR 113 million (2009: EUR 87 million). The total amount of direct operating
expenses (including repairs and maintenance) incurred from Real estate investments that did not generate rental income for the year
ended 31 December 2010 was EUR 6 million (2009: EUR 46 million).

Real estate investments by year of most recent appraisalby independent qualified valuers
in percentages 2010
Most recent appraisal in 2010 97
Most recent appraisal in 2009 3
100

ING Group’s exposure to real estate is included in the following balance sheet lines:

Real estate exposure

2010 2009
Real estate investments 1,900 3,638
Investments in associates 2,568 2,580
Other assets – property development and obtained
from foreclosures 2,153 2,515
Property and equipment – property in own use 1,642 1,686
Investments – available-for-sale 633 689
8,896 11,108

Furthermore, the exposure is impacted by third party interests, leverage in funds and off-balance commitments, resulting in an overall
exposure of EUR 11.1 billion (2009: EUR 13.1 billion) of which EUR 5.2 billion (2009: EUR 7.0 billion) relates to banking operations and
EUR 5.9 billion (2009: EUR 6.1 billion) relates to insurance operations. Reference is made to the section ‘Risk management’.

122 ING Group Annual Report 2010

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8 PROPERTY AND EQUIPMENT

Property and equipment by type

2010 2009
Property in own use 1,642 1,686
Equipment 1,435 1,442
Assets under operating leases 3,055 2,991
6,132 6,119

Property in own use by banking and insurance operations

2010 2009
Banking operations 1,329 1,364
Insurance operations 313 322
1,642 1,686

Changes in property in own use

2010 2009
Opening balance 1,686 1,841
Additions 51 46
Changes in the composition of the group –2
Transfers to and from Real estate investments –58
Transfers to and from Other assets –4 –24
Depreciation –31 –33
Revaluations –20 –51
Impairments –27 –8
Reversal of impairments 5 12
Disposals –43 –37
Exchange rate differences 25 –1
Other changes 1
Closing balance 1,642 1,686

Gross carrying amount as at 31 December 2,487 2,574

Accumulated depreciation as at 31 December –700 –764
Accumulated impairments as at 31 December –145 –124
Net book value 1,642 1,686

Revaluation surplus
Opening balance 531 606
Revaluation in year –3 –3
Released in year –72
Closing balance 528 531

The cost or the purchase price amounted to EUR 1,959 million (2009: EUR 2,043 million). Cost less accumulated depreciation
and impairments would have been EUR 1,114 million (2009: EUR 1,155 million).

Property in own use by year of most recent appraisal by independent qualified valuers
in percentages 2010
Most recent appraisal in 2010 51
Most recent appraisal in 2009 14
Most recent appraisal in 2008 25
Most recent appraisal in 2007 2
Most recent appraisal in 2006 8
100

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Changes in equipment
Fixtures and fittings
Data processing equipment and other equipment Total
2010 2009 2010 2009 2010 2009
Opening balance 344 320 1,098 1,087 1,442 1,407
Additions 192 189 284 407 476 596
Changes in the composition of the group –4 –9 –7 –88 –11 –97
Disposals –12 –13 –41 –32 –53 –45
Depreciation –167 –155 –262 –261 –429 –416
Impairments –1 –1
Exchange rate differences 12 6 20 4 32 10
Other changes 12 6 –33 –19 –21 –13
Closing balance 376 344 1,059 1,098 1,435 1,442

Gross carrying amount as at 31 December 1,707 1,593 2,642 3,084 4,349 4,677
Accumulated depreciation as at 31 December –1,330 –1,249 –1,583 –1,986 –2,913 –3,235
Accumulated impairments as at 31 December –1 –1
Net book value 376 344 1,059 1,098 1,435 1,442

Changes in assets under operating leases

Cars Other leased-out assets Total
2010 2009 2010 2009 2010 2009
Opening balance 2,986 3,140 5 8 2,991 3,148
Additions 1,284 1,034 1,284 1,034
Changes in the composition of the group –3 –3
Disposals –53 –93 –53 –93
Depreciation –784 –789 –3 –3 –787 –792
Exchange rate differences 13 28 13 28
Transfer and other changes –390 –334 –390 –334
Closing balance 3,053 2,986 2 5 3,055 2,991

Gross carrying amount as at 31 December 4,617 4,516 18 27 4,635 4,543

Accumulated depreciation as at 31 December –1,564 –1,530 –16 –22 –1,580 –1,552
Net book value 3,053 2,986 2 5 3,055 2,991

Transfer and other changes relates mainly to the transfer of cars under operating lease to Other assets due to the expiration of the
lease contract.

Depreciation of assets under operating leases is included in the profit and loss account in Other income as a deduction from operating
lease income.

No individual operating lease has terms and conditions that materially affect the amount, timing or certainty of the consolidated cash
flows of the Group.

The Group leases assets to third parties under operating leases as lessor. The future minimum lease payments to be received under
non–cancellable operating leases are as follows:

Future minimum lease payments by maturity

2010 2009
Within 1 year 1,155 1,094
More than 1 year but less than 5 years 1,887 1,893
More than 5 years 13 4
3,055 2,991

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9 INTANGIBLE ASSETS

Changes in intangible assets

Value of
business acquired Goodwill Software Other Total
2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
Opening balance 1,502 2,084 3,071 3,070 803 881 645 880 6,021 6,915
Additions 39 223 188 1 3 224 230
Capitalised expenses 90 79 148 132 238 211
Amortisation and unlocking –113 –120 –358 –342 –118 –120 –589 –582
Impairments –540 –31 –9 –571 –9
Effect of unrealised revaluations
in equity –286 –482 –286 –482
Changes in the composition
of the group –11 3 –94 –49 –62 –31 –143 –77 –310
Exchange rate differences 127 –48 238 62 13 10 48 36 426 60
Disposals –7 –6 5 –4 –12 –2 –14 –12
Closing balance 1,320 1,502 2,765 3,071 754 803 533 645 5,372 6,021

Gross carrying amount as

at 31 December 2,449 2,518 3,370 3,136 2,557 2,217 1,013 1,007 9,389 8,878
Accumulated amortisation
as at 31 December –1,129 –1,016 –1,751 –1,393 –426 –308 –3,306 –2,717
Accumulated impairments
as at 31 December –605 –65 –52 –21 –54 –54 –711 –140
Net book value 1,320 1,502 2,765 3,071 754 803 533 645 5,372 6,021

Amortisation of software and other intangible assets is included in the profit and loss account in Other operating expenses and Intangible
amortisation and other impairments. Amortisation of VOBA is included in Underwriting expenditure.

Goodwill
Changes in Goodwill
There were no additions to goodwill in 2010. Additions to Goodwill in 2009 mainly relate to the consolidation of 3W Holding BV
(EUR 26 million) and to the extension of ING Group’s Interhyp AG share of EUR 7 million. A goodwill impairment of EUR 540 million
was recognised in 2010. The impairment relates to the reporting unit Insurance US. There was no goodwill impairment in 2009. All other
changes in goodwill are mainly caused by foreign exchange rate differences.

Allocation of Goodwill to reporting units

Goodwill is allocated to reporting units as follows:

Goodwill allocation to reporting units

2010 2009
Retail Central Europe 870 834
Retail Belgium 49 49
Retail Netherlands 1 1
ING Direct 468 460
Commercial Banking – Lease 68 66
ING Real Estate 31 39
Commercial Banking – Other 15 14
Insurance Benelux 48 48
Insurance Central & Rest of Europe 123 122
Insurance Latin America 680 591
Insurance US * 483
Insurance Asia/Pacific – South Korea 192 171
Insurance Asia/Pacific – Rest of Asia 2 2
ING Investment Management 218 191
2,765 3,071
*
Excluding US Closed Block VA

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As of 2010 ING Investment Management is a separate reporting unit following the change in operating segments as explained in Note 51
‘Operating Segments’.

Goodwill impairment testing

Goodwill is tested for impairment at the lowest level at which it is monitored for internal management purposes. This level is defined as
the so called ‘reporting units’ as set out above. Goodwill is tested for impairment by comparing the book value of the reporting unit to
the best estimate of the recoverable amount of that reporting unit. The book value is determined as the IFRS-EU net asset value including
goodwill. The recoverable amount is estimated as the higher of fair value less cost to sell and value in use. Several methodologies are
applied to arrive at the best estimate of the recoverable amount.

As a first step of the impairment test, the best estimate of the recoverable amount of reporting units to which goodwill is determined
separately for each relevant reporting unit based on Price to Earnings, Price to Book, and Price to Assets under management ratios.
The main assumptions in this valuation are the multiples for Price to Earnings, Price to Book and Price to Assets under management;
these are developed internally but are either derived from or corroborated against market information that is related to observable
transaction in the market for comparable businesses. Earnings and book values are equal to or derived from the relevant measure under
IFRS-EU. If the outcome of this first step indicates that the difference between recoverable amount and book value may not be sufficient
to support the amount of goodwill allocated to the reporting unit, an additional analysis is performed in order to determine a recoverable
amount in a manner that better addresses the specific characteristics of the relevant reporting unit.

More details on this additional analysis and the outcome thereof are presented below for each of the relevant reporting units. For other
reporting units, the goodwill allocated to these reporting units was fully supported in the first step.

Insurance US
Due to the unfavourable market circumstances for Insurance, including the low interest rate environment, there were indications in the
third quarter of 2010 that the recoverable amount of the reporting unit Insurance US had fallen below book value. As a result, a full
goodwill impairment review was performed for the reporting unit Insurance US in the third quarter of 2010. The reporting unit Insurance
US equals the segment Insurance US as disclosed in Note 51 ‘Operating segments’. The 2009 impairment test for Insurance US showed
that the recoverable amount based on fair value (using market multiples for Price/Book and Price/Earnings of listed peer companies) was
at least equal to book value. The outcome of the impairment test performed in the third quarter of 2010 indicated that the fair value
has become less than book value by an amount that exceeded the goodwill of Insurance US, indicating that the full amount of goodwill
relating to Insurance US is impaired. Further analysis of the recoverable amount confirmed the impairment. As a result, the goodwill
of EUR 540 million (pre-tax) was written down. The related charge is included in the profit and loss account in the line ‘Intangibles
amortisation and other impairments’. Goodwill is recognised in the Corporate Line segment and, therefore, this charge is included in
the segment reporting in the Corporate Line Insurance segment.

Retail Central Europe

For the reporting unit Retail Central Europe the recoverable amount is determined as the sum of the recoverable amounts
of the most important components. For certain components, a market price is available based on listed equity securities. In such case,
the listed market price is used to determine the recoverable amount. For certain components, a full internal valuation was performed
upon acquisition. In such case, the recoverable amount is determined by updating the acquisition model for business and market related
developments. The most important assumptions in the acquisition model are the estimated short term expected profit, the terminal
growth rate (3.5% approximately) and the discount rate (between 10.8% and 12.8%). Based on this determination of recoverable
amount, it was concluded that the goodwill allocated to Retail Central Europe is not impaired.

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10 DEFERRED ACQUISITION COSTS

Changes in deferred acquisition costs

Investment contracts Life insurance Non-life insurance Total
2010 2009 2010 2009 2010 2009 2010 2009
Opening balance 0 89 11,355 11,489 43 265 11,398 11,843
Capitalised 9 1,550 1,609 12 12 1,562 1,630
Amortisation and unlocking –11 –2,821 –435 –13 –12 –2,834 –458
Effect of unrealised
revaluations in equity –765 –1,140 –765 –1,140
Changes in the composition
of the group –104 –5 58 –231 –5 –277
Exchange rate differences 17 1,246 –227 9 1,246 –201
Disposal of portfolios 2 1 2 1
Closing balance 0 0 10,562 11,355 42 43 10,604 11,398

For flexible life insurance contracts the growth rate assumption used to calculate the amortisation of the deferred acquisition costs for
2010 is 8.3% gross and 4.8% net of investment management fees (2009: 8.2% gross and 5.6% net of investment management fees).

Amortisation and unlocking in 2010 includes a EUR 975 million DAC write-off as explained in Note 51 ‘Operating segments’.
The remaining amount includes unlocking of EUR –538 million (2009: EUR –461 million), which mainly relates to Insurance US
and amortisation of EUR –1,321 million (2009: EUR 3 million).

11 ASSETS AND LIABILITIES HELD FOR SALE

Assets and liabilities held for sale include disposal groups whose carrying amount will be recovered principally through a sale transaction
rather than through continuing operations. This relates to businesses for which a sale is agreed upon or a sale is highly probable at the
balance sheet date but for which the transaction has not yet fully closed. For 31 December 2010 this relates mainly to Pacific Antai Life
Insurance Company Ltd. (PALIC), ING Arrendadora, S.A. de C.V. in Mexico, ING Real Estate Investment Management (ING REIM) and
Clarion Real Estate Securities. For 31 December 2009 this relates mainly to the Swiss and Asian Private Banking business, PALIC, and three
US independent retail broker-dealer units. Reference is made to Note 30 ‘Companies acquired and companies disposed’ for more details.

Assets held for sale

2010 2009
Cash and balances with central banks 28 264
Amounts due from banks 474
Financial assets at fair value through profit and loss 16 389
Available-for-sale investments 144 458
Loans and advances to customers 244 3,242
Reinsurance contracts 3
Investments in associates 43
Property and equipment 12 37
Intangible assets 15 3
Deferred acquisition costs 43 35
Other assets 136 119
681 5,024

Liabilities held for sale

2010 2009
Other borrowed funds 35
Insurance and investments contracts 217 191
Amounts due to banks 31
Customer deposits and other funds on deposit 4,480
Financial liabilities at fair value through profit and loss 36
Other liabilities 172 152
424 4,890

Cumulative other comprehensive income includes EUR 7 million (2009: EUR 13 million) related to Assets held for sale.

In addition to the entities presented as Held for sale above, ING is considering potential divestments, including those that are listed under
the European Commission Restructuring plan in Note 33 ‘Related parties’. However, none of these businesses qualify as held for sale as at
31 December 2010 as the potential divestments are not yet available for immediate sale in their present condition and/or a sale is not yet
highly probable to occur.

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12 OTHER ASSETS

Other assets by type

2010 2009
Reinsurance and insurance receivables 2,201 2,125
Deferred tax assets 3,425 3,969
Property development and obtained
from foreclosures 2,153 2,515
Income tax receivable 527 836
Accrued interest and rents 16,194 18,306
Other accrued assets 2,888 2,497
Pension assets 3,458 3,143
Other 5,623 5,838
36,469 39,229

Other includes EUR 1,875 million (2009: EUR 2,058 million) related to transactions still to be settled at balance sheet date.

Disclosures in respect of deferred tax assets and pension assets are provided in Note 21 ‘Other liabilities’.

Accrued interest and rents includes EUR 7,113 million (2009: EUR 6,956 million) accrued interest on assets measured at amortised
cost under the IAS 39 classification Loans and receivables.

The total amount of borrowing costs relating to Property development and obtained from foreclosures, capitalised in 2010 is
EUR 18 million (2009: EUR 98 million).

Reinsurance and insurance receivables

2010 2009
Receivables on account of direct insurance from:
– policyholders 1,272 1,443
– intermediaries 108 113
Reinsurance receivables 821 569
2,201 2,125

The allowance for uncollectible reinsurance and insurance receivables amounted to EUR 52 million as at 31 December 2010
(2009: EUR 47 million). The allowance is deducted from this receivable.

Property development and obtained from foreclosures

2010 2009
Property under development 821 1,438
Property developed 1,024 917
Property obtained from foreclosures 308 160
2,153 2,515

Gross carrying amount as at 31 December 3,240 3,228

Accumulated impairments as at 31 December –1,087 –713
Net book value 2,153 2,515

128 ING Group Annual Report 2010

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Notes to the consolidated annual accounts of ING Group continued

EQUITY
13 SHAREHOLDERS’ EQUITY (PARENT)/NON-VOTING EQUITY SECURITIES

Shareholders’ equity (parent)

2010 2009 2008
Share capital 919 919 495
Share premium 16,034 16,034 9,182
Revaluation reserve 4,752 2,466 –8,502
Currency translation reserve 105 –2,008 –1,918
Other reserves 19,745 16,452 18,077
Shareholders’ equity (parent) 41,555 33,863 17,334

The Revaluation reserve, Share of associates reserve (included in Other reserves), Currency translation reserve and the part of the Other
reserves that relates to the former Stichting Regio Bank cannot be freely distributed.

As at 31 December 2010, Other reserves included an amount of EUR 741 million (2009: EUR 645 million; 2008: EUR 566 million) related
to the former Stichting Regio Bank.

Share capital
Ordinary shares (par value EUR 0.24)
Number x1,000 Amount
2010 2009 2008 2010 2009 2008
Authorised share capital 4,500,000 4,500,000 4,500,000 1,080 1,080 1,080
Unissued share capital 668,439 668,439 2,436,852 161 161 585
Issued share capital 3,831,561 3,831,561 2,063,148 919 919 495

Changes in issued share capital

Ordinary shares (par value EUR 0.24)
Number x1,000 Amount
Issued share capital as at 1 January 2008 2,226,445 534

Issue of shares 1,848

Buy-back of shares –183,158 –44
Exercise of B warrants 18,013 5
Issued share capital as at 31 December 2008 2,063,148 495

Issue of shares 1,768,413 424

Issued share capital as at 31 December 2009 3,831,561 919

No changes have occurred in the issued share capital in 2010.

Share premium
Changes in Share premium are disclosed in the Consolidated statement of changes in equity of ING Group.

Rights issue (2009)

On 27 November 2009 existing holders of (depositary receipts for) ordinary shares were offered rights entitling to subscribe for new
(depositary receipts for) ordinary shares subject to applicable securities laws. Eligible rights holders could subscribe for 6 new (depositary
receipts for) ordinary shares in relation to every 7 subscription rights that they hold. The issue price was set at EUR 4.24 per share. This
represented a discount of 37.3% to the Theoretical Ex-Rights Price (TERP), based on the closing price of EUR 8.92 of ING Groep N.V.’s,
(depositary receipts for) shares on Euronext Amsterdam and on Euronext Brussels on 26 November 2009.

A total of 1,768,412,544 (depositary receipts for) ordinary shares were offered and sold, of which approximately 97% through
the exercise of rights and the remainder through placements to institutional investors. As a result, ING received approximately
EUR 7.3 billion in proceeds, net of fees and expenses.

ING Group Annual Report 2010 129

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Notes to the consolidated annual accounts of ING Group continued

Share buy-back programme (2007/2008)

In May 2007, ING Group announced a plan to adopt a buy-back programme under which it planned to purchase (depositary receipts for)
ordinary shares with a total value of EUR 5 billion over a period of 12 months, beginning in June 2007. On 23 May 2008 this programme
was terminated as ING Group had almost reached the legal limit then in force for the acquisition of its own shares (10% of the issued
share capital). In total, 183.2 million (depositary receipts for) ordinary shares were repurchased under this programme at an average price
of EUR 26.77 and a total consideration of EUR 4.9 billion (98% of the total amount of the share buy back programme as announced).
Repurchased ordinary shares and depositary receipts are included in the table ‘Changes in treasury shares’.

These ordinary shares repurchased, were cancelled in two blocks, effective on 25 June 2008 and 7 October 2008 respectively. These now
form part of the unissued share capital.

Ordinary shares
All ordinary shares are in registered form. No share certificates have been issued. Ordinary shares may be transferred by means of a deed of
transfer. A transfer of ordinary shares requires written acknowledgement by ING Groep N.V. The par value of ordinary shares is EUR 0.24. The
authorised ordinary share capital of ING Groep N.V. currently consists of 4,500 million ordinary shares; it increased in 2008 from 3,000 million
shares to 4,500 million shares as a result from an amendment made to the Articles of Association on 8 October 2008. As at 31 December
2010, 3,832 million of ordinary shares were issued and fully paid.

Depositary receipts for ordinary shares

More than 99.9% of the ordinary shares issued by ING Groep N.V. are held by Stichting ING Aandelen (ING Trust Office). In exchange for
these shares, ING Trust Office has issued depositary receipts in bearer form for these shares. The depositary receipts are listed on various
stock exchanges. Depositary receipts can be exchanged upon request of the holders of depositary receipts for (non-listed) ordinary shares
without any restriction, other than payment of an administrative fee of EUR 0.01 per depositary receipt with a minimum of EUR 25 per
exchange transaction.

The holder of a depositary receipt is entitled to receive from ING Trust Office payment of dividends and distributions corresponding to the
dividends and distributions received by ING Trust Office on an ordinary share.

In addition, the holder of a depositary receipt is entitled to attend and to speak at the General Meeting of Shareholders of ING Groep N.V.
either in person or by proxy. A holder of a depositary receipt, who thus attends the General Meeting of Shareholders, is entitled to vote
as a proxy of the ING Trust Office but entirely at his own discretion for a number of shares equal to the number of his depositary receipts.

A holder of depositary receipts who does not attend the General Meeting of Shareholders in person or by proxy is entitled to give a
binding voting instruction to the Trust Office for a number of shares equal to the number of his depositary receipts.

Depositary receipts for ordinary shares held by ING Group (Treasury shares)
As at 31 December 2010, 51.3 million (2009: 47.0 million; 2008: 36.5 million) depositary receipts for ordinary shares ING Groep N.V. with
a par value of EUR 0.24 were held by ING Groep N.V. or its subsidiaries. These depositary receipts for ordinary shares were purchased to
hedge option rights granted to the Executive Board members and other employees. In December 2010 ING Groep N.V. announced that
it will no longer rebalance its hedge portfolio. This decision is an effort to simplify the management and administration of ING’s various
employee share and option programmes. The remaining shares in the hedge portfolio will be used to fund the obligations arising out of
exercise and vesting. Once all shares in the hedge portfolio are used ING will fund these obligations by issuing new shares.

Restrictions with respect to dividend and repayment of capital

ING Groep N.V. is subject to legal restrictions regarding the amount of dividends it can pay to the holders of its ordinary shares. Pursuant
to the Dutch Civil Code, 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.

Moreover, ING Groep N.V.’s ability to pay dividends is dependent on the dividend payment ability of its subsidiaries and associates. ING Groep
N.V. is legally required to create a non-distributable reserve insofar profits of its subsidiaries and associates are subject to dividend payment
restrictions which apply to those subsidiaries and associates themselves. Such restrictions may among others be of a similar nature as the
restrictions which apply to ING Groep N.V. Furthermore there can be restrictions as a result of minimum capital requirements that are
imposed by industry regulators in the countries in which the subsidiaries operate, or other limitations which may exist in certain countries.

Without prejudice to the authority of the Executive Board to allocate profits to reserves and to the fact that the ordinary shares are the
most junior securities issued by ING Groep N.V., no specific dividend payment restrictions with respect to ordinary shares exist.

Furthermore, ING Groep N.V. is subject to legal restrictions with respect to repayment of capital to holders of ordinary shares. Capital may
be repaid to the holders of ordinary shares pursuant to an amendment of ING Groep N.V.’s Articles of Association whereby the ordinary
shares are written down.

130 ING Group Annual Report 2010

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Notes to the consolidated annual accounts of ING Group continued

Pursuant to the Dutch Civil Code, capital may only be repaid if none of ING Groep N.V.’s creditors opposes such a repayment within
two months following the announcement of a resolution to that effect.

On a distribution of a dividend ING Groep N.V. is in principle required to withhold an income tax on dividends at a rate of 15%.

B warrants (2008)
In 1998, ING Groep N.V. authorised the issue of a maximum of 17,317,132 B warrants, of which 17,220,200 were issued. On 5 January
2008 of the remaining 9,266,097 warrants, 259,484 warrants expired and 9,006,613 were exercised. Accordingly no B warrants were
outstanding as at 31 December 2010 (2009 and 2008: nil). B warrant holders were entitled to obtain from ING Groep N.V., for a fixed
price, depositary receipts for ordinary shares in the proportion of one B warrant to two depositary receipts. B warrant holders could
exercise their rights at their own discretion but no later than 5 January 2008.

The closing date for exercising warrants B was 5 January 2008. The exercise price of warrants B was EUR 49.92 for two depositary receipts.

Changes in revaluation reserve

Property Available- Cash flow
revaluation for-sale hedge
2010 reserve reserve reserve Total
Opening balance 411 1,683 372 2,466
Unrealised revaluations after taxation –32 3,401 3,369
Realised gains/losses transferred to profit and loss 86 86
Changes in cash flow hedge reserve 475 475
Transfer to insurance liabilities/DAC –1,644 –1,644
Closing balance 379 3,526 847 4,752

Changes in revaluation reserve

Property Available- Cash flow
revaluation for-sale hedge
2009 reserve reserve reserve Total
Opening balance 461 –10,140 1,177 –8,502
Unrealised revaluations after taxation –50 12,496 12,446
Realised gains/losses transferred to profit and loss 1,406 1,406
Changes in cash flow hedge reserve –805 –805
Transfer to insurance liabilities/DAC –2,079 –2,079
Closing balance 411 1,683 372 2,466

Changes in revaluation reserve

Property Available- Cash flow
revaluation for-sale hedge
2008 reserve reserve reserve Total
Opening balance 439 4,067 431 4,937
Unrealised revaluations after taxation 22 –18,876 –18,854
Realised gains/losses transferred to profit and loss 2,476 2,476
Changes in cash flow hedge reserve 746 746
Transfer to insurance liabilities/DAC 2,193 2,193
Closing balance 461 –10,140 1,177 –8,502

Transfer to insurance liabilities/DAC includes the change in the deferred profit sharing liability (net of deferred tax).
Reference is made to Note 17 ‘Insurance and investment contracts, reinsurance contracts’.

Changes in currency translation reserve

2010 2009 2008
Opening balance –2,008 –1,918 –1,354
Unrealised revaluations after taxation –777 –294 388
Realised gains/losses transferred to profit and loss 148 156
Exchange rate differences 2,890 56 –1,108
Closing balance 105 –2,008 –1,918

ING Group Annual Report 2010 131

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Notes to the consolidated annual accounts of ING Group continued

The unrealised revaluations after taxation relate to changes in the value of hedging instruments that are designated as net investment hedges.

Changes in other reserves

Share of
Retained associates Treasury Other
2010 earnings reserve shares reserves Total
Opening balance 21,905 645 –737 –5,361 16,452
Result for the year 3,220 3,220
Unrealised revaluations after taxation –156 171 15
Changes in treasury shares 22 22
Transfer to share of associates reserve –91 91
Employee stock options and share plans 36 36
Closing balance 24,914 907 –715 –5,361 19,745

Changes in other reserves

Share of
Retained associates Treasury Other
2009 earnings reserve shares reserves Total
Opening balance 23,232 726 –866 –5,015 18,077
Result for the year –935 –935
Unrealised revaluations after taxation –273 –5 –278
Changes in treasury shares 129 129
Transfer to share of associates reserve 76 –76
Dividend and repayment premium –259 –346 –605
Employee stock options and share plans 64 64
Closing balance 21,905 645 –737 –5,361 16,452

Dividend and repayment premium includes the coupon (EUR 259 million) and repayment premium (EUR 346 million) on the
repayment of EUR 5 billion non-voting equity securities.

Changes in other reserves

Share of
Retained associates Treasury Other
2008 earnings reserve shares reserves Total
Opening balance 27,025 1,202 –3,740 –135 24,352
Result for the year –360 –369 –729
Unrealised revaluations after taxation –77 106 29
Changes in treasury shares –2,030 –2,030
Dividend –3,387 –213 –3,600
Employee stock options and share plans 31 31
Issuance costs incurred –20 –20
Cancellation of shares 4,904 –4,860 44
Closing balance 23,232 726 –866 –5,015 18,077

Changes in treasury shares

Amount Number
2010 2009 2008 2010 2009 2008
Opening balance 737 866 3,740 47,047,225 36,457,118 126,759,829
Purchased/sold 48 47 2,159 6,393,739 11,648,765 94,105,700
Rights issue –64
Cancelled –4,904 –183,158,017
Share-based payments –23 –27 –22 –2,140,863 –1,058,658 –1,250,394
Other –47 –85 –107
Closing balance 715 737 866 51,300,101 47,047,225 36,457,118

132 ING Group Annual Report 2010

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Notes to the consolidated annual accounts of ING Group continued

Non-voting equity securities (Core Tier 1 securities)

On 12 November 2008, ING Groep N.V. issued one billion non-voting equity securities to the Dutch State at EUR 10 per non-voting equity
security, resulting in an increase of ING Group’s core Tier 1 capital of EUR 10 billion. The nominal value of each security is EUR 0.24. On
21 December 2009 ING repurchased EUR 5 billion of these securities. The non-voting equity securities do not form part of ING Group’s
share capital; accordingly they do not carry voting rights in the General Meeting.

These non-voting equity securities are deeply subordinated and rank pari-passu with ordinary shares in a winding up of ING Group.

On these non-voting equity securities a coupon was and is payable of the higher of:
• EUR 0.85 per security, payable annually in arrears, with a first coupon of EUR 0.425 per security paid on 12 May 2009; and
• 110% of the dividend paid on each ordinary share over 2009 (payable in 2010);
• 120% of the dividend paid on each ordinary share over 2010 (payable in 2011);
• 125% of the dividend paid on each ordinary share over 2011 onwards (payable in 2012 onwards).

Since ING Groep N.V. had already paid an interim dividend of EUR 0.74 per ordinary share in August 2008, ING recognised a coupon
payable of EUR 425 million to the Dutch State as of 31 December 2008. This coupon was paid out on 12 May 2009.

Further coupons are to be paid on 12 May of each year (the coupon date) in cash if the dividend on ordinary shares is paid in cash or to
be paid in scrip securities in the event of a scrip dividend on ordinary shares. Coupons are only due and payable, on a non-cumulative basis
and if a dividend is paid on ordinary shares over the financial year preceding the coupon date, either on an interim or a final dividend basis,
provided that ING Group’s capital adequacy position is and remains satisfactory both before and after payment in the opinion of the Dutch
central bank.

In December 2009, ING repurchased the first half of the non-voting equity securities (core Tier 1 securities) of EUR 5 billion plus a total
premium of EUR 605 million. In March 2011, ING announced that, at the next coupon reset date on 13 May 2011, ING intends to exercise its
option for early repurchase of EUR 2 billion of the remaining non-voting equity securities (core Tier 1 securities). The total payment in May
2011 will amount to EUR 3 billion and includes a 50% repurchase premium. ING will fund this repurchase from retained earnings. Provided
that the strong capital generation continues, ING intends to repurchase the remaining EUR 3 billion non-voting equity securities (core Tier 1
securities) ultimately by May 2012 from retained earnings. The final decision on repurchase of these non-voting equity securities (core Tier 1
securities) will be made before the envisaged repayment date and will be conditional upon there having been no material changes regarding
ING’s capital requirements and/or ING’s outlook on external market circumstances. The terms for the remaining non-voting equity securities,
including restrictions on remuneration and corporate governance, remained unchanged. Reference is made to Note 33 ‘Related parties’.

Cumulative preference shares

Pursuant to the Articles of Association of ING Groep N.V. as amended on 8 October 2008, the authorised cumulative preference share
capital consists of 4.5 billion cumulative preference shares, of which none have been issued. The par value of these cumulative preference
shares is EUR 0.24.

The cumulative preference shares rank before the ordinary shares in entitlement to dividend and to distributions upon liquidation of
ING Groep N.V.

The dividend on the cumulative preference shares will be equal to a percentage, calculated on the amount compulsorily paid up or yet
to be paid up. This percentage shall be equal to the average of the Euro OverNight Index Average (EONIA) as calculated by the European
Central Bank. During the financial year for which the distribution is made, this percentage is weighted on the basis of the number of
days for which it applies, increased by 2.5 percentage points.

If and to the extent that the profit available for distribution is not sufficient to pay the dividend referred to above in full, the shortfall will be made
up from the reserves insofar as possible. If, and to the extent that, the dividend distribution cannot be made from the reserves, the profits earned
in subsequent years shall first be used to make up the shortfall before any distribution may be made on shares of any other category.

ING Groep N.V.’s Articles of Association make provision for the cancellation of cumulative preference shares. Upon cancellation of
cumulative preference shares and upon liquidation of ING Groep N.V., the amount paid up on the cumulative preference shares
will be repaid together with the dividend shortfall in preceding years, insofar as this shortfall has not yet been made up.

Cumulative preference shares – Restrictions with respect to dividend and repayment of capital
ING Groep N.V. is subject to legal restrictions regarding the amount of dividends it can pay to the holders of its cumulative preference
shares, when issued. Pursuant to the Dutch Civil Code, 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.

Moreover, ING Groep N.V.’s ability to pay dividends is dependent on the dividend payment ability of its subsidiaries. ING Groep N.V. is
legally required to create a non-distributable reserve insofar profits of its subsidiaries are subject to dividend payment restrictions which
apply to those subsidiaries themselves. Such restrictions may among others be of a similar nature as the restrictions which apply to ING

ING Group Annual Report 2010 133

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Notes to the consolidated annual accounts of ING Group continued

Groep N.V. or may be the result of minimum capital requirements that are imposed by industry regulators in the countries in which the
subsidiaries operate, or other limitations which may exist in certain countries.

Without prejudice to the fact that the cumulative preference shares, when issued, will be junior securities of ING Groep N.V., no specific
dividend payment restrictions with respect to the cumulative preference shares exist.

Furthermore, ING Groep N.V. is subject to legal restrictions with respect to repayment of capital to holders of cumulative preference
shares. Capital may be repaid to the holders of cumulative preference shares pursuant to (i) an amendment of ING Groep N.V.’s articles
of association whereby the cumulative preference shares are written down or (ii) a resolution to redeem and cancel the cumulative
preference shares.

Pursuant to the Dutch Civil Code, capital may only be repaid if none of ING Groep N.V.’s creditors opposes such a repayment within
two months following the announcement of a resolution to that effect.

LIABILITIES
14 SUBORDINATED LOANS

Subordinated loans
Balance sheet value
Interest rate Year of issue Due date Notional amount in original currency 2010 2009
9.000% 2008 Perpetual EUR 10 10 10
8.500% 2008 Perpetual USD 2,000 1,469 1,357
8.000% 2008 Perpetual EUR 1,500 1,485 1,479
7.375% 2007 Perpetual USD 1,500 1,111 1,022
6.375% 2007 Perpetual USD 1,045 773 713
5.140% 2006 Perpetual GBP 600 692 670
5.775% 2005 Perpetual USD 1,000 741 690
6.125% 2005 Perpetual USD 700 504 472
4.176% 2005 Perpetual EUR 500 498 498
Variable 2004 Perpetual EUR 1,000 994 999
6.200% 2003 Perpetual USD 500 363 337
Variable 2003 Perpetual EUR 750 729 731
7.200% 2002 Perpetual USD 1,100 748 656
7.050% 2002 Perpetual USD 800 528 465
10,645 10,099

Subordinated loans consist of perpetual subordinated bonds issued by ING Groep N.V. These bonds have been issued to raise hybrid
capital for ING Verzekeringen N.V. and Tier 1 capital for ING Bank N.V. Under IFRS-EU these bonds are classified as liabilities. They are
considered capital for regulatory purposes.

Except for the 9% 2008 perpetual of EUR 10 million (a private placement), EUR 750 million of the 8% 2008 perpetual and USD 1,000 million
of the 5.775% 2005 perpetual (2009: the 9% 2008 perpetual of EUR 10 million), these loans have been subsequently provided as subordinated
loans by ING Groep N.V. to ING Verzekeringen N.V. and ING Bank N.V. under the same conditions as the original bonds as follows:

Subordinated loans provided by ING Groep N.V. to ING Bank N.V. and ING Verzekeringen N.V.
2010 2009
ING Bank N.V. 7,147 6,822
ING Verzekeringen N.V. 2,003 3,267
9,150 10,089

134 ING Group Annual Report 2010

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Notes to the consolidated annual accounts of ING Group continued

15 DEBT SECURITIES IN ISSUE

Debt securities in issue relate to debentures and other issued debt securities with either fixed interest rates or interest rates based
on floating interest rate levels, such as certificates of deposit and accepted bills issued by ING Group, except for subordinated items.
Debt securities in issue do not include debt securities presented as Financial liabilities at fair value through profit and loss. ING Group
does not have debt securities that are issued on terms other than those available in the normal course of business. The maturities of
the debt securities are as follows:

Debt securities in issue – maturities

2010 2009
Fixed rate debt securities
Within 1 year 63,518 64,994
More than 1 year but less than 2 years 7,518 2,376
More than 2 years but less than 3 years 7,925 6,551
More than 3 years but less than 4 years 9,580 4,938
More than 4 years but less than 5 years 5,648 9,542
More than 5 years 10,987 8,151
Total fixed rate debt securities 105,176 96,552

Floating rate debt securities

Within 1 year 14,007 10,021
More than 1 year but less than 2 years 4,321 6,545
More than 2 years but less than 3 years 3,552 1,164
More than 3 years but less than 4 years 2,113 1,375
More than 4 years but less than 5 years 864 1,478
More than 5 years 5,571 2,846
Total floating rate debt securities 30,428 23,429

Total debt securities 135,604 119,981

As of 31 December 2010, ING Group had unused lines of credit available including the payment of commercial paper borrowings relating
to debt securities in issue of EUR 6,518 million (2009: EUR 7,029 million).

ING Bank issued 3 year government guaranteed senior unsecured bonds amounting to USD 6 billion in January 2009. USD 5 billion
of the issue was priced at a fixed rate of 80 basis points over mid-swaps. USD 1 billion was priced at a variable rate of 80 basis points
over 3 month LIBOR.

ING Bank issued a 5 year EUR 4 billion fixed rate government guaranteed senior unsecured bond in February 2009. The issue was priced
at a fixed rate of 3.375%, 75 basis points over mid-swaps.

ING Bank issued a 5 year USD 2 billion fixed rate government guaranteed senior unsecured bond in March 2009. The issue was priced
at a fixed coupon of 3.90%, 145 basis points over USD mid-swaps.

All were issued under the Credit Guarantee Scheme of the State of the Netherlands and are part of ING Group’s regular medium-term
funding operations. ING Group pays a fee of 84 basis points over the issued bonds to the Dutch State to participate in the Credit
Guarantee Scheme.

ING Group Annual Report 2010 135

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Notes to the consolidated annual accounts of ING Group continued

16 OTHER BORROWED FUNDS

Other borrowed funds by remaining term

2010 2011 2012 2013 2014 2015 There after Total
Subordinated loans of group companies 2,647 1,673 684 81 1,086 7,609 13,780
Preference shares of group companies 1,121 1,121
Loans contracted 2,055 73 1,612 3,740
Loans from credit institutions 2,677 29 30 29 159 726 3,650
7,379 1,702 714 183 1,245 11,068 22,291

Other borrowed funds by remaining term

2009 2010 2011 2012 2013 2014 There after Total
Subordinated loans of group companies 1,107 3,570 1,671 681 81 7,320 14,430
Preference shares of group companies 1,040 1,040
Loans contracted 2,985 74 1,636 4,695
Loans from credit institutions 2,046 201 32 29 24 654 2,986
6,138 3,771 1,703 710 179 10,650 23,151

Subordinated loans of group companies relate to capital debentures and private loans which are subordinated to all current and future
liabilities of ING Bank N.V.

Preference shares of group companies comprise non-cumulative guaranteed Trust Preference Securities which are issued by wholly owned
subsidiaries of ING Groep N.V. These securities have a liquidation preference of a certain amount plus any accrued interest and unpaid
dividend. Dividends with regard to these preference securities are presented as an interest expense in the profit and loss account. These
trust preference securities have no voting rights.

17 INSURANCE AND INVESTMENT CONTRACTS, REINSURANCE CONTRACTS

The provisions for insurance and investment contracts, net of reinsurance (i.e. the provision for ING Group’s own account) is presented
in the balance sheet gross under ‘Insurance and investment contracts’ and ‘Reinsurance contracts’.

Insurance and investment contracts, reinsurance contracts

Insurance and
Provision net of reinsurance Reinsurance contracts investment contracts
2010 2009 2010 2009 2010 2009
Provision for non-participating life policy liabilities 80,144 69,641 5,150 4,798 85,294 74,439
Provision for participating life policy liabilities 51,191 50,102 173 200 51,364 50,302
Provision for (deferred) profit sharing and rebates 3,432 1,600 3 3 3,435 1,603
Life insurance provisions excluding provisions for
risk of policyholders 134,767 121,343 5,326 5,001 140,093 126,344

Provision for life insurance for risk of policyholders 114,603 99,299 359 374 114,962 99,673
Life insurance provisions 249,370 220,642 5,685 5,375 255,055 226,017

Provision for unearned premiums and unexpired risks 345 361 4 4 349 365

Reported claims provision 2,606 2,580 97 96 2,703 2,676

Claims incurred but not reported (IBNR) 497 493 3 5 500 498
Claims provisions 3,103 3,073 100 101 3,203 3,174

Total provisions for insurance contracts 252,818 224,076 5,789 5,480 258,607 229,556

Investment contracts for risk of company 5,991 5,896 5,991 5,896

Investment contracts for risk of policyholders 5,984 5,406 5,984 5,406
Total provisions for investment contracts 11,975 11,302 11,975 11,302

Total 264,793 235,378 5,789 5,480 270,582 240,858

The deferred profit sharing amount on unrealised revaluation is included in Provision for (deferred) profit sharing and rebates and amounts
to EUR 1,706 million as at 31 December 2010 (2009: EUR 313 million).

136 ING Group Annual Report 2010

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Notes to the consolidated annual accounts of ING Group continued

Changes in life insurance provisions

Provision
net of reinsurance Provision for life
(excluding provision for insurance for risk of
life insurance for risk policyholders Life insurance
of policyholders) (net of reinsurance) Reinsurance contracts provisions
2010 2009 2010 2009 2010 2009 2010 2009
Opening balance 121,343 122,533 99,299 84,279 5,375 5,582 226,017 212,394
Changes in the composition
of the group –24 –2,887 –2 23 –65 –26 –2,929
121,319 119,646 99,297 84,302 5,375 5,517 225,991 209,465

Current year provisions 11,843 12,864 7,500 8,734 415 574 19,758 22,172

Change in deferred profit

sharing liability 1,422 1,476 1,422 1,476

Prior year provisions

– benefit payments
to policyholders –11,938 –13,207 –10,681 –7,984 –557 –452 –23,176 –21,643
– interest accrual 4,466 4,311 35 39 4,501 4,350
– valuation changes for risk
of policyholders 10,468 16,652 10,468 16,652
– effect of changes in discount
rate assumptions 5 –2 5 –2
– effect of changes in
other assumptions 356 102 21 –5 6 –2 383 95
–7,111 –8,796 –192 8,663 –516 –415 –7,819 –548

Exchange rate differences 7,222 –1,364 8,488 –1,911 375 –124 16,085 –3,399
Other changes 72 –2,483 –490 –489 36 –177 –382 –3,149
Closing balance 134,767 121,343 114,603 99,299 5,685 5,375 255,055 226,017

Changes in the composition of the group in 2009 relate mainly to the sale of the annuity and mortgage business of Chile. Reference is
made to Note 30 ‘Companies acquired and companies disposed’.

Where discounting is used in the calculation of life insurance provisions, the rate is within the range 2.3% to 4.7% (2009: 2.8% to 5.8%)
based on weighted averages.

Insurance provisions include a provision for the estimated cost of the agreement with regard to unit-linked policies. For more information
reference is made to Note 31 ‘Legal proceedings’.

ING transferred part of its life insurance business to Scottish Re in 2004 by means of a co-insurance contract. This business continues
to be included in Life insurance provisions. The related asset from the co-insurance contract is recognised under Reinsurance contracts.
On 23 January 2009, Hannover Re and Scottish Re announced that Hannover Re has agreed to assume the ING individual life reinsurance
business originally transferred to Scottish Re in 2004.

ING transferred its U.S. group reinsurance business to Reinsurance Group America Inc. in 2010 by means of a reinsurance agreement.
This business continues to be included in Life insurance provisions. The related asset from the reinsurance contract is recognised under
Reinsurance contracts.

To the extent that the assuming reinsurers are unable to meet their obligations, the Group is liable to its policyholders for the portion
reinsured. Consequently, provisions are made for receivables on reinsurance contracts which are deemed uncollectible. The life reinsurance
market is highly concentrated and, therefore, diversification of exposure is inherently difficult. To minimise its exposure to significant losses
from reinsurer insolvencies, the Group evaluates the financial condition of its reinsurers, monitors concentrations of credit risk arising from
similar geographical regions, activities or economic characteristics of the reinsurer and maintains collateral. Reference is also made to the
‘Risk management’ section.

As at 31 December 2010, the total Reinsurance exposure, including Reinsurance contracts and Receivables from reinsurers (presented
in Other assets) amounted to EUR 6,610 million (2009: EUR 6,049 million) after the provision for uncollectible reinsurance of nil
(2009: EUR 1 million).

ING Group Annual Report 2010 137

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Notes to the consolidated annual accounts of ING Group continued

Changes in provision for unearned premiums and unexpired risks

Provision for
Provision unearned premiums
net of reinsurance Reinsurance contracts and unexpired risks
2010 2009 2010 2009 2010 2009
Opening balance 361 1,756 4 13 365 1,769
Changes in the composition of the group –1,454 –11 –1,465
361 302 4 2 365 304

Premiums written 1,676 1,702 65 70 1,741 1,772

Premiums earned during the year –1,702 –1,704 –65 –68 –1,767 –1,772
Exchange rate differences 1 58 1 58
Other changes 9 3 9 3
Closing balance 345 361 4 4 349 365

Changes in the composition of the group in 2009 relate mainly to the sale of ING Canada. Reference is made to Note 30 ‘Companies
acquired and companies disposed’.

Changes in claims provisions

Provision
net of reinsurance Reinsurance contracts Claims provisions
2010 2009 2010 2009 2010 2009
Opening balance 3,073 5,340 101 202 3,174 5,542
Changes in the composition of the group –2,366 1 –110 1 –2,476
3,073 2,974 102 92 3,175 3,066

Additions
– for the current year 1,121 1,111 20 21 1,141 1,132
– for prior years –35 –361 –11 –6 –46 –367
– interest accrual of provision 46 277 46 277
1,132 1,027 9 15 1,141 1,042

Claim settlements and claim settlement costs

– for the current year 491 485 3 2 494 487
– for prior years 621 574 8 10 629 584
1,112 1,059 11 12 1,123 1,071

Exchange rate differences 13 95 4 13 99

Other changes –3 36 2 –3 38
Closing balance 3,103 3,073 100 101 3,203 3,174

Changes in the composition of the group in 2009 relate mainly to the sale of ING Canada. Reference is made to Note 30 ‘Companies
acquired and companies disposed’.

ING Group had an outstanding balance of EUR 41 million as at 31 December 2010 (2009: EUR 42 million) relating to environmental
and asbestos claims of the insurance operations. In establishing the liability for unpaid claims and claims adjustment expenses related to
asbestos related illness and toxic waste clean-up, the management of ING Group considers facts currently known and current legislation
and coverage litigation. Liabilities are recognised for IBNR claims and for known claims (including the costs of related litigation) when
sufficient information has been obtained to indicate the involvement of a specific insurance policy, and management can reasonably
estimate its liability. In addition, liabilities are reviewed and updated regularly.

Where discounting is used in the calculation of the claims provisions, based on weighted averages, the rate is within the range of 3.0%
to 4.0% (2009: 3.0% to 4.0%).

138 ING Group Annual Report 2010

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Notes to the consolidated annual accounts of ING Group continued

Changes in investment contracts liabilities

2010 2009
Opening balance 11,302 21,085
Changes in the composition of the group –8,208
11,302 12,877

Current year liabilities 4,920 5,573

Prior year provisions

– payments to contract holders –5,184 –9,711
– interest accrual 81 122
– valuation changes investments 24 1,089
–5,079 –8,500

Exchange rate differences 593 981

Other changes 239 371
Closing balance 11,975 11,302

Changes in the composition of the group in 2009 relate mainly to the sale of ING Australia. Reference is made to Note 30 ‘Companies
acquired and companies disposed’.

Gross claims development table

Underwriting year
2004 2005 2006 2007 2008 2009 2010 Total
Estimate of cumulative claims:
At the end of underwriting year 1,234 1,125 1,117 1,040 1,095 1,185 1,183
1 year later 1,096 1,056 1,073 939 1,076 1,193
2 years later 942 933 994 875 1,042
3 years later 920 925 981 870
4 years later 919 910 981
5 years later 910 900
6 years later 898
Estimate of cumulative claims 898 900 981 870 1,042 1,193 1,183 7,067

Cumulative payments –766 –718 –770 –593 –705 –713 –494 –4,759
132 182 211 277 337 480 689 2,308
Effect of discounting –17 –24 –26 –39 –43 –44 –42 –235
Liability recognised 115 158 185 238 294 436 647 2,073

Liability relating to underwriting

years prior to 2004 1,130
Total amount recognised
in the balance sheet 3,203

The Group applies the exemption in IFRS-EU not to present Gross claims development for annual periods beginning before 1 January 2004
(the date of transition to IFRS-EU) as it is impracticable to obtain such information.

ING Group Annual Report 2010 139

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Notes to the consolidated annual accounts of ING Group continued

18 AMOUNTS DUE TO BANKS

Amounts due to banks include non-subordinated debt due to banks, other than amounts in the form of debt securities.
As at 31 December 2010, liabilities concerning securities sold in repurchase transactions amounted to EUR 12,200 million
(2009: EUR 17,991 million).

Amounts due to banks by type

Netherlands International Total
2010 2009 2010 2009 2010 2009
Non-interest bearing 1,893 1,615 701 669 2,594 2,284
Interest bearing 37,429 35,681 32,829 46,270 70,258 81,951
39,322 37,296 33,530 46,939 72,852 84,235

19 CUSTOMER DEPOSITS AND OTHER FUNDS ON DEPOSIT

Customer deposits and other funds on deposit

2010 2009
Savings accounts 324,581 304,104
Credit balances on customer accounts 127,177 110,087
Corporate deposits 55,024 53,272
Other 4,580 2,045
511,362 469,508

Customer deposits and other funds on deposit by type

Netherlands International Total
2010 2009 2010 2009 2010 2009
Non-interest bearing 13,522 13,541 6,773 5,936 20,295 19,477
Interest bearing 132,311 124,488 358,756 325,543 491,067 450,031
145,833 138,029 365,529 331,479 511,362 469,508

No funds have been entrusted to the Group by customers on terms other than those prevailing in the normal course of business.
As at 31 December 2010, Customer deposits and other funds on deposit included liabilities with regard to securities sold in repurchase
transactions amounting to EUR 5,272 million (2009: EUR 7,326 million).

Savings accounts relate to the balances on savings accounts, savings books, savings deposits and time deposits of personal customers.
The interest payable on savings accounts, which is contractually added to the accounts, is also included.

20 FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT AND LOSS

Financial liabilities at fair value through profit and loss

2010 2009
Trading liabilities 108,050 98,245
Non-trading derivatives 17,782 20,070
Designated as at fair value through profit and loss 12,707 11,474
138,539 129,789

Trading liabilities by type

2010 2009
Equity securities 4,811 3,052
Debt securities 16,707 12,457
Funds on deposit 44,767 42,505
Derivatives 41,765 40,231
108,050 98,245

As at 31 December 2010, the Funds on deposit include amounts payable of EUR 43,995 million (2009: EUR 41,876 million) with regard
to repurchase transactions.

140 ING Group Annual Report 2010

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Notes to the consolidated annual accounts of ING Group continued

Non-trading derivatives by type

2010 2009
Derivatives used in:
– fair value hedges 8,601 8,866
– cash flow hedges 5,264 6,468
– hedges of net investments in foreign operations 168 316
Other non-trading derivatives 3,749 4,420
17,782 20,070

Designated as at fair value through profit and loss by type

2010 2009
Debt securities 10,533 9,396
Funds entrusted 934 560
Subordinated liabilities 1,240 1,518
12,707 11,474

The change in the fair value of financial liabilities designated as at fair value through profit and loss attributable to changes in the credit
risk of that liability during 2010 was EUR 28 million (2009: EUR –191 million) and EUR 67 million (2009: EUR 39 million) on a cumulative
basis. This change has been determined as the amount of change in fair value of the financial liability that is not attributable to changes
in market conditions that gave rise to market risk (i.e. mainly interest rate risk based on yield curves).

The amount that ING Group is contractually required to pay at maturity to the holders of financial liabilities designated as at fair value
through profit and loss is EUR 12,438 million (2009: EUR 11,444 million).

21 OTHER LIABILITIES

Other liabilities by type

2010 2009
Deferred tax liabilities 2,618 2,399
Income tax payable 1,210 1,225
Pension benefits 543 589
Post-employment benefits 172 175
Other staff-related liabilities 1,248 735
Other taxation and social security contributions 885 1,001
Deposits from reinsurers 1,007 870
Accrued interest 13,220 16,789
Costs payable 2,873 2,654
Amounts payable to brokers 111 200
Amounts payable to policyholders 2,130 2,182
Reorganisation provision 434 644
Other provisions 533 747
Share-based payment plan liabilities 40 24
Prepayments received under property under
development 173 120
Amounts to be settled 5,553 5,167
Other 4,777 5,833
37,527 41,354

Other mainly relates to year-end accruals in the normal course of business.

Other staff-related liabilities include vacation leave provisions, bonus provisions, jubilee provisions and disability/illness provisions.

Deferred taxes are calculated on all temporary differences under the liability method using tax rates applicable in the jurisdictions
in which the Group is liable to taxation.

ING Group Annual Report 2010 141

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Notes to the consolidated annual accounts of ING Group continued

Changes in deferred tax

Change Change Changes in the
Net through through composition Exchange rate Net
liability equity net result of the group differences Other liability
2009 2010
Investments 209 1,205 –1,359 –2 73 –39 87
Financial assets and liabilities at
fair value through profit and loss –312 –18 –185 –2 5 –15 –527
Deferred acquisition costs
and VOBA 2,967 –368 173 336 3 3,111
Fiscal reserve 1 1
Depreciation 12 9 –10 –1 –6 4
Insurance provisions –1,446 –389 109 –135 –5 –1,866
Cash flow hedges 69 210 –14 –2 263
Pension and post-employment
benefits 700 –183 7 –21 503
Other provisions –1,012 –13 476 5 –127 16 –655
Receivables –149 –1 82 6 2 9 –51
Loans and advances to customers 714 –201 –5 –15 –20 473
Unused tax losses carried forward –2,508 1 801 –3 –152 10 –1,851
Other –814 29 419 11 –32 88 –299
–1,570 656 142 0 –53 18 –807

Comprising:
– deferred tax liabilities 2,399 2,618
– deferred tax assets –3,969 –3,425
–1,570 –807

Changes in deferred tax

Change Change Changes in the
Net through through composition Exchange rate Net
liability equity net result of the group differences Other liability
2008 2009
Investments –5,418 5,330 341 17 –114 53 209
Financial assets and liabilities at
fair value through profit and loss 28 –1 –324 –21 10 –4 –312
Deferred acquisition costs
and VOBA 3,481 –568 169 –12 –174 71 2,967
Fiscal reserve –48 48
Depreciation 15 –4 1 12
Insurance provisions –494 –483 –467 55 –1 –56 –1,446
Cash flow hedges 277 –197 –2 –9 69
Pension and post-employment
benefits 374 326 700
Other provisions –1,422 2 360 4 116 –72 –1,012
Receivables –61 –72 –5 –11 –149
Loans and advances to customers 560 136 –28 1 45 714
Unused tax losses carried forward –1,653 –951 7 82 7 –2,508
Other –119 –70 –695 –34 19 85 –814
–4,432 4,013 –1,229 –12 –68 158 –1,570

Comprising:
– deferred tax liabilities 3,602 2,399
– deferred tax assets –8,034 –3,969
–4,432 –1,570

In 2009, the Other changes in Change through net result relates mainly to the tax effect on the additional Illiquid Assets Back-Up
Facility payments as part of the overall agreement with the European Commission of EUR 1.3 billion and on tax losses of foreign
branches carried forward.

142 ING Group Annual Report 2010

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Notes to the consolidated annual accounts of ING Group continued

Deferred tax in connection with unused tax losses carried forward

2010 2009
Total unused tax losses carried forward 9,335 10,073
Unused tax losses carried forward not
recognised as a deferred tax asset –2,862 –1,779
Unused tax losses carried forward recognised
as a deferred tax asset 6,473 8,294

Average tax rate 28.6% 30.2%

Deferred tax asset 1,851 2,508

The following tax loss carry forwards and tax credits will expire as follows as at 31 December:

Total unused tax losses carried forward analysed by expiry terms

No deferred tax asset recognised Deferred tax asset recognised
2010 2009 2010 2009
Within 1 year 14 54 67 79
More than 1 year but less than 5 years 406 510 461 381
More than 5 years but less than 10 years 243 177 3,768 3,199
More than 10 years but less than 20 years 2,093 962 1,285 3,960
Unlimited 106 76 892 675
2,862 1,779 6,473 8,294

Deferred tax assets are recognised for temporary deductible differences, for tax loss carry forwards and unused tax credits only to the
extent that realisation of the related tax benefit is probable.

The deferred tax asset includes balances for which the utilisation is dependent on future taxable profits whilst the related entities have
incurred losses in either the current year or the preceding year. The aggregate amount for the most significant entities where this applies
is EUR 1,009 million (2009: EUR 1,754 million).

This can be specified by jurisdiction as follows:

Breakdown by jurisdiction
Banking operations Insurance operations Total
2010 2009 2010 2009 2010 2009
The Netherlands 230 119 171 233 401 352
United States 347 932 456 347 1,388
Great Britain 87 87
Belgium 75 15 90
Australia 40 40
Spain 19 14 19 14
Germany 19 19
Thailand 6 6
817 1,065 192 689 1,009 1,754

As a result of the partial write-off the deferred tax asset for tax loss carry forwards for Insurance in the US (as disclosed in Note 48
‘Taxation‘ in the line ‘Write down/reversal of deferred tax assets’) the loss carry forward amount for Insurance in the US is, in 2010,
less dependent on future taxable profits compared to 2009.

Recognition is based on the fact that it is probable that the entity will have taxable profits and/or can utilise tax planning opportunities
before expiration of the deferred tax assets. Changes in circumstances in future periods may adversely impact the assessment of the
recoverability. The uncertainty of the recoverability is taken into account in establishing the deferred tax assets.

As of 31 December 2010 and 31 December 2009, ING Group had no significant temporary differences associated with the parent
company’s investments in subsidiaries, branches and associates and interest in joint ventures as any economic benefit from those
investments will not be taxable at parent company level.

ING Group Annual Report 2010 143

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Notes to the consolidated annual accounts of ING Group continued

Changes in reorganisation provision

2010 2009
Opening balance 644 583
Changes in the composition of the group 38
Additions 285 686
Interest 5 11
Releases –77 –89
Charges –461 –604
Exchange rate differences 6 –2
Other changes –6 59
Closing balance 434 644

As at 31 December 2010, the provision for reorganisation, of which EUR 317 million relates to termination benefits, mainly related to the
merger of the Dutch Retail Banking activities as well as other restructuring activities.

As at 31 December 2009, the provision for reorganisation, of which EUR 433 million relates to termination benefits, mainly related to the
reorganisation of Postbank, Postkantoren, Nationale Nederlanden, RVS and Insurance US.

Changes in other provisions

Litigation Other Total
2010 2009 2010 2009 2010 2009
Opening balance 307 371 440 598 747 969
Changes in the composition of the group –26 7 –1 –35 –27 –28
Additions 25 24 52 247 77 271
Releases –1 –3 –15 –11 –16 –14
Charges –13 –109 –59 –347 –72 –456
Exchange rate differences 3 1 3 6 6 7
Other changes 9 16 –191 –18 –182 –2
Closing balance 304 307 229 440 533 747

As at 31 December 2009 Other provisions includes the provision for the industry-wide deposit guarantee scheme in the Netherlands due
to the bankruptcy of DSB Bank. In 2010 Dutch banks provided financing for the further dissolution of DSB. ING’s share is recognised, net
of the 2009 provision, under amounts due from banks at its fair value at issue. The provision for the estimated cost of the agreement with
regard to unit-linked policies is included in ‘Insurance and investment contracts’ as disclosed in Note 17.

In general, Reorganisation and Other provisions are of a short-term nature.

The amounts included in other provisions are based on best estimates with regard to amounts and timing of cash flows required to settle
the obligation.

Pension and post-employment benefits

Summary of pension benefits

2010 2009 2008 2007 2006
Defined benefit obligation 16,183 14,209 14,271 14,499 15,758
Fair value of plan assets 17,364 15,310 13,366 14,708 14,361
–1,181 –1,101 905 –209 1,397

Unrecognised past service costs –3 –3 –5 –3

Unrecognised actuarial gains/(losses) –1,731 –1,450 –2,072 198 –687
–2,915 –2,554 –1,172 –14 710

Presented as:
– Other liabilities 543 589 609 425 961
– Other assets –3,458 –3,143 –1,781 –439 –251
–2,915 –2,554 –1,172 –14 710

144 ING Group Annual Report 2010

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Notes to the consolidated annual accounts of ING Group continued

Summary of post-employment benefits

2010 2009 2008 2007 2006
Defined benefit obligation 168 156 210 220 239
Fair value of plan assets
168 156 210 220 239

Unrecognised past service costs 3 8 2 4 10

Unrecognised actuarial gains/(losses) 1 11 7 8 –2
172 175 219 232 247

The Group maintains defined benefit retirement plans in its major countries of operation. These plans generally cover all employees and
provide benefits that are related to the remuneration and service of employees upon retirement. The benefits in some of these plans are
subject to various forms of indexation. The indexation is, in some cases, at the discretion of management; in other cases it is dependent
upon the sufficiency of plan assets.

Annual contributions are paid to the funds at a rate necessary to adequately finance the accrued liabilities of the plans calculated in
accordance with local legal requirements. Plans in all countries comply with applicable local regulations governing investments and
funding levels.

The Group provides other post-employment employee benefits to certain employees and former employees. These are primarily
post-employment healthcare benefits and discounts on ING products provided to employees and former employees.

Certain group companies sponsor defined contribution pension plans. The assets of all ING Group’s defined contribution plans are held in
independently administered funds. Contributions are generally determined as a percentage of pay. These plans do not give rise to balance
sheet provisions, other than relating to short-term timing differences included in current liabilities. The amount incurred in 2010 was
EUR 67 million (2009: EUR 81 million).

Actuarial gains and losses related to pensions and post-employment benefits for the year ended 31 December 2010 include
EUR 1,085 million (2009: EUR 387 million; 2008: EUR –2,647 million; 2007: EUR –789 million; 2006: EUR –180 million) experience gain
adjustments for assets and EUR 154 million (2009: EUR 172 million; 2008: EUR –70 million; 2007: EUR 83 million; 2006: EUR –163 million)
experience gain adjustments for liabilities.

Changes in defined benefit obligation

Post-employment benefits
Pension benefits other than pensions
2010 2009 2010 2009
Opening balance 14,209 14,271 156 210
Current service cost 298 320 5 –8
Interest cost 795 778 8 10
Participants contributions 3 3
Benefits paid –634 –640 –6 –6
Actuarial gains and losses 1,396 –100 2 –10
Past service cost 18 –27
Changes in the composition of the group and
other changes –20 –372 –1 –10
Effect of curtailment or settlement –7 –96
Exchange rate differences 143 27 4 –3
Closing balance 16,183 14,209 168 156

Relating to:
– funded plans 16,051 14,104
– unfunded plans 132 105 168 156
16,183 14,209 168 156

Actuarial gains and losses in 2010 includes the impact of changes in mortality and indexation assumptions as set out below.

The estimated unrecognised past services cost and unrecognised actuarial gains and losses for the defined benefit plans to be amortised
to pension and other staff related liability costs during 2011 are nil and EUR 24 million, respectively.

ING Group Annual Report 2010 145

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Notes to the consolidated annual accounts of ING Group continued

Changes in fair value of plan assets

Pension benefits
2010 2009
Opening balance 15,310 13,366
Expected return on plan assets 886 842
Employer’s contribution 631 1,632
Participants contributions 2 3
Benefits paid –625 –600
Actuarial gains and losses 1,085 387
Changes in the composition of the group
and other changes –19 –374
Exchange rate differences 94 54
Closing balance 17,364 15,310

The actual return on the plan assets amounted to EUR 1,971 million (2009: EUR 1,229 million).

No plan assets are expected to be returned to ING Group during 2011.

Pension investment strategy

The primary financial objective of ING Employee Benefit Plans (the Plans) is to secure participant retirement benefits. As such, the key
objective in the Plans’ financial management is to promote stability and, where appropriate, growth in funded status (i.e. the ratio of
market value of assets to liabilities). The investment strategy for the Plans’ portfolios of assets (the Funds) balances the requirement to
generate returns with the need to control risk. The asset mix is recognised as the primary mechanism to influence the reward and risk
structure of the Funds in an effort to accomplish the Plans’ funding objectives. Desirable target allocations amongst identified asset
classes are set and within each asset class, careful consideration is given to balancing the portfolios among industry sectors, geographical
areas, interest rate sensitivity, dependence on economic growth, currency and other factors affecting investment returns. The assets are
managed by professional investment firms. They are bound by precise mandates and are measured against specific benchmarks. Factors
considered by the fund managers include balancing security concentration, investment style, and reliance on particular active investment
strategies. The asset mixes of the Funds are reviewed on a regular basis. Generally, the Funds’ asset mixes will be rebalanced to the
target mixes as individual portfolios approach their minimum or maximum levels.

Categories of plan assets in percentages

Weighted average expected long
Target allocation Percentage of plan assets term rate of return
2011 2010 2009 2010 2009
Equity securities 34 35 40 7.5 7.8
Debt securities 51 52 48 4.3 4.8
Other 15 13 12 6.0 6.3
100 100 100 5.7 6.0

Equity securities include ING Group ordinary shares of EUR 2 million (0.02% of total plan assets) as at 31 December 2010 (2009: EUR 3 million,
0.02% of total plan assets). Debt securities include investments in ING Group of EUR 57 million (0.4% of total plan assets) as at 31 December
2010 (2009: nil, 0% of total plan assets). Other includes mainly real estate. Real estate occupied by ING Group as at 31 December 2010 which
is included in Other includes EUR 5 million (0.04% of total plan assets) (2009: nil, 0.0% of total plan assets).

Determination of expected return on assets

An important aspect of financial reporting is the assumption used for return on assets (ROA). The ROA is updated at least annually,
taking into consideration the Plans’ asset allocations, historical returns on the types of assets held in the Funds, and the current economic
environment. Based on these factors, it is expected that the Funds’ assets will earn an average annual percentage in the long term.
This estimate takes into account a reduction for administrative expenses and non-ING investment manager fees paid from the Funds.
For estimation purposes, it is assumed that the long term asset mixes will be consistent with the current mixes. Changes in the asset
mixes could have an impact on the amount of recognised pension income or expense, the funded status of the Plans, and the need
for future cash contributions.

146 ING Group Annual Report 2010

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Notes to the consolidated annual accounts of ING Group continued

Weighted averages of basic actuarial assumptions in annual % as at 31 December

Post-employment benefits
Pension benefits other than pensions
2010 2009 2010 2009
Discount rates 5.40 5.70 4.70 5.30
Mortality rates 1.00 1.30 1.00 1.30
Expected rates of salary increases
(excluding promotion increases) 2.70 2.80 2.70 3.10
Medical cost trend rates 6.10 6.10
Indexation 1.80 2.00 2.00 2.10

The assumptions above are weighted by defined benefit obligations. The rates used for salary developments, interest discount factors
and other adjustments reflect country-specific conditions.

The presented discount rate is the weighted average of the discount rates that are applied in different countries. These rates are based
on AA corporate bond yields of the specific countries with durations matching the pension liabilities.

An increase of 1% in the assumed medical cost trend rate for each future year would have resulted in an additional accumulated
defined benefit obligation of EUR 5 million as at 31 December 2010 (2009: EUR 4 million) and EUR 1 million increase in the charge
for the year (2009: EUR 2 million). A decrease of 1% in the medical cost trend rate for each future year would have resulted in lower
defined benefit obligation of EUR 5 million as at 31 December 2010 (2009: EUR 3 million) and EUR 2 million decrease in the charge
for the year (2009: EUR 1 million).

The actuarial assumption for Mortality rates decreased from 1.3% in 2009 to 1.0% in 2010, mainly as a result of more recent information
on mortality rates in the Netherlands that became available in 2010. The actuarial assumption for Indexation for inflation decreased from
2.0% in 2009 to 1.8% in 2010 mainly as a result of a revised best estimate assumption for future indexation in the pension plan in the
Netherlands. As a result of the current circumstances the probability of granting indexation in the short-term future decreased. These
changes in the actuarial assumptions for Mortality and Indexation resulted in an increase respectively decrease of the defined benefit
obligation which was accounted for as an (unrecognised) actuarial gain(loss). As a result, these changes did not directly impact
shareholders’ equity and net result in 2010.

Expected cash flows

During 2011 the expected contributions to pension plans are EUR 567 million.

The following benefit payments, which reflect expected future service as appropriate, are expected to be paid by the plan:

Benefit payments
Post-
employment
Pension benefits other
benefits than pensions
2011 631 15
2012 597 15
2013 576 14
2014 573 14
2015 534 14
Years 2016 – 2020 3,315 46

ING Group Annual Report 2010 147

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Notes to the consolidated annual accounts of ING Group continued

22 ASSETS BY CONTRACTUAL MATURITY

Amounts presented in these tables by contractual maturity are the amounts as presented in the balance sheet.

Assets by contractual maturity

Less than 1–3 3–12 1–5 Over 5 Maturity not
2010 1 month months months years years applicable Total
Cash and balances with central banks 13,072 13,072
Amounts due from banks 30,770 4,608 4,706 9,447 2,297 51,828
Financial assets at fair value through profit and loss
– trading assets 42,785 8,875 11,569 34,468 27,423 555 125,675
– investments for risk of policyholders (1) 120,481 120,481
– non-trading derivatives 474 184 864 4,637 5,563 11,722
– designated as at fair value through profit and loss 140 53 917 1,291 1,902 1,713 6,016
Investments
– available-for-sale 4,551 3,842 14,273 72,824 103,375 23,682 222,547
– held-to-maturity 328 879 1,143 8,786 557 11,693
Loans and advances to customers 69,678 15,101 34,354 142,308 347,441 4,322 613,204
Reinsurance contracts 17 32 142 727 2,729 2,142 5,789
Intangible assets 6 12 295 698 195 4,166 5,372
Deferred acquisition costs 20 24 109 820 3,149 6,482 10,604
Assets held for sale 681 681
Other assets 13,043 3,137 7,890 6,052 5,518 829 36,469
Remaining assets (where maturities are
not applicable) (2) 11,957 11,957
Total assets 174,884 36,747 76,943 282,058 500,149 176,329 1,247,110
(1)
Investments for risk of policyholders are managed on behalf of policyholders on a fair value basis. Although individual instruments may (or may not)
have a maturity depending on their nature, this does not impact the liquidity position of ING.
(2)
Included in remaining assets where maturities are not applicable are property and equipment, real estate investments and investments in associates.
Due to their nature remaining assets consist mainly of assets expected to be recovered after more than 12 months.

Assets by contractual maturity

Less than 1–3 3–12 1–5 Over 5 Maturity not
2009 1 month months months years years applicable Total
Cash and balances with central banks 15,390 15,390
Amounts due from banks 25,598 2,649 4,448 7,733 2,969 43,397
Financial assets at fair value through profit and loss
– trading assets 39,844 8,316 12,400 28,014 22,443 427 111,444
– investments for risk of policyholders (1) 104,597 104,597
– non-trading derivatives 320 205 668 4,843 5,596 11,632
– designated as at fair value through profit and loss 412 169 626 1,244 1,577 1,489 5,517
Investments
– available-for-sale 3,129 6,716 15,449 67,065 83,655 21,689 197,703
– held-to-maturity 172 475 1,840 10,336 1,586 14,409
Loans and advances to customers 61,973 14,357 32,322 141,482 324,625 4,187 578,946
Reinsurance contracts 13 27 122 626 2,591 2,101 5,480
Intangible assets 3 7 254 705 317 4,735 6,021
Deferred acquisition costs 28 20 128 451 2,752 8,019 11,398
Assets held for sale 4,524 218 282 5,024
Other assets 15,564 3,621 7,451 6,385 5,594 614 39,229
Remaining assets (where maturities are
not applicable) (2) 13,456 13,456
Total assets 166,970 36,780 75,990 268,884 453,705 161,314 1,163,643
(1)
Investments for risk of policyholders are managed on behalf of policyholders on a fair value basis. Although individual instruments may (or may not)
have a maturity depending on their nature, this does not impact the liquidity position of ING.
(2)
Included in remaining assets where maturities are not applicable are property and equipment, real estate investments and investments in associates.
Due to their nature remaining assets consist mainly of assets expected to be recovered after more than 12 months.

148 ING Group Annual Report 2010

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23 LIABILITIES BY CONTRACTUAL MATURITY

The tables below include all financial liabilities by maturity based on contractual, undiscounted cash flows. Furthermore, the undiscounted
future coupon interest on financial liabilities payable is included in a separate line and in the relevant maturity bucket. Derivative liabilities
are included on a net basis if cash flows are settled net. For other derivative liabilities the contractual gross cash flow payable is included.
Non-financial liabilities are included based on a breakdown of the balance sheet amounts. Reference is made to the liquidity risk paragraph
in the ‘Risk Management’ section for a description on how liquidity risk is managed.

Liabilities by contractual maturity

Less than 1–3 3–12 1–5 Over 5 Maturity not
2010 1 month months months years years applicable Adjustment (1) Total
Subordinated loans 10,918 –273 10,645
Debt securities in issue 20,578 37,140 21,289 40,016 16,079 502 135,604
Other borrowed funds 3,969 2,055 1,289 3,600 9,785 1,121 472 22,291
Amounts due to banks 44,480 15,781 6,082 2,154 4,371 –16 72,852
Customer deposits and other
funds on deposit 451,425 25,142 20,690 12,376 1,729 511,362
Financial liabilities at fair value through
profit and loss
– other trading liabilities 46,084 5,329 1,182 9,377 3,779 534 66,285
– trading derivatives 3,096 3,255 9,615 27,747 18,930 –20,878 41,765
– non-trading derivatives 718 229 4,912 18,745 7,040 1,047 –14,909 17,782
– designated as at fair value through
profit and loss 260 472 1,014 6,094 4,996 –129 12,707
Financial liabilities 570,610 89,403 66,073 120,109 66,709 13,086 –34,697 891,293

Insurance and investment contracts 1,822 2,108 9,117 37,045 97,918 122,572 270,582
Liabilities held for sale 424 424
Other liabilities 11,787 2,513 9,855 7,516 4,458 1,398 37,527
Non-financial liabilities 13,609 4,621 19,396 44,561 102,376 123,970 308,533

Total liabilities 584,219 94,024 85,469 164,670 169,085 137,056 –34,697 1,199,826

Coupon interest due on

financial liabilities 2,813 1,599 3,891 12,277 51,920 72,500
(1)
This column reconciles the contractual undiscounted cash flows on financial liabilities to the balance sheet values. The adjustments mainly relate to the impact
of discounting and, for derivatives, to the fact that the contractual cash flows are presented on a gross basis (unless the cash flows are actually settled net).

Liabilities by contractual maturity

Less than 1–3 3–12 1–5 Over 5 Maturity not
2009 1 month months months years years applicable Adjustment (1) Total
Subordinated loans 10,099 10,099
Debt securities in issue 18,851 36,436 19,717 34,563 11,143 –729 119,981
Other borrowed funds 2,692 528 2,923 4,109 12,332 1,040 –473 23,151
Amounts due to banks 45,326 15,044 10,131 9,768 3,966 84,235
Customer deposits and other
funds on deposit 410,522 26,092 21,819 9,418 1,657 469,508
Financial liabilities at fair value
through profit and loss
– other trading liabilities 41,942 1,891 3,243 7,022 4,376 –460 58,014
– trading derivatives 2,725 3,419 11,235 27,908 12,258 –17,314 40,231
– non-trading derivatives 1,459 2,369 6,696 24,150 9,755 677 –25,036 20,070
– designated as at fair value through
profit and loss 218 616 1,715 5,220 4,047 –342 11,474
Financial liabilities 523,735 86,395 77,479 122,158 59,534 11,816 –44,354 836,763

Insurance and investment contracts 1,618 1,830 7,300 33,723 90,322 106,065 240,858
Liabilities held for sale 4,630 77 183 4,890
Other liabilities 15,567 3,059 12,256 5,586 4,319 567 41,354
Non-financial liabilities 21,815 4,966 19,739 39,309 94,641 106,632 287,102

Total liabilities 545,550 91,361 97,218 161,467 154,175 118,448 –44,354 1,123,865

Coupon interest due on

financial liabilities 4,163 1,578 5,654 15,371 55,681 82,447
(1)
This column reconciles the contractual undiscounted cash flows on financial liabilities to the balance sheet values. The adjustments mainly relate to the impact
of discounting and, for derivatives, to the fact that the contractual cash flows are presented on a gross basis (unless the cash flows are actually settled net).

ING Group Annual Report 2010 149

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24 DERIVATIVES AND HEDGE ACCOUNTING

Use of derivatives and hedge accounting
As described in the ‘Risk management’ section, ING Group uses derivatives (principally interest rate swaps and cross currency interest rate
swaps) for economic hedging purposes in the management of its asset and liability portfolios and structural positions. The objective of
economic hedging is to enter into positions with an opposite risk profile to an identified exposure to reduce that exposure. The impact of
ING Group’s hedging activities is to optimise the overall cost to the Group of accessing debt capital markets and to mitigate the market risk
which would otherwise arise from structural imbalances in the duration and other profiles of its assets and liabilities. In addition, hedging
activities are undertaken to hedge against the interest rate risk in the mortgage offer period in relation to retail mortgages and to lock-in
the interest margin in relation to interest bearing assets and the related funding.

The accounting treatment of hedge transactions varies according to the nature of the instrument hedged and whether the hedge qualifies
under the IFRS-EU hedge accounting rules. Derivatives that qualify for hedge accounting under IFRS-EU are classified and accounted for
according to the nature of the instrument hedged and the type of IFRS-EU hedge model that is applicable. The three models applicable
under IFRS-EU are: fair value hedge accounting, cash flow hedge accounting and net investment hedge accounting. These are described
under the relevant headings below. The company’s detailed accounting policies for these three hedge models are set out in section
‘Principles of valuation and determination of results’.

To qualify for hedge accounting under IFRS-EU, strict criteria must be met. Certain hedges that are economically effective from a risk
management perspective do not qualify for hedge accounting under IFRS-EU. The fair value changes of derivatives relating to such non
qualifying hedges are taken to the profit and loss account. However, in certain cases, the Group mitigates the resultant profit and loss
account volatility by designating hedged assets and liabilities at fair value through profit and loss. If hedge accounting is applied under
IFRS-EU, it is possible that during the hedge a hedge relationship no longer qualifies for hedge accounting and hedge accounting cannot
be continued, even if the hedge remains economically effective. As a result, the volatility arising from undertaking economic hedging in
the profit and loss account may be higher than would be expected from an economic point of view.

With respect to exchange rate and interest rate derivative contracts, the notional or contractual amounts of these instruments is indicative
of the nominal value of transactions outstanding at the balance sheet date; however they do not represent amounts at risk. ING Group
uses credit derivatives to manage its exposure to credit risk, including total return swaps and credit default swaps, to sell or buy protection
for credit risk exposures in the loan, investment and trading portfolios. Hedge accounting is not applied in relation to credit derivatives.

Fair value hedge accounting

ING Group’s fair value hedges principally consist of interest rate swaps and cross-currency interest rate swaps that are used to protect
against changes in the fair value of fixed-rate instruments due to movements in market interest rates.

Gains and losses on derivatives designated under fair value hedge accounting are recognised in the profit and loss account. The effective
portion of the fair value change on the hedged item is also recognised in the profit and loss account. As a result, only the net accounting
ineffectiveness has an impact on the net result.

For the year ended 31 December 2010, ING Group recognised EUR –748 million (2009: EUR –1,130 million) of fair value changes on
derivatives designated under fair value hedge accounting in the profit and loss account. This amount was partly offset by EUR 752 million
(2009: EUR 975 million) fair value changes recognised on hedged items. This resulted in EUR 4 million (2009: EUR –155 million) net
accounting ineffectiveness recognised in the profit and loss account. As at 31 December 2010, the fair values of outstanding derivatives
designated under fair value hedge accounting was EUR –4,474 million (2009: EUR –6,139 million), presented in the balance sheet as
EUR 4,127 million (2009: EUR 2,727 million) positive fair values under assets and EUR 8,601 million (2009: EUR 8,866 million) negative
fair values under liabilities.

ING Group applies fair value hedge accounting for portfolio hedges of interest rate risk (macro hedging) under the EU ‘carve out’ of
IFRS-EU. The EU ‘carve-out’ macro hedging enables a group of derivatives (or proportions) to be viewed in combination and jointly
designated as the hedging instrument and removes some of the limitations in fair value hedge accounting relating to hedging core
deposits and under-hedging strategies. Under the IFRS-EU ‘carve-out’, hedge accounting may be applied to core deposits and
ineffectiveness only arises when the revised estimate of the amount of cash flows in scheduled time buckets falls below the designated
amount of that bucket. ING Group applies the IFRS-EU ‘carve-out’ to its retail operations in which the net exposure of retail funding
(savings and current accounts) and retail lending (mortgages) is hedged. The hedging activities are designated under a portfolio fair
value hedge on the mortgages, using the IFRS-EU provisions.

150 ING Group Annual Report 2010

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Notes to the consolidated annual accounts of ING Group continued

Cash flow hedge accounting

ING Group’s cash flow hedges principally consist of (forward) interest rate swaps and cross-currency interest rate swaps that are used to
protect against its exposure to variability in future interest cash flows on non-trading assets and liabilities that bear interest at variable rates
or are expected to be refunded or reinvested in the future. The amounts and timing of future cash flows, representing both principal and
interest flows, are projected for each portfolio of financial assets and liabilities, based on contractual terms and other relevant factors
including estimates of prepayments and defaults. The aggregate principal balances and interest cash flows for the respective portfolios
form the basis for identifying the notional amount subject to interest rate risk that is designated under cash flow hedge accounting.

Gains and losses on the effective portions of derivatives designated under cash flow hedge accounting are recognised in Shareholders’
equity. Interest cash flows on these derivatives are recognised in the profit and loss account in interest income consistent with the manner
in which the forecast cash flows affect net result. The gains and losses on ineffective portions of such derivatives are recognised
immediately in the profit and loss account.

For the year ended 31 December 2010, ING Group recognised EUR 475 million (2009: EUR –805 million) after tax in equity as effective fair
value changes on derivatives under cash flow hedge accounting. As a consequence, the balance of the cash flow hedge reserve in equity
as at 31 December 2010 was EUR 1,110 million (2009: EUR 442 million) gross and EUR 847 million (2009: EUR 372 million) after deferred
tax. This cash flow hedge reserve will fluctuate with the fair value changes of the underlying derivatives and will be reflected in the profit
and loss account under Interest income/expense over the remaining term of the underlying hedged items. The cash flow hedge reserve
relates to a large number of derivatives and hedged items with varying maturities, up to 46 years for insurance operations and 59 years
for banking operations, with the largest concentrations in the range of 1 to 3 years for insurance operations and 1 to 12 years for banking
operations. Accounting ineffectiveness on derivatives designated under cash flow hedge accounting resulted in a loss of EUR 7 million
(2009: EUR 10 million loss) which was recognised in the profit and loss account.

As at 31 December 2010, the fair values of outstanding derivatives designated under cash flow hedge accounting was EUR –824 million
(2008: EUR –947 million), presented in the balance sheet as EUR 4,440 million (2009: EUR 5,521 million) positive fair values under assets
and EUR 5,264 million (2009: EUR 6,468 million) negative fair values under liabilities.

As at 31 December 2010 and 31 December 2009, there were no non-derivatives designated as hedging instruments for cash flow hedge
accounting purposes.

Included in Interest income and interest expense on non-trading derivatives is EUR 3,613 million (2009: EUR 2,159 million) and
EUR 3,138 million (2009: EUR 1,964 million), respectively, relating to derivatives used in cash flow hedges.

Hedges of net investments in foreign operations

ING Group’s net investment hedges principally consist of derivatives (including currency forwards and swaps) and non-derivative financial
instruments such as foreign currency denominated funding that are used to protect against foreign currency exposures on foreign
subsidiaries.

Gains and losses on the effective portions of derivatives designated under net investment hedge accounting are recognised in
Shareholders’ equity. The balance in equity is recognised in the profit and loss account when the related foreign subsidiary is disposed.
The gains and losses on ineffective portions are recognised immediately in the profit and loss account.

As at 31 December 2010, the fair values of outstanding derivatives designated under net investment hedge accounting was
EUR –87 million (2009: EUR –278 million), presented in the balance sheet as EUR 81 million (2009: EUR 38 million) positive fair values
under assets and EUR 168 million (2009: EUR 316 million) negative fair values under liabilities.

As at 31 December 2010, the fair values of outstanding non-derivatives designated under net investment hedge accounting was
EUR 208 million (2009: EUR 555 million).

Accounting ineffectiveness recognised in the profit and loss account for the year ended 31 December 2010 on derivatives and
non-derivatives designated under net investment hedge accounting was EUR 5 million (2009: EUR 1 million).

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25 MAXIMUM CREDIT EXPOSURE

ING Group’s maximum credit exposure as at 31 December 2010 and 2009 is represented as follows:

Maximum credit exposure

2010 2009
Cash and balances with central banks 13,072 15,390
Amounts due from banks
– loans and advances to banks 49,035 39,696
– cash advances, overdrafts and other balances 2,793 3,701
Trading assets
– debt securities 27,979 25,287
– loans and receivables 49,445 41,975
– derivatives 42,390 41,450
Non-trading derivatives 11,722 11,632
Designated as at fair value through profit and loss 6,016 5,517
Available-for-sale debt securities 212,793 188,850
Held-to-maturity debt securities 11,693 14,409
Loans and advances to customers
– policy loans 3,227 2,903
– to, or guaranteed by, public authorities 55,950 51,079
– secured by mortgages 346,851 319,174
– guaranteed by credit institutions 5,768 6,696
– unsecured loans 4,325 4,193
– personal lending 21,076 19,270
– asset backed securities 24,990 27,954
– corporate loans 149,868 146,613
– other 1,148 1,062
Reinsurance contracts 5,789 5,480
Reinsurance and insurance receivables 2,201 2,125
Accrued interest and rents 16,194 18,306
Other accrued assets 2,888 2,497
Other receivables 5,623 5,838
Maximum credit exposure on balance sheet 1,072,836 1,001,097

Off-balance sheet credit commitments

– discounted bills – Bank 3 1
– guarantees – Bank 21,711 21,545
– irrevocable letters of credit – Bank 15,540 12,352
– other – Bank 428 202
– irrevocable facilities 90,027 85,835
– commitments – Insurance 1,990 1,646
– guarantees – Insurance 678 955
Maximum credit exposure off balance sheet 130,377 122,536

Maximum credit exposure 1,203,213 1,123,633

The maximum credit exposure for items on the balance sheet that are exposed to credit risk is generally the balance sheet carrying
value for the relevant financial assets. For the off-balance sheet items the maximum credit exposure is the maximum amount that
could be required to be paid. Collateral received is not taken into account.

The manner in which ING Group manages credit risk and determines credit risk exposures for that purpose is explained in the
‘Risk management’ section.

152 ING Group Annual Report 2010

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26 ASSETS NOT FREELY DISPOSABLE

The assets not freely disposable consist primarily of interest bearing securities pledged to secure deposits from De Nederlandsche Bank
(the Dutch central bank) and other banks and serve to secure margin accounts or are used for other purposes required by law. The assets
not freely disposable are as follows:

Assets not freely disposable

2010 2009
Investments 8,632 5,906
Loans and advances to customers 37,638 33,053
Banks 12,025 7,441
Other assets 8,731 6,350
67,026 52,750

Banks includes Amounts due from banks and balances with central banks. ING Bank N.V. has an obligation to maintain a reserve
with an average monthly balance with the Dutch central bank. In December 2010 the required monthly average was EUR 5,909 million
(2009: EUR 5,620 million). As at 31 December 2010 the balance on this reserve was EUR 334 million (2009: EUR 354 million).

Loans and advances to customers, not freely disposable, includes the loan to the Dutch State in connection with the Illiquid Assets Back-Up
Facility agreement as disclosed in Note 33 ‘Related parties’ and loans that for liquidity purposes have been pledged as collateral in the
United States of EUR 7 billion (2009: EUR 7 billion), Germany of EUR 5 billion (2009: EUR 5 billion) and Canada of EUR 5 billion (2009: nil).

The table does not include assets relating to repurchase and stock lending transactions. Reference is made to Note 3 ‘Financial assets
at fair value through profit and loss’ and Note 4 ‘Investments’ for the relevant amounts.

There are no material terms and conditions relating to the collateral represented in the above table which are individually significant.

27 CONTINGENT LIABILITIES AND COMMITMENTS

In the normal course of business the Group is a party to activities whose risks are not reflected in whole or part in the consolidated
financial statements. In response to the needs of its customers, the Group offers financial products related to loans. These products
include traditional off-balance sheet credit-related financial instruments.

Contingent liabilities and commitments

Less than 1–3 3–12 1–5 Over 5 Maturity not
2010 1 month months months years years applicable Total
Banking operations
Contingent liabilities in respect of
– discounted bills 1 1 1 3
– guarantees 15,555 472 1,132 1,350 3,202 21,711
– irrevocable letters of credit 7,333 6,070 1,914 192 31 15,540
– other 333 22 64 9 428
23,222 6,565 3,111 1,551 3,233 37,682

Insurance operations
Commitments 1,514 117 63 186 7 103 1,990
Guarantees 109 7 556 6 678
1,514 117 172 193 563 109 2,668

Irrevocable facilities 38,082 16,552 5,251 24,686 5,456 90,027

62,818 23,234 8,534 26,430 9,252 109 130,377

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Contingent liabilities and commitments

Less than 1–3 3–12 1–5 Over 5 Maturity not
2009 1 month months months years years applicable Total
Banking operations
Contingent liabilities in respect of
– discounted bills 1 1
– guarantees 14,492 403 1,017 2,359 3,274 21,545
– irrevocable letters of credit 5,413 4,460 1,190 757 532 12,352
– other 112 36 42 12 202
20,017 4,900 2,249 3,128 3,806 34,100

Insurance operations
Commitments 1,218 8 83 292 2 43 1,646
Guarantees 955 955
1,218 8 83 292 957 43 2,601

Irrevocable facilities 36,284 17,539 8,351 20,130 3,531 85,835

57,519 22,447 10,683 23,550 8,294 43 122,536

Guarantees relate both to credit and non-credit substitute guarantees. Credit substitute guarantees are guarantees given by ING Group in
respect of credit granted to customers by a third party. Many of them are expected to expire without being drawn on and therefore do
not necessarily represent future cash outflows. In addition to the items included in contingent liabilities, ING Group has issued guarantees
as a participant in collective arrangements of national industry bodies and as a participant in government required collective guarantee
schemes which apply in different countries.

Irrevocable letters of credit mainly secure payments to third parties for a customer’s foreign and domestic trade transactions in order to
finance a shipment of goods. ING Group’s credit risk in these transactions is limited since these transactions are collateralised by the
commodity shipped and are of a short duration.

Other contingent liabilities include acceptances of bills and are of a short-term nature. Other contingent liabilities also include contingent
liabilities resulting from the normal operations of the Real Estate business including obligations under development and construction
contracts. None of the items included in Other contingent liabilities are individually significant.

Irrevocable facilities mainly constitute unused portions of irrevocable credit facilities granted to corporate clients. Many of these facilities
are for a fixed duration and bear interest at a floating rate. ING Group’s credit risk and interest rate risk in these transactions is limited.
The unused portion of irrevocable credit facilities is secured by customers’ assets or counter-guarantees by the central governments and
exempted bodies under the regulatory requirements. Irrevocable facilities also include commitments made to purchase securities to be
issued by governments and private issuers.

Future rental commitments for operating lease contracts

2011 199
2012 186
2013 159
2014 135
2015 129
Years after 2015 280

28 SPECIAL PURPOSE ENTITIES AND SECURITISATION

Securitisation
ING Group as originator
ING Group enters into synthetic securitisation programmes in order to reduce credit risk on certain assets. In synthetic securitisations,
ING Group enters into a credit default swap with securitisation Special Purpose Entities (SPEs), in relation to which ING Group purchases
credit protection in respect of residential mortgage loans and loans to small and medium-sized enterprises. The SPEs have in turn hedged
their exposure with investors through the issue of credit linked notes or credit linked commercial paper. As a result of these transactions,
ING Group has transferred a substantial part of the credit risk related to these loan portfolios to third-party investors. In general, the
third-party investors in securities issued by the SPE have recourse only to the assets of the SPE and not to ING Group.

After securitisation of these assets ING Group continues to recognise them on its balance sheet under Loans and advances to customers.
These transactions are therefore not off-balance sheet arrangements.

154 ING Group Annual Report 2010

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Notes to the consolidated annual accounts of ING Group continued

Assets under synthetic securitisation programmes

2010 2009
Loans to small and medium-sized enterprises 5,273 6,583
Mortgages 6,476 6,865
Total 11,749 13,448

ING Group as sponsor of multi-seller conduit

In the normal course of business, ING Group structures financing transactions for its clients by assisting them in obtaining sources of
liquidity by selling the clients’ receivables or other financial assets to an SPE. The SPE issues asset-backed commercial paper to the market
to fund the purchases. ING Group, in its role as administrative agent, facilitates these transactions by providing structuring, accounting,
funding and operations services.

ING Group supports the commercial paper programmes by providing the SPE with short-term standby liquidity facilities. These liquidity
facilities are intended primarily to cover temporarily disruptions in the commercial paper market. Once drawn these facilities bear normal
credit risk. A number of programmes are supported by granting structured liquidity facilities to the SPE, in which ING Group covers at least
some of the credit risk incorporated in these programmes itself (in addition to normal liquidity facilities), and might suffer credit losses as a
consequence. Furthermore, under a Programme Wide Credit Enhancement ING Group guarantees to a limited amount all remaining losses
incorporated in the SPE to the commercial paper investors. All facilities, which vary in risk profile, are granted to the SPE subject to normal
ING Group credit and liquidity risk analysis procedures. The fees received for services provided and for facilities are charged subject to
market conditions. The SPE is included in the consolidation of ING Group. These transactions are therefore not off-balance sheet
arrangements.

The normal non-structured standby liquidity facilities and the structured facilities are reported under irrevocable facilities.

Collateralised debt obligations (CDO)-transactions

Within ING Group, SPEs are used for CDO transactions. In a typical CDO transaction an SPE is used to issue structured, rated securities
which are backed (or collateralised) by a pool of transferable debt securities. Besides investing in CDOs ING Group often has different roles
in these transactions:
• the arranger of the transaction; ING Group structures the SPE, acquires the assets for the SPE and sells the CDOs to investors;
• collateral manager of the assets in the SPE; ING Group manages the assets based on strict conditions of the SPEs charter.

ING Group receives market-rate fees for structuring, asset managing and distributing CDO-securities to investors. The total amount of
these fees is not significant.

ING Group as investor

As part of its investment activities, ING Group invests in securitisations by purchasing notes or by selling credit protection in the market
using credit default swaps from securitisation SPEs. For certain own asset securitisation programmes ING Group acts as a market maker
and holds limited positions in this capacity.

Other entities
ING Group is also a party to other SPEs used, for example, in structured finance and leasing transactions.

Investment funds
ING Group as fund manager and investor
ING Group sets up investment funds for which it acts as a fund manager and sole investor at the inception of the fund. Subsequently, ING
Group will seek third-party investors to invest in the fund, thereby reducing the interest of ING Group. In general, ING Group will maintain
a small percentage of interest in these funds. These funds are included in the consolidated financial statements of the Group if and when
control exists, taking into account both ING Group’s financial interests for own risk and its role as investment manager.

ING Group as fund manager

ING Group acts as fund manager for several funds. Fees related to these management activities are charged on an at arm’s-length basis. In
general, as a fund manager ING Group will hold these funds in a fiduciary capacity. These funds are therefore generally not included in the
consolidated financial statements of ING Group.

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29 PRINCIPAL SUBSIDIARIES
The principal subsidiaries of ING Groep N.V. and their statutory seat are as follows:

Companies treated as part of the banking operations

ING Bank N.V. The Netherlands
Bank Mendes Gans N.V. The Netherlands
ING Lease Holding B.V. The Netherlands
ING Corporate Investments B.V. The Netherlands
ING Vastgoed Management Holding B.V. The Netherlands
ING Commercial Finance B.V. The Netherlands
Westland Utrecht Bank N.V. The Netherlands
ING België N.V. Belgium
ING Bank Slaski S.A. Poland
ING Bank Deutschland A.G. Germany
ING Financial Holdings Corporation United States of America
ING Middenbank Curaçao N.V. Netherlands Antilles
ING Vysya Bank Ltd. India
ING Direct N.V. Canada, Germany, Spain, Australia, France,
United States of America, Italy, United Kingdom
ING Bank A.S. Turkey

Companies treated as part of the insurance operations

ING Verzekeringen N.V. The Netherlands
Nationale-Nederlanden Levensverzekering Maatschappij N.V. The Netherlands
Nationale-Nederlanden Schadeverzekering Maatschappij N.V. The Netherlands
Parcom Capital B.V. The Netherlands
ING Levensverzekering Retail N.V. The Netherlands
ING Schadeverzekering Retail N.V. The Netherlands
RVS Levensverzekering N.V. The Netherlands
RVS Schadeverzekering N.V. The Netherlands
Movir N.V. The Netherlands
ING Re (Netherlands) N.V. The Netherlands
ING Fund Management B.V. The Netherlands
ING Vastgoed Belegging B.V. The Netherlands
ING Zivotna Poistovna a.s. Slovakia
ING Nationale-Nederlanden Polska S.A. Poland
ING Nationale-Nederlanden Polska Powszechne Towarzystwo Emerytaine S.A. Poland
ING Asigurari de Viata S.A. Romania
ING Greek Life Insurance Company S.A. Greece
ING Nationale-Nederlanden Magyarorszagi Biztosito Rt. Hungary
Nationale-Nederlanden Vida, Compañia de Seguros y Reaseguros S.A. Spain
Nationale-Nederlanden Generales, Compañia de Seguros y Reaseguros S.A. Spain
ING America Insurance Holdings, Inc. United States of America
ING International Insurance Holdings, Inc. United States of America
ING Life Insurance and Annuity Company United States of America
ING North America Insurance Corporation United States of America
Lion Connecticut Holdings Inc. United States of America
ReliaStar Life Insurance Company United States of America
ReliaStar Life Insurance Company of New York United States of America
Security Life of Denver Insurance Company United States of America
ING USA Annuity and Life Insurance Company United States of America
ING Investment Management Co United States of America
Security Life of Denver International Limited Cayman Islands
ING Afore S.A. de C.V. Mexico
ING Seguros de Vida S.A. Chile
AFP Capital S.A. Chile
ING Insurance Berhad Malaysia
ING Life Insurance Company (Japan) Limited Japan
ING Life Insurance Company (Korea) Limited South Korea
ING Life Insurance Company (Bermuda) Limited Hong Kong

156 ING Group Annual Report 2010

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30 COMPANIES ACQUIRED AND COMPANIES DISPOSED

Acquisitions effective in 2010
There were no significant acquisitions in 2010.

Most significant companies disposed in 2010

Asia Private Swiss Private ING Summit
Banking Banking Industrial
business (3) business (3) Fund LP Total
General
Primary line of business Bank Bank Bank

Sales proceeds
Cash proceeds (1) 985 345 333 1,663
Sales proceeds 985 345 333 1,663

Assets
Cash assets 4 179 183
Investments 41 236 277
Loans and advances to customers 2,390 816 6 3,212
Amounts due from banks 1,171 1,177 39 2,387
Financial assets at fair value through profit and loss 397 8 405
Real estate investments 1,620 1,620
Miscellaneous other assets 20 46 57 123

Liabilities
Amounts due to banks 180 755 952 1,887
Customer deposits and other funds on deposit 3,098 1,382 4,480
Miscellaneous other liabilities 92 53 52 197

Net assets 653 272 718 1,643

% disposed 100% 100% 50%(4)
Net assets disposed 653 272 359 1,248

Gain/loss on disposal (2) 332 73 –26 379

(1)
Cash outflow/inflow on group companies in the cash flow statement includes cash outflows/inflows on individually immaterial disposals in addition to the cash
flows presented.
(2)
The gain/loss on disposal comprises the sales proceed, the net assets disposed, the expenses directly related to the disposal and the realisation of unrealised reserves.
(3)
As per 31 December 2009 recognised as a disposal group held for sale.
(4)
After disposal of the 50% stake ING has no remaining stake in Summit.

Disposals effective in 2010

In October 2009 ING reached an agreement to sell its Asian Private Banking business for a consideration of USD 1,463 million
(EUR 985 million). The Asia franchise offers private banking services in 11 markets, including Hong Kong, the Philippines and Singapore.
The transaction generated a net profit for ING of EUR 332 million. The sale was completed in the first half of 2010. The Asian Private
Banking business was previously included in the segment Retail Asia.

In October 2009 ING reached an agreement to sell its Swiss Private Banking business to Julius Baer for a consideration of EUR 345 million
(CHF 520 million) in cash. The transaction generated a net profit for ING of EUR 73 million. The sale was completed in January 2010. The
Swiss Private Banking business was previously included in the segment Retail CE.

In August 2010 ING announced that it has agreed to sell its 50% stake in ING Summit Industrial Fund LP (‘Summit’), a Canadian light
industrial property portfolio to a joint venture between KingSett Capital and Alberta Investment Management Corporation (AIMCo).
The sale was completed in November 2010. The transaction value for 100% of Summit is CAD 2.0 billion (EUR 1.4 billion) and includes
assumed debt. In addition to its direct investment in Summit, ING has an indirect participation through its 7.8% unit holding of ING
Industrial Fund (IIF), an ING-managed listed property fund in Australia which owns the remaining 50% in Summit. As part of the
transaction, IIF has agreed to simultaneously sell its stake in Summit to KingSett/AIMCo. Consequently, ING’s indirect participation in
Summit will end as well. Separately, ING sold ING Real Estate Canada, the manager of Summit, to KingSett/AIMCo for an undisclosed
amount. The transaction had no material impact on ING Group’s 2010 results and capital ratios. The transaction resulted in a net loss
of EUR 26 million in 2010. Summit was previously included in the segment ING Real Estate.

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Furthermore there were some disposals that did not have a significant impact on ING’s balance sheet and profit and loss account.
In November 2009 ING reached an agreement to sell three of its US independent retail broker-dealer units to Lightyear Capital LLC
for a total consideration of EUR 96 million. The transaction concerns Financial Network Investment Corporation, based in El Segundo,
California, Multi-Financial Securities Corporation, based in Denver, Colorado, PrimeVest Financial Services, Inc., based in St. Cloud,
Minnesota, and ING Brokers Network LLC, the holding company and back-office supporting those broker dealers, which collectively
do business as ING Advisors Network. The sale was completed in February 2010. The three US independent retail broker-dealer units
were previously included in the segment Insurance US.

In December 2009 ING reached an agreement to sell the non-life insurance operations in Greece for a total consideration of EUR 4 million.
The sale was completed in July 2010.

Acquisitions and disposals announced and occurring or expected to occur in 2011

ING announced in February 2011 that it has reached agreement with CB Richard Ellis Group, Inc., to sell ING REIM Europe, ING REIM
Asia and Clarion Real Estate Securities (CRES), ING REIM’s US-based manager of listed real estate securities, as well as part of ING’s
equity interests in funds managed by these businesses. The proceeds for these REIM businesses and the equity interests amount to
approximately USD 1.0 billion. ING REIM Europe, ING REIM Asia and CRES combined have EUR 44.7 billion in assets under management
as of 31 December 2010. In a separate transaction, ING has agreed to sell the private market real estate investment manager of its
US operations, Clarion Partners, to Clarion Partners management in partnership with Lightyear Capital LLC for USD 100 million. Clarion
Partners has EUR 16.5 billion in assets under management as of 31 December 2010. The Real Estate Investment Management business
in Australia (ING REIMA), with EUR 4.8 billion in assets under management as of 31 December 2010, is not included in these transactions.
Within the context of the previously announced evaluation, ING finalised the review of the strategic options and implementation has
commenced. As a result ING will undertake a phased withdrawal from its Australian real estate investment management activities in
a timely and controlled manner. In the transaction with CB Richard Ellis, ING Insurance has agreed to continue its asset management
mandate with CB Richard Ellis as the new manager of the funds. ING Bank will continue to have an equity interest in some REIM funds
in Europe, Asia, the US and Australia. The equity stakes held by the Bank will be monetised over time as it continues to steadily reduce
its exposure to real estate. Combined, the transactions are expected to result in an after-tax gain on disposal of approximately
EUR 500 million at current exchange rates. The final terms are subject to potential adjustments at closing, customary for this kind of
transaction. ING Real Estate Development and ING Real Estate Finance are not impacted by the transactions and will continue to be
part of ING Bank. Both transactions are expected to close in the second half of 2011 and are subject to approvals by certain stakeholders
including various regulators.

In December 2009 ING announced the sale of its entire stake in China’s Pacific Antai Life Insurance Company Ltd. (PALIC) to China
Construction Bank. This is the outcome of a strategic review announced in April 2009 as part of ING’s Back to Basics program. The stake
in PALIC is included in the segment Insurance Asia/Pacific. The transaction is expected to be closed in 2011. The closing is subject to
regulatory approval.

The above described disposals and ING Arrendadora S.A. de C.V. are expected to close in 2011 and will be deconsolidated in 2011 when
ING loses control. They qualify as disposal groups held for sale at 31 December 2010 as ING expects to recover the carrying amount
principally through the sale transactions. They are available for sale in their immediate condition subject to terms that are usual and
customary for sales of such assets and the sales are considered to be highly probable.

2009
Goodwill recognised in 2009 amounted to EUR 39 million as disclosed in Note 9 ‘Intangible assets’. This includes EUR 26 million in relation
to the consolidation of 3W Holding B.V as disclosed below. There were no significant acquisitions in 2009.

In August 2009 ING obtained control of its 50% owned joint venture 3W Holding B.V., a real estate development company. ING obtained
a majority representation in the Supervisory Board of 3W Holding B.V. and entered into an option agreement that allows ING to acquire
the remaining 50%. As a result of obtaining control, 3W Holding B.V. is fully included in the consolidation as of September 2009. Net
assets upon consolidation amounted to EUR –21 million. The estimated consideration payable for obtaining the remaining 50% under the
option agreement is approximately EUR 5 million. Therefore, goodwill of EUR 26 million is recognised. This goodwill is mainly attributable
to operational synergies arising from obtaining control of the professional network of 3W and the future business potential in the southern
Netherlands where 3W is active.

158 ING Group Annual Report 2010

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Notes to the consolidated annual accounts of ING Group continued

3W Holding B.V.
General
Primary line of business Bank

Date of full consolidation 1 September

2009

Purchase consideration payable 5

Assets
Miscellaneous other assets 51

Liabilities
Customer deposits and other funds on deposit 21
Miscellaneous other liabilities 51

Net assets –21

Goodwill recognised 26

Profit since date of full consolidation –16

Income if fully consolidated as of start of year –5
Profit if fully consolidated as of start of year –19

Most significant companies disposed in 2009

Annuity and
Mortgage Australia/
(5)
ING Life Taiwan ING Canada business of Chile New Zealand Total
General
Primary line of business Insurance Insurance Insurance Insurance

Sales proceeds
Cash proceeds (1) 1,316 217 1,106 2,639
Non-cash proceeds 466 466
Sales proceeds 466 1,316 217 1,106 3,105

Assets
Cash assets 80 322 2 233 637
Investments 9,801 2,350 1,803 385 14,339
Loans and advances to customers 1,341 79 413 1,833
Financial assets at fair value through profit and loss 1,552 1,075 52 8,370 11,049
Miscellaneous other assets 2,538 2,092 74 639 5,343

Liabilities
Insurance and investment contracts 14,294 3,761 2,009 8,524 28,588
Miscellaneous other liabilities 260 223 95 334 912

Net assets 758 1,934 240 769 3,701

% disposed 100% 70% (4) 100% 100%
Net assets disposed 758 1,354 240 769 3,121

Gain/loss on disposal (2) –292 (3) –38 –23 337 –16

(1)
Cash outflow/inflow on group companies in the cash flow statement includes cash outflows/inflows on individually immaterial disposals in addition to the cash
flows presented.
(2)
The gain/loss on disposal comprises the sales proceed, the net assets disposed, the expenses directly related to the disposal and the realisation of unrealised reserves.
(3)
The loss was recognised in 2008.
(4)
After disposal of the 70% stake ING has no remaining stake in ING Canada.
(5)
Assets and liabilities included in this column were presented as assets/liabilities held for sale as at 31 December 2008.

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Notes to the consolidated annual accounts of ING Group continued

Disposals effective in 2009

In October 2008 ING reached agreement to sell its entire Taiwanese life insurance business, ING Life Taiwan, to Fubon Financial Holding
Co. Ltd. The sale was completed in February 2009 at a final sales price of EUR 466 million (USD 600 million). This differs from the proceeds
reported in 2008 of EUR 447 million due to movements in the dollar/euro exchange rate between date of signing the sales agreement and
the date of closing. ING was paid in a fixed number of shares with the difference between the fair value of those shares at the closing date
and the sale price being paid in subordinated debt securities of the acquirer. This transaction resulted in a loss of EUR 292 million. This loss
includes EUR 214 million loss on disposal (recognised in 2008 in ‘Net result on disposal of group companies’ in the profit and loss account)
and EUR 78 million operating loss in the period that ING Life Taiwan was held for sale. ING Life Taiwan was previously included in the
segment Insurance Asia/Pacific.

In February 2009, ING completed the sale of its 70% stake in ING Canada for net proceeds of EUR 1,316 million. This differs from the
proceeds presented in the annual accounts of 2008 of EUR 1,265 million due to movements in the Canadian dollar/euro exchange rate
between date of signing the sales agreement and the date of closing. The sale was effected through a private placement and a concurrent
‘bought deal’ public offering in Canada. This transaction resulted in a loss of EUR 38 million. ING Canada was previously included in the
segment Insurance US.

In July 2009 ING reached an agreement to sell its non-core Annuity and Mortgage businesses in Chile to Corp Group Vida Chile, S.A
for EUR 217 million. This sale does not impact ING’s Pension, Life Insurance, and Investment Management businesses in Chile where
ING remains committed to developing leadership positions. This sale was completed in November 2009 and resulted in a loss of
EUR 23 million. These non-core Annuity and Mortgages businesses were previously included in the segment Insurance Latin America.

In September 2009 ING reached an agreement to sell its life insurance and wealth management venture in Australia and New Zealand to
ANZ, its joint venture partner. Under the terms of the agreement, ING sold its 51% equity stakes in ING Australia and ING New Zealand
to ANZ for EUR 1,106 million cash proceeds. The transaction is part of ING’s Back to Basics strategy. The sale was completed in November
2009 and resulted in a profit for ING of EUR 337 million. The joint venture was previously included in the segment Insurance Asia/Pacific.

160 ING Group Annual Report 2010

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Most significant companies acquired in 2008

Chile Pension
Universal Lease business of
Interhyp AG Iberia Santander CitiStreet Oyak Emeklilik Total
General
Primary line of business Bank Bank Insurance Insurance Insurance

1 August 1 October 16 January 1 July 1 December

Date of acquisition 2008 2008 2008 2008 2008

Percentage of voting shares acquired 99% 100% 100% 100% 100%

Purchase price
Purchase price 418 397 578 110 1,503
Costs directly attributable to the acquisition 4 5 9
Cash purchase price 418 401 583 110 1,512

Cash in company acquired 45 35 80

Cash outflow on acquisition (2) 418 401 538 75 1,432

Assets
Cash assets 45 35 80
Investments 8 8
Loans and advances to customers 6 6
Amounts due from banks 43 43
Financial assets at fair value through profit and loss 78 78
Intangible assets 31 73 104
Miscellaneous other assets 20 235 2 24 8 289

Liabilities
Insurance and investment contracts 7 7
Customer deposits and other funds on deposit 224 224
Miscellaneous other liabilities 16 20 6 26 2 70
Net assets 47 –9 112 116 41 307
Minority interests
Net assets acquired 47 –9 112 116 41 307

Goodwill recognised (1) 371 9 285 462 69 1,196

Profit since date of acquisition –7 3 –7 –11

Income if acquisition effected at start of year 61 42 17 275 12 407
Profit if acquisition effected at start of year –20 –1 1 8 –12
(1)
Goodwill recognised in 2008 on immaterial acquisitions and real estate portfolios was EUR 133 million, resulting in total Goodwill recognised in 2008 of
EUR 1,329 million as disclosed in Note 9 ‘Intangible assets’.
(2)
Cash outflow/inflow on group companies in the cash flow statement includes cash outflows/inflows on individually immaterial acquisitions and real estate
portfolios in addition to the cash flows presented herein.

Acquisitions effective in 2008

In December 2008, ING acquired 100% of the voluntary pension fund Oyak Emeklilik for a total consideration of EUR 110 million.
Goodwill of EUR 69 million was recognised on the acquisition and is mainly attributable to the operational synergies and the future
business potential resulting from the acquisition.

In August 2008, ING acquired approximately 97% of Interhyp AG, Germany’s largest independent residential mortgage distributor for
a total consideration of EUR 418 million. Goodwill of EUR 371 million was recognised on the acquisition and is mainly attributable to
the future potential for enhancing ING’s distribution platforms in Europe resulting from the acquisition.

In July 2008, ING acquired 100% of CitiStreet, a leading retirement plan and benefit service and administration organisation in the
US defined contribution marketplace for a total consideration of EUR 578 million. Goodwill of EUR 462 million was recognised on
the acquisition and is mainly attributable to the operational synergies and the future business potential resulting from the acquisition,
making ING one of the largest defined contribution businesses in the US.

In January 2008, ING closed the final transaction to acquire 100% of Banco Santander’s Latin American pension and annuity businesses
through the acquisition of the pension business in Chile.

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Most significant companies disposed in 2008

Mexican non-life
NRG business Total
General
Primary line of business Insurance Insurance

Sales proceeds
Sales proceeds 272 950 1,222
Cash proceeds 272 950 1,222

Cash in company disposed 12 26 38

Cash inflow on disposal (1) 260 924 1,184

Assets
Cash assets 12 26 38
Investments 461 1,146 1,607
Loans and advances to customers 137 65 202
Financial assets at fair value through profit and loss 41 41
Miscellaneous other assets 26 1,261 1,287

Liabilities
Insurance and investment contracts 210 1,497 1,707
Miscellaneous other liabilities 10 274 284

Net assets 416 768 1,184

% disposed 100% 100%
Net assets disposed 416 768 1,184

Gain/loss on disposal (2) –144 182 38

(1)
Cash outflow/inflow on group companies in the cash flow statement includes cash outflows/inflows on individually immaterial disposals in addition
to the cash flows presented.
(2)
The gain/loss on disposal comprises the sales proceed, the net assets disposed, the expenses directly related to the disposal and the realisation of
unrealised reserves.

Disposals effective in 2008

In December 2007, ING reached an agreement with Berkshire Hathaway Group to sell its reinsurance unit NRG N.V. for EUR 272 million.
The sale resulted in a net loss of EUR 144 million. A loss on disposal of EUR 129 million was reported in 2007. In 2008 EUR 15 million
additional losses, predominantly relating to currency exchange rate changes were recognised.

In July 2008, ING completed the sale of part of its Mexican business, Seguros ING SA de CV and subsidiaries, to AXA as announced
in February 2008, for a total consideration of EUR 950 million (USD 1.5 billion). The sale resulted in a gain of EUR 182 million.

In January 2008 ING completed the sale of its health business in Chile, ING Salud, to Said Group and Linzor Capital Partners, resulting
in a gain on disposal of EUR 55 million.

ING acquired the AFJP Pension (Origenes AFJP S.A.) company in Argentina as part of the Santander transaction. In November 2008 the
Government of Argentina passed legislation to nationalise the private pension system (AFJPs). Under the law, all client balances held by
the private pension system had to be transferred to the Argentina Government and AFJP’s pension business was terminated. The law
became effective in December 2008 when the Argentine Social Security Administration (ANSES) took ownership over the affiliate
accounts. The nationalisation impacted the pension assets only, thus leaving ING responsible for the ongoing operating costs and
liabilities including severance obligations. This resulted in a loss of EUR 188 million being recognised in 2008.

162 ING Group Annual Report 2010

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31 LEGAL PROCEEDINGS
ING Group companies are involved in litigation and arbitration proceedings in the Netherlands and in a number of foreign jurisdictions,
including the United States, involving claims by and against them which arise in the ordinary course of their businesses, including in
connection with their activities as insurers, lenders, employers, investors and taxpayers. In certain of such proceedings, very large or
indeterminate amounts are sought, including punitive and other damages. While it is not feasible to predict or determine the ultimate
outcome of all pending or threatened legal and regulatory proceedings, the Company’s management is of the opinion that neither it nor
any of its subsidiaries is aware of any governmental, legal or arbitration proceedings (including any such proceedings which are pending or
threatened of which the Company is aware) which may have or have in the recent past had a significant effect on the financial position or
profitability of the Company.

Because of the geographic spread of its business, ING may be subject to tax audits in numerous jurisdictions at any point in time. Although
ING believes that it has adequately provided for all its tax positions, the ultimate resolution of these audits may result in liabilities which are
different from the amounts recognised.

Proceedings in which ING is involved, include complaints and lawsuits concerning the performance of certain interest sensitive products
that were sold by a former subsidiary of ING in Mexico. Proceedings also include lawsuits that have been filed by former employees of an
Argentinean subsidiary, whose employment was terminated as a result the Republic of Argentina’s nationalisation of the mandatory
pension business. Litigation has been filed by the purchaser of certain ING Mexican subsidiaries who claims that the financial condition of
the subsidiaries was not accurately depicted. Further, purported class litigation has been filed in the United States District Court for the
Southern District of New York alleging violations of the federal securities laws with respect to disclosures made in connection with the
2007 and 2008 offerings of ING’s Perpetual Hybrid Capital Securities. The Court has determined that the claims relating to the 2007
offerings were without merit and has dismissed them. The challenged disclosures that survived the Court’s ruling relate solely to the June
2008 offering, and primarily to ING Group’s investments in certain residential mortgage-backed securities. Additional purported class
litigation challenges the operation of the ING Americas Savings Plan and ESOP and the ING 401(k) Plan for ILIAC Agents. Recently, an
administrator of an ERISA plan filed a lawsuit seeking to represent a class of ERISA plan administrators claiming that an ING subsidiary had
breached certain of its ERISA duties. These matters are being defended vigorously; however, at this time, ING is unable to assess their final
outcome. Subject to court approval, litigation involving the interest crediting methodology used in connection with certain annuity
products and disclosures about that methodology, in which a state court of appeals determined a nationwide class could be maintained,
has been resolved.

In November 2006, the issue of amongst others the transparency of unit-linked products (commonly referred to as
‘beleggingsverzekeringen’) has received attention both in the Dutch public media and from the Dutch regulator for the insurance industry
and consumer protection organisations. In mid-November 2008 ING reached an outline agreement with consumer organisations in the
Netherlands to resolve a dispute regarding individual unit-linked products sold to customers in the Netherlands by ING’s Dutch insurance
subsidiaries. It was agreed that ING’s Dutch insurance subsidiaries would offer compensation to policyholders where individual unit-linked
policies have a cost charge in excess of an agreed maximum. The costs of the settlement have been valued at EUR 365 million. Although
the agreement is not binding for policyholders, ING believes a significant step was made towards resolving the issue. Implementation will
start in 2011. However, no agreement about implementation could be reached with one consumer protection organisation.

In January 2010 ING lodged an appeal with the General Court of the European Union against specific elements of the European
Commission’s decision regarding ING’s restructuring plan. In its appeal, ING contests the way the Commission has calculated the amount
of state aid ING received and the disproportionality of the price leadership restrictions specifically and the disproportionality of
restructuring requirements in general.

In January 2011 the Association of Stockholders (Vereniging van Effectenbezitters, ‘VEB’) has issued a writ alleging that investors were
misled by the prospectus that was issued with respect to the September 2007 rights issue of Fortis N.V. (now: Ageas N.V.) against Ageas
N.V., the underwriters of such rights issue, including ING Bank, and former directors of Fortis N.V. According to the VEB the prospectus
shows substantive incorrect and misleading information. The VEB states that the impact and the risks of the subprime crisis for Fortis and
Fortis’ liquidity position have been reflected incorrectly in the prospectus. The VEB requests a declaratory decision stating that the
summoned parties have acted wrongfully and are therefore responsible for the damages suffered by the investors in Fortis. The amount of
damages of EUR 18 billion has not been substantiated yet. ING will defend itself against this claim; at this time ING is not able to assess the
future outcome.

In March 2011, ING Groep N.V. was informed of the decision of the board of Stichting Pensioenfonds ING (the Dutch ING Pension Fund) to
institute arbitration against ING’s decision not to provide funding for indexing pensions. While it is not feasible to predict the ultimate
outcome of these arbitration proceedings, the Company’s management is of the opinion that these will not have a significant effect on the
financial position or profitability of the Company.

ING Group Annual Report 2010 163

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32 JOINT VENTURES
Joint ventures are included proportionally in the consolidated financial statements as follows:

Most significant joint ventures

2010 Interest held (%) Assets Liabilities Income Expenses
Postkantoren B.V. 50 91 100 30 28
KB Life Insurance Company (1) 49 1,236 1,118 436 425
ING-BOB Life Insurance Company Ltd (2) 50 333 289 87 85
ING Vysya Life Insurance Company Ltd (1) 26 495 466 127 136
Total 2,155 1,973 680 674
(1)
Accounted for as joint venture because of joint control.
(2)
Previously ING Capital Life Insurance Company Ltd.

Most significant joint ventures

2009 Interest held (%) Assets Liabilities Income Expenses
Postkantoren B.V. 50 147 152 143 141
KB Life Insurance Company (1) 49 748 702 281 277
ING Capital Life Insurance Company Ltd 50 236 214 57 59
ING Vysya Life Insurance Company Ltd (1) 26 342 329 112 122
Total 1,473 1,397 593 599
(1)
Accounted for as joint venture because of joint control.

33 RELATED PARTIES
In the normal course of business, ING Group enters into various transactions with related companies. Parties are considered to be related
if one party has the ability to control or exercise significant influence over the other party in making financial or operating decisions.
Transactions have taken place on an arm’s length basis and include rendering or receiving of services, leases, transfers under finance
arrangements and provisions of guarantees or collateral.

Transactions with joint ventures and associates

Joint ventures Associates
2010 2009 2010 2009
Receivables 114 432 1,283 648
Liabilities 41 187 38 6

Income received 6 103 127 115

Expenses paid 136 11

Transactions with ING Bank N.V. and ING Verzekeringen N.V.

ING Bank N.V. ING Verzekeringen N.V.
2010 2009 2010 2009
Receivables 9,411 9,154 2,095 3,412
Liabilities 736 793 7

Income received 825 725 184 299

Expenses paid 194 237

Receivables on ING Bank N.V. and ING Verzekeringen N.V. mainly include long term funding. Liabilities to ING Bank N.V. mainly include
short term deposits.

Transactions with key management personnel (Executive Board and Supervisory Board) and post-employment benefit plans are
transactions with related parties. These transactions are disclosed in more detail in the remuneration report in the annual report.
For the post-employment benefit plans see Note 21 ‘Other liabilities’.

In 2009 as a result of the change in strategy of ING Groep N.V. the Executive Board of ING Groep N.V. was reduced from eight to
three members. The effective date of this change was 1 June 2009. At the same time the Executive Board of ING Bank N.V. and ING
Verzekeringen N.V. were transformed into Management Boards for ING Bank N.V. and ING Verzekeringen N.V. The former Executive
Board members of ING Groep N.V. became Management Board members of ING Bank N.V or ING Verzekeringen N.V. Furthermore,
the three members of the Executive Board of ING Groep N.V. are also member of both Management Boards. The Management
Board members of ING Bank and ING Insurance are also considered to be key management of ING Group.

164 ING Group Annual Report 2010

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Key management personnel compensation (Executive Board and Management Boards)

Executive Management Boards
2010 Board of of ING Bank N.V. and
amounts in thousands of euros ING Groep N.V. ING Verzekeringen N.V. (1) Total
Base salary and cash bonus 4,121 5,910 10,031
Pension costs 292 1,263 1,555
Termination benefit 980 980
Fair market value of bonus in shares 1,268 1,376 2,644
Total compensation 5,681 9,529 15,210
(1)
Excluding three members that are also members of the Executive Board of ING Groep N.V.

Key management personnel compensation (Executive Board and Management Boards)

Executive Management Boards
2009 Board of of ING Bank N.V. and
amounts in thousands of euros ING Groep N.V. (1) ING Verzekeringen N.V. (2) Total
Base salary 4,936 2,933 7,869
Pension costs 935 772 1,707
Termination benefit 665 665
Retirement benefit 1,353 1,200 2,553
Total compensation 7,224 5,570 12,794
(1)
Comprising eight members from 1 January 2009 to 31 May 2009 and 3 members from 1 June 2009 to 31 December 2009.
(2)
As of 1 June 2009, excluding three members that are also members of the Executive Board of ING Groep N.V.

Key management personnel compensation (Supervisory Board)

Supervisory Board
amounts in thousands of euros 2010 2009
Base salary 1,010 1,128
Total compensation 1,010 1,128

Loans and advances to key management personnel

Amount
outstanding 31 December Average interest rate Repayments
amounts in thousands of euros 2010 2009 2010 2009 2010 2009
Executive Board members 1,968 380 3.6% 4.6%
Management Boards members of ING Bank N.V.
and ING Verzekeringen N.V. 13 244 4.3% 3.6% 4 933
Supervisory Board members 282 282 8.6% 8.6%
Total 2,263 906 4 933

The total number of stock options on ING Groep N.V. shares held by the Executive Board members of ING Group N.V. amounted to
164,689 as at 31 December 2010 (2009: 164,689) and total number of stock options on ING Groep N.V. shares held by Management
Board members of ING Bank N.V. and ING Verzekeringen N.V. amounted to 2,676,675 as at 31 December 2010 (2009: 2,718,765).
As at 31 December 2010, members of the Executive Board held 118,723 ING Groep N.V. shares (2009: 60,883) and members of
the Management Boards of ING Bank N.V. and ING Verzekeringen N.V. held 284,995 ING Groep N.V. shares (2009: 266,239).
As at 31 December 2010, members of the Supervisory Board held 167,407 ING Groep N.V. shares (2009: 137,407).

There are no significant provisions for doubtful debts or individually significant bad debt expenses recognised on outstanding balances
with related parties.

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Transactions with the Dutch State

Illiquid Assets Back-up Facility
ING Group and the Dutch State reached an agreement on an Illiquid Assets Back-up Facility (‘IABF’) on 26 January 2009. The transaction
closed on 31 March 2009. The IABF covers the Alt-A portfolios of both ING Direct US and ING Insurance US, with a par value of
approximately EUR 30 billion. Under the IABF, ING transferred 80% of the economic ownership of its Alt-A portfolio to the Dutch State.
As a result, an undivided 80% interest in the risk and rewards on the portfolio was transferred to the Dutch State. ING retained 100%
of the legal ownership of its Alt-A portfolio. The transaction price was 90% of the par value with respect to the 80% proportion of the
portfolio of which the Dutch State had become the economic owner. The transaction price remains payable by the Dutch State to ING and
will be redeemed over the remaining life. Furthermore, under the IABF ING pays a guarantee fee to the State and receives a funding fee
and a management fee. As a result of the transaction ING derecognised 80% of the Alt-A portfolio from its balance sheet and recognised
a receivable from the Dutch State. The transferred Alt-A portfolio was previously included in Available-for-sale debt securities. The Dutch
State also acquired certain consent rights with respect to the sale or transfer of the 20% proportion of the Alt-A portfolio that is retained
by ING.

Under the terms of the transaction as agreed on 26 January 2009, the overall sales proceeds amounted to EUR 22.4 billion at the transaction
date. The amortised cost (after prior impairments) at the transaction date was also approximately EUR 22.4 billion. The transaction resulted
in a loss in the first quarter of 2009 of EUR 109 million after tax (the difference between the sales proceeds and the amortised cost). The fair
value under IFRS-EU at the date of the transaction was EUR 15.2 billion.

In order to obtain approval from the European Commission on ING Group’s Restructuring Plan (see below), ING agreed to make additional
Illiquid Assets Back-up Facility payments as part of the overall agreement with the European Commission to the Dutch State corresponding
to an adjustment of the fees for the Illiquid Assets Back-up Facility. In total, these additional Illiquid Assets Back-up Facility payments as
part of the overall agreement with the European Commission amounted to a net present value of EUR 1.3 billion pre-tax, which was
recognised as a one-off charge in the fourth quarter of 2009. The remainder of the IABF as agreed in January 2009, including the transfer
price of the securities of 90%, remained unaltered.

The difference between the total sales proceeds of EUR 21.1 billion (EUR 22.4 billion -/- adjustment of EUR 1.3 billion) and the fair value
under IFRS-EU of EUR 15.2 billion represents a ‘Government grant’ under IAS 20. This government grant is considered to be an integral
part of the transaction and is therefore accounted for as part of the result on the transaction.

The transaction resulted in a reduction of the negative revaluation -and therefore an increase in equity- of EUR 4.6 billion (after tax).

The valuation method of the 20% Alt-A securities in the IFRS-EU balance sheet is not impacted by the IABF. The methodology used
to determine the fair value for these assets in the balance sheet under IFRS-EU is disclosed in Note 34 ‘Fair value of financial assets
and liabilities’.

As at 31 December 2010, the remaining outstanding amount from the transaction price that remained payable by the Dutch State
is EUR 13.1 billion. The net amount of other unamortised components of the total sales proceeds, as explained above, amounts to
EUR 0.7 billion payable.

Non-voting equity securities (Core Tier 1 securities)

On 12 November 2008, ING Groep N.V. issued one billion non-voting equity securities to the Dutch State at EUR 10 per non-voting
equity security, resulting in an increase of ING Group’s core Tier 1 capital of EUR 10 billion. The nominal value of each security is EUR 0.24.
The non-voting equity securities do not form part of ING Group’s share capital; accordingly they do not carry voting rights in the General
Meeting of Shareholders.

These non-voting equity securities are deeply subordinated and rank pari-passu with ordinary shares in a winding up of ING Group.

On these non-voting equity securities a coupon is payable of the higher of:

• EUR 0.85 per security, payable annually in arrears, with a first coupon of EUR 0.425 per security paid on 12 May 2009; and
• 110% of the dividend paid on each ordinary share over 2009 (payable in 2010);
• 120% of the dividend paid on each ordinary share over 2010 (payable in 2011);
• 125% of the dividend paid on each ordinary share over 2011 onwards (payable in 2012 onwards).

Since ING Groep N.V. had already paid an interim dividend of EUR 0.74 in August 2008, ING recognised a coupon payable of EUR 425
million to the Dutch State as of 31 December 2008. This coupon was paid on 12 May 2009.

Further coupons are to be paid on 12 May of each year (the coupon date) in cash if dividend on ordinary shares is paid in cash or to be
paid in scrip securities in the event of a scrip dividend on ordinary shares. Coupons are only due and payable, on a non-cumulative basis
and if a dividend is paid on ordinary shares over the financial year preceding the coupon date, either on an interim or a final dividend
basis, provided that ING Groep N.V.’s capital adequacy position is and remains satisfactory both before and immediately after payment
in the opinion of the Dutch Central Bank.

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Notes to the consolidated annual accounts of ING Group continued

ING Groep N.V. has the right to repurchase all or some of the non-voting equity securities at EUR 15 per security at any time, together
with the pro-rata coupon accrued to such date. ING Groep N.V. and the Dutch State have agreed in October 2009 that up to
EUR 5 billion of the EUR 10 billion non-voting equity securities could be repurchased at any time until 31 January 2010 at the original
issue price of EUR 10 per non-voting equity security, plus a repurchase premium and accrued interest.

ING Groep N.V. also has the right to convert all or some of the non-voting equity securities into ordinary shares on the basis of one core
Tier 1 security for 1.335 ordinary shares or bearer depositary receipts from three years after the issue date onwards, subject to certain
conditions. The Dutch State in that case has the right to demand a redemption payment of EUR 10 per non-voting equity security,
together with the pro-rata coupon, if due, accrued to such date.

Both repurchase and conversion of the securities must be approved by the Dutch Central Bank.

Repayment non-voting equity shares

In December 2009, ING repurchased the first half of the non-voting equity securities (core Tier 1 securities) of EUR 5 billion plus a total
premium of EUR 605 million. In March 2011, ING announced that, at the next coupon reset date on 13 May 2011, ING intends to exercise
its option for early repurchase of EUR 2 billion of the remaining non-voting equity securities (core Tier 1 securities). The total payment in
May 2011 will amount to EUR 3 billion and includes a 50% repurchase premium. ING will fund this repurchase from retained earnings.
Provided that the strong capital generation continues, ING intends to repurchase the remaining EUR 3 billion non-voting equity securities
(core Tier 1 securities) ultimately by May 2012 from retained earnings. The final decision on repurchase of these non-voting equity
securities (core Tier 1 securities) will be made before the envisaged repayment date and will be conditional upon there having been no
material changes regarding ING’s capital requirements and/or ING’s outlook on external market circumstances.

In order to finance the repayment, in December 2009, of the non-voting equity securities and the associated expenses as well as to
mitigate the capital impact of the additional Illiquid Assets Back-up Facility payments as part of the overall agreement with the European
Commission, ING launched a capital increase with preferential subscription rights for holders of (depositary receipts for) ordinary shares of
up to EUR 7.5 billion. The rights issue, as disclosed in Note 13 ‘Shareholders’ equity (parent)/non-voting equity securities’ was authorised by
the Extraordinary General Meeting of Shareholders on 25 November 2009. Proceeds of the issue in excess of the above amounts were
used to strengthen ING’s capital position.

European Commission Restructuring Plan

In 2009, ING Groep N.V. submitted a Restructuring Plan to the European Commission as part of the process to receive approval for the
government support measures. The Restructuring Plan has formally been approved by the European Commission. The main elements
of the Restructuring Plan as announced on 26 October 2009 are as follows:
• ING will eliminate double leverage and significantly reduce its balance sheet;
• ING will divest all Insurance and Investment Management activities;
• ING needs to divest ING Direct USA by the end of 2013;
• ING will create a new company in the Dutch retail market composed of Interadvies (including Westland Utrecht and the mortgage
activities of Nationale-Nederlanden) and the existing consumer lending portfolio of ING Retail in the Netherlands. This business,
once separated, will be divested;
• ING will not be a price leader in any EU country for certain retail and SME banking products and will refrain from the acquisition of
financial institutions or other businesses that would delay the repayment of the non-voting equity securities. These restrictions will
apply for the shorter period of three years or until the non-voting equity securities have been repaid in full to the Dutch State;
• ING will agree with the Dutch State to alter the repayment terms of 50% of the non-voting equity securities;
• EUR 5 billion of the non-voting equity securities issued in November 2008 to the Dutch State will be repurchased;
• additional Illiquid Assets Back-up Facility payments as part of the overall agreement with the European Commission will have to be
made to the Dutch State in the form of fee adjustments relating to the Illiquid Assets Back-Up Facility which resulted in a one-off
pre-tax charge to ING of EUR 1.3 billion in the fourth quarter of 2009;
• ING would launch a EUR 7.5 billion rights issue, in order to finance the repayment of 50% of the non-voting equity securities and to
mitigate the capital impact of the additional Illiquid Assets Back-up Facility payment as part of the overall agreement with the European
Commission to the Dutch State of EUR 1.3 billion;
• ING will execute the Restructuring Plan before the end of 2013;
• ING will refrain from acquisitions of financial institutions for a certain period;
• Whenever the overall return on the (remaining) non-voting equity securities (core Tier 1 securities) issued to the Dutch State is expected
to be lower than 10% p.a., the European Commission may consider the imposition of additional behavioural constraints; and
• The calling of Tier 2 capital and Tier 1 hybrids will in the future be proposed case by case to the Commission for authorisation, for the
shorter period of three years starting from the date of the Commission decision or up to the date on which ING has fully repaid the
non-voting equity securities (core-Tier 1 securities) to the Dutch State (including the relevant accrued interest of core Tier 1 coupons and
exit premium fees).

On 28 January 2010, ING lodged an appeal against specific elements of the European Commission’s decision. The outcome of ING’s
appeal to the European court is anticipated at the end of 2011.

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Notes to the consolidated annual accounts of ING Group continued

Credit Guarantee Scheme

As part of the measures adopted to protect the financial sector, the Dutch State introduced a EUR 200 billion credit guarantee scheme for
the issuance of medium term debt instruments by banks (the Credit Guarantee Scheme). ING Bank N.V. issued government guaranteed
debt instruments under this Credit Guarantee Scheme (‘Government Guaranteed Bonds’) as part of its regular medium-term funding
operations. The relevant Rules of the Credit Guarantee Scheme promulgate the rules applicable to any issues under the Credit Guarantee
Scheme and include information such as scope, denomination, tenor and fees payable by the banks. ING Group pays a fee of 84 basis
points over the issued bonds to the Dutch State to participate in the Credit Guarantee Scheme. Reference is made to Note 15 ‘Debt
securities in issue’.

Other
Following the transactions as disclosed in this note, the Dutch State is a related party of ING Group. All other transactions between
ING Group and the Dutch State are of a normal business nature and at arm’s length.

In the framework of the transactions with the Dutch State disclosed in this note, certain arrangements with respect to corporate governance
and executive remuneration were agreed with the Dutch State which will remain in place as long as the Dutch State owns at least 250 million
non-voting equity securities, as long as the Illiquid Assets Back-up Facility is in place or any of the Government Guaranteed Bonds is outstanding
(whichever expires last). These arrangements entail that:
• the Dutch State may recommend two candidates (the ‘State Nominees’) for appointment to the Supervisory Board. Certain decisions
of the Supervisory Board require approval of the State Supervisory Board members;
• ING Group must develop a sustainable remuneration policy for the Executive Board and Senior Management that is aligned to new
international standards and submit this to its General Meeting for adoption. This remuneration policy shall include incentive schemes
which are linked to long-term value creation, thereby taking account of risk and restricting the potential for ‘rewards for failure’.
This new remuneration policy must, amongst others, include objectives relating to corporate and social responsibility;
• members of the Executive Board may not receive any performance-related payment – either in cash, options, shares or bearer
depositary receipts – for the years 2008 and 2009 until the adoption of the new remuneration policy in 2010;
• severance payments to Executive Board members are limited to a maximum of one year’s fixed salary, in line with the Tabaksblat Code;
• ING has undertaken to support the growth of the lending to corporates and consumers (including mortgages) for an amount of EUR
25 billion, on market conforming terms;
• ING agreed to pro-actively use EUR 10 billion of the Dutch Guarantee Scheme over 2009;
• ING has committed itself to maintaining the Dutch payment system PIN on its payment debit cards as long as other market participants,
representing a substantial market share, are still making use of this payment system; and
• appointment of the Chief Executive Officer of the Executive Board requires approval of the State Nominees.

34 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

The following table presents the estimated fair values of ING Group’s financial assets and liabilities. Certain balance sheet items are not
included in the table, as they do not meet the definition of a financial asset or liability. The aggregation of the fair values presented below
does not represent, and should not be construed as representing, the underlying value of ING Group.

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Notes to the consolidated annual accounts of ING Group continued

Fair value of financial assets and liabilities

Estimated fair value Balance sheet value
2010 2009 2010 2009
Financial assets
Cash and balances with central banks 13,072 15,390 13,072 15,390
Amounts due from banks 51,651 43,506 51,828 43,397
Financial assets at fair value through profit and loss
– trading assets 125,675 111,444 125,675 111,444
– investments for risk of policyholders 120,481 104,597 120,481 104,597
– non-trading derivatives 11,722 11,632 11,722 11,632
– designated as at fair value through profit and loss 6,016 5,517 6,016 5,517
Investments
– available-for-sale 222,547 197,703 222,547 197,703
– held-to-maturity 11,854 14,809 11,693 14,409
Loans and advances to customers 614,548 578,488 613,204 578,946
Other assets (1) 26,906 28,764 26,906 28,764
1,204,472 1,111,850 1,203,144 1,111,799

Financial liabilities
Subordinated loans 9,215 7,478 10,645 10,099
Debt securities in issue 136,586 118,950 135,604 119,981
Other borrowed funds 21,822 22,261 22,291 23,151
Investment contracts for risk of company 5,991 5,896 5,991 5,896
Investment contracts for risk of policyholders 5,984 5,406 5,984 5,406
Amounts due to banks 73,227 84,968 72,852 84,235
Customer deposits and other funds on deposit 508,755 466,822 511,362 469,508
Financial liabilities at fair value through profit and loss
– trading liabilities 108,050 98,245 108,050 98,245
– non-trading derivatives 17,782 20,070 17,782 20,070
– designated as at fair value through profit and loss 12,707 11,474 12,707 11,474
Other liabilities (2) 29,671 33,946 29,671 33,946
929,790 875,516 932,939 882,011
(1)
Other assets do not include (deferred) tax assets, property held for sale, pension assets and deferred charges.
(2)
Other liabilities do not include (deferred) tax liabilities, pension liabilities, insurance provisions, prepayments received under property under development,
share-based payment plans, other provisions and other taxation and social security contributions.

The estimated fair values correspond to the amounts at which the financial instruments at our best estimate could have been traded at
the balance sheet date between knowledgeable, willing parties in arm’s length transactions. The fair value of financial assets and liabilities
is based on quoted market prices, where available. Such quoted market prices are primarily obtained from exchange prices for listed
instruments. Where an exchange price is not available, market prices are obtained from independent market vendors, brokers or market
makers. Because substantial trading markets do not exist for all financial instruments various techniques have been developed to estimate
the approximate fair values of financial assets and liabilities that are not actively traded. These techniques are subjective in nature and
involve various assumptions about the relevant pricing factors, especially for inputs that are not readily available in the market (such as
credit spreads for own-originated loans and advances to customers). Changes in these assumptions could significantly affect the estimated
fair values. Consequently, the fair values presented may not be indicative of the net realisable value. In addition, the calculation of the
estimated fair value is based on market conditions at a specific point in time and may not be indicative of future fair values.

The following methods and assumptions were used by ING Group to estimate the fair value of the financial instruments:

Financial assets
Cash and balances with central banks
The carrying amount of cash approximates its fair value.

Amounts due from banks

The fair values of receivables from banks are generally based on quoted market prices or, if unquoted, on estimates based on discounting
future cash flows using available market interest rates offered for receivables with similar characteristics, similar to Loans and advances to
customers described below.

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Financial assets at fair value through profit and loss and Investments
Derivatives
Derivatives contracts can either be exchange traded or over the counter (OTC). The fair value of exchange-traded derivatives is determined
using quoted market prices in an active market and those derivatives are classified in Level 1 of the fair value hierarchy. For those instruments
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 because quoted market prices in an active market are not available for such instruments. The valuation
techniques and inputs depend on the type of derivative and the nature of the underlying instruments. The principle techniques used to value
these instruments are based on discounted cash flows, Black-Scholes option models and Monte Carlo simulation. These valuation models
calculate the present value of expected future cash flows, based upon ‘no-arbitrage’ principles. These models are commonly used in the
banking industry. Inputs to valuation models are determined from observable market data wherever possible. Certain inputs may not be
observable in the market directly, but can be determined from observable prices via valuation model calibration procedures. The inputs used
include prices available from exchanges, dealers, brokers or providers of consensus pricing, yield curves, credit spreads, default rates, recovery
rates, dividend rates, volatility of underlying interest rates, equity prices and foreign currency exchange rates. These inputs are determined
with reference to quoted prices, recently executed trades, independent market quotes and consensus data, where available.

Equity securities
The fair values of public equity securities are based on quoted market prices when available. Where no quoted market prices are available,
fair value is determined based on quoted prices for similar securities or other valuation techniques. The fair value of private equity is based
on quoted market prices, if available. In the absence of quoted prices in an active market, fair value is estimated on the basis of an analysis
of the investee’s financial position and results, risk profile, prospects, price, earnings comparisons and revenue multiples and by reference
to market valuations for similar entities quoted in an active market.

Debt securities
Fair values for debt securities are based on quoted market prices, where available. Quoted market prices may be obtained from an
exchange, dealer, broker, industry group, pricing service or regulatory service. If quoted prices in an active market are not available,
fair value is determined by management based on an analysis of available market inputs, which may include values obtained from
one or more pricing services or by a valuation technique that discounts expected future cash flows using a market interest rate curves,
referenced credit spreads, maturity of the investment and estimated prepayment rates where applicable.

Certain asset backed securities in the United States are valued using external price sources that are obtained from third party pricing
services and brokers.

In order to determine which independent price in the range of prices obtained best represents fair value under IAS 39, ING applies a
discounted cash flow model to calculate an indicative fair value. The key input to this model is a discount rate derived from an internal
matrix that is used to construct the discount rate per security by applying credit and liquidity spreads relevant to the characteristics of
such asset class. The main assumptions in this matrix include:
• a base spread;
• a liquidity risk premium;
• an additional credit spread, based on:
• seniority in the capital structure – an adjustment is applied to each security based on its position in the capital structure;
• vintage – an adjustment is applied for underwriting guidelines deteriorating from 2004 to 2007 in combination with differences
in home price developments for these vintages.

The spreads are expressed in basis points and reflect the current market characteristics for credit and liquidity.

The indicative fair value obtained through the discounted cash flow model is then used to select the independently obtained price that is
closest to the indicative price. In addition, judgment is applied in the event that the resulting indicative fair value is closest to the highest
obtained vendor price and that price is a significant outlier compared to other obtained vendor prices. In such cases, the second highest
obtained vendor price is deemed the most representative of fair value. The indicative price is not itself used for valuing the security; rather,
it is used to select the most appropriate price obtained from independent external sources. As a result, each security in the portfolio is
priced based on an external price, without modification by ING Group.

Loans and receivables

Reference is made to Loans and advances to customers below.

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Notes to the consolidated annual accounts of ING Group continued

Loans and advances to customers

For loans and advances that are repriced frequently and have had no significant changes in credit risk, carrying amounts represent a
reasonable estimate of fair values. The fair values of other loans are estimated by discounting expected future cash flows using interest
rates offered for similar loans to borrowers with similar credit ratings.

The fair values of mortgage loans are estimated by taking into account prepayment behaviour and discounting future cash flows using
interest rates currently being offered for similar loans to borrowers with similar credit ratings. The fair values of fixed-rate policy loans
are estimated by discounting cash flows at the interest rates charged on policy loans of similar policies currently being issued. Loans
with similar characteristics are aggregated for calculations purposes. The carrying values of variable rate policy loans approximate
their fair value.

Other assets
The carrying amount of other assets is not materially different from their fair value.

Financial liabilities
Subordinated loans
The fair value of the subordinated loans is estimated using discounted cash flows based on interest rates and credit spreads that apply
to similar instruments.

Investment contracts
For investment contracts for risk of company the fair values have been estimated using a discounted cash flow approach based on interest
rates currently being offered for similar contracts with maturities consistent with those remaining for the contracts being valued. For
investment contracts for risk of policyholder the fair value generally equals the fair value of the underlying assets.

Amounts due to banks

The fair values of payables to banks are generally based on quoted market prices or, if not available, on estimates based on discounting
future cash flows using available market interest rates and credit spreads for payables to banks with similar characteristics.

Customer deposits and other funds on deposit

The carrying values of customer deposits and other funds on deposit with no stated maturity approximate their fair values. The fair values
of deposits with stated maturities have been estimated based on discounting future cash flows using the interest rates currently applicable
to deposits of similar maturities.

Financial liabilities at fair value through profit and loss

The fair values of securities in the trading portfolio and other liabilities at fair value through profit and 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. Reference is made to Financial assets at fair value
through profit and loss above.

Debt securities in issue and other borrowed funds

The fair value of debt securities in issue and other borrowed funds is generally based on quoted market prices or, if not available,
on estimated prices by discounting expected future cash flows using a current market interest rate and credit spreads applicable
to the yield, credit quality and maturity.

Other liabilities
The other liabilities are stated at their book value which is not materially different than fair value.

Fair value hierarchy

ING Group has categorised its financial instruments that are measured in the balance sheet at fair value into a three level hierarchy based
on the priority of the inputs to the valuation. The fair value hierarchy gives the highest priority to quoted prices in active markets for
identical assets or liabilities and the lowest priority to valuation techniques based on unobservable inputs. An active market for the asset
or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide reliable pricing
information on an ongoing basis. The fair value hierarchy consists of three levels, depending upon whether fair values were determined
based upon quoted prices in an active market (Level 1), valuation techniques with observable parameters (Level 2) or valuation techniques
that incorporate inputs which are unobservable and which have a more than insignificant impact on the fair value of the instrument (Level
3). Financial assets in Level 3 include for example illiquid debt securities, complex OTC and credit derivatives, certain complex loans (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) and asset backed securities for which there is no active market and a wide dispersion in quoted prices.

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Observable inputs reflect market data obtained from independent sources. Unobservable inputs are inputs which are based on the Group’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.

The fair values of the financial instruments carried at fair value were determined as follows:

Methods applied in determining fair values of financial assets and liabilities

2010 Level 1 Level 2 Level 3 Total
Assets
Trading assets 49,644 73,899 2,132 125,675
Investments for risk of policyholders 115,102 5,243 136 120,481
Non-trading derivatives 90 10,997 635 11,722
Financial assets designated as at fair value through
profit and loss 1,143 3,027 1,846 6,016
Available-for-sale investments 113,994 102,449 6,104 222,547
279,973 195,615 10,853 486,441

Liabilities
Trading liabilities 33,293 73,316 1,441 108,050
Non-trading derivatives 878 15,028 1,876 17,782
Financial liabilities designated as at fair value through
profit and loss 1,834 7,648 3,225 12,707
Investment contracts (for contracts carried at fair value) 2,879 3,088 17 5,984
38,884 99,080 6,559 144,523

Methods applied in determining fair values of financial assets and liabilities

2009 Level 1 Level 2 Level 3 Total
Assets
Trading assets 40,043 70,035 1,366 111,444
Investments for risk of policyholders 100,541 4,002 54 104,597
Non-trading derivatives 283 10,808 541 11,632
Financial assets designated as at fair value through
profit and loss 832 2,855 1,830 5,517
Available-for-sale investments 113,913 76,547 7,243 197,703
255,612 164,247 11,034 430,893

Liabilities
Trading liabilities 27,518 69,870 857 98,245
Non-trading derivatives 444 18,265 1,361 20,070
Financial liabilities designated as at fair value through
profit and loss 4,460 4,425 2,589 11,474
Investment contracts (for contracts carried at fair value) 3,040 2,327 39 5,406
35,462 94,887 4,846 135,195

Level 1 – Quoted prices in active markets

This category includes financial instruments whose fair value is determined directly by reference to published quotes in an active market.
A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange,
dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market
transactions on an arm’s length basis.

Level 2 – Valuation technique supported by observable inputs

This category includes financial instruments whose fair value is determined using a valuation technique (e.g. a model), where inputs in the
model are taken from an active market or are observable. If certain inputs in the model are unobservable, the instrument is still classified
in this category, provided that the impact of those unobservable inputs on the overall valuation is insignificant. Included in this category
are items whose value is derived from quoted prices of similar instruments, but for which the prices are modified based on other market
observable external data.

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Level 3 – Valuation technique supported by unobservable inputs

This category includes financial instruments whose fair value is determined using a valuation technique (e.g. a model) for which more than
an insignificant part of the inputs in terms of the overall valuation are not market observable. This category also includes financial assets
and liabilities whose fair value is determined by reference to price quotes but for which the market is considered inactive. Level 3 Available-
for-sale investments include mainly asset backed securities in the US as described above under ‘Debt securities’. Level 3 Trading assets,
Non-trading derivatives and Assets designated at fair value through profit and loss account and Level 3 Financial liabilities at fair value
through profit and loss include financial instruments with different characteristics and nature, which are valued on the basis of valuation
techniques that feature one or more significant inputs that are unobservable. An instrument in its entirety is classified as valued using
significant unobservable inputs if a significant portion of the instrument’s fair value is driven by unobservable inputs. Unobservable in
this context means that there is little or no current market data available from which the price at which an arm’s length transaction
would be likely to occur can be derived. More details on the determination of the fair value of these instruments is included above
under ‘Derivatives’, ‘Debt securities’ and ‘Loans and advances to customers’.

Change in Level 3 classification (2010)

ING changed the classification of certain assets and liabilities in the fair value hierarchy compared to prior years. The changes relate to
Trading assets/liabilities and Financial liabilities designated as at fair value through profit and loss. These changes result from further
improvements in the classification by fair value hierarchy in order to better align with common practices that have emerged within the
industry. As a result, certain financial instruments that were previously classified mainly in Level 2 (Valuation technique supported by
observable inputs) are now classified in Level 3 (Valuation technique supported by unobservable inputs). The comparatives for 2009 have
been adjusted accordingly.

The category of financial instruments that is most impacted by this change are issued structured notes that are classified as Financial
liabilities designated as at fair value through profit and loss. These structured notes are a combination of deposit-, loan- and derivative
components. Certain components of the structure represent Level 1 or Level 2 in the fair value hierarchy, whereas other components
represent Level 3. ING also has other positions that are not measured at fair value or are measured at fair value and are classified in various
levels of the fair value hierarchy. The combination of these instruments represents no significant exposure of ING to fair value changes
related to unobservable inputs and, therefore, until 2009 the overall exposure was classified mostly in Level 2. As of 2010, individual
financial instruments are classified individually in the fair value hierarchy. Furthermore, if the fair value of a financial instrument is based on
unobservable inputs for a component of that instrument, in most cases the entire instrument (including the components that are not
impacted by unobservable inputs) is now classified in Level 3.

The change to the 2009 comparatives resulted in assets in Level 3 of the fair value hierarchy increasing from 2.1% to 2.6% of total assets
measured at fair value. Liabilities in Level 3 of the fair value hierarchy increased from 1.0% to 3.6% of total liabilities measured at fair value.

As a result of the offsetting impact as explained above, there is no significant impact on the sensitivity of fair values to unobservable
inputs.

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Changes in Level 3 Assets

Financial assets
designated as
Investment at fair value Available-
for risk of Non-trading through profit for-sale
2010 Trading assets policyholders derivatives and loss investments Total
Opening balance 1,366 54 541 1,830 7,243 11,034
Amounts recognised in profit and loss during the year 193 –5 –275 3 –232 –316
Revaluation recognised in equity during the year 1,047 1,047
Purchase of assets 1,394 134 554 608 1,364 4,054
Sale of assets –899 –143 –340 –637 –720 –2,739
Maturity/settlement –275 –2 –96 –775 –1,148
Transfers into Level 3 474 86 143 21 1,156 1,880
Transfers out of Level 3 –150 –4 –3,355 –3,509
Exchange rate differences 29 10 14 121 376 550
Closing balance 2,132 136 635 1,846 6,104 10,853

Main changes in fair value hierarchy (2010 compared to 2009)

Amounts in each of the levels of the fair value hierarchy are impacted by changes in the volume of portfolios and fluctuations in pricing
levels and foreign currency rates. The amount in Level 3 is impacted by improved market-activity in this area leading to increased trading
and increases in portfolio volume in financial instruments that qualify for Level 3.

Level 3 assets increased because certain bonds were transferred to Level 3 in 2010 as a result of reduced market liquidity and/or pricing
sources that could no longer be classified as market observable. On the other hand, Level 3 assets decreased in 2010 because of a transfer
of available-for-sale investments of EUR 2.9 billion out of Level 3 to Level 2, relating to mortgage backed securities in the US. Previously
these were classified in Level 3 because of the dispersion between prices obtained for the same security from different price sources. In
2010 prices supported by market observable inputs became available and were used in determining fair value.

There were no significant transfers between Level 1 and 2.

Changes in Level 3 Assets

Financial assets
designated as
Investment at fair value Available-
for risk of Non-trading through profit for-sale
2009 Trading assets policyholders derivatives and loss investments Total
Opening balance 1,212 303 3 1,873 27,361 30,752
Amounts recognised in profit and loss during the year 17 2 –133 –90 –1,525 –1,729
Revaluation recognised in equity during the year 7,378 7,378
Purchase of assets 928 65 333 977 1,009 3,312
Sale of assets –191 –113 94 –569 –22,211 –22,990
Maturity/settlement –41 –68 –4 –171 –3,103 –3,387
Reclassifications –43 –67 –5,994 –6,104
Transfers into Level 3 8 243 123 7,095 7,469
Transfers out of Level 3 –516 –123 –76 –3,387 –4,102
Exchange rate differences –20 5 –78 698 605
Changes in the composition of the group –92 –78 –170
Closing balance 1,366 54 541 1,830 7,243 11,034

Main changes in fair value hierarchy (2009 compared to 2008)

As a result of changes in portfolios and/or markets during 2009, the following main changes in the fair value hierarchy occurred:
• Decrease in Level 1 and Level 2 – reclassifications from Available-for-sale investments to Loans and advances and Amounts due from
banks:
The reclassification in the first quarter from Available-for-sale investments to Loans and advances (EUR 17.2 billion) and Amounts due
from banks (EUR 5.6 billion) resulted in a reduction in Level 2 of approximately EUR 22.8 billion. Furthermore, certain asset backed
securities (approximately EUR 6.1 billion) were reclassified from Level 2 to Level 3 during the first quarter because the relevant markets
had become inactive; subsequently these were reclassified to Loans and advances during the second quarter. After reclassification to
Loans and advances and Amounts due from banks these are no longer recorded at fair value and therefore no longer subject to
disclosure in the fair value hierarchy;
• Decrease in Level 3 – derecognition of asset backed securities in the US:
The Illiquid Assets Back-up Facility agreed with the Dutch State resulted in the derecognition of asset backed securities in the United
States that were classified in Level 3. As a result of this transaction, financial assets in Level 3 (Available-for-sale investments) decreased
by approximately EUR 15.2 billion. This decrease includes the sale proceeds of EUR 22.4 billion and revaluation recognised in equity of
EUR 7.2 billion;

174 ING Group Annual Report 2010

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• Decrease in Level 3 – reclassification of asset backed securities in the US and certain private equities to Level 2:
During 2009, the pricing transparency and the level of trading activity in the secondary markets for asset backed securities in the United
States increased and the price of the securities as provided by the external pricing services converged . Accordingly, in the fourth quarter
of 2009, investments in asset backed securities in the United States of approximately EUR 2.8 billion were transferred from Level 3 to
Level 2. These assets were transferred into Level 3 during 2008, when the market became inactive and the dispersion between prices
for the same security from different prices sources increased significantly;
• Other:
Amounts in each of the levels are impacted by changes in the amount and composition of the relevant balance sheet items during
the year.

Changes in Level 3 Liabilities

Financial
liabilities Investment
designated as contracts
at fair value (for contracts
Trading Non-trading through profit carried at
2010 liabilities derivatives and loss fair value) Total
Opening balance 857 1,361 2,589 39 4,846
Amounts recognised in profit and loss during the year 119 85 –4 200
Revaluation recognised in equity during the year 9 9
Issue of liabilities 1,679 490 2,241 10 4,420
Early repayment of liabilities –876 –247 –863 –55 –2,041
Maturity/settlement –326 –1 –561 –888
Transfers into Level 3 165 282 11 458
Transfers out of Level 3 –176 –67 –266 –509
Exchange rate differences –1 58 7 64
Closing balance 1,441 1,876 3,225 17 6,559

Changes in Level 3 Liabilities

Financial liabilities
designated as Investment
at fair value contracts (for
Non-trading through profit contracts carried
2009 Trading liabilities derivatives and loss at fair value) Total
Opening balance 357 25 64 99 545
Amounts recognised in profit and loss during the year –64 –87 124 2 –25
Issue of liabilities 859 1,015 2,793 22 4,689
Early repayment of liabilities –110 –26 –155 –72 –363
Maturity/settlement –173 –121 –294
Transfers into Level 3 30 417 174 8 629
Transfers out of Level 3 –42 –290 –10 –342
Exchange rate differences 18 –10 8
Changes in the composition of the group –1 –1
Closing balance 857 1,361 2,589 39 4,846

Amounts recognised in profit and loss during the year (Level 3)

Held at balance Derecognised during
2010 sheet date the year Total
Assets
Trading assets 157 36 193
Investments for risk of policyholders –5 –5
Non-trading derivatives –248 –27 –275
Financial assets designated as at fair value through
profit and loss 29 –26 3
Available-for-sale investments –264 32 –232
–326 10 –316

Liabilities
Trading liabilities 119 119
Non-trading derivatives –2 2
Financial liabilities designated as at fair value through
profit and loss 85 85
Investment contracts (for contracts carried at fair value) 1 –5 –4
203 –3 200

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Amounts recognised in profit and loss during the year (Level 3)

Held at balance Derecognised during
2009 sheet date the year Total
Assets
Trading assets –55 72 17
Investments for risk of policyholders 2 2
Non-trading derivatives –133 –133
Financial assets designated as at fair value through
profit and loss –104 14 –90
Available-for-sale investments –1,534 9 –1,525
–1,826 97 –1,729

Liabilities
Trading liabilities –64 –64
Non-trading derivatives –154 67 –87
Financial liabilities designated as at fair value through
profit and loss 124 124
Investment contracts (for contracts carried at fair value) 2 2
–94 69 –25

Sensitivities of fair values in Level 3

Reasonably likely changes in the non observable assumptions used in the valuation of Level 3 assets and liabilities would not have a
significant impact on equity and net result, other than explained below for investments in asset backed securities in the United States.

Asset backed securities in the United States

Level 3 assets include EUR 3.4 billion at 31 December 2010 and EUR 6.4 billion at 31 December 2009 for investments in asset backed
securities in the United States. These assets are valued using external price sources that are obtained from third party pricing services
and brokers.

During 2008, the trading volumes in the relevant markets reduced significantly and the market became inactive. The dispersion between
prices for the same security from different price sources increased significantly. In order to ensure that the most accurate and relevant
sources available are used in determining the fair value of these securities, the valuation process was further enhanced during 2008
by using information from additional pricing sources and enhancing the process of selecting the most appropriate price.

Generally up to four different pricing services are utilised. Management carefully reviews the prices obtained in conjunction with other
information available, including, where relevant, trades in the market, quotes from brokers and internal evaluations. If the dispersion
between different prices for the same securities is limited, a hierarchy exists that ensures consistent selection of the most appropriate
price. If the dispersion between different prices for the same security is significant, additional processes are applied to select the most
appropriate price, including an internally developed price validation matrix and a process to challenge the external price source.

Valuation for these securities is inherently complex and subjective. Although each security in the portfolio is priced based on an external
price, without modification by ING Group, and management is confident that it has selected the most appropriate price in the current
market circumstances, the valuation of these portfolios would have been different had different prices been selected. The sensitivity
analysis shows that the highest and the lowest available market prices do not materially impact the valuation of these assets as at
31 December 2010.

Reference is made to the ‘Risk management’ section with regard to the exposure of these asset backed securities as at 31 December 2010
and 31 December 2009 and the impact from these asset backed securities on net result in 2010 and 2009.

Furthermore, the ‘Risk management’ section provides under Impact of financial crisis a breakdown of the methods applied in determining
fair values of pressurised assets.

176 ING Group Annual Report 2010

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Notes to the consolidated annual accounts of ING Group continued

35 INTEREST RESULT BANKING OPERATIONS

Interest result banking operations

2010 2009 2008
Interest income on loans 24,942 24,983 31,174
Interest income on impaired loans 40 24 –24
Total interest income on loans 24,982 25,007 31,150

Interest income on available-for-sale securities 3,532 3,923 7,449

Interest income on held-to-maturity securities 549 612 669
Interest income on trading portfolio 32,692 40,844 45,510
Interest income on non-trading derivatives 1,709 3,936 7,076
Other interest income 4,870 5,528 5,157
Interest income banking operations 68,334 79,850 97,011

Interest expense on deposits by banks 652 1,266 4,856

Interest expense on customer deposits and other
funds on deposit 8,324 10,976 19,594
Interest expense on debt securities 2,761 2,657 4,109
Interest expense on subordinated loans 1,856 1,784 1,784
Interest on trading liabilities 32,847 40,023 44,093
Interest on non-trading derivatives 2,166 4,483 7,391
Other interest expense 6,405 6,286 4,142
Interest expense banking operations 55,011 67,475 85,969

Interest result banking operations 13,323 12,375 11,042

Interest margin
in percentages 2010 2009 2008
Interest margin 1.44 1.34 1.09

In 2010, the growth in average total assets led to an increase of the interest result amounting to EUR 90 million (in 2009 the decline in
average total assets led to a decrease of the interest result of EUR 929 million; in 2008 the growth in average assets led to an increase of
the interest result of EUR 811 million). The increase of the interest margin by 10 basis points led to an increase of the interest result with
EUR 915 million (in 2009 the increase of the interest margin by 25 basis points led to an increase of the interest result with EUR 2,406
million; in 2008 the increase of the interest margin by 15 basis points led to an increase of the interest result with EUR 1,440 million).

36 GROSS PREMIUM INCOME

Gross premium income

2010 2009 2008
Gross premium income from life insurance policies 26,206 28,720 38,869
Gross premium income from non-life insurance policies 1,741 1,772 4,943
27,947 30,492 43,812

In 2009, Gross premium income decreased as a result of the divestments as disclosed in Note 30 ‘Companies acquired and companies
disposed’, including the divestment of ING Life Taiwan, ING Canada, Annuity and Mortgage business of Chile and Australia/New Zealand.
Furthermore, gross premium income declined due to ING’s decision to limit variable annuity sales in the United States and to cease variable
annuity sales in Japan, as well as a lower appetite for investment-linked products.

Gross premium income has been presented before deduction of reinsurance and retrocession premiums granted. Gross premium income
excludes premium received for investment contracts, for which deposit accounting is applied.

Effect of reinsurance on premiums written

Non-life Life Total
2010 2009 2008 2010 2009 2008 2010 2009 2008
Direct gross premiums written 1,718 1,746 4,920 25,042 27,421 37,487 26,760 29,167 42,407
Reinsurance assumed gross
premiums written 23 26 23 1,164 1,299 1,382 1,187 1,325 1,405
Total gross premiums written 1,741 1,772 4,943 26,206 28,720 38,869 27,947 30,492 43,812

Reinsurance ceded –65 –70 –196 –2,041 –1,867 –1,802 –2,106 –1,937 –1,998
1,676 1,702 4,747 24,165 26,853 37,067 25,841 28,555 41,814

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Effect of reinsurance on non-life premiums earned

2010 2009 2008
Direct gross premiums earned 1,744 1,746 4,889
Reinsurance assumed gross premiums earned 23 26 20
Total gross premiums earned 1,767 1,772 4,909

Reinsurance ceded –65 –68 –190

1,702 1,704 4,719

See Note 43 ‘Underwriting expenditure’ for disclosure on reinsurance ceded.

37 INVESTMENT INCOME

Investment income by banking and insurance operations

Banking operations Insurance operations Total
2010 2009 2008 2010 2009 2008 2010 2009 2008
Income from
real estate investments 128 157 196 71 63 75 199 220 271
Dividend income 59 46 84 212 172 646 271 218 730
187 203 280 283 235 721 470 438 1,001

Income from investments

in debt securities 5,651 5,429 6,535 5,651 5,429 6,535
Income from loans
– unsecured loans 263 223 209 263 223 209
– mortgage loans 826 856 1,044 826 856 1,044
– policy loans 190 177 200 190 177 200
– other 354 101 92 354 101 92
Income from investments
in debt securities and loans 7,284 6,786 8,080 7,284 6,786 8,080

Realised gains/losses on disposal

of debt securities 150 –945 40 25 –168 48 175 –1,113 88
Impairments of available-for-sale
debt securities –146 –1,491 –2,127 –589 –586 –777 –735 –2,077 –2,904
Reversal of impairments of
available-for-sale debt securities 10 2 10 2
Realised gains/losses and
impairments of debt securities 4 –2,436 –2,087 –554 –752 –729 –550 –3,188 –2,816

Realised gains/losses on disposal

of equity securities 338 24 30 194 404 685 532 428 715
Impairments of available-for-sale
equity securities –32 –49 –331 –43 –360 –1,585 –75 –409 –1,916
Realised gains/losses and
impairments of equity securities 306 –25 –301 151 44 –900 457 19 –1,201

Change in fair value of real estate

investments –50 –588 –350 –48 –125 –50 –98 –713 –400
Investment income 447 –2,846 –2,458 7,116 6,188 7,122 7,563 3,342 4,664

Reference is made to the ‘Risk management’ section for further information on impairments.

38 NET RESULT ON DISPOSALS OF GROUP COMPANIES

Net result on disposals of group companies in 2010

2010
Asian Private Banking business 332
Swiss Private Banking business 73
ING Summit Industrial Fund LP –26
Other –69
310

Other includes EUR –24 million related to the sale of certain associates. The remainder includes result on disposal of certain real estate
funds and other disposals that are individually not significant.

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Notes to the consolidated annual accounts of ING Group continued

Net result on disposals of group companies in 2009

2009
ING Australia and New Zealand 337
ING Canada –38
Annuity and Mortgage business in Chile –23
Other –12
264

Net result on disposals of group companies in 2008

2008
ING Salud, Chile 55
Seguros ING, Mexico 182
NRG –15
ING Life Taiwan –214
Other 9
17

Reference is made to Note 30 ‘Companies acquired and companies disposed’ for more details.

39 COMMISSION INCOME

Gross fee and commission income

Banking operations Insurance operations Total
2010 2009 2008 2010 2009 2008 2010 2009 2008
Funds transfer 861 859 888 861 859 888
Securities business 695 780 891 695 780 891
Insurance broking 190 188 175 344 241 87 534 429 262
Asset management fees 476 566 865 1,495 1,892 2,198 1,971 2,458 3,063
Brokerage and advisory fees 329 317 256 386 582 763 715 899 1,019
Other 965 825 850 562 540 531 1,527 1,365 1,381
3,516 3,535 3,925 2,787 3,255 3,579 6,303 6,790 7,504

Asset management fees related to the management of investments held for the risk of policyholders of EUR 358 million
(2009: EUR 825 million; 2008: EUR 1,174 million) are included in Commission income.

Other include commission fees of EUR 15 million (2009: EUR 18 million; 2008: EUR 21 million) in respect of underwriting syndication loans.

Fee and commission expenses

Banking operations Insurance operations Total
2010 2009 2008 2010 2009 2008 2010 2009 2008
Funds transfer 257 200 185 257 200 185
Securities business 125 159 268 125 159 268
Insurance broking –4 128 332 574 128 332 570
Management fees 19 24 169 201 241 217 220 265 386
Brokerage and advisory fees 70 43 5 196 496 573 266 539 578
Other 452 449 476 277 233 76 729 682 552
923 875 1,099 802 1,302 1,440 1,725 2,177 2,539

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Notes to the consolidated annual accounts of ING Group continued

40 VALUATION RESULTS ON NON-TRADING DERIVATIVES

Valuation results on non-trading derivatives

Banking operations Insurance operations Total
2010 2009 2008 2010 2009 2008 2010 2009 2008
Change in fair value of derivatives
relating to
– fair value hedges –679 –1,321 –5,299 –69 191 –193 –748 –1,130 –5,492
– cash-flow hedges
(ineffective portion) 2 –2 –9 –8 22 –7 –10 22
– hedges of net investment in
foreign entities (ineffective portion) 1 –6 1 –6
– other non-trading derivatives –720 –237 –28 94 –3,722 2,412 –626 –3,959 2,384
Net result on non-trading
derivatives –1,397 –1,560 –5,327 16 –3,538 2,235 –1,381 –5,098 –3,092

Change in fair value of assets

and liabilities (hedged items) 686 1,201 5,533 66 –226 164 752 975 5,697
Valuation results on assets
and liabilities designated as
at fair value through profit
and loss (excluding trading) 69 –557 127 150 4 –432 219 –553 –305
Net valuation results –642 –916 333 232 –3,760 1,967 –410 –4,676 2,300

In 2009, the Valuation results on non-trading derivatives was mainly a result of negative fair value changes on derivatives used to hedge
direct and indirect equity exposures without applying hedge accounting. Indirect equity exposures related to certain guaranteed benefits
in insurance liabilities in the US, Japan, and the Netherlands. In 2009 the fair value changes on these derivatives were negative, as stock
market returns became positive. The fair value changes on the derivatives related to the indirect equity exposures were generally offset
by an opposite amount in underwriting expenditure (reference is made to Note 43 ‘Underwriting expenditure’).

The Valuation results on assets and liabilities designated at fair value through profit and loss includes fair value changes on private equity
funds and issued debt securities, designated at fair value through profit and loss. In 2009, the Valuation results on assets and liabilities
designated at fair value through profit and loss were mainly a result of changes in fair value of financial liabilities, designated at fair value
through profit and loss, due to market circumstances; it includes fair value changes on issued debt securities, designated at fair value through
profit and loss, including fair value changes attributable to changes in own credit risk as disclosed in Note 20 ‘Financial liabilities at fair
value through profit and loss’.

41 NET TRADING INCOME

Net trading income

Banking operations Insurance operations Total
2010 2009 2008 2010 2009 2008 2010 2009 2008
Securities trading results 231 331 130 180 155 –239 411 486 –109
Foreign exchange transactions results 648 –158 274 –604 167 –90 44 9 184
Derivatives trading results 174 815 –766 79 174 815 –687
Other 64 –185 –43 –66 –94 –2 –185 –137
1,117 803 –405 –490 322 –344 627 1,125 –749

Securities trading results includes the results of making markets in instruments such as government securities, equity securities, corporate
debt securities, money-market instruments, and interest rate derivatives such as swaps, options, futures and forward contracts. Foreign
exchange transactions results include gains and losses from spot and forward contracts, options, futures, and translated foreign currency
assets and liabilities.

The portion of trading gains and losses for the year ended 31 December 2010 relating to trading securities still held as at 31 December
amounted to EUR 19 million (2009: EUR 105 million; 2008: EUR –246 million).

The majority of the risks involved in security and currency trading is economically hedged with derivatives. The securities trading results
are partly offset by results on these derivatives. The result of these derivatives is included in Derivatives trading results.

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42 OTHER INCOME

Other income
Banking operations Insurance operations Total
2010 2009 2008 2010 2009 2008 2010 2009 2008
Net operating lease income 213 175 195 213 175 195
Income from real estate
development projects 36 59 124 36 59 124
Income post office 99 144 99 144
Other 98 123 28 288 235 153 386 358 181
347 456 491 288 235 153 635 691 644

Net operating lease income comprises income of EUR 1,000 million (2009: EUR 967 million; 2008: EUR 961 million) and depreciation of
EUR 787 million (2009: EUR 792 million; 2008: EUR 766 million).

43 UNDERWRITING EXPENDITURE

Underwriting expenditure
2010 2009 2008
Gross underwriting expenditure
– before effect of investment result for risk
of policyholders 34,506 32,698 51,239
– effect of investment result risk of policyholders 10,492 17,742 –32,408
44,998 50,440 18,831
Investment result for risk of policyholders –10,492 –17,742 32,408
Reinsurance recoveries –1,741 –1,714 –1,754
Underwriting expenditure 32,765 30,984 49,485

The investment income and valuation results regarding investment result for risk of policyholders of EUR 10,492 million (2009: EUR 17,742
million; 2008: EUR –32,408 million) have not been recognised in Investment income and valuation results on assets and liabilities designated
at fair value through profit and loss but are recognised in Underwriting expenditure together with the equal amount of change in insurance
provisions for risk of policyholders.

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Notes to the consolidated annual accounts of ING Group continued

Underwriting expenditure
2010 2009 2008
Expenditure from life underwriting
Reinsurance and retrocession premiums 2,041 1,867 1,802
Gross benefits 25,687 24,044 27,159
Reinsurance recoveries –1,732 –1,708 –1,662
Change in life insurance provisions for risk of company 1,416 3,283 16,633
Costs of acquiring insurance business 2,775 350 1,877
Other underwriting expenditure 558 460 462
Profit sharing and rebates 538 438 358
31,283 28,734 46,629

Expenditure from non-life underwriting

Reinsurance and retrocession premiums 65 70 196
Gross claims 1,034 1,012 2,846
Reinsurance recoveries –9 –6 –92
Change in provision for unearned premiums –26 –2 28
Change in claims provision 44 –23 54
Costs of acquiring insurance business 281 290 742
Other underwriting expenditure –2 –4 –22
1,387 1,337 3,752

Expenditure from investment contracts

Costs of acquiring investment contracts 5 3 9
Other changes in investment contract liabilities 90 910 –905
95 913 –896

32,765 30,984 49,485

Profit sharing and rebates

2010 2009 2008
Distributions on account of interest
or underwriting results 9 91 198
Bonuses added to policies 328 289 131
Deferred profit sharing expense 201 58 29
538 438 358

The total Cost of acquiring insurance business (life and non-life) and investment contracts amounted to EUR 3,061 million (2009: EUR 643
million; 2008: EUR 2,628 million). This includes amortisation and unlocking of DAC of EUR 2,834 million (2009: EUR 458 million; 2008:
EUR 2,026 million) and the net amount of commissions paid of EUR 1,789 million (2009: EUR 1,815 million; 2008: EUR 3,273 million)
and commissions capitalised in DAC of EUR 1,562 million (2009: EUR 1,630 million; 2008: EUR 2,671 million).

The total amount of commission paid and payable with regard to the insurance operations amounted to EUR 2,514 million (2009: EUR 2,483
million; 2008: EUR 3,804 million). This includes the commissions recognised in Cost of acquiring insurance business of EUR 1,789 million (2009:
EUR 1,815 million; 2008: EUR 3,273 million) referred to above and commissions recognised in Other underwriting expenditure of EUR 725 million
(2009: EUR 668 million; 2008: EUR 531 million). Other underwriting expenditure also includes reinsurance commissions received of EUR 192
million (2009: EUR 255 million; 2008: EUR 306 million).

The Change in life insurance provisions for risk of company includes an amount related to variable annuity assumption changes in the United
States and Japan of approximately EUR 356 million (2009: EUR 343 million). These assumptions were updated to reflect lower-than-expected
surrenders on policies where the value of the benefit guarantees is significant.

In 2008, the Change in life insurance provisions for risk of company includes an amount of EUR 136 million in relation to reserve
strengthening for Insurance Asia/Pacific as described in further detail under Segment reporting. The 2010 and 2009 amounts are
nil following the disposal of ING Life Taiwan.

Other underwriting expenditure from life underwriting in 2010 includes a EUR 975 million DAC write-off as explained in Note 51
‘Operating segments’.

182 ING Group Annual Report 2010

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Notes to the consolidated annual accounts of ING Group continued

ING Group transferred part of its life insurance business to Scottish Re in 2004 by means of a co-insurance contract. A loss amounting to
EUR 160 million was recognised in Underwriting expenditure in 2004 on this transaction. This loss represented the reduction of the related
deferred acquisition costs. In addition, an amount of EUR 240 million is being amortised over the life of the underlying business, starting in
2005 and gradually decreasing in subsequent years as the business tails off. The amount amortised in 2010 was EUR 17 million (2009: EUR
13 million; 2008: EUR 12 million). The cumulative amortisation as at 31 December 2010 was EUR 132 million (2009: EUR 107 million; 2008:
EUR 96 million). On 23 January 2009, Hannover Re and Scottish Re announced that Hannover Re has agreed to assume the ING individual
life reinsurance business originally transferred to Scottish Re in 2004.

ING Group transferred its U.S. group reinsurance business to Reinsurance Group America Inc. in 2010 by means of a reinsurance agreement.
The transaction resulted in EUR 70 million ceding commission which is required to be recorded as a deferred gain and amortised over the life
of the underlying business, starting in 2010 and gradually decreasing in subsequent years as the business tails off. The amount amortised in
2010 was EUR 52 million. The cumulative amortisation as at 31 December 2010 was EUR 52 million.

44 INTANGIBLE AMORTISATION AND OTHER IMPAIRMENTS

Intangible amortisation and (reversals of) impairments

Impairment losses Reversals of impairments Total
2010 2009 2008 2010 2009 2008 2010 2009 2008
Property and equipment 28 8 19 –5 –12 23 –4 19
Property development 400 450 93 –7 –31 400 443 62
Goodwill 540 155 540 155
Software and other intangible assets 31 9 71 31 9 71
(Reversals of) other impairments 999 467 338 –5 –19 –31 994 448 307

Amortisation of other
intangible assets 118 120 157
1,112 568 464

In 2010, a goodwill impairment of EUR 540 million is recognised. Reference is made to Note 9 ‘Intangible assets’.

Impairments on Loans and advances to customers are presented under Addition to loan loss provision. Impairments on investments are
presented under Investment income. Reference is made to the ‘Risk management’ section for further information on impairments.

In 2010, impairments on Property development are recognised on a large number of Real Estate development projects in The Netherlands,
Spain and the US. Although the expectation is that the Real Estate markets will not further deteriorate, the unfavourable economic
circumstances in all regions resulted in lower expected sales prices.

In 2009, impairments on Property development are recognised on a large number of Real Estate development projects in Europe, Australia
and the US. Circumstances that have led to these impairments are unfavourable economic circumstances in all regions that have resulted
into lower expected sales prices, changes in strategy of ING Real Estate Development whereby certain projects are not developed further
and operational inefficiencies in a limited number of projects.

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Staff expenses
Banking operations Insurance operations Total
2010 2009 2008 2010 2009 2008 2010 2009 2008
Salaries 3,836 3,555 3,816 1,665 1,521 2,069 5,501 5,076 5,885
Pension and other staff-related
benefit costs 199 178 104 118 142 140 317 320 244
Social security costs 532 510 516 177 161 205 709 671 721
Share-based compensation
arrangements 79 58 75 41 38 49 120 96 124
External employees 627 660 1,056 125 96 160 752 756 1,216
Education 61 57 105 13 8 11 74 65 116
Other staff costs 220 195 252 78 159 206 298 354 458
5,554 5,213 5,924 2,217 2,125 2,840 7,771 7,338 8,764

Number of employees
Netherlands International Total
2010 2009 2008 2010 2009 2008 2010 2009 2008
Average number of employees at
full time equivalent basis 27,750 27,912 29,626 78,389 82,368 95,659 106,139 110,280 125,285

Share-based compensation arrangements includes EUR 91 million (2009: EUR 65 million; 2008: EUR 98 million) relating to equity-settled
share-based payment arrangements and EUR 29 million (2009: EUR 31 million; 2008: EUR 26 million) relating to cash-settled share-based
payment arrangements.

Pension and other staff-related benefit costs

Post-employment benefits
Pension benefits other than pensions Other Total
2010 2009 2008 2010 2009 2008 2010 2009 2008 2010 2009 2008
Current service cost 298 320 356 5 –8 –2 –2 –38 5 301 274 359
Past service cost –1 20 77 –21 –1 –1 77
Interest cost 795 778 787 8 10 11 5 9 4 808 797 802
Expected return on assets –886 –842 –886 1 1 –885 –841 –886
Amortisation of unrecognised past
service cost –5 –1 –1 –5 –1 –1
Amortisation of unrecognised
actuarial (gains)/losses 62 106 –23 –9 –5 1 5 54 106 –23
Effect of curtailment or settlement –7 –96 –140 –7 –96 –140
Other –14 –18 –15 15 6 –15 1 –12
Defined benefit plans 261 272 153 –1 –25 8 –10 –8 15 250 239 176

Defined contribution plans 67 81 68

317 320 244

Remuneration of senior management, Executive Board and Supervisory Board

Reference is made to Note 33 ‘Related parties’.

Stock option and share plans

ING Group has granted option rights on ING Group shares and conditional rights on depositary receipts (share awards) for ING shares to
a number of senior executives (members of the Executive Board, general managers and other officers nominated by the Executive Board),
and to a considerable number of employees of ING Group. The purpose of the option and share schemes, apart from promoting a lasting
growth of ING Group, is to attract, retain and motivate senior executives and staff.

184 ING Group Annual Report 2010

 Consolidated annual accounts 4

Notes to the consolidated annual accounts of ING Group continued

ING Group holds its own shares in order to fulfil its obligations with regard to the existing stock option plan and to hedge the position risk of
the options concerned (so-called delta hedge). As at 31 December 2010, 45,213,891 own shares (2009: 35,178,086; 2008: 32,367,870) were
held in connection with the option plan compared to 124,836,694 options outstanding (2009: 122,334,486; 2008: 87,263,381). As a result
the granted option rights were (delta) hedged, taking into account the following parameters: strike price, opening price, zero coupon interest
rate, dividend yield, expected volatility and employee behaviour. The hedge used to be rebalanced regularly at predetermined points in time.
In December 2010 ING Groep N.V. announced that it will no longer rebalance its hedge portfolio. This decision is an effort to simplify the
management and administration of ING’s various employee share and option programmes. The remaining shares in the hedge portfolio
will be used to fund the obligations arising from exercise and vesting. Once all shares in the hedge portfolio are used ING will fund these
obligations by issuing new shares.

Exposure arising from the share plan is not hedged. The obligations with regard to these plans will in the future be funded either by cash,
newly issued shares or remaining shares from the delta hedge portfolio at the discretion of the holder.

In December 2009 ING Groep N.V. completed a rights issue of EUR 7.5 billion. Outstanding stock options and share awards have been
amended to reflect the impact of the rights issue through an adjustment factor that reflects the fact that the exercise price of the rights
issue was less than the fair value of the shares. As a result, exercise prices and outstanding share options and share awards have been
amended through an adjustment factor of approximately 1.3.

On 6 April 2010 ING Groep N.V. announced that it has bought 13,670,000 (depositary receipts for) ordinary shares for its delta hedge
portfolio, which was used to hedge employee options and facilitate employee share programmes. The shares were bought in the open
market between 23 March and 6 April 2010 at an average price of EUR 7.47 per share.

On 2 June 2010 ING Groep N.V. announced that it has bought 2,080,000 (depositary receipts for) ordinary shares for its delta hedge
portfolio, which was used to hedge employee options and facilitate employee share programmes. The shares were bought in the open
market on 1 and 2 June 2010 at an average price of EUR 6.33 per share.

On 8 September 2010 ING Groep N.V. announced that it has sold 3,590,000 (depositary receipts for) ordinary shares of its delta hedge
portfolio, which was used to hedge employee options and facilitate employee share programmes. The shares were sold in the open
market on 7 and 8 September 2010 at an average price of EUR 7.39 per share.

The option rights are valid for a period of five or ten years. Option rights that are not exercised within this period lapse. Option rights
granted will remain valid until the expiry date, even if the option scheme is discontinued. The option rights are subject to certain
conditions, including a certain continuous period of service. The exercise prices of the options are the same as the quoted prices of
ING Group shares at the date on which the options are granted.

The entitlement to the share awards is granted conditionally. If the participant remains in employment for an uninterrupted period
of three years from the grant date, the entitlement becomes unconditional. In 2010, no shares (2009: nil; 2008: 211,049) have been
granted to the members of the Executive Board of ING Group, Management Boards of ING Bank and ING Insurance and 26,369,146
shares (2009: 6,273,467; 2008: 3,380,706) have been granted to senior management and other employees remaining in the service
of ING Group.

Every year, the ING Group Executive Board will decide whether the option and share schemes are to be continued and, if so, to what
extent. In 2010 the Group Executive Board has decided not to continue the option scheme as from 2011. The existing option schemes
up and until 2010 will be run off in the coming years.

Changes in option rights outstanding (1)

Options outstanding (in numbers) Weighted average exercise price (in euros)
2010 2009 2008 2010 2009 2008
Opening balance 122,334,486 87,263,381 76,888,553 17.31 25.93 26.66
Granted 19,434,097 14,803,109 14,905,232 7.35 3.93 21.85
Exercised –1,070,630 –22,757 –1,225,856 3.03 5.33 18.09
Forfeited –3,666,001 –5,974,275 –3,304,548 13.23 26.30 28.87
Rights issue 28,395,811
Expired –12,195,258 –2,130,783 20.52 32.11
Closing balance 124,836,694 122,334,486 87,263,381 15.73 17.31 25.93
(1)
2008 reflects original numbers and amounts, not restated for the rights issue adjustment factor.

As per 31 December 2010 total options outstanding consists of 105,036,931 options (2009: 103,523,988; 2008: 73,826,891) relating to
equity-settled share-based payment arrangements and 19,799,763 options (2009: 18,810,498; 2008: 13,436,490) relating to cash-settled
share-based payment arrangements.

ING Group Annual Report 2010 185

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Notes to the consolidated annual accounts of ING Group continued

The weighted average share price at the date of exercise for options exercised during 2010 is EUR 7.46 (2009: EUR 8.57; 2008: 24.07).

Changes in option rights non-vested (1)

Options non-vested (in numbers) Weighted average grant date fair value (in euros)
2010 2009 2008 2010 2009 2008
Opening balance 50,316,665 37,867,732 38,405,158 3.52 6.03 5.83
Granted 19,434,097 14,803,109 14,905,232 3.26 2.52 5.28
Vested –15,415,108 –11,100,675 –13,173,224 4.70 6.48 3.49
Forfeited –2,739,076 –2,931,533 –2,269,434 3.26 5.67 5.64
Rights issue 11,678,032
Closing balance 51,596,578 50,316,665 37,867,732 3.08 3.52 6.03
(1)
2008 reflects original numbers and amounts, not restated for the rights issue adjustment factor.

Summary of stock options outstanding and exercisable

2010 Options Weighted Options Weighted
outstanding average Weighted exercisable as at average Weighted
as at 31 remaining average 31 December remaining average
Range of exercise price in euros December 2010 contractual life exercise price 2010 contractual life exercise price
0.00 – 5.00 16,367,971 7.71 2.88
5.00 – 10.00 25,482,740 7.45 7.88 6,379,628 2.18 9.36
10.00 – 15.00 9,585,723 2.61 14.37 9,353,997 2.48 14.37
15.00 – 20.00 31,328,453 5.21 17.35 15,434,684 3.54 17.88
20.00 – 25.00 22,663,374 3.58 23.60 22,663,374 3.58 23.60
25.00 – 30.00 19,408,433 3.58 25.77 19,408,433 3.58 25.77
124,836,694 73,240,116

Summary of stock options outstanding and exercisable

2009 Options Weighted Options Weighted
outstanding average Weighted exercisable as at average Weighted
as at 31 remaining average 31 December remaining average
Range of exercise price in euros December 2009 contractual life exercise price 2009 contractual life exercise price
0.00 – 5.00 18,394,697 3.57 2.88
5.00 – 10.00 7,257,362 8.76 9.17 6,826,298 3.18 9.20
10.00 – 15.00 11,132,430 3.51 14.20 10,802,627 3.35 14.20
15.00 – 20.00 35,095,363 6.19 17.29 17,396,930 4.50 17.77
20.00 – 25.00 28,576,153 4.02 23.38 15,861,602 1.73 22.38
25.00 – 30.00 21,878,481 4.50 25.82 21,130,364 4.40 25.83
122,334,486 72,017,821

Summary of stock options outstanding and exercisable (1)

2008 Options Weighted Options Weighted
outstanding average Weighted exercisable as at average Weighted
as at 31 remaining average 31 December remaining average
Range of exercise price in euros December 2008 contractual life exercise price 2008 contractual life exercise price
0.00 – 5.00 5,772,054 4.19 12.11 5,772,054 4.19 12.11
15.00 – 20.00 9,425,787 4.70 18.69 9,149,037 4.55 18.69
20.00 – 25.00 28,055,499 7.49 22.49 14,212,102 5.83 23.22
25.00 – 30.00 15,390,859 2.74 28.57 14,729,456 2.44 28.71
30.00 – 35.00 23,157,582 7.71 32.46 71,400 2.57 33.06
35.00 – 40.00 5,461,600 2.13 35.51 5,461,600 2.13 35.51
87,263,381 49,395,649
(1)
2008 reflects original numbers and amounts, not restated for the rights issue adjustment factor.

The aggregate intrinsic value of options outstanding and exercisable as at 31 December 2010 was EUR 72 million and nil, respectively.

186 ING Group Annual Report 2010

 Consolidated annual accounts 4

Notes to the consolidated annual accounts of ING Group continued

As at 31 December 2010 total unrecognised compensation costs related to stock options amounted to EUR 65 million (2009: EUR 62
million; 2008: EUR 94 million). These costs are expected to be recognised over a weighted average period of 1.9 years (2009: 1.6 years;
2008: 1.8 years). Cash received from stock option exercises for the year ended 31 December 2010 was EUR 3 million (2009: nil; 2008:
EUR 22 million).

The fair value of options granted is recognised as an expense under staff expenses and is allocated over the vesting period of the options.
The fair values of the option awards have been determined by using a Monte Carlo simulation. This model takes the risk free interest rate
into account (2.0% to 4.6%), as well as the expected life of the options granted (5 year to 9 years), the exercise price, the current share
price (EUR 2.90 – EUR 26.05), the expected volatility of the certificates of ING Group shares (25% – 84%) and the expected dividends
yield (0.94% to 8.99%). The source for implied volatilities used for the valuation of the stock options is ING’s trading system. The implied
volatilities in this system are determined by ING’s traders and are based on market data implied volatilities not on historical volatilities.

Due to timing differences in granting option rights and buying shares to hedge them, an equity difference can occur if shares are
purchased at a different price than the exercise price of the options. However, ING Group does not intentionally create a position
and occurring positions are closed as soon as possible. If option rights expire, the results on the (sale of) shares which were bought
to hedge these option rights are recognised in Shareholders’ equity.

Changes in share awards (1)

Share awards (in numbers) Weighted average grant date fair value (in euros)
2010 2009 2008 2010 2009 2008
Opening balance 14,653,673 7,792,009 7,133,714 7.53 22.60 27.52
Granted 26,369,146 6,273,467 3,591,755 7.55 3.29 16.74
Performance effect –1,507,307 –1,085,987 –451,070 13.92 32.52 27.44
Vested –2,961,355 –1,228,764 –1,945,092 11.72 32.63 27.51
Forfeited –1,514,051 –498,553 –537,298 7.13 24.01 25.92
Rights issue 3,401,501
Closing balance 35,040,106 14,653,673 7,792,009 7.25 7.53 22.60
(1)
2008 reflects original numbers and amounts, not restated for the rights issue adjustment factor.

As per 31 December 2010 the share awards consists of 28,592,210 share awards (2009: 10,810,687) relating to equity-settled share-based
payment arrangements and 6,447,896 share awards (2009: 3,842,986) relating to cash-settled share-based payment arrangements.

The fair value of share awards granted is recognised as an expense under staff expenses and is allocated over the vesting period of the
share awards. The fair values of share awards have been determined by using a Monte Carlo simulation based valuation model. The model
takes into account the risk free interest rate, the current stock prices, expected volatilities and current divided yields of the performance
peer group used to determine ING’s Total Shareholder Return (TSR) ranking.

As at 31 December 2010 total unrecognised compensation costs related to share awards amounted to EUR 158 million (2009: EUR 41
million; 2008: EUR 56 million). These costs are expected to be recognised over a weighted average period of 2.1 years (2009: 1.8 years;
2008: 1.8 years).

46 OTHER INTEREST EXPENSES

Other interest expenses mainly consist of interest in connection with the insurance operations, including interest on the perpetual
subordinated loans.

Other interest expenses include nil and nil dividends paid on preference shares and trust preferred securities (2009: nil and EUR 86 million;
2008: EUR 1 million and EUR 94 million).

Total interest income and total interest expense for items not valued at fair value through profit and loss for 2010 were EUR 41,217 million
(2009: EUR 41,856 million; 2008: EUR 52,505 million) and EUR 19,206 million (2009: EUR 22,253 million; 2008: EUR 33,507 million)
respectively. Net interest income of EUR 19,815 million is presented in the following lines in the profit and loss account.

Total net interest income

2010 2009 2008
Interest result bank 35 13,323 12,375 11,042
Investment income – insurance 37 7,284 6,786 8,080
Other interest expenses –792 –716 –978
19,815 18,445 18,144

ING Group Annual Report 2010 187

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Notes to the consolidated annual accounts of ING Group continued

47 OTHER OPERATING EXPENSES

Other operating expenses

Banking operations Insurance operations Total
2010 2009 2008 2010 2009 2008 2010 2009 2008
Depreciation of property
and equipment 382 365 353 78 84 95 460 449 448
Amortisation of software 312 282 103 46 60 70 358 342 173
Computer costs 693 637 733 278 270 297 971 907 1,030
Office expenses 659 679 687 341 476 599 1,000 1,155 1,286
Travel and accommodation expenses 102 99 163 67 66 101 169 165 264
Advertising and public relations 591 539 833 108 90 204 699 629 1,037
External advisory fees 364 401 459 351 289 373 715 690 832
Postal charges 87 111 130 87 111 130
Addition/(releases) of provision for
reorganisations and relocations 109 339 136 99 258 8 208 597 144
Other 796 1,003 627 756 663 836 1,552 1,666 1,463
4,095 4,455 4,224 2,124 2,256 2,583 6,219 6,711 6,807

Other operating expenses include lease and sublease payments in respect of operating leases of EUR 200 million (2009: EUR 169 million;
2008: EUR 172 million) in which ING Group is the lessee. In 2009 Other operating expenses also includes the expenses related to the
industry-wide deposit guarantee scheme in the Netherlands due to the bankruptcy of DSB Bank and premiums for deposit guarantee
schemes in other countries.

For Addition/(releases) of provision for reorganisations and relocations reference is made to the disclosure on the reorganisation provision
in Note 21 ‘Other liabilities’.

No individual operating lease has terms and conditions that materially affect the amount, timing and certainty of the consolidated cash
flows of the Group.

The External advisory fees include fees for audit services and non-audit services provided by the Group’s auditors.

Fees of Group’s auditors

2010 2009 2008
Audit fees 36 35 46
Audit related fees 9 6 3
Tax fees 2 2 3
All other fees 1 2 7
Total 48 45 59

Fees as disclosed above relate to the network of the Group’s auditors.

188 ING Group Annual Report 2010

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Notes to the consolidated annual accounts of ING Group continued

48 TAXATION
Profit and loss account

Taxation by type
Netherlands International Total
2010 2009 2008 2010 2009 2008 2010 2009 2008
Current taxation 168 159 –296 842 598 830 1,010 757 534
Deferred taxation 48 –1,051 –197 94 –178 –1,058 142 –1,229 –1,255
216 –892 –493 936 420 –228 1,152 –472 –721

Reconciliation of the weighted average statutory income tax rate to ING Group’s effective income tax rate
2010 2009 2008
Result before tax 4,477 –1,525 –1,487
Weighted average statutory tax rate 25.1% 36.3% 49.9%
Weighted average statutory tax amount 1,124 –554 –742

Associates exemption –447 –135 69

Other income not subject to tax –125 –227 –210
Expenses not deductible for tax purposes 102 47 106
Impact on deferred tax from change in tax rates 8 –25
Deferred tax benefit from previously unrecognised amounts –32
Write down/reversal of deferred tax assets 544 546 360
Adjustment to prior periods –54 –117 –279
Effective tax amount 1,152 –472 –721

Effective tax rate 25.7% 30.9% 48.5%

The weighted average statutory tax rate decreased significantly in 2010 compared to 2009. This is caused by the fact that in 2010 profits
were realised in a significant part of the tax jurisdictions that incurred losses in 2009.

The weighted average statutory tax rate decreased in 2009 compared to 2008 mainly caused by the fact that a smaller part of the losses
was incurred in high tax jurisdictions than in 2008.

The effective tax rate in 2010 equals almost the weighted average statutory tax. This is caused by an off-setting effect of the write-down
of deferred tax assets (mainly in the United States) against the tax exempt income from associates.

The effective tax rate in 2009 was lower than the weighted average statutory tax rate, resulting in a lower tax benefit for the pre-tax loss.
This is caused by the fact that a write-down of the carrying value of deferred tax assets and non-deductible expenses exceeded tax
exempt income and releases from tax provisions.

The effective tax rate in 2008 was slightly lower than the weighted average statutory tax. Main reasons for this are tax exempt income
and releases of tax provisions, partly offset by non deductible expenses and a reduction of the deferred tax assets.

Adjustment to prior periods in 2010 relates mainly to a tax settlement.

Comprehensive income

Income tax related to components of other comprehensive income

2010 2009 2008
Unrealised revaluations –1,216 –4,712 6,647
Realised gains/losses transferred to profit and loss
(reclassifications from equity to profit and loss) 8 –494 –1,423
Changes in cash flow hedge reserve –194 203 –137
Transfer to insurance liabilities/DAC 719 1,017 –1,129
Exchange rate differences 8 13 –2
Total income tax related to components
of other comprehensive income –675 –3,973 3,956

ING Group Annual Report 2010 189

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Notes to the consolidated annual accounts of ING Group continued

49 EARNINGS PER ORDINARY SHARE

Earnings per ordinary share

Weighted average
Amount number of ordinary shares outstanding Per ordinary share
(in millions of euros) during the period (in millions) (in euros)
2010 2009 2008 2010 2009 2008 2010 2009 2008
Net result 3,220 –935 –729 3,781.5 2,102.9 2,042.7
Attribution to non-voting
equity securities (1) –441 –605
Impact of rights issue (2) 583.1 617.5
Basic earnings 2,779 –1,540 –729 3,781.5 2,686.0 2,660.2 0.73 –0.57 –0.27

Effect of dilutive securities:

Stock option and share plans 6.6 5.7 1.0
6.6 5.7 1.0

Diluted earnings 2,779 –1,540 –729 3,788.1 2,691.7 2,661.2 0.73 –0.57 –0.27
(1)
As a net profit is reported in 2010 an attribution to non-voting equity securities is included. This attribution represents the amount that would be payable to the
holders of the non-voting equity securities if and when the entire net profit of 2010 would be distributed as dividend. This amount is only included for the purpose
of determining earnings per share under IFRS-EU and does not represent a payment (neither actual nor proposed) to the holders of the non-voting equity
securities. The 2009 amount of EUR 605 million includes the coupon (EUR 259 million) and repayment premium (EUR 346 million) on the repayment of EUR 5
billion non-voting equity securities. The 2008 coupon of EUR 425 million paid on the non-voting securities did not impact basic earnings.
(2)
The rights issue, which was finalised on 15 December 2009 has an effect on the basic earnings per share and the diluted earnings per share, as defined in IFRS-EU.
All weighted average number of shares outstanding before the rights issue are restated with an adjustment factor of approximately 1.3 that reflects the fact that
the exercise price of the rights issue was less than the fair value of the shares. The effect of dilutive securities is adjusted as well.

Diluted earnings per share data are calculated as if the stock options and warrants outstanding at year-end had been exercised at the
beginning of the period. It is also assumed that ING Group uses the cash received from exercised stock options and warrants or non-voting
equity securities converted to buy its own shares against the average market price in the financial year. The net increase in the number of
shares resulting from exercising stock options and share plans or converting non-voting equity securities is added to the average number
of shares used for the calculation of diluted earnings per share. The potential conversion of the non-voting equity securities has an
anti-dilutive effect on the earnings per share calculation in 2010, 2009 and 2008 (the diluted earnings per share becoming higher or less
negative than the basic earnings per share). Therefore, the potential conversion is not taken into account when determining the weighted
average number of shares for the calculation of diluted earnings per share for these years.

50 DIVIDEND PER ORDINARY SHARE

Dividend per ordinary share

2010 (1) 2009 2008
Per ordinary share (in euros) 0.00 0.00 0.74
Total amount of dividend declared (in millions of euros) 0 0 1,500
(1)
The Executive Board, with the approval of the Supervisory Board, has proposed, subject to the ratification by the General Meeting of Shareholders,
not to pay a cash dividend for the year 2010.

In 2009 a coupon to the Dutch State of EUR 259 million was paid as part of the repayment of EUR 5 billion non-voting equity securities.

In 2008 coupon was payable to the Dutch State per non-voting equity security of EUR 0.425, provided that ING Group’s capital adequacy
position was and remained satisfactory both before and after payment in the opinion of the Dutch central bank. The full amount of EUR
425 million was recognised as a liability as at 31 December 2008. The amount was paid on 12 May 2009.

190 ING Group Annual Report 2010

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Notes to the consolidated annual accounts of ING Group continued

51 OPERATING SEGMENTS
ING Group’s operating segments relate to the internal segmentation by business lines. During 2010 the internal management reporting
structure was changed in order to improve transparency. The operating segments have changed accordingly. As at 31 December 2010,
ING Group identifies the following operating segments:

Operating segments of ING Group

Banking Insurance
Retail Netherlands Insurance Benelux
Retail Belgium Insurance Central & Rest of Europe (CRE)
ING Direct Insurance United States (US) *
Retail Central Europe (CE) Insurance US Closed Block VA
Retail Asia Insurance Latin America
Commercial Banking (excluding Real Estate) Insurance Asia/Pacific
ING Real Estate ING Investment Management (IM)
Corporate Line Banking Corporate Line Insurance
*
Excluding US Closed Block VA

In 2009 ING Group identified the following operating segments: Retail Banking, ING Direct, Commercial Banking, Insurance Europe,
Insurance Americas and Insurance Asia/Pacific.

All information by segment for 2010 and comparative years presented below reflect the operating segments as at 31 December 2010.

ING Group has adopted IFRS 8 ‘Operating Segments’, including the amendment following the issue of ‘Improvements to IFRSs’ in 2009,
with effect from 1 January 2009.

The Executive Board of ING Group, the Management Board Banking and the Management Board Insurance set the performance targets
and approve and monitor the budgets prepared by the business lines. Business lines formulate strategic, commercial and financial policy in
conformity with the strategy and performance targets set by the Executive Board, the Management Board Banking and the Management
Board Insurance.

The accounting policies of the operating segments are the same as those described under Accounting policies for the consolidated annual
accounts. Transfer prices for inter-segment transactions are set at arm’s length. Corporate expenses are allocated to business lines based
on time spent by head office personnel, the relative number of staff, or on the basis of income and/or assets of the segment.

ING Group evaluates the results of its operating segments using a financial performance measure called underlying result. The information
presented in this note is in line with the information presented to the Executive and Management Board. Underlying result is defined as
result under IFRS-EU excluding the impact of divestments and special items.

As of 2010:
• Capital gains on public equity securities (net of impairments) are reported in the relevant business line. Until 2009 capital gains on
public equity securities in Insurance were reported in the Corporate Line Insurance, whereas a notional return was allocated to the
Insurance business lines.
• An at arm’s length fee is charged by ING IM to the relevant business line. Until 2009 a cost-based fee was charged.
• The Corporate Line Insurance includes reinsurance by ING Re of ING Life Japan guaranteed benefits associated with single-premium
variable annuity (SPVA) contracts, along with the corresponding SPVA hedging results. Until 2009 these were reported under Insurance
Asia/Pacific.
The comparative figures were adjusted accordingly.

ING Group Annual Report 2010 191

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Notes to the consolidated annual accounts of ING Group continued

The following table specifies the main sources of income of each of the segments:

Specification of the main sources of income of each of the segments

Segment Main source of income
Retail Netherlands Income from retail and private banking activities. The main products offered are current and savings
accounts, mortgages and other consumer lending in the Netherlands.
Retail Belgium Income from retail and private banking activities in Belgium. The main products offered are similar to those
in the Netherlands.
Retail CE Income from retail and private banking activities in Central Europe. The main products offered are similar
to those in the Netherlands.
Retail Asia Income from retail banking activities in Asia. The main products offered are similar to those in the Netherlands.
ING Direct Income from direct retail banking activities. The main products offered are savings accounts and mortgages.
Commercial Banking (excluding Real Estate) Income from wholesale banking activities. A full range of products is offered from cash management
to corporate finance.
ING Real Estate Income from real estate activities.
Insurance Benelux Income from life insurance, non-life insurance and retirement services in the Benelux.
Insurance CRE Income from life insurance, non-life insurance and retirement services in Central and Rest of Europe.
Insurance US * Income from life insurance and retirement services in the US.
Insurance US Closed Block VA Consists of ING’s Closed Block Variable Annuity business in the US, which has been closed to new business
since early 2010 and which is now being managed in run-off.
Insurance Latin America Income from life insurance and retirement services in Latin America.
Insurance Asia/Pacific Income from life insurance and retirement services in Asia/Pacific.
ING IM Income from investment management activities.
Corporate Line Banking Corporate Line Banking is a reflection of capital management activities and certain expenses that are not
allocated to the banking businesses. ING Group applies a system of capital charging for its banking
operations in order to create a comparable basis for the results of business units globally, irrespective of the
business units’ book equity and the currency they operate in.
Corporate Line Insurance The Corporate Line Insurance includes items related to capital management, run-off portfolios and ING Re.
*
Excluding US Closed Block VA

This note does not provide information on the revenue specified to each product or service as this is not reported internally and is
therefore not readily available.

192 ING Group Annual Report 2010

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Notes to the consolidated annual accounts of ING Group continued

Operating segments Banking

Retail Commer- Corporate Total
Nether- Retail cial ING Real Line Banking Elimi- Total
2010 lands Belgium ING Direct Retail CE Retail Asia Banking Estate Banking segments nations Banking
Underlying income
– Net interest result 3,795 1,603 3,774 670 169 3,153 439 –153 13,450 13,450
– Commission income 507 347 151 278 55 937 367 –13 2,629 2,629
– Total investment and
other income 31 104 –144 29 62 858 56 222 1,218 1,218
Total underlying income 4,333 2,054 3,781 977 286 4,948 862 56 17,297 17,297

Underlying expenditure
– Operating expenses 2,337 1,349 1,857 760 180 2,172 437 100 9,192 9,192
– Additions to loan loss provision 561 160 446 61 26 395 102 1,751 1,751
– Other impairments * 39 29 1 3 386 35 493 493
Total underlying expenses 2,937 1,509 2,332 822 206 2,570 925 135 11,436 11,436

Underlying result before taxation 1,396 545 1,449 155 80 2,378 –63 –79 5,861 5,861
Taxation 367 91 463 31 15 497 47 –44 1,467 1,467
Minority interests –6 1 20 22 28 7 72 72
Underlying net result 1,029 460 985 104 43 1,853 –117 –35 4,322 4,322
*
Analysed as a part of operating expenses.

Operating segments Insurance

Insurance Insurance Insurance Corporate Total
Insurance Insurance Insurance US Closed Latin Asia/ Line Insurance Elimi- Total
2010 Benelux CRE US * Block VA America Pacific ING IM Insurance segments nations Insurance
Underlying income
– Gross premium income 7,177 2,115 11,285 676 161 6,506 27 27,947 27,947
– Commission income 46 147 263 181 398 12 887 3 1,937 1,937
– Total investment and
other income 2,951 348 3,017 –607 317 911 25 1,200 8,162 –580 7,582
Total underlying income 10,174 2,610 14,565 250 876 7,429 912 1,230 38,046 –580 37,466

Underlying expenditure
– Underwriting expenditure 8,305 2,082 13,074 1,950 245 6,369 3 737 32,765 32,765
– Operating expenses 942 271 1,107 90 222 541 731 118 4,022 4,022
– Other interest expenses 152 76 3 67 3 5 1,402 1,708 –580 1,128
– Other impairments 4 66 70 70
Total underlying expenses 9,399 2,357 14,257 2,043 534 6,913 739 2,323 38,565 –580 37,985

Underlying result before taxation 775 253 308 –1,793 342 516 173 –1,093 –519 –519
Taxation 130 63 –155 –185 54 135 62 –219 –115 –115
Minority interests 15 10 7 1 1 –9 25 25
Underlying net result 630 180 463 –1,608 281 380 110 –865 –429 –429
*
Excluding US Closed Block VA

As of the fourth quarter of 2010, the Legacy Variable Annuity business in the US is reported and analysed separately from the other US
business in the internal management reporting. Therefore as of 1 October 2010 ING reports the Insurance US Legacy VA business as a
separate business line to improve transparency and ongoing business. This segment is reported separately for the entire year 2010 and
comparative years 2009 and 2008. ING Group’s accounting policy for reserve adequacy as set out in the Accounting policies for the
consolidated annual accounts of ING Group requires each segment to be adequate at the 50% confidence level. The separation of
the Legacy VA business into a separate segment triggered a charge in the fourth quarter of 2010 to bring reserve adequacy on the new
Insurance US Closed Block VA business line to the 50% level. This charge is reflected as a DAC write-down of EUR 975 million before tax.

While the reserves for the segment Insurance US Closed Block VA are adequate at the 50% confidence level, a net reserve inadequacy
exists using a prudent (90%) confidence level. In line with Group Policy, Insurance US Closed Block VA is taking measures to improve
adequacy in that region. This inadequacy was offset by reserve adequacies in other segments, such that at the Group level there is a
net adequacy at the prudent (90%) confidence level.

ING Group Annual Report 2010 193

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Notes to the consolidated annual accounts of ING Group continued

Operating segments Total

2010 Total Banking Total Insurance Total Segments Eliminations Total
Underlying income
– Gross premium income 27,947 27,947 27,947
– Net interest result – banking operations 13,450 13,450 –93 13,357
– Commission income 2,629 1,937 4,566 4,566
– Total investment and other income 1,218 7,582 8,800 –243 8,557
Total underlying income 17,297 37,466 54,763 –336 54,427

Underlying expenditure
– Underwriting expenditure 32,765 32,765 32,765
– Operating expenses 9,192 4,022 13,214 13,214
– Other interest expenses 1,128 1,128 –336 792
– Additions to loan loss provision 1,751 1,751 1,751
– Other impairments 493 70 563 563
Total underlying expenses 11,436 37,985 49,421 –336 49,085

Underlying result before taxation 5,861 –519 5,342 5,342

Taxation 1,467 –115 1,352 1,352
Minority interests 72 25 97 97
Underlying net result 4,322 –429 3,893 3,893

Reconciliation between IFRS-EU and Underlying income, expenses and net result
2010 Income Expenses Net result
Underlying 54,427 49,085 3,893

Divestments 459 41 394

Special items 1 1,284 –1,067
IFRS-EU 54,887 50,410 3,220

Divestments in 2010 mainly relate to the sale of the three U.S. independent retail broker-dealer units, the sale of the Private Banking
businesses in Asia and Switzerland and to the sale of ING’s 50% stake in Summit Industrial Fund LP.

Special items in 2010 includes mainly restructuring expenses for the combining of the Dutch retail activities, the Belgium retail
transformation program, the cost related to the separation of Banking and Insurance and the expenses related to the goodwill
impairment in the United States of EUR 513 million (after tax) in 2010. Reference is made to Note 9 ‘Intangible assets’.

Impairments and reversals of impairments on investments per operating segment

Reversals of
2010 Impairments impairments
ING Direct 107
Commercial Banking (excluding Real Estate) 70
Insurance Benelux 53
Insurance CRE 18
Insurance US * 553
Insurance Asia/Pacific 8 –2
ING IM –8
Corporate Line Banking 1
810 –10
*
Excluding US Closed Block VA

The impairments on investments are presented within Investment income.

194 ING Group Annual Report 2010

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Notes to the consolidated annual accounts of ING Group continued

Operating segments Banking

Retail Commer- Corporate Total
Nether- Retail cial ING Real Line Banking Elimi- Total
2009 lands Belgium ING Direct Retail CE Retail Asia Banking Estate Banking segments nations Banking
Underlying income
– Net interest result 3,279 1,614 3,136 675 110 3,420 429 –156 12,507 12,507
– Commission income 535 342 167 261 43 834 362 –6 2,538 2,538
– Total investment and
other income 68 106 –1,541 –75 43 703 –651 –215 –1,562 –1,562
Total underlying income 3,882 2,062 1,762 861 196 4,957 140 –377 13,483 13,483

Underlying expenditure
– Operating expenses 2,472 1,291 1,652 660 132 1,878 433 250 8,768 8,768
– Additions to loan loss provision 529 200 765 116 39 971 239 2,859 2,859
– Other impairments * –2 –7 12 1 456 35 495 495
Total underlying expenses 2,999 1,484 2,429 776 171 2,850 1,128 285 12,122 12,122

Underlying result before taxation 883 578 –667 85 25 2,107 –988 –662 1,361 1,361
Taxation 233 79 –253 29 5 378 –193 –183 95 95
Minority interests 2 1 5 10 29 25 72 72
Underlying net result 650 497 –415 51 10 1,700 –820 –479 1,194 1,194
*
Analysed as a part of operating expenses.

Operating segments Insurance

Insurance Insurance Insurance Corporate Total
Insurance Insurance Insurance US Closed Latin Asia/ Line Insurance Elimi- Total
2009 Benelux CRE US * Block VA America Pacific ING IM Insurance segments nations Insurance
Underlying income
– Gross premium income 7,721 2,016 11,430 2,382 161 6,422 38 30,170 30,170
– Commission income 70 158 269 132 350 22 762 –16 1,747 1,747
– Total investment and
other income 2,045 354 2,615 –1,809 300 701 –25 179 4,360 –1,158 3,202
Total underlying income 9,836 2,528 14,314 705 811 7,145 737 201 36,277 –1,158 35,119

Underlying expenditure
– Underwriting expenditure 8,222 1,930 12,879 1,216 261 6,235 3 –320 30,426 30,426
– Operating expenses 1,029 271 966 138 175 516 556 124 3,775 3,775
– Other interest expenses 295 37 113 5 102 10 9 1,637 2,208 –1,158 1,050
– Other impairments 1 69 70 70
Total underlying expenses 9,546 2,238 13,958 1,359 538 6,762 568 1,510 36,479 –1,158 35,321

Underlying result before taxation 290 290 356 –654 273 383 169 –1,309 –202 –202
Taxation 58 56 138 –79 53 112 59 –402 –5 –5
Minority interests 15 12 6 1 1 –12 23 23
Underlying net result 217 222 218 –575 214 270 109 –895 –220 –220
*
Excluding US Closed Block VA.

ING Group Annual Report 2010 195

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Notes to the consolidated annual accounts of ING Group continued

Operating segments Total

2009 Total Banking Total Insurance Total Segments Eliminations Total
Underlying income
– Gross premium income 30,170 30,170 30,170
– Net interest result – banking operations 12,507 12,507 –165 12,342
– Commission income 2,538 1,747 4,285 4,285
– Total investment and other income –1,562 3,202 1,640 –171 1,469
Total underlying income 13,483 35,119 48,602 –336 48,266

Underlying expenditure
– Underwriting expenditure 30,426 30,426 30,426
– Operating expenses 8,768 3,775 12,543 12,543
– Other interest expenses 1,050 1,050 –336 714
– Additions to loan loss provision 2,859 2,859 2,859
– Other impairments 495 70 565 565
Total underlying expenses 12,122 35,321 47,443 –336 47,107

Underlying result before taxation 1,361 –202 1,159 1,159

Taxation 95 –5 90 90
Minority interests 72 23 95 95
Underlying net result 1,194 –220 974 974

Reconciliation between IFRS-EU and Underlying income, expenses and net result
2009 Income Expenses Net result
Underlying 48,266 47,107 974

Divestments 766 1,130 –150

Special items –1,267 1,053 –1,759
IFRS-EU 47,765 49,290 –935

Divestments in 2009 mainly include the net impact of the sale of ING’s 70% stake in ING Canada, the Nationale Nederlanden Industry
Pension fund portfolio, the Annuity and Mortgage businesses in Chile, three US independent retail broker-dealer units (three quarters of
ING Advisors Network) and ING Australia Pty Limited. Divestments in 2009 also relates to the operational result from the in 2010 divested
units Private Banking business Asia and Switzerland and Summit.

Special items in 2009 reflects mainly the net impact of transaction result on the Illiquid Asset Back-up Facility, including the additional
Illiquid Assets Back-up Facility payments as part of the overall agreement with the European Commission of EUR 1.3 billion (EUR 930
million after tax), and restructuring costs.

Impairments and reversals of impairments on investments per operating segment

Reversals of
2009 Impairments impairments
ING Direct 1,394
Commercial Banking (excluding Real Estate) 129
Insurance Benelux 360
Insurance CRE 36
Insurance US * 527
Insurance Asia/Pacific 15 –2
ING IM 3
Corporate Line Banking 17
Corporate Line Insurance 6
2,487 –2
*
Excluding US Closed Block VA

The impairments on investments are presented within Investment income.

196 ING Group Annual Report 2010

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Notes to the consolidated annual accounts of ING Group continued

Operating segments Banking

Retail Commer- Corporate Total
Nether- Retail cial ING Real Line Banking Elimi- Total
2008 lands Belgium ING Direct Retail CE Retail Asia Banking Estate Banking segments nations Banking
Underlying income
– Net interest result 3,564 1,262 2,517 589 90 3,008 260 –228 11,062 11,062
– Commission income 633 404 150 279 43 742 428 –4 2,675 2,675
– Total investment and
other income 139 54 –1,790 2 62 –91 –60 –422 –2,106 –2,106
Total underlying income 4,336 1,720 877 870 195 3,659 628 –654 11,631 11,631

Underlying expenditure
– Operating expenses 2,830 1,382 1,705 796 144 2,230 558 41 9,686 9,686
– Additions to loan loss provision 251 26 283 65 13 516 81 1,235 1,235
– Other impairments * –3 6 14 3 65 32 117 117
Total underlying expenses 3,078 1,414 2,002 861 157 2,749 704 73 11,038 11,038

Underlying result before taxation 1,258 306 –1,125 9 38 910 –76 –727 593 593
Taxation 264 64 –394 2 2 205 –16 –358 –231 –231
Minority interests 2 21 15 15 –5 48 48
Underlying net result 994 242 –733 –14 21 690 –55 –369 776 776
*
Analysed as a part of operating expenses.

Operating segments Insurance

Insurance Insurance Insurance Corporate Total
Insurance Insurance Insurance US Closed Latin Asia/ Line Insurance Elimi- Total
2008 Benelux CRE US * Block VA America Pacific ING IM Insurance segments nations Insurance
Underlying income
– Gross premium income 7,707 2,467 11,660 7,076 199 8,591 44 37,744 37,744
– Commission income 89 168 197 140 358 21 850 –23 1,800 1,800
– Total investment and
other income 3,161 307 1,798 755 200 364 –6 2,967 9,546 –1,252 8,294
Total underlying income 10,957 2,942 13,655 7,971 757 8,976 844 2,988 49,090 –1,252 47,838

Underlying expenditure
– Underwriting expenditure 9,141 2,400 13,357 8,318 376 8,314 4 1,716 43,626 43,626
– Operating expenses 1,255 332 967 184 211 602 633 34 4,218 4,218
– Other interest expenses 469 23 201 –1 18 62 26 1,723 2,521 –1,252 1,269
– Other impairments –2 2 81 81 81
Total underlying expenses 10,865 2,755 14,523 8,501 605 8,978 665 3,554 50,446 –1,252 49,194

Underlying result before taxation 92 187 –868 –530 152 –2 179 –566 –1,356 –1,356
Taxation 79 46 –81 –204 3 6 49 –259 –361 –361
Minority interests –18 12 5 14 1 –7 7 7
Underlying net result 31 129 –787 –326 144 –22 129 –300 –1,002 –1,002
*
Excluding US Closed Block VA

ING Group Annual Report 2010 197

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Notes to the consolidated annual accounts of ING Group continued

Operating segments Total

2008 Total Banking Total Insurance Total Segments Eliminations Total
Underlying income
– Gross premium income 37,744 37,744 37,744
– Net interest result – banking operations 11,062 11,062 90 11,152
– Commission income 2,675 1,800 4,475 4,475
– Total investment and other income –2,106 8,294 6,188 –382 5,806
Total underlying income 11,631 47,838 59,469 –292 59,177

Underlying expenditure
– Underwriting expenditure 43,626 43,626 43,626
– Operating expenses 9,686 4,218 13,904 13,904
– Other interest expenses 1,269 1,269 –292 977
– Additions to loan loss provision 1,235 1,235 1,235
– Other impairments 117 81 198 198
Total underlying expenses 11,038 49,194 60,232 –292 59,940

Underlying result before taxation 593 –1,356 –763 –763

Taxation –231 –361 –592 –592
Minority interests 48 7 55 55
Underlying net result 776 –1,002 –226 –226

Reconciliation between IFRS-EU and Underlying income, expenses and net result
2008 Income Expenses Net result
Underlying 59,177 59,940 –226

Divestments 7,114 7,444 –176

Special items 394 –327
IFRS-EU 66,291 67,778 –729

Divestments in 2008 mainly relate to the sale of Chile Health business (ING Salud), part of the Mexican business (ING Seguros SA) and the
Taiwanese life insurance business (ING Life Taiwan). Divestments in 2008 also relates to the operational result from the in 2010 divested
units Private Banking business Asia and Switzerland and Summit.

Special items in 2008 relate to the nationalisation of the annuity business in Argentina, the combining of ING Bank and Postbank and the
unwinding of Postkantoren.

Impairments and reversals of impairments on investments per operating

segment
2008 Impairments
Retail Belgium 4
ING Direct 1,891
Commercial Banking (excluding Real Estate) 267
Insurance Benelux 898
Insurance CRE 31
Insurance US * 966
Insurance Asia/Pacific 432
ING IM 17
Corporate Line Banking 296
Corporate Line Insurance 18
4,820
*
Excluding US Closed Block VA

In 2008 no reversals of impairments on investments were recognised.

The impairments on investments are presented within Investment income.

198 ING Group Annual Report 2010

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Notes to the consolidated annual accounts of ING Group continued

Interest income (external) and interest expenses (external) breakdown by operating segments Banking
Retail Commer- Corporate
Nether- Retail cial ING Real Line Total
2010 lands Belgium ING Direct Retail CE Retail Asia Banking Estate Banking Banking
Interest income 7,916 3,093 10,059 1,544 452 43,121 1,145 2,357 69,687
Interest expense 1,524 1,015 6,310 817 261 42,509 263 3,572 56,271
6,392 2,078 3,749 727 191 612 882 –1,215 13,416

Interest income (external) and interest expenses (external) breakdown by operating segments Insurance
Insurance Insurance Insurance Corporate
Insurance Insurance Insurance US Closed Latin Asia/ Line Total
2010 Benelux CRE US * Block VA America Pacific ING IM Insurance Insurance
Interest income 2,138 359 3,422 28 160 808 12 357 7,284
Interest expense 26 –2 55 5 68 3 4 633 792
2,112 361 3,367 23 92 805 8 –276 6,492
*
Excluding US Closed Block VA

Total interest income (external) and interest expenses (external)

Total Total Elimi-
2010 Banking Insurance nations Total
Interest income 69,687 7,284 76,971
Interest expense 56,271 792 93 57,156
13,416 6,492 –93 19,815

Interest income (external) and interest expenses (external) breakdown by operating segments Banking
Retail Corporate
Nether- Retail Commer- ING Real Line Total
2009 lands Belgium ING Direct Retail CE Retail Asia cial Banking Estate Banking Banking
Interest income 8,039 3,020 10,532 1,603 399 54,143 1,259 2,151 81,146
Interest expense 2,200 1,541 7,451 950 246 52,531 178 3,510 68,607
5,839 1,479 3,081 653 153 1,612 1,081 –1,359 12,539

Interest income (external) and interest expenses (external) breakdown by operating segments Insurance
Insurance Insurance Insurance Corporate
Insurance Insurance Insurance US Closed Latin Asia/ Line Total
2009 Benelux CRE US * Block VA America Pacific ING IM Insurance Insurance
Interest income 2,073 368 3,326 2 250 655 5 105 6,784
Interest expense 43 –3 206 5 68 5 7 385 716
2,030 371 3,120 –3 182 650 –2 –280 6,068
*
Excluding US Closed Block VA

Total interest income (external) and interest expenses (external)

Total Total Elimi-
2009 Banking Insurance nations Total
Interest income 81,146 6,784 87,930
Interest expense 68,607 716 165 69,488
12,539 6,068 –165 18,442

ING Group Annual Report 2010 199

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Notes to the consolidated annual accounts of ING Group continued

Interest income (external) and interest expenses (external) breakdown by operating segments Banking
Retail Commer- Corporate
Nether- Retail cial ING Real Line Total
2008 lands Belgium ING Direct Retail CE Retail Asia Banking Estate Banking Banking
Interest income 8,405 4,260 13,292 1,915 469 66,406 2,134 1,320 98,201
Interest expense 2,942 3,393 10,501 1,512 332 65,095 374 2,970 87,119
5,463 867 2,791 403 137 1,311 1,760 –1,650 11,082

Interest income (external) and interest expenses (external) breakdown by operating segments Insurance
Insurance Insurance Insurance Corporate
Insurance Insurance Insurance US Closed Latin Asia/ Line Total
2008 Benelux CRE US * Block VA America Pacific ING IM Insurance Insurance
Interest income 2,358 376 2,980 759 573 910 4 121 8,081
Interest expense 72 3 260 –1 70 3 17 554 978
2,286 373 2,720 760 503 907 –13 –433 7,103
*
Excluding US Closed Block VA

Total interest income (external) and interest expenses (external)

Total Total Elimi-
2008 Banking Insurance nations Total
Interest income 98,201 8,081 106,282
Interest expense 87,119 978 40 88,137
11,082 7,103 –40 18,145

IFRS-EU balance sheets by segment are not reported internally to, and not managed by, the chief operating decision maker. IFRS-EU
balance sheet information is prepared, and disclosed below, for the Banking operations as a whole and for the Insurance operations
as a whole and by segment.

Total assets and Total liabilities by segment

2010 2009 2008
Total Total Total Total Total Total
assets liabilities assets liabilities assets liabilities
Insurance Benelux 92,614 83,472 85,131 78,413 83,527 77,033
Insurance CRE 12,671 11,288 12,212 10,789 11,553 10,328
Insurance US * 114,870 102,780 101,322 97,213 105,315 102,768
Insurance US Closed Block VA 42,582 39,708 39,827 36,532 33,871 30,901
Insurance Latin America 4,056 2,239 3,504 2,043 5,139 4,339
Insurance Asia/Pacific 57,029 52,332 44,267 41,381 64,461 59,963
ING IM 2,054 1,189 926 434 1,724 1,160
Corporate Line Insurance 47,356 24,294 37,946 20,383 45,133 31,918
Total Insurance segments 373,232 317,302 325,135 287,188 350,723 318,410
Eliminations Insurance segments –47,374 –12,511 –34,840 –12,835 –38,633 –18,721
Total Insurance operations 325,858 304,791 290,295 274,353 312,090 299,689

Total Banking operations 955,923 908,740 901,354 861,476 1,050,389 1,021,793

Eliminations –34,671 –13,705 –28,006 –11,964 –30,816 –18,747
Total ING Group 1,247,110 1,199,826 1,163,643 1,123,865 1,331,663 1,302,735
*
Excluding US Closed Block VA

Further balance sheet related information for the banking operations is provided by segment in the section ‘Risk Management’.

200 ING Group Annual Report 2010

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Notes to the consolidated annual accounts of ING Group continued

52 INFORMATION ON GEOGRAPHICAL AREAS

ING Group’s business lines operate in seven main geographical areas: the Netherlands, Belgium, Rest of Europe, North America,
Latin America, Asia and Australia. The Netherlands is ING Group’s country of domicile. Geographical distribution of income is based
on the origin of revenue. A geographical area is a distinguishable component of the Group engaged in providing products or services
within a particular economic environment that is subject to risks and returns that are different from those of segments operating in other
economic environments. The geographical analyses are based on the location of the office from which the transactions are originated.

Geographical areas
Nether- Rest of North Latin Elimi-
2010 lands Belgium Europe America America Asia Australia Other nations Total
Total income 17,178 4,352 7,854 17,472 1,143 9,706 428 –3,246 54,887

Total assets 644,257 161,781 326,179 340,925 20,763 103,560 44,160 153 –394,668 1,247,110

Geographical areas
Nether- Rest of North Latin Elimi-
2009 lands Belgium Europe America America Asia Australia Other nations Total
Total income 14,880 4,573 7,676 15,143 1,194 8,571 865 –5,137 47,765

Total assets 580,272 156,059 317,994 295,615 17,698 82,987 35,365 134 –322,481 1,163,643

Geographical areas
Nether- Rest of North Latin Elimi-
2008 lands Belgium Europe America America Asia Australia Other nations Total
Total income 16,817 4,042 7,889 24,511 2,497 14,120 733 –4,318 66,291

Total assets 805,247 173,064 429,369 294,003 26,821 110,609 37,211 108 –544,769 1,331,663

53 NET CASH FLOW FROM INVESTING ACTIVITIES

Information on the impact of companies acquired or disposed of is presented in Note 30 ‘Companies acquired and companies disposed’.

54 INTEREST AND DIVIDEND INCLUDED IN NET CASH FLOW

Interest and dividend received and paid

2010 2009 2008
Interest received 78,335 89,229 103,534
Interest paid –57,435 –69,274 –84,061
20,900 19,955 19,473

Dividend received 500 344 937

Dividend paid –1,030 –3,207

55 CASH AND CASH EQUIVALENTS

Cash and cash equivalents

2010 2009 2008
Treasury bills and other eligible bills 4,441 3,182 7,009
Amounts due from/to banks 3,227 2,387 2,217
Cash and balances with central banks 13,072 15,390 22,045
Cash and cash equivalents at end of year 20,740 20,959 31,271

Interest and dividend received and paid

2010 2009 2008
Treasury bills and other eligible bills included
in trading assets 1,697 2,284 2,770
Treasury bills and other eligible bills included
in available-for-sale investments 2,744 898 4,239
4,441 3,182 7,009

ING Group Annual Report 2010 201

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Notes to the consolidated annual accounts of ING Group continued

Amounts due to/from banks

2010 2009 2008
Included in cash and cash equivalents:
– amounts due to banks –12,898 –12,334 –13,738
– amounts due from banks 16,125 14,721 15,955
3,227 2,387 2,217

Not included in cash and cash equivalents:

– amounts due to banks –59,954 –71,901 –138,527
– amounts due from banks 35,703 28,676 32,492
–24,251 –43,225 –106,035

Included in balance sheet:

– amounts due to banks –72,852 –84,235 –152,265
– amounts due from banks 51,828 43,397 48,447
–21,024 –40,838 –103,818

Cash and cash equivalents include amounts due to/from banks with a term of less than three months from the date on which they
were acquired.

ING Group’s risk management (including liquidity) is explained in the ‘Risk management’ section.

202 ING Group Annual Report 2010

 Consolidated annual accounts 4

Risk management
amounts in millions of euros, unless stated otherwise

Executive summary / Risk management in 2010

EXECUTIVE SUMMARY / RISK MANAGEMENT IN 2010

Taking measured risks is part of ING Group’s business. As a financial services company active in banking, investments, life insurance and
retirement services, ING Group is naturally exposed to a variety of risks. To ensure measured risk-taking, ING Group has integrated risk
management in its daily business activities and strategic planning. Risk Management assists with the formulation of risk appetite, strategies,
policies and limits and provides a review, oversight and support function throughout ING Group on risk-related issues. The main financial risks
ING Group is exposed to are credit risk (including transfer risk), market risk (including interest rate, equity, real estate, implied volatility and
foreign exchange risks), insurance risk, liquidity risk and business risk. In addition, ING Group is exposed to non-financial risks, e.g. operational
and compliance risks. The way ING Group manages these risks on a day-to-day basis is described in this risk management section.

As a result of the decision to manage ING Bank and ING Insurance separately, in preparation of the two IPOs for ING Insurance, ING has
implemented two distinct risk appetite frameworks for both Bank and Insurance. The common concept however is that risk appetite is
expressed as the tolerance to allow key capital ratios to deviate from their target levels under adverse scenarios. These frameworks are
discussed in more detail in the specific sections of this risk management section.

The economic capital model for credit risk was updated to bring it more in line with the regulatory capital framework, and now relies less
on diversification benefits.

A second commonality between ING Bank and ING Insurance is that both need to prepare for significant changes in the regulatory
requirements. ING Bank needs to prepare for the implementation of Basel III (which is the Basel II reform packages on risk and liquidity),
while ING Insurance runs an extensive program to allow the implementation of Solvency II (which is the fundamental reform of European
insurance solvency and risk governance legislation; which is effective as of 1 January 2013). Additionally, both in Bank and Insurance,
ING continued its stress testing efforts, with stress testing becoming more important and more embedded in the risk culture.

During 2010 strengthening of ING balance sheet continued. In 2010 ING continued to reduce the exposure on the ABS portfolio by means
of sales (primarily sales of CMBS) and limiting the reinvestments in ABS to agency paper only. Because of the strengthening of the US Dollar
and the improvements in the revaluation reserve this policy does not result in a lower balance sheet amount for this asset class.

In the first half of 2010 concerns arose regarding the creditworthiness of several southern European countries, which later spread to
a few other European countries. As a result of these concerns the value of sovereign debt decreased. The impact on ING’s revaluation
reserve in relation to sovereign debt is limited per 31 December 2010: the negative impact on troubled countries is offset by opposite
positive movements in bonds of financially stronger European countries and by the positive impact from lower interest rates in general.
Furthermore, in the course of 2010, ING reduced its sovereign debt exposure to these troubled countries.

IMPACT ON PRESSURISED ASSET CLASSES

Exposures, revaluations and losses on pressurised asset classes

31 December 2010 Change in 2010 31 December 2009
Revaluations Revaluations Write- Revaluations
Balance through through downs Balance through
Sheet equity equity through P&L Other Sheet equity
value (1) (pre-tax) (pre-tax) (pre-tax) changes value (1) (pre-tax)
US Subprime RMBS 1,647 –227 584 –380 15 1,428 –811
US Alt-A RMBS 2,847 237 476 –76 –517 2,964 –239
CDO/CLOs 1,530 –9 118 –1 –379 1,792 –127
CMBS 7,330 –512 1,322 –84 –1,619 7,711 –1,834
Total pressurised ABS 13,354 –511 2,500 –541 –2,500 13,895 –3,011

Pressurised Government and

Financial Institution bonds
for both Greece and Ireland (2) 1,633 –564 –439 –1,700 3,772 –125
(1)
For assets classified as loans and receivables: amortised cost; otherwise: fair value.
(2)
Country is based on the country of residence of the obligor; Covered bonds are excluded; government only includes central government.

In 2009, certain ABS (US Subprime RMBS, Alt-A RMBS, CMBS and CDO/CLOs) were considered pressurised asset classes. As of 2010,
Greek and Irish Government and Financial Institution bonds are also considered pressurised asset classes. Ireland and Greece are the only
countries that used the European Financial Stability Fund (EFSF) during 2010, only the government and financial institution unsecured
bonds for these countries are considered as pressurised assets by ING.

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Risk management continued

Executive summary / Risk management in 2010

Changes in the ABS portfolio

The total ABS portfolio remained relatively stable, changing slightly from EUR 58.4 billion at year-end 2009 to EUR 58.5 billion per end
of year 2010. The value of the ING Bank ABS portfolio decreased approximately 1.1 billion during 2010, while the value of the ING
Insurance portfolio increased by EUR 1.2 billion, leading to the stable value for ING Group. In the 2009 presentation of the CDO/CLOs
exposure, synthetic CDOs at notional value were included. As of 2010 this exposure is not included anymore, and the Balance sheet value
at 31 December 2009 is adjusted correspondingly.

ING maintained its policy to restrict reinvestment of maturing debt securities as much as possible and any reinvestments were mainly
in government guaranteed paper. During the year ING Insurance reduced the exposure to CMBS through sales of part of the portfolio
(approximately EUR 1.6 billion). The remaining CMBS portfolio increased in value as a result of revaluations and currency effects. Similar
effects in revaluation reserve improvements are visible for the other pressurised ABS classes, and the total revaluation reserve for US
Alt-A RMBS changed from negative to positive. Despite the improved market values, ING still took impairments on the ABS portfolio.
These impairments mainly relate to the ING Insurance part of the ABS portfolio, as EUR 481 million of the total EUR 541 million
in impairments are for the ING Insurance portfolio. The credit quality of the ING ABS portfolio did not materially change, with 88%
of the portfolio rated A or better at year-end 2010 (88% in 2009).

Of the exposure on pressurised ABS EUR 10.1 billion is measured at fair value (with the revaluation recognised in equity, except
impairments on these trades going through P&L). The table shows how the total fair values are determined through the following
Level 1, 2, 3 hierarchy:
Level 1 – Quoted prices in active markets;
Level 2 – Valuation technique supported by observable inputs;
Level 3 – Valuation technique supported by unobservable inputs.
An analysis of the method applied in determining the fair values of financial assets and liabilities is provided in Note 34 ‘Fair value
of financial assets and liabilities’.

Fair value hierarchy of pressurised ABS bonds

2010 Level 1 Level 2 Level 3 Total
US Subprime RMBS 17 1,629 1,646
US Alt-A RMBS 2,210 638 2,848
CDO/CLOs 9 64 558 631
CMBS 1 4,941 9 4,951
Total pressurised ABS 10 7,232 2,834 10,076

Fair value hierarchy of pressurised ABS bonds

2009 Level 1 Level 2 Level 3 Total
US Subprime RMBS 16 1,412 1,428
US Alt-A RMBS 2,308 656 2,964
CDO/CLOs 7 392 323 722
CMBS 123 5,074 18 5,215
Total pressurised ABS 130 7,790 2,409 10,329

Changes in the bond portfolio (excluding ABS)

The ING bond portfolio increased EUR 18.7 billion from EUR 217.7 billion at year-end 2009 to EUR 236.4 billion at end of year 2010.
For the government bonds the revaluation changes are triggered by a loss of confidence with regards to several southern European
countries and Ireland. During 2010, ING closely monitored the developments with regards to these countries and its sovereign debt
exposure to these countries. Ireland and Greece are the only countries that used the European Financial Stability Fund (EFSF) during
2010, only the government and financial institution unsecured bonds for these countries are considered as pressurised assets by ING.

For ING Bank, the bonds portfolio includes Government and Financial Institutions unsecured bonds exposures in Greece and Ireland
classified as available-for-sale of EUR 570 million (fair value), with a related negative revaluation reserve in equity of EUR –285 million.
Furthermore it includes, for ING Bank, similar exposures classified as loans and advances of EUR 358 million (amortised cost).

For ING Insurance, the bonds portfolio includes Government and Financial Institutions unsecured bond exposures in Greece and Ireland
classified as available-for-sale of EUR 705 million (fair value), with a related negative revaluation reserve in equity of EUR –279 million.

The Greek and Irish Government and Financial Institution bonds measured at fair value are in the fair value hierarchy levels 1 and 2.

ONGOING CHANGES IN THE REGULATORY ENVIRONMENT

After the turmoil in the financial markets over the last couple of years and the need for governments to provide aid to financial institutions,
financial institutions have been under more scrutiny from the public, supervisors and regulators. The resulting revised regulations are
intended to make sure that a crisis in the financial system can be avoided in the future.

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To accomplish this, regulations focus primarily at the following issues:

• More stringently aligning risk taking with the capital position of the financial institutions (revised Basel II for Banks). The revised Basel II
proposal narrows the definition of core Tier 1 and Tier 1 capital, and introduces a new definition for a leverage ratio that should
become part of Pillar 1 of the Basel framework. The Basel Committee has also issued a proposal for new liquidity requirements. Apart
from the above mentioned proposals, another aim is to reduce ‘pro-cyclicality’, to avoid that banks would be required to increase their
capital in bad times when it is most scarce. Lastly, there is the proposal to introduce additional capital requirements for counterparty
credit risk. Collectively these proposals are referred to as Basel III. These were issued by the Basel Committee in December 2010, and
the deadlines for implementation of specific item are set for the timeframe 2013 to 2018.
• Separate from but in line with the Basel III proposal, on a country level local regulators are becoming more stringent on the maximum
credit risk bank subsidiaries and branches are allowed to run on their parents. In the absence of a supranational harmonization this
leads to so-called trapped pools of liquidity, i.e. excess liquidity in a country that can not merely be transferred (unsecured) to a central
treasury in another country.
• Solvency II: Following the approval of the Solvency II Framework Directive in 2009, the European Commission has continued development
and consultation on the detailed implementing measures in 2010. ING has always been a firm supporter of the Solvency II initiative,
being an economic, risk-based solvency system. However some of the proposed measures currently under discussion are considered unduly
conservative. ING is committed to working actively together with all stakeholders to develop pragmatic solutions that would result in
Solvency II meeting its original intent, and a smooth transition to the new system. The legislation is now expected to become in force
by 1 January 2013. ING has launched a full implementation programme to be fully compliant before that date, and is also developing
its business strategies to operate optimally under the new environment.

ING GROUP RISK GOVERNANCE

To ensure measured risk-taking throughout the organisation, ING Group operates through a comprehensive risk management framework.
This ensures the identification, measurement and control of risks at all levels of the organisation so that ING Group’s financial strength
is safeguarded.

The mission of ING Group’s risk management function is to build a sustainable competitive advantage by fully integrating risk management
into daily business activities and strategic planning. This mission is fully embedded in ING Group’s business processes. The following
principles support this objective:
• Products and portfolios are structured, underwritten, priced, approved and managed appropriately and compliance with internal
and external rules and guidelines is monitored;
• ING’s risk profile is transparent, managed to avoid surprises, and is consistent with delegated authorities;
• Delegated authorities are consistent with the overall Group strategy and risk appetite;
• Transparent communication to internal and external stakeholders on risk management and value creation.

Risk Management benefits ING and its shareholders directly by providing more efficient capitalisation and lower costs of risk and funding.
The cost of capital is reduced by working closely with rating agencies and regulators to align capital requirements to risks. Risk Management
helps business units to lower funding costs, make use of the latest risk management tools and skills, and lower strategic risk, allowing
them to focus on their core expertise with the goal of making ING’s businesses more competitive in their markets.

RISK GOVERNANCE
ING’s risk management framework is based on the ‘three lines of defence’ concept which ensures that risk is managed in line with the risk
appetite as defined by the Management Boards for ING Bank and ING Insurance (and ratified by the Supervisory Board) and is cascaded
throughout ING. This concept provides a clear allocation of responsibilities for the ownership and management of risk, to avoid overlaps
and/or gaps in risk governance. Business line management and the regional and local managers have primary responsibility for the
day-to-day management of risk and form the first line of defence. The risk management function, both at corporate and regional/local
level, belongs to the second line of defence and has the primary responsibility to align risk taking with strategic planning e.g. in limit
setting. Risk managers in the business lines have a functional reporting line to the Corporate Risk General Managers described below.
The internal audit function provides an ongoing independent (i.e. outside of the risk organisation) and objective assessment of the
effectiveness of internal controls, including financial and operational risk management and forms the third line of defence.

Group Risk Management Function

The risk management function is embedded in all levels of the ING Group organisation.

Chief Risk Officer

The Chief Risk Officer (CRO), who is an Executive Board member, bears primary overall responsibility for the Risk management function.
The CRO is responsible for the management and control of risk on a consolidated level to ensure that ING’s group risk profile is consistent
with its financial resources and the risk appetite. The CRO is also responsible for establishing and maintaining a robust organisational basis
for the management of risk throughout the organisation.

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Group Risk Organisation

The organisation chart below illustrates the functional reporting lines within the ING Group risk organisation.

Chief Risk Officer

Corporate Credit Corporate Market Corporate Insurance Corporate Operational Group Compliance
Risk Management Risk Management Risk Management Risk Management Risk Management
(Bank & Insurance) (Bank) (Insurance) (Bank & Insurance) (Bank & Insurance)

The risk organisation is structured independently from the business lines and is organised through five risk departments:
• Corporate Credit Risk Management (CCRM) is responsible for credit risk management for ING Bank and ING Insurance;
• Corporate Market Risk Management (CMRM) is responsible for market and liquidity risk management of ING Bank;
• Corporate Insurance Risk Management (CIRM) is responsible for insurance, market and liquidity risk management of ING Insurance;
• Corporate Operational Risk Management (CORM) is responsible for the operational risk management of ING Bank and ING Insurance;
• Group Compliance Risk Management (GCRM) is responsible for (i) identifying, assessing, monitoring and reporting on the compliance
risks faced by ING, (ii) supporting and advising management on fulfilling its compliance responsibilities, and (iii) advising employees on
their (personal) compliance obligations.

The heads of these departments (Corporate Risk General Managers) report to the CRO and bear direct responsibility for risk (mitigating)
decisions at the Group level. The Corporate Risk General Managers and the CRO are responsible for the harmonisation and standardisation
of risk management practices.

In addition two staff departments report to the CRO:

• Risk Integration and Analytics, which is responsible for inter-risk aggregation processes and for providing group-wide risk information
to the CRO and Executive Board;
• Model Validation, which carries out periodic validations of all material risk models used by ING. To ensure independence from the
business and other risk departments, the department head reports directly to the CRO.

Group Risk Committees

The Group risk committees described below are also part of the second line of defence. They act within the overall risk policy and
delegated authorities granted by the Executive Board and have an advisory role to the CRO. To ensure a close link between the business
lines and the risk management function, the business line heads and the respective Corporate Risk General Managers are represented on
each committee (except for the Operational and Residual Risk Committee where the business is not represented). An important element
of the Group Risk Committee Governance is that the Chairman of each committee is responsible for making decisions after advice from
other committee members. Each committee is chaired by a senior risk representative.

• ING Group Credit Committee – Policy (GCCP): Discusses and approves policies, methodologies and procedures related to credit,
country and reputation risks within ING Group. The GCCP meets on a monthly basis.
• ING Group Credit Committee – Transaction Approval (GCCTA): Discusses and approves transactions which entail taking credit risk
(including issuer investment risk). The GCCTA meets twice a week.
• ING Group Investment Committee (GIC): Discusses and approves investment proposals for ING Real Estate. The GIC meets on a
monthly basis.
• Asset and Liability Committee ING Bank (ALCO Bank): Discusses and approves on a monthly basis the overall risk profile of all ING
Bank’s market risks that occur in its Commercial Banking, and Retail & Direct Banking activities. ALCO Bank defines the policy
regarding funding, liquidity, interest rate mismatch and solvency for ING Bank.
• Asset and Liability Committee ING Insurance (ALCO Insurance): Discusses and approves all risks associated with ING’s Insurance
activities. This includes volatility (affecting earnings and value), exposure (required capital and market risk) and insurance risks.
ALCO Insurance meets ten times a year.
• Operational and Residual Risk Committee (ORRC): Discusses and approves issues related to Methods, Models and Parameters for
Operational risk, Business risk in Banking, inter-risk diversification and consistency across risk types and businesses. The committee
meets at least twice a year.

Due to the implementation of the operational separation for ING Bank and ING Insurance the process was started to change Group level
risk committees into a separate Bank committee and a separate Insurance committee. As a result of these governance changes the ORRC
was disbanded towards the end of 2010, and the topics for this committee were transferred to other committees, like the newly created
Operational Risk Committee Bank (ORC Bank).

In addition, the Finance and Risk Committee (F&RC) is a platform for the CRO and the CFO, along with their respective direct reports, to
discuss and decide on issues that relate to both the finance and risk domains. Given the decision to manage ING Bank and ING Insurance
separately, there is a separate F&RC Bank and a separate F&RC Insurance. To cover specific Group issues there is also a F&RC Group
meeting, which meets at least on a quarterly basis.

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ING Group uses risk assessment and risk measurement to guide decision making. As a result, the quality of risk models is important.
The governance process for approval of risk models, methods and parameters ensures business and regulatory requirements, via a
clear assignment of responsibility and accountability.

Given the operational split of ING Bank and ING insurance, which became effective as of 1 January 2011, the risk organisation made
preparations to reflect this new structure as of 1 January 2011. This change was most significant for departments providing risk
management for both ING Bank and ING Insurance. In the new structure all risk departments have a small team for ING Group,
and separate teams for ING Bank and ING Insurance.

Board level risk oversight

ING Group has a two-tier board structure consisting of the Executive Board and the Supervisory Board; both tiers play an important role
in managing and monitoring the risk management framework. At the highest level of the ING organisation, there are board committees
which oversee risk taking, and have ultimate approval authority.

• The Executive Board is responsible for managing risks associated with the ING Group activities. Its responsibilities include ensuring
that internal risk management and control systems are effective and that ING Group complies with relevant legislation and regulations.
The Executive Board reports on these issues and discusses the internal risk management and control systems with the Supervisory
Board. On a quarterly basis, the Executive Board reports on the Group’s risk profile versus its risk appetite to the Audit Committee,
explaining changes in the risk profile.
• The Supervisory Board is responsible for supervising the policy of the Executive Board, the general course of affairs of the Company
and its business (including its financial policies and corporate structure). The Supervisory Board has several sub-committees related
to specific topics. Of these, two sub-committees are relevant for the risk management organisation and risk reporting, which are:
• The Audit Committee, which assists the Supervisory Board in reviewing and assessing ING Group’s major risk exposures and the
operation of internal risk management and control systems, as well as policies and procedures regarding compliance with applicable
laws and regulations.
• The Risk Committee, which assists the Supervisory Board on matters related to risk governance, risk policies and risk appetite setting.
It reports in the Supervisory Board on the main risk issues in the group.
Committee membership is organised such that specific business know-how, expertise relating to the activities of ING and the subject
matter of the committees is available. The CRO attends the Audit Committee and the Risk Committee meetings.

The CRO makes sure that the boards are well informed and understand ING Group’s risk position at all times. Every quarter, the CRO
reports to the board committees on ING’s risk appetite levels and on ING Group’s risk profile. In addition the CRO briefs the board
committees on developments in internal and external risk related issues and makes sure the board committees understand specific
risk concepts.

ING has integrated its risk management into the annual strategic planning process. This process aligns strategic goals, business strategies
and resources throughout ING Group. The Executive Board issues a Planning Letter which provides the organisation with the corporate
strategic direction, and addresses key risk issues. Based on the Planning Letter, the business lines and business units develop their business
plans which align with the Group’s strategic direction. The process includes a qualitative and quantitative assessment of the risks involved.
It is part of the process to explicitly discuss strategic limits and group risk appetite levels. At each level, strategies and metrics are identified
to measure success in achieving objectives and to assure adherence to the strategic plan. Based on the business plans, the Executive Board
formulates the Group Strategic Plan which is submitted to the Supervisory Board for approval.

Group risk policies

ING has a framework of risk management policies, procedures and standards in place to create consistency throughout the organisation,
and to define minimum requirements that are binding on all business units. The governance framework of the business units aligns with
the Group level framework and meets local (regulatory) requirements. Senior Management is responsible to ensure policies, procedures
and standards are implemented and adhered to. Policies, procedures and standards are regularly reviewed and updated via the relevant
risk committees to reflect changes in markets, products and emerging best practices.

ING GROUP RISK PROFILE

ING Group uses an integrated risk management approach for both its banking activities and for its Insurance activities, and no longer
uses an integrated risk management approach for ING Group. This change from a group-wide integrated risk management approach
to a separate ING Bank and a separate ING Insurance approach was driven by the operational separation of ING Bank and ING Insurance.
As a result the ING Group risk dashboard showing the metrics Earnings at Risk and Capital at Risk will no longer be provided. At the
ING Bank and ING Insurance level new risk frameworks were introduced and implemented in 2010.

The Executive Board uses the risk appetite frameworks to monitor and manage the actual risk profile in relation to the Bank and Insurance
risk appetite, which are derived from the Group risk appetite in line with the Group target AA rating. It enables the Executive Board to
identify possible risk concentrations and to support strategic decision making. The risk appetite levels are reported to the Executive Board
on a quarterly basis and are subsequently presented to the Risk Committee.

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ING Group’s risk appetite is defined by the Executive Board as part of the strategic planning process. As a next step, strict boundaries are
established with regard to acceptable risk types and levels for ING Bank and ING Insurance. In 2010 the revised risk appetite frameworks
were implemented, after approval by the Executive Board. As a result the Group risk appetite level is replaced by separate Bank and
Insurance risk appetite frameworks, which closely align the risk appetite setting with capital management targets.

The overall ING Group risk appetite is translated (through the bank and insurance risk appetite frameworks) into specific limits which
are cascaded down into the organisation, e.g.
• Credit risk limits for bank and insurance business;
• ALM/Value at Risk limits for bank operations;
• Mortality and concentration limits for insurance operations.

ING’s ‘three lines of defence’ governance framework ensures that risk is managed in line with the risk appetite as defined by the Executive
Board. Risk appetite is cascaded throughout the Group, thereby safeguarding controlled risk taking. The role of the business lines is to
maximise the value within established risk boundaries. Each quarter, the Executive Board monitors that the financial and non-financial
risks are within the boundaries of the risk appetite as set in the strategic planning process.

Risk types
ING measures the following main types of risks that are associated with its business activities:
• Credit risk: the risk of potential loss due to default by ING’s debtors (including bond issuers) or trading counterparties;
• Market risk: the risk of potential loss due to adverse movements in market variables. Market risks include interest rate, equity,
real estate, implied volatility, credit spread, and foreign exchange risks;
• Liquidity risk: the risk that ING or one of its subsidiaries cannot meet its financial liabilities when they come due, at reasonable
cost and in a timely manner. Liquidity risk can materialise both through trading and non-trading positions;
• Insurance risk: risks such as mortality, morbidity and property and casualty associated with the claims under insurance policies
it issues/underwrites; specifically, the risk that premium rate levels and provisions are not sufficient to cover insurance claims;
• Operational risk is the risk of direct or indirect loss resulting from inadequate or failed internal processes, people and systems
or from external events. It includes reputational risk, as well as legal risk;
• Business risk: the exposure to value loss due to fluctuations in volumes, margins and costs, as well as client behaviour risk.
These fluctuations can occur because of internal, industry, or wider market factors. It is the risk inherent to strategy decisions
and internal efficiency, and as such strategic risk is included in business risk.

Risk measures related to accounting are based on IFRS-EU where relevant, as IFRS-EU is the primary accounting basis, which is also
the basis for statutory and regulatory reporting and risk management.

Stress Testing
ING complements its regular standardised risk reporting process with (ad hoc) stress tests. A stress test is an instrument to check whether
a financial institution can withstand specific negative events or economic changes. More specific, stress testing examines the effect of
exceptional but plausible events on the capital and liquidity position of the financial institution and provides insight in which business
lines and portfolios are vulnerable to which type of scenarios.

Several stress tests are produced both scheduled and ad hoc, both in the form of sensitivity or scenario analysis, either for a specific risk
type or for ING Bank or ING Insurance as a whole. The stress test can represent various economic situations from mild recession to extreme
shock. In addition to regulatory required stress tests like those required by the Dutch Central Bank (De Nederlandsche Bank (DNB)) and the
Committee for European Banking Supervision (CEBS; which per 1 January 2011 became the European Banking Authority (EBA)), several ad
hoc tests have been conducted.

ING participated in the stress test conducted by the CEBS, which included a baseline scenario, adverse scenario and an additional sovereign
shock for 2010 and 2011. This stress test demonstrated ING Bank’s resilience in adverse scenarios. The strong underlying commercial
performance resulting from ING Bank’s franchises helps to offset the impact of higher loan loss provisions, additional impairments across
the securities portfolios and increased risk-weighted assets.

Risk models
A description of the models, underlying assumptions and key principles used by ING for calculating the risk metrics are provided in the
Model Disclosure section at the end of the risk management section.

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ING BANK FINANCIAL RISKS

ING Bank is engaged in selling a broad range of products. The Bank Management Board is responsible for managing risks associated with
the activities of ING Bank. The financial risks that arise from selling these products are managed by the Corporate Credit and Market Risk
departments. Operational risks are managed by the Corporate Operational Risk department.

ING BANK RISK PROFILE

Risk appetite
For financial risks, ING expresses its risk appetite as the tolerance to allow key capital ratios to deviate from their target levels. Therefore
the risk appetite is closely aligned to Capital Management activities and policies. ING has expressed tolerances for its risk weighted
solvency metrics (core Tier 1 ratio), for non-risk weighted solvency metrics (leverage ratio) and for more value based metrics (economic
capital). The metrics that are presented in the following sections relate to each of these metrics and present earnings sensitivity, economic
and regulatory capital.

Due to the way the risk departments are organised, these metrics are presented at a higher aggregation level (business line combinations)
than the identified segments in Note 51 ’Operating Segments’:
• Retail Banking Benelux contains Retail Netherlands, Retail Belgium (including Retail Luxemburg);
• Retail Banking Direct & International contains Retail Central Europe, Retail Asia and ING Direct;
• Commercial Banking corresponds to Commercial Banking and ING Real Estate;
• Bank Corporate Line coincides with Corporate Line.

ING Bank Economic Capital and Regulatory Capital

Main risk management tools for ING Bank are Economic Capital and Regulatory Capital. Both of these Capital metrics are used to
determine the amount of capital that a transaction or business unit requires to support the economic risks it faces. The main difference
in these metrics is the point of view, where Regulatory Capital is driven by methodologies prescribed by regulators and Economic Capital
is driven by internally developed models (all of which are approved by the Dutch Central Bank).

Economic capital is a non accounting measure which is inherently subject to dynamic changes and updates as a result of ING Bank’s
portfolio mix and general market developments. ING Bank has been and will continue recalibrating the underlying assumptions to its
economic capital models, which may have a material impact on the economic capital values going forward.

The tables below provide ING Bank’s Economic Capital and Regulatory Capital by risk type and business line combination.

Economic and Regulatory Capital (Bank diversified only) by risk type

Economic Capital Regulatory Capital
2010 2009 2010 2009
Credit risk (including Transfer risk) 15,245 9,991 22,452 22,790
Market risk 7,233 8,435 364 491
Business Risk 2,435 2,581
Operational Risk 1,619 2,074 2,872 3,309
Total bankings operations 26,532 23,081 25,688 26,590

Economic Capital (Bank diversified only) by business line combination

Economic Capital Regulatory Capital
2010 2009 2010 2009
Commercial Banking 10,695 8,662 11,395 12,824
Retail Banking Benelux 4,613 4,215 5,498 5,470
Retail Banking Direct & International 8,881 7,417 8,587 7,977
Corporate Line Bank * 2,343 2,787 208 319
Total banking operations 26,532 23,081 25,688 26,590
*
Corporate Line includes funding activities at ING Bank level, internal transactions between business units and the Corporate Line,
and is managed by Capital Management.

The EC figures shown reflect all diversification effects within ING Bank, including risk reduction between the risk categories; while
for Regulatory capital no diversification is taken into account. The ING Bank Economic Capital model is described in more detail in
the Model Disclosure section.

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In 2010 ING has been recalibrating the underlying assumptions for credit, transfer and operational risk. As the economic capital
model for credit risk was updated to bring closer alignment with the regulatory capital framework there was a material increase
in the economic capital.

Closer aligning the credit risk economic capital with the regulatory capital means that the difference between economic capital and
regulatory capital for credit risk decreases significantly. Given the different point of view of RC and EC, the market risk economic capital
is higher than the regulatory capital primarily due to the inclusion of the banking books in EC. The EC figures include Business risk, while
RC does not have any requirements for business risk. Another difference in scope is the confidence level used; a 99.95% confidence level
for EC, and a 99.9% confidence level for RC. Given the increase in Credit Risk EC and the differences in scope and methodology between
EC and RC the 2010 figures for EC are higher than the RC figure, while for 2009 this was exactly opposite. Correcting for the difference
in confidence level will lead to an EC figure that is lower than the RC figure.

The above risk metrics and risk appetite framework do not cover liquidity risk: the risk that ING Bank or one of its subsidiaries cannot meet
its financial liabilities, at reasonable cost and in a timely manner, when they come due. ING Bank has a separate liquidity management
framework in place to manage this risk, which is described in the Liquidity Risk section of ING Bank.

ING BANK – CREDIT RISKS

Credit risk is the risk of loss from default by debtors (including bond issuers) or trading counterparties. Credit risks are split into five
principal risk categories: a) lending (including guarantees and letters of credit); b) investments; c) pre-settlement (derivatives, securities
financing and foreign exchange trades); d) money markets and e) settlement. Corporate Credit Risk Management (CCRM) is responsible
for the measurement and management of credit risk incurred by all ING Group entities, including country-related risks. CCRM is organised
along the business lines of ING Bank and ING Insurance. The CCRM General Manager is functionally responsible for the global network
of credit risk staff, and the heads of the credit risk management functions for the business lines report directly to him.

Credit risk management is supported by dedicated credit risk information systems and internal credit risk measurement methodologies
for debtors, issuers and counterparties. CCRM creates consistency throughout the credit risk organisation by providing common credit
risk policies, methodologies, manuals and tools across the Group.

ING Group’s credit policy is to maintain an internationally diversified loan and bond portfolio, while avoiding large risk concentrations.
The emphasis is on managing business developments within the business lines by means of top-down concentration limits for countries,
individual borrowers and borrower groups. The aim within the banking sector is to expand relationship-banking activities, while
maintaining stringent internal risk/return guidelines and controls.

Credit analysis is risk/reward-oriented in that the level of credit analysis is a function of the risk amount, tenor, structure (e.g. covers
received) of the facility, and the risks entered into. For credit risk management purposes, financial obligations are classified into lending,
investments, pre-settlement, money market and settlement. ING Bank applies a Risk Adjusted Return on Capital framework (RAROC)
which measures the performance of different activities and links to shareholder value creation. The use of RAROC increases focus on
risks versus rewards in the decision making process, and consequently stimulates the use of scarce capital in the most efficient way. More
sophisticated RAROC-based tools are used internally to ensure a proper balance of risk and reward within the portfolio and concentration
parameters. ING’s credit analysts make use of publicly available information in combination with in-house analysis based on information
provided by the customer, peer group comparisons, industry comparisons and other quantitative techniques.

Risk categories for credit risk

Lending risk
Lending risk arises when ING grants a loan to a customer, or issues guarantees on behalf of a customer. This is the most common risk
category, and includes term loans, mortgages, revolving credits, overdrafts, guarantees, letters of credit, etc. The risk is measured at the
notional amount of the financial obligation that the customer has to repay to ING, excluding any accrued and unpaid interest, discount/
premium amortisations or impairments.

Investment risk
Investment risk is the credit default and risk rating migration risk that is associated with ING’s investments in bonds, commercial paper,
securitisations, and other similar publicly traded securities. Investment risk arises when ING purchases a (synthetic) bond with the intent
to hold the bond for a longer period of time (generally through maturity). Bonds that are purchased with the intent to re-sell in a short
period of time are considered to be trading risks, which are measured and monitored by the Corporate Market Risk Management
department. For credit risk purposes, Investment risk is measured at original cost (purchase price) less any prepayments or amortisations
and excluding any accrued and unpaid interest or the effects of any impairment.

Money market risk

Money market risk arises when ING places short term deposits with a counterparty in order to manage excess liquidity, as such, money
market deposits tend to be short term in nature (1–7 days is common). In the event of a counterparty default, ING may lose the deposit
placed. Money market risk is therefore measured simply as the notional value of the deposit, excluding any accrued and unpaid interest
or the effect of any impairment.

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Pre-settlement risk
Pre-settlement risk arises when a counterparty defaults on a transaction before settlement and ING has to replace the contract by a trade
with another counterparty at the then prevailing (possibly unfavourable) market price. The pre-settlement risk (potential or expected risk)
is the cost of ING replacing a trade in the market. This credit risk category is associated with dealing room products such as options,
swaps, and securities financing transactions. Where there is a mutual exchange of value, the amount of credit risk outstanding is generally
based on the replacement value (mark-to-market) plus a potential future volatility concept, using a 3–7 year historical time horizon and a
97.5% (1.96 standard deviations) confidence level.

Settlement risk
Settlement risk arises when there is an exchange of value (funds, instruments or commodities) for the same or different value dates and
receipt is not verified or expected until ING has paid or delivered its side of the trade. The risk is that ING delivers, but does not receive
delivery from the counterparty. Settlement risk can most commonly be contained and reduced by entering into transactions with
delivery-versus-payment (DVP) settlement methods, as is common with most clearing houses, or settlement netting agreements.

For those transactions where DVP settlement is not possible, ING establishes settlement limits through the credit approval process.
Settlement risk is then monitored and managed by the credit risk management units. Risk is further mitigated by operational procedures
requiring trade confirmations to counterparties with all transaction details, and by entering into internationally accepted documentation,
such as International Swaps and Derivatives Association (ISDA) Master Agreements for derivative transactions. Additionally, ING regularly
participates in projects with other financial institutions to improve and develop new clearing systems and clearing mechanisms to further
reduce the level of settlement risk. Due to the very short term nature of settlement exposure (daily or intra-day), settlement risks do not
attract economic or regulatory capital and are excluded from risk reporting disclosures.

Country risk
Country risk is the risk specifically attributable to events in a specific country (or group of countries). It can occur within each of the five
above described risk categories. All transactions and trading positions generated by ING include country risk which is further divided into
economic and transfer risk. Economic risk is the concentration risk relating to any event in the risk country which may affect transactions
and any other exposure in that country, regardless of the currency. Transfer risk is the risk incurred through the inability of ING or its
counterparties to meet their respective foreign currency obligations due to a specific country event.

In countries where ING is active, the relevant country’s risk profile is regularly evaluated, resulting in a country rating. Country limits are
based on this rating and ING’s risk appetite. Exposures derived from lending, investment pre-settlement and money market activities
are then measured and reported against these country limits on a daily basis. Country risk limits are assigned for transfer risk mainly
for emerging markets.

Credit Risk Mitigation

As with all financial institutions and banks in particular, ING is in the business of taking credit risks in an informed and measured fashion.
As such, the creditworthiness of our customers, trading partners and investments is continually evaluated for their ability to meet their
financial obligations to ING. ING uses different credit risk mitigation techniques, of which entering into Master Agreements, Collateral
Agreements and CDS contracts are the main techniques used.

Credit Risk Measurement and Reporting

Figures associated with Money Market and Lending activities are generally the nominal amounts, while amounts associated with
Investment activities are based on the original amount invested less repayments. Off-Balance Sheet exposures include the letters of credits
and guarantees, which are associated with the Lending Risk Category. Additionally, Off-Balance Sheet exposures include a portion of the
unused limits, associated with the statistically expected use of the unused portion of the limit between the moment of measurement and
the theoretical moment of statistical default. Collectively, these amounts are called ‘credit risk outstandings’.

Exposures associated with Securitisations (Asset Backed Financing, Commercial/Residential Mortgage Backed Securities and Covered
Bonds) are shown separately. These amounts also relate to the amount invested prior to any impairment activity or mark-to-market
adjustments. This amount is also considered to be ‘outstandings’.

Compensation and Master agreements

ING uses various market pricing and measurement techniques to determine the amount of credit risk on pre-settlement activities.
These techniques estimate ING’s potential future exposure on individual and portfolios of trades. Master agreements and collateral
agreements are frequently entered into to reduce these credit risks.

ING matches trades with similar characteristics to determine their eligibility for offsetting. This offsetting effect is called ‘compensation’.
Subsequently, ING reduces the amount by any legal netting that may be permitted under various types of Master Agreements, such
as ISDAs, GMRAs, GMSLAs, etc. Lastly, the amount is further reduced by any collateral that is held by ING under CSAs or other
similar agreements.

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ING Bank

Collateral policies
During the assessment process of creating new loans, trading limits, or making investments, as well as reviewing existing loans trading
positions and investments, ING determines the amount and type of collateral, if any, that a customer may be required to pledge to ING.
Generally, the lower the perceived creditworthiness of a borrower or financial counterparty, the more collateral the customer or counterparty
will have to provide. Within counterparty trading activities, ING actively enters into various legal arrangements whereby ING and/or
counterparties may have to post collateral to one another to cover market fluctuations of their relative positions. Laws in various
jurisdictions also affect the type and amount of collateral that ING can receive or pledge. The type of collateral which is held as security
is determined by the structure of the loan or position. Consequently, since ING’s portfolio is diversified, the profile of collateral it receives
is also diversified in nature and does not reflect any particular collateral type more than others.

As part of its securities financing business, ING entities actively enter into agreements to sell and buy back marketable securities.
These transactions can take many legal forms. Repurchase and reverse repurchase agreements, buy/sellback and sell/buyback agreements,
and securities borrowing and lending agreements are the most common. The amount of marketable securities that ING held as collateral
under these types of agreements was EUR 92.0 billion at 31 December 2010 and EUR 72.7 billion at 31 December 2009. The increase is
commensurate with the overall increase in open securities financing trades at year end 2010 compared to year end 2009. These amounts
exclude the cash leg of the respective transactions, as well as any pledges of securities under Tri-Party agreements (as the underlying is
not directly pledged to or owned by ING). As a general rule, the marketable securities that have been received under these transactions
are eligible to be resold or repledged in other (similar) transactions. ING is obliged to return equivalent securities in such cases.

Repossession policy
It is ING’s general policy not to take possession of assets of defaulted debtors. Rather, ING attempts to sell the assets from within the legal
entity that has pledged these assets to ING, in accordance with the respective collateral or pledge agreements signed with the obligors. In
those cases where ING does take possession of the collateral, ING generally attempts to sell the assets as quickly as possible to prospective
buyers. Based on internal assessments to determine the highest and quickest return for ING, the sale of repossessed assets could be the
sale of the obligor’s business as a whole (or at least all of its assets), or the assets could be sold piecemeal. With regard to the various
mortgage portfolios, ING often has to take possession of the underlying collateral but also tries to reduce the amount of time until resale.

ING Bank Credit Risk Profile

ING Bank’s credit exposure is mainly related to traditional lending to individuals and businesses followed by investments in bonds and
other securitised assets. Loans to individuals are mainly mortgage loans secured by residential property. Loans (including guarantees
issued) to businesses are often collateralised, but can be unsecured based on internal analysis of the borrowers’ creditworthiness. Bonds
in the investment portfolio are generally unsecured. Securitised assets such as Mortgage Backed Securities and Asset Backed Securities
are secured by the pro rata portion of the underlying diversified pool of assets (commercial or residential mortgages, car loans and/or
other assets) held by the security‘s issuer. The last major credit risk source involves pre-settlement exposures which arise from trading
activities, including derivatives, repurchase transactions and securities lending/borrowing and foreign exchange transactions.

For the banking operations, ING uses various market pricing and measurement techniques to determine the amount of credit risk on
pre-settlement activities. These techniques estimate ING’s potential future exposure on individual and portfolios of trades. Master
agreements and collateral agreements are frequently entered into to reduce these credit risks.

Credit quality: ING Bank portfolio, outstandings

2010 2009
Neither past due nor impaired 822,445 790,377
Past due but not impaired (1–90 days) (1) 5,638 7,404
Impaired 13,779 11,983
Total 841,862 809,764
(1)
Based on lending (consumer loans and residential mortgages only).

Risk classes
Risk classes are defined based upon the quality of the exposures in terms of creditworthiness, varying from investment grade to problem
grade expressed in S&P equivalents.

212 ING Group Annual Report 2010

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Risk classes ING Bank portfolio, as % of total outstandings (1)

Retail Banking Direct
Commercial Banking Retail Banking Benelux & International (2) Total ING Bank
2010 2009 2010 2009 2010 2009 2010 2009
1 (AAA) 3.0% 3.7% 0.2% 14.4% 18.3% 6.3% 7.8%
2–4 (AA) 14.3% 18.7% 4.0% 3.7% 12.1% 16.0% 10.6% 13.4%
5–7 (A) 24.0% 21.4% 5.3% 5.2% 18.8% 17.1% 16.8% 15.2%
8–10 (BBB) 22.9% 20.7% 42.0% 38.4% 28.9% 25.1% 30.4% 27.4%
11–13 (BB) 22.8% 22.0% 37.7% 41.0% 15.5% 13.5% 24.4% 24.5%
14–16 (B) 8.8% 8.5% 6.2% 6.4% 7.2% 6.9% 7.5% 7.3%
17–22 (CCC & Problem Grade) 4.2% 5.0% 4.8% 5.1% 3.1% 3.1% 4.0% 4.4%
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
(1)
Based on credit risk measurement contained in lending, pre-settlement, money market and investment activities.
The ratings reflect probabilities of default and do not take collateral into consideration.
(2)
Covered bonds are presented on the basis of the external credit rating of the issuer in question. Covered bond issues generally possess a better
external credit rating than the issuer standalone, given structural features of such covered bonds.

Risk classes ING Bank portfolio per credit risk type, as % of total outstandings (1)
Lending Investment Money Market Pre-settlement Total ING Bank
2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
1 (AAA) 0.8% 0.8% 30.8% 36.9% 1.2% 1.2% 3.5% 5.9% 6.3% 7.8%
2–4 (AA) 6.0% 7.0% 25.0% 29.4% 22.0% 45.6% 18.2% 26.1% 10.6% 13.4%
5–7 (A) 9.5% 9.1% 27.1% 23.1% 62.3% 40.9% 50.8% 46.7% 16.8% 15.2%
8–10 (BBB) 36.9% 35.0% 12.5% 6.5% 6.8% 7.2% 17.2% 11.0% 30.4% 27.4%
11–13 (BB) 32.0% 32.7% 2.0% 1.8% 7.4% 4.7% 7.3% 7.3% 24.4% 24.5%
14–16 (B) 9.9% 9.9% 0.6% 0.6% 0.1% 0.2% 1.8% 1.8% 7.5% 7.3%
17–22 (CCC & Problem Grade) 4.9% 5.5% 2.0% 1.7% 0.2% 0.2% 1.2% 1.2% 4.0% 4.4%
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
(1)
Based on credit risk measurement contained in lending, pre-settlement, money market and investment activities.
The ratings reflect probabilities of default and do not take collateral into consideration.

Within the Investment and Pre-Settlement portfolios, there was a slight downward shift from the high end investment grade, to the
midlevel investment grade in 2010. The Lending portfolios remained fairly stable. A large portion of the reduction in investment grade
counterparty risks (pre-settlement) is related to the increasing application of collateral and netting agreements with these counterparties.
Where such agreements are in place, ING generally has higher absolute volumes, while the credit risks are actually lowered due to the
benefit of collateral and netting agreements.

Risk concentration: ING Bank portfolio, by economic sector (1) (2)

Retail Banking Direct
Commercial Banking Retail Banking Benelux & International Total ING Bank
2010 2009 2010 2009 2010 2009 2010 2009
Private Individuals 0.1% 0.2% 74.8% 74.4% 51.6% 48.1% 40.0% 38.2%
Commercial Banks 17.9% 19.5% 0.3% 0.5% 13.2% 13.7% 11.2% 12.0%
Non-Bank Financial Institutions 13.3% 13.0% 1.2% 1.8% 16.8% 18.8% 11.1% 11.8%
Central Governments 11.7% 12.3% 1.0% 0.9% 8.0% 8.8% 7.3% 7.8%
Real Estate 13.6% 13.8% 4.5% 4.3% 0.9% 0.8% 6.4% 6.6%
Natural Resources 10.3% 8.7% 0.4% 0.4% 0.4% 0.3% 3.9% 3.4%
Transportation & Logistics 5.7% 5.6% 1.4% 1.5% 0.2% 0.1% 2.5% 2.5%
Services 3.3% 3.2% 3.3% 3.2% 0.3% 0.3% 2.2% 2.2%
Lower Public Administration 0.5% 0.5% 1.3% 1.2% 4.3% 3.4% 2.1% 1.7%
Other 23.6% 23.2% 11.8% 11.8% 4.3% 5.7% 13.3% 13.8%
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
(1)
Based on the total amount of credit risk in the respective column using ING’s internal credit risk measurement methodologies.
(2)
Economic sectors below 2% are not shown separately but grouped in Other.

As part of the Back to Basics focus on core clients, ING Bank reduced its exposure to governments and the financial sector while growing
the private individual and corporate portfolios. The industry Central Banks fell below the 2.0% threshold during 2010 (2009: 2.3%).

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ING Bank

ING Bank Lending portfolio

Largest economic exposures: ING Bank lending portfolio, by geographic area (1)
Retail Banking Direct &
Commercial Banking Retail Banking Benelux International Total ING Bank
2010 2009 2010 2009 2010 2009 2010 2009
Netherlands 20.7% 20.2% 74.8% 75.4% 4.8% 6.1% 31.2% 32.1%
Belgium 7.7% 9.8% 23.2% 21.4% 0.2% 0.3% 9.6% 9.9%
Rest of Europe 45.2% 44.6% 1.3% 1.7% 53.3% 56.3% 35.0% 35.6%
Americas 14.8% 15.5% 0.2% 0.6% 26.4% 24.3% 14.6% 14.1%
Asia/Pacific 11.2% 9.5% 0.1% 0.5% 15.3% 13.0% 9.4% 8.0%
Rest of World 0.4% 0.4% 0.4% 0.4% 0.2% 0.3%
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
(1)
Geographic areas are based on the country of residence of the obligor.

The largest relative geographic area of growth was Asia/Pacific which corresponds with the region’s economic recovery in 2010. Exchange
rate effects had further impact on the regional division.

In line with ING’s de-risking strategy, the portfolio developments in most countries mirrored the developments in the portfolio as a whole.
The depreciated Euro versus the Australian and the US dollar had an upward effect of the exposure to the Americas and Asia/Pacific and
therewith also to the Retail Banking Direct and International and Commercial Banking portfolios.

Problem loans
Renegotiated Loans
ING’s credit restructuring activities focus on managing the client relationships, improving the borrower’s risk profile, maximising collection
opportunities and, if possible, avoiding foreclosure or repossession. These activities are pro-actively pursued and primarily relate to
Wholesale and Small and Medium Enterprise (SME) borrowers (‘Business’), which are not yet in default. Common actions taken include,
but are not limited to, revising or extending repayment arrangements, assisting in financial reorganisation and/or turnaround management
plans, deferring foreclosure, modifying loan conditions and deferring certain payments pending a change in circumstances. For consumer
and residential mortgage loans (‘Consumer’) the approach is more portfolio oriented.

Restructuring activities for Business borrowers normally start with a watch list indication. Borrowers on the watch list maintain their rating
(1–19). A watch list indication may develop into a restructuring status (18–19) or even a recovery status (20–22). Most borrowers with a
watch list indication return to a regular status. For Consumer clients the watch list of ‘potential problem loan’ status is usually caused by
payment arrears (more than 1 month) which are subsequently reflected in the risk rating of 18–19 (or comparable status based on an
increased probability of default). Following restructuring relationship management is either transferred to the regular banking departments
or terminated.

ING’s renegotiated loans that would otherwise be past due or impaired are reflected below:

ING Bank renegotiated loans that would otherwise be past due or impaired (outstandings)
2010 2009
Consumer and Consumer and
Business loans mortgage loans Total Business loans mortgage loans Total
From restructuring (18–19) to regular (1–17) status 4,365 4,365 2,737 2,737
From recovery (20–22) to regular or restructuring
status (1–19) 2,744 3,209 5,953 2,895 3,210 6,105
Total of renegotiated loans 7,109 3,209 10,318 5,632 3,210 8,842

ING continues to take a proactive approach in working with its Business and Consumer customers which are experiencing financial
difficulties to restructure their loans and help return the companies to economic viability. The category ‘restructuring status’ is not
used for consumer borrowers, but only for Business customers.

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ING Bank

Past-due obligations
ING continually measures its portfolio in terms of payment arrears. Particularly the retail portfolios are closely monitored on a monthly
basis to determine if there are any significant changes in the level of arrears. Generally, an obligation is considered ‘past-due’ if a payment
of interest or principal is more than one day late. In practice, the first 5–7 days after an obligation becomes past due are considered to be
operational in nature for the retail loans and small businesses. After this period, letters are sent to the obligor reminding the obligor of
its (past due) payment obligations. If the arrear still exists after 90 days, the obligation is transferred to one of the ‘problem loan’ units.
In order to reduce the number of arrears, ING banking units encourage their obligors to set up automatic debits from their (current)
accounts to ensure timely payments.

Aging analysis (past due but not impaired): ING Bank portfolio, outstandings (1) (2)
2010 2009
Past due for 1–30 days 4,565 5,967
Past due for 31–60 days 973 1,281
Past due for 61–90 days 100 156
Total 5,638 7,404
(1)
Based on lending (consumer loans and residential mortgages only).
(2)
The amount of past due but not impaired financial assets in respect of non-lending activities was not material.

There is no significant concentration of a particular type of loan structure in the past due or the impaired loan portfolio.

ING tracks past due but not impaired loans most closely for the consumer loan and residential mortgage portfolios. Generally, all loans
with past due financial obligations of more than 90 days are automatically reclassified as impaired. For the wholesale lending portfolios
and securities obligations, there are generally reasons for declaring a loan impaired prior to being 90 days past due. These include,
but are not limited to, ING’s assessment of the customer’s perceived inability to meet its financial obligations, or the customer filing
for bankruptcy or bankruptcy protection. In some cases, a material breach of financial covenants will also trigger a reclassification of
a loan to the impaired category.

Impaired loans and provisions

The credit portfolio is under constant review. A formal analysis takes place quarterly to determine the provisions for possible bad debts,
using a bottom-up approach. Conclusions are discussed by the ING Provisioning Committee (IPC), which advises the Executive Board on
specific provisioning levels. ING Bank identifies as impaired loans those loans for which it is probable, based on current information and
events that the principal and interest amounts contractually due will not be collected in accordance with the contractual terms of the
loan agreements.

The table below represents the economic sector breakdown of credit risk outstandings (including impaired amounts) for loans and
positions that have been classified as problem loans and for which provisions have been made.

Impaired Loans: ING Bank portfolio, outstandings by economic sector

2010 2009
Private Individuals 4,838 4,589
Real Estate 2,777 1,528
General Industries 858 933
Food, Beverages & Personal Care 837 681
Transportation & Logistics 818 415
Builders & Contractors 792 628
Services 582 611
Non-Bank Financial Institutions 527 304
Other 1,750 2,294
Total 13,779 11,983

ING holds specific and collective provisions of EUR 2,697 million and EUR 1,404 million, respectively (2009: EUR 2,115 million and
EUR 1,246 million respectively), representing the difference between the amortised cost of the portfolio and the estimated recoverable
amount discounted at the effective rate of interest. In addition, there is EUR 1,051 million in provisions against the performing portfolio
and EUR 43 million of Net Present Value forgone for re-modified loans.

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ING Bank

Provisions: ING Bank portfolio

Retail Banking Direct
Commercial Banking Retail Banking Benelux & International Total ING Bank
2010 2009 2010 2009 2010 2009 2010 2009
Opening balance 1,628 1,024 1,290 802 1,481 785 4,399 2,611
Changes in the composition of the group –3 –3
Write-offs –337 –520 –454 –468 –375 –229 –1,166 –1,217
Recoveries 36 21 58 118 11 9 105 148
Increase/(decrease) in loan loss provision 497 1,211 721 728 533 1,034 1,751 2,973
Exchange differences 65 –28 8 –3 82 –17 155 –48
Other changes –34 –80 18 116 –33 –101 –49 –65
Closing balance 1,855 1,628 1,641 1,290 1,699 1,481 5,195 4,399

During 2010 we saw a slow reduction to more normalised risk costs. The lower risk costs level was largely the result of an improving
portfolio within Commercial Banking, which was partly offset due to the continuing elevated levels of the risk costs in Retail Benelux.

ING BANK – MARKET RISKS

Market risk is the risk that movements in market variables, such as interest rates, equity prices, foreign exchange rates and real estate
prices, negatively impact the bank’s earnings, market value or liquidity position. Market risk either arises through positions in trading books
or through the banking book positions. The trading positions are held for the purpose of benefiting from short-term price movements,
while the banking book positions are intended to be held in the long term (or until maturity) or for the purpose of hedging other banking
book positions.

Within ING Bank, market risk (including liquidity risk) falls under the supervision of the ALCO function with ALCO Bank as the highest
approval authority. ALCO Bank determines the overall risk appetite for market risk. The ALCO function is regionally organised with the
exception of ING Direct, which has a separate ALCO. The business lines Retail Banking and Commercial Banking are represented within
the respective regional and local ALCO’s. The ALCO structure within ING Bank facilitates top-down risk management, limit setting and
the monitoring and control of market risk. This ensures a correct implementation of the ING Bank risk appetite.

The Corporate Market Risk Management department (CMRM) is the designated independent department that is responsible for the design
and execution of the bank’s market risk management functions in support of the ALCO function. The CMRM structure recognises that risk
taking and risk management to a large extent occurs at the regional/local level. Bottom-up reporting allows each management level to
fully assess the market risk relevant at the respective levels.

CMRM is responsible for determining adequate policies and procedures for managing market risk and for monitoring the compliance
with these guidelines. An important element of the market risk management function is the assessment of market risk in new products
and businesses. Furthermore CMRM maintains an adequate limit framework in line with ING Bank’s risk appetite. The businesses are
responsible for adhering to the limits that ultimately are approved by ALCO Bank. Limit breaches are reported to senior management
on a timely basis and the business is required to take the appropriate actions to reduce the risk position.

Market risk in trading books

Organisation
Within the trading portfolios, positions are maintained in the professional financial markets for the purpose of benefiting from short term
price movements. Market risk arises in the trading portfolios through the exposure to various market risk factors, including interest rates,
equity prices and foreign exchange rates.

The Financial Markets Risk Committee (FMRC) is the market risk committee that, within the guidelines set by ALCO Bank, sets market risk
limits both on an aggregated level and on a desk level, and approves new products. CMRM advises both the FMRC and ALCO Bank on
the market risk appetite of trading activities.

With respect to the trading portfolios, CMRM focuses on the management of market risks of Commercial Banking (mainly Financial
Markets) as this is the only business line where significant trading activities take place. Trading activities include facilitation of client
business, market making and proprietary position taking in cash and derivatives markets. CMRM is responsible for the development
and implementation of trading risk policies and risk measurement methodologies, the reporting and monitoring of risk exposures
against approved trading limits and the validation of pricing models. CMRM also reviews trading mandates and limits, and performs
the gatekeeper role in the product review process. The management of trading market risk is performed at various organisational
levels, from CMRM overall down to specific business areas and trading offices.

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Measurement
CMRM uses the Value at Risk (VaR) methodology as its primary risk measure. The VaR for market risk quantifies, with a one-sided
confidence level of 99%, the maximum overnight loss that could occur due to changes in risk factors (e.g. interest rates, foreign exchange
rates, equity prices, credit spreads, implied volatilities) if positions remain unchanged for a time period of one day. The impact of historical
market movements on today’s portfolio is estimated, based on equally weighted observed market movements of the previous year. ING
uses VaR with a 1-day horizon for internal risk measurement, control and backtesting, and VaR with a 10-day horizon for determining
regulatory capital. ING’s VaR model has been approved by De Nederlandsche Bank (DNB: the Dutch Central Bank) to be used for the
regulatory capital calculation of its most important trading activities.

Market risk management for the fixed income and equity markets is split into two components: general market risk and specific market
risk. The general market risk component estimates the VaR resulting from general market-value movements (e.g. interest rate movements).
The specific market risk component estimates the VaR resulting from market-value movements that relate to e.g. the underlying issuer of
securities in the portfolios. This specific risk relates to all value movements not related to general market movements.

CMRM has implemented a historical simulation Value at Risk (HVaR) model for consolidated risk reporting for the trading books that has
replaced the Variance Covariance method used previously. ING has chosen to use a phased rollout approach. As of 1 January 2009, ING
implemented the first phase after approval from DNB. During 2010, further steps were made with the migration of a large part of the
non-linear risks from Monte Carlo simulation to historical simulation. The remaining non-linear risks and specific risk will migrate to
historical simulation in 2011.

Limitations
VaR as a risk measure has some limitations. VaR uses historical data to forecast future price behaviour. Future price behaviour could differ
substantially from past behaviour. Moreover, the use of a one-day holding period (or ten days for regulatory calculations) assumes that all
positions in the portfolio can be liquidated or hedged in one day. In periods of illiquidity or market events, this assumption may not hold
true. Also, the use of 99% confidence level means that VaR does not take into account any losses that occur beyond this confidence level.

The Basel Committee has proposed to supplement the current VaR regulatory capital framework for trading exposures with an Incremental
Risk Charge (IRC) and Stressed VaR to cover for the shortcomings of the current risk framework. The IRC ensures that Basel II capital
charges will capture default and credit migration risks which are not reflected in the current 99%, 10-day VaR model for the trading
books. The Basel II requirements on the incremental risk charge will come into force in 2011. ING performs experience runs on IRC as
part of the approval process with the Dutch regulator, the DNB.

Backtesting
Backtesting is a technique for the ongoing monitoring of the plausibility of the VaR model in use. Although VaR models estimate potential
future results, estimates are based on historical market data. In a backtest, the actual daily result is compared with the 1-day VaR. In
addition to using actual results for backtesting, ING also uses hypothetical results, which measure results excluding the effect of intraday
trading, fees and commissions. When the actual or hypothetical loss exceeds the VaR an ‘outlier’ occurs. Based on ING’s one-sided
confidence level of 99% an outlier is expected once in every 100 business days. In 2010, like in 2009, there was no occurrence where
a daily trading loss exceeded the daily consolidated VaR of ING Commercial Banking. ING reports the results of this backtesting to DNB
on a quarterly basis.

Stress testing
Stress tests are used for the monitoring of market risks under extreme market conditions. Since VaR in general does not produce an
estimate of the potential losses that can occur as a result of extreme market movements, ING uses structured stress tests for monitoring
the market risk under these extreme conditions. Stress scenarios are based on historical as well as hypothetical extreme events. The result
of the stress testing is an event risk number, which is an estimate of the profit and loss account effect caused by a potential event and its
world-wide impact for ING Commercial Banking. The event risk number for the ING Commercial Banking trading activity is generated
on a weekly basis. Like VaR, event risk is limited by ALCO Bank. ING’s event risk policy basically consists of defined stress parameters per
country and per market (fixed income, equity, foreign exchange, credit and related derivative markets). The scenarios and stress parameters
are evaluated against extreme actual market movements. If and when necessary, ING evaluates specific stress scenarios, as an addition to
its structural stress tests. These specific scenarios relate to current concerns, like political instability in certain regions, terrorist attacks or
extreme movements, e.g. in credit spreads.

Other trading controls

VaR and event risk limits are the most important limits to control the trading portfolios. Furthermore, ING uses a variety of other limits
to supplement VaR and event risk. Position and sensitivity limits are used to prevent large concentrations in specific issuers, sectors or
countries. In addition to this, other risk limits are set with respect to the activities in exotic derivatives trading. The market risk of these
products is controlled by product specific limits and constraints.

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ING Bank

Development of market risks

The following chart shows the development of the overnight VaR under a 99% confidence interval and a 1-day horizon. The overnight
VaR is presented for the ING Commercial Banking trading portfolio for 2009 and 2010. Several banking books are governed by the
trading risk process and are therefore excluded from the non-trading risk table and included in the below trading risk graph and table.

CONSOLIDATED TRADING VAR ING COMMERCIAL BANKING 2009–2010

in EUR millions

70

60

50

40

30

20

10

0
Jan 09 Apr 09 Jul 09 Oct 09 Jan 10 Apr 10 Jul 10 Oct 10 Dec 10
Date

Value at Risk VaR Limit

During 2010 the overnight VaR for the ING Commercial Banking trading portfolio ranged from EUR 17 million to EUR 30 million.
No limit excess was observed in 2010.

More details on the VaR of the ING Commercial Banking trading portfolio for 2010 and 2009 are provided in the table below:

Consolidated VaR trading books: ING Commercial Bank

Minimum Maximum Average Year end
2010 2009 2010 2009 2010 2009 2010 2009
Interest rate/Credit spread 18 20 29 54 22 33 20 24
Equity 1 4 9 11 4 7 3 5
Foreign exchange 1 1 9 11 2 5 4 3
Diversification (1) –6 –6 –8 –5
Total VaR 17 24 30 60 22 39 19 27
(1)
The total VaR for the columns Minimum and Maximum can not be calculated by taking the sum of the individual components since the observations for both the
individual markets as well as total VaR may occur on different dates.
Note: the above categories are consistent with those used for internal risk management purposes and do not relate to financial statement captions.

The VaR figures in the table above relate to all books under trading governance. In general, the level of the trading VaR was lower in
2010, continuing the decreasing trend of 2009. The interest rate market, which includes both the general interest rate and credit spread
exposures, provided the largest contribution to the trading VaR. The average VaR over 2010 was substantially lower than over 2009
(average VaR 2010: EUR 22 million and average VaR 2009: EUR 39 million). In line with the trend of 2009, the VaR decreased to EUR 19
million towards the end of 2010. This decrease is to a large extent related to the increased diversification of non-linear and linear risk
as a result of the HVaR implementation as explained under ‘Measurement’. Another reason is the discontinuing of the strategic trading
business in the United States, as part of ING’s continued balance sheet strengthening.

REGULATORY CAPITAL
According to the Dutch regulation, regulatory capital for trading portfolios can be calculated using the standardised approach (CAD1)
or an internal model approach (CAD2). In 1998, ING received approval from the DNB to use an internal Value-at-Risk (VAR) model
to determine the regulatory capital for the market risk in most trading books of ING Bank. Market risk capital of CAD2 trading books
is calculated according to the internal VaR model, where diversification is taken into account. On the other hand, market risk capital
of CAD1 books is calculated using standardised fixed risk weights.

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Regulatory capital requirements

Standardised Approach Internal Model Approach Total
2010 2009 2010 2009 2010 2009
Interest rate/Credit spread 105 127 172 233 277 360
Equity 40 75 40 75
Foreign exchange (1) 32 23 15 33 47 56
Total 137 150 227 341 364 491
(1)
The FX exposure under the Standardised Approach contains FX exposures on both trading and banking books

In 2010, ING applied the CAD2 model for most of its trading activities. The standard CAD1 model is used for some trading books in
smaller locations and/or products for which the internal model is not yet CAD2 compliant. The aim of ING is to receive CAD2 status
for all its trading books. In 2010, several trading books were moved from the standardised model to the internal model, further reducing
the number of books under the standardised model. It should be noted that due to the conservative nature of the CAD1 model the
capital charge for the standardised approach is much larger than for the internal model approach.

VaR Values for Internal Model Approach Portfolios

2010 Year end
Minimum Maximum Average 2010 2009
Interest rate/Credit spread 16 28 20 18 21
Equity 1 9 4 3 5
Foreign exchange 1 9 2 4 3
Diversification effect (1) –6 –8 –4
Total 15 28 20 17 25
(1)
The total VaR for the columns Minimum and Maximum can not be calculated by taking the sum of the individual components since the observations
for both the individual markets as well as total VaR may occur on different dates.
Note: the above categories are consistent with those used for internal risk management purposes and do not relate to financial statement captions

The VaR figures in the table above only relate to the CAD2 trading books for which the internal model approach is applied.
The VaR figures reported under Consolidated VaR trading books relate to all books under trading governance.

Sensitivities
The following tables show the largest trading foreign exchange positions and interest rate and credit spread sensitivities.
The credit spread sensitivities are furthermore split in different risk classes and sectors.

Most important foreign exchange positions (year-end 2010)

2010 2009
Foreign exchange Foreign exchange
US dollar –457 US dollar –266
Taiwan dollar 155 Chinese yuan 208
Chinese yuan 83 Bulgarian lev 37
South Korean won 68 Polish zloty 31
Bulgarian lev –57 South Korean won 20

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Most important interest rate and credit spread sensitivities (year-end 2010)
amounts in thousands of euros 2010 2009
Interest Rate (BPV (1)) Interest Rate (BPV (1))
Eurozone –377 Eurozone –1,175
United States 167 United States –359
Mexico –147 Mexico –153
Japan 141 UK –109
Russia –73 Japan 107

Credit Spread (BPV (1)) Credit Spread (BPV (1))

Eurozone –596 United States –115
Sweden –67 Eurozone –86
Hong Kong –47 Mexico –57
UK –47 Japan –17
United States –42 Russia –13
(1)
Basis Point Value (BPV) measures the impact on value of a 1 basis point increase in interest rates or credit spreads.

Credit spread sensitivities per risk class and sector (year-end 2010)
amounts in thousands of euros 2010 2009
Financial Financial
Credit Spread (BPV (1)) Corporate Institutions Corporate Institutions
Risk classes
1 (AAA) –8 –211 –18 –145
2–4 (AA) –25 –212 –18 –34
5–7 (A) –32 –257 83 –100
8–10 (BBB) –77 –102 16 14
11–13 (BB) –11 –47 –12 –20
14–16 (B) –30 –8 –21 20
17–22 (CCC and Problem Grade) –24 –33 –47 –11
No rating 15 –16
Total –207 –870 –2 –292
(1)
Basis Point Value (BPV) measures the impact on value of a 1 basis point increase in interest rates or credit spreads.

Market risk in banking books

Organisation
ING makes a distinction between trading and banking (non-trading) books. Positions in trading books can change swiftly, whereas
positions in banking books are intended to be held until maturity, or at least for the long term. Books that contain positions to hedge
exposures resulting from commercial activities are also classified as banking books.

Interest rate risk in banking books

Interest rate risk in the banking books is defined as the potential negative impact that moving interest rates have on earnings or market
value. The management of interest rate risk follows the Asset & Liability Management (ALM) framework as approved by ALCO Bank.
Main goal of this framework is to transfer interest rate risks out of commercial books in order to manage it centrally. This allows for
a clear demarcation between commercial business results and results on unhedged interest rate positions.

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ING distinguishes three types of activities: investment of own capital (by Capital Management), commercial business (ING Direct,
Retail Banking and Commercial Bank) and the strategic interest rate position (Financial Markets ALM). The scheme below presents
the ALM framework:

ING Bank
Capital
Management

Retail Banking Direct & Retail Banking Commercial

International Banking Benelux Banking

Financial Markets
RB Direct RB Int. Banking Commercial Bank
Trading

Model Risk Model Risk Model Risk Model Risk

Proprietary
(replication, (replication, (replication, (replication,
risk taking
prepayments) prepayments) prepayments) prepayments)

Risk transfer Risk transfer to Risk transfer to Risk transfer to

to market FM ALM FM ALM FM Treasury

Financial Markets
ALM / Treasury

Below, the three activities are described in more detail.

Capital Management is responsible for managing the investment of own funds (core capital). Capital is invested longer term, targeting
to maximize return, while keeping it stable at the same time.

Commercial activities lead to interest rate risk, as repricing tenors of assets differ from those of liabilities. Linear interest rate risk is transferred
out of the commercial business into the risk center (FM ALM), leaving convexity risk and model risk with the commercial business. The convexity
risk is a result of hedging products that contain embedded options, like mortgages, by using linear hedge instruments. Model risk reflects the
potential imperfect modelling of client behaviour. The risk transfer process takes place on a monthly basis, but more often if deemed necessary,
for instance in volatile markets.

In the risk transfer process, client behavioural characteristics play an important role. The behaviour in relation to mortgages, loans, savings
and demand deposits is modelled by CMRM, following extensive research. Models and parameters are back-tested regularly and updated
when deemed necessary. In the modelling of savings and current accounts different elements play a role: pricing strategies, outstanding
and expected volumes and the level and shape of the yield curve. The analyses result in an investment rule for the various portfolios. With
respect to mortgages and loans, prepayment behaviour and the interest sensitivity of the embedded offered rate options are modelled.

In line with other commercial businesses, ING Direct transfers interest rate risk out of their commercial books to a large extent.
The difference being that the risks are transferred directly to the external market, instead of to the risk center (FM ALM).

Within ING Commercial Banking, FM ALM contains the strategic interest rate position. The main objective is to maximise the economic
value of the book and to generate adequate and stable yearly earnings within the risk appetite boundaries set by ALCO Bank.

In the following sections, the interest rate risks in the banking books are presented. ING uses risk measures based on both an earnings
and a value perspective. Earnings Sensitivity (ES) is used to provide the earnings perspective and the Net Present Value (NPV)-at-Risk and
Basis Point Value (BPV) figures provide the value perspective. Several small banking books are governed by the trading risk process and
are therefore excluded from the following banking book risk tables. These are included in the trading risk graph and table in the section
‘Market Risk in Trading Books’.

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Earnings Sensitivity (ES)

ES measures the impact of changing interest rates on (pre tax) IFRS earnings. The ES figures in the table below reflect an instantaneous
shock up of 1% and a time horizon of one year. Management interventions are not incorporated in these calculations; balance sheet
dynamics (e.g. new business) where significant.

The ES is dominated by convexity risk and by the strategic interest rate position in FM ALM. The investment of own funds only impact
the ES marginally, given the long term duration.

Earnings Sensitivity banking books (1% instantaneous upward shock to interest rates)
2010 2009
By currency
Euro –237 –262
US dollar –114 –193
Pound sterling –15 –26
Other 50 46
Total –316 –435

In an environment where short term rates remain at relative low levels, both in the Eurozone and the US, the ES showed a limited decrease
in 2010. Interest paid on liabilities is expected to be less sensitive to market rate changes.

Net Present Value (NPV) at Risk

NPV-at-Risk measures the impact of changing interest rates on value. As a full valuation approach is applied, the risk figures include
convexity risk that results from embedded optionalities like mortgage prepayment options. Like for ES calculations, an instantaneous
shock up of 1% is applied.

The full value impact cannot be directly linked to the balance sheet or profit and loss account, as fair value movements in banking books
are generally not reported through the profit and loss account or through equity. The largest part, namely the value mutations of the
amortised cost balances, is neither recognised in the balance sheet nor directly in the profit and loss account. The value mutations are
expected to materialise over time in the profit and loss account, if interest rates develop according to forward rates throughout the
remaining maturity of the portfolio.

The NPV at Risk is dominated by the interest rate sensitive long term investments of own funds. The value of these investments is impacted
significantly if interest rates move up by 1%. Convexity risk in retail portfolios as well as the strategic interest position in FM ALM also
contribute significantly to the overall NPV at Risk.

NPV-at-Risk banking books (1% instantaneous upward shock to interest rates)

2010 2009
By currency
Euro –2,446 –1,811
US dollar –205 –39
Pound sterling –19 –53
Other 48 68
Total –2,622 –1,835

Total NPV-at-Risk increased in the course of 2010. The change was strongly influenced by the increase in long term interest rates in the
2nd half of 2010, which increased the duration of mortgages and thereby the value sensitivity to a further rate increase. Besides, the slow
housing market in the Netherlands also led to an increase in the mortgage duration.

Basis Point Value (BPV)

BPV measures the impact of a 1 basis point increase in interest rates on value. To a large extent the BPV and NPV at Risk reflect the same
risk − the difference being that BPV does not reflect convexity risk, given the small shift in interest rates.

In line with NPV at Risk, the bank’s overall BPV position is dominated by the long term investment of capital, as the present value of this
position is significantly impacted if interest rates move up by 1 basis point. Convexity risk plays a less important role, given that BPV only
reflects small movements in interest rates.

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BPV per currency banking books

amounts in thousands of euros 2010 2009
By currency
Euro –21,760 –15,340
US dollar –548 757
Pound sterling –284 –684
Other 175 475
Total –22,417 –14,792

The total BPV position increased in 2010 for the same reasons as the increase in NPV-at-Risk. The duration of mortgages increased
on the back of higher interest rates (both in the United States and the Eurozone) and a slow Dutch housing market.

Foreign exchange (FX) risk in banking books

FX exposures in banking books result from commercial banking business (business units doing business in other currencies than their
base currency), foreign currency investments in subsidiaries (including realised net profit and loss) and strategic equity stakes in foreign
currencies. The policy regarding these exposures is briefly explained below.

Commercial banking business

Every business unit hedges the FX risk resulting from commercial results into its base currency. Consequently, assets and liabilities are
matched in terms of currency.

FX Translation result
ING’s strategy is to protect the target core Tier 1 ratio against FX rate fluctuations, whilst limiting the volatility in the profit and loss
account. Compared to 2009 the strategy has changed in 2010 from protection of the target Tier 1 ratio to protection of the target
core Tier 1 ratio instead. The strategy is achieved by deliberately taking foreign currency positions equal to certain target positions,
such that the target core Tier 1 capital and risk-weighted assets are equally sensitive in relative terms to changing FX rates.
The following table presents the currency exposures in the banking books for the most important currencies:

Net currency exposures banking books

Foreign Investments Hedges Net Exposure
2010 2009 2010 2009 2010 2009
US dollar 7,275 6,913 –606 –3,980 6,669 2,933
Pound sterling –993 –1,155 1,144 1,220 151 65
Polish zloty 1,371 1,153 –643 –486 728 667
Australian dollar 2,908 2,186 –2,056 –1,423 852 763
Turkish lira 1,891 1,752 –444 –233 1,447 1,519
Other currency 7,160 7,321 –4,028 –3,549 3,132 3,772
Total 19,612 18,170 –6,633 –8,451 12,979 9,719

The US dollar Net Exposure increased significantly in 2010 due to the changed hedging strategy. The significantly decreased Net exposure
in the category ‘Other currency’ is mainly caused by changed share prices of strategic equity stakes. For example, the share price of the
bank’s equity stake in Bank of Beijing decreased over 30%, decreasing the Chinese renmimbi exposure.

In order to measure the remaining sensitivity of the target core Tier 1 ratio against FX rate fluctuations, the core Tier 1 ratio at Risk (cTaR)
measure is used. It measures the drop in the core Tier 1 ratio from the target when stressing a certain FX rate. The stress scenarios for the
FX rates that are used for calculating the cTaR, are presented in the last two columns. Only the scenarios are presented that negatively
impact the target core Tier 1 ratio: depending on whether the actual foreign currency position is above or below the target position, the
worst case scenario is either negative or positive. A positive stress scenario means that the foreign currency appreciates against the Euro.
For the Pound sterling this means that at the end of 2010 the target core Tier 1 ratio would only decrease by 0.02% in absolute terms
(e.g. from 9.02% to 9.00%) if the Pound Sterling appreciates by 15%. Backtesting shows that the strategy was effective in 2010; the
core Tier 1 ratio was hardly affected by changing FX rates.

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Core Tier 1 ratio sensitivity ING Bank

cTaR Stress Scenario
2010 2009 2010 2009
By currency
US dollar 0.11% 15% 15%
Pound sterling 0.02% 0.02% 15% 15%
Polish zloty 0.01% 0.01% –15% –15%
Australian dollar 0.01% 0.02% –20% –20%
Turkish lira 0.01% 25% –25%

Equity price risk in banking books

Equity price risk arises from the possibility that equity security prices will fluctuate, affecting the value of equity securities and other
instruments whose value reacts similarly to a particular security, a defined basket of securities, or a securities index. ING Bank maintains
a strategic portfolio with substantial equity exposure in its banking books. This equity exposure mainly consists of the investments in
associates of EUR 1,494 million (2009: EUR 1,396 million) and equity securities held in the Available-for-Sale (AFS) portfolio of EUR 2,741
million (2009: EUR 3,682 million). The value of equity securities held in the AFS portfolio is directly linked to equity security prices with
increases/decreases being recognised (except in the case of impairment) in the revaluation reserve. During the year ended 31 December
2010 the revaluation reserve relating to equity securities held in the Available-for-Sale portfolio fluctuated between a month-end low
amount of EUR 1,723 million (2009: EUR 1,198 million) and a high amount of EUR 2,370 million (2009: EUR 2,536 million). Investments
in associates are measured in accordance with the equity method of accounting and the balance sheet value is therefore not directly
linked to equity security prices.

Equities Unrealised Gains and Losses in the AFS portfolio

2010 2009
Gross unrealised gains 1,728 2,570
Gross unrealised losses –1 –12
Total 1,727 2,558

Total capital requirement for equity price risk under the Simple Risk Weight Approach at 31 December 2010 results in EUR 310 million
(2009: 364 million).

Real Estate price risk in banking books

Real estate price risk arises from the possibility that real estate prices fluctuate. This affects both the value of real estate assets and earnings
related to real estate activities. The crisis in the financial markets could lead to a further slowdown of the world economy in general. These
global economic factors could have future negative consequences for the value of and earnings related to real estate assets.

ING Bank has three different categories of real estate exposure on its banking books. First, ING Bank owns buildings it occupies. Second,
ING Bank has a Real Estate Development company for which results are dependent on the overall real estate market. The general policy is
to mitigate this risk by pre-sale agreements where possible. Third, ING Bank has co-invested seed capital and bridge capital to support the
launch of various real estate funds. A decrease in real estate prices will cause the value of this seed and bridge capital to decrease and will
lower the level of third party assets under management, which in turn will reduce the fee income from this activity.

For the third category mentioned above, real estate price shocks will have a direct impact on reported net profit and loss. ING Bank’s
real estate exposure (i.e. including leverage and committed purchases) is EUR 5.2 billion of which EUR 2.0 billion is recorded as fair value
through P&L. The remaining EUR 3.1 billion is booked at cost or is revalued through equity (with impairments going through P&L).

In total, Real Estate exposure decreased by EUR 1.8 billion mainly as a result of divestments (EUR –1.5 billion). Other important changes
are: negative fair value changes (EUR –0.1 billion), impairments (EUR –0.4 billion) and FX appreciation (EUR +0.2 billion).

Real Estate Exposure banking books recorded as fair value through P&L (by geographic area and sector type)
2010 2009 2010 2009
Continent Sector
Europe 662 871 Residential 207 198
Americas 812 1,590 Office 385 498
Australia 189 493 Retail 620 852
Asia 349 325 Industrial 516 1,255
Other 14 Other 298 476
Total 2,026 3,279 Total 2,026 3,279

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ING Bank’s real estate exposure revaluing through P&L decreased significantly mainly caused by sales of Canadian and Australian funds.
The fair value changes (EUR –0.1 billion) related to investments in funds were limited in 2010 compared with 2009.

Real Estate Exposure banking books not revalued through P&L (by geographic area and sector type)
2010 2009 2010 2009
Continent Sector
Europe 2,772 3,290 Residential 614 618
Americas 70 235 Office 1,456 1,547
Australia 204 159 Retail 874 883
Asia Industrial 43 74
Other 99 Other 158 562
Total 3,145 3,684 Total 3,145 3,684

ING Bank’s real estate exposure not revaluing through P&L has decreased, which is mainly driven by impairments in Real Estate Development.

ING BANK – LIQUIDITY RISK

Definition
Liquidity risk is the risk that ING Bank or one of its subsidiaries cannot meet its financial liabilities when they come due, at reasonable
cost and in a timely manner. Liquidity risk can materialise both through trading and non-trading positions.

Governance
As with other bank market risks, liquidity risk falls under the supervision of the ALCO function within ING Bank, with ALCO Bank
as the highest approval authority.

ALCO Bank determines the liquidity risk framework after which this is cascaded down in the organisation under the responsibility
of the regional and local ALCOs.

The main objective of ING’s liquidity risk framework is to ascertain – by means of proper risk appetite limits – that sufficient liquidity
is maintained in order to ensure safe and sound operations under a variety of circumstances.

For this purpose liquidity risk is measured, managed and controlled from three different angles, namely a structural, a tactical and
a contingency point of view.

Liquidity Risk Management

CMRM is responsible for liquidity risk management and bears the responsibility for the identification, measurement and monitoring of the
liquidity risk position. Next to this it is responsible for performing liquidity risk stress testing. For stress testing purposes, on a monthly basis
and as per Dutch Central Bank guidelines, ING Bank’s liquidity positions are stress tested under a scenario that is a mix between a market
event and an ING specific event. Also on periodic and ad-hoc basis additional stress testing exercises are undertaken on consolidated and
local level.

Structural liquidity risk

Structural liquidity risk is the risk that the structural, long term balance sheet cannot be financed timely or at a reasonable cost.
For the purpose of managing structural liquidity risk, a specific advisory committee to ALCO Bank has been established.

This committee which consists of key representatives from Corporate Market Risk Management, Capital Management and Financial
Markets focuses on all liquidity risk aspects from a going concern perspective. The main objective of the committee is to maintain
a sound liquidity profile through:
• Maintaining a well diversified mix of funding sources in terms of instrument types (e.g. unsecured deposits, commercial paper,
long term bonds or repurchase agreements), fund providers (e.g. professional money market players, wholesale and retail clients),
geographic markets and currencies;
• Actively managing access to the capital markets by regularly issuing public debt in all material markets and the maintenance of
investor relations;
• Holding a broad portfolio of eligible assets that can be utilised to obtain secured funding, e.g. from the repo market or (E)CB;
in this respect the total eligible collateral position amounts to EUR 156.6 billion (nominal);
• Management of liquidity gaps, taking into account the asset mix and both the secured and unsecured funding opportunities
of ING Bank;
• Maintaining a funds transfer pricing policy in which ING Bank’s cost of liquidity is adequately reflected both under a going concern
and a contingency perspective.

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With respect to funding sources, ING Bank aims to fund its own originated assets (loans) by an equal amount of own originated liabilities
(deposits), meaning a loan-to-deposit ratio of approximately 1. Ultimo 2010 the LtD ratio (excluding securities at amortised costs and IABF
receivable) equals 1.05. In the table below the actual funding mix is displayed.

ING Bank Funding Mix

2010 2009
Funding type
Retail deposits 46% 46%
Corporate & other deposits 19% 17%
Interbank (incl central bank) 8% 10%
Lending/repurchase agreement 7% 8%
Public debt 17% 16%
Subordinated debt 3% 3%
Total 100% 100%

The funding mix remained well diversified and according to targets set. Deposits accounted for 65% of the total funding mix.

Tactical liquidity risk

Liquidity risk which is resulting from short term cash and collateral positions is managed in the risk framework from a tactical liquidity
risk perspective. The day-to-day management of the overall short term liquidity risk of ING Bank is delegated to Financial Markets
Amsterdam, while regional and local Financial Markets departments manage liquidity in their respective regions and locations. Within
Financial Markets, the focus is on the daily and intraday cash and collateral positions and the policy is to manage and sufficiently spread
day-to-day funding requirements.

Contingency liquidity risk

Contingency liquidity risk specifically relates to the organisation and planning for liquidity management in time of stress. Within ING,
for contingency purposes, a specific crisis team – consisting of key Board Members, representatives from Corporate Departments (e.g.
Risk and Capital Management) and Treasuries – is responsible for liquidity management in times of crisis. Throughout the organisation
adequate and up-to-date contingency funding plans are in place to enable senior management to act effectively and efficiently in times
of crisis.

Contingency funding plans address both temporary and long-term liquidity disruptions, triggered by either a general market event or an
ING specific event.

New developments
In the aftermath of the crisis, all financial institutions have been confronted with a large number of new regulatory requirements which
are being implemented or are in the course of implementation. With regard to liquidity ING Bank is well on track in the implementation
of CRDII. As in respect of Basel III, and the to be implemented Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR), further
alignment will take place in the upcoming observation periods, ING will keep track of what is expected and will be at required levels well
in time.

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ING INSURANCE FINANCIAL RISKS

ING is engaged in selling a broad range of life and non-life insurance products. Risks from these products arise with respect to the
adequacy of insurance premium rate levels and provisions for insurance liabilities, earnings and capital position, as well as uncertainty as
to the future returns on investments of the insurance premiums. Financial Risks are classified as insurance risk (actuarial and underwriting),
market risk, liquidity risk, credit risk, and business risk. Compliance risk, legal risk and operational risk are classified as Non-Financial Risks.

The Management Board Insurance is responsible for managing risks associated with the activities of ING Insurance. The responsibility for
measurement and management of credit risk and operational risk resides with Corporate Credit Risk Management (CCRM) and Corporate
Operational Risk Management (CORM) respectively. Corporate Insurance Risk Management (CIRM) is responsible for insurance risk, market
risk and liquidity risk measurement and management, business risk measurement, as well as ensuring that investment mandates
adequately address credit portfolio risk.

Risk management governance

ING’s Insurance Risk Management (IRM) is organised along a functional line comprising three levels within the organisation: the corporate,
business line and business unit levels. The General Manager of CIRM, the Chief Insurance Risk Officer, heads the functional line and
reports to the ING Group CRO. Each of the business lines and business units has a similar function headed by a Chief Insurance Risk Officer
(business line and business unit CRO/CIRO). This layered, functional approach ensures consistent application of guidelines and procedures,
regular reporting and appropriate communication vertically through the risk management function, as well as providing ongoing support
for the business. The scope, roles, responsibilities and authorities of the risk management function at different levels are clearly described
in an Insurance Risk Management Governance Framework to which all consolidated business units and business lines must adhere.

The objective of the insurance risk management function is to provide the business a sustainable competitive advantage by fully integrating
risk management into the tactical daily business activities as well as ING’s broader business strategy. Insurance Risk Management
accomplishes this through four core activities. First, the IRM function ensures that products and portfolios are structured, underwritten,
priced, approved and managed appropriately in compliance with internal and external rules and guidelines. Second, IRM ensures that the
ING Insurance risk profile is transparent and well understood by management and stays within delegated authorities, with a ‘no surprises’
approach to reporting and monitoring risks. Third, IRM ensures that both risk and reward are adequately considered in the development of
business strategy, for example by supporting the planning and allocation of capital and limits during the strategic planning process. Finally,
IRM ensures that these steps are understood by ING’s stakeholders, including shareholders, rating agencies, regulators and policy holders.

Risk management policies and tools

To ensure appropriate risk management, CIRM in close co-operation with the business line CROs/CIROs, has developed Standards of
Practice guidelines and tools to manage risks. While these standards are principle based, they include mandatory requirements to which
the business unit CROs/CIROs must adhere.

A critical aspect of risk management is that all new products are designed, underwritten and priced appropriately. This is explicitly covered
by the Standard of Practice for the Product Approval and Review Process (PARP). This standard includes requirements related to risk profile,
traditional and value-oriented pricing metrics and targets and documentation. Customer Suitability is integral part of the PARP requirements
since December 2009. In addition to insurance and market risks, the requirements refer to credit risks, operational risks, compliance and
legal risks. For these risks, the IRM network works closely together with the other relevant risk departments. The PARP also includes
requirements to assess sensitivities to changes in financial markets, insurance risk (e.g. mortality and claims development), compliance
risks, legal risks and operational risks, as well as assessment of the administration and accounting aspects of the product.

Other standards prescribe quarterly insurance risk reporting, ALM procedures and reporting, actuarial and economic assumption setting
and reserve adequacy testing amongst others.

ING Insurance has developed an Economic Capital approach similar to that used within ING Bank. This is used as one of its core risk
measurement tools. An exception is the US Insurance business which is managed based on Regulatory Capital. More details on the
Economic Capital model are described in the Model Disclosure section. The ECAPS system provides a well controlled and automated
basis for Economic Capital and risk measurement. Beyond measurement and reporting, the ECAPS system also provides greatly enhanced
portfolio and capital analysis tools for management purposes.

CIRM expects this system to be the foundation of its internal fair value and solvency model, including the calculation of capital
requirements following the introduction of Solvency II. Through 2010 the system has been enhanced and its functionalities expanded.

To further manage risk, ING Insurance has implemented several limit structures. Examples include but are not limited to the following:
• Market Risk limits on sensitivities of Available Financial Resources, IFRS Earnings and Regulatory Capital. These limits provide the
fundamental framework to manage the market and credit risks resulting from the Insurance operations’ asset/liability mismatch;
• Credit risk concentration limits;
• Mortality concentration limits;
• Catastrophe and mortality exposure retention limits for its insurance risk; and
• Investment and derivative guidelines and limits.

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Reserve adequacy
CIRM instructs and supervises all ING Insurance entities to ensure that the total insurance liabilities of ING Insurance (both reserves and
capital) are tested for adequacy taking into account the insurance premium rate levels and the uncertainty of future returns on investments.
This is done by evaluating insurance liabilities on current best estimate actuarial assumptions plus a risk margin, ensuring that the reserves
remain adequate based on current assumptions. The assumed investment earnings are a combination of the run-off of portfolio yields on
existing assets and new money and reinvestment rates. For new money and reinvestments long-term best estimate assumptions are taken
into account, although current new money rates are used for the short-term reinvestments. For most products stochastic testing is required,
taking the 90% point as the testing outcome. In the case where deterministic testing is used the 90% confidence level is achieved by
subtracting risk margins off 20% of the best-estimate interest rates or one percent point, whichever is higher.

As of the fourth quarter of 2010, the Closed Block Variable Annuity business in the US is reported and analysed separately from the other
US business in the internal management reporting. Therefore as of 1 October 2010 ING reports the US Closed Block VA business as a
separate business line to improve transparency and ongoing business. ING Group’s accounting policy for reserve adequacy as set out in the
Accounting policies for the consolidated annual accounts of ING Group requires each business line to be adequate at the 50% confidence
level. The separation of the Closed Block VA business into a separate segment triggered a charge in the fourth quarter of 2010 to bring
reserve adequacy on the new Insurance US Closed Block VA business line to the 50% level. This charge is reflected as a DAC write-down
of EUR 975 million before tax.

While the reserves for the segment US Closed Block VA are adequate at the 50% confidence level, a net reserve inadequacy exists using
a prudent (90%) confidence level. In line with Group Policy, Insurance US Closed Block VA is taking measures to improve adequacy in that
region. This inadequacy was offset by reserve adequacies in other segments, such that at the Group level there is a net adequacy at the
prudent (90%) confidence level.

ING INSURANCE RISK PROFILE

The risk appetite of ING Insurance is derived from the ING Group risk appetite and is aligned with how its business is being managed and
anticipating regulatory developments going forward. The risk appetite of ING Insurance is bound by local regulatory restrictions and by
the target ratings for both the Insurance holding companies and certain rated operating subsidiaries.
• For the EurAsia and LatAm insurance business we align the Economic Capital (EC) definition with the Solvency II Capital Requirement
which is based on a 99.5% confidence level. The target ratio of Available Financial Resources (AFR) over Economic Capital is set based
on the business strategy and resulting risk appetite defined by the Management Board Insurance;
• For the US insurance business the risk appetite is aligned with local US Regulatory Capital requirements.

The EurAsia and LatAm business includes the Benelux, Central & Rest of Europe, Asia Pacific and Latin America business lines. For the risk
profile it is currently not yet feasible to show the Latin America business separately from the EurAsia business. The US business includes the
Insurance US and US Closed Block VA business lines. The risk of ING Investment Management (IIM) business line for EurAsia and LatAm
has no material impact and is therefore incorporated in the numbers of EurAsia and LatAm. The same applies to the risk of IIM for the US,
which is therefore incorporated in numbers of the US.

ING Insurance risk metrics in 2010

For the EurAsia and LatAm insurance business the insurance risk appetite is managed based on the metrics disclosed below:
• Economic Capital: the amount of capital that is required for the current net asset value (based on fair value) to absorb unexpected
losses in a severe stress scenario based on a 99.5% confidence level. This metric is only applicable for the EurAsia and LatAm insurance
business as this metric is aligned with Solvency II;
• AFR Sensitivities: the potential reduction of the current net asset value (based on fair values) during a moderate stress scenario.
This metric drives the ratio of Available Financial Resources over Economic Capital;
• Earnings Sensitivities: the potential reduction in IFRS earnings during a moderate stress scenario. Maintaining a high quality of earnings
helps ING to safeguard against being downgraded by the rating agencies.

The US insurance business is managed to a risk appetite based on two key risk metrics:
• US Regulatory Capital Sensitivities: the potential reduction, under a moderately market and credit stress scenario, of the excess of
available statutory capital above the minimum required under the US regulatory Risk Based Capital (RBC) methodology. The RBC
methodology is prescribed by the National Association of Insurance Commissioners (NAIC) and applies to US domiciled regulated
insurance entities.
• Earnings Sensitivities: the potential reduction in IFRS earnings during a moderate stress scenario. Maintaining a high quality of earnings
helps ING to safeguard against being downgraded by the rating agencies.

During 2010 the regulatory capital sensitivities effectively replaced Economic Capital as a key risk based metric on which the US insurance
business is measured. Therefore, we have excluded the US insurance business from our Economic Capital risk metrics and related AFR
sensitivities in order to better align reported risk metrics with those to which the US businesses are primarily managed and which are the
most common benchmarks in the regulatory and competitive environments in which the US businesses operate. To allow for reconciliation
with the Economic Capital numbers shown in the Risk Management Section of the Annual Report 2009, we show US Economic Capital
for 2009 split by risk type.

228 ING Group Annual Report 2010

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ING Insurance

ING Insurance’s risk metrics cover the most important aspects in terms of performance measures where risk can materialise and are
representative of the regulatory constraints that our business is subject to. The sensitivities for AFR, Earnings and US Regulatory Capital
are important metrics since they provide insight into the level of risk ING takes under ‘moderate stress’ scenarios. They also are the basis
for internal risk management.

When interpreting the Economic Capital and sensitivities for AFR, Earnings and US Regulatory Capital it is important to note that these
metrics do not take into account discretionary risk mitigation in a specific crisis situation, and are based on instantaneous shock scenarios.

Economic Capital ING Insurance – EurAsia and LatAm Insurance Business

The objective of the ING Insurance Economic Capital framework is to achieve an advanced risk and capital measurement and management
structure that:
• Covers all identified risks in the business units and is applied consistently across all risks and business units within its scope,
i.e. EurAsia and LatAm;
• Facilitates and encourages adequate risk- and capital management, including the proper pricing of products and sound capital
allocation decisions.

The ING Insurance Economic Capital model is based on a 99.5% one-year Value at Risk framework. During 2010 we changed the Value
at Risk confidence interval from 99.95% to 99.5% to align with the Solvency II standard for internal models which will become the group
regulatory constraint for the EurAsia and LatAm insurance business. For the total Economic Capital figures, we also provide ratios based on
both confidence intervals to provide comparability between the figures reported in the risk management section of the annual report
2009 and the figures provided below. It is important to note that since industry practice relating to Economic Capital is still evolving and
moreover, Solvency II standards are still under discussion, ING Insurance models are expected to evolve as a result.

ING has carried out a rigorous review of the internal model in the context of a Solvency II gap analysis. In the review we benchmarked our
models against the Solvency II Standard Formula, the CEIOPS consultation papers and commentary of expert groups like CRO Forum and
Group Consultative. We consequently plan further refinements of our Economic Capital model that address improvements of our market
risk calibration, in particular for spread risk; business risk, to improve our capturing of policyholder behaviour risk and to address country
risk; and operational risk. These changes will result in a material increase of our EC on top of the amount shown in the tables below which
we estimate to between one and two billion euro as at year end 2010. This estimate is not included in the tables below.

The ING Insurance Economic Capital model is described in more detail in the Model Disclosure section.

Economic Capital disclosures include diversification benefits that arise within ING Insurance (EurAsia and LatAm). Although the
diversification benefits in 2010 are very similar to those in 2009 it is important to point out that this is the result of two offsetting impacts.
Firstly, the 2010 Economic Capital no longer includes the US business which results in a higher diversification benefit between risk types
and business units. Secondly, the 2010 Economic Capital has a lower recognition of market risk diversification due to an updated method
to define market risk correlations which results in a lower diversification benefit between risk types and business units.

The following table provides an Economic Capital break down by risk category with diversification benefits allocated to the risk types:

Economic Capital break-down ING Insurance EurAsia and LatAm (99.5%) by risk category (1) (2)
2010 2009
Credit risk (including Transfer risk) 394 325
Market risk (including credit spread risk) 7,079 4,228
Insurance risk 1,283 982
Other risks (2) 1,606 1,419
Total insurance operations EurAsia and LatAm 10,362 6,954
(1)
The Economic Capital outcomes do not reflect any potential tax benefit resulting from the loss that occurs under the specified circumstances.
(2)
Other risk includes operational risk as well as business risk (covering expense risk and lapse risk).

Diversification across the risk categories is 30% for 2010 (32% for 2009 for combined ING insurance business including US).

The Economic Capital for ING Insurance EurAsia and LatAm is mostly related to market risks, both hedgeable and non-hedgeable. Overall,
Economic Capital and risk profile of the EurAsia and LatAm insurance business increased during 2010. The primary change came from
increased market risk, relating mainly to an increased equity and foreign exchange exposure and due to a partial unwinding of economic
hedges in combination with a lower recognition of market risk diversification within the Economic Capital model. Lower diversification is
also the main driver of the increases in the other risk categories.

The change in confidence interval from 99.95% to 99.5% reduced our 2010 Economic Capital for the EurAsia and LatAm business by
24% across risk types (25% for 2009). For market risk, insurance risk and other risks the reduction due to this change is in the same order
of magnitude. For credit risk the reduction is more significant due to its fat tailed distribution.

ING Group Annual Report 2010 229

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Risk management continued

ING Insurance

As we no longer include the US business in our Economic Capital, we provide for 2009 the numbers for both the EurAsia and LatAm
and US insurance business. The 2009 US figures are provided in the table below.

Economic Capital break-down ING Insurance US (99.5%) by risk category (1) (2)
2009
Credit risk (including Transfer risk) 510
Market risk (including credit spread risk) 4,528
Insurance risk 214
Other risks (2) 1,215
Total insurance operations 6,467
(1)
The Economic Capital outcomes do not reflect any potential tax benefit resulting from the loss that occurs under the specified circumstances.
(2)
Other risk includes operational risk as well as business risk (covering expense risk and lapse risk).

The change in confidence interval reduced our US 2009 Economic Capital number by 27% across risk types. Allowing for excluding the
change in confidence interval for both US 2009 figures and EurAsia and LatAm 2009 figures, and then adding these figures will allow for
reconciliation with the Economic Capital numbers shown in the Risk Management Section of the Annual Report 2009.

The following table provides the Economic Capital breakdown by business line with diversification benefits proportionally allocated to the
business lines.

Economic Capital break-down by ING Insurance business line for EurAsia and LatAm Business
2010 2009
Insurance Latin America 611 670
Insurance Asia/Pacific 1,750 1,688
Insurance Benelux 3,604 2,205
Insurance Central & Rest of Europe 783 765
Corporate Line Insurance (1) 3,614 1,626
Total insurance operations EurAsia and LatAm 10,362 6,954
(1)
Corporate Line includes funding activities at ING Insurance (EurAsia and LatAm) level, explicit internal transactions between business unit and Corporate Line,
managed by Capital Management, and corporate reinsurance. The responsibility (and risk) of free assets located within the business line for which there is no
explicit transfer via a Corporate Line transaction remain at the business unit level.

While the figures above are shown by business line, the diversification of risks across ING businesses is calculated across business
units. Total diversification between ING Insurance’s business units and the Corporate Line Insurance is 31% for 2010 for EurAsia and
LatAm (32% for 2009 for combined ING insurance business, including US).

Insurance Benelux and Corporate Line are the largest users of Economic Capital. Increased interest rate, equity and credit spread exposure
and a lower recognition of diversification has increased Economic Capital for Benelux. The Corporate Line risk includes foreign exchange
translation risk related to the potential loss of market value surplus in non-Euro denominated business units. The corporate line increase in
Economic Capital has four main causes: the reinsured Japan variable annuity business, which is now included in the corporate line (in 2009
included in Asia/Pacific), the increased Economic Capital related to the minority stake in our Brazil business which is included in the
corporate line, and a higher translation risk exposure mainly from increased market value surplus in non-Euro business and a decreased
recognition of diversification. The Asia/Pacific risk is unchanged as a lower recognition of diversification offsets the move of the
reinsurance Japan variable annuity business to the corporate line.

Regulatory Capital Sensitivities – US Insurance Business

For the capital adequacy assessment of ING’s US domiciled regulated insurance business, available capital is measured under US statutory
accounting principles and required capital is measured under the US regulatory Risk Based Capital (RBC) methodology defined by the
National Association of Insurance Commissioners (NAIC). Commonly in the US an insurer’s financial strength and ability to meet
policyholder obligations is measured in terms of the amount of statutory capital held in relation to the ‘Company Action Level’ RBC
defined by the NAIC framework. Note that the level of capital required by rating agencies to maintain an acceptable claims paying ability
rating is well above the regulatory minimum defined by Company Action Level RBC. Consequently the US Insurance business manages its
available capital primarily with respect to capital metrics that are aligned with the models of the various ratings agencies.

The US Insurance business calculates regulatory capital sensitivities on the Risk-Based Capital model of the National Association of
Insurance Commissioners (NAIC) in order to provide insight into how the amount of available capital in excess of regulatory required
capital is sensitive to an increase or decrease in different market and credit risk factors under a moderate stress scenario which corresponds
approximately with a 1-in-10 event. Our regulatory capital sensitivities are calculated in aggregate for the US domiciled regulated insurance
entities.

Statutory capital in the US domiciled regulated insurance entities ended 2010 with an estimated EUR 4,009 million in excess of Company
Action Level RBC. The Capital Management section describes the ratio of available statutory capital over required capital at the Company
Action Level.

230 ING Group Annual Report 2010

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ING Insurance

The table below presents market risk sensitivity figures before diversification between risks and legal entities. The stress events are
described in the Model Disclosure section. Interest rates are shocked 30% relative compared to the ten-year swap rate. The credit risk
sensitivities are based on the new methodology introduced in 2010 which can be found in the Model Disclosure section. Equities are
shocked 25% down. As the US regulatory capital sensitivities as described have only been set up during 2010 there are no 2009
comparable figures available. In 2009 the US Insurance Business was included in the Economic Capital framework which was used
to manage the risk.

Regulatory Capital Sensitivities – US Insurance Business (1) (2)

2010
Interest Rate Up –138
Interest Rate Down 76
Equity –298
Credit –466
(1)
Real Estate, Credit Spread, FX and Implied Volatility Sensitivities do not have a material impact.
(2)
Sensitivities are calculated at legal entity level and cover US domiciled insurance entities.

Taking into account diversification between risk factors as described in the Model Disclosure section, we are exposed to a EUR 818 million
decrease in our excess capital.

ING INSURANCE – MARKET RISKS

ING Insurance is exposed to market risk to the extent to which the market value of surplus can be adversely impacted due to movements
in financial markets; these include interest rates, credit spreads, equity prices, Real Estate prices, implied volatilities of options and foreign
exchange rates. Changes in financial market prices impact the market value of ING’s current asset portfolio and hedging derivatives directly
as well as the calculated market value of ING’s insurance liabilities.

In 2010 ING moved away from managing the market risk purely on an AFR basis (Market Value at Risk limits based on a 99.95%
confidence interval) and moved to a new risk limit framework based on limits set on market risk sensitivities for AFR, IFRS Earnings and
Regulatory Capital. On at least an annual basis, the Asset Liability Committee (ALCO) Insurance sets market risk limits at business line level,
which are ultimately allocated to the business units. The market risk limits are managed by ALCO Insurance at the relevant organisational
level. The Group Insurance ALCO determines the aggregate limit and ensures that the Group stays within its risk tolerance limits and
allocates the sub-limits to business lines, with similar roles for the business line and business unit ALCOs. Limit breaches by business lines
are reported to ALCO Insurance and resolved in accordance with the policy within the next quarter.

The market risk limit framework is based on moderate stress scenarios for market risk drivers. The section below shows the impact of
these stress scenarios on AFR and IFRS Earnings. These stress scenarios are described in more detail in the Model Disclosure section.

AFR Sensitivities
AFR Sensitivities are defined as the potential reduction of the current net asset value (based on fair values) during a moderate stress
scenario. Interest rates are shocked 30% upwards and downwards relative to the ten year swaps rates. The credit sensitivity in table
below is based on a new method introduced in 2010 such that there is no comparable 2009 number available. Equity and Real estate are
based on a 25% and 15% downward shock respectively. The FX shock is based on a 10% up or down movement for each currency.
Implied volatilities for swaptions are shocked by 30%. The shock for implied volatilities for equities is related to the underlying tenor. More
details on the stress scenarios can be found in the Model Disclosure section.

The AFR sensitivities are only applicable for the EurAsia and LatAm insurance business as these sensitivities drive the ratio of Available
Financial Resources over Economic Capital. The capital management section discusses the AFR over Economic Capital ratio.

AFR sensitivities for insurance market risks – EurAsia and LatAm Insurance Business
2010 2009
Interest Rate Up 329 –626
Interest Rate Down –1,538 –291
Equity –1,822 –988
Real Estate –813 –842
FX –1,547 –1,332
Credit Spread –1,746 n/a
Implied Volatility –468 –427

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ING Insurance

Interest rate sensitivities are mainly related to the Benelux and Asia/Pacific business. In 2010 the AFR has become significantly more
sensitive to downward interest rate movements. Lower interest rate levels have contributed to this increase. Furthermore economic
hedges have been unwound in the Benelux.

Equity sensitivity has increased due to unwinding of hedging activities, relating to both direct and indirect exposure and a higher equity
value due to positive equity markets in 2010. Direct exposure relates to the holding of shares and is most significant for ING in the
Netherlands. Indirect exposure relates to the potential loss of fee income from unit linked, variable annuity, and pension fund business
across all regions. Direct exposure represents approximately half of the equity sensitivity, after taking the hedge positions into account.

Credit Spread sensitivity relates to increases in credit spreads from investments in fixed income securities and also includes offsetting
movements in the liquidity premium on the liabilities. Sensitivity is largely driven by the general account business in Benelux and to a
smaller degree our Asia/Pacific business.

Real Estate sensitivity exists mostly in the Netherlands and relates in a large part to direct Real Estate investments.

Implied volatility sensitivity relates to the risk that market values of assets or liabilities change due to movements in the volatility implied
from market option prices. In general, ING is exposed to increases in implied volatility as the guarantees provided to customers become
more expensive.

Foreign exchange sensitivity is small in the business units. The main exposure is at the corporate level and relates to the FX translation
risk which increase due to a change in the market value surplus of non-Euro businesses and a lower recognition of diversification.

Earnings sensitivities
Complementing Economic Capital, which is based on a market value analysis, ING Insurance also measures risk based on IFRS earnings.
More specifically, using scenario analysis, ING Insurance measures the potential sensitivity of realised pre tax earnings of the insurance
operations to a change in different risk factors over a full year.

Earnings sensitivities are defined on moderate stress scenarios for pre-tax IFRS earnings. The tables below present figures before
diversification between risks and business units. Interest rates are shocked 30% upwards and downwards relative to the ten year swaps
rate. The credit sensitivity in the table below is based on new method introduced in 2010 such that there is no comparable 2009 number
available. Equity and Real estate are based on a 25% and 15% downward shock respectively. The FX shock is based on a 10% up or down
movement for each currency. Implied volatilities for swaptions are shocked by 30%. More details on the stress scenarios can be found in
the Model Disclosure section.

Earnings sensitivities for insurance market risks – EurAsia and LatAm Insurance Business
2010 2009
Interest Rate Up –205 –291
Interest Rate Down 285 317
Equity –137 –172
Real Estate –806 –812
FX –152 –181
Credit Default –258 n/a

The table above shows that Real Estate fluctuations can have a relatively large impact on earnings since most price volatility is reflected
in earnings for Real Estate investments. The impact on earnings of interest rates and equity price changes are normally lower than the
economic and shareholder’s equity impact given the fact that current accounting rules are not fully market value based. The sensitivity
results reflect the impacts of asymmetric accounting, whereby the hedges must be marked to market through earnings while the liability
value is not marked-to-market through earnings.

The interest rate sensitivity is dominated by the Dutch separate account business where interest rate derivatives are used to hedge
a liability on Group life contracts that is not marked to market.

Earnings sensitivities for insurance market risks – US Insurance Business

2010 2009
Interest Rate Up 17 76
Interest Rate Down –68 –44
Equity –934 –1,084
Real Estate –2 –2
Credit Default –795 –737

232 ING Group Annual Report 2010

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ING Insurance

The US earnings sensitivities are dominated by credit and equity exposure. The credit default exposure relates to general account debt
securities. Exposure to Asset Backed Securities (ABS) and Residential Mortgage Backed Securities (RMBS) contributes significantly to the
earnings sensitivity. Equity exposure relates mostly to the US Closed block VA where an equity stress scenario results in DAC unlocking.
As earnings sensitivities are forward looking, the US Closed Block VA business line sensitivities are based on the situation on 1 January
2011, which reflects the DAC write-down as well as change to apply current market interest rates and current estimates for other
assumptions in valuation of insurance liabilities and hedging of the interest rate exposure for the Guaranteed Minimum Withdrawal
Benefit (GMWB).

In the US there is no significant earnings sensitivity to Foreign Exchange Rates as the US is managed on a local currency basis and therefore
there is no translation risk to the group reporting currency included. There is no significant earnings exposure to non US currencies.

Real Estate
Real Estate price risk arises from the possibility that the value of Real Estate assets fluctuate because of a change in earnings related to
Real Estate activities and/or a change in required investor yield.

ING Insurance has two different categories of Real Estate exposure on its insurance books. First, ING Insurance owns buildings it occupies.
Second, ING Insurance has invested capital in several Real Estate funds and direct Real Estate assets. A decrease in Real Estate prices will
cause the value of this capital to decrease and as such ING Insurance is exposed to Real Estate price shocks.

The second category can be divided on the one hand in minority stakes in Real Estate assets that are revalued through equity and on
the other hand stakes in funds managed by ING and direct Real Estate revalued through P&L. Only for the last category will Real Estate
price shocks have a direct impact on reported net profit.

The crisis in the financial markets has led to a further slowdown of the world economy in general. These global economic factors also
had negative consequences for the value of Real Estate assets.

Per year end 2010 ING Insurance has EUR 3.8 billion of Real Estate related investments (excluding leverage). ING Insurance’ Real Estate
exposure (i.e. including leverage) is EUR 5.9 billion of which EUR 4.3 billion is recognised as fair value through P&L and EUR 1.6 billion
is not revalued through P&L, but is either booked at cost or is revalued through equity (with impairments going through P&L). In total,
Real Estate exposure decreased by EUR 179 million mainly as a result of negative fair value changes (EUR 71 million), impairments
(EUR 22 million) and divestments (EUR 140 million) compensated by net investments (EUR 16 million) and FX appreciation (EUR 32 million).

Real Estate Exposure (Insurance) recorded as fair value through P&L (by geographic area and sector type)
2010 2009 2010 2009
Continent Sector
Europe 4,105 4,236 Residential 349 379
Americas 108 94 Office 1,321 1,366
Australia 10 25 Retail 1,933 1,958
Asia 84 68 Industrial 422 450
Other Other 282 270
Total 4,307 4,423 Total 4,307 4,423

Real Estate Exposure (Insurance) not revalued through P&L (by geographic area and sector type)
2010 2009 2010 2009
Continent Sector
Europe 1,444 1,524 Residential 785 747
Americas 139 125 Office 329 373
Australia Retail 3
Asia 23 20 Industrial 5
Other Other 492 541
Total 1,606 1,669 Total 1,606 1,669

ING Group Annual Report 2010 233

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ING Insurance

ING Insurance – Liquidity risk

As with other ING Insurance market risks, liquidity risk falls under the supervision of the ALCO function. Liquidity risk is the risk that ING
Insurance or one of its subsidiaries cannot meet its financial liabilities when they come due, at reasonable cost and in a timely manner.
ING Insurance defines three levels of Liquidity Management. Short term liquidity, or cash management covers the day-to-day cash
requirements under normally expected or likely business conditions. Long term liquidity management takes into consideration of various
expected and adverse business conditions, which will result in the inability of realizing the current market values of the assets. The assets
may only be sold at a further distressed price simply due to the lack of liquidity. Stress liquidity management looks at the company’s ability
to respond to a potential crisis situation. The day-to-day and ongoing cash management allows for a more proactive response to potential
liquidity problems in distressed markets.

ING INSURANCE – INSURANCE RISKS

General
Actuarial and underwriting risks are risks such as mortality, longevity, morbidity, adverse motor or claims development, etc., which result
from the pricing and acceptance of insurance contracts. In general, these risks cannot be (easily) hedged directly in the financial markets
and tend to be mitigated by diversification across large portfolios. They are therefore primarily managed at the contract level through
standard underwriting policies, product design requirements as set by ING’s IRM function, independent product approval processes
and risk limitations related to insurance policy terms and conditions agreed with the client.

Measurement
For portfolio risks which are not mitigated by diversification, the risks are managed primarily through concentration and exposure limits
and through reinsurance and/or securitisation. Aggregate portfolio level limits and risk tolerance levels are set in reference to potential
losses stemming from adverse claims in ING’s insurance portfolios which are reviewed annually. ING Group has established actuarial and
underwriting risk tolerance levels in specific areas of its insurance operations as described below. For non-life insurance, risk tolerance
levels are set by line of business for catastrophic events (e.g. natural perils such as storms, earthquakes and floods) and for individual risks.

For the main non-life units (in the Benelux) the risk tolerance for property and casualty (P&C) business is derived from the total Non-Life
earnings of 2009. For 2010, this translated into an aggregated (pre-tax) risk tolerance level of EUR 180 million for the Benelux (2009:
EUR 190 million).

In order to determine how much reinsurance protection is required these risk tolerance levels are compared to the estimated maximum
probable loss resulting from catastrophic events with a 1 in 250 probability of occurrence which is in line with industry practice.
The maximum probable loss estimates for Fire business are based on risk assessment models that are widely accepted in the industry.

For the smaller non-life units, the (pre-tax) risk tolerance level for catastrophe related events for 2010 was set at EUR 5 million
(2009: EUR 5 million) per event per business unit.

With respect to life business, ING Group’s (pre-tax) risk tolerance level for 2010 was set at EUR 22 million (2009: EUR 22 million) per
insured life for mortality risk. While life insurance risks are considered to be naturally diversifiable by virtue of each life being a separate
risk, group contracts may result in significant exposures. For potential losses, resulting from significant mortality events (e.g. pandemics
or events affecting life insurance contracts involving multiple lives), ING applies a separate risk tolerance level which equalled EUR 1,100
million in 2010 (2009: EUR 1,100 million). The potential impact of pandemics continues to be modelled by ING based on studies
published by respected international organisations.

Overall exposures and concentrations are actively managed within limits and risk tolerance levels through the purchase of external
reinsurance from approved reinsurers in accordance with ING’s reinsurance credit risk policy. Particularly for the property and casualty
portfolio, ING purchases protection which substantially mitigates ING’s exposure due to natural catastrophes. ING believes that the
credit risks to which it is exposed under reinsurance contracts are relatively minor, with exposures being monitored regularly and
limited by a reinsurance credit risk policy.

For catastrophic losses arising from events such as terrorism, ING believes that it is not possible to develop models that support inclusion
of such events in underwriting in a reliable manner. The very high uncertainty in both the frequency and severity of these events makes
them, in ING’s opinion, uninsurable. For the non-life business, losses that result from these events are generally not covered unless
required by law. In various countries industry pools have been established to mitigate the terrorism risk to which the individual insurers
are nevertheless still exposed. ING participates in such pools.

234 ING Group Annual Report 2010

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ING Insurance

The following table provides an overview of the Economic Capital for insurance risks, split into mortality risk, morbidity risk and risk related
to P&C products:

Economic Capital Insurance risks EurAsia and LatAm

2010 2009
Mortality 797 578
Morbidity 361 298
P&C 125 106
Total EurAsia and LatAm 1,283 982

For insurance risk the EC is shown by risk type above. The tables below show Earnings sensitivities for both EurAsia/LatAm and US
Insurance business. The EC are based on a 99.5% confidence level. The change in confidence level from 99.95% to 99.5% reduced
the 2010 Economic Capital for insurance risks by 25% (29% for 2009).

The mortality risk relates to the potential for increasing deaths (life risk) or decreasing deaths (longevity risk). This risk relates to a potential
mortality catastrophe or to changes in long term mortality rates. As noted, ING manages these risks via limits and external reinsurance.
Morbidity risk relates to disability products in the Netherlands and some health riders sold in Asia. Finally, property and casualty risk exists
primarily in the Benelux.

Through scenario analyses, ING Insurance measures the sensitivity of pre-tax earnings of the insurance operations to a change of the
insurance risk factors over a one year period. These changes to earnings can relate to realised claims or any other profit item that would
be affected by these factors. ING assumes that not all the shifts presented below will happen at the same time.

Earnings sensitivities are defined on a shock scenario at the 90% confidence level on IFRS pre-tax earnings. The table below shows the
impact on earnings over a one year horizon.

Earnings sensitivities for Insurance risks – EurAsia and LatAm Insurance Business
2010 2009
Mortality –31 –34
Morbidity –100 –97
P&C –49 –42

The table above presents figures after diversification between insurance risks and diversification across business units of ING Insurance.
The largest earnings sensitivity to P&C claims relates to health and P&C claims in the Netherlands. Earnings sensitivity from Mortality
and Morbidity is more evenly spread over the regions.

Earnings sensitivities for Insurance risks – US Insurance Business

2010 2009
Mortality –16 –12
Morbidity –48 –37
P&C

The largest contribution to the Mortality sensitivity comes from the Retail Life business while the Morbidity exposure relates for a large
part to the Employee Benefit business.

ING INSURANCE – CREDIT RISKS

The credit risks in the general accounts portfolio within ING Insurance are subject to the same principles, policies, definitions and
measurement as those of the banking operations. The credit risks are measured and monitored by Corporate Credit Risk Management
(CCRM) as well as local credit risk managers within the various locations where credit risk is taken within ING Insurance and ING
Investment Management. Within ING Insurance, the goal is to maintain a low risk, well diversified credit risk portfolio that meets
or exceeds market based benchmark returns.

ING Insurance’s credit exposure arises from the investment of insurance premiums in assets subject to credit risk, largely in the form of
unsecured bond investments, and smaller amounts of residential mortgages and structured finance products. In addition, credit exposure
also arises from derivatives, sell/repurchase transactions, securities lending/borrowing and reinsurance contracts used to hedge the
portfolio. ING Insurance has a policy of maintaining a high quality investment grade portfolio.

Overall portfolio credit risk limits are established and integrated into investment mandates by ALCO Insurance based on asset or investment
category and risk classes. Individual issuer limits are determined based on the obligor’s rating. These limits are managed by the region
where the parent company is domiciled but may be sub-allocated to regional or local portfolios. In addition, each Insurance company
has one or more investment mandates (which may differ by insurance portfolio) specifying credit risk appetite by issuer type and quality.

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Risk management continued

ING Insurance

The credit risk classification of issuers, debtors and counterparties within the Insurance companies’ credit risk portfolios continues its
transition to the methodology used by the banking operations. Similar to ING Bank, ING Insurance uses risk classes which are calibrated
to the probability of default of the underlying issuer, debtor or counterparty. These ratings are defined based upon the quality of the
issuer in terms of creditworthiness, varying from investment grade to problem grade expressed in S&P equivalents.

Risk classes: ING Insurance portfolio, as % of total outstandings (1)

Insurance US Insurance EurAsia and LatAm Total ING Insurance
2010 2009 2010 2009 2010 2009
1 (AAA) 23.4% 25.1% 29.7% 30.5% 27.0% 28.1%
2–4 (AA) 14.5% 13.3% 14.4% 17.2% 14.5% 15.4%
5–7 (A) 24.6% 23.2% 32.1% 30.1% 28.7% 26.9%
8–10 (BBB) 22.3% 20.0% 11.8% 11.0% 16.3% 15.1%
11–13 (BB) 4.2% 7.1% 6.1% 6.5% 5.3% 6.8%
14–16 (B) 4.7% 5.0% 3.0% 2.7% 3.8% 3.7%
17–22 (CCC & Problem Grade) 6.3% 6.3% 2.9% 2.0% 4.4% 4.0%
100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
(1)
Based on credit risk measurement contained in lending, pre-settlement, money market and investment activities.
The ratings reflect probabilities of default and do not take collateral into consideration.

ING Insurance risk class distribution remained fairly stable during 2010, as downgrades experienced in the securitization market were
compensated by active divestment programs and other de-risking measures. The CCC and Problem Grade class mainly contains
downgraded securitizations but also some unrated private equity and real estate investments.

Risk concentration: ING Insurance portfolio, by economic sector (1) (2)

Insurance US Insurance EurAsia and LatAm Total ING Insurance
2010 2009 2010 2009 2010 2009
Non-Bank Financial Institutions 43.6% 48.5% 21.9% 21.6% 31.2% 34.0%
Central Governments 8.8% 12.2% 40.6% 40.7% 26.9% 27.7%
Commercial Banks 3.6% 3.6% 10.8% 11.6% 7.7% 7.9%
Private Individuals 2.4% 2.5% 8.6% 10.1% 5.9% 6.6%
Real Estate 8.3% 9.4% 2.4% 0.9% 5.0% 4.8%
Utilities 5.4% 4.0% 2.2% 2.4% 3.6% 3.1%
Natural Resources 5.7% 3.7% 1.2% 1.2% 3.2% 2.3%
Food, Beverages & Personal Care 3.3% 2.6% 1.1% 0.9% 2.1% 1.7%
Other 18.9% 13.5% 11.2% 10.6% 14.4% 11.9%
100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
(1)
Based on credit risk measurement contained in lending, pre-settlement, money market and investment activities.
(2)
Economic sectors below 2% are not shown separately but grouped in ‘Other’.

Where overall risk concentrations within ING Insurance shifted towards Central Governments in 2009, this was partially reversed in
2010 again. The upward shift in Real Estate for Insurance EurAsia and LatAm is related to real estate investments in The Netherlands.

Largest economic exposures: ING Insurance portfolio, by country (1)

Insurance US Insurance EurAsia and LatAm Total ING Insurance
2010 2009 2010 2009 2010 2009
Netherlands 3.7% 4.0% 22.6% 19.6% 14.3% 12.4%
Belgium 0.1% 0.1% 3.8% 3.3% 2.2% 1.8%
Rest of Europe 7.1% 5.8% 43.2% 47.9% 27.3% 28.5%
Americas 85.8% 87.6% 7.6% 7.8% 41.9% 44.7%
Asia/Pacific 3.2% 2.4% 22.7% 21.2% 14.2% 12.5%
Rest of World 0.1% 0.1% 0.1% 0.2% 0.1% 0.1%
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
(1)
Country is based on the country of residence of the obligor.

The US portfolio stayed constant in terms of local currency, but increased in Euro terms due to the appreciation of the US Dollar against
the Euro. The relative concentration in the US has diminished, however, due to faster growth in other regions. The portfolio in the
Netherlands mainly increased due to investments in state bonds. There were no other significant shifts in the portfolio concentration.

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Risk management continued

ING Group – non-financial risks

ING GROUP – NON-FINANCIAL RISKS

In addition to the above financial risks (credit, market, insurance and liquidity risk) the next paragraphs describe the non-financial risks,
being operational and compliance risks.

GENERAL
Policy implementation
To ensure robust non-financial risk management, ING monitors the full implementation of ING’s Risk Policies and Minimum Standards.
Business units have to demonstrate that the appropriate steps have been taken to control their operational and compliance risk. ING
applies scorecards to measure the quality of the internal control within a business unit. Scoring is based on the ability to demonstrate
that the required risk management processes are in place and effective within the business units.

Non-financial Risk Dashboard

The Non Financial Risk Dashboard (NFRD) is a report that is standard on the agenda for the meetings of the Management Boards Banking
and Insurance and the Risk Committee. NFRD provides management at all organisational levels with information on their key Operational,
Compliance and Legal Risks. NFRD is based on their risk tolerance within their business and a clear description of the risks and responses
enabling management to prioritise and to manage operational, compliance and legal risks.

OPERATIONAL RISKS
Operational Risk
Operational risk is the risk of direct or indirect loss resulting from inadequate or failed internal processes, people and systems or from
external events. It includes the related risk of reputation loss, as well as legal risk whereas strategic risks are not included. Effective
operational risk management leads to more stable business processes (including IT systems) and lower costs. Generic mandatory
controls are described in the Operational Risk Management (ORM) policy house.

Clear and accessible policies and minimum standards are embedded in ING business processes in all business lines. An infrastructure
is in place to enable management to track incidents and operational risk issues. A comprehensive system of internal controls creates
an environment of continuous improvement in managing operational risk. ING uses this knowledge (including lessons learned from
incidents) to improve the control of key risks.

Organisation of Operational Risk Management

The General Manager Corporate Operational Risk Management (CORM) reports directly to the CRO and is responsible for monitoring
operational risks and developing and establishing the Operational Risk Framework within ING Group, ING Bank and ING Insurance.
The General Manager Corporate ORM also establishes and approves the policies and minimum standards, and assists and supports
the Executive Board in managing ING’s operational risks.

The CORM function consists of functional departments for Operational risks (including policies, systems, SOX testing, capital allocation
and reporting), for Information (Technology) risks and for Security & Investigations. The CORM function is responsible for developing
and communicating ING’s operational risk framework, policies, minimum standards and guidelines. The corporate function advises
the Management Boards Banking and Insurance and senior management, supports the business line ORM staff, monitors the quality
of operational risk management and leads the group-wide reporting of operational risks to the Management Boards Banking and
Insurance and the Risk Committee.

ORM uses a layered functional approach within business lines to ensure systematic and consistent implementation of the group-wide ORM
framework, policies and minimum standards. To avoid potential conflicts of interests, it is imperative that the ORM officer is impartial and
objective when advising business management on operational risk matters in their business unit or business line. To facilitate this, a strong
functional reporting line to the next higher level ORM officer is in place. The functional reporting line has clear accountabilities with regard
to objective setting, remuneration, performance management and appointment of new ORM staff.

Operational risk framework

ING has developed a comprehensive framework supporting and governing the process of identifying, mitigating, measuring and
monitoring operational risks thus reflecting the stages described in the Enterprise Risk Management model of COSO (Committee
of Sponsoring Organisations of the Treadway Commission).

At all levels in the organisation Operational Risk Committees (ORC’s) are established that identify, measure and monitor the operational
risks of the region or business unit with appropriate quality of coverage (granularity) and to ensure that appropriate management action
is taken by the responsible line managers at the appropriate level of granularity. ORC’s, chaired by the business management, steer the
risk management activities of the first and second line of defence in their entities. On a group level the Operational & Residual Risk
Committee approves the operational risk capital model.

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Risk management continued

ING Group – non-financial risks

IT Risk Governance: IT risk management has become more and more important because of increasing dependency on IT and the increase
of IT risk due to amongst others cybercrime. Two Executive IT Risk Steering Committees, one for Banking and one for Insurance, steer and
monitor ING’s IT Risk Management process and results. In 2011 these Committees will be integrated into the respective ORC’s.

The operational risk appetite within ING is defined as the acceptable and authorised maximum level of risk, in each of the operational risk
areas that must be adhered to in order for ING to achieve its business plan within approved budgets. This risk appetite is quarterly
monitored through the Non-Financial Risk Dashboard which reports the key non financial risk exposures.

Processes are in place to identify key threats, vulnerabilities and the associated risks which might cause adverse events. Event identification
is performed proactively and precedes a risk assessment. Different techniques for event identification exist within ING, e.g. the structured
team approach, scenario analysis, external events inventories, internal incident analysis (e.g. based on information from incident reporting),
key risk indicator events and threat scans.

At least once a year business units and departments perform an integrated risk assessment with involvement of other departments such
as Operational Risk, Compliance, Legal and Finance.

Based on the results of the risk assessment, response measures must be determined for the identified risks beyond the risk appetite.
Risk response actions balance the expected cost for implementing these measures with the expected benefits regarding the risk
reduction. Risk response can be achieved through several combinations of mitigation strategies, for example reducing likelihood of
occurrence, reducing impact, risk avoidance, risk acceptance or through the transfer of risk. Tracking takes place through a global
Action Tracking system.

Certain operational risks can best be transferred to the insurance market if risks are high but difficult to mitigate internally. In order to
protect ING against financial consequences of uncertain operational events ING has acquired insurance policies issued by third-party
insurers for Crime, Professional Liability, Directors and Officers Liability through its Risk Management & Transfer Programmes.

Management at all levels in the organisation periodically needs information on their key operational risks (including compliance and legal
risks) and mitigating actions. In order to make it easier for management to access this kind of information, business units periodically
report through the Non-Financial Risk Dashboard (NFRD).

The yearly objective setting process for both business management and ORM professionals aims to keep improving the management
of operational risk throughout ING to ensure that ING stays in control of its current and future operational risks. ING’s ORM Framework
is further maturing towards an integrated controls framework according to pre-agreed requirements and development stages in the
individual business units. This development is measured through the scorecard process.

Capital calculation
The Operational Risk Capital model of ING is based on a Loss Distribution Approach (LDA). The Loss Distribution is based on both external
and internal loss data exceeding EUR 1 million. The model is adjusted for the scorecard results, taking into account the specific quality of
control in a business line and the occurrence of large incidents (‘bonus/malus’). This provides an incentive to local (operational risk)
management to better manage operational risk. The Bank Operational Risk Regulatory Capital is based on the Advanced Measurement
Approach (AMA) decreased from EUR 3,309 million in 2009 to EUR 2,872 million in 2010 due to the extension and improvement of
business environment factors and the update of the external operational loss data in the capital model as approved by the Operational &
Residual Risk Committee of ING. ING started in 2010 a program to further enhance its AMA framework in 2011 and align with peer/
industry practices as they develop.

Main developments in 2010

• Cybercrime – Based on a High-Tech Crime Prevention assessment a number of potential risks has been identified. Secure Code Review
was found as an area of concern and during 2010 a dedicated taskforce has taken action across ING Group. After remediation
of the identified gaps, dynamic code scan and review (in order to detect vulnerabilities in websites) has been implemented.
• Operational Risk Committees – Following the changes in the organisation and governance of ING and regulatory requirements, ING
has installed a periodic Bank Operational Risk Committee (ORC) in December 2010, consisting of the members of the Bank
management board, the CEO’s of the Regions and Functions, and the General Managers of ORM, Legal and Compliance. The mandate
of the Bank ORC has been approved in the Bank Management Board. The responsibility of the Bank ORC is to monitor and manage the
operational risks of the bank. Below the Bank ORC six Region/Function ORC’s were set up which are responsible for the regional and
functional operational risk oversight in their area of responsibility: ORC Netherlands, ORC Belgium, ORC ING Direct, ORC International/
Commercial Banking, ORC Financial Markets and ORC OIB.
• Anti-Fraud – ING has a ‘zero tolerance’ approach towards fraud and therefore implemented the ING’s Global Anti-Fraud Programme
in 2010. This programme aims for a high level of fraud resilience and further mitigation of losses deriving from fraud. Design and
implementation of additional fraud controls, training and building the anti-fraud community and risk awareness communication
are key elements to the programme.
• IT security monitoring – To ensure that the approved enterprise’s information security baseline is maintained, ING installed
monitoring agents on almost all platforms. This improved monitoring capabilities contributed to the reduction of the IT-risk profile.

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Risk management continued

ING Group – non-financial risks

• Disentanglement – The ORM function monitored during 2010 the operational risks around the disentanglement process of
ING Bank and ING Insurance (project Readiness). The Readiness project completed the Day-1 sign off in which CEO’s confirmed
to be operating at arm’s length.

COMPLIANCE RISKS
Compliance Risk is defined as the risk of damage to ING’s integrity as a result of failure (or perceived failure) to comply with relevant
laws, regulations, internal policies, procedures and ethical standards. In addition to reputational damage, failure to effectively manage
Compliance Risk could expose ING to fines, civil and criminal penalties, and payment of damages, court orders and suspension or
revocation of licenses, which would adversely impact customers, staff and shareholders of ING.

ING believes that fully embedded Compliance Risk Management preserves and enhances the trust of its customers, staff and shareholders.
Being trusted is essential to building sustainable businesses. ING’s Business Principles set the foundation for the high ethical standards ING
expects of all our business activities. ING’s Business Principles require all staff at every level to conduct themselves, not only in compliance
with laws and regulations, but also by acting with integrity, being open and clear, respectful, and responsible.

Clear and practical policies and procedures are embedded in ING business processes in all Business Lines. Systems are in place to enable
management to track current and emerging Compliance Risk issues, to communicate these to internal and external stakeholders, and to
drive continuous improvement. ING understands that good Compliance Risk Management involves understanding and delivering on the
expectations of customers and other stakeholders, thereby strengthening the quality of key relationships.

The Scope of the Compliance Risk Management function

The Compliance Risk Management function focuses on managing the risks arising from laws, regulations and standards which are specific
to the financial services industry. The Compliance Risk Management function actively educates and supports the business in managing
compliance risks including anti-money laundering, preventing terrorist financing, conflicts of interest, proper sales and trading conduct
and protection of customer interest.

ING separates Compliance Risk into four conduct-related integrity risk areas: client conduct, personal conduct, organisational conduct as
well as conduct required because of laws and regulations in the financial services industry. In addition to effective reporting systems, ING
has a Whistleblower procedure which encourages staff to speak up if they know of or suspect a breach of external regulations or internal
policies or Business Principles.

The Compliance Risk Management function

The Chief Compliance Officer (CCO) reports directly to the Chief Risk Officer who is a member of the Executive Board. The CCO is
responsible for developing and establishing the company-wide Compliance Risk Management Charter & Framework, establishes the
Minimum Standards for managing Compliance Risks and assists and supports the Executive Board in managing ING’s Compliance Risks.

ING uses a functional approach within Business Lines to ensure systematic and consistent implementation of the company-wide Charter
& Framework, policies, Minimum Standards and related procedures. The Local Compliance Officer has the responsibility to assist local
management in managing Compliance Risk within that business unit. The regional or division Compliance Officer has a management and
supervisory role over all functional activities of the Compliance Officers in the respective region or division. Reporting functionally into the
CCO, the Business Line Compliance Officers perform this task for their Business Line and also provide leadership and overall direction to
the regional or divisional Compliance Officers.

To avoid potential conflicts of interest, it is imperative that the Compliance Officers are impartial and objective when advising business
management on Compliance Risk in their Business Unit, region, division or Business Line. To facilitate this, a strong functional reporting line
to the next higher level Compliance Officer is in place. The functional reporting line has clear accountabilities relating to objective setting,
remuneration, performance management and the appointment of new Compliance Risk Management staff as well as obligations to veto
and escalate.

Compliance Risk Management Framework

The Framework consists of three key components: the Compliance Risk Management process, an Advisory component and the Scorecard.

1. The Compliance Risk Management process

The process has five key activities carried out in accordance with the requirements of the Framework:
A. Identification of Compliance Risk Obligations;
B. Risk Assessment;
C. Compliance Risk Mitigation (includes Training and Education);
D. Compliance Risk Monitoring (includes Action Tracking);
E. Compliance Risk Reporting (includes Incident Management).

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Risk management continued

ING Group – non-financial risks

2. Advisory
Compliance Officers proactively advise their CEO, Management, local boards and committees, the next higher level Compliance Officer,
and employees on Compliance Risk, responsibilities, obligations and concerns.

3. Scorecard
The Compliance Risk Management function works with the Operational Risk Management Scorecard process to evaluate how well
the Compliance Risk Management Framework is embedded in each business. Scoring is based on the ability of the business unit to
demonstrate that the required policies and procedures are implemented. The scoring indicates the level of control within the business
units and the result is integrated with the Operational Risk Management results into ING’s Dutch Central Bank approved regulatory
capital model.

Extra-territorial regulations
Financial institutions continue to be closely scrutinized by regulatory authorities, governmental bodies, shareholders, rating agencies,
customers and others to ensure they comply with the relevant laws, regulations, standards and expectations. Bank and insurance regulators
and other supervisory authorities in Europe, the US and elsewhere continue to oversee the activities of financial institutions to ensure that they
operate with integrity and conduct business in an efficient, orderly and transparent manner. ING seeks to meet the standards and
expectations of regulatory authorities and other interested parties through a number of initiatives and activities, including scrutinizing account
holder information, payment processing and other transactions to support compliance with regulations governing money laundering,
economic and trade sanctions, bribery and other corrupt practices. The failure or alleged failure by ING to meet applicable standards in these
areas could result in, among other things, suspension or revocation of ING’s licenses, cease and desist orders, fines, civil or criminal penalties
and other disciplinary action which could materially damage ING’s reputation and financial condition, and accordingly ING’s primary focus is to
support good business practice through its Business Principles and group policies.

Over the past years ING has significantly increased its Compliance efforts, including a major staff increase, amendment of key policies and
guidelines and the international rollout of several programmes for education, awareness and monitoring of compliance issues.

As a result of our frequent evaluation of all businesses from economic, strategic and risk perspectives ING continues to believe that for
business reasons doing business involving certain specified countries should be discontinued, which includes that ING has a policy not to enter
into new relationships with clients from these countries and processes remain in place to discontinue existing relationships involving these
countries. At present these countries include Myanmar, North Korea, Sudan, Syria, Iran and Cuba. Each of these countries is subject to a
variety of EU, US and other sanctions regimes. Cuba, Iran, Sudan, and Syria are identified by the US as state sponsors of terrorism and are
subject to US economic sanctions and export controls.

Regulatory measures and law enforcement agencies investigations

ING Bank N.V. has continued discussions with its Dutch bank regulator De Nederlandsche Bank (DNB) related to transactions involving persons
in countries subject to sanctions by the EU, the US and other authorities and its earlier review of transactions involving sanctioned parties. In
connection with that review and related discussions ING Bank has undertaken to complete the global implementation of enhanced
compliance and risk management procedures, and to monitor the implementation of such procedures on an ongoing basis, as instructed by
DNB.

ING Bank remains in discussions with authorities in the US and in other jurisdictions concerning these matters, including ING Bank‘s
compliance with Office of Foreign Asset Control requirements. ING Bank has received requests for information from US Government agencies
including the US Department of Justice and the New York County District Attorney’s Office. ING Bank is cooperating fully with the ongoing
investigations. It is currently not feasible for ING Bank to determine how the ongoing investigations may be resolved or the timing of any such
resolution, nor to estimate reliably the possible amount of any resulting fines and/or penalties, if any, which could be significant.

Main developments in 2010

• Regulator relationships – Group Compliance Risk Management continued to invest in pro-active relationships with regulators in the
jurisdictions where ING operates, striving for an open approach and cooperation in identifying and mitigating compliance risks for ING.
• Promoting Integrity Programme – Group Compliance Risk Management, together with Group Human Resources and Corporate
Communications & Affairs, created and launched the Promoting Integrity Programme (PIP), a global employee education programme
focusing on ING’s values (including the ING Business Principles) and the role they play in the business and workplace. A short e-learning
course was developed and was followed by manager-led dialogue sessions, where employees discussed what integrity means for them
and how the Business Principles can be applied in their daily work.
• Building Customer Trust – As part of ING’s commitment to building customer trust, Group Compliance Risk Management and the
business worked closely together to consider how both products and services could be enhanced to improve the customer experience.
• Further embedding of Financial Economic Crime & Extra-Territorial Laws – ING continued its strong commitment to preventing
any involvement in criminal activity. Existing activities were further strengthened by increased monitoring and internal audits as well as
awareness and training programmes and an internal annual sign-off process for senior management concerning implementation of
policies and procedures relating to Financial Economic Crime and business with ultra high risk countries.

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Risk management continued

Model disclosures

• Learning – Continuous education and awareness training was provided through face-to-face training sessions and online learning
tools on topics such as Ultra High Risk Countries & Export Trade, Financial Economic Crime, Competition Law and Customer Suitability.
Compliance Risk Management also continued its mandatory global Compliance Officer Training programme for all compliance officers
new to ING.

MODEL DISCLOSURES
Users of the information in the risk management section should bear in mind that the analyses provided are forward looking measures
that rely on assumptions and estimates of future events, some of which are considered extreme and therefore unlikely to occur. In the
normal course of business ING Group continues to develop, recalibrate and refine the various models that support risk metrics, which
may result in changes to the risk metrics as disclosed.

This model disclosure section explains the models applied in deriving the disclosed metrics. The methodologies used to determine
Economic Capital for ING Bank and ING Insurance are described, as are the methodologies for sensitivities for ING Insurance. The risk
models for the Economic Capital calculations are reviewed on a periodic basis and validated by the internal Model Validation department.
The ING Bank Economic Capital calculation is also used as part of the Basel II Pillar 2 Internal Capital Adequacy Assessment Process
(ICAAP) and the Supervisory Review and Evaluation Process (SREP) that is performed regularly by the Dutch Central Bank.

ECONOMIC CAPITAL (ING BANK)

Economic Capital is defined as the amount of capital that a transaction or business unit requires in order to support the economic risks
it originates. In general Economic Capital is measured as the unexpected loss above the expected loss at a given confidence level. This
Economic Capital definition is in line with the net market value (or surplus) definition. The process of Economic Capital modelling enables
ING Bank to allocate Economic Capital to the business units and support risk-adjusted performance measurement (RAROC).

The following fundamental principles and definitions have been established for the model:
• ING Bank uses a one-sided confidence level of 99.95% – consistent with ING’s target debt rating (AA) – and a one-year time horizon
to calculate Economic Capital;
• It is assumed that all currently known measurable sources of risk are included;
• The best estimate risk assumptions are as objective as possible and based on proper analysis of statistical data. There is one set
of best-estimate assumptions for each risk type to be used at ING Bank;
• The Economic Capital calculation is based on fair value principles. Where complete and efficient markets exist, fair value is equal
to market value;
• The Economic Capital calculations reflect known embedded options and the influence of client behaviour in banking products;
• The Economic Capital calculations are on a pre-tax basis and do not consider the effect of regulatory accounting and solvency
requirements on capital levels;
• The framework does not include any franchise value of the business, discretionary management intervention or future business
volumes and margins.

Specific measurement by risk type is described in greater detail in the separate risk type sections.

Aggregation model
The main processes executed in the ING Bank Economic Capital aggregation model are depicted in the flowchart below. The white
boxes show the processes performed by the model while the shaded box indicates inputs from other corporate risk departments.

Determine correlations

Determine stressed correlations

Calculate diversification ration per risk type

Economic capital per risk type Calculate diversified economic capital

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Risk management continued

Model disclosures

Correlation factors between risk types used for diversification are based on best estimate assumptions supported by statistical analysis
of historical data, ING risk expert judgement, external benchmark studies and common logic. As a foundation correlations are applied
based on a 90% confidence level, i.e. they correspond to the correlations observed in the 10% largest downward movements
(a ‘1 in 10’ event). As shown in the flow-chart, the correlation factors are stressed upwards where necessary to account for potential
measurement inaccuracy in extreme events due to limited historic data observations. Expert opinion is used for aggregating business
and operational risk.

The Economic Capital for ING Bank involves the aggregation of the underlying Economic Capital of five risk types, namely credit, transfer,
market, operational and business risks (latter two also referred to as other risks). These risk types are aggregated to provide a total
diversified ING Bank Economic Capital by applying the variance-covariance approach with a 5 x 5 inter-risk correlation matrix.

For allocation of Economic Capital to units and products, diversification factors are calculated for each risk type. These factors are applied
consistently throughout ING Bank. The level of diversification benefit is dependent on both the inter-risk correlations as well as the relative
size of the undiversified Economic Capital exposure for each risk type.

Reporting Framework
For each business unit and product line, the gross Economic Capital for each risk type is delivered to MISRAROC – the financial data
warehouse for RAROC and Economic Capital reporting of ING Bank. The net Economic Capital figures are calculated by taking the
product of the gross Economic Capital and one minus the diversification factor. Total Economic Capital is calculated as the sum of
the net Economic Capital for each risk type at all reporting levels.

CREDIT AND TRANSFER RISK (ING BANK)

Economic Capital for credit risk and for transfer risk is the portion of Economic Capital held to withstand unexpected losses inherent
in the credit portfolios related to (unexpected) changes in the underlying creditworthiness of debtors or the recovery value of underlying
collateral (if any). Credit risk and transfer risk capital are calculated on all portfolios which contain credit or transfer risk, including
investment portfolios. The same methodology is used for both the banking and the insurance operations.

Economic Capital for credit risk and for transfer risk are calculated using internally developed models with a 99.95% confidence level
and a time horizon of one year, which represents ING’s desired credit rating. ING uses a series of credit risk models that can be grouped
into three principal categories: Probability of Default (PD) models, which measure the standalone creditworthiness of individual debtors;
Exposure at Default models (EAD) which estimate the size of the financial obligation at the moment of default in the future; and Loss
Given Default Models (LGD), which estimate the recovery value of the underlying collateral or guarantees received (if any) and the
unsecured part. Collectively, ING uses over 100 models for credit risk. The various models can be grouped into three categories:
statistical, expert and hybrid.

The Economic Capital formula for credit and transfer risks relies on seven different risk drivers. In addition to the PD, EAD, and LGD models
mentioned above, the formula also considers the industry and the country of the debtor as well as the remaining term of the respective
underlying transactions. Lastly, the formula considers correlation of different asset class types.

The underlying formulas and models that are used for determining Economic Capital for credit and transfer risk are similar to those used
for determining the level of regulatory capital that is required under Basel II (Pillar 1). Despite the fact that the same underlying formulas
are used, (internal) Economic Capital and regulatory capital are not the same, due to various specific rules imposed by Basel II, such as
regulatory caps and floors, and the use of the standardised approach for certain portions of ING’s portfolio. These differences are
permitted under the Basel II guidelines.

The table below summarises different capital measures used for different purposes and shows the difference in key elements and purposes.

Credit Risk Capital

Measurements Methodology Location Confidence level Inputs Purpose
Regulatory Capital Basel II Formula Vortex Basel Engine 99.90% Basel II model outputs RWA
(‘VBE’) in the Central
Risk Database
Economic Capital Risk Adjusted Vortex Risk Engine 99.95% Basel II model outputs Pricing, Economic
Capital (RAC) (‘VRE’) in the Central excluding Basel II caps Capital for credit at
Closed Algebraic Risk Database and floors, maturity, transactional level
Formula repayment schedules, and above
correlation factors,
migration matrix.

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Risk management continued

Model disclosures

Economic Capital levels for credit and transfer risk are calculated regularly for most of the Commercial Bank, ING Retail Benelux, and
the Retail Direct & International banking operations. On a quarterly basis, the Economic Capital for credit risk and transfer risk figures
are consolidated with the corresponding Economic Capital components from other disciplines.

Governance of Economic Capital for Credit and Transfer Risk

All PD, EAD and LGD models are approved by the Credit Risk Committee (CRC) after thorough review of documentation by the Model
Development Committee (MDC) and Model Validation (MV). In addition, each model is validated on an annual basis by MV. Each model
has both a credit risk and a front office co-sponsor. Both the MDC and the CRC have participation from both credit risk officers as well
as the front office to ensure maximum acceptance by the organisation.

CREDIT AND TRANSFER RISK (ING INSURANCE)

For the determination of Economic Capital for credit and transfer risk within the ING Insurance entities the methodology used is the same
methodology as used for ING Bank, with the exception that the Economic Capital is reported on the 99.5% confidence level in line with
the requirements for Solvency II.

MARKET RISK (ING BANK)

General
Economic Capital for market risk is the Economic Capital necessary to withstand unexpected value movements due to changes in market
variables, such as interest rates, equity prices, foreign exchange rates and real estate prices. Economic Capital for market risk is calculated
for exposures both in trading portfolios and non-trading portfolios.

Measurement
Economic capital for market risk is calculated using internally developed methodologies with a 99.95% confidence interval and a horizon
of one year, which represents extreme events and ING’s target rating. The Economic Capital for market risk for non trading portfolios is
calculated for each risk type, while for trading portfolios it is calculated on a portfolio level. The calculations for Economic Capital market
risk include real estate risk, foreign exchange rate risk, equity price risk, interest rate risk and model risks.

Real estate price risk includes both the market risks in both the investment portfolio and the development portfolio of ING Real Estate.
The real estate price risk for the investment portfolio is calculated by stressing the underlying market variables. The stress scenarios at a
portfolio level take into account all diversification effects across regions and real estate sectors. Also, the leverage of participations in
the real estate investment funds is taken into account.

For the Real Estate development process, in addition to market sale price risk, the risk drivers of market rent, investor yield and construction
delays are taken into account. Furthermore the risk model differs for each development phase (i.e., research, development, and construction)
to appropriately reflect the risk taken in each phase. Using correlations, all risk drivers, and stages are used to calculate a possible market
value loss representing the Economic Capital for market risk for the development portfolio.

For the direct market risks, the actual VaR (measured at a 99% confidence interval, a one day holding period and under the assumption
of an expected value of zero) of the trading and non-trading portfolios is taken as a starting point for the Economic Capital calculations
for market risk. To arrive at the Economic Capital for market risk, a simulation based model is used which includes scaling to the required
confidence interval and holding period. In determining this scaling factor, several other factors are also taken into account like the
occurrence of large market movements (events) and management interventions.

The economic capital for the equity investments is calculated based on the ECAPS system. Using Monte-Carlo simulation, the model
generates 20,000 possible ‘states-of-the-world’, by randomly simulating all risk drivers simultaneously. For each state-of-the-world,
the market value is recalculated and the 99.95% worst-case change in market value is the Economic Capital level.

Economic Capital for market risk for the mortgage portfolios within ING Retail Banking (Benelux, Direct and International Banking)
and ING Commercial Banking is calculated for embedded option risk (e.g. the prepayment option and offered rate option in mortgages).
The embedded options are hedged using a delta-hedging methodology, leaving the mortgage portfolio exposed to convexity and
volatility risk. The Economic Capital model for market risk is based on the estimated 99% confidence adverse interest rate change.

While aggregating the different Economic Capital market risk figures for the different portfolios, diversification benefits are taken into
account as it is not expected that all extreme market movements will appear at the same moment.

The nature of market risk Economic Capital, evaluating the impact of extreme stress with a 99.95% confidence level, can sometimes be
difficult to evidence in a statistical sound manner with the available historical data. The Economic Capital figures disclosed by ING Group
are a best effort estimate based on available data and expert opinions.

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Risk management continued

Model disclosures

OPERATIONAL RISK (ING BANK AND ING INSURANCE)

Operational risk is the risk of direct or indirect loss resulting from inadequate or failed internal processes, people and systems or from
external events. It includes the risk of reputation loss, as well as legal risk, whereas strategic risks are not included. While operational
risk can be limited through management controls and insurance, operational risk incidents may have a substantial impact on the profit
and loss account of financial institutions.

The capital model, an actuarial model, consists of a combination of three techniques:

• Loss Distribution approach (LDA), which applies statistical analysis to historical loss data;
• Scorecard approach, which focuses on the quality of risk control measures within a specific business unit;
• ‘Bonus/Malus’ approach, which focuses on the actual operational incidents of a specific business unit.

Loss Distribution approach

The main objective of the LDA approach is to derive an objective capital amount based on the size and the risk appetite of an institution
and its business units. This approach estimates the likely (fat-tailed) distribution of operational risk losses over some future horizon for each
combination of business line and loss event type. The main characteristic of the LDA is the explicit derivation of a loss distribution, which
is based on separate distributions for event frequency (Poisson) and severity (Inverse Gaussian). The model uses both external and internal
loss data above one million EUR.

The calculation of operational risk capital for the units follows five basic principles:
• Principle 1: If the world gets riskier, the business units need more Economic Capital;
• Principle 2: If a business unit’s size increases, so does its capital;
• Principle 3: If the business of a business unit is more complex, it needs more capital;
• Principle 4: If the level of control of a business unit is higher, it needs less capital;
• Principle 5: If the business units’ losses from internal incidents exceed the level of expected loss accounted for in the first four
framework principles, it needs more capital.

The capital calculated according to the first three is ‘generic’: if two business units operate in the same markets and have the same size,
the resulting capital will be the same. The specific capital adjustments mentioned below adjust the generic capital of a specific institution
to its specific operational risk capital.

Scorecard approach (principle 4)

The scorecard adjustment reflects the level of quality of control in a specific institution. Scorecards aim to measure the quality of
key operational risk management processes. The scorecard procedure concerns questions that require quantitative data, qualitative
judgements or simple yes/no questions (e.g. indicating compliance with certain group policies). The scorecards are completed by all
business units using self-assessment and reviewed by an expert panel who determines the final score. The set of scorecards lead to
an increase or decrease of the capital of the specific unit.

‘Bonus/Malus’ approach (principle 5)

Units are assigned additional capital in case losses from internal incidents exceed the level of expected losses that have been accounted for
in the LDA. When the actual loss of a business unit is lower than expected based on a comparison with external losses of peers, the capital
of the related business unit is reduced.

BUSINESS RISK (ING BANK)

Business Risk for ING Bank has been defined as the exposure to value loss due to fluctuations in volumes, margins and costs, as well as
client behaviour risk. It is the risk inherent to strategy decisions and internal efficiency. The calculation of Business Risk Capital is done
by calculation of two components,
(i) Expense risk relates to the (in)flexibility to adjust expenses, when that is needed.
(ii) Client behaviour risk relates to clients behaving differently than expected and the effect that this behaviour can have on customer
deposits and mortgage pre-payments. The client behaviour risk is calculated by stressing the underlying assumptions in the models
for behavioural assets and liabilities.
Each of these components is calculated separately, and combined to one business risk figure via the variance-covariance methodology.

ECONOMIC CAPITAL (ING INSURANCE)

In 2007, ING Insurance introduced ECAPS as an intranet-based Economic Capital reporting system utilising replicating portfolio techniques.
Since then, ECAPS has been constantly enhanced to improve its robustness, usability and accuracy. Since 2010 Economic Capital is only
reported for EurAsia and LatAm businesses.

The ECAPS system provides a well controlled and automated basis for Economic Capital and risk sensitivity measurement. Each business
unit enters the risk characteristics of its assets and liabilities into the ECAPS system on a regular basis. These risk characteristics are then
translated to a uniform basis in the form of replicating portfolios of standardised financial instruments. Based on the constellation of
replicating portfolios (including representations of non-market risks), the ECAPS system then is capable of calculating Economic Capital
at every level of aggregation.

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Risk management continued

Model disclosures

Economic Capital (EC) is defined by ING Insurance as the amount of assets that needs to be held in addition to the market value of
liabilities to assure a non-negative surplus at a 99.5% level of confidence on a 1 year time horizon. ING Insurance measures Economic
Capital by quantifying the impact of adverse events on the Market Value Surplus (MVS), a ‘Surplus-at-Risk’ concept. The change in MVS
or Available Financial Resources (AFR) is the combined effect of changes in Market Value of Assets (MVA) minus Market Value of Liabilities
(MVL) and an adjustment for illiquidity spreads due to current dislocated asset markets.

ING continues to adjust Available Financial Resources to reflect the illiquidity in its insurance portfolios as reporting AFR with MVLs
discounted at the swap rates results in an asymmetry between the assets and liabilities.

Illiquidity is also reflected through Interest Rate Risk, (adding the liquidity spread to the discount curve effectively reduces the duration
of our liabilities and therefore reduces the duration mismatch between our assets and liabilities resulting in a reduced interest rate risk);
through Credit Spread Risk (the Economic Capital model stresses both the asset spreads and the illiquidity spread: the netting of asset
spread risk with illiquidity liability spread risk results in a lower credit spread risk) and through Foreign Exchange Risk (the adjustment of the
MVS for illiquidity results in a reduced net exposure to foreign currency movements and in particular the US dollar: this results in a lower
foreign exchange risk).

The MVL consists of the Financial Component of Liabilities (FCL) and a Market Value Margin (MVM) for non-hedgeable risks (e.g. insurance
risk). The MVM is calculated using a Cost-of-Capital approach based on an estimate of required shareholder return on Economic Capital.

ING quantifies the impact of the following types of risk in its Economic Capital model:
• Market risk
• Credit risk (including transfer risk)
• Business risk
• Operational risk
• Life risk (both catastrophe and non-catastrophe)
• Morbidity risk (both catastrophe and non-catastrophe)
• P&C risk (both catastrophe and non-catastrophe)
Strategic business risk has been excluded from the EC calculations of ING Insurance.

Non-market risk Economic Capital is calculated by business units, CCRM and CORM and inputted into ECAPS at the sub risk level.
ECAPS then aggregates 21 sub-risk types (e.g. mortality and trend risk) to 9 non-market risk types using a bottom-up Economic Capital
diversification approach based on a matrix of correlations. The inputs are used to calibrate marginal distributions for these risk types.
These distributions, in combination with the Gaussian copula, are then used in the Economic Capital calculation to measure diversification
between market and non-market risks.

The following fundamental principles have been established for the model:
• All identified sources of risk should be considered;
• The best estimate actuarial assumptions should be as objective as possible and based on a proper analysis of economic, industry,
and company-specific data. There is one set of best-estimate assumptions per product to be used for all purposes at ING;
• Valuation of assets and liabilities is based on fair value principles. Where complete and efficient markets exist, fair value is equal to
market value;
• The Economic Capital and valuation calculations should reflect the embedded options in insurance contracts;
• The Economic Capital and valuation calculations are on a pre-tax basis and do not consider the effect of local regulatory accounting
and solvency requirements on capital levels. Capital is assumed to be fully transferable between legal entities;
• The framework does not include any franchise value of the business. It does, however, include the expense risk associated with the
possibility of reduced sales volume in the coming year.

The following is a brief description of the model.

1. Market Data Retrieval, Calibration and Scenario Generation

• Automated retrieval and extrapolation of all current and historical market data
• Generation of a comprehensive (Market and Non-Market Risks) correlation matrix
• Calibration of market risk drivers for scenario generation
• Generation of 500 Risk Neutral and Risk Volatile scenarios that are sent to each business unit to locally develop stochastic asset
and liability cash flows
• Generation of 20,000 Real World Monte-Carlo scenarios for Economic Capital calculation

2. Stochastic Cash flows Generation and Aggregation of Non-market Risk Capital

• Actuarial software used to produce the stochastic cash flows based on Risk Neutral and Risk Volatile scenarios produced in step 1.
• Business units upload stochastic asset and liability cash flows to determine the optimised replicating portfolio
• Asset derivatives are directly processed as replicating instruments.
• Non-market risk capital calculated in accordance with ING Standards of Practice

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Risk management continued

Model disclosures

3. Replicating Portfolio Definition

• Capture the risk profile of the financial component of insurance liabilities by mapping onto a finite set of standard financial instruments
• Standard instruments contain zero coupon bonds, swaptions, callable bonds, CMS options, equity forwards/options and FX options.
Business units can define the strikes and tenors of the instruments themselves to fit best to the risk profile of their liabilities.
• Compile a replicating portfolio of standard financial instruments that matches the present value of cash flows as closely as possible
for the 500 Risk Neutral and Risk Volatile scenarios.

4. Economic Capital calculation

• For each Real World Scenario the market value of assets and liabilities is recalculated and the change in value of the Market Value
Surplus (MVS) is stored. The changes in MVS are sorted and the 99.5% worst case is identified to provide the market risk Economic
Capital level for the given level of aggregation.
• Non-market risks are aggregated and integrated with market risk.
• The total diversified Economic Capital then results.

Further details on the Insurance Economic Capital model

Market Data Retrieval, Calibration and Scenario Generation
ING Insurance uses ING Bank’s Global Market Database (GMDB) as a provider of market price and risk data for financial risk drivers.
All market data is obtained from reputable data providers such as Reuters and Bloomberg. The GMDB operational team then validates
the market data and calculates relevant risk parameters. This validated data is then automatically delivered to the ECAPS system.

Since ING Insurance operates in many developing financial markets, extrapolation algorithms are in place for extending beyond observable
market data when this is needed for the calculation of the Market Value Liabilities and the Economic Capital. These algorithms are based
on comparable data in mature markets.

Based on the market data from GMDB, ING calibrates two economic scenario generators:
• Risk Neutral Economic Scenario Generator (RN ESG): capable of generating multiple equity indices and exchange rates, consistent
with a multi-currency dynamic term structure model. Scenarios are used in the cash flow projection to determine replicating portfolios.
RN ESG scenarios are consistent with observed market prices of equity, FX and interest options;
• Real World Economic Scenario Generator (RW ESG): capable of jointly simulating all risk types, i.e. all market risks, credit risk, business
risk, operational risk, life risk, morbidity risk and P&C risk. Diversification between risks is taken into account through a Gaussian copula,
allowing for different marginal probability distributions at the risk driver level. RW ESG scenarios are calibrated based on historical time
series of the market risk drivers using at least 5 years of Historical data. Volatilities and correlations are calibrated to represent the
distribution on a quarterly frequency.

Stochastic Cash Flows Generation and Aggregation of Non-Market Risk Capital

The market risks in assets and liabilities are captured in and represented by stochastic cash flows in 500 scenarios. Business units are
responsible for generating these cash flows, the modelling of embedded options and guarantees and a proper mapping of risk drivers in
the scenario set to cash flow determinants such as policyholder behaviour and management actions restricted to dynamic hedge programs
and setting of crediting rates/profit sharing. To better capture the behaviour in the tails of the distribution, the set of scenarios consist of
300 Risk Neutral scenarios and 200 ‘Risk Volatile’ scenarios with double volatilities. The average of the 300 Risk Neutral scenarios provides
a check on the market value of the replicating portfolio. It should be noted that this serves only as a check, and that the simulated market
value of liabilities is derived directly from the replicating portfolio. The 200 Risk Volatile scenarios ensure that the replicating portfolio is
calibrated against enough extreme scenarios such that it can be used safely in Economic Capital calculations.

Replicating Portfolios Definition

To handle the full complexity of calculating diversification by Monte Carlo simulation, ING maps its assets and liabilities to a set of standard
financial instruments. The set of standard instruments consists of zero coupon bonds, market indices, equity forwards, swaptions, callable
bonds, FX options and equity options. Assets and the financial components of the liabilities are represented by a portfolio of this standard
set of instruments. A user interface allows the selection of different types of replicating instruments for different cash flow types. Then an
optimal replicating portfolio is created that matches the risk profile on a net present value of the stochastically generated cash flows as
closely as possible. The resulting replicating portfolio is used in the calculation of Economic Capital.

Through the inclusion of equity options, FX options and swaptions in the set of replicating instruments, ING is able to incorporate implied
volatility risk in the considered risk types. The same holds for the credit spread risk through the inclusion of credit risk bearing zero coupon
bonds in the set of replicating instruments.

The quality of the replicating portfolio is monitored by several statistical criteria including R-squared and benchmarked against market value
sensitivities such as duration, convexity, and changes in value for larger interest rate and equity shocks. High quality replicating portfolios
are important in several ways. First, they ensure a good reflection of the actual risk profile and an accurate calculation of Economic Capital.
Second, they assist business units in hedging strategies and management of Economic Capital. Third, the process of replicating portfolio
calculations increases the understanding of the complex nature of insurance liabilities in a market consistent environment.

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Risk management continued

Model disclosures

Replicating portfolios are currently determined from a single factor RN ESG interest rate model. The RW ESG interest rate scenarios
for the Value at Risk calculations are generated using a multi-factor model which allows for non-parallel interest rate moves.

Economic Capital calculation

ECAPS uses Monte-Carlo simulation to determine diversification benefits for the complete ‘portfolio hierarchy’, from business unit level
up to an ING Insurance level. All diversification calculations are done within ECAPS and are driven by the Gaussian copula of all risk drivers
using the underlying distributions applicable for each risk type. Diversification benefit allocation to business units, business lines and risk
types is done outside ECAPS.

For the calculation of Economic Capital ING uses a one-year time horizon. In practice, the model calculates instantaneous quarterly shocks
and then annualises the resulting VaR statistic to determine an annualised EC. The quarterly shock is used to stabilise the results and to
ensure the shocks are within a range that can be more credibly valued for assets and liabilities. Also, it can better capture the impact of
dynamic hedge strategies. It proves to have more consistency in how correlations between risk factors are defined and therefore align
closer to actual risk practices and reporting cycles.

Using Monte-Carlo simulation, ING’s Economic Capital model generates 20,000 possible ‘states-of-the-world’, by randomly simulating all
risk drivers – simultaneously. For each state-of-the-world, the market value of assets and liabilities are recalculated and the change in value
of the Market Value Surplus (MVS) is stored. All these changes in MVS are then sorted, and the 99.5% worst-case change in MVS is
identified, to provide the Economic Capital level for the given level of aggregation.

AFR SENSITIVITIES AND EARNINGS SENSITIVITIES (ING INSURANCE)

Scenarios for AFR sensitivities and Earnings sensitivities
The sensitivities shown for AFR and Earnings are based on simple to explain shocks to underlying risk factors. The following risk factors
are taken into account:
• Interest rates;
• Credit (including spread changes, liquidity premium and default);
• Equity;
• Real Estate;
• Foreign exchange;
• Implied volatility (of both equity and interest rates).

Changes in implied volatility levels mostly impact the AFR through embedded options in our liabilities. The same has no material impact for
IFRS Earnings and is currently not measured.

The table below provides an overview of the shock scenarios applied for the AFR and Earnings sensitivities. These shocks are also the basis
for the US regulatory capital market risk scenarios.

Risk factor Description shock

Interest Rates Up and down parallel shock equal to 30% of the 10 year swap rate. Shock is floored at 50bps and capped at 150bps.
Credit For AFR we apply a credit spread shock based on the rating of the debt security (e.g. single A shock 110bps).
Home government bonds (e.g. KRW government bonds in Korea) are excluded. The liquidity premium is shocked
by 50bps. For financial capital securities the underlying assumption is that they are called at their legal maturity
and not at earlier call-dates. For structured credit we increase credit spread shocks by 50%.

For Earnings we apply a credit default scenario in which we multiply the probability of Default, Loss Given Default and
Historical Cost. For impaired assets we apply a credit spread shock with default probabilities based on a 1-in-10 event.

The asset positions data used for the AFR credit spread shocks and Earnings credit default scenarios is for a large part
based on third quarter 2010 positions.
Equity All equity 25% down
Real Estate All real estate 15% down
Foreign Exchange The worst case of a 10% up or down movement for each currency
Implied Volatility Swaption volatilities up by 30%
Equity implied volatility up by 80% for tenors less than 1 year, up 30% for tenors between 1 and 3 years, up 20%
for tenors between 3–7 years and up 10% for tenors of 7 years and above.

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Risk management continued

Model disclosures

REGULATORY CAPITAL SENSITIVITIES – US INSURANCE BUSINESS

The sensitivities shown are calculated at legal entity level and cover US domiciled insurance entities. The sensitivities are based on simple
to explain shocks to underlying risk factors. The following risk factors are taken into account:
• Interest rates;
• Credit;
• Equity;
• Real Estate;
• Foreign exchange;
• Implied volatility.

The table below provides an overview of the shock scenarios applied for Statutory Surplus sensitivities.

Risk factor Description shock

Interest Rates Up and down parallel shock equal to 30% of the 10 year swap rate. Shock is floored at 50bps and capped at 150bps.
Credit The credit risk sensitivity consistent out of two components:
Firstly we apply a credit default scenario in which we multiply the probability of Default, Loss Given Default and
Historical Cost. For impaired assets we apply a credit spread shock with default probabilities based on a 1-in-10 event.
Secondly we apply rating migrations on the current portfolio using the rating transition matrix as observed by S&P
in the year 2002 for US Corporate Bonds.
Equity All equity 25% down
Real Estate All real estate 15% down
Foreign Exchange The worst case of a 10% up or down movement for each currency
Swaption volatilities up by 30%
Equity implied volatility up by 80% for tenors less than 1 year, up 30% for tenors between 1 and 3 years, up 20%
Implied volatility for tenors between 3–7 years and up 10% for tenors of 7 years and above.

The Regulatory Capital Sensitivity in aggregate is calculated by combining the joint impact of the various market stress events calculated
by taking into account the correlations between risk types.

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Capital management

amounts in millions of euros, unless stated otherwise

OBJECTIVES
ING Group Capital Management (Capital Management) is responsible for the sufficient capitalisation of ING Group entities at all times in
order to manage the risk associated with ING’s business activities. This involves the management, planning and allocation of capital within
ING Group. ING’s Corporate Treasury is part of Capital Management. It executes the necessary capital market transactions, term (capital)
funding and risk management transactions. Capital Management monitors and plans capital adequacy on a consolidated basis at three
levels: ING Group, ING Insurance and ING Bank. Capital Management takes into account the metrics and requirements of regulators
(Insurance Group Directive (IGD) Solvency I, Tier 1 and BIS ratios and limits for hybrid capital), rating agencies (leverage ratios, Adjusted
Equity) and internal models such as the economic capital and market value balance sheet approach for parts of ING Insurance including
Available Financial Resources (AFR).

ING applies the following main capital definitions:

• Adjusted Equity (ING Group) – This rating agency concept is defined as shareholders’ equity plus core Tier 1 securities, hybrid capital
and prudential filters and certain adjustments. See ‘Capital Base’ disclosures in this section. This capital definition is applied in
comparing available capital to core debt/financial leverage for ING Group/ING Insurance respectively;
• Insurance Group Directive (ING Insurance) –This regulatory concept is defined as shareholders’ equity plus hybrid capital, prudential
filters and certain adjustments. IGD capital is calculated in accordance with method 3 ‘method based on accounting consolidation’
of the Dutch Act on Financial Supervision. In this method the solvency margin is calculated on the basis of the consolidated accounts
and is the difference of (i) the assets eligible for the inclusion in the calculation of the solvency margin based on the consolidated
data; and (ii) the minimum amount of the solvency margin calculated on the basis of the consolidated data. In applying this method
a solvency deficit of an insurance subsidiary, if any, is taken into account, as well as regulatory adjustments of the Dutch insurance
subsidiaries based on the Dutch Act on Financial Supervision. See ‘Capital Base’ disclosures in this section. This capital definition is
applied in comparing IGD capital to EU required capital base. This measurement of available capital is different from previous years.
In previous years we treated fixed income revaluations similar to ING Bank to allow adding up Bank and Insurance on a consistent
basis. However with the upcoming separation and hence the decreased importance of Bank and Insurance consistency we changed
the IGD to align with European Insurance peers.
• Core Tier 1 capital, Tier 1 capital and total BIS capital (ING Bank) – Tier 1 capital is defined as shareholders’ equity including core Tier 1
securities plus hybrid capital less certain prudential filters and deductible items. Tier 1 and BIS capital divided by risk-weighted assets
equal the Tier 1 and BIS ratio respectively. Core Tier 1 capital is equal to Tier 1 capital excluding hybrid capital;
• AFR (ING Insurance other than the US) – This is a market value concept, defined as market value of assets (MVA) less the market value
of liabilities (MVL) on the balance sheet. The liabilities do not include perpetual hybrid capital which is included in AFR. The valuation
of ING Insurance includes an adjustment for portfolio illiquidity. AFR is used as the measure of available capital in comparison with
Economic Capital employed.
• EC, or Economic Capital (ING Insurance other than the US), is the required capital, based on a 99.5% confidence interval. This interval is
aligned with the Solvency II capital requirement. The excess of AFR over EC is set based on the business strategy and resulting risk
appetite defined by the Management Board Insurance.
• Risk Based Capital (ING US Insurance only). In the US, regulators have well developed capital adequacy models and stress tests that
reflect the unique characteristics of the US insurance industry. During 2010, ING decided that the US regulatory frameworks better
reflect the evolving capital management approach for ING Insurance’s US business. US domiciled insurance legal entities are required to
hold minimum capital levels by state insurance regulators. The level of capital required by rating agencies to maintain an acceptable
claims paying ability rating is well above these levels. The US Insurance business manages its statutory surplus primarily with respect to
capital metrics that are aligned with the models of the various ratings agencies.
• Financial Leverage (ING Insurance). Financial Leverage is the sum of hybrid capital, sub-debt and net financial debt and is used to
measure the debt ratio of ING Insurance starting 2010.

DEVELOPMENTS
In 2010 Capital Management’s main focus was to strengthen the capital position of ING Group, ING Bank and ING Insurance. ING’s
capital positions are well placed to deal with the uncertain financial environment, increasing regulatory requirements and the ambition
to repurchase the remaining outstanding Core Tier 1 securities.
In March 2011, ING announced that it has informed the Dutch State of its intention to early repurchase EUR 2 billion of the non-voting
equity securities (core Tier 1 securities) on 13 May 2011. The Dutch Central Bank has approved the intended repurchase. The total payment
will amount to EUR 3 billion and includes a 50% repurchase premium. In order to fund the repayment, it is probable that ING Bank will
pay, in 2011, a dividend out of retained earnings to ING Group for a similar amount. ING disclosed to the market that based on our capital
position at that date the intended repurchase in May would reduce the core Tier 1 ratio by 90 basis points and the ratio is expected to
remain above 8.5%.

POLICIES
The activities of Capital Management are executed on the basis of established policies, guidelines and procedures. The main documents
that serve as guidelines for capital planning are the Capital Letter (comprising the approved targets and limits for capital), the Capital
Planning Policy, the Dividend Policy and the Capital Request Policy. For the Corporate Treasury there are many policies and limits that
guide the management of the balance sheets and the execution of capital market transactions.

The above capital definitions and policies have been approved by the ING Group Executive Board or delegated authorities.

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Capital management continued

PROCESSES FOR MANAGING CAPITAL

In addition to measuring capital adequacy, Capital Management also ensures that sufficient capital is available through setting targets
and limits relevant to the above mentioned metrics for ING Group, ING Bank and ING Insurance and ensuring adherence to the set limits
and targets through planning and executing capital management transactions. The process is supplemented by stress testing and scenario
analysis. The ongoing assessment and monitoring of capital adequacy is embedded in Capital Management’s capital planning process
and results in a quarterly capital update report which is presented to both the ING Group Finance and Risk Committee and the ING Group
Executive and Supervisory Boards. The main objective of the assessment is to ensure that ING Group as a whole has sufficient capital
relative to its risk profile both in the short and the medium term.

A key priority of Capital Management is to make sure that strong stand-alone companies are created for banking and insurance in preparation
of the separation. All operating entities need to stay adequately capitalised based on local regulatory and rating agency requirements and
interdependencies should be reduced to a minimum. The entities should also be able to access capital markets independently.

CAPITAL ADEQUACY ASSESSMENT

During 2010, ING Group, ING Bank and ING Insurance were adequately capitalised in relation to their risk profile and strategic objectives.

ING Group’s Capital Base

Group Bank Insurance
2010 2009 2010 2009 2010 2009
Shareholders’ equity (parent) 41,555 33,863 34,452 30,222 20,811 15,887
Core Tier 1 securities 5,000 5,000
Group hybrid capital (1) 12,039 11,478 8,438 8,057 2,094 3,410
Group leverage (2) 8,462 6,913
Total capitalisation 67,057 57,254 42,890 38,279 22,905 19,297

Adjustments to equity:
Revaluation reserve debt securities –1,158 2,481 –19 123
Revaluation reserve crediting to life policyholders 1,488 –156
Revaluation reserve cashflow hedge –847 –372 639 472 –1,567 –926
Goodwill (3) –2,908 –3,244 –1,645 –1,636 –1,425 –1,857
Revaluation reserves fixed income & other –3,425 –1,291 –1,025 –1,040 –2,992 –2,783
Revaluation reserves excluded from Tier 1 (4) –2,212 –3,111
Insurance hybrid capital (5) 2,094 1,944
Minority interests 748 960 111 80
Deductions Tier 1 –1,069 –1,073
Tier 1 capital for Bank 39,332 34,015

Other qualifying capital (6) 9,813 10,716

Insurance Group Directive adjustments (7) –1,213 651
Group leverage (core debt) –8,462 –6,913
Total capital (Adjusted Equity for Group, BIS capital
for Bank and IGD capital for Insurance) 55,169 49,050 49,145 44,731 20,906 19,189
(1)
Tier 1 instruments issued by ING Group (e.g. perpetual debt securities and preference shares) at nominal value. Group hybrid Tier 1 instruments other than
preference shares are provided as hybrid capital to ING Bank or ING Insurance.
(2)
Investments in subsidiaries less equity (including core Tier 1 securities) of the Group holding company. This net debt position is provided as equity to ING Insurance
and ING Bank.
(3)
According to the regulatory definition.
(4)
Includes mainly EUR –1,727 million (2009: EUR –2,536 million) in participations (e.g. Kookmin, Bank of Beijing) and other equity investments, EUR –382 million
(2009: EUR –546 million) for Real estate for own use. The Dutch banking regulator requires this deduction to be made from Tier 1 capital. This deduction is added
back to Tier 2 capital.
(5)
Qualifying dated subordinated debt issued by ING Insurance at nominal value.
(6)
Consists of EUR 10,882 million (2009: EUR 11,789 million) Tier 2 capital and no Tier 3 (2009: nil), offset by EUR 1,069 million (2009: EUR 1,073 million) of
regulatory deductions.
(7)
An adjustment for the Dutch Financial supervision act. A ‘test-of-adequacy’ has to be included in the available capital measurement. The revaluation reserve debt
securities and revaluation reserve crediting to life policyholders are not reversed out of the IGD capital definition.

REGULATORY REQUIREMENTS
ING BANK
Capital adequacy and the use of regulatory required capital are based on the guidelines developed by the Basel Committee on Banking
Supervision (The Basel Committee) and the European Union Directives, as implemented by the Dutch Central Bank (DNB) for supervisory
purposes. The minimum Tier 1 ratio is 4% and the minimum total capital ratio (known as the BIS ratio) is 8% of all risk-weighted assets.

250 ING Group Annual Report 2010

 Consolidated annual accounts 4

Capital management continued

BASEL II
As of 2008 ING Bank publishes risk-weighted assets (RWA), Tier 1 and BIS capital and the accompanying capital ratios based on Basel II
data only. In addition, ING publishes the minimum required capital level according to Basel II and according to the Basel I floor. As of 2009
the Basel I floor is based on 80% of Basel I RWA. The minimum requirements according to Basel II and Basel I are both compared to total
BIS available capital according to Basel II.

Capital position of ING Bank

2010 2009
Shareholders’ equity (parent) 34,452 30,222
Minority interests (1) 748 960
Subordinated loans qualifying as Tier 1 capital (2) 8,438 8,057
Goodwill and intangibles deductible from Tier 1 (1) –1,645 –1,636
Deductions Tier 1 –1,069 –1,073
Revaluation reserve (3) –1,592 –2,515
Available capital – Tier 1 39,332 34,015

Supplementary capital – Tier 2 (4) 10,882 11,789

Available Tier 3 funds
Deductions –1,069 –1,073
BIS capital 49,145 44,731

Risk-weighted assets 321,103 332,375

Core Tier 1 ratio 9,62% 7,81%

Tier 1 ratio 12.25% 10.23%
BIS ratio 15.30% 13.46%

Required capital based on Basel I floor (5) 29,860 28,709

BIS ratio based on Basel I floor (5) 13.17% 12.46%
(1)
According to the regulatory definition.
(2)
Subordinated loans qualifying as Tier 1 capital have been placed by ING Groep N.V. with ING Bank N.V.
(3)
Includes revaluation debt securities, revaluation reserve cash flow hedge and revaluation reserves equity and real estate
(see ING’s Capital base table, footnote 3).
(4)
Includes eligible lower Tier 2 loans and revaluation reserves equity and real estate revaluations removed from Tier 1 capital.
(5)
Using 80% of Basel I Risk-Weighted Assets in 2010 and 2009 respectively.

ING INSURANCE
The table below shows the Insurance Group Directive which represent the consolidated regulatory Solvency I position of ING Insurance
business. The Insurance companies comply with their respective local regulatory requirement.

Capital position of ING Insurance

2010 2009
Shareholders’ equity (parent) 20,811 15,887
Hybrids issued by ING Group 2,094 3,410
Hybrids issued by ING Insurance 2,094 1,944
Required regulatory adjustments –4,094 –2,052
IGD capital 20,906 19,189

EU required capital base 8,374 7,774

IGD Solvency I ratio 250% 247%

ING Insurance continues to ensure that all operating entities are adequately capitalised based on local regulatory and rating agency requirements
and that on a consolidated basis, the financial leverage (hybrids, sub-debt and net financial debt) of ING Insurance is appropriate.

ING Group Annual Report 2010 251

 4 Consolidated annual accounts

Capital management continued

Capital base and financial leverage of ING Insurance

2010 2009
Shareholders’ equity (parent) 20,811 15,887
Revaluation reserve debt securities –1,164 2,334
Revaluation reserve crediting to life policyholders 1,488 –156
Revaluation reserve cashflow hedge –1,567 –926
Goodwill –1,425 –1,857
Minority interests 111 80
Capital base 18,254 15,362

Group hybrid capital (1) 2,094 3,405

Insurance hybrid capital (2) 2,313 2,337
Total hybrids 4,407 5,742

External debt issued by ING Verzekeringen NV 3,347 3,508

External debt issued by US Holding companies 1,384 1,408
Other net financial debt (3) 2,273 –166
Total financial debt (4) 7,004 4,750
(1)
Hybrids issued by ING Group at amortised cost value consistent with IFRS carrying value.
(2)
Hybrids issued by ING Insurance at amortised cost value consistent with IFRS carrying value.
(3)
Includes net internal borrowings from the operating subsidiaries, net of cash and current tax liability of the holding companies, mainly ING Verzekeringen NV and
ING America Insurance Holdings Inc.
(4)
The difference between the 2009 financial debt (of EUR 4,750 million) and the core debt EUR 2,586 million reported in the 2009 Annual Report is mainly due
to pension assets and deferred tax assets of the holding companies in the calculation of financial debt.

For ING Insurance (excluding the US business), Available Financial Resources (AFR) continues to be important (especially as an evolving
proxy for the Own Funds derivation from our internal model under Solvency II). ING has carried out a review of the internal model (own
funds and capital requirements) in the context of a Solvency II gap analysis. In the review we benchmarked our models against the
Solvency II Standard Formula as presented in QIS 5, the CEIOPS consultation papers and commentary of expert groups like CRO Forum and
Group Consultative. We consequently plan further refinements of our Economic Capital (EC) model that address improvements of our
market risk calibration, in particular for spread risk; business risk, to improve our capturing of policyholder behaviour risk and to address
country risk; and operational risk. These changes will result in a material increase of our EC, estimated to be between one and two billion
euro as at year end 2010.

At the end of 2009 the AFR for ING Insurance other than the US was EUR 19.0 billion. As described in the Risk Paragraph. EC, based on
99.5% confidence interval was EUR 7.0 billion, which leads to excess of AFR over EC for 2009 of EUR 12.0 billion. For 2010 the AFR is
EUR 19.7 billion, EC is EUR 10.4 billion and the excess of AFR over EC is EUR 9.4 billion. The EC for 2010 does not include the potential
adjustment between one and two billion, as described in the previous paragraph.

For the capital adequacy assessment of ING Insurance’s US domiciled regulated insurance business, available capital and required capital
are measured based on the US regulatory Risk Based Capital (RBC) methodology as prescribed by the National Association of Insurance
Commissioners (NAIC). For ING’s US domiciled regulated insurance business, the consolidated RBC ratio (available capital/required capital)
is estimated to be approximately 426% for the period ended 31 December 2010. The actual US consolidated RBC ratio may be different
from the estimate since the statutory results are not final until filed with the regulators. For ING Insurance’s US domiciled regulated
insurance business, the RBC ratio was 362% at the end of 2009.

ING GROUP
The debt/equity ratio of ING Group as at year-end 2010 was 13.30% (2009: 12.35%).

ING Group reports to the Dutch Central Bank as required under the Dutch implementation of the financial conglomerates directive. The
directive mainly covers risk concentrations in the group, intra-group transactions and an assessment of the capital adequacy of the Group.

In the following table, we show the Group’s FICO ratio on the following basis:
• Insurance required capital from applying European Solvency I rules to all ING Insurance entities globally (regardless of local
capital requirements);
• Bank required capital based on applying Basel II with the Basel I floor (80% in 2010 and 2009);
• Group FICO capital using an approach similar to that used for Bank BIS capital and Insurance IGD capital whereby Group leverage
is deducted.

252 ING Group Annual Report 2010

 Consolidated annual accounts 4

Capital management continued

Regulatory required capital ING Group

2010 2009
BIS capital 49,145 44,731
IGD capital 20,906 19,188
Group leverage (core debt) -8,462 -6,913
Regulatory capital 61,589 57,006

Required capital banking operations 29,860 28,709

Required capital insurance operations 8,374 7,774
Total required capital 38,234 36,483

FICO ratio 161% 157%

Capital adequacy and ratios

Quantitative disclosures on capital measures and ratios

Group Bank Insurance
2010 2009 2010 2009 2010 2009
Tier 1 ratio (Bank)
Year-end actual Tier 1 ratio 12.25% 10.23%
Regulatory minimum Tier 1 ratio 4.00% 4.00%
Target minimum Tier 1 ratio 10.00% 9.00%

BIS ratio (Bank)

Year-end actual BIS ratio 15.30% 13.46%
Regulatory minimum BIS ratio 8.00% 8.00%
Target minimum BIS ratio 10.00% 10.50%

Insurance Groups Directive

Year-end actual Capital coverage ratio 250% 247%
Required capital 100% 100%
Target ratio 150% 150%

Debt/Equity ratio (Group)

Debt/Equity ratio 13.30% 12.35%
Target maximum Debt/Equity ratio 15.00% 15.00%

In 2010, ING decided to raise the Tier 1 ratio target, as a move towards the more demanding solvency requirements of Basel III. The Tier 1
ratio is a regulatory requirement. Internally ING manages on the Core Tier 1 ratio, for which the target was raised from 7.5% to 8.0%
in 2010. The actual ratios were 7.81% at the end of 2009 and 9.62% at the end of 2010. ING expects the BIS ratio to lose its meaning.

ING Group Annual Report 2010 253

 4 Consolidated annual accounts

Capital management continued

Main credit ratings of ING at 31 December 2010

Standard & Poor’s Moody’s Fitch
ING Group
– long term A stable A1 stable A stable

ING Bank
– short term A-1 P-1 F1+
– long term A+ stable Aa3 stable A+ stable
– financial strength C+

ING Insurance
– short term A-2 P-2 F2
– long term A- negative Baa1 negative A- negative

ING’s key credit ratings and outlook are shown in the table above. Each of these ratings reflects only the view of the applicable rating
agency at the time the rating was issued, and any explanation of the significance of a rating may be obtained only from the rating agency.

A security rating is not a recommendation to buy, sell or hold securities and each rating should be evaluated independently of any other
rating. There is no assurance that any credit rating will remain in effect for any given period of time or that a rating will not be lowered,
suspended or withdrawn entirely by the rating agency if, in the rating agency’s judgment, circumstances so warrant. ING accepts no
responsibility for the accuracy or reliability of the ratings.

254 ING Group Annual Report 2010

 Consolidated annual accounts 4

Subsequent events

SUBSEQUENT EVENTS
ING changed its accounting policy for the insurance provisions for Guaranteed Minimum Withdrawal Benefits for Life (GMWBL) on the
Insurance US Closed Block VA book as of 1 January 2011. The revised accounting will better reflect the economic value of these guarantees
and more closely align accounting practice with US peers. Under the revised accounting, the insurance provisions will reflect current market
interest rates and current estimates for other assumptions, except for volatility and correlation (which remain unchanged). ING substantially
increased hedging of interest rate risk in the Insurance US Closed Block VA book; the results from these hedging derivatives are expected
to largely mirror the effect of interest changes on the guarantees in future periods. Implementation of the revised accounting for GMWBL
represents a change in accounting policy under IFRS, with a transitional impact being reflected in shareholders’ equity. Comparative periods’
results will be restated. The estimated combined impact on shareholders’ equity as at 1 January 2011 will be EUR 0.7 billion (lower equity),
of which EUR 0.4 billion and EUR 0.1 billion will be reflected in the restated 2010 and 2009 net result after tax (lower net result). This
impact reflects the revised accounting for the GMWBL retrospectively, but does not reflect the additional hedging of interest rate risk.

In December 2009, ING repurchased the first half of the non-voting equity securities (core Tier 1 securities) of EUR 5 billion plus a total
premium of EUR 605 million. In March 2011, ING announced that, at the next coupon reset date on 13 May 2011, ING intends to exercise
its option for early repurchase of EUR 2 billion of the remaining non-voting equity securities (core Tier 1 securities). The total payment in
May 2011 will amount to EUR 3 billion and includes a 50% repurchase premium. ING will fund this repurchase from retained earnings.
Provided that the strong capital generation continues, ING intends to repurchase the remaining EUR 3 billion non-voting equity securities
(core Tier 1 securities) ultimately by May 2012 from retained earnings. The final decision on repurchase of these non-voting equity
securities (core Tier 1 securities) will be made before the envisaged repayment date and will be conditional upon there having been no
material changes regarding ING’s capital requirements and/or ING’s outlook on external market circumstances.

On 11 March 2011 a severe earthquake and tsunami struck Japan. While ING does not have any non-life operations in Japan, ING has life
insurance, asset management and banking businesses in Japan. The life insurance business sold primarily two product types: Single
Premium Variable Annuities (SPVA, closed for new business in 2009) and Corporate Owned Life Insurance (COLI). ING’s financial position
may be impacted by these events and any related developments, including through (but not limited to) death and health-related claims,
policyholder behaviour, re-insurance coverage, investment losses and impact from general market developments. As of the date of this
Annual Report, the full impact of these catastrophic events was not yet known and, therefore, it is too early to determine the impact of
these events on ING.

AUTHORISATION OF ANNUAL ACCOUNTS

Amsterdam, 14 March 2011

THE SUPERVISORY BOARD THE EXECUTIVE BOARD

Peter A.F.W. Elverding, chairman Jan H.M. Hommen, CEO and chairman
Jeroen van der Veer, vice-chairman Patrick G. Flynn, CFO
J.P. (Tineke) Bahlmann J.V. (Koos) Timmermans, CRO
Henk W. Breukink
Claus Dieter Hoffmann
Piet C. Klaver
Aman Mehta
Joan E. Spero
Lodewijk J. de Waal

ING Group Annual Report 2010 255

 5 Parent company annual accounts

Parent company balance sheet

of ING Group
as at 31 December before appropriation of result

amounts in millions of euros 2010 2009

Assets
Investments in wholly owned subsidiaries 1 55,245 46,006
Other assets 2 11,965 13,124
Total assets 67,210 59,130

Equity 3
Share capital 919 919
Share premium 16,034 16,034
Non-voting equity securities 5,000 5,000
Legal reserves (1) 5,700 1,030
Other reserves 15,682 16,815
Unappropriated result 3,220 –935
46,555 38,863

Liabilities
Subordinated loans 4 11,766 11,139
Other liabilities 5 8,889 9,128
Total equity and liabilities 67,210 59,130
(1)
Legal reserves includes Share of associates reserve of EUR 6,639 million (2009: EUR 1,985 million)
and Currency translation reserve of EUR –939 million (2009: EUR –955 million).

References relate to the notes starting on page 260. These form an integral part of the parent company annual accounts.

256 ING Group Annual Report 2010

 Parent company annual accounts 5

Parent company profit and loss account

of ING Group
for the years ended 31 December

amounts in millions of euros 2010 2009

Result of group companies after taxation 3,414 167
Other results after taxation 6 –194 –1,102
Net result 3,220 –935

ING Group Annual Report 2010 257

 5 Parent company annual accounts

Parent company statement of changes in equity

of ING Group
for the years ended 31 December

Share of Currency
Share Share Non-voting associates translation Other
amounts in millions of euros capital premium equity securities reserve reserve reserves (1) Total
Balance as at 1 January 2009 495 9,182 10,000 –8,719 –951 17,327 27,334

Unrealised revaluations after taxation 12,344 –112 12,232

Realised gains/losses transferred to profit and loss 1,406 1,406
Transfer to insurance liabilities/DAC –2,079 –2,079
Change in cash flow hedge reserve revaluations –805 –805
Unrealised revaluations from net
investment hedges –294 –294
Exchange rate differences 208 –4 204
Total amount recognised directly in equity 10,780 –4 –112 10,664

Net result –935 –935

10,780 –4 –1,047 9,729

Transfer to share of associates reserve –76 76

Issuance costs incurred –222 –222
Repayment of non-voting equity securities –5,000 –5,000
Dividend and repayment premium (2) –605 –605
Proceeds from right issue 424 7,074 7,498
Purchases/sales of treasury shares 129 129
Balance as at 31 December 2009 919 16,034 5,000 1,985 –955 15,880 38,863

Unrealised revaluations after taxation 3,549 –72 3,477

Realised gains/losses transferred to profit and loss 86 86
Transfer to insurance liabilities/DAC –1,644 –1,644
Change in cash flow hedge reserve revaluations 475 475
Unrealised revaluations from net
investment hedges –777 –777
Exchange rate differences 2,874 16 2,890
Total amount recognised directly in equity 4,563 16 –72 4,507

Net result 3,220 3,220

4,563 16 3,148 7,727

Transfer to share of associates reserve 91 –91

Employee stock option and share plans –57 –57
Purchases/sales of treasury shares 22 22
Balance as at 31 December 2010 919 16,034 5,000 6,639 –939 18,902 46,555
(1)
Other reserves includes Retained earnings, Treasury shares, Other reserves and Unappropriated result.
(2)
The 2009 amount of EUR 605 million includes the coupon (EUR 259 million) and repayment premium (EUR 346 million) on the repayment of EUR 5 billion
non-voting equity securities.

258 ING Group Annual Report 2010

 Parent company annual accounts 5

Accounting policies for the parent company

annual accounts of ING Group

BASIS OF PRESENTATION
The parent company accounts of ING Group are prepared in accordance with the financial reporting requirements included in Part 9 of
Book 2, of the Dutch Civil Code. The accounting policies applicable to presentation and disclosures are in accordance with the financial
reporting requirements included in Part 9 of Book 2, of the Dutch Civil Code. The principles of valuation and determination of results
stated in connection with the consolidated balance sheet and profit and loss account are also applicable to the parent company balance
sheet and profit and loss account with the exception of Investments in group companies and investments in associates which are
recognised at net asset value with goodwill, if any, recorded under intangible assets.

The profit and loss account has been drawn up in accordance with Section 402, Book 2, of the Dutch Civil Code.

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.

Changes in balance sheet values due to changes in the Revaluation reserve of the associates are reflected in the Share of associates
reserve, which forms part of Shareholders’ equity. Changes in balance sheet values due to the results of these associates, accounted for
in accordance with ING Group accounting policies, are included in the profit and loss account. Other changes in the balance sheet value
of these associates, other than those due to changes in share capital, are included in Share of associates reserve in Other reserves.

A legal reserve is carried at an amount equal to the share in the results of associates since their first inclusion at net asset value less the
amount of profit distributions to which rights have accrued in the interim. Profit distributions which can be repatriated to the Netherlands
without restriction are likewise deducted from the Share of associates reserve.

ING Group Annual Report 2010 259

5 Parent company annual accounts

Notes to the parent company annual

accounts of ING Group
amounts in millions of euros, unless stated otherwise

1 INVESTMENTS IN WHOLLY OWNED SUBSIDIARIES

Investments in wholly owned subsidiaries

Balance sheet value
2010 2009
ING Bank N.V. 34,451 30,211
ING Verzekeringen N.V. 20,785 15,880
Other 9 –85
55,245 46,006

Other includes certain intercompany eliminations between ING Bank N.V. and ING Verzekeringen N.V.

Changes in investments in wholly owned subsidiaries

2010 2009
Opening balance 46,006 34,698
Revaluations 4,535 10,800
Result of the group companies 3,414 167
Capital contribution 1,500 700
Dividend –200 –350
55,255 46,015

Changes in ING Groep N.V. shares

held by group companies –10 –9
Closing balance 55,245 46,006

2 OTHER ASSETS

Other assets
2010 2009
Receivables from group companies 11,502 12,566
Other receivables, prepayments and accruals 463 558
11,965 13,124

As at 31 December 2010 an amount of EUR 11,524 million (2009: EUR 12,397 million) is expected to be settled after more than one year
from the balance sheet date.

3 EQUITY

Equity
2010 2009
Share capital 919 919
Share premium 16,034 16,034
Non-voting equity securities 5,000 5,000
Share of associates reserve 6,639 1,985
Currency translation reserve –939 –955
Other reserves 18,902 15,880
Equity 46,555 38,863

The Share of associates reserve includes the following components: Reserve for non-distributable profit of associates of EUR 907 million
(2009: EUR 645 million) and Revaluation reserve of associates of EUR 5,732 million (2009: EUR 1,340 million).

Share capital
Ordinary shares (par value EUR 0.24)
Number x1,000 Amount
2010 2009 2010 2009
Authorised share capital 4,500,000 4,500,000 1,080 1,080
Unissued share capital 668,439 668,439 161 161
Issued share capital 3,831,561 3,831,561 919 919

260 ING Group Annual Report 2010

 Parent company annual accounts 5

Notes to the parent company annual accounts of ING Group continued

Changes in issued share capital

Ordinary shares (par value EUR 0.24)
Number x1,000 Amount
Issued share capital as at 31 December 2008 2,063,148 495

Issue of shares 1,768,413 424

Issued share capital as at 31 December 2009 3,831,561 919

No changes have occurred in the issued share capital in 2010.

Share premium
Changes in Share premium are disclosed in the Parent company statement of changes in equity of ING Group.

Changes in other reserves and unappropriated result

Retained Treasury Other Total Other Unappro-
2010 earnings shares reserves reserves priated result Total
Opening balance 22,814 –737 –5,262 16,815 –935 15,880
Result for the year 3,220 3,220
Unrealised revaluations after taxation –72 –72 –72
Changes in treasury shares 22 22 22
Transfer to share of associates reserve –91 –91 –91
Transfer to retained earnings –935 –935 935
Employee stock option and share plans –57 –57 –57
Closing balance 21,659 –715 –5,262 15,682 3,220 18,902

Changes in other reserves and unappropriated result

Retained Treasury Other Total Other Unappro-
2009 earnings shares reserves reserves priated result Total
Opening balance 23,838 –866 –4,916 18,056 –729 17,327
Result for the year –935 –935
Unrealised revaluations after taxation –112 –112 –112
Changes in treasury shares 129 129 129
Dividend and repayment premium –346 –346 –259 –605
Transfer to share of associates reserve 76 76 76
Transfer to retained earnings –988 –988 988
Closing balance 22,814 –737 –5,262 16,815 –935 15,880

Dividend and repayment premium includes the coupon (EUR 259 million) and repayment premium (EUR 346 million) on the repayment
of EUR 5 billion non-voting equity securities.

As at 31 December 2010, the Share of associates reserve included an amount of EUR 741 million (2009: EUR 645 million) related to the
former Stichting Regio Bank that cannot be freely distributed.

ING Group Annual Report 2010 261

5 Parent company annual accounts

Notes to the parent company annual accounts of ING Group continued

Positive components of the Share of associates reserve and Currency translation reserve cannot be freely distributed. The reserve for cash
flow hedges is included in the Share of associates reserve on a net basis. Retained earnings can be freely distributed, except for an amount
equal to the negative balance in each of the components of the Currency translation reserve and Share of associates reserve. Unrealised
gains and losses on derivatives, other than those used in cash flow hedges, are presented in the profit and loss account and are therefore
part of Retained earnings and are not included in Share of associates reserve.

The total amount of Equity in the parent company annual accounts equals Shareholders’ equity (parent) in the consolidated annual
accounts. Certain components within equity are different, as a result of the following presentation differences between the parent
company accounts and consolidated accounts:
• Unrealised revaluations within consolidated group companies, presented in the Revaluation reserve in the consolidated accounts,
are presented in the Share of associates reserve in the parent company accounts;
• Foreign currency translation on consolidated group companies, presented in the Currency translation reserve in the consolidated
accounts, is presented in the Share of associates reserve in the parent company accounts;
• Revaluations on investment property and certain participations recognised in income and consequently presented in Retained earnings
in the consolidated accounts, is presented in the Share of associates reserve in the parent company accounts.

The total amount of non-distributable reserves is EUR 7,578 million (2009: EUR 2,940 million).

See Note 13 ‘Shareholders’ equity (parent)/non-voting equity securities’ in the consolidated annual accounts for additional information,
including restrictions with respect to dividend and repayment of capital.

Change in treasury shares

Amount Number
2010 2009 2010 2009
Opening balance 737 866 47,047,225 36,457,118
Purchased/sold 48 47 6,393,739 11,648,765
Rights issue –64
Share-based payments –23 –27 –2,140,863 –1,058,658
Other –47 –85
Closing balance 715 737 51,300,101 47,047,225

4 SUBORDINATED LOANS

Subordinated loans
Notional amount in Balance sheet value
Interest rate Year of issue Due date original currency 2010 2009
9.000% 2008 Perpetual EUR 10 10 10
8.500% 2008 Perpetual USD 2,000 1,469 1,357
8.000% 2008 Perpetual EUR 1,500 1,485 1,479
7.375% 2007 Perpetual USD 1,500 1,111 1,022
6.375% 2007 Perpetual USD 1,045 773 713
5.140% 2006 Perpetual GBP 600 692 670
5.775% 2005 Perpetual USD 1,000 741 690
6.125% 2005 Perpetual USD 700 504 472
4.176% 2005 Perpetual EUR 500 498 498
Variable 2004 Perpetual EUR 1,000 994 999
6.200% 2003 Perpetual USD 500 363 337
Variable 2003 Perpetual EUR 750 729 731
7.200% 2002 Perpetual USD 1,100 748 656
7.050% 2002 Perpetual USD 800 528 465
8.439% 2000 31 December 2030 USD 1,500 1,121 1,040
11,766 11,139

262 ING Group Annual Report 2010

 Parent company annual accounts 5

Notes to the parent company annual accounts of ING Group continued

The Subordinated loans rank subordinated to the Other liabilities in a winding-up of ING.

5 OTHER LIABILITIES

Other liabilities by type

2010 2009
Debenture loans 6,571 6,545
Amounts owed to group companies 501 532
Other amounts owed and accrued liabilities 1,581 1,783
Derivatives from group companies 236 268
8,889 9,128

Debenture loans
Balance sheet value
Interest rate Year of issue Due date 2010 2009
5.625% 2008 3 September 2013 1,072 1,073
4.699% 2007 1 June 2035 117 117
4.750% 2007 31 May 2017 1,890 1,864
Variable 2006 28 June 2011 749 749
Variable 2006 11 April 2016 997 997
4.125% 2006 11 April 2016 746 745
6.125% 2000 4 January 2011 1,000 1,000
6,571 6,545

The number of debentures held by group companies as at 31 December 2010 was 131,680 with a balance sheet value of EUR 13 million
(2009: 114,760 with a balance sheet value of EUR 11 million).

Amounts owed to group companies by remaining term

2010 2009
Within 1 year 1 32
More than 1 year but less than 5 years 500 500
501 532

The interest rate on the Amounts owed to group companies as at 31 December 2010 was 2.850% (2009: 2.850%).

Other amounts owed and accrued liabilities are payable within one year.

Derivatives from group companies by remaining term

2010 2009
Within 1 year 25
More than 1 year but less than 5 years 30
More than 5 years 211 238
236 268

ING Group Annual Report 2010 263

 5 Parent company annual accounts

Notes to the parent company annual accounts of ING Group continued

6 OTHER RESULTS AFTER TAXATION

2009
In order to obtain approval from the European Commission on ING Group’s Restructuring Plan, ING Group agreed in October 2009 to
make additional Illiquid Assets Back-up Facility payments as part of the overall agreement with the European Commission to the Dutch
State corresponding to an adjustment of the fees for the Illiquid Assets Back-up Facility. In total, these additional Illiquid Assets Back-up
Facility payments as part of the overall agreement with the European Commission amounted to a net present value of EUR 1.3 billion
pre-tax (EUR 930 million after tax), which was recognised as a one-off charge in the fourth quarter of 2009 for ING Groep N.V.(parent
company). Reference is made to Note 33 ‘Related parties’ in the consolidated annual accounts.

7 OTHER
Guarantees
As at 31 December 2010, ING Group had no guarantees given on behalf of third parties (2009: nil). ING Group has issued statements
of liabilities in connection with Section 403, Book 2 of the Dutch Civil Code and other guarantees for a number of group companies.

Fiscal unity
ING Groep N.V. forms a fiscal unity with several Dutch banking entities for corporation tax purposes. ING Groep N.V. and its banking
subsidiaries that form part of the fiscal unity are jointly and severally liable for taxation payable by the fiscal unity.

264 ING Group Annual Report 2010

 Parent company annual accounts 5

REMUNERATION OF SENIOR MANAGEMENT, EXECUTIVE BOARD AND SUPERVISORY BOARD

The information on share-based payment plans and remuneration of the members of the Executive Board and the Supervisory Board
is included in the Consolidated annual accounts (page 164 up to and including page 165).

AUTHORISATION OF PARENT COMPANY ANNUAL ACCOUNTS

Amsterdam, 14 March 2011

THE SUPERVISORY BOARD THE EXECUTIVE BOARD

Peter A.F.W. Elverding, chairman Jan H.M. Hommen, CEO and chairman
Jeroen van der Veer, vice-chairman Patrick G. Flynn, CFO
J.P. (Tineke) Bahlmann J.V. (Koos) Timmermans, CRO
Henk W. Breukink
Claus Dieter Hoffmann
Piet C. Klaver
Aman Mehta
Joan E. Spero
Lodewijk J. de Waal

ING Group Annual Report 2010 265

6 Other information

Independent auditor’s report

To the Shareholders, the Supervisory Board and the Executive Board of ING Groep N.V.

REPORT ON THE ANNUAL ACCOUNTS

We have audited the accompanying annual accounts 2010 of ING Groep N.V., Amsterdam (as set out on pages 88 to 265). The annual
accounts include the consolidated annual accounts and the parent company annual accounts. The consolidated annual accounts comprise
the consolidated balance sheet as at 31 December 2010, the profit and loss account, statement of comprehensive income, statement
of cash flows and statement of changes in equity for the year then ended, and a summary of significant accounting policies and other
explanatory notes. The parent company annual accounts comprise the parent company balance sheet as at 31 December 2010, the
parent company profit and loss account for the year then ended and the notes, comprising a summary of significant accounting policies
and other explanatory notes.

Management’s responsibility
Management is responsible for the preparation and fair presentation of these annual accounts in accordance with International Financial
Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Dutch Civil Code, and for the preparation of
the report of the Executive Board in accordance with Part 9 of Book 2 of the Dutch Civil Code. Furthermore management is responsible
for such internal control as it determines is necessary to enable the preparation of the annual accounts that are free from material
misstatement, whether due to fraud or error.

Auditor’s responsibility
Our responsibility is to express an opinion on these annual accounts based on our audit. We conducted our audit in accordance with Dutch
law, including the Dutch Standards on Auditing, and the standards of the Public Company Accounting Oversight Board (United States).
This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether about
the annual accounts are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual accounts.
The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of
the annual accounts, whether due to fraud or error.

In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of
the annual accounts in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the annual accounts.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion with respect to the consolidated annual accounts

In our opinion, the consolidated annual accounts give a true and fair view of the financial position of ING Groep N.V. as at 31 December
2010 and of its result and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted
by the European Union and with Part 9 of Book 2 of the Dutch Civil Code.

Opinion with respect to the parent company annual accounts

In our opinion, the parent company annual accounts give a true and fair view of the financial position of ING Groep N.V. as at
31 December 2010 and of its result for the year then ended in accordance with Part 9 of Book 2 of the Dutch Civil Code.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

Pursuant to the legal requirement under Section 2:393 sub 5 at e and f of the Dutch Civil Code, we have no deficiencies to report as a
result of our examination whether the report of the Executive Board, to the extent we can assess, has been prepared in accordance with
Part 9 of Book 2 of this Code, and whether the information as required under Section 2:392 sub 1 at b-h has been annexed. Further we
report that the report of the Executive Board, to the extent we can assess, is consistent with the annual accounts as required by Section
2:391 sub 4 of the Dutch Civil Code.

Amsterdam, 14 March 2011

For Ernst & Young Accountants LLP

signed by C.B. Boogaart

266 ING Group Annual Report 2010

 Other information 6

Proposed appropriation of result

and Subsequent events
amounts in millions of euros, except for amounts per share

PROPOSED APPROPRIATION OF RESULT

The result is appropriated pursuant to Article 37 of the Articles of Association of ING Groep N.V., the relevant stipulations of which state
that the Executive Board, subject to the approval of the Supervisory Board, determines what part of the result is to be appropriated to
reserves and that the remaining part of the result shall be at the disposal of the General Meeting.

For 2010, the Executive Board, with the approval of the Supervisory Board, has determined to appropriate the entire result to reserves,
so that no dividend will be paid.

In 2010 no interim dividend was paid.

Proposed appropriation of result

Net result 3,220

Addition to reserves pursuant to Article 37 (4)
of the Articles of Association 3,220
At the disposal of the General Meeting of
Shareholders pursuant to Article 37 (5) of
the Articles of Association 0

Dividend of EUR 0.00 per ordinary share

SUBSEQUENT EVENTS
ING changed its accounting policy for the insurance provisions for Guaranteed Minimum Withdrawal Benefits for Life (GMWBL) in the
Insurance US Closed Block VA book as of 1 January 2011 in order to better reflect the economic value of guarantees. Reference is made
to section ‘Subsequent events’ in the consolidated annual accounts.

In December 2009, ING repurchased the first half of the non-voting equity securities (core Tier 1 securities) of EUR 5 billion plus a total
premium of EUR 605 million. In March 2011, ING announced that, at the next coupon reset date on 13 May 2011, ING intends to exercise
its option for early repurchase of EUR 2 billion of the remaining non-voting equity securities (core Tier 1 securities). The total payment in
May 2011 will amount to EUR 3 billion and includes a 50% repurchase premium. ING will fund this repurchase from retained earnings.
Provided that the strong capital generation continues, ING intends to repurchase the remaining EUR 3 billion non-voting equity securities
(core Tier 1 securities) ultimately by May 2012 from retained earnings. The final decision on repurchase of these non-voting equity
securities (core Tier 1 securities) will be made before the envisaged repayment date and will be conditional upon there having been no
material changes regarding ING’s capital requirements and/or ING’s outlook on external market circumstances.

On 11 March 2011 a severe earthquake and tsunami struck Japan. While ING does not have any non-life operations in Japan, ING has life
insurance, asset management and banking businesses in Japan. The life insurance business sold primarily two product types: Single
Premium Variable Annuities (SPVA, closed for new business in 2009) and Corporate Owned Life Insurance (COLI). ING’s financial position
may be impacted by these events and any related developments, including through (but not limited to) death and health-related claims,
policyholder behaviour, re-insurance coverage, investment losses and impact from general market developments. As of the date of this
Annual Report, the full impact of these catastrophic events was not yet known and, therefore, it is too early to determine the impact of
these events on ING.

ING Group Annual Report 2010 267

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7 Additional information

Risk factors

Any of the risks described below could have a material adverse effect on the business activities, financial condition, results of operations
and prospects of ING. The market price of ING shares could decline due to any of these risks, and investors could lose all or part of their
investments. Additional risks of which the Company is not presently aware could also affect the business operations of ING and have
a material adverse effect on ING’s business activities, financial condition, results of operations and prospects. In addition, the business
of a multinational, broad-based financial services firm such as ING is inherently exposed to risks that only become apparent with the
benefit of hindsight. The sequence in which the risk factors are presented below is not indicative of their likelihood of occurrence or
the potential magnitude of their financial consequences.

RISKS RELATED TO FINANCIAL CONDITIONS, MARKET ENVIRONMENT AND GENERAL ECONOMIC TRENDS.
Because we are a financial services company conducting business on a global basis, our revenues and earnings are affected
by the volatility and strength of the economic, business and capital markets environments specific to the geographic regions
in which we conduct business. The ongoing turbulence and volatility of such factors have adversely affected, and may
continue to adversely affect, the profitability of our insurance, banking and asset management business.

Factors such as interest rates, securities prices, credit spreads, liquidity spreads, exchange rates, consumer spending, business investment,
real estate and private equity valuations, government spending, inflation, the volatility and strength of the capital markets, political events
and trends, and terrorism all impact the business and economic environment and, ultimately, the amount and profitability of business we
conduct in a specific geographic region. In an economic downturn characterised by higher unemployment, lower family income, lower
corporate earnings, higher corporate and private debt defaults, lower business investments, and lower consumer spending, the demand
for banking and insurance products is usually adversely affected and ING’s reserves and provisions typically would increase, resulting in
overall lower earnings. Securities prices, real estate values and private equity valuations may also be adversely impacted, and any such
losses would be realised through profit and loss and shareholders’ equity. Some insurance products contain minimum return or
accumulation guarantees. If returns do not meet or exceed the guarantee levels we may need to set up additional reserves to fund these
future guaranteed benefits. In addition, we may experience an elevated incidence of claims and lapses or surrenders of policies. Our
policyholders may choose to defer paying insurance premiums or stop paying insurance premiums altogether. Similarly, a downturn in
the equity markets causes a reduction in commission income we earn from managing portfolios for third parties, income generated from
our own proprietary portfolios, asset-based fee income on certain insurance products, and our capital base. We also offer a number of
insurance and financial products that expose us to risks associated with fluctuations in interest rates, securities prices, corporate and
private default rates, the value of real estate assets, exchange rates and credit spreads. See also ‘– Interest rate volatility may adversely
affect our profitability’, ‘–Turbulence and volatility in the financial markets have adversely affected us, and may continue to do so’, and
‘–Current market conditions have increased the risk of loans being impaired. We are exposed to declining property values on the collateral
supporting residential and commercial real estate lending’ below.

In case one or more of the factors mentioned above adversely affects the profitability of our business this might also result, among others,
in the following:
• the unlocking of deferred acquisition costs impacting earnings; and/or
• reserve inadequacies which could ultimately be realised through profit and loss and shareholders’ equity; and/or
• the write down of tax assets impacting net results; and/or
• impairment expenses related to goodwill and other intangible assets, impacting net results; and/or
• movements in Risk Weighted Assets for the determination of required capital.

Shareholders’ equity and our net result may significantly be impacted by turmoil and volatility in the worldwide financial markets. Negative
developments in financial markets and/or economies may have a material adverse impact on shareholders’ equity and net result in future
periods, including as a result of the potential consequences listed above. The recalibration we have conducted of our economic capital models
to reflect difficult market conditions experienced over recent years may have a material impact on our economic capital for credit risk. See
‘Risks Related to the Group – Turbulence and volatility in the financial markets have adversely affected us, and may continue to do so’.

Adverse capital and credit market conditions may impact our ability to access liquidity and capital, as well as the cost of
credit and capital.
The capital and credit markets have been experiencing extreme volatility and disruption for more than two years. In the second half of
2008, the volatility and disruption reached unprecedented levels. In some cases, market developments have resulted in restrictions on
the availability of liquidity and credit capacity for certain issuers.

We need liquidity in our day-to-day business activities to pay our operating expenses, interest on our debt and dividends on our capital
stock; maintain our securities lending activities; and replace certain maturing liabilities. The principal sources of our liquidity are deposit
funds, insurance premiums, annuity considerations, cash flow from our investment portfolio and assets, consisting mainly of cash or assets
that are readily convertible into cash. Sources of liquidity in normal markets also include a variety of short- and long-term instruments,
including repurchase agreements, commercial paper, medium-and long-term debt, junior subordinated debt securities, capital securities
and stockholders’ equity.

268 ING Group Annual Report 2010

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7

Risk factors continued

In the event current resources do not satisfy our needs, we may have to seek additional financing. The availability of additional financing
will depend on a variety of factors such as market conditions, the general availability of credit, the volume of trading activities, the overall
availability of credit to the financial services industry, our credit ratings and credit capacity, as well as the possibility that customers or
lenders could develop a negative perception of our long- or short-term financial prospects. Similarly, our access to funds may be limited
if regulatory authorities or rating agencies take negative actions against us. If our internal sources of liquidity prove to be insufficient,
there is a risk that external funding sources might not be available, or available at unfavourable terms.

Disruptions, uncertainty or volatility in the capital and credit markets, such as that experienced over the past few years and in the second
half of 2008 in particular, may also limit our access to capital required to operate our business. Such market conditions may in the future
limit our ability to raise additional capital to support business growth, or to counter-balance the consequences of losses or increased
regulatory capital requirements. This could force us to (1) delay raising capital, (2) reduce, cancel or postpone payment of dividends on
our shares, (3) reduce, cancel or postpone interest payments on other securities, (4) issue capital of different types or under different terms
than we would otherwise, or (5) incur a higher cost of capital than in a more stable market environment. This would have the potential to
decrease both our profitability and our financial flexibility. Our results of operations, financial condition, cash flows and regulatory capital
position could be materially adversely affected by disruptions in the financial markets.

In the course of 2008 and 2009, governments around the world, including the Dutch government, implemented unprecedented measures
to provide assistance to financial institutions, in certain cases requiring (indirect) influence on or changes to governance and remuneration
practices. In certain cases governments nationalised companies or parts thereof. The measures adopted in the Netherlands include both
liquidity provision and capital reinforcement, and a Dutch Credit Guarantee Scheme. The liquidity and capital reinforcement measures
expired on 10 October 2009, and the Credit Guarantee Scheme of the Netherlands expired on 31 December 2010. Our participation in
these measures has resulted in certain material restrictions on us, including those agreed to with the European Commission (‘EC’) as part
of our Restructuring Plan. See ‘Risks Related to the Restructuring Plan – Our agreements with the Dutch State impose certain restrictions
regarding the issuance or repurchase of our shares and the compensation of certain senior management positions’, ‘Risks Related to the
Restructuring Plan – The implementation of the Restructuring Plan and the divestments anticipated in connection with that plan will
significantly alter the size and structure of the Group and involve significant costs and uncertainties that could materially impact the
Group’. The Restructuring Plan as well as any potential future transactions with the Dutch State or any other government, if any, or actions
by such government regarding ING could adversely impact the position or rights of shareholders, bondholders, customers or creditors and
our results, operations, solvency, liquidity and governance.

We are subject to the jurisdiction of a variety of banking and insurance regulatory bodies, some of which have proposed regulatory
changes that, if implemented, would hinder our ability to manage our liquidity in a centralised manner. Furthermore, regulatory liquidity
requirements in certain jurisdictions in which we operate are generally becoming more stringent, including those forming part of the ‘Basel
III’ requirements discussed further below under ‘–We operate in highly regulated industries. There could be an adverse change or increase
in the financial services laws and/or regulations governing our business’, undermining our efforts to maintain this centralised management
of our liquidity. These developments may cause trapped pools of liquidity, resulting in inefficiencies in the cost of managing our liquidity,
and hinder our efforts to integrate our balance sheet, which is an essential element of our Restructuring Plan.

The default of a major market participant could disrupt the markets.

Within the financial services industry the default of any one institution could lead to defaults by other institutions. The failure of a sufficiently large
and influential institution could disrupt securities markets or clearance and settlement systems in our markets. This could cause market declines
or volatility. Such a failure could lead to a chain of defaults that could adversely affect us and our contract counterparties. Concerns about,
or a default by, one institution could lead to significant liquidity problems, losses or defaults by other institutions, because the commercial and
financial soundness of many financial institutions may be closely related as a result of their credit, trading, clearing or other relationships. Even the
perceived lack of creditworthiness of, or questions about, a counterparty may lead to market-wide liquidity problems and losses or defaults by
us or by other institutions. This risk is sometimes referred to as ‘systemic risk’ and may adversely affect financial intermediaries, such as clearing
agencies, clearing houses, banks, securities firms and exchanges with whom we interact on a daily basis. Systemic risk could have a material
adverse effect on our ability to raise new funding and on our business, financial condition, results of operations, liquidity and/or prospects.
In addition, such a failure could impact future product sales as a potential result of reduced confidence in the financial services industry.

Management believes that despite increased attention recently, systemic risk to the markets in which we operate continues to exist,
and dislocations caused by the interdependency of financial market participants continues to be a potential source of material adverse
changes to our business, results of operations and financial condition.

Because our life and non-life insurance and reinsurance businesses are subject to losses from unforeseeable and/or
catastrophic events, which are inherently unpredictable, our actual claims amount may exceed our established reserves
or we may experience an abrupt interruption of activities, each of which could result in lower net results and have an
adverse effect on our results of operations.
In our life and non-life insurance and reinsurance businesses, we are subject to losses from natural and man-made catastrophic events.
Such events include, without limitation, weather and other natural catastrophes such as hurricanes, floods, earthquakes and epidemics
that may be more severe or difficult to predict as a result of increasingly variable climate conditions, as well as events such as terrorist
attacks and political and social unrest.

ING Group Annual Report 2010 269

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Risk factors continued

The frequency and severity of such events, and the losses associated with them, are inherently unpredictable and cannot always be
adequately reserved for. Furthermore, we are subject to actuarial and underwriting risks such as, for instance, mortality, longevity,
morbidity, and adverse claims development which result from the pricing and acceptance of insurance contracts. In accordance with
industry practices, modelling of natural catastrophes is performed and risk mitigation measures are taken. In case claims occur, reserves
are established based on estimates using actuarial projection techniques. The process of estimating is based on information available
at the time the reserves are originally established and includes updates when more information becomes available. Although we
continually review the adequacy of the established claim reserves, there can be no assurances that our actual claims experience will not
exceed our estimated claim reserves. If actual claim amounts exceed the estimated claim reserves, our earnings may be reduced and our
net results may be adversely affected.

In addition, and as discussed further below under ‘Risks Related to the Group’s Business, Operations, and Regulatory Environment–
Operational risks are inherent in our business’, because unforeseeable and/or catastrophic events can lead to an abrupt interruption of
activities, our banking and insurance operations may be subject to losses resulting from such disruptions. Losses can relate to property,
financial assets, trading positions, insurance and pension benefits to employees and also to key personnel. If our business continuity plans
are not able to be put into action or do not take such events into account, losses may further increase.

We operate in highly regulated industries. There could be an adverse change or increase in the financial services laws
and/or regulations governing our business.
We are subject to detailed banking, insurance, asset management and other financial services laws and government regulation in each
of the jurisdictions in which we conduct business. Regulatory agencies have broad administrative power over many aspects of the financial
services business, which may include liquidity, capital adequacy and permitted investments, ethical issues, money laundering, privacy,
record keeping, and marketing and sales practices. Banking, insurance and other financial services laws, regulations and policies currently
governing us and our subsidiaries may also change at any time and in ways which have an adverse effect on our business, and it is
difficult to predict the timing or form of any future regulatory or enforcement initiatives in respect thereof. Also, bank regulators and
other supervisory authorities in the EU, the US and elsewhere continue to scrutinise payment processing and other transactions under
regulations governing such matters as money-laundering, prohibited transactions with countries subject to sanctions, and bribery or other
anti-corruption measures. Regulation is becoming increasingly more extensive and complex and regulators are focusing increased scrutiny
on the industries in which we operate, often requiring additional Company resources. These regulations can serve to limit our activities,
including through our net capital, customer protection and market conduct requirements, and restrictions on businesses in which we can
operate or invest. If we fail to address, or appear to fail to address, appropriately any of these matters, our reputation could be harmed
and we could be subject to additional legal risk, which could, in turn, increase the size and number of claims and damages asserted
against us or subject us to enforcement actions, fines and penalties.

In light of current conditions in the global financial markets and the global economy, regulators have increased their focus on the
regulation of the financial services industry. Most of the principal markets where we conduct our business have adopted, or are currently
considering, major legislative and/or regulatory initiatives in response to the financial crisis. In particular, governmental and regulatory
authorities in the Netherlands, the United Kingdom, the United States and elsewhere are implementing measures to increase regulatory
control in their respective financial markets and financial services sectors, including in the areas of prudential rules, capital requirements,
executive compensation, crisis and contingency management, bank levies and financial reporting, among others. For example, the EC
has agreed upon a full scale revision of the solvency framework and prudential regime applicable to insurance and reinsurance companies
known as ‘Solvency II’, which was adopted on 25 November 2009. Each member state of the EEA, including the Netherlands, is required
to implement Solvency II by 1 January 2013. Significant efforts towards establishing a more cohesive and streamlined European supervisory
framework, including establishing a European Systemic Risk Board and a European Insurance and Occupational Pensions Authority, may
also affect the Group’s operations.

In addition, the Basel Committee on Banking Supervision has announced higher global minimum capital standards for banks, introduced a
new global liquidity standard and called for a new leverage ratio. The Committee’s package of reforms, collectively referred to as the ‘Basel III’
rules, will, among other requirements, increase amount of common equity required to be held by subject banking institutions, prescribe the
amount of liquid assets a subject banking institution must hold at a given moment, and limit leverage. Banks will be required to hold a ‘capital
conservation buffer’ to withstand future periods of stress such that the total Tier 1 common equity ratio, when fully phased in on 1 January
2019, will rise to 7%. Further, Basel III calls for stricter definitions of capital that will have the effect of disqualifying many hybrid securities,
potentially including those issued by the Group, from inclusion in regulatory capital, as well as the higher capital requirements for trading,
derivative and securitisation activities to be introduced at the end of 2011 as part of a number of reforms to the Basel II framework. In
addition, the Basel Committee and Financial Stability Board (FSB) are currently considering measures that may have the effect of requiring
higher loss absorbency capacity, liquidity surcharges, exposure limits and special resolution regimes for ‘systemically important financial
institutions’ (SIFIs) and so-called ‘Global’ SIFIs (G-SIFI), in addition to the Basel III requirements otherwise applicable to most financial
institutions. While the full impact of the new Basel III rules, and any additional requirements for SIFIs or G-SIFIs if and as applicable to the
Group, will depend on how they are implemented by national regulators, including the extent to which regulators and supervisors can set
more stringent limits and additional capital requirements or surcharges, as well as on the economic and financial environment at the time
of implementation and beyond, we expect these rules can have a material impact on ING’s operations and financial condition and may
require the Group to seek additional capital. Further, the International Accounting Standards Board (‘IASB’) is considering changes to several
IFRS standards, which changes could also have a material impact on our reported results and financial condition.

270 ING Group Annual Report 2010

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7

Risk factors continued

Furthermore, in the United States, the Dodd-Frank Wall Street Reform and Consumer Protection Act (‘Dodd-Frank’ or the ‘Dodd-Frank
Act’) has imposed comprehensive changes to the regulation of financial services in the United States and has implications for non-US
financial institutions with a US presence, such as ING. Dodd−Frank directs existing and newly−created government agencies and bodies
to promulgate regulations implementing the law, a process anticipated to occur over the next few years. We cannot predict with any
certainty the requirements of the regulations ultimately adopted or how Dodd−Frank and such regulations will affect the financial markets
generally, impact the Group’s business, credit or financial strength ratings, results of operations, cash flows or financial condition or
advise or require the Group to raise additional capital. Key risks associated with the Dodd-Frank Act that may have an impact on the
Group include:

• The newly created risk regulator – the Financial Stability Oversight Council (the ‘FSOC’) – may designate the Group as a company
whose material financial distress, or whose nature, scope, size, scale, concentration, interconnectedness or mix of activities, could
pose a threat to the financial stability of the United States. In such an instance, the Group will become subject to the oversight of the
Federal Reserve. If the Group becomes subject to the examination, enforcement and supervisory authority of the Federal Reserve, the
Federal Reserve would have authority to impose capital requirements on the Group and its subsidiaries. The Group cannot predict what
capital regulations the Federal Reserve will promulgate under these authorisations, either generally or as applicable to organisations
with the Group’s operations, nor can management predict how the Federal Reserve will exercise potential general supervisory authority
over the Group as to its business practices or those of its subsidiaries. If designated as systemically important by the FSOC, the Group
would become subject to unspecified stricter prudential standards, including stricter requirements and limitations relating to risk−based
capital, leverage, liquidity and credit exposure, as well as overall risk management requirements, management interlock prohibitions
and a requirement to maintain a plan for rapid and orderly dissolution in the event of severe financial distress. The Group may become
subject to stress tests to be promulgated by the Federal Reserve in consultation with the newly created Federal Insurance Office
(discussed below) to determine whether, on a consolidated basis, the Group has the capital necessary to absorb losses as a result of
adverse economic conditions. We cannot predict how the stress tests will be designed or conducted or whether the results thereof
will cause the Group to alter its business practices or affect the perceptions of regulators, rating agencies, customers, counterparties
or investors about the Group’s financial strength. The FSOC may also recommend that state insurance regulators or other regulators
apply new or heightened standards and safeguards for activities or practices that the Group and other insurers or other financial
services companies engage in.
• Title II of Dodd−Frank provides that a financial company may be subject to a special orderly liquidation process outside the federal
bankruptcy code, administered by the Federal Deposit Insurance Corporation as receiver, upon a determination that the company
is in default or in danger of default and presents a systemic risk to US financial stability.
• Dodd−Frank creates a new framework for regulation of the over-the-counter (OTC) derivatives markets and certain market participants
which could affect various activities of the Group and its subsidiaries.
• Dodd−Frank establishes a Federal Insurance Office (‘FIO’) within the Department of the Treasury to be headed by a director appointed
by the Secretary of the Treasury. While not having a general supervisory or regulatory authority over the business of insurance, the
director of this office would perform various functions with respect to insurance (other than health insurance), including participating
in the FSOC’s decisions regarding insurers (potentially including the Group and its subsidiaries), to be designated for stricter regulation.
The FIO may recommend enhanced regulations to the states. As of this writing, a director for FIO has not been named.
• Dodd−Frank establishes the Bureau of Consumer Financial Protection (‘BCFP’) as an independent agency within the Federal Reserve
to regulate consumer financial products and services offered primarily for personal, family or household purposes. The BCFP will have
significant authority to implement and enforce federal consumer financial laws, including the new protections established under
Dodd−Frank, as well as the authority to identify and prohibit unfair and deceptive acts and practices. In addition, the BCFP will have
broad supervisory, examination and enforcement authority over certain consumer products, such as mortgage lending. Insurance
products and services are not within the BCFP’s general jurisdiction, and broker−dealers and investment advisers are not subject to the
BCFP’s jurisdiction when acting in their registered capacity.
• Dodd−Frank also includes various securities law reforms that may affect the Group’s business practices and the liabilities and/or
exposures associated therewith, including a provision intended to authorise the SEC to impose on broker-dealers fiduciary duties to
their customers, as applies to investment advisers under existing law, which new standard could potentially expose certain of ING’s
US broker-dealers to increased risk of SEC enforcement actions and liability. The SEC staff recently released a study on this issue.

In addition to the adoption of these measures, regulators and lawmakers around the world are actively reviewing the causes of the
financial crisis and exploring steps to avoid similar problems in the future. In many respects, this work is being led by the Financial Stability
Board (‘FSB’), consisting of representatives of national financial authorities of the G20 nations. The G20 and the FSB have issued a series
of papers and recommendations intended to produce significant changes in how financial companies, particularly companies that are
members of large and complex financial groups, should be regulated. These proposals address such issues as financial group supervision,
capital and solvency standards, systemic economic risk, corporate governance including executive compensation, and a host of related
issues associated with responses to the financial crisis. The lawmakers and regulatory authorities in a number of jurisdictions in which
the Group’s subsidiaries conduct business have already begun introducing legislative and regulatory changes consistent with G20 and
FSB recommendations, including proposals governing consolidated regulation of insurance holdings companies by the Financial Services
Agency (FSA) in Japan, proposals governing executive compensation by the financial regulators in Germany (BaFIN) and the United
Kingdom (FSA).

ING Group Annual Report 2010 271

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Risk factors continued

Governments in the Netherlands and abroad have also intervened over the past few years on an unprecedented scale, responding to
stresses experienced in the global financial markets. Some of the measures adopted subject us and other institutions for which they
were designed to additional restrictions, oversight or costs. For restrictions related to the Core Tier 1 Securities and the IABF, as further
described in ‘Our agreements with the Dutch State impose certain restrictions regarding the issuance or repurchase of our shares and
the compensation of certain senior management positions’. As a result of having received state aid through the Dutch State Transactions,
we were required to submit our Restructuring Plan to the EC in connection with obtaining final approval for the Dutch State Transactions.
See ‘Risks Related to the Group – The implementation of the Restructuring Plan and the divestments anticipated in connection with that
plan will significantly alter the size and structure of the Group and involve significant costs and uncertainties that could materially impact
the Group’.

On 1 March 2011, the European Court of Justice issued its judgment in the widely-followed Test Achats case. The Test Achats decision, in
effect, provides that the use of gender as a factor in the pricing of or benefits under life and non-life insurance coverage is incompatible
with the principles of equal treatment of men and women under the EU Charter. The Test Achat decision provides for a transition period,
however, until 21 December 2012, after which the use of such gender-based factors will no longer be permissible. It is unclear whether
this prohibition also applies to existing insurance contracts. While it is too early to assess the impacts of the Test Achats case on ING’s
insurance business, it is expected that the industry generally will incur potentially significant compliance-related costs as policy forms,
underwriting and pricing criteria, and related systems undergo required modifications. ING is unable at this stage to quantify the extent of
any such costs or other impacts on its business, and intends to follow closely the implementation of the Test Achats decision during the
above-referenced transition period.

We cannot predict whether or when future legislative or regulatory actions may be taken, or what impact, if any, actions taken to date
or in the future could have on our business, results of operations and financial condition.

Despite our efforts to maintain effective compliance procedures and to comply with applicable laws and regulations, there are a number
of risks in areas where applicable regulations may be unclear, subject to multiple interpretation or under development or may conflict with
one another, where regulators revise their previous guidance or courts overturn previous rulings, or we fail to meet applicable standards.
Regulators and other authorities have the power to bring administrative or judicial proceedings against us, which could result, amongst
other things, in suspension or revocation of our licenses, cease and desist orders, fines, civil penalties, criminal penalties or other
disciplinary action which could materially harm our results of operations and financial condition.

Turbulence and volatility in the financial markets have adversely affected us, and may continue to do so.
Our results of operations are materially impacted by conditions in the global capital markets and the economy generally. The stress
experienced in the global capital markets that started in the second half of 2007 continued and substantially increased throughout
2008 and, although market conditions have improved, volatility continued in 2009, particularly the early part of the year. The crisis in
the mortgage market in the United States, triggered by a serious deterioration of credit quality, led to a revaluation of credit risks. While
certain conditions have improved over 2009 and 2010, these conditions have generally resulted in greater volatility, widening of credit
spreads and overall shortage of liquidity and tightening of financial markets throughout the world. In addition, prices for many types
of asset-backed securities (‘ABS’) and other structured products have significantly deteriorated. These concerns have since expanded to
include a broad range of fixed income securities, including those rated investment grade, sovereign debt, the international credit and
interbank money markets generally, and a wide range of financial institutions and markets, asset classes, such as public and private equity,
and real estate sectors. As a result of these and other factors, sovereign governments across the globe, including in regions where the
Group operates, have also experienced budgetary and other financial difficulties, which have resulted in austerity measures, downgrades
in credit rating by credit agencies, planned or implemented bail-out measures and, on occasion, civil unrest. As a result, the market for
fixed income instruments has experienced decreased liquidity, increased price volatility, credit downgrade events, and increased probability
of default. In addition, the confluence of these and other factors has resulted in volatile foreign exchange markets. Securities that are
less liquid are more difficult to value and may be hard to dispose of. International equity markets have also been experiencing heightened
volatility and turmoil, with issuers, including ourselves, that have exposure to the real estate, mortgage, private equity and credit markets
particularly affected. These events and market upheavals, including extreme levels of volatility, have had and may continue to have an
adverse effect on our revenues and results of operations, in part because we have a large investment portfolio and extensive real estate
activities around the world. In addition, the confidence of customers in financial institutions is being tested. Consumer confidence in
financial institutions may, for example, decrease due to our or our competitors’ failure to communicate to customers the terms of, and
the benefits to customers of, complex or high-fee financial products. Reduced confidence could have an adverse effect on our revenues
and results of operations, including through an increase of lapses or surrenders of policies and withdrawal of deposits. Because a
significant percentage of our customer deposit base is originated via Internet banking, a loss of customer confidence may result in a
rapid withdrawal of deposits over the Internet.

As a result of the ongoing and unprecedented volatility in the global financial markets in 2007 and 2008, we have incurred substantial
negative revaluations on our investment portfolio, which have impacted our shareholders’ equity and earnings. During 2009 and 2010,
the revaluation reserve position improved substantially, positively impacting shareholders’ equity. Although we believe that reserves for
insurance liabilities are generally adequate at the Group, inadequacies in certain product areas have developed.

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Such impacts have arisen primarily as a result of valuation issues arising in connection with our investments in real estate (both in and
outside the US) and private equity, exposures to US mortgage-related structured investment products, including sub-prime and Alt-A
Residential and Commercial Mortgage-Backed Securities (‘RMBS’ and ‘CMBS’, respectively), Collateralised Debt Obligations (‘CDOs’) and
Collateralised Loan Obligations (‘CLOs’), monoline insurer guarantees and other investments. In many cases, the markets for investments
and instruments have been and remain highly illiquid, and issues relating to counterparty credit ratings and other factors have exacerbated
pricing and valuation uncertainties. Valuation of such investments and instruments is a complex process involving the consideration of
market transactions, pricing models, management judgment and other factors, and is also impacted by external factors such as underlying
mortgage default rates, interest rates, rating agency actions and property valuations. We continue to monitor our exposures, however
there can be no assurances that we will not experience further negative impacts to our shareholders’ equity or profit and loss accounts
in future periods.

Because we operate in highly competitive markets, including our home market, we may not be able to increase or maintain
our market share, which may have an adverse effect on our results of operations.
There is substantial competition in the Netherlands and the other countries in which we do business for the types of insurance, commercial
banking, investment banking, asset management and other products and services we provide. Customer loyalty and retention can be
influenced by a number of factors, including relative service levels, the prices and attributes of products and services, and actions taken by
competitors. If we are not able to match or compete with the products and services offered by our competitors, it could adversely impact
our ability to maintain or further increase our market share, which would adversely affect our results of operations. Such competition is
most pronounced in our more mature markets of the Netherlands, Belgium, the Rest of Western Europe, the United States, Canada and
Australia. In recent years, however, competition in emerging markets, such as Latin America, Asia and Central and Eastern Europe, has
also increased as large insurance and banking industry participants from more developed countries have sought to establish themselves
in markets which are perceived to offer higher growth potential, and as local institutions have become more sophisticated and competitive
and have sought alliances, mergers or strategic relationships with our competitors. The Netherlands and the United States are our largest
markets for both our banking and insurance operations. Our main competitors in the banking sector in the Netherlands are ABN AMRO
Bank/Fortis and Rabobank. Our main competitors in the insurance sector in the Netherlands are Achmea, ASR and Aegon. Our main
competitors in the United States are insurance companies such as Lincoln National, Hartford, Aegon Americas, AXA, Met Life, Prudential,
Nationwide and Principal Financial. Increasing competition in these or any of our other markets may significantly impact our results if we
are unable to match the products and services offered by our competitors. Over time, certain sectors of the financial services industry have
become more concentrated, as institutions involved in a broad range of financial services have been acquired by or merged into other firms
or have declared bankruptcy. These developments could result in our competitors gaining greater access to capital and liquidity, expanding
their ranges of products and services, or gaining geographic diversity. We may experience pricing pressures as a result of these factors
in the event that some of our competitors seek to increase market share by reducing prices. In addition, under the Restructuring Plan we
have agreed to certain restrictions imposed by the EC, including with respect to our price leadership in EU banking markets and our ability
to make acquisitions of financial institutions and other businesses. See ‘– The limitations agreed with the EC on our ability to compete
and to make acquisitions or call certain debt instruments could materially impact the Group’.

Because we do business with many counterparties, the inability of these counterparties to meet their financial obligations
could have a material adverse effect on our results of operations.
General
Third-parties that owe us money, securities or other assets may not pay or perform under their obligations. These parties include the
issuers whose securities we hold, borrowers under loans originated, customers, trading counterparties, counterparties under swaps,
credit default and other derivative contracts, clearing agents, exchanges, clearing houses and other financial intermediaries. Defaults
by one or more of these parties on their obligations to us due to bankruptcy, lack of liquidity, downturns in the economy or real estate
values, operational failure, etc., or even rumours about potential defaults by one or more of these parties or regarding the financial
services industry generally, could lead to losses for us, and defaults by other institutions. In light of experiences with significant constraints
on liquidity and high cost of funds in the interbank lending market, and given the high level of interdependence between financial
institutions, we are and will continue to be subject to the risk of deterioration of the commercial and financial soundness, or perceived
soundness, of other financial services institutions. This is particularly relevant to our franchise as an important and large counterparty
in equity, fixed-income and foreign exchange markets, including related derivatives, which exposes it to concentration risk.

We routinely execute a high volume of transactions with counterparties in the financial services industry, including brokers and dealers,
commercial banks, investment banks, mutual and hedge funds, insurance companies and other institutional clients, resulting in large daily
settlement amounts and significant credit exposure. As a result, we face concentration risk with respect to specific counterparties and
customers. We are exposed to increased counterparty risk as a result of recent financial institution failures and weakness and will continue
to be exposed to the risk of loss if counterparty financial institutions fail or are otherwise unable to meet their obligations. A default by, or
even concerns about the creditworthiness of, one or more financial services institutions could therefore lead to further significant systemic
liquidity problems, or losses or defaults by other financial institutions.

With respect to secured transactions, our credit risk may be exacerbated when the collateral held by us cannot be realised, or is liquidated
at prices not sufficient to recover the full amount of the loan or derivative exposure due us. We also have exposure to a number of
financial institutions in the form of unsecured debt instruments, derivative transactions and equity investments. For example, we hold
certain hybrid regulatory capital instruments issued by financial institutions which permit the issuer to defer coupon payments on the

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occurrence of certain events or at their option. The EC has indicated that, in certain circumstances, it may require these financial
institutions to defer payment. If this were to happen, we expect that such instruments may experience ratings downgrades and/or a drop
in value and we may have to treat them as impaired, which could result in significant losses. There is no assurance that losses on, or
impairments to the carrying value of, these assets would not materially and adversely affect our business or results of operations.

In addition, we are subject to the risk that our rights against third parties may not be enforceable in all circumstances. The deterioration or
perceived deterioration in the credit quality of third parties whose securities or obligations we hold could result in losses and/or adversely
affect our ability to rehypothecate or otherwise use those securities or obligations for liquidity purposes. A significant downgrade in the
credit ratings of our counterparties could also have a negative impact on our income and risk weighting, leading to increased capital
requirements. While in many cases we are permitted to require additional collateral from counterparties that experience financial difficulty,
disputes may arise as to the amount of collateral we are entitled to receive and the value of pledged assets. Our credit risk may also be
exacerbated when the collateral we hold cannot be realised or is liquidated at prices not sufficient to recover the full amount of the loan
or derivative exposure that is due to us, which is most likely to occur during periods of illiquidity and depressed asset valuations, such
as those currently experienced. The termination of contracts and the foreclosure on collateral may subject us to claims for the improper
exercise of its rights. Bankruptcies, downgrades and disputes with counterparties as to the valuation of collateral tend to increase in
times of market stress and illiquidity.

Any of these developments or losses could materially and adversely affect our business, financial condition, results of operations,
liquidity and/or prospects.

Reinsurers
Our insurance operations have bought protection for risks that exceed certain risk tolerance levels set for both our life and non-life
businesses. This protection is bought through reinsurance arrangements in order to reduce possible losses. Because in most cases we
must pay the policyholders first, and then collect from the reinsurer, we are subject to credit risk with respect to each reinsurer for all such
amounts. As a percentage of our (potential) reinsurance as of 31 December 2010, the greatest exposure after collateral to an individual
external reinsurer was approximately 24%, approximately 40% related to four other external reinsurers and the remainder of the
reinsurance exposure related to various other reinsurers. The inability or unwillingness of any one of these reinsurers to meet its financial
obligations to us, or the insolvency of our reinsurers, could have a material adverse effect on our net results and our financial results.

Improving market conditions observed over the last year, may not persist and increase the risk of loans being impaired.
We are exposed to declining property values on the collateral supporting residential and commercial real estate lending.
We are exposed to the risk that our borrowers may not repay their loans according to their contractual terms and that the collateral
securing the payment of these loans may be insufficient. We may continue to see adverse changes in the credit quality of our borrowers
and counterparties, for example as a result of their inability to refinance their indebtedness, with increasing delinquencies, defaults
and insolvencies across a range of sectors. This may lead to impairment charges on loans and other assets, higher costs and additions
to loan loss provisions. A significant increase in the size of our provision for loan losses could have a material adverse effect on our
financial position and results of operations.

Economic and other factors could lead to further contraction in the residential mortgage and commercial lending market and to further
decreases in residential and commercial property prices which could generate substantial increases in impairment losses.

Interest rate volatility may adversely affect our profitability.

Changes in prevailing interest rates may negatively affect our business including the level of net interest revenue we earn, and for our
banking business the levels of deposits and the demand for loans. In a period of changing interest rates, interest expense may increase
at different rates than the interest earned on assets. Accordingly, changes in interest rates could decrease net interest revenue. Changes
in the interest rates may negatively affect the value of our assets and our ability to realise gains or avoid losses from the sale of those
assets, all of which also ultimately affect earnings. In addition, an increase in interest rates may decrease the demand for loans.

In addition, during periods of declining interest rates, life insurance and annuity products may be relatively more attractive to consumers,
resulting in increased premium payments on products with flexible premium features, and a higher percentage of insurance policies
remaining in force from year-to-year, creating asset liability duration mismatches. A decrease in interest rates may also require an addition
to provisions for guarantees included in life policies, as the guarantees become more valuable to policy holders. During a low interest rate
period, our investment earnings may be lower because the interest earnings on our fixed income investments will likely have declined in
parallel with market interest rates on our assets recorded at fair value. Declining interest rates may also affect the results of our reserve
adequacy testing which may in turn result in reserve strengthening. In addition, mortgages and fixed maturity securities in our investment
portfolios will be more likely to be prepaid or redeemed as borrowers seek to borrow at lower interest rates. Consequently, we may be
required to reinvest the proceeds in securities bearing lower interest rates. Accordingly, during periods of declining interest rates, our
profitability may suffer as the result of a decrease in the spread between interest rates charged to policyholders and returns on our
investment portfolios.

Conversely, in periods of rapidly increasing interest rates, policy loans, and withdrawals and surrenders of life insurance policies and fixed
annuity contracts may increase as policyholders choose to forego insurance protection and seek higher investment returns. Obtaining cash

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to satisfy these obligations may require us to liquidate fixed maturity investments at a time when market prices for those assets are
depressed because of increases in interest rates. This may result in realised investment losses. Regardless of whether we realise an
investment loss, these cash payments would result in a decrease in total invested assets, and may decrease our net income. Premature
withdrawals may also cause us to accelerate amortisation of deferred policy acquisition costs, which would also reduce our net income.

We may incur losses due to failures of banks falling under the scope of state compensation schemes.
In the Netherlands and other jurisdictions deposit guarantee schemes and similar funds (‘Compensation Schemes’) have been implemented
from which compensation may become payable to customers of financial services firms in the event the financial service firm is unable to
pay, or unlikely to pay, claims against it. In many jurisdictions in which we operate, these Compensation Schemes are funded, directly or
indirectly, by financial services firms which operate and/or are licensed in the relevant jurisdiction. As a result of the increased number of
bank failures, in particular since the fall of 2008, we expect that levies in the industry will continue to rise as a result of the Compensation
Schemes. In particular, we are a participant in the Dutch Deposit Guarantee Scheme, which guarantees an amount of EUR 100,000 per
person per bank (regardless of the number of accounts held). The costs involved with making compensation payments under the Dutch
Deposit Guarantee Scheme are allocated among the participating banks by the Dutch Central Bank, De Nederlandsche Bank N.V. (the
‘DNB’), based on an allocation key related to their market shares with respect to the deposits protected by the Dutch Deposit Guarantee
Schemes. Given our size we may incur significant compensation payments to be made under the Dutch Deposit Guarantee Scheme, which
we may be unable to recover from the bankrupt estate. The ultimate costs to the industry of payments which may become due under the
Compensation Schemes, remains uncertain although they may be significant and these and the associated costs to us may have a material
adverse effect on our results of operations and financial condition. Going forward the Dutch Deposit Guarantee Scheme may change from
an ex-post scheme, where we contribute after the failure of a firm, to an ex-ante scheme where we pay yearly contributions to ensure the
scheme holds a target level of fund regardless of whether any failures occur. The costs associated with potential future yearly contributions
are today unknown, but given our size may be significant.

RISKS RELATED TO THE GROUP’S BUSINESS, OPERATIONS, AND REGULATORY ENVIRONMENT

We may be unable to manage our risks successfully through derivatives.

We employ various economic hedging strategies with the objective of mitigating the market risks that are inherent in our business and
operations. These risks include currency fluctuations, changes in the fair value of our investments, the impact of interest rate, equity
markets and credit spread changes and changes in mortality and longevity. We seek to control these risks by, among other things, entering
into a number of derivative instruments, such as swaps, options, futures and forward contracts including from time to time macro hedges
for parts of our business.

Developing an effective strategy for dealing with these risks is complex, and no strategy can completely insulate us from risks associated
with those fluctuations. Our hedging strategies also rely on assumptions and projections regarding our assets, general market factors and
the credit worthiness of our counterparties that may prove to be incorrect or prove to be inadequate. Accordingly, our hedging activities
may not have the desired beneficial impact on our results of operations or financial condition. Poorly designed strategies or improperly
executed transactions could actually increase our risks and losses. If we terminate a hedging arrangement, we may also be required to pay
additional costs, such as transaction fees or breakage costs. There have been periods in the past, and it is likely that there will be periods in
the future, during which we have incurred or may incur losses on transactions, perhaps significant, after taking into account our hedging
strategies. Further, the nature and timing of our hedging transactions could actually increase our risk and losses. In addition, hedging
strategies involve transaction costs and other costs. Our hedging strategies and the derivatives that we use and may use may not
adequately mitigate or offset the risk of interest rate volatility, and our hedging transactions may result in losses.

Because we use assumptions about factors, the use of different assumptions about these factors may have an adverse
impact on our results of operations.
The establishment of insurance provisions, including the impact of minimum guarantees which are contained within certain variable annuity
products, the adequacy test performed on the provisions for life policies and the establishment of Deferred Acquisition Costs (DAC) and
Value of Business Acquired (VOBA) are inherently uncertain processes involving assumptions about factors such as court decisions, changes
in laws, social, economic and demographic trends, inflation, investment returns, policyholder behaviour (e.g., lapses, persistency, etc.) and
other factors, and, in the life insurance business, assumptions concerning mortality, longevity and morbidity trends. The use of different
assumptions about these factors could have a material effect on insurance provisions and underwriting expense. Changes in assumptions
may lead to changes in the insurance provisions over time. Furthermore, some of these assumptions can be volatile.

Because we use assumptions to model client behaviour for the purpose of our market risk calculations, the difference
between the realisation and the assumptions may have an adverse impact on the risk figures and future results.
We use assumptions in order to model client behaviour for the risk calculations in our banking and insurance books. Assumptions are
used to determine insurance liabilities, the price sensitivity of savings and current accounts and to estimate the embedded optional risk
in the mortgage and investment portfolios. The realisation or use of different assumptions to determine the client behaviour could have
material adverse effect on the calculated risk figures and ultimately future results.

ING Insurance has a significant exposure to the take up of policy options by policyholders. The exposure is greatest for variable annuity
business with guarantees deeply in-the-money, policyholder behaviour is difficult to predict and small changes in the proportion of

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policyholders taking up an option can have a significant financial impact. Furthermore, assumptions about policyholder behaviour
are sometimes made for new insurance business without a substantial amount of experiential data. These assumptions may prove
imperfect, which can have a material impact on results.

We may incur further liabilities in respect of our defined benefit retirement plans if the value of plan assets is not sufficient to
cover potential obligations, including as a result of differences between results and underlying actuarial assumptions and models.
ING Group companies operate various defined benefit retirement plans covering a significant number of our employees. The liability
recognised in our consolidated balance sheet in respect of our defined benefit plans is the present value of the defined benefit obligations
at the balance sheet date, less the fair value of each plan’s assets, together with adjustments for unrecognised actuarial gains and losses
and unrecognised past service costs. We determine our defined benefit plan obligations based on internal and external actuarial models
and calculations using the projected unit credit method. Inherent in these actuarial models are assumptions including discount rates,
rates of increase in future salary and benefit levels, mortality rates, trend rates in health care costs, consumer price index, and the
expected return on plan assets. These assumptions are based on available market data and the historical performance of plan assets,
and are updated annually. Nevertheless, the actuarial assumptions may differ significantly from actual results due to changes in market
conditions, economic and mortality trends and other assumptions. Any changes in these assumptions could have a significant impact
on our present and future liabilities to and costs associated with our defined benefit retirement plans.

Our risk management policies and guidelines may prove inadequate for the risks we face.
The methods we use to manage, estimate and measure risk are partly based on historic market behaviour. The methods may, therefore,
prove to be inadequate for predicting future risk exposure, which may be significantly greater than what is suggested by historic
experience. For instance, these methods did not predict the losses seen in the stressed conditions in recent periods, and may also not
adequately allow prediction of circumstances arising due to the government interventions and stimulus packages, which increase the
difficulty of evaluating risks. Other methods for risk management are based on evaluation of information regarding markets, customers
or other information that is publicly known or otherwise available to us. Such information may not always be correct, updated or
correctly evaluated.

We are subject to a variety of regulatory risks as a result of our operations in certain countries.
In certain countries in which we operate, judiciary and dispute resolution systems may be less developed. As a result in case of a breach of
contract we may have difficulties in making and enforcing claims against contractual counterparties and, if claims are made against us, we
might encounter difficulties in mounting a defence against such allegations. If we become party to legal proceedings in a market with an
insufficiently developed judiciary system, it could have an adverse effect on our operations and net result.

In addition, as a result of our operations in certain countries, we are subject to risks of possible nationalisation, expropriation, price
controls, exchange controls and other restrictive government actions, as well as the outbreak of hostilities, in these markets. In addition,
the current economic environment in certain of these countries in which we operate may increase the likelihood for regulatory initiatives to
protect homeowners from foreclosures. Any such regulatory initiative could have an adverse impact on our ability to protect our economic
interest in the event of defaults on residential mortgages.

Because we are continually developing new financial products, we might be faced with claims that could have an adverse
effect on our operations and net result if clients’ expectations are not met.
When new financial products are brought to the market, communication and marketing aims to present a balanced view of the product
(however there is a focus on potential advantages for the customers). Whilst we engage in a due diligence process when we develop
products, if the products do not generate the expected profit, or result in a loss, or otherwise do not meet expectations, customers
may file claims against us. Such claims could have an adverse effect on our operations and net result.

Ratings are important to our business for a number of reasons. Downgrades could have an adverse impact on our
operations and net results.
We have credit ratings from Standard & Poor’s Ratings Service, Moody’s Investor Service and Fitch Ratings. Each of the rating agencies
reviews its ratings and rating methodologies on a recurring basis and may decide on a downgrade at any time. In the event of a
downgrade the cost of issuing debt will increase, having an adverse effect on net results. Certain institutional investors may also
be obliged to withdraw their deposits from ING following a downgrade, which could have an adverse effect on our liquidity.

Claims paying ability, at the Group or subsidiary level, and financial strength ratings are factors in establishing the competitive position
of insurers. A rating downgrade could elevate lapses or surrenders of policies requiring cash payments, which might force us to sell assets
at a price that may result in realised investment losses. Among others, total invested assets decreases and deferred acquisition costs might
need to be accelerated, adversely impacting earnings. A downgrade may adversely impact relationships with distributors of our products
and services and customers, which may affect new sales and our competitive position.

Furthermore, ING Bank’s assets are risk weighted. Downgrades of these assets could result in a higher risk weighting which may result in
higher capital requirements. This may impact net earnings and the return on capital, and may have an adverse impact on our competitive
position. For ING’s insurance businesses in a number of jurisdictions, such as the US and the EU, downgrades of assets will similarly affect
the capital requirements for ING Insurance in those jurisdictions.

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Our business may be negatively affected by a sustained increase in inflation.

A sustained increase in the inflation rate in our principal markets would have multiple impacts on us and may negatively affect our
business, solvency position and results of operations. For example, a sustained increase in the inflation rate may result in an increase
in market interest rates which may
(1) decrease the value of certain fixed income securities we hold in our investment portfolios resulting in reduced levels of unrealised
capital gains available to us which could negatively impact our solvency position and net income,
(2) result in increased surrenders of certain life & savings products, particularly, those with fixed rates below market rates, and
(3) require us, as an issuer of securities, to pay higher interest rates on debt securities we issue in the financial markets from time
to time to finance our operations which would increase our interest expenses and reduce our results of operations.

A significant and sustained increase in inflation has historically also been associated with decreased prices for equity securities and sluggish
performance of equity markets generally. A sustained decline in equity markets may
(1) result in impairment charges to equity securities that we hold in our investment portfolios and reduced levels of unrealised capital
gains available to us which would reduce our net income and negatively impact our solvency position,
(2) negatively impact performance, future sales and surrenders of our unit-linked products where underlying investments are often
allocated to equity funds, and
(3) negatively impact the ability of our asset management subsidiaries to retain and attract assets under management, as well as the
value of assets they do manage, which may negatively impact their results of operations.

In addition, in the context of certain property & casualty risks underwritten by our insurance subsidiaries (particularly ‘long-tail’ risks),
a sustained increase in inflation with a resulting increase in market interest rates may result in (1) claims inflation (i.e., an increase in the
amount ultimately paid to settle claims several years after the policy coverage period or event giving rise to the claim), coupled with (2) an
underestimation of corresponding claims reserves at the time of establishment due to a failure to fully anticipate increased inflation and its
effect on the amounts ultimately payable to policyholders, and, consequently, (3) actual claims payments significantly exceeding associated
insurance reserves which would negatively impact our results of operations. In addition, a failure to accurately anticipate higher inflation
and factor it into our product pricing assumptions may result in a systemic mispricing of our products resulting in underwriting losses
which would negatively impact our results of operations.

Operational risks are inherent in our business.

Our businesses depend on the ability to process a large number of transactions efficiently and accurately. Losses can result from
inadequate trained or skilled personnel, IT failures, inadequate or failed internal control processes and systems, regulatory breaches, human
errors, employee misconduct including fraud, or from external events that interrupt normal business operations. We depend on the secure
processing, storage and transmission of confidential and other information in our computer systems and networks. The equipment and
software used in our computer systems and networks may be at or near the end of their useful lives or may not be capable of processing,
storing or transmitting information as expected. Certain of our computer systems and networks may also have insufficient recovery
capabilities in the event of a malfunction or loss of data. In addition, such systems and networks may be vulnerable to unauthorised
access, computer viruses or other malicious code and other external attacks or internal breaches that could have a security impact and
jeopardise our confidential information or that of our clients or our counterparts. These events can potentially result in financial loss,
harm to our reputation and hinder our operational effectiveness. We also face the risk that the design and operating effectiveness of
our controls and procedures prove to be inadequate or are circumvented. Furthermore, widespread outbreaks of communicable diseases,
such as the outbreak of the H1N1 influenza virus, may impact the health of our employees, increasing absenteeism, or may cause a
significant increase in the utilisation of health benefits offered to our employees, either or both of which could adversely impact our
business. Unforeseeable and/or catastrophic events can lead to an abrupt interruption of activities, and our operations may be subject
to losses resulting from such disruptions. Losses can result from destruction or impairment of property, financial assets, trading positions,
the payment of insurance and pension benefits to employees and the loss of key personnel. If our business continuity plans are not able
to be implemented or do not take such events into account, losses may increase further.

We have suffered losses from operational risk in the past and there can be no assurance that we will not suffer material losses from
operational risk in the future.

Reinsurance may not be available, affordable or adequate to protect us against losses. We may also decide to reduce,
eliminate or decline primary insurance or reinsurance coverage.
As part of our overall risk and capacity management strategy we purchase reinsurance for certain risks underwritten by our various
insurance business segments. Market conditions beyond our control determine the availability and cost of the reinsurance protection we
purchase. Accordingly, we may be forced to incur additional expenses for reinsurance or may not be able to obtain sufficient reinsurance
on acceptable terms, which could adversely affect our ability to write future business.

In addition, we determine the appropriate level of primary insurance and reinsurance coverage based on a number of factors and from
time to time decide to reduce, eliminate or decline coverage based on our assessment of the costs and benefits involved. In such cases,
the uninsured risk remains with us.

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Our business may be negatively affected by adverse publicity, regulatory actions or litigation with respect to us,
other well-known companies or the financial services industry in general.
Adverse publicity and damage to our reputation arising from our failure or perceived failure to comply with legal and regulatory
requirements, financial reporting irregularities involving other large and well known companies, increasing regulatory and law enforcement
scrutiny of ‘know your customer’ anti-money laundering, prohibited transactions with countries subject to sanctions, and bribery or other
anti-corruption measures and anti-terrorist-financing procedures and their effectiveness, regulatory investigations of the mutual fund,
banking and insurance industries, and litigation that arises from the failure or perceived failure by us to comply with legal, regulatory and
compliance requirements, could result in adverse publicity and reputation harm, lead to increased regulatory supervision, affect our ability
to attract and retain customers, maintain access to the capital markets, result in cease and desist orders, suits, enforcement actions, fines
and civil and criminal penalties, other disciplinary action or have other material adverse effects on us in ways that are not predictable.

RISKS RELATED TO THE RESTRUCTURING PLAN

The implementation of the Restructuring Plan and the divestments anticipated in connection with that plan will significantly
alter the size and structure of the Group and involve significant costs and uncertainties that could materially impact the Group.
In November 2008 the Dutch State purchased the Core Tier 1 Securities, and in the first quarter of 2009 we entered into the Illiquid
Asset Back-up Facility (IABF) with the Dutch State. As a result of having received state aid through the Dutch State Transactions, we were
required to submit a restructuring plan (the ‘Restructuring Plan’) to the EC in connection with obtaining final approval for the Dutch State
Transactions under the EC state aid rules. On 26 October 2009, we announced our Restructuring Plan, pursuant to which we are required
to divest by the end of 2013 all of our insurance business, including the investment management business, as well as ING Direct US, which
operates our direct banking business in the United States, and certain portions of our retail banking business in the Netherlands. The EC’s
approval of the Restructuring Plan was issued on 18 November 2009. On 28 January 2010 ING lodged an appeal with the General Court
of the European Union (the ‘General Court’) against specific elements of the EC’s decision regarding the Restructuring Plan. Although we
believe in the merit of our appeal lodged with the General Court of the European Union, there can be no assurance as to its success or
as to any consequences resulting from its rejection. Notwithstanding this appeal, we are committed executing the Restructuring Plan as
announced on 26 October 2009.

In connection with the Restructuring Plan, we have also agreed to not be a price leader in certain EU markets with respect to certain retail,
private and direct banking products and to refrain from (i) acquisitions of financial institutions and (ii) acquisitions of other businesses if this
would delay our repurchase of the remaining Core Tier 1 Securities. Those limitations may last until 18 November 2012 and could adversely
affect our ability to maintain or grow market share in key markets as well as our results of operations. See ‘Risks Related to the Group –
The limitations agreed with the EC on our ability to compete and to make acquisitions or call certain debt instruments could materially
impact the Group’.

There can be no assurance that we will be able to implement the Restructuring Plan successfully or complete the announced divestments
on favourable terms or at all, particularly in light of both the plan’s 2013 deadline and expected challenging market conditions in which
other financial institutions may place similar assets for sale during the same time period and may seek to dispose of assets in the same
manner. Any failure to successfully implement the Restructuring Plan may result in EC enforcement actions and may have a material
adverse impact on the assets, profitability, capital adequacy and business operations of the Group. Moreover, in connection with the
implementation of the Restructuring Plan, including any proposed divestments, we or potential buyers may need to obtain various
approvals, including of shareholders, works councils and regulatory and competition authorities, and we and potential buyers may face
difficulties in obtaining these approvals in a timely manner or at all. In addition, the implementation of the Restructuring Plan may strain
relations with our employees, and specific proposals in connection with the implementation may be opposed by labour unions or works
councils. Furthermore, following the announcement of the Restructuring Plan, several of our subsidiaries have been downgraded or put on
credit watch by rating agencies. See ‘Risks Related to the Group – Ratings are important to our business for a number of reasons.
Downgrades could have an adverse impact on our operations and net results’.

Other factors that may impede our ability to implement the Restructuring Plan successfully include an inability of prospective purchasers
to obtain funding due to the deterioration of the credit markets, insufficient access to equity capital markets, a general unwillingness of
prospective purchasers to commit capital in the current market environment, antitrust concerns, any adverse changes in market interest
rates or other borrowing costs and any declines in the value of the assets to be divested. Similarly, it may also be difficult to divest all or
part of our insurance or investment management business through one or more initial public offerings. There can also be no assurance
that we could obtain favourable pricing for a sale of all or part of our insurance or investment management business in the public markets
or succeed in turning the relevant subsidiaries into viable standalone businesses. A divestment may also release less regulatory capital than
we would otherwise expect.

Any failure to complete the divestments on favourable terms, could have a material adverse impact on our assets, profitability, capital
adequacy and business operations. If we are unable to complete the announced divestments in a timely manner, we would be required
to find alternative ways to reduce our leverage, and we could be subject to enforcement actions or proceedings by the EC. In particular,
if we do not succeed in completing divestitures as described in the Restructuring Plan within the timelines set out therein, the EC may
request the Dutch State to appoint a divestiture trustee with a mandate to complete the relevant divestiture with no minimum price.

278 ING Group Annual Report 2010

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Risk factors continued

The implementation of the divestments announced in connection with the Restructuring Plan, including the separation of the insurance
and most of the investment management operations from the banking operations, will also give rise to additional costs related to the legal
and financial assessment of potential transactions. The implementation may also result in increased operating and administrative costs.
The process of completing the steps contemplated by the Restructuring Plan may be disruptive to our business and the businesses we are
trying to sell and may cause an interruption or reduction of our business and the businesses to be sold as a result of, among other factors,
the loss of key employees or customers and the diversion of management’s attention from our day-to-day business as a result of the need
to manage the divestment process as well as any disruptions or difficulties that arise during the course of the divestment process. We may
face other difficulties in implementing the Restructuring Plan and completing the planned divestments. For instance, the divestments,
individually or in the aggregate, may trigger provisions in various contractual obligations, including debt instruments, which could require
us to modify, restructure or refinance the related obligations. We may not be able to effect any such restructuring or refinancing on similar
terms as the current contractual obligations or at all. In addition, the announced divestments could be the subject of challenges or
litigation, and a court could delay any of the divestment transactions or prohibit them from occurring on their proposed terms, or from
occurring at all, which could adversely affect our ability to use the funds of the divestments to repurchase the Core Tier 1 Securities,
reduce or eliminate our double leverage and strengthen our capital ratios as anticipated and eliminate the constraints on competition
imposed by the EC.

The limitations agreed with the EC on our ability to compete and to make acquisitions or call certain debt instruments
could materially impact the Group.
As part of our Restructuring Plan, we have undertaken with the EC to accept certain limitations on our ability to compete in certain
retail, private and direct banking markets in the European Union and on our ability to acquire (i) financial institutions and (ii) businesses
insofar this would delay our repurchase of the remaining Core Tier 1 Securities held by the Dutch State. These restrictions apply until
the earlier of (1) 18 November 2012, and (2) the date upon which we repurchase all remaining Core Tier 1 Securities held by the Dutch
State. We have also agreed to limitations on our ability to call Tier 2 capital and Tier 1 hybrid debt instruments. If the EC does not approve
the calling of Tier 2 capital and Tier 1 hybrid debt instruments in the future, this may have adverse consequences for us, result in additional
payments on these instruments and limit our ability to seek refinancing on more favourable terms. The limitations described above will
impose significant restrictions on our banking business operations and on our ability to take advantage of market conditions and growth
opportunities. Such restrictions could adversely affect our ability to maintain or grow market share in key markets, as well as our results
of operations.

Upon the implementation of the Restructuring Plan, we will be less diversified and may experience competitive
and other disadvantages.
Following completion of the planned divestments under the Restructuring Plan, we expect to become a significantly smaller, regional
financial institution focused on retail, direct and commercial banking in the Benelux region and certain other parts of Europe, as well
as selected markets outside Europe. Although we will remain focused on banking operations, we may become a smaller bank than that
represented by our current banking operations. In the highly competitive Benelux market and the other markets in which we operate,
our competitors may be larger, more diversified and better capitalised and have greater geographical reach than us, which could have
a material adverse effect on our ability to compete, as well as on our profitability. The divested businesses may also compete with the
retained businesses, on their own or as part of the purchasers’ enlarged businesses. In addition, the restrictions on our ability to be a
price leader and make acquisitions and on our compensation policies could further hinder our capacity to compete with competitors
not burdened with such restrictions, which could have a material adverse effect on our results of operations. There can be no assurance
that the implementation of the Restructuring Plan will not have a material adverse effect on the market share, business and growth
opportunities and results of operations for our remaining core banking businesses.

Our Restructuring Programs may not yield intended reductions in costs, risk and leverage.
On 26 October 2009, we announced that we had reached an agreement with the EC on the Restructuring Plan. Projected cost savings
and impact on our risk profile and capital associated with these initiatives are subject to a variety of risks, including:
• contemplated costs to effect these initiatives may exceed estimates;
• divestments planned in connection with the Restructuring Plan may not yield the level of net proceeds expected, as described under
‘Risks Related to the Group – The implementation of the Restructuring Plan and the divestments anticipated in connection with that
plan will significantly alter the size and structure of the Group and involve significant costs and uncertainties that could materially
impact the Group’;
• initiatives we are contemplating may require consultation with various regulators as well as employees and labor representatives,
and such consultations may influence the timing, costs and extent of expected savings;
• the loss of skilled employees in connection with the initiatives; and
• projected savings may fall short of targets.

While we have begun and expect to continue to implement these strategies, there can be no assurance that we will be able to do so
successfully or that we will realise the projected benefits of these and other restructuring and cost saving initiatives. If we are unable to
realise these anticipated cost reductions, our business may be adversely affected. Moreover, our continued implementation of restructuring
and cost saving initiatives may have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our agreements with the Dutch State impose certain restrictions regarding the issuance or repurchase of our shares
and the compensation of certain senior management positions.

ING Group Annual Report 2010 279

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7 Additional information

Risk factors continued

For so long as the Dutch State holds at least 25% of the Core Tier 1 Securities, for so long as the IABF is in place, or for so long as any of
the government guaranteed senior unsecured bonds issued by ING Bank N.V. under the Credit Guarantee Scheme of the Netherlands (the
‘Government Guaranteed Bonds’) are outstanding, we are prohibited from issuing or repurchasing any of our own shares (other than as
part of regular hedging operations and the issuance of shares according to employment schemes) without the consent of the Dutch State’s
nominees on the Supervisory Board. In addition, under the terms of the Core Tier 1 Securities and IABF, we have agreed to institute certain
restrictions on the compensation of the members of the Executive Board and senior management, including incentives or performance-
based compensation. These restrictions could hinder or prevent us from attracting or retaining the most qualified management with the
talent and experience to manage our business effectively. In connection with these transactions, the Dutch State was granted the right
to nominate two candidates for appointment to the Supervisory Board. The Dutch State’s nominees have veto rights over certain material
transactions. Our agreements with the Dutch State have also led to certain restrictions imposed by the EC as part of the Restructuring
Plan, including with respect to our price leadership in EU banking markets and our ability to make acquisitions of financial institutions and
other businesses. See ‘Risks Related to the Group – The limitations agreed with the EC on our ability to compete and to make acquisitions
or call certain debt instruments could materially impact the Group’.

Whenever the overall return on the (remaining) Core Tier 1 securities issued to the Dutch State is expected to be lower than
10% p.a., the European Commission may consider the imposition of additional behavioural constraints.
As stated in the decision of the European Commission of 12 November 2008 (in State aid N 528/2008 – The Netherlands), the Core Tier 1
state-aid measure must be (re)notified to the European Commission by the Dutch authorities whenever the overall return on the Core Tier 1
Securities is expected to be lower than 10% p.a. Such (re)notification by the Dutch authorities is particularly required (i) when ING abstains
from paying dividend on its shares for a period of two consecutive years or for three years in the five years following the date of the
aforementioned decision or (ii) if after a transition period of one year following the date of the aforementioned decision, the share price
over a period of two consecutive years remains on average below EUR 13. In such cases, the European Commission may require additional
behavioural constraints as a condition of the compatibility of the measure.

ADDITIONAL RISKS RELATING TO OWNERSHIP OF ING SHARES

Because we are a Dutch company and because the Stichting ING Aandelen holds more than 99.9% of our ordinary shares,
the rights of our shareholders may differ from the rights of shareholders in other jurisdictions or companies that do not
use a similar trust structure, which could affect your rights as a shareholder.
While holders of our bearer depositary receipts are entitled to attend and speak at our General Meeting of Shareholders (‘General
Meeting’), voting rights are not attached to the bearer depositary receipts. The Trust holds more than 99.9% of our ordinary shares, and
exercises the voting rights attached to the ordinary shares (for which bearer depositary receipts have been issued). Holders of bearer
depositary receipts who attend – in person or by proxy – the General Meeting must obtain and are entitled to voting rights by proxy from
the Trust. Holders of bearer depositary receipts and holders of the ADSs (American depositary shares) representing the bearer depositary
receipts who do not attend the General Meeting may give binding voting instructions to the Trust. The Trust is entitled to vote on any
ordinary shares underlying the bearer depositary receipts for which the Trust has not granted voting proxies, or voting instructions have
not been given to the Trust. In exercising its voting discretion, the Trust is required to be guided primarily by the interests of the holders of
bearer depositary receipts, while also taking into account:
• our interests,  and
• the interests of our affiliates.

The Trust may, but has no obligation to, consult with the holders of bearer depositary receipts in exercising its voting rights in respect of
any ordinary shares for which it is entitled to vote. These arrangements differ from practices in other jurisdictions, and accordingly may
affect the rights of the holders of bearer depositary receipts and their power to affect ING’s business and operations.

The share price of ING shares has been, and may continue to be, volatile.
The share price of our bearer depositary receipts has been volatile in the past, and the share price and trading volume of our bearer
depositary receipts may continue to be subject to significant fluctuations due, in part, to changes in our actual or forecast operating results
and the inability to fulfil the profit expectations of securities analysts, as well as to the high volatility in the securities markets generally and
more particularly in shares of financial institutions. Other factors, besides our financial results, that may impact our share price include, but
are not limited to:
• market expectations of the performance and capital adequacy of financial institutions in general;
• investor perception of the success and impact of our strategies;
• a downgrade or review of our credit ratings;
• the implementation and outcome of our Restructuring Plan;
• potential litigation or regulatory action involving ING or sectors we have exposure to through our insurance and banking activities;
• announcements concerning financial problems or any investigations into the accounting practices of other financial institutions; and
• general market circumstances.

280 ING Group Annual Report 2010

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Risk factors continued

There can be no assurance that we will pay dividends on our ordinary shares in the future.
It is ING’s policy to pay dividends in relation to the long-term underlying development of cash earnings. Dividends can only be declared
by shareholders when the Executive Board considers such dividends appropriate, taking into consideration the financial conditions then
prevailing and the longer-term outlook. Given the uncertain financial environment, ING will not pay a dividend over 2010 and there can be
no assurance that we will pay dividends in the future.

Certain transactions have resulted in the cumulative change in ownership of our U.S. subsidiaries of approximately 43%
for U.S. tax purposes as of 21 December 2009. Future increases of capital or other changes in ownership may adversely
affect our net result and equity.
Sections 382 and 383 of the U.S. Internal Revenue Code contain loss limitation rules, the general purpose of which is to prevent
trafficking in tax losses (i.e. they are anti-abuse rules). The rules are triggered when the ownership of a corporation changes by more
than 50% (measured by value) on a cumulative basis in any three-year period. If triggered, restrictions may be imposed on the future
use of realised tax losses as well as certain losses that are built into the assets of the corporation at the time of the ownership change
and that are realised within the next five years. As of 21 December 2009, the cumulative change in ownership of our U.S. subsidiaries
was approximately 43% for purposes of Sections 382 and 383 (taking into account the issuance of the Core Tier 1 Securities to the
Dutch State on 12 November 2008, the repurchase of some of the Core Tier 1 Securities on 21 December 2009, and the issuance of
Ordinary shares on 21 December 2009). However, the calculation is subject to uncertainties and is based on various assumptions.
Future increasesof capital or other changes in ownership may adversely affect our net result and equity.

The remaining Core Tier 1 Securities issued to the Dutch State may be converted into ordinary shares or bearer depositary
receipts and dilute existing shareholders.
The terms of the Core Tier 1 Securities permit us, on or after 12 November 2011, to convert any or all of the remaining Core Tier 1
Securities (EUR 5 billion per year end 2010) into ordinary shares or bearer depositary receipts on the basis of one core Tier 1 security
for 1,335 ordinary shares or bearer depositary receipts. Any such conversion would dilute existing shareholders. If we exercise our
conversion right, the Dutch State may opt to require us to redeem the Core Tier 1 Securities on the conversion date at the original issue
price of EUR 10 per Core Tier 1 Security, together with the pro rata coupon, if due, accrued to such date.

Certain holders of ING shares may not be able to participate in future equity offerings with subscription rights.
We may undertake future equity offerings with subscription rights. Holders of ING shares in certain jurisdictions, however, may not be
entitled to exercise such rights unless the rights and the related shares are registered or qualified for sale under the relevant legislation
or regulatory framework. Holders of ING shares in these jurisdictions may suffer dilution of their shareholding should they not be
permitted to participate in future equity offerings with subscription rights.

ING Group Annual Report 2010 281

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Financial glossary

ACTUARIAL AND UNDERWRITING RISK AVAILABLE-FOR-SALE FINANCIAL ASSETS

These risks (mortality, longevity, morbidity, adverse motor or home Those non-derivative financial assets that are designated
claims, etc.), result from the pricing and acceptance of insurance as available-for-sale or are not classified as:
contracts. Actuarial risk is the risk that premium levels and • loans and receivables;
provisions in respect of insurance risk may turn out to be (no • held-to-maturity investments; or
longer) correct. Underwriting risk is the risk that an issuer will • financial assets at fair value through profit and loss.
receive a claim under an insurance policy it issues/underwrites.
Maximum underwriting exposures are limited through exclusions, BASEL I
cover limits and reinsurance. Regulatory requirements issued by the Basel Committee on Banking
Supervision for the solvency calculation, which are superseded by
ADVANCED MEASUREMENT APPROACH (AMA) Basel II, for ING, from 2008 onwards.
The risk methodology to calculate the regulatory Operational
Risk capital. BASEL II
Regulatory requirements issued by the Basel Committee on Banking
ALT-A RESIDENTIAL MORTGAGE BACKED SECURITY Supervision for the solvency calculation, which, for ING, apply from
(ALT-A RMBS) 2008 onwards. Basel II is an international standard for calculating
A type of US residential mortgage which is considered riskier the required capital based on internal models that take into account
than ‘prime’ and less risky than ‘sub-prime’ mortgages. Parameters the financial and operational risks.
generally taken into account are borrower credit scores, residential
property values and loan-to-value ratios. Alt-A mortgages are BASEL III
further characterised by a limited degree of income and/or Regulatory requirements issued by the Basel Committee on Banking
asset verification. Supervision for the solvency calculation and liquidity requirements,
which will supersede Basel II. From 1 January 2013 these
AMORTISED COST requirements will start to apply, with the full requirements being
The amount at which the financial asset or liability is measured effective as of 1 January 2018.
at initial recognition less principal repayments, plus or minus the
cumulative amortisation using the effective interest method of any BASIS POINT VALUE (BPV)
difference between that initial amount and the maturity amount, The change in the Net Present Value of a cash flow or a pool of
and minus any reduction for impairment or uncollectibility. cash flows due to a one basis point change of the yield curve.

ASSET AND LIABILITY COMMITTEE (ALCO) BASIS RISK

Manages the balance sheet of ING, especially with regard to This risk arises from an imperfect correlation in the adjustment
strategic non-trading risk. These risks comprise interest rate of the rates earned and paid on different financial instruments.
exposures, equity risk, real estate risk, liquidity, solvency and Examples of products in which these risks are inherent are demand
foreign exchange risk and fluctuations. deposits, saving accounts and mortgages with prepayment options.

ASSET LIABILITY MANAGEMENT (ALM) BIS

The practice of managing a business such that decisions on assets An international organisation which fosters international monetary
and liabilities are coordinated. It involves the ongoing process of and financial co-operation and serves as a bank for central banks.
formulating, implementing, monitoring and revising strategies BIS has set a minimum for the solvency ratio reflecting the
related to assets and liabilities. relationship between capital and risk weighted assets. The ratio
should be at least 8%.
ASSET BACKED COMMERCIAL PAPER (ABCP)
Commercial paper that is collateralised by other financial assets. BUSINESS RISK
The exposure to value loss due to fluctuations in volumes, margins
ASSET BACKED SECURITIES (ABS) and costs. These fluctuations can occur because of internal,
A type of bond or note that is based on pools of assets, or industry, or wider market factors. It is the risk inherent to strategy
collateralised by the cash flows from a specified pool of decisions and internal efficiency.
underlying assets.
CAPITAL AT RISK (CAR)
ASSOCIATE The maximum negative impact on ING Group’s economic surplus
An entity over which the Group has significant influence, generally over a one year forward looking horizon under normal market
accompanying a shareholding of between 20% and 50% of the conditions. CaR is calculated at a 90% confidence interval.
voting rights, and that is not a subsidiary not a joint venture.
CERTIFICATES OF DEPOSIT
AVAILABLE FINANCIAL RESOURCES (AFR) Short-term negotiable bearer debt instruments issued by banks.
The available financial resources equal the market value of assets
minus market value of liabilities, excluding hybrids issued by ING
Group which is counted as capital. ING’s policy is that the available
financial resources should exceed economic capital for Bank,
Insurance and Group.

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Financial glossary continued

CLAIM CONVERTIBLE DEBENTURES

A demand for payment of a policy benefit because of the Debentures with embedded options issued by corporations. The
occurrence of an insured event, such as the death or disability of holder has the right to exchange a convertible debenture for equity
the insured or the maturity of an endowment, the incurrence of in the issuing company at certain times in the future according to a
hospital or medical bills, the destruction or damage of property certain exchange ratio. Very often, the conversion is callable. This
and related deaths or injuries, defects in, liens on, or challenges means that it can be repurchased by the issuer at a certain price at
to the title to real estate, or the occurrence of a surety loss. certain times in the future. Once the debentures have been called,
the holder can always choose to convert prior to repurchase.
CLAIMS RATIO
Claims, including claims handling expenses, expressed as a CONVEXITY
percentage of net earned premiums. The non-linear relationship between changes in the interest rates
and changes in bond prices and their Net Present Value. It is a
COLLATERALISED DEBT OBLIGATION (CDO) very important market risk measure for portfolios containing
A type of asset-backed security which provides investors exposure (embedded) options.
to the credit risk of a pool of fixed income assets.
CORE DEBT
COLLATERALISED LOAN OBLIGATION (CLO) Investments in ING Group subsidiaries minus the equity of the
A type of CDO which is backed primarily by leveraged bank loans. holding company including hybrids.

COMBINED RATIO COST OF CAPITAL

The sum of the claims ratio and the cost ratio for a non-life The costs related to owning capital. These can be split into the cost
insurance company or a reinsurance company. A combined ratio of equity, hybrids and debt, taking a target leverage into account.
of more than 100% does not necessarily mean that there is a loss
on non-life insurance policies, because the result also includes the COST RATIO
allocated investment income. Underwriting costs expressed as a percentage of premiums written.

COMMERCIAL PAPER COUNTRY RISK

Promissory note (issued by financial institutions or large firms) with The risk that a government will not fulfil its obligations or obstructs
very-short to short maturity period (usually 2 to 30 days, and not the remittance of funds by debtors, either for financial reasons
more than 270 days), and unsecured. (transfer risk) or for other reasons (e.g. political risk).

COMPLIANCE RISK CREDIT INSTITUTIONS

Compliance risk is defined as the risk of damage to ING’s reputation All institutions that are subject to banking supervision by public
as a result of failure or perceived failure to comply with relevant laws, authorities, including mortgage banks, capital market institutions,
regulations, internal policies and procedures or ethical standards. multilateral development banks and the International Monetary
Fund (IMF).
CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk exist when changes in economic, CREDIT RISK
industry or geographical factors similarly affect groups of The risk of loss from default by borrowers (including bond issuers)
counterparties whose aggregate exposure is material in relation or counterparties. Credit risks arise in ING’s lending, presettlement
to ING Group’s total exposure. and investment activities, as well as in its trading activities. Credit
risk management is supported by dedicated credit risk information
CONTINGENT LIABILITIES systems and internal rating methodologies for debtors and
Possible obligations that arises from past events and whose existence counterparties.
will be confirmed only by the occurrence or non-occurrence of one
or more uncertain future events not wholly within the control of the DEFERRED TAX LIABILITIES
entity; or a present obligation that arises from past events but is not The amounts of income tax payable in future periods in respect of
recognised because: taxable temporary differences between carrying amounts of assets
• it is not probable that an outflow of resources embodying or liabilities in the balance sheet and tax base, based on tax rates
economic benefits will be required to settle the obligation; or that are expected to apply in the period when the assets are
• the amount of the obligation cannot be measured with realised or the liabilities are settled.
sufficient reliability.
DEFINED BENEFIT PLAN
CONTROL Post-employment benefit plans other than defined contribution plans.
The power to govern the financial and operating policies of an
entity so as to obtain benefits from its activities. DEFINED CONTRIBUTION PLAN
Post-employment benefit plans under which an enterprise pays
fixed contributions into a separate entity (a fund) and will have no
legal or constructive obligation to pay further contributions if the
fund does not hold sufficient assets to pay all employee benefits
relating to employee service in the current and prior periods.

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Financial glossary continued

DELTA HEDGE ELIMINATION

The delta hedge minimises the exposure of the employee option A process by which intercompany transactions are matched with
scheme by holding an appropriate number of (depositary receipts each other and deducted, so that the assets, liabilities, income and
for) ordinary shares. The exposure is reassessed every quarter and, expenses are not inflated.
if necessary, ordinary shares are bought from the market. In
December 2010 ING Groep N.V. announced that it will no longer EMBEDDED VALUE (EV)
rebalance its hedge portfolio. This decision is an effort to simplify Embedded value is the present value of all future cash flows from
the management and administration of ING’s various employee the contracts being owned today (embedded value does not take
share and option programmes. The remaining shares in the hedge into account future sales). The discount rate used is equal to
portfolio will be used to fund the obligations arising out of exercise Weighted average cost of capital.
and vesting. Once all shares in the hedge portfolio are used ING
will fund these obligations by issuing new shares. EMBEDDED VALUE PROFIT (EVP)
Embedded value profit is the change in embedded value over a
DEPOSITARY RECEIPT given period over and above the amount related to the unwinding
Depositary receipt for ordinary and preference shares, issued by of the discount rate.
the ING Trust Office, in exchange for ordinary and preference
shares issued by ING Group. EMPLOYEE BENEFITS
All forms of consideration given by a company in exchange for
DERIVATIVES service rendered by (current and former) employees.
Financial instruments, which include forwards, futures, options
and swaps, whose value is based on an underlying asset, index FAIR VALUE
or reference rate. The amount for which an asset could be exchanged, or a
liability settled, between knowledgeable, willing parties in an
DISCOUNTED BILLS arm’s length transaction.
Bills that are sold under deduction of interest giving the owner
the right to receive an amount of money on a given date. FINANCE LEASE
A lease that transfers substantially all the risks and rewards
DISCRETIONARY PARTICIPATION FEATURE associated with ownership of an asset to the lessee. Title may
A contractual right to receive, as a supplement to guaranteed or may not eventually be transferred.
benefits, additional benefits that: are likely to be a significant
portion of the total contractual benefits, whose amount or timing FINANCIAL ASSET
is contractually at the discretion of the insurer, that are contractually Any asset that is:
based on the performance of a specified pool or type of contract, • cash;
(un)realised investment returns on a specified pool of assets held • an equity instrument of another company;
by the insurer, or the profit of the company, fund, or other entity • a contractual right to;
that issues the contract. • receive cash or another financial asset from another
company; or
EARNINGS AT RISK (EAR) • exchange financial instruments with another company
Measures the impact on earnings resulting from changes in market under conditions that are potentially favourable; or
rates over a one-year horizon. • certain contract that will or may be settled in ING’s own
equity instruments.
EARNINGS SENSITIVITY (ES)
Measures the impact on earnings resulting from changes in FINANCIAL INSTRUMENTS
economic and financial conditions over a one-year horizon. Contracts that give rise to both a financial asset for one company
and a financial liability or equity instrument for another company.
ECONOMIC CAPITAL
The minimum amount of capital that is required to absorb FINANCIAL LIABILITY
unexpected losses in times of severe stress. Given ING Group’s Any liability that is a contractual obligation:
A target rating, ING calculates economic capital requirements for • to deliver cash or another financial asset to another company; or
ING Bank at a 99.95% level of confidence. This confidence level • to exchange financial instruments with another company under
is derived from the historical default frequency of AA-rated conditions that are potentially unfavourable; or
companies (probability of default of 1 in 2000 years or 0.05%). • certain contracts that will or may be settled in ING’s own
For ING Insurance the economic capital is calculated based on a equity instruments.
confidence level of 99.5%, which is aligned with the Solvency II.
FOREIGN EXCHANGE RATE RISK
EFFECTIVE INTEREST METHOD Probability of loss occurring from an adverse movement in foreign
A method of calculating the amortised cost of a financial asset or exchange rates.
liability and of allocating the interest income or interest expense
over the relevant period. FORWARD CONTRACTS
Commitments to exchange currencies or to buy or sell other
financial instruments at specified future dates.

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Financial glossary continued

FUTURE CONTRACTS INVESTMENT RISK

Commitments to exchange currencies or to buy or sell other financial Investment risk is the credit default and risk rating migration
instruments at specified future dates. Exchanges act as intermediaries risk that is associated with ING Group’s investments in bonds,
and require daily cash settlement and collateral deposits. commercial paper, securitisations, and other similar publicly traded
securities. Investment risk arises when ING purchases a (synthetic)
GROSS PREMIUMS WRITTEN bond with the intent to hold the bond for a longer period of time
Total premiums (whether or not earned) for insurance contracts (generally through maturity).
written or assumed (including deposits for investment contracts
with limited or no life contingencies written) during a specific INVESTMENT PORTFOLIO
period, without deduction for premiums ceded. Comprises those assets which are intended for use on a continuing
basis, and have been identified as such. These investments are held
HELD-TO-MATURITY INVESTMENTS in order to cover the insurance provisions and to manage interest
Non-derivative financial assets with fixed or determinable payments rate, capital and liquidity risks.
and fixed maturity that ING Group has the positive intention and
ability to hold to maturity other than: IRREVOCABLE FACILITIES
a. those that ING Group upon initial recognition designates as at Mainly constitute unused portions of irrevocable credit facilities
fair value through profit and loss; granted to corporate clients and commitments made to purchase
b. those that ING Group designates as available-for-sale; and securities to be issued by governments and private issuers.
c. those that meet the definition of loans and receivables.
IRREVOCABLE LETTERS OF CREDIT
HISTORICAL SIMULATION Concerns an obligation on behalf of a client to pay an amount of
A model to calculate Value at Risk, assuming that future changes money under submission of a specific document or to accept a bill of
in risk factors will have the same distribution as they had in the past exchange, subject to certain conditions. An irrevocable letter of credit
taking into account the non-linear behaviour of financial products. cannot be cancelled or adjusted by the bank that has granted it during
the duration of the agreement unless all those concerned agree.
IMPAIRMENT LOSS
The amount by which the carrying amount of an asset exceeds its JOINT VENTURE
recoverable amount. A contractual arrangement whereby two or more parties undertake
an economic activity which is subject to joint control.
INTEREST BEARING INSTRUMENT
A financial asset or a liability for which a time-proportionate LEGAL RISK
compensation is paid or received in relation to a notional amount. Legal risk is the risk related to:
• a failure (or perceived failure) to adhere to applicable laws,
INTERNAL RATE OF RETURN (IRR) regulations and standards;
Internal rate of return is the discount rate at which the present • contractual liabilities or contractual obligations that are
value of distributable earnings from new business equals the defaulted or cannot be enforced as intended, or are
investment in new business (i.e. the projected return on the enforced in an unexpected or adverse way; and
investment in new business) is calculated. • liability (tort) towards third parties due to an act or omission
contributable to ING; (potentially) resulting in impairment of
INTEREST-RATE REBATES ING’s integrity, leading to damage to ING’s reputation, legal
Profit sharing for group life insurance business. A rebate granted or regulatory sanctions, or financial loss.
to policyholders based on the discounted value of the difference
between the interest rate used to calculate the premiums and the LENDING RISK
expected yield on investment. The profit sharing is granted by means Lending risk arises when ING Group grants a loan to a customer,
of a premium discount related to the yield on government bonds. or issues guarantees on behalf of a customer. This is the most
common risk category, and includes term loans, mortgages,
INTEREST RATE RISK revolving credits, overdrafts, guarantees, letters of credit, etc. The
Probability that the market interest rates will rise significantly risk is measured at the notional amount of the financial obligation
higher than the interest rate earned on investments such as that the customer has to repay to ING, excluding any accrued and
bonds, resulting in their lower market value. unpaid interest, or discount/premium amortisations or impairments.

IN THE MONEY LIQUIDITY RISK

A call option is said to be in the money if the exercise price is lower The risk that ING Group or one of its subsidiaries cannot meet its
than the price of the underlying value; a put option is said to be financial liabilities when they fall due, at reasonable costs and in
in the money if the exercise price is higher than the price of the a timely manner.
underlying value.
MARKET RISK
Market risk is the risk that movements in market variables, such as
interest rates, equity prices, implied volatilities, foreign exchange rates,
real estate prices negatively impact the earnings or market value.

ING Group Annual Report 2010 285

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Financial glossary continued

MARKET VALUE AT RISK (MVAR) NON-VOTING EQUITY SECURITIES

A calculation method which measures the decrease in the Core Tier 1 securities issued to the Dutch State in November 2008
market value surplus caused by movements in financial markets, for a total consideration of EUR 10 billion. In December 2009
at a 99.95% confidence level over a one year horizon. EUR 5 billion was paid back to the Dutch State. This capital injection
qualifies as core Tier 1 capital for regulatory purposes.
MINORITY INTERESTS
The part of the profit and loss and net assets of a subsidiary NOTIONAL AMOUNTS
attributable to an interest which is not owned, directly or Represent units of account which, in respect of derivatives, reflect
indirectly, by the parent company. the relationship with the underlying assets. They do not reflect,
however, the credit risks assumed by entering into derivative
MONETARY ASSETS AND LIABILITIES transactions.
Assets and liabilities which are fixed in terms of units of currency
by contract or otherwise. Examples are cash, short or long-term OPERATING LEASE
accounts, notes receivable in cash and notes payable in cash. A lease other than a finance lease.

MONEY MARKET RISK OPERATIONAL RISK

Money market risk arises when ING Group places short term The risk of a direct or indirect loss resulting from inadequate or failed
deposits with a counterparty in order to manage excess liquidity, internal processes, people and systems or from external events.
as such, money market deposits tend to be short term in nature
(1–7 days is common). In the event of a counterparty default, ING OPTION CONTRACTS
Group may lose the deposit placed. Money market risk is therefore Give the purchaser, for a premium, the right, but not the obligation,
measured simply as the notional value of the deposit, excluding to buy or sell within a limited period of time a financial instrument
any accrued and unpaid interest or the effect of any impairment. or currency at a contracted price that may also be settled in cash.
Written options are subject to market risk, but not to credit risk
MONOLINER since the counterparties have already performed in accordance
A financial company that deals specifically with one particular with the terms of the contract by paying a cash premium up front.
branch of the financial industry.
ORDINARY SHARE
MONTE CARLO SIMULATION An equity instrument that is subordinate to all other classes of equity
A model to calculate Value at Risk, assuming that changes in instruments. Ordinary shares participate in the net profit for the
risk factors are (jointly) normally distributed taking into account financial year after other types of shares such as preference shares.
nonlinear behaviour of financial products.
OUT OF THE MONEY
MORTGAGE BACKED SECURITIES (MBS) A call option is said to be out of the money if the exercise price is
A security whose cash flows are backed by typically the principal higher than the price of the underlying value; a put option is said
and/or interest payments of a pool of mortgages. to be out of the money if the exercise price is lower than the price
of the underlying value.
NEW SALES
New sales of life insurance, measured as Annual Premium Equivalent OVER-THE-COUNTER INSTRUMENT
(APE), have been defined as the total of annual premiums and 10% A non-standardised financial instrument not traded on a stock
of single premiums received on production in a given period. exchange but directly between market participants.

NET ASSET VALUE PLAN ASSETS

Used in the equity method of accounting. The initial net asset value Comprise assets held by a long-term employee benefit fund and
of the investment is determined by the fair value of the assets and qualifying insurance policies. Assets held by a long-term employee
liabilities of the investee. After the initial valuation of assets and benefit fund are assets (other than non-transferable financial
liabilities of the investee at fair value, the assets and liabilities of instruments issued by the reporting enterprise) that:
the investee are valued in accordance with the accounting policies • are held by an entity (a fund) that is legally separate from the
of the investor. The profit and loss account reflects the investor’s reporting enterprise and exists solely to pay or fund employee
share in the results of operations of the investee. benefits; and
• are available to be used only to pay or fund employee benefits, are
NET PREMIUMS WRITTEN not available to the reporting enterprise’s own creditors (even in
Gross premiums written for a given period less premiums ceded to bankruptcy), and cannot be returned to the reporting enterprise,
retrocessionaires during the given period. unless either the remaining assets of the fund are sufficient to meet
all the related employee benefit obligations of the plan or the
NET PRESENT VALUE AT RISK (NPV-AT-RISK) reporting enterprise or the assets are returned to the reporting
Establishes what the value of future cash flows is in terms of today’s enterprise to reimburse it for employee benefits already paid.
monetary value. NPV-at-Risk establishes the change in value of future
cash flows as a result of interest rate changes in terms of today’s
monetary value.

286 ING Group Annual Report 2010

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A qualifying insurance policy is an insurance policy issued by an PROJECTED UNIT CREDIT METHOD
insurer that is not a related party of the reporting enterprise, An actuarial valuation method that considers each period of service
if the proceeds of the policy: as giving rise to an additional unit of benefit entitlement and
• can be used only to pay or fund employee benefits under measures each unit separately to build up the final obligation.
a defined benefit plan; and
• are not available to the reporting enterprise’s own creditors QUALIFYING ASSET (WITHIN THE MEANING OF
(even in bankruptcy) and cannot be paid to the reporting BORROWING COSTS)
enterprise, unless either the proceeds represent surplus assets An asset that necessarily takes a substantial period of time to get
that are not needed for the policy to meet all the related ready for its intended use or sale.
employee benefit obligations or the proceeds are returned
to the reporting enterprise to reimburse it for employee RECOGNITION
benefits already paid. The process of incorporating in the balance sheet or profit and loss
account an item that meets the definition of an element and
POST-EMPLOYMENT BENEFIT PLANS satisfies the following criteria for recognition:
Formal or informal arrangements under which a company • it is probable that any future economic benefit associated
provides post-employment benefits for one or more employees. with the item will flow to or from the enterprise; and
Post-employment benefits are employee benefits other than • the item has a cost or value that can be measured reliably.
termination benefits and equity compensation benefits, which
are payable after the completion of employment. RECOVERABLE AMOUNT
The higher of an asset’s net selling price and its value in use.
PREFERENCE SHARE
Similar to an ordinary share but carries certain preferential rights. REDEMPTION VALUE
These rights usually concern the guarantee of a fixed (cumulative) With respect to investments in fixed-interest securities, the amount
return to the shareholder or a guaranteed return on the investment. payable on the maturity date.

PREMIUMS EARNED REINSURANCE

The portion of net premiums written in current and past periods The practice whereby one party, called the reinsurer, in
which applies to the expired portion of the policy period, calculated consideration for a premium paid to him, agrees to indemnify
by subtracting movements in unearned premium reserves from another party, called the reinsured or ceding company, for part
net premiums. or all of the liability assumed by the reinsured under a contract
or contracts of insurance which the reinsured has issued. The
PRE-SETTLEMENT RISK reinsured may also be referred to as the original or primary
Pre-settlement risk arises when a counterparty defaults on insurer, the direct writing company, or the ceding company.
a transaction before settlement and ING Group has to replace
the contract by a trade with another counterparty at the then RETURN ON EQUITY (ROE)
prevailing (possibly unfavourable) market price. The pre-settlement The return on equity is the net result as percentage of the
risk (potential or expected risk) is the cost of ING Group replacing average equity.
a trade in the market. This credit risk category is associated with
dealing room products such as options, swaps, and securities RISK ADJUSTED RETURN ON CAPITAL (RAROC)
financing transactions. Where there is a mutual exchange of value, A performance indicator that measures revenues in the perspective
the amount of outstanding is generally based on the replacement of the risks that had to be taken to obtain that revenue. RAROC is
value (mark-to-market) plus potential future volatility concept, calculated by dividing the risk-adjusted-return by economic capital.
using an historical 7 year time horizon and a 99% confidence level. In the RAROC calculation, the actual credit-risk provisioning is
replaced by statistically expected losses reflecting the average
PRESSURISED ASSETS credit losses over the entire economic cycle.
Pressurised assets have been defined as subprime ABS exposures,
Alt-A ABS exposures, CMBS, CDO/CLOs, Greek Government bonds, RISK-WEIGHTED ASSETS (‘RWA‘ UNDER BASEL I)
Greek Financial Institution Bonds, Irish Government bonds and Irish Assets which are weighted for credit risk according to a formula
Financial Institution bonds. used by the Dutch central bank (De Nederlandsche Bank), which
conforms to the capital adequacy guidelines of the BIS (Bank of
PRIVATE LOAN International Settlements). On and off-balance-sheet items are
Loans to governments, other public bodies, public utilities, corporations, weighted for risk, with off-balance-sheet items converted to
other institutions or individuals with a loan agreement as the only balance-sheet equivalents (using credit-conversion factors)
instrument of title. before being allocated a risk weight.

PRIVATE PLACEMENT RISK-WEIGHTED ASSETS (‘RWA’ UNDER BASEL II)

A placement in which newly issued shares or debentures come into Assets which are weighted for credit and market risk in accordance
possession of a limited group of subscribers who are prepared to with the Basel II methodology. The risk-weighted assets are calculated
buy the new securities. using internal models approved by The Dutch central bank
(De Nederlandsche Bank). Regulatory capital requirements for
operational risk are calculated without use of risk-weighted assets.

ING Group Annual Report 2010 287

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Financial glossary continued

SETTLEMENT RISK TREASURY BILLS

Settlement risk arises when there is an exchange of value (funds, Generally short-term debt certificates issued by a central
instruments or commodities) for the same or different value dates government. Dutch Treasury Certificates are regarded as
and receipt is not verified or expected until ING Group has paid or Dutch Treasury bills.
delivered its side of the trade. The risk is that ING Group delivers,
but does not receive delivery from the counterparty. TREASURY SHARES
An entity’s own equity instruments, held by the entity or
SIGNIFICANT INFLUENCE other members of the consolidated group.
The power to participate in the financial and operating policy
decisions of an entity, but not to have control over these policies. VALUE CREATION
Significant influence may be gained by share ownership, statute Value creation is measured by Economic Profit (regarding non
or agreement. life and asset management business and banking operations)
and Embedded Value Profit (regarding life and long term
SOLVENCY II health business).
The fundamental reform of European insurance solvency and risk
governance legislation, which is effective as of 1 January 2013. VALUE AT RISK (VAR)
Quantifies, with a one-sided confidence level of at least 99%, the
SUB-PRIME MORTGAGES maximum overnight loss in Net Present Value that could occur due
Mortgage loans made to borrowers who cannot get a regular to changes in risk factors (e.g. interest rates, foreign exchange rates,
mortgage because they have a bad credit history or limited income. equity prices, credit spreads, implied volatilities) if positions remain
unchanged for a time interval of one day.
SUBSIDIARY
An entity that is controlled by another entity. VALUE IN USE
The present value of estimated future cash flows expected to arise
SURRENDER from the continuing use of an asset and from its disposal at the
The termination of a life or retirement contract at the request end of its useful life.
of the policyholder after which the policyholder receives the
cash surrender value, if any, on the contract. VARIANCE-COVARIANCE
A model to calculate Value at Risk, assuming that changes in risk
SWAP CONTRACTS factors are (jointly) normally distributed and that the change in
Commitments to settle in cash at a specified future date, based portfolio value is linearly dependent on all risk factor changes.
on differentials between specified financial indices as applied to
a notional principal amount. Generally, no cash is exchanged at WARRANT
the outset of the contract and no principal payments are made A financial instrument that gives the holder the right to purchase
by either party. ordinary shares.

TIER 1 CAPITAL WEIGHTED AVERAGE COST OF CAPITAL (WACC)

Also referred to as the core capital of ING Bank. It comprises paid The weighted average cost of capital is used as the discount
up share capital, reserves excluding revaluation reserves, retained rate for calculating the present value of future cash flows.
earnings, minority interests and hybrid Tier 1.

TIER 1 RATIO
Reflecting the Tier 1 capital of ING Bank as a percentage of its
total risk weighted assets. The minimum set by the Dutch central
bank is 4%.

TOTAL AND UNDERLYING NET RESULT

The variance between Total and Underlying net result is caused
by divestments and special items.

TRADING PORTFOLIO
Comprises those financial instruments which are held to obtain
short-term transaction results, to facilitate transactions on behalf
of clients or to hedge other positions in the trading portfolio.

TRANSFER RISK
Probability of loss due to currency conversion (exchange)
restrictions imposed by a foreign government that make
it impossible to move money out of the country.

288 ING Group Annual Report 2010

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General information

Disclaimer
Certain of the statements contained in this Annual Report that are not historical
facts, including, without limitation, certain statements made of future
expectations and other forward-looking statements that are based on
management’s current views and assumptions and involve known and unknown
risks and uncertainties that could cause actual results, performance or events to
differ materially from those expressed or implied in such statements. Actual
results, performance or events may differ materially from those expressed or
implied in such statements due to, without limitation: (1) changes in general
economic conditions, in particular economic conditions in ING’s core markets,
(2) changes in performance of financial markets, including developing markets,
(3) the implementation of ING’s restructuring plan to separate banking and
insurance operations, (4) changes in the availability of, and costs associated
with, sources of liquidity such as interbank funding, as well as conditions
in the credit markets generally, including changes in borrower and counterparty
creditworthiness, (5) the frequency and severity of insured loss events, (6)
changes affecting mortality and morbidity levels and trends, (7) changes
affecting persistency levels, (8) changes affecting interest rate levels, (9) changes
affecting currency exchange rates, (10) changes in general competitive factors,
(11) changes in laws and regulations, (12) changes in the policies of governments
and/or regulatory authorities, (13) conclusions with regard to purchase
accounting assumptions and methodologies, (14) changes in ownership that
could affect the future availability to us of net operating loss, net capital and
built-in loss carry forwards, (15) ING’s ability to achieve projected operational
synergies, and (16) the move towards fair value accounting for Guaranteed
Minimum Withdrawal Benefits for the Insurance US Closed Block VA business
line. ING assumes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information or for any other reason.

ING Group Annual Report 2010 289

7 Additional information

General information continued

ING PUBLICATIONS
– Annual Report, in Dutch and English
– Annual Report on Form 20-F, in English
(in accordance with SEC guidelines)

These publications are available on www.ing.com.

The publications can be ordered on the internet:
www.ing.com, button ‘Publications’,
by fax: +31 411 652 125, or
by mail: P.O. Box 258, 5280 AG Boxtel, the Netherlands.

This Annual Report contains the Reports of the Executive

Board and Supervisory Board as well as the Annual Accounts
and Other information for the financial year 2010 in their
original language (English).

ING Groep N.V.

Amstelveenseweg 500, 1081 KL Amsterdam
P.O. Box 810, 1000 AV Amsterdam
The Netherlands
Telephone +31 20 5415411
Fax +31 20 5415444

Commercial Register of Amsterdam, no. 33231073

290 ING Group Annual Report 2010

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General information continued

WRITTEN AND PRODUCED BY

ING Groep N.V.
Corporate Communications, Amsterdam

DESIGNED BY
Addison Corporate Marketing, London

PRINTED BY
Drukkerij Tesink, Zutphen

ING Group Annual Report 2010 291

 232435

ING Group Annual Report 2010

ING Group Annual Report

2010
Shaping our future

ING Groep N.V.

Amstelveenseweg 500
1081 KL Amsterdam
P.O. Box 810, 1000 AV Amsterdam
The Netherlands
Telephone: +31 20 5415411
Fax: +31 20 5415444
Internet: www.ing.com

Commercial Register of Amsterdam, no. 33231073

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