Application of the Dutch Banking Code by ING Bank N.V. 20 March

Application of the Dutch Banking Code

by ING Bank N.V.

20 March 2012

Contents

1 Introduction 3

2 Supervisory Board 4

3 Executive Board 7

4 Risk Management 13

5 Audits 15

6 Remuneration Policy 16

1 Introduction

IIn September 2009, the Dutch Banking Association (NVB)

published the Banking Code (Code Banken). The Banking Code

lays out the principles for Dutch banks in terms of corporate

governance, risk management, audit and remuneration.

The Banking Code is a form of self-regulation that took effect on

1 January 2010 on a ‘comply or explain’ basis, and was drawn up

in response to a report entitled ‘Restoring Trust’ (‘Naar herstel van

vertrouwen’), published in April 2009 by the Advisory Committee

on the Future of Banks (Adviescommissie Toekomst Banken) in

the Netherlands.

The Banking Code applies to all activities in the Netherlands

performed by banks that are in possession of a banking licence

granted under the Financial Supervision Act (Wet op het

ﬁnancieel toezicht (Wft)), irrespective of whether they perform

their activities in the Netherlands or in another Member State,

and irrespective of whether those activities are performed by a

branch.

Accordingly, ING applies the Banking Code within the following

legal entities that hold a Dutch banking license:

• ING Bank N.V.

• ING Direct N.V.

• Bank Mendes Gans N.V.

Pursuant to a decision of the European Commission of

18 November 2009 with respect to state support that was

received by ING, ING is obliged to divest certain banking

activities in the Netherlands (“WestlandUtrecht Hypotheekbank

N.V./Interadvies”). As a ﬁrst step to divestment these business

activities are held-separate per 18 November 2010.

This applies to the following entities:

WestlandUtrecht Hypotheekbank N.V., WestlandUtrecht

Effectenbank N.V. and Nationale-Nederlanden Financiële Diensten

B.V.. Therefore these entities will have to apply the Banking Code

on their own accord and are not included in this booklet.

Banks that are part of a group can apply parts of the Banking

Code at group level or on a consolidated basis. The Management

Board Banking has decided to apply the corporate governance

principles of the Banking Code at the consolidated level, i.e. for

the Management Board Banking and Supervisory Board of ING

Bank N.V. The remuneration principles, insofar as they relate

to executive remuneration, also apply to the members of the

Executive Board of ING Groep N.V. Other principles relating to risk

management (including the product approval process), customer

due care, business principles and remuneration are or will be

implemented for all entities in the ING banking organisation for

which ING has management control.

In this booklet ING reports on how the principles of the Banking

Code are applied by ING Bank (including ING Direct N.V. and

Bank Mendes Gans N.V.). ING Bank strongly supports the

principles of the Banking Code as an important step by the

banking sector to regain trust, ensure stability and protect

the interests of our stakeholders. Regaining trust requires a

sustainable approach and continuous attention. Following

the signiﬁcant steps taken to comply with the principles of

the Banking Code in 2010, ING has continued this effort over

the ﬁnancial year 2011. As an international bank with global

activities, ING Bank has taken its entire operational environment

into account when applying the principles of the Banking Code.

ING Bank recognizes that complying with these principles will be

an on-going process. ING Bank is strongly committed to meet the

principles of the Banking Code going forward, not only by the

letter but also in accordance with the spirit of the Banking Code

in a climate of ever changing needs of our stakeholders.

2 Supervisory Board

2.1 Composition and expertise

General

Text Banking Code Implementation by ING

2.1.1 The supervisory board shall be composed in such

a way that it is able to perform its tasks properly.

Complementarity, a collegial board, independence and

diversity are preconditions for the supervisory board to

perform its tasks properly.

ING applies this principle. The composition of the Supervisory

Board of ING allows the board to fulﬁl its tasks properly. The

Supervisory Board consists of ten members. The diversity in the

composition of the Supervisory Board is among others reﬂected

in nationality, gender, age and professional background. The

broad diversity in professional background of the members

of the board ensures the complimentary proﬁle of the board.

The Supervisory Board acts as a collegial body. While decisions

are formally taken by majority, the board in principle acts

on a consensus basis. All members of the Supervisory Board

except one meet the independence criteria as laid down in

the Dutch Corporate Governance Code, which is compliant

with the last mentioned code. Each year the Supervisory Board

performs a self-assessment, a.o. on the composition of the

Board. Moreover, in the context of balancing all statutory

requirements and the overall proﬁle of the Supervisory Board,

the Supervisory Board aims at adding at least another female

member to the Supervisory Board.

The Charter of the Supervisory Board of ING Bank N.V. has

been amended in accordance with this principle. .

Text Banking Code Implementation by ING

2.1.2 The supervisory board shall have a sufﬁcient number of

members to properly perform its function, including in

its committees. The appropriate number of members

depends on the nature, size and complexity of the

bank.

ING applies this principle. The number of Supervisory

Board members of ING is sufﬁcient to fulﬁl the tasks of

the Supervisory Board and its committees. Each year the

Supervisory Board assesses whether it still consists of a

sufﬁcient number of members - taking into account the various

committees within the Supervisory Board - to properly perform

its function. Next to this, the Charter of the Supervisory Board

of ING Bank N.V. has been amended accordingly.

Text Banking Code Implementation by ING

2.1.3 The members of the supervisory board shall have

thorough knowledge of the bank’s functions in society

and of the interests of all parties involved in the bank.

The supervisory board shall carefully consider the

interests of all parties involved in the bank, such as the

bank’s clients, its shareholders and its employees.

ING applies this principle. Each Supervisory Board member

follows a tailor-made introduction programme shortly after his/

her appointment to become better acquainted with ING and

his/her role as a Supervisory Board member.

ING introduced a regular Knowledge Day for Supervisory Board

members to acquire additional in-depth knowledge regarding

general developments in the ﬁnancial market, customer

care, commercial activities, risk management and regulatory

developments. In 2011 culture, developments in the US and

Europe and customer and society were among the topics

discussed during the Knowledge Day. Furthermore, audit,

ﬁnancial reporting and risk management, remuneration, the

regulatory developments of De Nederlandsche Bank as well

as a visit to business units have been part of the Permanent

Education programme for the Supervisory Board.

The bank’s function in society and interests of all stakeholders

are taken into account by the Supervisory Board in performing

its duties.

The Charter of the Supervisory Board of ING Bank N.V. and the

Supervisory Board proﬁle have been amended accordingly.

Text Banking Code Implementation by ING

2.1.4 Each member of the supervisory board shall be

capable of assessing the main aspects of the bank’s

overall policy in order to form a balanced and

independent opinion about the basic risks involved.

Each member of the supervisory board shall also

possess the speciﬁc expertise needed to perform his

or her role in the supervisory board.

To this end, whenever a vacancy arises on the

supervisory board, an individual proﬁle shall be drawn

up for the new member of the board.

2.1.5 As part of the process to ﬁll the vacancy of chairman

of the supervisory board, an individual proﬁle shall be

drawn up that also focuses on the bank’s requirements

in terms of expertise and experience in relation to the

ﬁnancial sector and familiarity with the socio-economic

and political culture and the social environment of the

bank’s main markets.

2.1.6 Each member of the supervisory board – the chairman

in particular – shall be sufﬁciently available and

contactable to properly perform his or her tasks in

the supervisory board and the supervisory board’s

committees.

2.1.7 Each member of the supervisory board shall receive

suitable compensation for the amount of time that

he or she spends on supervisory board activities. This

compensation shall not depend on the bank’s results.

ING applies this principle. In order to support the Supervisory

Board members in assessing the main aspects of the bank’s

overall policy in order to form a balanced and independent

opinion about the basic risks involved, risk management is a

key topic in the Supervisory Board introduction programme

and the Permanent Education Programme.This principle has

been laid down in the Charter of the Supervisory Board of

ING Bank N.V.In 2011 three new Supervisory Board members

were appointed to the Supervisory Board. Next to the general

Supervisory Board proﬁle, the selection was based on expertise

that was complementary to the current Supervisory Board.

For more information on the Supervisory Board proﬁle, go to

ing.com.

ING applies this principle. A proﬁle was drawn up for the

chairman of the Supervisory Board that focuses on the bank’s

requirements in terms of expertise and competences.

ING applies this principle. The members of the Supervisory

Board of ING are sufﬁciently available and accessible to fulﬁl

their tasks. The members of the Supervisory Board availability

is a.o. reﬂected in the attendance lists of the Supervisory Board

meetings. In 2011 on average 93% of the Supervisory Board

members were present at the Supervisory Board and committee

meetings. Outside these meetings various topics are discussed

by e-mail or by phone or individual Supervisory Board members

visit the ING ofﬁces upon request or on their own initiative.

All members of the Supervisory Board also have an ING e-mail

address.

ING has amended the Charter of the Supervisory Board of ING

Bank N.V. to implement this principle.

ING applies this principle and has amended the Charter of

the Supervisory Board of ING Bank N.V. accordingly. The

compensation of Supervisory Board members of ING does not

depend on the bank’s results. Information on remuneration of

the Supervisory Board will be disclosed in ING’s remuneration

report in the 2011 Annual Report. Go to ing.com.

2.1.8 The chairman of the supervisory board shall organise

a programme of lifelong learning, with the aim of

maintaining the expertise of the supervisory board

directors at the required standard and improving their

expertise where necessary. The learning programme

shall cover relevant developments at the bank and in

the ﬁnancial sector, corporate governance in general

and in the ﬁnancial sector in particular, the duty of care

towards the client, integrity, risk management, ﬁnancial

reporting and audits.

Every member of the supervisory board shall take

part in the programme and meet the requirements of

lifelong learning.

ING applies this principle. In order to maintain the expertise

of the Supervisory Board and to improve their expertise where

needed, a Permanent Education Programme for the Supervisory

Board is in place. As part of the annual self-assessment

Supervisory Board members may request further training or

education on speciﬁc topics which are implemented in the

Permanent Education Programme. Each year ING reports how

the Corporate Governance Code has been implemented. This

report contains substantiated wording on how Permanent

Education for the Supervisory Board has been organized

and executed. This principle of the Code is also reﬂected in

the Charter of the Supervisory Board of ING Bank N.V. Refer

to 2.1.3 for more information on the Permanent Education

Programme for the Supervisory Board.

Text Banking Code Implementation by ING

2.1.10 In addition to the supervisory board’s annual self-

evaluation, the functioning of the supervisory board

shall be evaluated under independent supervision once

every three years. The involvement of each member of

the supervisory board, the culture within the supervisory

board and the relationship between the supervisory

board and the executive board shall be part of this

evaluation.

2.2 Tasks and working methods

2.2.1 As part of its supervisory tasks, the supervisory

board shall pay special attention to the bank’s risk

management.

All discussions about risk management shall be

prepared by a risk committee or a similar committee,

which committee shall be appointed by the supervisory

board from its ranks for this purpose.

ING applies this principle and has amended the Charter of

the Supervisory Board of ING Bank N.V. accordingly. A self-

assessment under external assistance took place in 2011.

ING applies this principle. Per August 2009 a Risk Committee

of the Supervisory Board has been installed. On a quarterly

basis ﬁnancial and non-ﬁnancial risk reports are discussed in

the Risk Committee and subsequently in the Supervisory Board.

Adjusted risk appetite statements are also discussed in the Risk

Committee and subsequently in the Supervisory Board. The

Charter of the Supervisory Board of ING Bank N.V. and the Risk

Committee have been amended accordingly.

For more information on Risk Management, see Chapter on

Risk Management in ING’s Annual Account section in the

Annual Report.

2.1.9 The assessment of the effectiveness of the lifelong

learning referred to in principle 2.1.8 shall be part of

the annual evaluation performed by the supervisory

board.

ING applies this principle. The Permanent Education

Programme for the Supervisory Board is one of the subjects in

the yearly self-assessment performed by the Supervisory Board.

The Charter of the Supervisory Board of ING Bank N.V. has

been amended accordingly.

2.2.2 Both the risk committee and the audit committee

shall be subject to speciﬁc requirements as regards

competency and experience. For example, a number

of members of the risk committee must have sound

knowledge of the ﬁnancial aspects of risk management

or the experience needed to make a thorough

assessment of risks. A number of members of the audit

committee must have sound knowledge of ﬁnancial

reporting and internal control systems and audits or the

experience needed to thoroughly supervise these areas.

ING applies this principle. Both the members of the Audit

Committee and the Risk Committee must meet speciﬁc

requirements regarding competence and experience which are

laid down in the Charters of the Audit and Risk Committee of

the Supervisory Board.

Text Banking Code Implementation by ING

3.1.1 The executive board shall be composed in such

a way that it is able to perform its tasks properly.

Complementarity, a collegial board and diversity are

preconditions for the executive board to perform its

tasks properly.

3.1.2 Each member of the executive board shall possess a

thorough knowledge of the ﬁnancial sector in general

and the banking sector in particular. Each member of

the executive board shall have thorough knowledge

of the bank’s functions in society and of the interests

of all parties involved in the bank. In addition, each

member of the executive board shall possess thorough

knowledge so that he or she is able to assess and

determine the main aspects of the bank’s overall policy

and then form a balanced and independent opinion

about the risks involved.

3.1.3 The chairman of the executive board shall organise

a programme of lifelong learning, with the aim of

maintaining the expertise of the executive board

directors at the required standard and improving their

expertise where necessary. The learning programme

shall cover relevant developments at the bank and in

the ﬁnancial sector, corporate governance in general

and in the ﬁnancial sector in particular, the duty of care

towards the client, integrity, risk management, ﬁnancial

reporting and audits.

ING applies this principle. The Management Board Banking

is composed in such a way that it is able to perform its tasks

properly. Members of the Management Board Banking have

various backgrounds and areas of expertise in banking,

ﬁnance or risk management. However, the Management

Board Banking recognizes the importance for diversity within

the Management Board Banking and considers this as a clear

priority. The Management Board Banking is committed to

continue encouraging diversity through her talent management

programme. The requirements on the composition of the

Management Board Banking are laid down in the Executive

Board Proﬁle that can be found on ing.com. The Management

Board Banking acts as a collective body and strives to take

decisions on a consensus basis.

ING applies this principle. Members of the Management Board

Banking have various backgrounds and areas of expertise in

banking, ﬁnance or risk management. Please go to ing.com

to ﬁnd the Management Board Banking members’ individual

proﬁles. The requirements on composition and competence

of the Management Board are included in the Executive Board

Proﬁle that can be found on ing.com. Furthermore board

members are subject to an integrity and expertise test by De

Nederlandse Bank in order to ensure that the composition of

the Management Board Banking is sufﬁcient for the properly

fulﬁlment of its tasks.

On a regular basis the Supervisory Board evaluates the

functioning of the individual members of the Management

Board Banking.

ING applies this principle. A collective Permanent Education

Programme for the members of the Management Board

Banking exists. The Permanent Education Programme covers

developments in the ﬁnancial sector, corporate governance,

duty of care towards the client, integrity, risk management,

ﬁnancial reporting and auditing and regulatory developments.

The collective programme is organised on a two monthly basis.

External thought leaders and experts are invited to educate

on various topics. Topics that have been included in the 2010

and 2011 sessions are (a.o.) Restoring Trust, culture, Corporate

Governance, Customer due care, Audit and Risk management

as well as Integrity and Remuneration. Individual sessions differ

per board member. There are also presentations during regular

board meetings which contribute to general education.

In 2012 we will continue to improve the Permanent Education

Programme.

3 Executive Board

3.1 Composition and expertise

Text Banking Code Implementation by ING

3.1.4 Every member of the executive board shall take part

in the programme referred to in 3.1.3 and meet the

requirements of lifelong learning. They have to satisfy

this condition in order to sit on the executive board.

The supervisory board shall ascertain whether the

members of the executive board continue to fulﬁl the

expertise requirements developed by De Nederlandsche

Bank [the Dutch central bank].

3.1.5 Each year, the bank shall indicate in its annual report in

what manner it implemented principles 3.1.3 and 3.1.4.

3.1.6 Taking into account the risk appetite approved by the

supervisory board, the executive board shall ensure a

balanced assessment between the commercial interests

of the bank and the risks to be taken.

ING applies this principle and has amended the Charter of the

Management Board of ING Bank N.V. accordingly. See Principle

3.1.3 for more details.

The manner of implementation of the principles 3.1.3 and

3.1.4 is described in this booklet.

ING applies this principle. In executing its duties the

Management Board Banking carefully considers both the

commercial interests of the bank as well as the ﬁnancial risks,

while taking into consideration the interest of all stakeholders,

applicable law and codes of conduct.

The Charter of the Management Board of ING Bank N.V.has

been amended to reﬂect this principle.

Text Banking Code Implementation by ING

3.1.7 Within the executive board one member shall be

responsible for preparing the decision-making with

regard to risk management.

This member of the executive board shall be involved,

in a timely manner, in the preparation of decisions that

are of material signiﬁcance for the bank as regards

the risk proﬁle, especially where these decisions may

result in departure from the risk appetite approved by

the supervisory board.

Risk management shall also include a focus on the

interests of ﬁnancial stability and on the impact that

systemic risk could have on the risk proﬁle of the bank.

ING applies this principle. As of 2007 ING has appointed

a Chief Risk Ofﬁcer (CRO) to the Management Board

Banking who 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 Bank 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. The

CRO in the Board does not combine his role with any other

commercial focus areas.

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 Executive Board (and

ratiﬁed by the Supervisory Board) and is cascaded throughout

ING Bank. The risk committees are 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.

The CRO is co-chairman of the Asset and Liability Committee

(ALCO) of the Bank. The ALCO 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. The CRO is also chairman of the CRO Staff

and co-chairman of the Finance & Risk Committee (F&RC). The

F&RC is a platform for the CRO and the Chief Financial Ofﬁcer

(CFO), along with their respective direct reports, to discuss

and decide on issues that relate to both the ﬁnance and risk

domains. As part of all this, the CRO is closely involved in risk

matters and decisions that may have a material impact on the

bank. He is also member of the Global Credit Committee Policy

(GCCP), which discusses and approves policies, methodologies

and procedures related to credit, country and reputation

risks within ING Bank and the Global Credit Committee –

Transaction Approval (GCCTA), which discusses and approves

transactions that entail taking credit risk above a certain

threshold.

As an example how ING’s Risk management includes a focus

on the interests of ﬁnancial stability and on the impact that

systemic risk could have on the risk proﬁle of the bank, ING

complements its regular standardized risk reporting 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 conducted, both scheduled and ad

hoc, both in the form of sensitivity or scenario analysis, either

for a speciﬁc risk type or for the bank or insurance company

as a whole. The stress test can represent various economic

situations from mild recession to extreme shock. In 2011 a

stress test was performed on the Bank Medium Term Plan as

part of budget process.

In addition to regulatory required stress tests such as those

from De Nederlandsche Bank and EBA, several ad hoc tests

have been conducted.

For further information on Risk Management, see Chapters on

Risk Management in the ING Annual Report.

Text Banking Code Implementation by ING

3.2 Tasks and working methods

3.2.1 In all of its actions, the bank’s executive board shall

ensure that it carefully considers the interests of all of

the parties involved in the bank, such as the bank’s

clients, its shareholders and its employees. These

considerations shall take into account the continuity of

the bank, the environment in society in which the bank

operates and legislation, regulations and codes that

apply to the bank.

ING applies this principle. This principle is reﬂected in the

Charter of the Management Board of ING Bank N.V.

Stakeholder engagement has always been an important

element of ING’s overall corporate strategy. The primary

objective of ING’s stakeholder engagement approach is to

provide optimal, accurate, transparent and easy to understand

information on products, services, strategic direction, ﬁnancial

and operating performance and/or speciﬁc purpose policies to

serve the often diverging interests of the various stakeholder

groups.

In response to the ﬁnancial crisis ING has further intensiﬁed

its stakeholder management activities, in particular given

the shifting needs and increased expectations, demands

and inﬂuence of various stakeholder groups (in particular

customers, policymakers and Dutch society). ING launched

a number of initiatives to actively seek a dialogue with all its

stakeholders. These included a series of dialogue sessions

and round table discussions attended by a multiplicity

of stakeholders (customers and consumer organisations,

entrepreneurs, business associations, employees, trade unions,

Non-Governemental Organizations, politicians, regulators,

private investors, special interest groups, academics, opinion

leaders and journalists). The main objective of these sessions

was to facilitate discussion between ING and its stakeholders,

for ING to receive their feedback and address their issues of

concern.

The sessions have enabled Management Board Banking

members and other senior management to actively discuss a

wide range of issues with a multiplicity of stakeholders, varying

from topics like the ﬁnancial crisis and our own role therein,

customer centricity, (sustainable) entrepreneurship and our

strategy towards corporate responsibility to the scale and scope

of ﬁnancial services companies and the future of ﬁnancial

regulation and supervision.

Text Banking Code Implementation by ING

3.1.8 The member of the executive board who is responsible

for preparing the decision-making with regard to risk

management may combine his or her function with

other focus areas, on the condition that he or she does

not bear any individual commercial responsibility for the

commercial task areas and operates independently from

those areas.

The CRO in the board does not combine his role with any other

commercial focus areas.

Text Banking Code Implementation by ING

3.2.2 Maintaining a continued focus on its clients’ interests is

a necessary precondition for the continuity of the bank.

Without prejudice to the principle formulated in 3.2.1,

the executive board shall ensure that the bank always

treats its clients with due care.

The executive board shall see to it that the duty of care

for the client is embedded in the bank’s culture.

In order to apply this principle the duty of care for clients is

embedded in ING Bank policies, procedures, communication

and marketing.

From 2009 to mid-2011, ING launched and is embedding

its Customer Care/ Customer Suitability programme. The

main objective of the Customer Suitability programme was

to structurally assess globally existing products, services and

advice processes available to Retail, Mid-Corporate and Small

and Medium Enterprises clients.

Internally, ING offers training programmes to emphasise the

importance of customer centricity to its employees.

The Customer Golden Rules are required to be part of the

Product Approval and Review Process. Customer Care is

monitored and acted upon by Complaints Handling processes,

the Net Promoter Score and the Winning Performance Culture

Scan.

The Dutch Supervisor, the Autoriteit voor Financiële Markten

(“AFM”) yearly provides a score to Dutch banks in respect of

the level of customer centricity that a bank can demonstrate

and in respect of any measures taken to implement any

required improvements to customer centricity. ING Domestic

Bank Netherlands received an “on track” score on both

accounts, with scores being higher than the market average.

ING Domestic Bank Netherlands created one overview for the

rates of the main products on their website. The Domestic

Bank Netherlands has also developed short movies which were

launched on their internet, explaining why customers have to

pay fees and charges for a particular product, and how they

are built up. These movies address topics including: (explaining

the rates of) payments, savings, loans and mortgage interest.

In addition, customers can ﬁnd the online ‘Savings Guideline’

(‘Spaarwijzer’) introduced by ING Domestic Bank Netherlands

on the internet.

Text Banking Code Implementation by ING

3.2.3 The members of the executive board shall perform their

tasks in a meticulous, expert and fair manner, taking

into account the applicable laws, codes of conduct and

regulations

Each member of the executive board shall sign a moral

and ethical conduct declaration. A declaration has been

included in the explanatory notes to this code. This

declaration is a model declaration, which means that

each bank can supplement it as it deems appropriate.

3.2.4 The executive board shall ensure that the declaration

referred to in principle 3.2.3 is translated into principles

that form guidelines for the behaviour of all of the

bank’s employees.

The content of these principles shall be expressly

pointed out to every new employee of the bank when

he or she joins the bank by inserting a reference to

these principles in the new employee’s contract of

employment. Every new employee shall be required to

comply with these principles.

ING applies this principle. All Management Board Banking

members have signed the Moral and Ethical Conduct

statement and the Charter of ING Bank has been amended to

reﬂect the principle.

ING applies this principle. The ING Business Principles cover all

aspects of the moral and ethical conduct declaration. Speciﬁc

reference to the ING Business Principles is included in employee

contracts. Besides, various initiatives further emphasize that

every employee understands how their actions and behaviours

can help earn and retain customer and stakeholder trust. The

ING Business Principles continue to form an integrated part

of employee trainings in the so called Promoting Integrity

Programme across the organisation.

More information on the ING Business Principles can be found

on http://www.ingforsomethingbetter.com/our_approach/

business_principles/

Text Banking Code Implementation by ING

4.1 The executive board – and primarily the chairman of

the executive board – shall be responsible for adopting,

implementing, monitoring and, where necessary,

adjusting the bank’s overall risk policy.

The executive board shall propose the risk appetite to

the supervisory board for approval at least once a year.

Any material changes to the risk appetite in the interim

shall also require the supervisory board’s approval.

4.2 The supervisory board shall supervise the risk policy

pursued by the executive board.

As part of their supervision, the supervisory board shall

discuss the bank’s risk proﬁle and assess at a strategic

level whether capital allocation and liquidity impact

in the general sense are in line with the approved risk

appetite.

In the performance of this supervisory role, the

supervisory board shall be advised by the risk committee

formed from the ranks of the supervisory board for this

purpose.

4.3 The supervisory board shall assess periodically at the

strategic level whether the commercial activities in the

general sense are appropriate in the context of the

bank’s risk appetite.

The executive board shall provide the supervisory board

with the relevant information for this assessment in

such a way that the supervisory board is able to form a

sound opinion.

ING applies this principle. While the Management Board

Banking has a collective responsibility to manage the

company, one of the Management Board Banking members

has been appointed CRO who is primarily responsible for risk

management.

Each year, the risk appetite is set by the Management Board

and submitted to the Supervisory Board for approval.

Any material changes within this period are also set by the

Management Board Banking and submitted to the Supervisory

Board for approval. This principle is reﬂected in the Charter of

the Management Board of ING Bank N.V..

ING applies this principle. The Supervisory Board discusses the

bank’s risk proﬁle based on the ﬁnancial and non-ﬁnancial risk

management reports. The ﬁnancial risk management report

provides for a comparison of the actual risk proﬁle (capital and

liquidity) versus the approved risk appetite.

A Supervisory Board Risk Committee has been established in

August 2009. Risk Committee meetings take place at least 4

times a year. The Risk committee prepares the discussion and

the decision making by the Supervisory Board with respect to

risk management. This principle is reﬂected in the Charter of

the Supervisory Board of ING Bank N.V..

ING applies this principle. On a quarterly basis, the ﬁnancial

risk management report and non-ﬁnancial risk management

report are provided by the Management Board Banking to

the Supervisory Board. This enables the Supervisory Board to

discuss and assess whether the commercial activities of the

bank are appropriate in the context of the risk appetite of the

bank.

Each year, the risk appetite is set by the Executive Board and

submitted to the Supervisory Board for approval.

This principle is reﬂected in the relevant Charters.

4 Risk Management

Text Banking Code Implementation by ING

4.4 The executive board shall ensure that risk management

is arranged adequately so that the executive board is

aware in good time of any material risks run by the

bank so that these risks can be managed properly.

The executive board shall take any decisions that are

of material signiﬁcance for the risk proﬁle, the capital

allocation or the liquidity impact.

4.5 Every bank shall have a Product Approval Process.

The executive board shall organise the product approval

process and shall be responsible for the process working

properly.

Products that go through the product approval process

at the bank shall not be launched on the market or

distributed without careful consideration of the risks

by the bank’s risk manager and a careful assessment of

any other relevant factors, including the duty of care

towards the client.

Based on an annual risk analysis, the in- house auditor

shall check whether the product approval process

has been designed properly, is present and is working

effectively and shall then inform the executive board

and the relevant supervisory board committee (risk

committee or similar committee) about the results.

ING applies this principle. The Management Board Banking is

responsible to put in place effective internal risk management

and control processes and systems. The individual board

members are closely involved in these processes and decisions

taken by the committees for that purpose. Various risk policies,

ﬁnancial and non-ﬁnancial risk dashboards and risk committees

are in place to identify and manage material risks in an early

stage. Following on the local Non-Financial Risk Committees

(NFRC) that are long part of the internal risk management a

Bank Non Financial Risk Committee has been established in

2010. The members of the Bank NFRC are the members of the

Management Board Banking, the heads of the non-ﬁnancial

risk departments and senior management.

The Non-Financial Risk Committee is responsible for all risk

management activities related to the following risk areas:

– Operational risk

– Compliance risks

– Legal risk

– Reputational risk

Decisions that are of material signiﬁcance for the risk proﬁle,

the capital allocation or the liquidity impact of the bank are

ultimately taken by the Management Board Banking or by

individual board members participating in risk committees.

This principle has been reﬂected in the Charter of the

Management Board Banking.

ING applies this principle. Within the Management Board

Banking the CRO is responsible for ING’s product approval and

review process while business line management is responsible

for execution of the process.

The product approval and review process ensures relevant risk

functions, including Legal, Compliance Risk Management,

Market Risk, Credit Risk and Operational Risk Management, are

involved to consider the risks and assessment of other

relevant factors. Through this process new products or product

modiﬁcation need to meet the requirements set by ING to drive

continuous focus on the client’s interest. These requirements

are ING’s guiding principles for doing business with its clients.

These rules go beyond what is legally required and aim to

ensure that products, services and sales practices are in line

with the ING business principles.

In addition to the ING Business Principles and the product

approval and review process ING has rolled out a tool to

continuously measure how well ING is meeting our client’s

needs. Based on this information ING is able to improve

products and services in order to satisfy clients and create

promoters of our company.

The product approval and review process is included in the

Corporate Audit Services (CAS) Bank audit planning. The audit

activities are determined using a risk based approach.

Text Banking Code Implementation by ING

5.1 The executive board shall ensure that a systematic audit

is conducted of the management of the risks related to

the bank’s business activities.

5.2 Each bank shall have its own, internal auditor who shall

occupy an independent position within the bank. The

head of the internal audit team shall present a report to

the chairman of the executive board and shall report to

the chairman of the audit committee.

5.3 The internal auditor shall have the task of assessing

whether the internal control measures have been

designed properly, are present and are working

effectively. This assessment shall include the quality

and effectiveness of the system of governance, risk

management and the bank’s control procedures.

The internal auditor shall report the ﬁndings to the

executive board and the audit committee.

5.4 The internal auditor, the external auditor and the

supervisory board’s risk committee and/or audit

committee shall consult periodically, including as

regards the risk analysis and the audit plan of both the

internal auditor and the external auditor.

5.5 As part of the general audit assignment for the ﬁnancial

statements, the external auditor shall produce a report

for the executive board and the supervisory board

which shall contain the external auditor’s ﬁndings

concerning the quality and effectiveness of the system

of governance, risk management and the bank’s control

procedures.

5.6 The internal auditor shall take the initiative in arranging

talks with De Nederlandsche Bank and the external

auditor at least once a year to discuss each other’s risk

analysis and ﬁndings and each other’s audit plan at an

early stage.

ING applies this principle. ING has an internal audit department

– CAS Bank – that prepares a yearly risk based audit plan

which is discussed with the Management Board Banking and

the Audit Committee of the Supervisory Board prior to its

ﬁnalisation.

ING applies this principle. CAS Bank is independently

positioned within the organisation. CAS Bank staff reports

to the General Manager of CAS Bank, who reports to the

General Group Manager CAS. The General Group Manager

CAS directly reports to the Chief Executive Ofﬁcer (CEO) and

functionally (escalation and approval of audit plan) to the Audit

Committee of the Supervisory Board.

ING applies this principle. CAS Bank assesses whether the

internal control measures have been designed properly, are

present and are working effectively. This assessment includes

the quality and effectiveness of the system of governance, risk

management and the bank’s control procedures.

CAS Bank reports on the key risks to the Management Board

Banking and the Audit Committee of the Supervisory Board on

a semi-annual basis.

ING applies this principle. CAS Bank prepares and discusses

its risk analysis and audit plan with the Management Board

Banking, the Audit Committee of the Supervisory Board, the

external auditor and with De Nederlandsche Bank (the Dutch

central bank). Subsequently, CAS Bank exchanges periodically

information between these stakeholders in order to update its

risk analysis and audit plan (at least quarterly).

ING applies this principle. Ernst & Young, ING’s external auditor,

issues a management letter and audit report annually, and

review letters quarterly to the Management Board Banking

Bank and the Supervisory Board, which may include relevant

ﬁndings relating to governance, risk management and control.

CAS Bank monitors that the external auditor adheres to these

responsibilities.

ING applies this principle. ING’s internal auditor operates in

accordance with this principle. Upon initiative of CAS Bank

a risk assessment meeting with the external auditor and De

Nederlandsche Bank takes place annually in accordance with

the new ‘tripartite design’ of De Nederlandsche Bank as of

2010.

5 Audits

Text Banking Code Implementation by ING

6.1.1 The bank shall implement a meticulous, restrained

and long-term remuneration policy that is in line with

its strategy and risk appetite, objectives and values,

taking into account the long-term interests of the bank,

the relevant international context and wider societal

acceptance.

The supervisory board shall take this basis into

account when performing their tasks in relation to the

remuneration policy.

The executive board shall take this basis into account

when performing their tasks in relation to the

remuneration policy.

ING applies this principle. The remuneration policy of

ING strikes a balance between interests of its customers,

employees, shareholders and society at large, and supports the

long-term objectives of the company.

The general principles underpinning ING’s remuneration policy

are as follows:

• Create a balanced compensation mix

• Reduce emphasis on variable remuneration

• Enhance long-term value creation

• Improve the alignment of risk and reward

• Place a signicant weighting on non-nancial sustainable

performance indicators

The variable remuneration is linked to clear targets of which

a large part non-ﬁnancial targets, e.g. operational excellence,

customer focus and top employer.

The remuneration policy for the Executive Board of ING Group

as proposed by the Supervisory Board has been approved by

the Annual General Meeting of Shareholders (AGM) on

27 April 2010 and adjustments were approved by the AGM

on 9 May 2011. The remuneration policy for the Executive

Board of ING Group applies in full to the members of the

Management Board Banking. For more information, see the

chapter on the Remuneration Report in ING’s Annual Report

2010, 2011 and presentation for general meeting

of shareholders (see ING.com).

Both the charters of the Management Board Banking Banking

and the Supervisory Board reﬂect that the Management Board

Banking and Supervisory Board are committed to ensure that

the execution of the remuneration policy continues to be in line

with the criteria set out in this principle.

6 Remuneration Policy

Basis

Text Banking Code Implementation by ING

Governance

6.2.1 The supervisory board shall be responsible for the

implementation and evaluation of the remuneration

policy adopted with regard to the members of the

executive board.

The supervisory board also approves the remuneration

policy for the senior management and oversees its

implementation by the executive board.

Additionally, the supervisory board approves the

principles of the remuneration policy for other bank

employees.

The bank’s remuneration policy shall also comprise

the policy on awarding retention, exit and welcome

packages.

6.2.2 The supervisory board shall annually discuss the highest

variable incomes at the bank.

The supervisory board shall ensure that the executive

board assesses whether variable incomes are consistent

with the remuneration policy adopted by the bank, and

in particular whether they comply with the principles set

out in this article.

The executive board assesses whether variable incomes

are consistent with the remuneration policy adopted by

the bank, and in particular whether they comply with

the principles set out in this article.

Furthermore, the supervisory board shall discuss

material retention, exit and welcome packages, assess

whether they are consistent with the remuneration

policy adopted by the bank and ensure that these

packages are not excessive.

ING applies this principle. The Supervisory Board has

always been and will continue to be responsible for the

implementation and evaluation of the remuneration policy for

the Executive Board of ING Group and the Management Board

Banking.

The Supervisory Board has approved the remuneration

principles and actively oversees the Senior Management

remuneration policy as executed by the Executive Board of

ING Group e.g. by annually reviewing business line variable

remuneration pools and individual remuneration proposals for

Senior Management. The remuneration principles applicable to

the remainder of the ING organization have also been reviewed

and approved by the Supervisory Board.

Material retention, exit and welcome packages are subject

to Supervisory Board approval as of 2010. Furthermore, it is

ING’s policy to subject any exit and welcome packages that

signiﬁcantly deviate from standard local practice to a strict

internal review and sign-off processes. Retention packages are

always subject to a strict internal review and sign-off process.

The principle is reﬂected in the Charter of the Supervisory

Board of ING Bank N.V.

ING applies this principle.

In 2011 the Supervisory Board reviewed the highest variable

incomes within the organization and as such whether the

variable incomes are consistent with the remuneration policy

adopted by the bank.

As of 2010 material retention, exit and welcome packages are

subject to Supervisory Board approval.This principle is reﬂected

in the Charter of the Supervisory Board of ING Bank N.V. and

Management Board Banking.

The Executive Board of ING Group and of the Management

Board Banking reviews the proposed variable income for Senior

Management within the business to ensure they are consistent

with the remuneration policy adopted by the bank. The existing

Senior Management policy complies with the principles set out

in this principle.

The Executive Board of ING Group annually discusses the

highest variable incomes within the organization and whether

such variable incomes are consistent with the remuneration

policy adopted by the bank. This assessment is discussed and

reviewed by the Supervisory Board.

Text Banking Code Implementation by ING

6.3.1 The total income of a member of the executive board

shall be in reasonable proportion to the remuneration

policy adopted by the bank. At the time when his or

her total income is decided, it shall be slightly below the

median level for comparable positions in the relevant

markets both inside and outside the ﬁnancial sector.

The relevant international context shall be a major

factor.

6.3.2 In the event of dismissal, remuneration may not exceed

one year’s salary (the ‘ﬁxed’ remuneration component).

If the maximum of one year’s salary would be manifestly

unreasonable for an executive board member who is

dismissed during his or her ﬁrst term of ofﬁce, such

board member shall be eligible for severance pay not

exceeding twice the annual salary.

6.3.3 When variable remuneration is awarded to the

executive board, the long-term component shall

be taken into account as well as proﬁtability and/

or continuity of the bank and a material part of the

variable remuneration shall be conditional and shall not

be paid until at least three years have passed.

6.3.4 Shares granted to executive board members without

ﬁnancial consideration shall be retained for a period

of at least ﬁve years or at least until the end of the

employment, if this period is shorter. If options are

granted, they shall, in any event, not be exercised in

the ﬁrst three years after the date on which they were

awarded.

ING applies this principle. The remuneration policy for the

Executive Board of ING Group and the Management Board

Banking is in line with the criteria described in this principle.

This includes benchmarking against a peer group of major

European multinationals (ﬁnancial and non-ﬁnancial) and

setting remuneration levels below median. The total income for

the Executive Board of ING Group and the Management Board

Banking members is therefore below the market median.

More information can be found in the Remuneration Report of

the Annual Report 2010 and 2011.

ING applies this principle. The remuneration policy that applies

to the Executive Board of ING Group and the Management

Board Banking fully complies with the criteria as laid down in

this principle.

ING applies this principle. The performance targets of each

member of the Executive Board of ING Group and the

Management Board Banking include measures relating to

the proﬁtability and the continuity of the bank. All variable

remuneration for these Board members is conditional upon

meeting performance targets. Moreover, 60% of the variable

remuneration is long-term focused i.e. All cash and shares

offered as part of the long-term component are subject to a

3-year tiered vesting schedule, after which a retention period

follows such that all shares are retained for a period of at least

5 years (including vesting time). The variable remuneration is

also subject to a “no proﬁt – no bonus” principle.

More information can be found in the Remuneration Report of

the Annual Report 2010 and 2011.

ING applies this principle. Stock is subject to a 5 year

mandatory holding period (including vesting time) to comply

with this provision. It is noted that each Board member is

permitted to sell that portion of the vested stock to ﬁnance his

or her tax obligations that exist on the vesting date.

Remuneration of members of the executive board

Text Banking Code Implementation by ING

6.4.1 The allocation of variable remuneration shall be related

to the bank’s long-term objectives.

6.4.2 a. Every bank shall set a maximum ratio of variable

remuneration to ﬁxed salary that is appropriate for the

bank in question.

The variable remuneration per annum of members

of the executive board shall not exceed 100% of the

member’s ﬁxed income.

ING applies this principle. Variable remuneration for the

Executive Board of ING Group, the Management Board

Banking and Senior Management is determined by

performance objectives which include long-term objectives

(such as customer satisfaction, employee engagement, and

corporate responsibility). In addition, a signiﬁcant part of their

variable remuneration is long-term in nature as it is deferred

over a period of three years. For the Executive Board of ING

Group and the Management Board Banking this is 60% of

total variable remuneration.

Senior Management receive part of their variable remuneration

in conditional shares through participation in a long-term

incentive program. In addition they also defer a signiﬁcant

portion of their variable remuneration therefore emphasizing

long term focus.

For the levels below Senior Management there is generally

also a long-term focus, although it is possible that due to local

arrangements (e.g. with unions or as a result of collective

labour agreements) deviation may be necessary.

ING applies this principle. The variable remuneration per

annum of members of ING’s Executive Board and Management

Board Banking does not exceed 100% of the member’s ﬁxed

income. They apply the 1:1 ratio as set in this principle. As

described in our 2009, 2010 and 2011 Annual Report, ING has

committed to also transition its Senior Management to a more

balanced mix between ﬁxed and variable pay.

For the remainder of the organization, ING applies a maximum

ratio between ﬁxed and variable remuneration. The ratios differ

per geographical location and per business area. The speciﬁed

maximum can be departed from only if necessary on the basis

of a competitive position for certain high-calibre specialists

and employees/managers in speciﬁc globally-oriented business

units. Exceptions need to be reviewed and approved by the

Supervisory Board.

For the vast majority of our Dutch staff the actual ratio

between ﬁxed and variable is signiﬁcantly below the 1:1 ratio.

Variable remuneration

Text Banking Code Implementation by ING

6.4.3 Variable remuneration shall be based on the

performances of the individual, his part of the business

and the performance of the bank as a whole according

to pre-determined and assessable performance criteria.

In addition to ﬁnancial performance criteria, non-

ﬁnancial performance criteria shall also make up a

signiﬁcant portion of the assessment of the individual.

Performance criteria shall be deﬁned in terms that are

as objective as possible in the bank’s remuneration

policy.

6.4.4 When performances are assessed based on the

pre-determined performance criteria, ﬁnancial

performances shall be adjusted to allow for estimated

risks and capital costs.

6.4.5 In exceptional circumstances – for example, if

application of the predetermined performance criteria

would result in undesired variable remuneration for a

member of the executive board – the supervisory board

shall have the discretionary power to adjust the variable

remuneration if, in its opinion, this remuneration would

have unfair or unintended effects.

6.4.6 The supervisory board shall be authorised to reclaim

variable remuneration allocated to a member of the

executive board based on inaccurate data (whether or

not the inaccurate data is ﬁnancial in nature).

ING applies this principle. Variable remuneration for the

Executive Board of ING Group, the Management Board

Banking and Senior Management complies fully with these

criteria. Performance objectives for this group include

employee engagement, customer satisfaction and corporate

responsibility. This principle is also implemented throughout the

banking organization as a whole although it is possible that

due to local arrangements (e.g. with unions or as a result of

collective labour agreements) deviation may be necessary.

ING applies this principle. Employees’ individual performances

are being assessed based on pre-determined performance

criteria. Performance criteria for the Executive Board of

ING Group, Management Board Banking and Senior

Management will include risk objectives. Moreover, for Senior

Management and the remainder of the organization the

variable remuneration is based amongst others on ﬁnancial

performance. Variable cash and equity compensation will be

adjusted for estimated risk and capital costs on an aggregate

level. However, some local arrangements made as a result of

collective labour agreements and/or arrangements with unions

may deviate from this principle in which case ING must honour

the existing obligations.

ING applies this principle. This power of the Supervisory Board

is reﬂected in the Charter of the Supervisory Board of

ING Bank N.V..

ING applies this principle. This power of the Supervisory Board

is reﬂected in the Charter of the Supervisory Board of

ING Bank N.V..