Ing Groep NV 20-F for FY2019

2019 ING Group Annual Report on Form 20-F

1

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON,

D.C. 20549

FORM 20-F

(Mark One)

☐

REGISTRATION

STATEMENT

PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE

ACT OF

1934

OR

☒

ANNUAL REPORT PURSUANT TO

SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended 31 December 2019

OR

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

OR

☐

SHELL COMPANY REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

Commission File Number: 001-14642

ING GROEP N.V.

(Exact name of Registrant as specified in its charter)

ING GROUP

(Translation

of Registrant’s name into English)

The Netherlands

(Jurisdiction of incorporation or organization)

ING Groep N.V.

Bijlmerdreef 106

1102 CT Amsterdam

P.O.

Box 1800, 1000 BV Amsterdam

The Netherlands

(Address of principal executive offices)

Erwin Olijslager

Telephone: +31 20 564 7705

E-mail: Erwin.Olijslager@ing.com

Bijlmerdreef 106

1102 CT Amsterdam

The Netherlands

(Name, Telephone, E-mail and/or

Facsimile number and Address of Company

Contact Person)

Securities registered or to

be registered pursuant to

Section 12(b) of the Act.

Title of each class

Trading symbols

Name of each exchange on which registered

American Depositary Shares

ING

New York Stock Exchange

Ordinary shares

New York Stock Exchange

(i)

6.125% ING Perpetual Debt Securities

ISG

New York Stock Exchange

3.150% Fixed Rate Senior Notes due 2022

ING22

New York Stock Exchange

3.950% Fixed Rate Senior Notes due 2027

ING27

New York Stock Exchange

Floating Rate Senior Notes due 2022

ING22A

New York Stock Exchange

Floating Rate Senior Notes due 2023

ING23A

New York Stock Exchange

4.100% Fixed Rate Senior Notes due 2023

ING23

New York Stock Exchange

4.550% Fixed Rate Senior Notes due 2028

ING28

New York Stock Exchange

3.550% Fixed Rate Senior Notes due 2024

4.05% Fixed Rate Senior Notes due 2029

4.05% Fixed Rate Senior Notes due 2029

ING24

New York Stock Exchange

4.050% Fixed Rate Senior Notes due 2029

ING29

New York Stock Exchange

(i)

Not for trading, but only in connection with the registration of American Depositary Shares

representing such ordinary shares,

pursuant to the requirements of the Securities and

Exchange Commission.

2019 ING Group Annual Report on Form 20-F

2

Securities registered or to

be registered pursuant to Section

12(g) of the Act.

None

Securities for which there is a reporting

obligation pursuant to Section 15(d) of the Act.

None

Indicate the number of outstanding shares

of each of the issuer’s classes of capital or common stock as of the close of

the period covered

by the annual report.

Ordinary Shares, nominal value

EUR 0.01 per Ordinary Share

3.896.734.271

Indicate by check mark if the registrant

is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

☐

Yes

☒

No

If this report is an annual or transition report,

indicate by check mark if the registrant

is not required to file reports pursuant to Section 13

or 15(d) of the Securities Exchange Act of 1934.

☐

Yes

☒

No

Note — Checking the box above will

not relieve any registrant

required to file reports pursuant to Section 13 or 15(d) of the Securities

Exchange Act of 1934 from their obligations under

those Sections.

Indicate by check mark whether the registrant

(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities

Exchange Act of 1934 during the preceding 12

months (or for such shorter period that the registrant

was required to file such reports),

and (2) has been subject to such filing requirements for the past 90 days.

☒

Yes

☐

No

Indicate by check mark whether the registrant

has submitted electronically every

Interactive Data File required

to be submitted pursuant

to Rule 405 of Regulation S-T

(§232.405 of this chapter) during the preceding 12

months (or for such shorter period that the registrant

was required to submit

and post such files).

☒

Yes

☐

No

Indicate by check mark whether the registrant

is a large accelerated

filer, an accelerated filer, a non-accelerated filer, or an emerging

growth company. See definition of “large accelerated

filer,” accelerated filer,” and “emerging growth company”

in Rule 12b-2 of the

Exchange Act.

Large accelerated

filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Emerging growth company

☐

If an emerging growth company

that prepares its financial statements in accordance

with U.S. GAAP, indicate by check mark if

the

registrant has elected not to use the extended

transition period for complying with any

new or revised financial accounting standards†

provided pursuant to Section 13(a) of the Exchange

Act.

☐

†

The term “new or revised financial accounting standard”

refers to any update issued by the Financial

Accounting Standards Board

to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the

registrant has used to prepare

the financial statements included in this filing:

U.S. GAAP

☐

International Financial Reporting Standards

as issued

by the International Accounting Standards

Board

☒

Other

☐

If “Other” has been checked in response to the previous

question, indicate by check mark which financial statement item the registrant

has elected to follow.

☐

Item 17

☐

Item 18

If this is an annual report, indicate by check mark whether the registrant

is a shell company (as defined in Rule 12b-2 of the Exchange

Act).

☐

Yes

☒

No

2019 ING Group Annual Report on Form 20-F

3

ING Group

Filed with the United States Securities and Exchange Commission for the year ended December 31st, 2019

Annual Report 2019 on Form 20-F

Contents

|

Part I

|

Part II

|

Part III

|

Additional Information

|

Financial Statements

2019 ING Group Annual Report on Form 20-F

4

Contents

PART

I

PRESENTATION

OF INFORMATION

5

CAUTIONARY STATEME

NT WITH RESPECT TO FORWARD

-LOOKING STATEMENTS

7

1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

9

2.

OFFER STATISTICS

AND EXPECTED TIMETABLE

9

3.

KEY INFORMATION

9

4.

INFORMATION ON THE COMPANY

33

4A.

UNRESOLVED

STAFF COMMENTS

66

5.

OPERATING

AND FINANCIAL REVIEW AND PROSPECTS

66

6.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

91

7.

MAJOR SHAREHOLDERS AND RELATED PARTY

TRANSACTIONS

130

8.

FINANCIAL INFORMATION

132

9.

THE OFFER AND LISTING

133

10.

ADDITIONAL INFORMAT ION

136

11.

QUANTITATIVE AND QUALITATIVE

DISCLOSURE ABOUT MARKET RISK

140

12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

141

PART

II

13.

DEFAULTS,

DIVIDEND ARREARAGES AND DELINQUENCIES

144

14.

MATERIAL MODIFICATIONS

TO THE RIGHTS OF SECURITY HOLDERS AND USE OF

PROCEEDS

144

15.

CONTROLS AND PROCEDURES

144

16A.

AUDIT COMMITTEE FINANCIAL EXPERT

146

16B.

CODE OF ETHICS

146

16C.

PRINCIPAL ACCOUNTANT

FEES AND SERVICES

147

16D.

EXEMPTIONS FROM THE LISTING STANDARDS FOR

AUDIT COMMITTEES

148

16E.

PURCHASES OF REGISTERED EQUITY SERVICES BY THE ISSUER AND AFFILIATED

PURCHASERS

148

16F.

CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

149

16G.

CORPORATE GOVERNANCE

149

16H.

MINE SAFETY DISCLOSURE

151

PART

III

17.

FINANCIAL STATEMENTS

152

18.

FINANCIAL STATEMENT

S

152

19

EXHIBITS

153

ADDITIONAL INFORMATION

RISK MANAGEMENT

156

SELECTED STATISTICAL

INFORMATION ON BANKING OPERATIONS

239

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Part

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Part III

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Additional Information

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Financial Statements

2019 ING Group Annual Report on Form 20-F

5

PRESENTATION

OF INFORMATION

In this Annual Report, and unless otherwise stated or the context otherwise dictates, references to

"ING Groep N.V.",

"ING Groep" and "ING Group" refer

to ING Groep N.V.

and references to "ING", the

"Company", the "Group", "we" and "us" refer to ING Groep

N.V.

and its consolidated subsidiaries.

ING Groep N.V.'s

primary

banking subsidiary is ING Bank N.V.

(together with its consolidated

subsidiaries, "ING Bank"). References to "Executive Board"

and "Supervisory Board" refer to the

Executive Board or Supervisory Board of ING Groep

N.V.,

respectively.

ING presents its consolidated financial statements in euros, the currency of the European Economic

and Monetary Union. Unless otherwise specified

or the context otherwise requires, references

to

“$”, “US$” and “Dollars” are to the United States dollars and references to “EUR” are

to euros.

Solely for the convenience of the reader, this Annual Report contains translations of certain euro

amounts into U.S. dollars at specified rates. These translations should not be construed as

representations that the translated

amounts actually represent such dollar or euro amounts, as

the case may be, or could be converted into U.S. dollars or euros, as the case may be, at the rates

indicated or at any other rate. Therefore,

unless otherwise stated, the translations of euros into U.S.

dollars have been made at the rate of EUR 1.00 = U.S. $ 1.0855, the noon buying rate in New York

City for cable transfers in euros as certified for customs purposes by the Federal Reserve Bank of

New York

(the “Noon Buying Rate”) on 21 February 2020.

ING prepares financial information in accordance with International Financial Reporting Standards

as issued by the International Accounting Standards Board (“IFRS-IASB”) for purposes of reporting

with the U.S. Securities and Exchange Commission (“SEC”), including financial information

contained in this Annual Report on Form 20-F.

ING Group’s accounting policies and its use of various

options under IFRS-IASB are described under ‘Principles of valuation and determination of results’ in

the consolidated financial

statements. In this document the term “IFRS-IASB” is used to refer to

IFRS-IASB as applied by ING Group.

The published 2019 Annual Accounts of ING Group, however, are

prepared in accordance

with IFRS-

EU. IFRS-EU refers to International Financial Reporting Standards (“IFRS”) as adopted by the

European Union (“EU”), including the decisions ING Group made with regard

to the options available

under IFRS as adopted by the EU (IFRS-EU).

IFRS-EU differs from IFRS-IASB, in respect of certain paragraphs in IAS 39 ‘Financial Instruments:

Recognition and Measurement’ regarding

hedge accounting for portfolio hedges of interest rate

risk. Under IFRS-EU, ING Group applies fair value hedge accounting for portfolio hedges of interest

rate risk (fair value macro

hedges) in accordance with the EU “carve-out” version of IAS 39. Under

the EU “IAS 39 carve-out”, hedge accounting may be applied, in respect of fair value macro hedges,

to core deposits and hedge ineffectiveness is only recognised when the revised estimate of the

amount of cash flows in scheduled time buckets falls below the original designated amount

of that

bucket, and is not recognised when the revised amount of cash flows in scheduled time buckets is

more than the original designated amount. Under IFRS-IASB, hedge accounting for fair value macro

hedges cannot be applied to core deposits and hedge ineffectiveness arises whenever the revised

estimate of the amount of cash flows in scheduled time buckets is either

more or less than the

original designated amount of that bucket. IFRS-IASB financial

information is prepared by reversing

the hedge accounting impacts that are applied under the EU “carve-out”’ version of IAS 39.

Financial information under IFRS-IASB accordingly does not take account of the possibility that, had

ING Group applied IFRS-IASB as its primary accounting framework, it might have applied alternative

hedge strategies where those alternative hedge strategies could

have qualified for IFRS-IASB

compliant hedge accounting. These decisions could have resulted

in different shareholders’ equity

and net result amounts compared to those indicated in this Annual Report on Form 20-F.

Other than for the purpose of SEC reporting, ING Group intends to continue to prepare

its Annual

Accounts under IFRS-EU. A reconciliation between IFRS-EU and IFRS-IASB for shareholders’

equity

and net result is included in Note 1 ‘accounting policies’ to the consolidated financial statements.

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Financial Statements

2019 ING Group Annual Report on Form 20-F

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In addition to the consolidated financial

statements, which are prepared

in accordance with IFRS-

IASB, this Annual Report on Form 20-F contains certain measures that are not defined by generally

accepted accounting principles (GAAP) such as IFRS. Our management uses these financial

measures, along with the most directly comparable GAAP financial measures, in evaluating

segment performance and allocating resources. We

believe that presentation of this information,

along with comparable GAAP measures, is useful to investors because it allows investors to

understand the primary method used by management to evaluate performance on a meaningful

basis. Non-GAAP financial

measures should not be considered in isolation from, or as a substitute

for, financial information presented in compliance with GAAP, including the consolidated financial

statements. Non-GAAP financial

measures as defined by us may not be comparable with similarly

titled measures used by other companies.

Certain amounts set forth herein, such as percentages, may not sum due to rounding.

This Annual Report on Form 20-F contains inactive textual addresses to Internet websites operated

by us and third parties. Reference to such websites is made for information purposes only, and

information found at such websites is not incorporated by reference

into this Annual Report on

Form 20-F.

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Part III

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Additional Information

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Financial Statements

2019 ING Group Annual Report on Form 20-F

7

CAUTIONARY STATEMENT

WITH RESPECT TO

FORWARD

-LOOKING

STATEMENTS

Certain

of

the

statements

contained

herein

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 in such statements due to a number of factors, including, without limitation,

●

changes

in

general

economic

conditions,

in

particular

economic

conditions

in

ING’s

core

markets;

●

changes affecting interest rate levels;

●

changes in performance of financial markets,

including developing markets;

●

changes

in

the

fiscal position

and

the

future

economic

performance

of

the

US

including

potential consequences

of a

downgrade of

the sovereign credit

rating of

the US

government;

●

consequences of the United Kingdom’s withdrawal from the European

Union;

●

introduction of, changes in or discontinuation of ‘benchmark’ indices;

●

inflation

and

deflation

in

our

principal

markets;

changes

in

conditions

in

the

credit

and

capital

markets

generally,

including

changes

in

borrower

and

counterparty

creditworthiness;

●

changes

in

laws

and

regulations,

including

those

governing

financial services

or

financial

institutions, and the interpretation and application thereof;

●

changes in compliance obligations;

●

geopolitical

risks,

political

instability

and

policies

and

actions

of

governmental

and

regulatory authorities;

●

ING’s ability to meet minimum capital and other prudential regulatory requirements;

●

the outcome of current and future legal and regulatory proceedings;

●

changes in tax laws;

●

operational risks, such

as system

disruptions or

failures, breaches of security,

cyber-attacks,

human error,

changes in

operational practices,

inadequate controls

including in

respect of

third

parties

with

which

we

do

business,

natural

disasters

or

outbreaks

of

communicable

diseases;

●

risks and changes related to cybercrime including the effects

of cyber-attacks and changes

in legislation and regulation related to cybersecurity and data privacy;

●

changes in general competitive factors;

●

the inability to protect our intellectual property and infringement claims by third parties;

●

changes in credit ratings;

●

business, operational,

regulatory,

reputation

and other

risks and

challenges in

connection

with climate change;

●

the inability to attract and retain key personnel;

●

conclusions with

regard to purchase

accounting assumptions

and methodologies,

and other

changes in

accounting

assumptions and

methodologies including

changes in

valuation

of

issued securities and credit market exposure;

●

changes in investor and customer behavior;

●

changes

in

the

availability

of,

and

costs

associated

with,

sources

of

liquidity

such

as

interbank funding;

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Additional Information

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Financial Statements

2019 ING Group Annual Report on Form 20-F

8

●

changes affecting currency exchange rate;

●

changes in ownership

that could affect

the future availability to

us of net

operating loss, net

capital and built-in loss carry forwards;

●

ING’s ability

to achieve

its strategy,

including projected

operational

synergies

and change

programmes, and

●

the other risks

and uncertainties

detailed in the

most recent annual

report of ING

Groep N.V.

(including the

Risk Factors

contained therein)

and ING’s

more

recent

disclosures,

including

press releases, which are

available on www.ING.com.

This annual report contains inactive textual addresses to internet websites operated by us and third

parties. Reference to such websites is made for information purposes only, and information found

at such websites is not incorporated by reference

into this annual report. ING does not make any

representation or warranty

with respect to the accuracy or completeness of, or take any

responsibility for, any information found at any websites operated by third

parties. ING specifically

disclaims any liability with respect to any information found at websites operated by third parties.

ING cannot guarantee that websites operated by third

parties remain available following the filing

of this annual report or that any information found at such websites will not change following the

filing of this annual

report. Many of those factors are beyond ING’s control.

Any forward looking statements made by or on behalf of ING speak only as of the date they are

made, and 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.

This document does not constitute an offer to sell, or a solicitation of an offer

to purchase, any

securities in the United States or any other jurisdiction.

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Part III

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Additional Information

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Financial Statements

2019 ING Group Annual Report on Form 20-F

9

PART

I

Item

1.

Identity

of Directors,

Senior

Management

And Advisors

Not Applicable.

Item

2.

Offer

Statistics

and Expected

Timetable

Not Applicable.

Item

3.

Key Information

A.

Selected financial data

The selected consolidated financial

information data is derived from the IFRS-IASB consolidated

financial statements

of ING Group.

The following information should be read in conjunction with, and is qualified by reference to the

Group’s consolidated financial statements and other financial

information included elsewhere

herein.

IFRS-IASB Consolidated Income Statement

Data

for the years ended 31 December

2019

2019

2018

2017

2016

2015

In millions except amounts per share

US$

EUR

EUR

EUR

EUR

EUR

Continuing operations

Interest income

30,571

28,163

28,129

43,890

44,182

46,321

Interest expense

15,580

14,353

14,169

30,243

30,941

33,760

Net interest result

14,992

13,811

13,960

13,647

13,241

12,561

Net fee and commission income

3,113

2,868

2,798

2,710

2,433

2,318

Other income

485

446

1,566

2,233

2,228

3,128

Total

income

18,589

17,125

18,324

18,590

17,902

18,007

Addition to loan loss provision

1,215

1,120

656

676

974

1,347

Operating expenses

11,238

10,353

10,682

9,829

10,614

9,326

Total

expenses

12,453

11,472

11,338

10,505

11,588

10,673

Result before tax

from continuing operations

6,136

5,653

6,986

8,085

6,314

7,334

Taxation

1,793

1,652

2,116

2,539

1,705

1,924

Net result from continuing operations

4,344

4,001

4,869

5,546

4,609

5,410

Net result from discontinued operations

0

0

0

0

441

–76

Net result attributable to Non-controlling

interests

107

99

108

82

75

408

Net result ING Group

IFRS-IASB attributable to

Equityholders of the parent

4,236

3,903

4,761

5,464

4,975

4,926

Addition to shareholders’ equity

1,318

1,214

2,115

2,861

2,415

2,411

Dividend

2,919

2,689

2,646

2,603

2,560

2,515

Basic earnings per Ordinary Share

1.09

1.00

1.22

1.41

1.28

1.27

Diluted earnings per Ordinary Share

1.09

1.00

1.22

1.41

1.28

1.27

Dividend per Ordinary Share

0.75

0.69

0.68

0.67

0.66

0.65

Number of Ordinary Shares outstanding in the

market (in millions)

3,896.7

3,896.7

3,891.7

3,884.8

3,877.9

3,868.7

Euro amounts have been translated

into U.S. dollars at the exchange rate of $ 1.0855 to EUR 1.00,

the Noon Buying Rate in New York

City on 21 February 2020 for cable transfers in euros

as certified

for customs purposes by the Federal Reserve

Bank of New York.

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Financial Statements

2019 ING Group Annual Report on Form 20-F

10

Reference is made to Note 1 'Accounting policies' for information on Changes in accounting

principles, estimates and presentation of the consolidated financial

statements and related notes.

Dividend reported is the amount declared over the year.

Basic earnings per share amounts have been calculated based on the weighted average number of

ordinary shares of ING Groep

N.V.

(“Ordinary Shares”) outstanding during the relevant

period. For

purposes of this calculation, Ordinary Shares held by Group companies are

deducted from the total

number of Ordinary Shares in issue. The effect of dilutive securities is also adjusted.

IFRS-IASB Consolidated Balance Sheet Data

as at 31 December

2019

2019

2018

2017

2016

2015

In billions except amounts per share or otherwise

indicated

US$

EUR

EUR

EUR

EUR

EUR

Total

assets

964.5

888.5

884.6

843.9

842.2

1,002.3

Financial assets at fair value through profit or

loss

104.4

96.2

120.5

123.2

122.1

138.0

Loans and advances to customers

660.0

608.0

589.7

571.9

560.2

696.9

Savings accounts

354.6

326.7

322.7

319.7

315.7

305.9

Other deposits and funds

268.8

247.7

233.0

220.1

207.2

358.3

Customer deposits

623.5

574.4

555.7

539.8

522.9

664.2

Deposits from banks

37.8

34.8

37.3

36.8

32.0

33.8

Shareholders' equity

55.4

51.0

49.0

48.4

47.3

45.0

Non-voting equity securities

Shareholders' equity per Ordinary Share

oustanding

14.21

13.09

12.61

12.47

12.19

11.62

Number of Ordinary shares outstanding (in millions)

3,895.8

3,895.8

3,890.6

3,885.8

3,878.5

3,870.2

Euro amounts have been translated

into U.S. dollars at the exchange rate of $ 1.0855 to EUR 1.00,

the Noon Buying Rate in New York

City on 21 February 2020 for cable transfers in euros

as certified

for customs purposes by the Federal Reserve

Bank of New York.

ING has changed its accounting policy for the netting of cash pooling arrangements in the second

quarter of 2016. Loans and advances to customers and Customer deposits, as at 31 December

2015, are adjusted as a result.

The amounts for the period ended 31 December 2019 and 31 December 2018 have been prepared

in accordance with IFRS 9. ING Group has applied the classification, measurement, and impairment

requirements of IFRS 9 retrospectively

as of 1 January 2018 by adjusting the opening balance sheet

and opening equity at 1 January 2018. ING Group decided not to restate comparative periods as

permitted by IFRS 9. Reference is made to Note 1 'Accounting policies' for information on Changes

in accounting principles, estimates and presentation of the consolidated financial statements

and

related

notes.

Shareholders’ equity per ordinary share amounts have been calculated based on the number of

Ordinary Shares outstanding at the end of the respective periods.

B.

Capitalization and indebtedness

This item does not apply to annual reports on Form 20-F.

C.

Reasons for the offer

and use of proceeds

This item does not apply to annual reports on Form 20-F.

D.

Risk Factors

Any of the risks described below could have a material adverse effect on the business activities,

financial condition,

results and prospects of ING. ING may face a number of the risks described

below simultaneously and some risks described below may be interdependent. While the risk

factors below have been divided into categories, some risk factors could belong in more than one

category and investors should carefully consider all of the risk factors set out in this section.

Additional risks of which the Company is not presently aware, or that are

currently viewed as

immaterial, could also affect the business operations of ING and have a material adverse effect on

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2019 ING Group Annual Report on Form 20-F

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ING’s business activities, financial

condition, results and prospects. The market price of ING shares

or other securities could decline due to any of those risks including the risks described below, and

investors could lose all or part of their investments.

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, liquidity, funding and capital

markets environments

of the

various geographic regions

in which we conduct business, and an adverse

change in

any one region could have

an impact on our business, results and financial condition.

Because ING is a multinational banking and financial

services corporation, with a global presence

and serving around 38.4 million customers, corporate clients and financial institutions in over 40

countries, ING’s business, results and financial condition may be significantly

impacted by turmoil

and volatility in the worldwide financial

markets or in the particular geographic areas in which we

operate. In Retail Banking, our products include savings, payments, investments, loans and

mortgages in most of our retail markets. In Wholesale Banking, we provide specialised lending,

tailored corporate finance, debt and equity market solutions, payments & cash management and

trade and treasury services. As a result,

negative developments in financial markets and/or regions

in which we operate have in the past had and may in the future have a material adverse impact on

our business, results and financial condition, including as a result of the potential consequences

listed below.

Factors such as interest rates, securities prices, credit

spreads, liquidity spreads, exchange rates,

consumer spending, changes in client behaviour, business investment, real estate values and

private equity valuations, government spending, inflation or deflation,

the volatility and strength of

the capital markets, political events and trends, terrorism, pandemics and epidemics (such as

COVID-19) or other widespread health emergencies all impact the business and economic

environment and, ultimately, our solvency, liquidity and the amount and profitability of business

we conduct in a specific

geographic region. Certain of these risks are

often experienced globally as

well as in specific geographic regions and are described in greater detail below under the headings

“–Interest rate volatility and other interest

rate changes may adversely affect our business, results

and financial condition”, “–Inflation

and deflation may negatively affect

our business, results and

financial condition”, “–Market conditions, including those observed over the past few years and the

application of IFRS 9 may increase the risk of loans being impaired and have a negative effect on

our results and financial condition” and “–Continued risk of political instability and fiscal uncertainty

in Europe and the United States, as well as ongoing volatility in the financial markets and the

economy generally have adversely affected, and may continue to adversely affect, our business,

results and financial condition”.

In case one or more of the factors mentioned above adversely affects the profitability of our

business, this might also result, among other things, in the following:

◾

reserve and provisions inadequacies, which could ultimately be realised

through profit and loss

and shareholders’ equity;

◾

the write-down of tax assets impacting net results and/or equity;

◾

impairment expenses related to goodwill and other intangible assets, impacting net result;

and/or

◾

movements in risk weighted assets for the determination of required capital.

In particular, we are exposed to financial, economic, market and political conditions

in the Benelux

countries and Germany, from which we derive a significant portion of our revenues in both Retail

Banking and Wholesale Banking, and which present risks of economic downturn. Though less

material, we also derive substantial revenues in the following geographic regions:

Turkey, Eastern

Europe (primarily Poland among others), Southern Europe

(primarily Spain among others), East

Asia (primarily Singapore among others) and Australia which also present risks of economic

downturn. In an economic downturn, we expect that higher unemployment, lower family income,

lower corporate earnings, higher corporate and private

debt defaults, lower business investments

and lower consumer spending would adversely affect the demand for banking products, and that

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ING may need to increase its reserves and provisions,

each of which may result 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.

We also offer a number of 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.

For further information on ING’s exposure to particular geographic areas, see Note 35 ‘Information

on geographic areas’ to the consolidated financial statements.

Interest rate

volatility and other interest

rate changes may adversely

affect our

business, results and financial condition.

Changes in prevailing interest

rates may negatively affect our business, including the level of net

interest revenue

we earn, and the levels of deposits and the demand for loans. A sustained

increase in the inflation rate in our principal markets may also negatively affect

our business,

results and financial condition. For example, a sustained increase in the inflation rate may result in

an increase in nominal market interest rates. A failure

to accurately anticipate higher inflation and

factor it into our product pricing assumptions may result in mispricing of our products, which could

materially and adversely impact our results. On the other hand, recent concerns regarding

negative interest rates and the low level

of interest rates generally

may negatively impact our net

interest income, which may have an adverse impact on our profitability.

A prolonged period of low interest rates has resulted

in, and may continue to result in:

◾

lower earnings over time on investments, as reinvestments will earn lower

rates;

◾

increased prepayment or redemption of mortgages and fixed maturity securities in our

investment portfolios, as well as increased prepayments of corporate

loans. This as borrowers

seek to borrow at lower interest

rates potentially combined with lower credit spreads.

Consequently, we may be required to reinvest

the proceeds into assets at lower interest rates;

◾

lower profitability as the result of a decrease in the spread between

client rates earned on assets

and client rates paid on savings, current account

and other liabilities;

◾

higher costs for certain derivative instruments that may be used to hedge certain of our product

risks;

◾

lower profitability since we may not be able to fully track the decline in interest rates in our

savings rates;

◾

lower profitability since we may not always be entitled to impose surcharges to customers to

compensate for the decline in interest rates;

◾

lower profitability since we may have to pay a higher premium for the defined contribution

scheme in the Netherlands for which the premium paid is dependent on interest rate

developments and DNB’s methodology for determining the ultimate forward rate;

◾

lower interest rates

may cause asset margins to decrease thereby lowering our results.

This may

for example be the consequence of increased competition for investments as result

of the low

rates, thereby driving margins

down; and/or

◾

(depending on the position) a significant

collateral posting requirement

associated with our

interest rate hedge programs,

which could materially and adversely affect liquidity and our

profitability.

The foregoing impacts have been and may be further amplified

in a negative interest rate

environment, since we may not be able earn interest on our assets (including reserves), or may be

forced to pay negative interest

on our assets, while still paying a positive interest or no interest to

others to hold our liabilities, resulting in an adverse impact on our credit spread and lowering of our

net interest income. Furthermore,

in the event that a negative interest rate

environment results

in

ING’s depositors being forced to pay a premium to ING to hold cash deposits, some depositors may

choose to withdraw their deposits in lieu of making such payments to ING, which would have an

adverse effect on our reputation, business, results and financial condition.

Alternatively, any period of rapidly increasing

interest rates may result

in:

◾

a decrease in the demand for loans;

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◾

higher interest rates to be paid on debt securities that we have issued or may issue on the

financial markets

from time to time to finance our operations and on savings, which would

increase our interest expenses and reduce

our results;

◾

higher interest rates can lead to lower investments

prices reduce the revaluation reserves,

thereby lowering IFRS equity and the capital ratios. Also the lower

securities value leads to a loss

of liquidity generating capacity which needs to be compensated by attracting new liquidity

generating capacity which reduces our results;

◾

prepayment losses if prepayment rates are

lower than expected or if interest rates increase

too

rapidly to adjust the accompanying hedges; and/or

◾

(depending on the position) a significant

collateral posting requirement

associated with our

interest rate hedge program.

The default of a major market

participant could disrupt the markets and may have

an adverse effect on our business, resu

lts and financial condition.

Within the financial

services industry, the severe distress or default

of any one institution (including

sovereigns and central

counterparties (CCPs)) could lead to defaults by, or the severe distress of,

other market participants. While prudential regulation may reduce the probability of a default by a

major financial

institution, the actual occurrence of such a default could have a material adverse

impact on ING. Such distress of, or default by, a major financial institution

could disrupt markets or

clearance and settlement systems and lead to a chain of defaults by other financial institutions,

since the commercial and financial soundness of many financial

institutions may be closely related

as a result of credit, trading,

clearing or other relationships. Even the perceived

lack of

creditworthiness of a sovereign

or a major financial

institution (or a default by any such entity)

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 and financial

instruments of sovereigns in which we invest.

Systemic risk could impact ING directly, by exposing it to material credit losses on transactions with

defaulting counterparties or indirectly by significantly

reducing the available market liquidity on

which ING and its lending

customers depend to fund their operations and/or leading to a write

down of loans or securities held by ING. Systemic risk could have a material adverse effect on our

ability to raise new funding and on our business, results and financial condition. In addition, such

distress or failure could

impact future product sales as a potential result of reduced confidence in

the financial services

industry.

Continued risk of political instability and

fiscal uncertainty in Europe

and the United

States, as well as ongoing volatility

in the financial markets and the economy

generally have adversely

affected, and may continue to adversely

affect, our

business, results and financial condition.

Our global business and results are materially affected by conditions in the global capital markets

and the economy generally. In Europe,

there are continuing concerns over

weaker economic

conditions, as well as concerns in relation to European

sovereign debt, the uncertain outcome of

the negotiations between the UK and the EU following the Brexit decisions in UK parliament,

increasing political instability, levels of unemployment, the availability and cost of credit, credit

spreads, and the impact of continued quantitative easing within the Eurozone through bond

repurchases and the ECB’s targeted

longer-term refinancing operation (‘TLTRO’). In the United

States, political uncertainty, US national debt levels and changes in US trade and foreign

investment policies (including tensions with China and Eurozone) may result

in adverse economic

developments. In addition, geopolitical issues, including with respect to the Middle East,

Russia/Ukraine and North Korea may all contribute to adverse developments in the global capital

markets and the economy generally.

Adverse developments in the market have included, for example, decreased liquidity, increased

price volatility, credit downgrade events,

and increased probability of default for fixed income

securities. Moreover, there

is a risk that an adverse credit event at one or more European

sovereign

debtors (including a credit rating downgrade or a default) could

trigger a broader economic

downturn in Europe and elsewhere.

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

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value and may be hard to dispose of.

International equity markets have also continued to

experience 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,

market upheavals and continuing risks, including high levels of volatility, have had and may

continue to have an adverse effect on our results, in part because we have a large investment

portfolio.

There is also continued uncertainty over the long-term outlook for the tax, spending and borrowing

policies of the US, the future economic performance of the US within the global economy and any

potential future budgetary restrictions in the US, with a potential impact on a future sovereign

credit ratings downgrade

of the US government, including the rating of US Treasury

securities. A

downgrade of US Treasury

securities could also impact the ratings and perceived creditworthiness

of instruments issued, insured or guaranteed by institutions, agencies or instrumentalities directly

linked to the US government. US Treasury

securities and other US government-linked securities are

key assets on the balance sheets of many financial

institutions and are widely used as collateral by

financial institutions

to meet their day-to-day cash flows in the short-term

debt market. The

impact of any further downgrades to the sovereign credit rating

of the US government or a default

by the US government on its debt obligations would create broader financial turmoil and

uncertainty, which would weigh heavily on the global financial

system and could consequently

result in a significant adverse impact to the Group’s business and operations.

In many cases, the markets for investments and instruments have been and remain 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. Historically these factors have

resulted in, among other things, valuation and impairment issues in connection with our exposures

to European sovereign

debt and other investments.

Any of these general developments in global financial and political conditions could negatively

impact to our business, results and financial condition

in future periods.

The uncertainty surrounding the

United Kingdom’s withdrawal

from the European

Union may have adverse effects on our

business, results and financial condition.

Although the UK is not a member state of the Eurozone, the departure of the UK from the

EU

(commonly referred to as ‘Brexit’)

remains a major political and economic event whose

consequences are not fully known or understood and may further destabilize the Eurozone.

The UK

withdrew from the EU on January 31, 2020, though the relationship between

the UK and the EU

remains uncertain during the ongoing transition period, which largely maintains current

arrangements and provides time for the UK and the EU to negotiate the details of their future

relationship. The transition period is currently

expected to end on December 31, 2020, and, if no

agreement is reached, the default scenario would be

a non-negotiated Brexit. In the event of a

non-negotiated Brexit, the UK will depart the EU with no agreements in place beyond any

temporary arrangements which have been or may be put in place by the EU or individual EU

Member States, and the UK as part of no-deal contingency efforts

and those conferred by mutual

membership of the World Trade

Organization. Accordingly, there

continues to be uncertainty with

respect to the process surrounding Brexit

and the outcome of the ongoing Brexit negotiations,

including any related regulatory changes, and over the future

economic relationship between the

UK and the rest of the world (including the EU). Any of these developments could have an adverse

effect on economic and financial

conditions in the UK, the EU or globally. Although ING has

continued to take further steps throughout 2019 to prepare for known risks related

to Brexit, such

as substantially progressing applications for a Third Country

Branch banking licence in the UK,

taking actions for contract continuity and working to establish alternatives in the EU for those euro

clearing activities that may be expected to move from London following Brexit, the possible

economic and operational impacts of Brexit on the Group and its counterparties remain uncertain.

Given ING’s significant pre-existing EU-licensed banking network and the various scenario analyses

performed by ING on its Brexit sensitive clients and sectors, ING believes that it is positioned to

largely avoid, or has taken significant steps to mitigate, potential direct adverse effects of Brexit.

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However, the regulatory

impact of Brexit continues to present material risks and uncertainties,

particularly as to how regulations may diverge between the EU and the UK, which could materially

increase ING’s compliance costs and have a material adverse effect on ING’s business, results and

financial condition.

Discontinuation of or changes to ‘benchmark’ indices

may negatively affect our

business, results and financial condition.

The London Interbank Offered Rate (‘LIBOR’), the Euro

OverNight Index Average

(‘EONIA’), the Euro

Interbank Offered Rate (‘EURIBOR’) and other interest rates or other types of rates

and indices

which are deemed to be ‘benchmarks’ are the subject of ongoing national and international

regulatory reform. Following

the implementation of any such potential reforms, the manner of

administration of benchmarks may change, with the result that they may perform or be calculated

differently than in the past, or benchmarks could cease to exist entirely, or there could be other

consequences which cannot be predicted. Although the UK Financial Conduct Authority (‘FCA’) has

authorized ICE Benchmark Administration as administrator of LIBOR, on 27 July 2017 the FCA

announced that it will no longer persuade or compel banks to submit rates for the calculation of

the LIBOR benchmark after 2021. The announcement indicates that the continuation

of the LIBOR

on the current basis cannot and will not be guaranteed after 2021. In addition, as of October 2019,

the new euro risk-free rate

euro short-term rate (€STR) is being published and the EONIA

benchmark was reformed, making it dependant to the €STR benchmark. The reformed EONIA

benchmark will cease to exist by 1 January 2022 and therefore the European Money Markets

Institute (EONIA’s administrator) has indicated that EONIA cannot be used in any contracts that will

be outstanding as of 1 January 2022. Public authorities have initiated industry working groups in

various jurisdictions to search for and recommend alternative risk-free rates

that could serve

alternatives if current benchmarks like LIBOR and EONIA cease to exist or materially change. The

work of these working groups is still ongoing, though certain such organizations have advanced

proposals for benchmark replacements. For example,

the US Federal Reserve’s

Alternative

Reference Rates

Committee (commonly referred

to as ‘ARRC’) has recommended adoption of the

Secured Overnight Financing Rate (commonly referred

to as ‘SOFR’) as an alternative to US dollar

LIBOR.

The potential discontinuation of the LIBOR and EONIA benchmarks or any other benchmark, or

changes in the methodology or manner of administration of any benchmark, could result in a

number of risks for the Group, its clients, and the financial services industry

more widely. These

risks include legal risks in relation to changes required to documentation for new and existing

transactions may be required. Financial risks may also arise from

any changes in the valuation of

financial instruments

linked to benchmark rates, and changes to benchmark indices could impact

pricing mechanisms on some instruments. Changes in valuation, methodology or documentation

may also result into complaints or litigation. The Group may also be exposed to operational risks or

incur additional costs due to the potential requirement to adapt IT systems, trade reporting

infrastructure and operational processes, or in relation

to communications with clients or other

parties and engagement during the transition period.

Except for EONIA, the replacement of benchmarks together with the timetable and mechanisms for

implementation have not yet been confirmed

by central banks. Accordingly, it is not currently

possible to determine whether, or to what extent, any such changes would affect

the Group.

However, the implementation of alternative benchmark rates may have a material adverse effect

on our business, results and financial condition.

Inflation and deflation may negatively affect our business, results and financial

condition.

A sustained increase in the inflation rate in our principal markets would have multiple impacts on

us and may negatively affect our business, results and financial

condition. For example, a sustained

increase in the inflation rate may result in an increase in market interest rates,

which may:

◾

decrease the estimated fair value of certain fixed income securities that we hold in our

investment portfolios, resulting in:

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◾

reduced levels of unrealised

capital gains available to us, which could negatively impact our

solvency position and net income, and/or

◾

a decrease in collateral values,

◾

result

in increased withdrawal of certain savings products, particularly those with fixed rates

below market rates,

◾

require us, as an issuer of securities, to pay higher interest rates

on debt securities that we issue

in the financial markets

from time to time to finance our operations, which would increase our

interest expenses and reduce our results.

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:

◾

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

◾

lower the value of our equity investments impacting our capital position.

In addition, a failure to accurately anticipate higher inflation and factor it into our product pricing

may result in a systemic mispricing of our products, which would negatively impact our results.

On the other hand, deflation

experienced in our principal markets may also adversely affect

our

financial performance. In recent years, the risk of low inflation

and even deflation (i.e., a continued

period with negative rates of inflation) in the Eurozone has materialized. Deflation may erode

collateral values and diminish the quality of loans and cause a decrease in borrowing

levels, which

would negatively affect our business and results.

Market conditions, including those

observed over the past few

years, and the

application of IFRS 9 may increase

the risk of loans being impaired and have

a

negative effect on our results

and financial condition.

We are

exposed to the risk that our borrowers (including sovereigns) 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 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 business, results and financial condition.

IFRS 9 ‘Financial Instruments’ became effective as per 1 January 2018 and

results in loan loss

provisions that may be recognized earlier, on a more

forward looking basis and on a broader scope

of financial instruments

than was previously the case under IAS 39. ING has applied the

classification, measurement, and impairment requirements retrospectively by adjusting the

opening balance sheet and opening equity as at 1 January 2018. As a result of applying IFRS 9

going forward, a shift in the forward looking consensus view of economic conditions may materially

impact the models used to calculate loan loss provisions under IFRS 9 and cause more volatility in,

or higher levels of, loan loss provisions, any of which could adversely affect the Group’s results,

financial condition

or regulatory capital position.

Economic and other factors could lead to contraction in the residential mortgage and commercial

lending market and to decreases in residential and commercial property prices, which could

generate substantial increases in impairment losses. Additionally, continuing low oil prices could

have an influence on the repayment capacity of certain corporate borrowers active in the oil and oil

related services industries.

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We may incur

losses due to failures

of banks falling under the scope of state

compensation schemes.

While prudential regulation is intended to minimize the risk of bank failures, in the event such a

failure occurs, given our size, we may incur significant compensation payments to be made under

the Dutch Deposit Guarantee Scheme (DGS), which we may be unable to recover from

the bankrupt

estate, and therefore the consequences of any future

failure of such a bank could be significant to

ING. Such costs and the associated costs to be borne by us may have a material adverse effect

on

our results and financial condition.

On the basis of the EU Directive on deposit guarantee schemes,

ING pays quarterly risk-weighted contributions into a DGS-fund.

The DGS-fund is to grow to a

target size of 0.8% of all deposits guaranteed under the DGS, which is expected to be reached in

July 2024. In case of failure of a Dutch bank, depositor

compensation is paid from the DGS-fund. If

the available financial means of the

fund are insufficient,

Dutch banks, including ING, may be

required pay to extraordinary

ex-post contributions not exceeding 0.5% of their covered deposits

per calendar year.

In exceptional circumstances and with the consent of the competent authority,

higher contributions may be required. However,

extraordinary ex-post contributions may be

temporarily deferred if, and for so long as, they would

jeopardise the solvency or liquidity of a bank.

Depending on the size of the failed bank, the available financial

means in the fund, and the required

additional financial

means, the impact of the extraordinary ex-post contributions on ING may be

material.

Since 2015, the EU has been discussing the introduction of a pan-European deposit guarantee

scheme (‘EDIS’), (partly) replacing or complementing national compensation schemes in two or

three phases. Proposals contain elements of (re)insurance,

mutual lending and mutualisation of

funds. The new model is intended to be ‘overall cost-neutral’. Discussions have continued in 2019,

but it remains uncertain when EDIS will be introduced and, if introduced, what impact EDIS would

have on ING’s business and operations.

Risks related to the regul

ation and supervision of the Group

Non-compliance with laws and/or

regulations concerning financial services or

financial institutions could result in fines and other liabilities,

penalties or

consequences for us, which

could materially affect our business and reduce

our

profitability.

Despite our efforts to maintain effective

compliance procedures and to comply with applicable laws

and regulations, we have faced, and in the future

may continue to face, the risk of consequences in

connection with non-compliance with applicable laws and regulations. For additional information

on legal proceedings, see Note 46 ‘Legal proceedings’

to the consolidated financial

statements.

There are a number of risks in areas where

applicable regulations may be unclear, subject to

multiple interpretations or under development, or where regulations

may conflict with one

another, or where regulators revise

their previous guidance or courts overturn previous rulings,

which could result in our failure

to meet applicable standards. Regulators and other authorities

have the power to bring administrative or judicial proceedings against us, which could result,

among 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

and financial condition.

If we fail to address, or appear to fail to address, any of these matters

appropriately, 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 brought against us or

subject us to enforcement actions, fines

and penalties.

Changes in laws and/or

regulations governing

financial services or financial

institutions or the application of such laws

and/or regulations

may increase our

operating costs and limit our

activities.

We are

subject to detailed banking laws and government regulation in the jurisdictions in which we

conduct business.

Regulation of the industries in which we operate is becoming increasingly more

extensive and complex, while also attracting scrutiny from regulators. Compliance with applicable

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and new laws and regulations is resources

-intensive, and may materially increase our operating

costs. Moreover, these regulations can limit our activities, among others, through stricter net

capital, customer protection and market conduct requirements and restrictions on the businesses

in which we can operate or invest.

Our revenues and profitability and those of our competitors have been and will continue to be

impacted by requirements relating to capital, additional loss-absorbing capacity, leverage,

minimum liquidity and long-term funding levels, requirements related to resolution

and recovery

planning, derivatives clearing and margin rules and levels of regulatory

oversight, as well as

limitations on which and, if permitted, how certain business activities may be

carried out by

financial institutions.

We are

subject to additional legal and regulatory

risk in certain countries where

we

operate with less developed

or predictable legal and regulatory

frameworks.

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 judicial system, it could have an adverse

effect on our operations and net results.

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 and or war, in these markets. Furthermore, the current

economic environment in certain countries in which we operate may increase the likelihood

for

regulatory initiatives to enhance consumer protection or to protect homeowners from foreclosures.

Any such regulatory initiative could have an adverse impact on our ability to protect our economic

interest, for instance in the event of defaults

on residential mortgages.

We are

subject to the regulatory supervision of the ECB and other

regulators with

extensive supervisory and investigatory

powers.

In its capacity as principal bank supervisor in the EU, the ECB has extensive supervisory and

investigatory powers, including the ability to issue requests for information, to conduct regulatory

investigations and on-site inspections, and to impose monetary and other sanctions.

For example,

under the SSM, the regulators with jurisdiction over the Group, including the ECB, may conduct

stress tests and have discretion to impose capital surcharges

on financial institutions

for risks that

are not otherwise recognised in risk-weighted assets or other surcharges

depending on the

individual situation of the bank and take or require other measures, such as restrictions on or

changes to the Group’s business. Competent regulators may also, if the Group fails to comply with

regulatory requirements,

in particular with minimum capital requirements (including buffer

requirements) or with liquidity requirements, or if there

are shortcomings in its governance and risk

management processes, prohibit the Group from

making dividend payments to shareholders or

distributions to holders of its regulatory capital instruments. Generally, a failure to comply with the

new quantitative and qualitative regulatory requirements

could have a material adverse effect on

the Group’s business, results and financial condition.

Failure

to meet minimum capital and other prudential

regulatory requir

ements as

applicable to us from time to

time may have a material adverse

effect on our

business, results and financial condition and on our

ability to make payments on

certain of our securities.

We are

subject to regulations that require us to comply with minimum requirements

for capital

(own funds) and additional loss absorbing capacity, as well as for liquidity, and to comply with

leverage restrictions. These are

developed or enacted by various organisations such as the Basel

Committee on Banking Supervision (‘BCBS’), the Financial Stability Board (‘FSB’) and the European

Union (‘EU’). The main pieces of legislation in this field

that apply to us are the EU’s Capital

Requirements Directive (‘CRD’) and Capital Requirements

Regulation (‘CRR’), and the Bank Recovery

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and Resolution Directive, all as amended from time to time and as implemented in national law

where required.

The capital and liquidity requirements and leverage

restrictions that apply to us result in various

minimum capital ratios (of capital to risk-weighted assets) and liquidity ratios that we must

maintain, and in a minimum leverage ratio

(based on unweighted assets). A key capital ratio is the

Common Equity Tier 1 ratio or CET1 ratio,

which is the ratio of common equity tier 1 capital to the

total risk exposure amount (‘TREA’, often referred to as risk-weighted assets or ‘RWA’).

In addition

to the capital requirements, we must maintain at all times a sufficient aggregate amount of own

funds and ‘eligible liabilities’ (that is, liabilities that may be bailed in using the bail-in tool),

known as

the minimum requirements for own funds and eligible liabilities (‘MREL’).

Capital, liquidity and leverage requirements

and their application and interpretation may change.

Any changes may require us to maintain more capital or to raise

a different type of capital by

disqualifying existing capital instruments from continued inclusion in regulatory capital, requiring

replacement with new capital instruments that meet the new criteria. Sometimes changes are

introduced subject to a transitional period during which the new requirements are

being phased in,

gradually progressing to a fully

phased-in, or fully-loaded, application of the requirements.

Any failure to comply with these requirements

may have a material adverse effect on our business,

results and financial condition, and may require us to seek additional capital. It may also prohibit us

from making payments on certain of our securities. Our business, results and financial condition

may also be adversely affected if these requirements change, which may also require us to seek

additional capital or a different type of capital. Because implementation phases and transposition

into EU or national regulation where required

may often involve a lengthy period, the impact of

changes in capital, liquidity and leverage regulations on our business, results

and financial

condition, and on our ability to make payments on certain of our securities, is often

unclear.

Our US commodities and derivatives

business is subject to CFTC and SEC regulation

under the Dodd-Frank

Act.

Title VII of Dodd-Frank created

a new framework for regulation

of the over-the-counter derivatives

markets and certain market participants which has affected

and could continue to affect various

activities of the Group and its subsidiaries. ING Capital Markets LLC, a wholly-owned indirect

subsidiary of ING Bank N.V.,

has registered with the US Commodity Futures

Trading

Commission

(‘CFTC’) as a swap dealer and intends to register with the SEC as a securities-based swap dealer.

The

SEC has adopted regulations, among others, establishing registration, reporting, risk management,

business conduct, and margin and capital requirements for security-based swaps. Such regulations

are expected to be effective on or around September 1, 2021.Additionally, the CFTC recently re-

proposed, and is expected to adopt, capital requirements for swap dealers, although the specific

requirements, and any available exemptions, have not been finalized. If these requirements are

applicable to ING, and no exemptions are available, it is possible that these requirements will be

difficult

for ING to comply with and may, as a result, materially and adversely impact ING’s ability

to operate as a swap dealer in the US. Other CFTC regulatory requirements,

already implemented,

include registration of swap dealers, business conduct rules imposed on swap dealers,

requirements that some categories of swaps be centrally executed

on regulated trading facilities

and cleared through regulated

clearing houses, and initial and variation margin requirements for

uncleared swaps. In addition, new position limits requirements for market participants that have

been proposed and may be contained in final regulations to be adopted by the CFTC could limit

ING’s position sizes in swaps referencing specified physical commodities and similarly limit the

ability of counterparties to utilize certain of our products by narrowing the scope of hedging

exemptions from position limits for commercial end users and the trading activity of speculators.

All of the foregoing areas of regulation

of the derivative markets and market participants will likely

result in increased cost of hedging and other trading activities, both for ING and its customers,

which could expose our business to greater risk and could reduce the size and profitability of our

customer business. In addition, the imposition of these regulatory restrictions and requirements,

could result in reduced

market liquidity, which could in turn increase market volatility and the risks

and costs of hedging and other trading activities.

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We are

subject to the ‘Bank Recovery

and Resolution Directive’

(‘BRRD’) among

several

other bank recovery

and resolution regimes

that include statutory write

down and conversion

as well as other powers, which remains

subject to significant

uncertainties as to scope and impact on us.

We are

subject to several recovery

and resolution regimes, including the Single Resolution

Mechanism (‘SRM’), the BRRD as implemented in national legislation, and the Dutch ‘Intervention

Act’ (Wet bijzondere maatregelen

financiële

ondernemingen. as implemented in the Dutch

Financial Supervision Act). The aim of the BRRD is to provide supervisory authorities and resolution

authorities with common tools and powers to address banking crises pre-emptively in order to

safeguard financial stability and minimise taxpayers’ exposure to losses.

The powers granted to authorities include, among others, a statutory ‘write-down and conversion

power’ and a ‘bail-in’ power, which gives the resolution authority the power to, as a resolution

action or when the resolution authority determines that otherwise we would no longer be viable,

inter alia, (i) reduce or cancel existing shares, (ii) convert relevant

capital instruments or eligible

liabilities or bail-inable liabilities into shares or other instruments of ownership of the relevant entity

and/or (iii) write down relevant

capital instruments or eligible liabilities or reduce or cancel the

principal amount of, or interest on, certain unsecured liabilities (which could include certain

securities that have been or will be issued by us), whether in whole or in part and whether or not on

a permanent basis.

In addition to the ‘write-down and conversion power’ and the ‘bail-in’ power, the powers granted to

the resolution authority include the power to (i) sell and transfer a banking group or all or part of its

business on commercial terms without requiring the consent of the shareholders or complying with

the procedural requirements

that would otherwise apply, (ii) transfer a banking group or all or part

of its business to a ‘bridge institution’ (a publicly controlled entity) and (iii) separate and transfer all

or part of a banking group’s business to an asset management vehicle (a publicly controlled entity)

to allow them to be managed over time.

In addition, among the broader powers granted to the resolution authority, the BRRD provides

powers to the resolution authority to amend the maturity date and/or any interest payment date

of, or the interest amount payable under, debt instruments or other bail-inable liabilities, including

by suspending payment for a temporary period.

The Intervention Act confers wide-ranging powers to the Dutch Minister of Finance, including,

among other things, in relation to shares and other securities issued by us or with our cooperation

or other claims on us (including, without limitation, expropriation thereof)

if there is a grave and

immediate threat to the stability of the financial system.

None of these actions would be expected to constitute an event of default under our securities

entitling holders to seek repayment. If these powers were to be exercised in

respect of us, there

could be a material adverse effect on us and on holders of our securities,

including through a

material adverse effect on credit ratings and/or the price of our securities. Investors in our securities

may lose their investment if resolution measures are taken under current

or future regimes.

For further discussion of the impact of bank recovery and resolution regimes

on ING, see “Item 4.

Information on the Company—Regulation and Supervision—Regulatory Developments—Bank

recovery and resolution

directive.”

Risks related to changes

in laws of general application, litigation,

enforcement

proceedings and investigations

We may be subject to

litigation, enforcement

proceedings, investigations

or other

regulatory actions, and adverse

publicity.

We are

involved in governmental, regulatory,

arbitration and legal proceedings and investigations

involving claims by and against us which arise in the ordinary course of our businesses, including in

connection with our activities as financial

services provider, employer, investor and taxpayer.

As a

financial institution,

we are subject to specific laws and regulations governing financial

services or

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financial institutions.

See “– Changes in laws and/or regulations governing

financial services or

financial institutions

or the application of such laws and/or regulations may increase

our operating

costs and limit our activities” above. Financial reporting irregularities involving other large

and well-

known companies, possible findings

of government authorities in various jurisdictions which are

investigating several rate

-setting processes, notifications made by whistleblowers, increasing

regulatory and law enforcement scrutiny of ‘know your customer’ anti-money laundering, tax

evasion, prohibited transactions with countries or persons subject to sanctions, and bribery or other

anti-corruption measures and anti-terrorist-financing procedures and their effectiveness,

regulatory investigations of the banking industry, and litigation that arises from the failure or

perceived failure

by us to comply with legal, regulatory, tax and compliance requirements could

result in adverse publicity and reputational harm, lead to increased regulatory

supervision, affect

our ability to attract and retain customers and maintain access to the capital markets, result in

cease and desist orders, claims, 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.

Some claims and allegations may be brought by or on behalf of a class and claimants may seek

large or indeterminate amounts of damages, including compensatory, liquidated, treble and

punitive damages. Our reserves for litigation liabilities may prove to be inadequate.

Claims and

allegations, should they become public, need not be well founded, true or successful to have a

negative impact on our reputation. In addition, press reports and other public statements that

assert some form of wrongdoing could result in inquiries or investigations by regulators, legislators

and law enforcement officials, and

responding to these inquiries and investigations, regardless of

their ultimate outcome, is time consuming and expensive. Adverse publicity, claims and

allegations, litigation and regulatory investigations and sanctions may have a material adverse

effect on our business, results, financial

condition and/or prospects in any given period.

We are

subject to different tax regulations

in each of the jurisdictions where we

conduct business, and are exposed

to changes in tax laws, and risks of non-

compliance with or proceedings

or investigations with respect to,

tax laws.

Changes in tax laws (including case law) could increase our taxes and our effective tax rates and

could materially impact our tax receivables and liabilities as well as deferred tax assets and

deferred tax liabilities, which could have a material adverse effect on our business, results and

financial condition.

Changes in tax laws could also make certain ING products less attractive, which

could have adverse consequences for our businesses and results. Because of the geographic

spread

of its business, ING may be subject to tax audits, investigations and procedures in numerous

jurisdictions at any point in time. Although we believe that we have adequately provided for all our

tax positions, the ultimate resolution of these audits, investigations and procedures

may result in

liabilities which are different from the amounts recognized.

Increased bank taxes in countries where the Group

is active result in increased taxes on ING’s

banking operations, which could negatively impact our operations, financial condition and liquidity.

We may be subject to

withholding tax if we fail

to comply with the Foreign

Account

Tax

Compliance Act and other US withholding

tax regulations

Under provisions of US tax law commonly referred

to as FATCA,

non-US financial institutions

are

required to provide

to the US Internal Revenue Service (‘IRS’) certain information about financial

accounts held by US taxpayers or by foreign entities in which US taxpayers hold a substantial

ownership interest. Every

three years, certain ING branches and subsidiaries are required

to certify

their compliance with FATCA

requirements to the IRS. If the IRS determines that any such branches

and/or subsidiaries are not in compliance with the FATCA

requirements, then the FATCA

regulations

would impose a 30 percent penalty tax on all US-source payments (e.g.,

interest and dividends)

made to the branch/subsidiary, regardless

of whether the branch/subsidiary is the beneficial owner

of such payment or is acting as an intermediary for customers/payees.

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Under provisions of other US tax law concerning withholding

tax, non-US financial

institutions

acting as intermediaries are required to withhold tax on US-source

payments to payees and remit

the tax to the IRS. Every three years, certain ING branches and subsidiaries are

required to certify

their compliance with such Qualified

Intermediary (‘QI’) requirements to the IRS. If the IRS

determines that any such branches and/or subsidiaries are not in compliance with

the QI

requirements, then it would not be commercially

feasible for ING to offer certain products to

customers.

Failure to comply with FATCA

and/or QI requirements

and regulations could also harm our

reputation and could subject the Group to enforcement

actions, fines

and penalties, which could

have a material adverse effect on our business, reputation, revenues, results, financial condition

and prospects. For additional information with respect to specific proceedings, see Note 46 ‘Legal

proceedings’ to the consolidated financial statements.

ING is exposed to the risk of claims from

customers who feel

misled or treated

unfairly because of advice or information

received.

Our banking products and advice services for third-party products are exposed to claims from

customers who might allege that they have received misleading advice or other information from

advisers (both internal and external) as to which products were most appropriate for them, or that

the terms and conditions of the products, the nature of the products or the circumstances under

which the products were sold, were

misrepresented to them. When new financial products are

brought to the market, ING engages in a multidisciplinary product approval process

in connection

with the development of such products, including production of appropriate marketing and

communication materials. Notwithstanding these processes, customers may make claims against

ING if the products do not meet their expectations. Customer protection regulations, as well as

changes in interpretation and perception by both the public at large and governmental authorities

of acceptable

market practices, influence customer expectations.

Products distributed through person-to-person sales forces have a higher exposure to such claims

as the sales forces provide

face-to-face financial planning and

advisory services. Complaints may

also arise if customers feel that they have not been treated reasonably or fairly, or that the duty of

care has not been complied with. While a considerable amount of time and resources

have been

invested in reviewing and assessing historical sales practices and products that were

sold in the

past, and in the maintenance of risk management, legal and compliance procedures to monitor

current sales practices, there can be no assurance

that all of the issues associated with current and

historical sales practices have been or will be identified, nor that any issues

already identified will

not be more widespread than presently estimated.

The negative publicity associated with any sales practices, any compensation payable in respect of

any such issues and regulatory changes resulting from such issues, has had and could have a

material adverse effect on our reputation, business, results, financial condition and

prospects. For

additional information regarding legal proceedings or claims, see Note 46 ‘Legal

proceedings’ to the

consolidated financial statements.

Risks related to the Group’s

business and operations

Operational risks, such as

systems disruptions or failures,

breaches of security,

cyber attacks, human error,

changes in operational practices, inadequate

controls

including in respect of third parties with which

we do business, natural

disasters or

outbreaks of communicable diseases

may adversely impact our reputation, business

and results.

We face the risk that the design and operating effectiveness of our controls and procedures

may

prove to be inadequate. Operational

risks are inherent to our business. Our businesses depend on

the ability to process a large number of transactions efficiently and accurately. In addition, we

routinely transmit, receive

and store personal, confidential and proprietary information by email

and other electronic means. Although we endeavour to safeguard our systems and processes,

losses can result from inadequately trained

or skilled personnel, IT failures (including due to a

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computer virus or a failure to anticipate or prevent

cyber attacks or other attempts to gain

unauthorised access to digital systems for purposes of misappropriating assets or sensitive

information, corrupting data, or impairing operational performance, or security breaches by third

parties), inadequate or failed internal control processes and systems, regulatory breaches,

human

errors, employee misconduct, including fraud, or from natural disasters or other external events

that interrupt normal business operations. Such losses may adversely affect our reputation,

business and results. 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 not always be capable of processing,

storing or transmitting information as expected. Despite our business continuity plans and

procedures, certain of our computer systems and networks may have insufficient recovery

capabilities in the event of a malfunction or loss of data. As part of our Accelerated Think Forward

strategy, we are consistently managing and monitoring our IT risk profile globally. ING is subject to

increasing regulatory requirements

including EU General Data Protection Regulation (‘GDPR’) and

EU Payment Services Directive (‘PSD2’). Failure

to appropriately manage and monitor our IT risk

profile could affect

our ability to comply with these regulatory requirements, to securely

and

efficiently

serve our clients or to timely, completely or accurately process, store

and transmit

information, and may adversely impact our reputation, business and results. For further description

of the particular risks associated with cybercrime, see “–We are subject to increasing risks related

to cybercrime and compliance with cybersecurity regulation”

below.

Widespread outbreaks of communicable diseases 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. We also

face physical risks, including as a direct result of climate change, such as extreme weather events

or rising water levels, which could have a material adverse effect on our operations, particularly

where our headquarters may be impacted.

In addition, other events including 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, and the loss of key personnel. If our

business continuity plans are not able to be implemented, are not effective or do not sufficiently

take such events into account, losses may increase further.

We are

subject to increasing risks related

to cybercrime and compliance

with

cybersecurity regulation.

Like other financial

institutions and global companies, we are regularly the target

of cyber attacks.

In particular, threats from Distributed Denial of Service (‘DDoS’), targeted attacks (also called

Advanced Persistent Threats) and Ransomware

intensify worldwide, and attempts to gain

unauthorised access and the techniques used for such attacks are increasingly sophisticated. We

have faced, and expect to continue to face, an increasing number of cyber attacks (both successful

and unsuccessful) as we have further digitalized. This includes the continuing expansion of our

mobile- and other internet-based products and services, as well as our usage and reliance on cloud

technology. In 2019 we experienced continuous DDoS attacks, of which one DDoS attack breached

our DDoS defences (compared to two attacks in 2018). This DDoS attack caused an outage of

approximately four-hours, which affected customers of ING in Romania. In addition, ING Philippines

experienced one virus infection on a vendor-supplied server for two hours, which had no customer

impact. Furthermore, due to our reliance on national critical infrastructure and interconnectivity

with third-party vendors, exchanges, clearing houses, financial institutions

and other third parties,

we could be adversely impacted if any of them is subject to a successful cyber attack or other

information security event.

Cybersecurity, customer data and data privacy have become the subject of increasing legislative

and regulatory focus. The EU’s second Payment Services Directive (‘PSD2’), implemented in 2019,

and GDPR are examples of such regulations. In certain locations where ING is active, there

are

additional local regulatory requirements and legislation on top of EU regulations

that must be

followed for business conducted in that jurisdiction. Some of these legislations and regulations may

be conflicting

due to local regulatory interpretations. We

may become subject to new EU and local

legislation or regulation concerning cybersecurity, security of customer data in general or the

privacy of information we may store or maintain. Compliance with such new legislation or

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regulation could increase

the Group’s compliance cost. Failure

to comply with new and existing

legislation or regulation could harm our reputation and could subject the Group to enforcement

actions, fines

and penalties.

ING may be exposed to the risks of misappropriation, unauthorised access, computer viruses or

other malicious code, cyber attacks and other external attacks or internal breaches that could have

a security impact. These events could also jeopardise our confidential information or that of our

clients or our counterparties and this could be exacerbated by the increase in data protection

requirements as a result

of GDPR. These events can potentially result in financial loss and harm to

our reputation, hinder our operational effectiveness, result in regulatory censure,

compensation

costs or fines resulting from regulatory investigations and could have a material adverse effect on

our business, reputation, revenues, results,

financial condition and prospects.

Even when we are

successful in defending against cyber attacks, such defence may consume significant resources or

impose significant

additional costs on ING.

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.

There is substantial competition in the Netherlands and the other countries in which we do

business for the types of wholesale banking, retail banking, investment banking and other products

and services we provide. Customer loyalty and retention can

be influenced by a number

of factors,

including brand recognition, reputation, relative

service levels, the prices and attributes of products

and services, scope of distribution, credit ratings and actions taken by existing or new competitors

(including non-bank or financial

technology competitors). A decline in our competitive position as

to one or more of these factors could adversely impact our ability to maintain or further increase

our market share, which would adversely affect our results. Such competition is most pronounced

in our more mature markets of the Netherlands, Belgium, the rest of Western

Europe 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 financial services companies 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 proceeded to form alliances, mergers or strategic

relationships with our competitors. The

Netherlands is our largest market. Our main competitors in the banking sector in the Netherlands

are ABN AMRO Bank and Rabobank.

Competition could also increase due to new entrants

(including non-bank and financial

technology

competitors) in the markets that may have new operating models that are not burdened by

potentially costly legacy operations and that are subject to reduced regulation. New

entrants may

rely on new technologies, advanced data and analytic tools, lower cost to serve, reduced

regulatory burden and/or

faster processes in order to challenge traditional

banks. Developments in

technology has also accelerated the use of new business models, and ING may not be successful in

adapting to this pace of change or may incur significant

costs in adapting its business and

operations to meet such changes. For example, new business models have been observed in retail

payments, consumer and commercial lending (such as peer-to-peer lending), foreign exchange

and low-cost investment advisory services. In particular, the emergence of disintermediation in the

financial sector

resulting from new banking, lending and payment solutions offered by rapidly

evolving incumbents, challengers and new entrants, in particular with respect to payment services

and products, and the introduction of disruptive technology may impede our ability to grow or

retain our market share and impact our revenues

and profitability.

Increasing competition in the markets in which we operate (including from non-banks and financial

technology competitors) may significantly

impact our results if we are unable to match the

products and services offered by our competitors. Future economic turmoil may accelerate

additional consolidation activity. 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

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pressures as a result

of these factors in the event that some of our competitors seek to increase

market share by reducing

prices.

We may not

always be able to protect our intellectual

property developed

in our

products and services and may be subject to infringement claims,

which could

adversely impact our core business,

inhibit efforts to monetize our internal

innovations and restrict our

ability to capitalize on future

opportunities.

In the conduct of our business, we rely on a combination of contractual rights with third parties and

copyright, trademark, trade name, patent and trade secret

laws to establish and protect our

intellectual property, which we develop in connection with our products and services. Third parties

may infringe or misappropriate our intellectual property. We may have to litigate to enforce

and

protect our copyrights, trademarks, trade names, patents,

trade secrets and know-how

or to

determine their scope, validity or enforceability. In that event, we may be required

to incur

significant costs, and

our efforts may not prove successful. The inability to secure or protect our

intellectual property assets could have an adverse effect on our core business and our ability to

compete, including through the monetization of our internal innovations.

We may also be subject to claims made by third parties for (1) patent, trademark or copyright

infringement, (2) breach of copyright, trademark or licence usage rights, or (3) misappropriation of

trade secrets. Any such claims and any resulting litigation could

result in significant expense and

liability for damages. If we were found to have infringed or misappropriated a third

-party patent or

other intellectual property right, we could in some circumstances be enjoined from providing

certain products or services to our customers or from utilizing and benefiting

from certain methods,

processes, copyrights, trademarks, trade

secrets or licences. Alternatively, we could be required

to

enter into costly licensing arrangements with third parties or to implement a costly workaround.

Any of these scenarios could have a material adverse effect on our business and results and could

restrict our ability to pursue future business opportunities.

The inability of counterparties to meet their financial obligations

or our inability to

fully enforce our

rights against counterparties could have

a material adverse effect

on our results.

Third parties that owe us money, securities or other assets may not pay or perform under their

obligations. These parties include the issuers and guarantors (including sovereigns) of securities we

hold, borrowers under loans originated, reinsurers,

customers, trading counterparties, securities

lending and repurchase 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, continuing low oil or

other commodity prices, operational failure or other factors, or even rumours about potential

defaults by one or more of these parties or regarding a severe

distress of the financial services

industry generally, could have a material adverse effect on our results, financial condition and

liquidity. 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 sovereigns

and 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.

We routinely

execute a high volume of transactions, such as unsecured debt instruments,

derivative transactions and equity investments with counterparties and customers in the financial

services industry, including brokers and dealers, commercial and investment banks, mutual and

hedge funds, insurance companies, institutional clients, futures clearing merchants, swap dealers,

and other institutions, resulting in large periodic settlement amounts, which may result in our

having significant credit exposure to one or more of such counterparties or customers. As a result,

we could face concentration risk with respect to liabilities or amounts we expect to collect from

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

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by, or even concerns about the creditworthiness of, one or more

of these counterparties or

customers or other financial

services institutions could therefore have

an adverse effect on our

results or liquidity.

With respect to secured transactions, our credit risk may be exacerbated when the collateral held

by us cannot be or is liquidated at prices not sufficient

to recover the full amount of the loan or

derivative exposure due to 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 cancel coupon payments on the occurrence of certain events or at their option. The EC

has indicated that, in certain circumstances, it may require

these financial

institutions to cancel

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, results or financial

condition.

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. Also in this case, our credit risk may also be exacerbated when the collateral we

hold cannot be liquidated at prices sufficient

to recover the full amount of the loan or derivative

exposure due to us, which is most likely to occur during periods of illiquidity and depressed asset

valuations, such as those experienced during the financial

crisis of 2008. The termination of

contracts and the foreclosure on collateral

may subject us to claims. 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, results, financial

condition, and/or prospects.

Ratings are important to our

business for a number of reasons,

and a downgrade or

a potential downgrade in our

credit ratings could

have an adverse impact on our

results and net results.

Credit ratings represent

the opinions of rating agencies regarding an entity’s ability to repay its

indebtedness. Our credit ratings are important to our ability to raise capital and funding through

the issuance of debt and to the cost of such financing.

In the event of a downgrade, the cost of

issuing debt will increase, having an adverse effect on our 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. We have credit ratings from

S&P, 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.

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.

As rating agencies continue to evaluate the financial services industry, it is possible that rating

agencies will heighten the level of scrutiny that they apply to financial

institutions, increase the

frequency and scope of their credit reviews,

request additional information from the companies

that they rate and potentially adjust upward the capital and other requirements

employed in the

rating agency models for maintenance of certain ratings levels. It is possible that the outcome of

any such review of us would have

additional adverse ratings consequences, which could have a

material adverse effect on our results and financial

condition. We may need to take actions in

response to changing standards or capital requirements

set by any of the rating agencies, which

could cause our business and operations to suffer.

We cannot predict what additional actions

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rating agencies may take, or what actions we may take in response to the actions of rating

agencies.

We may be exposed

to business, operational, regulatory,

reputational and other

risks in connection with climate change.

Climate change is an area of significant focus for governments and regulators, investors and ING’s

customers, and developments with respect to climate change topics may expose ING to significant

risks. The perception of climate change as a risk by civil society, shareholders, governments and

other stakeholders continues to increase, including in relation to the financial sector’s

operations

and strategy, and international actions regulating or restricting CO2 emissions, such as the Paris

agreement, may also result in financial institutions coming under increased pressure from such

stakeholders regarding the management and disclosure of their climate risks and related lending

and investment activities. For further information regarding the alignment of ING’s lending portfolio

with its climate-related goals, see “Item 4. – Information on the Company – Business Overview –

Responsible finance” below.

Additionally, rising climate change concerns may lead to additional

regulation that could increase our operating

costs or negatively impact the profitability of our

investments and lending activities, including those involving the natural resources sector.

ING may

incur substantial costs in complying with current or future laws and regulations relating

to climate

change, including with respect to international actions regulating or restricting CO2 emissions or

changes in capital requirements regulations

in response to climate change. In addition, ING is

exposed to transition risks related to climate change, which result from

changes in the behaviour of

economic and financial actors

in response to the implementation of energy policies or

technological changes. Any of these risks may result in changes in our business activities or other

liabilities or costs, including exposure to reputational risks, any of which may have a material and

adverse impact on our business, results or financial condition.

For a description of the physical risks to our business resulting from climate change, see “–

Operational risks, such as systems disruptions or failures, breaches of security, cyber attacks,

human error, changes in operational practices, inadequate controls including in respect of third

parties with which we do business, natural disasters or outbreaks of communicable diseases may

adversely impact our reputation, business and results” above.

An inability to retain or attract

key personnel may affect our business

and results.

ING Group relies to a considerable

extent on the quality of its senior management, such as

members of the executive committee, and management in the jurisdictions which are material to

ING’s business and operations. The success of ING Group’s operations is dependent, among other

things, on its ability to attract and retain highly qualified personnel. Competition for key personnel

in most countries in which ING Group operates, and globally for senior management, is intense. ING

Group’s ability to attract and retain key personnel, in senior management and in particular areas

such as technology and operational management, client relationship management, finance,

risk

and product development, is dependent on a number of factors, including prevailing market

conditions and compensation packages offered by companies competing for the same talent.

The (increasing) restrictions on remuneration, plus the public and political scrutiny especially in the

Netherlands, will continue to have an impact on existing ING Group remuneration policies and

individual remuneration packages for personnel. For example,

under the EU’s amended

Shareholder Rights Directive, known as ‘SRD II’, which came into effect on June 10, 2019, ING is

required to hold a shareholder

advisory vote

on ING’s remuneration policy for directors (including

members of the executive board and the supervisory board) and on the annual remuneration

report for such directors. This may restrict our ability to offer competitive compensation compared

with companies (financial and/or non-financial)

that are not subject to such restrictions and it could

adversely affect ING Group’s ability to retain or attract key personnel, which, in turn, may affect our

business and results.

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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 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.

Risks related to the Group’s

risk management practices

Risks relating to our use

of quantitative models or assumptions to

model client

behaviour for the purposes of our market

calculations may adversely impact our

reputation or results.

We use quantitative methods, systems or approaches that apply statistical, economic financial, or

mathematical theories, techniques and assumptions to process input data into quantitative

estimates. Errors in the development, implementation, use or interpretation of such models, or

from incomplete or incorrect data, can lead to inaccurate, noncompliant or misinterpreted

model

outputs, which may adversely impact our reputation and results. In addition, we use assumptions

in order to model client behaviour for the risk calculations in our banking books. Assumptions are

used to determine the interest rate risk profile of savings and current accounts and to estimate the

embedded option risk in the mortgage and investment portfolios. Assumptions

based on past client

behaviour may not always be a reliable indicator of future behaviour.

The realisation or use of

different assumptions to determine client behaviour could have a material adverse effect on the

calculated risk figures and, ultimately, our future results or reputation. Furthermore,

we may be

subject to risks related to changes in the laws and regulations governing the risk management

practices of financial institutions. For further information, see “Risks related to the regulation and

supervision of the Group – Changes in laws and/or regulations governing

financial services or

financial institutions

or the application of such laws and/or regulations may increase

our operating

costs and limit our activities” above.

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 rates, equity markets and credit spread

changes, the occurrence of credit defaults and changes in client behaviour.

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, either directly as a counterparty or as a credit support provider to affiliate

counterparties. 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, liabilities, general market

factors and the creditworthiness 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 or financial condition. Poorly designed strategies or improperly executed transactions

could actually increase our risks and losses. Hedging strategies involve transaction costs and other

costs, and if we terminate a hedging arrangement, we may also be required to pay additional

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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, possibly significant, after

taking into account our hedging strategies. Further, the

nature and timing of our hedging transactions could actually increase our risk and losses. Hedging

instruments we use to manage product and other risks might not perform as intended or expected,

which could result in higher (un)realised losses, such as credit

value adjustment risks or unexpected

P&L effects, and unanticipated cash needs to collateralise or settle such transactions. Adverse

market conditions can limit the availability and increase the costs of hedging instruments, and

such costs may not be recovered

in the pricing of the underlying products being hedged. In

addition, hedging counterparties may fail to perform their obligations, resulting in unhedged

exposures and losses on positions that are not collateralised. As such, our hedging strategies and

the derivatives that we use or may use may not adequately mitigate or offset the risks they intend

to cover, and our hedging transactions may result in losses.

Our hedging strategy additionally relies on the assumption that hedging counterparties remain

able and willing to provide the hedges required by our strategy.

Increased regulation, market

shocks, worsening market conditions (whether due to the ongoing euro crisis or otherwise), and/or

other factors that affect or are perceived to affect the financial

condition, liquidity and

creditworthiness of ING may reduce the ability and/or

willingness of such counterparties to engage

in hedging contracts with us and/or other parties, affecting our overall ability to hedge our risks and

adversely affecting our business, results and financial

condition.

Our risk management policies and guidelines may prove

inadequate for the risks

we

face.

[We have developed

risk management policies and procedures and will continue to review

and

develop these in the future. Nonetheless, our policies and procedures

to identify, monitor and

manage risks may not be fully effective, particularly during

extremely turbulent times. 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 different than suggested by historical experience. For instance, these methods may

not predict the losses seen in the stressed conditions in recent periods, and may also not

adequately allow prediction of circumstances arising due to 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, catastrophic

occurrence or other information that is publicly known or otherwise available to us. Such

information may not always be accurate, complete, updated or properly evaluated.

Management

of operational, compliance, legal and regulatory risks requires,

among other things, policies and

procedures to record

and verify large numbers of transactions and events. These policies and

procedures may not be fully effective, resulting in a material and adverse impact on our

competitive position, reputation, business, results and financial condition.

Risks related to the Group’s

liquidity and financing activities

We depend

on the capital and credit markets,

as well as customer deposits, to

provide the liquidity and capital

required

to fund our operations, and adverse

conditions in the capital and credit

markets, or significant withdrawals

of customer

deposits, may impact our liquidity, borrowing and

capital positions, as well as the

cost of liquidity, borrowings

and capital.

Adverse capital market conditions have in the past affected, and may in the future affect,

our cost

of borrowed funds and our ability to borrow on a secured

and unsecured basis, thereby impacting

our ability to support and/or grow our businesses. Furthermore,

although interest rates are

at or

near historically low levels, since the recent financial crisis, we have experienced increased funding

costs due in part to the withdrawal of perceived government support of such institutions in the

event of future financial crises. In addition, liquidity in the financial

markets has also been

negatively impacted as market participants and market

practices and structures adjust to new

regulations.

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We need liquidity 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. Without

sufficient

liquidity, we will be forced to curtail our operations and our business will suffer.

The

principal sources of our funding include a variety of short-and long-term instruments, including

deposit fund, repurchase agreements, commercial

paper, medium- and long-term debt,

subordinated debt securities, capital securities and shareholders’ equity.

In addition, because we rely on customer deposits to fund our business and operations, the

confidence of customers in

financial institutions

may be tested in a manner that may adversely

impact our liquidity and capital position. 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 liquidity and capital position through withdrawal of deposits, in

addition to our revenues and results. 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.

In the event that our current resources

do not satisfy our needs, we may need 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 we may not be able to successfully obtain additional financing on favourable

terms, or at all. Any actions we might take to access financing

may, in turn, cause rating agencies

to re-evaluate our ratings.

Disruptions, uncertainty or volatility in the capital and credit markets may also limit our access to

capital. Such market conditions may in the future limit our ability to raise additional capital to

support business growth, or to counterbalance the consequences of losses or increased regulatory

capital and rating agency capital requirements. This could

force us to (i) delay raising capital,

(ii)

reduce, cancel or postpone payment of dividends on our shares, (iii) reduce, cancel or postpone

interest payments on our other securities, (iv) issue capital of different types or under different

terms than we would otherwise, or (v) 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, financial

condition, cash flows, regulatory capital and rating agency capital

position could be materially adversely affected by disruptions

in the financial markets.

Furthermore, regulatory

liquidity requirements in certain jurisdictions in which we operate are

becoming more stringent, undermining our efforts to maintain centralised management of our

liquidity. These developments may cause trapped pools of liquidity and capital, resulting in

inefficiencies

in the cost of managing our liquidity and solvency, and hinder our efforts to

integrate

our balance sheet. An example of such trapped liquidity includes our operations in Germany where

German regulations impose separate liquidity requirements

that restrict ING’s ability to move a

liquidity surplus out of the German subsidiary.

As a holding company, ING Groep

N.V.

is dependent for liquidity on payments

from

its subsidiaries, many of which are subject to regulatory

and other restrictions on

their ability to transact with affiliates.

ING Groep N.V.

is a holding company and, therefore, depends on dividends, distributions and other

payments from its subsidiaries to fund dividend payments and to fund all payments on its

obligations, including debt obligations. Many of our subsidiaries, including our bank subsidiaries,

are

subject to laws that restrict dividend payments or authorize regulatory bodies to block or reduce

the flow of funds from those subsidiaries to ING Groep N.V.

In addition, our bank subsidiaries are subject to restrictions on their ability to lend or transact with

affiliates

and to minimum regulatory capital and other requirements, as well as restrictions on their

ability to use client funds deposited with them to fund their businesses. Additional

restrictions on

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related-party transactions, increased capital and liquidity requirements and additional limitations

on the use of funds in client accounts, as well as lower earnings, can reduce the amount of funds

available to meet the obligations of ING Groep N.V.,

and even require

ING Groep N.V.

to provide

additional funding to such subsidiaries. Restrictions or regulatory action of that kind could impede

access to funds that ING Groep N.V.

needs to make payments on its obligations, including debt

obligations, or dividend payments. In addition ING Groep N.V.’s

right to participate in a distribution

of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the

subsidiary’s creditors.

There is a trend towards

increased regulation and supervision of our subsidiaries by the

governments and regulators in the countries in which those subsidiaries are located or do business.

Concerns about protecting clients and creditors of financial institutions that are controlled by

persons or entities located outside of the country in which such entities are located or do business

have caused or may cause a number of governments and regulators to take additional steps to

“ring fence” or maintain internal total loss-absorbing capacity at such entities in order to protect

clients and creditors of such entities in the event of financial difficulties

involving such entities. The

result has been and may continue to be additional limitations on our ability to efficiently

move

capital and liquidity among our affiliated

entities, thereby increasing the overall

level of capital and

liquidity required by ING on a consolidated basis.

Furthermore, ING Groep N.V.

has in the past and may in the future guarantee the payment

obligations of certain of its subsidiaries, including ING Bank N.V.,

subject to certain exceptions. Any

such guarantee may require

ING Groep N.V.

to provide substantial funds or assets to its subsidiaries

or their creditors or counterparties at a time when ING Groep N.V.

or its subsidiaries are in need of

liquidity to fund their own obligations.

The requirements for ING Groep

N.V.

to develop and submit recovery and resolution

plans to

regulators, and the incorporation of feedback received

from regulators, may require

us to increase

capital or liquidity levels or issue additional long-term debt at ING Groep N.V.

or particular

subsidiaries or otherwise incur additional or duplicative operational or other costs at multiple

entities, and may reduce our ability to provide ING Groep N.V.

guarantees for the obligations of our

subsidiaries or raise debt at ING Groep N.V.

Resolution planning may also impair our ability to

structure our intercompany and external activities in a manner that we may otherwise deem most

operationally efficient.

Furthermore, arrangements to facilitate

our resolution planning may cause

us to be subject to additional costs such as resolution planning related taxes and funds. Any such

limitations or requirements would be in addition to the legal and regulatory restrictions described

above on our ability to engage in capital actions or make intercompany dividends or payments.

Additional risks relating to

ownership of ING shares

Holders of ING shares may experience

dilution of their holdings.

ING’s AT1 Securities may, under certain circumstances, convert into equity securities, and such

conversion would dilute the ownership interests of existing holders of ING shares and such dilution

could be substantial. Additionally, any conversion, or the anticipation of the possibility of a

conversion, could depress the market price of ING shares. Furthermore,

we may undertake future

equity offerings with or without subscription rights. In case of 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, or otherwise chose not to, participate in

future equity offerings with subscription rights.

Because we are incorporated

under the laws of the Netherlands and many of the

members of our Supervisory and Executive

Board and our officers reside outside

of

the United States, it may be difficult to enforce

judgments against ING or the

members of our Supervisory and Executive

Boards or our officers.

Most of our Supervisory Board members, our Executive Board members and some of the experts

named in this Annual Report, as well as many of our officers

are persons who are not residents of

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the United States, and most of our and their assets are located outside the United States. As a

result, investors may not be able to serve process

on those persons within the United States or to

enforce in the United States judgments obtained in US courts against us or those persons based on

the civil liability provisions of the US securities laws.

Investors also may not be able to enforce judgments of US courts under the US federal securities

laws in courts outside the United States, including the Netherlands. The United States and the

Netherlands do not currently have a treaty providing

for the reciprocal recognition

and

enforcement of judgments (other than arbitration awards) in civil and commercial

matters.

Therefore, we

may not be able to enforce in the Netherlands a final judgment

for the payment of

money rendered by any US federal

or state court based on civil liability, even if the judgment is not

based only on the US federal securities laws, unless a competent court in the Netherlands gives

binding effect to the judgment.

Therefore, a final judgment for the payment of money rendered by any federal or state court in the

United States based on civil liability, whether or not predicated solely upon the U.S. federal

securities laws, would not be enforceable in the Netherlands unless the underlying claim is re-

litigated before a Dutch court. However, under current

practice, the courts of the Netherlands may

be expected to render a judgment in accordance with the judgment of the relevant

U.S. court,

provided that such judgment (i) is a final judgment and has been rendered by a court which has

established its jurisdiction on the basis of internationally accepted grounds of jurisdictions, (ii) has

not been rendered in violation of elementary principles of fair trial, (iii) is not contrary to the public

policy of the Netherlands, and (iv) is not incompatible with (a) a prior judgment of a Netherlands

court rendered in a dispute between the same parties, or (b) a prior judgment of a foreign court

rendered in a dispute between

the same parties, concerning the same subject matter and based

on

the same cause of action, provided that such prior judgment is not capable of being recognized in

the Netherlands. It is uncertain whether this practice extends to default judgments as well.

Based on the foregoing, there can be no assurance

that U.S. investors will be able to enforce

against us or members of our board of directors, officers

or certain experts named herein who are

residents of the Netherlands or countries other than the United States any judgments obtained in

U.S. courts in civil and commercial matters, including judgments under the U.S. federal securities

laws.

In addition, there is doubt as to whether a Dutch court would impose civil liability on us, the

members of our board of directors, our officers or certain

experts named herein in an original

action predicated solely upon the U.S. federal securities laws brought in a court of competent

jurisdiction in the Netherlands against us or such members,

officers

or experts, respectively.

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Item

4.

Information

on the

Company

A.

History

and development

of the

company

General

ING Groep N.V.

was established as a Naamloze Vennootschap (a Dutch public limited liability

company) on March 4, 1991. ING Groep N.V.

is incorporated under the laws of the Netherlands.

The corporate site of ING, www.ing.com,

provides news, investor relations

and general information

about the company.

ING is required to file certain documents and information with the United States Securities and

Exchange Commission (SEC). These filings relate primarily to periodic reporting requirements

applicable to issuers of securities, as well as to beneficial

ownership reporting requirements as a

holder of securities. The most common filings

we submit to the SEC are Forms 6-K and 20-F

(periodic reporting requirements) and Schedules 13D and 13G (beneficial ownership requirements).

The SEC maintains an internet site that contains reports, proxy and information statements, and

other information regarding issuers that file electronically with the SEC at http://www.sec.gov.

ING’s

electronic filings are available on the SEC’s internet site under CIK ID 0001039765 (ING Groep N.V.).

The official

address of ING Group is:

The name and address of ING

Group’s agent for service of process

in the United States in connection

with ING’s registration statement on

Form F-3 is:

ING Groep N.V.

Bijlmerdreef 106

1102 CT

Amsterdam

P.O.

Box 1800,

1000 BV Amsterdam

The Netherlands

ING Financial Holdings Corporation

1133 Avenue of the Americas

New York, NY

10036

United States of America

Telephone

+31 20 563 9111

Telephone

+1 646 424 6000

Changes in the composition of the Group

For information on changes in the composition of the Group, reference

is made to Note 47

‘Consolidated companies and businesses acquired and divested’.

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Our strategy

and how we create

value

ING’s

Think

Forward

strategy

continued

to

guide

us

during

2019.

It

was

a year

of

rapid

transformation

in

the

competitive

landscape,

regu

lation,

customer

preferences

and

the

economic

context.

It

was

marked

as

well

by

the

growing

threat

of

climate

change.

These

developments

present

both

challenges

and

opportunities

.

There were numerous

developments in 2019 with important implications for financial

services

providers and their future strategic

direction. Digitalisation increased,

with a growing percentage of

customers doing their banking with mobile devices. Big Tech platforms continued to leverage

their

expertise in the digital customer experience to encroach on banks’ market share by targeting

lucrative parts of their traditional value chains, such as payments.

Competition was further spurred by implementation in 2019 of the EU’s PSD2 directive opening the

payments market to non-bank competitors. Persistently low interest rates in Europe

edged still

lower, pressuring banks’ interest income and profits. And the growing threat of climate change

intensified the debate about

the role business can and should play to promote a sustainable future.

Think Forward

Our Think Forward strategy

– with its purpose to empower people to stay a step ahead in life and in

business – continued to guide our strategic response to the challenges and opportunities these

developments present. Chief among these is how banks can master the digital customer

experience and tap into its opportunities.

The strategic priorities that are the focus of the Think Forward

strategy aim to create a

differentiated customer experience. They do that by deepening the relationship with the customer,

by providing us with tools to know our customers better and to anticipate their evolving needs, and

by fostering an innovation culture that will ensure we

are able to continuously adapt our offerings

and business model to anticipate and meet those needs in future.

And the Customer Promise –

clear and easy, anytime anywhere, empower, and keep getting better – forms the basis of the

customer experience we aim for.

In concrete terms, this translates into a focus on primary relationships. These are

relationships

where we serve multiple banking or other needs of retail customers and wholesale banking clients

and which allow us to know these customers and their needs better so we can add value for them

and grow the relationship. To

do this, we aim to master data management and analytics skills,

including artificial

intelligence. To

provide for future

needs, we promote a culture of innovation

within ING and partner with fintechs

and other innovative partners to develop interesting

propositions, both in financial services and beyond banking

that can add value for our customers

and others.

Platform approach

The competitive landscape that banks face is increasingly being shaped by Big Tech

companies.

They offer customers a superior digital experience through an open platform approach that delivers

a range of their primary needs in a go-to digital ecosystem. This ability to provide for primary

needs, with both proprietary and third-party offerings that are easily accessed through mobile

devices, defines their success. Banking, by contrast, is a facilitator and not a primary need. The

choice for banks is to challenge their existing business models, to disrupt themselves, or risk being

disintermediated and relegated to a status of white label facilitators of others’ platforms.

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ING chooses to pursue its own platform approach. It aims to create a go-to financial services

platform offering one customer experience wherever we operate and one that’s mobile-first in

keeping with ING’s clear and easy, anytime anywhere Customer Promise. To

support this ambition,

we’re evolving to a single global modular technological foundation that can be easily scaled up to

accommodate growth, and one that’s open so it’s ready to connect to other platforms and offers

users relevant third

-party products and services.

Innovation and transformation

To

pursue this aim, we are converging businesses with similar customer propositions. The Unite

be+nl initiative is combining the Netherlands and Belgium. The Maggie (formerly Model Bank)

transformation programme is standardising

our approach in four European markets -

Czech

Republic, France,

Italy and Spain - similar to our successful digital approach in Germany based on a

standardised omnichannel customer experience across mobile devices and web. We

pursue a plug-

and-play approach to product development to ensure we can share

innovations quickly across our

businesses. Examples of this in practice include the One App now active in Belgium, Germany and

the Netherlands, offering one mobile customer experience in those markets.

And we’re evolving

toward a uniform approach

to data and its management, to processes and to one way of working

to support this transformation and accelerate innovation.

Increasing the pace of innovation is a strategic priority and core

to ensuring we remain relevant to

our customers and can live up to our purpose to empower people to stay a step ahead in life and in

business. And it is a prerequisite for realising

our platform ambitions. We do this by fostering an

internal culture of innovation through

customised methodologies and by providing resources

to our

business through the ING Innovation Fund.

And we collaborate with a wide range of fintechs and

other external parties to accelerate the development of innovative solutions for customers.

To

spur this collaboration, ING in 2019 opened the Cumulus Park innovation district in Amsterdam

Zuidoost, an initiative together with local government and educational institutions offering

businesses, academics and innovators workspaces designed to co-create, learn, research

and

inspire in a collaborative atmosphere

around the themes of urbanisation and digital identity.

And through ING Labs in Amsterdam,

Brussels, London and Singapore we’re

also collaborating with

fintechs and others

on disruptive innovations in value spaces that best match the expertise and

ecosystems in those locations.

Examples of collaborative innovations

include beyond banking initiatives for retail customers. In

2019 we launched the first

protection products as part of the global insurance partnership with

AXA, distributed primarily through our mobile app. Examples in Wholesale Banking include Cobase,

a platform that enables companies to manage accounts at multiple banks through one interface,

and blockchain solutions in areas like trade finance that drastically reduce the time and complexity

of trades.

In 2019, resources were

devoted to improving our capabilities in the areas

of know your customer

and fighting financial

economic crime, causing some reprioritisation related to the pace of

implementation of innovation and transformation goals. However, our strategy

and priorities in

these areas remains unchanged.

Promoting

a sustainable society

ING’s empowerment purpose is not limited to our own customers. In striving to help people to stay

a step ahead in life and in business, we see a key role for ING in promoting a sustainable society, as

well as important opportunities both for us and our customers.

To

promote people’s financial health, we focus on giving them the knowledge and tools

to make

informed decisions, and we support initiatives that are developing awareness about the drivers

behind how people arrive at financial decisions

so better methods and tools can be developed in

the future. And through our financing we seek to positively influence society’s

transition to a more

sustainable, low-carbon economy. One of the important ways we do that is through our Terra

approach to steer the impact of our lending portfolio to support the Paris Climate Agreement’s goal

to limit the rise of global temperatures to well below two

degrees Celsius.

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Elements of our strategy

Our Think Forward strategy

was launched in 2014 and guides everything we do. It was visionary

then and today is ever more relevant

to our success. This section describes the strategy and

includes references to examples and additional information on how our strategy

links to the

material topics identified

by our stakeholders.

Strategic

priorities

To

deliver on our Customer Promise and create a differentiating customer experience, we have

identified four strategic priorities:

1. Earn the primary relationship

Earning the primary relationship is a strategic priority for ING as it leads to deeper relationships,

greater customer satisfaction and, ultimately, customers choosing us for more of their financial

needs. In Retail Banking we define primary customers

as those with multiple active ING products, at

least one of which is a current account where they deposit a regular income such as a salary. For

Wholesale Banking these are active clients with lending and daily banking products and at least

one extra product generating recurring revenues

over the last 12 months.

2. Develop data analytics

With the further digitalisation of banking, data is an important asset

that helps us improve the

customer experience and earn the strategically important primary relationship. We rely

on data to

understand what customers want and need. We use these insights to personalise our interactions

with customers and empower them to make their own financial

decisions. Data skills are also

essential to know our customers from a regulatory and risk perspective, to prevent fraud,

improve

operational processes and generate

services that go beyond traditional banking. At ING, we

recognise that excelling at data management is a core competency if we are

to realise our

ambition to create a personal digital experience for customers. We are

on course to implement one

global approach to data management to ensure we maximise the potential of this key resource.

Discussions in society about data privacy and the tightening of data privacy legislation and

regulations, as embodied in the EU’s General Data Protection Regulation (GDPR), are

raising

awareness of this important issue. At ING, we are

committed to handling customer data safely and

being open about how we use it.

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3. Increase the pace of innovatio

n

to serve changing customer needs

Evolving customer expectations, new technologies and new competitors are transforming banking.

Innovation is at the heart of the Think Forward strategy

and essential to develop the beyond

banking and disruptive products, services and experiences that support our platform ambitions. We

promote innovation internally through ING's own PACE

innovation methodology and by

earmarking funds to support businesses with innovative initiatives. To speed up the pace of

innovation, we also partner with outside parties, including fintechs.

4. Think beyond traditional banking to

develop new services and business

models

Persistent low interest rates

and disruption from the rise of new non-bank entrants in the financial

services sector are challenging banks’ traditional business models. Thinking beyond traditional

banking is crucial if we are to find new ways to be relevant to our customers. Here, open banking

offers opportunities. By partnering

with others or developing our own digital platforms, we can offer

customers new and complementary services that go beyond banking – and create new revenue

streams for ING.

Enablers

Four strategic enablers support the implementation of our strategy: simplifying and streamlining

our organisation, operational excellence, enhancing our performance culture

and diversifying our

lending capabilities.

1. Simplify and streamline

Simplify and streamline refers to ING’s aim to become a more effective, cost-efficient and

agile

organisation with the flexibility to respond to fast-changing customer needs and low-cost

competitors. To

support our ambition to evolve into one, scalable, mobile-first

digital platform that

offers a uniform and superior customer experience we are building a global foundation with the

same approach to data, IT infrastructure, and processes. This will feature

simplified

and

standardised products and systems and by modular architecture, integrated

and scalable IT

systems and shared services. We also apply one Way

of Working (WoW),

based on agile principles,

across many areas of ING to speed up the pace of innovation and bring new customer solutions to

market faster, as well as to enable global collaboration and knowledge sharing.

2. Operational excellence

Operational excellence requires

continuous focus. We need to ensure

that ING’s operations provide

a seamless and flawless customer

experience and that our operations remain safe and secure so

we can play our important role as gatekeepers to the financial system.

We invest to provide

stable

IT systems and platforms so we are there for our customers when they need us and to provide

them with the highest standards of data security. As part of our know your customer (KYC)

enhancement programme we are

developing a global approach to how we deal with customer due

diligence and transaction monitoring, supported by standardised tools, a uniform approach to data

and clear governance.

3. Performance

culture

We believe

there are strong

links between employee engagement, customer engagement and

business performance. We aim to continually improve

our performance culture by creating a

differentiating employee experience and enhancing the capabilities of our leaders.

By focusing on

delivering a great employee experience and by stepping up our leadership capabilities we develop

our employees’ engagement and ability to deliver on our purpose and strategy.

ING’s Think Forward Leadership

Programme (TFLP) aims to develop greater

leaders and better

managers who can engage staff and enhance team performance. Introduced for senior leaders in

2017, it was extended later that year to people managers globally as the TFL Experience (TFLE), a

four-day programme with follow-up learning activities. The first phase of the programmes focused

on the Orange Code, individual purpose and the Think Forward

strategy. Phase 2, launched for TFLP

in 2018, focused on high sustainable performance, talent management and performance

transparency. It will be extended to the TFLE in 2020.

We expect every ING employee to ensure we are

a bank people can trust and that we can be proud

of. This starts at the top as leaders should create the right conditions for our employees to

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safeguard the bank and society from financial economic crime. In 2019, we developed a new global

e-learning module that will be rolled out in early 2020 to all employees to enhance their KYC

awareness. And a global code of conduct was rolled out in the first quarter of 2020 that builds on

the Orange Code and gives employees worldwide concrete

examples of how to put the ING values

into practice.

We promote

a more diverse and inclusive workforce

by aiming for ‘mixed teams’. We have adopted

the 70 percent principle, which gives managers a basis for building mixed teams around

appropriate dimensions of diversity (with a focus on gender, nationality and age group) and strives

for a minimum 30 percent difference in team make-up. In 2019, we worked to further this aim by

deep-diving into diversity dimensions ING-wide and setting up dashboards to help different areas of

the business monitor their progress. Like many other financial organisations, getting the right mix

of people remains a challenge in parts of the business and there is more to be done to redress

imbalances that still exist.

4. Lending capabilities

Broadening and diversifying our lending capabilities to continue to grow client franchises is our

fourth strategic enabler.

To

do so, we are seeking opportunities in Retail, SME and Consumer

Lending segments, as well as focusing on Wholesale Banking lending growth in our businesses in

Challengers & Growth (C&G) markets and in our sector lending franchises. ING is also considered

one of the pioneers in sustainable finance,

having introduced the first sustainability ESG-linked

loan and a made-to-measure sustainability improvement loan. In 2019, ING continued to shape

this sector and open up new markets by developing sustainability improvement concepts and

financial products. In 2019, we continued to grow at resilient interest margins, with net core

lending

growth of €17.2 billion, or 2.9 percent, mainly realised in our Retail

markets. Our ambition is to

continue to grow profitably within our risk appetite, but given market dynamics we expect growth

at Wholesale Banking to be slightly lower than in Retail Banking.

B.

Business

overview

Corporate Organisation

ING Group’s segments are based on the internal reporting structure by lines of business. For more

information see ‘Item 5 Operating and Financial Review and Prospects”.

Our business

We

achieved

good

results

in

2019

with

solid

profitability

and

healthy

growth

in

both

lending

and

deposits.

Net

core

lending

grew

by

€17.2

billion

over

the

year,

with

net

inflow

of

customer

deposit

s

growing

by

€23.4

billion.

We

added

more

than

830,000

primary

customers,

which

shows

that

our

customer

experience

continues

to

be

differentiating

and

drives

growth.

With

digital

disruption

changing

customer

expectations

we’re

looking

for

new

ways

to

stand

out

from

the

crowd.

Our markets

ING’s retail business serves 38.8 million customers. In most of our retail markets we offer a full

range of banking products and services, covering payments, savings, insurance, investments and

secured and unsecured lending. Our wholesale banking business offers clients advisory value

propositions such as specialised lending, tailored corporate finance and debt and equity-market

solutions. Our clients range from large companies to multinational corporations and financial

institutions.

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Our

Market Leaders

are Belgium, the Netherlands and Luxembourg.

These are mature businesses

where we have strong positions in retail

and wholesale banking. We’re investing in digital

leadership to deliver a uniform customer experience with one customer interaction platform and a

harmonised business model.

In 2019 the Market leader highlights were the following:

◾

Launched Payconiq in the Netherlands: customers can pay with their smartphone in stores and

online

◾

Apple Pay introduced for customers in the Netherlands

◾

Customers in Belgium can now use voice activated Google assistant to look up information on

ING

◾

In Belgium, customers can now start the mortgage process online

◾

We offer large mid-corporates in

the Netherlands a scalable self-service digital marketplace

called Invoice Trader

where they can trade their receivables

to external investors

Our

Challengers

markets are Australia, Austria, Czech Republic, France,

Germany, Italy and Spain.

Here we’re

aiming for a full retail and wholesale relationship, digitally distributed through low-cost

retail platforms. We

also aim to use our direct-banking experience to grow consumer and SME

lending, and our strong savings franchises to fund the expansion of wholesale banking in these

markets.

In 2019 the highlights for the Challenger Markets were the following:

◾

In Austria, we expanded our product range to include mortgages in cooperation with ING owned

mortgage broker Interhyp

◾

We help customers in Germany to better manage their money by notifying them of upcoming

payments

◾

Introduced

Apple Pay for customers in Spain. The use of mobile contactless payments in

Germany rose after the launch of Google and Apple Pay in Germany

◾

Australia and Spain achieved #1 NPS rankings, demonstrating

the value of our Think Forward

strategy

Our

Growth Markets

are universal banks with a full range of retail

and wholesale banking services

in countries whose economies have high growth potential. These include Poland, Romania and

Turkey. In these markets we’re

investing to achieve sustainable franchises and will focus on digital

leadership by converging to a mobile-first model and prioritising innovation. Our newest Growth

Market is ING in the Philippines, where we launched an all-digital retail

bank in November 2018.

In 2019 the highlights for the Growth market were the following:

◾

Apple Pay introduced for

customers in Romania

◾

In Poland, customers can add their Visa debit card to their Apple Wallet using the Moje ING app

◾

ING customers in Poland can now use voice-activated Google assistant - without logging in -

to

check their balances or to make transfers between accounts

◾

To

help customers In Poland better manage their money we now offer features notifying them of

upcoming payments

◾

In a first for ING countries business

customers in Poland

can use Garmin Pay and Apple Pay,

contributing to a further increase in mobile contactless payments there

◾

In Turkey, we

can see in real time when customers have a problem at our ATMs

and proactively

call them to try and solve it

Wholesale Banking

is an important and integral contributor to ING's commercial performance.

With a local presence in more than 40 countries, ours is a sector-focused client business providing

corporate clients and financial institutions with advisory

value propositions,

such as specialised

lending, tailored corporate finance and debt and equity market solutions. We also serve their daily

banking needs with payments and cash management, trade and treasury services.

In 2019 the following highlights were achieved within Wholesale Banking:

◾

Supported 62 green, social and sustainability bonds and 61 sustainable improvement loans

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◾

We issued the largest green

Schuldschein to date with Porsche

◾

Blockchain-based trade finance platform Contour, co-founded by ING Ventures, launched into

the $18 trillion global trade finance market

◾

We introduced

the first sustainable

improvement derivative to market

◾

We provided

a centralized digital vault for corporate

customers to store their KYC docs and

enhanced transaction monitoring tooling for our KYC purposes

◾

PSD2 APIs live on the open banking Developer portal

Achieving our business goals

Banks are operating in a fast-changing environment marked by new competitors, new customer

expectations, increased regulation and higher capital requirements. At

the same time, persistently

low interest rates put pressure

on our savings business model. We are finding new ways to be

relevant to our customers.

To

achieve our business goal of creating a superior customer experience, we focus on four strategic

priorities: earning the primary relationship; thinking beyond traditional banking to develop new

services and business models; using our advanced data capabilities to understand our customers

better and meet their changing needs, and innovating faster.

Earning the primary relationship

Earning the primary relationship is a strategic priority for ING as it leads to deeper relationships,

greater customer satisfaction and ultimately customers choosing us for more of their banking

needs.

We don’t only want our customers to do some of their banking with us, we want to be their first

partner, where they deposit their salary, handle their payments and do most of their other banking

business. At the moment, ING has 13.3 million primary relationships, and the target is to grow this

to over 16.5 million by 2022.

In Retail Banking, we define primary customers as

those with multiple active ING products, of which

one is a current account where they deposit a regular

income such as a salary. For Wholesale

Banking, a primary client is an active client with lending and daily banking

products, and at least

one extra product generating recurring revenues

over the last 12 months.

Customer numbers continued to grow in 2019. Primary customer growth across Retail

segments in

2019 included 63,000 for the Benelux, 526,000 for the Challenger markets, and 242,000 for Growth

Markets. In Wholesale Banking, the number of primary customers grew by three percent as we

deepened our relationships, particularly in the daily banking space with existing lending-only

clients in the US and EMEA.

Customer promise

Banking doesn’t have to be difficult

and time consuming. Clear products, plain language, fair prices

and simple processes save customers time and money. ING promises to make banking clear and

easy, to provide services anytime anywhere, and to keep getting better.

We are

driven by our purpose to empower people to stay a step ahead in life and in business. We

do this by constantly innovating to deliver a differentiating customer experience that aims to be

smart, personal and easy.

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Across ING, digital channels are accounting for an increased number of contacts with Retail

customers. For example, a growing

share of retail customers only interacts with ING on their mobile

device, up from 12 percent

in 2016 to 37 percent in 2019. The number of interactions grew by 80

percent since 2016, reaching 4.5 bln interactions in 2019, with mobile interactions increasing

to 82

percent in 2019, versus 52 percent in 2016.

Given the rise of digitalisation, and growing competition from disruptive newcomers

to our sector,

we want to do more than just live up to our Customer Promise.

We want to surpass people’s

expectations.

We want to use the insights from our 4.5 billion customer interactions to offer a personalised and

empowering experience, giving them even more reasons to interact

with us. This is how we can

differentiate ING from other banks and become an essential part of people’s digital lives.

One of the ways we measure our progress

is the Net Promoter Score (NPS), which measures

customer satisfaction and loyalty (whether they would recommend ING to others). The score is

calculated as the difference between the percentage of promoters

(who rate ING as 9 or 10 out of

10) and detractors (those scoring ING below a 6). Our aim is to achieve a number one NPS ranking

in all our retail markets, with a 10-point lead over our main competitors. Based on a rolling average

of our NPS scores in 2019, ING ranked number one in seven out of our 14 Retail markets.

In Wholesale Banking, the overall NPS score improved

by 11 percent year on year to 49.6 (on a

scale of -100 to +100), outperforming the industry benchmark. This suggests clients appreciate our

new approach (see ‘Unleashing sector potential’ below). The number of surveys sent increased by

28 percent year on year, and the response rate increased

from 46.6 percent to 50.6 percent.

The

NPS growth for Platinum clients decreased year on year but the NPS of all the other segments

increased. Overall level

of satisfaction went up from 8.4 to 8.5. We now have NPS scores

from WB

clients generating 42 percent of our revenues.

We added a further five countries to the NPS programme in 2019, which is now running in 26

Wholesale Banking markets. In 2019, NPS played an even more prominent role in gauging client

satisfaction in Wholesale Banking, with clearly defined

KPIs applied across all parts of the business

and a more active

feedback process.

Unleashing sector potential

In 2019, we remained focused on servicing our corporate clients with relevant

advice, data-driven

insights and customised, integrated solutions that make their day-to-day banking more efficient

and support their business ambitions.

This is in line with the revised Wholesale Banking strategy we introduced in 2018 to enable us to

adapt to and overcome a challenging and complex market environment, as well as increased

regulatory requirements,

evolving technology, greater competition and our clients’ changing

needs.

We developed

our sector strategy over the year, pairing local and global insight with sector

knowledge and financial expertise.

‘Commercial passports’ give us insight into what services we

provide to each client and the regions where

we serve them, while our uniform client segmentation

framework helps us tailor our daily banking and advisory value propositions to their specific needs.

Several deals in 2019 reflect this sector focus. In the telecom, media and technology space, ING

acted as financial

advisor for global asset management company DWS in the merger of leading

Dutch data centres NLDC (DWS's infrastructure business acquired

NLDC from Dutch telco KPN in

2019), and The Datacenter Group (TDCG) group.

By advising DWS, ING enabled it to make its

maiden investment in the telecom infrastructure sector and created the largest player in the Dutch

market. In the food and agribusiness sector, ING coordinated the largest-ever sustainability

improvement loan in commodity trading for China’s multinational leading food and agri company,

COFCO International. The $2.1 billion loan links COFCO International’s interest

rate to its

sustainability performance and rating. And in the sustainable finance space, ING added another

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first to its growing sustainable finance

deal portfolio in Asia/Pacific. We provided a subsidiary of

Sunseap Group, a Singapore-based renewable energy

company, with $37 million to build rooftop

solar projects in Singapore.

In Transaction

Services, we optimised our client-facing model, streamlining our products and

services and increasing efficiency

in sales support. We also brought together various client trading

activities scattered across Financial Markets into one team and further embedded the FM business

into our client organisation with a new sales model that is fully aligned with the rest of Wholesale

Banking. This will help to maximise cross-buy opportunities and improve our client-service delivery

with consistent products and a one-client approach everywhere.

Platform thinking

ING’s purpose is to empower people to stay a step ahead in life and in business. To continue doing

this in a world that is changing quicker than ever before, we need to be where our customers are –

on digital platforms.

Thinking beyond traditional banking is crucial to find

new ways to be relevant to customers. Here,

open banking offers opportunities.

By partnering with others or developing our own digital

platforms, we can offer customers new and complementary services that go beyond banking – and

create new revenue

streams for ING.

Platforms empower customers by providing them with a range of primary needs in one place.

Through frequent user interactions, platforms also generate

large amounts of data. By mastering

data skills, platforms get to know their customers and their needs increasingly well, enhancing the

platform’s value, and that of its users.

The other advantage with platforms is that they are scalable, open and borderless, offering their

users the same experience everywhere. With little to differentiate one bank’s products from

another, we believe it is customer experience that will set ING apart.

ING has different faces in different markets and different banking interfaces, each with its own look

and feel. By uniting our platforms, processes and products we can provide

a consistent customer

experience in every country. This is driven by a growing desire

for similar online experiences in an

increasingly digital world.

We are

making progress in achieving this in a number of ways, including by working internally to

establish a truly cross-border banking platform that aims to provide

one unique, uniform customer

experience that is best in class and leverages scale, and by pursuing strategic platform initiatives.

This was the year that Unite be+nl became a reality for our customers in the Netherlands and

Belgium, with the introduction of common digital channels in these countries. Unite be+nl is one of

several programmes

we are rolling out to build ‘one ING’ and is an important step towards a global

platform. Maggie (formerly Model Bank) is our transformation programme uniting our retail

strategy and capabilities in Spain, Italy, France

and the Czech Republic. Its emphasis is on

increasing our digital interaction with customers, improving customer satisfaction and boosting

sales.

Platform initiatives

Our Yolt aggregator

app was named Personal Finance App of the Year

at the 7th Annual Payments

Awards in the

UK. We extended the app with Yolt

Pay, a new feature that enables users to move

money between their accounts and make payments to friends and family from supported banks.

In 2019, we increased our stake in international payments platform Payvision to make it a wholly

owned subsidiary. This is an important step towards becoming the preferred platform

for business

customers and strengthens ING’s digital payments business, especially in e-commerce. Payvision

facilitates more than 80 payment methods in 150 currencies. In 2019, Payvision and ING

introduced the omnichannel (eCom + in-store) proposition for

corporate clients. The ING and

Payvision combined commerce solutions proposition helps merchants offer our clients’ shoppers a

seamless checkout experience across all channels.

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Through ING Ventures,

we are continuing to invest in fintechs, focusing on collaborations that

support our strategy of creating a differentiating customer experience. In 2019, we made a further

multi-million euro investment in Spanish-based fintech Fintonic. Fintonic is the leading finance

app

in Spain. It provides financing and savings solutions that help users

manage their personal finances

more effectively.

We’ve invested

in Flowcast, a tool we hope to use to benefit Wholesale

Banking clients The fintech

start-up uses machine learning algorithms to improve the credit decision process. Its predictive

models reduce risk and unlock credit to businesses. The investment is a boost to ING’s AI

capabilities.

We also invested in multibank platform Cobase,

which makes it easier and more efficient

for

international corporate clients to work with multiple banks. As a cloud solution, Cobase minimises

the IT effort for clients and does not require investments or long-term contracts for licences or

hardware.

Beyond banking platforms

In 2019, we introduced the first products resulting from our collaboration with insurer

AXA, offering

customers personalised insurance services in a clear and easy way via the ING mobile app.

Targeting

six of our Challengers markets, the partnership aims to provide insurance products and

related services through a central

digital insurance platform. We

launched seven products in four

countries: Italy, Australia, Germany and France,

and grew the team in our central Paris office,

working closely with all our markets. The first

product, instant travel insurance through

a mobile

phone, was launched in Italy. Geo-localised travel insurance can be activated with just a few clicks

on a smartphone from the airport or country of destination.

In Australia, we widened our digital insurance portfolio by adding motor and travel insurance

to our

existing home insurance offer.

The motor insurance coverage

has been particularly successful with

more than 1,000 new customers a week now covered

following its launch in May 2019. And in

Germany, ING customers can now secure the repayment of their mortgage in the event of death.

We built on our beyond banking proposition with third

-party offerings such as ING+Deals in Belgium

and ING Punten in the Netherlands. ING+Deals, launched in 4Q 2018, is a cashback platform for

customers, made possible by exclusive deals ING has negotiated with various A-brands (40+ brands

offering over 45 deals a month). It has 150,000 users who to date have received more than

€400,000 cash back, generating €2 million for the participating brands. In addition, participating

customers increased their interactions with ING’s online channels by more than 20 percent. ING

Punten, a shopping platform for customers in the Netherlands to increase loyalty and drive digital

interactions, is also partnering with trusted A-brands. In 2019, 1.1 million products were sold,

delivering a turnover of €31 million.

Following our 2018 acquisition of a 90 percent stake in Dutch digital real

-estate platform

Makelaarsland, which allows people to buy or sell homes online independently or with support

of a

local Makelaarsland agent, we achieved a number of milestones in 2019. These include successfully

launching a home

buying proposition, expanding the agent network to 20 agents – now covering

half of the Netherlands – and creating strong links between ING’s mortgage advisors and

Makelaarsland’s agents.

In the fourth quarter, ING launched real-estate marketplace Scoperty across Germany, a joint

venture with Pricehubble and Sprengnetter, which aims to bring transparency

to the German

housing market. Based on high-quality data and machine learning, the Munich-based

proptech

company aims to show all 40 million properties in Germany and to connect potential buyers and

sellers. Scoperty was initially piloted in Nuremberg with more than 100,000 properties, before

expanding nationwide by the end of 2019. More transparency in the German residential housing

market can mean a broader offering of properties for consumers. The team is working on pre-

qualifying potential homeowners by aligning with Interhyp’s mortgage process. Interhyp is ING’s

independent mortgage brokerage platform in Germany and Austria. For sellers and real-estate

brokers this pre-qualification has important value in their choice of accepting offers from buyers. As

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part of the network effect, pre-qualified

buyers may even benefit from three days access to new

home listings. Interhyp, which offers access to 500 mortgage lenders, had a

record year in 2019,

with €24.5 billion in new residential mortgages, and 9.0 percent market share in Germany.

Differentiating customer

experience

Understanding our customers better and meeting their changing needs is core to what we do. In

2019, we continued to innovate to improve

the banking experience for our customers, while helping

them transition to a more efficient and

more sustainable economy. ING’s ambition is to be a leader

in terms of the digital banking experience, offering our customers everywhere the same

empowering and differentiating experience and making banking frictionless. In addition to uniting

several of our Retail businesses on digital platforms that will provide

the same customer experience

everywhere, for the first time we also have a shared brand direction and our first global tagline. The

‘do your thing’ tagline articulates ING’s purpose and our customer promise. It encourages people to

do more of the things that move them or their business. It’s not about irresponsible behaviour, but

about people being free to live the life they want to live, knowing they are making their world a

little better for it.

Launched in the Netherlands in January 2020, the new brand direction and tagline will be rolled out

across ING during the year and used in all our business units to bring our customer experience to

life.

Our advanced data capabilities are an important asset in helping us improve the customer

experience and earn the strategically important primary relationship. We

rely on data to

understand what customers want and need. We use these insights to personalise our interactions

with customers and empower them to make their own financial

decisions.

Our customer-facing platforms offer multiple touch points to interact with customers and collect

data that we use to define customer

journeys; for example when and where they choose to do

their banking, the device they use and the services they prefer.

We test these insights with

feedback from customers to continuously improve

our services.

One of the ways we’re working to enhance the customer experience is through our transformation

to a customer-focused organisation. The benefits of introducing one Way of Working (WoW)

across

ING include transparency, wider alignment, increased speed and predictability in product delivery

and, most importantly, putting the customer first.

More examples of how we’re

providing a differentiating customer experience come from Poland,

where Wholesale Banking clients can now sign credit documentation electronically, and Belgium,

where customers are able to begin the mortgage process online.

In November 2019, we held our first global customer experience (CX) day.

The focus was on making

banking frictionless through many small improvements that make it more personal, easy and

smart, and by working to eliminate or minimise any compromises to the experience resulting from

backlogs or other priorities.

For example, in Poland one result

of CX day was an improvement to Moje ING that improves

the

communication process for entrepreneurs

applying for a loan, making it clearer and more timely.

ING in Romania introduced biometrics to authorise customers to do payments. Colleagues in Spain

found a better way to track their customers' experience and also developed functionality on their

banking app to allow them to easily schedule branch appointments. In the Netherlands and

Belgium, 2,000 participants made 565 improvements for our clients.

We’re

on the right track. Among other achievements, ING topped Forbes’ inaugural World’s

Best

Banks list in 2019. The survey asked 40,000 customers in almost 24 countries about their opinions

on the banks they use. ING was placed among the best-performing banks for customer-centricity in

Australia, Austria, Belgium, France,

Germany, Italy, Poland, and Spain. And we topped the rankings

on both trust and digital services.

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In Australia, new research

in 2019 found ING had the highest customer satisfaction among retail

banks, scoring well above the industry average.

The 2019 Australia Retail Banking Satisfaction

study by JD Power measured the satisfaction of nearly 5,000 banking customers.

Know your customer

Just as we need to know our customers better to deliver better products and services, we also need

this knowledge to ensure we do not accept people or institutions who misuse the financial

system.

We are

making ongoing progress strengthening our global KYC organisation

and activities

throughout ING. We are

using technology and our innovation skills to make improvements and

rolling out global KYC solutions that all countries can connect to.

ING continues to work on the global KYC enhancement programme, which emphasises regulatory

compliance as the key priority. This is a sizeable operation as we have activities in over 40 countries

and have more than 38 million customers. The programme encompasses all client segments in all

ING business units.

We are

also working with local authorities, law enforcement agencies and other financial

institutions to fight

financial and economic crime. In 2019, ING was one of five

banks in the

Netherlands to join forces in the fight against money laundering. The ambition

is to investigate the

set-up of a cross-bank organisation that will monitor payment transactions: Transaction

Monitoring

Netherlands (TMNL). Together with the Dutch Banking Association (NVB), we are involved

in a

feasibility study into the technical and legal challenges involved. In the proposed new plans, we are

collectively looking for cooperation with Dutch authorities, including the Financial Intelligence Unit

(FIU), the Public Prosecution Service, Fiscal Information and Investigation Service (FIOD) and relevant

ministries.

Continuing to innovate

In 2019, we continued to innovate to improve

the banking experience for our customers,

introducing several

innovations that make banking faster and more secure for our clients.

Our cutting-edge AI tool Katana – named

as an Innovator 2019 by Global Finance magazine – helps

to improve decision-making in bond trading. In 4Q, Katana

was spun out into an independent

London-based company called Katana Labs,

with backing from ING Ventures

and other investors.

This is in line with ING’s strategy to create innovative

fintech solutions

and then support them in

becoming independent companies.

The advanced analytics platform can aggregate vast amounts of data from multiple sources

to

predict the price and identify the most promising trades. The results

show traders using Katana win

20 percent more trades

and their prices are 20 percent sharper.

At the same time, it helps

investment managers to make faster, better informed, data-driven investment decisions.

We participated in the launch of instant payments in the Netherlands and Belgium by the Dutch

Payments Association and the Belgian Banking Federation. Funds now get credited

to the

beneficiary account within five

seconds, giving customers immediate access to their funds and

helping them optimise cash flows. We will extend this to the rest of Europe from

2020.

Wholesale Banking clients were able to initiate and receive instant payments in Hungary as of July

2019. Instant payments are now processed within five seconds, with a maximum amount of HUF

10 million. Instant payments make it possible to make payments 24/7,

365 days a year.

There is no

difference between ‘working days’ and ‘non-working days’.

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In another exciting payments innovation, ING is collaborating with Dutch retailer Albert Heijn, which

is piloting a fully digital supermarket. This physical store is packed with convenience-boosting and

time-saving technological innovations. ING helped to develop these in our FABlab

(fabrication

laboratory), which focuses on cross-industry collaborative innovation. Shoppers use their bank

cards to gain entry to the store. The items they select from the shelves are

registered

automatically. Payment, processed by ING, happens automatically when they leave.

We aim to ‘wow’ our customers with improvements

to their service experience. In Turkey, we can

now immediately identify when customers are having a problem at one of our ATMs; we

call them

at that moment to try and solve it. We also use our app to help customers in Turkey

who are more

than one kilometre away from an ING ATM

by granting them the right to use other banks’ ATMs

free of charge.

Together

with UniCredit, we invested in Axyon AI, an Italian company that helps banks offer better

and faster advice to their clients by using artificial

intelligence to, for example, identify investors

most likely to participate in a syndicated loan.

Our open-source software ‘FINN – Banking of Things’ was created within ING Labs

and enables

smart devices to pay for their own usage, such as allowing a car to pay for the car wash. We offer

this software to our business clients, who can use it to ‘wow’ their own customers.

In Wholesale Banking, highlights in innovation in the digitalisation space include two KYC initiatives:

Domino and CoorpID. Using advanced algorithms, Domino collects and connects payments, lending

and financing

data to provide insights that would not normally be readily available. The platform is

live in several departments and used by approximately 800 retail

and WB colleagues, of which 50

serve around 20 percent of ING’s Dutch corporate

clients. CoorpID provides a centralised

digital

vault for corporate customers to store and share

all their KYC documentation in a secure way. It

enables clients to manage their own KYC data and easily share it with other banks, insurance

companies, or auditors.

Blockchain and distributed ledger

technology (DLT)

ING is considered an industry leader in the distributed ledger technology (DLT) space.

In 2019,

Forbes ranked us fifth among global listed companies with high blockchain potential,

recognising

the pioneering work we’ve done in this area to improve

our product offering and make banking

even easier for our clients.

This includes breakthroughs in improving data privacy

within distributed or shared ledgers using

our open-source zero-knowledge range

proof

codes. Bulletproofs builds on these earlier codes,

making them even faster, safer and easier to use, while our zero-knowledge proof

notary service

improves the privacy and security of transactions on the Corda

blockchain platform. It evaluates

the validity of a blockchain transaction without revealing anything about it, except that it’s valid –

like a notary whose job is to witness the signing of documents to validate them.

Blockchain is reinventing commodity trading, making it quicker, easier and more efficient. ING’s

Easy Trading

Connect platform was one of the first to digitalise

commodity trade financing.

Building on its success, we’ve tested a number of successful experiments on the platform. These

include Vakt, announced in 2017, which manages physical energy transactions from

trade entry to

final settlement and

Komgo, the blockchain-based platform that transmits commodity

transactions in a secure environment. In August, we successfully executed

our first oil trade on

Komgo, which has evolved into a venture

with 15 corporates and financial institutions. The deal

was executed by the Commodity Trade

Finance branch in Geneva with a letter of credit

issued on

behalf of Mercuria Energy Trading

S.A.

We also teamed up with commodity companies and financial institutions to

launch Forcefield, a

blockchain-based inventory management system that makes post-trade commodity transaction

processing cheaper, safer, and more efficient. It manages commodities throughout their entire

supply chain life cycle and reduces the risks and costs of handling physical inventory.

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And we joined forces with other global banks to create a digital coin that can be used to settle

international money transfers instantly. This is a new step in the development of the Utility

Settlement Coin (USC) project, set up in 2015 by Swiss bank UBS to develop a blockchain-powered

payment mechanism to make transactions more efficient.

A digital version of existing currencies,

USC will cut out intermediaries, reduce exchange-rate risks, making the payments and settlements

process faster and lowering transaction costs.

In Q4, blockchain-based trade finance platform Contour, co-founded by ING Ventures, launched in

Singapore into the USD 18 trillion global trade finance market. Contour was co-created by ING and

seven other banks in 2018 to simplify letters of credit, reducing the amount of time needed to

process them from five to 10 days to under 24 hours. The launch follows a series of live pilots in 14

countries and a global trial with more than 50 banks and corporates. Ninety-six percent of

participants said Contour would accelerate their letters of credit process,

improve efficiencies and

reduce costs.

Open banking

We strive at all times to protect customer data and privacy in line with the new European

regulations. Customers’ needs and expectations are changing rapidly and companies have no

option but to embrace this shift and adapt. At the same time, open banking requires banks to

rethink traditional products and services, and go beyond traditional banking territory in creating

new customer experiences.

We’ve chosen a strategic

approach towards the revised

Payments Services Directive (PSD2) and

open banking. We invest in building one global platform serving all of our 38 million Retail

customers, and corporate and institutional clients, in more than 15 countries. This helps us to

become a global platform bank, scalable, open and borderless, with one user experience, one API

(application programming interface) solution and one developer portal to efficiently and

seamlessly connect and interact with customers and partners.

Open Banking is a key enabler for new open business propositions and strategic platform strategies

across all client segments. Since September 2019, all banks in Europe must implement PSD2. We

have three PSD2 APIs available to external parties on our developer portal. These give customers

the choice to use third-party apps to manage their money or make online payments. For business

clients in the Netherlands we launched a payment request API that enables them to enhance their

end-consumer experience by adding a convenient, simple payment functionality into their own

app.

Partnerships are becoming more and more important to the delivery of optimal client experiences.

APIs are essential for enabling digital businesses, as they are the de facto standard for integration

and co-creation with our partners. With open banking, we are laying the foundation for the bank of

the future. We

provide the key capabilities that allow ING to open up by establishing secure,

scalable, compliant and uniform connectivity with external parties via APIs.

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Our digitalisation journey

Digital banking, innovation and transformation are in

our DNA. ING’s aim is to be the next

generation digital bank, offering a single digital platform or ‘ecosystem’ where customers can find

solutions to all of their financial

and finance-related needs.

Digitalisation guides our investments and transformation efforts. Our ambition is to offer customers

everywhere the same empowering and differentiating experience. We

are going about this in

several ways.

In 2019, we continued to innovate to improve

the digital customer experience and to strengthen

our mobile-first approach. The number of mobile

card transactions increased six-fold in 2019 from

2018, boosted by the integration of third-party services like Apple Pay and Google Pay. The overall

share of customers who only interact with us on their mobile device increased to 37 percent in

2019 from 26 percent in 2018. The adoption of mobile payments will grow exponentially in coming

years, which is expected to boost mobile even further.

We are

digitalising more processes to make them convenient and time-saving for customers. For

example, in 2019, with Apple Pay, we enhanced the experience of our mobile app users in the

Netherlands, Germany, Romania and Spain. In Germany and Poland, we now offer features that

help customers to better manage their money by notifying them of upcoming payments,

similar to

the ‘Kijk Vooruit’ feature

in the Netherlands. We also made Google Pay available in Germany and

Poland.

Another highlight was the launch of our mobile-only bank offering

in the Philippines. ING has been

operating in the Philippines for nearly 30 years, but only moved into retail banking with the official

launch of our first all-digital

savings product in November 2018. It is the first bank savings

product

that allows transactions to be conducted solely on ING’s mobile app. creating an account is free.

Users only have to download the ING app and make sure they meet a number of requirements,

including being at least 18 years old and having one of three government-issued IDs. Since the

launch, there have been around one million app installations, we have signed up more than

100,000 customers and the app scores an average 4.2 rating.

In the Netherlands and Germany, Wholesale Banking clients can now easily open an account

digitally and directly from their

ERP via e-Bank Account Management, using a SWIFT standard. In

developing this, we enable clients to standardise the process for account

openings and later

mandate changes to be able to create the basis for digital lifecycle management.

In 2019, we saw increased uptake of our

Virtual Cash Management

solution, enabling treasurers to

manage their cash position via a single master account, while keeping local accounts across Europe

for local operations without the burden of managing all those accounts individually.

Our digital portal,

InsideBusiness

, is a key enabler of our ‘digital first’

philosophy in Wholesale

Banking. Our main interactive channel for business clients, it offers a single point of access to a

growing range of corporate

banking services, online and through a mobile app. It provides all the

touch points that business clients need, through a single sign-on, giving them real-time insights

and a single source to manage all their financial transactions at any

time, and on any device. We

launched InsideBusiness in 2015 and it now has around 18,000 companies using it, with 57,000

active users, 6,000 of whom use the mobile app. Large corporates

make up 32 percent of users,

with the rest being mid-corporates. Our goal is to have all our corporate clients using it

– and we’re

gradually closing in on that target.

A recent improvement

was the launch of Corporate Administrator.

This allows clients to decide for

themselves which employees can do certain things in their account. Clients can appoint one or two

of their own corporate administrators who can grant

access rights. Already, around 40 percent

of

our corporate clients are using Corporate

Administrator, which is ahead of our targets.

Another enhancement is the addition of a breakthrough feature called

M-Token

. This addresses the

priority we place on security combined with convenience. It replaces the previous

card-and-reader

access, which became increasingly inconvenient for our customers. M-Token,

via the InsideBusiness

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app, makes access a lot easier.

Now, to gain access, clients can simply launch the mobile app and

scan a QR code on the login page.

New-look branches

While banking is becoming increasingly digital, our branches still have an important role to play in

providing more complex, personal advice to customers.

This is driving ING to change its branches, making them even more personal, while equipping them

to meet today’s digital needs. The idea is to make customers feel at home. Some branches have a

big table, where customers can settle down, have a cup of coffee or do some work. There are

separate booths to get personal advice. There’s also a kid’s corner and a fully equipped ‘digi-corner’

for online banking or learn-how activities.

In time, all of ING’s branches will adopt this new, home-like concept. Some have already opened in

Turkey, Poland,

Spain, Romania, Belgium, the Netherlands, Italy, Austria and Luxembourg.

SME & Mid-Corp

The SME & Mid-Corp segment aims to empower people to manage and accelerate their business.

No matter how big or small, businesses everywhere are increasingly digitalised and expect their

bank to be connected and integrated into their world. They want digital solutions that are smart,

personal and easy. To meet these needs and deliver an exceptional experience for

these

customers, we’re transforming our current

service model and building digital capabilities to offer

compelling end-to-end digital customer journeys supported by a common infrastructure.

This includes enabling merchants in Turkey to accept

payments more easily via their smartphones

rather than expensive point-of-sale terminals; an online banking platform that gives businesses a

single access point to all their financial

products and services; and instant loans for entrepreneurs

in Germany through our acquisition of fintech Lendico. In November 2019, new loan utilisation

increased from €1 million to €14.4 million.

In Poland, ING’s online banking platform for business customers was named by Global Finance

Magazine as the world’s best Integrated Corporate Banking site for 2019. It currently

provides

around 65,000 SME and mid-corporate clients with a single access point for all their banking

products and services and handles more than 70 million transfer orders a year.

In Romania, the

business platform processed its first one million payments

in 3Q 2019.

Also in Poland, ING is the first bank to launch its own payment gateway – imoje – that provides

merchants with a unique ‘buy now, pay within 21 days’ payment option. Co-created with Czech

fintech Twisto, 1,500 shops are now using the payment gateway and 580,000 transactions have

been carried out on imoje since April 2018.

Responsible finance

ING is committed to contributing to a low-carbon and financially

healthy society, both through our

own efforts and by helping our clients to be more sustainable. As a bank, we make the most impact

through our financing, via the loans we provide to clients. This is why we announced in September

last year that we would steer our €600 billion lending portfolio towards meeting the well-below

two-degree goal of the Paris Climate Agreement.

Our strategy to get there is called the

Terra

approach.

One year later, we published our first

progress report

on Terra,

providing a status update on the

alignment of our lending portfolio with the pathway to the goal. The report presented our climate

alignment performance, targets, challenges and next steps for five of the nine sectors

with the

biggest influence on greenhouse gas emissions: power generation, automotive, commercial real

estate, residential real estate and cement.

For the remaining four in scope, fossil

fuels, shipping, aviation and steel, we provided an update on

progress to date, initiatives and next steps. Quantitative results

for these four sectors are expected

to be disclosed in 2020.

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The report’s centrepiece, the Climate Alignment Dashboard (CAD), discloses quantitative results

on

the climate alignment of our lending portfolio. It shows the CO2e intensity per sector of our

portfolio compared to the market and the relevant below two

-degrees climate scenario. It also

displays the climate alignment target per sector and ING’s intended decarbonisation pathway per

sector to converge towards

the target.

While Terra

is supporting our responsible finance business

and will guide ING towards new

opportunities to support our clients, Terra will also help us to build a more climate-resilient portfolio

as it guides our strategies towards two

-degree alignment. Terra,

therefore, forms part of our

alignment with the Taskforce

for Climate-related Financial Disclosures (TCFD)

recommendations.

As each sector requires a custom approach, Terra

draws upon more than one methodology for

target-setting. Currently, we focus on the Paris

Alignment Capital Transition

Assessment (PACTA)

for corporate lending, and the Science Based Targets

Initiative’s Sectoral Decarbonisation Approach

(SBTi SDA).

PACTA

was co-developed with the 2˚ Investing Initiative (2˚ii), a global think-tank developing

climate metrics in financial

markets. It looks at the technology shift that’s needed

across certain

sectors to slow global warming and then measures this against the actual technology clients are

using – or plan on using in the future. The SBTi SDA sets out sector-specific decarbonisation

pathways designed so as to be in line with the science-based scenarios using intensity metrics.

Both methodologies use science-based scenarios developed by independent organisations like the

International Energy Agency and inform us what needs to shift, by how much and by when. This is

where financing comes in – and ING can have an impact.

The client data underlying the Terra

approach is obtained from global databases that track public

and private asset level and company data worldwide in the sectors in scope. This is easier for

clients, as they are not required

to provide any additional data themselves.

In December 2018, the global banks BBVA,

BNP Paribas, Société Générale, and Standard Chartered

joined ING in making the Katowice Commitment to align their loan portfolios with global climate

goals using a similar approach. We have

also personally and individually engaged with more than

40 banks interested in the work ING is doing and the positive results are

visible.

Since its launch at ING’s offices

in London in February 2019, more

than 17 systemically important

banks, including ING, have joined the 2˚ii PACTA

pilot for banks. ING was also among the first

signatories of the UNEP-FI Principles for Responsible Banking (PRB). In addition, ING co-chaired the

sub-group that developed the PRB Collective Commitment on Climate Action which took ING’s

Katowice Commitment initiative as its foundation.

The Terra

approach is complemented by the other ways we work to drive sustainable business. We

have committed to reducing our

thermal coal exposure

to close to zero by 2025 and support our

clients globally to transition to a low-carbon and self-reliant society. We

do this through various

financial instruments,

including green loans, sustainable improvement loans, bonds and advisory

services.

We were

well on track in 2019. Climate finance increased 13 percent to €18.7 billion, and lending to

industry ESG leaders grew slightly by 0.1 percent to €7.1 billion. Although social impact financing

decreased 3 percent to €750 million due to repayments, we remain

committed by lending to

projects that lead to, for example, basic infrastructure improvements,

community development or

essential services.

In addition to lending, we supported 62 mandates for clients through green, social and

sustainability bonds. ING increased its bonds business by 68 percent year-on-year to €5.6 billion,

outpacing the total euro denominated bond market growth.

ING is considered one of the pioneers in sustainable finance, having introduced the first

sustainability ESG-linked loan and a made-to-measure sustainability improvement loan. In 2019,

ING continued to shape this sector and open up new markets by developing sustainability

improvement concepts and financial products.

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In 2019, we introduced the first sustainability-linked Schuldschein, together

with machinery and

plant manufacturer Dürr.

ING jointly arranged and structured the transaction.

In the second quarter, we announced the world’s first

sustainability improvement derivative (SID)

provided to SBM Offshore, a global company that supplies floating production units to the offshore

energy industry. The SID is an interest rate

swap that hedges the interest rate risk of the

construction of one of SBM Offshore’s floating

production, storage and offloading facilities. It’s the

world’s first derivative with a price linked to the company’s sustainability performance, as well as

trading risk, capital require

ments and profit. The credit spread of the SID can increase or decrease

based on SBM Offshore’s ESG performance, as scored by Sustainalytics, an independent provider of

ESG research and ratings.

In October, we launched another product aimed at encouraging companies to get measured on

ESG goals. Our sustainability improvement capital call facility for Singapore-based Quadria Capital

Management is the first

in the world to link the interest rate of the private equity fund to the

sustainability performance of its portfolios. The USD 65 million three-year revolving capital call

facility is the first of

its kind in the global fund finance industry,

which is currently worth USD 400

billion.

We continued to deepen our market credentials with sustainable finance products that support our

corporate clients in achieving better sustainability performance.

We issued 61 sustainability improvement

loans and supported 62 green loans and social and

sustainability bonds in 2019. These include green finance

frameworks and green

loans for Italo,

Europe’s leading high-speed rail passenger operator,

and Itochu, a Japanese trading company, as

well as a sustainability-linked loan for Chinese-owned trading firm COFCO. ING also closed its first

sustainability improvement loan in the US, structured by ING’s sustainable finance Americas team.

Alongside the growing number of green loans and bonds, there were

a number of sustainability

firsts in 2019. ING issued

the largest green Schuldschein with Porsche for €1 billion, and the first

green bond framework in the telecom sector with UK telecoms company Vodafone.

The Porsche

transaction is also the first of its kind

by a car manufacturer, and the huge demand resulted in the

original order book volume having to be increased. ING acted as the green advisor on the project.

ING also issued its first-ever green covered bond. In October, ING Bank Hipoteczny in Poland

launched a PLN 400 million (USD 93 million) five-year

green covered

bond on the back of strong

investor interest.

ING was also the sole green structuring advisor for the Norwegian bank SR-Boligkreditt’s €500

million first green covered bond, helping to draft a green bond framework that stipulates

investments in green buildings, renewable

energy and clean transportation.

Almost half of our loan book consists of mortgages. Our ambition is to make our mortgage

portfolio

energy-positive by 2050. This means the homes in this portfolio will collectively produce more

energy than they consume.

To

this end, we are developing retail

products, tools and services to help homeowners make their

houses more sustainable. As houses generally account for about 20 percent

of CO

2

emissions, we

believe this could have a meaningful impact in the fight against climate change. At the same time

it will help our customers to lower their CO

2

footprint and energy bill. We have already

provided

green mortgages in Germany through development bank KfW.

Customers can use the new

products to finance solar panels,

for example, or insulate their homes. In the Netherlands and

Belgium, we also offer a consumer loan with a reduced interest rate to help customers pay for

green refurbishments.

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Besides these financial

solutions, we also help to raise awareness on the topic. Consumers in the

Netherlands, for example, can check the energy profile of their homes on our website, as well as

the options and financing

available to improve in this area. We

also provide Dutch homeowners

who want to invest in upgrading their energy label with a free

rating as we know how insights can

help people to take the first steps towards a more sustainable home.

ING offers sustainable investment (SI) services to its retail banking customers in the Netherlands,

Belgium, Luxembourg

and Germany. In 2019, our retail customers in these countries invested a

combined € 9.3 billion using ING’s SI services, up from € 6.3 billion in 2018. SI services represented

seven percent of ING’s total retail

banking customer investments in 2019. We have the ambition to

grow our SI services.

To

take sustainable finance further

in the business we have set up regional sustainable finance

teams in the Americas and Asia to support our clients in these regions.

Our efforts in this area are being recognised. In 2019, we were

ranked as ‘climate action leader’ by

the leading global environmental disclosure platform CDP for the fifth year.

Financial health

As a result of our financial empowerment activities, 25.9

million people (67 percent of our customer

base) felt financially empowered in 2019. In 2018, this was 25 million or 65 percent. Our ambition

for 2022 is for 32 million customers to feel financially

empowered by ING.

Information

We believe

that the right information at the right time can help people make better financial

decisions. For example:

◾

In the Netherlands the

’Kijk Vooruit’

forecasting tool gives customers an overview of their

planned and predicted transactions, allowing them to gain more control over

their finances.

◾

Also in the Netherlands, we launched the

'Digitaal vooruit'

initiative where Digicoaches are

available in pop-up stores at several

locations to answer any digital

questions people may have.

◾

In Austria and Romania, we offer customers access to

EmpowerCamp

– a five-week programme

to help customers understand their financial

profile and take steps to improve their finances.

◾

In Poland, our

YouTube

videos

providing people with financial insights have had over 100 million

views.

Innovation

Products and services are similar across banks. We

differentiate ourselves by going a step further

and innovating to create tools that help customers make better financial decisions. For example:

◾

In the Netherlands, we introduced our new

voice-activated ATMs

in branches of Albert Heijn and

at Schiphol Airport. The speech function

on the cash machines makes it easier for people who

have difficulty

reading or who are visually impaired to withdraw

money themselves.

◾

In Australia,

Everyday Roundup

makes saving money and paying off your home

loan easier and

more convenient for customers in Australia. ING customers saved AUD 81 million via 70 million

transactions by having ERU enabled on almost 300.000 accounts. The average saving was AUD

1.16 per transaction and

AUD

284.41 per account in 2019.

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◾

In Spain and France, our digital investment

advisors

My Money Coach

and

Coach Epargne

continued to offer customers precise and intelligent investment solutions.

◾

We also partnered with others to accelerate

innovation like

Minna

, which helps people keep track

of and manage their subscriptions.

Involvement

Our involvement in both the communities we operate in and in developing countries also

contributes to financial health.

For example:

◾

Globally, we continued our

Power for Youth

partnership with UNICEF

to empower adolescents

with financial, entrepreneurial, and civic leadership skills. Since 2015 the partnership

has directly

empowered more than 500,000 adolescents,

benefiting

more than 11 million indirectly.

◾

Also globally, hundreds of ING colleagues took part in

Global Money Week

, volunteering in

classrooms across the Netherlands, Spain, Czech Republic, Luxembourg,

Philippines, and Turkey

to teach young people about money management.

◾

In the Netherlands we support the

Youth Perspective Fund

, which helps young people aged 18 to

27 to manage their debts. The initiative supports around 150 youngsters a year.

◾

Also in the Netherlands we’re a founding partner in the debt-prevention programme

Nederlandse Schuldhulproute

, along with several other banks and the Dutch Banking

Association. This unique public-private collaboration aims to prevent and solve problematic

debt.

◾

Lastly in the Netherlands, we offered more

than 250,000 lessons on

digital skills for students

in

collaboration with organisations such as Bomberbot and DesignWeek@School.

◾

In Romania, we supported

Banometru

to help adults with financial difficulties

to access financial

planning and counselling.

Competition

ING is a global financial

institution with a strong European base, offering retail and wholesale

banking services to customers around the globe. The purpose of ING is empowering people to stay

a step ahead in life and in business.

ING’s Retail business serves 38.8 million customers. In most of our Retail markets we offer a full

range of banking products and services, covering payments, savings, insurance, investments and

secured and unsecured lending. Our Wholesale Banking business offers clients advisory value

propositions such as specialised lending, tailored corporate finance and debt and equity-market

solutions. Our clients range from large companies to multinational corporations and financial

institutions.

There is substantial competition in the Netherlands and the other countries in which we do

business for the types of wholesale banking, retail banking, investment banking and other products

and services we provide.

Such competition is most pronounced in our more mature markets of the Netherlands, Belgium,

the rest of Western Europe

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

financial services

companies 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 proceeded to form alliances, mergers

or strategic

relationships with our competitors. The Netherlands is our largest market. Our main competitors in

the banking sector in the Netherlands are ABN AMRO Bank and Rabobank.

Competition is coming from new market entrants (including non-bank and financial technology

competitors) with new operating models that are not burdened by potentially costly legacy

operations and that are subject to reduced regulation.

New entrants rely on new technologies,

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advanced data and analytic tools, lower cost to serve, reduced regulatory

burden and/or

faster

processes in order to challenge traditional banks.

The competitive landscape that banks face is increasingly being shaped by Big Tech

companies.

They offer customers a superior digital experience through an open platform approach that delivers

a range of their primary needs in a go-to digital ecosystem. This ability to provide for primary

needs, both with proprietary and third-party offerings that are easily accessed through mobile

devices, defines their success. Banking, by contrast, is a facilitator and not a primary need. The

choice for banks is to challenge their existing business models, to disrupt themselves, or risk being

disintermediated and relegated to a status of white label facilitators of others’ platforms.

The digital customer experience is now the key differentiator, and our main competitors are no

longer just other banks. They are also Big Tech

digital leaders like Apple, Google and Tencent who

are increasingly moving into financial services. The content, offerings and digital savvy of these

go-

to platforms cater to a wide range of customers’ primary needs with a personal, instant, relevant

and seamless experience.

To

compete in this new environment, banks have to think beyond banking and develop their own

platforms. Winners will be those with a superior digital experience, a strong trusted brand, and the

ability to leverage a large

customer base to attract partners to their platforms. The successful

platforms take the effort out of managing finances,

offering personalised, real-time advice and a

suite of products and services to cover all financial and other relevant needs.

Developments in technology have also accelerated the use of new business models. Examples are

new business models in retail payments, consumer and commercial lending (such as peer-to-peer

lending), foreign exchange and low-cost investment advisory services. A significant competitive

development is the emergence of disintermediation in the financial sector

resulting from new

banking, lending and payment solutions offered by rapidly evolving incumbents, challengers and

new entrants, especially with respect to payment services and products, and the introduction of

disruptive technology.

An important example of this is the newly enacted PSD2 European directive opening the payments

market to non-bank entrants. This is causing banks to face an unlevel playing field when competing

with new, mainly less regulated, market entrants in a lucrative

area that in the past was dominated

by banks and other financial

services providers.

Statements regarding ING’s competitive position reflect the assessment of ING’s management

about the general competitive landscape in which ING operates.

Regulation and Supervision

The banking and broker-dealer businesses of ING are subject to detailed and comprehensive

supervision in all of the jurisdictions in which ING conducts

business.

Regulatory agencies and supervisors have broad administrative power

and enforcement

capabilities over many aspects of our business, which may include liquidity, capital adequacy,

permitted investments, ethical issues, money laundering, anti-terrorism measures, privacy,

recordkeeping, product and sale suitability, marketing and sales practices, remuneration

policies,

personal conduct and our own internal governance practices. Also, regulators and other

supervisory authorities in the EU, the US and elsewhere continue to scrutinise payment processing

and other transactions and activities of the financial

services industry through laws and regulations

governing such matters as money laundering, anti-terrorism financing, tax evasion, prohibited

transactions with countries or persons subject to sanctions,

and bribery or other anti-corruption

measures.

As discussed under “Item 3. Key Information — Risk Factors”, as a large multinational financial

institution we are subject to reputational and other risks in connection with regulatory and

compliance matters

involving these countries.

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European

Regulatory framework

In November 2014 the European Central

Bank (ECB) assumed responsibility, conferred on it by the

Single Supervisory Mechanism (“SSM”),

for a significant part of the prudential

supervision of euro

area banking groups in the Eurozone,

including ING Group and ING Bank. Now that the ECB

assumed responsibility for the supervision of the banking groups in the Eurozone, it

has become

ING Group’s and ING Bank’s main supervisor.

The ECB is amongst others responsible for tasks such

as market access, compliance with capital and liquidity requirements and governance

arrangements. National regulators,

including the Dutch Central Bank for ING Group and ING Bank,

remain responsible for supervision of tasks that have not been transferred

to the ECB such as

financial crime and

payment supervision.

ING expects to benefit

from the harmonization of supervision resulting from the SSM but at the

same time does not expect such harmonization to be fully in place in the short to mid-term.

ING

expects that the Dutch Central bank will continue to play a significant role in the supervision of ING

Group and ING Bank.

Another significant

change in the regulatory environment is the setting up of the Single Resolution

Mechanism (“SRM”), which comprises the Single Resolution Board (“SRB”) and the national

resolution authorities and is fully responsible for the resolution of banks within the Eurozone

as of 1

January 2016. ING has been engaging already with the Dutch national resolution authorities and

the SRB for a few years with the aim to support in the draw up a resolution plan for ING and will

continue to collaborate with the resolution authorities. The rules underpinning the SRM could have

a significant impact

on business models and capital structure of financial

groups in order to

become resolvable but at this stage it is not fully

clear what the impact on ING will be.

As a third pillar to the Banking Union, the EU aims at further harmonizing regulations for Deposit

Guarantee Schemes (DGS).

Main elements are the creation of ex-ante funded DGS funds, financed

by risk-weighted contributions from banks.

As a next step, the EU is discussing a pan-European (or

pan-banking union) DGS (the European Deposit Insurance Scheme (EDIS)), (partly) replacing or

complementing national compensation schemes. The progress on the EDIS proposal is slower than

expected; this proposal as well as certain accompanying risk reduction measures are still being

discussed in the European Parliament and in the Council.

Dutch Regulatory

Framework

The Dutch regulatory system for financial supervision consists of prudential supervision

–

monitoring the soundness of financial

institutions and the financial

sector, and conduct-of-business

supervision – regulating institutions’ conduct in the markets. As far as prudential supervision has

not been transferred to the ECB, it is exercised

by the Dutch Central Bank (De Nederlandsche Bank

or “DNB”), while conduct-of-business supervision is performed by the Dutch

Authority for the

Financial Markets (Autoriteit Financiële Markten or “AFM”). DNB

is in the lead with regard to

macroprudential

supervision.

Global Regulatory Environment

There is a variety of proposals for laws and regulations

that could impact ING globally, in particular

those made by the Financial Stability Board and the Basel Committee on Banking Supervision at the

transnational level and an expanding series of supranational directives and national legislation in

the European Union (see “Item 3. Key

Information — Risk Factors — We operate

in highly regulated

industries. Changes in laws and/or regulations governing financial services or financial

institutions

or the application of such laws and/or regulations governing our business may reduce

our

profitability). The aggregated impact and possible interaction of all of these proposals are hard to

determine, and it may be difficult

to reconcile them where they are

not aligned. The financial

industry has also taken initiatives by means of guidelines and self-regulatory initiatives.

Dodd-Frank

Act and other US Regulations

ING Bank has a limited direct presence in the United States through the ING Bank Representative

Offices

in New York and Dallas, Texas.

Although the offices’

activities are strictly limited to

essentially that of a marketing agent of bank products and services and a facilitator (i.e. the offices

may not take deposits or execute any transactions), the offices

are subject to the regulation of the

State of New York Department of Financial Services and the Texas

Department of Banking, as well

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as the Federal Reserve.

ING Bank also has a subsidiary in the United States, ING Financial Holdings

Corporation, which through several

operating subsidiaries (one of which is registered with the U.S.

Commodity Futures

Trading

Commission as a swap dealer and another of which is registered with

the U.S. Securities and Exchange Commission as a securities broker-dealer) offers various financial

products, including lending, and financial

markets products. These entities do not accept deposits in

the United States on their own behalf or on behalf of ING Bank N.V.

The U.S. Dodd-Frank

Wall Street Reform

and Consumer Protection Act (“Dodd-Frank Act”), which

became law on 21 July 2010, represented a significant overhaul in the regulation of U.S. financial

institutions and markets. The primary impact on ING is through the establishment of a regulatory

regime for the off-exchange derivatives market, pursuant to Title VII of the Dodd-Frank Act.

Among other things, the Dodd-Frank Act and regulations enacted thereunder required

swap

dealers to register with the Commodity Futures

Trading

Commission (the “CFTC”, the primary swaps

regulator in the U.S.) as ‘swap dealers’ and be subject to CFTC regulation and oversight.

The ING

subsidiary, ING Capital Markets LLC, is registered

as a swap dealer.

As a registered entity, it is

subject to business conduct, record-keeping and reporting requirements, as well as margin

requirements

and, once regulations are finalized, capital requirements

. In addition to the

obligations imposed on registrants, such as swap dealers, reporting, clearing, and on-facility

trading requirements

have been imposed for much of the off-exchange derivatives market. It is

possible that registration, execution, clearing, margin and compliance requirements

will increase

the costs of and restrict participation in the derivative markets. These rules (as well as further

regulations, some of which are not yet final) could therefore restrict trading

activity, reducing

trading opportunities and market liquidity, potentially increasing the cost of hedging transactions

and the volatility of the relevant markets. This could adversely affect the business of ING in these

markets.

The Dodd-Frank Act also impacts U.S. banks and non-U.S. banks with branches or agencies in the

United States, primarily through the Volcker Rule

and the enhanced prudential standards of Section

165 of the Dodd-Frank Act.

Because ING Bank does not have a U.S. banking presence, these

provisions do not currently apply to ING.

The Dodd-Frank Act also created

a new agency, the Financial Stability Oversight Council (“FSOC”),

an inter-agency body that is responsible for monitoring the activities of the U.S. financial

system,

designating systemically significant

financial

services firms and

recommending a framework for

substantially increased regulation of such firms, including systemically important non-bank

financial companies

that could consist of securities firms, insurance companies and other providers

of financial services,

including non-U.S. companies. ING has not been designated a systemically

significant non-bank financial

company by FSOC and such a designation currently is unlikely.

Although U.S. legislative and regulatory bodies have taken initial steps over

the past year to tailor

the regulatory regime created

under Dodd-Frank, Dodd-Frank

continues to impose significant

requirements on us, some of which may have a material impact on our operations and results, as

discussed further under “Item 3. Key Information — Risk Factors—We operate

in highly regulated

industries. Changes in laws and/or regulations governing financial services or financial

institutions

or the application of such laws and/or regulations governing our business may reduce

our

profitability”.

Basel III and European

Union Standards as currently

applied by ING

Bank

DNB, our home country supervisor until the ECB took over that position in November 2014, has

given ING permission to use the most sophisticated approaches for solvency reporting under the

Financial Supervision Act, the Dutch legislation reflecting

the Basel II and Basel III Frameworks. DNB

has shared information with host regulators of relevant

jurisdictions to come to a joint decision. In

all jurisdictions where the bank operates through a separate

legal entity that is a credit institution,

ING

must meet local implementation of Basel requirements as well. ING uses the Advanced IRB

Approach for credit risk, the Internal Model Approach for its trading

book exposures and the

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Advanced Measurement Approach for operational

risk. A small number of portfolios are reported

under the Standardized Approach.

In December 2010, the Basel Committee on Banking Supervision announced higher global

minimum capital standards for banks, and has introduced a new global liquidity standard and a

new leverage ratio.

The Basel Committee's package of reforms, collectively referred

to as the “Basel

III” rules, has, among other requirements, increased

the amount of common equity required to be

held by subject banking institutions, has prescribed

the amount of liquid assets and the long term

funding a subject banking institution must hold at any given moment, and

has limited leverage.

Banks are required

to hold a “capital conservation buffer” to withstand future periods of stress.

Basel III has also introduced a “countercyclica

l

buffer” as an extension of the capital conservation

buffer, which permits national regulators to require banks to hold more capital during periods of

high credit growth (to strengthen

capital reserves and moderate the

debt markets). Further, Basel

III has strengthened the definition of capital that will have the effect

of gradually disqualifying

many hybrid securities during the years 2013-2022, including the hybrids that

were issued by the

Group, from inclusion in regulatory

capital, as well as the higher capital requirements associated

with certain business conditions (for example, for credit value adjustments (“CVAs”)

and illiquid

collateral) as part of a number of reforms to the Basel II framework.

In addition, the Basel

Committee and Financial Stability Board (“FSB”) published measures

that have

had the effect of

requiring higher loss absorbency capacity, liquidity surcharges, exposure limits and special

resolution regimes for, and instituting more

intensive and effective supervision of, “systemically

important financial

institutions” (“SIFIs”), in addition to the Basel III requirements otherwise

applicable to most financial

institutions. One such measure, published by the FSB in November

2015, is the Final Total

-Loss Absorbing Capacity (‘TLAC’) standard

for G-SIFIs, which aims for G-SIFIs

to have sufficient loss-absorbing

and recapitalisation capacity available in resolution. ING Bank has

been designated by the Basel Committee and FSB as a so-called “Global Systemically Important

Bank” (“G-SIB”), since 2011, and by DNB and the Dutch Ministry of Finance as a “domestic SIB” (“D-

SIB”) since 2011.

The Basel III proposals and their potential impact are monitored via semi-annual monitoring

exercises in which ING Group participates. As a result of such monitoring exercises

and ongoing

discussions within the regulatory environment, revisions have

been made to the original Basel III

proposals as was the case with the revised Liquidity Coverage

Ratio in January 2013 and the

revised Net Stable Funding Ratio

and Leverage

Ratio in January 2014. In December 2017, revisions

to Basel III were formally announced by the Basel Committee. These revisions

to Basel III establish

new prudential rules for banks, including a revision to the standardised approach

to credit risk, the

introduction of a capital floor based on standardised approaches, the use of internal models,

limitation of options for modelling operating risks, and new rules for the establishment of risk-

weighted items and unused credit lines at the banks. Such revisions have a long implementation

phase and are yet to be fully transposed into EU regulation.

The revisions are commonly referred

to

as "Basel III Reform" or "Basel IV.

For European

banks the Basel III requirements have been implemented through the Capital

Requirement Regulation (CRR) and the Capital

Requirement Directive (“CRD IV”). The Dutch CRD IV

Implementation Act has led to significant

changes in the Dutch prudential law provisions, most

notably with regard to higher capital and liquidity requirements

for all banks. The CRD IV regime

entered into effect in August 2014 in the Netherlands, but not all requirements are to be

implemented all at once. Having started in 2014, the requirements have been gradually tightened,

mostly before 2019, until the Basel III migration process is completed. While the full impact of the

Basel III rules, and any additional requirements for G-SIBs if and as applicable to the Group, will

depend on how they are implemented by national regulators, including the extent to which such

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 to have a material impact on ING’s operations and financial

condition and may require the Group

to seek additional capital. DNB requires the largest Dutch

banks, including ING Group, to hold a 3% Systemic Risk Buffer during 2016-2019 in addition to the

capital conservation buffer and the countercyclical buffer described above, but this buffer then

includes both the G-SIB and D-SIB buffers mentioned above.

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CRD IV has not only resulted in new quantitative requirements

but has also led to the setting of

new standards and evolving regulatory

and supervisory expectations in the area of governance,

including with regard to topics like conduct and culture, strategy

and business models, outsourcing

and reporting accuracy.

The European Banking Association (EBA) in particular has published new

guidance such as the revised Guidelines on Internal Governance (2017), the Guidelines on the

assessment of the suitability of members of the management body and key function

holders

(2017) and the revised Guidelines on the governance framework

with regard to outsourcing

arrangements (2019). These guidelines enhance the roles and responsibilities of the management

body as well as those of the risk management function and put importance on

the establishment

of a sound risk culture and code of conduct, and managing conflicts

of interest. ING’s lead regulator

the ECB increasingly puts emphasis on these new standards in its day to day supervision and

incorporates the standards in the SREP methodology. Continuing initiatives by multiple regulators

and supervisors on corporate governance may significantly impact how ING Bank designs and

structures its governance.

Following the adoption of the CRR and CRD IV, regulators increasingly came to focus

on the

required capital calculations across

banks. Since the start of the financial

crisis there has been

much debate on the risk-weighted capitalisation of banks, and specifically

on whether internal

models are appropriate for such purposes. These developments have suggested that stricter rules

may be applied by a later framework. The Basel Committee released seve

ral consultative papers,

containing proposals to change the methodologies for the calculation of capital requirements and

is expected to issue further standards in this respect. In these proposals, the Basel Committee

suggests methods to calculate RWA using

more standardised or simpler methods in order to

achieve greater comparability,

transparency and consistency.

On 27 June 2019, a series of measures referred to as the Banking Reform

Package (including

certain amendments to CRR and CRDIV commonly referred

to as ‘CRR II’ and CRR V’) came into

force, subject to various transitional and staged timetables. The adoption of the Banking Reform

Package concluded a process that began in November 2016 and marks an important step toward

the completion of the European

post-crisis regulatory reforms, drawing

on a number of

international standards agreed by the Basel Committee, the Financial Stability Board

and the G20.

The Banking Reform Package updates the framework of harmonized rules established following the

financial crisis and

introduces changes to the CRR, CRDIV, the Bank Recovery and Resolution

Directive (BRRD) and the Single Resolution Mechanism

Regulation (SRMR). The Banking Reform

Package covers multiple areas, including the Pillar 2 framework,

the leverage ratio,

mandatory

restrictions on distributions, permission for reducing own funds and eligible liabilities,

macroprudential tools, a new category of ‘non-preferred’ senior debt, the minimum requirement

for own funds and eligible liabilities (MREL) and the integration of the TLAC standard into EU

legislation.

Whilst the Banking Reform Package was being developed, the ECB introduced the Targeted

Review

of Internal Models (TRIM) in June 2017 to assess reliability and comparability between banks’

models for calculating each bank’s risk-weighted assets (‘RWA’) used for determining certain of

such bank’s capital requirements. The operating consequences of the TRIM exercise

have been

significant. The TRIM is expected

to finalise

in 2020, and could impact ING through more stringent

regulation on internal models. There is also heightened supervisory attention for the credit quality

of loans to corporates and/or households. These exercises

could impact the RWA we recognise

for

certain assets.

Regulatory Developments

Basel IV

As of 1 January 2022, the first

stage of Basel IV (revised Internal Rating-Based Approach) will

probably come into effect conditional to the finalization

of the legislative process in the EU. Based

on the current estimates, without management actions this is expected to potentially increase

RWA by roughly

15-18% on a fully loaded basis. While any BIV impact will not come in before 2022,

other banking regulations and model reviews are

expected to bring forward a significant part of

this

impact before BIV implementation date.

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Requirement and guidance

for 2020 Pillar 2 requirements

One specific element

of Basel III is the possible restriction on distributable items. This limits the

ability of the bank to pay dividends, hybrid coupons and/or management remuneration if its capital

drops below the sum of its Pillar 1, Pillar 2 and combined buffer requirements, often referred to as

the Maximum Distributable Amount (MDA) trigger.

The Pillar 2 requirement in the supervisory

review and evaluation process

(SREP) 2019 decision is split into:

◾

Pillar 2 requirement (P2R), which is binding and therefore breaches

have direct legal

consequences.

◾

Pillar 2 guidance (P2G), which is not legally binding and therefore a breach does not

automatically trigger regulatory action.

By providing guidelines regarding

the SREP, the European Banking Authority (EBA) gives further

direction for the internal capital adequacy assessment process (ICAAP) and enhancement of the

capital management framework.

Bank recovery

and resolution directive

Since its adoption by the European Parliament in 2014, the Bank recovery

and resolution directive

(BRRD) has become effective in all EU countries after

transposition into national law, including in

the Netherlands. The BRRD aims to safeguard financial stability and

minimise the use of public

funds in case banks face financial distress or fail to comply with the BRRD. Banks across the EU

need to have recovery

plans in place and need to cooperate with resolution authorities to

determine, and make feasible, the preferred resolution strategy.

The banking reform which came

into force on 27 June 2019 includes changes to the minimum requirement for own funds and

eligible liabilities (MREL) to ensure an effective bail in process. It also includes new competences for

resolution authorities and requires G-SIBs to have more

loss-absorbing and recapitalisation

capacity.

ING has had a recovery plan in place since 2012. The plan includes information on crisis

governance, recovery

indicators, recovery options, and operational stability and communication

measures. The plan enhances the bank’s readiness and decisiveness in case of a financial crisis. The

plan is updated annually to make sure it stays fit for purpose. The completeness, quality and

credibility of the updated plan is assessed each year by ING’s regulators.

The Single Resolution Board (SRB) confirmed to ING in 2017 that a single-point-of-entry

(SPE)

strategy is ING’s preferred

resolution strategy, with ING Groep N.V.

as the resolution entity.

In 2018, ING Group received a formal notification from De Nederlandsche Bank (DNB) of its MREL.

The MREL requirement has been established to ensure that banks in the European

Union have

sufficient

own funds and eligible liabilities to absorb losses in the case of potential bank failure. The

MREL requirement is set for ING Group at a consolidated level,

as determined by the Single

Resolution Board (SRB). This MREL requirement has been set at 10.89% of total liabilities and own

funds.

ING has been replacing, and will continue to replace, maturing ING Bank N.V.

debt with ING Groep

N.V.

instruments. In order to build up our MREL capacity, ING Groep N.V.

issued multiple

transactions. These transactions will not only allow us to support business growth, but will also help

to meet future MREL and TLAC requirements

with ING Groep N.V.

instruments only.

CRR II implements the Financial Stability Board’s total loss absorbing (TLAC) requirement for Global

Systemically Important Institutions (G-SII), which is the EU equivalent of a G-SIB. The transitional

requirement—the higher of 16 percent of the

resolution group’s Risk weighted assets (RWA)

or six

percent of the leverage

ratio exposure measure—applies immediately. The higher requirement

—18

and 6.75 percent, respectively—comes into effect as of January 1, 2022. As a G-SII ING is expected

to meet the TLAC requirement alongside the other minimum regulatory requirements

set out in EU

regulation.

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Stress testing

Stress testing is an integral component of our risk and capital management framework.

It allows us

to (i) assess potential vulnerabilities in our businesses, business model, and/or portfolios; (ii)

understand the sensitivities of the core assumptions in our strategic and capital plans; and (iii)

improve decision making throug

h

balancing risk and return.

In addition to running internal stress test scenarios to reflect the outcomes of the annual risk

assessment, ING also participates in regulatory stress test exercises. ING participated in the 2018

EU-wide stress test conducted by the EBA in cooperation with the European Central

Bank (ECB), the

Dutch central bank (DNB), the European Commission

and the European Systemic Risk Board (ESRB).

The adverse stress test scenario was developed by the ECB and covers

a three-year time horizon

(2018-2020). The stress test was carried out applying a static balance sheet assumption as of

December 2017, and therefore does not take into account current

or future business strategies and

management actions. The results also reflect the impact

of IFRS 9 for determining loan loss

provisions in adverse circumstances.

The results of the EBA stress test reaffirmed the resilience of our business model and the strength

of ING’s capital base. Our commitment to maintain a robust, fully-loaded Group common equity

Tier 1 (CET1) ratio in excess of prevailing

requirements remain.

Under the hypothetical baseline

scenario and EBA’s methodological instructions, ING Group would have a fully loaded CET1 of

13.99% in 2020. Under the hypothetical adverse scenario and EBA’s methodological instructions,

ING Group would have a fully loaded CET1 ratio

of 10.70% in 2020 without management actions.

EBA will launch a new stress test exercise in January 2020 and is expected to publish the results by

July 2020.

Deposit 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. ING Bank is a participant in the Dutch Deposit

Guarantee Scheme (‘DGS’), which guarantees an amount of EUR 100,000 per person per bank

(regardless of the number of accounts held). On the basis of the EU Directive on deposit guarantee

schemes, ING pays quarterly risk-weighted contributions into a DGS-fund.

The DGS-fund is to grow

to a target size of 0.8% of all deposits guaranteed under the DGS, which is expected to be reached

in July 2024. In case of failure of a Dutch bank, depositor compensation is paid from the DGS-fund.

If the available financial means

of the fund are insufficient,

Dutch banks, including ING, may be

required pay to extraordinary

ex-post contributions not exceeding 0.5% of their covered deposits

per calendar year.

In exceptional circumstances and with the consent of the competent authority,

higher contributions may be required. However,

extraordinary ex-post contributions may be

temporarily deferred if, and for so long as, they would

jeopardise the solvency or liquidity of a bank.

Since 2015, the EU has been discussing the introduction of a pan-European deposit guarantee

scheme (‘EDIS’), (partly) replacing or complementing national compensation schemes in two or

three phases. Proposals contain elements of (re)insurance,

mutual lending and mutualisation of

funds. The new model is intended to be ‘overall cost-neutral’. Discussions have continued in 2019,

but it remains uncertain when EDIS will be introduced.

Payment Services Directive

2 (PSD2)

PSD2 entered into force in January 2018 and responds

to technical change and a variety of

developments in the payments domain. It fosters innovation and competition by promoting non-

discriminatory access to payment systems and accounts, including the newly introduced account

information services and payment initiation services.

Customers benefit

from greater transparency

of costs and charges, PSD2's extended geographical reach and being applicable to transactions in

any currency, a reduction of the maximum liability for unauthorized transactions and a backstop

date for complaint resolution. Finally, to combat cybercrime and online fraud, PSD2 continues the

trend towards

enhancing the security around the making of payments, e.g. by the introduction of

strong customer authentication. It consists of two factor authentication, to be performed every

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time a payer accesses its payment account online or initiates electronic remote payment

transactions. The Regulatory Technical

Standards for strong customer authentication and common

and secure communication provide further requirements

to implement the strict security

requirements for payment service providers

in the EU.

Benchmark Regulation

The London Interbank Offered Rate (‘LIBOR’), the Euro

OverNight Index Average

(‘EONIA’), the Euro

Interbank Offered Rate (‘EURIBOR’) and other interest rates or other types of rates

and indices

which are deemed to be ‘benchmarks’ are the subject of ongoing national and international

regulatory reform. On 8 June 2016, the EU adopted a Regulation (the ‘Benchmarks Regulation’) on

indices (such as LIBOR and EURIBOR) used in the EU as benchmarks in financial

contracts. The

Benchmarks Regulation became effective as of 1 January 2018. It provides that administrators of

benchmarks used in the EU generally must be authorised by or registered with regulators no later

than 1 January 2020, and that they must comply with a code of conduct designed primarily

to

ensure reliability of input data, governing issues such as conflicts of interest, internal controls and

benchmark methodologies. Furthermore, on 27 July 2017 the FCA announced that it will no longer

persuade or compel banks to submit rates for the calculation of the LIBOR benchmark after 2021.

The announcement indicates that the continuation of the LIBOR on the current basis cannot and

will not be guaranteed after 2021. In addition, as of October 2019, the

new euro risk-free rate

euro

short-term rate (€STR) is being published and the EONIA benchmark was reformed, making it

dependant to the €STR benchmark. The reformed EONIA benchmark will cease to exist by 1

January 2022 and therefore the European

Money Markets Institute (EONIA’s administrator) has

indicated that EONIA cannot be used in any contracts that will be outstanding as of 1 January

2022. Public authorities have initiated industry working groups in various jurisdictions to search for

and recommend alternative risk-free rates

that could serve alternatives if current benchmarks like

LIBOR and EONIA cease to exist or materially change. The work of these working groups is still

ongoing, though certain of such organizations have advanced proposals for benchmark

replacements. For example, the

US Federal Reserve’s

Alternative Reference

Rates Committee

(commonly referred to as ‘ARRC’) has recommended

adoption of the Secured Overnight Financing

Rate (commonly referred

to as ‘SOFR’) as an alternative to US dollar LIBOR.

Financial Transaction

Taxes

In February 2013, the EC adopted a proposal setting out the details of a financial transaction tax

(‘FTT’) under the enhanced cooperation procedure, to be levied

on transactions in financial

instruments by financial

institutions if at least one of the parties to the transaction is established

in

the financial transaction tax zone (‘FTT-Zone’) or if the instrument which is the subject of the

transaction is issued within the territory of a Member State in the FFT-Zone. 10 Member States have

indicated they wish to participate in the FTT (Austria, Belgium, France, Germany, Greece, Italy,

Portugal, Slovakia, Slovenia and Spain). The initial proposal contemplated that the FTT would enter

into effect on 1 January 2014, which

would have then required

us to pay a tax on transactions in

financial instruments

with parties (including Group affiliates)

located in such FTT-zone.

However,

the FTT remains subject to negotiation between the participating Member States and currently it is

uncertain whether and in what form and by which Member States the FTT will be adopted. The

implementation date of any FTT will thus depend on the future approval by participating Member

States in the Council, consultation of other EU institutions, and the subsequent transposition into

local law.

For additional information regarding

regulatory developments, including with respect to the 5

th

AML Directive, FATCA,

CRS, DAC6 and MIFID II, see also this Form 20F 2019, under “Additional

Information – ING Group Risk Management-

Compliance Risk- Regulatory Developments”.

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Know your customer (KYC)

ING is committed to the preservation of its reputation and integrity through compliance with

applicable laws, regulations and ethical standards in each of the markets in which it operates. All

employees are expected to adhere to these laws, regulations and ethical standards, and

management is responsible for ensuring such compliance. Compliance is therefore

an essential

ingredient of good corporate governance.

As gatekeepers of the financial

system we have

obligations to safeguard trust in that system and prevent misuse. However,

money laundering is

not contained within a single country or jurisdiction, it is a global challenge that impacts

the entire

financial system. ING,

like all other participants in the financial

services industry, has an important

role to play in helping to combat financial economic crime. We contribute knowledge and capacity

to various public-private partnerships fighting

financial

crime. We believe

we can be even more

effective in safeguarding the financial

system if we join forces and work with other banks and with

national and European authorities and law enforcement to identify and manage the financial

economic crime risks better, taking all relevant laws and regulations into account. Improving

the

way we manage compliance risk, especially when it comes to preventing criminals from misusing

the financial system,

is a key priority for ING.

KYC policy framework

The know your customer (KYC) policy and related control standards

(‘KYC policy framework’) sets

the minimum requirements and control objectives for all ING entities to guard against involvement

in financial crime activity.

The KYC policy framework reflects relevant national and international

laws, regulations and industry standards related to financial economic crime (money laundering,

terrorist financing), export trade controls, proliferation financing, sanctions (economic, financial

and

trade), countries designated by ING as ultra high risk countries (UHRC), CTI, FATCA,

CRS, and (parts

of)

ESR. The KYC policy framework is mandatory and applies to all ING entities, majority-owned ING

business, businesses under management control, staff departments, product lines and

to all

customer engagements and transactions. The KYC Policy Framework

reflects relevant national and

international laws, regulations and industry standards related to business partners and overarching

requirements with regards

to record retention,

training and awareness. The management of ING

entities also includes local procedures aimed at enabling them to comply with local laws and

regulations and the KYC Policy

Framework.

Where local laws and regulations are

more stringent,

these more stringent local laws and regulations are

applied.

As a result of frequent evaluation

of the businesses from economic, strategic and risk perspective

ING continues to believe that for business reasons doing business involving certain specified

countries should be discontinued. In that respect, 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 are

Cuba, Iran, North

Korea, Sudan and Syria.

In addition to addressing financial economic crime-related requirements, the KYC policy framework

also reflects KYC-related requirements of the FATCA/CRS

policy, as well as certain elements of the

Environmental Social Risk policy.

KYC enhancement programme

In 2017, ING began implementation of its KYC enhancement programme across all customer

segments and in all ING business units. The KYC enhancement programme consists of, among

other things:

◾

Enhancing selected customer due diligence files

to improve customer documentation, customer

data and identity verification;

◾

Working on structural solutions to become sustainably better in the execution of our KYC policies,

tooling, monitoring, governance and knowledge and behaviour; and

◾

Assessing selected past transactions and follows the applicable reporting process should any

unusual transactions be identified.

In September 2018, ING announced that it had reached a settlement agreement with the Dutch

Public Prosecutor related to an investigation that found serious shortcomings in the execution of

customer due diligence and transaction monitoring requirements related to fighting financial

economic crime, and announced steps to further enhance its management of compliance risks and

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embed stronger awareness across

the whole organisation as part of the KYC enhancement

programme.

In 2019, we continued the implementation of the KYC enhancement programme, and had more

than 4,000 FTEs working on KYC-related activities globally. In March 2019, ING in Italy took steps to

improve its KYC

processes and compliance risks in line with the global KYC enhancement

programme after the Italian central bank identified shortcomings in anti-money laundering

processes. This was based on an inspection conducted from October 2018 to January 2019. In

consultation with the Banca d’Italia, ING agreed to refrain

from taking on new customers in Italy

while further discussions on the enhancement plans took place. ING continued to fully serve

existing clients in Italy while working to address the shortcomings and resolve the issues identified.

Please refer to Note 46 ‘Legal proceedings’

to the consolidated financial

statements for more

information.

In 2019, as part of our commitment to enhance the way we manage compliance risks and embed

stronger awareness across

the whole organisation, we also took the following steps across our five

KYC pillars:

◾

Policies and risk

: This pillar focuses on the development and roll out of a global KYC policy, a

global KYC risk appetite statements and KYC risk assessments on customers, capability structure

and maturity assessments.

-

In 2019, we updated the new KYC policy, which integrated all existing policies related to anti-

money laundering, financial

economic crime and customer due diligence. It came into effect in

July. (See section ‘KYC policy framework’ above).

-

The global KYC policy may be stricter than local requirements, in which case the global risk

appetite statement is used as the starting point to execute a uniform risk assessment and to

determine the local KYC-related risk appetite.

-

As part of our due diligence process we updated the environmental and social risk (ESR)

framework, which helps us make transparent choices about who and what we finance. All

customers undergo an initial ESR check as part of the onboarding process. (See ‘Environmental and

social risk framework’ in the credit risk chapter for more

information)

-

We implemented a systematic integrated risk approach

(SIRA) in all business lines globally.

Driven by data, the SIRA provides guidance on KYC integrity risks and helps determine which

customers to accept/continue and the type and frequency of monitoring. It takes into account

elements such as where the customer is located and the type of product and sector they are active

in. The KYC integrity risks are reviewed

each year.

◾

Tooling

: This pillar aims to improve processes

and tooling around customer due diligence,

screening and monitoring. This entails rolling out a bank-wide KYC digital service and fulfilling

client acceptance and maintenance life cycle on one global digital platform. In addition, all

required screening

components (name screening, pre-transaction screening, adverse media

screening) are incorporated

into the client acceptance due diligence process. Once a customer is

onboarded, ongoing screening and monitoring of transactions can then be activated. Steps taken

in 2019 included:

-

Developed new customer due diligence case management modules for Private Banking

clients in Luxembourg, and mid-corporates

in Poland, which is to be rolled out in other countries

with similar client segments.

-

The target adverse media screening tool was rolled

out in most locations

-

Innovating to automate and improve KYC

processes. In 2019, we developed a ‘smurfing’ tool,

which uses artificial

intelligence to detect instances of smurfing

when large fraudulent transactions

are broken up into smaller transactions that will not be flagged by conventional monitoring

systems. And we are developing a virtual alerts handler that uses artificial

intelligence to reduce

the number of false positives, freeing up KYC staff to concentrate on those alerts that do require

attention.

-

In September 2019, an anomaly detection tool went live to monitor the payment flow

of ING’s

correspondent banking clients. Developed by ING, the tool uses advanced analytics to detect

changes in behaviour that could indicate money laundering or other financial

economic crime. The

approach for innovations is per country and business line and based on success will be scaled up

and rolled out in other locations.

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◾

Monitoring and screening

: This pillar entails translating risk assessment outcomes into

scenarios

and alert definitions

that can be applied in transaction monitoring. This includes the design and

definitions

of the applicable financial

economic crime and client activity monitoring scenarios

tailored to the entity yet based on a global set, building alert definitions

(including data feeds)

and validating and testing the approach from risks to alerts.

-

In 2019, we introduced the new standard transaction monitoring tooling in the first countries.

This includes risk-based scenarios, with follow-up for handling alerts and reporting suspicious

activity.

-

In May 2019, the first

version of the global transaction monitoring (TM) control guidance

came into effect. It outlines the adoption

of a uniform TM methodology framework to mitigate

financial economic

crime risks.

-

In September 2019, ING partnered with four other Dutch banks to explore options to jointly

monitor payment transactions. Transaction Monitoring Netherlands (TMNL) is part of a broader

cooperation with the private sector, government agencies, regulators and law enforcement

to

harmonise efforts to fight

financial

crime and strengthen the resilience of the financial system as a

whole, both on a national and European level. We

also work with the Dutch central bank and are a

member of the public-private partnership council of the Dutch Financial Expertise Centre (FEC-RAAD

PPS).

-

The increased focus on KYC and our efforts to streamline our operations led to an increased

number of accounts being closed. This includes inactive accounts and accounts of customers who

do not respond adequately to our requests for information. We

are also re-evaluating

certain client

and business relationships.

◾

Governance

: Under this pillar we are setting up a global KYC governance to ensure

decision

making on standards, operations, customer acceptance and continuous improvements.

This

started with the appointment of a global head of KYC at the end of 2018 and a global Centre of

Expertise, as well as a Delivery Tribe, who together with the business lines and the second line of

defence (Risk and Compliance functions) are responsible for implementing KYC across

the

organisation.

-

In 2019, local KYC Committees were

established in the countries/regions and business lines to

manage and steer all KYC-related activities. These committees are overseen by the global KYC

Committee, which drives improve

ments and ensures alignment between KYC-related projects

and

activities. It also monitors all KYC-related costs, helps prioritise activities and steers decisions on

KYC-related issues and developments.

-

Client Integrity Risk Committees (CIRCs) were set up in the retail

business lines and Wholesale

Banking to steer decisions around client acceptance and exits, based on compliance criteria and

risk appetite. The committee members represent both the first and second lines of defence to

ensure proper decision-making is adhered to.

◾

Knowledge and behaviour

: This pillar focuses on increasing knowledge about KYC, providing

training and carrying out behavioural risk assessments to detect high-risk behaviours,

intervening where necessary.

-

Internal communication in 2019 reiterated the importance of non-financial risk and

compliance.

-

We set up a global KYC Academy to coordinate

a global learning curriculum and provide

expert training for specialist KYC staff and new joiners as well as awareness training for all ING

employees. A new KYC awareness module for

all staff is due to be rolled out in 1Q 2020.

-

The first behavioural risk assessments in KYC were carried out in the Netherlands, the

Philippines and the US by ING’s team of behavioural experts. The outcomes were discussed by

senior management at ING’s leadership days in March, as well as with the management teams of

the countries involved and in Wholesale Banking with the intention of changing behaviours to

enhance KYC, starting from the top.

Following on from that, workstreams

were set up with senior managers and a number of

interventions were initiated with the aim of changing high-risk behavioural patterns. Another

behavioural risk assessment was conducted at ING in Belgium in the fourth quarter of 2019.

We

will start a dialogue in

2020 to dive into the outcomes and root causes of the behavioural patterns

observed.

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Regulatory developments

KYC

Compliance with applicable laws and regulations is resource

-intensive. Banks continue to be faced

with new and increasingly onerous regulatory

requirements. Generally, we

expect the scope and

extent of regulations in the jurisdictions in which we operate to continue to increase.

Regulation is becoming more extensive and complex. An example is the implementation of DAC6

which like FATCA

and CRS requires financial institutions to report detailed client-related information

to the competent authorities. Customer due diligence (CDD), (sanctions) screening and transaction

monitoring impose requirements on financial institutions to maintain appropriate policies,

procedures and controls

to detect, prevent and report to the competent authorities on e.g. money

laundering and terrorist financing.

The increasing regulatory scrutiny drives the need to continuous change in the various processes,

procedures and IT systems. In some situations the applicable laws and regulations, at local and/or

at global level, seem to be conflicting with each

other, which imposes a significant

challenge on

banks as part of the implementation of requirements. In addition, the timeline for implementation

of those new/changed requirements

is sometimes very short, which is challenging in general, yet

especially in IT development. Obviously ING will continuously work on embedding the processes

and procedures

reflecting the applicable requirements in our IT systems and data sources, driving a

business environment which is compliant by desire and design, and will execute ongoing training

and awareness to develop its people to have the right knowledge and skills.

That also accounts for risks deriving from new technologies. As an innovative bank, ING

continuously monitors regulatory developments to make risk assessments and define the

banks

risk appetite.

Regulations on distributed ledger technology and business developments in this area

are as rapid and impactful as the accompanying risks.

5th AML Directive

In addition, the 5th AML Directive will be implemented in the Netherlands. The 5th AML Directive

was originally adopted by the EU Council in June 2018, with the aim of addressing means of

terrorist financing, increasing transparency to combat money laundering and helping to

strengthen the fight against tax avoidance. The most important aspects

of the 5th AML Directive

involve the (anti money-laundering) risks relating to the use of virtual currencies, the improvement

of information exchange between supervising authorities, and the introduction of beneficial

ownership registers for corporate

and other legal entities.

ING expects to revise the KYC policy framework to reflect the requirements

of the 5th AML Directive.

Prior to the adoption of the 5th AML Directive, European supervisory authorities (ESAs) had

previously issued their final guidelines on risk factors, which

came into force in June 2018. These

guidelines promote a common understanding of the risk-based approach to anti-money

laundering/combatting terrorist financing (AML/CFT) and set out how it should be applied in the

context of the 4th AML Directive. These guidelines are currently

in the process of being updated, in

order to support firms’ AML/CFT compliance efforts

and enhance the ability of the EU’s financial

sector to effectively deter and detect

money laundering/terrorist financing. The ESAs

published a

consultation version of the updated guidelines on 5 February 2020. The final updated guidelines

are

expected to come into force in the course of 2020. Furthermore, in

September 2017, the ESAs

issued their final guidelines

to prevent the abuse of funds transfers for

terrorist financing and

money laundering purposes. These guidelines came into force in June 2018.

Policy with respect to certain

countries

As a result of frequent evaluation

of all businesses from economic, strategic and risk perspective

ING continues to believe that for business reasons doing business involving certain specified

countries should be discontinued. In that respect, 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 are

Cuba, Iran, North

Korea, Sudan and Syria.

ING Bank maintains a limited legacy portfolio of guarantees, accounts, and loans that involve

various entities with a connection to Iran. These positions remain on the books but certain accounts

related thereto are

‘frozen’ where prescribed

by applicable laws and procedures and in all cases

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subject to increased scrutiny within ING Bank. Specifically,

ING Bank has controls in place to monitor

transactions related to these accounts. ING Bank may receive loan repayments,

duly authorised by

the relevant competent authorities where prescribed

by applicable laws. For the calendar year

2019, ING Group had revenues

of approximately USD 276.774. ING Group estimates that it had a

net profit

of approximately USD 16.599.

Sanctions developments

The Ukraine-/Russia-related sanctions imposed by both the US and the EU remained in force. In

2019 the US added sanctions regarding the Nordstream 2 pipeline.

The US also added sanctions

against Venezuela in 2019, aimed amongst others at assets from the

government of Venezuela.

With respect to Cuba, the US lifted in 2019 the suspension

of the private right of action under Title

III of the Helms-Burton Act. This allows former owners of properties expropriated by the Cuban

government to bring claims before the U.S. courts against foreign companies alleged to have

“trafficked” with those properties.

In 2020, the US imposed new sanctions on Iran. The EU blocking regulation remained in force.

The

EU revised this regulation in 2018 in response

to the U.S. withdrawal from

the Joint Comprehensive

Plan of Action. The regulation aims to shield EU companies from U.S. sanctions on Iran, in part by

prohibiting European companies from

complying with the sanctions the EU considers to be

“extraterritorial”

in nature.

With a view to these ongoing developments ING continuously evaluates its sanctions compliance

controls to respond to risks of new or expanding sanctions regimes.

C. Organizational

structure

General

ING Groep N.V.,

a publicly-listed company, is the parent of one main legal entity: ING Bank N.V.

(ING

Bank).

ING Bank is the parent company of various Dutch and foreign banks.

Principal Group Companies

Reference is made to Exhibit 8 “List of subsidiaries of ING Groep N.V.”

D.

Property,

plants

and equipment

ING predominantly leases the land and buildings used in the normal course of its business. In

addition, ING has invested in land and buildings. Management believes that ING’s facilities are

adequate for its present needs in all material respects.

For information on property, plants and equipment, reference

is made to Note 9 ‘Property and

equipment’, for information on lease liabilities reference is made to Note 17 ‘Other liabilities’ and

for information on investment properties reference

is made to Note 11 ‘ Other assets’ in the

consolidated financial statements.

Item

4A.

Unresolved

Staff

comments

Not applicable.

Item

5.

Operating

and financial

review

and prospects

The following operating and financial review and prospects should be read in conjunction with the

consolidated financial statements

and the related Notes thereto included elsewhere herein.

The

consolidated financial statements

have been prepared in accordance

with IFRS-IASB. Unless

otherwise indicated, financial

information for ING Group included herein is presented on a

consolidated basis under IFRS-IASB.

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A.

Operating

results

Factors affecting results

of operations

ING Group’s results of operations are

affected by demographics, regulations and by a variety of

market conditions, including economic cycles, banking industry cycles and fluctuations

in stock

markets, interest and foreign exchange rates,

political developments and client behavior changes.

For further information on regulations reference

is made to “Item 4. Information on the Company –

Regulation and Supervision”. For

further information on other factors that can impact ING Group’s

results of operations, ref

erence is made to “Item 3. Key information - Risk Factors” for more

factors

that can impact ING Group’s results of operations.

Financial environment

Global economic developments

Being a global financial

services company, ING’s revenues and earnings are affected by the

volatility and strength of the economic, business, liquidity, funding and capital markets

environments specific to the geographic regions in which we do business. This includes operations

in both advanced economies, as well as emerging economies.

Against a backdrop of continuing US-China trade tensions, prolonged uncertainty on Brexit and

reduced US fiscal stimulus, global economic growth weakened throughout 2019. The global

economic growth rate fell to its lowest

level in a decade.

In addition, the first

months of 2020 were marked by the spread of corona (COVID

-19) virus-linked

infections in and beyond China, negatively affecting

Chinese manufacturing and trade, and posing

the threat of significant disruption to global supply chains,

global manufacturing, travel and

tourism, investment and consumer spending.

Advanced economies

Global economic growth slowed in 2019, with a decline in trade and industrial output as well as a

weakening in the services sector.

In the US, economic momentum slowed as the positive effects of

2018’s fiscal stimulus ebbed away and confidence

slipped against the background of increased

trade tariffs. Economic growth in Netherlands, Belgium and Luxembourg

remained strong despite

the weak global trade environment and remains

above the eurozone average.

In Germany,

economic growth came to a near standstill during the year due to several factors combined with

weak external demand. In Italy, economic growth was minimal as an uncertain fiscal outlook took

its toll on domestic demand. Consistent with slowing economic growth, inflation slowed or

remained low in major advanced economies.

Deteriorating economic sentiment and expectations about monetary policy easing drove bond

yields down in most advanced economies. Yields on 10-year US government bonds fell to the

lowest level since July 2016, and the yield on 10-year German government bonds reached a record

low of -0.73 percent in August. As a result, sovereign

yield curves were partially inverted

in most

advanced economies.

Both the level of interest rates

and the difference between short and long-term rates (the ‘slope’ of

the yield curve) impact our net interest income. Given our geographical footprint, eurozone

rate

developments are more

important for us than US ones.

Prospects for weaker economic growth and lower inflation induced both

the US Federal Reserve

and the ECB to loosen monetary policy.

The historically low, and even negative, interest rates

in the eurozone make it challenging for banks

to maintain positive income in the form of a margin between traditional saving and lending

activities.

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Emerging economies

Central banks in some of the main emerging market economies eased policy to pre-empt a further

deterioration of economic circumstances. Brazil, India, Korea

and Mexico, among others, lowered

their policy rate.

Economic growth in Asia was negatively impacted by the imposition of import tariffs and related

uncertainty about global trade. In China, already in the midst of a structural slowdown, economic

growth slowed to its lowest rate

in 29 years. To

address this adverse external environment, both

fiscal and monetary stimuli were introduced.

Poland continued to be resilient to slowing growth

in the eurozone and the economic slowdown in

Turkey

found a floor. Falling

inflation and a return of investor confidence

in Turkey contributed to a

general decline in interest rates.

How exchange rates

responded

Exchange rate fluctuations have an influence

on the business of a globally operating bank like ING,

including in the areas of profitability and funding. Several factors in the course of the year

contributed to the exchange rate of the euro weakening against the dollar.

These included yields in

the euro area persistently being below those of the US, uncertainty around the possibility of a

broadening of the US trade dispute from China to Europe,

and the negative fall-out on economic

activity of a possible no-deal Brexit.

During the year, the British pound’s performance against the euro was erratic, mostly driven by

changing market expectations about the possibility

of the UK leaving the EU with or without a

withdrawal agreement.

Brexit factor

Brexit continued to dominate 2019, with the UK finally leaving the

EU on 31 January 2020.

Milestones in the year included British Prime Minister Theresa May making way for Boris Johnson,

several extensions to withdrawal

dates, and a snap general election, which the Conservatives won

by a landslide in December.

In 2019, the financial

sector, regulators and banks alike put tremendous effort into preparing for all

Brexit scenarios, with the aim of ensuring the resilience of the banking sector even in the face of a

no-deal scenario. For banks, the implementation of their contingency planning was a key priority.

On the legislative side, EU and UK regulators took the necessary steps ensuring operational

continuity.

ING took several steps to prepare

for Brexit, making various adaptations to ensure a smooth

transition. Following Brexit,

the European Central

Bank (ECB) was set to classify the UK as a non-EU

or third country. As a consequence, ING has made the decision to move a number of EU-related

trading operations to a location within the EU. Brussels was chosen due to its existing

infrastructure.

The proposed changes by no means dilute the importance of the UK as one of ING’s major

Wholesale Banking hubs. The UK centres of expertise, including Financial Markets, support ING’s

clients and its teams in other countries and regions across the globe. The UK team will continue to

be an important pillar for ING.

Fluctuations in equity markets

Our banking operations are exposed to fluctuations in equity markets. ING maintains an

internationally diversified and mainly

client-related trading portfolio. Accordingly,

market

downturns are likely to lead to declines in securities trading and brokerage

activities which we

execute for customers and therefore

to a decline in related commissions and trading results. In

addition to this, ING also maintains equity investments in its own non-trading books. Fluctuations in

equity markets may affect the value of these investments.

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Fluctuations in interest rates

Our banking operations are exposed to fluctuations in interest rates. Mismatches in the interest re-

pricing and maturity profile of assets and

liabilities in our balance sheet can affect the future

interest earnings and economic value of the bank's underlying banking operations. In addition,

changing interest rates may impact the (assumed) behavior of our customers, impacting the

interest rate exposure,

interest hedge positions and future interest earnings, solvency and

economic value of the bank’s underlying banking operations. In the current low (and in some cases

negative) interest rate environment

in the Eurozone, the stability of future

interest earnings and

margin also depends on the ability to actively manage pricing of customer assets and liabilities.

Especially, the pricing of customer savings portfolios in relation to re-pricing customer assets and

other investments in our balance sheet is a key factor in the management of the bank’s interest

earnings.

Fluctuations in exchange rates

ING Group is exposed to fluctuations in exchange rates. Our management of exchange rate

sensitivity affects the results of our operations through the trading activities and because we

prepare and publish our consolidated financial statements in euros. Because a substantial portion

of our income, expenses and foreign investments is denominated in currencies other than euros,

fluctuations

in the exchange rates used to translate foreign

currencies, particularly the U.S. Dollar,

Pound

Sterling, Turkish

Lira, Chinese Renminbi, Australian Dollar, Japanese Yen,

Polish Zloty, Korean

Won, the Indian Rupee, Brazilian Real, Singapore

Dollar, Thai Baht and Russian Ruble into euros can

impact our reported results of operations, cash flows and reserves from year to year.

Fluctuations

in exchange rates will also impact the value (denominated in euro) of our investments in our non-

euro reporting subsidiaries. The impact of these fluctuations

in exchange rates is mitigated to some

extent by the fact

that income and related expenses, as well as assets and liabilities, of each of our

non-euro reporting subsidiaries are generally denominated in the same currencies. FX translation

risk is managed by taking into account the effect of translation results on the Core Equity Tier 1

ratio (CET1).

Critical Accounting Policies

A number of new or amended standards became applicable for the current reporting period.

ING Group changed its accounting policies in 2019 as a result of adopting IFRS 16 ‘Leases’

The other changes in standards and amendments did not have a significant impact

on ING Group’s

accounting policies.

For detailed information regarding

ING’s accounting policies, including changes in accounting

policies, reference is made to Note 1 ‘Accounting Policies’

to the consolidated financial

statements.

Consolidated result

of operations

ING Group’s management evaluates the results of ING Group’s

banking segments using a non-IFRS

financial performance measure called underlying result. To give

an overview of the underlying

result measure, we also present

consolidated underlying result before tax and underlying net

result. Underlying figures are derived from figures determined in accordance with IFRS-IASB by

excluding the impact of special items, adjustment of the EU ‘IAS 39 carve-out’ and Insurance Other.

Special items consist of items of income or expense that are significant and

arise from events or

transactions that are clearly distinct from ordinary operating activities. The adjustment of the EU

‘IAS 39 carve-out’ refers to the fact that ING Group applies fair value hedge accounting for portfolio

hedges of interest rate risk (fair value macro

hedges) in accordance with the EU “carve-out” version

of IAS 39. No hedge accounting is applied to these derivatives

under IFRS-IASB. Insurance Other

reflects (former) insurance related activities that are not part of the discontinued operations.

While items excluded from underlying result are

significant components in understanding

and

assessing the Group’s consolidated financial performance, ING Group believes that the presentation

of underlying net result is relevant

and useful for investors because it allows investors to

understand the primary method used by management to evaluate the Group’s operating

performance and make decisions about allocating resources. In addition, ING Group believes

that

the presentation of underlying net result helps investors compare

its segment performance on a

meaningful basis by highlighting result before tax attributable to ongoing operations and the

underlying profitability of the segment businesses. For example, ING believes that trends in the

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underlying profitability of its segments can be more clearly identified

by disregarding the effects of

special items and the impact of the IAS39 carve-out adjustment. ING Group believes that the most

directly comparable GAAP financial measure to underlying net result is net result. However,

underlying net result should not be regarded

as a substitute for net result as determined in

accordance with IFRS-IASB. Because underlying net result is not determined in accordance

with

IFRS-IASB, underlying net result as presented by ING may not be comparable to other similarly

titled measures of performance of other companies. In addition, ING Group’s definition of

underlying net result may change over time.

The section Segment Reporting Banking Operations on the next pages presents the segment results

on the basis of the performance measure underlying result.

For further information on underlying result for the Banking activities, as well as the reconciliation

of our segment underlying result before tax to our net result,

see Note 34 ‘Segments’ in the

consolidated financial statements.

Group Overview

The following table sets forth the consolidated results of ING Group in accordance

with IFRS-IASB for

the years ended 31 December 2019, 2018 and 2017:

IFRS-IASB Consolidated Income

Statement

Amounts in millions of euros

2019

2018

2017

Continuing operations

Interest income

28,163

28,129

43,890

Interest expense

14,353

14,169

30,243

Net interest income

13,811

13,960

13,647

Net fee and commission income

2,868

2,798

2,710

Investment and Other income

446

1,566

2,233

Total

income

17,125

18,324

18,590

Operating expenses

10,353

10,682

9,829

Addition to loan loss provisions

1,120

656

676

Total

expenditure

11,472

11,338

10,505

Result before tax

5,653

6,986

8,085

Taxation

1,652

2,116

2,539

Net result from continuing operations

4,001

4,869

5,546

Non-controlling interests

from continuing operations

99

108

82

Net result IFRS-IASB

3,903

4,761

5,464

Reconciliation from IFRS-IASB to ING Group’s underlying results

Amounts in millions of euros

2019

2018

2017

Net result IFRS-IASB

3,903

4,761

5,464

-/- Special items

1

-775

0

-/- Adjustment of the EU 'IAS 39 carve-out'

-878

58

559

-/- Insurance Other

90

-52

Underlying net result

4,781

5,389

4,957

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1.

Special items: settlement agreement with the Dutch authorities on regulatory issues

as announced on 4

September 2018 (EUR -775 million, 2018); tax charge of EUR 121 million at ING Australia

Holdings Ltd related to

the years 2013-2017, for which a full reimbursement is expected to be received

from NN Group (impact on net

result EUR 0 million, 2017).

Year

ended 31 December 2019 compared to year ended 31 December 2018

In 2019, ING showed solid commercial performance despite the challenging rate environment,

geopolitical uncertainties and demanding regulatory environment. However, the net result

declined

18.0% to EUR 3,903 million in 2019 from EUR 4,761 million in 2018, which has been negatively

affected by the EUR 775 million settlement agreement with the Dutch authorities on

regulatory

issues that was recorded as a special item. The net result

in 2019 also included EUR 878 million

drop in fair value changes on derivatives related

to asset-liability-management activities (including

a negative impact under interest income of ending some hedge relationships), with the EU carve-

out version of IAS 39 applied. In 2019, there were no results

from Insurance Other as ING sold its

last warrants related to its previous

Insurance activities in November 2018. The net result in 2018

included EUR 90 million from Insurance Other, reflecting the net result on the warrants on Voya

Financial and NN Group shares.

Underlying net result for 2019 was EUR 4,781 million, a decrease of 11.3% from EUR 5,389 million in

2018. Underlying net result is derived from total net result

by excluding the impact from special

items and adjustment of the EU ‘IAS 39’ carve-out

and Insurance Other.

Year

ended 31 December 2018 compared

to year ended 31 December 2017

ING posted strong commercial results

in 2018, but they were negatively affected by the EUR 775

million settlement agreement with the Dutch authorities on regulatory issues. The net result

dropped to EUR 4,761 million from EUR 5,464 million in 2017, primarily due to the settlement

agreement which was recorded

as a special item. In 2017, there was a special item related to a EUR

121 million tax charge at ING Australia Holdings Ltd, for which a full reimbursement

will be received

from NN Group. Although the

bottom-line impact for ING Bank was nil, it affected

both the tax and

'other income' lines. The net result in 2018 also included EUR 58 million increase in fair value

changes on derivatives (including a negative impact under net interest income of ending some

hedge relationships) related to asset-liability-management activities for the mortgage and savings

portfolios in Benelux, Germany and Czech Republic, with the EU carve-out version of IAS 39 applied,

while these fair value changes were EUR 559 million in 2017. Insurance Other added EUR 90 million

to the net result, compared with a EUR 52 million loss in 2017. Insurance

Other mainly comprised

the net result on the warrants on Voya

Financial and NN Group shares. ING sold its remaining part

of warrants on the shares of Voya

Financial in March 2018, while the warrant agreement between

NN Group and ING was terminated in November 2018.

Underlying net result for 2018 was EUR 5,389 million, an increase of 8.7% from EUR 4,957 million in

2017. Underlying net result is derived from total net result

by excluding the impact of special items,

adjustment of the ‘EU IAS 39 carve-out’ and Insurance Other.

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Segment Reporting

ING Group evaluates the resul

ts of its banking segments using a non-IFRS financial

performance

measure called underlying result. Underlying result

is derived from result determined in

accordance with IFRS-IASB by excluding the impact of special items, adjustment of the ‘EU IAS 39

carve-out’ and Insurance Other.

Because underlying result is not determined in accordance with IFRS-IASB, underlying result as

presented by ING may not be comparable to other similarly titled measures of performance of

other companies. The underlying result of ING’s segments is reconciled to the Net result

as reported

in the IFRS-IASB Consolidated

profit or loss account.

The published 2019 Annual Accounts of ING Group includes financial

information in accordance

with International Financial Reporting Standards

as adopted by the European Union (IFRS-EU). The

segment reporting in the annual report on Form 20-F has been prepared in

accordance with

International Financial Reporting Standards as issued by the International Accounting Standards

Board (IFRS-IASB) for consistency with the other financial information contained in this report. The

difference between the accounting standards is reflected in the Wholesale segment, and in the

geographical segments the Netherlands, Belgium, Germany and Other Challengers. Reference is

made to Note 1 ‘Accounting Policies’ for a reconciliation between IFRS-EU and IFRS-IASB.

The information presented in this section is in line with the information presented to the Executive

Board and Management Board Banking.

For further information on underlying result for the Banking activities, as well as the reconciliation

of our segment underlying result before tax to our net result,

see Note 34 ‘Segments’ in the

consolidated financial statements.

ING Group’s segments are based on the internal reporting structures. The following table specifies

the segments by line of business and the main sources of income of each of the segments:

Retail Netherlands

(Market Leaders)

Income from retail and private banking activities in the Netherlands, including the SME and mid-

corporate segments and the Real Estate Finance

portfolio related to Dutch domestic mid-

corporates.

The main products offered are current and savings accounts, business lending,

mortgages and other consumer lending in the Netherlands.

Retail Belgium

(Market Leaders)

Income from retail and private banking activities in Belgium (including Luxembourg),

including the

SME and mid-corporate segments. The main products offered are similar to those in the

Netherlands.

Retail Germany

(Challengers and Growth Markets)

Income from retail and private banking activities in Germany (including Austria). The main products

offered are current and savings accounts, mortgages and other customer lending.

Retail Other

(Challengers and Growth Markets)

Income from retail banking activities in the rest of the world, including the SME and mid-corporate

segments in specific

countries. The main products offered are similar to those in the Netherlands.

Wholesale Banking

Income from wholesale banking activities. The main products are: lending, debt capital markets,

working capital solutions, export finance,

daily banking solutions, treasury and risk solutions, and

corporate finance.

The accounting policies of the segments are the same as those described in Note 1 ‘Accounting

policies’ in the consolidated financial

statements. 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, expenses and/or

assets of the segment.

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As of 1 January 2019, the Real Estate Finance portfolio related to Dutch domestic mid-corporates,

which was included under Wholesale Banking, has been transferred to Retail Netherlands in order

to define clearer roles and responsibilities. The presentation of previously reported underlying profit

and loss amounts has been adjusted to reflect this

change.

Corporate Line Banking

In addition to these segments, ING Group reconciles the total segment results to the total result

of

Banking using Corporate Line Banking. The Corporate

Line Banking is a reflection of capital

management activities and certain income and expense items that

are not allocated to the

banking businesses, including a higher VAT

refund in 2019 as well as a EUR 119 million gain from

the release of a currency translation reserve

following the sale of ING’s stake in Kotak Mahindra

Bank and the recognition of a EUR 79 million receivable related to the

insolvency of a financial

institution (both recorded under income). Furthermore,

the Corporate Line Banking includes the

isolated legacy costs (mainly negative interest results) caused by the replacement

of short-term

funding with long-term funding during 2013 and 2014. 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.

Banking Operations

The following table sets forth the contribution of ING’s banking business lines and the corporate line

banking to the underlying net result for each of the years 2019, 2018 and 2017.

1 January to 31 December 2019

Amounts in millions of euros

Retail

Banking

Netherlands

Retail

Banking

Belgium

Retail

Banking

Germany

Retail

Other

Wholesale

Banking

Corporate

Line

Banking

Total

Underlying income:

• Net interest income

3,541

1,907

1,579

2,787

3,794

470

14,079

• Net fee and commission income

674

374

268

423

1,135

-6

2,868

• Total investment

and other income

290

161

138

298

369

103

1,360

Total underlying

income

4,505

2,442

1,985

3,509

5,298

568

18,306

Underlying expenditure:

• Underlying operating expenses

2,210

1,609

1,080

2,210

2,937

307

10,353

• Additions to loan loss provision

91

186

-53

364

532

0

1,120

Total underlying

expenditure

2,301

1,794

1,027

2,574

3,469

307

11,472

Underlying result before taxation

2,204

647

957

935

1,830

261

6,834

Taxation

558

192

328

234

464

179

1,955

Non-controlling interests

0

0

3

82

14

0

99

Underlying net result

1,646

455

627

619

1,352

82

4,781

Special items

Adjustment of the EU 'IAS 39 carve-out'

-878

-878

Net result Banking

1,646

455

627

619

474

82

3,903

Net result Insurance

Other

Net result from continuing operations

3,903

Net result IFRS-IASB

3,903

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1 January to 31 December 2018

Amounts in millions of euros

Retail

Banking

Netherlands

1

Retail

Banking

Belgium

Retail

Banking

Germany

Retail

Other

Wholesale

Banking

1

Corporate

Line

Banking

Total

Underlying income:

• Net interest income

3,749

1,830

1,671

2,690

3,686

290

13,916

• Net fee and commission income

664

371

225

395

1,152

–4

2,803

• Total investment

and other income

335

169

76

230

673

–113

1,369

Total underlying

income

4,747

2,369

1,972

3,315

5,510

173

18,088

Underlying expenditure:

• Underlying operating expenses

2,220

1,610

1,027

2,033

2,771

247

9,907

• Additions to loan loss provision

–41

164

–27

350

210

–1

656

Total underlying

expenditure

2,179

1,774

1,000

2,383

2,981

246

10,563

Underlying result before taxation

2,568

595

972

932

2,529

–72

7,524

Taxation

626

199

324

200

633

47

2,028

Non-controlling interests

0

6

3

80

19

0

108

Underlying net result

1,942

390

646

652

1,877

–119

5,389

Special items

–775

–775

Adjustment of the EU 'IAS 39 carve-out'

58

58

Net result Banking

1,942

390

646

652

1,935

–894

4,672

Net result Insurance

Other

90

Net result from continuing operations

4,761

Net result IFRS-IASB

4,761

1

In 2019, the Dutch domestic midcorporates real

estate finance portfolio transferred from Wholesale Banking to

Retail Banking Netherlands. Comparative

figures have been adjusted.

1 January to 31 December 2017

Amounts in millions of euros

Retail

Banking

Netherlands

Retail

Banking

Belgium

Retail

Banking

Germany

Retail

Other

Wholesale

Banking

Corporate

Line

Banking

Total

Underlying income:

• Net interest income

3,866

1,842

1,704

2,437

3,639

226

13,714

• Net fee and commission income

607

408

215

384

1,102

–3

2,714

• Total investment

and other income

256

224

–28

207

919

–301

1,277

Total underlying

income

4,730

2,473

1,891

3,028

5,660

–78

17,704

Underlying expenditure:

• Underlying operating expenses

2,260

1,584

1,032

1,919

2,744

290

9,829

• Additions to loan loss provision

15

104

–10

284

282

1

676

Total underlying

expenditure

2,275

1,688

1,022

2,203

3,026

291

10,505

Underlying result before taxatio

n

2,455

785

869

825

2,634

–369

7,199

Taxation

615

296

241

188

832

–13

2,160

Non-controlling interests

0

–2

2

67

15

0

82

Underlying net result

1,839

491

625

569

1,788

–356

4,957

Special items

0

0

Adjustment of the EU 'IAS 39 carve-out'

559

559

Net result Banking

1,839

491

625

569

2,347

–356

5,516

Net result Insurance

Other

–52

Net result from continuing operations

5,464

Net result IFRS-IASB

5,464

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Financial Statements

2019 ING Group Annual Report on Form 20-F

75

Year

ended 31 December 2019 compared to year ended 31 December 2018

In 2019, ING’s banking operations showed solid commercial performance despite the challenging

rate environment, geopolitical uncertainties and demanding regulatory environment.

The net

result Banking (including the impact of special items and adjustment of the EU ‘IAS 39 carve-out’)

declined 16.5% to EUR 3,903 million in 2019 from EUR 4,672 million in 2018, which has been

negatively affected by the EUR 775 million settlement

agreement with the Dutch authorities on

regulatory issues that was recorded

as a special item. The net result was affected by a EUR 936

million negative swing in net contribution of fair value changes on derivatives related to asset-

liability-management activities for the mortgage and savings

portfolios in the Benelux, Germany,

France

and Czech Republic. These fair value changes are mainly caused by changes in market

interest rates. No hedge accounting is applied to these derivatives under IFRS-IASB.

The underlying net result dropped 11.3% to EUR 4,781 million from EUR 5,389 million. This was in

part due to an increased underlying effective tax rate of 28.6% from 27.0% in 2018, mainly

reflecting higher non-deductible

costs, including the cancellation of tax deductibility of interest

expenses on additional Tier 1 instruments in the Netherlands

as from 2019. Underlying net result is

derived from total net result

by excluding the impact from special items and adjustment of the EU

‘IAS 39’ carve-out.

The underlying result before tax

declined 9.2% to EUR 6,834 million in 2019 from EUR 7,524 million

in 2018, primarily due to increased operating expenses and higher risk costs. Commercial

momentum remained solid, albeit at a slower pace than previous year.

ING grew net core lending

(adjusted for currency impacts, and excluding Treasury

and

the run-off portfolios) by EUR 17.2

billion, or 2.9%, and net customer deposits rose by EUR 23.4 billion in 2019. The global retail

customer base grew to 38.8 million at year-end, and the number of primary customers rose during

the year by 0.8 million to 13.3 million.

The underlying income increased 1.2% to EUR 18,306 million from EUR 18,088 million in 2018,

driven by Corporate Line (predominantly one-offs) and Retail Banking, while income in Wholesale

Banking (mainly in Financial Markets and Lending) declined. Net interest income rose 1.2% to EUR

14,079 million. The increase was driven by higher interest results

on customer lending mainly

supported by volume growth, partly offset by lower margins on savings and current accounts. The

total lending margin was slightly up compared with 2018, as the impact of improved interest

margins on mortgages was largely offset by lower margins on other customer lending. ING’s overall

net interest margin remained

at 1.54% in 2019.

Net fee and commission income rose 2.3% to EUR 2,868 million. The increase was driven by Retail

Banking with increases in most countries, partly offset by a small decline in Wholesale

Banking.

Investment and other income slightly decreased to EUR 1,360 million from EUR 1,369 million in

2018, with a decline in Wholesale Banking, mainly due to negative valuation adjustments in

Financial Markets, and some one-offs. The decline was largely offset

by increases in Retail Banking

and Corporate Line. The latter was supported by a EUR 119 million gain from the release

of a

currency translation reserve

following the sale of ING’s stake in Kotak Mahindra Bank and the

recognition of a EUR 79 million receivable related

to the insolvency of a financial institution.

Underlying operating expenses increased 4.5% to EUR 10,353 million from EUR 9,907 million in

2018. The increase was visible in all segments, except for Retail Netherlands and Retail Belgium.

Regulatory expenses rose to EUR 1,021 million from EUR 947 million in previous year.

Excluding

regulatory costs, expenses were

up 4.2%, mainly due to higher KYC-related costs, increased staff

costs and continued investments in business growth, partly offset by costs savings and one-offs

(including a higher VAT

refund, recorded

in Corporate Line). The cost/income ratio was 56.6%

versus 54.8% in 2018.

The net addition to the provision for loan losses rose to EUR 1,120 million from EUR 656 million in

2018. This increase was mainly caused by a number of large individual files in Wholesale Banking

and higher, but still relatively low risk costs in Retail Netherlands. Risk costs rose to 18 basis points

of average customer lending in 2019, remaining below ING Bank’s through-the-cycle average

of

approximately 25 basis points, compared with 11 basis points of average customer lending in 2018.

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2019 ING Group Annual Report on Form 20-F

76

Year

ended 31 December 2018 compared to year ended 31 December 2017

ING’s banking operations posted strong commercial results

in 2018, but they were negatively

affected by the EUR 775 million settlement agreement with the Dutch authorities on

regulatory

issues. The net result Banking (including the impact of special items and adjustment of the EU ‘IAS

39 carve-out’) dropped to EUR 4,672 million from EUR 5,516 million in 2017, primarily due to the

settlement agreement which was recorded

as a special item. In 2017, there was a special item

related to a EUR 121 million tax charge at ING Australia Holdings Ltd,

for which a full

reimbursement will be received from

NN Group. Although the bottom-line impact for ING was nil, it

affected both the tax and 'other income' lines. The

result was negatively affected by a EUR 501

million lower net contribution of fair value changes on derivatives related to asset-liability-

management activities for the mortgage and savings

portfolios in the Benelux, Germany and Czech

Republic. These fair value changes are mainly caused by changes in market interest rates.

No

hedge accounting is applied to these derivatives under IFRS-IASB.

The underlying net result rose 8.7% to EUR 5,389 million in 2018 from EUR 4,957 million in 2017;

this was partly caused by a lower underlying effective tax rate supported by the tax reforms in

Belgium and the US. Underlying net result is derived from total net result

by excluding the impact

from special items and adjustment of the EU ‘IAS 39 carve-out’.

The underlying result before tax rose

4.5% to EUR 7,524 million in 2018

from EUR 7,199 million in

2017, primarily driven by continued business growth at resilient interest margins,

higher net fee

and commission income, and slightly lower risk costs. Commercial performance was strong

in

2018. ING grew net core lending (adjusted for currency

impacts, and excluding Bank Treasury and

the run-off portfolios) by EUR 36.6 billion,

or 6.4%, and net customer deposits rose by EUR 19.3

billion in 2018. The global retail customer base grew by one million customers to reach 38.4 million

over the year, and the number of primary customers rose by 1.1 million to 12.5 million.

Total

underlying income increased 2.2% to EUR 18,088 million from EUR 17,704 million in 2017. Net

interest income rose 1.5% to EUR 13,916 million, due to an increase of the average

balance sheet

total, partly offset by a narrowing of the net interest margin to 1.53% from 1.54% in 2017. The

increase of the average balance sheet was mainly driven by the continued growth

in net core

lending and customer deposits. The interest result on customer lending activities increased driven

by higher volumes at stable margins. The interest result on customer deposits slightly declined, as

the impact of volume growth was more than offset by margin pressure

on current accounts (due to

lower reinvestment yields); the interest

margin on savings stabilized, mainly due to a further

lowering of client savings rates in several

countries. Net interest income was furthermore

negatively affected by a decline in the volatile interest results of Financial Markets. Net fee and

commission income rose 3.3% to EUR 2,803 million. The increase was mainly in Wholesale Banking

(supported by the inclusion of Payvision as from the second quarter of 2018) and most of the Retail

Banking countries, except for Belgium and Turkey. Investment

and other income rose to EUR 1,369

million from EUR 1,277 million in 2017, mainly caused by higher valuation results and net trading

income, including improved hedge ineffectiveness results, and one-off results. The increase was

primarily visible in Retail Banking (excluding Belgium) and the Corporate Line. In Wholesale Banking,

investment and other income declined, mainly due to a loss recorded on the intended sale of an

Italian lease run-off portfolio in 2018, while

2017 included a gain on the sale of an equity stake in

the real estate run-off portfolio.

Underlying operating expenses increased 0.8% to EUR 9,907 million from EUR 9,829 million in 2017.

In 2018, expenses included EUR 947 million of regulatory expenses up from EUR 901 million in the

previous year.

Excluding regulatory costs, expenses were up

0.4%, as higher costs for strategic

projects and to support business growth, were larg

ely offset by lower performance-related

expenses and strict cost management. The underlying cost/income

ratio improved

to 54.8% from

55.5% in 2017.

The net addition to the provision for loan losses declined 3.0% to EUR 656 million from EUR 676

million in 2017. Risk costs were 11 basis points of average customer lending compared with 12

basis points in 2017.

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2019 ING Group Annual Report on Form 20-F

77

RETAIL NETHERLANDS

Amounts in millions of euros

2019

2018

1

2017

Underlying income:

Net interest income

3,541

3,749

3,866

Net fee and commission income

674

664

607

Investment income and other income

290

335

256

Total

underlying income

4,505

4,747

4,730

Underlying expenditure:

Underlying operating expenses

2,210

2,220

2,260

Additions to the provision for loan losses

91

–41

15

Total

underlying expenditure

2,301

2,179

2,275

Underlying result before tax

2,204

2,568

2,455

Taxation

558

626

615

Non-controlling interests

0

0

0

Underlying net result

1,646

1,942

1,839

Net result

1,646

1,942

1,839

1

As from 2019, Retail Netherlands includes the real estate finance portfolio to Dutch domestic

mid-corporates. This portfolio

was transferred from Wholesale Banking to Retail Netherlands in order to define clearer roles and responsibilities. All

comparative figures have been adjusted.

Year

ended 31 December 2019 compared to year ended 31 December 2018

Both net result and underlying net result of Retail Netherlands decreased

by EUR 296 million, or

15.2%, to EUR 1,646 million in 2019 from EUR 1,942 million in 2018. There were no special items in

2019 and 2018.

The underlying result before tax

of Retail Netherlands decreased 14.2% to EUR 2,204 million from

EUR 2,568 million in 2018. This was mainly due to lower income, mainly reflecting lower margins on

customer deposits and lower revenues from

Treasury,

combined with higher risk costs. Operating

expenses declined slightly.

Underlying income fell 5.1% to EUR 4,505 million from EUR 4,747 million previous year.

The interest

result was 5.5% lower, reflecting margin pressure

on savings and current accounts due to lower re-

investment yields and lower revenues from

Treasury.

This was partly compensated by improved

margins on mortgages. Net core lending (excluding the WUB run-off portfolio and Treasury-related

products) grew by EUR 2.0 billion in 2019, equally divided over mortgages and other lending. Net

growth in customer deposits (excluding Treasury)

was EUR 8.4 billion in 2019. Net fee and

commission income rose by EUR 10 million, or 1.5%, primarily due to higher daily banking fees.

Investment and other income declined by EUR 45 million, mainly attributable to lower results from

financial markets-related products.

Underlying operating expenses declined 0.5% on 2018, this was mainly due to lower regulatory

costs, benefits from the ongoing cost-saving initiatives and some positive one-offs,

partly offset by

increased salaries as well as higher KYC and IT-related

expenses.

Risk costs in 2019 increased to a relatively low EUR 91 million, or 6 basis points of average customer

lending, partly caused by a change in the house price index that is used for Dutch mortgages.

This

compared

with a net release of EUR 41 million 2018, which included releases in both mortgages

and business lending.

Year

ended 31 December 2018 compared to year ended 31 December 2017

Both net result and underlying net result of Retail Netherlands increased

by EUR 103 million, or

5.6%, to EUR 1,942 million in 2018 from EUR 1,839 million in 2017. There were no special items in

2018 and 2017.

The underlying result before tax

of Retail Netherlands rose 4.6% to EUR 2,568 million from EUR

2,455 million in 2017. This was mainly due to lower risk costs and benefits

from the ongoing cost-

saving programmes.

Underlying income rose 0.4% to EUR 4,747 million. The interest result was 3.0% lower, mainly

caused by margin pressure

on savings and current accounts, and a decline in the average lending

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2019 ING Group Annual Report on Form 20-F

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volumes, partly offset by higher margins on mortgages. Net core lending (excluding the WUB run-

off portfolio and Bank Treasury-related products)

grew by EUR 1.5 billion as from 1 January 2018,

of which EUR 0.8 billion in mortgages and EUR 0.7 billion in other lending. Net growth in customer

deposits (excluding Bank Treasury)

was EUR 3.5 billion in 2018. Net fee and commission income

rose by EUR 57 million, or 9.4%, primarily due to higher daily banking fees. Investment and other

income rose by EUR 79 million, mainly attributable to higher allocated Bank Treasury

revenues.

Underlying operating expenses declined 1.8% on 2017, mainly driven by the benefits

from the

ongoing cost-saving initiatives and lower expenses for legal claims.

Risk costs turned to a net release of EUR 41 million, or -3 basis points of average customer lending,

from a net addition of EUR 15 million in 2017, reflecting the continued positive macroeconomic

conditions in the Netherlands.

RETAIL BELGIUM

Amounts in millions of euros

2019

2018

2017

Underlying income:

Net interest income

1,907

1,830

1,842

Net fee and commission income

374

371

408

Investment income and other income

161

169

224

Total

underlying income

2,442

2,369

2,473

Underlying expenditure:

Underlying operating expenses

1,609

1,610

1,584

Additions to the provision for loan losses

186

164

104

Total

underlying expenditure

1,794

1,774

1,688

Underlying result before tax

647

595

785

Taxation

192

199

296

Non-controlling interests

0

6

–2

Underlying net result

455

390

491

Net result

455

390

491

Year

ended 31 December 2019 compared to year ended 31 December 2018

Both net result and underlying net result of Retail

Belgium (including ING in Luxembourg) increased

by EUR 65 million, or 16.7%, to EUR 455 million in 2019 from EUR 390 million in 2018. There were no

special items in 2019 and 2018.

The underlying result before tax

of Retail Belgium rose 8.7% to EUR 647 million in 2019, compared

with EUR 595 million in 2018. The increase reflects higher income and stable expenses, only

partly

offset by an increase in risk costs.

Underlying income increased to EUR 2,442 million from EUR 2,369 million in 2018. The interest

result was 4.2% up to EUR 1,907 million, mainly due to volume growth, increased margins

on

mortgages, and supported by higher net interest income from Treasury

-related products. This was

in part offset by lower net interest income from savings and current accounts, reflecting the low

interest rate environment,

and some margin pressure on non-mortgage lending. The net growth in

customer lending (excluding Treasury)

was EUR 3.3 billion, of which EUR 1.2 billion was in residential

mortgages and EUR 2.1 billion in other lending. The net inflow

in customer deposits (excluding

Treasury)

was EUR 4.1 billion in 2019. Net fee and commission income increased 0.8% to EUR 374

million. Investment and other income was EUR 8 million lower, mainly due to lower Trea

sury-

related revenues.

Operating expenses declined 0.1% to EUR 1,609 million, mainly due to lower staff-related expenses

stemming from the transformation programmes,

partly offset by higher regulatory costs and KYC-

related expenses.

Risk costs increased by EUR 22 million to EUR

186 million, or 21 basis points of average customer

lending, from EUR 164 million, or 19 basis points, in 2018. The increase was mainly caused by

additional provisioning on individual mid-corporates files and higher collective provisions for

consumer lending.

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2019 ING Group Annual Report on Form 20-F

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Year

ended 31 December 2018 compared to year ended 31 December 2017

Both net result and underlying net result of Retail

Belgium (including ING in Luxembourg) declined

by EUR 101 million, or 20.6%, to EUR 390 million in 2018 from EUR 491 million in 2017. The

decrease was partly mitigated by a lower underlying effective tax rate, because 2017 included the

impact of a tax reform in Belgium, which resulted in a tax charge to record

a reduction in deferred

tax assets. There were no special items in 2018 and 2017.

The underlying result before tax

of Retail Belgium fell 24.2% to EUR 595 million in 2018, compared

with EUR 785 million in 2017. The decline reflects

lower income, higher expenses and an increase in

risk costs.

Underlying income decreased to EUR 2,369 million from EUR 2,473 million in 2017. The interest

result declined 0.7% to EUR 1,830 million, mainly due to margin pressure

on most products, in part

offset by volume growth in the lending portfolio as well as current accounts. The net production in

customer lending (excluding Bank Treasury

and the sale of a mortgage portfolio) was EUR 6.1

billion, of which EUR 2.2 billion was in mortgages and EUR 3.9 billion in other lending. The net inflow

in customer deposits was EUR 3.0 billion in 2018. Net fee and commission income decreased 9.1%,

mainly due to lower fee income on investment products. Investment and other income fell by EUR

55 million, mainly due to lower income from financial markets products.

Operating expenses rose by EUR 26 million, or 1.6%, to EUR 1,610 million, mainly due to higher

external staff expenses related to the transformation programmes and

the successful integration

of Record Bank into ING Belgium. Risk costs increased by EUR 60 million to EUR

164 million, or 19

basis points of average customer lending, from EUR 104 million, or 13 basis points of average

customer lending, in 2017. The increase was primarily in business lending.

RETAIL GERMANY

Amounts in millions of euros

2019

2018

2017

Underlying income:

Net interest income

1,579

1,671

1,704

Net fee and commission income

268

225

215

Investment income and other income

138

76

–28

Total

underlying income

1,985

1,972

1,891

Underlying expenditure:

Underlying operating expenses

1,080

1,027

1,032

Additions to the provision for loan losses

–53

–27

–10

Total

underlying expenditure

1,027

1,000

1,022

Underlying result before tax

957

972

869

Taxation

328

324

241

Non-controlling interests

3

3

2

Underlying net result

627

646

625

Net result

627

646

625

Year

ended 31 December 2019 compared to year ended 31 December 2018

Both net result and underlying net result of Retail

Germany (including ING in Austria) decreased by

EUR 19 million, or 2.9%, to EUR 627 million in 2019 from EUR 646 million in 2018. There were no

special items in 2019 and 2018.

The underlying result before tax

declined 1.5% to EUR 957 million, compared with EUR 972 million

in 2018, mainly due to higher expenses, partly offset

by slightly increased income and a higher net

release in risk costs.

Underlying income increased 0.7% to EUR 1,985 million in 2019 from EUR 1,972 million a year ago.

Net interest income declined 5.5%, mainly due to lower Treasury

-related interest results

(with a

partial offset in other income). Excluding Treasury, net interest

income rose marginally, mainly

reflecting volume growth in most products and improved margins

on mortgages, offset by lower

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2019 ING Group Annual Report on Form 20-F

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interest results on savings and deposits due to margin pressure.

The net growth in core lending

(excluding Treasury)

was EUR 3.0 billion in 2019, of which EUR 2.4 billion in mortgages and EUR 0.6

billion in consumer lending. Net inflow

in customer deposits (excluding Treasury)

was EUR 0.8

billion. Net fee and commission income rose 19.1% to EUR 268 million, due to higher fees on

mortgages and daily banking. Investment and other income rose by EUR 62 million to EUR 138

million, largely due to the aforementioned accounting asymmetry in Treasury

revenues.

Operating expenses rose 5.2% to EUR 1,080 million from EUR 1,027 million in 2018. The increase

was mainly due to a restructuring provision related to the completion of ING’s Agile transformation

in Germany, higher KYC-related expenses, investments to accelerate

the acquisition of primary

customers, and the launch of Interhyp in Austria.

Risk costs were EUR -53 million, or -6 basis points of average customer lending, compared with EUR

-27 million in 2018. The net release in 2019 mainly related to model updates for mortgages, while

the net release in 2018 included a significant release in the consumer lending portfolio.

Year

ended 31 December 2018 compared to year ended 31 December 2017

Both net result and underlying net result of Retail

Germany (including ING in Austria) increased by

EUR 21 million, or 3.4%, to EUR 646 million in 2018 from EUR 625 million in 2017.

The underlying result before tax increased

11.9% to EUR 972 million, compared with EUR 869

million in 2017, mainly due to higher income and a net release in risk costs.

Underlying income increased 4.3% to EUR 1,972 million in 2018 from EUR 1,891 million a year ago.

Net interest income declined 1.9% reflecting margin compression on mortgages and current

accounts, and lower Bank Treasury

-related interest income.

This was only partly offset by higher

margins on savings and deposits and volume growth in most products. Net core lending growth,

which excludes Bank Treasury

products, was EUR 4.4 billion in 2018, of which EUR 3.6 billion was in

mortgages and EUR 0.8 billion in consumer lending. Net inflow

in customer deposits (excluding

Bank Treasury)

was EUR 5.0 billion, mainly driven by a promotional savings campaign in the fourth

quarter of 2018. Net fee and commission income rose 4.7%, due to higher fee income on

investment products and an improvement in fees on current

accounts. Investment and other

income rose to EUR 76 million, mainly due to improved

hedge ineffectiveness results from Bank

Treasury.

Operating expenses declined 0.5% to EUR 1,027 million from EUR 1,032 million in 2017. This

decrease

was mainly caused by lower regulatory costs and a decline in marketing expenses, partly

offset by higher costs to support business

growth and a restructuring provision

in 2018. Risk costs

were EUR -27 million in 2018, compared with EUR -10 million in 2017, reflecting a benign credit

environment in the German market and a review of the consumer lending portfolio.

RETAIL OTHER

Amounts in millions of euros

2019

2018

2017

Underlying income:

Net interest income

2,787

2,690

2,437

Net fee and commission income

423

395

384

Investment income and other income

298

230

207

Total

underlying income

3,509

3,315

3,028

Underlying expenditure:

Underlying operating expenses

2,210

2,033

1,919

Additions to the provision for loan losses

364

350

284

Total

underlying expenditure

2,574

2,383

2,203

Underlying result before tax

935

932

825

Taxation

234

200

188

Non-controlling interests

82

80

67

Underlying net result

619

652

569

Net result

619

652

569

Year

ended 31 December 2019 compared to year ended 31 December 2018

Retail Other consists of the Other Challengers & Growth Markets, including the bank stakes in Asia.

Both net result and underlying net result of Retail Other decreased

by EUR 33 million, or 5.1%, to

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EUR 619 million in 2019 from EUR 652 million in 2018. There were no special items in 2019 and

2018.

Retail Other’s underlying result before tax

increased 0.3% to EUR 935 million in 2019, from EUR 932

million in 2018. This was mainly due to higher income, partly offset

by increased expenses and

higher risk costs.

Total

underlying income rose by EUR 194 million, or 5.9%, to EUR 3,509 million. This increase was

driven by strong results across

most of the countries, whereas 2018 included a higher profit from

ING Bank’s stake in TMB due to one-offs. Net interest income rose 3.6% to EUR 2,787 million,

reflecting volume growth in lending and customer deposits, and a stable total interest margin. This

increase was offset by accounting asymmetry in Treasury with

an offset in other income. The net

production in customer lending (excluding currency effects and Treasury) was EUR 7.8 billion, with

increases mainly in Spain, Poland and Australia, while Turkey

and Italy declined. Net customer

deposits grew by EUR 6.9 billion in 2019, with the largest increases in Poland, Spain and Australia.

Net commission and fee income increased 7.1% to EUR 423 million driven by increases in most

countries, but declined in Spain and Turkey. Investment and other income rose

by EUR 68 million,

mainly due to the aforementioned accounting asymmetry in Treasury

and a higher dividend from

Bank of Beijing, partly offset

by a lower profit from TMB.

Operating expenses increased by EUR 177 million, or 8.7%, to EUR 2,210 million. This increase was

in addition to higher regulatory costs and legal provisions, mainly due to higher expenses to

support business growth and the implementation of bank-wide regulatory programmes, including

KYC.

Risk costs were EUR 364 million, or 38 basis points of average customer lending, compared with

EUR 350 million, or 40 basis points, in 2018. The increase was mainly attributable to higher risk

costs in Spain and Poland, while risk costs in Turkey and Italy declined.

Year

ended 31 December 2018 compared to year ended 31 December 2017

Retail Other consists of the Other Challengers & Growth Markets, including the stakes in Asia. Both

net result and underlying net result of Retail

Other increased by EUR 83 million, or 14.6%, to EUR

652 million in 2018 from EUR 569 million in 2017. There were no special items in 2018 and 2017.

Retail Other’s underlying result before tax

increased 13.0% to EUR 932 million in 2018, from EUR

825 million in 2017. This was mainly due to higher income, partly offset

by increased expenses and

higher risk costs.

Total

underlying income rose by EUR 287 million, or 9.5%, to EUR 3,315 million. This increase was

driven by continued strong commercial results

across most countries, reflecting customer growth

and higher volumes. Net interest income rose 10.4% to EUR 2,690 million, reflecting sustainable

growth in lending and customer deposits volumes and an improved total interest

margin. The net

production (excluding currency effects and Bank Treasury) in customer lending was EUR 9.6 billion,

of which EUR 6.4 billion was in mortgages and EUR 3.2 billion in other lending (mainly consumer

loans). Net customer deposits grew by EUR 8.6 billion in 2018. Net fee and commission income rose

2.9% driven by increases in most countries, partly offset by a decline in Turkey. Investment and

other income increased by EUR 23 million, mainly due to a higher dividend from Bank of Beijing and

a higher profit contribution from ING Bank’s 25% stake in TMB (which was mainly driven by one-

offs), while previous year included a gain on the sale of MasterCard

shares in Turkey.

Operating expenses increased by EUR 114 million, or 5.9%, to EUR 2,033 million. This increase was,

next to higher regulatory costs, mainly due to higher staff expenses in most counties to support

commercial growth and higher investment

s

in strategic projects. Risk costs were

EUR

350 million,

or 40 basis points of average customer lending, compared with EUR 284 million, or 34 basis points,

in 2017. The increase was mainly attributable to higher risk costs in Italy, Romania and Poland,

while risk costs in Turkey remained

on the same high level as in 2017.

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2019 ING Group Annual Report on Form 20-F

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WHOLESALE BANKING

Amounts in millions of euros

2019

2018

1

2017

Underlying income:

Net interest income

3,794

3,686

3,639

Net fee and commission income

1,135

1,152

1,102

Investment income and other income

369

673

919

Total

underlying income

5,298

5,510

5,660

Underlying expenditure:

Underlying operating expenses

2,937

2,771

2,744

Additions to the provision for loan losses

532

210

282

Total

underlying expenditure

3,469

2,981

3,026

Underlying result before tax

1,830

2,529

2,634

Taxation

464

633

832

Non-controlling interests

14

19

15

Underlying net result

1,352

1,877

1,788

Adjustment of the EU 'IAS 39 carve-out'

–878

58

559

Net result

474

1,935

2,347

1

In 2019, the Dutch domestic midcorporates real estate finance portfolio transferred from Wholesale Banking to Retail

Banking Netherlands. Comparative figures have been adjusted.

Year

ended 31 December 2019 compared to year ended 31 December 2018

The net result of Wholesale Banking declined to EUR 474 million in 2019 compared with EUR 1,935

million in 2018. The adjustment of the EU ‘IAS 39 carve-out’, included in the net result, turned to a

loss of EUR 878 million in 2019, from EUR 58 million in 2018, due to fair value changes on

derivatives related to asset-liability-management activities for the mortgage and savings portfolios

in the Benelux, Germany, France and Czech Republic. These fair value changes are

mainly a result

of changes in market interest rates.

No hedge accounting is applied to these derivatives under IFRS-

IASB. The underlying net result, which excludes the adjustment of the EU ‘IAS 39 carve-out’,

declined to EUR 1,352 million from EUR 1,877 million in 2018. There were no special items in 2018

and 2017.

The full-year 2019 results for Wholesale Banking show that conditions were challenging in our

markets. The underlying result before tax dropped 27.6% to EUR 1,830 million, down from EUR

2,529 million in 2018. The decline reflects

elevated risk costs (compared with a relatively

low level a

year ago), lower revenues in mainly Financial Markets and Lending,

as well as higher expenses.

Lending posted an underlying result before

tax of EUR 1,597 million, down 20.4% compared with

2018. The decline reflects lower income combined with higher expenses (including increased

regulatory costs and KYC-related

expenses) and higher risk costs due to a number of large

individual files. Despite higher

average volumes, Lending

income declined, mainly due to some

pressure on margins and the EUR 66 million gain related

to an equity-linked bond in Belgium

recorded in 2018. The underlying result

before tax from Daily Banking & Trade

Finance declined

24.3% to EUR 476 million from EUR 629 million in 2018. A modest increase in income, reflecting

improved margins

at lower average volumes, could

not compensate for higher expenses and

elevated risk costs. The increased expenses reflect higher regulatory costs and KYC-related

expenses as well as investments in Payvision and regulatory changes (including PSD2). Risk costs in

2019 included a sizeable provision for a suspected external fraud case.

Financial Markets recorded an underlying result

before tax of EUR -121 million, compared with EUR

-36 million in 2018. The drop was predominantly due to lower income, which was impacted by EUR

228 million of negative valuation adjustments versus EUR -1 million in 2018, in part offset

by lower

expenses on the back of ongoing cost efficiency

measures. Excluding valuation adjustments, pre-

tax result rose by EUR 142 million compared

with 2018, driven by higher client income. The

underlying result before tax of Treasury

& Other was EUR -123 million compared with EUR -70

million in 2018. This decline was mainly due to lower results from Treas

ury-related activities and

Corporate Investments, whereas

the result of the run-off businesses improved after the EUR 123

million loss on the intended sale of an Italian Lease run-off portfolio recorded in 2018. Expenses

increased mainly due to investments in KYC enhancement and innovation, while 2018 included a

release from a legal provision.

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Total

underlying income of Wholesale Banking fell 3.8% to EUR 5,298 million compared with 2018,

mainly reflecting lower revenues in Financial Markets, Lending and Tr

easury-related revenues,

while 2018 included the aforementioned loss on the intended sale of an Italian lease run-off

portfolio. In 2019, the net core lending book (adjusted for currency impacts and excluding Treasury

and the Lease run-off portfolio) grew by EUR 1.1 billion. The inflow in net customer deposits

(excluding currency impacts and Treasury)

was EUR 3.1 billion. Net interest income increased 2.9%,

mainly driven by volume growth in Lending

at lower margins and higher interest results

in Daily

Banking & Trade

Finance, especially in Bank Mendes Gans and Payments & Cash Management. Net

fee and commission income declined 1.5%. Investment and other income fell by EUR 304 million,

mainly due to lower valuation results in Financial Markets, while previous year included a gain on a

bond transaction in Belgium and a loss on the intended sale of an Italian lease run-off

portfolio.

Underlying operating expenses rose 6.0% to EUR 2,937 million, in part due to higher regulatory

costs. Excluding regulatory costs, expenses rose

4.7%, mainly attributable to higher KYC, IT and

staff-related expenses, partly offset

by continued cost-efficiency

savings. The underlying

cost/income ratio increased to 55.4%, from 50.3% in 2017.

Risk costs increased to EUR 532 million, or 29 basis points of average customer lending, from a

relatively low EUR 210 million, or 12 basis points of average customer lending, in previous

year.

The

increase was mainly attributable to a number of large individual files, including a sizeable provision

for a suspected external fraud case.

Year

ended 31 December 2018 compared to year ended 31 December 2017

The net result of Wholesale Banking declined to EUR 1,935 million in 2018 compared with EUR

2,347 million in 2017. The adjustment of the EU ‘IAS 39 carve-out’, included in the net result,

decreased to EUR 58 million in 2018, from EUR 559 million in 2017, due to fair value changes on

derivatives related to asset-liability-management activities for the mortgage and savings portfolios

in the Benelux, Germany and Czech Republic. These fair value changes are mainly a result of

changes in market interest rates. No hedge accounting is applied to these derivatives under IFRS-

IASB. The underlying net result, which excludes the adjustment of the EU ‘IAS 39 carve-out’, rose to

EUR 1,877 million from EUR 1,788 million in 2017. This increase was primarily due to a lower

effective tax rate supported by the impact of the corporate tax reforms in Belgium and the US.

There were no special items in 2018 and 2017.

The underlying result before tax was EUR 2,529 million, down 4.0% from

2017, as higher results in

Daily Banking & Trade

Finance as well as Lending were

more than offset by lower results in

Financial Markets and Treasury

& Other.

Lending posted an underlying result before

tax of EUR 2,006 million, up 2.0% compared with 2017.

Higher income, mainly due to improved margi

ns and a EUR 66 million gain related to an equity-

linked bond in Belgium in 2018, was largely offset by increased expenses (in part due to higher

regulatory costs) and higher risk costs. The underlying result before

tax from Daily Banking & Trade

Finance rose to EUR 629 million from EUR 542 million in 2017. Higher income, supported by volume

growth and the inclusion of Payvision as from the second quarter of 2018, more than outpaced a

slight increase in expenses (due to payment innovation initiatives and higher regulatory costs,

largely

offset by strict cost control), whereas risk costs remained low.

Financial Markets recorded an underlying result

before tax of EUR -36 million compared with EUR

68 million in 2017. The drop in result was caused by lower

income, which was impacted by lower

client activity and challenging global market conditions, partly

offset by a modest decline in

expenses. The underlying result before tax of Treasury

& Other fell to a loss of EUR 70 million

compared with a gain of EUR 58 million in 2017. This was mainly due to lower results in the run-off

businesses (including a EUR 123 million loss recorded in the fourth quarter of 2018 on the intended

sale of an Italian lease run-off portfolio,

while 2017 included a EUR 97 million gain on the sale of an

equity stake in the real estate run-off portfolio), partly offset

by lower expenses for litigation issues.

Total

underlying income of Wholesale Banking fell 2.7% to EUR 5,510 million compared with 2017,

mainly reflecting lower revenues in Financial Markets and the loss on the intended sale of an Italian

lease run-off portfolio. Wholesale Banking’s net core lending book (adjusted for currency impacts,

and excluding Bank Treasury

and the Lease run-off portfolio) grew by EUR 14.9 billion in 2018. Net

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customer deposits (excluding currency impacts and Bank Treasury)

shrank by EUR 0.8 billion. The

interest result rose

1.3% on 2017, whereas net fee and commission income increased 4.5%

(supported by the inclusion of Payvision). Investment and other income fell by EUR 246 million; this

was almost fully attributable to the aforementioned one-off results in the lease and real estate

run-off businesses.

Underlying operating expenses increased 1.0% to EUR 2,771 million due to higher regulatory costs.

Expenses excluding regulatory costs were

0.4% lower, mainly reflecting lower performance-related

expenses and strict cost control, and despite the inclusion of Payvision. The underlying cost/income

ratio increased to 50.3% from

48.5% in 2017. Risk costs declined to EUR 210 million, or 12 basis

points of average customer lending, from EUR 282 million, or 18 basis points in 2017. The relatively

low risk costs in 2018 were supported by several

larger net releases for clients and only a few larger

new additions. On top of that, risk costs for the Italian lease run-off portfolio were significantly

lower than in the previous year.

B.

Liquidity

and capital

resource

s

Consolidated assets and liabilities

The following table sets forth ING Group’s condensed consolidated assets and liabilities as of 31

December 2019 and 31 December 2018. Reference is made to the consolidated statement of

financial position for the

complete overview of consolidated assets and liabilities of ING Group.

Amounts in billions of euros

2019

2018

Cash and balances with central banks

53.2

50.0

Loans and advances to banks

35.1

30.4

Financial assets as at fair value through profit or loss

96.2

120.5

Financial assets at fair value through other comprehensive

income

34.5

31.2

Securities at amortised cost

46.1

47.3

Loans and advances to customers

608.0

589.7

Other assets

15.4

14.3

Assets held for sale

1.3

Total

assets

888.5

884.6

Deposits from banks

34.8

37.3

Customer deposits

574.4

555.7

Financial liabilities at fair value through profit or loss

77.9

92.7

Other liabilities

14.4

15.5

Debt securities in issue/subordinated

loans

135.1

133.5

Total

liabilities

836.6

834.8

Shareholders’ equity

51.0

49.0

Non-controlling interests

0.9

0.8

Total

equity

51.9

49.9

Total

liabilities and equity

888.5

884.6

Shareholders’ equity per Ordinary Share

(in EUR)

13.09

12.61

Year

ended 31 December 2019 compared to year ended 31 December 2018

ING Group increased its total assets by EUR 4 billion, or 0.4%, to EUR 889 billion at year-end 2019

from EUR 885 billion on 31 December 2018. Made comparable for EUR 3 billion of positive currency

impacts, (increasing the 31 December 2018 amount due to a relative rise of other currencies versus

the euro) total assets were EUR 1 billion higher.

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The balance sheet growth was mainly due to EUR 18 billion higher loans and advances to

customers. Also loans and advances to banks (EUR 5 billion), financial

assets through other

comprehensive income (OCI) and cash and balances with central banks (EUR 3 billion each) were

up. These increases were

largely offset by EUR 24 billion lower financial assets

at fair value through

profit or loss (predominantly financial

assets mandatorily at fair value through profit or loss due to

a reduction in demand for repo loans structures). Assets held for sale declined by EUR 1 billion to

nil, reflecting

the sale of an Italian lease run-off portfolio,

which was completed on 1 July 2019.

The higher loans and advances to customers was due to EUR 17 billion of growth in net core

customer lending and an increase in non-core customer lending of EUR 1 billion. The increase in

non-core customer lending included EUR 2 billion of positive FX impacts, a limited increase in

Treasury

lending and a EUR 1 billion decline of the WUB and Lease run-off portfolios.

ING Group increased its subordinated

loans by EUR 3 billion. Debt securities in issue were down by

EUR 1 billion as certificates

of deposit and commercial paper were EUR 4 billion lower (related

to

liquidity management and the facilitation of short-term commercial activities), while other debt

securities, mainly long-term debt, increased by EUR 3 billion. Customer deposits increased by EUR

19 billion. Excluding currency impacts and a EUR 5 billion decline in Treasury,

net customer deposits

growth was EUR 23 billion. Financial liabilities at fair value through profit or loss were

EUR 15 billion

lower, due to EUR 11 billion lower financial liabilities designated at FV PL and

EUR 3 billion less

trading liabilities.

Shareholders’ equity increased by EUR 1.9 billion to EUR 51.0 billion at the end of 2019, from EUR

49.0 billion on 31 December 2018. The increase was mainly due to the net result for the year 2019

of EUR 3.9 billion, which was partly offset by EUR

2.6 billion of dividend paid in 2019.

Capital Management

Risk and capital management remain central to the entrepreneurship

of the bank. Maintaining our

risk profile within our risk appetite and strengthening our capital base is how we grow a sustainable

business and achieve our strategic objectives.

Our overall approach

to capital management is to ensure we have enough capital to cover our

(economic) risks at all levels and comply with local and global regulations, while delivering a return

for our shareholders and investing in innovation.

We believe

that our working capital is sufficient

for our present requirements.

In 2019, our capital position remained strong, despite higher capital requirements

and additional

risk-weighted asset growth from model impacts. ING’s CET1 ratio was 14.6% at the end of 2019,

which was well above our CET1 ratio ambition of around

13.5%. The CET1 ratio at the end of the

year improved as risk-weighted assets increased due to volume

growth and model impacts, effects

that were offset by profit retention and positive risk migration.

In 2019, we issued €2.4 billion and redeemed €0.9 billion additional Tier 1 instruments.

Furthermore, a total of €1.0 billion of Tier 2 bonds were issued whereas

no Tier 2 instruments were

redeemed in 2019. In addition to these instruments, to build up our MREL capacity, we issued

multiple transactions in 2019 for a total amount of €6.3 billion.

ING’s profit generating capacity remained strong and after dividend reserves we included €2.1

billion of capital to our capital base.

ING’s dividend policy aims to pay a progressive dividend that will reflect considerations including

expected future capital requirements, growth

opportunities available, net earnings, and regulatory

developments. The Executive Board proposes

to pay a total cash dividend of €2,689 million, or

€0.69 per ordinary share, over the financial year 2019. This is subject to the approval of

shareholders at the Annual General Meeting in April 2020.

For further information regarding capital management, reference

is made to Note 52 “ Capital

Management” to the consolidated financial

statements. In addition to the restrictions in respect of

minimum capital and capital base requirements that are imposed by banking and other regulators

in the countries in which ING Groep N.V.’s

subsidiaries operate, other limitations exist in certain

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countries. For further information, reference

is made to Item 3. Key Information - Risk Factors” and

“Item 4. Information on the Company – Regulation and Supervision.”

Funding and liquidity

The main objective of ING’s funding and liquidity risk management is to maintain

sufficient

liquidity

to fund the commercial activities of ING both in normal and stressed market circumstances across

various geographies, currencies and tenors. This requires

a diversified funding structure considering

relevant opportunities and constraints.

ING has a Funding & Liquidity (F&L) Framework

which aims to maintain sufficient

liquidity under

normal, adverse and stressed market circumstances. In general, ING considers the adequacy of its

F&L position through three main lenses: (i) Stress; (ii) Sustainability and (iii) Regulatory. For

each

lens, ING has a set of risk appetite statements that underscore the bank’s risk appetite profile

commensurate with the principles for liquidity adequacy. These risk appetite statements are

subsequently translated into a number of metrics with appropriate boundaries and instruments to

measure and manage ING’s F&L adequacy.

ING’s funding consists mainly of retail and corporate deposits contributing 51% and 21% of the

total funding respectively. These funding sources provide a relatively

stable funding base. The

remainder of the required

funding is attracted primarily through a combination of long-term and

short-term professional funding. Group Treasury

manages

the professional funding in line with the

F&L risk appetite to ensure a sufficiently

diversified and stable funding base.

The Loan-to-deposit ratio remained

stable at the level of 1.06.

ING’s long-term professional funding is well diversified across maturities and currencies. The main

part of it is EUR and USD denominated which is in line with the currency composition of customer

lending.

For further information regarding funding and liquidity, see “Additional

information – ING Group

Risk Management”.

At 31 December 2019, 2018 and 2017, ING Groep N.V.

had EUR nil, EUR nil and EUR nil of cash,

respectively. Dividends paid to the Company by its subsidiaries amounted to EUR 2,848 million in

2019, EUR 2,517 million in 2018 and EUR 3,182 million in 2017, respectively, in each case

representing dividends paid with respect to the reporting calendar year and the prior calendar year.

The amounts paid to ING Groep N.V.

were received

from ING Bank, EUR 2,848 million in 2019, EUR

2,517 million in 2018 and EUR 3,176 million in 2017, from ING Support Holding, EUR nil in 2019, EUR

Nil million in 2018 and 6 million in 2017.

As a holding company, ING Groep N.V.’s

total debt and capital securities outstanding to third

parties at 31 December 2019 was EUR 37,403 million, 31 December 2018 was EUR 27,901 million

and at 31 December 2017 was EUR 14,187 million. The EUR 27,901 million of debt and capital

securities outstanding at 31 December 2019 consisted of subordinated loans of EUR 13,113 million

and debenture loans of EUR 24,290 million, both specified

below:

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Subordinated loans

Amounts in millions of euros

Statement of

financial

position value

Interest rate

Year of issue

Due date

2019

1.00%

2019

13 November 2030

996

5.75%

2019

Perpetual

1,336

6.75%

2019

Perpetual

1,121

4.70%

2018

22 March 2028

1,124

2.00%

2018

22 March 2030

759

1.63%

2017

26 September 2029

997

4.00%

2017

14 September 2032

90

4.25%

2017

23 June 2032

146

1.15%

2017

14 June 2029

98

1.10%

2017

31 May 2027

82

3.00%

2017

11 April 2028

1,058

2.50%

2017

15 February 2029

764

6.88%

2016

Perpetual

900

6.50%

2015

Perpetual

1,123

6.00%

2015

Perpetual

901

9.00%

2008

Perpetual

10

6.13%

2005

Perpetual

631

Variable

2004

Perpetual

556

Variable

2003

Perpetual

421

13,113

At 31 December 2019 and 2018, ING Groep N.V.

also owed EUR 145 million and EUR 136 million,

respectively, to ING Group companies pursuant to intercompany lending arrangements. At 31

December 2019 ING Group Companies owed ING Group N.V.

EUR 44,478 million (2018: EUR 34,902),

as a result of normal intercompany transactions.

On the maturity profile of borrowings and a further description of the borrowings reference is made

to Notes 18 ‘Debt securities in issue’ and 19 ‘Subordinated Loans’ in the consolidated financial

statements. The use of financial

instruments for hedging purposes is described in Note 39

‘Derivatives and hedge accounting’ in the consolidated financial statements.

Debenture loans

Amounts in millions of euros

Interest

rate

Year of

Issue

Due date

2019

2.755%

2019

3 September 2031

102

0.100%

2019

3 September 2025

998

4.050%

2019

9 April 2029

896

3.550%

2019

9 April 2031

894

1.625%

2019

21 March 2029

139

1.998%

2019

19 March 2029

46

1.074%

2019

21 February 2029

173

0.810%

2019

21 February 2024

729

3.000%

2019

18 February 2026

1197

5.000%

2019

31 January 2031

85

3.920%

2019

23 January 2029

79

2.125%

2019

10 January 2026

1018

3.399%

2018

28 December 2030

71

1.169%

2018

13 December 2028

157

0.848%

2018

13 December 2023

880

3.790%

2018

13 December 2030

152

5.000%

2018

5 June 2029

110

variable

2018

5 December 2022

250

2.500%

2018

15 November 2030

1,503

4.625%

2018

6 January 2026

1,134

4.100%

2018

2 October 2023

1,347

4.550%

2018

2 October 2028

1,120

variable

2018

2 October 2023

448

2.000%

2018

20 September 2028

1,502

variable

2018

20 September 2023

999

1.000%

2018

20 September 2023

998

1.125%

2018

14 February 2025

1,006

3.950%

2017

29 March 2027

1,344

3.150%

2017

29 March 2022

1,343

variable

2017

29 March 2022

889

0.750%

2017

9 March 2022

1,506

1.375%

2017

11 January 2028

1,011

4.699%

2007

1 June 2035

164

24,290

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ING Group Consolidated

Cash Flows

Year

ended 31 December 2019 compared to year ended 31 December 2018

Net cash flow from operating activities amounts to EUR 13,055 million for the year-end 2019,

compared to EUR 6,915 million at 31 December 2018. The increase in cash flow from operating

activities of EUR 6,140 million is explained by lower cash outflows

from Loans and advances

to

customer (increase of EUR 14,669 million to EUR - 16,687 million in 2019), an increase in other

(increase of EUR 7,685 million to EUR + 11,752 million in 2019) mainly relating to assets

mandatorily at fair value through profit or loss and other financial

liabilities at fair value through

profit and loss. The increases are

offset by a cash outflow

of trading assets and liabilities (decrease

of EUR 12,478 million to EUR – 2,568 million) and a cash outflow

in loans and advances to banks

(decrease of EUR 3,700 million to EUR – 3,911 million).

Net cash flow from investing activities amounts EUR – 2,495 million compared to EUR + 5,451

million in 2018 the net cash flow from investing activities decreased by EUR 7,946 million. The

movement is explained by a decrease in financial assets at fair value

through other comprehensive

income in investments and advances of EUR 5,753 million to EUR – 16,270 million and securities at

amortised costs (decreased by EUR 5,708 million to EUR + 13,001 million). Moreover, financial

assets at fair value through other comprehensive income decreased by

EUR 2,267 million to EUR +

13,390 in disposals and redemptions. These movements are offset by an increase in securities at

amortised costs of investments and advances (increase of EUR 5,717 million to EUR – 12,268

million).

Net cash flow from financing

activities amounts EUR – 4,154 million in 2019, compared to EUR

15,983 million in 2018. The decrease of EUR 20,137 million is explained by a decrease of EUR -

61,750 million to EUR + 90,793 million in proceeds from debt securities and offset by an increase of

EUR 36,673 million to EUR – 94,497 million in repayments of debt securities.

The operating, investing and financing activities described

above result in an increase

of EUR 6,406

million in cash and cash equivalents to EUR 54,031 at year end 2019.

Specification of cash position:

Amounts in millions of euros

2019

2018

Treasury

bills and other eligible bills

43

159

Amounts due from/to banks

786

–2,617

Cash and balances with central banks

53,202

49,987

Cash and cash equivalents at end of year

54,031

47,529

Year

ended 31 December 2018 compared to year ended 31 December 2017

Net cash flow from operating activities amounted to EUR 6,915 million for the year ended 31

December 2018, compared to EUR -5,253 million at year-end 2017. The increase in cash flow from

operating activities of EUR 12,168 million was due to higher cash inflows

from net trading balances,

EUR 21,097 million (2018; EUR 9,910 million, 2017 EUR –11,187 million), higher cash inflows

from

Customer deposits EUR 1,418 million (2018 EUR 19,709 million, 2017 EUR

18,291 million) and a

higher cash inflow from Other EUR 6,521 million (2018 EUR 4,067 million, 2017

EUR -1,751). These

higher cash inflows were partly offset by an increase in cash outflows

from loans and advances of

EUR 9,966 (2018 EUR -31,356 million, 2017 EUR -21,390).

Net cash flow from operating activities was largely affected by the cash inflow

from a decrease of

the trading assets. The cash inflow was due to lower trading balances consisting of equity

securities, debt securities, trading derivatives and loans and receivables. In 2017 the cash outflow

to trading assets was due to higher trading balances consisting of loans and receivables and equity

shares. The cash inflows related to increased customer deposits and were mainly due to increased

savings individuals and credit balances on customer accounts, this net cash inflow was in line with

2017. Newly issued mortgage loans, corporate lending and personal lending led to a cash outflow

which was partly offset by a decrease in loans to public authorities.

Net cash flow from investing activities amounted to EUR 5,451 million, from EUR 11,754 million in

2017. Investments and advances in financial assets at fair value through other comprehensive

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income and securities at amortised cost amounted to EUR -10,517 million and

EUR -17,985 million

respectively as in 2017 the investments in available-for-sale securities and Held-to-maturity

investments amounted to EUR -21,601 and EUR -3,609 million respectively.

Disposals and

redemptions of financial assets at fair value through other comprehensive income and securities at

amortised cost amounted to EUR 15,657 million and EUR 18,709 million respectively as in 2017

the

Disposals and redemptions of in available-for-sale securities Held-to-maturity investments

amounted to EUR 32,788 million and EUR 2,675 million respectively.

Net cash flow from financing

activities amounted to EUR 15,983 million in 2018, compared to EUR -

3,948 million

in 2017. The increase of EUR 19,931 million in net cash flow was mainly due higher

proceeds of debt securities.

The operating, investing and financing activities described

above resulted in an increase

of EUR

28,552 million in cash and cash equivalents from EUR 18,977 million at year-end 2017 to EUR

47,529 million at year end 2018.

Specification of cash position:

Amounts in millions of euros

2018

2017

Treasury

bills and other eligible bills

159

391

Amounts due from/to banks

–2,617

–3,403

Cash and balances with central banks

49,987

21,989

Cash and cash equivalents at end of year

47,529

18,977

Sovereign Debt

Exposures

For information regarding

certain sovereign debt exposures, see Note 5 “Financial assets at fair

value through other comprehensive income”

in the financial

statements and “Additional

information ING Group Risk Management”.

C.

Research

and development,

patents

and licenses,

etc.

Not applicable.

D.

Trend

information

For information regarding

trend information, see Item 5.A of this Form 20-F.

E.

Off-balance

sheet

arrangements

For information regarding

off-balance sheet arrangements, see Note 45 ‘Contingent liabilities and

commitments’ in the financial

statements and see “Risk Management” to the “Additional

information- ING Group Risk Management”.

F.

Tabular

disclo

sure

of cont

ractual

obligations

For information about future payments in relation

to pension benefit

liabilities reference is made

to Note 37 ‘Pension and other post-employment benefits’

in the consolidated financial

statements.

For information about coupon interest due on financial liabilities by maturity bucket reference is

made to Note 41 ‘Liabilities by maturity’ in the consolidated financial

statements.

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Contractual obligations

Payment due by period

Amounts in millions of euros

Total

Less than

one year

1-5 years

More than

5 years

2019

Lease liabilities²

1,528

217

668

643

Subordinated loans

16,177

0

1,780

14,396

1

Debt securities in issue

115,297

51,810

36,895

26,592

Total

133,001

52,026

39,342

41,632

2018

Operating lease obligations

1,376

259

719

398

Subordinated loans

13,549

1,713

11,836

1

Debt securities in issue

117,790

55,309

41,068

21,413

Total

132,715

55,568

43,500

33,647

¹ The maturity bucket ‘ more than 5 years’

includes subordinated loans of EUR 6,941 million (2018: EUR 5,339) with

no maturity date (perpetual).

² The lease liabilities for the period ended December 2019 has been prepared

in accordance with IFRS 16.

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Item 6. Directors, Senior Management and Employees

A.

Directors

and senior

management

Supervisory Board

Appointment, suspension and dismissal

Members of the Supervisory Board are appointed, suspended and dismissed by the General

Meeting. For the appointment of Supervisory Board members, the Supervisory Board may draw up

a binding list, which may be rendered non-binding by the General Meeting.

A resolution of the General Meeting to render this list non-binding, or to suspend or dismiss

Supervisory Board members without this being proposed by the Supervisory Board, requires an

absolute majority of the votes cast. Additionally, this majority must represent more than half of the

issued share capital. The Articles of Association exclude the waiver of the latter requirement in a

second General Meeting. This ensures that significant proposals of shareholders cannot be adopted

in a General Meeting with a low attendance rate and can only be adopted with substantial support

of ING Group’s shareholders.

Candidates for appointment to the Supervisory Board are subject to a suitability and reliability

assessment by DNB and ECB and must continue to meet these while in function.

Function of the Supervisory Board

The function of the Supervisory Board is to supervise the policy of the Executive Board and the

general course of affairs of ING Group and its business, as well as to provide advice to the Executive

Board.

In line with Dutch company law, the Articles of Association, the Dutch Corporate Governance Code

as well as the Charter of the Supervisory Board, all members of the Supervisory Board are required

to:

◾

act in accordance with the interests of ING Group and the business connected with it, taking into

account the relevant interests

of all stakeholders of ING Group;

◾

perform their duties without mandate and independent of any interest in the business of ING

Group; and

◾

refrain from

supporting one interest without regard to the other interests involved.

According to the Banker’s Oath that was taken by the members of the Supervisory Board, they

must carefully consider the interests of all stakeholders of ING. In that consideration they must put

the customer’s interests at the centre of all their activities. Certain resolutions of the Executive

Board, specified in the Articles of Association,

in the Charter of the Management Board and in

Charter of the Supervisory Board, are subject to approval of the Supervisory Board.

Pursuant to the Articles of Association ING Group indemnifies

the members of the Supervisory

Board as far as legally permitted against direct financial losses in connection

with claims from third

parties lodged or threatened to be lodged against them by virtue of their service as a member of

the Supervisory Board.

Profile of members of the Supervisory Board

The Supervisory Board has drawn up a profile to be used as a basis for its composition. It is available

on the website of ING Group

(www.ing.com).

In view of their experience and the valuable contribution that former members of the Executive

Board can make to the Supervisory Board, it has been decided, taking into account the size of the

Supervisory Board and ING’s wide range of activities that such individuals may become members of

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the Supervisory Board of ING Group. Former

Executive Board members must wait at least one year

before becoming eligible

for appointment to the Supervisory Board.

Former members of the Executive Board

are not eligible for appointment to the position of

chairman or vice-chairman of the Supervisory Board.

After a former member of the Executive Board has been appointed to the Supervisory Board, this

member may also be appointed to one of the Supervisory Board’s committees. However,

appointment to the Audit Committee is only possible if the individual in question resigned from the

Executive Board at least three

years prior to such appointment.

The Supervisory Board of ING shall consist of a mix of persons with executive experience, preferably

gained in the banking sector, experience in corporate governance of large stock-listed companies

and experience in the political and social environment in which such companies operate. In the

selection of Supervisory Board members, ING is striving for a balance in nationality, gender, age,

and educational and work background. In addition, there should be a balance in the experience and

affinity

with the nature and culture of the business of ING and its subsidiaries. More specifically ING

strives to have at least 30 percent of the seats held by women, and at least 30 percent of the seats

by men. These guidelines that relate to the composition of the Supervisory Board, are laid down in

the Supervisory Board Profile. Based on this profile, the Supervisory Board is responsible for

selecting and nominating candidates for appointment or reappointment to the Supervisory Board.

With respect to gender diversity, three female members currently serve on the Supervisory Board:

Mariana Gheorghe, Margarete Haase and Herna verhagen, the latter appointed on 23 April 2019,

with her membership becoming effective per 1 October

2019. With the appointment of Herna

Verhagen in 2019 the Supervisory Board has met its 30 percent

gender diversity target.

We believe

that the Supervisory Board, diversity wise, is well balanced in terms of other relevant

diversity aspects. Overall, the preferred

emphasis on members with a financial

or banking

background has been maintained. In terms of nationality, the ratio between Dutch and non-Dutch

nationalities in 2019 was 44 percent - 56 percent.

Term

of appointment of members of the Supervisory Board

As a general rule, Supervisory Board members step down from

the Supervisory Board in the fourth,

eighth, 10

th

and 12

th

year after their initial appointment. They are eligible for re-appointment in the

fourth year after their initial appointment and,

with explanation, also in the eighth and 10th year.

Under special circumstances the Supervisory Board may, with explanation, deviate from this

general rule, for instance to maintain a balanced composition of the Supervisory Board and/or

to

preserve valuable expertise and experience.

The retirement schedule is available on the website of

ING Group (www.ing.com).

Ancillary positions/conflicting interests

Members of the Supervisory Board may hold other positions, including directorships, either paid or

unpaid.

CRD IV restricts the total number of supervisory board positions or non-executive directorships with

commercial organisations that may be held by a Supervisory Board member to four, or to two, if

the Supervisory Board member also has an executive board position. The European

Central Bank

may, under special circumstances, permit a Supervisory Board member to fulfil an additional

supervisory board position or non-executive directorship. Positions with, inter alia, subsidiaries or

qualified holdings

are not taken into account in the application of these restrictions. Such positions

may not conflict

with the interests of ING Group.

It is the responsibility of the individual member of

the Supervisory Board and the Supervisory Board collectively to ensure that the directorship duties

are performed properly and are

not affected by any other positions

that the individual may hold

outside ING Group.

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Members of the Supervisory Board are to disclose material conflicts of interest (including potential

conflicts of interest) and to provide all relevant information relating

to them. The Supervisory Board

– without the member

concerned taking part – then decides whether a conflict

of interest exists.

In case of a conflict of interest, the relevant member of the Supervisory Board abstains from

discussions and decision-making on the topic or the transaction in relation to which he or she has a

conflict of interest with ING Group.

Transactions

involving actual or potential

conflicts of interest

In accordance with the Dutch Corporate

Governance Code, transactions involving members of the

Supervisory Board in which there are material conflicting interests are disclosed in the Annual

Report.

Any relation that a member of the Supervisory Board may have with ING Group subsidiaries as an

ordinary, private individual is not considered a significant conflict

of interest. Such relationships are

not reported, with the exception of any loans that may have been granted.

Independence

The members of the Supervisory Board are requested to assess annually whether the criteria of

dependence set out in the Dutch Corporate Governance Code

do not apply to them and to confirm

this in writing. On the basis of these criteria, all members of the Supervisory Board, with the

exception of Eric Boyer de la Giroday, are to be regarded

as independent on 31 December 2019.

Eric Boyer de la Giroday is not considered independent because of his former position as Chairman

of the Board of Directors of ING Belgium SA/NV and his former positions as member of the Executive

Board of ING Group and vice-chairman of the Management Board Banking of ING Bank N.V.

On the

basis of the NYSE listing standards, all members of the Supervisory Board are independent.

Permanent committees

of the Supervisory Board

On 31 December 2019, the Supervisory Board had four permanent committees: the Risk

Committee, the Audit Committee, the Nomination and Corporate Governance

Committee and the

Remuneration Committee.

An organisational chart of the four permanent committees of the

Supervisory Board can be found above.

The organisation, powers and conduct of the Supervisory Board are detailed in the Supervisory

Board Charter that can be found on

www.ing.com.

Separate charters have been drawn up for the Risk Committee, the Audit Committee, the

Nomination and Corporate Governance Committee

and the Remuneration Committee. These

charters are available on the website of ING Group

(www.ing.com)

. A short description of the duties

of the four permanent committees follows below.

The Risk Committee assists and advises the Supervisory Board in monitoring the risk profile of ING

as a whole as well as on the structure and operation of the internal risk management and control

systems. On 31 December 2019, the members of the Risk Committee were: Robert Reibestein

(chairman), Jan Peter Balkenende, Eric Boyer de la Giroday, Mariana Gheorghe, Hermann-Josef

Lamberti and Mike Rees.

The Audit Committee assists and advises the Supervisory Board in monitoring the integrity of the

financial statements

of ING Group and ING Bank N.V.,

in monitoring compliance with legal and

regulatory requirements

and in monitoring the independence and performance of ING Group’s

internal and external auditors. On 31 December 2019, the members of the Audit Committee were:

Hermann-Josef Lamberti (chairman), Eric Boyer de la Giroday, Margarete Haase, Robert Reibestein

and Hans Wijers.

The appointment of Margarete Haase as supervisory board member became effective as per 1 May

2018 (as decided by the Supervisory Board in January 2018) and per that date Margarete Haase is

considered a financial expert as defined

by the SEC in its final rules implementing Section

407 of the

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Sarbanes-Oxley Act of 2002. Eric Boyer de la Giroday is a financial

expert as defined

in the Dutch

Corporate Governance

Code considering his academic background as well as his knowledge and

experience in his previous role as board

member and vice-chairman of ING Groep N.V.

and ING Bank

N.V

.

The Nomination and Corporate Governance Committee’s

tasks include advising the Supervisory

Board on the composition of the Executive Board

and Supervisory Board and assisting the

Supervisory Board in monitoring and evaluating the corporate governance

of ING as a whole and

the reporting thereon in the Annual Report and to the General Meeting, and advising the

Supervisory Board on improvements. On 31 December 2019, the members of the Nomination and

Corporate Governance

Committee were: Hans Wijers (chairman), Mariana Gheorghe and Herna

Verhagen.

The Remuneration Committee’s tasks include advising the Supervisory Board on the terms and

conditions of employment (including remuneration) of the members of the Executive Board and on

the policies and general principles on which the terms and conditions of employment of the

members of the Executive Board and of senior managers of ING Group and its subsidiaries are

based. On 31 December 2019 the members of the Remuneration Committee were: Mariana

Gheorghe (chairman until 1 October 2019), Herna Verhagen (chairman from 1 October 2019),

Robert Reibestein and Hans Wijers.

The composition of the Supervisory Board Committees can be found on ING Group’s website

www.ing.com.

Remuneration

and share ownership

Remuneration of the members of the Supervisory Board is determined by the General Meeting and

is not dependent on the results of ING Group. Details of remuneration

are provided

in the

Remuneration report. Members of the Supervisory Board are

permitted to hold shares in the share

capital of ING Group for long-term investment purposes. Transactions

by members of the

Supervisory Board in these shares are subject to the ING regulations for

insiders.

ING regulations regarding

insiders are available on

www.ing.com

.

Information on members of the Supervisory Board

G.J. (Hans) Wijers (Chairman)

(Born 1951, Dutch nationality, male; appointed in 2017, term expires in 2021)

Former position: chief executive officer and member of the Executive Board of AkzoNobel N.V.

Relevant positions

pursuant to CRD IV

Chairman of the Supervisory Board of ING Groep N.V./ING

Bank N.V.

and member of the Supervisory

Board of Hal Holding N.V.

Other relevant

ancillary positions

Chairman of the Supervisory Board of Het Concertgebouw N.V.

and member of the Temasek

European Advisory Panel of Temasek

Holdings Private Limited.

H.J.M. (Hermann-Josef) Lamberti (Vice-Chairman)

(Born 1956, German nationality, male; appointed in 2013, term expires in 2021)

Former position: chief operating officer of Deutsche Bank AG.

Relevant positions

pursuant to CRD IV

Vice-chairman of the Supervisory Board of ING Groep N.V./ING

Bank N.V.,

non-executive member of

the Board of Directors of Airbus Group N.V.,

chairman of the Supervisory Board of Addiko Bank

(including senior business adviser of Advent International GmBH) and director of Frankfurt

Technology

Management GmbH. The ECB has authorised Hermann-Josef Lamberti to hold a third

non-executive position i.e. in deviation of the maximum of two provided

for in section 91 of CRD IV.

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J.P.

(Jan Peter) Balkenende

(Born 1956, Dutch nationality, male; appointed in 2017, term expires in 2021)

Former

position: partner EY (on corporate responsibility).

Relevant positions

pursuant to CRD IV

Member of the Supervisory Board of ING Groep N.V./ING

Bank N.V.

Other relevant

ancillary positions

Professor of governance, institutions and internationalisation at Erasmus University Rotterdam

(the

Netherlands), external senior adviser to EY, member of the Supervisory Board of Goldschmeding

Foundation, chairman of the Board of Maatschappelijke Alliantie (the Netherlands) and chairman of

the Board of Noaber Foundation.

E.F.C.B.

(Eric) Boyer de la Giroday

(Born 1952, Belgian nationality, male: appointed in 2014, term expires in 2022)

Former position: member of the Executive Board of ING Groep

N.V.

and ING Bank N.V.

Relevant positions

pursuant to CRD IV

Member of the Supervisory Board of ING Groep N.V./ING

Bank N.V.

and non-executive chairman of

the Board of Directors of ING Belgium SA/NV.

Other relevant

ancillary position

Non-executive director of the Board of Directors of the Instituts Internationaux de Physique et de

Chimie fondés par Ernest Solvay, asbl.

M. (Mariana) Gheorghe

(Born 1956, Romanian nationality, female, appointed in 2015, term expires in 2023)

Former position: CEO of OMV Petrom

SA.

Relevant positions

pursuant to CRD IV

Member of the Supervisory Board of ING Groep N.V./ING

Bank N.V.

and non-executive director of

ContourGlobal Plc.

Other relevant

ancillary position

Member of the Advisory Council of the Bucharest Academy of Economic Studies, Romania.

M. (Margarete)

Haase

(Born 1953, Austrian nationality, female; appointed in 2017, term expires in 2021)

Former position: CFO of Deutz AG.

Relevant positions

pursuant to CRD IV

Member of the Supervisory Board of ING Groep N.V./ING

Bank N.V.

(effective per 1 May 2018),

member of the Supervisory Board and chairwoman of the Audit Committee of Fraport AG,

member

of the Supervisory Board and chairwoman of the Audit Committee of Osram Licht AG and member

of the Supervisory Board and chairwoman of the Audit Committee of Marquard & Bahls AG.

Other relevant

ancillary positions

Chairwoman of the Employers Association of Kölnmetall and member of the German Corporate

Governance Commission.

A.M.G. (Mike) Rees

(Born 1956, British nationality, male; appointed in 2019, term expires in 2023)

Former position: Deputy CEO of Standard Chartered Bank PLC.

Relevant positions

pursuant to CRD IV

Member of the Supervisory Board of ING Groep N.V./ING

Bank N.V.,

f

ounder and consultant of

Strategic Vitality Ltd and non-executive

chairman of Athla Capital Management Ltd.

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Other relevant

ancillary position

Non-executive director Mauritius Africa FinTech

Hub.

R.W.P.

(Robert) Reibestein

(Born 1956, Dutch nationality, male; appointed in 2012 as an observer, full member as of 2013,

stepped down per 1 January 2020)

Former position: senior partner of McKinsey & Company.

Relevant positions

pursuant to CRD IV

Member of the Supervisory Board of ING Groep N.V./ING

Bank N.V.

and member of the Supervisory

Board of IMC B.V.

Other relevant

ancillary positions

Member of the Supervisory Board of Stichting World Wildlife Fund

(the Netherlands) and member of

the advisory committee of Forward.one.

H.W.P.M.A.

(Herna) Verhagen

(Born 1966, Dutch nationality, female; appointed in 2019, term expires in 2023)

Former position:

member of the Supervisory Board of SNS Reaal N.V.

(now: SRH N.V.).

Relevant positions

pursuant to CRD IV

Member of the Supervisory Board of ING Groep N.V./ING

Bank N.V.

(per 1 October 2019), CEO of

PostNL N.V.

and non-executive Board member and chairwoman of the Nomination Committee of

Rexel SA.

Other relevant

ancillary positions

Member of the Supervisory Board, nomination committee and sponsering committee of Het

Concertgebouw N.V.,

member of the advisory council of Goldschmeding Foundation and member

of the Board of VNO-NCW (inherent to her position at Post NL N.V.).

Other relevant

ancillary positions

Member of the Supervisory Board, nomination committee and sponsering committee of Het

Concertgebouw N.V.,

member of the advisory council of Goldschmeding Foundation and member

of the Board of VNO-NCW (inherent to her position at Post NL N.V.).

Company secretary

The Supervisory Board and Executive Board are

assisted by the company secretary Cindy van

Eldert-Klep.

Changes in the composition

Mike Rees and Herna Verhagen were

appointed during the Annual General Meeting of 23 April

2019. Henk Breukink retired

from the Supervisory Board as per the end of the Annual General

Meeting of 2019. Robert Reibestein stepped down from the Supervisory Board as per 1 January

2020.

Appointment, suspension and dismissal

Members of the Executive Board are

appointed, suspended and dismissed by the General Meeting.

For the appointment of Executive Board

members, the Supervisory Board may draw up a binding

list, which may be rendered non-binding by the General Meeting. A resolution of the General

Meeting to render this list non-binding, or to suspend or dismiss Executive Board members without

this being proposed by the Supervisory Board, requires

an absolute majority of the votes cast.

Additionally, this majority must represent more than half of the issued share capital.

The Articles of

Association exclude the waiver of the latter requirement in a second General

Meeting. This ensures

that significant proposals of shareholders cannot be adopted in a General Meeting with a low

attendance rate and can only be adopted with substantial support of ING Group’s shareholders.

Candidates for appointment to the Executive Board are

subject to a suitability and reliability

assessment by DNB and ECB and must continue to meet these while in function.

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Function of the Executive

Board

The Executive Board is charged

with the management of ING Group. This includes responsibility for

setting and achieving ING Group’s strategy, objectives and policies, as well as the ensuing delivery

of results. It also includes the day-to-day management of ING Group. The Executive Board

is

accountable for the performance of these duties to the Supervisory Board and the General Meeting.

The responsibility for the management of ING Group is vested in the Executive

Board collectively.

The organisation, powers and modus operandi of the Executive

Board are detailed in the Charter of

the Management Board.

The Charter of the Management Board is available at www.ing.com.

According to the Banker’s Oath that is taken by the members of the Executive Board, they must

carefully consider the interests of all stakeholders of ING. In that consideration they must put the

customer’s interests at the centre of all their activities.

ING Group indemnifies the members of the Executive Board against direct financial

losses in

connection with claims from third parties, as far as permitted by law, on the conditions laid down in

the Articles of Association and their commission contract. ING Group has taken out liability

insurance for the members of the Executive Board.

Profile of members of the Executive

Board

ING Group aims to have an adequate and balanced composition of its Executive Board. The

Supervisory Board annually assesses the composition of the Executive Board on a continuous basis.

The Supervisory Board has drawn up a profile to be used as a basis for selecting members of the

Executive Board

. It is available on the website of ING Group (www.ing.com).

ING aims for the Executive Board of ING to consist of a diverse selection of persons with executive

experience, preferably gained in the banking sector, experience in corporate governance of large

stock-listed companies and experience in the political and social environment in which such

companies operate. In addition, there should be a good balance in the experience and affinity with

the desired nature and culture

of the business of ING. ING strives to have at least 30 percent of the

seats held by women, and at least 30 percent of the seats by men.

In 2018, ING introduced a new principle in a bid to bolster diversity within our organisation. The 70

percent principle gives managers a basis for building mixed teams around appropriate

dimensions

of diversity (with a focus on gender, nationality and age group) and strives for a 30 percent

difference in team make-up. It is our ambition to adhere to this principle across the organisation

within both local and global teams. This principle is incorporated into succession planning for the

Executive Board.

Diversity and succession planning

The guidelines that relate to the composition of the Executive Board, are

laid down in the Executive

Board Profile. Based on this profile, the Supervisory Board is responsible for selecting and

nominating candidates for appointment or reappointment to the Executive Board.

Finding suitable candidates remains challenging, as there are numerous

requirements to take into

account, including gender to enhance the composition of the Executive Board and specific criteria

for each function, including regulatory requirements.

As an example to demonstrate the aforementioned: with the unexpected departure of the previous

CFO Koos Timmermans, in early 2018, the Supervisory Board was faced with the challenge of

appointing a successor as soon as possible. For the succession of the CFO position we reviewed

a

number of suitable candidates from diverse backgrounds. When searching new Executive

Board

members, the Supervisory Board looks broadly at diversity – considering all aspects as well as

primarily looking to ensure ING has the best candidate for the job.

Succession planning

Currently, there are

no female members of the Executive Board, although our ambition of gender

diversity remains unchanged. The succession planning for Executive Board

-positions is continually

worked on, balancing the career advancement of (female) senior managers, considering female

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candidates fit for the role and bringing in talents from outside the bank. In view of the appointment

terms of the current Executive Board

members (every four years) ING considers it likely that the

preferred gender balance will not be achieved

in the short term as replacements are not currently

envisaged. We are

therefore unable to set a clear deadline to reach

this gender balance.

We are

also looking long term and taking steps to improve the appointment of women in senior

positions throughout the bank in line with our recently adopted diversity and inclusion principle.

Remuneration

and share ownership

Members of the Executive Board are

permitted to hold shares in the share capital of ING Group for

long-term investment purposes. Transactions by members of the Executive

Board in these shares

are subject to the ING regulations for insiders. These regulations are

available on the website of ING

Group (

www.ing.com

).

Details of the remuneration of members of the Executive Board,

including shares granted to them,

together with additional information, are provided in the ‘Remuneration

report’ chapter.

Ancillary positions/conflicting interests

No member of the Executive Board has corporate

directorships at listed companies outside ING.

Transactions

involving actual or potential

conflicts of interest

In accordance with the Dutch Corporate

Governance Code, transactions with members of the

Executive Board in which there

are significant conflicts

of interest will be disclosed in the Annual

Report.

Significant conflicting

interests are considered

to be absent and are not reported if a member of

the Executive

Board obtains financial products and services, other than loans,

which are provided

by ING Group subsidiaries in the ordinary course of their business on terms that apply to all

employees. In connection with the aforementioned, the term loans does not include financial

products in which the granting of credit is of a subordinated nature,

e.g. credit cards

and overdrafts

in current account, because of a lack of materiality.

For an overview

of loans granted to members of the Executive Board, see the ‘Remuneration

report’

chapter.

Information on members of the Executive

Board

R.A.J.G. (Ralph) Hamers, chief executive

officer (‘CEO’)

(Born 1966, Dutch nationality, male; appointed in 2013, will step down as of 30 June 2020)

Ralph Hamers has been a member of the Executive Board of ING Group since 13 May 2013 and was

appointed CEO and chairman of the Executive Board and the Managing Board Banking on 1 October

2013. He is responsible for the proper functioning of the Executive Board,

the Management Board

Banking and its committees, formulating and implementing ING’s strategy and acting as main

contact for the Supervisory Board. He is also responsible for the following departments: Innovation,

Legal, Corporate

Strategy, Corporate HR,

CoE Comms & Brand Experience

and Corporate Audit

Services. He joined ING in 1991 and has held various positions including global head Wholesale

Banking Network from 2007 to 2010, head of Network Management for Retail Banking Direct &

International from 2010 to 2011, and CEO of ING Belgium and Luxembourg

from 2011 to 2013. Due

to the resignation of the head of Market Leaders in July 2019, he has taken up this role on an

interim basis until a replacement is found. In this interim role he is also responsible for

ING Bank’s

operations in the Benelux. He holds a Master of Science degree in Business

Econometrics/Operations Research

from Tilburg University, the Netherlands.

As announced on 20 February 2020, Ralph Hamers will step down from his position and leave ING

as of 30 June 2020. He will join UBS on 1 September 2020 and will become group chief executive

officer

per 1 November 2020. He will remain in his role as chief executive

officer

of ING Groep N.V.

and ING Bank N.V.

until 30 June 2020 continuing to run the daily business and working with the

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Executive Board and the Management Board Banking to ensure

a smooth transition of leadership.

Further announcements on the succession process will be made if and when appropriate.

Relevant positions

pursuant to CRD IV

1

Chairman and CEO of the Executive Board of ING Groep

N.V.

and of the Management Board Banking

of ING Bank N.V.

Other relevant

ancillary positions

Member of the Management Board of the Nederlandse Vereniging

van Banken (NVB), member of

the Board of Directors of the Institute of International Finance, Inc., non-executive member of the

board Concertgebouw orkest

and

member of UNICEF’s Global Board of the Young People’s

Agenda.

T.

(Tanate)

Phutrakul, chief financial officer (‘CFO’)

(Born 1965, Thai nationality, male; appointed in 2019, term expires in 2023)

Tanate

Phutrakul was appointed as chief financial officer

of ING Groep N.V.

and ING Bank N.V.

and

member of the Management Board Banking of ING Bank on 7 February 2019. Subsequently, he was

appointed as a member of the Executive Board of ING Groep N.V.

at the Annual General Meeting on

23 April 2019.

Tanate

Phutrakul is responsible for ING’s financial departments, Group Treasury

(including capital

management activities), Investor Relations, Group Research and Regulatory & International Affairs.

Before his appointment to the Executive Board,

he was ING Group controller in Amsterdam

and

between 2015-2018 he was the CFO of ING in Belgium.

He holds a master’s degree in Engineering from Imperial College, University of London, and an MBA

from Harvard Business School.

Relevant positions

pursuant to CRD IV

Member and CFO of the Executive Board of ING Groep

N.V.,

member and CFO of the Management

Board Banking of ING Bank N.V.,

and Non-executive member of the board of ING Belgium N.V./S.A.

S.J.A. (Steven) van Rijswijk, chief risk officer (‘CRO’)

(Born 1970, Dutch nationality, male; appointed in 2017, term expires in 2021)

Steven van Rijswijk has been a member of the Executive Board since

8 May 2017. He was appointed

CRO on 1 August 2017. He is also a member and CRO of the Management Board Banking. Before

becoming a member of the Executive Board, he was global head of Client Coverage

within ING

Wholesale Banking. Steven van Rijswijk joined ING in 1995 in the Corporate Finance team holding

various positions in the areas of Mergers & Acquisitions and Equity Markets. He holds a master’s

degree in business economics from Erasmus University Rotterdam

(the Netherlands).

Relevant positio

ns pursuant to CRD IV

Member and CRO of the Executive Board of ING Groep N.V.

and member and CRO of the

Management Board

Banking of ING Bank N.V.

Changes in the composition

Tanate

Phutrakul was appointed as a member of the Executive Board

of ING Groep N.V.

at the

Annual General Meeting on 23 April 2019. As announced on 20 February 2020, Ralph Hamers will

step down as chief executive officer of

ING Groep N.V.

and ING Bank N.V.

as of 30 June 2020. He will

join UBS on 1 September 2020 and will become group chief executive officer

per 1 November 2020.

Further announcements on the succession process will be made if and when appropriate.

1

The fourth EU Capital Requirements

Directive 2013/36/EU

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B.

Compensation

Remuneration

report

Our view

on remuneration

FOR INFORMATION

ONLY

ING’s

remuneration

approach

is

designed

to

attract,

motivate

and

retain

leaders

and

qualified

staff

who

have

the

skills,

abilities,

values

and

behaviours

needed

to

achieve

our

strategy.

It

aims

to

ensure

we

offer

well

-balanced

remuneration

within

our

risk

appetite,

promoting

effective

risk

management.

At

the

same

time,

we

take

into

account

our

responsibility

to

our

customers,

society

and

other

stakeholders,

whose

trust

– quite

simply

– is

our

licence

to

operate.

ING’s remuneration principles are important to achieve the bank’s strategy,

its purpose – to

empower people to stay a step ahead in life and in business – and its risk profile. These principles

apply to all employees, including members of the Executive Board (hereafter ‘EB’). They aim to

maintain a balance between short-term and long-term value creation for all stakeholders while

being responsible and fair.

Ultimately, it’s about making sure we are able to effectively reward

success and avoid rewarding

for failure.

In this report we look back on the year 2019. We report on ING’s performance and how 2019 events

have impacted remuneration. We

outline the current Executive Board and Supervisory Board

remuneration policies and share details of remuneration awarded

in 2019 to the Executive Board,

including variable remuneration, and to the Supervisory Board.

Thereafter, we set out the remuneration approach that applies to all employees and explain more

about how total direct compensation and variable remuneration work within ING. We

also explain

the performance management process and its link to remuneration, and we provide

more

information on the measures we have in place to mitigate risk.

Overall, the Supervisory Board has concluded that the Executive

Board members did well to deliver

our results in 2019. Although the underlying result before

tax and underlying return on equity

decreased compared to 2018, good progress

was made in the execution of the Think Forward

strategy. This is shown by the continued growth of primary customers, ongoing execution of the

KYC enhancement programme

with strong governance from top management and further

progress in sustainability.

Looking ahead, there is an additional section in this year's report outlining the Supervisory Board's

proposal for remuneration

policies for the Executive Board and the Supervisory Board for the

coming years.

This 2019 remuneration report is our first under the requirements of the Dutch Act implementing

the Shareholder Rights Directive II (SRD II). This report is also drafted in the spirit of the European

Commission’s non-binding draft guidelines for disclosure. We

intend to update our 2020

remuneration report to reflect the final guidelines, which

we expect will have been published by

then, also taking into account the advisory vote of shareholders regarding

this 2019 remuneration

report.

Our starting

point

The Supervisory Board acknowledges that in the past it has not always got its stance on

remuneration right. This was especially apparent in 2018, when a proposal to amend the

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remuneration policy of the Executive

Board elicited much criticism. It was subsequently withdrawn

and the Supervisory Board promised to carry out an extensive review

of the remuneration policy.

We did this review

in 2019, in consultation with advisory bodies and a broad range of stakeholders,

holding meaningful discussions to make sure our remuneration approach and subsequent proposal

achieves the right balance among the various viewpoints and interests.

Stakeholder

engagement

A long list of stakeholders participated in these discussions,

including our Dutch Central Works

Council, representatives

of Dutch trade unions, the Advisory Council of ING Netherlands, trade

bodies and regulatory and governmental authorities such as the Dutch central bank and the

European Central

Bank. A number of institutional shareholders together holding approximately

24% of ING’s share capital were also consulted, as well

as proxy advisory firms and Dutch

shareholder advocacy groups. A specialised market research

firm elicited qualitative feedback from

customers, and we asked current members of the Executive Board for

their views, in line with the

Dutch Corporate Governance

Code.

In these dialogues

the most contentious point was the level of total direct compensation. Some

investors were concerned about ING’s ability to attract the relevant

talent. Other stakeholders were

more critical about the general remuneration

level. There was also criticism that the EURO STOXX

50 peer group, which ING uses as a benchmark for remuneration, includes too many companies

that are not sufficiently

comparable.

On the subject of variable remuneration, stakeholders understood and supported the continuation

of this within the limits of Dutch legislation (i.e. a maximum of 20% of base salary). There was a

clear ask for more transparency

about the metrics used to determine variable remuneration and

how these are applied for the performance year.

The insights gained from the stakeholder engagement process have significantly contributed to the

quality of the remuneration policy that we intend to propose to shareholders at

the next Annual

General Meeting (hereafter ‘AGM’) in April 2020. Both myself and my colleagues on the Supervisory

Board highly appreciate the participation of stakeholders and the meaningful insights they

provided.

Proposed

way forward

Based on the various viewpoints, interests, remarks and concerns, going forward

we are proposing

a moderate annual base salary increase linked to an external indexation reference

point such as a

consumer price index and ING’s CLA increases.

To

increase the relevancy

of our peer group, the Supervisory Board is proposing to use a smaller

one based on geography, relevant talent market, size and governance

framework. We

intend to

include a balancing factor to ensure we also consider relevant peer companies that may not fulfil

the other criteria. The proposed benchmark consists of eight comparable Dutch companies and

eight relevant European

financial

services providers.

Among other things it aims to provide more clarity on the performance metrics to be used for

awarding variable remuneration,

how targets are set and how achievements are

measured, as well

as reflecting ING’s risk culture and compliance initiatives.

Subject to approval by shareholders at the next AGM, the new remuneration

policies for Executive

Board and Supervisory Board members will become effective retroactively from

1 January 2020.

As the discussions with stakeholders last year showed, remuneration is an important topic for

many stakeholder groups, who raised varying viewpoints on the topic. Myself and my colleagues

on the Supervisory Board are fully committed to making sure we

get our approach to remuneration

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right – for now and in the future. It’s about achieving a balance that is right for ING, for customers,

shareholders, other stakeholders and society at large.

Herna Verhagen

Chairman of the Supervisory Board Remuneration Committee

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2019 ING Group Annual Report on Form 20-F

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Remuneration

Report Executive

Board and Supervisory Board

FOR ADVISORY VOTE AT

2020 AGM

This part of the Remuneration Report explains how the 2019 EB Remuneration Policy and the

current SB Remuneration was implemented during 2019. This part is the Remuneration Report as

referred

to in the Dutch Act implementing Shareholder Rights Directive II (SRD II). This

Remuneration Report will be presented to the 2020 AGM for an advisory vote.

In the Remuneration

Report 2020 an explanation will be included on how the result thereof has been taken into account.

Also the requirements for the report prepared

by the Supervisory Board as stated in the Dutch

Corporate Governance

Code are taken into account.

This 2019 Remuneration Report is our first under the requirements of the Dutch Act implementing

Shareholder Rights Directive II (SRD II). This report is also drafted in the spirit of the draft (non-

binding) guidelines for disclosure from the European

Commission. As such, 2019 should be

considered a transitional year.

In 2020, we aim to disclose fully in line with these final

guidelines.

Business

events

2019

In February 2019, Tanate

Phutrakul was appointed as ING’s chief financial officer

and a member of

the Management Board Banking. He was subsequently appointed to the Executive Board at the

AGM on 23 April 2019. Tanate

Phutrakul succeeded Koos Timmermans who, in consultation with

the Supervisory Board, stepped down from his position as chief financial officer

and member of the

Executive Board of ING Gro

up on 7 February 2019.

At the 2019 AGM shareholders approved

the reappointment of Mariana Gheorghe and the

appointment of Mike Rees and Herna Verhagen to the Supervisory Board.

Supervisory Board member Robert Reibestein, announced his early resignation effective 1 January

2020 because of persistent personal health issues.

After the very challenging year 2018, a majority of shareholders at the AGM in April 2019 voted

against discharge of the Executive Board and Supervisory Board

members from their potential

liability against the company for their duties performed in 2018. The Supervisory Board and

Executive Board fully understand and share

the underlying disappointment, especially regarding

the shortcomings in the prevention of financial and economic crime, which was also expressed by

shareholders in the many direct contacts during the year.

Both boards have taken the vote as a

clear signal and firm

encouragement to continue with the enhancement programme announced in

September 2018 and ensure we make structural improvements to bring our gatekeeping function

in the area of customer due diligence and anti-money laundering to the appropriate level.

Executive

Board

remuneration

policy

The current Executive Board

remuneration policy (hereafter called the 2019 EB Remuneration

Policy) complies with applicable laws and regulations and is in line with the remuneration principles

that apply to all employees.

The current remuneration

policy for the Executive Board was adopted by shareholders

at the AGM

on 27 April 2010. Subsequent amendments to this policy were adopted at AGMs on:

◾

9 May 2011 in response to new regulatory requirements

◾

12 May 2014 with respect to pensions for the Executive Board

◾

11 May 2015 to lower the maximum variable remuneration in line with legal requirements

and

specify that variable remuneration for the Executive

Board be paid fully in shares

◾

8 May 2017 to extend the deferral period of the variable remunerat

ion from three to five years.

For 2019, the remuneration

policy for the Executive Board remained

unchanged. Shareholders will

be asked to vote on a revised Executive

Board remuneration

policy at the 2020 AGM, which is a

binding vote. For further information on the revised

policy, we refer to the Chairman’s letter.

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Total

direct

compensation

Total

direct compensation for the Executive Board is determined and reviewed

periodically by the

Supervisory Board. In line with the 2019 Executive Board Remuneration

Policy,

the Executive

Board’s total direct compensation for 2019 was compared to a peer group

EURO STOXX 50

companies. The total direct compensation under the 2019 Executive Board Remuneration

Policy is

below the median of the EURO STOXX 50. This approach is in line with the requirements

laid down

in the Dutch Banking Code.

Variable

remuneration

Variable remuneration

for Executive Board members is limited to a maximum of 20% of base

salary. At least 50% of this is based on non-financial

performance criteria. The 2019 EB

Remuneration Policy provides

for an at-target variable remuneration

of 16% of base salary. If

performance criteria are exceeded, the Supervisory Board can increase

the variable component to

the maximum. If performance is below target, the variable component will be decreased,

potentially to zero.

The Supervisory Board pre-determines the performance criteria for the Executive

Board each year

to ensure alignment between ING's strategy and performance objectives.

Variable remuneration

is paid fully in shares. Forty percent

of the variable remuneration is paid

upfront and 60% is deferred. For

all shares awarded to Executive

Board members (in their capacity

as board members) there is a minimum retention period of five years from the date of conditional

grant and one year from the vesting date.

Vesting of any deferred

variable remuneration is not

subject to performance and can only be adjusted in case of an ex-post risk measure as described in

the Risk adjustments paragraph or if an Executive Board

member leaves ING. This award approach

aligns remuneration with creating long-term value for

ING.

Pension

Since 1 January 2015, all members of the Executive Board have participated

in the Collective

Defined Contribution (CDC) pension plan

with respect to their annual salary-up to €107,593 for

2019. This is similar to all employees working in the Netherlands without a supplementary

pension

scheme. Above this amount, members of the Executive Board

are compensated for the lack of

pension accrual by means of a savings allowance (see Benefits),

to be annually determined, on the

same terms that apply to other participants in the Dutch pension scheme.

Benefits

Executive Board members are

eligible for additional benefits

(all within benchmarks),

such as:

-

costs associated with the use of a company car;

-

contributions to company savings plans;

-

expatriate allowances (if applicable);

-

banking and insurance benefits from ING (on the same terms as for other employees of ING in

the Netherlands);

-

tax and financial planning

services to ensure compliance with the relevant

legislative

requirements.

Tenure

Members of the Executive Board are

appointed by shareholders at the AGM for a maximum period

of four years. They may be reappointed by the AGM in line with applicable rules and regulations.

Executive Board members have a commission contract for

an indefinite

period. ING has the option

to terminate if they are not reappointed by shareholders at the AGM or if their membership of the

board is terminated. There is a three

-month notice period for individual board members and a six-

month period for ING. During this time the board member continues to work and remains eligible

for all agreed remuneration

components.

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In the event of an involuntary exit, Executive Board

members are eligible for an exit arrangement. If

termination of the contract is based on mutual agreement, the Executive Board member is also

eligible for a severance payment. These arrangements are

subject to specific

requirements (e.g.

limited to a maximum of one year of fixed

base salary, under the condition that there should be no

reward

for failure).

Periodic

review

of the

remuneration

policy

and the

remuneration

paid

In accordance with the 2019 EB Remuneration Policy

,

the Supervisory Board annually determines

the actual remuneration for members of the Executive Board,

based on the advice given by the

Remuneration Committee of the Supervisory Board.

The Remuneration Committee’s responsibilities include prepar

ing the Supervisory Board for

decisions regarding the remuneration

of individual members of the Executive Board. Remuneration

proposals for individual Executive Board members are

drawn up in accordance with the 2019 EB

Remuneration Policy and cover

the following aspects: remuneration structure, the amount of the

fixed and variable remuneration components, the performance criteria used, scenario analyses

that are carried out and, if and when considered appropriate,

the pay ratios within the company

and its affiliated

enterprises. The Remuneration Committee takes note of the views of individual

Executive Board members with regard

to the amount and structure of their own remuneration,

including the aspects mentioned above.

Special

employment

conditions

Special employment conditions, for example to secure the recruitment of new executives, may be

used in exceptional circumstances subject to approval by the Supervisory Board.

In 2019, there

were none.

2019 Remuneration

Executive

Board

This section includes remuneration details for current and former Executive

Board members

relating to the period that they served on the Executive Board during 2019.

1

In line with the Dutch Corporate Governance Code,

ING determines the internal ratio of

remuneration for Executive

Board members and a representative

reference group.

Deemed most

relevant for this ratio

is the total direct compensation of the CEO compared to the average total

direct compensation of all ING employees. On this basis, the internal ratio in 2019 was 1:31. For the

sake of transparency we also calculated the ratio

of the total direct compensation of the other

Executive Board members compared

to the average total direct compensation of all ING

employees. On that basis the internal ratio in 2019 was 1:21.

2

The higher ratios compared to 2018,

is due to fact that no variable remuneration was granted over

performance year 2018.

3

As disclosed in the Annual Report 2018, in consultation with the Supervisory Board, chief financial

officer

Koos Timmermans stepped down from his position as chief financial officer

and as a

member of the Executive Board on 7 February

2019. To facilitate

an orderly transition and fulfil

ING’s contractual notice period of six months, he continued to advise the company until 31 August

2019. In line with applicable regulations a severance

payment was granted. Although entitled to a

maximum severance payment of one year’s fixed annual pay, the Supervisory Board at its

discretion set the severance

pay at a level of 50% of fixed annual pay (€601,800).

1

Koos Timmermans was an EB member until 6 February 2019; Steven van Rijswijk was appointed to the EB on 8 May 2017;

Tanate Phutrakul

was appointed to the EB immediately following the 23 April 2019 AGM. As Ralph Hamers has been an EB

member for the full years 2017-2019, the full remuneration is presented and no pro-rata method has been applied.

2

Total direct

compensation comprises fixed base

salary and variable remuneration, excluding benefits such as pension

arrangements, and allowances.

3

The internal ratio in 2018 for the CEO was 1:29, for the other Executive Board members this amounted to 1:20. In 2017,

the internal ratio for the CEO was 1:33 and for the other Executive Board members this amounted to 1:23.

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Remuneration

versus

company

performance

and average

employee

remuneration

The table below shows the link between directors’ remuneration,

company performance and the

average remuneration

of an ING employee. This is done by presenting the relative development of

the remuneration for the Executive

Board and Supervisory Board members over the last five years.

With respect to the remuneration of the Supervisory Board, note that there is no link to company

performance to emphasise their independent role.

Furthermore, the relative

performance of the company is presented on three different metrics over

the last five years. The metrics

consist of:

◾

Retail primary customers

◾

Profit before tax ING Group

◾

Underlying Return on Equity

Finally, we present the development of the remuneration

on average (per employee). For this

number the same data has been used as to determine the internal ratio. Since the internal ratio

was disclosed by ING as of 2017, we only have three years of data available.

Due to the strict regulations on variable remuneration in the Netherlands (e.g. 20% bonus cap) and

due to the fact that Executive Board members did not receive any variable

remuneration over

performance year 2018, the link between remuneration and company performance is relative.

Furthermore variable remuneration

must be based on at least 50% non-financial

targets.

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remuneration

2019 ING Group Annual Report on Form 20-F

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FY 2019

FY 2019 vs FY 2018

FY 2018 vs FY 2017

4

FY 2017 vs FY 2016

FY 2016 vs FY 2015

FY 2015 vs FY 2014

Directors remuneration (Executive

Board)

1, 2, 3, 5

Ralph Hamers

2,016

15.2%

-12.8%

1.4%

2.9%

51.4%

Tanate

Phutrakul

973

-

-

-

-

-

Koos Timmermans

818

-11.8%

Steven van Rijswijk

1,399

16.2%

-11.8%

-

-

-

Directors remuneration (Supervisory Board)

6

Hans Wijers

202

9.2%

340.5%

-

-

-

Hermann-Josef Lamberti

141

1.4%

-1.4%

-5.4%

34.2%

37%

Jan-Peter Balkenende

99

0%

200%

-

-

-

Henk Breukink

40

-68.3%

-0.8%

-8.6%

39%

8.7%

Mariana Gheorghe

118

12.4%

11.7%

-4.1%

145%

-

Eric Boyer de la Giroday

108

0%

1.9%

-7%

23.9%

73.6%

Margarate Haase

98

55.6%

-

-

-

-

Mike Rees

73

-

-

-

-

-

Robert Reibestein

136

-1.4%

1.5%

-1.4%

50%

-2.1%

Herna Verhagen

30

-

-

-

-

-

Company’s performance

5, 6

-

Retail primary relationships (in mln)

13.3

7%

10%

9%

14%

9%

Profit before Tax

ING Group (continuing operations) (in mln)

6,834

0%

-6%

23%

-4%

66%

Underlying Return on Equity

9.4%

-2%

1%

0%

2%

1%

Average employee remuneration

Average

fixed and annual variable remuneration

65

7%

-1.1%

-

-

-

1

The remuneration of the Executive Board consist of base salary and variable remuneration (total direct compensation).

2

Variable remuneration

of the Executive Board is included in the year in which the performance has been delivered. Thus prior to the year in which it has been paid out.

3

The fixed remuneration for the Executive Board has not changed over 2019. Hence, the relative total compensation increase from 2018 to 2019 is fully attributed to the fact that no variable remuneration was awarded over performance year 2018. In addition,

since Tanate Phutrakul

has not been an Executive Board member for the full year and since Koos Timmermans left ING during the year, the comparison

between 2018 and 2019 could not be made.

4

The decrease in 2018 versus 2017 comparison for the CFO and CRO is fully attributed to the fact that for performance year 2018 no variable remuneration has been awarded while over performance year 2017 variable remuneration was awarded. For the CEO

the impact is less due to the fact that his fixed

remuneration was increased by 2.2% in 2018 compared to 2017. The fixed remuneration

for the CFO and CRO remained the same.

5

Fixed remuneration for Executive

Board members within ING is not linked to company performance but is based on a benchmark exercise and total direct compensation of Executive Board members should stay below the median of the benchmark

based on the

Dutch Banking Code. This has a mitigating effect on the correlation with the company performance.

6

Supervisory Board members do not receive any variable remuneration. Their remuneration is based on fixed fees related to their role and amount of meetings. The high fluctuations are caused by joining and leaving

the Supervisory Board during the year,

change of roles during the year and the difference in the amount of meetings. Hence there is no correlation between the SB remuneration and the company performance.

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2019

Executive

Board

base

salary

As announced in our 2018 Annual Report, the base salary of all Executive Board members

remained the same in 2019 as it was in 2018.

2019

performance

indicators

Executive

Board

As indicated in the remuneration policy, the performance of the Executive

Board is assessed on

non-financial and

financial indicators. The performance indicators

assessed for 2019 included the

following (overview of combined performance indicators of the Executive

Board members):

Financial performance indicators

◾

Underlying result before tax

◾

Net core lending

◾

Underlying return on equity (IFRS-EU)

à

hurdle for variable pay

◾

Underlying cost/income ratio

◾

Common Equity Tier 1 ratio (SREP)

à

hurdle for variable pay

Non-financial performance indicators

◾

Customer: ensuring growth of retail primary customers.

◾

Operational control: ensuring ING is a safe and compliant bank now and in the future, in line with

regulations.

◾

Think Forward

Strategy: ensuring intended outcomes of key strategic initiatives are executed

and result in improved

customer experience and commercial growth.

◾

People: driving initiatives to continue to be a healthy organisation and great place to work.

◾

Sustainability: increasing ING’s social and environmental impact through our sustainability

activities

2019

Executive

Board

performance

evaluation

The table below highlights key achievements, collectively accomplished by the Executive Board in

2019 in the areas mentioned. It reflects both ING’s overall ambitions and the specific

performance

priorities agreed with the Supervisory Board at the beginning of 2019.

Financial

performance

Achieved underlying

result before tax

of €6,834 million down 9.2% from 2018,

reflecting a well-diversified

loan book with resilient margins, despite margin

pressure on customer deposits. The net profit is €4,781 million, up 1.7% from

2018.

Grew net core

lending by €17.2 billion (+2.9%); increased customer deposits by

€23.4 billion (+4.2%).

Realised underlying

return on equity

(IFRS-EU) for ING Group of 9.4%, down

from 11.2% in 2018.

The underlying cost/income ratio decreased to 56.6% from 54.5% in 2018

driven by higher KYC, staff and regulatory costs (51% excluding regulatory

costs).

Customer

Increased the number of

primary customers

by more than 830,000 to 13.3

million in 2019 (+6.7%).

The total retail customer base reaches 38.8 million.

Ranked number one in Net Promotor Score rela

tive to competitors in six of the

14 retail markets.

A growing share of Retail

customers only interacts with ING on their mobile

device, up from 26% in 2018 to 37% in 2019. Increase in conversion of

customer interactions into sale, with seven times higher mobile sales in 2019

than in 2016.

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Operational

Control

In 2019 countering financial

and economic crime remained a priority:

◾

The number of FTEs working globally on know your customer (KYC) related

activities has increased to ~4,000.

◾

The increased focus on KYC and efforts to streamline operations are leading

to an increased number of accounts being closed, including inactive

accounts or accounts of which the customers were insufficiently

responsive

to information requests.

◾

Further progress

was made in strengthening the global KYC organisation

and governance structure throughout ING.

◾

Further progress

was made in the global roll-out of KYC tools to enable the

onboarding of customers and monitor their transactions across ING’s global

network in a more effective and consistent way.

◾

The implementation of a systematic integrity risk analysis in all business

lines and regions was completed, contributing to consistent KYC risk

assessments across the bank.

ING keeps investing in regulatory compliance, developing promising

tools to

increase accuracy and efficiency in KYC operations:

◾

A virtual alert handler using artificial

intelligence (AI) to sort “false positives”

from the alerts that need more investigation, so far reducing

“false

positives” by half.

◾

A tool to detect instances of fraudulent transactions related to “smurfing”;

the practice of breaking up transactions into smaller amounts to evade

conventional rule-based monitoring systems.

◾

An advanced AI-based anomaly detection model to automatically analyse

and detect new potentially suspicious behaviour in foreign currency clearing

and settlement that ING executes on behalf of others.

◾

Development of SparQ, a global platform that uses AI to automate the

process of turning regulation into policy. It gives insight into applicable

regulations, identifies changes, helps analyse documents

and can link

regulation directly to our policies.

ING is committed to periodically providing the Dutch central bank (DNB) with

regular updates on the progress

made.

Execution Think

Forward

Strategy

Important steps taken in the

major digital transformation programmes

:

◾

Unite be+nl:

Reduced the branch footprint and introduced two

common

digital channels across Belgium and Netherlands (OneApp and OneWeb)

that have been piloted with customers. Introduction of one platform for all

customer-facing collegues to allow supporting customers faster and in a

more uniform way.

◾

Maggie (former Model Bank):

The digital platform has now over 450,000

active customers and the platform is ready to onboard customers from

Italy, Spain and France

in the coming years.

◾

Welcome:

ING in Germany completed the programme early 2019 after

introducing a new mobile app (One App) and a Go2Place platform including

e-signature, multi-banking account overview, forecasting,

third-party

services and end-to-end digital process for account opening, consumer

loans and mortgages.

◾

Wholesale TOM:

Improved the experience of the ING’s Wholesale Banking

customers through the implementation of target solutions in Financial

Markets, Lending and Tra

nsaction Services, setting up a pan-European Daily

banking Desk and by expanding our client platform InsideBusiness, which is

used by more than 18,000 international clients.

New initiatives developed and aligned with partners to improve the customer

experience being:

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Financial Statements

2019 ING Group Annual Report on Form 20-F

110

◾

ING’s partnership with

AXA

reached another milestone in 2019 by going live

with its global platform, which will provide home, mobility and health

insurance services in six markets via the mobile app. The first product

launched on the platform is home insurance, delivered by the ING mobile

app in Italy. This is in addition to the six products launched outside the

platform in 2019.

◾

Yolt

, ING’s personal finance

aggregator, reached over one million users and

was chosen as the best personal finance

app at the International Payments

Awards 2019.

◾

The launch of

instant payments

in Netherlands and Belgium, enabling

money to be available in five seconds to the beneficiary

every moment of

the day all year round.

◾

Introduction of

ApplePay

to enhanced the experience of our mobile app

users.

◾

In order to improve

the credit decision process for Wholesale Banking

clients, ING has invested in

Flowcast

. This is a start-up that uses machine

learning algorithms to create predictive models that reduce risk and unlock

credit to businesses.

Major milestone achieved in the

blockchain area

:

◾

ING joined a consortium with MineHub to develop a blockchain-based

platform that would help ING clients in the metals and mining sector to

lower costs, increase transparency

and contribute to sustainable production

and trading.

◾

First client transaction completed on Komgo, a platform that digitalises and

streamlines trade and commodity finance.

People

The Organisation Health Index (OHI) survey carried out 2019 showed room for

improvement. The overall

health score is a performance indicator measuring

organisational health relative to a global benchmark of 1,900 companies.

Although ING continues to outperform our peers in most areas, there was a

decline in the 2019 results.

Sustainability

In September ING published the first

progress report

on

Terra

, ING’s approach

to steer its €600 billion lending book in line with the goals of the Paris

Agreement to keep global warming to well-below two degrees.

The disclosure addresses developments and climate alignment for the sectors:

power generation, fossil fuels, automotive, shipping, aviation, steel, cement,

residential mortgages and commercial real estate.

These are the sectors in

ING’s portfolio that are most responsible for greenhouse gas emissions. In a

Climate Alignment Dashboard (CAD) the report presents which sectors are on

track for climate alignment and where work is still in progress.

This climate

change disclosure is a first for banks.

ING is recognised as an

A-list company for leadership on climate action

for the

fifth

year in a row by CDP, the leading global environmental disclosure

platform.

In 2019 ING reinforced

the commitment to help customers reach their

sustainability goals by closing more than twice the amount of sustainable

finance deals compared to 2018.

Variable

remuneration outcome

Based on these achievements, the Supervisory Board has concluded that the Executive Board

members did well overall to deliver these results.

This was despite a challenging rate environment

and increase in costs related to the KYC enhancement programme.

Although the underlying result

before tax and underlying return on equity decreased compared

to 2018, good progress was made

in the execution of the Think Forward Strategy.

This is shown by the continued growth of the

primary customer base and the increase in mobile interactions by retail customers. Risk costs

remained below the through-the-cycle average.

ING also continued executing the KYC

enhancement programme, with strong governanc

e

from top management, more FTEs working in

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Additional Information

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Financial Statements

Total direct compensation for individual Executive Board members

2019 ING Group Annual Report on Form 20-F

111

KYC and the roll out of global KYC tools. In sustainability ING remains a leading company, making

further progress with the Terra

approach by partnering with 30 other banks to steer the lending

portfolio towards the climate goals of the Paris Agreement. Overall

this has resulted in a variable

remuneration for the Executive

Board members of between 15 and 16%.

2019

Executive

Board

remuneration

The tables below (i.e. total direct compensation, pension costs and other emoluments) show the

remuneration awarded

to individual Executive Board members with respect to the performance

years 2019, 2018 and 2017. The 2019 figures reflect

a partial year as Executive Board members for

Tanate

Phutrakul and Koos Timmermans. The 2018 figures reflect an entire year for all three active

members of the Executive Board. The 2017 figures reflect a partial year as Executive Board

members for Koos Timmermans and Steven van Rijswijk.

All remuneration of the Executive

Board is paid directly by ING, in other words no payments have

been made by any of our subsidiaries.

2019

2018

2017

Amounts in euros (rounded figures)

Amount

Number of

shares

Amount

Number of

shares

Amount

Number of

shares

Ralph Hamers (CEO)

Base salary

1,750,000

1,750,000

1,713,000

Variable remuneration

(fully in shares)¹

266,000

25,726

293,000

18,547

Tanate

Phutrakul (CFO)

2

Base salary

831,100

Variable remuneration

(fully in shares)¹

141,400

13,675

Koos Timmermans (CFO)

3

Base salary

802,400

1,203,600

781,000

Variable remuneration

(fully in shares)¹

16,000

1,553

104,000

6,612

Steven van Rijswijk (CRO)

Base salary

1,203,600

1,203,600

781,000

Variable remuneration

(fully in shares)¹

195,000

18,858

104,000

6,584

Total

aggregated base salary

4,587,100

4,157,200

3,275,000

Total

aggregated variable remuneration

618,400

501,000

Total

aggregated number of shares

59,812

31,743

1

The number of shares is based on the average ING share price (€10,34) on the day on which the year-end results were

published.

2

Tanate Phutrakul

was appointed to the Executive Board immediately following the 23 April 2018 AGM. This amount of

variable remuneration reflects his period as an Executive Board member.

Thus, for the period from 23 April 2019 – 31

December 2019.

3

Koos Timmermans left ING per 7 February 2019 as an Executive Board member.

Until 31 August 2019 he received an

advisor fee for the period in which he transferred his activities to his successor. Thus the base salary reflects the payments

from 1 January 2019 – 31 August 2019. The amount of variable remuneration however, only reflects his period as an

Executive Board member.

Thus, for the period from 1 January 2019 – 7 February 2019.

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Financial Statements

Pension costs for individual Executive Board members

Other emoluments

2019 ING Group Annual Report on Form 20-F

112

Pension

costs

Members of the Executive Board participate in the Collective

Defined Contribution

(CDC) pension

plan. In 2019, pension accrual only applied to salary up to an amount of €107,593. The table

below

shows the pension costs of the individual members of the

Executive Board in 2019, 2018 and 2017.

Amounts in euros (rounded figures)

1

2019

2018

2017

Ralph Hamers

23,000

26,000

30,000

Tanate

Phutrakul

2

16,000

–

–

Koos Timmermans

3

15,000

26,000

19,000

Steven van Rijswijk

23,000

26,000

19,000

1

Pension accrual only applies to salary up to an annually set amount (i.e. €103,317 for 2017, €105,075 for 2018 and

€107,593 for 2019).

2

Tanate Phutrakul

was appointed to the Executive Board immediately following the 23 April 2018 AGM. Thus, the figures

reflect a partial year as an

Executive Board member.

3

Koos Timmermans left ING per 7 February 2019 as an Executive Board member. Until 31 August 2019 he received an

advisor fee for the period in which he transferred his activities to this successor. Thus the pension costs reflect the period

from 1 January 2019 – 31 August 2019.

Benefits

The individual members of the Executive Board receive other emoluments, including savings

allowances to compensate for

the loss of pension benefits

on salary above €107,593 for 2019,

employer contributions to savings schemes,

reimbursement of costs related to home/work

commute, costs associated

with a company car and

for expats, the costs associated with housing

and schooling.

The other emoluments amounted in 2019, 2018 and 2017 to the

following costs.

Amounts in euros (rounded figures)

2019

1

2018

2017

2

Ralph Hamers

521,000

561,000

624,000

Tanate

Phutrakul

235,000

–

–

Koos Timmermans

3

231,000

408,000

290,000

Steven van Rijswijk

367,000

369,000

274,000

1

The 2019 emoluments reflect the partial

year as an Executive Board member for Tanate

Phutrakul.

2

The 2017 emoluments for Koos Timmermans and Steven van Rijswijk reflect the partial

year as an Executive Board

member.

3

Koos Timmermans left ING per 7 February 2019 as an Executive Board member. Until 31 August 2019 he received an

advisor fee for the period in which he transferred his activities to his successor. Thus the emoluments reflect the period from

1 January 2019 – 31 August 2019.

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Financial Statements

Other emoluments in more detail 2019

Total remuneration

2019 ING Group Annual Report on Form 20-F

113

Amounts in euros (rounded figures)

Ralph

Hamers

Tanate

Phutrakul

2

Koos

Timmermans

3

Steven van

Rijswijk

Contribution individual savings

61,000

29,000

28,000

42,000

Individual savings allowance

391,000

179,000

175,000

261,000

Travel

and accident insurance

18,000

13,000

2,000

18,000

Other amounts

1

50,000

15,000

26,000

46,000

1

Other amounts contains the following elements: personnel facility (mortgage),

tax and financial planning,

one-off

compensation for Steven van Rijswijk for retroactive tax impact of use of company car and temporary housing for Tanate

Phutrakul.

2

The 2019 emoluments reflect the partial

year as an Executive Board member for Tanate

Phutrakul.

3

Koos Timmermans left ING per 7 February 2019 as an Executive Board member. Until 31 August 2019 he received an

advisor fee for the period in which he transferred his activities to his successor. Thus the emoluments reflect the period from

1 January 2019 – 31 August 2019.

Total

remuneration

The table below contains the total remuneration of the Executive

Board members over 2019.

Amounts in euros

(rounded figures)

Base salary

Variable

remuneration

Total

direct

compensation

Pension

Emoluments

Total

remuneration

Ralph Hamers

1,750,000

266,000

2,016,000

23,000

521,000

2,560,000

Tanate

Phutrakul

831,100

141,400

972,500

16,000

235,000

1,223,500

Koos Timmermans

802,400

16,000

818,400

15,000

231,000

1,064,400

Steven van Rijswijk

1,203,600

195,000

1,398,600

23,000

367,000

1,788,600

As recognised in the profit or loss statement of 2019, the expenses for each member of the

Executive Board (active on 31 December 2019), while serving on the Executive Board,

amount to

€2.4 million for the CEO, €1.1 million for the CFO and €1.7 million for the CRO.

Long-term

incentives

awarded

in previous

years

Long-term incentives to the Executive

Board members in previous years are disclosed in the table

ING shares held by Executive Board

members.

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Financial Statements

Options held by Executive Board members

2019 ING Group Annual Report on Form 20-F

114

Employee

stock

options

The table below contains information on the outstanding employee stock options and the movements during the financial

year of employee stock options held by the members of the Executive Board on 31

December 2019 including those awarded prior to their appointment to the Executive Board.

Number of options

Outstanding on

31 December

2019

Exercised in 2019

Waived or

expired in 2019

Outstanding on

31 December

2019

Grant price in

euros

Grant date

Vesting date

Expiry date

Ralph Hamers

19,985

19,985

2.90

19 March 2009

19 March 2012

19 March 2019

22,124

22,124

7.35

17 March 2010

17 March 2013

17 March 2020

Tanate

Phutrakul

4,163

4,163

2.90

19 March 2009

19 March 2012

19 March 2019

11,062

11,062

7.35

17 March 2010

17 March 2013

17 March 2020

Steven van Rijswijk

1,688

1,688

2.90

19 March 2009

19 March 2012

18 March 2019

11,658

11,658

2.90

19 March 2009

19 March 2012

18 March 2019

2,318

2,318

7.35

17 March 2010

17 March 2013

16 March 2020

10,694

10,694

7.35

17 March 2010

17 March 2013

17 March 2020

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Additional Information

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Financial Statements

Shares vested for Executive Board members during 2019

2019 ING Group Annual Report on Form 20-F

115

Shares

Deferred shares are shares

conditionally granted subject to a tiered vesting over a period of five years (for awards in 2019 and before), with the ultimate value

of each deferred share based on ING’s share

price on the vesting date. This is all conditional on there being no holdback.

Number of shares

Shares

2

Grant date

Vesting date

End date of

retention period

No. of shares

granted

5

No. of shares

vested

Vesting price in

euros

No. of unvested

shares remaining

6

Ralph Hamers

LSPP

11 May 2016

11 May 2019

11 May 2021

28,404

5,682

10.44

0

LSPP

11 May 2017

11 May 2019

11 May 2022

23,092

4,618

10.44

4,619

LSPP

10 May 2018

11 May 2019

10 May 2023

18,547

2,225

10.44

8,903

Tanate

Phutrakul

1

LSPP Units

3

27 March 2015

27 March 2019

N/A

6,915

922

10.55

0

LSPP Units

3

25 March 2016

27 March 2019

N/A

7,987

1,065

10.55

1,065

LSPP Units

3

27 March 2017

27 March 2019

N/A

6,032

482

10.55

1,931

LSPP Units

3

27 March 2018

27 March 2019

N/A

4,972

2,983

10.55

1,989

LSPP

27 March 2019

27 March 2019

27 March 2020

2,837

1,702

10.55

1,135

Koos Timmermans

LSPP

4

11 May 2016

11 May 2019

11 May 2021

18,278

0

-

0

LSPP

4

11 May 2017

11 May 2019

11 May 2022

15,838

1,465

10.44

3,169

LSPP

10 May 2018

11 May 2019

10 May 2023

10,139

1,216

10.44

4,867

Steven van Rijswijk

1

LSPP

25 March 2016

27 March 2019

27 March 2020

19,362

3,227

10.55

0

LSPP

27 March 2017

27 March 2019

27 March 2020

13,890

2,315

10.55

2,315

LSPP

27 March 2018

27 March 2019

27 March 2020

3,460

346

10.55

1,384

LSPP

10 May 2018

11 May 2019

10 May 2023

6,584

790

10.44

3,160

1

Shares granted to Tanate

Phutrakul (March 2015 to March 2019) and Steven van Rijswijk (March 2016 to March 2018) were

awarded for their performance in positions prior to their Executive Board appointment.

2

All current Executive Board members participate in ING Group Long

Term Sustainable Performance Plan (LSPP) under which plan rules they receive their shares.

3

Deferred share units of Tanate

Phutrakul are cash settled instruments. The value of these are based on ING Group’s share price at the vesting date. No retention period applies.

4

The (partial) holdback (3,657 and 1,702) of the outstanding deferred variable remuneration, is effectuated on these grants.

5

Number of shares granted includes both deferred and upfront part awarded at the granting date.

6

The balance of unvested shares post holdback, where applicable.

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Additional Information

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Financial Statements

Total value of vested and unvested shares of Executive

Board members - 2019

Loans and advances to individual Executive Board members

• 2019

Loans and advances to individual Executive Board members -

2018

Loans and advances to individual Executive Board members

• 2017

ING shares held by Executive Board members

2019 ING Group Annual Report on Form 20-F

116

Amounts in euros (rounded figures)

Vested shares

Unvested

shares

Share price in

euros

1

Total

value

Ralph Hamers

12,525

13,522

10.68

278,000

Tanate

Phutrakul

7,154

6,120

10.68

142,000

Steven van Rijswijk

6,678

6,859

10.68

145,000

1

The opening stock price on 31 December 2019.

Loans

and advances

to Executive

Board

members

The table below presents the loans and advances provided to Executive

Board members that were

outstanding on 31 December 2019, 2018 and 2017. These loans were provided on market

conditions with due observance of the applicable policies within ING.

Amount in thousands of euros

Amount

outstanding

31 December

Average

interest rate

Repayments

Ralph Hamers

2,402

1.4%

97

Tanate

Phutrakul

-

-

-

Steven van Rijswijk

-

-

-

Amount in thousands of euros

Amount

outstanding

31 December

Average

interest rate

Repayments

Ralph Hamers

2,499

1.4%

-

Koos Timmermans

182

6.2%

-

Steven van Rijswijk

-

-

-

Amount in thousands of euros

Amount

outstanding

31 December

Average

interest rate

Repayments

Ralph Hamers

2,499

1.4%

-

Koos Timmermans

182

6.2%

-

Steven van Rijswijk

-

-

-

ING shares

held

by Executive Board members

Executive Board members are encouraged to hold ING shares

as a long-term investment to

maintain alignment with ING. The table below shows an overview of the shares held by members of

the Executive Board on 31 December 2019, 2018 and 2017.

Numbers of shares

2019

2018

2017

Ralph Hamers

93,833

67,392

58,094

Tanate

Phutrakul

9,200

-

-

Steven van Rijswijk

69,490

66,153

59,914

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Financial Statements

Supervisory Board remuneration structure

2019 ING Group Annual Report on Form 20-F

117

2020

Executive

Board

remuneration

The Supervisory Board decided to increase the base salary of the Executive Board

members by

1.5% as of 1 January 2020. This decision was based on reliable indexation reference

points,

including the Consumer Prices Index 2020 (forecast) in line with the proposed Executive

Board

Remuneration Policy 2020. This increase is below

the CLA increase in the Netherlands.

4

For 2020 the following target

areas will be taken into account.

Financial

◾

Profit before tax

◾

Return on equity

Non-financial

◾

Customer – Retail primary customers

◾

People – Organisational Health Index

◾

Strategy – executing Think Forward

Strategy

◾

Sustainability – Terra

◾

Regulatory – deliver commitments to regulators (CRO)

◾

Manage financial

and non-financial

risk within Board approved risk appetite (CRO)

Remuneration

Supervisory

Board

Supervisory Board remuneration

policy

The current remuneration

policy for the Supervisory Board, as approved at the AGM on 25 April

2016, aims to:

◾

Provide a simple and transparent

structure

◾

Bring remuneration levels

in line with peers and with levels adequate to attract qualified

(international) Supervisory Board members

◾

Align remuneration with increased responsibilities

and time spent.

The Supervisory Board remuneration levels for 2019, similar to 2018, are shown below:

Annual fees in euros

2019

Chairman Supervisory Board

125,000

Vice chairman Supervisory Board

95,000

Supervisory Board member

70,000

Committee fees (annual amounts)

Chairman committee

20,000

Member committee

10,000

Attendance fees (per event)

Attendance fee outside country of residence

2,000

Attendance fee outside continent of residence

7,500

The remuneration of Supervisory Board members is not paid out in equity (i.e. solely cash).

Furthermore, Supervisory Board members are

not eligible for any variable remuneration. In

addition, members of the Supervisory Board are reimbursed for their travel

and ING-related

business expenses.

4

The collective salary increase based on the Collective Labour Agreement in the Netherlands (agreed for the period from 1

January 2019 – 31 December 2020), per 1 September 2019 was 3% for all

employees in the Netherlands. In addition, per 1

September 2020 another collective salary increase of 3% will take place.

Contents

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Part III

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Additional Information

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Financial Statements

2019 Remuneration Supervisory Board

ING shares held by Supervisory Board members

Employee stock options on ING Groep N.V. shares held by

members of the Supervisory Board on

31 December 2019

2019 ING Group Annual Report on Form 20-F

118

2019 Remuneration

Supervisory Board

The table below shows the remuneration, including attendance fees per Supervisory Board

member.

All fees for the Supervisory Board are paid directly by ING, in other words

no payments have been

made by any of our subsidiaries.

2019

2018

2017

Amount in euros (rounded figures)

Remuneration

VAT

Remuneration

VAT

Remuneration

VAT

Hans Wijers (chairman)

167,000

35,000

153,000

32,000

35,000

7,000

Hermann-Josef Lamberti (vice-

chairman)

141,000

139,000

141,000

Jan Peter Balkenende

82,000

17,000

82,000

17,000

27,000

6,000

Henk Breukink¹

33,000

7,000

104,000

22,000

105,000

22,000

Mariana Gheorghe

119,000

105,000

94,000

Eric Boyer de la Giroday

108,000

108,000

106,000

Margarete Haase

98,000

63,000

Mike Rees²

73,000

Robert Reibestein

112,000

24,000

114,000

24,000

112,000

24,000

Herna Verhagen³

25,000

5,000

1

Henk Breukink stepped down as of 23 April 2019. The remuneration figures for 2019 reflect a partial

year as a member of

the Supervisory Board.

2

Mike Rees was appointed to the Supervisory Board by the 23 April 2019 AGM. His appointment became effective

as of the

end of the AGM. The remuneration figures for 2019 reflect a partial year

as a member of the Supervisory Board.

3

Herna Verhagen was appointed to the Supervisory Board by the 23 April 2019 AGM. Her appointment became effective as

of 1 October 2019. The remuneration figures for 2019 reflect

a partial year as a member of the Supervisory

Board.

Compensation of former members of the Supervisory

Board who are not included in the table above

amounted to nil in 2019, €69,000 in 2018 and €344,000 in

2017.

Loans and advances to Supervisory Board members

Supervisory Board members may obtain banking and

insurance services from ING Group and

its

subsidiaries in the ordinary

course of their business and on terms that are customary

in the sector.

The Supervisory Board members do not receive privileged financial services.

On 31 December 2019,

there were no loans and advances outstanding

to Supervisory Board members.

ING shares and employee stock options held by

Supervisory Board members

Supervisory Board members are permitted to hold ING shares as a long-term

investment. The table

below shows

the holdings by members of the Supervisory Board on 31 December

2019, 2018 and

2017.

Numbers of shares

2019

2018

2017

Hermann-Josef Lamberti

5,700

5,700

5,700

Eric Boyer de la Giroday

47,565

47,565

47,565

Margarete Haase

800

800

The following table contains information on employee stock options outstanding and awards

vested for Supervisory Board members.

Number of stock options

Outstanding

on 31

December

2019

Expired in

2019

Outstanding

on 31

December

2018

Expired in

2018

Outstanding

on 31

December

2017

Expired in

2017

Eric Boyer de la Giroday

-

-

–

113,479

113,479

113,479

2020 Remuneration

Supervisory Board

The Supervisory Board decided not to change the metrics for 2020.

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119

General information

for all staff

FOR INFORMATION

ONLY

The primary objective of ING’s remuneration principles is to enable ING to attract, motivate and

retain qualified and expert leaders as well as senior staff

(including Executive Board members) and

other highly qualified

employees. Our remuneration principles apply to all employees, including

Executive Board members. The approach did not change in 2019.

The principles are an integral part of ING’s corporate strategy

and risk profile. They maintain a

sustainable balance between short and long-term value creation and build on ING’s long-term

responsibility towards customers, society and other stakeholders.

ING’s remuneration principles apply to all staff and are embedded in ING’s Remuneration

Regulations Framework

(IRRF). The IRRF complies with relevant international and local legislation

and regulations.

Our remuneration

principles

Our remuneration principles apply to all employees and comprise the following:

Aligned with business strategy

ING’s remuneration principles are aligned with the business strategy and company goals.

Creates long-term value

ING’s remuneration principles contribute to long-term value creation and support a focus on the

long-term interests of its stakeholders, including employees, customers and shareholders.

Responsible and fair

In line with our Orange Code values and behaviours, ING acts responsibly and treats staff fairly

across the globe.

Mitigates risk and optimises controls

Risk management is an enabler of long-term value creation. ING ensures its remuneration

principles are properly correlated

with its risk profile and stakeholder interests.

Performance driven

ING operates a robust performance management process linked to remuneration

to steer and

motivate all employees to deliver on its strategic goals, aiming to reward

success and prevent

rewarding

for failure.

Sustainable

ING supports the sustainable recruitment, engagement and retention of all employees.

Performance management

We aim to reward

for success and avoid rewarding

for failure. That is why ING’s remuneration

approach is strongly linked to a comprehensive performance

management process. Outcomes of

performance evaluations

provide direct input for remuneration.

This does not necessarily mean

that performance is directly linked to variable remuneration since within ING not all employees are

eligible for variable remuneration. In the Netherlands, for example the vast majority of the

employees do not receive any variable remuneration.

Step Up Performance Management is our global performance management approach applicable to

the majority of employees.

It aims to improve people’s individual performance and thereby their

team performance and ultimately ING's performance.

Step Up Performance Management is one of

our people practices that help to increase focus, alignment and transparency. We

do this through

continuous conversations between managers, employees and teams. To

support these

conversations, there are three

formal moments to discuss performance during the year: target

setting, mid-year review and year-end evaluation.

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The Step Up Performance Management approach consists of three dimensions:

◾

Job: the impact employees have in their daily work on an individual and team level, based on

factors such as qualitative job description, dynamic planning and specific

selected quantitative

priorities.

◾

Orange Code behaviours: how employees do their work and how effective their behaviour is as a

professional and colleague. We

expect all employees to act in line

with ING’s Orange Code.

◾

Stretch Ambitions: at ING, we believe high performance requires

stretch and investment (to

achieve the stretch). Therefore

we ask people to set ambitions

beyond their day-to-day role and

connect their personal passion, expertise or interest with the long-term success of ING.

All targets are

agreed between the employee and their manager, as well as within management

teams, to ensure consistency across the bank. ING uses

three labels to evaluate performance:

excellent, well done and improvement required.

Step Up Performance

Management

does not

prescribe the

targets employees

should set.

However,

the following

regulatory requirements

apply to

specific

groups:

◾

For employees eligible for variable remuneration,

a minimum of 50% non-financial

priorities.

◾

For all employees in control functions (Legal,

Risk, Finance, Compliance, Audit and HR), no

individual financial

KPIs are allowed, unless required

by local law.

◾

For identified risk takers, risk mitigation measures may lead to a downwards adjustment of the

performance outcome and negatively affect variable remuneration (a risk modifier can be

applied).

Total

direct compensation

Total

direct compensation is the total of fixed and variable remuneration, excluding benefits such

as pension and allowances.

ING aims to provide total direct compensation levels for expected business and individual

performance which, on average, are at the median of the markets in which we operate,

benchmarked against relevant peer groups. In line with the Dutch Banking Code, for the Executive

Board and the Management Board Banking we aim for a level below

the median. To ensure

we

adhere to this policy, we regularly monitor and benchmark salary levels across ING.

Fixed remuneration represents

a sufficiently

high proportion, in line with the level of expertise and

skills, and allows a fully flexible variable remuneration award. In case no variable remuneration

is

awarded, the compensation level is still sufficient for a decent standard of living. Variable

remuneration is performance driven, subject to regulatory caps

and prevents excessive

risk taking,

where applicable.

The comprehensive

process

around

variable

remuneration

The awarding of variable remuneration, where applicable, is based on individual, business line and

bank-wide performance

criteria unless local

legislation prescribes

otherwise. In all ING countries, we

adhere to the applicable variable remuneration

caps. In the Netherlands, for example, we apply a

variable remuneration cap of 20% with limited exceptions in line with the Dutch Remuneration

Policy for Financial Enterprises Act (Wet Beloningsbeleid Financiële Ondernemingen, hereafter

‘WBFO’).

For Identified

Staff (i.e. staff considered to have a material impact on ING’s risk profile),

at least 40%

of variable remuneration is deferred

over a period of three to five years with a tiered vesting

schedule. Furthermore, at least 50% of variable

remuneration is awarded

in equity (linked

instruments).

Performance and

risk assessment

ING applies measures to mitigate risk relating to variable remuneration.

Our global remuneration

policy takes into consideration risk, capital, liquidity and the likelihood and timing of earnings.

Measures include pre-award

and post-award risk assessments of variable remuneration.

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In 2019, the Management Board Banking and the Supervisory Board approved the Variable

Remuneration Accrual Model (VRAM) set-up and approach for determining the 2019 variable

remuneration pool based on the new VRAM formally approved

in 2018.

The VRAM takes a holistic view of the overall performance of ING across three

key dimensions:

(i)

financial,

(ii)

non-financial,

and

(iii)

risk.

Within each of these three elements specific criteria are used to measure performance (e.g.

customer, people, strategy, operational excellence, financial and non-financial

risk).

The proposal for the variable remuneration

pool is prepared by Human Resources,

Risk and Finance,

and in line with the VRAM principles. The Management Board Banking then proposes the amount of

the overall variable remuneration

pool to the Supervisory Board, taking into account the advice of

the Risk and the Remuneration committees.

The variable remuneration pool (for both individual and collective variable remuneration),

encompasses all employees eligible for variable remuneration globally, including Identified Staff.

ING takes a multi-step approach to determine whether to award variable remuneration

in a given

performance year and the maximum amount of the pool. Within this process, a range of risk

elements is assessed at various levels and, where appropriate, risk adjustments are

made to the

variable

remuneration pools at both a group and business line level.

Risk and performance hurdles

To

unlock the variable remuneration pools, regulatory

and performance hurdles must be met.

These are:

◾

The Common Equity Tier 1 (CET1) ratio must be at or above the threshold

established by

applicable regulations;

◾

The Return on Equity (RoE – IFRS-EU) is equal to or higher than the percentage determined at the

beginning of each performance year by the Management Board Banking and the Supervisory

Board;

◾

If both the CET1 ratio and RoE are met, the maximum variable remuneration

pool is unlocked, as

accrued in line with the VRAM; and

◾

If only one (or none) of the two tests is met, in principle, no bank-wide variable remuneration

pool is released.

A variable remuneration pool is also separately

accrued for staff in control functions and support

functions and for those employees subject to a collective

variable remuneration plan. The amount

is defined by the Management

Board Banking and approved by the Supervisory Board.

Risk adjustments

In determining the overall size of the variable remuneration

pool, a multi-layered, consistent and

bank-wide approach to risk tests and adjustments is applied to the process, based on an

assessment by the chief risk officer.

To

establish appropriate ex ante risk adjustments, there are measures

to assess the bank’s current

and future risks and whether performance sufficiently

aligns with risk appetite levels. The risk

adjustment assessment includes measurements on ‘forward looking’ capital, liquidity and non-

financial risk, where adjustments are made on deviation from risk appetite.

In addition, ex post risk adjustments are a key element in the process of determining both final

variable remuneration pools and individual awards.

Here, the chief risk officer

may provide

additional input at a more granular level to risk adjust (downwards)

ING’s overall or business line

and/or country variable remuneration

pools in circumstances where a business line or a specific

unit is not performing in line with desired risk parameters or based on events that have a material

impact on ING’s

financial

results or reputation.

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The ex ante and/or ex post risk adjustments require

Supervisory Board approval, taking into

account the input of the Risk and Finance functions and the advice of the Risk and Remuneration

Committees.

The final risk adjustment

measure lies in the individual performance assessment itself. An

employee’s performance is extensively assessed before variable remuneration

is proposed and

awarded. Every

manager carefully assesses the performance delivered by their individual team

members on the basis of pre-agreed performance priorities and in line with the Step Up

Performance Management framework. In addition, managers have the discretionary power to

lower the proposed variable remuneration

if risk taking is perceived as inappropriate.

In this way,

variable remuneration is aligned with any additional risks identified during the performance year

on an individual basis.

Additional risk requirements apply to Identified Staff who are considered risk takers in accordance

with CRD IV.

These risk requirements set the minimum standards to be met during the performance

year.

Deviation from these standards may lead to downward

adjustment of the variable

remuneration, a so-called risk modifier. This process

is run independently by the Risk function for

which the chief risk officer

is ultimately responsible. The Supervisory Board, advised by its Risk

Committee, is responsible for Risk Takers

within the Management Board Banking.

Finally, a post-award risk assessment can be applied. This assessment analyses whether any

events or findings occurred that should lead to a downward adjustment of variable remuneration

of previous years by applying a holdback (i.e., forfeiture

of up to 100% of the awarded, but

unvested, variable remuneration)

or clawback (surrender of up to 100% of the paid or vested

variable remuneration).

Shareholders

’

mandate

to exceed

100%

variable

remuneration

cap

ING’s remuneration policies comply with international and local legislation and regulations. Under

the WBFO (which sets various requirements on remuneration),

financial institutions

are permitted

to set a variable remuneration cap higher than 100% of fixed remuneration for employees outside

of the European Economic

Area (EEA), provided that the higher cap is approved

by shareholders

and does not conflict

with ING’s capital adequacy requirements.

At the 2017 AGM, shareholders approved

to apply an increased maximum percentage of up to

200% for employees outside the EEA for a period of five

performance years, from 2017 up to and

including 2021. ING uses this facility very rarely. In 2019, it was applied to no employees worldwide.

2019

specifics

The total amount of variable remuneration awarded

to all eligible employees (worldwide) for 2019

was €378 million, compared to total employee costs of €5,755 million.

For 2018, the total amount

was €303 million and €403 million for 2017. In comparison,

the total employee costs in 2018 were

€5,420 million and €5,202 million in 2017.

Variable remunerati

on includes both individual and

collective variable remuneration such as profit sharing arrangements.

In 2019, eight employees in the Corporate staff, Wholesale Banking and Retail Banking business

lines - excluding members of the Management Board Banking - were awarded total annual

remuneration (including employer pension contributions and severance payments made) of €1

million or more. In comparison, in 2018 seven employees were

awarded total annual remuneration

of €1 million or more and 14 employees in 2017.

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Summary and further explanation of the proposed

new

remuneration

policy for the Executive

Board and Supervisory

Board from

2020

FOR INFORMATION

ONLY

Executive

Board:

proposed

remuneration

policy

2020

ING's 2019 EB Remuneration Policy has been in place since 2010, with legal amendments adopted

in 2011, 2014, 2015 and 2017, as described above. In line with the Dutch Act on Implementation of

SRD II, the Supervisory Board will propose a new Executive Board

remuneration policy to

shareholders at the 2020 AGM, where it will be subject to a binding approval vote.

The full proposal

will be provided to our shareholders.

Once adopted by the AGM, the new Executive Board

remuneration policy will be effective

retroactively from 1 January 2020 until the 2024 AGM at the latest. The rem

uneration policy is

available in full on ING's corporate website https://www.ing.com/remuneration

.

In case of any

differences between this summary and the published Executive Board remuneration

policy, the

latter is leading. In the event of proposed changes to the new Executive Board remuneration

policy,

it will be subject to AGM approval.

The objective of ING's new Executive Board remuneration

policy is to enable ING to attract,

motivate and retain leaders with the ability, experience, skills, values and behaviours to meet ING's

strategic priorities and its stakeholder interests. In designing the new Executive Board

remuneration

policy, many factors were taken into account, such as the amount of fixed and variable

remuneration, the performance measures

used and, ING’s risk appetite and scenario analyses

(taking into account internal pay ratios and stakeholder support).

ING recognises that remuneration

is an area of particular interest to stakeholders including

shareholders, employees and customers. The Supervisory Board actively engages with stakeholders

and takes into account their views as well as ING’s need to attract, motivate and retain leaders with

the ability, experience, skills, values and behaviours to meet its strategic priorities and its

stakeholder interests.

In line with various regulations, in the course of formulating this policy, the Supervisory Board

consulted various stakeholders in meetings, conference calls and through online surveys. Such

stakeholders included Retail and Wholesale

Banking customers, investors, analysts, rating

agencies, shareholder advisory firms, trade unions, employee representatives, regulators,

politicians and the current members of the Executive Board.

The Supervisory Board notes that stakeholder views, especially on remuneration, can vary.

However, the Supervisory Board values the insight and engagement that these interactions provide,

including the expression of different views. This engagement is meaningful and helpful to the

Supervisory Board and contributes directly to the advice made by its Remuneration Committee.

The feedback received from

stakeholders was taken into account when drafting this proposed

remuneration policy.

Governance

The Supervisory Board and the Remuneration Committee are

responsible for reviewing the

Executive Board remuneration

policy at least annually, taking into account regulatory

requirements, stakeholder views, ING's benchmark position, internal pay ratios and whether policy

incentives take into consideration risk, capital, liquidity and the likelihood and timing of earnings.

Following the periodic reviews,

the Supervisory Board can propose amendments to the Executive

Board remuneration policy.

The amended Executive Board remuneration

policy will be submitted to

shareholders at the AGM for binding approval.

In case of no amendments the policy will be

submitted to the AGM for approval

every four years.

The Risk Committee will, at least, annually review the remuneration

policy and may recommend

actions to be taken by the Supervisory Board regarding the establishment of a sound Executive

Board remuneration policy without prejudice

to the tasks of the Remuneration Committee.

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Remuneration components

The individual base salaries are set according to the role, responsibilities

and experience of each

Executive Board member with reference

to market practice. The below factors are given

consideration in determining base salaries:

◾

the individual’s level of skill and performance;

◾

ING’s business performance, and market conditions;

◾

internal pay ratios

and salary increases for other ING employees within the wider ING group;

◾

remuneration level within the external peer group;

◾

public indexation reference

points (e.g. consumer price index);

◾

stakeholder views.

The Remuneration Committee

reviews the individual base salaries of the Executive Board

members

each year and advises the Supervisory Board on this. Potential future salary increases take into

account the factors highlighted above. The Supervisory Board will pro

-actively report the base

salary development in the Annual Report. If any significant changes to

Executive Board base

salaries are to be proposed, a stakeholder consultation will be carried out.

In line with the Dutch Banking Code, ING aims for the total direct remuneration of members of the

Executive Board to be below the median when benchmarked against comparable positions inside

and outside the financial

industry, taking into account the relevant international context. In recent

years stakeholders have expressed discontent with the use of the EURO STOXX 50 index, which ING

has used as a peer group since 2010. This type of benchmark is also unusual compared to the

approach taken by peers. As a result, the Supervisory Board has chosen to change the benchmark

for ING's proposed

new Executive Board remuneration

policy to a smaller peer group based on five

guiding principles: (i) geography, (ii) relevant talent market, (iii) size, (iv) governance framework

and

(v) a balancing factor.

The new benchmark is more fitting to ING, incorporating relevant companies rather than an index

proxy. Rules and regulations

prescribe a mix of comparable relevant

Dutch and relevant European

financial and non-financial

institutions. Given the very different pay structures in the UK and

Switzerland we have excluded those institutions from our benchmark. Smaller companies and

financial institutions

active only in one or two countries were also excluded as they are

not

comparable in terms of scope and complexity.

With regards to the relevant

market for talent, ING increasingly competes with players across

sectors and industries. Therefore not only traditional banking competitors are included in the

benchmark, but also companies from other industries. This also aligns with the stipulation in the

Banking Code.

Size is a significant factor in the

dynamics and complexity of a company. Therefore it is important

to include companies in the peer group that are broadly comparable

in terms of size and

complexity. For this, potential peer group companies were

assessed on the metrics of market

capitalisation (where applicable), number of employees and revenue, with companies considered in

the range of one quarter up to four times the size of ING. For general industry peers and for

Western-European

financial services

peers, this ranges from one third

up to three times the size

of ING.

The applicable governance framework for

the company is also seen as a relevant factor.

ING is a

stock listed company subject to the Dutch financial

services regulatory framework,

operating within

the Dutch stakeholder environment. Therefore

the peer group selection is aligned with the Dutch

stakeholder environment and/or a financial services regulatory framework.

As a final factor,

the Supervisory Board looks at the balance of the peer group, ensuring it keeps

sight of relevant peer companies that do not sufficiently

match other criteria. This resulted in the

inclusion of a number of relevant Dutch peer companies.

The Supervisory Board intends to keep the peer group as stable as possible. Each year the

appropriateness of the selected companies will be assessed against the guiding principles, which

will not change. The peer group constituents will be reported in the Annual Report.

5

5

For more information on the peer group composition in 2020, we refer to the additional information on the next page.

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To

drive and reward

performance the Executive Board is eligible for annual variable remuneration,

in accordance with the applicable regulatory requirements.

The amount of variable remuneration is

based on actual performance as measured against agreed financial (50%), non-financial

(50%) and

risk objectives that are consistent with ING's strategy and align with the long-term interests of

stakeholders. For the CEO and CFO the applicable performance measures are

based on group

performance. Under ING's proposed Executive Board

remuneration policy, the CRO's performance

will be assessed predominantly based on individual functional objectives.

Any variable remuneration awarded

to the Executive Board members is fully paid in ING shares. In

combination with long-term deferral and holding requirements this ensures alignment with ING's

strategy, long-term performance and sustainability goals and with long-term stakeholder interests.

For this reason ING does not operate

separate short-

and long-term incentive plans but rather one

plan that has many characteristics of a long-term incentive plan. The amount of variable

remuneration awarded

to the Executive Board members can range

from 0% to 20% of annual base

salary.

To

mitigate risk relating to variable remuneration,

the Risk Committee carries out pre-award

and

post-award risk assessments of variable remuneration, which may result

in a downward

adjustment of the variable remuneration at the discretion of the Supervisory Board.

After the performance year, the Supervisory Board reviews performance on the applicable criteria

and determines the appropriate variable remuneration amount to be awarded.

It uses input and

support from the other Supervisory Board committees, such as the Risk Committee and the Audit

Committee. The outcomes for each quantitative performance measure are

assessed on a linear

scale ranging from threshold,

target to maximum. The outcomes for qualitative performance

measures are assessed using a standard 1-3

rating scale.

The actual individual performance measures and the actual outcome of the review of the

performance measures are disclosed retrospectively

in the Remuneration Report. The Supervisory

Board is of the opinion that the performance measures for the variable remuneration

are

commercially sensitive and that it would be detrimental to ING to disclose target details at the start

of the relevant performance year.

We will disclose according to the

SRD disclosure requirements.

With respect to pension, Executive Board members participate in ING’s general Collective Defined

Contribution (CDC) pension plan in the same way as all employees working in the Netherlands

without a supplementary pension scheme. Furthermore, Executive Board

members are eligible for

benefits at a level that the Supervisory Board considers appropriate in the context of the executive’s

role, specific individual circumstances and benefits

offered to the wider workforce and at

comparable roles in ING’s peer group.

Contractual arrangements

Members of the Executive Board are

appointed by the shareholders at the Annual General Meeting

(AGM) for a maximum period of four years. The appointment may be renewed subject to re-

election by shareholders (and in line with ING’s Articles of Association and

applicable rules and

regulations).

In principle, in the event of an involuntary exit, the Executive Board

member is eligible for a

severance payment. If termination of the contract is based on mutual agreement, the Executive

Board member is also eligible for severance payment. The arrangements

are subject to legal

requirements, including being limited to a maximum of one year of fixed base salary and under the

condition that there should be no reward

for failure.

Additional information not included

in the Executive Board

remuneration

policy

Based on these five guiding principles,

the selected peer group for 2020 consists of the following 16

companies. Note the guiding principles are part of the remuneration policy. (The list below only

relates to 2020):

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ABN AMRO

Ahold Delhaize

BBVA

Deutsche Bank

Aegon

ASML

Banco Santander

Intesa Sanpaolo

NN Group

Heineken

BNP Paribas

Société Générale

Rabobank

Philips

Crédit Agricole

UniCredit

Based on compensation data for 2018, compared to the peer group, total direct compensation

levels for the CEO amount to approximately 57% of the median (43% compared to the median of

the EURO STOXX 50). Total

direct compensation levels of the CRO and CFO amount to

approximately 81% of the median (63% compared to the median of the EURO STOXX

50).

Supervisory

Board:

proposed

remuneration

policy

2020

The Supervisory Board will propose a Supervisory Board remuneration

policy to shareholders at the

2020 AGM,

where it will be subject to a binding approval vote.

Compared to the existing policy,

which was approved at the AGM

on 25 April 2016, there are no significant changes other than that

the Supervisory Board remuneration will be benchmarked against a new reference

market and that

the policy is extended to include all relevant requirements of the

Dutch Act implementing SRD II.

Once adopted, the new Supervisory Board remuneration policy will be effective retroactively from

1

January 2020 until the 2024 AGM at the latest. The remuneration policy is available in full on ING's

corporate website https://www.ing.com/remuneration

.

In case of any differences between this

summary and the published Supervisory Board remuneration policy, the latter is leading. If any

changes are proposed, the revised

Supervisory Board remuneration policy will be subject to AGM

approval before

becoming effective.

It is important that ING is able to attract members for its Supervisory Board who have the ability,

experience, skills, values and behaviours to deliver on the company strategy and goals and support

ING's purpose. The Supervisory Board strives to have a diverse composition with regards

to gender,

ethnicity, nationality and generation. The Supervisory Board remuneration policy therefore

aims to

(i) be clear and easy, (ii) have remuneration levels in line with peers, (iii) enable ING to attract

qualified (international)

Supervisory Board members and (iv) align remuneration with

responsibilities and time spent.

Governance

The Remuneration Committee is responsible for

annually reviewing the Supervisory Board

remuneration policy and making recommendations to the Supervisory Board on amendments. The

review takes into account at least the following:

(i) ING's benchmark position, (ii) stakeholders'

views on remuneration and (iii) regulatory

requirements. Following

the periodic review, the

Supervisory Board can propose amendments to the Supervisory Board remunerati

on policy to the

General Meeting for adoption. In the event of no amendments the policy will be submitted to the

General Meeting for adoption every four years.

Remuneration components

As often as appropriate, but at least every four years, the total fees for Supervisory Board members

are reviewed

against comparable positions in the market. Under the proposed new Supervisory

Board remuneration policy,

the Supervisory Board will use an updated benchmark, similar to the

benchmark proposed for the Executive Board

.

This benchmark is periodically determined by the

Supervisory Board and based on the following peer group guiding principles: (i) geography, (ii)

relevant talent market, (iii) size, (iv) governance framework

and (v) a balancing factor.

In the

benchmark exercise ING’s position is for Supervisory Board member’s fees to be below the median.

The peer group will be disclosed annually in our Annual Report.

The remuneration structure of the Supervisory Board members reflects the roles and

responsibilities of individual Supervisory Board members. All fees for Supervisory Board members

are paid out fully in cash. No variable remuneration

is provided to ensure that the Supervisory

Board members can maintain independence. Additionally, the Supervisory Board members are not

eligible for retirement benefits nor for any other benefits

in relation to their position on the

Supervisory Board.

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C.

Board

practices

For information regardin

g

board practices, see Item 6.A

Severance payments to members of the Executive Board

The contracts entered into with the members of the Executive Board provide

for severance

payments that become due upon termination of the applicable Executive Board member’s

contract, including if termination occurs in connection with a public bid as defined

in section 5:70 of

the Dutch Financial Supervision Act. For purposes of calculating the amounts due, it is not relevant

whether or not termination of the employment or commission contract is related to a public bid.

Severance payments to the members of the Executive

Board are limited to a maximum of one

year’s fixed salary, in line with the Dutch Financial Supervision

Act and the Corporate Governance

Code

D.

Employees

The average number of employees at a full time equivalent basis was 53,431 at the end of 2019, of

which 14,415 or 27%, were employed in the Netherlands. Substantially all of the Group’s Dutch

employees are subject to a collective labor agreement covering ING in the Netherlands.

The distribution of employees with respect to the Group’s continuing operations for the years 2019,

2018 and 2017 were as follows:

Average number of employees at full time equivalent basis

Netherlands

International

Total

2019

2018

2017

2019

2018

2017

2019

2018

2017

Total average

number of

employees at full time equivalent

basis

14,415

13,600

13,141

39,016

38,633

38,363

53,431

52,233

51,504

The Group employs a significant numbers of temporary employees. The average number of

temporary employees, not included in the table above, at a full time equivalent basis was 7,394 at

the end of 2019.

E.

Share

ownership

For information regarding

share ownership, see Item 6.B of this Form 20-F and Note 27 ‘Staff

expenses’ to the consolidated financial

statements.

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Item 7.

Major shareholders

and related

party transactions

A. Major shareholders

ING Group ordinary shares

are listed on the stock exchanges of Amsterdam (Euronext

Amsterdam)

and Brussels (Euronext Brussels). ING Group American Depositary Shares

(“ADSs”)

are listed on the

New York

Stock Exchange (NYSE). Options on ING Group ordinary shares or in the form of American

depository receipts (ADRs) are traded

on the Euronext Amsterdam

Derivative Markets and the

Chicago Board Options Exchange.

Holders of ordinary shares or American Depositary Shares with a stake of 3% or more

To

the best of our knowledge, as of 31 December 2019, no holder of ordinary shares or ADSs, other

than BlackRock Inc. and Artisan Investments GP LLC held 3% or more of ING Group’s issued share

capital. Artisan Investments GP LLC has since notified the

AFM that

,

as of January 17, 2020 its

beneficial ownership of ING’s

issued share capital had dropped to 2.96%. Artisan Investments GP

LLC has since notified the AFM that, as of February 28, 2020, its beneficial

ownership of ING’s issued

share capital had increased to 3.06%.

On 30 January 2018, BlackRock, Inc. disclosed by way of a Schedule 13G filed

with the SEC,

beneficial ownership of 304,505,468

ordinary shares of ING Group as of 31 December 2017,

representing 7.8% of ING Group’s issued share

capital. On 4 February 2019, BlackRock, Inc. disclosed

by way of a Schedule 13G filed with the SEC, beneficial

ownership of 233,492,874 ordinary shares of

ING Group as of 31 December 2018, representing 6.0% of ING Group’s

issued share capital.

On 5 February 2020, BlackRock, Inc. disclosed by way of a Schedule 13G filed with the SEC,

beneficial ownership of 259,231,767

ordinary shares of ING Group as of 31 December 2019,

representing 6.7% of ING Group’s issued share

capital.

On 31 December 2019, ING Groep N.V.

and its subsidiaries held 919,387 ordinary shares or ADSs,

representing 0.02% of ING Group’s issued share

capital. ING Groep N.V.

does not have voting rights

in respect of shares and ADSs it holds or which are held by its

subsidiaries.

Pursuant to section 5.3 of the Dutch Financial Supervision Act (“Major

Holdings Rules”), shareholders

and holders of ADSs are only required to provide

updated information on their holdings once their

interest reaches, exceeds or falls below

threshold levels of 3%, 5%, 10%, 15%, 20%, 25%, 30%, 40%,

50%, 60%, 75% and 95%. As a result, other than based on information available from public filings

available under the applicable laws of any other jurisdiction, ING Groep N.V.

is not aware of any

changes in the ownership of ordinary shares or ADSs between the thresholds levels

mentioned in

the previous sentence.

On 31 December 2019, no person is known to ING Groep N.V.

to be the owner of more than 10% of

the ordinary shares or ADSs. As of 31 December 2019, members of the Supervisory Board and their

related third parties held 54,065 Ordinary Shares

.

Members of the Supervisory Board do not hold

ING options.

As of 31 December 2019, members of the Executive Board and their related third parties held

172,523 ordinary shares of which 35,905 are restricted by a retention

period.

As of 31 December 2019 ING Groep N.V.

was not a party to any material agreement that becomes

effective, or is required to be amended or terminated in case of a change of control of ING Groep

N.V.

following a public bid as defined in

the Dutch Financial Supervision Act. ING Groep N.V.’s

subsidiaries may have customary change of control arrangements included in agreements related

to various business activities, such as joint venture agreements, letters of credit and other credit

facilities, ISDA-agreements, hybrid capital and debt instruments, reinsurance

contracts and futures

and option trading agreements. Following a change of control

of ING Groep N.V.

(as the result of a

public bid or otherwise), such agreements may be amended or terminated, leading, for example, to

an obligatory transfer of the interest in the joint venture, early repayment

of amounts due, loss of

credit facilities or reinsurance

cover and liquidation of outstanding futures and option trading

positions.

As of 31 December 2019 ING Groep N.V.

was not aware of any arrangements the operation of

which may result in a change of control of ING Groep N.V.

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B. Related

Party Transactions

In the normal course of business, ING Group enters into various transactions with related parties.

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. Related parties of ING

Group include, among others, its subsidiaries, associates, joint ventures, key management

personnel, and various defined

benefit and

contribution plans. Transactions between

related parties

include rendering or receiving of services, leases, transfers under finance arrangements and

provisions of guarantees or collateral.

There are no significant provisions for doubtful debts or

individually significant

bad debt expenses recognised on outstanding balances with related parties.

As of 31 December 2019, there was no amount outstanding in respect of loans and advances,

including mortgages, made to members of the Supervisory Board. The amount outstanding in

respect of loans and advances, mostly mortgages, to members of the Executive Board was EUR

2.402 million at an average interest rate

of 1.49%. The largest aggregate amount of loans and

advances outstanding to the members of the Executive Board during 2019 was EUR 2.681 million.

The loans and advances mentioned in the preceding paragraph (1) were

made in the ordinary

course of business, (2) were granted on conditions that are

comparable to those of loans and

advances granted to all employees and (3) did not involve more

than the normal risk of

collectability or present other unfavorable features. Loans

and advances to members of the

Executive Board are

compliant with the standards set out in the DNB guidelines for loans to officers

and directors of a regulated entity, such as ING.

As described under “Item 6. Directors, Senior Management and Employees”, some members of

the

Supervisory Board are current

or former senior executives of leading multi-national corporations

based primarily in the Netherlands. ING Group may at any time have lending, investment banking

or other financial relationships with one or more of these corporations in the ordinary course of

business on terms which we believe are no less favorable

to ING than those reached with

unaffiliated

parties of comparable creditworthiness.

In addition, ING Group has entered into various transactions with related parties. For

more

information, reference

is made to Note 50 “Related parties” in the consolidated financial

statements.

C. Interests

of experts

and counsel

This item does not apply to annual reports on Form 20-F.

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Item 8.

Financial information

A.

Consolidated

statements

and other

financial

information

Consolidated statements

For information regarding

consolidated statements and other financial

information, see Item 18 of

this Form 20-F.

Legal Proceedings

For a description of ING’s legal proceedings,

see Note 46 ‘Legal proceedin

gs’ in the consolidated

financial statements.

Policy on dividend distribution

ING Group’s dividend policy aims to pay a progressive

dividend that will reflect

considerations

including expected future capital requirements, growth

opportunities available to the Group, net

earnings, and regulatory developments.

The Executive Board proposes to pay a total cash dividend of EUR 2,689 million, or EUR 0.69 per

ordinary share, over

the financial year

2019. This is subject to the approval of shareholders at the

Annual General Meeting in April 2020.

Taking

into account the interim dividend of EUR 0.24 per ordinary share paid in August 2019, the

final dividend

will amount to EUR 0.45 per ordinary share and will be paid fully in cash. These

payments per share repre

sent gross amounts which are subject to Dutch dividend withholding tax.

Cash distributions on ING Groups ordinary shares

are generally paid in Euros.

However, the

Executive Board may decide, with the approval

of the Supervisory Board, to declare dividends in the

currency of a country other than the Netherlands in which the shares are traded. Amounts payable

to holders of ADSs that are paid to the Depositary in a currency other than dollars will be converted

to dollars and subjected to a charge by the Depositary for any expenses incurred by it in such

conversion.

If the Executive Board has been designated as a body authorised to resolve to issue shares,

it may

decide, with the approval of the Supervisory Board, that a distribution on ordinary shares shall be

made in the form of ordinary shares instead of cash or to determine that the holders of ordinary

shares shall be given the choice of receiving the distribution in cash or in the form of ordinary

shares on such terms as the Executive Board,

with the approval of the Supervisory Board, may

decide.

The right to dividends and distributions in respect of the ordinary shares will lapse if such dividends

or distributions are not claimed within five years following the day after the

date on which they

were made available.

There are no legislative or other legal provisions

currently in force in the Netherlands or arising

under ING Groups’ Articles of Association restricting the remittance of dividends to holders of

ordinary shares, or ADSs not resident in the Netherlands. Insofar as the laws of the Netherlands are

concerned, cash dividends paid in Euro may be transferred

from the Netherlands and converted

into any other currency, except that for statistical purposes such payments and transactions must

be reported by ING Group to DNB

and, further, no payments, including dividend payments, may

be

made to jurisdictions or persons, that are subject to certain sanctions,

adopted by the Government

of the Netherlands, implementing resolutions of the Security Council of the United Nations, or

adopted by the European Union.

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Dividends are subject to

withholding taxes in the

Netherlands as

described under Item 10,

“Additional Information -

Taxation - Netherlands Taxation”.

B.

Significant

changes

For information on subsequent events reference

is made to Note 51 ‘Subsequent events’ of the

consolidated financial statements.

Since 31 December 2019, until the filing

of this report, no other significant changes

have occurred

in the financial statements

of the Group included in “Item 18 Consolidated Financial Statements” of

this document

.

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Item 9.

The offer and listing

A.

Offer

and listing

details

Ordinary Shares (nominal value EUR 0.01 per share) are

traded on Euronext

Amsterdam, the

principal trading market for

the Ordinary Shares, under the symbol “INGA”.

The Ordinary Shares

are also listed on the stock exchange of Euronext

Brussels, under the symbol “INGA”. ADSs,

representing an equal number of Ordinary Shares,

are traded on the New York

Stock Exchange

under the symbol “ING”.

B.

Plan

of distribution

This item does not apply to annual reports on Form 20-F.

C.

Markets

For information regarding

markets, see Item 9.A of this Form 20-F.

D.

Selling

shareholders

This item does not apply to annual reports on Form 20-F.

E.

Dilution

This item does not apply to annual reports on Form 20-F.

F.

Expenses

of the

issue

This item does not apply to annual reports on Form 20-F.

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Item 10. Additional information

A.

Share

capital

This item does not apply to annual reports on Form 20-F.

B.

Memorandu

m

and articles

of association

For a description of ING’s memorandum and articles of association, please see Exhibit 2.1

“Description of Securities Registered under Section 12 of the Exchange Act”, which is incorporated

by reference

herein.

C.

Material

contracts

Except for the settlement of ING Bank N.V.

with the Dutch Public Prosecution Service (DPPS) in 2018

on regulatory issues in the ING Netherlands business that resulted in penalties totalling EUR 775

million, there have been no material contracts outside the ordinary course of business to which ING

Groep N.V.

or any of its subsidiaries is a party in the last two years.

D.

Exchange

controls

Cash distributions, if any,

payable in Euros on Ordinary Shares and ADSs

may be officially

transferred from the Netherlands and converted into

any other currency without

violating Dutch

law, except that for statistical purposes

such payments and transactions

must be reported by

ING

Groep N.V.

to the Dutch Central Bank and,

further, no payments,

including dividend payments,

may

be made to

jurisdictions or persons subject

to certain sanctions,

adopted by the government

of the

Netherlands

or the European Union.

E.

Taxation

The following is a summary of certain Netherlands tax consequences, and the United States federal

income tax consequences, of the ownership of our Ordinary Shares or American Depositary Shares

(“ADSs”)

by U.S. Shareholders (as defined below) who hold Ordinary Shares or ADSs as capital

assets.

For the purposes of this summary, a “U.S. Shareholder” is a beneficial owner of Ordinary Shares or

ADSs that is:

◾

an individual citizen or resident of the United States,

◾

a corporation organized under the laws of the United States or of any state of the United States,

or any entity taxable as United States corporation,

◾

an estate, the income of which is subject to United States federal income tax without regard to

its source, or

◾

a trust if a court within the United States is able to exercise primary supervision over the

administration of the trust and one or more United States persons have the authority to control

all substantial decisions of the trust.

Further, this summary is limited to U.S. Shareholders who are not, and are

not deemed to be, a

resident of the Netherlands for Dutch tax purposes.

This summary is based on the United States Internal Revenue Code of 1986 and the laws of the

Netherlands, each as amended, their legislative history, existing and proposed regulations,

published rulings and court decisions, and the tax treaty between the United States and the

Netherlands for the Avoidance of Double Taxation

and the Prevention of Fiscal Evasion

with respect

to Taxes

on Income (“Treaty”),

all as of the date hereof. These laws are

subject to change, possibly

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on a retroactive basis. The information provided

below is neither intended as tax advice nor

purports to describe all of the tax considerations that may be relevant to investors and prospective

investors. It should not be read as extending to matters not specifically discussed, and investors

should consult their own advisors as to the tax consequences of their ownership and disposal of

Ordinary Shares or ADSs. In particular, the summary does not take into account the specific

circumstances of particular investors (such as tax-exempt organizations, banks, insurance

companies, dealers in securities, traders in securities that elect to mark-to-market their securities

holdings, investors liable for alternative minimum tax, investors whose functional currency is not

the U.S. dollar, investors that actually or constructively own 10% or more of the combined voting

power of the voting stock or of the total value of ING Groep N.V.,

investors that hold Ordinary

Shares or ADSs as part of a straddle or a hedging or conversion transaction, investors that acquired

or dispose of Ordinary Shares or ADSs as part of a wash sale, or investors that own Ordinary Shares

or ADSs through a partnership), some of which may be subject to special rules.

Moreover, this summary does not discuss the Dutch tax treatment of a holder of Ordinary

Shares or

ADSs that is an individual who receives income or capital gains derived from the Ordinary Shares

and ADSs and this income received or capital gains derived are

attributable to the past, present or

future employment activities of such holder.

The summary is based in part upon the representations of the Depositary and the assumption that

each obligation in the Deposit Agreement and any related agreement will be performed in

accordance with its terms. In general, for United States federal

income tax and Netherlands tax

purposes, holders of ADSs will be treated as the owners of the Ordinary Shares underlying the ADSs,

and exchanges of Ordinary Shares for ADSs, and exchanges of ADSs for Ordinary

Shares, will not be

subject to United States federal income tax or Netherlands income tax. References to Ordinary

Shares in this section include references to ADSs.

It is assumed, for purposes of this summary, that a U.S. Shareholder is eligible for the benefits

of

the Treaty

and that a U.S. Shareholder’s eligibility is not limited by the limitation on benefits

provisions of the Treaty.

Netherlands Taxation

Withholding tax on dividends

The Netherlands imposes a withholding tax on a distribution of a dividend at the statutory rate of

15%. Dividends include:

i.

dividends paid in cash and in kind;

ii.

deemed and constructive dividends;

iii.

the consideration for the repurchase

or redemption of shares in excess of the qualifying

average paid-in capital unless such repurchase

is made for temporary investment purposes

or is exempt by law;

iv.

any (partial) repayment of paid-in capital not qualifying as capital for Dutch dividend

withholding tax purposes;

v.

liquidation proceeds in excess of the qualifying average paid-in capital for Dutch

dividend

withholding tax purposes; and

vi.

stock dividends up to their nominal value (unless distributed out of ING Groep N.V.’s

qualifying

paid-in capital).

Reduction of Dutch dividend withholding tax based on Dutch law

Under certain circumstances, a reduction of Dutch dividend withholding tax can be obtained based

on Dutch law:

i.

An exemption at source is available if the Dutch participation exemption applies and the

Ordinary Shares or ADSs are

attributable to a business carried out in the Netherlands. To

qualify for the Dutch participation exemption, the U.S. Shareholder must generally hold at

least 5.0 percent of our nominal paid-in capital and meet certain other requirements.

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ii.

An exemption at source is available for dividend distributions to certain qualifying corporate

U.S. Shareholders owning our Ordinary Shares

or ADSs if such shareholder would have been

able to apply the Dutch participation exemption if it would have been resident of the

Netherlands, unless such shareholder holds the Ordinary Shares or ADSs with the primary aim

or one of the primary aims to avoid the levy of Dutch dividend withholding tax at the level of

another person and the Ordinary Shares or ADSs are not held for valid commercial

reasons

that reflect economic reality.

iii.

Certain tax exempt organizations (e.g.

pension funds and excluding collective investment

vehicles) may be eligible for a refund of Dutch dividend withholding tax upon their request.

Based on domestic law not yet entered into force, in those circumstances, an exemption at

source may also become available upon request.

iv.

Upon request and under certain conditions, certain qualifying individual and corporate U.S

Shareholders of Ordinary Shares or ADSs which are

not subject to personal or corporate

income tax in the Netherlands may request a refund of Dutch dividend withholding tax

insofar the withholding tax withheld on the gross dividend is higher than the personal or

corporate income tax which would have been due on the net dividend if they were resident

or

established in the Netherlands. This refund is however not applicable when, based on the

Treaty,

the Dutch dividend withholding tax can be fully credited in the United States by the

U.S. Shareholder.

However, it is unclear whether (i) which (financing) costs can be taken into

account when determining the hypothetical personal or corporate income tax due on the net

income (ii) or how the Netherlands would determine whether, based on the double taxation

convention, a full credit is available in the country of residence

of the holder for purposes of

this refund. See “United States Taxation

—Taxes

on dividends” for more information. The

provision in essence is intended to be a codification of certain judgments by both the

European Free

Trade

Association Court of Justice and the European Court of Justice that

already indicated that in certain circumstances a refund

should be available prior to the

introduction of the provision in Dutch law.

It is possible that this provision is an insufficient

codification of these judgments

and that based on EU law a larger refund should be provided.

Reduction of Dutch dividend withholding tax based on the Treaty

Pursuant to the provisions of the Treaty,

certain corporate U.S. Shareholders owning directly

at

least 10% of our voting power are eligible for a reduction to 5% Dutch dividend withholding tax

provided that the U.S. Shareholder is the beneficial owner of the dividends received and does not

have an enterprise or an interest in an enterprise that is, in whole or in part, carried on through a

permanent establishment or permanent representative in the Netherlands to which the dividends

are attributable. The Treaty

also provides for a dividend withholding tax exemption on dividends,

but only for a shareholder owning directly at least 80.0 percent of our voting power and meeting all

other requirements.

Provided that certain conditions are met, under the Treaty

dividends paid to qualifying exempt

pension trusts and other qualifying exempt organizations, as defined in the Treaty, are exempt

from Dutch dividend withholding tax. To

obtain a refund of the tax withheld such qualifying exempt

pension trusts are required

to file a request. Only if certain conditions are fulfilled,

such qualifying

exempt pension trusts may be eligible for relief at source upon payment of the dividend. Qualifying

exempt organizations (other than qualifying exempt pension trusts) can only file for a refund of the

tax withheld.

Anti-dividend stripping rules

Pursuant to the Dutch anti-dividend stripping rules, in the case of dividend-stripping, the 15%

dividend withholding tax cannot be reduced or refunded. Dividend-stripping is deemed to be

present if the recipient of a dividend is, different from what has been assumed above,

not the

beneficial owner thereof and is entitled to a larger credit, reduction or refund of dividend

withholding tax than the beneficial

owner of the dividends. Under these rules, a recipient of

dividends will not be considered the beneficial owner thereof if as a consequence of a combination

of transactions a person other than the recipient wholly or partly benefits

from the dividends,

whereby such person retains, whether directly or indirectly, an interest

similar to the shares on

which the dividends were paid.

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Credit for ING Groep N.V.

ING Groep N.V.

may, with respect to certain dividends received from qualifying non-Netherlands

subsidiaries, credit taxes withheld from those dividends against the Netherlands withholding tax

imposed on certain qualifying dividends that are redistributed by ING Groep N.V.,

up to a maximum

of the lesser of:

◾

3% of the amount of qualifying dividends redistributed by ING Groep N.V.;

and

◾

3% of the gross amount of certain qualifying dividends received by ING Groep N.V.

The reduction is applied to the Dutch dividend withholding tax that ING Groep N.V.

must pay to the

Dutch tax authorities and not to the Dutch dividend withholding tax that ING Groep N.V.

must

withhold.

Taxes

on income and capital gains

Income and capital gains

Income and capital gains derived from the Ordinary Shares or ADSs by an individual or corporate

U.S. Shareholder are generally

not subject to Netherlands income tax or corporation tax, unless:

i.

such income and gains are attributable to a (deemed) permanent establishment or (deemed)

permanent representative in the Netherlands of the U.S. Shareholder; or

ii.

the shareholder is entitled to a share in the profits of an enterprise or (in case of a non-Dutch

resident corporate shareholder

only) a co-entitlement to the net worth of an enterprise, that

is effectively managed in the Netherlands

(other than by way of securities) and to which

enterprise the Ordinary Shares or ADSs are attributable; or

iii.

such income and capital gains are derived from a direct, indirect or deemed substantial

interest in the share capital of ING Groep

N.V.

(such substantial interest not being a business

asset), and in the case of a non-Dutch resident corporate shareholder only, that substantial

interest is being held with the primary aim or one of the primary aims to avoid the levy of

income tax from another person and is put in place without valid economic reasons that

reflect economic reality;

iv.

in case of a non-Dutch resident corporate shareholder,

such shareholder is a resident of

Aruba, Curacao or Saint Martin with a permanent establishment or permanent representative

in Bonaire, Eustatius or Saba to which the Ordinary Shares

or ADS are attributable, while the

profits of such shareholder are taxable in the Netherlands pursuant to Article 17(3)(c) of the

Dutch Corporate Tax

Act 1969; or

v.

in case of a non-Dutch resident individual, such individual derives income or capital gains

from the Ordinary Shares

or ADSs that are taxable as benefits from ‘miscellaneous activities’

in the Netherlands (‘resultaat uit overige werkzaamheden’, as defined in the Dutch Income

Tax

Act 2001), which includes the performance of activities

with respect to the Ordinary

Shares or ADSs that exceed regular portfolio management.

Substantial interest

Generally speaking, for Dutch tax purposes, an interest in the share capital of ING Groep N.V.,

should not be considered a substantial interest if the holder of such interest, and, in case of an

individual, his or her spouse, registered partner, certain other relatives or certain persons sharing

the holder’s household, alone or together, does or do not hold, either directly or indirectly, the

ownership of, or certain rights over, shares or rights resembling shares

representing 5% or more

of

the total issued and outstanding capital, or the issued and outstanding capital of any class of

shares, of ING Groep N.V.

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Gift or inheritance tax

No Netherlands gift or inheritance tax will be imposed on

the transfer or deemed transfer of the

Ordinary Shares or ADSs by way of a gift by or on the death of a U.S. Shareholder if, at the time of

the gift or the death of that shareholder, such shareholder is not a (deemed) resident of the

Netherlands.

Netherlands inheritance or gift taxes (as the case may be) are due, however, if the transfer of the

bearer receipts or ADSs are

construed as an inheritance or as a gift made by or on behalf of a

person who, at the time of the gift or death, is deemed

to be a resident of the Netherlands. For the

purposes of Netherlands gift or inheritance tax, an individual

of Dutch nationality is deemed to be a

resident of the Netherlands if he or she has been a resident thereof at any time during the ten

years preceding the time of the gift or death. For the purposes of Netherlands gift tax, any person

is

deemed to be a resident of the Netherlands if he or she has resided therein at any time in the

twelve months preceding the gift.

United States Taxation

Taxes

on dividends

The tax treatment of owning Ordinary shares

will depend in part on whether or not ING Groep N.V.

is classified as a passive foreign investment company, or PFIC, for United States federal income tax

purposes.

Except as discussed below under “-PFIC Rules”, this discussion assumes that we are not

classified as a PFIC

for United States federal income tax purposes.

Under the United States federal income tax laws, a U.S. Shareholder will be required

to include in

gross income the full amount of a cash dividend (including any Netherlands withholding tax

withheld) as ordinary income when the dividend is actually or constructively received by the U.S.

Shareholder.

For this purpose, a “dividend”

will include any distribution paid by ING Groep N.V.

with

respect to the Ordinary Shares, but only to the extent such distribution is not in excess of ING Groep

N.V.’s

current and accumulated earnings and profits as determined for United States federal

income tax purposes. Distributions in excess of current and accumulated earnings and profits, as

determined for United States federal income tax purposes, will be treated

as a non-taxable return

of capital to the extent of a U.S. Shareholder’s basis in the Ordinary Shares

and thereafter as capital

gain. Because ING Groep N.V.

does not keep account of its earnings and profits, as determined for

United States federal income tax purposes, U.S. Shareholders should generally

expect to treat any

distribution as a dividend for U.S. federal income tax purposes.

For foreign

tax credit purposes, dividends will generally be income from sources

outside the United

States and will, depending on the circumstances of the U.S. Shareholder, generally be “passive”

income for purposes of computing the foreign tax credit allowable to the shareholder.

A dividend

will not be eligible for the dividends received deduction generally allowed to U.S. corporations

in

respect of dividends received from

other U.S. corporations. Dividends paid to a non-corporate U.S.

Shareholder that are considered

qualified

dividend income will be taxable to the shareholder at

preferential rates

applicable to long-term capital gains provided that the shareholder holds the

Ordinary Shares for more

than 60 days during the 121-day period beginning 60 days before the ex-

dividend date and meets other holding period requirements. Dividends paid by ING Groep N.V.

with

respect to the Ordinary Shares generally will be

qualified

dividend income.

Subject to certain limitations, a U.S. Shareholder may generally deduct from income, or credit

against its United States federal income tax liability, the amount of any Netherlands withholding

taxes under the Treaty.

The Netherlands withholding tax will likely not be creditable against the U.S.

Shareholder’s United States tax liability, however, to the extent that ING Groep N.V.

is allowed to

reduce the amount of dividend withholding tax paid over to the Netherlands Tax

Administration by

crediting withholding tax imposed on certain dividends paid to ING Groep N.V.

In addition, special

rules apply in determining the foreign tax credit limitation with respect to dividends that are

subject to preferential rates. To

the extent a reduction or refund of the tax withheld is available to

you under Dutch law or under the Treaty,

the amount of tax withheld that could have been

reduced or is refundable will not be eligible for credit

against your United States federal income tax

liability. In addition, to the extent an amount of Dutch tax withheld is contingent on the availability

of a credit against the amount of income tax owed to another country, that amount of Dutch tax

withheld will not be eligible for a credit against your United States federal income tax liability. It is

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unclear whether or how the Netherlands would apply this rule in determining whether, based on

the Treaty,

a credit is available in the United States for purposes of the dividend withholding tax

refund provision described in Section IV under “Netherlands Taxation

—Withholding tax on

dividends—Reduction of Dutch dividend withholding tax based on Dutch law”.

Since payments of dividends with respect to Ordinary Shares will be made in Euros, a U.S.

Shareholder will generally be required

to determine the amount of dividend income by translating

the Euro into United States dollars at the “spot rate”

on the date the dividend distribution is

includable in the income of the U.S. Shareholder.

Generally, any gain or loss resulting from currency

exchange fluctuations

during the period from the date the dividend distribution is includable in the

income of the U.S. Shareholder to the date such payment is converted into U.S. dollars will be

treated as ordinary income or loss and will not be eligible for the special tax rate applicable to

qualified dividend

income. Such gain or loss will generally be income or loss from sources within the

United States for foreign tax credit

limitation purposes.

Taxes

on capital gains

Gain or loss on a sale or exchange of Ordinary Shares by a U.S. Shareholder

will generally be a

capital gain or loss for United States federal income tax purposes. If such U.S. Shareholder has held

the Ordinary Shares for more

than one year, such gain or loss will generally be long-term capital

gain or loss. Long-term capital gain of a non-corporate U.S. Shareholder

is generally taxed at

preferential rates.

In general, gain or loss from a sale or exchange of Ordinary Shares

by a U.S.

Shareholder will be treated as income or loss from sources

within the United States for foreign tax

credit limitation purposes.

PFIC rules

ING Groep N.V.

believes it is not a PFIC for United States federal income tax purposes, and it does

not expect to become a PFIC in the foreseeable future. However, this conclusion is a factual

determination that must be made annually and thus may be subject

to change. It is therefore

possible that we could become a PFIC in a future taxable year

If ING Groep N.V.

were to be treated as a PFIC, unless a U.S. Shareholder

made an effective election

to be taxed annually on a mark-to-market basis with respect to the Ordinary Shares, any gain from

the sale or disposition of Ordinary Shares by a U.S. Shareholder would

be allocated ratably to each

year in the holder’s holding period and would be treated as ordinary income. Tax

would be imposed

on the amount allocated to each year prior to the year of disposition at the highest rate in effect

for that year, and interest would be charged at the rate

applicable to underpayments on the tax

payable in respect of the amount so allocated. The same rules would apply to “excess

distributions”, defined

generally as distributions in a single taxable year exceeding 125% of the

average annual distribution made by ING Groep N.V.

over the shorter of the holder’s holding period

or the three preceding years. Dividends received

by a U.S. Shareholder will not be eligible for the

special tax rates applicable to qualified dividend income if ING Groep N.V.

were to be treated as a

PFIC with respect to the shareholder either in the taxable year of the distribution or the preceding

taxable year, but instead will be taxable at rates applicable to ordinary income.

A U.S. Shareholder who owns Ordinary Shares

during any year that ING Groep N.V.

is a PFIC may be

required to file Internal Revenue Service Form 8621.

F.

Dividends

and paying

agents

This item does not apply to annual reports on Form 20-F.

G.

Statement

by experts

This item does not apply to annual reports on Form 20-F.

H.

Documents

on display

ING Groep N.V.

is subject to the informational requirements of the Securities Exchange Act of 1934,

as amended. In accordance with these requirements, ING Groep

N.V.

files reports and other

information with the Securities and Exchange Commission (”SEC”). These materials, including this

Annual Report and its exhibits, may be inspected and copied on the SEC’s website at www.sec.gov.

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You

may also inspect ING Groep N.V.’s

SEC reports and other information on the website of ING

Groep N.V.

(www.ing.com).

I.

Subsidiary

information

This item does not apply to annual reports on Form 20-F.

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Item 11. Quantitative and Qualitative

Disclosure

of Market Risk

See “Item 5. Operating and Financial Review and Prospects – Factors

Affecting Results of

Operations” and “Additional

information - ING Group Risk Management” for these

disclosures,

including disclosures relating to operational, compliance and other non-market-related

risks.

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Item 12. Description of Securities Other Than Equity

Securities

A.

Debt

securities

This item does not apply to annual reports on Form 20-F.

B.

Warrants

and rights

This item does not apply to annual reports on Form 20-F.

C.

Other

securities

This item does not apply to annual reports on Form 20-F.

D.

American

depositary

shares

Fees and Charges

Payable by a Holder of ADSs

JPMorgan Chase Bank, N.A., as ADR depositary,

may collect fees for, among other things, the

delivery and surrender of ADSs directly from investors,

or from intermediaries acting for them,

depositing Ordinary Shares or surrendering ADSs for the purpose of withdrawal.

The charges of the ADR depositary payable which may be payable by investors are as follows:

Type of Service

ADR Depositary Actions

Fee Payable

Depositing or

substituting the

underlying Ordinary

Shares

Issuance of ADSs against the deposit of Ordinary

Shares, including deposits and issuances in respect

of:

·

share distributions, rights and other

distributions.

·

a stock dividend or stock split.

·

a merger, exchange of securities or

other transactions or events affecting

the ADSs or the underlying Ordinary

Shares.

$5.00 for each 100 ADSs (or

portion thereof) issued, delivered

or upon which a share distributive

or elective distribution is made or

offered.

The ADR depositary may

sell sufficient

securities or

property received in respect

of

share distributions, rights and

other distributions prior to such

deposit to pay such charge.

Receiving or

distributing cash

dividends

Distribution of cash dividends or other cash

distributions, or offering of elective cash/stock

dividends.

$0.05 or less per ADS held.

Selling or exercising

rights

·

additional ADRs resulting from

a

dividend or free distribution consisting

of Ordinary Shares, or U.S

dollars

resulting from sales of Ordinary

Shares

received in a distribution.

·

Instruments representing rights to

acquire additional ADRs as a result

of

distribution on Ordinary Shares, or U.S

dollars resulting from

sales of such

rights.

·

other securities available to the ADR

depositary resulting from

any

distribution on the deposited Ordinary

Shares, or U.S dollars resulting

from

sales of such other securities.

An amount equal to the fee for

the execution and delivery of

ADSs which would have been

charged as a result

of the deposit

of such securities.

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Withdrawing an

underlying Ordinary

Share

Acceptance of ADSs surrendered

for withdrawal of

deposited Ordinary Shares

$5.00 for each 100 ADSs (or

portion thereof) reduced,

cancelled or surrendered.

Type of Service

ADR Depositary Actions

Fee Payable

Transferring,

splitting

or grouping of ADRs

Registration, registration

of transfer, combination

and split-up of ADRs in the ADR register as evidenced

by the ADRs surrendered or upon delivery

of proper

instruments of transfer

$1.50 per ADR.

General depositary

services, particularly

those charged on an

annual basis

Other services performed by the ADR depositary in

administering the ADR program

$0.05 per ADS per calendar year

(or portion thereof), which may

be charged on a periodic basis

during each calendar year

against holders of the record

date(s) set by the ADR depositary

and shall be payable at the sole

discretion of the ADR depositary

by billing such holders or

deducting such charge from one

or more cash distributions.

Reimbursement of

fees, charges and

expenses of the ADR

depositary

The ADR depositary and/or any of its agents may

incur fees, charges and expenses (including

expenses incurred on behalf of holders of ADRs in

connection with compliance with foreign exchange

control regulations

or any law or regulation relating

to foreign investment) in connection with the

servicing of the underlying Ordinary Shares or other

deposited securities, the sale of securities (including,

without limitation, deposited securities), the delivery

of deposited securities or otherwise in connection

with the ADR depositary’s compliance with

applicable law, rule or regulation.

Fees and charges shall be

assessed on a proportionate basis

against holders of ADRs as of the

record date

or dates set by the

ADR depositary and shall be

payable at the sole discretion of

the ADR depositary by billing

such holders of ADRs or by

deducting such charge from one

or more cash dividends or other

cash distributions.

Type of Service

ADR Depositary Actions

Fee Payable

Other charges and

expenses of the ADR

depositary

The ADR depositary may incur charges and expenses

on behalf of holders in connection with:

·

stock transfer or other taxes and other

governmental charges.

·

SWIFT, cable, telex and facsimile

transmission and delivery charges

incurred at the request of persons

depositing, or holders of ADRs delivering

underlying Ordinary Shares, ADRs or

deposited securities.

·

transfer or registration

fees for the

registration or transfer

of deposited

securities.

·

fees, expenses and other charges of the

ADR depositary or its agent in

connection with the conversion of

foreign currency into U.S.

dollars.

Payable by holders or persons

depositing Ordinary Shares.

Payable by persons depositing, or

holders of ADRs delivering

underlying Ordinary Shares, Ads

or deposited securities.

Payable by persons depositing or

withdrawing deposited securities.

Payable by persons receiving

such foreign currency, as the ADR

depositary will deduct any fees,

expenses and other charges prior

to distributing such foreign

currency.

Fees and Payments

made by the ADR depositary to ING

In consideration for acting as depositary, the ADR depositary has agreed to provide ING with certain

amounts on an annual basis. In the year ended 31 December 2019, the ADR depositary

paid

aggregate fees and made other direct and indirect payments to ING in an amount of USD

6,807,428

.

Under certain circumstances, including removal of the ADR depositary or termination of the ADR

program by ING, ING is required

to repay the ADR depositary certain amounts reimbursed and/or

expenses paid to or on behalf of ING.

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PART

II.

Item

13. Defaults,

Dividend

Arrearages

and Delinquencies

None.

Item

14. Material

Modifications

to the

Rights

of Security

Holders

and

Use of

Proceeds

None.

Item

15. Controls

and Procedures

Internal control over

financial reporting

Due to the listing of ING shares on the New York

Stock Exchange, ING Group is required

to comply

with the SEC regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act (SOX 404).

These regulations require

that the Chief Executive Officer

(“CEO”) and the Chief Financial Officer

(“CFO”) of ING Group report and certify on an annual basis on the effectiveness of ING Group’s

internal controls over financial reporting.

Furthermore, the external auditors are required

to

provide an opinion on the effectiveness of ING Group’s internal controls over financial reporting.

SOX 404 activities are organized

along the lines of the governance structure, and involve the

participation of senior management across ING. Following the SOX 404 process, ING is in the

position to publish an unqualified

statement that the Company’s internal control over financial

reporting was effective as of 31 December 2019. The SOX 404 statement by the Executive Board is

included on this page, followed by the report of the external auditor as issued on Form 20-F.

Disclosure Controls

and Procedures

The Company’s management under the supervision and with the participation

of the CEO and CFO,

has performed an evaluation of the effectiveness of the design and operation of the Company’s

disclosure controls and procedures.

Based on that evaluation, the Company’s management

concluded that the Company’s disclosure controls and procedures

were effective as of December

31, 2019, the end of the period covered by the 2019 Form 20-F.

Report of the Executive

Board on Internal Control

Over Financial Reporting

The Executive Board is responsible

for establishing and maintaining adequate internal control over

financial reporting. ING’s internal

control over financial reporting is a process designed under the

supervision of our principal executive and principal financial

officers

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.

Our internal control over financial

reporting includes those policies and procedures that:

●

Pertain to the maintenance of records that, in reasonable detail,

accurately and fairly reflect

the transactions and dispositions of assets of ING;

●

Provide reasonable assurance

that transactions are recorded

as necessary to permit

preparation of financial statements in accordance with generally accepted accounting

principles, and that our receipts and expenditures are being made only in 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

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subject to the risk that controls may become inadequate because of changes in conditions, or that

the degree of compliance with the policies or procedure

s

may deteriorate.

The Executive Board assessed the effectiveness of internal control over financial reporting as of 31

December 2019. In making this assessment, the Executive Board performed tests based on the

criteria of the Committee of Sponsoring Organisations of the Treadway

Commission (“COSO”) in

Internal Reporting – Integrated Framework

(2013 Framework).

Based on the Executive Board’s

assessment and those criteria, the Executive Board concluded that the Company’s internal control

over disclosure and financial reporting was effective as of 31 December 2019.

Attestation Report

of the Registered

Public Accounting Firm

Our independent registered public accounting firm has audited and issued their report on ING’s

internal control over financial reporting, which appears on the page below.

Changes in Internal Controls

over Financial Reporting

There have been no changes in the Company’s internal controls over

financial reporting during the

period covered by this Annual Report that have materially affected or are reasonably likely to

materially affect, our internal controls over financial reporting.

Report of Independent Registered

Public Accounting Firm

To

the Shareholders and the Supervisory Board

ING Groep N.V.:

Opinion on Internal Control

Over Financial

Reporting

We have audited ING Groep

N.V.

and subsidiaries’ (the Company) internal control over financial

reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated

Framework

(2013) issued by the Committee of Sponsoring Organizations of the Treadway

Commission. In our opinion, the Company maintained, in all material respects, effective internal

control over financial reporting as of December 31, 2019, based on criteria established in Internal

Control – Integrated

Framework

(2013) issued by the Committee of Sponsoring Organizations of the

Treadway

Commission.

We also have audited, in accordance

with the standards of the Public Company Accounting

Oversight Board (United States) (“PCAOB”), the consolidated statements of financial position of the

Company as of December 31, 2019 and 2018, the related consolidated statements of profit or loss,

comprehensive income, changes in equity, and cash flows for each of the years in the three year

period ended December 31, 2019, and the related notes and specific disclosures described in Note 1

of the consolidated financial

statements as being part of the consolidated statements (collectively,

the consolidated financial

statements), and our report dated March 2, 2020 expressed an

unqualified opinion

on those consolidated financial

statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial

reporting and 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 are

a public accounting firm registered with the PCAOB

and are required

to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange

Commission and the PCAOB.

We conducted our audit in accordance with the standards

of the PCAOB. 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 of

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internal control over financial reporting included obtaining an understanding of internal control

over financial reporting, assessing the risk that a material weakness exists, and

testing and

evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the

circumstances. We

believe that our audit provides a reasonable

basis for our opinion.

Definition and Limitations of Internal Control

Over Financial Reporting

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 authorizations of management and

directors of the company; and (3) provide reasonable assurance

regarding prevention

or timely

detection of unauthorized 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.

/s/ KPMG Accountants N.V.

Amstelveen, The Netherlands

March 2, 2020

Item

16A.

Audit

Committee

Financial

Expert

The Supervisory Board has determined that Margarete Haase, who is a member of the Supervisory

Board, qualifies as an “audit committee financial

expert” as defined

by the SEC pursuant to section

407 of the Sarbanes-Oxley Act of 2002. The Supervisory Board has further determined

that

Margarete Haase is “independent”, as defined in Rule 10A-3 under the U.S. Securities Exchange Act

of 1934. She was appointed as a member of the Supervisory Board at the General Meeting in May

2017 and her appointment became effective as per 1 May 2018, as decided

by the Supervisory

Board in January 2018.

Item

16B.

Code

of Ethics

How we work

Creating a differentiating employee experience starts with ING’s distinctive culture: entrepreneurial,

open, collaborative, innovative

and energetic. Who we are and how we work are

set out in the

Orange Code, our internal Code of Ethics. Putting

‘integrity above all’

, it comprises:

• Our values.

The

non-negotiable promises we make to the world no matter what.

• We are

honest.

• We are

responsible.

• We are

prudent.

• Our behaviours.

The commitments we make to each other and the standards by which we

measure each other’s performance:

• You take

it on and make it happen.

• You help

others to be successful.

• You are

always a step ahead.

The Orange Code is supported by a compliments tool, kudos, that allows employees to give each

other compliments based on Orange Code behaviours. Employees are introduced to the Orange

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Code early with new joiners invited to complete a global online e-learning introduction module that

explains more about ING’s culture, how we work

and what we expect from employees. In 2019, ING

also developed a global code of conduct that builds on the Orange Code and sets the standards we

expect our people to uphold. This ING Global Code of Conduct was launched in February 2020.

Our Orange Code behaviours are included within the performance management process and

discussed throughout the year.

They are also linked to our Employee Value Proposition,

which

forms the basis of all people-related programmes. Through

these activities, our aim is to develop a

culture that is focused on long-

term value creation.

The Orange Code applies to all employees worldwide, including the principal executive, financial

and accounting officers.

The values and behaviours of the Orange Code are available

on the ING

website at

https://www.ing.jobs/Global/Careers/Orange-code.htm

.

In 2019, there were no amendments to the Orange

Code. ING did not grant any waivers

(including

implicit waivers) under the Orange Code to the principal executive, financial or accounting officers

in 2019.

Regarding the management of actual or potential conflicts

of interest, ING maintains a Policy on

Information Barriers and Conflicts of Interest which applies to all employees worldwide, including

the principal executive, financial and accounting officers.

A description of the Policy on Information

Barriers and Conflicts of Interest is available to view on the ING website at

https://www.ing.com/About

-us/Compliance/Information-Barriers-Conflicts-of-Interest.htm

.

The relevant principle as defined in the Conflict

of Interest Policy is:

‘Any person not being a third party working for or on behalf of ING Bank, on contract or temporary,

including Senior Management and members of the Executive Board, Management Board Banking

and the Supervisory Board must not put themselves in a position in which their personal, financial

or otherwise, might influence or give the foreseeable appearance of influencing

any action they

take, judgment they make, or advice they give on behalf of ING’.

In 2019, there were no amendments to the Policy on Information Barriers and Conflicts of Interest.

ING did not grant any waivers (including implicit waivers) under the Policy on Information Barriers

and Conflicts of Interest to the principal executive, financial

or accounting officers

in 2019.

Regarding reporting of breaches of the Orange

Code and raising concerns about suspected or

actual criminal conduct, unethical conduct or other

misconduct by or within ING, ING maintains a

Whistleblower Policy next to the standard reporting and escalation lines. This requires

prompt

internal reporting of violations of the Orange Code and applies to all employees worldwide,

including the principal executive, financial and

accounting officers.

A description of the

Whistleblower Policy is available on the ING website at

www.ing.com/About

-us/Compliance/ING-

Group-Whistleblower-Policy

.

ING did not grant any waivers (including implicit waivers) under the Whistleblower Policy to the

principal executive, financial or accounting officers

in 2019.

Banker’s Oath

All employees working for ING in the Netherlands (including ING's principal executive, financial

or

accounting officers)

take the Banker's Oath. The oath contains a set of principles affirming

the

banking industry's commitment to maintain high standards of ethical behaviour.

Accountability

and a disciplinary sanction mechanism are linked to breaches of these principles.

Compliance is trained to support employees in dealing with dilemmas via workshops and dialogue

sessions,

using the Orange Code dilemma model (a so-called “four-step approach”

weighing the

rights and interest of stakeholders involved).

In 2019, there were no amendments to the Banker's Oath. ING did not grant any waivers under the

Banker's Oath to principal executive, financial or accounting

officers

in 2019. The text of the

Banker’s oath can be found here:

https://www.ing.com/About

-us/Corporate-governance/Dutch-

Banking-Code.htm

Item

16C.

Principal

Accountant

Fees

and Services

At the Annual General Meeting held on 11 May 2015, KPMG was appointed as the external audit

firm for ING Group for the financial

years 2016 through 2019. This appointment includes the

responsibility to provide an audit opinion on the financial statements and internal control over

financial reporting on 31 December 2019

and to report on the outcome of these audits to the

Executive Board and the Supervisory Board.

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The external auditor may be questioned at the Annual General Meeting in relation to its audit

opinion on the financial

statements. The external auditor will therefore attend and be entitled to

addresses this meeting. The external auditor attended the meetings of the Risk Committee and of

the Audit Committee and attended and addressed the 2019 Annual General Meeting, at which the

external auditor was questioned its audit opinion.

The external auditor may only provide services to ING Group and its subsidiaries with the

permission of the Audit Committee, in line with the ING Group Policy on External Auditor

Independence. All services were pre

-approved by the Audit Committee and the exception

procedure was not applied to any engagement.

Following the advice of the Supervisory Board, in 2019 the General Meeting of Shareholders

reappointed KPMG as external auditor for the fiscal years 2020 up and

until 2023. More information

on ING Group’s policy on External Auditor Independence is available on the website of ING Group

www.ing.com.

Audit fees

Audit fees were paid for professional

services rendered by the auditors for the audit of the

consolidated financial statements

of ING Group and statutory financial statements of ING’s

subsidiaries or services provided in connection with the audit of Form 20-F and other filings for

regulatory and supervisory purposes as well as the review on interim financial statements and

work performed relating to comfort letters issued in connection with prospectuses and reviews of

SEC product filings.

Audit-related fee

s

Audit-related fees were paid for

assurance and related services that are

reasonably related to the

performance of the audit or review of the consolidated financial statements and are not reported

under the audit fee item above.

These services consisted primarily of specific

agreed-upon

procedure engagements and assurance engagements.

Tax

fees

Over 2019 no tax fees were paid. Under the current ING Policy

on External Auditor Independence

most tax services are prohibited and some tax services are

only allowed after specific

approval

under an ‘exception procedure’.

Reference is made to Note 28 in the consolidated financial statements for audit, audit-related, tax

and all other fees paid to the external auditors in 2019, 2018 and 2017.

Item

16D. Exemptions

from

the Listing

Standards

for Audit

Committees

Not applicable.

Item

16E.

Purchases

of Equity

Securities

by the

Issuer

and Affiliated

Purchasers

There were no purchases

by us or any of our affiliated

purchasers of any of our equity securities

registered pursuant to Section 12 of the U.S. Securities Exchange Act of 1934 during the fiscal years

ended December 31, 2019 and 2018.

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Item

16F.

Changes

in Registrant

’s Certifying

Accountant

Not applicable.

Item

16G.

Corporate

Governance

This chapter reports on the application of the Dutch Corporate Governance Code

effective as from 1

January 2017, by ING Groep N.V.

(‘ING Group’), including information on ING’s share capital, control,

Executive Board, Supervisory Board and external auditor.

Dutch

Corporate

Governance

Code

Compliance with the Dutch

Corporate

Governance Code

ING Group uses the Dutch Corporate Governance

Code as reference

for its corporate governance

structure and practices.

The Dutch Corporate Governance

Code can be downloaded from the website of the Dutch

Corporate Governance

Code Monitoring Committee

www.commissiecorporategovernance.nl

.

ING’s application of the Dutch Corporate Governance Code

is described in the 2019 publication

ING’s

application of the Dutch Corporate Governance Code

, available on the website of ING Group

www.ing.com

. This is to be read in conjunction with this chapter and is deemed to be incorporated

into this chapter.

Dutch Banking Code

The Dutch Banking Code (‘Banking Code’), a revised version of which was adopted by the Dutch

Banking Association in 2014, is applicable only to ING Bank N.V.

and not to ING Group. The Banking

Code can be downloaded from the website of the Dutch Banking Association (

www.nvb.nl

). Its

application by ING Bank is described in ‘

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

’,

available on ING Group’s website (

www.ing.com

). ING Group voluntarily applies the principles of the

Banking Code regarding remuneration

of the members of its Executive Board. ING Group’s

remuneration policy for the Executive

Board and senior management is compliant with the Banking

Code principles.

Differences between Dutch and US corporate governance practices

ING Groep N.V.

is a public limited liability company (

naamloze vennootschap

) organised under the

laws of the Netherlands and qualifies

as a foreign private issuer under SEC rules and for the

purposes of the New York Stock Exchange (‘NYSE’)

listing standards. Under NYSE listing standards,

listed companies that are foreign private

issuers are permitted to follow home-country practice in

some circumstances in lieu of the provisions of the corporate

governance rules contained in Section

303A of the NYSE Listed Company Manual that are applicable to US listed companies. In

accordance with the requirements

of the SEC and NYSE, ING Group must disclose in its Annual

Report on Form 20-F any significant differences between its corporate governance practices and

those applicable to US companies under NYSE listing standards. ING Group believes the following to

be the significant differences between its corporate governance practices and the NYSE corporate

governance rules applicable to US companies:

◾

ING Group has a two-tier board structure,

in contrast to the one-tier board structure used by

most US companies. In the Netherlands, a public limited liability company with a two-tier board

structure has an executive board as its management body and a supervisory board that advises

and supervises the executive board. Supervisory board members are often former state or

business leaders and sometimes former members of the executive board. A member of the

executive board or other officer or employee of the

company cannot simultaneously be a

member of the supervisory board. The supervisory board must approve specified decisions of the

executive board.

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◾

NYSE listing standards generally require

that a majority of board members be ‘independent’ as

determined under the NYSE listing standards. Under the Corporate Governance

Code, all

members of the supervisory board, with the exception of not more than one person, should be

‘independent’ as determined under the Corporate Governance Code.

However, the definition of

‘independent’ under the Corporate Governance Code

differs in its details from the definition

of

‘independent’ under the NYSE listing standards. In some cases, Dutch requirements are

stricter; in

other cases the NYSE listing standards are stricter.

All members of the Supervisory Board, other

than Eric Boyer de la Giroday, are independent as determined under the Corporate Governance

Code.

◾

NYSE listing standards require

a US company to have a compensation committee and a

nominating/corporate

governance committee, each composed entirely of independent directors.

The Nomination and Corporate Governance Committee

and Remuneration Committee are

composed entirely of members of the Supervisory Board who are independent as determined

under the Corporate Governance

Code.

◾

NYSE listing standards require

that, when a member of the audit committee of a US company

serves on four or more audit committees of public companies, the company should disclose

(either on its website or in its annual proxy statement or annual report filed with the SEC) that

the board of directors has determined that this simultaneous service would not impair the

director’s service to the company. Dutch law does not require the Supervisory Board to make

such a determination.

◾

In contrast to the NYSE listing standards, the Corporate

Governance Code contains an ‘apply-or

explain’ principle, offering the possibility of deviating from the Corporate Governance Code.

For

any deviations by ING Group, please refer to the paragraph

‘Compliance with the Dutch

Corporate Governance

Code’

◾

NYSE listing standards applicable to US companies require

that external auditors be appointed by

the audit committee. By contrast, Dutch law requires

that ING Group’s external auditors be

appointed by the General Meeting and not by the Audit Committee. The Audit Committee is

responsible for preparing the Supervisory Board’s nomination to the General Meeting for the

appointment and remuneration of the Group’s external auditor, and annually evaluates the

independence and functioning of, and the developments in the relationship with, the Group’s

external auditor and informs the Supervisory Board of its findings and

proposed measures.

The Articles of Association provide that there are no quorum requirements

to hold a General

Meeting, although certain shareholder actions and certain resolutions may require a quorum.

◾

Under NYSE listing standards, shareholders of US companies must be given the opportunity to

vote on all equity compensation plans and to approve material revisions

to those plans, with

limited exceptions set forth in the NYSE rules. The NYSE rules require

a shareholder vote on all

equity compensation plans applicable to any employee, director or other service provider of a

company. The results of such votes are advisory in nature

rather than binding. Under Dutch law

and the Corporate Governance

Code, binding 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.

◾

NYSE listing standards applicable to US companies require

that external auditors be appointed

by the audit committee. By contrast, Dutch law requires

that ING Group’s external auditors be

appointed by the General Meeting and not by the Audit Committee. The Audit Committee is

responsible for preparing the Supervisory Board’s nomination to the General Meeting for the

appointment and remuneration of the Group’s external auditor, and annually evaluates the

independence and functioning of, and the developments in the relationship with, the Group’s

external auditor and informs the Supervisory Board of its findings

and proposed measures.

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◾

The Articles of Association provide that there are no quorum requirements

to hold a General

Meeting, although certain shareholder actions and certain resolutions may require a quorum.

◾

Under NYSE listing standards, shareholders of US companies must be given the opportunity to

vote on all equity compensation plans and to approve material revisions

to those plans, with

limited exceptions set forth in the NYSE rules. The NYSE rules require

a shareholder vote on all

equity compensation plans applicable to any employee, director or other service provider of a

company. The results of such votes are advisory in nature

rather than binding. Under Dutch law

and the Corporate Governance

Code, binding 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.

Item

16H.

Mine

Safety

Disclosure

Not applicable.

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PART

III.

Item

17.

Consolidated

Financial

Statements

Not applicable.

Item

18. Consolidated

Financial

Statements

Reference is made to the Consolidated financial statements of ING Group starting on page F-1.

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Item

19. Exhibits

The following exhibits are filed as part of this Annual Report:

Exhibit

1.1

Amended and Restated Articles of Association of ING Groep N.V.,

dated 26 July 2016 (incorporated by reference to ING Groep N.V.’s

Report on Form 6-K furnished on 6 January 2017)

Exhibit

2.1

Description of Securities Registered under Section 12 of the

Exchange Act

Exhibit

2.2

Subordinated Indenture, dated 18 July 2002, between the

Company and The Bank of New York, (incorporated by reference

to Exhibit 2.1 of ING Groep N.V.’s Annual Report on Form 20-F for

the year ended 31 December 2002, File No. 1-14642 filed on 27

March 2003)

Exhibit

2.3

Third Supplemental Indenture, dated 28 October 2003, between

the Company and The Bank of New York (incorporated by

reference to Exhibit 2.4 of ING Groep N.V.’s Annual Report on

Form 20-F for the year ended 31 December 2003, File No. 1-

14642 filed on 30 March 2004)

Exhibit

2.4

Fourth Supplemental Indenture, dated 26 September 2005,

between the Company and The Bank of New York (incorporated

by reference to Exhibit 4.2 of ING Groep N.V.’s Report on Form 6-K

filed on 23 September 2005)

Exhibit

2.5

Sixth Supplemental Indenture, dated 13 June 2007, between the

Company and The Bank of New York (incorporated by reference

to Exhibit 4.1 of ING Groep N.V.’s Report on Form 6-K filed on 12

June 2007)

Exhibit

2.6

First Supplemental Indenture between ING Groep N.V. and The

Bank of New York Mellon, London Branch, as trustee, dated 16

April 2015, in respect of 6.000% Perpetual Additional Tier 1

Contingent Convertible Capital Securities (incorporated by

reference to Exhibit 4.2 of ING Groep N.V.’s Report on Form 6-K

filed on 16 April 2015)

Exhibit

2.7

Second Supplemental Indenture between ING Groep N.V. and The

Bank of New York Mellon, London Branch, as trustee, dated 16

April 2015, in respect of 6.500% Perpetual Additional Tier 1

Contingent Convertible Capital Securities (incorporated by

reference to Exhibit 4.3 of ING Groep N.V.’s Report on Form 6-K

filed on 16 April 2015)

Exhibit

2.8

Senior Debt Securities Indenture between ING Groep N.V. and The

Bank of New York Mellon, London Branch, as Trustee, dated 29

March 2017 (incorporated by reference to Exhibit 4.1 of ING Groep

N.V.’s Report on Form 6-K filed on 29 March 2017)

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Exhibit

2.9

First Supplemental Indenture between ING Groep N.V. and The

Bank of New York Mellon, London Branch, as trustee, dated 29

March 2017, in respect of 3.150% Fixed Rate Senior Notes due

2022, 3.950% Fixed Rate Senior Notes due 2027 and Floating Rate

Senior Notes due 2022 (incorporated by reference to Exhibit

4.2 of ING Groep N.V.’s Report on Form 6-K filed on 29 March

2017)

Exhibit

2.10

Third Supplemental Indenture between ING Groep N.V. and The

Bank of New York Mellon, London Branch, as trustee, dated 9 April

2019, in respect of 3.550% Fixed Rate Senior Notes due 2024 and

4.050% Fixed Rate Senior Notes due 2029 (incorporated by

reference to Exhibit 4.1 of ING Groep N.V's Report on Form 6-K

filed on 9 April 2019)

Exhibit

2.11

Third Supplemental Indenture between ING Groep N.V. and The

Bank of New York Mellon, London Branch, as trustee, dated 10

September 2019, in respect of 5.750% Perpetual Additional Tier 1

Contingent Convertible Capital Securities (incorporated by

reference to Exhibit 4.1 of ING Groep N.V's Report on Form 6-K

filed on 10 September 2019)

Exhibit 8

List of Subsidiaries of ING Groep N.V.

Exhibit

12.1

Certification of the Registrant’s Chief Executive Officer pursuant to

Section 302 of the Sarbanes Oxley Act of 2002

Exhibit

12.2

Certification of the Registrant’s Chief Financial Officer pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit

13.1

Certification of the Registrant’s Chief Executive Officer pursuant to

18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

Exhibit

13.2

Certification of the Registrant’s Chief Financial Officer pursuant to

18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

Exhibit

15.1

Consent of KPMG Accountants

Exhibit

101

eXtensible Business Reporting Language (XBRL)

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SIGNATURES

The registrant hereby

certifies that

it meets all the requirements for filing on Form 20-F and that it

has duly caused and authorised the undersigned to sign this annual report on its behalf.

ING Groep N.V.

(Registrant)

By:/s/T.

Phutrakul

T.

Phutrakul

Chief Financial Officer

Date: March 2, 2020

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Additional information

ING Group

Risk

Management

As a global financial

institution with a strong European base, offering banking services, ING is

exposed to a variety of risks. We manage these risks through a comprehensive

risk management

framework that integrates risk management into daily business activities and strategic planning.

This safeguards ING Group’s financial strength by promoting the identification, measurement and

control of risks at all levels of the organisation. Taking

measured risks is the core of ING’s business.

The risk management function supports

the Executive Board in formulating the risk appetite,

strategies, policies and limits. It provides review,

oversight and support functions throughout ING on

risk-related items. ING’s main financial risks exposures are to credit risk (including transfer risk),

market risk (including interest rate, equity, real estate, credit

spread, and foreign exchange risks),

funding & liquidity risk and business risk. ING Group is also exposed to non-financial

risks, including

operational, IT and compliance risks, as well as to model risks. The ING Group Chief Risk Officer (CRO)

is also the CRO of ING Bank.

This section sets out how ING manages its risks on a day-to-day basis. It explains

how the risk

management function is embedded within the organisation based on the ‘three lines of defence’. It

describes the key risks that arise from ING’s business model and how these are managed by

dedicated risk management departments, with various specific

areas of expertise. The section

provides qualitative and quantitative disclosures

about credit, market, funding & liquidity, business,

operational, IT, compliance and model risks.

Basis of disclosures

The risk management section contains information relating to the nature and the extent of the

risks of financial instruments

as required by International Financial Reporting Standards (IFRS) 7

'Financial Instruments: Disclosures'.

These disclosures are an integral

part of ING Group

Consolidated financial statements and are indicated by the symbol (*). Chapters, paragraphs,

graphs or tables within the risk management section that are indicated with this symbol in the

respective headings or table header are considered to be an integral

part of the consolidated

financial statements.

This risk management section also includes additional disclosures beyond those required by IFRS-

IASB standards, such as certain legal and regulatory disclosures. Not all information in this section

can be reconciled back to the primary financial statements

and corresponding notes, as it has been

prepared using risk data that differs to the accounting basis of measurement. Examples of such

differences include the exclusion of accrued interest and certain costs and fees from risk data, and

timing differences in exposure values (IFRS 9 models report expected credit loss on underlying

exposures). Disclosures in accordance

with Part Eight of the CRR and CRD IV, and as required by the

supervisory authority, are published in our ‘Additional Pillar III Report’, which can be found on our

corporate website ing.com.

Risk governance (*)

Effective risk management requires firm-wide risk governance. ING’s risk and control structure is

based on the ‘three lines of defence’ governance model, whereby each line has a specific role and

defined responsibilities in such a way that the execution of tasks is separated from the control of

these same tasks. At the same time, they have to work closely together to identify, assess, and

mitigate risks. This governance framework is designed such that risk is managed in line with the risk

appetite as approved

by the Management Board Banking (MBB), the Executive Board (EB) and the

Supervisory Board (SB), and is cascaded throughout ING. The MBB is composed of the Executive

Board of ING Group, the heads of the business lines and the chief operating officer.

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The heads of ING’s banking business & support functions

and the heads of the country units, or

their delegates, are the first line of defence. They have the primary ownership, accountability and

responsibility for assessing, controlling and mitigating all financial and non-financial

risks affecting

their businesses, and, for the completeness and accuracy of the financial statements

and risk

reports with respect to their responsible areas. The COO is responsible

and accountable for proper

security and controls on global applications and IT platforms servicing the Bank and implementing

proper processes.

The second line of defence consists of oversight and specialised functions in risk management and

compliance, and includes at least the control functions Risk and Compliance. They (i) have co-

responsibility for risk management, through articulating and translating the risk appetite into

methodologies and policies to support and monitor business

management's control of risk, (ii)

objectively challenge risk management execution and control processes and coordinate the

reporting of risks and controls by the first line of defence, (iii) advise management on risk

management and compliance and have decision-making power in relation to business activities

that are judged to present unacceptable risks to ING and (iv) can set minimum requirements

in

terms of quality and quantity of global resourcing in the risk management and compliance

functions.

The internal audit function forms the third line of defence. It provides an independent assessment

of the effectiveness of internal controls over the risks to ING’s business processes and assets,

including risk management activities performed in both

the first and

second lines of defence. To

protect its independent nature, decisions

regarding the

appointment, re-appointment or dismissal

from office as well as the remuneration package of the head of the internal audit function require

supervisory board approval.

The next graph illustrates the different key senior management level committees in place in the

risk governance structure.

(*)

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Board level

risk oversight (*)

ING has a two-tier board structure consisting of a management board (EB for ING Group

and MBB

for ING Bank) and the SB; both tiers play an important role in managing and monitoring the risk

management framework.

◾

The SB is responsible for supervising EB and MBB policy, the general course of affairs of ING

Group, ING Bank and its business (including its financial

policies and corporate structure). For risk

management purposes the SB is advised mainly by the Risk Committee, which assists and

advises in monitoring the risk profile and

approving the overarching

risk appetite of the company

as well as the structure and effective operation of the internal risk management and control

systems.

◾

The EB is responsible for managing risks associated with all activities of ING Group, whereas the

MBB is responsible for managing risks associated with all activities of ING Bank. The EB and MBB

responsibilities include ensuring that internal risk management and control systems are effective

and that ING Group and ING Bank comply with relevant legislation and regulations. On a regular

basis, the EB and MBB report on these issues and discuss the internal risk management and

control systems with the SB. On a quarterly basis, the EB and MBB report on ING’s risk profile

versus its risk appetite to the Risk Committee, explaining changes in the risk profile.

As a member of the EB and the MBB, the CRO is responsible for ensuring that risk management

issues are heard and discussed at the highest level. The CRO steers a risk organisation both at

head-office

and business-unit levels, which participates in commercial decision-making, bringing

countervailing power to keep the agreed risk profile within the risk tolerance. The CRO reports to the

SB committees on ING’s risk appetite levels and on ING’s risk profile at least quarterly. In addition,

the CRO briefs them on developments in internal and external risk-related issues and seeks to

ensure they understand specific risk concepts.

Executive level

(*)

The key risk committees described below act within the overall risk policy and delegated authorities

granted by the MBB:

◾

Global Credit & Trading

Policy Committee (GCTP) discusses and approves policies, methodologies,

and procedures related

to credit, trading, country, and reputation

(i.e. environmental and social

risk or ESR) risks. The GCTP meets on a monthly basis. After the MBB and

the GCTP, the Credit &

Trading

Risk Committee (CTRC) is the highest level body authorised to discuss and approve

policies, methodologies, and procedures related to credit

risk;

◾

Global Credit Committee – Transaction

Approval (GCC(TA))

discusses and approves transactions

that entail taking credit risk (including investment risk), country, legal, and ESR risk. The GCC(TA)

meets twice a week;

◾

Asset and Liability Committee Bank (ALCO Bank) discusses and steers, on a monthly basis, the

overall risk profile of all ING Bank’s balance sheet and capital management risks. ALCO Bank

discusses and approves policies, methodologies and procedures regarding

solvency, market risk

in the banking book and funding and liquidity risks;

◾

Non-Financial Risk Committee Bank (NFRC Bank) is accountable for the design and maintenance

of the Non-Financial Risk Management Framework including Operational

Risk Management,

Compliance and Legal policies, minimum standards, procedures

and guidelines, development of

tools, methods, and key parameters (including major changes) for risk identification,

measurement,

mitigating and monitoring/ reporting. NFRC Bank meetings are at least quarterly;

and

◾

The Model Risk Management Committee (MoRMC) aims to align overall model strategy, model

risk appetite, supporting model frameworks, policies and methodologies.

Regional and business unit level

(*)

ING’s regional and/or business unit management have primary responsibility for the management

of risks (credit, market, funding and liquidity, operational, IT and compliance risks) that arise in their

daily operations. They are accountable for the implementation and execution of appropriate risk

frameworks affecting their businesses in order to comply with procedures and processes

at the

corporate level. Where

necessary, the implementation is adapted to local requirements. The

regional and/or business unit CROs are

involved in these activities. The local (regional and BU) CRO

is responsible for the analysis, control and management of risks across the whole value chain (from

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front to back office). The local risks are discussed in local risk committees that roll up to the key risk

committees at executive level. Local

Client Integrity Risk Committees (CIRCs) assess client integrity

risk and they have a final decision on client acceptance or client off-boarding,

from a risk-based

perspective, in the areas of Financial Economic Crime (FEC), Foreign

Account Tax

Compliance Act

(FATCA),

Common Reporting Standards (CRS) and ESR.

Risk management function (*)

Organisational structure

(*)

Over the past years, banks have been faced with regulatory and public pressure

with regard to their

risk management policies, processes, and systems. A raft of new requirements and regulations has

been introduced and implemented. To

address these internal and external (market and regulatory)

developments and challenges effectively, ING regularly reviews the set-up of its risk-management

organisation. This allows for better support of the Bank’s Think Forward strategy

and enhances the

interconnectedness of the risk oversight responsibilities in business units with global risk functions.

The organisation chart illustrates the reporting lines in 2019 for the risk organisation:

Risk policies, procedures

and standards (*)

ING has a framework of risk management policies, procedures, and minimum standards

in place to

create consistency throughout the organisation, and to define requirements that are binding to all

business units. The goal of the governance framework of the local business units is to align with

ING’s framework and to meet local (regulatory) requirements.

Senior management is responsible

for the implementation and adherence to policies, procedures and standards.

Policies, procedures,

and standards are regularly

reviewed and updated via the relevant

risk committees to reflect

changes in requirements, markets, products and practices.

Internal Control

Framework

ING has organised its Internal Control Framework

(ICF) with the objective to translate policies and

control objectives into consistent standards and controls

in the business lines and as such support

and promote an effective risk and control environment. The framework

includes binding principles,

(*)

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definitions,

process steps and roles and responsibilities

to create consistent bank-wide policies and

standards.

The scope of the ICF is the development and maintenance or update of global internal control

documents: policies, minimum standards, product control frameworks,

support control frameworks

and process-related control

standards. These global documents are designed by head office

functions and are to be adhered to by entities and support functions. Domain ownership of policies

and minimum standards is with the 2nd Line of Defence, whereas product and support control

frameworks are

owned by the 1st Line of Defence and are approved

by 2nd line of Defence. Process

control standards can be owned by both 1st and 2nd Line of Defence, related

to the underlying

processes involved.

Domain owners are responsible for a specific risk domain and aim that their internal policies and

standards do not overlap with other documents. The ICF aims for single testing for multiple

purposes meaning that the same control should not have to be tested more than once for different

functions. This means that the test results of one control can be used for more than one sign-off.

The principal role of the independent ICF gatekeeper function is that of a quality assurance role and

to provide advice for approval

to the SB, EB, MBB and NFRC Bank. The ICF gatekeeper challenges the

alignment of the internal control documents with the agreed methodology and taxonomy and

verifies that the process of development and communication of internal control documents is

executed in adherence to the process as described below.

The ICF gatekeeper is the guardian of the

ICF binding principles.

The process of developing internal control documents is standardised

for each type of internal

control document. Domain owners should adhere to the standardised process

that includes the

following steps: domain owner identification, risk-based approach, impact assessment,

approval

body and involvement of local entities for sounding on key and expected controls. The gatekeeper

oversees the steps above.

All policies, procedures and control

standards are published on ING’s intranet and new

and updated

documents are periodically communicated by means of a policy update to all country senior

managers and heads of business departments.

Risk model governance and

validation (*)

Risk models are built according to ING’s internal risk modelling methodology standards and model

life cycle. After the review and documentation of each model by the Model Development (MD) and

Model Risk Management (MoRM) departments, dedicated risk committees approve new and

changed models. After approval by the applicable risk committee, and where necessary by the

regulator, the risk model is implemented. MoRM re-validates models on a regular basis. Validation

results and capital impacts are reported on a quarterly basis to senior management, the risk

committees and the supervisor.

The MoRM department is one of the cornerstones of ING’s risk model governance. The department

sets and maintains a model risk framework containing (1) the governance setting out the

responsibilities; (2) the model risk appetite; (3) model risk management policies and standards; and

(4) the model management inventory and tooling. MoRM monitors global model risk and model

performance.

The validation teams provide independent model validation, which starts with the determination

that a model is appropriate for its intended use. This is followed by an on going process whereby

the reliability of the model is verified at different stages during its lifecycle: at conception, before

approval, periodically after implementation and when significant changes to

the model are made.

The validation process contains a mix of developmental evidence

assessment, process verification

and outcome analysis. When model validation identifies

model risks, it provides recommendations

to address those.

Risk culture

The reputation and integrity of ING’s organisation are core

elements to operate successfully in the

financial world. ING’s

risk culture promotes awareness

of collectively shared values, ideas and

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goals, but also of potential threats and aligns the individual performance objectives with the short-

and long-term strategy. ING therefore

aims to make risk responsibilities transparent within the

different levels of the organisation and to hold every employee accountable for his/her actions.

Orange code

Commonly seen as norms and traditions of behaviour of individuals and of groups within an

organisation, risk culture determines the way in which employees identify, understand, discuss,

and act on the risks the organisation is confronted with and the risks it takes. This is a continuous

long-term commitment and journey. In this respect, The Orange Code is a declaration of who we

are. It describes what we can expect from each other when we turn up to work each day. It is a set

of standards that we collectively value, strive to live up to, and invite others to measure

us by.

The Orange Code is the sum of two parts, the ING values and ING behaviours, with integrity being

the overarching

principle. The ING values (being honest, prudent and responsible) are designed to

be non-negotiable promises

we make to the world, principles we seek to stick to, no matter what.

The ING behaviours (take it on and make it happen, help others to be successful, and always be a

step ahead) represent our way to differentiate ourselves. The Orange

Code is embedded in

commitments we make to each other and the standards by which we will measure each other’s

performance.

Risk awareness is about being alert to potential threats that can occur during day-to-day business,

which can be specific to the

sector, the region or the clients ING is doing business with. To support

the further embedding of risk culture into business practices, ING has initiated different

programmes and issued several

guidelines.

To

reinforce

the values and behaviours in our Orange Code, which puts integrity above all, we invite

all employees to participate in e-learnings that aim to equip them to make

the right decisions

when faced with a dilemma or issue. In 2019, we commenced the creation of new e-learnings on

anti-competitive conduct, anti-bribery and corruption and data protection for launch early 2020.

We also developed a global code of conduct that builds on the Orange Code and sets the standards

we expect our people to uphold.

This global code of conduct was launched during 1Q 2020.

Orange code dilemma dialogue

To

enhance risk awareness we continued to support the business in the area of risk culture and

monitor compliance risk. This included training by compliance and data experts to enhance

balanced decision-making in line with the Orange Code dilemma model (introduced in 2017) to

support well-balanced and integrity-led decision-making. This four-step model helps to delay

judgment and aims to find

out where the moral weight lies for a potential decision.

The model is already embedded in some decision-making processes (such as the data ethics

governance process) and we are

exploring how to embed it in other decisive governance processes

within the bank. During early 2019 around 30 compliance officers

were trained globally to support

the organisation in properly applying the model in practice in their respective countries.

Global data ethics and the I-for-integrity

programme

Other initiatives such Global Data Ethics and the I-for-integrity programme within the Netherlands

and Belgium are continuing. In addition, new employees undergo a series of e-learnings on topics

such as KYC, compliance, dealing with dilemmas, data risk and integrity in practice.

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We also introduced

a new global learning model in 2019 to further professionalise Compliance, KYC

and risk training. It introduces governance,

a board to approve

trainings based on business needs,

global planning and greater cooperation between content owners, learning experts and corporate

communications teams to ensure the best fit for the training need. In addition, a Risk Academy was

set up for people working in risk, with the aim of eventually bringing Risk training to a broader

audience if necessary.

Banker’s Oath

In the Netherlands, employees of all financial

institutions – and that includes ING – are required to

take the Banker’s Oath. This requirement came into force on 1 April 2015 as part of the joint

approach from all banks, known as ‘Future

-oriented Banking.' The introduction of social regulations,

the revision of the Dutch Banking Code, and the implementation of a Banker’s Oath (with the

associated rules of conduct and disciplinary law), are a way for Dutch banks to show society what

they stand for and are accountable for, as both individual banks and as a sector.

Remuneration

ING aims to align its remuneration policy with its risk profile and the interests of all stakeholders.

For more

information on ING’s compensation and benefits

policies and its relation to the risk taken,

please refer to the “Capital Requirements

Regulation (CRR) Remuneration disclosure”

published on

the corporate website ing.com. https://www.ing.com/About

-us/Annual-reporting-suite.htm

Centre of Expertise on

Behavioural Risk

Behavioural Risk Management (BRM) is a new expertise that has been added to ING's global Risk

organisation. Behavioural risk is an increasingly important risk area for ING and across the financial

industry. It arises when behavioural patterns are at the root of financial and non-financial

risks in

the organisation.

The complexity of this type of risk is less tangible compared to other risk areas. It is about how

decisions are made, how people communicate and whether they can take ownership. Behaviour is

motivated by formal and informal drivers. Examples of formal drivers are

the processes ING applies

and how its governance is structured. Informal drivers are less tangible, such as group

dynamics or

underlying beliefs that influence behaviour.

At ING, BRM is positioned in the second line of defence, reporting directly to the chief risk officer.

The global BRM Centre of Expertise, set up in 2018, not only assesses behavioural risk in the

organisation, but also has the mandate to direct, challenge and support business owners to

intervene on high-risk behaviours and their underlying drivers.

Behavioural risk assessment

s

Behavioural risk assessments identify, analyse and mitigate high-risk behaviours within ING and

provide management with specific direction on how to change these behaviours. They focus on the

effectiveness of groups rather than individuals, the role of leadership and on less visible aspects

such as team dynamics and unwritten social norms. The goal is to understand and systematically

assess what drives undesired habits at ING. The BRM model of behavioural risk will be used as the

standard across ING to signal behavioural risks going forward.

In 2019, the outcomes of the first behavioural risk assessments were shared with senior leaders at

ING’s International Conference in March

and with the relevant departments. These were primarily

teams involved in Know Your

Customer activities in the Netherlands, US and Philippines.

Based on

these outcomes, a number of interventions have been implemented with the goal to change high-

risk behavioural patterns.

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Behavioural risk assessments were also carried out in Belgium and the interventions based on

these outcomes will be implemented in 2020. The BRM team will continue to assess behavioural

risk, focusing predominantly on KYC.

Behavioural risk interventions

Effective mitigation requires a deep understanding of what drives undesired behaviours. Theory

and evidence-based techniques and tools developed in behavioural science play an important role

in designing and evaluating interventions. These interventions impact all levels of the organisation.

Employees are invited to participate in ‘nudge labs’ where they work together to identify small

behavioural changes that can have a positive impact on processes and collaboration.

Given the crucial role of leaders in creating the right conditions for employees, interventions are

first initiated at leadership

level. These include leadership labs, which address topics such as

‘governance and ownership’ and ‘alignment and trust’, as well as bringing together the ‘whole

system in the room’. Here senior leaders delve into the outcomes of the assessments, identifying

deeply rooted and often complex issues for improvement.

The BRM team works closely with the business units and departments such

as HR, Audit, and

Compliance to align on and embed desired leadership and risk behaviours (i.e. speak up,

psychological safety, communication, guiding leadership).

Risk profile

This chart provides high level information on the risks arising from ING’s business activities:

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Risk cycle process

ING uses a step-by-step risk management approach to monitor, manage and mitigate its financial

and non-financial

risks. The approach consists of a cycle of five recurrent activities: risk

identification, risk assessment,

risk control, risk monitoring, and risk reporting. In short, this implies:

determining what the risks are, assessing which of those risks can really do harm, taking mitigating

measures to control these risks, monitoring the development of the risk to see if the measures

taken are effective, and reporting the findings to management

at all relevant levels to enable them

to take action when needed.

The recurrence is twofold.

Firstly, the identification, assessment,

review, and update of mitigating

measures are done periodically. Secondly, the periodic monitoring exercise may indicate emerging

risks, known risks that are changing, risk levels that are changing, or current control

measures that

are not effective enough. Further analyses of these findings

may result in renewed

and more

frequent risk identification, and/or assessment, and/or change of mitigating measures.

Risk identification

Risk identification is

a joint effort of the business and the risk management

functions. Its goal is to

detect potential new risks and determine changes in known risks. Regular risk identification

is

essential for effective risk management. Potential risks that are not identified,

will not be controlled

and monitored and may lead to surprises later.

Known risks may have changed over time and as a

consequence the existing mitigating measures and monitoring may be inadequate or obsolete.

Risk identification is

performed periodically. In case of material internal or external change,

additional ad-hoc risk identification

can be performed.

Risk assessment

Each identified risk is assessed to determine

its importance. This enables ING to decide which of the

identified risks need

control measures and how strict or tolerant these measures

should be. Known

risks are re-assessed to detect any change in the risk level.

The importance of a risk is based on the likelihood that the risk materialises

and the subsequent

financial or reputational impact that

may occur should the risk arise. Unlikely risks with a

potentially high impact need to be controlled. A risk that is likely to happen regularly but expected

to have a modest financial impact

may not need to be mitigated if the consequences are accepted

by management.

Risk control

Risks can be controlled by mitigating measures that lower the likelihood the risk occurs, lower the

impact when it occurs or both. The ultimate measure to lower a risk is to stop the activity or service

that causes the risk (risk avoidance). Risk control and mitigation measures are

defined and

maintained at both the bank-wide and local level.

Monitoring and reporting

ING monitors the risk control measures by checking if they are executed, complied with and have

the expected mitigating effects

and by following the development of the risks and their risk levels.

Risk reporting provides senior and local management with information needed

to manage risks.

Risk Appetite Framework

The Risk Appetite Framework

(RAF) is one of the pillars of the Enterprise Risk Management (ERM)

Framework.

Its objective is to set the appropriate risk appetite at the consolidated level across the

different risk categories and to allocate the risk appetite throughout the organisation.

The RAF policy states the overarching

global risk appetite. Within the RAF, ING monitors a range of

financial and non-financial

risk metrics to ensure that our risk profile is in line with our risk appetite

while executing our strategy. ING’s RAF, which is approved by the Supervisory Board (SB), defines

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our desired risk profile that is integrated in the strategic decision-making and financial planning

process. It is designed to be able to withstand market volatility and stress, while meeting

regulatory requirements.

The framework including underlying assumptions and metrics, is

regularly reviewed

so that it remains relevant. The

RAF combines various financial

and non-

financial risk appetite

statements into a single coordinated approach to provide the business with a

clear overview of the relevant

risks and the tools to manage them. This view allows the Executive

Board (EB), the Management Board Banking (MBB) and senior management to form an opinion on

the adequacy of internal risk management and control systems for the risks ING faces while

pursuing its strategy.

Process

The RAF is focused on setting the risk appetite at the consolidated level and across the different risk

categories, and provides the principles for cascading this risk appetite down into the organisation.

The RAF and underlying limit allocation is reviewed on an annual basis, or more frequently if

necessary, based on their quarterly review in the EB, the MBB and the SB. It is therefore a top-down

process, which bases itself on the ambition of the bank in terms of its risk profile and is a function

of

the capital and liquidity levels, the regulatory environment,

and the economic context. The set of

limits used are split based on the approval level

needed for them. The limits that need SB approval

are called Boundary and the underlying metrics supporting the boundaries which need EB and

MBB

approval are

called instruments.

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Step 1. Identify & assess ING’s key risks

The outcome of the risk identification

& risk assessment process is used as starting point for the

review of the RAF.

Within this step the risks ING is facing when executing its strategy are identified,

it is assessed if the potential impact is material and if it is controlled within ING’s risk management

function; benchmarking current risk framework versus regulatory developments;

re-assessing

known risks to confirm risk level or detect potential changes;

and reflecting on the current set of

Risk Appetite Statements.

Step 2. Set Risk Appetite Framework

Based on ING’s risk assessment and risk purpose, boundary for the overarching risk frameworks are

set. Once the overarching

risk appetite thresholds have been set and approved by EB/MBB and

subsequent SB, the statements are translated into risk-type specific statements and lower level

thresholds which are set and approved

by senior risk committees ALCO Bank, GCTP and NFRC Bank.

Cascading is done via a number of detailed risk appetite statements which have been defined per

risk type, the combination of which ensure compliance with the overarching

Solvency,

Concentration and Funding

& Liquidity RAS.

Step 3. Cascade into statements

per risk type and business unit

The bank-wide risk appetite is translated per risk type, which is further cascaded into the

organisation to the lowest level. Risk appetite statements are then translated

into dedicated

underlying risk limits that are used for the day-to-day monitoring and management of ING’s risks.

The suite of risk appetite statements serve as inputs for the quarterly planning process as well as

for the establishment of key performance indicators and targets for senior management.

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Risk Appetite Statements

Boundaries

Underlying risk metrics

Funding & Liquidity

Liquidity Coverage Ratio

Net Liquidity Position – internal stress

test

Solvency

CET1 ratio

Leverage

ratio

Capital Utilisation

MREL

TLAC

Concentration

Concentration event

Risk (LGD)

Event Risk

Instruments

Underlying risk metrics

Credit Risk

EAD

RWA

ECL

INCAP

Market Risk (Trading

Book)

Value-at-Risk

Stressed VaR

Incremental Risk Charge

Regulatory/ Economic Market Risk

capital

Market Risk (Banking Book)

IFRS P&L-at-Risk

NPV-at-Risk

Customer Behavior/Market Risk

Economic capital

Revaluation-Reserve-at-Risk

Non-Financial Risk

Expected Loss

Regulatory/ Economic Operational

Risk capital

Overdue iRisk

Business Risk

IFRS P&L-at-Risk

Step 4. Monitor and manage underlying risk

limits

In order to verify that it remains within the risk appetite framework,

ING reports its risk positions vis-

à-vis its limits on a regular basis to senior management committees. The Quarterly Risk Update

reflecting the exposure of ING against the risk appetite targets is submitted quarterly to the EB and

the MBB and to the (Risk Committee of the) SB. Moreover every quarter the financial plan is checked

for potential limit breaches within a 1 year horizon, where in the strategic dialog the MBB can take

mitigating measures or adjustments to the dynamic plan can be made.

Stress testing

Stress testing is an important risk management tool that provides input for strategic decisions and

capital planning. The purpose of stress testing is to assess the impact of plausible but severe stress

scenarios on ING’s capital and liquidity position. Stress tests provide insights into the vulnerabilities

of certain portfolios, with regards to adverse macroeconomic circumstances,

stressed financial

markets, and changes in the (geo)political climate.

Types of stress

tests

Within ING, different types of stress tests are performed. The most comprehensive type of stress

tests are the firm-wide scenario analyses, which involve setting scenario assumptions for all the

relevant macroeconomic

and financial

market variables in all countries relevant to ING. These

assumptions usually follow a qualitative narrative that provides

a background to the scenario. In

addition to firm-wide

scenario analyses, ING executes scenario analyses for specific countries or

portfolios. Furthermore, sensitivity analyses are performed, which focus on stressing one or more

risk drivers; usually without an underlying scenario narrative. Finally, ING performs reverse

stress

tests, which aim to determine scenarios that could lead to a pre-defined severe adverse outcome.

Process

The stress testing process of ING consists of several

stages, which

are:

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◾

Risk identification

& risk assessment: It identifies

& assesses the risks ING or the relevant entity is

facing when executing its strategy based on the current and possible future economic, political,

regulatory and technological environment. It provides

a description of the main risks related to

the nature of ING’s business, activities and vulnerabilities.

◾

Scenario definition

& parameterisation: Based on the outcome of the previous step, a set of

scenarios should be determined where the relevant scope and set of risk drivers is determined for

each scenario, as well as the severity, the key assumptions and input parameters. The output of

this phase includes a quantitative description of the stress scenarios to be analysed, the relevant

output metrics and, when applicable, a narrative description.

◾

Impact calculation and aggregation: Based on the quantitative description of the stress scenarios

determined in the previous step, the impact is determined for the relevant scenario, scope and

horizon. The impact calculation and aggregation can be part of a recurring process or are part of

a specific process set-up for one-off stress tests.

◾

Scenario reporting: For each stress test, a report

is prepared after each calculation which

describes the results of the scenario, gives a recap of the scenario and its main assumptions and

parameters. It is complemented, if needed, with an advice for management action based on the

stress testing results.

◾

Scenario control & management assessment: Depending on the outcomes of the stress test and

the likelihood of the scenario, mitigating actions may be proposed. Mitigating actions

may

include, but are not limited to, sales or transfers of assets and reductions of risk limits.

Methodology

Detailed and comprehensive models are used to calculate the impact of the scenarios. In these

models, statistical analysis is combined with expert opinion to make sure that the results

adequately reflect the scenario assumptions. The methodologies

are granular and portfolio-specific

and use different macroeconomic and market variables as input variables. The calculations are in

line with our accounting and regulatory reporting frameworks. The stress

testing models are

subject to review by Model Risk Management.

Regulatory environment

CRRII/CRDV and BRRDII

On 16 April 2019, the European Parliament (EP) approved

the final agreement on a package of

reforms proposed by EC to strengthen

the resilience and resolvability

of European banks. The

package of reforms comprises two regulations

and two directives, namely amendments to the

Capital Requirements Regulation

and Directive (CRR/CRD), the Bank Recovery and Resolution

Directive (BRRD), and the Single Resolution Mechanism Regulation (SRMR).

The key changes introduced by the banking reform package consist of among others a binding

Leverage

Ratio (LR) requirement, independent from

the riskiness of the underlying exposures, as a

backstop to risk-weighted capital requirements, and a Net Stable Funding

Ratio (NSFR) based on the

Basel NSFR standard but including adjustments with regard to pass-through models and covered

bonds issuance. Further, the EBA obtained a mandate to investigate how to incorporate

environmental, social, and governance (ESG) risks into the supervisory process and what the

prudential treatment of assets associated with environmental or social objectives should look like.

Also, the rules on the subordination of Minimum Requirement

for own funds and Eligible Liabilities

(MREL) instruments are tightened and a new category of large banks with a balance sheet size

greater than EUR 100 billion, is introduced.

Basel III revisions and

upcoming regulations

In December 2017, the Basel III revisions were formally announced by the Basel Committee on

Banking Supervision (BCBS). These new prudential rules for banks consist of a revision to the

standardised approach to credit

risk, the introduction of a capital floor based

on standardised

approaches, the use of internal models, the limitation of options for modelling operating risks, and

new rules for the establishment of risk-weighted items and unused credit lines at the banks. In

Europe, this will be implemented through the CRR III / CRD VI in the coming years. With this long

implementation phase and the transposition into EU regulation still pending, some question marks

remain on how this will shape up.

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Targeted

Review of Internal

Models

In order to make capital levels more comparable

and to reduce variability in banks’ internal models,

the European Central

Bank (ECB) introduced the Targeted

Review of Internal Models (TRIM) in June

2017 to assess the reliability and comparability between banks’ models. The TRIM aims to create a

level playing field by harmonising the regulatory guidance around internal models with the

ultimate goal to restore trust in European

banks’ use of internal models.

In July 2019, the ECB published final chapters of the

guide to internal models, covering credit risk,

market risk and counterparty credit risk. These risk type-specific

chapters are intended to ensure a

common and consistent approach to the most relevant aspects of the regulations

on internal

models for banks directly supervised by the ECB. Additionally, they provide transparency on how

the ECB understands the regulations on the use of internal models to calculate own funds

requirements for the three

risk types. Impact on ING is through more stringent regulation on

internal models as well as an increase of Risk Weigthed Assets (RWA).

Top

and emerging risks

The risks listed below are defined as material existing and emerging risks that may have a

potentially significant impact

on our financial

position or our business model. They may have a

material impact on the reputation of the company, introduce volatility in future operation results,

or impact ING’s medium and long-term strategy including the ability to pay dividends, maintain

appropriate levels of capital or meet liquidity and funding targets. An emerging risk

is defined

as a

risk that has the potential to have a significant

negative effect on our performance, but whose

impact on the organisation is currently more difficult to assess than other risk factors

that are not

identified as emerging risks.

The topics have emerged as part of the annual Risk Assessment that is performed as part of the

Stress Testing

Framework

and the Risk Appetite Framework. The

sequence in which the risks are

presented below is not indicative of their likelihood of occurrence

or the potential magnitude of

their financial

consequences.

During 2019, several changes were made to our top and emerging

risks. The top risks in 2019 are

related to financial crime, cybercrime and persistent low interest rates in Eurozone.

Also, climate

change risk remains an emerging risk, reflecting the impact a deterioration of the climate may

have for the financial position and/or reputation of ING.

Macroeconomic developments

The economic activity was marked in 2019 by a slowdown in global growth led by prolonged

uncertainty on Brexit, effects of US-China trade tensions and reduced US fiscal stimulus. The

decision of the United Kingdom to leave the European Union (‘Brexit’) remains a major political

and

economic event that continues to affect

sentiment. Despite negotiating a revised deal in October

2019, the vote in the UK parliament did not go ahead. The UK parliament chose to postpone the

vote on the deal until legislation needed to turn the withdrawal agreement into UK law was

completed. ING continued to take steps throughout the year to prepare for various options.

Although ING has activities in the UK through the Wholesale Banking (WB) business line, no

material asset quality deterioration following the Brexit decision has taken place.

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The coronavirus,

COVID-19, is recently dominating global news. As the coronavirus outbreak

spreads rapidly, a central

ING team has been set up to monitor the situation globally and provide

guidance on health and safety measures, travel advice and business continuity for our company.

As the situation differs from country to country, we are following local government guidelines in

our response to the virus. Also the potential economic implications for the countries and sectors

where ING is active in are being assessed and discussed in order to identify possible mitigating

actions.

Financial economic crime

Knowing who we do business with helps us to protect our customers, society and our bank from

financial economic

crimes (FEC). We believe

that as gatekeepers to the financial

system we have an

obligation to prevent criminals from misusing it or detect and respond when it is being misused. We

believe we can be even more

effective in safeguarding the financial

system if we join forces and

work with other banks and with national, European and global authorities and law enforcement

agencies to tackle financial

economic crime.

In 2019, we continued to implement and execute policies and procedures to further enhance our

Know Your

Customer (KYC) activities. We continued to work on the global KYC enhancement

programme that started at ING in 2017 and which we built on in 2018 and 2019. The programme

encompasses all customer segments in all ING business units. For more information on FEC and KYC

see ‘Compliance risk’ chapter.

Model risk

Risk management also depends on models more and more as banking has become a digital

business in a volatile, uncertain, complex and ambiguous world with constantly changing customer

needs, more demanding regulatory expectations, increasing dependency on the use of models and

the need to adapt and react quickly.

In 2019, we initiated a programme (the Model Paradigm

Shift) to improve the availability and

quality of our data, model governance and processes, further strengthening our risk modelling and

data capabilities to give ING a competitive advantage.

Cybercrime

Cybercrime remains a continuous threat to companies in general

and to financial

institutions

specifically. Both the frequency and the intensity of attacks increase on a global scale. Threats from

Distributed Denial of Service (DDoS), targeted attacks (also called Advanced Persistent Threats) and

Ransomware have intensified worldwide.

ING builds on its cybercrime resilience through its dedicated Cyber Crime Expertise and Response

Team,

further enhancing the control environment to protect, detect and respond to e-banking

fraud, DDoS and targeted attacks. Controls

and monitoring continue to be embedded in the

organisation as part of the overall internal control

framework and are

continuously re-assessed

against existing and new threats. The identification and monitoring of new threat actors and

campaigns relevant to ING also informs this process

as does the closer alignment between IT

security and fraud teams. In addition, ING continues to strengthen its global cybercrime and fraud

resilience through extensive collaboration

with financial

industry peers, law enforcement

authorities, government (e.g. National Cyber Security Center) and internet service providers

(ISPs).

Low interest

rates in Eurozone

The persistence of a low interest rate environment

in Europe, where

central banks held their rates

at very low and even negative levels

in most countries, continued to negatively impact short-term

as well as long-term market rates. This is posing a challenge for banks to maintain positive income

in the form of net interest income from traditional

savings activities.

Sourcing risk and third

-party resources

The amount of business processes that is sourced to third-parties increased significantly over the

years. Most notable is our (internal) sourcing in Poland, the Philippines and Slovakia but also

(external) third-party sourcing increased.

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Through the renewed sourcing

policy and related control standard, ING will actively monitor the

controls around sourcing

(internal & external). According to 2019 EBA guidelines, all external and

internal contracts have to re-assessed and properly classified and registered before end of 2021. In

2020, NFR will focus on improving business units’ risk data on Sourcing risk and related reporting.

Climate change risk

The urgency around climate change is escalating and climate-related risk tops the World

Economic

Forum’s global ranking in terms of likelihood and impact. The potential financial impacts

of extreme

weather events such as hurricanes, floods and heatwaves are elevating the risks associated with

climate change. With more than 38 million customers in over 40 countries, our business activities

can both significantly influence

communities and the environment and be impacted by climate

risks. As such, we take our responsibility to help mitigate this risk seriously.

Shifts in societal expectations on

climate change and developments in climate science are driving

new initiatives and policy updates within the bank to address this threat. For example, we’ve

set

ambitious targets to reduce financing for coal power generation to close to zero by 2025, and no

longer provide financing to new clients whose business is over 50 percent reliant on coal-fired

power.

By the end of 2025, we will not finance

any clients in the utilities sector who are more than

five percent reliant on coal. In addition, we are steering our loan portfolio to meet the well-below

two degrees goal of the Paris Climate Accord.

In 2019, we published our first

progress report

on

Terra,

our pathway towards climate alignment in the sectors most responsible for climate change.

We expect climate change to remain firmly on ING’s agenda, as well as the agendas of our

customers and of regulatory and supervisory bodies around the world. We have

committed to

report in line with the recommendations of the Taskforce

for Climate-related Financial Disclosures

(TCFD) and we continue to work on the challenging exercise of translating

potential climate risks

and transition risks into financial risk for ING.

Task

Force

on Climate-Related Financial

Disclosures (TCFD)

ING endorses the Financial Stability Board’s (FSB) Task

Force

on Climate-Related Financial

Disclosures (TCFD) recommendations. This voluntary disclosure

outlines the progress made to date.

To

further strengthen understanding and adoption of TCFD recommendations, ING has joined the

UNEP FI TCFD Phase 2 to develop transition and physical risk assessment models in 2019.

Governance

ING’s Climate Change Committee (CCC) is mandated to oversee and set priorities for the

implementation of the TCFD recommendations and other strategic climate-related topics that

impact the group. For details please refer

to our approach to climate governance.

Strategy

In order to get an understanding of our company’s exposure to climate risk, we have started with

the analysis of climate-affected sectors

as outlined in the report ‘Recommendations of the Task

Force

on Climate-related Financial Disclosures (June 2017)’. We

conducted an Energy Transition

assessment for particularly sensitive sectors within the Transportation, Industrials, Power and Real

Estate sectors where the results can help improve

our understanding of the impacts of changing

regulation and technology developments. ING is committed to continuously reviewing

and

monitoring its policies and strategies as climate-related risks and opportunities emerge. As a result

of transition risk ING further refined its coal policy in 2017, targeting near-zero coal exposure by

2025.

In 2018, ING started measuring and steering our lending portfolio towards the Paris Agreement’s

well-below two degree goal by 2040 – our Terra

Approach (Report of the Executive Report). For

instance, our automotive, real estate and power portfolio have been assessed. For

an overview of

how we capitalise on climate-related opportunities, please refer to Responsible Finance (Report of

the Executive Report).

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Risk Management

Our approach continues to evolve as we develop

a better understanding of climate risk and we

start to embed climate risk within our risk management process. ING has a Risk Identification

and

Risk Assessment process in place, helping us to adjust risk appetite and policies to reflect external

environment management.

ING’s Environmental and Social Risk (ESR) management process evaluates risks on a client and

transaction basis. In 2019, we updated our ESR policy and implemented a standalone climate

change policy which aims to limit deal-specific

potential negative climate impacts. (refer to ESR

policy).

Metrics and Targets

We have set climate-related

targets in our lending portfolio. This includes exiting coal by 2025 and

steering our €600 billion portfolio towards meeting the Paris Agreement’s well-below two

degree

goal (Terra

Approach). Under Terra,

we need to set one target per sector for each of the nine

sectors. As of year-end 2019, we had developed an approach and target for five sectors. For details

refer to our 2019 Terra

Progress Report. For

our approach to setting opportunity-related metrics

and targets please refer to Climate Fi

nance.

Next Steps

In the course of 2020 we aim to identify physical risk in our lending portfolio while we continue our

transition risk analysis. We utilise learnings and best practices from

sector initiatives and our

participation in the UNEP FI TCFD programme.

Credit

risk

Introduction

Credit risk is the risk of loss from the default and/or

credit rating deterioration

of clients. Credit risks

arise in ING's lending, financial

markets and investment activities. The credit risk section provides

information on how ING measures, monitors and manages credit risk and gives an insight into the

portfolio from a credit risk perspective.

Governance (*)

ING’s credit risk strategy is to maintain an internationally diversified loan and bond portfolio,

avoiding large risk concentrations. The emphasis is on managing business developments within the

business lines by means of a top-down risk appetite framework, which sets concentration limits for

countries, individual clients, sectors, products, secondary risk (collateral/guarantees) and

investment activities. The aim is to support relationship-banking activities,

while maintaining

internal risk/reward

guidelines and controls.

Credit risk is a Tier 1 level risk function within ING and is part of the second line of defence. It is

managed by regional and/or business unit CROs. The CRO Wholesale Banking (WB), CRO

Challengers & Growth Markets (C&G), CRO Netherlands and CRO Belux focus on specific

risks in the

geographical and/or business areas

of their responsibilities. The Financial Risk department is a Tier 2

level risk function, which is responsible for the consolidated risk appetite setting, risk frameworks,

model development

and policies.

The credit risk function encompasses the following activities:

◾

Measuring, monitoring and managing credit risks in the bank’s portfolio;

◾

Challenging and approving new and modified transactions and borrower reviews;

◾

Managing the levels of provisioning and risk costs, and advising on impairments; and

◾

Providing consistent credit risk policies, systems and tools to manage the credit lifecycle of all

activities.

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Credit risk categories

(*)

Credit risk uses the following risk categories to differentiate between the different types of credit

risk:

◾

Lending risk:

is the risk that the client (counterparty, corporate or individual) does not pay the

principal, interest or fees on a loan when they are due, or on demand for letters of credit (LCs)

and guarantees provided by ING..

◾

Investment risk

: is the credit default and risk rating migration

risk that is associated with ING’s

investments in bonds, commercial paper, equities, securitisations, and other similar publicly

traded securities. This can be viewed as the potential loss that ING may incur as a result of

holding a position in underlying securities whose Issuer's credit quality deteriorates or defaults.

All investments in the banking book are classified in the investment risk category. The primary

purpose of ING’s investments in the banking books is for liquidity management.

◾

Money market (MM) risk

: arises when ING places short-term deposits with a counterparty

in

order to manage excess liquidity. In the event of a counterparty default, ING may lose the

deposit placed.

◾

Pre-settlement (PS) risk

: arises when a client defaults on a transaction before settlement and

ING must replace the contract by a trade with another counterparty at the then prevailing

(possibly unfavourable) market price. This credit risk category is associated with derivatives

transactions (exchange-traded derivatives, over-the-counter

(OTC) derivatives and securities

financing transactions).

◾

Settlement risk

: is the risk that arises when there is an exchange of value (funds or instruments)

for the same value date or different value dates and receipt is not verified or expected until after

ING has given irrevocable instructions to pay or has paid or delivered its side of the trade.

The risk

is that ING delivers but does not receive delivery from

its counterparty. ING manages settlement

risk in the same way as other credit risks by setting a risk limit per client. Due to the short-term

nature (typically one day), ING does not hold provisions or capital for settlement risk. Although a

relatively low risk, ING increasingly uses DVP

(delivery versus payment) and safe settlement

payment techniques to reduce settlement risk.

For the reconciliation between

credit risk outstandings categories and financial assets, refer to table

below:

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Reconciliation between credit risk categories and financial position

(*)

Credit risk categories

Mainly relates to:

Notes in the financial statements

Lending risk

-Cash and balances with central banks

Note 2 Cash and balances with central banks

-Loans and advances to banks

Note 3 Loans and advances to banks

-Loans and advances to customers

Note 4 Financial assets at fair value through profit or loss

-Off-balance sheet items e.g. obligations under financial guarantees and letters of credit and undrawn credit

facilities

Note 5 Financial assets at fair value through other comprehensive

income

Note 7 Loans and advances to customers

Note 45 Contingent liabilities and commitments

Investment risk

-Debt securities

Note 4 Financial assets at fair value through profit or loss

-Equity securities

Note 5 Financial assets at fair value through other comprehensive

income

Note 6 Securities at amortised cost

Money market (MM) risk

-Cash and balances with central banks

Note 2 Cash and balances with central banks

-Loans and advances to banks

Note 3 Loans and advances to banks

-Loans and advances to customers

Note 7 Loans and advances to customers

Pre-settlement (PS) risk

-Financial assets at fair value through profit or loss (trading assets and

non-trading derivatives)

Note 4 Financial assets at fair value through profit or loss

-Financial liabilities at fair value through profit or loss (trading assets and non-trading

derivatives)

Note 15 Financial liabilities at fair value through profit or loss

-Securities financing

Note 44 Offsetting financial

assets and liabilities

Settlement risk

-Financial assets at fair value through profit or loss (trading assets and

non-trading derivatives)

Note 4 Financial assets at fair value through profit or loss

-Financial liabilities at fair value through profit or loss (trading assets and non-trading

derivatives)

Note 11 Other assets

-Amounts to be settled

Note 15 Financial liabilities at fair value through profit or loss

Note 17 Other liabilities

Credit risk appetite and concentration

risk framework

(*)

The credit risk appetite and concentration risk framework

is designed to prevent undesired high

levels of credit risk and credit concentrations

within various levels of the ING portfolio. It is derived

from the concepts of boundaries and instruments as described in the Risk Appetite Framework.

Credit risk appetite statements

(*)

Credit risk appetite is the maximum level of credit risk ING is willing to accept for growth

and value

creation. The credit risk appetite

is linked to the overall bank-wide risk appetite framework. The

credit risk appetite is expressed in quantitative and qualitative measures. Having a credit

risk

appetite achieves:

◾

Clarity about the credit risks that ING is prepared to assume, target

setting and prudent risk

management;

◾

Consistent communication to different stakeholders;

◾

Guidelines on how to align reporting and monitoring tools with the organisational structure and

strategy; and

◾

Alignment of business strategies and key performance indicators of business units with ING’s

credit risk appetite through dynamic planning..

Credit risk appetite is present across different levels

within ING, at portfolio level as well as

transaction level. The various credit risk appetite components at portfolio and transaction levels

together result in the credit risk appetite framework

.

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The credit risk appetite and concentration risk framework

is composed of:

◾

Country risk concentration

: Country risk is the risk that arises due to events in a specific country

(or group of countries). In order to manage the maximum country event loss ING is willing to

accept, boundaries are approved

by the Supervisory Board ensure ING’s consolidated 3-year

average result

before tax can absorb an estimated country event loss due to a country risk

occurrence. The estimated level

is correlated to the risk rating assigned to a given country.

Actual country limits are set by means of country instruments, which are reviewed monthly and

updated when needed. For countries with elevated levels of geopolitical or severe

economic cycle

risk, monitoring is performed on a more frequent basis with strict pipeline and exposure

management.

◾

Single name and industry sector concentration

: ING has established a credit concentration risk

framework in order to identify, measure

and monitor single name concentration and industry

sector concentration (systemic risk). The same concept of boundaries and instruments are

applied.

◾

Product and secondary risk concentration

: ING has established a concentration framework to

identify, measure and monitor product concentration and secondary risk.

◾

Scenarios and stress tests

: Stress testing evaluates ING’s financial stability under severe, but

plausible stress scenarios, and supports decision-making that assures ING remains a financially

going concern even after a severe event occurs. In addition to the bank-wide stress

testing

framework as described above, ING performs regularly

sensitivity analysis to assess portfolio risks

and concentrations. These sensitivity analyses are consistent with the stress scenario established

in the Group-wide credit risk appetite framework

.

◾

Product approvals

: The product approval and review

process (PARP)

assesses and manages risks

associated with the introduction of new or modified

products. It ensures that sound due diligence

is performed by relevant stakeholders and the relevant

risks (credit, operational, compliance,

etc.) are addressed appropriately

..

◾

Sector policies

: These are detailed analyses of defined products and/or industries. They identify

the major risk drivers and mitigants, the internal business mandate, and propose the risk

(including business) parameters – and potentially the maximum product and/or portfolio limit -

to undertake that business. A sector policy is always prepared by the front office responsible for

the internal business mandate and requires an approval from

the designated approval authority.

Sector policies may carry various names and/or may have geographical and/or

business

limitations (e.g. local

vs global).

◾

Reference benchmarks:

The maximum credit risk appetite per obligor group is expressed as a

(benchmark) exposure at the concentration risk level, which corresponds

to (maximum) internal

capital consumption for credit risk. It is used as a reference

amount in the credit approval

process.

◾

Credit approval process

: The purpose of the credit approval process

is that individual

transactions and the risk associated with these transactions are assessed on a name-by-name

basis. For each type of client there is a dedicated process

with credit risk managers specialised

along the business lines of ING. The credit approval process

is supported by a risk rating system

and exposure monitoring system. Risk ratings are used to indicate a client’s creditworthiness

which translates into a probability of default. This is used as input to determine the maximum

risk appetite that ING has for a given type of client (reference benchmark). The determination of

the delegated authority (the amount that can be approved at various levels of the organisation)

is a function of the risk rating of the client and ING’s credit risk exposure on the client.

Given the nature of the retail business, roles

and responsibilities of the local credit risk policy are

delegated to local retail credit risk management. However,

the global retail risk policy prescribes

no-go criteria and minimum standards for underwriting. Lending standards, including material

changes to those standards, are approved

by the global head of retail risk.

Environmental and

Social Risk Framework

ING’s environmental and social risk (ESR) policy framework helps us make transparent

choices

about how, where and who we do business with. In 2019 we renewed our ESR Framework

based on

input from different stakeholders including clients, peers, NGOs and our own colleagues. Through

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regular updates like these we keep abreast of societal norms and regulation relating

to

sustainability and challenge our own increasingly strong commitments on the topics of human

rights and climate change.

ESR in practice in 2019

The ESR policy framework includes standards and best practice guidance for ESR-sensitive sectors.

It includes explicit restrictions on activities not in line with ING’s values and harmful to people or the

environment (for example companies involved

in manufacturing cluster munitions), which we will

not directly finance.

The next table gives insight into the ESR policies that are part of the Framework

and where they are

applied.:

Credit risk portfolio per economic sector and application of ESR framework

in percentage

2019

outstandings

ING Values

Human rights

Environmental

compliance

Animal

welfare

Defence

Equator principles

Forestry and

Agrocommodities

Mining and Metals

Tobacco*

Infrastructure

Generic engineering*

Manufacturing

Chemicals

Energy**

Fisheries*

Consumer lending

32.4%

●

Financial institutions

20.5%

●

Governments

7.1%

●

Other

0.4%

●

Corporates

39.6%

●

●

●

Real estate

6.6%

●

●

●

●

Natural resources

5.5%

●

●

●

●

●

●

Transportation

& logistics

4.4%

●

●

●

●

●

●

Services

3.7%

●

●

●

●

●

●

●

Food, beverages

& personal care

3.2%

●

●

●

●

●

●

●

●

●

General industries

3.2%

●

●

●

●

●

●

●

Builders & contractors

2.0%

●

●

●

●

●

Chemicals, health & pharmaceuticals

2.0%

●

●

●

●

●

●

●

Other

1.9%

●

●

●

●

Utilities

1.5%

●

●

●

●

●

Media and telecom

1.4%

●

●

●

●

●

●

Retail

1.1%

●

●

●

●

Automotive

0.8%

●

●

●

●

●

●

Technology

2.2%

●

●

●

●

●

●

●

*

Fully or partially excluded activities.

** Includes policies on Oil and Gas, Coal, Nuclear Energy and Power Generation.

The way the Framework

is applied in practice differs per product type. Generally the largest

potential environmental and social impacts come from large corporates

within our Wholesale

Banking (WB) segment. WB is therefore the initial focus of our assessments and where we promote

active ESR dialogue. We have been working with wholesale clients for more than 15 years to

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support them in understanding and managing their environmental and social impact. A simplified

version of the ESR policy framework, following the same rationale

and principles, applies to ING’s

retail activities for mid-corporates and small medium enterprises.

The ESR policy framework is incorporated in ING’s KYC

policy framework, meaning the ESR client

assessment is part of client on-boarding and review.

The ESR framework minimum requirements

are also included in ING’s procurement policy and apply to the scree

ning of suppliers of ING’s

procurement activities.

ESR is applied in practice in different ways, including an ESR client assessment during KYC

onboarding, an ESR transaction assessment for Wholesale Banking, separate in-depth advice from

the global ESR team for ESR high-risk WB transactions and name screening for transactions with

fully restricted clients. These ESR check and controls are integrated

into our client and transaction

due diligence processes.

Of all WB engagements in scope of the ESR policy framework in 2019, 85 percent were considered

ESR low risk, 9 percent ESR medium risk and 6 percent ESR high risk. ESR high-risk cases require

specialised advice from the global ESR team. The team now consists of 13 dedicated ESR advisors,

11 of them are in Amsterdam and two

are located in Geneva and New York.

Whereas we have a

strong ESR policy framework, we

acknowledge that we need to further improve our processes in

order to ensure accuracy

and completeness of the data. The ESR advice assesses the specific

product offered and impacts associated with it, the sector, operating context and geography of the

engagement and other relevant factors. Based on this in-depth research, a binding advice is given

that can only be overruled at Board level.

Of the 304 ESR advices given in 2019, 45 percent were

positive, 25 percent positive subject to conditions and 30 percent negative. Conditions

can play an

important role in helping clients transition towards improved

environmental and social

performance on the ground.

The ESR team’s main focus is on its policy development and transaction advisory roles. However

the team also provides training (both in-person and via webinars) to hundreds of colleagues around

the world every year in risk, front-office, KYC and compliance teams, so that ESR knowledge is built

on and spread.

Updates in the ESR Framework

The renewed ESR Framework

went live in July 2019. In this review, building on internal and external

stakeholder input, we improved our structure and aimed to provide more

clarity on the scope and

governance of ESR. The Framework

now includes standalone policies on human rights and climate

change and an infrastructure policy. This reflects external developments, societal expectations and

our ambitions for these topics and sustainability in general.

New restrictions in the updated framework include arctic offshore oil and gas exploration and

production, white phosphorus, asbestos and small arms and light weapons for private individuals.

We have a zero

-tolerance policy for some of the restrictions, such as with companies involved in

the production of cluster munitions. For others, we try to refrain

as much as possible from any form

of involvement, whether directly or indirectly.

The new framework also affects companies with

both controversial and non-controversial

activities.

In the updated ESR policy framework we have ensured

that each sector policy includes the proper

references

to the relevant standards of the

human rights and climate change overarching pillars.

Incorporating

these helps us to determine which transactions require further analysis and action,

and provides our stakeholders with a better understanding of our approach to human rights and

climate change when assessing transactions. The updated ESR policy also encourages clients to

identify and be transparent about how human rights and/or environmental

issues affect their

supply chains. They should provide evidence of proper monitoring and where

relevant, translate

these findings into

acceptance criteria for partners

and suppliers.

Developing international

best practice and stakeholder

engagement

Our ESR approach helps us and our clients to gradually enhance the implementation of key

standards like the UN Guiding Principles on Human Rights and the Organisation for Economic

Cooperation and Development (OECD) Guidelines for Multinational Enterprises. But beyond

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stimulating better environmental and social performance in our own portfolio, ING actively

collaborates with other institutions, peers and regulators to address the environmental

and social

challenges we face:

◾

ING and the Equator Principles (EPs):

The EPs, an environmental and social risk management

framework adopted by over 100 banks globally, were

updated in 2019. The new version (EP4),

has increased the scope to capture more

project-related transactions. It contains new

commitments on human rights, climate change, Indigenous people and biodiversity. ING, an

active EP Association member, co-led the coordination of the EP4 update process. ING is a

member of several working groups,

including those on social risks, climate change and scope. ING

also co-leads the capacity building and training working group, which resulted in the roll-out

of

an online EP learning tool to ING risk and front-office

employees last year.

The tool is used by

other EP banks globally.

◾

Dutch Banking Sector Agreement

: We continued our engagement in Dutch multi-stakeholder

platforms to implement the Dutch Banking Sector Agreement on International Responsible

Business Conduct Regarding Human Rights. In 2018, we published our first human rights

report in

which we disclosed our saliency process and the human rights salient to ING – child labour,

forced labour and land-related community issues. In 2019, we published an update focused on

our role as a corporate lender and the outcome of an exercise

where we proactively engaged

with 29 clients in human rights.

◾

Thun Group

: In the international arena, ING actively participates in the Thun Group, an informal

group of bank representatives

sharing expertise and experience to support the

integration of the

UN Guiding Principles on Business and Human Rights into the policies and practices of banks.

◾

OECD

: ING’s active role in promoting and integrating human rights is reflected in our participation

as a formal advisory member to the OECD on responsible business conduct in our sector. In 2019

the OECD published the Due Diligence for Responsible Corporate Lending

and Securities

Underwriting report that provides a global environmental and social risk framework

for financial

institutions. We participate in the annual meetings for practitioners from financial institutions

(export credit agencies, EP financial

institutions, commercial banks, development institutions,

etc.) organised by the OECD in Paris, enhancing knowledge sharing and collaboration.

◾

United Nations Human Rights Office

: In May, at the request of the UN Human Rights Office

of

the High Commissioner, ING hosted a meeting with Dutch private sector industrials and the UN

High Commissioner for Human Rights, Ms Michelle Bachelet, during her first

official

visit to the

Netherlands, to discuss the role and leverage of the private sector in this important area.

By taking part in the above-mentioned initiatives, we aim to contribute our viewpoint and those of

our clients, employees and other stakeholders to help shape a consensus and develop clear

guidelines that can serve as a standard for our industry.

Credit risk models (*)

Within ING, internal Basel compliant models are used to determine probability of default (PD),

exposure at default (EAD) and loss given default (LGD)

for regulatory and economic capital

purposes. These models also form the basis of ING’s IFRS 9 loan loss provisioning (see “IFRS 9

models” below). Bank-wide, ING has implemented around 100 credit risk models, for regulatory

capital,

economic capital and loan loss provisioning purposes.

There are two

main types of PD, EAD and LGD models used throughout the Bank:

◾

Statistical models

are created where

a large set of default or detailed loss data is available. They

are characterised by a sufficient number of data

points that facilitate meaningful statistical

estimation of the model parameters. The model parameters are estimated with statistical

techniques based on the data set available;

◾

Hybrid models

contain characteristics of statistical models combined with knowledge and

experience of experts from risk management and front-office

staff, literature from rating

agencies, supervisors and academics. These models are especially appropriate for ‘low default

portfolios’, where limited historical defaults exist.

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Credit risk rating process

(*)

In principle, all risk ratings are based on a Risk Rating (PD) Model that complies with the minimum

requirements detailed in CRR/CRDIV, ECB Supervisory Rules and EBA guidelines. This concerns all

borrower types and segments.

ING’s PD rating models are based on a 1-22 scale (1=highest rating; 22=lowest rating)

referred to as

the ‘Master scale’, which roughly corresponds to the rating grades

that are assigned by external

rating agencies, such as Standard & Poor’s, Moody’s and Fitch. For

example, an ING rating of 1

corresponds to an S&P/Fitch

rating of AAA and a Moody’s rating of Aaa; an ING rating of 2

corresponds to an S&P/Fitch

rating of AA+ and a Moody’s rating of Aa1, and so on.

The 22 grades are composed of the following categories:

◾

Investment grade (risk rating 1-10);

◾

Non-investment grade (risk rating 11-17);

◾

Sub-standard (risk rating 18-19); and

◾

Non-performing (risk rating 20-22).

The three first categories (1-19) are risk ratings for performing loans. The ratings are calculated in IT

systems with internally developed models based on data that is either manually or automatically

fed. Under certain conditions, the outcome of a manually fed model can be challenged through a

rating appeal process. Risk ratings for

non-performing loans (NPL) (20-22) are set by the global or

regional credit restructuring department. For securitisation portfolios, the external ratings of the

tranche in which ING has invested are leading.

Risk ratings assigned to clients are reviewed

at least annually, with the performance of the

underlying models monitored regularly. Over 90 percent of ING’s credit

exposures have been rated

using one of the in-house developed PD rating models. Some of these models are global in nature,

such as models for large corporates, commercial

banks, insurance companies, central

governments, local governments, funds, fund managers, project finance and leveraged companies.

Other models are more regional-

or country-specific:

there are PD models for Small Medium

Enterprise (SME) companies in Central Europe,

the Netherlands, Belgium, Luxembourg, as well as

residential mortgage and consumer loan models in the various retail markets.

Rating models for retail clients are predominantly

statistically driven and automated, such that

ratings can be updated on a monthly basis. Rating models for large corporates,

institutions and

banks include both statistical characteristics and manual input, with the ratings being manually

updated on at least an annual basis.

Credit risk models - Pre

-settlement measurement models

For regulatory capital,

pre-settlement (PS) exposure is calculated using a marked to market (MtM)

plus regulatory-based add-on. For internal capital purposes,

ING uses a combination of a MtM plus

model add-on approach and a scenario simulation approach.:

ING recognises that the above approaches are

not sufficiently

accurate for certain trading products

such as highly structured or exotic derivative transactions. For the assessment of risk exposures of

such complex products a bespoke calculation is made.

Under Pillar 1, ING uses the Current Exposure Method (Mark to Market method), which is a standard

approach prescribed by the regulation. There

are no exposures under the advanced, Internal Model

Method (IMM) under Pillar1. Under Pillar 2 however, for FX and interest rate derivatives, ING

uses a

risk sensitive approach based on Monte Carlo simulations.

Credit risk tools

Credit risk systems and data standards

The acceptance, maintenance, measurement, management and reporting of credit risks at all

levels of ING is executed through single, common credit

risk data standards using shared credit risk

tools that support standardised and transparent credit risk practices.

ING has chosen to develop

credit risk tools centrally. The philosophy is to use a single source of data, in an integrated

approach that includes ING policy, the regulatory environment in which we operate,

and the daily

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processes that are active throughout the Group.

Disciplined application in these three areas is

essential for achieving high data quality

standards. The customer-centric data model conforms to

the three core business needs of ING:

◾

To

monitor the risks we undertake.

◾

To

be compliant with our internal and external obligations; and

◾

To

transact effectively and efficiently

with our clients.

Credit risk portfolio (*)

ING’s credit exposure is mainly related to lending to individuals and businesses followed by

investments in bonds and securitised assets. Loans to individuals are mainly mortgage loans

secured by residential property. Loans

(including guarantees issued) to businesses are often

collateralised, but may be unsecured based on the internal analysis of the borrower’s

creditworthiness. Bonds in the investment portfolio are generally

unsecured, but predominantly

consist of bonds issued by central governments and EU and/or OECD

based financial

institutions.

Secured bonds, such as mortgage backed securities and asset backed securities are secured by the

underlying diversified pool of assets

(commercial or residential mortgages, car loans and/or other

assets) held by the securities issuer.

The last major credit risk source involves pre

-settlement (PS)

exposures which arise from trading activities, including derivatives, repurchase

transactions and

securities lending/borrowing transactions. This is also commonly referred

to as counterparty credit

risk.

The prior period outstandings have been updated to improve consistency and comparability to the

current year presentation. This is applicable to all following tables in the sections credit risks

portfolio, credit risk mitigation and credit quality that include outstandings with prior period

comparatives.

Portfolio analysis per business

line (*)

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Outstandings per line of business

1,2,3

(*)

Wholesale Banking

Retail Benelux

Retail Challengers &

Growth Markets

Corporate Line

Total

Rating class

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

Investment grade

1 (AAA)

31,859

25,179

372

466

18,973

16,390

24,774

29,333

75,978

71,368

2-4 (AA)

46,394

46,847

5,853

5,572

36,460

28,515

1,832

1,431

90,539

82,365

5-7 (A)

66,756

63,917

20,922

19,645

48,587

41,325

323

398

136,588

125,285

8-10 (BBB)

115,888

110,875

115,192

109,844

49,681

56,551

3,190

3,149

283,951

280,419

Non-Investment grade

11-13 (BB)

86,342

93,152

63,993

66,899

41,584

43,154

31

957

191,950

204,162

14-16 (B)

22,929

18,462

15,845

16,447

14,755

12,098

13

53,528

47,020

17 (CCC)

1,081

1,648

2,223

2,324

933

764

98

90

4,335

4,826

Substandard grade

18 (CC)

1,228

1,441

1,409

1,492

531

602

.

3,168

3,536

19 (C)

659

298

1,056

1,093

672

630

.

2,387

2,022

NPL grade

20-22 (D)

4,516

4,395

4,316

4,229

2,399

2,189

275

314

11,506

11,128

Total

377,651

366,214

231,180

228,011

214,575

202,220

30,524

35,685

853,930

832,130

Industry

Private Individuals

31

32

164,466

164,220

167,262

156,385

331,758

320,637

Central Banks

34,044

28,962

8,383

6,124

23,339

27,116

65,766

62,202

Commercial Banks

44,152

45,213

250

251

8,884

8,889

3,502

4,461

56,788

58,814

Natural Resources

54,113

52,458

976

1,153

806

910

55,894

54,521

Central Governments

37,449

32,356

1,364

1,306

6,356

6,244

3,131

3,131

48,300

43,037

Non-Bank Financial Institutions

45,214

37,032

1,832

2,138

378

623

512

926

47,936

40,720

Real Estate

30,819

38,517

12,769

12,222

2,732

2,353

46,320

53,092

Transportation

& Logistics

27,334

27,009

2,882

2,704

764

769

30,980

30,481

Food, Beverages

& Personal Care

16,691

14,996

5,960

5,601

2,151

2,325

24,802

22,923

Services

10,252

12,461

10,929

9,911

862

990

3

2

22,046

23,363

General Industries

12,599

14,799

4,269

3,934

2,764

2,801

19,632

21,535

Lower Public Administration

3,594

3,459

5,619

5,296

8,184

8,227

17,397

16,983

Utilities

16,377

15,154

741

597

145

143

17,263

15,893

Chemicals, Health & Pharmaceuticals

9,213

10,190

6,213

6,258

1,017

1,129

16,443

17,577

Other

35,769

33,574

12,910

12,420

3,889

4,309

36

50

52,603

50,353

Total

377,651

366,214

231,180

228,011

214,575

202,220

30,524

35,685

853,930

832,130

Region

Europe

Netherlands

41,255

41,807

142,547

142,621

905

657

25,340

30,025

210,046

215,110

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Belgium

33,936

36,546

82,368

79,362

572

671

18

16

116,894

116,595

Germany

18,067

15,832

485

476

99,966

96,278

43

45

118,561

112,630

Poland

15,713

14,377

66

66

20,377

17,801

36,156

32,244

Spain

8,849

10,957

68

64

21,838

19,092

30

15

30,785

30,128

United Kingdom

27,026

26,633

277

256

225

258

1,872

1,463

29,400

28,610

Luxemburg

22,209

18,145

4,051

3,779

1,554

1,603

13

13

27,827

23,540

France

13,914

13,736

519

519

6,267

4,605

3

5

20,703

18,865

Rest of Europe

65,432

65,324

406

400

22,816

23,962

25

21

88,679

89,706

Americas

67,893

64,672

223

294

1,457

1,572

340

379

69,912

66,917

Asia

52,065

48,563

103

105

180

194

2,840

3,703

55,188

52,564

Australia

8,622

6,755

27

28

38,416

35,524

1

1

47,066

42,308

Africa

2,671

2,867

40

43

2

4

2,713

2,915

Total

377,651

366,214

231,180

228,011

214,575

202,220

30,524

35,685

853,930

832,130

1

Based on credit risk measurement contained in lending, pre-settlement, money market and investment activities.

2

Based on the total amount of credit risk in the respective column using ING’s internal credit risk measurement methodologies. Economic sectors (industry) below 2% are not shown separately but grouped in Other.

3

Geographic areas are based on country of residence, except for private individuals for which the geographic areas are

based on the primary country of risk.

Overall Portfolio (*)

During 2019, ING’s portfolio size increased by EUR 22.3 billion (2.69%) to EUR 854 billion

outstanding, driven by volume growth and foreign exchange rate

changes. The net volume growth

was concentrated in the Lending

risk category. FX rate movements contributed to EUR 3.2 billion of

the total growth, driven by the appreciation of the US dollar (+1.8%), British pound (+5.5%),

Australian dollar (+1.5%) and Polish new zloty (+0.9%), partially off-set by the depreciation of New

Turkish Lira

(-9.0%) and New Romania Leu (-2.7%) against the Euro

.

Rating distribution (*)

Overall the rating class concentration

improved. The share of Investment

grade rating classes

increased from 67.2% to 68.7%, while the share of non-investment grade

slightly decreased, from

30.8% to 29.3%. Substandard grade outstanding remained stable at EUR 5.5 billion whereas the

NPL grade increased by 3.4%.

With respect to the rating distribution within the Business lines, in Wholesale Banking AAA-rated

assets increased driven by the reserve deposit to Banque Centrale

du Luxembourg

and bond

exposure to the Federal

Government of the United States of America. Wholesale A rating class

increased as a result of outstanding to Bank of Japan and large corporate

customers in the US, Asia

and the Netherlands. Reduced concentration in the BB rating class was mainly seen in real estate

exposure.

In Retail Challengers & Growth Markets, the increase in AAA-rating

was explained by increased

reserve deposit to Deutsche Bundesbank. Volume growth

in AA and A-rated residential mortgages

was

visible in Australia, Germany, Poland and Spain. This positive effect on the rating composition

of C&G was slightly off-set by an increase in B rating related to lower ratings of Turkey’s

mid-

corporate segment.

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The rating distribution for Retail Benelux improved

mostly driven by improved risk profile of Dutch

residential mortgages shifting from rating classes BB to BBB, driven by historically low

unemployment rate and continuing increase of the NVM House price index, improving LTV’s.

Corporate line decreased

concentration in AAA rating class due to a reduction in the reserve

deposit with De Nederlandsche Bank.

Industry (*)

The industry composition within Retail is concentrated in private individuals with 71% for Retail

Benelux and 78% for Retail Challengers & Growth. In C&G, mortgage volume increased, primarily in

Germany, Poland and Australia.

In Retail Benelux the slight increase in Belgium and Luxemburg

was largely off-set by the overall

reduction in Dutch mortgages due to a trend of early pre-payments and the transfer from

Westland Utrecht

Bank to Nationale Nederlanden.

Within Wholesale Banking, the sector development in Central Governments and Central Banks is

consistent with the aforementioned development in the AAA-rating category. Exposure

towards

Commercial Banks decreased mainly due to reduced

pre-settlement and lending exposures within

UK, Republic of Korea and Spain. Outstanding to Non-Bank FIs increased,

most notably in funds &

fund management sub-industry in Western Europe.

Apart from the movements against the financial counterparties,

ING Wholesale increased its

exposure to Food, Beverages

& Personal Care industry (in Brazil

and Hong Kong); to Natural

Resources (UK and Singapore), and to Utilities (Luxemburg

and the UK). Exposure decreased

in Real

Estate (Italy and the Benelux), Services (France

and Belgium), and General Industries (US and the

Netherlands).

Portfolio analysis per geographical

area (*)

The portfolio analysis per geographical area re-emphasizes the international distribution of the ING

portfolio. The share of Netherlands in the overall portfolio decreased

further from 25.9% to 24.6%.

The most noticeable outstanding trends in the Netherlands were the previously mentioned

reduction in regulatory reserves with the central

bank. The lower volumes of residential mortgage

loans were almost completely off-set by a growth in term loans granted to SMEs. For

Belgium the

overall exposure

remained fairly stable as the reduction in the central bank deposit was off-set by

increased exposures to Non-Bank FIs and growth

in term loans to mid-corporates. Outstanding in

Germany increased mainly due to residential mortgage lending, instalment loans and central bank

exposures.

The higher exposure in the Americas was mainly driven by bond exposures to the US central

government. In Asia, the concentration of outstanding slightly increased, with noticeable growth in

exposure to Japan and Singapore, partly off-set by reduced exposures in China and Republic of

Korea. Australia

reported a growth in outstanding which was mainly driven by trade related

transactions with Commercial Banks and mortgage lending to Private Individuals.

The top 5 countries within Rest of Europe based on outstanding were:

Italy (EUR 16,781 million),

Switzerland (EUR 12,016 million), Turkey (EUR 11,383 million), Romania (EUR 7,473 million) and

Russian Federation (EUR 5,652 million).

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Outstandings by economic sectors and geographical area

1

(*)

Region

Total

Total

Industry

Netherlands

Belgium

Germany

Poland

Spain

United

Kingdom

Luxemburg

France

Rest of

Europe

America

Asia

Australia

Africa

2019

2018

Private Individuals

117,194

43,057

84,281

11,296

20,758

248

3,019

2,242

15,626

222

179

33,602

36

331,758

320,637

Central Banks

21,635

16,651

7,573

211

370

1,867

5,048

796

6,454

0

4,951

200

8

65,766

62,202

Commercial Banks

1,918

358

4,231

254

743

7,206

3,771

5,945

7,398

7,682

13,576

3,353

352

56,788

58,814

Natural Resources

2,556

1,323

959

729

220

4,307

2,339

652

16,037

9,521

15,442

749

1,061

55,894

54,521

Central Governments

7,970

5,777

3,033

6,626

4,597

42

184

1,554

6,668

9,724

1,071

689

367

48,300

43,037

Non-Bank Financial Institutions

4,168

2,516

3,824

1,292

906

7,486

4,438

1,815

4,974

12,435

3,259

674

149

47,936

40,720

Real Estate

17,162

8,949

450

2,375

659

326

2,410

3,006

3,682

3,395

805

3,091

8

46,320

53,092

Transportation

& Logistics

4,722

2,298

505

1,100

569

2,081

868

812

6,129

3,979

6,818

651

447

30,980

30,481

Food, Beverages

& Personal Care

6,301

3,095

322

2,093

329

995

1,779

874

2,602

4,632

1,651

111

19

24,802

22,923

Services

4,683

9,272

574

822

162

774

646

711

1,109

2,264

604

426

0

22,046

23,363

General Industries

4,096

3,301

1,143

2,295

274

382

437

144

3,504

2,628

1,423

5

0

19,632

21,535

Lower Public Administration

522

5,949

5,798

727

4

728

471

536

958

18

1,686

0

17,397

16,983

Utilities

1,331

1,056

1,673

654

418

2,032

571

445

3,103

3,493

1,380

843

265

17,263

15,893

Chemicals, Health & Pharmaceuticals

4,160

3,517

935

1,066

112

95

257

524

2,812

2,286

474

205

0

16,443

17,577

Other

11,628

9,774

3,260

4,614

664

1,560

1,331

712

8,045

6,694

3,536

782

2

52,603

50,353

Total

210,046

116,894

118,561

36,156

30,785

29,400

27,827

20,703

88,679

69,912

55,188

47,066

2,713

853,930

832,130

Rating class

Investment grade

144,134

73,010

95,685

22,921

23,598

24,429

21,444

15,418

50,878

42,689

41,134

31,542

175

587,056

559,437

Non-Investment grade

60,937

39,994

21,616

12,219

6,832

4,807

6,229

5,163

35,775

25,660

13,553

14,573

2,457

249,814

256,007

Substandard grade

1,993

1,023

555

212

85

17

75

25

484

464

347

265

9

5,555

5,558

NPL grade

2,983

2,867

705

806

270

148

79

96

1,541

1,100

154

686

71

11,506

11,128

Total

210,046

116,894

118,561

36,156

30,785

29,400

27,827

20,703

88,679

69,912

55,188

47,066

2,713

853,930

832,130

1

Geographic areas are based on country of residence, except for private individuals for which the geographic areas are

based on the primary country of risk.

Credit risk mitigation (*)

ING uses various credit risk mitigation techniques and instruments to mitigate the credit risk

associated with an exposure and to reduce the losses incurred subsequent to a default by a

customer.

The most common terminology used in ING for credit risk protection is ‘cover’. While a

cover may be an important mitigant of credit risk and an alternative source of repayment,

generally it is ING’s practice to lend on the basis of the customer’s creditworthiness rather than

exclusively relying on the value of the cover

.

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Cover forms

(*)

Within ING, there are two

distinct forms of covers. First, where the asset has been pledged to ING as

collateral or security ING has the right to liquidate it should the customer is unable to fulfil its

financial obligation.

As such, the proceeds can be applied towards

full or partial compensation of

the customer's outstanding exposure. This may be tangible (such as cash, securities, receivables,

inventory, plant and machinery, and mortgages on real estate properties) or intangible (such as

patents, trademarks, contract rights and licenses). Second, where there

is a third-party obligation,

indemnification or

undertaking (either by contract and/or by law) ING has the right to claim from

that third party an amount, if the customer fails on its obligations. The most common examples

are guarantees (such as parent

guarantees and export credit insurances), letters of comfort or

third-party pledged mortgages.

Cover valuation

methodology (*)

General guidelines for cover valuation are

established to ensure consistent application within ING.

These also require that the value of the cover

is monitored on a regular basis. Covers

are revalued

periodically and whenever there is reason to believe

that the market is subject to significant

changes in conditions. The frequency of monitoring and revaluation depends on the type of cover.

The valuation method also depends on the type of covers. For asset collateral, the valuation

sources can be the customer’s balance sheet (e.g. inventory, machinery and equipment), nominal

value (e.g. cash and receivables),

market value (e.g. securities and commodities), independent

valuations (commercial real estate) and market indices (residential real

estate). For third-party

obligations, the valuation is based on the value that is attributed to the contract between ING and

that third party.

Cover values

(*)

This section provides insight into the types of covers and the extent to which exposures benefit

from collateral or guarantees.

The disclosure differentiates between risk categories (lending,

investment, money market and pre-settlement). The most relevant types of cover

include

mortgages, financial

collateral (cash and securities) and guarantees. ING obtains cover

that is

eligible for credit risk mitigation under CRR/CRDIV, as well as cover that is not eligible. Collateral

covering financial market transactions is valued on a daily basis, and as such not included

in the

following tables. To

mitigate the credit risk arising from Financial Markets transactions, the bank

enters into legal agreements governing the exchange of financial collateral (high-quality

government bonds and cash).

The cover values are

presented for the total portfolio of ING, both the performing and non-

performing portfolio. Our definition of

non-performing is explained in detail in the Credit

restructuring section (below). For additional insight, a breakdown of ING’s portfolio by industry and

geography is provided.

Exposures are categorised into different Value

to Loan (VTL) buckets that give insight in the level of

collateralisation of ING’s portfolio. VTL is calculated as the cover value

divided by the outstandings

at the balance sheet date. The cover values are indexed

where appropriate and exclude any cost of

liquidation. Covers can either be valid for all or some of a borrower’s

exposures or particular

outstandings, the latter being the most common. For the purpose of aggregation, over-

collateralisation is ignored in the total overview

and VTL coverage of more than 100% is reported as

fully covered. For

VTL coverage in the tables for Dutch mortgages, consumer lending and business

lending, each cover is subsequently assigned to one of the six defined

VTL buckets: no cover, >0%

to 25%, >25% to 50%, >50% to 75%, >75% to <100%, and ≥ 100%.

The next table gives an overview of the collateralisation of the ING’s total portfolio.

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Cover values including guarantees received

• Total

ING Bank – 2019

(*)

Outstandings

Cover type

Value to Loan

Mortgages

Financial

Collateral

Guarantees

Other covers

No Cover

Partially

covered

Fully covered

Consumer Lending

329,949

574,786

3,775

26,766

36,774

6.9%

7.6%

85.5%

Business Lending

378,444

154,351

21,073

93,407

296,286

36.7%

24.3%

39.1%

Investment and Money Market

94,866

33

133

64

266

96.0%

3.9%

0.1%

Total

Lending, Investment and Money Market

803,258

729,171

24,981

120,236

333,326

31.4%

15.0%

53.5%

Pre-settlement

1

50,672

Total

Bank

853,930

1

More information on the credit risk mitigants can be found in the Pre-settlement section.

Cover values including guarantees received

• Total

ING Bank – 2018

(*)

Cover type

Value to Loan

Outstan-dings

Mortgages

Financial

Collateral

Guarantees

Other

No Cover

Partially

covered

Fully covered

Consumer Lending

318,804

547,832

3,509

25,760

39,446

6.6%

7.9%

85.4%

Business Lending

365,804

147,205

19,090

86,222

257,929

37.0%

24.5%

38.5%

Investment and Money Market

95,857

80

145

214

90.8%

9.1%

0.2%

Total

Lending, Investment and Money Market

780,465

695,037

22,679

112,128

297,590

31.2%

15.8%

52.9%

Pre-settlement

1

51,665

Total

Bank

832,130

1

More information on the credit risk mitigants can be found in the Pre-settlement section.

Over the year, the collateralisation level of the total portfolio remained stable.

Excluding the pre-

settlement portfolio, 53.5% of ING Group’s outstandings were fully collateralised in 2019 (2018:

52.9%). Since investments traditionally do not require

covers, the percentage for ‘no covers’

in this

portfolio is close to 90%. However, 99% of the investment outstanding is investment grade.

Improved economic conditions in ING’s main markets contributed to improved

collateral valuations,

observed in consumer lending.

Consumer lending portfolio (*)

The consumer lending portfolio accounts for 38.6% of ING’s total outstanding, primarily consisting

of residential mortgage loans and other consumer lending loans, which mainly comprise term

loans, revolvers

and personal loans to consumers. As a result, most of the collateral consists of

mortgages. The mortgage values are collected in an internal central database and in most cases

external data is used to index the market value (e.g. mortgage values for the Netherlands are

updated on a quarterly basis using the NVM house price index).

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Financial Statements

2019 ING Group Annual Report on Form 20-F

187

A significant part

of ING’s residential mortgage portfolio is in the Netherlands (37.9%), followed by

Germany (25.0%), Belgium and Luxembourg (13.6%) and Australia (10.7%). Given the size of the

Dutch mortgage portfolio, the valuation methodology to determine the cover values for Dutch

residential mortgages is provided below.

Dutch mortgages valuation (*)

When a mortgage loan is granted in the Netherlands, the policy dictates maximum loan to market

value (LTMV)

for an existing property and for construction property financing

of 100 percent.

In case of newly built houses usually the building /purchase agreement is sufficient as valuation. In

the case of existing houses three types of valuations are allowed. If the LTMV

is below 90 percent,

either WOZ (fiscal market value, determined by government authorities) or an automated model

valuation (the Calcasa ING Valuation)

are permitted. In most cases, a valuation is performed by

certified valuers that are registered at one of the organisations accepted by ING. In addition, the

valuer must be a member of the NVM (Nederlandse Vereniging

van Makelaars – Dutch Association

of Real Estate Agents), VBO (Vereniging

Bemiddeling Onroerend Goed – Association of Real Estate

Brokers), VastgoedPRO

(Association of Real Estate Professionals) or NVR (Nederlandse Vereniging

van Rentmeesters).

Consumer lending portfolio – cover

values (*)

The below tables show the values of different covers and the VTL split between performing and

non-performing loans.

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Part III

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Additional Information

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Financial Statements

2019 ING Group Annual Report on Form 20-F

188

Cover values including guarantees received

• Consumer lending portfolio – 2019

(*)

Cover type

Value to Loan

Out-

stan-

dings

Mortgages

Financial

Colla-teral

Guarantees

Other covers

No Cover

>0% - 25%

>25%-50%

>50% - 75%

>75% - <100%

≥ 100%

Performing

Residential Mortgages (Private Individuals)

294,658

561,766

2,897

24,281

30,541

0.1%

0.8%

7.2%

91.8%

Residential Mortgages

(SME)

1

5,687

8,786

258

145

1,402

0.2%

0.8%

1.4%

8.0%

89.6%

Other Consumer Lending

26,025

183

603

2,204

3,980

83.8%

0.3%

0.1%

0.1%

0.3%

15.4%

Total

Performing

326,370

570,734

3,759

26,630

35,922

6.7%

–

0.1%

0.8%

6.7%

85.7%

Non-performing

Residential Mortgages (Private Individuals)

2,477

3,804

14

121

720

0.2%

0.2%

0.7%

2.3%

9.6%

87.1%

Residential Mortgages

(SME)

1

147

240

–

7

36

0.2%

0.3%

0.8%

2.9%

6.0%

89.8%

Other Consumer Lending

956

7

2

8

96

94.0%

0.4%

0.2%

0.4%

0.5%

4.6%

Total

Non-performing

3,579

4,052

16

136

852

25.3%

0.2%

0.5%

1.8%

7.0%

65.2%

Total

Consumer Lending

329,949

574,786

3,775

26,766

36,774

6.9%

–

0.1%

0.8%

6.7%

85.5%

1

Consists mainly of residential mortgages to small one man business clients

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Part III

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Additional Information

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Financial Statements

2019 ING Group Annual Report on Form 20-F

189

Cover values including guarantees received

• Consumer lending portfolio – 2018

(*)

Cover type

Value to Loan

Outstanding

s

Mortgages

Financial

Collateral

Guarantees

Other covers

No Cover

>0% - 25%

>25%-50%

>50% - 75%

>75% -

<100%

≥ 100%

Performing

Residential Mortgages (Private Individuals)

285,976

535,664

2,839

23,741

33,446

0.1%

1.0%

7.3%

91.6%

Residential Mortgages

(SME)

1

5,383

8,219

160

155

1,239

0.3%

0.8%

1.7%

7.5%

89.7%

Other Consumer Lending

23,937

156

493

1,694

4,072

84.7%

0.3%

0.1%

0.1%

0.5%

14.3%

Total

Performing

315,297

544,039

3,492

25,591

38,757

6.4%

0.1%

0.1%

0.9%

6.8%

85.7%

Non-performing

Residential Mortgages (Private Individuals)

2,490

3,568

16

152

607

0.5%

0.2%

0.8%

2.9%

13.6%

82.0%

Residential Mortgages

(SME)

1

134

218

9

29

0.4%

0.7%

2.4%

8.9%

87.7%

Other Consumer Lending

884

7

1

9

52

95.4%

0.5%

0.1%

0.2%

0.6%

3.2%

Total

Non-performing

3,508

3,793

17

169

689

24.4%

0.2%

0.6%

2.2%

10.1%

62.4%

Total

Consumer Lending

318,804

547,832

3,509

25,760

39,446

6.6%

0.1%

0.1%

1.0%

6.9%

85.4%

1

Consists mainly of residential mortgages to small one man business clients

The collateralisation of the consumer lending portfolio continued to improve during 2019. The rise

in collateralisation levels was due to rising housing prices observed in different mortgage markets,

specifically noticeable in the

Netherlands.

ING’s residential mortgage outstanding increased mainly in Germany (3.1%), Spain (14.8%) and

Poland (23.2%). Mortgage outstanding in the Netherlands decreased slightly (0.8%). For the

residential mortgages portfolio, the cover type guarantees relate to mortgages covered

by

governmental insurers under the Nationale Hypotheek Garantie (NHG) in the Netherlands. The NHG

guarantees the repayment of a loan in case of a forced

property sale.

Business lending portfolio (*)

Business lending accounts for 44.3 percent of ING’s total outstanding (44.0 percent in 2018). In line

with our objective to give stakeholders insight into the portfolio, we present the business lending

portfolio per industry breakdown in accordance with the NAICS definition and per region and main

market. Business Lending presented in this section does not include pre-settlement, investment

and money market exposures, which are outlined in the next sections.

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Additional Information

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Financial Statements

2019 ING Group Annual Report on Form 20-F

190

Cover values including guarantees received

• Business lending portfolio – 2019

(*)

Cover type

Value to Loan

Industry

Outstandings

Mortgages

Financial

Collateral

Guarantees

Other covers

No Cover

>0% - 25%

>25%-50%

>50% - 75%

>75% - <100%

≥ 100%

Natural Resources

53,796

1,197

2,426

22,041

35,691

26.6%

15.3%

9.6%

11.6%

12.9%

24.1%

Real Estate

45,927

85,946

1,442

5,942

17,765

2.6%

0.7%

1.9%

2.0%

9.7%

83.1%

Central Banks

42,087

7

100.0%

Non-Bank Financial Institutions

30,230

13,726

11,486

6,565

43,672

26.2%

2.8%

4.6%

5.0%

5.9%

55.6%

Transportation

& Logistics

29,303

3,293

168

7,519

36,223

17.0%

6.4%

2.3%

4.1%

11.3%

58.9%

Food, Beverages

& Personal Care

22,585

8,030

407

8,777

34,633

24.5%

5.2%

7.8%

10.3%

12.8%

39.5%

Commercial Banks

22,508

331

129

1,656

6,062

72.4%

3.3%

2.0%

1.6%

5.9%

14.8%

Services

21,044

10,090

1,519

8,799

29,470

30.7%

5.0%

6.3%

6.5%

6.9%

44.6%

General Industries

18,849

5,031

246

5,369

22,154

32.2%

5.1%

4.3%

8.3%

9.6%

40.6%

Utilities

15,952

242

1,036

3,785

7,928

41.7%

19.7%

3.9%

5.5%

2.0%

27.3%

Chemicals, Health & Pharmaceuticals

15,410

8,361

203

3,744

12,439

26.4%

6.7%

3.9%

7.5%

11.8%

43.7%

Builders & Contractors

15,054

7,449

201

3,802

15,704

27.5%

6.7%

7.2%

8.6%

8.7%

41.2%

Others

1

45,698

10,655

1,800

15,407

34,546

41.5%

4.9%

4.6%

5.8%

7.7%

35.4%

Total

Business Lending

378,444

154,351

21,073

93,407

296,286

36.7%

6.0%

4.4%

5.7%

8.2%

39.1%

of which Total Non-performing

7,856

2,600

281

2,643

6,305

32.6%

3.6%

7.9%

9.2%

16.5%

30.2%

1

‘Others’ comprises industries with outstandings lower than EUR 10 billion.

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Part III

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Additional Information

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Financial Statements

2019 ING Group Annual Report on Form 20-F

191

Cover values including guarantees received

• Business lending portfolio – 2018

(*)

Cover type

Value to Loan

Industry

Outstandings

Mortgages

Financial

Collateral

Guarantees

Other covers

No Cover

>0% - 25%

>25%-50%

>50% - 75%

>75% - <100%

≥ 100%

Natural Resources

52,783

1,170

2,142

17,944

38,366

23.9%

15.5%

11.9%

11.2%

13.3%

24.2%

Real Estate

52,476

93,181

1,500

7,399

10,995

4.3%

1.2%

2.2%

3.1%

7.6%

81.6%

Central Banks

34,365

6

100.0%

Non-Bank Financial Institutions

21,083

1,581

9,163

5,529

32,346

34.6%

5.6%

3.2%

9.1%

6.9%

40.6%

Transportation

& Logistics

28,980

3,085

148

7,470

30,855

17.7%

6.2%

3.0%

4.5%

10.3%

58.4%

Food, Beverages

& Personal Care

20,970

7,376

302

7,380

24,099

28.7%

4.9%

6.8%

10.3%

11.8%

37.6%

Commercial Banks

23,876

323

338

1,312

3,918

78.8%

2.6%

1.7%

0.3%

6.2%

10.4%

Services

22,248

9,379

2,889

7,480

21,432

34.1%

4.7%

4.2%

6.7%

6.0%

44.3%

General Industries

20,391

5,027

263

6,065

31,648

33.2%

5.9%

3.7%

8.4%

8.3%

40.5%

Utilities

14,442

376

616

3,447

7,955

42.2%

16.4%

5.6%

5.1%

3.6%

27.1%

Chemicals, Health & Pharmaceuticals

16,444

8,634

203

3,899

10,849

35.5%

2.8%

3.9%

7.6%

11.9%

38.3%

Builders & Contractors

14,843

7,132

205

4,370

13,739

27.0%

7.5%

5.7%

8.2%

10.5%

41.1%

Others

1

42,901

9,941

1,315

13,927

31,728

43.5%

4.2%

5.1%

4.7%

7.8%

34.6%

Total

Business Lending

365,804

147,205

19,090

86,222

257,929

37.0%

5.9%

4.6%

5.9%

8.2%

38.5%

of which Total Non-performing

7,543

3,578

266

2,676

4,447

28.7%

3.8%

4.9%

9.1%

15.7%

37.7%

1

‘Others’ comprises industries with outstandings lower than EUR 10 billion.

Contents

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Part III

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Additional Information

|

Financial Statements

2019 ING Group Annual Report on Form 20-F

192

Cover values including guarantees received

• Business lending portfolio – 2019

(*)

Cover type

Value to Loan

Region

Outstandings

Mortgages

Financial

Collateral

Guarantees

Other covers

No Cover

>0% - 25%

>25%-50%

>50% - 75%

>75% - <100%

≥ 100%

Europe

Netherlands

81,383

60,334

3,265

8,845

52,909

37.4%

2.8%

3.7%

5.3%

10.7%

40.1%

Belgium

51,881

35,937

1,231

23,583

51,204

25.4%

1.8%

2.6%

4.0%

6.7%

59.5%

Germany

18,366

3,143

95

1,237

4,916

62.7%

9.2%

2.4%

2.2%

2.5%

20.9%

Luxembourg

19,013

7,076

1,690

3,780

31,685

48.3%

2.3%

6.6%

3.2%

3.0%

36.7%

Poland

17,498

8,896

135

3,053

27,356

30.1%

3.4%

4.6%

7.0%

11.4%

43.4%

United Kingdom

14,919

1,132

1,128

4,381

10,159

39.0%

18.0%

5.7%

8.9%

5.3%

23.0%

Switzerland

11,328

83

656

2,950

6,085

35.7%

13.7%

12.3%

7.4%

11.7%

19.2%

France

10,015

6,843

147

2,003

4,661

39.5%

5.7%

5.5%

3.5%

1.3%

44.6%

Rest of Europe

48,494

15,504

2,873

17,219

40,243

32.1%

7.8%

4.9%

4.7%

10.2%

40.2%

America

48,048

7,253

7,856

8,827

39,792

39.7%

6.1%

5.0%

6.6%

9.2%

33.4%

Asia

45,131

920

1,941

14,051

24,632

37.2%

8.4%

4.5%

9.2%

7.2%

33.5%

Australia

9,731

7,219

4

1,640

1,867

37.3%

9.6%

1.5%

3.0%

5.5%

43.1%

Africa

2,638

9

51

1,838

778

9.2%

16.5%

9.6%

13.2%

12.2%

39.3%

Total

Business Lending

378,444

154,351

21,073

93,407

296,286

36.7%

6.0%

4.4%

5.7%

8.2%

39.1%

of which Non-performing

7,856

2,600

281

2,643

6,305

32.6%

3.6%

7.9%

9.2%

16.5%

30.2%

Contents

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Part

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Part

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Part III

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Additional Information

|

Financial Statements

2019 ING Group Annual Report on Form 20-F

193

Cover values including guarantees received

• Business lending portfolio – 2018

(*)

Cover type

Value to Loan

Region

Outstandings

Mortgages

Financial

Collateral

Guarantees

Other covers

No Cover

>0% - 25%

>25%-50%

>50% - 75%

>75% - <100%

≥ 100%

Europe

Netherlands

84,669

56,560

2,978

7,560

49,346

43.4%

2.1%

2.9%

5.7%

9.8%

36.1%

Belgium

49,464

34,299

990

18,601

45,209

25.0%

2.0%

3.1%

4.2%

6.4%

59.4%

Germany

15,168

2,288

71

1,366

4,064

62.4%

5.0%

3.3%

3.9%

2.3%

23.1%

Luxembourg

12,903

6,834

2,626

3,768

22,132

23.4%

5.6%

12.8%

6.1%

3.6%

48.5%

Poland

15,982

7,992

122

3,054

26,346

30.2%

3.8%

3.4%

7.1%

10.1%

45.4%

United Kingdom

14,623

1,031

1,191

3,411

7,883

41.1%

18.5%

4.8%

3.4%

9.9%

22.3%

Switzerland

11,109

18

470

2,543

4,773

30.7%

25.2%

11.0%

7.6%

6.8%

18.8%

France

9,828

7,312

106

2,631

4,054

42.1%

2.5%

4.8%

4.0%

1.0%

45.6%

Rest of Europe

52,084

17,813

2,690

18,908

28,064

33.7%

7.5%

4.7%

6.2%

8.3%

39.7%

America

47,458

6,105

6,408

7,007

39,839

40.1%

5.6%

6.1%

6.8%

9.1%

32.2%

Asia

41,943

868

1,153

14,391

23,332

37.9%

9.1%

5.2%

7.4%

9.0%

31.3%

Australia

7,741

6,074

226

939

1,965

33.6%

3.4%

1.8%

3.7%

6.3%

51.2%

Africa

2,830

10

62

2,043

925

15.5%

4.6%

6.5%

16.6%

25.0%

31.7%

Total

Business Lending

365,804

147,205

19,090

86,222

257,929

37.0%

5.9%

4.6%

5.9%

8.2%

38.5%

of which Non-performing

7,543

3,578

266

2,676

4,447

28.7%

3.8%

4.9%

9.1%

15.7%

37.7%

The tables above describe the collateralisation of ING’s business lending portfolio. Breakdowns are

provided by industry as well as by geographical region

or market, based on the residence of the

borrowers.

Broken down by industry, the largest increase

in outstanding is attributable to Non-Bank Financial

Institutions (EUR 9.1 billion, 43.1%), followed by Central Banks (EUR 7.7 billion, 22.5%), with low

covers. The largest decrease in outstanding was observed in

Chemicals, Health & Pharmaceuticals

(EUR 8.2 billion), where the total cover percentage increased.

The proportion of the business lending portfolio in Africa and the Netherlands with no cover

decreased substantially year-on-year, respectively from 15.5% to 9.2% and from 43.4% to 37.4% in

2019. All industry types experienced an increase in total covers, but while the industries’ cover

levels grew, only the outstanding for Utilities grew

slightly faster.

The largest increases in outstanding in absolute figures were seen in Germany (21.1%) and Asia

(7.6%). The increase in Germany (EUR 3.2 billion) was primarily due to increases in term loans,

regulatory reserve deposits and nostro

accounts. As these deposits and nostro accounts are not

collateralised, this increase had only a small impact on total cover amounts.

Credit quality (*)

Following the higher credit risk levels

seen as a result of the financial crisis and economic downturn,

credit quality has been improving since 2014 and also continued the improving

trend in 2019..

Contents

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Part III

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Additional Information

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Financial Statements

2019 ING Group Annual Report on Form 20-F

194

Credit

risk categories

(*)

Regular

Watch List

Restructurin

g

1

Non-

performing

1

Possible ratings

1–19

1–19

11–20

20-22

Typical ratings

1–14

15–17

18–20

20-22

Deterioration in risk

Not

significant

Significant

Significant

Significant

Significant intervention

Not required

Not required

Required

Required

Includes impairments

No

No

Yes

Yes

Account Ownership

Front Office

Front Office

Front Office

Front Office

Credit Risk Management

Regular

Regular

Credit

Restructurin

g

Credit

Restructurin

g

Primary Manager

Front Office

Front Office

Credit

Restructurin

g

Credit

Restructurin

g

Accounting provisioning

Stage 1/2

Stage 1/2

Stage 2/3

Stage 3

1

More information on the Restructuring and Non-performing categories can be found in the Credit restructuring section.

Credit quality outstandings

(*)

2019

2018

Neither past due nor non-performing

831,340

816,588

Business lending past due but performing (1–90 days)1

1

7,747

Consumer lending past due but performing (1–90 days)

3,367

4,440

Non-performing

2

11,477

11,102

Total

853,930

832,130

1

For 2018, the business lending amount past due but performing could not be isolated.

2

Based on lending and investment activities

The credit quality of the ING portfolio improved overall.

For consumer lending past due but

performing, the portfolio decreased by EUR 1.1 billion mainly in Retail portfolio in Belgium &

Luxembourg,

from EUR 1.9 billion to EUR 0.9 billion. For non-performing assets, an increase was

observed mainly in Belgium & Luxembourg for Retail

portfolio (EUR 0.4 billion) and Wholesale

Banking portfolio (EUR 0.3 billion), and the United Kingdom WB (EUR 0.3 billion).

This increase was

partially offset by the decrease in non-performing exposures in Netherlands Retail (EUR 0.4 billion)

and Real Estate & Other (EUR 0.4 billion).

Past due obligations (*)

Retail Banking continuously measures its portfolio in terms of payment arrears and on a monthly

basis determines if there are any significant changes in the level of arrears. This methodology is

principally extended to loans to private individuals, such as residential mortgage loans, car loans

and other consumer loans. An obligation is considered ‘past due’ if a payment of interest or

principal is more than one day late. ING aims to help its customers as soon as they are past due by

communicating to remind them of their payment obligations. In its contact with the customers,

ING aims to solve the (potential) financial difficulties

by offering a range of measures (e.g. payment

arrangements, restructuring). If the issues cannot be cured, for example because the customer is

unable or unwilling to pay, the contract is sent to the recovery unit. The facility is downgraded

to

risk rating 20 (non-performing) when arrears exceed 90 days past due and to risk rating 21 or 22

when the contract is terminated. The table below captures all past due exposures starting from day

1.

Aging analysis (past due but performing): Consumer lending portfolio, outstandings

1

(*)

2019

2018

Past due for 1–30 days

2,564

3,283

Past due for 31–60 days

639

892

Past due for 61–90 days

163

265

Total

3,367

4,440

1

Based on consumer lending. The amount of past due but performing

financial assets in respect of non-lending

activities was

not significant.

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195

Aging analysis (past due but performing): Consumer lending portfolio by geographic area,

outstandings

1

(*)

2019

2018

Region

Residential

Mortgages

Other retail

Total

Total

Europe

Netherlands

829

11

840

934

Belgium

733

166

899

1,870

Germany

372

104

476

606

Poland

145

90

236

215

Luxemburg

21

36

56

46

Spain

3

24

27

55

France

2

10

13

11

United Kingdom

3

3

5

Rest of Europe

195

290

484

515

America

3

3

3

Asia

3

3

2

Australia

310

18

328

178

Africa

1

Total

2,619

749

3,367

4,440

1

Based on consumer lending. The amount of past due but performing

financial assets in respect

of non-lending activities

was not significant.

Total

past due, but performing exposure, for consumer loans decreased by EUR 1.1 billion. The

improvement was mainly visible in the 1-30 days bucket driven by Belgium and the Netherlands

residential mortgages due to macro-economic factors (low unemployment, low inflation and

increasing house prices). This was partially offset by the increase in Australia. Less significant

decreases were witnessed in the 31-60 and 61-90 days past due buckets mainly driven by the

Belgium residential mortgages portfolio.

In Wholesale Banking, ING classifies

the relevant obligors for business loans (governments,

institutions, and corporates) as non-performing when any of the following default triggers occur:

◾

The borrower has failed in the payment of principal or interest/fees and such payment failure has

remained unresolved for

the following periods:

Ÿ

for corporates:

more than 90 days; and

Ÿ

for financial institutions

and governments – from day 1. However,

a period of 14 calendar days

will be observed in order for ING to establish whether the payment default was due to non-

operational reasons (i.e.

the deteriorated credit quality of the financial institution) or due to

operational reasons. The latter does not trigger default.

◾

ING believes the borrower is unlikely to pay; the borrower

has evidenced significant financial

difficulty,

to the extent that it will have a negative impact on the future cash flows of the

financial asset. The

following events could be seen as indicators of financial difficulty:

Ÿ

The borrower (or third

party) has started insolvency proceedings.

Ÿ

A group company/co

-borrower has NPL status.

Ÿ

Significant fraud (affecting

the company’s ability to service its debt).

Ÿ

There is doubt as to the borrower’s ability to generate

stable and sufficient

cash flows to

service its debt.

Ÿ

Restructuring of debt.

◾

ING has granted concessions relating to the borrower’s

financial

difficulty,

the effect of which is a

reduction in expected future cash flows of the financial

asset below current carrying amount.

Further, Wholesale Banking has an individual name approach, using Early Warnings indicators to

signal possible future issues in debt service.

Aging analysis (past

due but performing): Business lending, outstandings

(*)

2019

Past due for 1–30 days

6,681

Past due for 31–60 days

658

Past due for 61–90 days

408

Total

7,747

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Aging analysis (past due but performing): Business lending portfolio by geographic area,

outstandings

(*)

Region

Total

Europe

Netherlands

751

Belgium

1,028

Germany

385

United Kingdom

820

Spain

688

France

639

Luxemburg

340

Poland

279

Rest of Europe

1,445

America

1,159

Asia

187

Australia

23

Africa

2

Total

7,747

Credit restructuring (*)

Global Credit Restructuring (GCR) is the dedicated and independent department that deals with

non-performing loans and loans that hold a reasonable probability that ING will end up with a loss,

if no specific action

is taken. GCR deals with accounts or portfolios requiring an active approach,

which may include renegotiation of terms & conditions and business or financial

restructuring. The

loans are managed by GCR or by units in the various regions and business units.

ING uses three distinct statuses to categorise the management of clients with (perceived)

deteriorating credit risk profiles, i.e. there

is doubt as to the performance and the collectability of

the client’s contractual obligations:

◾

Watch List

: Usually, a client is first

classified

as Watch List when there are

concerns of any

potential or material deterioration in credit risk profile that may affect the ability of the client to

adhere to its debt service obligations or to refinance its existing loans. Watch List status requires

more than usual attention, increased monitoring and quarterly reviews. Some clients with a

Watch List status may develop into a Restructuring status or even

a Recovery status.

◾

Restructuring

: A client is classified

in Restructuring when there are concerns about the client’s

financial stability, credit worthiness, and/or ability to repay, but where the situation does not

require the recall

or acceleration of facilities or the liquidation of collateral. ING’s actions aim to

maintain the going concern status of the client by:

o

Restoring the client’s financial stability;

o

Supporting the client’s turnaround;

o

Restoring the balance between debt and equity; and

o

Restructuring the debt to a sustainable situation.

◾

Recovery

: A client is classified

as in Recovery when ING and/or

the client concludes that the

client’s financial

situation cannot be restored and a decision is made to end the (credit)

relationship or even to enter into bankruptcy. ING will prefer an amicable exit, but will enforce

and liquidate the collateral or claim under the guarantees if deemed necessary.

Watch List, Restructuring and Recovery accounts

are reviewed

at least quarterly by the front office,

GCR, and the relevant credit

risk management executives.

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Non-performing loans (*)

ING’s loan portfolio is under constant review.

Loans with past due financial obligations of more than

90 days are reclassified as non-performing. For commercial lending portfolios, there generally are

reasons for declaring a loan non-performing prior to being 90 days past due. These reasons 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.

The table below represents the breakdown

by industry of credit risk outstandings for lending and

investment positions that have been classified as non-performing.

Non-performing Loans: outstandings by economic sector and business lines

1

(*)

Wholesale

Banking

Retail Benelux

Retail Challengers

& Growth

Markets

Corporate Line

Total

Industry

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

Private Individuals

–

1

2,173

2,163

1,573

1,535

3,746

3,698

Natural Resources

1,108

925

35

43

53

54

1,196

1,022

Food, Beverages

&

Personal Care

599

372

351

294

168

109

1,119

775

Transportation

&

Logistics

651

599

96

177

40

28

787

804

Services

320

260

357

265

60

38

737

563

Builders & Contractors

265

405

258

332

168

152

691

889

Real Estate

312

823

311

333

9

3

631

1,159

General Industries

248

373

204

186

153

135

605

693

Non-Bank Financial

Institutions

426

25

34

27

2

2

462

54

Retail

89

80

172

134

63

44

325

258

Other

2

467

507

326

274

110

90

275

314

1,178

1,187

Total

4,487

4,370

4,316

4,229

2,399

2,188

275

313

11,477

11,102

1

Based on Lending and Investment outstandings.

2

Economic sectors not specified

in above overview are grouped in Other.

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Non-performing Loans: outstandings by economic sectors and geographical area

(*)

Region

Total

Total

Industry

Netherlands

Belgium

Germany

Poland

Spain

United

Kingdom

France

Luxemburg

Rest of

Europe

America

Asia

Australia

Africa

2019

2018

Private Individuals

840

1,271

585

134

195

4

14

24

411

4

3

261

1

3,746

3,698

Natural Resources

83

21

28

63

254

533

84

111

20

1,196

1,022

Food, Beverages

& Personal

Care

315

153

63

117

1

12

68

1

109

254

26

1,119

775

Transportation

& Logistics

432

48

1

31

47

49

3

88

32

10

46

787

804

Services

224

377

0

36

3

49

42

6

737

563

Builders & Contractors

88

226

1

103

1

3

230

39

691

889

Real Estate

219

225

0

96

19

7

28

27

8

4

631

1,159

General Industries

176

148

12

89

3

1

127

48

1

605

693

Non-Bank Financial Institutions

53

8

3

7

0

0

5

14

107

264

462

54

Retail

74

147

40

4

7

1

52

325

258

Other

1

464

239

44

130

10

1

9

173

34

23

51

1,178

1,187

Total

2,968

2,864

705

805

270

144

96

79

1,534

1,099

154

686

71

11,477

11,102

1

Economic sectors not specified

in above overview are grouped in Other.

The non-performing portfolio increased slightly during 2019. The increase was mainly visible in

Challengers & Growth and Wholesale Banking. The increase in Challengers & Growth was due to a

combination of various smaller items, while the increase in Wholesale Banking was mainly driven

by Food, Beverages

& Personal Care and Natural

Resources. This was largely

offset by a significant

decrease in Real Estate NPL outstandings. The largest

increases were witnessed in Belgium in the

services industry, the natural resources industry in the Americas and in Australia

over various

smaller items. The largest decreases were

visible in the Netherlands in real estate and private

individuals.

.

Forbearance

(*)

Forbearance occurs when a client is unable to meet their financial commitments due to financial

difficulties

it faces or is about to face and ING grants concessions towards this client. Forborne

assets are assets in respect of which forbearance measures

have been granted.

Forbearance may enable clients experiencing financial difficulties

to continue repaying their debt.

For business customers, ING mainly applies forbearance measures to support clients with

fundamentally sound business models that are experiencing temporary difficulties

with the aim of

maximising the client’s repayment ability and therewith avoiding a default situation or helping the

client to return to a performing situation.

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2019 ING Group Annual Report on Form 20-F

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For ING retail units, clear criteria have been established to determine whether a client is eligible for

forbearance process. Specific approval mandates are

in place to approve the measures, as well

as

procedures to manage, monitor and report the forbearance

activities.

ING reviews the performance of forborne exposures at least quarterly, either on a case-by-case

(business) or on a portfolio (retail) basis.

All exposures are eligible for forbearance

measures, i.e. both performing (Risk Ratings 1-19) and

non-performing (Risk Ratings 20-22) exposures. ING uses specific criteria to

move forborne

exposures from non-performing to performing or to remove

the forbearance statuses that are

consistent with the corresponding EBA standards. An exposure is reported

as forborne for a

minimum of two years. An additional one year probation period is observed for forborne exposures

that move from

non-performing back to performing.

The prior period outstandings and performing/ non-performing amounts in the table Summary

Forborne

assets have been updated by EUR 46 million to improve consistency and comparability to

the current year presentation.

This is also applicable to the other tables in this section

Forbearance.

Summary Forborne portfolio

1

(*)

2019

2018

Business Line

Outstandi

ngs

Of which:

Perfor-

ming

Of which:

Non-

Perfor-

ming

% of total

portfolio

Outstandi

ngs

Of which:

Perfor-

ming

Of which:

Non-

Perfor-

ming

% of total

portfolio

Wholesale Banking

4,632

2,699

1,932

1.7%

5,081

3,088

1,994

1.9%

Retail Banking

4,861

2,686

2,175

1.1%

5,012

2,862

2,151

1.2%

Total

9,492

5,385

4,107

1.3%

10,094

5,949

4,145

1.4%

1

Undrawn commitments

are excluded.

Summary Forborne portfolio by forbearance type

1

(*)

2019

2018

Forbearance type

Outstandi

ngs

Of which:

Perfor-

ming

Of which:

Non-

Perfor-

ming

% of total

portfolio

Outstandi

ngs

Of which:

Perfor-

ming

Of which:

Non-

Perfor-

ming

% of total

portfolio

Loan modification

8,285

4,800

3,485

1.1%

8,410

4,827

3,583

1.2%

Refinancing

1,208

585

622

0.2%

1,684

1,122

561

0.2%

Total

9,492

5,385

4,107

1.3%

10,094

5,949

4,145

1.4%

1

Undrawn commitments are excluded.

As per December 2019 ING’s total forborne assets decreased by EUR 0.6 billion (6%) against

December 2018 to EUR 9.5 billion, mainly driven by Wholesale Banking (-EUR 0.5 billion). Please

note, that 2018 amount includes EUR 46 million of non-IFRS eligible items (i.e. undrawn

commitments and guarantees).

Wholesale Banking

(*)

As per December 2019, Wholesale Banking forborne assets amounted to EUR 4.6 billion, which

represented 1.7% of the total Wholesale Banking portfolio.

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Wholesale Banking: Forborne portfolio by geographical area

1

(*)

2019

2018

Region

Outstandi

ngs

Of which:

Perfor-

ming

Of which:

Outstandi

ngs

Of which:

Perfor-

ming

Of which:

Non-

Perfor-

ming

Non-

Perfor-

ming

Europe

Netherlands

822

410

412

1,138

687

451

Belgium

41

16

25

131

102

29

Germany

246

182

63

127

94

33

United Kingdom

332

251

81

287

246

41

Italy

197

115

83

388

113

275

Ukraine

169

77

93

297

108

189

Norway

151

124

27

258

236

22

Poland

134

31

103

190

78

113

Rest of Europe

502

322

180

462

288

174

America

1,315

759

556

1,173

695

478

Asia

316

206

109

378

300

78

Australia

214

85

129

104

86

17

Africa

192

122

71

148

55

93

Total

4,632

2,699

1,932

5,081

3,088

1,994

1

Undrawn commitments are excluded.

Wholesale Banking: Forborne portfolio by economic sector

1

(*)

2019

2018

Industry

Outstandi

ngs

Of which:

Perfor-

ming

Of which:

Outstandi

ngs

Of which:

Perfor-

ming

Of which:

Non-

Perfor-

ming

Non-

Perfor-

ming

Natural Resources

1,587

909

678

1,474

943

532

Transportation

& Logistics

674

362

313

833

445

388

General Industries

427

286

142

402

190

212

Food, Beverages

& Personal Care

375

227

148

244

161

83

Real Estate

374

207

167

998

601

397

Chemicals, Health & Pharmaceuticals

212

209

3

189

171

19

Builders & Contractors

195

79

116

145

37

109

Utilities

188

55

133

181

30

152

Services

129

69

60

129

76

53

Retail

114

92

22

118

84

34

Automotive

108

72

36

134

131

3

Other

248

134

114

233

220

12

Total

4,632

2,699

1,932

5,081

3,088

1,994

1

Undrawn commitments are excluded.

The main concentration of forborne assets in a single country was in the Netherlands with 18%

(2018: 22%) of the total Wholesale Banking forborne assets and 21% (2018: 23%) of the total non-

performing forborne assets.

Wholesale Banking forborne assets decreased by EUR 0.5 billion compared to 2018, of which the

performing forborne assets decreased by EUR 0.4 billion. The decrease of the performing forborne

assets was attributed mostly to a few cured large entities which exited forborne status.

Wholesale Banking forborne assets were mainly concentrated in Natural Resources,

Transportation

& Logistics and General Industries. Together

they accounted for 58% of the total Wholesale

Banking forborne assets and 59% of the total Wholesale Banking non-performing forborne assets.

Back in 2018, the main concentration was witnessed in Natural Resources,

Real Estate and

Transportation

& Logistics, with 65% of the total WB forborne. A significant decrease in forborne

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2019 ING Group Annual Report on Form 20-F

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assets was visible in the Real Estate industry (EUR 0.6 billion) during 2019, followed by the

Tra

nsportation & Logistics (-EUR 0.2 billion), partly offset by the Food, Beverages & Personal Care

and the Natural Resources

(+EUR 0.1 billion each).

Retail Banking

(*)

As per end of December 2019, Retail Banking forborne assets amounted to a total of EUR 4.9 billion,

which represented 1.1% of the total Retail Banking portfolio.

Retail Banking: Forborne portfolio by geographical area

1

(*)

2019

2018

Region

Outstandi

ngs

Of which:

Perfor-

ming

Of which:

Outstandi

ngs

Of which:

Perfor-

ming

Of which:

Non-

Perfor-

ming

Non-

Perfor-

ming

Europe

Netherlands

2,212

1,367

845

2,461

1,514

946

Belgium

1,149

435

714

1,046

383

663

Germany

425

294

131

462

337

126

Turkey

314

184

130

273

197

77

Poland

209

101

109

216

115

101

Romania

101

55

46

69

36

33

Italy

25

13

12

25

13

12

Spain

25

13

12

39

23

16

Rest of Europe

43

22

22

37

18

19

America

2

1

1

1

1

Asia

1

0

1

3

2

1

Australia

354

201

153

381

225

156

Africa

Total

4,861

2,686

2,175

5,012

2,862

2,151

1

Undrawn commitments are excluded.

The main concentration of forborne assets in a single country was in the Netherlands with 46%

(2018: 49%) of the total Retail Banking forborne assets and 39% (2018: 44%) of the non-performing

forborne assets. .

Loan Loss Provisioning

(*)

Since 1 January 2018, ING has recognised loss allowances based on the expected credit loss model

(ECL) of IFRS 9, which is designed to be forward-looking. The IFRS 9 impairment requirements are

applicable to on-balance sheet financial

assets measured at amortised cost or fair value through

other comprehensive income (FVOCI), such as loans, debt securities and lease receivables, as well

as off-balance sheet items such as undrawn loan commitments, certain financial

guarantees, and

undrawn committed revolving

credit facilities. These financial instruments are divided into three

groups, depending on the stage of credit quality deterioration.

IFRS 9 models (*)

The IFRS 9 models leverage the advanced internal rating

-based (AIRB) models (PD, LGD, EAD), which

include certain required conservatism. In order

to include IFRS 9 requirements, such regulatory

conservatism is removed from

the ECL parameters (PD, LGD and EAD). The IFRS9 models apply two

types of adjustments to the ECL parameters: (1) to economic outlook and (2) for stage 2 and stage

3 assets only, to the lifetime horizon. The IFRS9 model parameters are estimated based on

statistical techniques and supported by expert judgement.

Portfolio quality (*)

As shown in the table below, 94.0% of the total gross carrying amounts is classified as stage 1,

mainly composed of investment grade, while stage 2 and 3 make up 4.7% and 1.3% of total

amounts, respectively..

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Gross Carrying amount per IFRS 9 stage and rating class

1,2,3,4

(*)

2019

Stage 1

Stage 2

Stage 3

Total

Rating class

Gross Carrying

Amount

Provisions

Gross Carrying

Amount

Provisions

Gross Carrying

Amount

Provisions

Gross Carrying

Amount

Provisions

Investment grade

1 (AAA)

75,144

1

75,144

1

2-4 (AA)

82,992

3

28

83,020

3

5-7 (A)

131,931

11

273

132,204

11

8-10 (BBB)

295,449

55

4,905

6

300,354

61

Non-Investment grade

11-13 (BB)

194,643

209

7,925

54

202,568

263

14-16 (B)

36,683

202

18,416

367

55,099

569

17 (CCC)

405

7

4,067

146

4,472

153

Substandard grade

18 (CC)

3,253

160

3,253

160

19 (C)

2,216

148

2,216

148

NPL grade

20-22 (D)

10,955

3,275

10,955

3,275

Total

817,247

490

41,082

881

10,955

3,275

869,284

4,646

1 Compared to the credit risk portfolio, the differences are mainly undrawn committed amounts (EUR 115 billion) not included in Credit outstandings and non-IFRS 9 eligible assets (EUR 100 billion,

mainly guarantees, letters of credit and pre-settlement exposures)

included in Credit outstandings.

2 For a reference

to the Notes in the consolidated financial

statements, we refer to the table ‘Reconciliation between credit risk categories and financial position’, page 176.

3 IAS 37 provisions (EUR 93.3 million) are excluded.

4 The table is generated in 2019 for the first time, no comparable schedule for 2018 available.

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Changes in loan loss provision and gross carrying amounts

(*)

##SL

Changes in gross carrying amounts and loan loss provisions

(*)

1,2,3,4

2019

Stage 1

Stage 2

Stage 3

Total

Gross carrying

amount

Provisions

Gross carrying

amount

Provisions

Gross carrying

amount

Provisions

Gross carrying

amount

Provisions

Opening balance

788,537

501

46,949

925

10,758

3,141

846,244

4,568

Transfer

into 12-month ECL (Stage 1)

12,856

30

-12,579

-253

-277

-23

-246

Transfer

into lifetime ECL not credit impaired

(Stage 2)

-21,577

-73

22,382

474

-805

-81

320

Transfer

into lifetime ECL credit impaired

(Stage 3)

-2,210

-6

-1,753

-135

3,964

1,113

972

Net remeasurement of loan loss provisions

-77

36

283

242

New financial assets originated or purchased

180,605

205

180,605

205

Financial assets that have been derecognised

-126,082

-103

-9,108

-162

-1,659

-137

-136,849

-402

Net drawdowns and repayments

-14,880

-4,807

1

-19,686

Changes in models/risk parameters

15

2

-8

9

Increase in loan loss provisions

-9

-39

1,147

1,099

Write-offs

-1

-1

-2

-2

-1,027

-1,028

-1,030

-1,031

Recoveries of amounts previously

written off

55

55

Foreign exchange

and other movements

-1

-3

-41

-45

Closing balance

817,247

490

41,082

881

10,955

3,275

869,284

4,646

1 At the end of December 2019, the Gross carrying amounts included loans and advances to

central banks (EUR 51.2 billion), loans and advances to banks (EUR 35.1 billion), financial assets at FVOCI (EUR 32.2 billion),

securities at amortised cost (EUR 46.1 billion), loans and advances to customers (EUR 612.6

billion) and contingent liabilities (credit replacements)

in scope of IFRS 9 (EUR 115.7 billion) and

excludes receivables related

to securities in reverse repurchase

transaction (EUR -9.9 billion), cash collateral in respect of derivatives

(EUR -10.2 billion),

a receivable that is offsetted by a liquidity facility (EUR -1.3 billion), de-netting of

cash pool balances (EUR -1.8 billion) and other differences amounting to EUR -0.3 billion.

2 Stage 3 Lifetime credit impaired

includes EUR 1 million Purchased or Originated Credit Impaired

(2018: EUR 2 million).

3 At the end of December 2019, the stock of provisions included provisions

for loans and advances to central banks (EUR 1 million), loans and advances

to banks (EUR 9 million), financial assets at FVOCI (EUR 10 million),

securities at amortised cost (EUR 10 million), provisions for loans and advances to customers (EUR 4,590 million) and provisions

for contingent liabilities (credit replacements)

recorded under Provisions

(EUR 25 million).

4 The table is generated in 2019 for the first time, no comparable schedule for 2018 available.

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The table above provides a reconciliation

by stage of the gross carrying/nominal amount and

allowances for loans and advances to banks and customers, including loan commitments and

financial guarantees. The transfers of financial

instruments represents the impact of stage

transfers upon the gross carrying/nominal amount and associated allowance for

ECL. This includes

the net remeasurement of ECL arising from

stage transfers, for example, moving from a 12-month

(stage 1) to a lifetime (stage 2) ECL measurement basis.

The net remeasurement line represents

the changes in provisions for facilities that remain in the

same stage.

The following table shows the reconciliations from the opening to the closing balance of the loan

loss provisions in 2018.

1

Changes in loan loss provisions

(*)

2018

Stage 1

Stage 2

Stage 3

Total

Provisions

Provisions

Provisions

Provisions

Opening balance

438

955

3,923

5,316

Transfer

into 12-month ECL (Stage 1)

19

-206

-23

-209

Transfer

into lifetime ECL not credit impaired

(Stage 2)

-62

501

-56

383

Transfer

into lifetime ECL credit impaired

(Stage 3)

-7

-86

707

615

Net remeasurement of loan loss provisions

17

-55

312

274

Changes in models/risk parameters

New financial assets originated or purchased

213

212

Financial assets that have been derecognised

-101

-145

-341

-588

Increase in loan loss provisions

80

9

599

688

Write-offs

-1,043

-1,044

Recoveries of amounts previously

written off

53

53

Foreign exchange

and other movements

-18

-38

-390

-446

Closing balance

501

925

3,141

4,568

The following table provides the following

information:

• Information on financial assets that were modified during the year (i.e. qualified as forborne) while they had a loss

allowance measured at an amount equal to lifetime ECL (i.e.

stage 2).

• Financial assets that were reclassified to stage

1 during the period.

Financial assets modified

(*)

2019

2018

Financial assets modified during the period

Amortised cost before modification

2,662

2,503

Net modification results

164

-50

Financial assets modified since initial recognition

Gross carrying amount at 31 December of financial assets for which loss allowance has

changed to 12-month measurement during the period

689

908

Sensitivity analysis of key sources

of estimation uncertainty (*)

The introduction of IFRS 9, with its inherent complexities and potential impact on the carrying

amounts of our assets and liabilities, represents a key source of estimation uncertainty. In

particular, the Group’s reportable ECL numbers are most sensitive to the forward

-looking

macroeconomic forecasts

used as model inputs, the probability-weights applied to each of the

three scenarios, and the criteria for identifying a significant increase in credit risk. As such, these

crucial components require consultation and management judgement, and are subject to

extensive governance.

Forward

-looking macroeconomics used

as model inputs (*)

As a baseline for IFRS 9, ING Group uses the consensus outlook for economic variables. The Oxford

Economics’ Global Economic Model (OEGEM) is then used to complement the consensus with

consistent projections for variables for which there are

no consensus estimates available (most

notably House Price Index (HPI) and unemployment), and to ensure general consistency of the

scenarios.

The Group’s consensus view of the baseline scenario suggests economic growth will level off over

the initial (three year) forecast period, as the pace of expansion in the main advanced economies

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and emerging markets is expected to wane. For the eurozone, as output

gaps close and monetary

policy begins to normalise, growth is expected to decline. For the US, the near-term outlook is still

positive. The Group continues to monitor the potential escalation of an international trade conflict,

and the likely outcome of any Brexit deal, which, at present remains unclear.

The downside scenario sees a relatively synchronised global downturn with economic growth in

advanced economies falling close to zero, and emerging markets suffering a pronounced

slowdown. The upside scenario sees economic growth returning to rates

not seen since the

financial crisis and

a return to pre-crisis unemployment rates.

The relevance and selection of macro-economic variables is defined by the ECL models under credit

risk model governance. The scenarios are review

ed and challenged by two panels. The first panel

consists of economic experts from Global Markets Research and Risk and Modelling specialists,

while the second panel consists of relevant senior managers.

Probability weights applied

to each of the three sce

narios (*)

The alternative scenarios are technically based on the forecast errors

of the OEGEM. To

understand

the baseline level of uncertainty around any forecast, Oxford

Economics keeps track of all its

forecast errors

of the past 20 years. The distribution of forecast errors for GDP, unemployment,

house prices and share prices is applied to the baseline forecast creating a broad

range of

alternative outcomes. In addition, to understand the balance of risks facing the economy in an

unbiased way, Oxford Economics runs a survey with respondents from

around the world and

across a broad range

of industries. In this survey the respondents put forward their views of key

risks. Following the survey results,

the distribution of forecast errors (that is being used for

determining the scenarios) may be skewed.

For the downside scenario, ING has chosen for the 90th percentile of that distribution because this

corresponds with how within risk management earnings at risk is defined

within the Group. The

upside scenario is represented by the 10th percentile of the distribution. The distribution of the

scenarios, taking into account the applicable percentile of the distribution, results in the upside and

downside scenario being weighted at 20% each. Consequently, the base case scenario has a 60%

probability weighting. Please note that, given their technical nature, the downside scenario and

upside scenario are not explicitly based on a specific narrative.

Based on the above two sources of estimation uncertainty, analysis on the sensitivity of key

forward-looking macroeconomic inputs used in the ECL collective-assessment modelling process

and the probability-weights applied to each of the three scenarios is presented below.

The

countries included in the analysis are the Group’s most significant geographic regions, in terms of

both gross contribution to reportable ECL, and sensitivity of ECL to forward

-looking

macroeconomics. Accordingly, the Group

considers these portfolios to present the most significant

risk of resulting in a material adjustment to the carrying amount of financial

assets within the next

financial year. The Group also observes that, in general, the Wholesale business is more sensitive to

the impact of forward-looking macroeconomic scenarios.

Real GPD, unemployment rate and HPI (in that order) are

considered the variables with the largest

impact on the LLP.

Exposure class based the largest impact is observed in Corporates,

followed by

Retail Mortgages, SMEs and Retail non-SMEs. This is supported by statistical analysis. These

forward-looking macroeconomics

(among others) are used in the calculation of the Group’s un-

weighted ECLs, to which are applied the probability-weightings as disclosed, to arrive at the

reportable ECL for collectively-assessed assets. While the table does give a high-level indication of

the sensitivity of the outputs to the different scenarios, it does not provide insight on the

interdependencies and correlations between different macroeconomic

variable inputs.

Furthermore, in addition to forward

-looking macroeconomics, there are a number of other model

inputs and processes which contribute to the calculation of un-weighted ECLs. Any sensitivity

analysis which relies on this data should consider these complexities.

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Sensitivity analysis

1,2,3

(*)

2020

2021

2022

Un-weighted

ECL (Eur mln)

Probability-

weighing

Reportable ECL

(Eur mln)

4

Netherlands

Upside scenario

Real GDP

2.3

3.5

3.2

370

20%

428

Unemployment

2.8

2.4

2.3

HPI

14.1

11.3

2.9

Baseline Scenario

Real GDP

1.4

1.5

1.6

416

60%

Unemployment

3.6

3.9

4.2

HPI

3.3

2.9

2.8

Downside scenario

Real GDP

-0.7

-0.9

0.5

520

20%

Unemployment

5.0

6.3

7.1

HPI

-7.5

-7.0

2.7

Germany

Upside scenario

Real GDP

2.6

2.8

1.8

458

20%

502

Unemployment

2.4

1.7

1.4

HPI

9.7

7.0

6.4

Baseline Scenario

Real GDP

0.8

1.1

1.3

495

60%

Unemployment

3.2

3.2

3.3

HPI

6.1

3.5

2.9

Downside scenario

Real GDP

-1.2

-1.7

0.5

567

20%

Unemployment

4.3

4.8

5.2

HPI

2.5

-0.3

-1.1

Belgium

Upside scenario

Real GDP

2.3

2.6

2.0

323

20%

357

Unemployment

5.5

5.4

5.3

HPI

5.1

4.2

4.3

Baseline Scenario

Real GDP

1.1

1.2

1.3

350

60%

Unemployment

5.8

5.9

6.1

HPI

3.5

3.4

3.4

Downside scenario

Real GDP

-0.4

-0.2

1.0

411

20%

Unemployment

7.5

8.4

8.4

HPI

1.5

2.6

2.4

United States

Upside scenario

Real GDP

2.6

4.1

3.8

74

20%

144

Unemployment

2.6

1.7

1.5

HPI

5.0

8.0

8.1

Baseline Scenario

Real GDP

1.8

1.8

1.9

127

60%

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Unemployment

3.7

3.7

3.8

HPI

2.6

2.6

2.8

Downside scenario

Real GDP

-0.6

-0.5

0.3

267

20%

Unemployment

5.2

6.5

7.1

HPI

0.1

-3.1

-3.4

1 Real GDP, in % year-on-year change

2 Unemployment in % of total labour force

3 House Price Index (HPI) in % year-on-year

4 Sensitivity does not include the effect of

manual adjustments, which are not material

Criteria for identifying a significant increase

in credit risk (*)

All assets and off-balance sheet items are in scope of IFRS 9 impairment and which are subject to

collective ECL assessment are allocated a 12-month ECL if deemed to belong in Stage 1, or a

lifetime ECL if deemed to belong in Stages 2 and 3. An asset belongs in Stage 2 if it is considered to

have experienced a significant increase in credit risk since initial origination or purchase. The stage

allocation process involves an asset’s derived scenario weighted average

PD being assessed against

a set of PD threshold bandings, which determines the appropriate staging and ECL. Stage 2 is

triggered when either a threshold for absolute change in lifetime PD or relative change in lifetime

PD is hit. The thresholds for the absolute change in lifetime PD vary between 75bps for Retail

portfolios, 100bp for Wholesale and 250bps for SMEs, based on the characteristics of the specific

portfolio. The threshold for the relative change in LT

PD are inversely correlated with the PD at

origination; the higher the PD at origination, the lower the threshold. Despite this, the relative

threshold is punitive for Investment grade

assets while the absolute threshold primarily affects

Speculative grade assets.

The Group reports total ECL collective-assessment of EUR 1,291 million

(2018: EUR 1,391 million).

The setting of PD threshold bandings requires management judgement, and is a key source of

estimation uncertainty. To demonstrate

the sensitivity of the ECL to these PD thresholds bandings,

analysis was run on all collectively-assessed assets, which assumed all assets were below the

threshold, and apportioned a 12 month ECL. On the same asset base, analysis was run which

assumed all performing assets were above the threshold, and apportioned a lifetime ECL. This gave

rise to a hypothetical collective-assessment ECLs of EUR 866 million (2018: EUR 888 million) and

EUR 2,665 million (2018: EUR 3,333 million) respectively. Please note that in this analysis all other

ECL risk parameters (except for the stage) were

kept equal.

It should be noted that the lifetime PD thresholds are not the only drivers of stage allocation. An

asset can change stages by virtue of being in arrears, on a Watch List, being forborne etc. Refer to

section 1.6.8 of Note 1 ‘Accounting Policies’ for an exhaustive list. Furthermore, this analysis is

rudimentary in that other parameters would change when an asset changes stages.

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Market

risk

Introduction

Market risk is the risk that movements in market variables, such as interest rates, equity prices,

foreign exchange rates, credit

spreads and real estate prices negatively impact the bank’s earnings,

capital, market value or liquidity position. Market risk either arises through positions in banking

books or trading books. The banking book positions are intended to be held for the long-term (or

until maturity) or for the purpose of hedging other banking book positions. The trading book

positions are typically

held with the intention of short-term trading or in order to hedge other

positions in the trading book. This means that financial

instruments in the trading books should be

free of trade restrictions. Policies

and processes are in place to monitor the inclusion of positions in

either the trading or banking book as well as to monitor the transfer of risk between the trading

and banking books.

ING recognises the importance of sound market risk management and bases its market risk

management framework on the approach to identify, assess, control and manage market risks.

The approach consists of a cycle of five recurring activities: risk identification,

risk assessment, risk

control, risk monitoring and risk reporting.

(*)

◾

Risk identification is

a joint effort of the first

and second lines of defence out of the three lines of

the defence. The goal of risk identification is to detect

potential new risks and any changes in

known risks. See the Risk Governance paragraph

under the Group risk Management section for

more on our “three lines of defence” governance

model;

◾

Identified risks are assessed and measured by means of various risk metrics to determine the

importance of the risk to ING and subsequently to identify the control measures needed;

◾

Risk control measures used by ING include policies, procedures,

minimum standards, limit

frameworks, buffers and stress tests;

◾

Risk monitoring occurs to check if the implemented risk controls are executed, complied with

across the organisation, and are

effective; and

◾

Market risk management results and findings are reported to the necessary governing

departments and approval bodies.

Governance (*)

A governance framework

has been established defining

specific roles and responsibilities of

business management units, market risk management units, and internal approval bodies per

activity.

Supervision of market risk falls under the responsibility of the MBB and is delegated to the ALCO

function, where ALCO Bank is the highest approval

authority and sets the market risk appetite.

ALCO Bank monitors ING’s adherence to the risk appetite for market risk and sets additional limits

where appropriate. These limits are

cascaded through the organisation through lower

level ALCOs.

This ALCO structure facilitates top-down risk management, limit setting, and the monitoring and

control of market risk.

The monitoring and control of market risk is the responsibility of the Financial Risk (FR) department

and Financial Institutions – Financial Markets (FI-FM) Risk. FR and FI-FM Risk are the designated

departments of the second line of defence that report to the CRO function and are responsible for

the design and execution of the bank’s market risk and counterparty credit risk management

functions in support of the ALCO function. FR focuses on the market risks in the banking books,

whereas FI-FM Risk is responsible for counterparty credit risk and market risks resulting

from the

Financial Markets trading books. FR and FI-FM Risk are responsible for determining adequate policies

and procedures for actively managing market risk in the banking and trading books and for

monitoring ING’s compliance with these guidelines.

FR and FI-FM Risk also maintain a limit framework in line with ING’s Risk Appetite Framework.

The

businesses are responsible for adhering to limits that are ultimately approved

by the ALCO Bank.

Limit excesses are reported to senior management on a timely basis and the business is required

to take appropriate actions to reduce the risk position. To

adhere to the established limit

framework, ING implements hedging and risk mitigation strategies that range from

the use of

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traditional market instruments, such as interest rate swaps, to more

sophisticated hedging

strategies to address a combination of risk factors arising at the portfolio level.

The organisational structure facilitates top-down risk management by recognising that risk taking

and risk management to a large extent occur at the regional/local level. Bottom-up reporting from

regional/local units to head office

units allows each management level to fully assess the market

risks relevant at the respective levels.

Several committees govern

communication between the parties involved in market risk

management. These committees have a functional reporting line to ALCO Bank, which derives its

global discretion from the ING Group Decision Structure and as such is the highest level ING Bank

body with the exception of the Management Board Banking (MBB). The Market Risk Model

Committee (MRMC) is the dedicated authority within ING for the approval of all trading

and banking

risk models, methodologies and parameters related to market risk. The Trading

Pricing Model

Committee (TPMC) approves pricing models for trading

and banking books. Financial Risk and FI-FM

Risk departments provide systematic risk reporting to the EB and MBB, the senior executive

management of the CRO function and the senior executive management of related business

functions.

The FI-FM Risk Management Framework

governs the boundary between trading books and banking

books. It defines the activities

ING considers to be trading according to a regulatory

definition and

for own funds requirement purposes. The trading

activity is systematically reviewed and positions

are assessed against the mandates jointly by the first and

second lines of defence. As specified in

the framework, the transfer of risk or the transfer

of positions between banking and trading books

is in principle not allowed but in exceptional cases when a re-designation is deemed necessary, the

re-designation should be approved by senior management.

The following market risk paragraphs elaborate

on the various elements of the risk management

framework for:

◾

Market risk economic capital (trading and banking books);

◾

Market risks in banking books; and

◾

Market risks in trading books.

Market risk economic capital

(trading and banking books)

Economic capital for market risk is the economic capital necessary to withstand unexpected value

movements due to changes in market variables and model risk.

Economic capital for market risk is calculated for exposures both in trading

portfolios and banking

portfolios and includes interest rate risk, credit spread

risk, equity price risk, foreign exchange rate

risk, real estate risk, model risks and pension risk. Economic capital for market risk is calculated

using internally developed methodologies with a 99.9% confidence

level and a horizon of one year.

For the trading books and the linear interest

rate risk and equity investments in the banking books,

the Value at Risk (VaR)

is taken as a starting point for the economic capital calculations for market

risk. The VaR is measured

at a 99% confidence level, a one day holding period.

To

arrive at the economic capital for market risk, a simulation based model is used which includes

scaling to the required confidence level and holding period. In determining this scaling factor, other

factors are also taken into account like the occurrence of large

market movements (events).

Embedded options, e.g. the prepayment option and offered rate option in mortgages in the

banking books, result in non-linear interest rate

risk in the banking books. The embedded options

are economically hedged using a delta-hedging methodology, leaving the mortgage portfolio

exposed to convexity risk, volatility risk and model risk. For the calculation of economic capital for

this non-linear interest rate risk, ING performs a Monte Carlo simulation.

Real estate price risk includes the market risks in both the real estate investment and the

development portfolio of the ING Wholesale Banking business line. The economic capital for real

estate price risk is calculated by stressing the underlying market variables.

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While aggregating the different economic capital market risk figures for the different portfolios,

diversification benefits

(based on stressed correlations) are taken into account as it is not expected

that all extreme market movements will appear at the same moment.

Market risk in banking books (*)

ING makes a distinction between the trading and banking (non-trading) books. Positions in banking

books originate from the market risks inherent in commercial products that are

sold to clients,

Group Treasury

exposures, and from the investment of our own funds (core

capital). Both the

commercial products and the products used to hedge market risk exposures in these products are

intended to be held until maturity, or at least for the long-term.

Risk transfer

(*)

An important element of the management of market risks in the banking book

is the risk transfer

process. In this process the interest

rate, FX, funding and liquidity risks are transferred

from the

commercial books through matched funding to Group Treasury,

where it is centrally managed. The

scheme below presents the transfer and management process of market risks in the banking

books:

(*)

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Risk measurement (*)

The main concepts and metrics used for measuring market risk in the banking book are described

below per risk type.

Interest rate

risk in banking book (*)

Interest rate risk in the banking book is defined as the exposure of a bank’s earnings, capital, and

market value to adverse movements in interest rates

originated from positions in the banking book.

Governance (*)

The management of interest rate risk follows the Interest Rate

Risk in the Banking Book (IRRBB)

framework as approved

by ALCO Bank. This framework

describes roles, responsibilities, risk metrics,

the policies and procedures related

to interest rate risk management. Furthermore

ALCO Bank sets

the risk appetite for interest rate risk, which is then translated into limits for the interest

rate risk

metrics.

ING’s approach to interest rate

risk management, as set forth in this framework, is the

centralisation of risks from commercial books (that capture

the products sold to clients) to globally

managed interest rate risk books. This enables a clear demarcation between commercial

business

results and results on unhedged interest

rate positions.

ING distinguishes between three types of activities that generate interest rate

risk in the banking

book:

◾

Investment of own funds (by Group Treasury);

◾

Commercial business (e.g. Retail

business); and

◾

The strategic interest rate

position (Group Treasury).

Below the three activities are described in more detail:

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Group Treasury

is responsible for managing the investment of own funds (core capital), more

information can be found in the Capital Management section. Capital is invested for longer periods

to keep earnings stable.

The commercial activities can result in linear interest rate

risk, for example, when re-pricing tenors

of assets differ from those of liabilities. Also, interest rate risk can arise from customer behaviour

depending on the nature of the underlying product characteristics. Customer behaviour risk is

defined as the

potential future value loss due to deviations in the actual behaviour of clients versus

the modelled behaviour towards the embedded options in commercial products. General sources

of

customer behaviour risk include the state of the economy, competition, changes in regulation,

legislation and tax regime, and developments in the housing market. Since these risk factors

cannot be (fully) mitigated, ING holds capital to be able to absorb possible losses as a result of

changed customer behaviour.

From

an interest rate risk perspective, commercial activities can typically be divided into three main

product types: savings and demand deposits, mortgages, and loans.

◾

Savings and demand deposits are generally invested with the goal to hedge their value and

minimize the sensitivity of the margin to market interest rates. Interest

rate risk can arise when

there is a lag between savings rate

adjustments and the adjustments experienced through

market rates or when market rate changes cannot be passed on to clients. Interest rate

risk is

modelled based on the stability of the deposit and the pass through rate. This takes into account

different elements, such as pricing strategies, volume developments and the level and shape of

the yield curve. Savings volumes are typically assumed not to be sensitive to interest rate

shocks;

◾

Interest rate risk for mortgages arises through prepayment

behaviour.

In modelling this risk,

interest rate dependent pre

-payments are considered. Next to the dependence on interest

rates,

modelled prepayment may include other effects such as loan to value, seasonality and the reset

date of the loan. In addition, the interest sensitivity of embedded offered rate options is

considered;

and

◾

Wholesale Banking loans typically do not experience interest rate prepayment behavior as they

are hedged from an interest

rate risk perspective and therefore do not contain significant fixed

rate convexity risk.

Customer behaviour in relation to mortgages, loans, savings and demand deposits is modelled,

based on extensive research. Per

business unit and product type, exposures are typically

segmented into different portfolios based on expected client behaviour. For each of the segments,

model parameters for example for the pass through rate

and customer behaviour are determined

based on historical data and expert opinion. Models are back tested and updated when deemed

necessary. Model parameters and the resulting risk measures are

approved by (local) ALCO.

Linear interest rate risk is transferred

from the commercial business to the treasury book (Group

Treasury),

if necessary, using estimations of customer behaviour. The originating commercial

business is ultimately responsible for estimating customer behaviour, leaving convexity risk and

(unexpected) customer behaviour risk with the commercial business. Risk measurement and the

risk transfer process take place

on a monthly basis, but more often if deemed necessary, for

instance in volatile markets.

The commercial business manages the convexity risk that is the result of products that contain

embedded options, like mortgages. Here the convexity risk is defined as the optionality

effects in

the value due to interest rate changes, excluding the first-order effects. In some cases, convexity

risk is transferred from

the commercial books to treasury books using cap/floor contracts.

Group Treasury

manages the strategic interest rate

position including capital investments. The

main objective is to maximise the economic value of the book and to generate adequate and stable

annual earnings within the risk appetite boundaries set by ALCO Bank.

In the following sections, the interest rate risk exposures in the banking books are

presented. ING

uses risk measures based on both an earnings and a value perspective. Net Interest Income (NII)-

at-Risk is used to provide the earnings perspective and the Net Present Value (NPV)-at-Risk and

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Basis Point Value

(BPV) figures provide the value perspective. Please note that corrective

management actions are not taken into account in these figures although price adjustments are

included in the earnings risk measure.

During 2019, the following refinements to the risk measurement for Interest Rate Risk in the

Banking Book were made:

◾

Review of the risk appetite for Interest Rate

Risk for the Banking Book;

◾

Annual review of the interest rates

scenarios used for calculating NII-a-Risk and NPV-at-Risk; and;

◾

Savings model updates for market developments.

Net Interest Income (NII) at

Risk (*)

NII-at-Risk measures the impact of changing interest rates on (before tax) net interest

income of

the banking book with a time horizon of one year.

This excludes credit spread sensitivity and longer

term earnings impact. The NII-at-Risk figures

in the tables below reflect a parallel interest rate

shock with a time horizon of one year.

Next to parallel scenarios, IRRBB monitoring and

management includes the impact of non-parallel scenarios and the impact over a longer horizon.

The NII-at-Risk asymmetry between the downward and upward

ramped scenarios (gradual shock ≈

+/-100bps) is primarily caused by the convexity risk in the mortgage and savings portfolio due to

the embedded options and pricing constraints.

NII-at-Risk banking books per business

• year 1

(*)

2019

2018

Ramped, unfloored

Ramped, unfloored

parallel

▼

parallel

▲

parallel

▼

parallel

▲

By business

Wholesale Banking

–12

12

–204

239

Retail Banking Benelux

–91

40

–49

22

Retail Challengers & Growth Markets

–3

–3

165

–186

Corporate Line Banking

–30

30

–30

30

Total

–136

79

–119

106

The NII-at-Risk is mainly influenced

by the sensitivity of savings to interest rate movements due to pass through rate

differences between savings rates and investment yields, but is partially offset by the sensitivity of

mortgages. The investment

of own funds only impacts the earnings sensitivity marginally, as only a relatively small part has to

be (re)invested within the

1-year horizon.

NII-at-Risk banking book per currency - year 1

(*)

2019

2018

Ramped, unfloored

Ramped, unfloored

parallel

▼

parallel

▲

parallel

▼

parallel

▲

By currency

Euro

-134

65

–81

60

US Dollar

25

-24

20

–20

Other

-27

39

–57

65

Total

-136

79

–119

106

Year

-on-year variance analysis (*)

The change in NII-at-Risk is mainly visible for Retail Banking Benelux and Retail Challengers &

Growth Markets. This is driven by the savings model updates for market developments in ING

Belgium, ING Germany, ING Netherlands, ING Spain and ING Poland. The annual update of the

interest rate scenarios also led to a limited increase in the NII-a-Risk for year 1.

Net Present Value

(NPV) at Risk (*)

NPV-at-Risk measures the impact of changing interest rates on value.

The NPV-at-Risk is defined as

the outcome of an instantaneous increase and decrease in interest rates

from applying currency

specific scenarios. The

NPV-at-Risk asymmetry between the downward

and upward shock is

primarily caused by convexity risk in the mortgage and savings portfolio. The NPV-at-Risk figures

are also calculated using the updated interest rate

scenarios.

The full value impact cannot be directly linked to the financial

position or profit or loss account, as

fair value movements in banking books are not necessarily reported through

the profit or loss

account or through Other Comprehensive

Income (OCI). 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.

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NPV-at-Risk banking books per business

(*)

2019

2018

unfloored

unfloored

parallel

▼

parallel

▲

parallel

▼

parallel

▲

By business

Wholesale Banking

182

400

–55

134

Retail Banking Benelux

-1,431

268

–1,344

–269

Retail Challengers & Growth Markets

-259

-452

–521

–54

Corporate Line Banking

0

0

–38

35

Total

-1,508

216

–1,958

–153

The asymmetry between the NPV-at-Risk for a downward

and an upward shock scenario is

primarily caused by the convexity risk, which arises from (embedded) optionality in the savings and

mortgage portfolio.

Year

-on-year variance analysis

(*)

The change in NPV-at-Risk for Retail Banking Benelux was driven by updates in the savings model

to reflect the most recent market developments in The Netherlands and Belgium. The internal view

on capital replication of the own funds long-term investments is included in the NPV-at-Risk figures.

Only a mismatch from the target investment profile results in NPV-at-Risk.

IBOR Transition

(*)

Interbank offered rates, such as Euribor and Libor, are widely used as benchmarks to set interest

rates across a broad

range of financial products and contracts. The financial

markets are going

through a significant reform and financial institutions

are obligated to implement a replacement of

these major interest rate reference

rates. In line with recommendations from the Financial Stability

Board, a fundamental review and reform

of the major interest rates benchmarks has been

undertaken. For the Eurozone,

this led to a reform of the EURIBOR benchmark rate and

development of €STR as the recommended new nearly risk free rate

to replace EONIA. For LIBOR

benchmarks the reform will include replacing interest rate

benchmarks with alternative, nearly risk-

free rates. This process

is at different stages, and is progressing at different speeds, across

several

major currencies.

ING is currently making the necessary preparations for the potential cessation and transition of

IBORs in the years to come, where we take 2022 as the potential first date that

this could

materialise. Due to the many uncertainties the overall IBOR transition still faces, at this stage the

potential impact of this major event on ING’s credit risk profile, business model and

funding profiles

is not entirely clear.

We would

like to underline however that ING is aware of the significant impact

of this transition and is therefore

putting all efforts into making sure that it is properly prepared for

this transition in a timely manner.

For this purpose, ING has established a global program across

all

areas of the bank to coordinate ING’s transition

activities and to assess the potential risks and

impacts of any transition. It is a multi-year global program that encompasses various workstreams

and departments including the client facing teams, Legal, Finance, Operations and IT.

The following interest rate

benchmarks are in scope of ING’s IBOR transition program: GBP LIBOR,

USD LIBOR, EUR LIBOR, EURIBOR, EONIA, CHF LIBOR and JPY LIBOR.

ING is pro-actively reaching out to industry participants, counterparties and clients to create

awareness and support on the upcoming transition.

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

Standards Board (IASB) has commenced a two phase project.

Phase 1 addresses those issues that

affect financial

reporting before the replacement of an existing benchmark and Phase 2 focuses on

issues that may affect financial

reporting when the existing benchmark rate is reformed or

replaced. In 2019, ING early adopted the amendments to IFRS issued by the IASB as part of Phase 1

(refer to section 1.6.5 of Note 1 of the financial statements).

Refer to Note 39 ‘Derivatives and

hedge accounting’ for the disclosure requirements

relating to the application of the amendments

as part of Phase 1. Phase 2 of the project is still ongoing and focusses on, amongst others,

accounting for changes to contracts due to the IBOR reform and impact on hedge accounting. ING

continues to monitor the progress of Phase 2 of the project and will assess the impact as more

information becomes available.

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Foreign exchange

(FX) risk in banking books (*)

FX exposures in banking books result from core

banking business activities (business units doing

business in currencies other 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.

Governance – Core

banking business (*)

Every business unit hedges the FX risk resulting from core

banking business activities into its base

currency.

Consequently, assets and liabilities are matched in terms of currency.

Governance – FX translation

result (*)

ING’s strategy is to keep the target CET1 ratio within a certain range when FX rates

fluctuate,

whilst

limiting the volatility in the profit and loss account. Therefore, hedge accounting is applied to the

largest extent possible. Taking

this into account, the CET1 ratio hedge can be achieved by

deliberately taking foreign currency

positions equal to certain target positions, such that the target

CET1 capital and risk-weighted assets are equally sensitive in relative

terms to changing FX rates.

For a selection of emerging market currencies ING decided not to enter into foreign currency

hedges as allowed under the policy.

Risk profile – FX translation

result (*)

The following table presents the currency exposures

in the banking books for the most important

currencies for the FX translation result.

Positive figures indicate long positions in the respective

currency. As a result of the strategy

to hedge the CET1 ratio a net foreign currency exposure

exists.

In order to measure the sensitivity of the target CET1 ratio

against FX rate fluctuations, the

Historical Value at Risk is used based on historical series of last year’s FX rates. It measures

the drop

in the CET1 ratio from the target

based on historical FX rates. Based on these time series and with a

probability of 10%, the drop in the CET1 ratio would

be 0.09%..

Net banking currency exposures banking books

(*)

Foreign

Investments

Hedges

Net exposures

2019

2018

2019

2018

2019

2018

US Dollar

8,031

5,794

-11

–1

8,020

5,793

Pound Sterling

-22

614

-22

614

Polish Zloty

2,522

2,563

-278

–526

2,244

2,036

Australian Dollar

3,565

3,569

-2,033

–2,398

1,532

1,171

Turkish Lira

1,337

1,219

1,337

1,219

Chinese Yuan

2,255

2,208

2,255

2,208

Indian Rupee

917

917

Russian Rouble

540

460

-85

–101

455

359

Other currency

4,742

4,462

-1,834

–2,057

2,907

2,405

Total

22,969

21,806

-4,242

–5,084

18,727

16,722

The USD net exposure increased due to optimization of the capitalization and funding of the NY

entity. In 2019, we reviewed and updated our methodology for specific CET1 deductibles. This

drives the move in GBP net exposure and applies to the calculation of the FX Translation

figures in

the above table hence has no impact on the reported CET1 figure itself. ING sold its stake in Kotak

Mahindra in February 2019 and therefore

no longer has exposure on Indian Rupee.

Equity price risk in banking

books

(*)

Governance (*)

ING maintains a strategic portfolio with substantial equity exposure in its banking books. Local

offices

are responsible for the management of the equity investment positions. Financial Risk is

responsible for monitoring the regulatory capital for equity investments on a monthly basis and

acts independently from ING’s / Local management when monitoring these positions.

Risk Profile

(*)

Equity price risk arises from the possibility that an equity security’s price will fluctuate,

affecting the

value of the equity security itself as well as other instruments whose value react similarly to the

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particular security, a defined

basket of securities, or a securities index. ING’s equity exposure mainly

consists of the investments in associates and joint ventures of EUR 1,790 million (2018: EUR 1,203

million) and equity securities held at fair value through other comprehensive income (FVOCI) of EUR

2,306 million (2018: EUR 3,228 million). The value of equity securities held at FVOCI is directly linked

to equity security prices with increases/decreases

being recognized in the revaluation

reserve.

Investments in associates and joint ventures are

measured in accordance with the equity method

of accounting and the balance sheet value is therefore

not directly linked to equity security prices.

Year

-on-year variance analysis (*)

The revaluation reserve

relating to equity securities at FVOCI moved from EUR 1,914 million per

year end 2018 to EUR 1,580 million per year end 2019. In 2019, the securities

at FVOCI decreased

by EUR 334 million following the full disposal of Kotak in the same year.

Revaluation reserve equity securities at fair value through other comprehensive

income

1

(*)

2019

2018

Positive re-measurement

1,582

1,923

Negative re-measurement

-2

–8

Total

1,580

1,914

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 the earnings related to Real

Estate activities.

Governance (*)

Real Estate is a run-off business consisting of Real Estate Development and Real Estate

Investment

Management activities which are being wound down by sale of assets, strict execution of contract

maturity, or through portfolio sales.

Market risk in trading books

(*)

Within the trading portfolios, positions are maintained in the financial markets. These positions

are

often a result of transactions with clients and may benefit

from short-term price movements. In

2019, ING continued its strategy of undertaking trading activities to develop its

client-driven

franchise and deliver a differentiating experience by offering

multiple market and trading products.

Governance (*)

The Financial Markets Risk Committee (FMRC) is the market risk committee that, within the risk

appetite set by ALCO Bank, sets market risk limits both on an aggregated level and on a desk level,

and approves new products. FI-FM Risk advises both FMRC and ALCO

Bank on the market risk

appetite of trading activities.

With respect to the trading portfolios, FI-FM Risk focuses on the management of market risks of

Wholesale Banking (mainly Financial Markets) as this is the only business line within ING where

trading activities take place. Trading

activities include facilitation of client business and market

making. FI-FM Risk is responsible for the development and implementation of trading risk policies

and risk measurement methodologies, and for reporting and monitoring risk exposures against

approved trading

limits. FI-FM Risk also reviews trading mandates and limits, and performs the

gatekeeper role in the product review process.

The management of market risk in trading portfolios

is performed at various organisational levels. The FI-FM Risk Management Framework

defines

policies and procedures for the overall

management of trading books. Trading

activity is

systematically reviewed and positions against the mandates are assessed jointly by the first and

second lines of defence.

Risk measurement (*)

ING uses a comprehensive set of methodologies and techniques to measure market risk in trading

books: Value at Risk (VaR)

and Stressed Value

at Risk (SVaR),

Incremental Risk Charge (IRC), and

Event Risk (stress testing). Systematic validation processes

are in place to validate the accuracy

and internal consistency of data and parameters used for the internal models and modelling

processes.

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Value

at Risk (*)

FI-FM Risk uses the historical simulation VaR methodology (Hvar) as its primary risk measure.

The

HVaR for

market risk quantifies,

with a one-sided confidence

level of 99%, the maximum overnight

loss that could occur in the trading portfolio of ING due to changes in risk factors (e.g. interest rates,

equity prices, foreign exchange rates, credit

spreads, implied volatilities) if positions remain

unchanged for a time period of one day. Next to general market movements in these risk factors,

HVaR also takes into account market data movements for

specific moves in e.g. the underlying

issuer of securities. A single model that diversifies

general and specific risk is used. In general, a full

revaluation approach is applied, and for a limited number of linear trading positions and risk factors

in commodity and equity risk classes a sensitivity-based approach is applied. The potential impact

of historical market movements on today’s portfolio is estimated, based on equally weighted

observed market movements of the previous year (260 days). When simulating potential

movements in risk factors, depending on the risk factor type, either an absolute or a relative shift is

used. The data used in the computations is updated daily. ING uses HVaR with a one-day horizon

for internal risk measurement, management control, and backtesting, and HVaR

with a ten-day

horizon for determining regulatory capital. To

compute HVaR with a ten-day horizon the one day

risk factor shifts are scaled by the square root of ten and then used as an input for the revaluation.

The same model is used for all legal entities within ING with market risk exposure in the trading

portfolio.

Limitations (*)

HVaR has some limitations: HVaR

uses historical data to forecast future price behaviour, but future

price behaviour could differ substantially from past behaviour.

Moreover, the use of a one-day

holding period (or ten days for regulatory capital 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. Also, the use of a 99% confidence

level means that HVaR

does not take

into account any losses that occur beyond this confidence

level.

Backtesting (*)

Backtesting is a technique for the ongoing monitoring of the plausibility of the HVaR model in use.

Although HVaR models estimate potential future trading

results, estimates are based on historical

market data. In a backtest, the actual daily trading result (excluding fees and commissions) is

compared with the one-day HVaR.

In addition to using actual results for backtesting, ING also uses

hypothetical results, which exclude the effects of intraday trading, fees, and commissions. When

an actual or a hypothetical loss exceeds the HVaR, an ‘outlier’ occurs. Based on ING’s one-sided

confidence level of 99%, an outlier is expected once in every 100 business days. In

2019, there were

five actual outliers

i.e. occurrences

of actual loss and four hypothetical outliers i.e. occurrences of

hypothetical loss, when the daily trading loss exceeded the daily consolidated HVaR of ING. The

outliers were driven by interest rates

market moves mainly related to quantitative easing. ING

reports the backtesting results on a quarterly basis to the ECB.

Stressed HVaR

(*)

The Stressed HVaR

(SVaR)

is intended to replicate the HVaR

calculation that would be generated on

the bank’s current portfolio with inputs calibrated to the historical data from a continuous 12-

month period of significant

financial stress relevant to the bank’s portfolio. To

calculate SVaR,

ING

uses the same model that is used for 1DHVaR, with a ten-day horizon. The data for historical stress

period used currently includes the height of the credit crisis around the fall of Lehman Brothers,

and this choice is reviewed regularly.

The historical data period is chosen so that it gives the worst

scenario loss estimates for the current portfolio. The same SVaR

model is used for management

purposes and for regulatory purposes. The same SVaR

model is used for all legal entities within ING

with market risk exposure in the trading portfolio.

Incremental Risk Charge

(*)

The IRC for ING is an estimate of the default and migration risks for unsecuritised credit products in

the trading book, over a one-year capital horizon, with a 99.9% confidence level. The same IRC

model is used for all legal entities within ING with market risk exposure in the trading portfolio.

Unsecuritised trading positions of ING, which are subject to specific

interest rate risk included in the

internal model approach for market risk regulatory capital, are

in scope of the IRC model. By model

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choice, equity is excluded from the model. For the calculation of IRC, ING performs a Monte-Carlo

simulation based on a Gaussian copula model. The asset correlations used in the Gaussian copula

model are determined using the IRB correlation formula. The rating

change is simulated for all

issuers over the different liquidity horizons (i.e. time required

to liquidate the position or hedge all

significant risks) within

one year.

Movements across different rating

categories and probabilities of

default are governed by a credit

-rating transition matrix. An external transition matrix is obtained

from Standard & Poor’s (S&P). The financial impact is then determined for the simulated migration

to default, or for the simulated migration to a different rating

category, based on LGD or credit

spread changes, respectively.

The liquidity horizon has been set to the regulatory minimum of three months for all positions in

scope. ING reviews

the liquidity horizons regularly based on a structured assessment of the time it

takes to liquidate the positions in the trading portfolio.

ING periodically assesses the compliance of the IRC model with regulatory requirements by

performing gap analyses, substantiating the modelling choices, and quantifying the impact

of

alternative approaches.

Stress Testing

and Event Risk (*)

Stress Testing

and Event Risk are valuable

risk management tools. In addition to the bank-wide

stress test framework as described in the stress

testing section, FI-FM Risk performs structured

stressed scenario tests under the Event Risk framework

to monitor market risks under extreme

market conditions. Event Risk is calculated because HVaR

in general does not produce an estimate

of the potential losses that can occur as a result of extreme market movements, i.e.

beyond the

confidence level. Event Risk evaluates the bank’s financial stability under severe but plausible stress

scenarios and assists in decision-making aimed at maintaining a financially

healthy going-concern

institution after a severe event occurs. Event

Risk is based on historical as well as hypothetical

extreme scenarios. The result is an estimate of the profit and loss caused by a potential event and

its world-wide impact for ING. The Event Risk number for ING trading activity is generated on a

weekly basis. Like for HVaR, risk appetite for

Event Risk is limited by ALCO Bank.

ING’s Event Risk policy is based on a large set of possible stress scenarios per risk type. In stress

scenarios, shocks are applied to prices (credit spreads,

interest rates, equity, commodities, and fx

rates) and volatilities. Depending on the type of the stress test, additional scenario assumptions

can be made, for example on correlations, dividends, or recovery

rates. For example,

for equity

products both a crisis scenario (prices decrease) as well as a bull scenario (prices increase)

are

assumed. Scenarios are calculated based on events happening independently, jointly by region, or

in all countries simultaneously. This way, for each risk type, a large set of scenarios is calculated.

The worst scenarios per market are combined across markets by assessing both independent

events per market, and the worst events happening in all markets at the same time.

Risk measurement - Other trading

controls

HVaR and Event

Risk limits are the most important limits to control the trading portfolios.

Additionally, limits have been set on SVaR

and IRC. Furthermore, ING uses a variety of other

controls to supplement these limits. Position and sensitivity limits are used to prevent

large

concentrations in specific issuers, sectors,

or countries. Moreover, other risk limits are

set with

respect to the activities in complex derivatives trading. The market risk of these products is

controlled by product specific limits and constraints.

Risk profile

The following chart shows the development of the overnight HVaR

under a 99% confidence level

and a one-day horizon versus actual and hypothetical daily trading profits and losses.

In calculation

of the hypothetical daily profit and loss, the trading position is kept constant and only the market

movement is taken into account. The overnight HVaR

is presented for the ING trading portfolio from

2014 to 2019.

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1

CVA risk is not included in VaR.

.

The risk figures in the backtesting graph above and in the table below relate to all trading books for

which the internal model approach is applied, i.e. all trading books, including Credit Exposure

Management books.

1d VaR for

Internal Model Approach trading portfolios

Minimum

Maximum

Average

Year end

amounts in millions of

euros

2019

2018

2019

2018

2019

2018

2019

2018

Interest rate

1

3

3

13

7

6

5

12

4

Equity and commodity

1

1

7

10

2

3

1

7

Foreign exchange

1

1

11

10

2

4

1

9

Credit spread

4

3

7

6

6

4

5

6

Diversification

2

-6

–8

-6

–13

Total

VaR

6

5

15

16

10

9

13

13

1 For calculation of HVaR per risk class the full valuation is performed according

to HVaR methodology using a set of scenario

changes for the risk factors for the particular risk class, while

risk factors for all other risk classes are kept unchanged.

2 The total HVaR for the columns Minimum and Maximum cannot be calculated by taking the sum of the individual

components since the minimum/maximum observations for both the individual markets as well as for total HVaR may occur

on different dates. Therefore, diversification is not calculated for the minimum and maximum categories.

3

CVA risk is not included in VaR.

Average

1D/10D HVaR,

10D SVaR

and IRC over 2019 are

in line with the average

over

2018. The average

for foreign

exchange decreased

compared to 2018

while credit

spread increased

compared to 2018,

both driven by portfolio changes. The VaR

at the

period end of 2019 and 2018 was EUR

13 million, however

the asset class

decomposition changed significantly. The risk moved from

foreign exchange

and

equity and commodity towards

interest rate

asset class

EU MR4: Consolidated trading HVaR

1

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EU MR3: Internal Model Approach values for trading portfolios

amounts in millions of euros

2019

2018

VaR (10 day 99%)

1 Maximum value

42

46

2 Average

value

27

25

3 Minimum value

16

15

4 Period end

33

40

Stressed VaR (10 day 99%)

5 Maximum value

126

139

6 Average

value

72

73

7 Minimum value

47

41

8 Period end

76

124

Incremental Risk Charge (99.9%)

9 Maximum value

169

107

10 Average

value

76

62

11 Minimum value

42

40

12 Period end

64

58

Comprehensive Risk capital charge

(99.9%)

13 Maximum value

n/a

n/a

14 Average

value

n/a

n/a

15 Minimum value

n/a

n/a

16 Period end

n/a

n/a

Regulatory Capital

According to the Capital Requirements

Regulation (CRR/CRD IV), regulatory capital (own funds

requirements) for market risk can be calculated using the standardised approach

or an internal

model approach. ING received regulatory

approval to use an internal model to determine the

regulatory capital for the market risk in all trading books of ING. Market risk capital of trading books

is calculated according to the CRR, using internal HVaR,

SVaR,

and IRC models, where diversification

is taken into account. Capital for foreign exchange

risk from the banking books and for Collective

Investment Undertakings (CIUs) exposures in trading books are calculated

using Standardised

Approach with fixed risk weights. ING does not have a correlation trading portfolio or any other

securitisations in the trading book.

Standardised Approach

EU MR1: Market risk under Standardised Approach

2019

2018

amounts in EUR millions

RWA

Capital

requirement

s

RWA

Capital

requirement

s

Outright products

1 Interest rate risk (general

and specific)

14

1

2 Equity risk (general and specific)

3 Foreign exchange risk

1,131

90

4 Commodity risk

Options

5 Simplified approach

6 Delta-plus method

7 Scenario approach

8 Securitization (specific risk)

9

Total

14

1

1,131

90

The MRWA under Standardised

Approach decreased significantly compared to 4Q2018. At the

beginning of 2019 an important FX position in the banking book was closed causing the FX

exposure to decrease below the 2% own funds threshold. According

to Art. 351 CRR, in such a case,

the calculation of Market Risk regulatory capital is not required. As of 3Q2019, CIU exposures

in

trading books are capitalised in Market risk under Standardised Approach under

interest rate

specific risk and

foreign exchange risk categories.

Internal Model Approach

Market risk Regulatory Capital increased during the 2019 compared to 2018. The increase

is driven

by an increase in IRC, while VaR

and SVaR

slightly decreased. IRC capital increased as a result

of

changes in the portfolio in combination with credit spread movements.

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EU MR2-A: Market risk under Internal Model Approach

2019

2018

amounts in EUR millions

RWA

Capital

requirement

s

RWA

Capital

requirement

s

1

VaR (higher of values a

and b)

1,261

101

1,394

112

(a) Previous day's VaR

(Article 365(1) (VaRt-1))

404

32

529

42

(b) Average

of the daily VaR (Article 365(1)) on each of the

preceding sixty business days

(VaRavg)

x multiplication factor ((mc) in accordance with

Article 366)

1,261

101

1,394

112

2

SVaR (higher of values

a and b)

3,011

241

3,217

257

(a) Latest SVaR

(Article 365(2) (sVaRt-1))

902

72

1,486

119

(b) Average

of the SVaR (Article 365(2) during the preceding

sixty business days (sVaRavg)

x

multiplication factor (ms) (Article 366)

3,011

241

3,217

257

3

Incremental risk charge -IRC (higher of values a and

b)

1,278

102

767

61

(a) Most recent IRC value (incremental

default and migration

risks section 3 calculated in

accordance with Section 3 articles 370/371)

799

64

727

58

(b) Average

of the IRC number over the preceding 12 weeks

1,278

102

767

61

4

Comprehensive Risk Measure

–

CRM

(higher of values a, b

and c)

(a) Most recent risk number for the correlation

trading

portfolio (article 377)

(b) Average

of the risk number for the correlation trading

portfolio over the preceding 12-weeks

(c) 8 % of the own funds requirement in SA

on most recent risk

number for the correlation

trading portfolio (Article 338(4))

5

Total

5,550

444

5,378

430

Sensitivities (*)

As part of the risk monitoring framework, FI-FM Risk actively monitors the daily changes of

sensitivities of the trading portfolios. Sensitivities measure the impact of movements in individual

market risk factors (foreign exchange rates, interest

rates, credit spreads,

equity, and commodity

prices) on profit and loss results of the trading positions and portfolios.

The following tables show the five largest trading positions in terms of sensitivities to foreign

exchange, interest rate

and credit spread risk factor movements. These largest exposures

also

reflect concentrations of risk in FX risk per currency, IR risk per currency, and Credit Spread risk per

country and rating and sector.

Due to the nature of the trading portfolios, positions in the portfolios

can change significantly from day to day, and sensitivities of the portfolios

can change daily

accordingly.

Most important foreign exchange year-end trading positions

(*)

amounts in EUR millions

2019

2018

Foreign exchange

Foreign exchange

US Dollar

116

US Dollar

–957

Chinese Yuan Renminbi

-21

Chinese Yuan Renminbi

–18

South Korean Won

20

Swiss Franc

–14

Brazilian Real

-15

Polish Zloty

14

Japanese Yen

-10

South Korean Won

14

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Most important interest rate and credit spread sensitivities at year-end (*)

amounts in EUR thousands

2019

2018

Interest Rate (BPV)

1

Interest Rate (BPV)

1

Euro

-740

Euro

–214

US Dollar

-325

US Dollar

189

Russian Ruble

-105

Great-Britain Pound

–112

Great-Britain Pound

-68

Taiwan

New Dollar

96

Australian Dollar

-31

Polish Zloty

54

Credit Spread (CSO1)

2

Credit Spread (CSO1)

2

United States

360

Germany

345

Germany

163

United States

330

France

117

Russian Federation

177

Russian Federation

73

Netherlands

164

United Kingdom

72

France

151

1

Basis Point Value (BPV) measures the impact on value of a 1 basis point increase in interest rates. The figures include

commodity risk in banking books.

2

Credit Spread Sensitivity (CS01) measures the impact on value of a 1 basis point increase in credit spreads. Exposures to

supranational institutions are not assigned

to a specific country.

Credit spread sensitivities per risk class and sector at year-end

(*)

2019

2018

amounts in EUR thousands

Corporate

Financial

Institutions

Corporate

Financial

Institutions

Credit Spread (CSO1)

1

Risk classes

1 (AAA)

1

-1

–6

90

2–4 (AA)

-15

-63

3

–24

5–7 (A)

143

32

117

78

8–10 (BBB)

273

1

245

–2

11–13 (BB)

148

9

85

6

14–16 (B)

51

1

37

13

17–22 (CCC and NPL)

26

0

18

Not rated

0

0

1

Total

626

-21

500

161

1

1 Credit Spread Sensitivity (CS01) measures the impact on

value of a 1 basis point increase in credit spreads.

Funding

and liquidity

risk

(*)

Introduction (*)

Funding and liquidity (F&L) risk is the risk that ING Group or one of its subsidiaries cannot meet its

financial liabilities

when they are due at reasonable cost and in a timely manner.

ING incorporates

funding and liquidity management in its business strategy and applies a funding and liquidity risk

framework in order to manage such risks within pre

-defined boundaries.

A high-level overview of the F&L framework

is provided in the next figure.

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(*)

Governance (*)

Funding & liquidity risk management within ING falls under the supervision of the ALCO Bank

function which approves the funding and liquidity risk appetite that is subsequently cascaded

throughout the organisation. In addition, ALCO Bank has delegated responsibilities concerning the

ICLAAP processes and documents as per the ICLAAP Framework

of ING Group towards

the Internal

Capital & Liquidity Adequacy Assessment Process (ICLAAP) Committee. Therefore,

it focuses on

technical liquidity documents and oversees business processes and deliverables concerning ILAAP.

The EB and MBB, staff departments from the CRO and CFO domain as well as Group Treasury

have

oversight of and are responsible for

managing funding and liquidity risk.

ING’s liquidity risk framework is based on the three lines of defence concept whereby

risk principles

are implemented, monitored and controlled in conjunction with both first and second line of

defence functions.

Group Treasury

and business lines are the first line of defence functions.

Group Treasury’s

main

responsibility is to manage ING’s (regulatory) liquidity and funding position by executing ING’s

funding plan, maintaining access to both the short and the long term professional funding markets

and managing the liquidity buffer. Business lines are responsible

for managing the funding and

liquidity positions from the originated business. A large part of this is replicated with Group

Treasury.

The second line of defence Financial Risk function is responsible for developing and maintaining

ING’s policies, standards and guidelines on F&L risk management as well as for setting the F&L risk

appetite. Furthermore, the Financial Risk function measures funding & liquidity risks, executes

stress testing, provides management

information and controls the liquidity and funding

requirements on commercial

products. The Finance function is responsible for management and

regulatory reporting related to funding and liquidity risk management.

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Funding and liquidity management strateg

y

and objectives (*)

The main objective of ING’s funding and liquidity risk management is to maintain

sufficient

liquidity

to fund the commercial activities of ING both in normal and stressed market circumstances across

various geographies, currencies and tenors. This requires

a diversified funding structure considering

relevant opportunities and constraints.

ING’s funding consists mainly of retail and corporate deposits contributing 51% and 21% of the

total funding respectively. These funding sources provide a relatively

stable funding base. The

remainder of the required

funding is attracted primarily through a combination of long-term and

short-term professional funding. Group Treasury

manages the professional funding in line with the

F&L risk appetite to ensure a sufficiently

diversified and stable funding base.

ING Bank Funding Mix

1

(*)

2019

2018

Funding type

Customer deposits (retail)

51%

50%

Customer deposits (corporate)

21%

21%

Interbank

5%

5%

Lending/repurchase

agreement

5%

7%

CD/CP

5%

6%

Long-term debt

11%

11%

Subordinated debt

2%

2%

Total

100%

100%

1

Liabilities excluding trading securities and IFRS equity

The Loan-to-deposit ratio remained

stable at the level of 1.06.

ING’s long-term professional funding is well diversified across maturities and currencies. The main

part of it is EUR and USD denominated which is in line with the currency composition of customer

lending:

ING Group long-term debt maturity profile by currency

1

(*)

2020

2021

2022

2023

2024

2025

Beyond

2025

Total

Currency

EUR

9

9

8

5

1

4

26

62

USD

3

2

4

4

1

-

8

22

Other

1

2

1

1

1

-

2

10

Total

13

14

13

10

3

4

37

94

1 Nominal amounts in EUR billion.

Funding and liquidity adequacy and

risk appetite (*)

ING distinguishes several key drivers of future

liquidity and funding needs:

◾

Refinancing needs resulting from maturing debt and asset growth;

◾

Current and future regulatory

requirements;;

◾

Risk appetite statements set by ING’s funding and liquidity risk function;;

◾

The outcomes of various stress tests;

◾

Ability to distribute and transfer liquidity.

Taking

into consideration the abovementioned factors, ING Group assesses its current and future

liquidity adequacy and, if deemed necessary, takes steps to further improve ING’s liquidity position

and to ensure sufficient counterbalancing

capacity. That is achieved through the quarterly update

of the Liquidity adequacy statement and the execution of the ILAAP process.

ING’s Funding and Liquidity framework aims to ensure

sufficient

liquidity under normal, adverse

and stressed market circumstances. ING assesses its F&L adequacy through three lenses: (i) Stress,

(ii) Sustainability and (iii) Regulatory.

(i) Through the Stress lens ING evaluates its ability to withstand a period of prolonged F&L stress

(idiosyncratic, market-wide or a combination of the two) which is characterised by customer

deposit outflows and/or deterioration of funding markets access;

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ii) Through the Sustainability lens ING assesses the extent to which its customers, professional

counterparties and investors are comfortable extending funding in tenors, currencies and

instruments necessary to sustainably fund ING under a going-concern situation;

(iii) Through the Regulatory lens ING ascertains that it is in a position to meet both current and

future regulatory

requirements.

For each lens, ING has established a related set of risk appetite statements which define ING’s risk

appetite commensurate with the principles of liquidity adequacy. These risk appetite statements

are summarised in the next graph.

(*)

The F&L risk appetite statements are translated into a number of metrics with appropriate

boundaries and instruments which are used to measure and manage ING’s funding and liquidity

risk.

The risk appetite with respect to the stress lens is set to ensure there is sufficient counterbalancing

capacity under various internally defined stress scenarios. Regarding the sustainability perspective,

an internally defined

Stable funding to loans (SFL) ratio (supplemented by other metrics) is used to

ensure a diversified funding base and to prevent overreliance

on professional funding. Finally, the

Liquidity Coverage Ratio

(LCR) and the Net Stable Funding Ratio (NSFR) regulatory

metrics are

monitored in terms of both ING’s risk appetite and regulatory requirements.

The LCR compares the volume

of available high quality liquid assets (HQLA) to net outflows

(outflows-

inflows) over a 30-day stress scenario defined

by the regulator.

ING’s liquidity buffer is

part of the counterbalancing capacity which serves as a liquidity cushion under normal and

stressed conditions.

The liquidity buffer consists mainly of Level 1 assets which are represented

by government and

central bank assets and are of the highest liquidity quality. Only assets that are freely available

(not pledged under existing contracts) for liquidity purposes are included in the buffer. The size and

composition of the Liquidity buffer are driven by ING’s risk appetite as well as by regulatory

requirements.

The macroeconomic and market environment are also important considerations in ING’s funding

and liquidity framework.

The macroeconomic environment comprises various exogenous factors over which ING has no

control but which may have a material impact on ING’s F&L position. The main macroeconomic

factors analysed on a regular basis include:

◾

Global and local economic performance: e.g. shifts in GDP, inflation rate, unemployment rates

and public deficit/surplus;

◾

Changing geopolitical trends;

◾

Monetary policy with special focus on the impact of the eventual reversal of unconventional

monetary measures employed by central banks in recent years; and

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◾

Regulatory requirements:

e.g. understanding the changing regulatory landscape as well as the

impact of ING’s actions on existing regulatory boundaries.

The strategic ambitions of ING, together with the design and execution of the funding plan, are

assessed under both current and projected market conditions. Key emphasis is placed on

understanding overall market trends and developments, credit

rating changes and peer

comparison.

Liquidity Stress Testing

(*)

Funding and liquidity stress testing forms part of the overall

F&L framework. It allows ING to

examine the effects of exceptional but plausible future events on ING’s liquidity position and

provides insight into which entities, business lines or portfolios are vulnerable to which types of risk

and under which scenarios.

The stress testing framework encompasses the funding and liquidity risks of the consolidated

balance sheet of ING Group including all entities, business lines as well as on and off-balance sheet

positions. The Net liquidity position and Time-to-survive are the two main stress testing output

metrics. Both metrics are impacted differently under specific

F&L stress scenarios with related

parameterisation.

The stress testing framework considers idiosyncratic,

market-wide and combined (idiosyncratic and

market-wide) stress scenarios. Moreover, it differentiates between

stress events that develop in a

gradual and in a fast manner.

The generic design of the framework, which is based on empirical

evidence supplemented by expert judgment, can easily be applied to a specific

scenario. For

example, it can be used as input for firm-wide stress testing and reverse stress testing.

The outcomes of the stress testing are taken into account in all the key aspects of ING’s F&L risk

framework and F&L risk management:

◾

risk appetite framework (through risk appetite statements);

◾

risk identification and

assessment;

◾

monitoring of the liquidity position;

◾

contingency funding plan; and

◾

early warning indicators.

The Funding and liquidity stress testing framework

is also subject to regular internal validation.

In line with ECB regulation, ING’s liquidity position is stress tested on a monthly basis using

particular scenarios that form part of the F&L risk appetite statement. In addition, the results of all

internal stress scenarios are monitored and assessed on a regular

basis. They also serve as input in

the decision on additional contingency measures.

Contingent F&L risks are addressed in the contingency funding plan whose focus is on early

warning indicators as well as organisation and planning of liquidity management in times of stress.

The contingency funding measures are developed in conjunction with the ING recovery

plan and

are tested on a regular basis.

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Non-f

inancial

risk

Introduction

Non-financial risk

is defined as

the risk of financial

loss, legal or regulatory sanctions, or

reputational damage due to inadequate or failing internal processes, people and systems; a failure

to comply with laws, regulations and standards; or external events. The Non-Financial

Risk (NFR)

function encompasses Operational Risk Management (ORM), Information Risk Management (IRM),

the Independent Validation Unit (IVU) and Corporate

Security & Investigations (CSI).

Governance

The head of Corporate ORM, Corporate

IRM, IVU, CSI, Professional Practice Unit and Strategy, Central

Services & Digitalisation Unit report to the global head of NFR, who directly reports to the bank

CRO.. The global head of Non-Financial Risk is responsible for developing the framework

of non-

financial risk policies

and standards within ING, and for monitoring the quality of non-financial risk

management in the ING entities.

Non-Financial risk measurement

In line with the Advanced Measurement Approach (AMA),

the bank has in place a model to define

the required level

of own funds for operational risk (operational risk capital). This model predicts

potential operational risk losses (annually aggregated) by combining a forward-looking and a

backward-looking view on operational risk events. The business has a leading role

in assessing

scenario severities, with the ORM function validating and challenging the results.

ING uses its AMA model for regulatory capital calculation purposes and reports the regulatory

capital numbers on a quarterly basis. The bank is currently not using any insurance or risk transfer

mechanisms for the mitigation of risk in the context of the AMA capital calculation.

Risk categories

ING categorises NFR risks in a number of areas:

◾

Information (Technology)

risk is the risk of financial

loss, regulatory sanctions or reputational

damage due to breaches of confidentiality, integrity or availability within

business processes or

information or lack of information quality;

◾

Continuity risk is the risk of financial loss,

regulatory sanctions or reputational damage due to

business disruptions (loss of people, processes, systems, data, premises);

◾

Control and processing risk

are the risks of financial loss, regulatory sanctions or reputational

damage due to ineffective organisational structures and governance procedures (including

unclear roles and responsibilities and inadequate reporting structure), failed (transaction)

processing (input, execution, output) or failing process management; monitoring and

enforcement of risk mitigating measures; and risk culture;

◾

Internal fraud risk

is the risk of financial

loss, regulatory sanctions or reputational damage due to

deliberate abuse of procedures,

systems, assets, products and/or services of ING by employees

(incl. temporary workers, third party contractors, internships and consultants) who intend to

deceitfully or unlawfully benefit themselves or others;

◾

External fraud risk

is the risk of financial

loss, regulatory sanctions or reputational damage due to

deliberate abuse of procedures,

systems, assets, products and/or services of ING by external

parties (clients, potential clients or other third parties, including vendors and outside agencies)

who intend to deceitfully or unlawfully benefit themselves or others;

◾

Unauthorised activity risk

is the risk of financial

loss, regulatory sanctions or reputational damage

due to employees performing outside the normal course of their business, intentionally giving

unauthorised approvals or overstepping their authority;

◾

Personal and physical security risk

is the risk of financial

loss, regulatory sanctions or reputational

damage due to criminal and environmental threats that might endanger the security or safety of

ING personnel at work, people in ING locations, ING assets or assets entrusted to ING, people at

ING event locations, or might have an impact on ING organisation's confidentiality, integrity or

availability; and

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◾

Employment practice risk

is the risk of financial

loss, regulatory sanctions or reputational damage

due to acts that are inconsistent with employment, health and/or safety laws, regulations or

agreements, from payment of personal injury claims, or from diversity/discrimination

events.

Data Governance

and Data Quality

ING recognises that information and underlying data are assets that are key (together with people,

processes and IT systems) to further develop its digital profile. Cooperation and mutual agreement

on global data management roles and responsibilities in ING are critical success factors to meet

this objective. As such ING has embraced multiple data management and governance initiatives

triggered by internal and external stakeholders (e.g. Principles for Effective Risk Data Aggregation

and Risk Reporting). These principles are embedded in risk data management and enshrined within

the Data Governance framework. The framework

outlines roles and responsibilities relevant

for the

risk lifecycle and data quality assurance.

Main developments in 2019

Cybercrime and

Fraud

◾

Controls and monitoring continue to be embedded in the organisation as part of the overall

internal control framework

and are continuously re-assessed against existing and new threats.

The identification and

monitoring of new threat actors and campaigns relevant to ING also

informs this process as does the closer alignment between IT security and fraud teams. In

addition, ING continues to strengthen its global cybercrime and fraud resilience through

extensive collaboration with financial industry peers, law enforcement authorities, government

(e.g. National Cyber Security Centre)

and internet service providers (ISPs).

◾

Concerns over the potential impact of insider threats continues to increase with specific

information relating to external instances or trends in the financial industry remaining limited,

albeit collaboration

within the financial

sector is improving.

The increasing use of third party vendors for services and the implementation of PSD2 are likely

to present ongoing fraud management and IT security challenges; both in the short-

and

medium-term as criminal actors target financial

and broader PII data outside the traditional

banking environment.

◾

Dealing with current and emerging fraud threats

effectively requires continuous improvement of

fraud management capabilities such as real-time transaction and response capabilities and

better alignment and standardisation of cross border fraud

management across ING and related

platforms as well as exchanging data cross border.

With legislation such as EBA PSDII and the

continuing emphasis on duty of care, financial institutions are becoming more and more

responsible for losses incurred by clients, and taking on more of the burden

of reclaiming those

losses.

Enterprise Risk Management

In 2019, a professional practice unit (PPU) has been set up to establish an Enterprise Risk

Management (“ERM”) Framework

gatekeeper for policy design. ERM is designed to be an

overarching

risk management framework (RMF) pulling together common design principles and

roles & responsibilities for all risk types (Financial, Non-financial, and Strategic). The purpose and

benefits of the ERM

Framework

facilitates clear and easy communication and improving the visible

and transparent link to ING’s Strategy, business activities and processes. The ERM Framework

is

being implemented to ensure standardisation of all risk frameworks and, once finalised, it will apply

to all businesses lines and entities on global and local level.

User Access Management (UAM)

UAM is one of the focus areas of ING and an important element in our control framework to

mitigate the risk of unauthorized and / or inappropriate access to systems, processes and the data

and information contained therein. Consequently, the UAM processes, controls

and practices are

periodically reviewed, tested, adapted and improved

by a dedicated UAM team to address ongoing

developments in and outside ING. In 2019, ING continued to mature, with attention to

standardization, harmonisation of processes via standardized workflows and further automation of

UAM controls, which will continue in 2020.

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GDPR

As per 25 May 2018, the European General Data Protection Regulation

(GDPR) became effective.

GDPR affords greater protection to individuals and requires

more control on data and transparency

regarding the use of data by companies. In 2019, ING continued its central programme,

initiated in

2016, in a continuing effort to mature our data protection standards in line with GDPR standards.

Outsourcing Risk

In 2019, a renewed Sourcing Policy

became effective, outlining the inherent critical and high risks

that can materialise during the sourcing life-cycle. In addition, a Sourcing Guideline was issued to

support updated requirements, issued by EBA in 1Q 2019. Support Control Framework

(SCF)

Sourcing defines the controls that have to be implemented and tested to effectively mitigate the

risks. The scope of sourcing encompasses outsourcing to external providers as well as intra

-group

sourcing.

BCBS239

In January 2013 the Basel Committee on Banking Supervision published the principles for effective

risk data aggregation and risk reporting (BCBS 239), which is adopted by the ECB and became

effective for all G-Sib’s as of

January 2016.

ING initiated a central program

which is continued in

2019 to improve the risk data aggregation and reporting capa

bilities.

Compliance

risk

Introduction

Compliance risk is defined as the risk of impairment of ING’s

integrity, leading to damage to ING’s

reputation, legal or regulatory sanctions, or financial loss, due to a failure (or perceived failure) to

comply with applicable laws, regulations and standards and the ING Orange Code

.

Governance

The Compliance Risk Management function is organised via countries and business lines. The heads

of Financial Crime Compliance, Regulatory & Conduct Compliance, Strategy

& Transformation

Office

at the head office,

as well as the heads of compliance in the Netherlands and Belux and the

business lines Challenge & Growth and Wholesale Banking report to the chief compliance officer

(CCO), who is the global head of Compliance Risk Management. This is an independent function that

is amongst others responsible for developing and establishing bank-wide policies and minimum

standards for managing compliance risks. The CCO assists the Supervisory Board, Executive

Board

and Management Board Banking in managing ING’s compliance risks and control framework. The

CCO is a permanent participant of the Risk Committee of the Supervisory Board. The CCO regularly

meets the chairman of the Risk Committee of the SB.

Risk categories

ING categorises compliance risk into four conduct-related integrity risk areas:

◾

Client/third party conduct refers to the compliance risks arising from the relationship with or

generated by the conduct of our customers and/or business partners, like money laundering

or

terrorist financing. Those risks are generally defined

within ING as financial

economic crimes.

Furthermore, client conduct refers to the compliance risks relating

to FATCA,

CRS, CTI and US

withholding tax and information reporting regulations;

◾

Personal conduct refers to the compliance risks arising from the conduct of ING employees. The

scope includes amongst others personal conduct related conflicts

of interest, bribery and

corruption, protection of personal data;

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◾

Financial services conduct refers to the compliance risks arising from or generated by the

conduct of ING when developing product offerings, marketing and/or selling products and

services to its clients as well as customer interest and protection;

and

Organisational conduct refers to the compliance risks arising from the way the bank is

organising itself to develop its activities. This category covers among others the licences

required to perform its regulated

banking activities, the operating effectiveness of its

information barriers, organisation conduct conflicts

of interest, anti-competitive conduct,

record retention

.

Controls aiming to mitigate the compliance risks associated with the above-mentioned risk areas

are designed and applied to the day-to-day processes in the bank. The effectiveness of the controls

is tested and monitored periodically, and senior management is responsible for ensuring that

processes are compliant with applicable laws and regulations, ING’s internal policies, and the

Orange Code.

In cases where an employee of ING suspects an actual or potential irregularity or misconduct

within ING that leads or could lead to a violation of the Orange Code, any ING policy and/or any

applicable law, regulation or code, this can be reported anonymously in line with the Whistle-

blower Policy, via internal or external channels as well as through normal reporting channels.

Strengthening the global compliance

function

ING has introduced measures to strengthen the Compliance

Risk Management function. These

measures are being implemented as part of a multi-year, global compliance strategy and

transformation programme

The programme encompasses the whole compliance function and

aims at enhancing global steering and oversight by the compliance function.

Know your customer (KYC)

ING is committed to the preservation of its reputation and integrity through compliance with

applicable laws, regulations and ethical standards in each of the markets in which it operates. All

employees are expected to adhere to these laws, regulations and ethical standards, and

management is responsible for ensuring such compliance. Compliance is therefore

an essential

ingredient of good corporate governance.

As gatekeepers of the financial

system we have

obligations to safeguard trust in that system and prevent misuse.

For example a recent

study

found almost €13 billion worth of criminal money is laundered in the Netherlands each year –

around 1.6 percent of the GDP.

However, money laundering is not contained within a single

country or jurisdiction, it is a global challenge that impacts

the entire financial system. ING, like all

other participants in the financial

services industry, has an important role to play in helping to

combat financial economic crime. We contribute knowledge and capacity to various public-private

partnerships fighting

financial crime. We believe we can be even more effective in safeguarding the

financial system

if we join forces and work with other banks and with national and European

authorities and law enforcement to identify and manage the financial

economic crime risks better,

taking all relevant laws and regulations into account.

Improving the way we manage compliance

risk, especially when it comes to preventing criminals from misusing the financial system, is a key

priority for ING.

KYC policy framework

The know your customer (KYC) policy and related control standards

(‘KYC policy framework’) sets

the minimum requirements and control objectives for all ING entities to guard against involvement

in financial crime activity.

The KYC policy framework reflects relevant national and international

laws, regulations and industry standards related to financial economic crime (money laundering,

terrorist financing), export trade controls, proliferation financing, sanctions (economic, financial

and

trade), countries designated by ING as ultra high risk countries (UHRC), CTI, FATCA,

CRS, and (parts

of)

ESR. The KYC policy framework is mandatory and applies to all ING entities, majority-owned ING

business, businesses under management control, staff departments, product lines and

to all

customer engagements and transactions. The KYC Policy Framework

reflects relevant national and

international laws, regulations and industry standards related to business partners and overarching

requirements with regards

to record retention,

training and awareness. The management of ING

entities also includes local procedures aimed at enabling them to comply with local laws and

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regulations and the KYC Policy

Framework.

Where local laws and regulations are

more stringent,

these more stringent local laws and regulations are

applied.

As a result of frequent evaluation

of the businesses from economic, strategic and risk perspective

ING continues to believe that for business reasons doing business involving certain specified

countries should be discontinued. In that respect, 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 are

Cuba, Iran, North

Korea, Sudan and Syria.

In addition to addressing financial economic crime-related requirements, the KYC policy framework

also reflects KYC-related requirements of the FATCA/CRS

policy, as well

as certain elements of the

Environmental Social Risk policy.

KYC enhancement programme

In 2017, ING began implementation of its KYC enhancement programme across all customer

segments and in all ING business units. The KYC enhancement programme consists of, among

other things:

◾

Enhancing selected customer due diligence files

to improve customer documentation, customer

data and identity verification;

◾

Working on structural solutions to become sustainably better in the execution of our KYC policies,

tooling, monitoring, governance and knowledge and behaviour; and

◾

Assessing selected past transactions and follows the applicable reporting process should any

unusual transactions be identified.

In September 2018, ING announced that it had reached a settlement agreement with the Dutch

Public Prosecutor related to an investigation that found serious shortcomings in the execution of

customer due diligence and transaction monitoring requirements related to fighting financial

economic crime, and announced steps to further enhance its management of compliance risks and

embed stronger awareness across

the whole organisation as part of the KYC enhancement

programme.

In 2019, we continued the implementation of the KYC enhancement programme, and had more

than 4,000 FTEs working on KYC-related activities globally. In March 2019, ING in Italy took steps to

improve its KYC

processes and compliance risks in line with the global KYC enhancement

programme after the Italian central bank identified shortcomings in anti-money laundering

processes. This was based on an inspection conducted from October 2018 to January 2019. In

consultation with the Banca d’Italia, ING agreed to refrain

from taking on new customers in Italy

while further discussions on the enhancement plans took place. ING continued to fully serve

existing clients in Italy while working to address the shortcomings and resolve the issues identified.

Please refer to Note 46 ‘Legal proceedings’

to the consolidated financial

statements for more

information.

In 2019, as part of our commitment to enhance the way we manage compliance risks and embed

stronger awareness across

the whole organisation, we also took the following steps across our five

KYC pillars:

◾

Policies and risk

: This pillar focuses on the development and roll out of a global KYC policy, a

global KYC risk appetite statements and KYC risk assessments on customers, capability structure

and maturity assessments.

o

In 2019, we updated the new KYC policy, which integrated all existing policies related to anti-

money laundering, financial

economic crime and customer due diligence. It came into effect

in July. (See section ‘KYC policy framework’ above).

o

The global KYC policy may be stricter than local requirements, in which case the global risk

appetite statement is used as the starting point to execute a uniform risk assessment and to

determine the local KYC-related risk appetite.

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o

As part of our due diligence process we updated the environmental and social risk (ESR)

framework, which helps us make transparent choices about who and what we finance. All

customers undergo an initial ESR check as part of the onboarding process. (See

‘Environmental and social risk framework’ in the credit

risk chapter for more information)

o

We implemented a systematic integrated risk approach

(SIRA) in all business lines globally.

Driven by data, the SIRA provides guidance on KYC integrity risks and helps determine which

customers to accept/continue and the type and frequency of monitoring. It takes into

account elements such as where the customer is located and the type of product and sector

they are active in. The KYC integrity risks are reviewed

each year.

.

◾

Tooling

: This pillar aims to improve processes

and tooling around customer due diligence,

screening and monitoring. This entails rolling out a bank-wide KYC digital service and fulfilling

client acceptance and maintenance life cycle on one global digital platform. In addition, all

required screening

components (name screening, pre-transaction screening, adverse media

screening) are incorporated

into the client acceptance due diligence process. Once a customer is

onboarded, ongoing screening and monitoring of transactions can then be activated. Steps taken

in 2019 included:

o

Developed new customer due diligence case management modules for Private Banking

clients in Luxembourg, and mid-corporates

in Poland, which is to be rolled out in other

countries with similar client segments.

o

The target adverse media screening tool was rolled

out in most locations

o

Innovating to automate and improve KYC

processes. In 2019, we developed a ‘smurfing’ tool,

which uses artificial

intelligence to detect instances of smurfing

when large fraudulent

transactions are broken up into smaller transactions that will not be flagged by conventional

monitoring systems. And we are developing a virtual alerts handler that uses artificial

intelligence to reduce the number of false positives, freeing up KYC

staff to concentrate on

those alerts that do require attention.

o

In September 2019, an anomaly detection tool went live to monitor the payment flow

of

ING’s correspondent banking clients. Developed by ING, the tool uses advanced analytics to

detect changes in behaviour that could indicate money laundering or other financial

economic crime. The approach for innovations is per country and business line and based on

success will be scaled up and rolled out in other locations.

◾

Monitoring and screening

: This pillar entails translating risk assessment outcomes into

scenarios

and alert definitions

that can be applied in transaction monitoring. This includes the design and

definitions

of the applicable financial

economic crime and client activity monitoring scenarios

tailored to the entity yet based on a global set, building alert definitions

(including data feeds)

and validating and testing the approach from risks to alerts.

o

In 2019, we introduced the new standard transaction monitoring tooling in the first countries.

This includes risk-based scenarios, with follow-up for handling alerts and reporting suspicious

activity.

o

In May 2019, the first

version of the global transaction monitoring (TM) control guidance

came into effect. It outlines the adoption

of a uniform TM methodology framework to

mitigate financial

economic crime risks.

o

In September 2019, ING partnered with four other Dutch banks to explore options to jointly

monitor payment transactions. Transaction Monitoring Netherlands (TMNL) is part of a

broader cooperation with the private sector, government agencies, regulators and law

enforcement to harmonise efforts to fight

financial crime

and strengthen the resilience of the

financial system as

a whole, both on a national and European level. We

also work with the

Dutch central bank and are a member of the public-private partnership council of the Dutch

Financial Expertise Centre (FEC-RAAD PPS).

o

The increased focus on KYC and our efforts to streamline our operations led to an increased

number of accounts being closed. This includes inactive accounts and accounts of customers

who do not respond adequately to our requests for information. We

are also re-evaluating

certain client and business relationships.

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◾

Governance

: Under this pillar we are setting up a global KYC governance to ensure

decision

making on standards, operations, customer acceptance and continuous improvements.

This

started with the appointment of a global head of KYC at the end of 2018 and a global Centre of

Expertise, as well as a Delivery Tribe, who together with the business lines and the second line of

defence (Risk and Compliance functions) are responsible for implementing KYC across

the

organisation.

o

In 2019, local KYC Committees were

established in the countries/regions and business lines to

manage and steer all KYC-related activities. These committees are overseen by the global

KYC Committee, which drives improveme

nts and ensures alignment between KYC-related

projects and activities. It also monitors all KYC-related costs, helps prioritise activities and

steers decisions on KYC-related issues and developments.

o

Client Integrity Risk Committees (CIRCs) were set up in the retail

business lines and Wholesale

Banking to steer decisions around client acceptance and exits, based on compliance criteria

and risk appetite. The committee members represent both the first and second lines of

defence to ensure proper decision-making is adhered to.

◾

Knowledge and behaviour

: This pillar focuses on increasing knowledge about KYC, providing

training and carrying out behavioural risk assessments to detect high-risk behaviours intervening

where necessary.

o

Internal communication in 2019 reiterated the importance of non-financial risk and

compliance.

o

We set up a global KYC Academy to coordinate

a global learning curriculum and provide

expert training for specialist KYC staff and new joiners as well as awareness training for all

ING employees.

o

The first behavioural risk assessments in KYC were carried out in the Netherlands, the

Philippines and the US by ING’s team of behavioural experts. The outcomes were discussed

by senior management at ING’s leadership days in March,

as well as with the management

teams of the countries involved and in Wholesale Banking with the intention of changing

behaviours to enhance KYC, starting from the top.

Following on from that, workstreams

were set up with senior managers and a number of

interventions were initiated with the aim of changing high-risk behavioural patterns. Another

behavioural risk assessment was conducted at ING in Belgium in the fourth quarter of 2019.

We

will start a dialogue in 2020 to dive into the outcomes and root causes of the behavioural patterns

observed.

Regulatory developments

Compliance with applicable laws and regulations is resource

-intensive. Banks continue to be faced

with new and increasingly onerous regulatory

requirements. Generally, we

expect the scope and

extent of regulations in the jurisdictions in which we operate to continue to increase.

Regulation is becoming more extensive and complex. An example is the implementation of DAC6

which like FATCA

and CRS requires financial institutions to report detailed client-related information

to the competent authorities. Customer due diligence (CDD), (sanctions) screening and transaction

monitoring impose requirements on financial institutions to maintain appropriate policies,

procedures and controls

to detect, prevent and report to the competent authorities on e.g. money

laundering and terrorist financing.

The increasing regulatory scrutiny drives the need to continuous change in the various processes,

procedures and IT systems. In some situations the applicable laws and regulations, at local and/or

at global level, seem to be conflicting with each

other, which imposes a significant

challenge on

banks as part of the implementation of requirements. In addition, the timeline for implementation

of those new/changed requirements

is sometimes very short, which is challenging in general, yet

especially in IT development. Obviously ING will continuously work on embedding the processes

and procedures reflecting the applicable requirements in our IT systems and data sources, driving a

business environment which is compliant by desire and design, and will execute ongoing training

and awareness to develop its people to have the right knowledge and skills.

That also accounts for risks deriving from new technologies. As an innovative bank, ING

continuously monitors regulatory developments to make risk assessments and define the

banks

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risk appetite. Regulations on distributed ledger technology and business developments in this area

are as rapid and impactful as the accompanying risks.

5th AML Directive

In addition, the 5th AML Directive will be implemented in the Netherlands. The 5th AML Directive

was originally adopted by the EU Council in June 2018, with the aim of addressing means of

terrorist financing, increasing transparency to combat money laundering and helping to

strengthen the fight against tax avoidance. The most important aspects

of the 5th AML Directive

involve the (anti money-laundering) risks relating to the use of virtual currencies, the improvement

of information exchange between supervising authorities, and the introduction of beneficial

ownership registers for corporate

and other legal entities.

ING expects to revise the KYC policy framework to reflect the requirements

of the 5th AML Directive.

Prior to the adoption of the 5th AML Directive, European supervisory authorities (ESAs) had

previously issued their final guidelines on risk factors, which

came into force in June 2018. These

guidelines promote a common understanding of the risk-based approach to anti-money

laundering/combatting terrorist financing (AML/CFT) and set out how it should be applied in the

context of the 4th AML Directive. These guidelines are currently

in the process of being updated, in

order to support firms’ AML/CFT compliance efforts

and enhance the ability of the EU’s financial

sector to effectively deter and detect

money laundering/terrorist financing. The ESAs

published a

consultation version of the updated guidelines on 5 February 2020. The final updated guidelines

are

expected to come into force in the course of 2020. Furthermore, in

September 2017, the ESAs

issued their final guidelines

to prevent the abuse of funds transfers for

terrorist financing and

money laundering purposes. These guidelines came into force in June 2018.

Financial Account Tax

Compliance Act (FATCA)

Under provisions of US tax law commonly referred

to as FATCA,

non-US financial institutions

are

required to provide

certain information on their US account holders and/or certain US investors to

the US Internal Revenue Service (IRS). A 30 percent withholding tax will be imposed on

‘withholdable payments’ made to non-compliant non-US financial

institutions. As part of the

actions taken to comply with FATCA

and other US withholding tax regulations, ING is for example

updating and strengthening its withholding compliance programme and reviewing,

amending and

filing the necessary tax returns and information reports.

Many countries, including the Netherlands, have entered into agreements (intergovernmental

agreements or IGAs) with the US to facilitate the type of information reporting required under

FATCA.

While the existence of IGAs will not eliminate the risk of the withholding tax described

above, these agreements are expected to reduce

that risk for financial institutions

and investors in

countries that have entered into IGAs. IGAs often require financial institutions in those countries to

report information on their US account holders to the taxing authorities of those countries, who

then pass the information to the IRS.

If the Group cannot rely on IGA or satisfy the requirements,

certain payments to the Group may be

subject to withholding under FATCA.

Certain payments may also be subject to other US withholding

tax regulations. The possibility of such withholding and the need for account holders and investors

to provide certain information may adversely affect the sales of certain of the Group’s products. In

addition, compliance with the terms of such IGAs and with FATCA,

any regulations or other

guidance promulgated thereunder, or any legislation promulgated under an IGA, and offering

products that generate ‘withholdable payments’, may substantially increase the Group’s

compliance costs.

Common Reporting Standard (CRS)

Similarly, the Organisation for Economic Cooperation

and Development (‘OECD’) has developed a

Common Reporting Standard (‘CRS’) and model competent authority agreement to enable the

multilateral and automatic exchange of financial account information. CRS requires financial

institutions to identify and report the tax residency and account details of non-resident customers

to the relevant authorities in CRS-compliant jurisdictions. As of 19 September 2019, 109

jurisdictions (‘signatory countries’), including the Netherlands,

have signed a multilateral

competent authority agreement to automatically exchange information pursuant to CRS. The

majority of countries where ING has a presence have committed to CRS. The EU has made CRS

mandatory for all its member states. The first

information exchange by the Netherlands (as for

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approximately half of the signatory countries) was executed in 2017. Most other signatory

countries commenced their information exchange in 2018 and some in 2019.

The OECD has also introduced two additional new measures to tackle global tax avoidance/evasion:

◾

Mandatory Disclosure Rules for Addressing CRS Avoidance

Arrangements and Opaque Offshore

Structures

◾

Preventing Abuse of Residence by Investment

(RBI) and Citizenship by Investment (CBI) Schemes

to Circumvent the CRS.

These measures are in the process

of being implemented in local laws. With regard to the

mandatory disclosure rules for EU jurisdictions, this was done via the amendment to Directive

2011/16 (DAC6). See below.

DAC6 (EU2018/822, an amendment to EU Directive 2011/16)

DAC6 imposes mandatory disclosure requirements

for taxpayers and intermediaries involving the

reporting of cross-border arrangements affecting at least one EU member state that fall within one

of a number of ‘hallmarks’. These hallmarks are broad categories setting out particular

characteristics identified as potentially

indicative of aggressive tax avoidance.

The reporting

obligations apply to ‘intermediaries’ (financial

institutions like ING may fall under this term) or, in

some circumstances, the taxpayer itself. There

will be a mandatory automatic exchange of

information on such reportable cross-border schemes via the Common Communication Network

(CCN) between the member states which will be set-up by the EU. Although DAC6 is not effective

until 1 July 2020, taxpayers and intermediaries have been required to monitor cross-border

arrangements since 25 June 2018.

MiFID II

Integrity and transparency in financial markets are essential for public and investor confidence. The

revised Markets in Financial Instruments Directive European

legislation (MiFID II/MiFIR) came into

effect in January 2018 and had a major

impact on ING and the markets in which it operates. A

central programme

continued in 2019 to support ING’s commitment to further embed the revised

legislation throughout the organisation.

The requirements set out in MiFID II/MiFIR are manifold and impact a large part of our organisation

and day-to-day business. In order to ensure compliance with these rules, standard controls

were

rolled out throughout the ING EU entities. In addition, a framework measuring MiFID compliance risk

was implemented in order to stay abreast of any compliance issues that need addressing.

Regulatory guidance around MiFID II/MiFIR continues to evolve and key requirements

are currently

under review.

As a result, ING will ensure that the organisation has continuous access to central

guidance giving a clear steer on expected conduct and processes. A network of experts has been

set up to ensure timely implementation of any regulatory changes.

Learning

In 2019 we continued to develop our approach to learning on compliance and risk culture

(and e.g.

established the KYC Academy).

Supporting staff to deliver a sound and consistent risk culture is a

focus for our learning. We emphasise a standard and streamlined

approach that facilitates

consistent messaging and learning across the bank, as appropriate.

More focus is being given to

role of specific training in ensuring staff continue to extend knowledge, skills and

behaviours for

their particular roles and responsibilities.

Model

risk

Introduction

Model risk is the risk that the financial

or reputational position of ING is negatively impacted as a

consequence of the use of models. Model risk can arise from errors in the development,

implementation, use or interpretation of models, or from incomplete or wrong data etc., leading to

inaccurate, noncompliant or misinterpreted model outputs.

A model is defined

as a quantitative method, system, or approach that applies statistical,

economic, financial,

or mathematical theories, techniques, and assumptions to process input data

into quantitative estimates.

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A candidate model is considered a model when:

◾

the outcome is used for a decision: by the customer, community, business / colleagues, and / or

other internal or external stakeholders such as regulators or shareholders, and

◾

the model is repeatedly used without a manual change of the design, and

◾

the outcome is an estimation, not the 100 percent measured truth; and

◾

it processes the data input with a quantitative method or approach that applies statistical,

economic, financial,

or mathematical theories, techniques and / or assumptions.

Models governance

The growing complexity and number of models created and utilised every year for decision-making

makes it important to manage and control the associated model risk accordingly. Within ING this

overarching

responsibility for this risk type lies within Model Risk Management. The department, in

addition to its traditional function of model validation, is also responsible for

global model risk

oversight. It sets and maintains a model risk management framework containing: (1) the

governance, (2) the model risk appetite, (3) model risk management policies and standards and (4)

the global model inventory tool. It is also responsible for monitoring and reporting the global model

risk exposures of ING.

The Model Risk Management Committee (MoRMC) has been established to align the overall model

strategy and the model risk appetite, and approve model policies, procedures

and methodologies.

Mandated by the MBB and chaired by the CRO of ING, the MoRMC meets monthly.

Model lines of defence

ING’s model risk and control structure is based on the three model lines of defence (MLoD)

approach. This approach aims to provide

a sound governance framework for model risk

management by defining

and implementing three different management layers with distinct roles

and oversight responsibilities.

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In terms of composition and main activities:

◾

The 1st LoD is composed of the model owners (mainly the business), data management and

model development, accountable for, among others, the development, implementation and use

of the models as well as monitoring the effectiveness of the models;

◾

The 2nd LoD is composed of model validation and model risk management, which owns the

model risk management framework and the

risk appetite; and

◾

The 3rd LoD

is the internal audit, reviewing the quality of execution in all lines of defence and

providing independent

assurance.

An important difference with the financial

and non-financial

risk lines of defence is that models can

also be owned by risk (normally a 2nd LoD), e.g. for bank wide stress

testing, or by the audit service

(normally a 3rd LoD), e.g.

to support their audits. In that case both domains (risk or audit service)

become 1st model line of defence.

Model Risk Appetite (MoRAS)

The model risk appetite is designed to control the level of model risk ING is willing to accept in

pursuit of its strategic objectives. It is derived from the concepts of boundaries and instruments as

described in the Risk Appetite Framework. Model RAS and related

boundaries and instruments will

be set in 2020 and going forward will be reviewed

on an annual basis. RAS requires approval

from

the MBB/EB and ratification from SB.

Model risk management

Since models are by definition simplifications

of reality, model risk is inherent in the use of models

and therefore model risk must be identified and managed. Model risk management

includes the

identification, assessment,

control (acceptance or mitigation) and monitoring (and reporting) of the

risks caused by applying models.

Model management is executed through the model life cycle with two types of components, which

are (i) the stages that each individual model goes through, from initiation to final decommissioning

and (ii) the overarching

components to manage ING’s model risk of all models: continuous model

inventory and reporting.

Model lifecycle

The next figure provides a schematic overview of the model lifecycle, where orange represents

the

1st model LoD, blue the 2nd and grey the 3rd.

It is composed of a set of processes starting after a

model is identified.

The objectives of the different processes

are outlined below.

Initiation or change

: The initiation of the development of a new model or change of an existing

model can be triggered by different factors. These may be (i) internal, such as the introduction of a

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new product that cannot be handled by the existing models, a change in ING’s organisation,

financial or commercial strategy or findings

and issues by an auditor, validator or based on

monitoring; or (ii) external, such as innovation/new technology that becomes available (for

example the Fintech models), new or upcoming supervisory regulations or ongoing technical

developments.

Data collection

is the process of defining and collecting data that

meets the defined data quality

requirements for model development. The process

includes the definition

of the data needed,

assessment of data availability and quality, assumptions and limitations, as well as the gathering

of the data needed for the analyses, impact study and testing during the model development

process.

Model development

is a structured process that leads to a model that is ready for validation and

subsequent use.

Depending on the development approach these first stages can be separate or integrated. An

example of the latter is data science based application development.

Pre-approval

validation

is the independent confirmation

that the model is valid for its intended

use, before the new or changed model is submitted for use approval.

To

ensure objectivity and

effective challenge, the model validator is independent from other model parties such as

the model

developer, model owner or model approver.

Model validation applies equally to in-house developed

and third-party models.

The objective of the

model approval

stage is approval for use.

The model owner submits the model

for formal consent by the internal approver before

being deployed and used. The

recommendations and validation report prepared

by the model validator are key inputs for

approval for use.

During the

implementation

stage, the model is realised, tested and made available in a production

environment.

In the

model use

stage the model is applied by the users for the specific

purpose it was designed

for.

The model can only be used after formal validation and approval for use of the model.

The objective of model

performance monitoring

is to regularly check if the model is performing as

intended, also after possible changes in the commercial, organisational or legal environment.

Model performance monitoring begins when model use has started and continues until the model

has officially

been decommissioned.

Periodic validation

: During the life time of a model the ongoing validity of the models must be

safeguarded. This is done by periodical independent (re)validation that assesses whether the model

is still valid for its intended use. There are

two types of validation: (1) periodic, such as annual,

which is mandatory for regulatory models, or (2) ad hoc, for example triggered by changes in the

model, the business or financial

instruments etc. The actual frequency of periodic validation

depends on the model risk, model type and applicable regulation.

A model that is / will no longer be used must be decommissioned.

Decommissioning

disables the

model. It can, for example, be triggered because (1) the product, organisation or risk the model is

made for has changed considerably or no longer exists, (2) the model is outdated, underperforming

or better alternatives are available, (3i) the model became obsolete due to standardisation or (4)

the external approver withdraws its approval

for the model.

Continuous model inventory and reporting

: Keeping an inventory of all models and their status

during their lifecycle is a continuous process. It supports management and control of the models in

scope, both per individual model and the overarching management of all ING’s models. Periodic

model risk reporting provides the relevant

internal and external stakeholders with an overview of

the models in use and the associated model risk given the defined

model risk appetite..

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Business

Risk

Introduction

Business Risk for ING has been defined

as the exposure to value loss due to fluctuations in

volumes/margins as well as expenses. It is the risk inherent to strategy

decisions and internal

efficiency.

Business risk capital is calculated via the variance-covariance methodology for expense

risk, covering the risk that expenses will deviate from the expected expenses over the horizon of the

relevant activities. This risk primarily relates to inability of adjusting expenses when that is needed.

Expense risk only concerns non-financial expenses (e.g. staff and

IT expenses); financial

expenses

are not in scope.

Governance and risk management

ING applies an explicit Risk Appetite Statement regarding business risk, focusing on earnings

stability and diversification of the business

mix. Avoiding putting all eggs in one basket reduces the

risk that volumes and/or margins will suddenly drop

due to unexpected changes in the business

environment for certain markets and products. Furthermore, the underlying risk types (expense risk

and volume-margin risk) are mitigated and managed differently. Expense risk is monitored and

managed via the financial

performance of the bank and the local units, whereby the reported

expense numbers are compared on a quarterly basis with the projected cost/income ratio.

Deviations from this ambition are monitored as part of the financial projections that are discussed

continuously within different parts of the organisation.

SELECTED

STATISTICAL

INFORMATION

ON BANKING

OPERATIONS

Reference is made to Note 1 ‘ Accounting Policies’

of the Consolidated financial statements for

information on Changes in accounting principles, estimates and presentation of the consolidated

financial statements

and related notes.

The information in this section sets forth selected statistical

information regarding the Group’s

operations.

Information for 2019, 2018 and 2017 is set forth under IFRS-IASB. Unless otherwise indicated,

average balances, when used, are calculated from

monthly data and the distinction between

domestic and foreign is based on the location of the office

where the assets and liabilities are

booked, as opposed to the domicile of the customer. However,

the Company believes that the

presentation of these amounts based upon the domicile of the customer would not result in

material differences in the amounts presented in this section.

Year ended 31 December

2019

2018

2017

Return on equity

7.8%

9.9%

11.4%

Return on assets

0.4%

0.5%

0.6%

Equity to assets

5.7%

5.5%

5.7%

Net interest margin

1.5%

1.5%

1.5%

AVERAGE

BALANCES AND INTEREST RATES

The following tables show the Group’s operations, average interest

-earning assets and average

interest-bearing liabilities, together with average rates, for

the periods indicated. The interest

income, interest expense and average yield figures do not reflect interest income and expense on

derivatives and other interest income and expense not considered to be directly related

to interest-

bearing assets and liabilities. These items are reflected in the corresponding interest income,

interest expense and net interest income figures in the consolidated financial statements. A

reconciliation of the interest income, interest

expense and net interest income figures to the

corresponding line items in the consolidated financial statements is provided hereunder.

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ASSETS

Interest-earning assets

2019

2018

2017

Average

balance

Interest

income

Averag

e yield

%

Average

balance

Interest

income

Average

yield %

Average

balance

Interest

income

Average

yield %

(EUR millions)

(EUR millions)

(EUR millions)

Time deposits with banks

1

domestic

8,213

95

1.2

3,395

41

1.2

16,234

89

0.6

foreign

34,583

912

2.6

40,970

1,016

2.5

39,807

536

1.4

Loans and advances

1

domestic

190,143

5,679

3.0

187,440

5,893

3.1

204,229

6,109

3.0

foreign

461,833

13,973

3.0

445,512

13,539

3.0

417,708

12,280

2.9

Interest-earning securities

2

domestic

29,892

347

1.2

29,454

336

1.1

28,856

400

1.4

foreign

50,156

917

1.8

50,699

1,055

2.1

61,035

1,341

2.2

Other interest-earning assets

domestic

30,659

56

0.2

36,898

34

0.1

22,526

24

0.1

foreign

24,978

66

0.3

30,224

80

0.3

30,215

75

0.2

Total

830,456

22,047

2.7

824,594

21,994

2.7

820,610

20,854

2.5

Non-interest earning assets

54,459

59,345

34,286

Derivatives assets

25,322

27,432

33,572

Total

assets

910,238

911,370

888,468

Percentage of assets

applicable to foreign

operations

70.0%

70.2%

67.5%

Interest income on

derivatives

5,499

5,556

22,498

Other

617

579

644

Total

interest income

28,163

28,129

43,996

(1) Securities purchased with agreements to resell are reflected in the categories Time deposits with banks, and Loans and

advances.

(2) Substantially all interest-earning securities held by the banking operations of the Company are taxable securities.

LIABILITIES

Interest-bearing liabilities

2019

2018

2017

Average

balance

Interest

expense

Average

yield

Average

balance

Interest

expense

Average

yield

Average

balance

Interest

expense

Average

yield

(EUR millions)

%

(EUR millions)

%

(EUR millions)

%

Time deposits from banks

domestic

17,673

28

0.2

17,805

22

0.1

17,219

25

0.1

foreign

14,270

200

1.4

15,262

210

1.4

15,169

234

1.5

Demand deposits

domestic

66,667

498

0.7

60,679

289

0.5

59,207

164

0.3

foreign

108,193

32

0.0

95,977

29

0.0

83,878

21

0.0

Time deposits

(1)

domestic

14,019

336

2.4

21,746

391

1.8

26,315

239

0.9

foreign

14,114

300

2.1

14,607

259

1.8

15,766

255

1.6

Savings deposits

domestic

93,911

114

0.1

92,203

121

0.1

92,818

246

0.3

foreign

266,470

1,301

0.5

261,398

1,257

0.5

263,340

1,502

0.6

Short term debt

domestic

22,559

180

0.8

18,253

96

0.5

6,958

47

0.7

foreign

17,928

405

2.3

31,521

553

1.8

23,479

260

1.1

Long term debt

domestic

72,012

1,700

2.4

55,080

1,525

2.8

60,915

1,520

2.5

foreign

14,110

317

2.2

12,765

345

2.7

14,424

435

3.0

Subordinated liabilities

domestic

15,304

664

4.3

16,444

721

4.4

16,635

395

2.4

foreign

77

3

4.3

81

3

4.1

150

6

4.1

Other interest

‑

bearing

liabilities

domestic

1,508

146

9.7

4,227

100

2.4

16,375

106

0.7

foreign

10,162

140

1.4

16,310

192

1.2

64,595

756

1.2

Total

748,979

6,363

0.8

734,359

6,113

0.8

777,243

6,211

0.8

Non-interest bearing

liabilities

86,107

102,449

35,447

Derivatives liabilities

24,376

25,927

33,297

Total

Liabilities

859,461

862,735

845,987

Group Capital

50,777

48,635

42,481

Total

liabilities and capital

910,238

911,370

888,468

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2019 ING Group Annual Report on Form 20-F

241

LIABILITIES

Interest-bearing liabilities

2019

2018

2017

Average

balance

Interest

expense

Average

yield

Average

balance

Interest

expense

Average

yield

Average

balance

Interest

expense

Average

yield

(EUR millions)

%

(EUR millions)

%

(EUR millions)

%

Percentage of liabilities

applicable to foreign

operations

63.5%

65.2%

62.3%

Other interest expense:

Interest expenses on

derivatives

5,925

6,212

23,064

other

2,064

1,844

1,074

Total

interest expense

14,353

14,169

30,349

Total

net interest result

13,811

13,960

13,647

(1) These captions do not include deposits from banks.

ANALYSIS

OF CHANGES IN NET INTEREST INCOME

The following table allocates changes in the Group’s operations’ interest income and expense and

net interest result between

changes in average balances and rates for the periods indicated.

Changes due to a combination of volume and rate have been allocated to changes in average

volume. The net changes in interest income, interest expense and net interest

result, as calculated

in this table, have been reconciled to the changes in interest income, interest expense and net

interest result in the consolidated financial statements. See introduction to “Average

Balances and

Interest Rates” for a discussion of the differences between interest

income, interest expense and

net interest result as calculated

in the following table and as set forth in the consolidated financial

statements.

2019 over 2018

2018 over 2017

Increase (decrease)

due to changes in

Increase (decrease)

due to changes in

Average

volume

Average

rate

Net

change

Average

volume

Average

rate

Net

change

(EUR millions)

(EUR millions)

Interest-earning assets

Time deposits to banks

domestic

58

–4

54

–71

22

–48

foreign

–158

55

–103

16

462

478

Loans and advances

domestic

97

–311

–214

–504

289

–216

foreign

520

–85

435

818

442

1,259

Interest-earning securities

Domestic

5

7

12

8

–73

–65

foreign

–11

–127

–138

–227

–59

–286

Other interest-earning assets

domestic

–6

28

22

15

–5

11

foreign

–14

–1

–15

–

5

5

Interest income

domestic

154

–280

–126

–552

233

–319

foreign

336

–157

179

606

850

1,457

Total

490

–437

53

55

1,083

1,138

Other interest income

1

–19

–17,007

Total

interest income

34

–15,869

(1)

Since 2018,

ING Group changed its separate presentation of interest (income and expenses) for trading derivatives, trading

securities and trading loans / deposits (mainly repo’s) to presenting the full fair value movements in ‘Valuation results and

net trading income’.

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The following table shows the interest spread and net interest

margin for the past two years.

2019

2018

Average

rate

Average

rate

%

%

Interest spread

Domestic

1.2

1.3

Foreign

2.2

2.1

Total

1.8

1.8

Net interest margin

Domestic

1.0

1.2

Foreign

2.3

2.2

Total

1.9

1.9

2019 over 2018

2018 over 2017

Increase (decrease)

due to changes in

Increase (decrease)

due to changes in

Average

volume

Average

rate

Net

change

Average

volume

Average

rate

Net

change

(EUR millions)

(EUR millions)

Interest-bearing liabilities

Time deposits from banks

domestic

–0

7

7

1

–5

–4

foreign

–14

4

–9

1

–26

–24

Demand deposits

domestic

29

180

209

4

122

126

foreign

4

–1

3

3

5

8

Time deposits

domestic

–139

84

–55

–42

193

151

foreign

–9

49

40

–19

23

4

Savings deposits

domestic

2

–10

–8

–1

–124

–125

foreign

25

18

44

–11

–234

–245

Short term debt

domestic

23

62

85

76

–27

49

foreign

–238

91

–148

89

203

292

Long term debt

domestic

469

–294

175

–146

150

5

foreign

36

–64

–28

–50

–40

–90

Subordinated liabilities

domestic

–50

–8

–58

–5

331

326

foreign

–0

0

0

–3

–0

–3

Other interest-bearing liabilities

domestic

–64

110

46

–79

72

–6

foreign

–72

20

–52

–565

1

–564

Interest expense

domestic

269

131

400

–191

712

521

foreign

–268

118

–150

–554

–67

–622

Total

1

249

250

–745

645

–100

Other interest expense

1

–67

–16,082

Total

interest expense

183

–16,182

Net interest

domestic

–115

–411

–526

–361

–479

–840

foreign

604

–275

329

1,160

918

2,078

Net interest

488

–686

–197

800

439

1,239

Other net interest result

48

–925

Net interest result

–149

314

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2019 ING Group Annual Report on Form 20-F

243

(1)

Since 2018, ING Group changed its separate presentation of interest (income and expenses) for trading derivatives, trading

securities and trading loans / deposits (mainly repo’s) to presenting the full fair value movements in ‘Valuation results and

net trading income’.

INVESTMENTS OF THE GROUP’S BANKING OPERATIONS

The following table shows the balance sheet value under IFRS-IASB of the investments of the

Group’s banking operations (excluding debt securities held in the trading portfolio).

Year ended 31 December

2019

2018

2017

Debt securities at fair value through other comprehensive

income

30,483

25,616

n/a

Debt securities at amortised cost

46,108

47,276

n/a

Debt securities at fair value through profit or loss

3,067

3,218

1,739

Debt securities available for sale

n/a

n/a

65,747

Debt securities held to maturity

n/a

n/a

9,343

Shares and convertible debentures

2,464

3,438

2

3,983

Land and buildings

1

803

834

839

Total

82,926

80,382

81,651

(1)

Including commuted ground rents

(2)

The prior period has been updated to improve consistency and comparability.

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Year ended 31 December

2019

2018

2017

(EUR millions)

Debt securities at fair value through other comprehensive income

Dutch government

1,831

1,444

n/a

German government

2,836

2,278

n/a

Belgian government

1,997

2,059

n/a

Other governments

13,729

11,847

n/a

Central banks

43

n/a

Banks and financial institutions

5,164

5,321

n/a

Other corporate debt securities

486

484

n/a

U.S. Treasury

and other U.S. Government agencies

3,190

1,061

n/a

Other debt securities

1,206

1,123

n/a

Total

debt securities at fair value through other comprehensive

income

30,483

25,616

n/a

Debt securities at amortised cost

Dutch government

6,155

6,484

n/a

German government

4,863

4,959

n/a

Belgian government

1,975

2,285

n/a

Other governments

13,004

12,771

n/a

Central banks

712

1,455

n/a

Banks and financial institutions

11,478

11,906

n/a

Other corporate debt securities

305

974

n/a

U.S. Treasury

and other U.S. Government agencies

6,419

4,959

n/a

Other debt securities

1,199

1,483

n/a

Total

debt securities at amortised cost

46,108

47,276

n/a

Year ended 31 December

2019

2018

2017

(EUR millions)

Debt securities available for sale

Dutch government

n/a

n/a

7,053

German government

n/a

n/a

10,682

Belgian government

n/a

n/a

4,892

Other governments

n/a

n/a

19,804

Central banks

n/a

n/a

1,216

Banks and financial institutions

n/a

n/a

15,356

Other corporate debt securities

n/a

n/a

1,493

U.S. Treasury

and other U.S. Government agencies

n/a

n/a

3,034

Other debt securities

n/a

n/a

2,217

Total

debt securities available for sale

n/a

n/a

65,747

Debt securities held to maturity

Dutch government

n/a

n/a

1,087

German government

n/a

n/a

238

Belgian government

n/a

n/a

628

Other governments

n/a

n/a

2,240

Central banks

n/a

n/a

310

Banks and financial institutions

n/a

n/a

908

Other corporate debt securities

n/a

n/a

209

U.S. Treasury

and other U.S. Government agencies

n/a

n/a

3,507

Other debt securities

n/a

n/a

216

Total

debt securities held to maturity

n/a

n/a

9,343

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2019 ING Group Annual Report on Form 20-F

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Banking investment strategy

ING’s investment strategy for its investment portfolio related to the banking activities is formulated

by the Asset and Liability Committee (“ALCO”).

The exposures of the investments to market rate

movements are managed by modifying the asset and liability mix, either directly or through the

use of derivative financial products including interest rate swaps, futures, forwards

and purchased

option positions such as interest rate caps, floors and collars. See “Item 11. Quantitative and

Qualitative Disclosure of Market Risk”.

Portfolio maturity

Year ended 31 December 2019

1 year or

less

Between

1 and 5

years

Between 5

and 10

years

Over 10

years

Total

Fair value through other comprehensive

income

Dutch government

16

1,400

416

–0

1,831

German government

63

1,973

801

2,836

Belgian government

202

1,165

630

1,997

Other governments

685

6,620

6,410

15

13,729

Central banks

43

43

Banks and financial institutions

334

2,867

1,963

–0

5,164

Other corporate debt securities

176

182

128

486

U.S. Treasury

and other U.S. Government

agencies

18

229

2,133

810

3,190

Other debt securities

1

91

659

455

1,206

Fair value through other comprehensive

income

1,537

14,528

13,139

1,280

30,483

Yield

(1)

2.8

2.8

1.6

2.2

(1)

Since substantially all investment securities held by the banking operations of the Company are taxable securities, the

yields are on tax-equivalent basis.

Year ended 31 December 2019

1 year or

less

Between

1 and 5

years

Between

5 and 10

years

Over 10

years

Total

Securities at amortised cost

Dutch government

1,426

4,729

6,155

German government

692

4,131

40

4,863

Belgian government

110

139

1,726

1,975

Other governments

2,319

4,753

5,498

433

13,004

Central banks

712

–

–

712

Banks and financial institutions

2,524

6,634

2,320

11,478

Other corporate debt securities

35

236

33

305

U.S. Treasury

and other U.S. Government

agencies

32

3,391

1,551

1,445

6,419

Other debt securities

2

543

459

195

1,199

Total

Securities at amortised cost

7,851

24,556

11,628

2,074

46,108

Yield

(1)

3.1

1.9

1.3

3.5

(1)

Since substantially all investment securities held by the banking operations of the Company are taxable securities, the

yields are on a tax-equivalent basis.

On 31 December 2019, ING Group also held the following securities for the banking operations that

exceeded 10 % of shareholders’ equity:

2019

Book value

Market

value

(EUR millions)

German government

11,527

11,796

Dutch government

9,403

9,538

US Treasury

and other US governments

10,651

10,745

Polish government

7,450

7,442

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2019 ING Group Annual Report on Form 20-F

246

LOAN PORTFOLIO

Loans and advances

to banks and customers

Loans and advances to banks include all receivables

from credit institutions, except for cash,

current accounts and deposits with other banks (including central banks). Loans and advances

to

customers includes lending facilities to corporate and private customers encompass among others,

loans, overdrafts and finance lease receivables.

The following table sets forth the gross loans and advances to banks and customers as of 31

December 2019, 2018, 2017, 2016 and 2015 under IFRS-IASB.

IFRS-IASB

Year ended December 31

2019

2018

2017

2016

2015

By domestic offices:

Loans guaranteed

by public authorities

25,340

24,547

26,975

27,746

30,912

Loans secured

by mortgages

117,199

117,848

119,514

123,378

124,771

Loans to or guaranteed

by credit institutions

13,847

8,163

8,157

10,582

16,343

Other private lending

3,482

3,304

3,162

3,236

5,636

Other corporate lending

39,645

37,213

38,208

39,669

197,069

Total

domestic offices

199,514

191,074

196,016

204,611

374,731

By foreign offices:

Loans guaranteed

by public authorities

16,849

17,257

19,397

18,634

18,214

Loans secured

by mortgages

231,327

219,530

204,451

195,328

179,938

Loans to or guaranteed

by credit institutions

25,069

25,364

22,641

19,427

17,688

Other private lending

24,768

21,563

20,074

18,723

17,041

Asset backed securities excluding MBS

–

–

2,209

3,380

4,937

Other corporate lending

150,233

149,787

140,455

134,092

119,161

Total

foreign offices

448,246

433,500

409,227

389,585

356,979

Total

gross loans and advances to banks and

customers

647,759

624,575

605,243

594,196

731,710

Maturities and sensitivity of loans to

changes in interest rates

The following table analyses loans and advances to banks and customers by time remaining until

maturity as of 31 December 2019.

1 year

or less

1 year

to 5 years

After

5 years

Total

(EUR millions)

By domestic offices:

Loans guaranteed

by public authorities

2,311

1,897

21,132

25,340

Loans secured

by mortgages

5,811

16,091

95,298

117,199

Loans guaranteed

by credit institutions

12,705

1,060

82

13,847

Other private lending

1,591

905

987

3,482

Other corporate lending

22,253

13,215

4,177

39,645

Total

domestic offices

44,670

33,167

121,676

199,514

By foreign offices:

Loans guaranteed

by public authorities

3,507

6,440

6,902

16,849

Loans secured

by mortgages

23,577

57,244

150,506

231,327

Loans guaranteed

by credit institutions

18,725

3,658

2,686

25,069

Other private lending

6,439

12,826

5,504

24,768

Other corporate lending

55,966

72,772

21,495

150,233

Total

foreign offices

108,213

152,940

187,093

448,246

Total

gross loans and advances to banks and customers

152,883

186,107

308,769

647,759

The following table analyzes loans and advances to banks and customers by interest rate

sensitivity by maturity as of 31 December 2019.

1 Year or

less

Over 1 Year

Total

Non-interest earning

3,584

1,032

4,617

Fixed interest rates

61,570

87,181

148,751

Floating or adjustable interest rates

(1)

87,729

406,662

494,391

Total

152,883

494,876

647,759

(1)

Loans that have an interest rate that remains

fixed for more than one year and which can then be changed are classified

as “adjustable interest rates”

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Loan concentration

The following industry concentrations were

in excess of 10% of total loans as of 31 December,

2019:

Total

outstanding

Private Individuals

38.9%

Risk elements

Loans Past Due 90 days

and Still Accruing Interest

Loans past due 90 days and still accruing interest are

loans that are contractually past due 90 days

or more as to principal or interest on which we continue to recognize

interest income on an accrual

basis in accordance with IFRS-IASB. Once an impairment loss is recognized for a loan, interest

income is recognized using the rate of interest

used to discount the future cash flows for the

purpose of measuring the impairment loss.

The following table sets forth the gross balance of the loans past due 90 days and still accruing

interest for the years ended 31 December 2019, 2018, 2017, 2016 and 2015 under IFRS-IASB.

IFRS-IASB

Year ended 31 December

(EUR millions)

2019

2018

2017

2016

2015

Domestic

2,272

2,948

4,343

5,292

7,523

Foreign

3,126

2,427

3,861

3,338

4,055

Total

loans past due 90 days and still accruing

interest

5,398

5,375

8,204

8,630

11,578

As of 31 December 2019, EUR5,398 million of the loans past due 90 days and still accruing interest

have a loan loss provision. ING’s loan portfolio is under constant review.

Loans with past due

financial obligations

of more than 90 days are reclassified as non-performing.

For commercial

lending portfolios, there generally are reasons for

declaring a loan non-performing

prior to being 90 days past due.

These reasons 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.

The total loans classified as

non performing, including those loans classified

as past due 90 days

and still accruing interest, amounts to EUR 11,477 million as of 31 December 2019.

For information on credit restructuring reference

is made to “Additional

information – ING Group

Risk Management”.

Troubled

Debt Restructurings

Troubled

debt restructurings are loans that we have restructured due to deterioration

in the

borrower’s financial position and in relation to which, for economic or legal reasons related to the

borrower’s deteriorated

financial

position, we have granted a concession to the borrower

that we

would not have otherwise granted.

The following table sets forth the gross outstanding balances of the troubled debt restructurings as

of December 31 2019, 2018, 2017, 2016 and 2015 under IFRS-IASB.

IFRS-IASB

Year ended 31 December

2019

2018

2017

2016

2015

(EUR millions)

Troubled

debt restructurings:

Domestic

869

672

675

325

86

Foreign

946

779

330

277

376

Total

troubled debt restructurings

1,815

1,451

1,005

602

462

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2019 ING Group Annual Report on Form 20-F

248

Relationship Between Forbearance

and Troubled

Debt Restructurings (TDR)

Both forbearance and TDR refer to a situation in which a debtor is facing financial difficulties

and

the creditor grants concessions in respect of the terms of the loans, but the application of the

respective guidance, specifically the entry criteria under

both standards, results in differences

between the total amount of reported forborne loans and the amount of forborne loans which are

considered TDR.

This difference is due to ING’s determination of forbearance being based on the criteria in the

European Implementing Technical

Standards on Supervisory reporting on forbearance and non-

performing exposures under article 99(4) of Regulation (EU) No 575/2013 (the “EU Standard”), while

ING’s determination of Troubled

Debt Restructurings (TDR) is based on FASB codification (ASC) 310-

40 “Troubled

Debt Restructurings by Creditors” (the “TDR Standard”).

Under the EU Standard, all concessions that ING makes in respect of a loan given to a debtor in

financial difficulty

will result in a loan being considered forborne, including modification of payment

terms (such as interest deferrals or extensions of maturity) as well

as concessions that do not have

any impact on cash flows, such as

when ING waives covenant or other non-payment-related loan

terms. As a result, the “Total

Forborne Loans” in the table below represents

all loans where ING has

made borrower concessions, regardless

of the impact of such concessions on the timing or

likelihood of repayment.

Under the TDR Standard, however, loans may only be classified as TDR if the creditor has granted a

concession and as a result of such concession does not expect to collect all amounts due, including

both interest and principal. For these purposes, the TDR Standard also provides

that concessions

that result in a delay in payment that is only considered “insignificant” will not result in the loan

being considered TDR. This means that the loans reported by ING as TDR will not include loans for

which covenant or other non-payment terms have been modified, as

well as loans for which

payment-related concessions would, in ING’s judgment, result in only insignificant delays in

repayment. Examples of concessions which result in only insignificant delays in payment would

include temporary payment holidays for retail mortgage clients, or standstill arrangements with

corporate borrowers.

As ING will ordinarily receive compensation in connection with such

concessions (generally through additional interest income), these concessions would typically not

result in a significant NPV loss or would result in a delay in payment that we would consider to be

insignificant taking into account the remaining duration of the loan. Debt forgiveness, either

through principal or interest reductions, is generally not granted

by ING, but to the extent granted

would likely result in the loan being classified as TDR.

As a result of the application of these two standards,

ING reports a significantly larger amount of

loans in the forborne category than in the TDR category. The following table (in EUR millions) sets

forth total forborne loans and loans that are TDR as of December 31, 2019, 2018 and 2017, as well

as a reconciliation indicating the categories of forborne loans under the EU Standard which do not

meet the criteria of the TDR Standard.

2019

2018

2017

Total

Forborne Loans (EU Standard)

9,492

10,094

11,819

Wholesale Banking:

Concessions not reducing cash flows (e.g., covenant

waiver)

–1,018

–1,429

–2,359

Concessions that do not result

in significant delay in payment (1)

–2,536

–2,244

–2,817

Retail Banking:

Concessions that do not result

in significant delay of payment

–4,029

–4,696

–5,317

Other

–94

–274

–321

Total

Loans that are Troubled

Debt Restructurings (TDR Standard)

1,815

1,451

1,005

(1) This category includes concessions where the NPV loss is less than 1%.

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2019 ING Group Annual Report on Form 20-F

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Interest Income on Troubled

Debt Restructurings

The following table sets forth the gross interest income that would have been recorded

during the

year ended 31 December 2019 on troubled debt restructurings had such loans been current in

accordance with their original contractual terms and interest

income on such loans that was

actually included in interest income during the year ended 31 December 2019.

Year ended 31 December 2019

(EUR millions)

Domestic

Offices

Foreign

Offices

Total

Interest income that would have

been recognized under the

original contractual terms

17

40

58

Interest income recognized

in the profit and loss account

10

17

27

Potential Problem

Loans

Potential problem loans are loans that are

not classified

as loans past due 90 days and still

accruing interest or troubled debt restructurings and amounted to EUR 4,845 million as of 31

December 2019. Of this total, EUR 1,865 million relates to domestic loans and EUR 2,980 million

relates to foreign loans. These loans are

considered potential problem loans as there is known

information about possible credit problems causing us to have serious doubts as to the ability of

the borrower to comply with the present loan repayment terms and which may result

in classifying

the loans as loans past due 90 days and still accruing interest or as troubled debt restructurings.

Cross-border

outstandings

Cross-border outstandings are

defined

as loans (including accrued interest), acceptances, interest-

earning deposits with other banks, other interest-earning investments and any other monetary

assets that are denominated in euro or other non-local currency. To

the extent that material local

currency outstandings are not hedged or are not funded by local currency

borrowings, such

amounts are included in cross-border outstandings.

Commitments such as irrevocable

letters of credit are not considered as cross

border outstanding.

Total

outstandings are in line with Dutch Central Bank requirements.

On 31 December 2019, there

were no outstandings exceeding 1% of total assets in any country where current

conditions give

rise to liquidity problems which are expected to have a material impact on the timely repayment of

interest or principal.

The following tables analyze cross-border outstandings as of the end of 31 December 2019, 2018

and 2017 stating the name of the country and the aggregate amount of cross-border outstandings

to borrowers in each foreign country where

such outstandings exceed 1% of total assets, by the

following categories.

Year ended 31 December 2019

Government

& official

institutions

Banks &

other

financial

institutions

Commercial

& industrial

Other

Total

Cross-

border

Commitmen

ts

(EUR millions)

United States of America

9,890

5,994

70,325

1,707

87,917

25,965

United Kingdom

1,811

18,552

14,665

3,496

38,525

7,314

France

1,318

15,824

17,720

991

35,854

8,670

Ireland

55

1,628

19,168

211

21,061

1,720

Luxembourg

949

7,165

6,595

1,286

15,996

3,303

Germany

2,400

5,216

3,985

3,869

15,470

11,974

Switzerland

1,192

717

11,501

1,989

15,399

2,060

Singapore

0

1,322

12,343

1,119

14,783

795

Cayman Islands

10,657

645

143

11,445

479

China

54

4,924

1,180

4,563

10,721

331

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2019 ING Group Annual Report on Form 20-F

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Year ended 31 December 2018

Government

& official

institutions

Banks &

other

financial

institutions

Commercial

& industrial

Other

Total

Cross-

border

Commitmen

ts

(EUR millions)

United States of America

6,054

5,759

71,956

2,407

86,176

19,819

United Kingdom

1,420

14,756

13,213

2,376

31,766

6,415

France

1,851

11,535

16,017

979

30,383

2,360

Ireland

1,819

19,506

142

21,467

1,008

Switzerland

220

3,087

13,406

1,886

18,598

2,272

Germany

2,965

3,837

3,800

3,935

14,537

12,142

Luxembourg

863

2,969

8,026

1,369

13,227

3,901

Singapore

1,163

9,823

769

11,755

774

China

31

4,920

1,848

3,969

10,768

733

Belgium

997

1,805

7,054

845

10,702

13,954

Year ended 31 December 2017

Government

& official

institutions

Banks &

other

financial

institutions

Commercial

& industrial

Other

Total

Cross-

border

Commitmen

ts

(EUR millions)

United States

6,665

7,165

65,444

2,727

82,001

16,621

France

2,564

24,353

15,333

1,230

43,479

7,840

United Kingdom

1,263

13,493

14,373

2,574

31,702

6,442

Switzerland

4

7,594

10,800

2,700

21,098

2,521

Ireland

574

19,686

161

20,421

927

Germany

4,404

5,873

3,897

3,267

17,441

12,585

Belgium

439

2,612

12,496

812

16,359

14,484

China

85

7,849

2,248

5,490

15,671

320

Singapore

1,601

9,175

550

11,326

618

Luxembourg

508

2,151

6,910

1,598

11,167

3,445

Turkey

1,274

3,710

5,312

234

10,530

1,139

Hong Kong

4,512

4,134

575

9,221

300

The following table Discloses cross-border outstandin’s as of the end of 31 December 2019, 2018

and 2017 stating the name of the country and the aggregate amount of cross-border outstandings

to borrowers in each foreign country where

such outstandings are between 0.75 percent and 1.0

percent of total assets.

Year ended

2019

(EUR millions)

Belgium

8,277

Hong Kong

8,232

Canada

8,169

Japan

7,674

Turkey

6,630

Year ended

2018

(EUR millions)

Cayman Islands

8,516

Turkey

7,831

Spain

7,523

Hong Kong

7,083

Japan

6,792

Year ended

2017

(EUR millions)

Japan

8,332

Canada

6,116

Cayman Islands

6,062

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2019 ING Group Annual Report on Form 20-F

251

Summary of Loan Loss

Experience

For further explanation on loan loss provision reference

is made to Note 1 ‘Accounting Policies’ and

Additional info – Risk Management.

The following table presents the movements in allocation of the provision for loan losses on loans

accounted for as loans and advances to banks and customers for 2019, 2018, 2017, 2016 and 2015

under IFRS-IASB.

IFRS-IASB

Calendar period

2019

2018

(1)

2017

2016

2015

(EUR millions)

Balance on 1 January

4,568

4,521

5,308

5,786

5,995

Effect of changes in accounting policy

795

Write-offs:

Domestic:

Loans guaranteed

by public authorities

–69

–207

Loans secured

by mortgages

–127

–127

–231

–323

–436

Loans to or guaranteed

by credit institutions

–5

Other private lending

–72

–177

–48

–93

–121

Other corporate lending

–264

–105

–409

–234

–447

Foreign:

Loans secured

by mortgages

–48

–70

–66

–129

–154

Loans to or guaranteed

by credit institutions

–1

Other private lending

–144

–141

–188

–233

–303

Other corporate lending

–375

–354

–331

–275

–257

Total

write-offs

–1,030

–1,044

–1,278

–1,494

–1,718

Recoveries:

Domestic:

Loans guaranteed

by public authorities

Loans secured

by mortgages

13

15

24

14

23

Other private lending

10

11

15

15

16

Other corporate lending

7

14

19

6

–5

Foreign:

Loans secured

by mortgages

2

2

3

3

4

Other private lending

11

4

7

8

37

Other corporate lending

12

7

–8

48

16

Total

recoveries

55

53

60

94

91

Net write-offs

–975

–992

–1,218

–1,400

–1,627

Additions and other adjustments (included in value Adjustments

to receivables of the Banking operations)

1,052

244

538

922

1,418

Balance on 31 December

4,645

4,568

4,628

5,308

5,786

Ratio of net charge

‑

offs to average loans and advances to banks

and customers

0.14%

0.15%

0.20%

0.23%

0.28%

(1) As from 1 January 2018 changes in loan loss provision presents IFRS 9 expected credit losses (excluding IAS 37 provisions

for non-credit replacement positions). The IAS 39 comparative 2017 amount includes IAS 37 provision for all off balance

positions

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2019 ING Group Annual Report on Form 20-F

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Additions to the provision for loan losses presented in the table above were

influenced by

developments in general economic conditions as well as certain individual exposures. The following

table shows the allocation of the provision for loan losses on loans accounted for as loans and

advances to banks and to customers, to financial

assets at at fair value through other

comprehensive income and amortised cost and contingent liabilities for 2019, 2018, 2017, 2016

and 2015 under IFRS-IASB.

IFRS-IASB

Year ended December 31

2019

2018(2)

2017

2016

2015

EUR

%(1)

EUR

%(1)

EUR

%(1)

EUR

%(1)

EUR

%(1)

(EUR millions)

Domestic:

Loans guaranteed

by

public

authorities

4

4

4

5

5

Loans secured

by mortgages

472

18

421

19

347

20

550

21

819

22

Loans to or guaranteed

by credit

institutions

6

2

5

1

2

1

2

2

2

Other private lending

72

1

119

1

118

1

122

1

177

1

Other corporate lending

657

6

959

6

1,268

6

1,738

6

1,904

7

Total

domestic

1,207

31

1,504

31

1,735

32

2,412

34

2,900

37

Foreign:

Loans guaranteed

by public

authorities

3

3

7

3

3

3

7

3

2

3

Loans secured

by mortgages

599

36

700

35

526

34

638

32

717

30

Loans to or guaranteed

by credit

institutions

4

4

8

4

7

4

12

3

15

3

Other private lending

820

4

763

3

746

3

620

3

712

3

Mortgage backed securities

9

2

1

2

1

Other corporate lending

1,992

23

1,563

24

1,602

23

1,617

23

1,438

22

Total

foreign

3,418

69

3,041

69

2,893

67

2,896

66

2,886

63

Total

4,625

100

4,545

100

4,628

100

5,308

100

5,786

100

LLP financial assets at FVOCI

10

11

LLP Securities at AC

10

11

Total

provisions

4,645

4,568

(1) The percentages represent the loans in each category as a percentage of the total loan portfolio for loans and advances to

banks and customers.

(

2) As from 1 January 2018 changes in loan loss provision presents IFRS 9 expected credit losses (excluding IAS 37 provisions

for non-credit replacement positions). The IAS 39 comparative 2017 amount includes IAS 37 provision for all off balance

positions.

DEPOSITS

For information on deposits reference

is made to Note 13 ‘Deposits from banks’ and Note 14 ‘

Customer deposits’ of the consolidated financial

statements.

For the years ended 31 December 2019, 2018 and 2017 the aggregate amount of deposits by

foreign depositors in domestic offices

was EUR 27,649 million EUR 27,586 million and EUR 43,572

million, respectively.

Outstanding of time certificates

of deposit and other time deposits > EUR 20.000

On 31 December 2019, the amount of domestic time certificates

of deposit and other time

deposits,

exceeding EUR 20,000, issued by domestic offices

by time remaining until maturity was:

Time certificates of

deposit

Other time deposits

(EUR

millions)

%

(EUR

millions)

%

3 months or less

3,912

39.5

7,487

29.5

6 months or less but over 3 months

1,298

13.1

11,093

43.6

12 months or less but over 6 months

4,702

47.4

913

3.6

Over 12 months

5,921

23.3

Total

9,912

25,414

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The following table shows the amount outstanding for time certificates

of deposit and other time

deposits exceeding EUR 20,000 issued by foreign offices on

December 31 2019.

(EUR

millions)

Time certificates of deposit

4,000

Other time deposits

23,279

Total

27,278

Short-term Borrowings

Short-term borrowings are borrowings with an original maturity of one year or less. Commercial

paper and securities sold under repurchase agreements are

the only significant

categories of short-

term borrowings within our banking operations.

The following table sets forth certain information relating to the categories of our short-term

borrowings.

IFRS-IASB

Year ended 31 December

2019

2018

2017

(EUR millions, except % data)

Commercial paper:

Balance at the end of the year

27,581

33,471

20,506

Monthly average balance outstanding during the year

28,751

34,647

17,600

Maximum balance outstanding at any period end during the year

36,692

39,556

20,748

Weighted average

interest rate during the year

1.36%

1.37%

1.19%

Weighted average

interest rate on balance at the end of the year

1.42%

1.42%

1.02%

Securities sold under repurchase agreements:

Balance at the end of the year

43,255

52,481

41,672

Monthly average balance outstanding during the year

57,501

76,953

65,465

Maximum balance outstanding at any period end during the year

64,334

92,796

89,225

Weighted average

interest rate during the year

2.42%

1.63%

0.98%

Weighted average

interest rate on balance at the end of the year

3.22%

2.38%

1.54%

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Financial Statements

2019 ING Group Annual Report on Form 20-F

F - 1

Contents

Consolidated statement of financial position

F – 4

Consolidated statement of profit or loss

F – 5

Consolidated statement of comprehensive income

F – 7

Consolidated statement of changes in equity

F – 8

Consolidated statement of cash flows

F – 11

Notes to the consolidated financial

statements

F – 13

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2019 ING Group Annual Report on Form 20-F

F - 2

Report of independent registered

public accounting firm

To

the Shareholders and the Supervisory Board

ING Groep N.V.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of financial

position of ING Groep N.V.

and subsidiaries (‘the Company’) as of December 31, 2019 and 2018,

the related consolidated

statements of profit or loss, comprehensive income, changes in equity, and cash flows for each of

the years in the three year period ended December 31, 2019,

and the related notes and specific

disclosures described in Note 1 of the consolidated financial

statements as being part of the

consolidated financial statements (collectively: ‘the consolidated financial

statements’). In our

opinion, the consolidated financial statements present fairly, in all material respects, the financial

position of the Company as of December 31, 2019 and 2018, and

the results of its operations and its

cash flows for each of the years in the three year period ended

December 31, 2019, in conformity

with International Financial Reporting Standards as issued by

the International Accounting

Standards Board.

We also have audited, in accordance with the standards of the Public Company

Accounting

Oversight Board (United States) (‘PCAOB’), the Company’s internal control over financial

reporting

as of December 31, 2019, based on criteria established in

Internal Control – Integrated Framework

(2013) issued by the Committee of Sponsoring Organizations

of the Treadway Commission, and our

report dated March 2, 2020 expressed an unqualified opinion on

the effectiveness of the Company’s

internal control over financial reporting.

Changes in Accounting Principle

As discussed in Note 1 to the consolidated financial statements,

the Company has changed its

method of accounting in 2019 due to the adoption of International

Financial Reporting Standard 16,

‘Leases’. The Company early adopted the amendments to IAS

39 ‘Financial Instruments:

Recognition and Measurement’ and IFRS 7 ‘Financial Instruments:

Disclosures’ in relation to the

Interest Rate Benchmark Reform as issued by the IASB in

September 2019. The Company changed

its method of accounting for financial instruments in 2018 due to

the adoption of International

Financial Reporting Standard 9, ‘Financial Instruments’.

Basis for Opinion

These consolidated financial statements are the responsibility

of the Company’s management. Our

responsibility is to express an opinion on these consolidated financial

statements based on our

audits. We are a public accounting firm registered with the PCAOB and are required

to be

independent with respect to the Company in accordance with

the U.S. federal securities laws and

the applicable rules and regulations of the Securities and

Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require

that we plan and perform the audit to obtain reasonable assurance

about whether the consolidated

financial statements are free of material misstatement, whether

due to error or fraud. Our audits

included performing procedures to assess the risks of material

misstatement of the consolidated

financial statements, whether due to error or fraud, and performing

procedures that respond to those

risks. Such procedures included examining, on a test basis, evidence

regarding the amounts and

disclosures in the consolidated financial statements. Our audits also

included evaluating the

accounting principles used and significant estimates made by

management, as well as evaluating

the overall presentation of the consolidated financial statements.

We believe that our audits provide

a reasonable basis for our opinion.

Critical Audit Matter

The Critical Audit Matter communicated below is a matter arising from

the current period audit of the

consolidated financial statements that was communicated or required

to be communicated to the

Audit Committee and that: (1) relates to accounts or disclosures

that are material to the consolidated

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Financial Statements

2019 ING Group Annual Report on Form 20-F

F - 3

financial statements and (2) involved our especially challenging,

subjective, or complex judgement.

The communication of a Critical Audit Matter does not alter in

any way our opinion on the

consolidated financial statements, taken as a whole, and we

are not, by communicating the Critical

Audit Matter below, providing a separate opinion on the Critical Audit Matter or on the accounts or

disclosures to which it relates.

Assessment of Expected Credit Losses on loans and advances

to customers and banks.

As discussed in the Credit Risk section on pages 172-207, and in Note

7 and Note 3 to the

consolidated financial statements, the loans and advances to

customers and loans and advances to

banks amounts are EUR 608 billion and EUR 35 billion, respectively, as at December 31, 2019.

These loans and advances are measured at amortised cost, less

a provision for Expected Credit

Losses (‘ECL’) of EUR 4.6 billion. Considerable judgement is exercised in determining the amount of

ECL for loans and advances to customers and banks assessed

on both a collective and an

individual basis.

We identified the assessment of ECL on loans and advances to customers and banks

as a Critical

Audit Matter because there was a high degree of estimation uncertainty

as a result of complexity of

the models, inputs, assumptions and judgements in measuring

the ECL. Specifically, assessment of

the probability of default (‘PD’), the loss given default (‘LGD’), and

the exposure at default (‘EAD’),

including expected future recovery cash flows, the use of the macro-economic

assumptions in the

ECL, and the criteria for identifying significant increase in credit risk

(‘SICR’) required significant and

complex auditor judgement and knowledge and experience in the industry.

The primary procedures we performed to address this Critical Audit Matter, included the following:

-

We tested certain internal controls over the Company’s ECL process for loans and advances

to

customers and banks, including controls related to governance

and monitoring of the ECL, review

of the relevant loan inputs used in the collective provisioning

models, determination of risk ratings,

and the estimated future recovery cash flows of individual loan provisions.

Furthermore, we tested

certain internal controls with respect to the assessment of the PD,

LGD, and EAD assumptions in

credit risk models used to calculate the collective ECL, including

the development of macro-

economic scenarios, SICR criteria, and review of model outputs.

-

We involved professionals with specialised skills and knowledge who assisted in:

●

evaluating the inputs, assumptions and judgements to determine

the PD, LGD, and EAD

parameters in models used by the Company to calculate

the collective provisions;

●

assessing the criteria and thresholds used to identify loans that experienced

a significant

increase in credit risk.

-

With the assistance of Corporate Finance professionals and Real Estate

Valuation professionals

with specialised skills and knowledge, we assessed the methodologies,

cash flows and collateral

values used in expected future recovery cash flow assessments of provisions

for impaired loans,

including the Company’s judgements made.

-

We involved economic professionals with specialised skills and knowledge to

assist in the

assessment of the Company’s methodology in determining the macro-economic

scenarios used

in the ECL calculation.

/s/ KPMG Accountants N.V.

We have served as the Company’s auditor since 2016.

Amstelveen, the Netherlands

March 2, 2020

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Additional Information

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Financial Statements

2019 ING Group Annual Report on Form 20-F

F - 4

Consolidated

statement of financial

position

As at 31 December

in EUR million

2019

1

2018

2019

1

2018

Assets

Liabilities

Cash and balances with central banks

2

53,202

49,987

Deposits from banks

13

34,826

37,330

Loans and advances to banks

3

35,136

30,422

Customer deposits

14

574,355

555,729

Financial assets at fair value through profit or loss

4

Financial liabilities at fair value through profit or loss

15

– Trading

assets

49,254

50,152

– Trading

liabilities

28,042

31,215

– Non-trading derivatives

2,257

2,664

– Non-trading derivatives

2,215

2,299

– Designated as at fair value through profit or loss

3,076

2,887

– Designated as at fair value through profit or loss

47,684

59,179

– Mandatorily at fair value through profit or loss

41,600

64,783

Current tax liabilities

554

822

Financial assets at fair value through other comprehensive

income

5

34,468

31,223

Deferred tax liabilities

37

322

180

Securities at amortised cost

6

46,108

47,276

Provisions

16

688

1,011

Loans and advances to customers

7

608,029

589,653

Other liabilities

17

12,829

13,510

Investments in associates and joint ventures

8

1,790

1,203

Debt securities in issue

18

118,528

119,751

Property and equipment

9

3,172

1,659

Subordinated loans

19

16,588

13,724

Intangible assets

10

1,916

1,839

Total

liabilities

836,631

834,751

Current tax assets

251

202

Deferred tax assets

37

1,242

958

Equity

20

Other assets

11

7,018

8,433

Share capital and share premium

17,117

17,088

Assets held for Sale

12

1,262

Other reserves

4,013

3,621

Retained earnings

29,866

28,339

Shareholders’ equity (parent)

50,996

49,049

Non-controlling interests

893

803

Total

equity

51,889

49,851

Total

assets

888,520

884,603

Total

liabilities and equity

888,520

884,603

1

The amounts for the period ended December 2019

have been prepared in accordance with IFRS 16. The right-of-use-assets are presented under line-item 'Property and Equipment' and the lease liability is included in line-item 'Other liabilities'. Prior period

amounts have not been restated.

References relate

to the accompanying notes. These are an integral part of the Consolidated financial statements.

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Financial Statements

2019 ING Group Annual Report on Form 20-F

F - 5

Consolidated

statement of profit or loss

for the years ended 31 December

in EUR million

2019

1

2018

1

2017

1

2019

1

2018

1

2017

1

Continuing operations

Interest income using effective interest rate

method

25,056

25,249

n/a

Addition to loan loss provisions

7

1,120

656

676

Other interest income

3,107

2,880

n/a

Staff expenses

27

5,755

5,420

5,202

Total

interest income

28,163

28,129

43,996

Other operating expenses

28

4,598

5,262

4,627

Total

expenses

11,472

11,338

10,505

Interest expense using effective interest rate

method

–11,268

–11,171

n/a

Other interest expense

–3,084

–2,997

n/a

Result before tax

from continuing operations

5,653

6,986

8,085

Total

interest expense

–14,353

–14,169

–30,349

Taxation

37

1,652

2,116

2,539

Net interest income

21

13,811

13,960

13,647

Net result from continuing operations

4,001

4,869

5,546

Fee and commission income

4,439

4,240

3,865

Net result (before

non-controlling interests)

4,001

4,869

5,546

Fee and commission expense

–1,571

–1,442

–1,155

Net result attributable to Non-controlling

interests

99

108

82

Net fee and commission income

22

2,868

2,798

2,710

Net result attributable to Equityholders of the parent

3,903

4,761

5,464

Valuation results

and net trading income

23

–159

1,227

1,512

1 The amounts for the period ended 31 December 2019 and 2018 have been prepared

in accordance with IFRS 9. The

adoption of IFRS 9 led to new presentation requirements.

2017 period amounts have not been restated.

2018 amounts in other interest income and other interest

expense have been updated to improve

consistency and

comparability.

Investment income

24

188

183

192

Share of result from

associates and joint ventures

8

48

143

178

Result on disposal of group companies

25

117

–123

1

Other income

26

252

136

350

Total

income

17,125

18,324

18,590

Reference relate

to the accompanying notes. These are an integral part of the Consolidated

financial statements.

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Financial Statements

2019 ING Group Annual Report on Form 20-F

F - 6

Consolidated

statement of profit or loss – continued

in EUR

2019

2018

2017

Earnings per ordinary share

29

Basic earnings per ordinary share

1.00

1.22

1.41

Diluted earnings per ordinary share

1.00

1.22

1.41

Earnings per ordinary share from

continuing operations

29

Basic earnings per ordinary share from

continuing operations

1.00

1.22

1.41

Diluted earnings per ordinary share from

continuing operations

1.00

1.22

1.41

Dividend per ordinary share

30

0.69

0.68

0.67

References relate

to the accompanying notes. These are an integral part of the Consolidated

financial statements.

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Financial Statements

2019 ING Group Annual Report on Form 20-F

F - 7

Consolidated

statement of comprehensive

income

for the years ended 31 December

in EUR million

2019

1

2018

1

2017

1

Net result (before non-controlling

interests)

4,001

4,869

5,546

Other comprehensive income

Items that will not be reclassified to the statement of profit or loss:

Realised and unrealised revaluations

property in own use

58

1

26

Remeasurement of the net defined benefit asset/liability

36

58

6

–29

Net change in fair value of equity instruments at FVOCI

139

–461

n/a

Change in fair value of own credit

risk of financial liabilities at FVPL

–116

199

n/a

Items that may subsequently be reclassified to the statement of profit or

loss:

Unrealised revaluations

AFS investments and other revaluations

n/a

n/a

–283

Realised gains/losses on AFS investments reclassified to the statement of

profit or loss

n/a

n/a

–92

Net change in fair value of debt instruments at FVOCI

–42

–177

n/a

Realised gains/losses on debt instruments at FVOCI reclassified to the

statement of profit or loss

–34

–56

n/a

Changes in cash flow hedge reserve

640

382

–525

Exchange rate differences

–29

–396

–864

Share of other comprehensive income of associates

and joint ventures and

other income

–

14

–5

Total

comprehensive income

4,674

4,381

3,774

Comprehensive income attributable to:

Non-controlling interests

142

132

109

Equity holders of the parent

4,532

4,250

3,665

4,674

4,381

3,774

1 The amounts for the period ended 31 December 2019 and 2018 have been prepared in accordance with IFRS 9. The adoption

of IFRS 9 led to new presentation requirements. 2017 period amounts have not been restated.

References relate

to the accompanying notes. These are an integral part of the Consolidated

financial statements.

For the disclosure on the income tax effects on each component of the other comprehensive

income reference is made to Note 37 ‘Taxation’.

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Financial Statements

2019 ING Group Annual Report on Form 20-F

F - 8

Consolidated

statement of changes in equity

For the years ended 31 December

in EUR million

Share

capital and

share

premium

Other

reserves

Retained

earnings

Share-

holders'

equity

(parent)

Non-

controlling

interests

Total

equity

Balance as at 31 December 2018

17,088

3,621

28,339

49,049

803

49,851

Net change in fair value of equity instruments at fair value through

other comprehensive income

–335

472

137

1

139

Net change in fair value of debt instruments at fair value through

other comprehensive income

–43

–43

1

–42

Realised gains/losses on debt instruments at fair value through other comprehensive

income reclassified to the statement of profit or loss

–33

–33

–1

–34

Changes in cash flow hedge reserve

604

604

36

640

Realised and unrealised revaluations

property in own use

49

9

58

–0

58

Remeasurement of the net defined benefit asset/liability

36

58

58

–

58

Exchange rate differences and

other

–36

–36

7

–29

Share of other comprehensive income of associates

and joint ventures and other income

69

–69

–

–

–

Change in fair value of own credit

risk of financial liabilities at fair value through profit or loss

–123

6

–116

–

–116

Total

amount recognised directly in other comprehensive

income net of tax

–

211

418

629

44

673

Net result

–

180

3,723

3,903

99

4,001

Total

comprehensive income net of tax

–

391

4,141

4,532

142

4,674

Dividends

30

–

–

–2,650

–2,650

–29

–2,679

Changes in treasury shares

–

1

–

1

–

1

Employee stock option and share plans

28

–

13

41

0

41

Changes in the composition of the group and other changes

–

–

23

23

–23

–0

Balance as at 31 December 2019

17,117

4,013

29,866

50,996

893

51,889

References relate

to the accompanying notes. These are an integral part of the Consolidated financial statements.

Changes in individual Reserve components are presented in Note 20 ‘Equity’.

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Additional Information

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Financial Statements

2019 ING Group Annual Report on Form 20-F

F - 9

Consolidated

statement of changes in equity - continued

in EUR million

Share

capital and

share

premium

Other

reserves

Retained

earnings

Share-

holders'

equity

(parent)

Non-

controlling

interests

Total

equity

Balance as at 31 December 2017

17,045

4,362

27,022

48,429

715

49,144

Effect of change in accounting policy due to implementation of IFRS 9

–604

–390

–993

–14

–1,008

Balance as at 1 January 2018

17,045

3,759

26,632

47,435

700

48,136

Net change in fair value of equity instruments at fair value through

other comprehensive income

–518

56

–461

0

–461

Net change in fair value of debt instruments at fair value through

other comprehensive income

–177

–177

0

–177

Realised gains/losses on debt instruments at fair value through other comprehensive

income reclassified to the statement of profit or loss

–54

–54

–2

–56

Changes in cash flow hedge reserve

342

–

342

41

382

Realised and unrealised revaluations

property in own use

–2

3

1

–0

1

Remeasurement of the net defined benefit asset/liability

36

6

6

–

6

Exchange rate differences and

other

–380

–380

–16

–396

Share of other comprehensive income of associates

and joint ventures and other income

283

–270

14

14

Change in fair value of own credit

risk of financial liabilities at fair value through profit or loss

199

199

199

Total

amount recognised directly in other comprehensive

income net of tax

–301

–211

–512

24

–488

Net result

160

4,601

4,761

108

4,869

Total

comprehensive income net of tax

–141

4,391

4,250

132

4,381

Dividends

30

–2,607

–2,607

–61

–2,668

Changes in treasury shares

4

4

4

Employee stock option and share plans

44

19

63

0

63

Changes in the composition of the group and other changes

1

–96

–96

31

–65

Balance as at 31 December 2018

17,088

3,621

28,339

49,049

803

49,851

1 Includes an amount for the initial recognition of the redemption liability

related to the acquisition of Payvision Holding B.V.

and Makelaarsland B.V.

that reduces the Retained earnings of the Group.

Future re

measurements of the redemption liability are

recognised in the statement of profit or loss.

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Additional Information

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Financial Statements

2019 ING Group Annual Report on Form 20-F

F - 10

Consolidated

statement of changes in equity - continued

in EUR million

Share

capital and

share

premium

Other

reserves

Retained

earnings

Share-

holders'

equity

(parent)

Non-

controlling

interests

Total

equity

Balance as at 1 January 2017

16,989

5,897

24,371

47,257

606

47,863

Unrealised revaluations

available-for sale investments and other revaluations

–293

–293

10

–283

Realised gains/losses transferred

to the statement of profit or loss

–90

–90

–2

–92

Changes in cash flow hedge reserve

–514

–514

–11

–525

Unrealised revaluations

property in own use

26

26

26

Remeasurement of the net defined benefit asset/liability

36

–29

–29

–29

Exchange rate differences

–894

–894

30

–864

Share of other comprehensive income of associates

and joint ventures and other income

138

–143

–5

–5

Total

amount recognised directly in other comprehensive

income

–

–1,682

–117

–1,799

27

–1,772

Net result from continuing and

discontinued operations

153

5,311

5,464

82

5,546

Total

comprehensive income net of tax

–1,529

5,194

3,665

109

3,774

Dividends

30

–2,564

–2,564

–2,564

Changes in treasury shares

–6

–6

–6

Employee stock option and share plans

56

21

77

77

Balance as at 31 December 2017

17,045

4,362

27,022

48,429

715

49,144

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Financial Statements

2019 ING Group Annual Report on Form 20-F

F - 11

Consolidated

statement

of cash flows

for the years ended 31 December

in EUR million

2019

1

2018

1

2017

1

2019

1

2018

1

2017

Cash flows from operating activities

31

Disposals and redemptions:

– Associates and joint ventures

67

116

245

Result before tax

5,653

6,986

8,085

– Available-for-sale investments

n/a

n/a

32,788

Adjusted for:

– Depreciation and amortisation

789

520

520

– Held-to-maturity investments

n/a

n/a

2,675

– Addition to loan loss provisions

1,120

656

676

• Financial assets at fair value through other

comprehensive income

13,390

15,657

n/a

– Other non-cash items in Result before tax

1,213

–1,763

703

• Securities at amortised cost

13,001

18,709

n/a

Taxation

paid

–2,345

–1,602

–1,691

– Property and equipment

81

17

79

Changes in:

–

Net change in Loans and advances to/from

banks,

not available/payable on demand

–3,911

–211

3,194

– Loans sold

744

206

1,815

–

Net change in Trading

assets and Trading

liabilities

–2,568

9,910

–11,187

– Other investments

34

9

–

Loans and advances to customers

–16,687

–31,356

–21,390

Net cash flow from/(used in) investing activities

–2,495

5,451

11,754

–

Customer deposits

18,040

19,709

18,291

–

Other

31

11,752

4,067

–2,454

Cash flows from financing activities

Net cash flow from/(used in) operating activities

13,055

6,915

–5,253

Proceeds from debt securities

90,793

152,543

95,458

Repayments of debt securities

–94,497

–131,170

–96,837

Cash flows from investing activities

Proceeds from issuance of subordinated

loans

3,429

1,859

2,331

Investments and advances:

• Acquisition of subsidiaries, net of cash acquired

–17

–111

Repayments of subordinated loans

–933

–4,646

–2,343

• Associates and joint ventures

–507

–97

–79

Repayments of principal portion of lease liabilities

2

–271

n/a

n/a

– Available-for-sale investments

n/a

n/a

–21,601

Purchase/sale of treasury

shares

1

4

7

– Held-to-maturity investments

n/a

n/a

–3,609

Dividends paid

–2,679

–2,607

–2,564

• Financial assets at fair value through other

comprehensive income

–16,270

–10,517

n/a

Other financing

2

• Securities at amortised cost

–12,268

–17,985

n/a

Net cash flow from/(used in) financing activities

–4,154

15,983

–3,948

– Property and equipment

–355

–286

–304

Net cash flow

6,406

28,349

2,553

– Other investments

–395

–258

–264

Cash and cash equivalents at beginning of year

33

47,529

18,977

16,164

Effect of exchange rate changes on cash and cash equivalents

95

204

260

Cash and cash equivalents at end of year

33

54,031

47,529

18,977

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Financial Statements

2019 ING Group Annual Report on Form 20-F

F - 12

1

The amounts for the period ended 31 December 2019 and 2018 have been prepared in accordance with IFRS 9. The

adoption of IFRS 9 led to new presentation requirements.

2017 period amounts have not been restated.

2

The amount for the period ended 31 December 2019 has been prepared in accordance with IFRS 16. Previous period

amounts have not been restated.

As at 31 December 2019, Cash and cash equivalents includes cash and balances with central banks

of EUR 53,202 million (2018: EUR

49,987 million; 2017: EUR 21,989 million). The increase in cash

and balances with central banks reflects ING’s liquidity management. Reference is made to Note 33

‘Cash and cash equivalents’.

References relate

to the accompanying notes. These are an integral part of the Consolidated

financial statements.

The table below presents the Interest and dividend received

and paid.

2019

1

2018

1

2017

1

Interest received

28,957

28,722

45,014

Interest paid

–14,550

–14,948

–31,032

14,407

13,774

13,982

Dividend received

2

219

183

206

Dividend paid

–2,679

–2,607

–2,564

1.

The amounts for the period ended 31 December 2019 and 2018 have been prepared in accordance with IFRS 9, the

adoption of IFRS 9 led to new presentation requirements; 2017 period amounts have not been restated, refer also to note

21 ‘Net interest income’.

2.

Includes dividends received as recognized within Investment Income, from equity securities included in the Financial assets

at fair value through profit or loss, Financial assets at fair value through OCI, and from Investments in associates and joint

ventures. Dividend

paid and received from trading positions have been included.

Interest received,

interest paid and dividends received are

included in operating activities in the

Consolidated statement of cash flow. Dividend paid is included in financing

activities in the

Consolidated statement of cash flow.

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Financial Statements

2019 ING Group Annual Report on Form 20-F

F - 13

Notes to the Consolidated

financial

statements

1

Basis

of preparation

and accounting

policies

1.1

Reporting entity

ING Groep N.V.

is a company domiciled in Amsterdam, the Netherlands. Commercial Register of

Amsterdam, number 33231073. These Consolidated financial statements, as at and

for the year

ended 31 December 2019, comprise ING Groep N.V.

(the Parent company) and its subsidiaries,

together referred to as ING Group.

ING Group

is a global financial institution

with a strong European

base, offering a wide range of retail and wholesale banking services to customers in over 40

countries.

1.2

Authorisation of the Consolidated

financial statements

The ING Group Consolidated financial statements, as at and for the year ended 31 December 2019,

were authorised for issue in accordance

with a resolution of the Executive Board on 2 March

2020.

The Executive Board may decide to amend the financial statements as long as these are not

adopted by the General Meeting of Shareholders. The General Meeting of Shareholders may decide

not to adopt the financial

statements, but may not amend these.

1.3

Basis of preparation

of the Consolidated financial statements

The ING Group Consolidated financial statements have been prepared in accordance

with

International Financial Reporting Standards as issued by the International Accounting Standards

Board for purposes of reporting with the U.S. Securities and Exchange Commission (SEC), including

financial

information contained in this Annual report on Form 20-F.

The term ‘IFRS-IASB’ is used to

refer to International Financial Reporting Standards as issued by the International Accounting

Standards Board, including the decisions ING Group made with regard

to the options available

under IFRS-IASB.

The ING Group Consolidated financial statements have been prepared on a going concern basis.

The consolidated financial

statements are presented in euros and rounded

to the nearest million,

unless stated otherwise. Amounts may not add up due to rounding.

1.3.1

Presentation of Risk

management disclosures

To

improve transparency,

reduce duplication and present related

information in one place, certain

disclosures of the nature and extent of risks related to financial instruments required by IFRS 7 are

now included in the “ING Group Risk management” section of the Annual Report.

These disclosures are an integral part of ING Group

Consolidated financial statements and are

indicated in the ‘Risk management’ section by the symbol (*). Chapters,

paragraphs, graphs

or

tables within the risk management section that are indicated with this symbol

in the respective

headings or table header are considered to be an integral part of the consolidated financial

statements.

1.3.2

Reconciliation between IFRS-EU

and IFRS-IASB

The published 2019 Annual Accounts of ING Group are prepared

in accordance with IFRS-EU. IFRS-

EU refers to International Financial Reporting Standards (‘IFRS’) as adopted by the European

Union

(EU), including the decisions ING Group made with regard to the options available under IFRS as

adopted by the EU. IFRS-EU differs from

IFRS-IASB in respect of certain paragraphs in IAS 39

‘Financial Instruments: Recognition and Measurement’ regarding hedge accounting for portfolio

hedges of interest rate risk.

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2019 ING Group Annual Report on Form 20-F

F - 14

Under IFRS-EU, ING Group applies fair value hedge accounting for portfolio hedges of interest rate

risk (fair value macro hedges) in accordance

with the EU carve-out version of IAS 39. Under the EU

IAS 39 carve-out, hedge accounting may be applied, in respect of fair value macro hedges, to core

deposits and hedge ineffectiveness is only recognised when the revised estimate of the amount of

cash flows in scheduled time buckets falls below the original designated amount

of that bucket and

is not recognised when the revised amount of cash flows in scheduled time buckets is more than

the original designated amount. Under IFRS-IASB, hedge accounting for fair value macro hedges

cannot be applied to core deposits and ineffectiveness arises whenever the revised estimate of the

amount of cash flows in scheduled time buckets is either

more or less than the original designated

amount of that bucket.

This information is prepared by reversing

the hedge accounting impacts that are applied under the

EU ‘carve-out’ version of IAS 39. Financial information under IFRS-IASB accordingly does not take

account of the possibility that had ING Group applied IFRS-IASB as its primary accounting

framework it might have applied alternative hedge strategies where

those alternative hedge

strategies could have qualified for IFRS-IASB compliant hedge accounting. These decisions could

have resulted in different shareholders’ equity and net result

amounts compared to those indicated

in this Annual Report on Form 20-F.

A reconciliation between IFRS-EU and IFRS-IASB is included below.

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

accepted in

the United States of America (US GAAP).

Reconciliation net result under IFRS-EU and IFRS-IASB

Net result

2019

2018

2017

In accordance with IFRS-EU

4,781

4,703

4,905

Adjustment of the EU IAS 39 carve-out

–1,181

148

817

Tax

effect of the adjustment

1)

303

–90

–258

Effect of adjustment after tax

–878

58

559

In accordance with IFRS-IASB (attributable to the equityholders of the parent)

3,903

4,761

5,464

Non-controlling interests

99

108

82

In accordance with IFRS-IASB Total

net result

4,001

4,869

5,546

1)

includes the effect of changes in tax rate.

Reconciliation shareholders’ equity under IFRS-EU and IFRS-IASB

Total

Equity

2019

2018

2017

In accordance with IFRS-EU

53,769

50,932

50,406

Adjustment of the EU IAS 39 carve-out

–3,658

–2,460

–2,655

Tax

effect of the adjustment

885

577

678

Effect of adjustment after tax

–2,773

–1,883

–1,977

Shareholders’ equity

50,996

49,049

48,429

Non-controlling interests

893

803

715

In accordance with IFRS-IASB Total

Equity

51,889

49,851

49,144

1.4

Changes to accounting policies

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

Consolidated financial statements, except for changes due to the introduction of IFRS 16 in 2019

and IFRS 9 in 2018. Comparatives were

not restated when applying these Standards.

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2019 ING Group Annual Report on Form 20-F

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1.4.1 Changes in IFRS effective in 2019

ING Group changed its accounting policies in 2019 as a result of adopting IFRS 16 ‘Leases’.

The impact of the adoption of IFRS 16 is disclosed in paragraph 1.4.3 ‘Changes to accounting

policies in 2019’ of Note 1.

ING Group early adopted the amendments to IAS 39 ‘Financial Instruments: Recognition and

Measurement’ and IFRS 7 ‘Financial Instruments: Disclosures’ in relation to the Interest

Rate

Benchmark Reform as issued by the IASB in September 2019.

These amendments are early

adopted retrospectively to hedging relationships that existed at the start of the reporting period or

were designated thereafter.

The amendments provide temporary relief from

applying specific

hedge accounting requirements to hedging relationships directly affected by IBOR reform. The

amendments require certain additional disclosures and have no further impact. Refer to paragraph

1.6.5 of Note 1 and to Note 39 ‘Derivatives and hedge accounting’ for more information on the

adoption of these amendments.

The other changes in IFRS that became effective in 2019 did not have a significant

impact on ING

Group’s accounting policies, ING Group’s results

or financial

position:

◾

Annual Improvements to IFRS Standards 2015-2017 Cycle: Amendments to IFRS 3 ‘Business

Combinations’, IFRS 11 ‘Joint Arrangements’, IAS 12 ‘Income Taxes’,

IAS 23 ‘Borrowing Costs’

(issued on 12 December 2017);

◾

Amendments to IAS 19 ‘Employee Benefits’:

Plan Amendment, Curtailment or Settlement (issued

on 7 February 2018);

◾

Amendments to IAS 28 ‘Investments in Associates and Joint Ventures’: Long

-term Interests in

Associates and Joint Ventures

(issued on 12 October 2017); and

◾

IFRIC 23 ‘Uncertainty over Income Tax

Treatments’

(issued on 7 June 2017).

The amendments to IFRS 9 ‘Financial Instruments’: Prepayment Features with Negative

Compensation and Modifications of Financial Liabilities (issued on

12 October 2017) were early

adopted by ING Group in 2018.

Apart from the amendments to IAS 39 and IFRS 7 in relation to Interest Rate Benchmark Reform,

ING Group has not early adopted any other standard, interpretation or amendment in 2019 which

has been issued, but is not yet effective.

1.4.2

Upcoming changes in IFRS after 2019

The following published amendments are not mandatory for 2019 and have not been early

adopted by ING Group. ING Group is still currently

assessing the detailed impact of these

amendments, however the implementation of these amendments is expected to have no

significant impact

on ING Group’s Consolidated financial statements.

The list of upcoming changes to IFRS, which are applicable for ING Group:

Effective in 2020:

◾

Amendments to IFRS 3 ‘Business Combinations’: Definition

of a Business (issued on 22 October

2018);

◾

Amendments to IAS 1 and IAS 8: ‘Definition

of Material’ (issued on 31 October 2018); and

◾

Amendments to References to the Conceptual Framework

in IFRS Standards (issued on 29 March

2018).

Effective in 2022:

◾

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

Current or Non-current (issued on 23 January 2020).

The IASB has also issued IFRS 17 ‘Insurance Contracts’. The original effective date of IFRS 17 was 1

January 2021, but in June 2019 the IASB has published an Exposure Draft proposing 1 January

2022 as the new effective date. ING Group is currently assessing the detailed impact of IFRS 17.

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2019 ING Group Annual Report on Form 20-F

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1.4.3 Changes to accounting policies in 2019

IFRS 16 ‘Leases’

IFRS 16 ‘Leases’ was issued by the IASB in January 2016. IFRS 16 replaces IAS 17 ‘Leases’, IFRIC 4

‘Determining whether an Arrangement contains a Lease’, SIC-15 ‘Operating Leases

-

Incentives’ and

SIC-27 ‘Evaluating the Substance of Transactions

Involving the Legal Form

of a Lease’. ING Group

has adopted IFRS 16 retrospectively from 1 January 2019, but has not restated comparatives

for

the 2018 and 2017 reporting periods, as permitted under the specific

transitional provisions in the

Standard, the so-called ‘modified retrospective approach'. The reclassifications and the

adjustments arising from the new leasing rules are therefore

recognised in the opening statement

of financial position

on 1 January 2019.

IFRS 16 ‘Leases’ – Impact of adoption

Transition

For lessee accounting, the new Standard removes

the distinction between operating and finance

leases. All leases are recognised on the statement of financial position with exemptions for short-

term leases with a lease term of less than 12 months and leases of low-value assets (for example

mobile phones or laptops).

There is no significant impact of the adoption of IFRS

16 on ING Group’s Net Result, Comprehensive

income and Shareholders’ equity on transition. This follows ING Group’s implementation decision

where the value of the right-of-use asset is based on the value of the lease liability, adjusted for

any previously recognised prepaid

and/or accrued lease payments on that lease contract, as is

permitted under the Standard.

On transition to IFRS 16, ING Group recognised lease liabilities of EUR 1,301 million and right-of-use

assets of EUR 1,279 million equal to the lease liability adjusted for any previously recognised

prepaid or accrued lease payments on that lease.

The weighted average incremental borrowing

rate applied to lease liabilities recognised in the

statement of financial

position at the date of initial application is 2.47%.

The following table reconciles the future rental

commitments for operating lease contracts under

IAS 17 to the lease liability under IFRS 16 on transition to IFRS 16 as of 1 January 2019:

1 January

2019

Future rental

commitments for operating lease contract disclosed under IAS 17 as at 31 December

2018

1,378

(Less) discounting effect using ING’s incremental borrowing

rate at 1-1-2019

–108

(Less) recognition

exemption for short-term leases

–16

(Less) recognition

exemption for low value assets

–3

(Less) non-lease components of a contract

–78

Add extension and termination options reasonably certain to be exercised

143

(Less) variable lease payments based on an index or a rate

–15

Lease liability recognised under IFRS 16 at 1 January 2019

1,301

In applying IFRS 16 for the first

time, ING Group has used the following practical expedients

permitted by the Standard:

◾

Reliance on previous assessments whether a contract

is, or contains a lease at the date of initial application;

◾

The use of a single discount rate to a portfolio of leases with reasonably similar

characteristics;

◾

Reliance on previous assessments on whether leases are

onerous;

◾

The accounting for operating leases with a remaining

lease term of less than 12 months as at 1 January 2019 as

short-term leases;

◾

The exclusion of initial direct costs for the measurement

of the right-of-use asset at the date of initial application;

and

◾

The use of hindsight in determining the lease term where the contract contains options to extend

or terminate

the lease.

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IFRS 16 ‘Leases’ – Accounting policies applied from 1 January 2019

ING Group as the lessee

A lessee is required to recognise

a right-of-use asset representing its right to

use the underlying leased asset and a

corresponding liability representing

its obligation to make lease payments at the date at which the leased asset is

available for use by ING Group.

Each lease payment is allocated between the repayment

of the liability and finance

cost. The finance costs are charged to profit or loss over the lease period so as to produce a constant

periodic rate of

interest on the remaining balance of the liability for

each period. The right-of-use asset is depreciated over the

shorter of the asset’s useful life and the lease term on a straight-line basis.

Assets and liabilities arising from a lease are initially measured

on a present value basis. Lease

liabilities include the

net present value of the following lease payments:

◾

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

◾

Variable lease payments that are

based on an index or a rate;

◾

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

◾

The exercise price of a purchase

option if the lessee is reasonably certain to exercise

that option; and

◾

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

The lease payments are discounted using the interest

rate implicit in the lease. If that rate

cannot be readily

determined, the lessee’s incremental borrowing

rate is used, being the rate that the lessee would

have to pay to

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

with similar terms

and conditions. This rate is approximated

by using the risk free rate applicable to the lease term, the currency

of the

lease payment and jurisdiction, with the Fund Transfer

Pricing (FTP) rate as an add-on. The FTP rate is used to

transfer interest rate

risk and funding and liquidity risk positions between the ING Group business and treasury

departments. It is determined by either ING Group or Local

Asset and Liability Committee (ALCO).

Right-of-use assets are measured at cost comprising

the amount of the initial measurement of the lease liability,

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

received and any initial

direct costs and restoration

costs.

Payments associated with short-term leases and leases of low-value assets are recognised

on a straight-line basis

as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets

comprise mainly IT-equipment (for example

mobile phones or laptops) and small items of office furniture.

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

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

and equipment’ and Note 17 ‘Other liabilities’.

Subsequently, the right-of-use asset will amortise using a straight-line method to the income statement over the

life of the lease. The lease liability will subsequently increase for the accrual

of interest and decrease when

payments are made. Any remeasurement

of the lease liability due to a lease modification or other reassessment

result in a corresponding adjustment

to the carrying amount of the right-of-use asset.

ING Group as the lessor

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

Group as a lessor these are mainly finance leases. The present value of the lease payments is recognised

as a

receivable under Loans

and advances to customers or Loans and advances

to banks. The difference between the

gross receivable

and the present value of the receivable

is unearned finance lease income. Lease income is

recognised over the term of the lease using the net investment

method (before tax), which reflects a constant

periodic rate of return.

Operating leases for lessees prior to 1 January 2019 under IAS 17

The comparative figures presented are

accounted for using the previous

Standard, IAS 17 ‘Leases’. Under this

Standard a distinction was made between finance leases and operating leases. A lease was considered

a finance

lease if it transfers substantially all risks and rewards

of the ownership of the asset. All other leases are operating

leases.

Leases entered into

by ING Group as a lessee were primarily operating

leases. The total payments under operating

leases were recognised

in the statement of profit or loss on a straight-line basis over the period of the lease.

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1.5 Significant judgements and critical accounting estimates

and assumptions

The preparation of the consolidated financial statements requires management to make

judgements in the process of applying its accounting policies and to use estimates and

assumptions. The estimates and assumptions affect

the reported amounts of the assets and

liabilities and the amounts of the contingent assets and contingent liabilities at the balance sheet

date, as well as reported income and expenses for the year.

The actual outcome may differ from

these estimates. The process of setting assumptions is subject to internal control procedures and

approvals.

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

use

critical accounting estimates and assumptions based on the information and financial

data that

may change in future periods. These areas are:

◾

The determination of the fair values of financial

assets and liabilities;

◾

Loan loss provisions; and

◾

Provisions.

For further discussion of the significant judgements and

critical accounting estimates and

assumptions in these areas, reference

is made to the relevant parts in paragraph

1.6 ‘Financial

instruments’, 1.17 ‘Provisions, contingent liabilities and contingent assets’

of Note 1 and the

applicable notes to the Consolidated financial statements.

1.6 Financial instruments

1.6.1

Recognition and derecogniti

on of financial instruments

Recognition of financial assets

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

provisions of the instrument. For a regular

way purchase or sale of a financial asset, trade date and

settlement

date accounting is applied depending on the classification

of the financial

asset.

Derecognition of financial assets

Financial assets are derecognised when the rights to receive

cash flows from the financial

assets

have expired or where

ING Group has transferred

substantially all risks and rewards of ownership. If

ING Group neither transfers nor retains substantially all the risks and rewards

of ownership of a

financial asset, it derecognises the financial

asset if it no longer has control over the asset. The

difference between the carrying amount of a financial asset that has been extinguished

and the

consideration received

is recognised in profit or loss.

Recognition of financial liabilities

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

provisions of the instrument.

Derecognition of financial liabilities

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

cancelled or expired. The difference between the carrying amount of a financial liability that has

been extinguished and the consideration paid is recognised in profit or loss.

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1.6.2

Classification and measurement of financial instruments

Financial assets

ING Group classifies its financial

assets in the following measurement categories:

◾

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

and

◾

those to be measured at amortised cost (AC).

At initial recognition, ING Group measures

a financial

asset at its fair value plus, in the case of a

financial asset not

at FVPL, transaction costs that are directly attributable to the acquisition of the

financial asset. Transaction costs of financial assets

carried at fair value through profit or loss (FVPL)

are expensed in the statement of profit or loss.

Financial assets - Debt instruments

The classification depends

on the entity’s business model for managing the financial

assets and the

contractual terms of the cash flows at initial recognition.

Business models

Business models are classified as Hold to Collect (HtC), Hold

to Collect and Sell (HtC&S) or Other

depending on how a portfolio of financial

instruments as a whole is managed. ING Group’s business

models are based on the existing management structure of the bank, and refined based on

an

analysis of how businesses are evaluated and reported, how their specific business risks are

managed and on historic and expected future sales. Sales are permissible in a HtC business model

when these are due to an increase in credit risk, take place close to the maturity date (where the

proceeds from the sales approximate

the collection of the remaining contractual cash flows), are

insignificant in value (both individually

and in aggregate) or are infrequent.

Contractual cash flows Solely Payments

of Principal and Interest (SPPI)

The contractual cash flows of a financial

asset are assessed to determine whether they represent

SPPI. Interest includes consideration for the time value of money, credit risk and also considera

tion

for liquidity risk and costs associated with holding the financial

asset for a particular period of time.

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

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

whether their cash flows are SPPI.

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

terms of the instrument. This includes assessing whether the financial

asset contains a contractual

term that could change the timing or amount of contractual cash flows such that it would not

meet this condition. In making the assessment, terms such as the following are considered, with an

example of an SPPI failure for each consideration:

◾

prepayment terms. For example a prepayment

of an outstanding principal amount plus a

penalty which is not capped to three or six months of interest;

◾

leverage features,

which increase the variability of the contractual cash flows with the result that

they do not have the economic characteristics of interest. An example is a Libor contract with a

multiplier;

◾

terms that limit ING Group’s claim to cash flows from specified

assets - e.g. non-recourse asset

arrangements. This could be the case if payments of principal and interest are met solely by the

cash flows generated by the underlying asset, for example instances in real estate, shipping and

aviation financing;

and

◾

features that modify consideration of the time value of money. These are contracts

with for

example an interest rate which is reset

every month to a one-year rate. ING Group

performs

either a qualitative or quantitative benchmark test on a financial

asset with a modified

time

value of money element. A qualitative test is performed when it is clear with little or no analysis

whether the contractual cash flows solely represent SPPI.

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2019 ING Group Annual Report on Form 20-F

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Based on the entity’s business model for managing the financial

assets and the contractual terms

of the cash flows, there are three measurement categories into which ING Group classifies its debt

instruments:

◾

Amortised Cost (AC):

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

model where those cash flows represent SPPI are measured

at AC. Interest income from these

financial assets is included

in Interest income using the EIR method. Any gain or loss arising on

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

separate line item in the Consolidated statement of profit

or loss.

◾

FVOCI:

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

financial assets under

a HtC&S business model, where the assets’ cash flows represent SPPI, are

measured at FVOCI. Movements in the carrying amount are

recognised in OCI, except for the

recognition of impairment gains or losses, interest revenue

and foreign exchange gains and

losses which are recognised in profit or loss. When the financial asset

is derecognised, the

cumulative gain or loss previously recognised in OCI

is reclassified from equity to profit or loss

and presented in Investment income or Other income, based on the specific characteristics of

the business model. Interest income from these financial assets is included in Interest income

using the EIR method. Impairment losses are presented as a separate line item in the

Consolidated statement of profit or loss.

◾

FVPL:

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

includes debt instruments that are held-for-trading (presented separately

as Trading

assets)

and all other debt instruments that do not meet the criteria for AC or FVOCI (presented

separately as Mandatorily at FVPL). ING Group may in some cases, on initial recognition,

irrevocably designate a financial asset as classified

and measured at FVPL. This is the case

where doing so eliminates or significantly reduces an accounting mismatch that would

otherwise arise on assets measured at AC or FVOCI. Fair

value movements on trading securities,

trading loans and deposits (mainly reverse repo’s)

are presented fully within valuation result

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

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

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

part of a hedge relationship, but not subject to hedge accounting, is recognised in profit or loss

and presented within Interest income or Interest

expense in the period in which it arises.

ING Group reclassifies debt investments when, and only when, its business model for managing

those assets changes. Such changes in business models are expected to be very infrequent. There

have been no reclassifications during the reporting period.

Financial assets - Equity instruments

All equity investments are measured at fair

value. ING Group applies the fair value through

OCI

option to investments which are considered strategic,

consisting of investments that add value to

ING Group’s core banking activities.

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

derecognition of investments if elected to be classified and measured as FVOCI. Dividends from

such investments continue to be recognised in profit or loss as Investment income when ING

Group’s right to receive

payments is established. Impairment requirements are not applicable to

equity investments classified and measured as FVOCI.

Other remaining equity investments are measured

at FVPL. All changes in the fair value are

recognised in Valuation

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

loss.

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2019 ING Group Annual Report on Form 20-F

F - 21

Financial liabilities

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

contracts, derivatives and liabilities designated at FVPL. Financial liabilities classified

and measured

at FVPL are presented as follows:

◾

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

liability designated at FVPL is presented in OCI. Upon derecognition this Debit Valuation

Adjustment (DVA)

impact does not recycle from OCI to profit or loss; and

◾

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

results and net trading income’. Interest

on financial liabilities

at FVPL is also recognised in the

valuation result, except for items voluntarily

designated as FVPL for which interest is presented

within ‘Other interest income (expense).

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

reimburse the holder for a loss it incurs because a specified debtor fails to make

payment when

due in accordance with the original or modified terms of a debt instrument. Such a contract is

initially recognised at fair value and is subsequently measured at the higher of (a) the amount

determined in accordance with impairment provisions of IFRS 9 (see section “Impairment of

financial assets”) and

(b) the amount initially recognised less, when appropriate, cumulative

amortisation recognised in accordance with the revenue

recognition principle of IFRS 15.

1.6.3

Fair values of financial assets and

liabilities

All financial assets and

liabilities are recognised initially at fair value.

Subsequently, except for

financial assets and

financial liabilities

measured at amortised cost, all the other financial

assets

and liabilities are measured at fair value.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability

in an orderly transaction between market participants at the measurement date. It assumes that

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

when pricing the asset or liability. Fair values of financial assets and liabilities

are based on

unadjusted quoted market prices where available. Such quoted market prices are primarily

obtained from exchange prices for listed financial instruments. Where an exchange price is not

available, quoted prices in an active market may be obtained from independent market vendors,

brokers, or market makers. In general, positions are valued at the bid price for a long position and

at the offer price for a short position or are valued at the price within the bid-offer spread that is

most representative of fair value

in the circumstances. In some cases where positions are marked

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

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

instruments, fair value is determined using valuation techniques. These range from discounting of

cash flows to various valuation models, where relevant

pricing factors including the market price of

underlying reference instruments, market parameters (volatilities, correlations

and credit ratings),

and customer behaviour are taken into account. ING maximises the use of market observable

inputs and minimises the use of unobservable inputs in determining the fair value. It can be

subjective dependent on the significance

of the unobservable input to the overall valuation. All

valuation techniques used are subject to internal review and approval.

Most data used in these

valuation techniques are validated on a daily basis when possible.

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

exposures, the fair value of a group of financial assets and liabilities are measured on a net portfolio

level.

To

include credit risk in fair value, ING applies both Credit and Debit Valuation

Adjustments (CVA,

DVA).

Own issued debt and structured notes that are designated as measured at FVPL are adjusted

for credit risk by means of a DVA.

Additionally, derivatives valued at fair value are adjusted for

credit risk by a CVA.

The CVA

is of a bilateral nature as both the credit risk on the counterparty as

well as the credit risk on ING are included in the adjustment. All input data that is used in the

determination of the CVA is based on market implied data. Additionally, wrong-way risk (when

exposure to a counterparty is increasing and the credit quality of that counterparty deteriorates)

and right-way risk (when exposure to a counterparty is increasing and the credit quality of that

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counterparty improves) are

taken into account in the measurement of the valuation adjustment.

ING applies an additional ‘Funding Valuation

Adjustment’ (FVA) to the uncollateralised

derivatives

based on the market

price of funding liquidity.

Significant judgements and critical accounting estimates and assumptions:

Even if market prices are available, when markets are

less liquid there may be a range of prices for

the same security from different price sources. Selecting the most appropriate price requires

judgement and could result in different estimates of fair value.

Valuation techniques are

subjective in nature and significant judgement

is involved in establishing

fair values for certain financial assets and liabilities. Valuation techniques involve various

assumptions regarding pricing factors. The use of different valuation techniques and assumptions

could produce significantly different estimates of fair value.

Price testing is performed to assess whether the process of valuation has led to an appropriate fair

value of the position and to an appropriate reflection of these valuations in the statement of profit

or loss. Price testing is performed to minimise the potential risks for economic losses due to

incorrect or misused models.

Reference is made to Note 38 ‘Fair

value of assets and liabilities’ and Market risk paragraph in the

‘Risk management’ section of the Annual Report for the basis of the determination

of the fair value

of financial instruments

and related sensitivities.

1.6.4

Credit risk management classification and maximum credit

risk exposure

Credit risk management disclosures are provided

in the Credit risk’ paragraph ‘Credit

risk categories’

of the ‘Risk management’ section in the Annual Report.

The maximum credit risk exposure for items in the statement of financial position is generally the

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. Re

ference is made to Note 45

‘Contingent liabilities and commitments’ for these off-balance sheet items. Collateral received is

not taken into account when determining the maximum credit risk exposure.

The manner in which ING Group manages credit risk and determines credit risk exposures for that

purpose is explained in the Credit risk paragraph ‘Credit

Risk Appetite and Concentration Risk

Framework’

of the ‘Risk management’ section in the Annual Report.

1.6.5

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 market transactions and valuation techniques (such as

discounted cash flow models and option pricing models),

as appropriate. All derivatives are

carried

as assets when their fair value is positive and as liabilities when their fair value is negative. Fair

value movements on derivatives are

presented in profit or loss in Valuation result

and net trading

income, except for derivatives in either a formal hedge relationship and so-called economic hedges

that are not in a formal hedge accounting relationship where

a component is presented separately

in interest result in line with ING’s risk management strategy.

Embedded derivatives are separated from

financial liabilities

and other non-financial

contracts and

accounted for as a derivative if, and only if:

a) the economic characteristics and risks of the embedded derivative are not closely related to the

economic characteristics and risks of the host contract;

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b) a separate instrument with the same terms as the embedded derivative would meet the

definition of a derivative; and

c) the combined instrument is not measured at fair value with changes in fair value reported in

profit or loss.

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

standing contract.

The method of recognising the resulting fair value

gain or loss depends on whether the derivative is

designated as a hedging instrument, and if so, the nature of the item being hedged. 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 also macro cash flow hedge accounting to hedge the variability in future cash

flows of non-trading assets and liabilities due to the interest rate risk and foreign currency

exchange rate risk. The designated hedged items are floating rated assets or liabilities, such as

floating rate mortgages and corporate loans. The effective portion

of changes in the fair value of

the derivatives are recognised

in the Other Comprehensive Income.

Fair value hedges

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

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

item attributable to the hedged risk. If the hedge relationship no longer meets the criteria for hedge

accounting, the cumulative adjustment of the hedged item is, in the case of interest bearing

instruments, amortised through the statement of profit or loss

over the remaining term of the

original hedge or recognised directly when the hedged item is derecognised. For non-interest

bearing instruments, the cumulative adjustment of the hedged item is recognised in the statement

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

Cash flow hedges

The effective portion of changes in the

fair value of derivatives that are designated and qualify as

cash flow hedges are recognised in the Other Comprehensive Income.

The gain or loss relating to

the ineffective portion is recognised immediately in the statement of profit

or loss. Amounts

accumulated in the Other Comprehensive Income are

recycled to the statement of profit or loss in

the periods in which the hedged item affects

net result. When a hedging instrument expires or is

sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or

loss existing in the Other Comprehensive Income at that time remains in the Other Comprehensive

Income and is recognised when the forecast transaction is ultimately recognised

in the statement

of profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or

loss that was reported in the Other Comprehensive Income is transferred

immediately to the

statement of profit or loss.

Net investment hedges

Hedges of net investments in foreign operations are

accounted for in a similar way to cash flow

hedges. Any gain or loss on the hedging instrument relating to the effective portion

of the hedge is

recognised in the Other Comprehensive

Income and the gain or loss relating to the ineffective

portion is recognised immediately in the statement of profit or loss. Gains and losses accumulated

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in the Other Comprehensive Income are

included in the statement of profit or loss when the foreign

operation is disposed.

Specific policies applicable from 1 January 2019 for hedges directly affected by IBOR reform

ING Group early adopts the amendments as described in paragraph 1.4.1 ‘Changes in IFRS effective

in 2019’ of Note 1. The amendments provide temporary reliefs which enable hedge accounting to

continue during the period of uncertainty before the replacement of an existing interest rate

benchmark with an alternative nearly risk-free interest rate

(an “RFR”). The following temporary

reliefs are part of the amendment:

●

Highly probable requirement for

cash flow hedges

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

interest rate benchmark on which the hedged cash flows are based is not altered as a result

of

the reform.

●

Prospective

assessment of hedge effectiveness

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

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

●

Retrospective assessment of hedge effectiveness

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

even if actual results are outside the 80-125% range,

during the period of uncertainty arising

from the IBOR reform.

●

Designation of a component of an item as a hedged item

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

separately identifiable requirement only needs to be demonstrated at the inception of such

hedging relationships (including macro hedges).

The amendments are relevant

given that ING Group hedges and applies hedge accounting to

benchmark interest rate exposure part of IBOR reform

.

Hedging instruments and hedged items

continue to be indexed by the IBOR benchmark rates. Therefore,

there is uncertainty over the

timing and the amount of the replacement rate cash flows. ING Group will cease to apply the

amendments when this uncertainty is no longer present or when the hedging relationship is

discontinued.

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 statement of profit or loss.

1.6.6

Offsetting of financial assets and financial liabilities

Financial assets and financial

liabilities are offset, and the net amount reported, in the statement of

financial position 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.

1.6.7

Repurchase transactions

and reverse

repurchase transactions

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

continue to be recognised in the consolidated statement of financial position. The counterparty

liability is measured at FVPL (designated) and included in Other financial

liabilities at FVPL if the

asset is measured at FVPL. Otherwise, the counterparty liability is included in Deposits from banks,

Customer deposits, or Trading,

as appropriate.

Securities purchased under agreements to resell (reverse

repos), securities borrowings and similar

agreements are not recognised

in the consolidated statement of financial

position. The

consideration paid to purchase securities is recognised as Loans

and advances to customers, Loans

and advances to banks, Other financial

assets at FVPL or Trading

assets, as appropriate. The

difference between the sale and repurchase

price is treated as interest and amortised over the life

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of the agreement using the effective interest method for instruments that are not measured at

FVPL.

1.6.8

Impairment of financial assets (IFRS 9)

An ECL model is applied to on-balance sheet financial

assets accounted for at AC and FVOCI such as

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

loan commitments, certain financial

guarantees, and undrawn committed revolving

credit facilities.

Under the

ECL model ING Group calculates the allowance for credit

losses (loan loss provision, LLP)

by considering on a discounted basis the cash shortfalls it would incur in various default scenarios

for prescribed future periods and multiplying the shortfalls by the probability of each scenario

occurring. The LLP is the sum of these probability-weighted outcomes and the ECL estimates are

unbiased and include supportable information about past events, current conditions, and forecasts

of future economic conditions. ING Group’s approach

leverages the existing regulatory capital

models that use the Advanced Internal Ratings Based (AIRB) models for regulatory purposes.

Three stage approach

Financial assets are classified in any of the below 3 Stages at each

reporting date. A financial asset

can move between Stages during its lifetime. The Stages are

based on changes in credit quality

since initial recognition and defined as follows:

◾

Stage 1: 12 month ECL;

Financial assets that have not had a significant

increase in credit risk since initial recognition (i.e.

no

Stage 2 or 3 triggers apply). Assets are classified as stage 1 upon initial

recognition (with the

exception of purchased or originated credit impaired

(POCI) assets) and have a provision for ECL

associated with the probability of default (PD) events occurring with the next 12 months (12

months ECL). For those financial assets with a remaining maturity of less than 12 months, a PD is

used that corresponds to the remaining maturity;

◾

Stage 2: Lifetime ECL not credit impaired

Financial assets showing a significant increase in credit risk since initial recognition. A provision is

made for the life time ECL representing losses over

the life of the financial instrument (lifetime

ECL);

or

◾

Stage 3: Lifetime ECL credit impaired

Financial instruments that are credit impaired require

a life time provision.

Significant increase in credit risk

ING Group established a framework, incorporating quantitative

and qualitative indicators, to

identify and assess significant

increases in credit risk (SICR). This is used to determine the

appropriate ECL Staging for each financial asset.

The main determinate of SICR is a quantitative test, whereby the lifetime PD of an asset at each

reporting date is compared against its lifetime PD at the date of origination or purchase. If the delta

is above pre-defined absolute or relative PD thresholds, then an asset is considered to have

experienced a SICR, which is a trigger for movement between Stage 1 and Stage 2. In these

instances, assets will cease reporting a 12 month ECL, and instead report a lifetime ECL. Assets can

also return to Stage 1 if there is sufficient evidence that there has been a significant

reduction in

credit risk.

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

◾

Forbearance status;

◾

Watch List status. Loans

on the Watch List are

individually assessed for Stage 2 classification;

◾

Intensive care management;

◾

Substandard Internal rating; and

◾

Arrears status.

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Credit impaired financial assets (Stage 3)

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

when circumstances warrant further assessment. Evidence of credit

-impairment includes arrears of

over 90 days on any material credit obligation, indications that the borrower is experiencing

significant financial

difficulty,

a breach of contract, bankruptcy or distressed restructuring.

An asset that is in stage 3 will move back to stage 2 when, as at the reporting date, it is no longer

considered to be credit-impaired.

The asset will migrate back to stage 1 when its credit risk at the

reporting date is no longer considered to have increased significantly since initial recognition.

Definition of default

ING Group has aligned the definition of credit impaired under IFRS 9 (Stage 3) with the definition

of

default for prudential purposes. This is also the definition

used for internal risk management

purposes.

Macroeconomic scenarios

ING has established a quarterly process whereby forward-looking macroeconomics

scenarios and

probability weightings are developed for ECL

calculation purposes. ING Group applies data

predominantly from a leading service provider

enriched with the internal ING Group view. A

baseline, up-scenario and a down-scenario are determined to reflect an unbiased and probability-

weighted ECL amount. As a baseline scenario, ING Group applies the market-neutral view

combining consensus forecasts for economic variables such as unemployment rates, GDP growth,

house prices, commodity prices, and short-term interest rates. Applying market consensus in the

baseline scenario ensures unbiased estimates of the expected credit losses.

The alternative scenarios are based on observed forecast errors

in the past, adjusted for the risks

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

likelihoods of observing the three scenarios and are derived from confidence intervals on a

probability distribution. The forecasts for the economic variables are

adjusted on a quarterly basis.

Measurement of ECL

ING Group applies a collective assessment method to measure ECL for performing (Stage 1), under-

performing (Stage 2), and certain non-performing (Stage 3) assets. Other non-performing assets

subject to ECL measurement apply the individual assessment method, and are all in Stage 3.

Collectively assessed

assets (Stages 1 to 3)

This is a model-based approach that calculates ECL in a formula that is expressed simplistically as

PD x EAD x LGD, adjusted for the time value of money. Assets that are collectively assessed are

grouped on the basis of similar credit risk characteristics, taking into account loan type, industry,

geographic location, collateral type, past due status and other relevant

factors. These

characteristics are relevant

to the estimation of future cash flows for groups of such assets by

being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of

the assets being evaluated.

For Stage 3 assets the PD equals 100% and the LGD and EAD represent

a lifetime view of the losses

based on characteristics of defaulted facilities.

To

build the IFRS 9 models, ING Group’s expected loss models (PD, LGD, EAD) used for regulatory

and capital purposes have been adjusted by removing embedded prudential conservatism (such as

floors) and converted through-the-cycle estimates to point-in-time estimates to support the

calculation of collective-assessment ECL under IFRS 9. The models assess ECL on the basis of

forward-looking macroeconomic forecasts

and other inputs. For most financial assets, the expected

life is limited to the remaining maturity. For overdrafts

and certain revolving credit facilities, such as

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

repayment schedule.

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Individually assessed assets (Stage

3)

ING Group estimates individual impairment provisions for individually significant credit impaired

financial assets within

Stage 3. Individual provisions are calculated using the discounted expected

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

used. Each scenario is analysed based on the probability of occurrence and including forward

looking information.

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

account. These include expected developments in credit quality, business and economic forecasts,

and estimates of if/when recoveries will occur and taking into account ING’s restructuring/recovery

strategy.

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

amount minus discounted expected future cash flow using the original EIR)

per scenario, based on

best estimates of expected future cash flows. Recoveries can be from different sources including

repayment of the loan, collateral recovery,

asset sale etc. Cash flows from collateral and other

credit enhancements are included in the measurement of the expected credit losses of the related

financial asset

when it is part of or integral to the contractual terms of the financial asset and the

credit enhancement is not recognised separately. For

the individual assessment, with granular

(company or deal-specific)

scenarios, specific factors

can have a larger impact on the future cash

flows than macroeconomic factors.

When a financial

asset is credit-impaired, interest ceases to be

recognised on the regular accrual

basis, which accrues income based on the gross carrying amount of the asset. Rather, interest

income is calculated by applying the original EIR to the AC of the asset, which is the gross carrying

amount less the related loan loss provision.

Purchased

or Originated Credit Impaired (POCI) assets

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

POCI asset is determined based on lifetime ECL from initial recognition. POCI assets are recognised

initially at an amount net of impairments and are measured at AC using a credit-adjusted effective

interest rate.

In subsequent periods any changes to the estimated lifetime ECL are recognised in

profit or loss. Favourable changes are recognised

as an impairment gain even if the lifetime ECL at

the reporting date is lower than the estimated lifetime ECL at origination.

Modifications

In certain circumstances ING grants borrowers

postponement and/or reduction of loan principal

and/or interest

payments for a temporary period of time to maximise collection opportunities, and

if possible, avoid default, foreclosure,

or repossession. When such postponement and/or reduction

of loan principal and/or interest payments is executed based on credit

concerns it is also referred to

as forbearance (refer

to the ‘Risk Management’

section of the Annual Report for more details). In

such cases, the net present value of the postponement and/or reduction of loan and/or

interest

payments is taken into account in the determination of the appropriate level of impairment loss. If

the forbearance results in a substantial modification of the terms of the loan, the original loan is

derecognised and a new loan is recognised at its fair value at the modification date. ING Group

determines whether there has been a substantial modification

using both quantitative and

qualitative factors.

Write-off and debt forgiveness

If there is no reasonable expectation of recovery

and/or collectability of amounts due a write-off

can occur.

The following events can lead to a write-off:

◾

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

the remaining loan exposure (including partial debt forgiveness);

◾

In a bankruptcy liquidation scenario;

◾

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

◾

Upon conversion of a credit facility into equity; or

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◾

ING Group releases a legal (monetary) claim it has on its customer.

When a loan is uncollectable, it is written off against

the related loan loss provision. Subsequent

recoveries of amounts previously

written off are recognised in the statement of profit or loss.

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

of

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

debt. As a result, the financial asset needs to be derecognised. Distinction is

made in situations

where ING ends the relationship with the client and situations where ING (partially) continues the

financing of the client.

Presentation of ECL

Loss allowances for financial assets measured at AC are deducted from the gross

carrying amount

of the assets. For debt instruments at FVOCI, the loss allowance is recognised in OCI, instead of

deducting the carrying amount of the asset. For impaired financial assets with

drawn and undrawn

components, ECL also reflects any credit losses related to the portion of the loan commitment that

is expected to be drawn down over the remaining life of the instrument. The loss allowance on

issued financial

guarantee contracts, in scope of IFRS 9 and not measured at FVPL, are recognised

as liabilities and presented in Other provisions. ECL are

presented in profit or loss in Addition to loan

loss provision.

Significant judgements and critical accounting estimates and assumptions:

Considerable management judgement is exercised in determining the amount of LLP for financial

assets assessed on both a collective and an individual impairment basis. In particular,

this

judgement requires ING Group to make various assumptions about the risk of default, the

subsequent expected loss rates in the event of default, and expected future cash flows. These

assumptions are based on a combination of the Group’s past history, existing market conditions

and forward-looking estimates at the end of each reporting period. Changes in these assumptions

may lead to changes in the LLP over time. Given they are subjective and complex in nature, and

because the LLP and the underlying exposures subject to impairment assessment are material,

these assumptions are considered critical accounting assumptions.

The sensitivity of these

assumptions is assessed in the credit risk section of the ‘Risk Management’ section

in the Annual

Report.

The critical accounting estimates and assumptions are:

The use of forward-looking macroeconomic scenarios in both collective and individual impairment

assessments. Forward-looking macroeconomic

scenarios are subjective and uncertain in nature.

The process the Group follows

involves using inputs from third

party provider Oxford Economics

(OE), and subjecting these to internal expert review and challenge to ensure the inputs used in the

models reflect ING’s view on the macro economy. Two internal groups, the Macroeconomics

Scenarios Team

and the Macroeconomics Scenarios Expert Panel, were established for this purpose.

The latter team consists of senior management representatives from

the Business, Risk and

Finance.

The use of alternate forward-looking macroeconomic scenarios can produce

significantly

different estimates of ECL. This is demonstrated in the sensitivity analysis in the ‘Risk Management’

section of the Annual Report, where the un-weighted ECL under each of the three scenarios for

some significant portfolios

is disclosed.

The probability weights applied to each of the three scenarios. This is a management judgement

that ultimately requires estimation and consideration of the range

of possibilities. This ensures

consensus view on the likelihood of each scenario materializing is appropriately reflected in the

weights applied by the Group for collective assessment ECL calculations. The sensitivity analysis in

the ‘Risk Management’ section of the Annual Report discloses

these weights used.

The significant judgements

are:

The criteria for identifying a significant

increase in credit risk. When determining whether the credit

risk on a financial

asset has increased significantly, ING Group considers reasonable and

supportable information available to compare the risk of default occurring at reporting date with

the risk of a default occurring at initial recognition of the financial asset. Whilst judgement

is

required in applying each financial asset with a PD rating, there is significant judgement used in

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determining the stage allocation PD banding thresholds. The process of comparing a financial

asset’s PD with the PD banding thresholds determines its ECL stage. Assets in Stage 1 are allocated

a 12 month ECL, and those in Stage 2 are allocated a lifetime ECL, and the difference is often

significant. As such, the judgement

made both in assigning financial

asset PDs and in setting PD

banding thresholds constitute a significant judgement. Analysis

of the sensitivity associated with

the assessment of significant

increase in credit risk is presented in the ‘Risk Management’ section of

the Annual Report.

The definition of default. Judgement is

exercised in management’s evaluation of whether there is

objective evidence of impairment loss has been incurred for larger exposures. Management

judgement is required in assessing evidence of credit

-impairment.

1.7

Financial instruments, prior to 1 January

2018 under IAS 39

The following is applicable to periods prior to 1 January 2018 for financial

instruments accounted

for under IAS 39, to the extent not already discussed earlier in this section. The 2017 comparative

period was not restated for the adoption of IFRS 9.

1.7.1

Classification and measurement of financial assets and financial liabilities

(IAS 39)

Financial assets and liabilities designated at fair

value through profit or

loss

Management will designate a financial

asset or a financial

liability as such only if this eliminates a

measurement inconsistency, if the related assets and liabilities are managed on a fair value basis

or classified as an

embedded derivative as described below.

Interest income and expense from financial instruments classified

at fair value through profit or

loss is recognised in Interest income using the effective interest method (where

applicable). The

remaining changes in fair value of such instruments are recognised in Valuation

results and net

trading income in the statement of profit or loss. Dividend income from equity instruments

classified at fair value through profit or loss

is generally recognised in ‘Valuation

results and net

trading income’ in the statement of profit or loss when the dividend has been declared.

Embedded derivatives

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 or 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

statement of profit or loss. An assessment is carried out when ING 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.

Investments

Investments (including loans quoted in active markets) are classified

either as held-to-maturity or

available-for-sale. Investment debt 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 quoted 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 financial

assets.

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 in the statement of

profit or loss. Dividend income from equity instruments classified

as available-for-sale is recognised

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in Investment income in the statement of profit or loss when the dividend has been declared.

Unrealised gains and losses arising from changes in the fair value are recognised

in equity and are

recycled to the statement of profit or loss as Investment income when the asset is disposed.

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

ING 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 AC 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 statement of profit or loss 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 AC using the effective interest method less any impairment

losses. Loans and receivables

include Cash and balances with central banks, Loans and advances to

banks, Loans and advances to customers, and some categories of Other assets and are reflected in

these line items in the statement of financial

position. Interest income from loans and receivables is

recognised in Interest income in the statement of profit or loss using the effective interest method.

Impairments of financial assets at amortised cost (loan loss provisions)

(IAS 39)

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 ING Group’s credit

risk systems.

Losses expected as a result of future

events, no matter how likely, are not recognised.

ING Group first assesses whether objective

evidence of impairment (a loss event/trigger) exists

individually for financial assets

that are individually significant, and then individually or collectively

for financial assets that are not individually significant.

If ING Group determines that no objective

evidence of impairment (a loss event/trigger) 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 AC has been incurred,

the amount of the loss is measured as the difference between the asset’s carrying amount and the

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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 statement of profit or loss 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.

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 statement of profit or

loss.

Impairments on other debt instruments (Loans and held-to-maturity investments) are part of the

loan loss provision as described above.

Impairment of AFS assets

At each balance sheet date, ING 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, 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 six 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 statement of profit or loss. 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 statement of profit or

loss, the impairment loss is reversed through the statement of profit or loss.

1.8

Consolidation

ING Group comprises ING Groep N.V.

(the Parent Company), ING Bank N.V.

and all other subsidiaries.

Subsidiaries are entities controlled by ING Groep N.V.

Control exists if ING Groep N.V.

is exposed or

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

investee. Control

is usually achieved through situations including, but not limited to:

◾

Ownership, directly or indirectly, of more than half of the voting power;

◾

Ability to appoint or remove the majority of the board of directors;

◾

Power to govern operating

and financial

policies under statute or agreement; and

◾

Power over more

than half of the voting rights through an agreement with other investors.

The existence and effect of potential voting rights that are currently exercisable or convertible are

considered in assessing whether Group controls another entity.

For interests in

structured entities, the existence of control requires

judgement as these entities are

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

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

contractual arrangements that give rights to direct the structured entities relevant

activities and

commitment to ensure that the structured entity operates as designed.

A list of principal subsidiaries is included in Note 48 ‘Principal subsidiaries’.

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.

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The results of the operations and the net assets of subsidiaries are included in the statement of

profit or loss and the statement of financial

position 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.

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 Groep N.V.

and its Dutch group companies are subject to legal restrictions regarding the

amount of dividends they can pay to their shareholders. The Dutch Civil Code contains the

restriction that dividends can only be paid up to an amount equal to the excess of the company’s

own funds over the sum of the paid-up capital and reserves required

by law. Additionally, certain

Group companies are subject to restrictions on the amount of funds they may transfer in the form

of dividends, or otherwise, to the parent company.

Furthermore, in addition to the restrictions in respect of minimum capital requirements

that are

imposed by industry regulators in the countries in which the subsidiaries operate, other limitations

exist in certain countries.

1.9

Segment reporting

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

or services, whose operating results are

regularly reviewed

by the Executive Board of ING Group

and the Management Board Banking (together the Chief Operating Decision Maker (CODM)) to

make decisions about resources to be allocated to the segments and assess its performance. A

geographical area is a distinguishable component of 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 CODM examines ING Group’s performance both by line of business and geographic perspective

and has identified

five reportable segments by line of business

and six by geographical area. The

geographical analyses are based on the location of the office from which the transactions are

originated.

1.10 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 Group’s

presentation currency.

Transactions

and balances

Foreign currency

transactions are translated into the functional currency using the exchange rate

prevailing at the date of the transactions. Exchange rate

differences resulting from

the settlement

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

liabilities denominated in foreign currencies are

recognised in the statement of profit or loss, except

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

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

are

translated using the exchange rate at the date of the transaction.

Exchange rate differences on non-monetary items, measured

at fair value through profit or loss,

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

at the date

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 statement of profit or loss are generally included in ‘Valuation

results and net trading income’. Reference

is made to Note 23 ‘Valuation results

and net trading

income’, which discloses the amounts included in the statement of profit or loss.

Exchange rate

differences relating to the disposal of debt and FVPL equity securities are considered to be an

inherent part of the capital gains and losses recognised in Investment income. As mentioned

below, in Group companies relating to the disposals of group companies, any exchange rate

difference deferred in equity is recognised in the statement of profit or loss in ‘Result on disposal of

group companies’. Reference

is also made to Note 20 ‘Equity’, which discloses the amounts

included in the statement of profit or loss.

Group companies

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

from the presentation currency

are translated into the presentation currency

as follows:

◾

Assets and liabilities included in each statement of financial

position are translated at the closing

rate at the date of that statement of financial position;

◾

Income and expenses included in each statement of profit or loss

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.

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

forms part of the net investment in a foreign operation, and of borrowings and other instruments

designated as hedges of such investments, are taken to shareholders’ equity. When a foreign

operation is sold, the corresponding exchange rate

differences are recognised in the

statement of

profit or loss as part of the gain or loss

on sale.

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

treated

as assets and liabilities of the foreign operation and translated at the exchange rate

prevailing at

the balance sheet date.

1.11 Investments in associates

and joint ventures

Associates are all entities over which the Group has significant influence but not

control. Significant

influence is the ability to participate

in the financial

and operating policies of the investee. It

generally results from

a shareholding of between 20% and 50% of the voting rights or through

situations including, but not limited to one or more of the following:

◾

Representation on the board of directors;

◾

Participation in the policymaking process; and

◾

Interchange of managerial personnel.

Joint ventures are entities over

which the Group has joint control. Joint control is the contractually

agreed sharing of control over

an arrangement or entity, which exists only when decisions about

the relevant activities require

the unanimous consent of the parties sharing control. Joint control

means that no party to the agreement is able to act unilaterally to control the activity of the

entity. The parties to the agreement must act together to control the entity and therefore exercise

the joint control.

Investments in associates and joint ventures are

initially recognised at cost and subsequently

accounted for using the equity method of accounting.

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

includes goodwill identified

on acquisition. The Group’s share of its associates and joint ventures

post-acquisition profits or losses is recognised in the statement of profit or loss,

and its share of

post-acquisition changes in reserves is recognised in equity. The cumulative post-acquisition

changes are adjusted against the carrying amount of the investment. When the Group’s share of

losses in an associate or joint venture equals or exceeds its interest in the associate or joint venture,

including any long-term interests in the associate like uncollateralised loans that are neither

planned nor likely to be settled in the foreseeable future, the Group does not recognise

further

losses, unless it has incurred obligations or made payments on behalf of the associate or joint

venture.

Unrealised gains on transactions between the Group and its associates and joint ventures

are

eliminated to the extent of the Group’s interest in the associates and joint ventures. Unrealised

losses are also eliminated unless they provide evidence of an impairment of the asset transferred.

Accounting policies of associates and joint ventures have been changed where necessary to ensure

consistency with the policies adopted by the Group. The reporting dates of all significant associates

and joint ventures are consistent with the reporting date of the Group.

1.12 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 statement of profit or loss. Increases that reverse a

revaluation decrease

on the same asset previously recognised in net result

are recognised in the

statement of profit or loss. 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 done by independent qualified

valuers or by internal valuers, 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.

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 recognised in the

statement of profit or loss as incurred. Expenditure incurred on major improvements is capitalised

and depreciated.

Disposals of property and equipment

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

in the

statement of profit or loss under Other income.

1.13 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

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assets, liabilities and contingent liabilities as at the date of acquisition, is capitalised as an

intangible asset. Goodwill is only recognised separately on acquisitions. The results of the

operations of the acquired companies are

included in the statement of profit or loss from the date

control is obtained.

Where applicable, the consideration for the acquisition includes any asset or liability resulting from

a contingent consideration arrangement, the contingent consideration is measured

at its

acquisition-date fair value. Contingent consideration arrangements

classified as

an asset or a

liability, are subsequently measured at fair value and the changes in fair value will be recognised in

the statement of profit or loss. Changes in the fair value of the contingent consideration classified

as equity, are not recognised.

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 obtains control) and the result

ing gain or loss, if any, is recognised in the

statement of 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 the

statement of profit or loss, where such treatment would be appropriate if that interest were

disposed of. Acquisition related costs are

recognised in the statement of profit or loss as incurred

and presented in the statement of profit or loss as Other operating expenses.

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 Financial statements can be limited.

The initial accounting shall be completed within a year after acquisition. 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 where control

is lost, the

difference between the sale proceeds and carrying value (including goodwill) and the unrealised

results (including the currency translation

reserve in equity) is included in the statement of profit or

loss.

Goodwill impairment

ING assesses at each reporting period, whether there is an indication that an intangible asset may

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

indefinite useful life, including goodwill acquired in a business combination, and intangible assets

not yet available for use, are tested annually for impairment. Goodwill is allocated to groups of

CGUs (that is, the group of cash generating units or CGUs) for the purpose of impairment testing.

These groups of CGUs represent

the lowest level at which goodwill is monitored for internal

management purposes. Goodwill is tested for impairment by comparing the carrying value of the

group of CGUs to the recoverable

amount of that group of CGUs. The carrying value is determined

as the IFRS net asset value including goodwill. In compliance with IAS 36 ‘Impairment of assets’, the

carrying value is determined on a basis that is consistent with the way in which the recoverable

amount of the CGU is determined. When the carrying values need to be allocated between Retail

and Wholesale solvency (risk-weighted assets) are used as a basis. The recoverable

amount is

estimated as the higher of fair value less costs of disposal and value in use. Several

methodologies

are applied to arrive at the best estimate of the recoverable

amount. Impairment of goodwill, if

applicable, is included in the statement of profit or loss in Other operating expenses.

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

five years. Amortisation

is included in Other

operating expenses.

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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.

1.14 Taxation

Income tax on the result for the year comprises current and deferred

tax. Income tax is recognised

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

are recognised directly in equity.

Deferred income

tax

Deferred income tax is provided

in full, using the liability method, on temporary differences arising

between the tax basis 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 substantively 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.

Fair value remeasurement

of debt and equity instruments measured at FVOCI and cash flow

hedges are recognised directly in equity. Deferred

tax related to this fair value remeasurement

is

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

together with the deferred gain or loss.

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

will be a cash outflow; a current tax liability is recognised.

1.15 Other assets

Investment property

Investment properties are recognised at

fair value at the balance sheet date. Changes in the

carrying amount resulting from revaluations

are recognised in the statement of profit or loss. On

disposal, the difference between the sale proceeds and carrying value is recognised

in the

statement of profit or loss.

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, 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 is included in Other assets – Property development

and obtained from foreclosures.

Depending on the intention of ING Group after completion of the

development, the property is measured as follows:

Intention to sell: at the lower of cost and net realisable value;

Intention to use as a real estate investment: at fair value.

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1.16 Disposal groups held for sale

and discontinued operations

Disposal groups (and groups of 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 group of

assets) is available for immediate sale in its present condition; management must be committed to

the sale, which is expected to occur within one year from the date of classification

as held for sale.

Upon classification as

held for sale, the disposal group is measured at the lower of its carrying

amount and fair value less costs to sell, except where specifically exempt from IFRS 5.

An

impairment loss is recognised for any initial or subsequent write-down of the disposal group to fair

value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to

sell of the disposal group, but not in excess of any cumulative impairment loss previously

recognised. A gain or loss not previously recognised

by the date of the sale of the disposal group is

recognised at the date of derecognition. Assets within the disposal group are not depreciated

or

amortised while they are classified as

held for sale. Interest and other expenses attributable to the

liabilities of a disposal group classified as

held for sale continue to be recognised. The assets of the

disposal group classified as held for sale are presented separately from the other assets in the

balance sheet. The liabilities of a disposal group classified

as held for sale are presented separately

from other liabilities in the balance sheet.

When a group of assets that is classified as held for sale represents a major line of business or

geographical area the disposal group is classified as discontinued operations. Upon classification

of

a business as held for sale and discontinued operations the individual income and expenses are

presented within the Total

net result from discontinued operations instead of being presented

in

the usual line items in the Consolidated statement of profit or loss. All comparative years in the

Consolidated statement of profit or loss are restated and presented as discontinued operations for

all periods presented. Furthermore, the individual assets and liabilities are presented

in the

Consolidated statement of financial position as Assets

and liabilities held for sale and are no longer

included in the usual line items in the Consolidated statement of financial

position. Changes in

assets and liabilities as a result of classification as held for sale are included in the notes in the line

‘Changes in composition of the group and other changes’.

1.17 Provisions, contingent liabilities

and contingent assets

A provision is a present obligation arising from past events,

the settlement of which is expected to

result in an outflow of resources embodying economic benefits, however the timing or the amount

is uncertain. Provisions are discounted when the effect of the time value of money is significant

using a pre-tax discount rate.

Reorganisation provisions include employee termination benefits when 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.

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

by the

relevant legislation, occurs. For

a levy that is triggered upon reaching a minimum threshold, the

liability is recognised only upon reaching the specified minimum threshold.

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

be confirmed only

by the occurrence or non-occurrence of one or more

uncertain future events not

wholly within the control of ING Group; or a present obligation that arises from

past events but is

not recognised because it is either not probable that an outflow of economic benefits

will be

required to settle the obligation or the amount of the obligation cannot be measured reliably.

Contingent liabilities are not recognised in the statement of financial position, but are rather

disclosed in the notes unless the possibility of the outflow

of economic benefits is remote.

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

confirmed

only by the occurrence or non-occurrence of one or more

uncertain future events not

wholly within the control of ING Group. Contingent

assets are recognised in the statement of

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financial position only

when realisation of the income that arises from such an asset is virtually

certain. Contingent assets are disclosed in the notes when an inflow of economic benefits

is

probable.

Significant judgements and critical accounting estimates and assumptions:

The recognition and measurement of provisions is an inherently uncertain process

involving using

judgement to determine when a present obligation exists and estimates regarding probability,

amounts and timing of cash flows.

ING Group may become involved in legal proceedings.

The degree of uncertainty and the method

of making the accounting estimate depends on the individual case, its nature and complexity.

Legal cases are

usually one of a kind. Judgement is required to estimate the probability of an

unfavourable outcome and the amount of potential loss. For the assessment of litigation provisions

ING Group consults with legal experts. Even taking into consideration legal experts’ advice, the

probability of an outflow of economic benefits

can still be uncertain and the amount provisioned

can remain sensitive to the assumptions used which may have a broad range of outcomes.

Reference is made to Note 16 ‘Provisions’.

For legal proceedings where

it is not possible to make a

reliable estimate of the expected financial

effect, that could result from the ultimate resolution of

the proceedings, no provision is recognised,

however disclosure is included in the financial

statements. Reference is made to Note 46 ‘Legal

proceedings’.

Critical accounting estimates and assumptions for the reorganisation provision are

in estimating

the amounts and timing of cash flows as the announced

transformation initiatives are

implemented over a period of several years. Reference

is made to Note 16 ‘Provisions’.

1.18 Other liabilities

Defined benefit plans

The net defined benefit

asset or liability recognised in the statement of financial

position in respect

of defined benefit

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

defined benefit

obligation at the balance sheet date.

Plan assets are measured at fair value at the balance sheet date. For

determining the pension

expense, the return on plan assets is determined using a high quality corporate bond rate identical

to the discount rate used in determining the defined benefit

obligation.

Changes in plan assets that effect Shareholders’ equity and/or Net result, include mainly:

◾

Return on plan assets using a high quality corporate bond rate at the start of the reporting period

which are recognised as staff costs in the statement of profit or loss; and

◾

Remeasurements which are recognised

in Other comprehensive income (equity).

The defined

benefit obligation

is calculated by internal and external actuaries through actuarial

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

future payments required to settle the obligation resulting

from employee service in the current

and prior periods, discounted using a high quality corporate bond rate. Inherent in these actuarial

models are assumptions including discount rates, rates of increase

in future salary and benefit

levels, mortality rates, consumer price index and the expected level of indexation. The assumptions

are based on available market data as well as management expectations and are updated

regularly. 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 obligation and future

pension costs.

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Changes in the defined

benefit obligation

that effects Shareholders’ equity and/or Net result,

include mainly:

◾

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

◾

Interest expenses using a high quality corporate bond rate at the start of the period which are

recognised as staff costs in the Statement of profit or loss; and

◾

Remeasurements which are recognised

in Other comprehensive income (equity).

Remeasurements

recognised in other comprehensive income are

not recycled to profit or loss. Any

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

plan amendment. Gains and losses on curtailments and settlements

are recognised in the

statement of profit or loss when the curtailment or settlement

occurs.

The recognition of a net defined benefit

asset in the Consolidated statement of financial position

is

limited to the present value of any economic benefits available in the form of refunds from the

plans or reductions in future contributions to the plans.

Defined contribution plans

For defined contribution plans, 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 in the profit or

loss when they are due. Prepaid contributions are

recognised as an

asset to the extent that a cash refund or a reduction in the future payments is available.

Other post-employment obligations

Some group companies provide other post-employment 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.

1.19 Income recognition

Interest

Interest income and expense are recognised

in the statement of profit or loss 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.

Interest results on instruments classified at Amortised Cost, assets measured at FVOCI and

derivatives in a formal hedge accounting relationship is presented in ‘Interest

income (expense)

using effective interest rate method’. Interest result

on financial assets

and liabilities voluntarily

designated as at FVPL and derivatives in so called economic hedges and instruments designated at

fair value are presented in ‘Other interest

income (expense)’. Interest result on all other financial

assets and liabilities at FVTPL is recognised in ‘Valuation results

and net trading income’.

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F - 40

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.

1.20 Expense recognition

Expenses are recognised in the statement of profit or loss 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. Fee

and commission expenses are generally a result

from a contract with ING

service providers in order to perform the service for ING Group’s

customers. Costs are generally

presented as ‘Commission expenses’ if they are specific, incremental, directly attributable and

identifiable to generate commission income.

Share-based payments

Share-based payment expenses are recognised as a staff expense over the vesting period. A

corresponding increase in equity is recognised

for equity-settled share-based payment

transactions. A liability is recognised for cash-settled share-based payment transactions. The fair

value of equity-settled share-based payment transactions are measured at the grant

date, and the

fair value of cash-settled share-based payment transactions are measured at each balance sheet

date. Rights granted will remain valid until the expiry date, even

if the share based payment

scheme is discontinued. The rights are subject to certain conditions, including a pre-determined

continuous period of service.

1.21 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 ordinar

y

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; and

◾

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

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weighted average number of ordinary shares

outstanding during the period is not impacted by the

non-voting equity securities.

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.

1.22 Statement of cash flows

The statement of cash flows is prepared 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 statement of profit or

loss and changes in items per the statement of financial

position, 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 balances with

central banks, treasury bills and other eligible bills, amounts due from other banks, and deposits

from 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 statement of financial position

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 between the opening and closing balance of Cash and cash equivalents in the statement of

financial position is

due to exchange rate differences and is presented

separately in the cash flow

statement.

Liabilities arising from financing activities

are debt securities and subordinated loans.

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Assets

2

Cash

and balances

with

central

banks

Cash and balances with central banks

2019

2018

Amounts held at central banks

51,178

47,655

Cash and bank balances

2,024

2,333

53,202

49,987

The movement in Cash and balances with central banks reflects ING’s active liquidity management.

Amounts held at central banks reflect on demand balances.

Reference is made to Note 42 ‘Assets not freely disposable’ for restrictions on Cash balances

with

central banks.

3 Loans and advances

to banks

Loans and advances to banks

Netherlands

International

Total

2019

2018

2019

2018

2019

2018

Loans

13,641

7,967

21,499

22,460

35,140

30,428

Cash advances, overdrafts

and other balances

0

1

4

3

5

3

13,641

7,968

21,504

22,463

35,145

30,431

Loan loss provisions

–6

–5

–3

–5

–9

–9

13,635

7,963

21,501

22,458

35,136

30,422

Reference is made to Note 42 ‘Assets not freely disposable’ for restrictions on Loans

and advances

to banks.

Loans include balances (mainly short-term deposits) with central banks amounting to EUR 3,185

million (2018: EUR 4,713 million).

As at 31 December 2019, Loans include receivables related

to securities in reverse repurchase

transactions amounting to EUR 8,943 million (2018: EUR 6,686 million) and receivables related to

finance lease contracts amounting to EUR 24 million

(2018: EUR 51 million). Reference is made to

Note 7 ‘Loans and advances to customers’ for information on finance lease receivables.

As at 31 December 2019, all loans and advances to banks are non-subordinated.

4 Financial assets at fair value

through profit or loss

Financial assets at fair value through profit or loss

2019

2018

Trading

assets

49,254

50,152

Non-trading derivatives

2,257

2,664

Designated at fair value through profit or loss

3,076

2,887

Mandatorily measured at fair value through

profit or loss

41,600

64,783

96,187

120,486

Financial assets at fair value through profit or loss includes securities lending and sales and

repurchase transactions which were

not derecognised, because ING Group continues to be exposed

to substantially all risks and rewards of the transferred

financial asset. These

assets are included in

Trading

assets and Financial assets mandatorily measured at fair value through profit or loss.

Reference is made to Note 43 ‘Transfer

of financial assets’

for information on transferred

assets

which were not derecognised.

Trading

assets

Trading assets by type

2019

2018

Equity securities

8,499

8,898

Debt securities

6,256

5,213

Derivatives

21,694

22,110

Loans and receivables

12,806

13,931

49,254

50,152

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Trading

assets include assets that are classified under

IFRS as Trading,

but are closely related to

servicing the needs of the clients of ING Group. ING offers institutional clients, corporate clients, and

governments, products that are traded on the financial markets.

A significant part

of the derivatives in the trading portfolio is related to servicing corporate clients in

their risk management to hedge for example currency or interest rate

exposures. In addition, ING

provides its customers access to equity and debt markets for issuing their own equity or debt

securities (securities underwriting). Although these are presented as Trading

under IFRS, these are

directly related to services to ING’s customers.

Part of the trading assets are sold subject to repurchase

agreements, securities lending and similar

agreements comparable to collateralised

lending, and continue to be recognised in the

consolidated statement of financial position.

From

a risk perspective, the gross amount of trading assets must be considered together with the

gross amount of trading liabilities, which are presented

separately on the statement of financial

position since IFRS does not always allow netting of these positions in the statement of financial

position.

As at 31 December 2019, Trading

Assets - Loans and receivables include receivables

of EUR 11,969

million (2018: EUR 12,939 million) with regard to reverse repurchase

transactions.

Reference is made to Note 15 ‘Financial liabilities at fair value thro

ugh profit or loss’ for information

on trading liabilities.

Non-trading derivatives

Non-trading derivatives by type

2019

2018

Derivatives used in

-

fair value hedges

524

650

-

cash flow hedges

677

1,012

-

hedges of net investments in foreign operations

23

41

Other non-trading derivatives

1,033

961

2,257

2,664

Reference is made to Note 39 ‘Derivatives

and hedge accounting’ for information on derivatives

used in hedge accounting.

Other non-trading derivatives mainly includes interest rate

swaps and foreign exchange currency

swaps for which no hedge accounting is applied.

Designated at fair value

through profit or loss

Designated at fair value through profit or loss by type

2019

2018

Debt securities

2,334

2,114

Loans and receivables

742

772

3,076

2,887

‘Financial assets designated at fair value through profit or loss’ includes 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

at fair value through profit or loss’ approximates its carrying value. The cumulative

change in fair

value of the loans attributable to changes in credit risk is not significant.

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The notional value of the related credit derivatives is EUR 1,672 million (2018: EUR 1,364 million).

The change in fair value of the credit derivatives attributable to changes in credit risk since the

loans were first designated, amounts to EUR 29 million (2018: EUR -23 million)

and the change for

the current year amounts to EUR -52 million (2018: EUR 17 million).

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.

Mandatorily at fair value

through profit or loss

Mandatorily at fair value through profit or loss by type

2019

2018

Equity securities

159

210

Debt securities

733

1,103

Loans and receivables

40,708

63,469

41,600

64,783

None of the equity securities are individually significant

for ING Group.

For details on ING Group’s total exposure

to debt securities reference is made to Note 6 ‘Securities

at amortised cost’.

As at 31 December 2019, Loans and receivables

mandatorily measured at fair value through profit

or loss includes EUR

38,985 million (2018: EUR

63,022 million) with regard to reverse

repurchase

transactions.

5 Financial assets at fair value

through other comprehensive

income

Financial assets at fair value through other comprehensive income by type

2019

2018

Equity securities

2,306

3,228

Debt securities

1

30,483

25,616

Loans and advances

1

1,680

2,379

34,468

31,223

1

Debt securities include an amount of EUR -7 million

(2018: EUR -6 million)

and the Loans and advances includes EUR -3

million (2018: EUR -5 million) of Loan loss provisions.

Exposure to equity securities

Equity securities designated as at fair value through other comprehensive

income

Carrying

value

Dividend

income

Carrying

value

Dividend

income

2019

2019

2018

2018

Investment in Bank of Beijing

2,001

93

1,967

83

Investment in Kotak Mahindra

Bank

–

–

919

1

Other Investments

305

18

342

8

2,306

111

3,228

92

For strategic equity securities, ING decided to apply the option to irrevocably designate these

investments at fair value through other comprehensive

income, instead of the IFRS 9 default

measurement of fair value through profit or loss.

As at 31 December 2019 ING holds approximately 13% (2018: 13%)

of the shares of Bank of

Beijing, a bank listed on the stock exchange of Shanghai. Following a change in regulatory

requirements set by China Banking and Insurance

Regulatory Commission,

ING, as a shareholder

holding more than 5% or more of the shares, is required

to supply additional capital when

necessary. No request for additional capital was received

in 2019 (2018: not applicable).

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The following table presents changes in financial assets at fair value through other comprehensive

income.

Changes in fair value through other comprehensive income financial assets

FVOCI equity

securities

FVOCI debt

instruments

1

Total

2019

2018

2019

2018

2019

2018

Opening balance as at 1 January

3,228

3,983

27,995

65,747

31,223

69,730

Effect of change in accounting policy due to the

implementation of IFRS 9

–184

–31,945

–32,129

Additions

11

33

16,259

10,486

16,270

10,518

Amortisation

–12

–12

–12

–12

Transfers

and reclassifications

3

1

–0

1

3

2

Changes in unrealised revaluations

2

139

–463

258

–660

397

–1,123

Impairments

–2

–2

Reversals of impairments

1

16

1

16

Disposals and redemptions

–1,091

–178

–12,298

–15,478

–13,389

–15,656

Exchange rate differences

15

35

–40

–159

–25

–124

Changes in the composition of the group and other

changes

0

2

1

3

1

Closing balance

2,306

3,228

32,163

27,995

34,468

31,223

1 Fair value through other comprehensive income debt instruments includes both debt securities and loans and advances.

2 Changes in unrealised revaluations include changes on hedged items which are recognised in the statement of profit or loss.

Following a partial divestment in the fourth quarter of 2018, ING sold its last tranche of shares in

India’s Kotak Mahindra Bank (Kotak)

in the first quarter

of 2019 for EUR 880 million. The transaction,

for a stake of 3.07%, concluded the divestment process and was the main driver for the increase in

the ‘disposal’ line.

Reference is made to Note 6 ‘Securities at amortised cost’ for details on ING Group’s total exposure

to debt securities.

6 Securities at amortised cost

Securities at amortised cost fully consist of Debt securities.

ING Group’s exposure to debt securities is included in the following lines in the statement of

financial position:

Exposure to debt securities

2019

2018

Debt securities at fair value through other comprehensive

income

30,483

25,616

Debt securities at amortised cost

46,108

47,276

Debt securities at fair value through other comprehensive

income and amortised cost

76,592

72,893

Trading

assets

6,256

5,213

Debt securities at fair value through profit or loss

3,067

3,218

Total

debt securities at fair value through profit or loss

9,323

8,431

85,914

81,323

ING Group’s total exposure to debt securities (excluding debt securities held in the trading portfolio)

of EUR 79,659 million (31 December 2018: EUR 76,111 million) is specified

as follows:

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Debt securities by type of exposure

Debt Securities

at FVPL

Debt Securities

at FVOCI

Debt Securities

at AC

Total

2019

2018

2019

2018

2019

2018

2019

2018

Government bonds

408

142

20,300

15,580

25,627

24,659

46,334

40,381

Sub-sovereign, Supranationals

and

Agencies

505

467

6,606

5,928

10,689

11,244

17,801

17,639

Covered

bonds

1,734

2,245

6,960

6,722

8,693

8,967

Corporate bonds

–

23

476

485

143

765

619

1,273

Financial institutions' bonds

1,440

1,527

332

460

1,536

2,415

3,308

4,402

ABS portfolio

714

1,059

1,043

924

1,163

1,483

2,920

3,466

3,067

3,218

30,491

25,622

46,118

47,288

79,676

76,128

Loan loss provisions

–7

–6

–10

–11

–17

–17

Bond portfolio

3,067

3,218

30,483

25,616

46,108

47,276

79,659

76,111

Approximately 90% (2018: 99%) of the exposure in the ABS portfolio is externally rated AAA, AA or

A. There are no borrowed

debt securities recognised in the statement of financial position.

7 Loans and advances

to customers

Loans and advances to customers by type

Netherlands

International

Total

2019

2018

2019

2018

2019

2018

Loans to, or guaranteed

by, public authorities

25,340

24,547

16,849

17,257

42,190

41,803

Loans secured

by mortgages

117,199

117,848

231,327

219,530

348,526

337,379

Loans guaranteed

by credit institutions

206

195

3,569

2,901

3,775

3,095

Personal lending

3,482

3,304

24,768

21,563

28,250

24,867

Corporate loans

39,645

37,213

150,233

149,787

189,878

187,000

185,873

183,106

426,746

411,037

612,619

594,144

Loan loss provisions

–1,193

–1,480

–3,398

–3,011

–4,590

–4,491

184,680

181,626

423,349

408,027

608,029

589,653

As at 31 December 2019, Loans and advances to customers – corporate loans include receivables

with regard to securities which have been acquired

in reverse repurchase

transactions amounting

to EUR 180 million (2018: EUR 266 million).

Loans and advances to customers by subordination

2019

2018

Non-subordinated

607,908

589,533

Subordinated

121

120

608,029

589,653

No individual loan or advance has terms and conditions that significantly

affect the amount, timing

or certainty of the consolidated cash flows

of the Group.

Loans and advances to customers and Loans

and advances to banks include finance lease

receivables and are detailed as follows:

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Finance lease receivables

2019

2018

Maturities of gross investment in finance lease receivables

-

within 1 year

3,116

2,374

-

between 1-2 years

3,811

n/a

-

between 2-3 years

2,145

n/a

-

between 3-4 years

717

n/a

-

between 4-5 years

367

n/a

-

more than 1 year but less than 5 years

n/a

5,959

-

more than 5 years

434

1,646

10,591

9,979

Unearned future finance income on finance leases

–580

–673

Net investment in finance leases

10,011

9,306

Included in Loans and advances to banks

24

51

Included in Loans and advances to customers

9,987

9,256

10,011

9,306

The finance lease receivables mainly relate to the financing

of equipment and to a lesser extent

real estate for third parties, where ING is the lessor.

The finance lease receivables are part of

corporate loans. Interest income in 2019 on Finance lease receivables

amounts to EUR 251 million

(2018: EUR 269 million).

Expected credit losses for uncollectable finance lease receivables of EUR 136 million as at 31

December 2019 (2018: EUR 150 million) is included in the loan loss provision. The loan loss provision

for finance lease receivables is classified

into the following loan loss provision stages; stage 1: EUR 2

million (2018: EUR 5 million), stage 2: EUR 6 million (2018: EUR 11 million), and

stage 3: EUR 128

million (2018: EUR 134 million).

No individual finance lease

receivable has terms and conditions that significantly affect

the

amount, timing or certainty of the consolidated cash flows

of the Group.

8 Investments in associates

and joint venture

s

Investments in associates and joint ventures

2019

Interest

held (%)

Fair value

of listed

invest-

ments

Balance

sheet

value

Total

assets

Total

liabilities

Total

income

Total

expenses

TMB Public Company Limited

23

1,109

1,509

55,804

49,974

1,145

891

Other investments in associates and joint

ventures

281

1,790

Investments in associates and joint ventures

2018

Interest

held (%)

Fair value

of listed

invest-

ments

Balance

sheet

value

Total

assets

Total

liabilities

Total

income

Total

expenses

TMB Public Company Limited

30

776

991

23,494

20,884

1,055

722

Other investments in associates and joint

ventures

212

1,203

TMB is a financial institution

providing products and services to Wholesale, Small and Medium

Enterprise (SME), and Retail customers. TMB is domiciled in Bangkok, Thailand and is listed on the

Stock Exchange of Thailand (SET). In December 2019 TMB merged with Thanachart Bank and

became Thailand’s sixth largest bank. Prior to this merger ING paid a capital contribution to TMB of

EUR 381 million. As a result of the merger transaction ING recognized

a gain of EUR 16 million

mainly to partial release of the related foreign currency

reserves.

Other investments in associates and joint ventures are mainly financial services and financial

technology funds or vehicles operating predominantly in Europe

ING Group does not hold any interests in Investments in associates and joint ventures

that are

individually significant

to ING Group. Other investments in associates and joint ventures represents

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a large number of associates and joint ventures with an individual carrying value of less than EUR

50 million.

Significant influence

for associates in which the interest held is below 20%, is based on the

combination of ING Group’s financial interest and other arrangements, such as participation in the

Board of Directors.

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

the Group, but by no more than three months.

Accumulated impairments of EUR 49 million (2018: EUR 15 million) have been recognised. The

values presented in the tables above could differ from the values presented

in the individual

financial statements

of the associates and joint ventures, due to the fact that the individual values

have been brought in line with ING Group’s accounting principles. When the fair value of the

investment is below cost for a significant amount or prolonged period of time, an impairment test

is performed.

The associates and joint ventures of ING are subject to legal and regulatory restrictions regarding

the amount of dividends it can pay to ING. These restrictions are for example dependent on the

laws in the country of incorporation for declaring dividends or as a result of minimum capital

requirements that are

imposed by industry regulators in the countries in which the associates and

joint ventures operate.

In addition, the associates and joint ventures also consider other factors in

determining the appropriate levels of equity needed. These factors and limitations include, but are

not limited to, rating agency and regulatory views, which can change over time.

Changes in Investments in associates and joint ventures

2019

2018

Opening balance

1,203

1,088

Effect of change in accounting policy due to the implementation of IFRS 9

–28

Additions

507

97

Transfers

to and from Investments/Other assets and liabilities

4

5

Revaluations

–18

–2

Share of results

82

146

Dividends received

–58

–30

Disposals

–10

–116

Impairments

–34

–3

Exchange rate differences

113

47

Closing balance

1,790

1,203

Share of results from

associates and joint ventures of EUR 82 million (2018: EUR 146 million) as

included in the table above, is mainly attributable to results of TMB of EUR 77 million (2018: EUR

117 million).

Share of results from

associates and joint ventures as presented in the statement of profit or loss

includes, besides above mentioned share of results, also impairments.

9 Property and equipment

Property and equipment by type

2019

2018

Property in own use

757

780

Equipment

940

879

Right- of- use assets

1,476

n/a

3,172

1,659

As ING has implemented IFRS 16 Leases without restating comparatives,

no Right-of-use assets

were recognised in 2018. Reference

is made to Note 1 ‘Accounting policies’, 1.4.3. IFRS 16 ’leases’ –

Impact of adoption.

ING considers valuations from third party

experts in determining the fair values of Property, Plant

and Equipment.

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Changes in property in own use

2019

2018

Opening balance

780

774

Additions

5

5

Reclassifications

• Transfers

to and from Other Assets

–1

11

Amounts recognised in the statement of profit or loss for the year

• Depreciation

–11

–14

-

Impairments

–2

–4

-

Reversal of impairments

6

17

–7

–1

Revaluations recognised

in equity during the year

58

23

Disposals

–72

–12

Exchange rate differences

–7

–20

Closing balance

757

780

Gross carrying amount as at 31 December

1,279

1,320

Accumulated depreciation as at 31 December

–385

–387

Accumulated impairments as at 31 December

–137

–153

Net carrying value as at 31 December

757

780

Revaluation surplus

Opening balance

280

279

Revaluation in the year

59

1

Closing balance

339

280

The cost or the purchase price amounted to EUR 940 million (2018: EUR 1,040 million). Cost or the

purchase price less accumulated depreciation and impairments would have been EUR 417 million

(2018: EUR 500 million) had property in own use been valued at cost instead of at fair value.

Changes in equipment

Data processing

Fixtures and fittings

equipment

and other equipment

Total

2019

2018

2019

2018

2019

2018

Opening balance

290

291

589

626

879

917

Additions

149

148

200

136

349

284

Disposals

–1

–1

–8

–4

–9

–5

Depreciation

–136

–133

–142

–164

–278

–298

Impairments

–0

–4

–1

–1

–1

–5

Exchange rate differences

1

–8

1

–5

2

–13

Changes in the composition of the group

and other changes

3

–4

–5

1

–3

–2

Closing balance

307

290

633

589

940

879

Gross carrying amount as at 31 December

1,479

1,346

2,408

2,305

3,886

3,651

Accumulated depreciation as at 31 December

–1,171

–1,055

–1,774

–1,716

–2,946

–2,771

Accumulated impairments as at 31 December

–1

–1

–1

–0

–1

–1

Net carrying value as at 31 December

307

290

633

589

940

879

Right-of-use assets relates to leased land and buildings, cars and other assets.

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Changes in Right-of-use assets

Property

Cars

Other

leases

Total

2019

2019

2019

2019

Opening balance

n/a

n/a

n/a

n/a

Effect of changes in accounting policy due to the implementation of IFRS 16

1,138

70

72

1,280

Additions

381

65

–2

444

Depreciation

–211

–40

–12

–262

Impairments

–0

–0

Remeasurements

29

1

0

30

Disposals

–18

–0

–0

–19

Exchange rate differences

8

–0

–1

7

Changes in the composition of the group and other changes

–4

0

–4

Closing balance

1,323

96

57

1,476

Gross carrying amount as at 31 December

1,503

135

69

1,707

Accumulated depreciation as at 31 December

–213

–40

–12

–265

Accumulated impairments as at 31 December

–0

–0

Accumulated remeasurement

as at 31 December

33

1

0

34

Net carrying value as at 31 December

1,323

96

57

1,476

10 Intangible assets

Changes in intangible assets

Goodwill

Software

Other

Total

2019

2018

2019

2018

2019

2018

2019

2018

Opening balance

918

816

868

648

53

5

1,839

1,469

Additions

17

202

94

95

0

111

297

Capitalised expenses

285

286

285

286

Amortisation

–235

–204

–2

–5

–237

–209

Impairments

–61

–12

–0

–61

–12

Exchange rate differences

–28

–99

0

–5

–

0

–28

–104

Disposals

–1

0

–0

–1

0

Changes in the composition of the group

and other changes

8

59

1

52

9

111

Closing balance

907

918

958

868

52

53

1,916

1,839

Gross carrying amount as at 31 December

907

918

2,608

2,359

61

60

3,575

3,338

Accumulated amortisation as at 31 December

–1,641

–1,487

–7

–5

–1,648

–1,492

Accumulated impairments as at 31 December

–9

–4

–2

–2

–11

–6

Net carrying value as at 31 December

907

918

958

868

52

53

1,916

1,839

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Goodwill

Goodwill is allocated to groups of cash generating

units (CGUs) as follows:

Goodwill allocation to group of CGUs

Method used for

recoverable

amount

Discount

rate

Long term

growth rate

Goodwill

Goodwill

Group of CGU’s

2019

2018

Retail Netherlands

Values in use

6.10%

0.00%

30

14

Retail Belgium

Values in use

6.94%

0.00%

50

50

Retail Germany

Values in use

6.10%

0.00%

349

349

Retail Growth Markets

1

Values in use

10.47%

3.34%

209

231

Wholesale Banking

1

Values in use

7.29%

0.69%

268

274

907

918

1

Goodwill related to Growth Countries is allocated across two groups

of CGUs, EUR 209 million to Retail Growth Markets and

EUR 61 million to Wholesale Banking (2018: EUR 230 million to Retail Growth Markets and EUR 67 million to Wholesale

Banking).

Changes in the goodwill in 2019 mainly relate to the acquisition of 80% of the shares of

Intersoftware Group B.V.

The transaction resulted in recognition of EUR 16 million of goodwill which

is fully allocated to Retail Netherland CGU.

In 2018, changes in the goodwill relate to the acquisition of 75% of the shares of Payvision Holding

B.V.

and 90% of the shares of Makelaarsland B.V.

The acquisition of Payvision and Makelaarsland

resulted in a recognition of goodwill of respectively EUR 188 million, allocated to Wholesale

Banking, and EUR 14 million, allocated to Retail Netherland.

Other changes in goodwill of the CGU’s Wholesale Banking and Retail Growth Markets relate to

changes in currency exchange rates. Reference

is made to Note 47 ‘Consolidated companies and

businesses acquired and divested’ for further information on the acquisitions that took place in

2018, 2019 and the goodwill recognised.

Methodology

Several methodologies are applied to arrive

at the best estimate of the recoverable amount. In line

with IFRS, the recoverable

amount is determined as the higher of the fair value less costs of

disposal and Value in Use (VIU). Fair

value less costs of disposal is based on observable share prices

(Level

1 inputs in the fair value hierarchy), observable Price-to-Book multiples of relevant

peer

banks (Level 2), or based on a discounted free

cash flow model (Level 3). The VIU calculation is

based on a Dividend Discount model using four year management approved plans. When

estimating the VIU of a CGU, local conditions and requirements determine the capital

requirements, discount rates,

and terminal growth rates. These local conditions and requirements

determine the ability to upstream excess capital and profits to ING Group. The discount rate

calculation includes other inputs such as equity market premium, country risk premium, and long

term inflation which are based on market sources and management’s judgement. The long term

growth rate for

EU-countries is based on long-term risk-free rate by reference

to the yield of a

composite index consisting of Euro generic government bonds, with a maturity of 30 years. For

other countries, the growth rate includes long term inflation rate obtained from market sources.

The recoverable

amount exceeds the carrying value of the CGUs for 2019 and 2018 and therefore

no impairment is required.

Sensitivity of key assumptions

Key assumptions in the goodwill impairment test model are the Price-to-Book ratios, level 1 inputs

(e.g. share price

of a listed subsidiary), and the local parameters for CET1, discount rate, and long

term growth rates. The model was tested for

sensitivity by changing the key parameters in the

model to more conservative values. The sensitivity analysis did not trigger additional impairment

considerations.

Software and Other intangible assets

Software, includes internally developed software amounting to EUR 741 million (2018: EUR 624

million).

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In 2018, Changes in the composition of the group and other changes mainly relates to the

recognition of intangible assets following the acquisition of Payvision.

Reference is made to Note

47 ‘Consolidated companies and businesses acquired and divested’ for further information on the

acquisitions that took place in 2018 and the assets and liabilities recognised.

The carrying value of CGU Wholesale Banking includes EUR 20 million of intangibles with indefinite

life which relates to acquired trade

names in the payments and cash management business. The

asset is deemed to have indefinite life because there is no foreseeable limit to the cash flows

generated by those intangible assets.

No impairment of indefinite

useful life asset was recognised

in 2019 (2018: nil).

11 Other assets

Other assets by type

2019

2018

Net defined benefit

assets

709

527

Investment properties

46

54

Property development and obtained from

foreclosures

98

124

Accrued assets

783

783

Amounts to be settled

2,835

4,248

Other

2,546

2,696

7,018

8,433

Disclosures in respect of Net defined benefit

assets are provided in Note 36 ‘Pension and other post-

employment benefits’.

Accrued assets

Accrued assets relate to income to be received attributable to 2019 and amounts paid in advance

in respect of costs chargeable to subsequent periods.

Amounts to be settled

Amounts to be settled include primarily transactions not settled at the balance sheet date. The

nature of these transaction is short term and are expected to settle shortly after the closing date of

the balance sheet.

Other

Other relates to various receivables

in the normal course of business, amongst others, short term

receivables relating to mortgage issuance and other amounts receivable from

customers.

12 Assets

and liabilities

held for

sale

Assets and liabilities held for sale includes disposal groups whose carrying amount will be recovered

principally through a sale transaction rather than through continuing operations.

In December 2018, ING reached an agreement to sell part of the ING Lease Italy business and

classified the this Italian

lease business as Assets held for Sale (EUR 1.261 million). In the first

6

months of 2019 customers repaid EUR 100 million on outstanding. The sale of this Italian lease

business was completed per 1 July 2019. The settlement price amounted to EUR 1.162 million,

consisted of a EUR 368 million cash settlement, a EUR 20 million Deferred Purchase Price and a EUR

774 million Senior Loan facility for the portfolio of lease receivables. The deferred

purchase price is

linked to the performance of the sold portfolio and is reported under the financial

assets

mandatorily measured at fair value through profit and loss. The additional loss in 2019 amounted

to EUR -2 million (2018: EUR -123 million).

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Reference is made to Note 25 ‘Result

on disposal of group companies’ and to Note 47 ‘Consolidated

companies and businesses acquired and divested’.

13 Deposits

from

banks

Deposits from banks include non-subordinated debt from banks, except for amounts in the form of

debt securities.

Deposits from banks by type

Netherlands

International

Total

2019

2018

2019

2018

2019

2018

Non-interest bearing

107

22

73

412

180

434

Interest bearing

17,544

17,211

17,101

19,686

34,646

36,896

17,651

17,233

17,175

20,097

34,826

37,330

Deposits from banks includes ING’s participation in the targeted longer-term refinancing operations

(TLTRO)

of EUR 17.7 billion (2018: EUR 17.7 billion). The TLTRO aims to stimulate lending to the real

economy in the Eurozone.

The interest rate

on the TLTRO’s is fixed over the life of each operation at

the benchmark rate of the European Central

Bank.

14 Customer deposits

Customer deposits

2019

2018

1

Savings accounts

326,864

322,711

Credit balances on customer accounts

224,022

205,053

Corporate deposits

22,329

26,920

Other

1,140

1,044

574,355

555,729

1

The prior periods have been updated to improve

consistency and comparability.

Customer deposits by type

Netherlands

International

Total

2019

2018

2019

2018

2019

2018

Non-interest bearing

19,030

16,841

24,782

25,342

43,812

42,182

Interest bearing

159,546

155,910

370,997

357,635

530,543

513,546

178,576

172,751

395,779

382,977

574,355

555,729

Savings accounts relate to the balances on savings accounts, savings books, savings deposits, and

time deposits of private individuals.

15 Financial liabilities at fair

value through profit

or loss

Financial liabilities at fair value through profit or loss

2019

2018

Trading

liabilities

28,042

31,215

Non-trading derivatives

2,215

2,299

Designated at fair value through profit or loss

47,684

59,179

77,942

92,693

Reference is made to Note 43 ‘Transfer

of financial assets’

for information on securities lending as

well as sale and repurchase transactions included in Trading

liabilities and Financial liabilities

designated at fair value through profit or loss.

Trading

liabilities

Trading liabilities by type

2019

2018

Equity securities

193

355

Debt securities

1,201

5,363

Funds on deposit

5,322

3,968

Derivatives

21,325

21,528

28,042

31,215

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As at 31 December 2019, Trading

liabilities include funds on deposit of EUR 4,556 million (2018: EUR

3,227 million) with regard to repurchase

transactions.

Non-trading derivatives

Non-trading derivatives by type

2019

2018

Derivatives used in:

-

fair value hedges

873

1,035

-

cash flow hedges

339

458

-

hedges of net investments in foreign operations

51

17

Other non-trading derivatives

953

791

2,215

2,299

Reference is made to Note 39 ‘Derivatives

and hedge accounting’ for information on derivatives

used for hedge accounting.

Other non-trading derivatives mainly includes interest rate

swaps and foreign currency swaps for

hedging purposes, but for which no hedge accounting is applied.

Designated at fair value

through profit or loss

Designated at fair value through profit or loss by type

2019

2018

Debt securities

8,053

8,216

Funds entrusted

39,386

50,650

Subordinated liabilities

246

313

47,684

59,179

As at 31 December 2019, financial

liabilities designated at fair value through profit or loss include

funds entrusted of EUR 38,492 million (2018: EUR 49,010 million) with regard to repurchase

transactions.

As at 31 December 2019, the change in the fair value of financial

liabilities designated at fair value

through profit or loss attributable to changes in credit risk is EUR 139 million (2018: EUR 18 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 at fair value through profit or loss excluding repurchase agreements is EUR

8,634 million (2018: EUR

9,934 million).

16 Provisions

Provisions by type

2019

2018

Reorganisation provisions

385

613

Other provisions

303

399

688

1,011

Reorganisation provisions

Changes in reorganisation provisions

2019

2018

Opening balance

613

1,097

Additions

56

53

Unused amounts reversed

–49

–49

Utilised

–234

–487

Other changes

–0

–2

Closing balance

385

613

In 2019 the addition to the reorganisation provision is mainly related

to ING’s Agile transformation

in Germany and updates in existing reorganization provisions.

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In 2018, changes in the reorganisation provisions were

mainly attributable to existing initiatives

following the digital transformation programmes

of ING Bank. These initiatives are implemented

over a period of several

years and the estimate of the reorganisation provisions is inherently

uncertain. The provision at the balance sheet date represents the best estimate of the expected

redundancy costs and are expected to be sufficient

to cover these costs.

Other provisions

Changes in other provisions

Litigation

Other

Total

2019

2018

2019

2018

2019

2018

Opening balance

165

365

234

251

399

616

Effect of change in accounting policies

7

11

7

11

Additions

74

59

46

35

120

95

Interest

–5

1

–5

1

Unused amounts reversed

–31

–76

–38

–37

–68

–113

Utilised

–104

–186

–12

–28

–116

–214

Exchange rate differences

–1

–4

–0

1

–1

–3

Other changes

–0

6

–31

–0

–31

6

Closing balance

102

165

201

234

303

399

Reference is made to Note 46 ‘Legal

proceedings’ for developments in litigation provisions.

In 2019, Other provisions – other includes provisions of EUR 25 million (2018: EUR 42 million) that

relate to credit replacement

facilities and EUR 93 million (2018: EUR 80 million)

that relate to non-

credit replacement, off balance facilities.

As at 31 December 2019 amounts expected to be settled within twelve months, amount to EUR

146 million. 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.

Further reference

is made to Note 28 ‘Other operating expenses’.

17 Other liabilities

Other liabilities by type

2019

2018

Net defined benefit

liability

483

421

Other post-employment benefits

84

76

Other staff-related liabilities

526

473

Share-based payment plan liabilities

6

9

Other taxation and social security contributions

442

403

Rents received in advance

9

61

Costs payable

2,111

2,272

Amounts to be settled

4,741

6,098

Lease liabilities

1,507

n/a

Other

2,921

3,697

12,829

13,510

Disclosures in respect of Net defined benefit

liabilities are provided in Note 36 ‘Pension and other

post-employment benefits’.

Other staff-related liabilities

Other staff-related liabilities includes vacation leave provisions, variable compensation provisions,

jubilee provisions, and disability/illness provisions.

Costs payable

Costs payable relate to costs attributable to 2019, which will be paid in subsequent periods.

Amounts to be settled

Amounts to be settled include primarily transactions not settled at the balance sheet date. The

nature of these transaction is short term and are expected to settle shortly after the closing date of

the balance sheet.

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Lease liabilities

As ING has implemented IFRS 16 Leases without restating comparatives,

no Lease Liabilities were

recognised in 2018. Reference

is made to Note 1 ‘Accounting policies’, 1.4.3. IFRS 16 ’leases’ –

Impact of adoption.

The total cash outflow for leases in 2019 was EUR 271 million.

Other

Other relates mainly to balances on margin accounts or amounts payable to customers.

18 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 or 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

2019

2018

Fixed rate debt securities

Within 1 year

26,871

32,626

More than 1 year but less than 2 years

10,358

7,766

More than 2 years but less than 3 years

9,527

10,267

More than 3 years but less than 4 years

6,321

8,228

More than 4 years but less than 5 years

2,836

6,288

More than 5 years

29,007

20,321

Total

fixed rate debt securities

84,920

85,496

Floating rate debt securities

Within 1 year

24,938

22,684

More than 1 year but less than 2 years

3,126

4,134

More than 2 years but less than 3 years

3,041

1,587

More than 3 years but less than 4 years

1,541

1,234

More than 4 years but less than 5 years

144

1,563

More than 5 years

816

3,053

Total

floating rate debt securities

33,608

34,255

Total

debt securities

118,528

119,751

In 2019 Debt securities in issue decreased by EUR 1.2 billion. This decrease is mainly attributable to

a decrease in commercial paper of EUR 6.1 billion, matured savings certificates of EUR 1.2 billion,

the redemption of RMBS (residential mortgage backed securities) of EUR 2.3 billion, partly

offset by

the issuance of long term maturity bonds of EUR 2.8 billion, covered bonds of EUR 2.9 billion and

certificates of deposits

of EUR 1.9 billion,

and an increase in other Debt securities in issue of EUR 0.8

billion.

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19 Subordinated

loans

Subordinated loans by group companies

2019

2018

ING Groep N.V.

13,069

10,355

ING Group companies

3,519

3,370

16,588

13,724

Subordinated loans issued by ING Groep N.V.

include bonds issued to raise Tier 1 and lower Tier 2 (CRD IV eligible)

capital for ING Bank N.V.

Under IFRS these bonds are classified as liabilities and for regulatory purposes, they are

considered capital. Subordinated

loans issued by ING Group companies comprise, for the most part, subordinated

loans which are subordinated to all current

and future liabilities of ING Bank N.V.

Changes in subordinated loans

2019

2018

Opening balance

13,724

15,968

Effect of change in accounting policy due to the implementation of IFRS 9

241

New issuances

3,429

1,859

Repayments

–933

–4,646

Exchange rate differences and

other

367

302

Closing balance

16,588

13,724

In 2019 ING Groep N.V.

issued two Perpetual additional Tier 1 Contingent Convertible Capital

Securities of USD 1.25 billion with first

call date on 16 April 2024 and USD 1.5 billion with first

call

date on 16 November 2026. In addition, subordinated Tier 2 notes of EUR 1 billion have been issued

on 13 November 2019.

In June 2019 ING redeemed USD 1 billion Tier 1 ING Perpetual Hybrid Capital Securities.

The average interest rate

on subordinated loans is

4.38% (2018: 4.44%). The interest expense

during the year 2019 was EUR 660 million (2018: EUR 711 million).

Equity

20 Equity

Total

equity

2019

2018

2017

Share capital and share premium

-

Share capital

39

39

39

-

Share premium

17,078

17,050

17,006

17,117

17,088

17,045

Other reserves

-

Revaluation reserve:

Available-for

-sale and other

n/a

n/a

3,447

-

Revaluation reserve:

Equity securities at FVOCI

1,580

1,914

n/a

-

Revaluation reserve:

Debt instruments at FVOCI

322

398

n/a

-

Revaluation reserve:

Cash flow hedge

1,208

604

263

-

Revaluation reserve:

Credit liability

–114

8

n/a

-

Revaluation reserve:

Property in own use

253

204

203

-

Net defined benefit

asset/liability remeasurement reserve

–336

–394

–400

-

Currency translation reserve

–2,079

–2,043

–1,663

-

Share of associates and joint ventures

and other reserves

3,189

2,940

2,527

-

Treasury

shares

–10

–11

–15

4,013

3,621

4,362

Retained earnings

29,866

28,339

27,022

Shareholders’ equity (parent)

50,996

49,049

48,429

Non-controlling interests

893

803

715

Total

equity

51,889

49,851

49,144

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2019 ING Group Annual Report on Form 20-F

F - 58

Share capital and share

premium

Share capital

Share capital

Ordinary shares (par value EUR 0.01)

Number x 1,000

Amount

2019

2018

2017

2019

2018

2017

Authorised share capital

14,729,000

14,729,000

14,729,000

147

147

147

Unissued share capital

10,832,266

10,837,272

10,843,210

108

108

108

Issued share capital

3,896,734

3,891,728

3,885,790

39

39

39

Changes in issued share capital

Ordinary shares

(par value EUR 0.01)

Number x

1,000

Amount

Issued share capital as at 1 January 2017

3,878,484

39

Issue of shares

7,306

Issued share capital as at 31 December 2017

3,885,790

39

Issue of shares

5,938

Issued share capital as at 31 December 2018

3,891,728

39

Issue of shares

5,006

Issued share capital as at 31 December 2019

3,896,734

39

In 2019, ING Groep N.V.

issued 5.0 million ordinary shares (2018: 5.9 million ordinary shares, 2017:

7.3 million). These issues were made in order to fund obligations arising from share-based

employee incentive programmes.

In 2019, 2018 and 2017 respectively, ING Groep N.V.

issued USD 2,750 million, nil and nil Perpetual

Additional Tier 1 Contingent Convertible Capital Securities which can, in accordance

with their terms

and conditions, convert by operation of law into ordinary shares if the conditions to such

conversion are fulfilled. As a result of this conversion, the issued share capital can increase

by no

more than 306 million ordinary shares. Reference

is made to Note 19 ‘Subordinated loans’.

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.

Ordinary shares are

listed on various stock exchanges. The

par value of ordinary shares is EUR 0.01 . The authorised ordinary share

capital of ING Groep N.V.

currently consists of 14,729 million ordinary shares. As at 31 December 2019, 3,897 million

ordinary shares were

issued and fully paid.

Ordinary shares held by ING Group (Treasury

shares)

As at 31 December 2019, 0.9 million ordinary shares (2018: 1.1 million and 2017: 0.9 million) of ING

Groep N.V.

with a par value of EUR 0.01 are held by ING Groep N.V.

or its subsidiaries. The

obligations with regard to the existing stock option plan and the share plans will be funded either

by cash or by newly issued shares at the discretion of ING Group.

Share premium

Share premium

2019

2018

2017

Opening balance

17,050

17,006

16,950

Issue of shares

28

44

56

Closing balance

17,078

17,050

17,006

The increase in share premium, is a result

of the issuance of ordinary shares related

to share-based

employee incentive programmes.

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2019 ING Group Annual Report on Form 20-F

F - 59

Other reserves

Revaluation reserves

Changes in revaluation reserve

Equity securities at FVOCI

Debt instruments at FVOCI

AFS and other

Cash flow hedge

Credit liability

Property in own use

2019

2018

2017

2019

2018

2017

2019

2018

2017

2019

2018

2017

2019

2018

2017

2019

2018

2017

Opening balance

1,914

n/a

n/a

398

n/a

n/a

n/a

3,447

3,830

604

263

777

8

n/a

n/a

204

203

204

Effect of change in accounting policy due to the implementation of

IFRS 9

2,432

629

-3,447

-190

Changes in credit liability reserve

-116

199

Unrealised revaluations

137

-461

-43

-177

-293

604

342

-514

58

3

25

Realised gains/losses transferred

to the statement of profit or loss

-33

-54

-90

Realised revaluations transferred

to retained earnings

-472

-56

-6

-9

-2

-26

Closing balance

1,580

1,914

n/a

322

398

n/a

n/a

n/a

3,447

1,208

604

263

(114)

8

n/a

253

204

203

Equity securities at FVOCI

In 2019, the unrealised revaluations of EUR 137 million are

due to the revaluation of shares

in Bank

of Beijing EUR 35 million and shares in EquensWorldLine EUR 101 million. The EUR -472 million

transfer of revaluation

reserve to retained earnings is mainly related

to the sale of shares in Kotak

Mahindra Bank EUR -320 million and EquensWorldLine EUR -149 million.

In 2018, the Equity securities at FVOCI revaluation reserve

decreased by EUR 517 million, mainly

due to the revaluation of shares

in Bank of Beijing EUR -549 million, partly offset

by revaluation of

shares in Kotak Mahindra

Bank EUR 71 million.

Available-for-sale and other

As from 2018, due to implementation of IFRS 9, the revaluation results

of Available-for-sale and

other are reported in the FVOCI reserve.

In 2017, the Available-for-sale revaluation

reserve decreased by EUR 383 million mainly due to the

revaluation of shares

in Bank of Beijing EUR -479 million, partly offset

by revaluation of shares in

Kotak Mahindra Bank EUR 302 million.

Cash flow hedge

ING mainly hedges floating

rate lending with interest rate

swaps. Due to decrease in interest rate

yield curve in 2019 the interest rate swaps had a positive revaluation

of EUR 604 million which is

recognised in cah flow hedge reserve.

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2019 ING Group Annual Report on Form 20-F

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Net defined benefit asset/liability

remeasurement reserve

Reference is made to Note 36 ‘Pension and other post-employment

benefits’.

Currency translation

reserve

Changes in currency translation reserve

2019

2018

2017

Opening balance

–2,043

–1,663

–770

Unrealised revaluations

–134

71

192

Realised gains/losses transferred

to the statement of profit or loss

–138

Exchange rate differences

236

–451

–1,085

Closing balance

–2,079

–2,043

–1,663

Realised gains/losses transferred to the statement of profit or loss is related to the sale of shares in

Kotak Mahindra Bank (EUR -119 million) and the effect of the merger transaction of TMB (EUR -18

million).

Unrealised revaluations relates

to changes in the value of hedging instruments that are designated

as net investment hedges. The hedging strategy is to hedge the CET1 ratio. The net increase of

unrealized revaluations

and Exchange rate differences of EUR 102 million is related to several

currencies.

Share of associates, joint ventures

and other reserves

Changes in share of associates, joint ventures and other

reserves

2019

2018

2017

Opening balance

2,940

2,527

2,235

Effect of change in accounting policy due to the implementation of IFRS 9

–28

Result for the year

180

160

153

Transfer

to/from retained earnings

69

280

139

Closing balance

3,189

2,940

2,527

Treasury

shares

Changes in treasury shares

Amount

Number

2019

2018

2017

2019

2018

2017

Opening balance

–11

–15

–8

1,137,701

944,257

600,634

Purchased/sold

1

4

–7

–218,314

193,444

343,623

Closing balance

–10

–11

–15

919,387

1,137,701

944,257

Retained earnings

Changes in retained earnings

2019

2018

2017

Opening balance

28,339

27,022

24,371

Effect of change in accounting policy due to the implementation of IFRS 9

–390

Transfer

to/from other reserves

418

–211

–139

Result for the year

3,723

4,601

5,311

Dividend

–2,650

–2,607

–2,564

Employee stock options and share plans

13

19

21

Changes in composition of the group and other changes

23

–96

22

Closing balance

29,866

28,339

27,022

Changes in the composition of the group

In 2019 ING acquired the additional 23% of shares in Payvsion. Given that ING already had control

over Payvision, the acquisition of the shares in 2019 represents

a shareholder transaction and

resulted in a transfer

between Non-controlling interest

and Retained earnings within Shareholders

equity of EUR 24 million. Reference is made to Note 47, 'Consolidated companies and businesses

acquired and divested', 'Acquisitions'.

Dividend

In 2019, a cash dividend of EUR 2,650 million (2018: EUR 2,607 million and 2017: EUR 2,564 million)

was paid to the shareholders of ING Group.

For further information, reference

is made to Note 30 ‘Dividend per ordinary share’.

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2019 ING Group Annual Report on Form 20-F

F - 61

Ordinary shares

• Restrictions with respect to dividend and repayment

of capital

The following equity components cannot be freely distributed: Revaluation reserves,

Net defined

benefit asset/liability

remeasurement reserve,

Currency translation reserve,

Share of associates

and joint ventures reserve

and Other reserves including the part related to the former Stichting

Regio Bank and the former Stichting Vakbondsspaarbank SPN.

As at 31 December 2019, an amount of EUR 1,818 million (2018: EUR 1,638 million; 2017: EUR 1,478

million) related to the former Stichting Regio Bank and the former Stichting Vakbondsspaarbank

SPN is included.

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, associates and joint ventures. ING Groep N.V.

is legally required to create

a non-

distributable reserve insofar as profits of its subsidiaries, associates and joint ventures are subject

to dividend payment restrictions which apply to those subsidiaries, associates and joint ventures

themselves. Such restrictions may among others be of a similar nature as the restrictions which

apply to ING Groep N.V.,

including minimum capital requirements that are imposed by industry

regulators in the countries in which the subsidiaries, associates and joint ventures operate, or other

limitations which may exist in certain countries.

Non distributable reserves, determined in accordance with the financial reporting requirements

included in Part 9 of Book 2 of the Dutch Civil Code, from ING Group’s subsidiaries, associates and

joint ventures are as follows:

Non-distributable reserves

2019

2018

2017

ING Bank

8,397

7,603

7,603

Other

0

97

75

Non-distributable reserves

8,398

7,700

7,678

Furthermore there

are restrictions to the ability of subsidiaries, associates and joint ventures to

distribute reserves to ING Groep N.V.

as a result of minimum capital requirements

that are imposed

by industry regulators in the countries in which the subsidiaries operate.

In addition to the legal and regulatory restrictions on distributing dividends from subsidiaries,

associates and joint ventures to ING Groep N.V.

there are various other considerations

and

limitations that are taken into account in determining the appropriate levels of equity in the

Group’s subsidiaries, associates and joint ventures. These considerations and limitations include,

but are not restricted to, rating agency and regulatory

views, which can change over time; it is not

possible to disclose a reliable quantification of these limitations.

For an overview

of the minimal

capital requirements of ING Group

refer to the ‘Capital Management’ section.

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.

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.

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2019 ING Group Annual Report on Form 20-F

F - 62

Cumulative preference

shares (not issued)

Pursuant to the Articles of Association of ING Groep N.V.

the authorised cumulative preference

share capital consists of 4.6 billion cumulative preference

shares, of which none have been issued.

The par value of these cumulative preference

shares is EUR 0.01.

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 being weighted on the basis of the

number of days for which it applies, and 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 accrued dividend as well as any dividend shortfall in preceding years, insofar as this shortfall

has not yet been made up.

No specific dividend

payment restrictions with respect to the cumulative preference

shares exist.

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2019 ING Group Annual Report on Form 20-F

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Notes to the Consolidated

statement of pro

fit or loss

21 Net interest income

Net interest income

2019

2018

2017

2019

2018

2017

Interest income on loans

19,028

18,966

1

18,338

Interest expense on deposits from banks

361

362

301

Interest income on financial assets at fair value through OCI

615

554

n/a

Interest expense on customer deposits

2,934

2,607

2,664

Interest income on financial assets at amortised cost

673

780

1

n/a

Interest expense on debt securities in issue

2,350

2,254

2,054

Interest income on non-trading

derivatives (hedge accounting)

4,319

4,497

n/a

Interest expense on subordinated loans

660

711

784

Negative interest on liabilities

422

453

500

Negative interest on assets

349

412

407

Total

interest income using effective interest rate

method

25,056

25,249

n/a

Interest expense on non-trading derivatives

(hedge accounting)

4,615

4,826

5,946

Total

interest expense using effective interest rate

method

11,268

11,171

n/a

Interest income on financial assets at fair value through profit or loss

1,897

1,795

n/a

Interest income on investments

n/a

n/a

1,494

Interest expense on financial liabilities at fair value through profit or loss

1,695

1,578

n/a

Interest income on trading derivatives

n/a

n/a

16,108

Interest expense on trading derivatives

n/a

n/a

16,117

Interest income on other trading

portfolio

n/a

n/a

1,028

Interest expense on other trading liabilities

n/a

n/a

744

Interest income on non-trading

derivatives (no hedge accounting)

1,181

1,059

1

700

1

Interest expense on non-trading derivatives

(no hedge accounting)

1,311

1,387

1

1,001

1

Interest income on non-trading

derivatives (hedge accounting)

n/a

n/a

5,690

Interest expense on lease liabilities

25

n/a

n/a

Interest income other

30

25

138

Interest expense other

54

33

331

Total

other interest income

3,107

2,880

n/a

Total

other interest expense

3,084

2,997

n/a

Total

interest income

28,163

28,129

43,996

Total

interest expense

14,353

14,169

30,349

Net interest income

13,811

13,960

13,647

1 The prior periods have been updated to improve consistency and comparability.

Total

Net interest income of EUR 13,811 million (2018: EUR 13,960 million) includes interest income

and expense for instruments calculated using the effective interest rate method and other interest

income and interest expense. IFRS 9 resulted

in changes to IAS 1 for the presentation of Interest

income for instruments calculated using the effective interest rate method, which ING reports as a

separate line item in the consolidated statement of profit or loss as from 2018.

To

further enhance the relevance of the interest disclosures, ING

Group changed its separate

presentation since 2018 of interest (income and expenses) for trading derivatives,

trading securities

and trading loans / deposits (mainly repo’s) to presenting the full fair value movements in

‘Valuation results

and net trading income’. The change in presentation is in line with the changed

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presentation of accrued interest in the balance sheet that is no longer separately presented,

but

included in the corresponding balance sheet item of the host contract.

The new interest presentation was applied prospectively

together with the other presentation

requirements of IFRS 9 as from

2018.

22 Net fee and commission income

Fee and commission income

2019

2018

2017

Funds transfer

1,513

1,394

1,172

Securities business

603

618

532

Insurance broking

191

173

176

Asset management fees

205

170

116

Brokerage and advisory fees

611

584

548

Other

1,317

1,302

1,321

4,439

4,240

3,865

Other, mainly consists of commission fees in respect of bank guarantees of EUR 202 million (2018:

EUR 207 million; 2017: EUR 209 million), in respect of underwriting syndication loans

of EUR 10

million (2018: EUR 4 million; 2017: EUR 52 million), in respect of structured finance

fees of EUR 141

million (2018: EUR 129 million; 2017: EUR 136 million), and in respect of collective instruments

distributed but not managed by ING of EUR 167 million (2018: EUR 165 million; 2017: EUR 165

million).

Fee and commission

expenses

2019

2018

2017

Funds transfer

659

597

437

Securities business

140

170

150

Insurance broking

2

2

4

Asset management fees

8

4

5

Brokerage and advisory fees

282

220

192

Other

481

448

367

1,571

1,442

1,155

All of ING’s net fee and commission income are in scope of IFRS 15 ‘Revenue from

Contracts with

Customers’. Reference is made to Note 34 ‘Segments’ which includes net fee and commission

income, as reported to the Executive Board and the Management Board

Banking, disaggregated by

line of business and by geographical segment.

23 Valuation

results and net trading

income

Valuation results and net trading

income

2019

2018

2017

Securities trading results

974

–722

656

Derivatives trading results

–998

540

59

Other trading results

117

116

62

Change in fair value of derivatives relating

to

–

fair value hedges

–318

185

–184

–

cash flow hedges (ineffective portion)

47

–19

44

–

other non-trading derivatives

93

868

–301

Change in fair value of assets and liabilities (hedged items)

–518

–176

91

Valuation results

on assets and liabilities designated at FVPL

(excluding trading)

–358

366

–109

Foreign exchange

transactions results

801

69

1,194

–159

1,227

1,512

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2019 ING Group Annual Report on Form 20-F

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Securities trading results includes the results

of market making 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. As from current year the other trading results are

presented separately in this disclosure.

Prior year figures are updated accordingly. Other trading

results include the results of trading

loans and funds entrusted.

The portion of trading gains and losses relating to trading securities still held as at 31 December

2019 amounts to EUR -82 million (2018: EUR 396 million; 2017: EUR -68 million).

Net trading income relates to trading

assets and trading liabilities which include assets and

liabilities that are classified under IFRS as

Trading

but are closely related to servicing the needs of

the clients of ING. ING offers products that are traded on the financial markets

to institutional

clients, corporate clients, and governments. ING Group’s trading

books are managed based on

internal limits and comprise a mix of products with results which could be offset. A significant

part

of the derivatives in the trading portfolio are related

to servicing corporate clients in their risk

management to hedge for example currency or interest rate

exposures. From

a risk perspective,

the gross amount of trading assets must be considered together with the gross amount of trading

liabilities, which are presented separately on the statement of financial position. However, IFRS

does not always allow netting of these positions in the statement of financial

position. Reference is

made to Note 4 ‘Financial assets at fair value through profit or loss’ and Note 15 ‘Financial liabilities

at fair value through profit or loss’ for information on trading liabilities.

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. The

result on currency trading

is

included in foreign exchange transactions results.

In 2019, Derivatives trading results

include EUR 39 million CVA/DVA

adjustments on trading

derivatives (2018: EUR -20 million; 2017: EUR 47 million).

‘Valuation results

and net trading income’ include the fair value movements on derivatives (used

for both hedge accounting and economically hedging exposures) as well as the changes in the fair

value of assets and liabilities included in hedging relationships as hedged items. Reference is made

to Note 39 ‘Derivatives and hedge accounting’ for information on derivatives used for hedge

accounting.

The fair value movements on the derivatives are

influenced by changes in the

market conditions,

such as stock prices, interest rates and currency exchange

rates. In addition, ‘Valuation

results and

net trading income’ include the results on assets and liabilities designated at fair value through

profit or loss.

The Valuation results

on assets and liabilities designated at fair value through profit or loss include

fair value changes on certain issued debt securities. Valuation results

on assets and liabilities

designated at fair value through profit or loss were mainly due to changes in the fair value of

financial liabilities

driven by changes in market conditions as disclosed in Note 15 ‘Financial

liabilities at fair value through profit or loss’.

In 2019, Valuation results

on assets and liabilities designated at fair value through profit or loss

(excluding trading) include fair value adjustments on own issued notes amounting to EUR -424

million (2018: EUR 302 million; 2017: EUR -107 million). In 2017, DVA adjustment on own issued

notes amounting to EUR -79 million was included in Valuation results. Starting 2018, in accordance

with IFRS 9, the DVA

adjustment on own issued notes is recognised in Other Comprehensive

Income

‘Credit

liability reserve’.

Compared to previous

years, in 2019 Valuation results

and net trading income do not include

results on non-trading derivatives

related to warrants on the shares

of Voya and NN Group

(2018:

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2019 ING Group Annual Report on Form 20-F

F - 66

EUR 90 million; 2017: EUR -52 million). As at 31 December 2018 ING no longer holds any

warrants

on the shares of Voya

and NN Group.

Interest income from trading

assets in 2019 amounted to EUR 15,187 million (2018: EUR 13,924

million). Interest expense from trading liabilities in 2019

amounted to EUR 14,922 million (2018:

EUR 13,976 million).

‘Valuation results

and net trading income’ are reflected in the Consolidated statement of cash flows

in the line Result before tax - Adjusted for: other.

24 Investment income

Investment income

2019

1

2018

1

2017

1

Dividend income

115

102

80

Realised gains/losses on disposal of debt instruments measured at FVOCI

46

77

n/a

Realised gains/losses on disposal of Available-for

-sale debt securities

n/a

n/a

64

Impairments of Available-for-sale debt securities

n/a

n/a

Reversal of impairments of Available

-for-sale debt securities

n/a

n/a

3

Realised gains/losses and impairments of debt instruments measured at

FVOCI

46

77

67

Realised gains/losses on disposal of Available-for

-sale equity securities

n/a

n/a

48

Impairments of Available-for-sale equity securities

n/a

n/a

–6

Realised gains/losses and impairments of Available-for

-sale equity

securities

n/a

n/a

42

Income from and fair value gains/losses on investment

properties

27

4

3

Investment income

188

183

192

1 The adoption of IFRS 9 led to new presentation requirements for 2019 and 2018; 2017 period amounts have not been

restated.’.

In 2019, 2018 and 2017, Dividend income mainly consists of dividend received from ING’s equity

stake in Bank of Beijing.

Impairments and reversals of impairments on investments are presented

within Investment

income, which is part of Total income.

25 Result on disposal of group

companies

Result on disposal of group companies

2019

2018

2017

Baring Private Equity Partners

1

ING Lease Italy

–2

–123

ING Mauritius

119

117

–123

1

In 2019 the Result on disposal of group companies is mainly impacted by the sale of ING’s stake in

Kotak Mahindra Bank by ING Mauritius during 1Q 2019. ING Mauritius is in the process of being

liquidated and consequently, the release of the currency translation reserve

(CTA) and the release

of the Net Investment Foreign Entities reserve

resulted in a one-off gain of EUR 119 million.

The Result on disposal of group companies includes the result (fair value

less cost to sell) on the

sale of part of the ING Lease Italy business amounting to EUR -123 million, which was recognized in

2018 and a final result of EUR -2 million recognized in 2019.

In 2017 the Result on disposal of group companies included realised deferred

profits on

divestments in prior periods related to Baring Private Equity Partners

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26 Other

income

In 2019, Other income of EUR 252 million (2018: EUR 136 million; 2017: EUR 350 million) includes

the recognition of EUR 79 million receivable related

to the insolvency of a financial institution.

Furthermore, Other income includes income from subleasing right of use assets and gains or losses

from sale and lease back transactions amounting to EUR 5 million as well as income from positive

recovery of defaulted

receivables of EUR 32 million. The remainder of the Other income is mainly

impacted by positive results on the sale of loans and property and various other non-recurring

results.

In 2017 an amount of EUR 121 million is included related to a tax charge at ING Australia Holdings

Ltd., for which a full reimbursement is expected to be received

from NN Group.

27 Staff expenses

Staff expenses

2019

2018

2017

Salaries

3,572

3,287

3,273

Pension costs and other staff-related benefit costs

366

385

381

Social security costs

530

509

499

Share-based compensation arrangements

41

49

74

External employees

974

901

716

Education

64

87

76

Other staff costs

208

202

183

5,755

5,420

5,202

Number of employees

Netherlands

International

Total

2019

2018

2017

2019

2018

2017

2019

2018

2017

Total

average number

of internal employees at

full time equivalent basis

14,415

13,600

13,141

39,016

38,633

38,363

53,431

52,233

51,504

Share-based compensation arrangements include EUR 38 million (2018: EUR 46 million; 2017: EUR

69 million) relating to equity-settled share-based payment arrangements and EUR 3 million (2018:

EUR 3 million; 2017: EUR 5 million) relating to cash-settled share-based payment arrangements.

Remuneration of

senior management, Executive

Board and Supervisory Board

Reference is made to Note 50 ‘Related parties’.

Stock option and share

plans

ING Groep N.V.

has granted option rights on ING Groep N.V.

shares and conditional rights on 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.

ING grants four types of share awards,

deferred shares, performance shares

and upfront shares,

which form part of the variable remuneration offering via the Long term Sustainable Performance

Plan (LSPP), as well as fixed shares. The entitlement to the LSPP share awards is granted

conditionally. If the participant remains in employment for an uninterrupted period between the

grant date and the vesting date, the entitlement becomes unconditional, with the exception of the

upfront shares which are

immediately vested upon grant. Additionally, a condition before vesting

was applied to performance shares until 2018. As of 2019, this performance condition is no longer

applicable. Upfront and deferred

shares awarded to the Management Board members of ING Group

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F - 68

as well as identified staff,

have a retention obligation that must be adhered to upon vesting, a

minimum retention of 12 months applies. ING has the authority to apply a hold back to awarded

but unvested shares and a claw-back to vested shares.

In addition to the LSPP share awards, ING also pays a number of senior employees fixed shares. The

number of shares are determined each month from a cash value that forms part of the employee

fixed remuneration. The shares are immediately vested to the employee, but have a minimum

holding requirement of two

years before the employee can dispose of the shares. The fixed shares

are not subject to holdback or clawback.

The share awards granted

in 2019 relate to the performance year 2018. In 2019, no

share awards

(2018: 31,743; 2017: 54,768) were granted to the members of the Executive Board

of ING Groep

N.V.,

and

2,837 share awards (2018: 80,036; 2017:

104,449) were granted to the Management

Board Banking (related to pre

-board service period). To

senior

management and other employees

2,167,817 share awards (2018:

3,989,214; 2017:

4,846,903) were granted.

Every year, the ING Group Executive

Board decides whether the option and share schemes are to

be continued and, if so, to what extent. In 2010, the Group Executive Board decided not to continue

the option scheme as from 2011. The existing option schemes will run off in the coming year as

the

option rights will expire in 2020.

The option rights are valid for a period of 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 pre-

determined continuous period of service. The exercise prices of the options are the same as the

quoted prices of ING Groep N.V.

shares at the date on which the options are granted.

The obligations with regard to the existing stock option plan and the share plans will be funded

either by cash or by newly issued shares at the discretion of ING Group.

Changes in option rights outstanding

Options outstanding

Weighted average

exercise price

(in numbers)

(in euros)

2019

2018

2017

2019

2018

2017

Opening balance

5,123,853

15,141,980

25,574,912

5.69

12.36

15.53

Exercised

–2,186,316

–827,755

–2,216,764

4.40

5.91

5.89

Forfeited

–45,852

–89,816

–168,007

7.01

8.09

14.26

Expired

–535,342

–9,100,556

–8,048,161

3.51

16.75

24.18

Closing balance

2,356,343

5,123,853

15,141,980

7.35

5.69

12.36

As per 31 December 2019, total options outstanding consists of

1,733,349 options (2018:

3,754,976; 2017: 10,156,219) relating to equity-settled share-based payment arrangements and

622,994 options (2018: 1,368,877; 2017: 4,985,761) relating to cash-settled share-based payment

arrangements.

The weighted average share price

at the date of exercise for options exercised during 2019 is EUR

10.89 (2018: EUR 13.65; 2017: 13.81). All option rights are vested.

Summary of stock options outstanding and exercisable

Options outstanding and exercisable as

at 31 December

Weighted average

remaining contractual life

Weighted average

exercise

price

Range of exercise

price in euros

2019

2018

2017

2019

2018

2017

2019

2018

2017

0.00 –

5.00

1,930,068

2,294,423

0.21

1.21

2.88

2.88

5.00 –

10.00

2,356,343

3,193,785

3,754,542

0.22

1.21

2.21

7.35

7.38

7.38

10.00 –

15.00

110,086

0.71

14.35

15.00 –

20.00

8,982,929

0.21

16.84

2,356,343

5,123,853

15,141,980

All options outstanding are exercisable.

As at 31 December 2019, the aggregate intrinsic value of

options outstanding and exercisable is EUR 8 million (2018: EUR 19 million; 2017: EUR 59 million).

Cash received

from stock option exercises for the year ended 31 December 2019 is EUR 7 million

(2018: EUR 4 million; 2017: EUR 10 million).

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Changes in share awards

Share awards

Weighted average

grant date fair value

(in numbers)

(in euros)

2019

2018

2017

2019

2018

2017

Opening balance

5,854,999

7,222,279

8,382,963

11.62

11.46

10.44

Granted

2,170,654

4,100,993

5,006,120

10.04

12.50

13.20

Performance effect

–

341,623

379,934

11.12

11.65

10.47

Vested

–3,945,020

–5,565,093

–6,328,318

11.23

12.05

11.40

Forfeited

–223,585

–244,803

–218,420

11.39

11.52

10.83

Closing balance

3,857,048

5,854,999

7,222,279

11.14

11.62

11.46

As at 31 December 2019 the share awards consists of

3,346,004 share awards (2018: 5,211,339;

2017: 6,416,705)

relating to equity-settled share-based payment arrangements and

511,044

share awards (2018: 643,660; 2017: 805,574) 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 value calculation takes into account

the current stock prices, expected volatities and the dividend yield of ING shares.

As at 31 December 2019, total unrecognised compensation costs related to share awards

amount

to EUR 15 million (2018: EUR 29 million; 2017: EUR 37 million). These costs are expected to be

recognised over a weighted average

period of 1.4 years (2018: 1.4 years; 2017: 1.4 years).

28 Other operating expenses

Other operating expenses

2019

2018

2017

Regulatory costs

1,021

947

901

Audit and non-audit services

30

26

22

IT related expenses

759

779

737

Advertising and public relations

391

402

455

External advisory fees

416

358

353

Office

expenses

325

564

587

Travel

and accommodation expenses

140

179

178

Contributions and subscriptions

108

91

91

Postal charges

46

54

50

Depreciation of property and equipment

1

551

312

319

Amortisation of intangible assets

237

209

179

Impairments and reversals on property

and equipment and intangibles

59

19

18

Addition/(unused amounts reversed) of provision

for reorganisations

6

4

–5

Addition/(unused amounts reversed) of other provisions

29

–13

167

Other

477

1,332

575

4,598

5,262

4,627

1 Includes depreciation expenses of right-of-use assets as recognised under IFRS 16.

Regulatory costs

Regulatory costs represent contributions to the Deposit Guarantee

Schemes (DGS), The Single

Resolution Fund (SRF), local bank taxes and local resolution funds. Included in Regulatory costs

for

2019, are contributions to DGS of EUR 362 million (2018: EUR 364 million; 2017: EUR 341 million)

mainly related to the Netherlands, Germany, Belgium, Poland, and Spain and contributions to the

SRF and local resolution funds of EUR 239 million (2018: EUR 208 million; 2017: EUR 179 million). In

2019 local bank taxes increased by EUR 45 million from EUR 375 million in 2018 to EUR 420 million

(2017: EUR 381 million).

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F - 70

Audit and non-audit services

Total

audit and non-audit services include the following fees for services provided by the Group’s

auditor.

Fees of Group’s auditors

2019

2018

2017

Audit fees

21

19

18

Audit related fees

2

1

1

Total

1

23

20

19

1

The Group’s auditors did not provide any non-audit services.

Fees as disclosed in the table above relate

to the network of the Group’s auditors and are the

amounts related to the respective years, i.e.

on an accrual basis. The increase in audit fees 2019

primarily relates to audit activities for the implementation of IFRS 16, new statutory audits and new

IT systems in scope.

Tangible

and Intangible impairments and reversals

Impairments and reversals of property and equipment and intangibles

Impairment losses

Reversals of impairments

Total

2019

2018

2017

2019

2018

2017

2019

2018

2017

Property and equipment

4

9

10

–6

–17

–24

–3

–8

–14

Property development

1

15

2

1

15

2

Software and other

intangible assets

61

12

30

–0

61

12

30

(Reversals of) other impairments

66

35

42

–7

–17

–24

59

19

18

Impairment losses on software and intangible assets in 2019 relate to rescoping of IT

transformation programs.

2018 and 2017 impairments include software that was impaired to its

Value in Use, related

to the acceleration of the Think Forward

Strategy.

In 2018, impairment losses on property development mainly relate to impairments in Spain and

Italy due to lower expected Net Realizable Values.

The reversals of impairments on property and equipment in both 2018 and 2017 relate to

impairments previously recognised in the statement of profit or loss and mainly include

impairments on property in own use that were reversed

following the sale process of office

buildings.

Addition/(unused amounts reversed)

of provision for

reorganisations

Included in Addition/(unused amounts reversed) provision for reorganisations

in 2019, is an

increase in relation to the reorganisation

relating to ING’s Agile transformation in

Germany.

Reference is made to Note 16 ‘Provisions’.

Addition/(unused amounts reversed)

of other provisions

Included in Addition/(unused amounts reversed) of other provisions in 2019, are

movements

mainly in the litigation provision. Reference

is made to Note 16 ‘Provisions’ and Note 46

‘Legal

proceedings’.

Other

In 2018 Other operating expenses - Other included, amongst others, the settlement with the Dutch

Public Prosecution Service of EUR 775 million. The settlement related to previously disclosed

investigations regarding various

requirements for client on-boarding

and the prevention of money

laundering and corrupt practices. Reference is made to Note 46 ‘Legal

proceedings’.

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29 Earnings per ordinary

share

Earnings per ordinary share

Weighted average

number of ordinary

shares outstanding

Amount

during the period

Per ordinary share

(in EUR million)

(in millions)

(in EUR)

2019

2018

2017

2019

2018

2017

2019

2018

2017

Basic earnings

3,903

4,761

5,464

3,894.8

3,888.9

3,882.8

1.00

1.22

1.41

Basic earnings from

continuing operations

3,903

4,761

5,464

1.00

1.22

1.41

Effect of dilutive

instruments:

Stock option and share

plans

0.5

1.5

2.8

0.5

1.5

2.8

Diluted earnings

3,903

4,761

5,464

3,895.3

3,890.4

3,885.6

1.00

1.22

1.41

Diluted earnings from

continuing operations

3,903

4,761

5,464

1.00

1.22

1.41

Dilutive instruments

Diluted earnings per share is calculated as if the stock options and share plans outstanding at the

end of the period had been exercised at the beginning of the period and assuming that the cash

received from

exercised stock options and share plans is used to buy own shares

against the

average market price during the period. The net increase in the number of shares resulting

from

exercising stock options and share plans is added to the average number of shares

used for the

calculation of diluted earnings per share.

30 Dividend per ordinary share

Dividends to shareholders of the parent

Per ordinary

share

Total

(in EUR)

(in EUR million)

Dividends on ordinary shares:

In respect of 2017

• Interim dividend, paid in cash in August 2017

0.24

933

• Final dividend, paid in cash in May 2018

0.43

1,670

Total

dividend in respect of 2017

0.67

2,603

In respect of 2018

• Interim dividend, paid in cash in August 2018

0.24

934

• Final dividend, paid in cash in May 2019

0.44

1,714

Total

dividend in respect of 2018

0.68

2,648

In respect of 2019

• Interim dividend, paid in cash in August 2019

0.24

935

• Final dividend declared

0.45

1,754

Total

dividend in respect of 2019

0.69

2,689

ING Groep N.V.

is required to withhold tax of 15% on dividends paid.

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31 Net

cash flo

w

from

operating

activities

The table below shows a detailed overview of the net cash flow from operating activities.

Cash flows from operating activities

in EUR million

2019

2018

2017

Cash flows from operating activities

Result before tax

5,653

6,986

8,085

Adjusted for:

• Depreciation and amortisation

789

520

520

-

Addition to loan loss provisions

1,120

656

676

-

Other non-cash items included in result before

tax

1,213

–1,763

703

Taxation

paid

–2,345

–1,602

–1,691

Changes in:

–

Loans and advances to banks, not available on demand

–1,338

–777

–3,126

–

Deposits from banks, not payable on demand

–2,574

566

6,320

Net change in loans and advances to/ from banks,

not available/ payable on demand

–3,911

–211

3,194

–

Trading

assets

605

16,928

–1,612

–

Trading

liabilities

–3,173

–7,018

–9,575

Net change in Trading

assets and Trading

liabilities

–2,568

9,910

–11,187

Loans and advances to customers

–16,687

–31,356

–21,390

Customer deposits

18,040

19,709

18,291

–

Non–trading derivatives

1,072

–215

–2,239

–

Assets designated at fair value through profit or loss

–7

–725

441

–

Assets mandatorily at fair value through profit or loss

23,343

–6,968

n/a

–

Other assets

1,363

684

–430

–

Other financial liabilities at fair value through profit or loss

–12,235

10,522

–565

–

Provisions and other liabilities

–1,784

769

339

Other

11,752

4,067

–2,454

Net cash flow from/(used in) operating activities

13,055

6,915

–5,253

32 Changes in liabilities arising from

financing activities

Changes in liabilities arising from financing activities

Debt securities in

issue

Subordinated Loans

Lease liabilities

Total

Liabilities from

financing activities

2019

2018

2019

2018

2019

2018

2019

2018

Opening balance

119,751

96,086

13,724

15,968

n/a

n/a

133,475

112,054

Effect of change in

accounting policy due to

the implementation of

IFRS 9/16

–

740

–

241

1,301

1,301

981

Cashflows:

Additions

90,793

152,543

3,429

1,859

–

94,222

154,402

Redemptions / Disposals

–94,497

–131,170

–933

–4,646

–271

–95,700

–135,816

Non cash changes:

Amortisation

135

85

1

13

25

161

98

Other

21

–0

26

443

490

–0

Changes in FV

1,018

–53

201

–73

–

1,220

–126

Foreign exchange

movement

1,306

1,521

140

362

8

1,454

1,883

Closing balance

118,528

119,751

16,588

13,724

1,507

n/a

136,622

133,475

33 Cash and cash equivalents

Cash and cash equivalents

2019

2018

2017

Treasury

bills and other eligible bills

43

159

391

Deposits from banks/Loans

and advances to banks

786

–2,617

–3,403

Cash and balances with central banks

53,202

49,987

21,989

Cash and cash equivalents at end of year

54,031

47,529

18,977

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Treasury bills and other eligible bills included in cash and cash equivalents

2019

2018

2017

Treasury

bills and other eligible bills included in trading assets

0

17

5

Treasury

bills and other eligible bills included in AFS investments

n/a

n/a

386

Treasury

bills and other eligible bills included in FVOCI

–0

n/a

Treasury

bills and other eligible bills included in securities at AC

43

142

n/a

43

159

391

Deposits from banks/Loans and advances to banks

2019

2018

2017

Included in cash and cash equivalents:

–

Deposits from banks

–8,519

–8,520

–8,563

–

Loans and advances to banks

9,304

5,903

5,160

786

–2,617

–3,403

Not included in cash and cash equivalents:

–

Deposits from banks

–26,307

–28,811

–28,258

–

Loans and advances to banks

25,832

24,519

23,651

–476

–4,292

–4,607

Total

as included in the statement of financial position:

–

Deposits from banks

–34,826

–37,330

–36,821

–

Loans and advances to banks

35,136

30,422

28,811

310

–6,909

–8,010

Cash and cash equivalents includes deposits from banks and loans and advances to banks that are

on demand.

Included in Cash and cash equivalents, are minimum mandatory reserve deposits to be held with

various central banks. Reference

is made to Note 42 ‘Assets not freely disposable’ for restrictions on

Cash and balances with central banks.

Segment

reporting

34 Segments

a. General

ING Group’s segments are based on the internal reporting structures by lines of business.

The Executive Board of ING Group

and the Management Board Banking set the performance

targets, approve

and monitor the budgets prepared by the business lines. Business lines formulate

strategic, commercial, and financial plans in conformity with the strategy and performance targets

set by the Executive Board of ING Group

and the Management Board Banking.

Recognition and measurement of segment results are

in line with the accounting policies as

described in Note 1 ‘Accounting policies’. 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,

expenses and/or assets of the segment.

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The following table specifies the segments

by line of business and main sources of income of each

of the segments:

Specification of the main sources of income of each of the segments by line of business

Segments of the Banking results by

line of business

Main source of income

Retail Netherlands

Income from retail and

private banking activities in the Netherlands,

including the SME and mid-corporate segments, and the Real Estate

Finance portfolio related to Dutch domestic mid-corporates.

The main

products offered are current

and savings accounts, business lending,

mortgages and other consumer lending in the Netherlands.

(Market Leaders)

Retail Belgium

Income from retail and

private banking activities in Belgium (including

Luxembourg),

including the SME and mid-corporate segments. The main

products offered are similar to those in the Netherlands.

(Market Leaders)

Retail Germany

Income from retail and

private banking activities in Germany (including

Austria). The main products offered are current

and savings accounts,

mortgages and other customer lending.

(Challengers and Growth Markets)

Retail Other

Income from retail banking activities in the rest

of the world, including the

SME and mid-corporate segments in specific countries. The main products

offered are similar to those in the Netherlands.

(Challengers and Growth Markets)

Wholesale Banking

Income from wholesale banking activities. The main products are: lending,

debt capital markets, working capital solutions, export finance, daily

banking solutions, treasury and risk solutions, and corporate

finance.

As of 1 January 2019, the Real Estate Finance portfolio related to Dutch domestic mid-corporates,

which was included under Wholesale Banking, has been transferred to Retail Netherlands in order

to define clearer roles and responsibilities. The presentation of previously reported underlying profit

and loss amounts has been adjusted to reflect this

change.

The geographical segments for the Banking results are presented

on page F - 79.

Specification of geographical

segments

Geographical segments

Main countries

The Netherlands

Belgium

Including Luxembourg

Germany

Including Austria

Other Challengers

Australia, France,

Italy, Spain, Portugal, Czech Republic, and UK Legacy

and

Other

Growth Markets

Poland, Romania, Turkey,

Philippines and Asian bank stakes

Wholesale Banking Rest of World

UK, Americas, Asia and other countries in Central

and Eastern Europe

Other

Corporate Line Banking and the run-off portfolio of Real Estate

ING Group evaluates the results

of its banking segments using a financial

performance measure

called underlying result. Underlying result is used to monitor the performance of ING Group at a

consolidated level and by segment. The Executive Board and the Management Board Banking

consider this measure to be relevant

to an understanding of the Group’s financial performance,

because it allows investors to understand the primary method used by management to evaluate

the Group’s operating performance and make decisions about allocating resources.

In addition, ING

Group believes that the presentation of underlying net result

helps investors compare its segment

performance on a meaningful basis by highlighting result before tax attributable to ongoing

operations and the underlying profitability of the segment businesses. Underlying

result is derived

by excluding from IFRS the following: special items, adjustment of the EU ‘IAS 39 carve out’, the

impact of divestments and Insurance Other.

Special items include items of income or expense that are significant and arise

from events or

transactions that are clearly distinct from the regular operating

activities. Disclosures on

comparative periods also reflect the impact of divestments. Insurance Other reflects (former)

insurance related activities that are not part of the discontinued operations.

ING Group reconciles the total segment results

to the total result of Banking using Corporate

Line

Banking. The Corporate Line Banking is a reflection of capital management activities and certain

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Financial Statements

2019 ING Group Annual Report on Form 20-F

F - 75

income and expenses that are not allocated to the banking businesses, including a higher VAT

refund in 2019 as well as a EUR 119 million gain from the release of a currency

translation reserve

following the sale of ING’s stake in Kotak Mahindra Bank and the recognition of a EUR 79 million

receivable related

to the insolvency of a financial institution

(both recorded under income).

Furthermore, the Corporate

Line Banking includes the isolated legacy costs (mainly negative

interest results) caused by the replacement

of short-term funding with long-term funding during

2013 and 2014. 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.

Underlying result as presented below is a non-GAAP financial measure and is not a measure of

financial performance under IFRS. Because

underlying result is not determined in accordance with

IFRS, underlying result as presented by ING may not be comparable to other similarly titled

measures of performance of other companies. The underlying result of ING’s segments is

reconciled to the net result as reported in the

IFRS Consolidated statement of profit or loss below.

The information presented in this note is in line with the information presented to the Executive

Board of ING Group and Management Board Banking.

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.

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Financial Statements

2019 ING Group Annual Report on Form 20-F

F - 76

Reconciliation between IFRS and Underlying income, expenses and net result

2019

2018

2017

Income

Expenses

Taxation

Non-

Controlling

interests

Net result¹

Income

Expenses

Taxation

Non-

Controlling

interests

Net result¹

Income

Expenses

Taxation

Non-

Controlling

interests

Net result¹

Net result IFRS attributable to equity holder of the parent

17,125

11,472

1,652

99

3,903

18,324

11,338

2,116

108

4,761

18,590

10,505

2,539

82

5,464

Remove impact of:

Special items

2

–775

775

–121

–121

0

Insurance Other

3

–89

1

–90

53

1

52

Adjustment of the EU 'IAS 39 carve out'

4

1,181

303

878

–148

–90

–58

–817

–258

–559

Underlying

5

18,306

11,472

1,955

99

4,781

18,088

10,563

2,028

108

5,389

17,704

10,505

2,160

82

4,957

1 Net result, after tax and non-controlling interests.

2 Special items in 2018 comprised a settlement agreement with the Dutch authorities on regulatory issues as announced on 4

September 2018.

Special items in 2017 comprised a tax charge at ING Australia Holdings Ltd related to the years 2013-2017, for which a full reimbursement is expected to be received from NN Group.

3 Insurance Other comprises the net result relating to warrants on the shares of Voya

Financial and NN Group. In March 2018 ING sold its remaining part of warrants on the shares of Voya Financial. In November

2018 the warrant agreement between NN Group

and ING was terminated.

4 ING prepares the Form 20-F in accordance

with IFRS-IASB. This information is prepared by reversing the hedge accounting impacts that applied under the EU 'carve-out'

5 Underlying figures are derived from figures according to IFRS by excluding the impact of adjustment of the EU 'IAS

39 carve-out', special items and Insurance Other.

b. ING Group

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Financial Statements

2019 ING Group Annual Report on Form 20-F

F - 77

ING Group Total

2019

2018

2017

ING

Bank N.V.

Other

Banking

1

Total

Banking

Legacy

Insurance

Total

ING

Bank N.V.

Other

Banking

1

Total

Banking

Legacy

Insurance

Total

ING

Bank N.V.

Other

Banking

1

Total

Banking

Legacy

Insurance

Total

Underlying income

Net interest income

14,074

4

14,079

14,079

13,949

–34

13,916

13,916

13,782

–68

13,714

13,714

Net fee and commission income

2,868

–0

2,868

2,868

2,803

–0

2,803

2,803

2,714

–0

2,714

2,714

Total

investment and other income

1,352

8

1,360

1,360

1,350

19

1,369

1,369

1,259

17

1,277

1,277

Total

underlying income

18,295

12

18,306

18,306

18,102

–15

18,088

18,088

17,755

–51

17,704

17,704

Underlying expenditure

Operating expenses

10,343

9

10,353

10,353

9,920

–13

9,907

9,907

9,795

34

9,829

9,829

Additions to loan loss provision

1,120

0

1,120

1,120

656

0

656

656

676

0

676

676

Total

underlying expenses

11,463

9

11,472

11,472

10,576

–13

10,563

10,563

10,472

34

10,505

10,505

Underlying result before taxation

6,831

3

6,834

6,834

7,526

–2

7,524

7,524

7,283

–84

7,199

7,199

Taxation

1,889

66

1,955

1,955

2,036

–8

2,028

2,028

2,182

–22

2,160

2,160

Non-controlling interests

99

99

99

108

108

108

82

82

82

Underlying net result

4,843

–63

4,781

4,781

5,382

6

5,389

5,389

5,019

–62

4,957

4,957

Special items

–775

–775

–775

0

0

0

Insurance Other

90

90

–52

–52

Adjustment of the EU 'IAS 39 carve out'

–878

–878

–878

58

58

58

559

559

559

Net result IFRS attributable to equity holder of the parent

3,966

–63

3,903

3,903

4,665

6

4,672

90

4,761

5,578

–62

5,516

–52

5,464

1

Comprises for the most part the funding charges of ING Groep N.V.

(Holding).

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Financial Statements

2019 ING Group Annual Report on Form 20-F

F - 78

c. Banking activities

Segments Banking by line of business

2019

2018

2017

Retail

Nether-

lands

Retail

Belgium

Retail

Germany

Retail

Other

Wholesale

Banking

Corporate Line

Banking

Total

Banking

Retail

Nether-

lands

1

Retail

Belgium

Retail

Germany

Retail

Other

Wholesale

Banking

1

Corporate Line

Banking

Total

Banking

Retail

Nether-

lands

1

Retail

Belgium

Retail

Germany

Retail

Other

Wholesale

Banking

1

Corporate Line

Banking

Total

Banking

Underlying income

–

Net interest income

3,541

1,907

1,579

2,787

3,794

470

14,079

3,749

1,830

1,671

2,690

3,686

290

13,916

3,866

1,842

1,704

2,437

3,639

226

13,714

–

Net fee and commission income

674

374

268

423

1,135

–6

2,868

664

371

225

395

1,152

–4

2,803

607

408

215

384

1,102

–3

2,714

–

Total

investment and other income

290

161

138

298

369

103

1,360

335

169

76

230

673

–113

1,369

256

224

–28

207

919

–301

1,277

Total

underlying income

4,505

2,442

1,985

3,509

5,298

568

18,306

4,747

2,369

1,972

3,315

5,510

173

18,088

4,730

2,473

1,891

3,028

5,660

–78

17,704

Underlying expenditure

–

Operating expenses

2,210

1,609

1,080

2,210

2,937

307

10,353

2,220

1,610

1,027

2,033

2,771

247

9,907

2,260

1,584

1,032

1,919

2,744

290

9,829

–

Additions to loan loss provision

91

186

–53

364

532

–0

1,120

–41

164

–27

350

210

–1

656

15

104

–10

284

282

1

676

Total

underlying expenses

2,301

1,794

1,027

2,574

3,469

307

11,472

2,179

1,774

1,000

2,383

2,981

246

10,563

2,275

1,688

1,022

2,203

3,026

291

10,505

Underlying result before taxation

2,204

647

957

935

1,830

261

6,834

2,568

595

972

932

2,529

–72

7,524

2,455

785

869

825

2,634

–369

7,199

Taxation

558

192

328

234

464

179

1,955

626

199

324

200

633

47

2,028

615

296

241

188

832

–13

2,160

Non-controlling interests

0

3

82

14

99

6

3

80

19

108

–2

2

67

15

82

Underlying net result

1,646

455

627

619

1,352

82

4,781

1,942

390

646

652

1,877

–119

5,389

1,839

491

625

569

1,788

–356

4,957

Special items

–775

–775

0

0

Adjustment of the EU 'IAS 39 carve out'

–878

–878

58

58

559

559

Net result Banking

1,646

455

627

619

474

82

3,903

1,942

390

646

652

1,935

–894

4,672

1,839

491

625

569

2,347

–356

5,516

Net result Insurance

Other

90

–52

Net result IFRS-IASB

3,903

4,761

5,464

1 In 2019, the Dutch domestic midcorporates real

estate finance portfolio transferred from Wholesale Banking to Retail

Banking Netherlands. Comparative figures have been adjusted.

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Financial Statements

2019 ING Group Annual Report on Form 20-F

F - 79

Geographical segments Banking

2019

2018

2017

Nether-

lands

Belgium

Germany

Other

Challengers

Growth

markets

Wholesale

Banking Rest

of World

Other

Total

Banking

Nether-

lands

Belgium

1

Germany

Other

Challengers

Growth

markets

Wholesale

Banking Rest

of World

1

Other

Total

Banking

Nether-

lands

Belgium

1

Germany

Other

Challengers

Growth

markets

Wholesale

Banking Rest

of World

1

Other

Total

Banking

Underlying income

–

Net interest income

4,213

2,233

2,122

1,808

1,606

1,636

461

14,079

4,374

2,137

2,200

1,732

1,639

1,548

285

13,916

4,537

2,110

2,172

1,527

1,515

1,625

227

13,714

–

Net fee and commission

income

994

533

315

283

299

451

–7

2,868

980

520

273

254

297

482

–4

2,803

871

521

269

232

316

507

–3

2,714

–

Total

investment and other

income

119

233

169

16

411

301

111

1,360

509

379

99

–92

333

245

–104

1,369

445

480

–17

22

296

245

–193

1,277

Total

underlying income

5,325

2,999

2,606

2,107

2,316

2,388

566

18,306

5,863

3,037

2,572

1,895

2,269

2,274

177

18,088

5,853

3,111

2,424

1,781

2,127

2,377

31

17,704

Underlying expenditure

–

Operating expenses

2,994

1,925

1,237

1,318

1,261

1,309

308

10,353

2,929

1,932

1,171

1,217

1,175

1,222

263

9,907

2,930

2,071

1,154

1,142

1,126

1,105

301

9,829

–

Additions to loan loss

provision

146

268

–40

171

271

303

–0

1,120

–65

153

6

163

274

126

–1

656

3

160

–15

201

241

85

1

676

Total

underlying expenses

3,140

2,194

1,197

1,489

1,533

1,612

308

11,472

2,863

2,085

1,176

1,380

1,449

1,347

262

10,563

2,933

2,231

1,140

1,344

1,367

1,190

301

10,505

Underlying result before

taxation

2,185

805

1,409

618

784

776

258

6,834

3,000

952

1,396

515

820

927

–85

7,524

2,920

880

1,285

437

760

1,188

–270

7,199

Taxation

549

247

476

207

166

137

173

1,955

741

291

459

178

143

174

43

2,028

708

369

407

145

151

379

–1

2,160

Non-controlling interests

–0

0

3

96

99

1

6

3

98

108

–

–2

2

82

82

Underlying net result

1,637

558

929

411

521

639

85

4,781

2,258

655

935

337

580

753

–128

5,389

2,212

512

875

292

527

808

–269

4,957

Special items

–

–

–775

–775

0

0

Insurance Other

–

–

90

90

–52

–52

Adjustment of the EU 'IAS 39

carve out'

–273

–372

–232

–0

–878

106

22

–72

2

58

465

38

113

–58

558

Net result IFRS

1,363

186

697

411

521

639

85

3,903

2,364

677

863

339

580

753

–813

4,761

2,677

550

988

234

527

808

–321

5,464

1 As from 2019, financials of Nordics locations (which are managed from Brussels( transferred from 'Wholesale Banking rest of the World' to 'Belgium'. Comparative figures have been adjusted.

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2019 ING Group Annual Report on Form 20-F

F - 80

35 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. 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

geographical areas operating

in other economic environments. The geographical analyses are

based on the location of the office

from which the transactions are originated. The Netherlands is

ING Group’s country of domicile.

The tables below provide additional information, for the years 2019, 2018 and 2017 respectively, on

names of principal subsidiaries and branches, nature of main activities and average number of

employees on a full time equivalent basis by country/tax jurisdiction.

Additional information by country

Geographical area

Country/Tax

jurisdiction

Name of principal

subsidiary

Main (banking)

activity

Average

number of employees

at full time equivalent basis

Total

Income

Total

assets

Result before tax

Taxation

2019

2018

2017

2019

2018

2017

2019

2018

2017

2019

2018

2017

2019

2018

2017

Netherlands

Netherlands

ING Bank N.V.

Wholesale / Retail

14,415

13,600

13,141

5,198

6,130

6,396

267,368

259,387

239,342

1,397

1,973

2,940

437

738

812

Belgium

Belgium

ING België N.V.

Wholesale / Retail

7,694

8,248

8,893

2,277

2,838

3,041

121,813

120,287

119,068

291

898

1,093

142

285

455

Luxemburg

ING Luxembourg

S.A.

Wholesale / Retail

841

791

777

292

315

298

16,608

13,310

14,748

123

199

68

29

50

27

Rest of Europe

Poland

ING Bank Slaski S.A

Wholesale / Retail

8,968

8,829

8,664

1,344

1,229

1,119

37,220

33,040

29,976

533

525

444

141

128

112

Germany

ING DiBa A.G.

Wholesale / Retail

4,639

4,625

4,587

2,141

2,315

2,477

147,642

144,861

138,185

1,032

1,203

1,405

355

397

448

Romania

Branch of ING Bank N.V.

Wholesale / Retail

2,575

2,269

1,968

457

403

314

7,424

7,112

5,940

221

183

135

34

25

23

Spain

Branch of ING Bank N.V.

Wholesale / Retail

1,233

1,201

1,135

706

600

509

26,118

23,757

23,858

249

195

97

72

71

25

Italy

Branch of ING Bank N.V.

Wholesale / Retail

959

911

838

269

231

336

15,726

16,991

16,728

–39

–101

–4

4

–24

7

UK

Branch of ING Bank N.V.

Wholesale

692

672

603

594

505

550

61,088

64,016

78,573

214

180

324

52

44

76

France

1

Branch of ING Bank N.V.

Wholesale / Retail

659

620

591

308

323

310

12,058

12,063

10,678

70

111

93

35

45

32

Russia

ING Bank (Eurasia) Z.A.O.

Wholesale

293

277

270

93

82

136

1,499

1,449

1,607

68

25

78

22

3

20

Czech Republic

Branch of ING Bank N.V.

Wholesale / Retail

339

306

245

88

106

–5

4,494

6,278

5,640

10

39

–55

2

10

–11

Hungary

Branch of ING Bank N.V.

Wholesale

138

141

146

24

40

32

1,299

1,227

1,003

–7

5

–

2

3

2

Slovakia

Branch of ING Bank N.V.

Wholesale

703

571

497

14

14

14

587

487

677

2

–0

2

–0

1

1

Ukraine

PJSC ING Bank Ukraine

Wholesale

111

109

106

43

36

30

481

368

321

31

22

9

9

3

2

Austria

Branch of ING DiBa A.G.

Wholesale / Retail

279

235

225

80

85

80

1,441

753

682

0

18

25

1

6

–1

Bulgaria

Branch of ING Bank N.V.

Wholesale

68

69

70

12

9

9

358

360

268

2

–0

–2

–

–

–

Ireland

Branch of ING Bank N.V.

Wholesale

48

47

43

71

68

57

2,575

2,868

2,337

58

65

47

8

8

6

Portugal

Branch of ING Bank N.V.

Wholesale

12

11

11

18

18

14

899

905

667

14

13

9

4

4

3

Switzerland

Branch of ING België N.V.

Wholesale

257

244

204

234

257

224

8,577

8,266

9,737

126

169

145

–36

35

38

1

Public subsidies received, as defined in article 89

of the CRD IV, amounts to EUR 0.3 million (2018: EUR 0.5 million;

2017: EUR 0.5 million).

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Financial Statements

2019 ING Group Annual Report on Form 20-F

F - 81

Additional information by country (continued)

Geographical area

Country/Tax

jurisdiction

Name of principal

subsidiary

Main (banking)

activity

Average

number of employees

at full time equivalent basis

Total

Income

Total

assets

Result before tax

Taxation

2019

2018

2017

2019

2018

2017

2019

2018

2017

2019

2018

2017

2019

2018

2017

North America

Canada

Payvision Canada Services

Ltd.

Wholesale

1

1

3

3

1

2

2

0

0

–

USA

ING Financial Holdings

Corp.

Wholesale

626

617

564

813

736

724

45,521

61,440

42,873

366

343

371

118

61

134

Latin America

Brazil

Branch of ING Bank N.V.

Wholesale

89

88

78

43

35

47

2,921

1,974

1,184

27

16

16

6

9

4

Colombia

ING Capital Colombia

S.A.S.

Wholesale

3

3

2

1

1

1

2

2

2

Mexico

ING Consulting, S.A. de

C.V.

Wholesale

8

8

8

1

1

1

2

2

2

–2

–2

–2

Asia

China

Branch of ING Bank N.V.

Wholesale

89

86

81

35

37

35

2,031

2,107

2,298

7

3

7

–1

7

–2

Japan

Branch of ING Bank N.V.

Wholesale

33

32

35

31

36

33

5,109

2,300

2,238

22

19

17

8

5

11

Singapore

Branch of ING Bank N.V.

Wholesale

592

546

512

349

340

297

27,982

32,222

25,803

76

176

133

13

21

9

Macau

Payvision Macau Ltd.

Wholesale

n/a

–

n/a

–

n/a

–

n/a

–

n/a

Hong Kong

Branch of ING Bank N.V.

Wholesale

128

122

108

96

110

94

7,350

6,975

7,850

38

52

55

7

8

7

Philippines

Branch of ING Bank N.V.

Wholesale/ Retail

1,420

878

604

25

17

18

412

395

322

–11

0

6

–5

3

2

South Korea

Branch of ING Bank N.V.

Wholesale

79

80

82

60

55

55

5,457

4,299

4,602

25

14

21

7

3

6

Taiwan

Branch of ING Bank N.V.

Wholesale

34

33

33

26

23

23

2,873

2,839

3,910

10

7

11

0

0

–

Indonesia

PT ING Securities

Indonesia

Wholesale

0

3

5

0

0

1

6

6

6

–0

–0

–

Malaysia

Branch of ING Bank N.V.

Wholesale

5

5

5

1

1

166

139

29

0

0

–1

0

0

India

Branch of ING Bank N.V.

Wholesale

–

–

–

0

1

1

2

0

–

1

0

–0

Turkey

ING Bank A.S.

Wholesale / Retail

4,074

4,709

5,221

677

678

741

9,927

11,521

13,798

304

245

267

66

50

54

United Arabic

Emirates

Branch of ING Bank N.V.

Wholesale

11

11

10

–1

–0

0

0

–2

–1

–2

Australia

Australia

ING Bank (Australia) Ltd.

Wholesale / Retail

1,319

1,234

1,143

701

647

577

43,482

39,673

37,982

400

389

330

121

118

235

Other

Mauritius

ING Mauritius Ltd.

Investment

Management

0

1

1

1

920

939

–0

1

–

Total

53,431

52,233

51,504

17,125

18,324

18,590

888,520

884,603

843,878

5,653

6,986

8,085

1,652

2,116

2,539

2019

The relatively high tax charge of 31% in the Netherlands (compared to statutory rate

of 25%) is

mainly caused by the non-deductible Dutch bank tax (EUR 177 million) and the

non-deductible AT1

interest expenses (EUR 276 million).

The relatively low tax charge in Switzerland is caused by a deferred

tax benefit following a tax rate

reduction in 2019.

2018

The relatively high tax charge of 37% in the Netherlands (compared to statutory rate

of 25%) is

mainly caused by non-deductible expenses of EUR 775 million upon the settlement

agreement

reached with the Dutch authorities on regulatory

issues.

2017

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Australia has a very high tax charge due to a tax charge at ING

Australia Holdings Ltd related

to the

years 2007-2013, for which a full reimbursement is expected to be received from NN Group.

Although the impact on net result was nil, this special item affected both the tax and ‘other

income’ line in the Consolidated statement of profit or loss.

Due to the tax reforms in the US and Belgium, which resulted in a tax charge to record

a reduction

in deferred tax assets, the tax charge is significantly higher.

Austria, China, Singapore and Taiwan

all have lower tax charges due to prior year adjustments.

Additional

notes

to the

Consolidated

financial

statements

36 Pension

and other

post-employment

benefits

Most 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 remuneration.

For the defined contribution scheme in the

Netherlands, the premium paid is also dependent on the interest rate developments and the

methodology of the Dutch Central Bank for determining the ultimate forward rate.

These plans do

not give rise to provisions in the statement of financial position, other than relating to short-term

timing differences included in other assets/liabilities.

ING Group maintains defined benefit

retirement plans in some countries. These plans 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

are designed

to comply with applicable local regulations governing investments and funding levels.

ING Group provides other post-employment 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.

Statement of financial position - Net defined benefit asset/liability

Plan assets and defined benefit

obligation per country

Plan assets

Defined benefit

obligation

Funded Status

2019

2018

2019

2018

2019

2018

The Netherlands

454

394

634

540

–180

–146

United States

277

222

275

224

3

–3

United Kingdom

1,887

1,703

1,184

1,179

703

524

Belgium

590

547

676

636

–85

–88

Other countries

168

154

383

334

–214

–181

Funded status (Net defined benefit asset/liability)

3,377

3,019

3,151

2,913

226

106

Presented as:

• Other assets

709

527

• Other liabilities

–483

–421

226

106

The most recent (actuarial) valuations of the plan assets and the present value of the defined

benefit obligation

were carried out as at 31 December 2019. The present value of the defined

benefit obligation,

and the related current service cost and past service cost, were

determined

using the projected unit credit method.

Changes in the fair value of plan assets for the period were as follows:

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Changes in fair value of plan assets

2019

2018

Opening balance

3,019

3,206

Interest income

70

66

Remeasurements: Return on plan assets excluding

amounts included in interest income

274

–143

Employer's contribution

34

66

Participants contributions

2

3

Benefits paid

–126

–176

Exchange rate differences

104

–3

Closing balance

3,377

3,019

Actual return on the plan assets

344

–77

As at 31 December 2019 the various defined

benefit plans

did not hold any direct investments in

ING Groep N.V.

(2018: nil). During 2019 and 2018 there were no purchases or sales of assets

between ING and the pension funds.

ING does not manage the pension funds and thus receives no compensation for fund

management. The pension fund has not engaged ING in any swap or derivative transactions to

manage the risk of the pension funds.

No plan assets are expected to be returned to ING Group during 2020.

Changes in the present value of the defined benefit

obligation and other post-employment benefits

for the period were as follows:

Changes in defined benefit obligation

and other post-employment benefits

Defined benefit

obligation

Other post-

employment

benefits

2019

2018

2019

2018

Opening balance

2,913

3,140

76

87

Current service cost

28

39

–1

–4

Interest cost

65

61

3

2

Remeasurements: Actuarial gains and losses arising from changes in

demographic assumptions

–6

2

Remeasurements: Actuarial gains and losses arising from changes in

financial assumptions

206

–153

7

–11

Participants’ contributions

2

3

1

1

Benefits paid

–130

–179

–1

–1

Past service cost

0

Exchange rate differences

73

2

1

2

Changes in the composition of the group and other changes

0

–1

Closing balance

3,151

2,913

84

76

Amounts recognised directly in Other comprehensive

income (equity) were as follows:

Changes in the net defined benefit

assets/liability remeasurement reserve

2019

2018

Opening balance

–394

–400

Remeasurement of plan assets

274

–143

Actuarial gains and losses arising from changes in demographic assumptions

6

–2

Actuarial gains and losses arising from changes in financial assumptions

–206

153

Taxation

and Exchange rate differences

–15

–3

Total

Other comprehensive income movement

for the year

58

6

Closing balance

–336

–394

In 2019, EUR 274 million remeasurement of plan assets recognized as a gain in Other

comprehensive income is driven by higher yields on investments. The EUR -206 million actuarial

gains and losses arising from changes in financial

assumptions in the calculation of the defined

benefit obligation

are mainly due to a decrease in discount rates.

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The accumulated amount of remeasurements recognised directly

in Other comprehensive income

(equity) is EUR -378 million (EUR -336 million after

tax) as at 31 December 2019 (2018: EUR -453

million; EUR -394 million after tax).

Amounts recognised in the statement of profit or loss related to pension and other staff related

benefits are as follows:

Pension and other staff-related benefit costs

Net defined benefit

asset/liability

Other post-

employment benefits

Other

Total

2019

2018

2017

2019

2018

2017

2019

2018

2017

2019

2018

2017

Current service cost

28

39

34

–1

–4

–3

1

22

–2

29

57

29

Net Interest cost

–5

–4

–4

3

2

3

0

1

–2

–2

Effect of curtailment

or settlement

–3

–1

–1

–3

Other

Defined benefit

plans

23

35

27

2

–1

2

21

–1

26

54

26

Defined contribution

plans

340

331

355

366

385

381

Determination of the net defined benefit asset/liability

The net defined benefit

asset/liability is reviewed and adjusted annually. The assumptions used in

the determination of the net defined

benefit asset/liability

and the Other post-employment

benefits include discount rates, mortality rates, expected rates of salary increases (excluding

promotion increases), and indexation. The rates used for salary developments,

interest discount

factors, and other adjustments reflect

country-specific conditions.

The key assumption in the determination of the net defined

benefit asset/liability

is the discount

rate. The discount rate

is the weighted average of the discount rates that are

applied in different

regions where ING Group

has defined

benefit pension plans

(weighted by the defined

benefit

obligation). The discount rate is based on a methodology that uses market yields on high quality

corporate bonds of the specific regions with durations matching the pension liabilities as key input.

Market yields of high quality corporate bonds reflect the yield on corporate bonds with an AA rating

for durations where such yields are

available. An extrapolation is applied in order to determine the

yield to the longer durations for which no AA-rated corporate

bonds are available. As a result

of the

limited availability of long-duration AA-rated corporate bonds, extrapolation

is an important

element of the determination of the discount rate. The weighted average discount rate

applied for

net defined

benefit

asset/liability for 2019 was 1.5% 2018: (2.3%) based on the pension plan in the

Netherlands, Germany, Belgium, The United States of America, and the United Kingdom. The

average discount rate

applied for Other post-employment benefits

was 3.3% 2018: (3.9%).

Sensitivity analysis of key assumptions

ING performs sensitivity analysis on the most significant

assumptions: discount rates, mortality,

expected rate of salary increase, and indexation. The sensitivity analysis has been carried out

under the assumption that the changes occurred at the end of the reporting period.

The sensitivity analysis calculates the financial

impact on the defined

benefit

obligation of an

increase or decrease of the weighted averages

of each significant actuarial

assumption, all other

assumptions held constant. In practice, this is unlikely to occur, and some changes of the

assumptions may be correlated. Changes to mortality, expected rate of salary increase, and

indexation would have no material impact on the defined

benefit obligation.

The most significant

impact would be from a change in the discount rate. An increase

or decrease in the discount rate of

1% creates an impact on the defined

benefit obligation

of EUR -443 million and EUR 561 million,

respectively.

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Expected cash flows

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

are designed to comply with applicable local regulations governing investments

and funding levels.

ING Group’s subsidiaries should fund the cost of the entitlements expected to be earned on a yearly

basis.

For 2020 the expected contributions to defined benefit

pension plans are EUR 44 million.

The benefit payments

for defined benefit

and other post-employment benefits

expected to be

made by the plan between 2020-2024 are estimated to be between EUR 100 million and EUR 135

million per annum. From 2025 to 2029 the total payments made by the plan are expected to be

EUR 882 million.

37 Taxation

Statement of financial position – Deferred

tax

Deferred taxes are

recognised on all temporary differences under the liability method using tax

rates applicable in the jurisdictions in which ING Group is subject to taxation.

Changes in deferred tax

2019

Net

liability (-)

Net

asset (+)

2018

Change

through

equity

Change

through

net result

Exchange

rate

differences

Changes

in the

composi-

tion of the

group and

other

changes

Net

liability (-)

Net

asset (+)

2019

Financial assets at FVOCI

1

–118

23

–11

–1

–107

Investment properties

–6

–1

–0

–7

Financial assets and liabilities at FVPL

1

632

314

2

–2

947

Depreciation

–23

5

–0

–19

Cash flow hedges

–140

–199

2

–337

Pension and post-employment benefits

59

–14

2

–5

42

Other provisions

10

–1

–3

6

Loans and advances

1

474

–1

18

491

Unused tax losses carried forward

51

5

5

–0

61

Other

–160

16

–13

1

–0

–156

778

–176

318

2

–2

920

Presented in the statement of financial

position as:

–

Deferred tax liabilities

–180

–322

–

Deferred tax assets

958

1,242

778

920

1

The prior period has been updated to improve consistency and comparability.

IFRS 16 Leases (implemented per 1 January 2019) requires lessees to recognise

right-of-use assets

and lease liabilities on the balance sheet. The above table shows netted amounts which include in

the row ‘Other’ a deferred tax

amount for right-of-use assets

of EUR 370 million (1 January 2019:

EUR 320 million) and a deferred tax amount for lease liabilities of EUR -376 million (1 January 2019:

EUR -323 million).

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Financial assets and liabilities FVPL changes through net result in 2019 relates to the increase in fair

value of derivatives due to decreased interest

yield curves.

Changes in deferred tax

2018

Net

liability (-)

Net

asset (+)

Effect of

changes in

accounting

policies due

to the

implement-

ation of IFRS

9

Change

through

equity

Change

through

net result

Exchange

rate

differences

Changes in

the composi-

tion of the

group and

other

changes

Net

liability (-)

Net

asset (+)

2018

Financial assets FVOCI

1

–663

157

113

273

4

–2

–118

Investment properties

–5

–1

0

–6

Financial assets and

liabilities at FVPL

1

1,082

–15

–453

17

1

632

Depreciation

–24

1

–0

–23

Cash flow hedges

–72

–76

7

1

–140

Pension and post-

employment benefits

76

–12

–8

2

0

59

Other provisions

198

4

–187

–7

1

10

Loans and advances

1

337

137

3

–5

–0

2

474

Unused tax losses carried

forward

–8

61

–2

–0

51

Other

–178

45

–53

55

1

–31

–160

Total

744

328

–25

–265

23

–27

778

Presented in the

statement of financial

position as:

–

deferred tax liabilities

–362

–180

–

deferred tax assets

1,106

958

744

778

1

The prior period has been updated to improve consistency and comparability.

The deferred tax balance recorded

under 'Other provisions' declined in 2018 by EUR 187 million

change through net result of which EUR 90 million relates to the decline of the Belgian

reorganisation provision.

Changes in the Composition of the Group and other changes include the deferred tax liability (EUR

30 million) regarding the acquisition of Payvision.

Deferred tax in connection with unused tax losses carried forward

2019

2018

To

tal unused tax losses carried forward

1,685

1,773

Unused tax losses carried forward not recognised

as a deferred tax asset

922

1,010

Unused tax losses carried forward recognised

as a deferred tax asset

764

763

Average

tax rate

21.4%

20.4%

Deferred tax asset

163

156

Total

unused tax losses carried forward analysed by expiry terms

No deferred tax

asset recognised

Deferred tax

asset recognised

2019

2018

2019

2018

Within 1 year

1

1

More than 1 year but less than 5 years

4

2

17

2

More than 5 years but less than 10 years

92

83

1

Unlimited

824

923

746

759

922

1,010

764

763

The above mentioned deferred tax of EUR 163 million (2018: EUR 156 million) and the related

unused tax losses carried forward exclude the deferred

tax liability recorded in the Netherlands

with respect to the recapture of previously

deducted UK tax losses in the Netherlands for the

amount of EUR -102 million (2018: EUR -105 million).

Deferred tax assets are recognised

for temporary deductible differences, for tax losses carried

forward and unused tax credits only to the extent that realisation

of the related tax benefit is

probable.

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Breakdown of certain net deferred tax asset positions by jurisdiction

2019

2018

Italy

181

189

Philippines

7

Slovakia

1

189

189

The table above include a breakdown of certain net deferred tax asset positions by jurisdiction for

which the utilisation of the deferred tax asset is dependent on future taxable profits in excess of the

profits arising from the reversal of existing taxable temporary differences

whilst the related entities

have incurred losses in either the current or the preceding year.

Statement of profit or loss – Tax

ation

Taxation

by type

Netherlands

International

Total

2019

2018

2017

2019

2018

2017

2019

2018

2017

Current taxation

488

587

488

1,481

1,264

1,527

1,970

1,851

2,015

Deferred taxation

–51

151

324

–267

114

200

–318

265

524

437

738

812

1,214

1,379

1,727

1,652

2,116

2,539

Reconciliation of the weighted average statutory income tax rate

to

ING Group’s effective income tax rate

2019

2018

2017

Result before tax

from continuing operations

5,653

6,986

8,085

Weighted average

statutory tax rate

25.8%

25.8%

27.5%

Weighted average

statutory tax amount

1,459

1,803

2,226

Participation exemption

–49

–77

–45

Other income not subject to tax

–76

–70

–74

Expenses not deductible for tax purposes

237

346

156

Impact on deferred tax from change in tax rates

–57

50

55

Deferred tax benefit from previously unrecognised

amounts

–4

Current tax from previously

unrecognised amounts

48

28

66

Write-off/reversal

of deferred tax assets

2

4

2

State and local taxes

72

25

47

Adjustment to prior periods

16

7

110

Effective tax amount

1,652

2,116

2,539

Effective tax rate

29.2%

30.3%

31.4%

The weighted average statutory tax rate

in 2019 is equal to the rate of 25.8% in 2018. The

weighted average statutory tax rate

in 2018 is lower compared to 2017, due to a decrease in

statutory income tax rates in the USA and Belgium in that year.

The effective tax rate of 29.2% in 2019 is higher than the weighted average statutory tax rate. This

is mainly caused by a high amount of expenses non-deductible for tax purposes with respect to

interest on additional Tier 1 securities and non-deductible bank tax in the Netherlands and

regulatory expenses non-deductible for tax purposes in some other European countries.

The effective tax rate of 30.3% in 2018 is significantly

higher than the weighted average statutory

tax rate. This is mainly caused by a high amount of expenses non-deductible for tax purposes (tax

amount: EUR 346 million).

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This relatively high amount of non-deductible expenses is caused by the EUR 775 million

settlement agreement reached with the Dutch Public Prosecution Service (tax amount: EUR 194

million).

The effective tax rate in 2017 was with 31.4% significantly

higher than the weighted average

statutory tax rate. This was caused by the following items:

◾

A relatively high amount of prior period tax adjustments which ING, for the most part is

reimbursed by NN Group (reimbursement is included in the result

before tax), recognised under

‘Adjustment to prior periods’;

◾

Impact on deferred tax positions following changes in the income tax rate in the USA and

Belgium, recognised under ‘Impact on deferred tax from change in tax rates’;

and

◾

The recapture of previously

deducted UK tax losses in the Netherlands due to increased

profitability in the United Kingdom, recognised under ‘Current tax from previously unrecognised

amounts’.

Equity – Other comprehensive

income

Income tax related to components of other comprehensive income

2019

2018

1

2017

Unrealised revaluations

financial assets at fair value through other comprehensive

income and other revaluations

11

90

103

Realised gains/losses transferred

to the statement of profit or loss

(reclassifications from equity to profit or loss)

12

23

20

Changes in cash flow hedge reserve

–199

–76

167

Remeasurement of the net defined benefit asset/liability

–14

–12

–25

Changes in fair value of own credit risk of financial liabilities at fair value through

profit or loss

7

–33

Exchange rate differences and

other

7

–18

–12

Total

income tax related to components of other comprehensive

income

–176

–25

253

1

The prior period has been updated to improve consistency and comparability.

Tax

Contingency

The contingent liability (also disclosed in note 45 ‘Contingent liabilities’) in connection with taxation

in the Netherlands refers to a possible obligation arising from the deduction from Dutch taxable

profit of losses incurred by ING Bank in the United Kingdom in previous years. The existence of this

obligation will be confirmed

only by the occurrence of future profits in the United Kingdom.

38 Fair

value

of assets

and liabilities

a) Financial assets and liabilities

The following table presents the estimated fair values of ING Group’s financial assets and liabilities.

Certain items per the statement of financial position

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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Fair value of financial assets and liabilities

Estimated fair value

Statement of financial

position value

2019

2018

2019

2018

Financial assets

Cash and balances with central banks

53,202

49,987

53,202

49,987

Loans and advances to banks

35,133

30,549

35,136

30,422

Financial assets at fair value through profit or loss

–

Trading

assets

49,254

50,152

49,254

50,152

–

Non-trading derivatives

2,257

2,664

2,257

2,664

–

Assets mandatorily as at fair value through profit or loss

41,600

64,783

41,600

64,783

–

Assets designated as at fair value through profit or loss

3,076

2,887

3,076

2,887

Financial assets at fair value through other comprehensive

income

–

Equity securities

2,306

3,228

2,306

3,228

–

Debt securities

30,483

25,616

30,483

25,616

–

Loans and advances

1,680

2,379

1,680

2,379

Securities at amortised cost

46,928

47,815

46,108

47,276

Loans and advances to customers

621,194

602,841

608,029

589,653

Other assets

1

5,854

7,397

5,854

7,397

892,966

890,299

878,985

876,444

Financial liabilities

Deposits from banks

35,086

37,631

34,826

37,330

Customer deposits

575,055

556,127

574,355

555,729

Financial liabilities at fair value through profit or loss

–

Trading

liabilities

28,042

31,215

28,042

31,215

–

Non-trading derivatives

2,215

2,299

2,215

2,299

–

Designated as at fair value through profit or loss

47,684

59,179

47,684

59,179

Other liabilities

2

9,776

12,117

9,776

12,117

Debt securities in issue

118,844

119,893

118,528

119,751

Subordinated loans

17,253

13,519

16,588

13,724

833,956

831,980

832,014

831,345

1

Other assets do not include, among others: (deferred) tax assets, net defined

benefit asset, inventory, property development

and property obtained from foreclosures.

2

Other liabilities do not include, among others: (deferred) tax liabilities, net defined

benefit and related employee benefit

liabilities, reorganisation and other provisions, other taxation, social security contributions and lease liabilities.

Valuation Methods

The estimated fair values represent the price that would be

received to sell an asset or paid to

transfer a liability in an orderly transaction between market participants at the measurement date.

It is a market-based measurement, which is based on assumptions that market participants would

use and takes into account the characteristics of the asset or liability that market participants

would take into account when pricing the asset or liability. Fair values of financial assets and

liabilities are based on quoted prices in active market where available. When such quoted prices are

not available, the fair value is determined by using valuation techniques.

ING uses unadjusted quotes where available. Unadjusted quoted prices are primarily obtained from

exchange prices for listed financial instruments. Where an exchange price is not available, quoted

market prices in active markets may be obtained from independent market vendors, brokers, or

market makers. In general, positions are valued at the bid price for a long position and at the offer

price for a short position or are valued at the price within the bid-offer spread that is most

representative

of fair value at the date of valuation.

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 various valuation models, where relevant

pricing factors including the market price of underlying reference instruments, market parameters

(e.g. volatilities, correlations and credit

ratings), and customer behaviour are taken into account.

ING maximises the use of market observable inputs and minimises the use of unobservable input in

determining the fair value. The fair value can be subjective dependent on the significance of the

unobservable input to the overall valuation. All valuation techniques used are

subject to internal

review and approval.

Data used in these valuation techniques are validated on a daily basis when

possible.

When a group of financial assets and financial

liabilities are managed on the basis of their net risk

exposures, are measured

the fair value of a group of financial assets or liabilities on net portfolio

level.

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Control framework

To

determine whether the valuations based upon data inputs have led to an appropriate fair value,

the process of independent price verification (‘IPV’) or price testing is applied. This is done to ensure

the appropriate reflection of these valuations in balance sheet and the profit

and loss accounts. IPV

tests and confirms the reliability of the market data used in these valuations and

can lead to

adjustments in valuation. The IPV process is performed at least monthly or more frequently

depending on the nature of the market or trading activity. Multiple data sources are used to the

extent that such prices are available and taking into account cost-benefit ratio of retrieving such

prices. Valuation differences between

primary and secondary source data are assessed. When

differences resulting from

price testing exceed pre-approved

thresholds, adjustments to the profit

and loss shall be made. Differences and adjustments must be assessed individually, approved by

the Local Parameter

Committee, and reported back in the meeting minutes. In case a material

difference in value is found through the IPV process,

it must be fully understood what the

underlying cause is for the difference, and if a systematic change is required (e.g.

change of

source). Pricing and price testing is applied at individual trade level and is organised

at a desk level.

Valuation processes

are governed by various governance

bodies, which include Local Parameter

Committees (LPC), Global Price Testing

and Impairment Committee (GP&IC), Market Data

Committee (MDC), Trading

Pricing Model Committee (TPMC). All relevant committees meet on a

quarterly basis or more frequent as required.

Key valuation controls including product approval

process (PARP),

IPV, valuation adjustments, and model use is monitored.

The Global Price Testing

and Impairment Committee is responsible for the oversight and the

approval of the outcome of

impairments (other loan loss provisions) and valuation-

(price-testing)

processes It oversees the quality and coherence

of valuation methodologies and processes.. The

TMPC is responsible for validating the appropriate models. Local

Parameter Committees monitor

the appropriateness of (quoted) pricing, any other relevant market info, as well as that of pricing

models themselves related to the fair valued positions to which they are applied. LPC executes

valuation methodology and processes at a local level. The Market Data Committee approves

and

reviews all pricing inputs for the calculation of market parameters.

Valuation Adjustments

Valuation adjustments are

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

value to provide better estimation of market exit value on measurement date. ING considers

various valuation adjustments to arrive at the fair value including Bid-Offer adjustments, Credit

Valuation Adjustments (CVA),

Debt Valuation Adjustments (DVA),

Model Risk Adjustments,

Collateral Valuation

Adjustment (CollVA),

Funding Valuation

Adjustment (FVA) and Exceptional

Valuation Adjustments. The combination of Credit Valuation

adjustment and Debt Valuation

adjustment for derivatives is called Bilateral Valuation

Adjustment (BVA).

◾

Bid-Offer adjustments are required to adjust mid-market values to appropriate bid or offer value

in order to best represent the exit value,

and therefore fair value.

It is applicable to financial

assets and liabilities that are valued at mid-price initially. In practice this adjustment accounts for

the difference in valuation from mid to bid and mid to offer for long and short exposures

respectively. In principle assets are valued at the bid prices and liabilities are valued at the offer

price. For certain assets or liabilities, where market quoted price is not available, the price within

the bid-offer spread that is most representative of fair value is used.

◾

Bilateral Valuation

Adjustment (BVA)

is the valuation component for the counterparty credit risk

of the derivative contracts. It has bilateral nature, where

both counterparty’s credit risk and ING’s

own credit risks is taken into account. The calculation is based on the estimation of the expected

exposure, the counterparties’ risk of default, and taking into account the collateral agreements

as well as netting agreements. The counterparties’ risk of default is measured by probability of

default and expected loss given default, which is based on market information including credit

default swap (CDS) spread. Where counterparty CDS spreads are

not available, relevant proxy

spreads are used. Additionally, wrong-way risk (when exposure

to a counterparty is increasing

and the credit quality of that counterparty deteriorates) and right-way risk (when exposure to a

counterparty is increasing and the credit quality of that counterparty improves) are

included in

the adjustment.

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◾

ING applies Debt Valuation Adjustment (DVA)

to own issued financial liabilities

that are measured

at fair value through profit or loss, if the credit risk component has not been included in the

prices. In the DVA

calculation, the default probability of the institution are estimated based on

the ING Funding spread.

◾

Model risk adjustments reduce the risk of possible financial

losses resulting from the use of a mis-

specified, misapplied,

or incorrect implementation of a model.

◾

Collateral Valuation

Adjustment (CollVA)

is a derivative valuation adjustment capturing specific

features of CSA (Credit Support Annex) with a counterparty that the regular valuation framework

does not capture. Non-standard CSA features

may include deviations in relation to the currency

in which ING posts or receives collateral, deviations in remuneration

rate on collateral which may

pay lower or higher rate than overnight rate

or even no interest at all. Other deviations can be

posting securities rather than cash as collateral.

◾

ING applies an additional ‘Funding Valuation

Adjustment’ (FVA) to address

the funding costs

associated with the

collateral funding asymmetry on uncollateralized or partially collateralized

derivatives in the portfolio. This adjustment is based on the expected exposure profiles of the

uncollateralized or partially collateralized OTC

derivatives and market-based funding spreads.

◾

Exceptional Valuation

Adjustments - Exceptional valuation adjustments are valuation

adjustments of temporary nature and are subject to approval

of GP&IC.

The following methods and assumptions were used by ING Group to estimate the fair value of the

financial instruments:

a.1) Financial assets

Cash and balances with central banks

The carrying amount of cash approximates its fair value.

Loans and advances to 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 including appropriate spreads offered for

receivables with similar characteristics, similar to

Loans and advances to customers described below.

Financial assets at fair value through profit or loss, Financial assets at fair value through other

comprehensive income and Securities at amortised cost

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

principal techniques used to value these instruments are based on (amongst others) discounted

cash flows option pricing models and Monte Carlo simulation. These valuation models calculate the

present value of expected future cash

flows, based on ‘no-arbitrage’ principles. These models are

commonly used in the financial

industry. Inputs to valuation models are determined from

observable market data where possible. Certain inputs may not be observable in the market, but

can be determined from observable prices via valuation model calibration procedures.

The inputs

used include for example prices available from exchanges, dealers, brokers or providers

of pricing,

yield curves, credit spreads, default rates,

recovery rates,

dividend rates, volatility of underlying

interest rates, equity prices, and foreign

currency exchange rates. These inputs are

determined

with reference

to quoted prices, recently executed trades, independent market quotes and

consensus data, where available.

For uncollateralised OTC

derivatives, ING applies Credit Valuation

Adjustment to correctly reflect the

counterparty credit risk in the valuation. See section CVA/DVA/BVA

for more details regarding

the

calculation.

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Equity securities

The fair values of publicly traded 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. The quoted prices from

non-exchange sources are assessed to determine if they

are tradable prices. This distinction determines where it falls in the fair value hierarchy.

If quoted prices in an active market are not available, fair value is based on an analysis of available

market inputs, which may include consensus prices 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.

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 the fair value.

The fair value of other

loans is estimated by discounting expected future cash flows

using a discount rate that reflects

credit risk, liquidity, and other current market conditions. The fair value of mortgage loans is

estimated by taking into account prepayment behaviour.

Loans with similar characteristics are

aggregated for calculation purposes.

Other assets

The other assets are stated at their carrying value which is not significantly different from their fair

value.

a.2) Financial liabilities

Deposits from 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

The carrying values of customer deposits with an immediate on demand features approximate

their fair values. The fair values of deposits with fixed contractual terms 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 or loss

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

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

those securities not actively traded,

fair values are estimated based on internal discounted cash flow valuation techniques using

interest rates and credit

spreads that apply to similar instruments. Reference is made to Financial

assets at fair value through profit or loss above.

Other liabilities

The other liabilities are stated at their carrying value which is not significantly different from their

fair value.

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Debt securities in issue

The fair value of debt securities in issue 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.

Subordinated loans

The fair value of publicly traded subordinated loans are

based on quoted market prices when

available. Where no quoted market prices are

available, fair value of the subordinated loans is

estimated using discounted cash flows based on interest rates and credit spreads that apply to

similar instruments.

a.3) Fair value hierarchy

ING Group has categorised its financial instruments that are either measured in the statement of

financial position at

fair value or of which the fair value is disclosed, into a three level

hierarchy

based on the priority of the inputs to the valuation. The fair value hierarchy gives the highest

priority to (unadjusted) quoted prices in active markets for identical assets or liabilities and the

lowest priority to valuation techniques supported by 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 on

(unadjusted) quoted prices in an active market (Level 1), valuation techniques with observable

inputs (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 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.

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

market. Unobservable inputs may include volatility, correlation, spreads to discount rates, default

rates and recovery

rates, prepayment rates,

and certain credit spreads. Transfers

into and transfers

out of fair value hierarchy

levels are made on a quarterly basis.

Level 1 – (Unadjusted) quoted prices in active markets

This category includes financial

instruments whose fair value is determined directly by reference to

(unadjusted) quoted prices in an active market that ING Group can access. A financial

instrument is

regarded as quoted in an active market if quoted prices are readily

and regularly available from an

exchange, dealer markets, brokered markets, or principal to principal markets. Those prices

represent actual and regularly occurring market transactions with sufficient frequency and volume

to provide pricing information on an ongoing basis. Transfers

out of Level 1 into Level

2 or Level 3

occur when ING Group establishes that markets are no longer active and therefore

(unadjusted)

quoted prices no longer provide reliable pricing information.

Level 2 – Valuation

technique supported by observable inputs

This category includes financial

instruments whose fair value is based on market observables other

than (unadjusted) quoted prices. The fair value for financial instruments

in this category can be

determined by reference to quoted prices for

similar instruments in active markets, but for which

the prices are modified based on other market observable external data or reference to quoted

prices for identical or similar instruments in markets that are not active. These prices can be

obtained from a third party pricing service. ING analyses how the prices are

derived and determines

whether the prices are liquid tradable prices or model based consensus prices taking various data

as inputs.

For financial instruments that do not have a reference price available, fair value is determined using

a valuation technique (e.g. a model), where inputs in the model are taken from

an active market or

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are observable, such as interest rates

and yield curves observable at commonly quoted intervals,

implied volatilities, and credit spreads.

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. The

notion of significant is particularly

relevant for

the distinction between Level 2 and Level

3 assets

and liabilities. ING Group has chosen to align the definition

of significant with

the 90% confidence

range as captured in the prudent value definition by EBA. Unobservable parameters are shifted

down and upwards to reach

this 90% confidence range. The same 90% confidence

range is applied

to model uncertainty. If the combined change in asset value resulting from the shift of the

unobservable parameters and the model uncertainty exceeds the threshold, the asset is classified

as Level

3. A value change below the threshold results in a Level

2 classification.

Valuation techniques used for Level

2 assets and liabilities range from discounting of cash flows to

various industry standard valuation models such as option pricing model and Monte Carlo

simulation model, 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.

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. An instrument in its entirety is classified as Level 3 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 to derive

a price that an unrelated,

informed buyer would purchase the asset or liability at.

Financial instruments at fair value

The fair values of the financial instruments were determined as follows:

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

Level 1

Level 2

Level 3

Total

2019

2018

2019

2018

2019

2018

2019

2018

Financial Assets

Financial assets at fair value through profit or loss

• Trading

assets

13,228

13,041

35,852

36,617

174

494

49,254

50,152

• Non-trading derivatives

2,249

2,636

8

27

2,257

2,664

• Assets mandatorily at fair value through profit or loss

22

141

40,196

63,601

1,381

1,042

41,600

64,783

• Assets designated as at fair value through profit or loss

203

147

1,628

1,665

1,244

1,075

3,076

2,887

Financial assets at fair value through other comprehensive

income

32,165

27,218

343

1,256

1,961

2,749

34,468

31,223

45,618

40,547

80,269

105,775

4,768

5,387

130,655

151,709

Financial liabilities

Financial liabilities at fair value through profit or loss

–

Trading

liabilities

1,446

5,706

26,401

25,387

195

122

28,042

31,215

–

Non-trading derivatives

2,105

2,219

110

80

2,215

2,299

–

Financial liabilities designated as at fair value through

profit or loss

1,081

1,166

46,419

57,305

184

708

47,684

59,179

2,527

6,872

74,924

84,911

490

910

77,942

92,693

In 2019, the decrease in financial assets mandatorily at fair value through profit or loss, mainly

relates to reverse

repurchase transactions for which the valuation technique is supported by

observable inputs.

In 2019

there were no significant transfers between level

1 and 2 and no significant changes

in

valuation techniques.

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Changes in Level 3 Financial assets

Trading

assets

Non-trading

derivatives

Financial assets

mandatorily at FVPL

Financial assets

designated at FVPL

Financial assets

at FVOCI

Total

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

Opening balance

494

1,104

27

85

1,042

1,075

365

2,749

480

5,387

2,034

Effect of change in accounting policy due to the implementation of IFRS 9

1,653

–1

3,446

5,097

Realised gain/loss

recognised in the statement of profit or loss during the period

1

40

–54

–21

109

–63

10

–6

–20

–15

1

–66

45

Revaluation recognised

in other comprehensive income during the period

2

155

–131

155

–131

Purchase of assets

28

359

2

1,494

1,154

360

731

11

85

1,893

2,331

Sale of assets

3

–53

–120

–3

–166

–832

–1,677

–212

–680

–557

–1,780

–2,521

Maturity/settlement

3

–11

–42

–461

–78

–35

–212

–330

–719

–450

Reclassifications

–279

279

3

2

4

2

Transfers

into Level 3

26

85

4

9

63

–0

103

85

Transfers

out of Level 3

–72

–839

–88

–37

–53

–249

–214

–1,125

Exchange rate differences

1

–1

17

1

3

1

20

Changes in the composition of the group and other changes

2

1

–1

3

–1

Closing balance

174

494

8

27

1,381

1,042

1,244

1,075

1,961

2,749

4,768

5,387

1

Net gains/losses were recorded as ‘Valuation

results and net trading income’ in the statement of profit or loss. The total

amounts includes EUR 43 million of unrealised gains and losses recognised in the statement of profit

or loss.

2

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

at fair value through other comprehensive income’.

3

Prior period of Financial assets at FVOCI has been updated to improve consistency and comparability.

In 2019 the amounts reported on the line reclassifications relate to syndicated loans reclassed

From

trading assets to financial assets mandatory at FVPL.

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Changes in Level 3 Financial liabilities

Financial liabilities designated as at fair

value through profit or loss

Trading

liabilities

Non-trading derivatives

Available-for-sale investments

2019

2018

2019

2018

2019

2018

2019

2018

Opening balance

122

1,073

80

68

708

101

910

1,242

Effect of change in accounting policy due to the implementation of IFRS 9

4

4

Realised gain/loss recognised in the statement of profit or loss

during the period

1

102

–67

–16

8

32

1

118

–58

Issue of liabilities

72

42

46

35

545

154

587

Early repayment of liabilities

–30

–87

–0

–10

–20

–40

–106

Maturity/settlement

–32

–37

–479

–11

–511

–49

Reclassifications

Transfers

into Level 3

13

39

49

92

62

131

Transfers

out of Level 3

–52

–844

–150

–202

–844

Exchange rate differences

–0

–0

–0

Changes in the composition of the group and other changes

2

2

Closing balance

195

122

110

80

184

708

490

910

1

Net gains/losses were recorded as ‘Valuation

results and net trading income’ in the statement of profit or loss. The total

amount includes EUR 115 million of unrealised gains and losses recognised in the statement

of profit or loss.

In 2019 and 2018, financial

liabilities mainly repo’s were transferred

out of Level

3 mainly due to

the valuation not being significantly impacted

by unobservable inputs.

Recognition of unrealised

gains and losses in Level

3

Amounts recognised in the statement of profit or loss relating to unrealised gains and losses during

the year that relates to Level

3 assets and liabilities are included in the line item ‘Valuation results

and net trading income’ in the statement of profit or loss.

Unrealised gains and losses that relate to ‘Financial assets at fair value through other

comprehensive income’ (2019 and 2018) are included in the Revaluation

reserve – Equity securities

at fair value through other comprehensive income

or Debt Instruments at fair value through other

comprehensive income (2019 and 2018).

Level 3 Financial

assets and liabilities

Financial assets measured at fair value in the statement of financial position as at 31 December

2019 of EUR 131 billion includes an amount of EUR 4.8 billion ( 3.6%) which is classified

as Level

3

(31 December 2018: EUR 5.4 billion, being 3.6%). Changes in Level 3 from 31 December 2018 to 31

December 2019 are detailed above in the table Changes in Level

3 Financial assets.

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Financial liabilities measured at fair value in the statement of financial position as at 31 December

2019 of EUR 78 billion includes an amount of EUR 0.5 billion ( 0.6%) which is classified

as Level

3 (31

December 2018: EUR 0.9 billion, being 1.0%). Changes in Level 3 from 31 December 2018 to 31

December 2019 are disclosed above in the table ‘Changes in Level

3 Financial liabilities’.

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

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

(ii)

quoted prices which have been adjusted to reflect that the market was not actively

trading at or

around the balance sheet date. Unobservable inputs are inputs which are based on ING’s own

assumptions about the factors that market participants

would use in pricing an asset or liability,

developed based on the best information available in the circumstances. Unobservable inputs may

include volatility, correlation, spreads to discount rates, default

rates and recovery

rates,

prepayment rates, and certain credit spreads.

Valuation techniques that incorporate

unobservable

inputs are sensitive to the inputs used.

Of the total amount of financial

assets classified

as Level 3 as at 31 December 2019 of EUR 4.8

billion (31 December 2018: EUR 5.4 billion), an amount of EUR 2.5 billion ( 52.6%) (31 December

2018: EUR 3.4 billion,

being 63.2%) is based on unadjusted quoted prices in inactive markets. As ING

does not generally adjust quoted prices using its own

inputs, there is no significant sensitivity to

ING’s own unobservable inputs.

Furthermore, Level

3 financial assets includes

approximately EUR 1.3 billion (31 December 2018:

EUR 1.1 billion) which relates to financial assets that are part of structures that are designed to be

fully neutral in terms of market risk. Such structures include various financial assets and liabilities

for which the overall sensitivity to market risk is insignificant. Whereas the fair value of individual

components of these structures may be determined using different techniques and the fair value

of each of the components of these structures may be sensitive to unobservable inputs, the overall

sensitivity is by design not significant.

The remaining EUR 1.0 billion (31 December 2018: EUR 0.8 billion) of the fair value classified

in Level

3 financial assets is

established using valuation techniques that incorporates certain inputs that are

unobservable.

Of the total amount of financial

liabilities classified

as Level 3 as at 31 December 2019 of EUR 0.5

billion (31 December 2018: EUR 0.9 billion),

an amount of EUR 0.2 billion (39.3%) (31 December

2018: EUR 0.7 billion, being 82.0%) is based on unadjusted quoted prices in inactive markets.

As ING

does not generally adjust quoted prices using its own inputs, there is no significant sensitivity to

ING’s own unobservable inputs.

Furthermore, Level

3 financial liabilities

includes approximately EUR 0.1 billion (31 December 2018:

EUR 0.1 billion) which relates to financial liabilities that are part of structures that are designed to

be fully neutral in terms of market risk. As explained above, the fair value of each of the

components of these structures may be sensitive to unobservable inputs, but the overall sensitivity

is by design not significant.

The remaining EUR 0.2 billion (31 December 2018: EUR 0.1 billion) of the fair value classified

in Level

3 financial liabilities

is established using valuation techniques that incorporates certain inputs that

are unobservable.

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

lower and upper range of such unobservable inputs, by type of Level

3 asset/liability. The lower and

upper range mentioned in the overview represent

the lowest and highest variance of the respective

valuation input as actually used in the valuation of the different financial

instruments. Amounts

and percentages stated are unweighted. The range

can vary from period to period subject to

market movements and change in Level

3 position. Lower and upper bounds reflect the variability

of Level

3 positions and their underlying valuation inputs in the portfolio, but do

not adequately

reflect their level of valuation uncertainty. For valuation uncertainty assessment, reference is made

to section Sensitivity analysis of unobservable inputs (Level 3)

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Valuation techniques and range of unobservable inputs (Level 3)

Assets

Liabilities

Valuation techniques

Significant unobservable inputs

Lower range

Upper range

2019

2018

2019

2018

2019

2018

2019

2018

At fair value through profit or loss

Debt securities

920

807

3

Price based

Price (%)

0%

0%

121%

105%

Net asset value

Price (%)

n/a

0%

n/a

0%

Present value techniques

Credit spread (bps)

n/a

131

n/a

131

Loan pricing model

Credit spread (bps)

n/a

n/a

n/a

n/a

Equity securities

146

162

1

Price based

Price

0

0

5,475

5,475

Loans and advances

1,576

1,047

15

Price based

Price (%)

0%

1%

104%

102%

Present value techniques

Price (%)

n/a

100%

n/a

100%

Credit spread (bps)

1

19

250

550

(Reverse) repo's

3

481

1

424

Present value techniques

Price (%)

4%

3%

4%

4%

Structured notes

184

284

Price based

Price (%)

83%

77%

124%

108%

Net asset value

Price (%)

n/a

n/a

n/a

n/a

Option pricing model

Equity volatility (%)

13%

13%

20%

34%

Equity/Equity correlation

0.6

0.6

0.8

0.9

Equity/FX correlation

-0.5

-0.7

0.3

0.5

Dividend yield (%)

2%

1%

4%

5%

Interest rate volatility

(%)

n/a

49

n/a

86

IR/IR correlation

n/a

0.8

n/a

0.8

Present value techniques

Implied correlation

n/a

(0.7)

n/a

0.7

Derivatives

–

Rates

13

57

68

39

Option pricing model

Interest rate volatility

(bps)

17

23

137

300

Interest rate correlation

n/a

0.8

n/a

0.8

IR/INF correlation

n/a

n/a

n/a

n/a

Present value techniques

Reset spread (%)

2%

2%

2%

2%

Prepayment rate (%)

n/a

n/a

n/a

n/a

Inflation rate (%)

n/a

n/a

n/a

n/a

Credit spread (bps)

n/a

46

n/a

46

–

FX

1

Present value techniques

Inflation rate (%)

n/a

n/a

n/a

n/a

Option pricing model

FX volatility (bps)

5

8

–

Credit

102

67

183

86

Present value techniques

Credit spread (bps)

2

8

11,054

364

Implied correlation

n/a

0.7

n/a

0.7

Jump rate (%)

12%

12%

12%

12%

Price based

Price (%)

n/a

n/a

n/a

n/a

–

Equity

42

68

50

54

Option pricing model

Equity volatility (%)

4%

4%

84%

94%

Equity/Equity correlation

-

0.2

-

0.9

Equity/FX correlation

-0.6

-0.80

0.6

0.5

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Valuation techniques and range of unobservable inputs (Level 3)

Assets

Liabilities

Valuation techniques

Significant unobservable inputs

Lower range

Upper range

2019

2018

2019

2018

2019

2018

2019

2018

Dividend yield (%)

0%

0%

13%

13%

–

Other

3

2

3

5

Option pricing model

Commodity volatility (%)

11%

12%

53%

79%

Com/Com correlation

0.3

0.3

0.9

0.9

Com/FX correlation

-0.5

-0.5

-0.3

-0.5

At fair value through other comprehensive

income

–

Debt

Price based

Price (%)

n/a

n/a

n/a

n/a

–

Loans and advances

1,680

2,379

Present value techniques

Prepayment rate (%)

6%

6%

6%

6%

–

Equity

282

317

Present value techniques

Credit spread (bps)

n/a

3.2

n/a

3.2

Inflation rate (%)

3%

3%

3%

3%

Price

1

-

187

-

Other

n/a

63

n/a

80

Total

4,768

5,387

490

910

Non-listed equity investments

Level

3 equity securities mainly include corporate investments, fund investments and other equity

securities which are not traded in active markets. In the absence of an active market, fair values are

estimated on the basis of the analysis of fund managers reports, company’s financial

position,

future prospects, and other factors, considering valuations of similar positions or by the reference

to acquisition cost of the position. For equity securities best market practice will be applied using

the most relevant valuation method.

All non-listed equity investments, including investments in private equity funds, are subject to

a standard review

framework which ensures that valuations reflect fair values.

Price

For securities where market prices are

not available fair value is measured by comparison with

observable pricing data from similar instruments. Prices of 0% are distressed to the point that no

recovery is expected, while prices significantly in excess of 100% or par are expected to pay a good

yield.

Credit spreads

Credit spread is the premium

above a benchmark interest rate, typically LIBOR or relevant

Treasury

instrument, required by the market participant to accept a lower credit quality. Higher credit

spreads indicate lower credit

quality and a lower value of an asset.

Volatility

Volatility is a measure

for variation of the price of a financial instrument

or other valuation input

over time. Volatility

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

volatility, the higher value of the option. Volatility varies

by the underlying reference (equity,

commodity, foreign currency and interest

rates), by strike, and maturity of the option. The

minimum level of volatility is 0% and there is no theoretical maximum.

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Correlation

Correlation is a measure

of dependence between two underlying references

which is relevant for

valuing derivatives and other instruments which have more than one underlying reference.

For

example, correlation between underlying equity names may be a relevant

input parameter for

basket equity option pricing models. High positive correlation (close to 1) indicates strong positive

(statistical) relationship between underlyings, implying they typically move in the same direction.

High negative correlation, on the other hand, implies that underlyings typically move in opposite

directions.

Interest rates

Examples of interest rate

related unobservable inputs are prepayment rates,

reset rates and

inflation rates.

Prepayment rate and reset

spread are key inputs to mortgage linked prepayment swaps valuation.

Prepayment rate is the estimated rate

at which mortgage borrowers will repay their mortgages

early, e.g. 5% per year.

Reset spread is the future spread

at which mortgages will re-price at

interest rate reset

dates.

Inflation rate is a key input to inflation

linked instruments. Inflation

linked instruments protect

against price inflation

and are denominated and indexed to investment units. Interest payments

would be based on the inflation index and

nominal rate in order to receive/pay

the real rate of

return. A rise in nominal coupon payments is a result of an increase in inflation expectations, real

rates, or both. As markets for these inflation linked derivatives are illiquid, the valuation parameters

become unobservable.

Dividend yield

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

a company is expected to pay out each year relative to its share price. Dividend yields are generally

expressed as an annualised percentage of share price.

Sensitivity analysis of unobservable inputs (Level

3)

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

and which have a more than insignificant impact on

the fair value of the instrument, the actual

value of those inputs at the balance date may be drawn from a range of reasonably

possible

alternatives. In line with market practice the upper and lower bounds of the range of alternative

input values reflect a 90% level of valuation certainty. The actual levels chosen for the

unobservable inputs in preparing the financial statements are consistent with the valuation

methodology used for fair valued financial instruments.

If ING had used input values from the upper and lower bound of this range of reasonably possible

alternative input values when valuing these instruments as of 31 December 2019, then the impact

would have been higher or lower as indicated below.

The purpose of this disclosure is to present the

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

instruments where

unobservable inputs are significant to the valuation.

As ING has chosen to apply a 90% confidence level for its IFRS valuation of fair valued financial

instruments, the downward valuation uncertainty has become immaterial, whereas the potential

upward valuation uncertainty, reflecting a potential profit, has increased.

In practice valuation uncertainty is measured and managed per exposure to individual valuation

inputs (i.e. risk factors) at portfolio level across different product categories. Where

the disclosure

looks at individual Level 3 inputs the actual valuation adjustments may also reflect the benefits

of

portfolio offsets.

Because of the approach taken, the valuation uncertainty in the table below is broken down by

related risk class rather than by product.

In reality some valuation inputs are interrelated

and it would be unlikely that all unobservable

inputs would ever be simultaneously at the limits of their respective ranges of reasonably

possible

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alternatives. Therefore it can

be assumed that the estimates in the table below show a greater fair

value uncertainty than the realistic position at year end assuming normal circumstances/normal

markets.

Also, this disclosure does not attempt to indicate or predict future fair value movement.

The

numbers in isolation give limited information as in most cases these Level 3 assets and liabilities

should be seen in combination with other instruments (for example as a hedge) that are classified

as Level

2.

The possible impact of a change of unobservable inputs in the fair value of financial

instruments at

fair value through other comprehensive income are

estimated to be immaterial.

Sensitivity analysis of Level 3 instruments

Positive fair value

movements from

using reasonable

possible alternatives

Negative fair value

movements from

using reasonable

possible alternatives

2019

2018

2019

2018

Fair value through profit or loss

Equity (equity derivatives, structured notes)

35

60

4

Interest rates (Rates

derivatives, FX derivatives)

40

43

Credit (Debt securities, Loans, structured

notes, credit derivatives)

10

39

85

142

–

4

Other financial instruments

The fair values of the financial instruments carried at amortised

cost in the statement of financial

position, but for which fair values are disclosed are determined as follows:

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Methods applied in determining fair values of financial

assets and liabilities (carried at amortised cost)

Level 1

Level 2

Level 3

Total

2019

2018

2019

2018

2019

2018

2019

2018

Financial Assets

Loans and advances to banks

1

728

445

11,469

7,152

20,570

20,742

32,767

28,339

Loans and advances to customers

1

165

138

12,622

14,656

588,063

567,016

600,850

581,810

Securities at amortised cost

43,784

43,550

2,304

3,024

840

1,242

46,928

47,815

44,677

44,132

26,395

24,832

609,473

589,000

680,545

657,964

Financial liabilities

Deposits from banks

1

128

23,900

24,433

6,589

7,314

30,490

31,875

Customer deposits

1

5,666

6,695

18,003

26,645

20,760

22,172

44,429

55,512

Debt securities in issue

57,563

47,985

42,638

52,194

18,642

19,713

118,844

119,893

Subordinated loans

14,552

10,840

2,701

2,679

17,253

13,519

77,781

65,648

87,243

105,951

45,992

49,199

211,016

220,799

1

Financial assets and liabilities that are on demand are excluded from the fair value hierarchy as their fair value approximates the carrying value.

b) Non-financial assets and liabilities

ING Group’s non-financial assets comprise Investments in associates and joint ventures, Property in

own use, Investment property as included in the statement of financial position

in the line items

Investments in associates and joint ventures, Property and equipment, and Other assets

respectively.

Investments in associates and joint ventures are

accounted for using the equity method. For

further information, reference is made to Note 8 ’Investments in associates and joint ventures’.

Other non-financial

assets (Property in own use, and Investment properties) are recognised

at fair

value at the balance sheet date.

As at 31 December 2019, the estimated fair value of Property in own use and Investment property

amounts to EUR

757 million (2018: EUR 780 million) and EUR

46 million (2018: EUR 54 million)

respectively and is categorised as Level

3 of the fair value hierarchy on the basis of methods

applied in determining the fair values.

Amounts recognised in the statement of profit or loss relating to unrealised gains and losses during

the year that relate to Level

3 non-financial

assets are included in the statement of profit or loss as

follows:

◾

Impairments on Property in own use are included in Other operating expenses - Impairments and

reversals on property and equipment and intangibles ; and

◾

Changes in the fair value of Investment property are included in Investment income.

Unrealised gains and losses on Property in own use are included in the Revaluation

reserve –

Property

in own use reserve.

For amounts recognised in the Statement of profit or loss and other changes in non-financial

assets

during the year, reference is made to Note 9 ‘Property and equipment’ and Note 11 ‘Other assets’.

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As at 31 December 2019, ING Group has no non-financial liabilities

measured at fair value (2018:

none).

39 Derivatives

and hedge

accounting

Use of derivatives

ING Group uses derivatives for economic hedging purposes to manage its asset and liability

portfolios and structural risk positions. The primary objective of ING Group’s hedging activities is to

manage the risks which arises from structural imbalances in the duration and other profiles of its

assets and liabilities. The objective of economic hedging is to enter into positions with an opposite

risk profile to an identified

risk exposure to reduce that exposure.

The main risks which are being

hedged are interest rate

risk and foreign currency exchange rate

risk. These risks are primarily

hedged with interest rate swaps cross

currency swaps and foreign exchange forwards/swaps.

ING Group uses credit derivatives to manage its economic 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 these credit

derivatives.

Hedge accounting

Derivatives that qualify for hedge accounting under IFRS are classified and accounted for in

accordance with the nature of the instrument hedged and the type of IFRS hedge model that is

applicable. The three models applicable under IFRS are: fair value

hedge accounting, cash flow

hedge accounting, and hedge accounting of a net investment in a foreign operation. How and to

what extent these models are applied are described under the relevant headings below.

The

company’s detailed accounting policies for these three hedge models are set out in paragraph

1.6

‘Financial instruments’ of Note 1 ‘Basis of preparation and accounting policies’.

IBOR transition

Following the decision by global regulators to seek alternatives for current

critical benchmarks in

use in various jurisdiction in order to comply with the EU Benchmarks Regulation, the IBOR

transition program

of ING was initiated in 2018 to prepare the Group

for the reform.

Reference is made to note Risk management/ IBOR Transition

for more information on to what

rates ING is exposed and on how ING is managing the transition to alternative benchmark rates.

At the reporting date, ING Group assessed the extent to which hedge relationships are subject to

uncertainties driven by the IBOR reform.

ING applies fair value and cash flow hedge accounting in accordance with IAS 39, and interest rate

and foreign currency risks are

designated as hedged risks in various micro and macro models.

Except for EONIA and EUR LIBOR all IBOR’s in scope of ING’s program

are a component of either

hedging instrument and/or hedged item where the interest rate

and/or foreign currency

risk are

the designated hedged risk. The hedged exposures are mainly loan portfolio’s, issued debt

securities and purchased debt instruments.

ING Group early adopted the amendments to IAS 39 issued in September 2019 to these hedging

relationships directly affected by IBOR reform. This excludes EURIBOR hedges as EURIBOR is

Benchmarks Regulation compliant.

LIBOR indexed fair value and cash flow hedges are expected to be directly affected by the

uncertainties arising from the IBOR reform. In particular, uncertainties over the timing and amount

of the replacement rate may impact the effectiveness and highly probable assessment.

For these affected fair value and cash flow hedge relationships ING Group assumes that the LIBOR

based cash flows from the hedging instrument and hedged item will remain unaffected.

The same assumption is used while assessing the likelihood of occurrence of the forecast

transaction that are subject to cash flow hedges. The cash flow

hedges directly impacted by the

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IBOR reform still meet the highly probable requirement

assuming the respective LIBOR benchmark

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

The following table contains details of the gross notional amounts of hedging instruments as at 31

December 2019 that are used in the Group's hedge accounting relationships for which the

amendments to IAS39 were applied:

Hedging instruments in EUR

Benchmark

Notional

Amount

USD LIBOR

45,496

GBP LIBOR

2,184

JPY LIBOR

2,922

CHF LIBOR

313

Approximately 68% of the above notional amounts have a maturity date beyond 2021.

The notional amounts of the derivative hedging instruments (in above table) provide a close

approximation of the extent of the risk exposure ING manages through these hedging relationships.

Fair value hedge

accounting

ING Group’s fair value hedges principally consist of 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. ING Group’s approach to manage market risk, including interest

rate risk, is discussed in ‘Risk

management –Market risk’. ING Group’s exposure to interest rate

risk is disclosed in paragraph

‘Interest rate risk in banking book’.

By using derivative financial instruments

to hedge exposures to changes in interest rates, ING

Group also exposes itself to credit risk of the derivative counterparty, which is not offset by the

hedged item. ING Group minimises counterparty credit risk in derivative instruments by clearing

most of the derivatives through Central

Clearing Counterparties. In addition ING Group only enters

into transactions with high-quality counterparties and requires posting collateral.

ING Group applies fair value hedge accounting on micro level

in which one hedged item is hedged

with one or multiple hedging instruments. Micro fair value hedge accounting is mainly applied on

issued debt securities and purchased debt instruments for hedging interest rate risk.

Before fair value hedge accounting is applied by ING Group, ING Group

determines whether an

economic relationship between the hedged item and the hedging instrument exists based on an

evaluation of the quantitative characteristics of these items and the hedged risk that is supported

by quantitative analysis. ING Group considers whether the critical terms of the hedged item and

hedging instrument closely align when assessing the presence of an economic relationship. ING

Group evaluates whether the fair value of the hedged item and the hedging instrument respond

similarly to similar risks. In addition ING is mainly using regression analysis to assess whether the

hedging instrument is expected to be and has been highly

effective in offsetting

changes in the fair

value of the hedged item.

ING Group uses the following derivative financial instruments in a fair value hedge accounting

relationship:

Gross carrying value of derivatives designated under fair value hedge accounting

Assets

2019

Liabilities

2019

Assets

2018

Liabilities

2018

As at 31 December

Hedging instrument on interest rate

risk

– Interest rate swaps

5,133

5,486

3,222

4,085

– Other interest derivatives

87

70

78

65

The derivatives used for fair value hedge accounting are included in the statement of financial

position line-item ‘Financial assets at fair value through profit or loss – Non-trading derivatives’ for

EUR

524 million (2018: EUR: 650 million) respectively ‘Financial liabilities at fair value through profit

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or loss – Non-trading derivatives’ EUR 873 million (2018: EUR 1,035 million). The remaining

derivatives

are offset with other derivatives and collaterals paid or received.

For our main currencies the average

fixed rate for interest rate swaps used in fair value hedge

accounting are 2.98% (2018: 1.76%)for EUR and 3.55% (2018: 3.38%) for USD.

The following table shows the net notional amount of derivatives designated in fair value hedging,

split into the maturity of the instruments. The net notional amounts presented in the table are a

combination of payer (-) and receiver (+) swaps.

Maturity derivatives designated in fair value hedging

As at 31 December 2019

Less

than 1

month

1 to 3

months

3 to 12

months

1 to 2

year

2 to 3

years

3 to 4

years

4 to 5

years

>5 years

Total

Hedging instrument on

interest rate risk

– Interest rate swaps

–59

612

6,394

12,936

7,637

7,195

3,266

16,494

54,475

– Other interest

derivatives

–20

–22

58

–242

–404

–290

–44

1,075

110

As at 31 December 2018

Hedging instrument on

interest rate risk

• Interest rate swaps

467

511

869

13,531

8,826

6,806

8,337

9,983

49,331

– Other interest

derivatives

–11

–53

–101

–55

–228

–325

–325

–51

–1,148

Gains and losses on derivatives designated under fair value hedge accounting are recognised in the

statement of profit or loss. The effective portion

of the fair value change on the hedged item is also

recognised in the statement of profit or loss. As a result, only the net accounting ineffectiveness

has an impact on the net result.

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Hedged items included in a fair value hedging relationship

Carrying amount of the hedged items

Accumulated amount of fair value hedge

adjustment on the hedged item included in

the carrying amount of the hedged item

Change in fair value

used for measuring

ineffectiveness for the

period

Change in fair value

hedge instruments

Hedge ineffectiveness

recognised in the

statement of profit or

loss gain (+) / loss (-)

Assets

Liabilities

Assets

Liabilities

As at 31 December 2019

– Amounts due from banks

–0

– Debt securities at fair value through other comprehensive

income

23,281

n/a

357

– Loans at FVOCI

n/a

– Loans and advances to customers

959

75

31

– Debt instruments at amortised cost

6,133

429

356

– Debt securities in issue

62,236

2,706

–1,018

– Subordinated loans

14,970

261

–201

– Amounts due to banks

8,783

38

1

– Customer deposits and other funds on deposit

299

2

–12

– Discontinued hedges

688

7

Total

30,373

86,288

1,192

3,014

–487

504

18

As at 31 December 2018

Interest rate risk

– Amounts due from banks

–1

– Debt securities at fair value through other comprehensive

income

18,471

n/a

1

– Loans at FVOCI

–0

n/a

– Loans and advances to customers

2,909

273

–134

– Debt instruments at amortised cost

16,843

687

–91

– Debt securities in issue

55,081

1,659

53

– Subordinated loans

12,799

53

57

– Amounts due to banks

17,717

55

–52

– Customer deposits and other funds on deposit

193

–0

–11

– Discontinued hedges

272

Total

38,223

85,790

1,232

1,767

–176

185

8

The main sources of ineffectiveness are:

◾

differences in maturities of the hedged item(s) and hedging instrument(s);

◾

different interest rate

curves applied to discount the hedged item(s) and hedging instrument(s);

◾

differences in timing of cash flows of the hedged item(s) and hedging instrument(s).

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2019 ING Group Annual Report on Form 20-F

F - 108

Additionally, for portfolio (macro) fair value hedges of ING Group’s fixed rate mortgage portfolio,

ineffectiveness also arises from the disparity between expected and actual prepayments

(prepayment risk).

There were no other sources

of ineffectiveness in these hedging relationships.

Cash flow hedge accounting

ING Group’s cash flow hedges mainly consist of interest rate swaps and cross-currency

swaps that

are used to protect against the exposure to variability in future 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 variables including estimates of prepayments. These projected cash flows form the basis for

identifying the notional amount subject to interest rate risk or foreign currency exchange rate

risk

that is designated under cash flow hedge accounting.

ING Group’s approach to manage market risk, including interest rate

risk and foreign currency

exchange rate risk, is discussed in ‘Risk management – Credit risk and Market risk’. ING Group

determines the amount of the exposures to which it applies hedge accounting by assessing the

potential impact of changes in interest rates and foreign currency exchange rates

on the future

cash flows from its floating-rate assets and liabilities. This

assessment is performed using analytical

techniques.

As noted above for fair value hedges, by using derivative financial instruments to hedge exposures

to changes in interest rates and foreign currency

exchange rates, ING Group exposes itself to credit

risk of the derivative counterparty, which is not offset by the hedged

items. This exposure is

managed similarly to that for fair value hedges.

Gains and losses on the effective portions

of derivatives designated under cash flow hedge

accounting are recognised in Other Comprehensive

Income. Interest cash flows on these

derivatives are recognised

in the statement of profit or loss in ‘Net interest income’ consistent with

the manner in which the forecasted cash flows affect net

result. The gains and losses on ineffective

portions of such derivatives are recognised immediately in the statement of profit or loss in

‘Valuation results

and net trading income’.

ING Group determines an economic relationship between the cash flows of the hedged item and

the hedging instrument based on an evaluation of the quantitative characteristics of these items

and the hedged risk that is supported by quantitative analysis. ING Group considers whether the

critical terms of the hedged item and hedging instrument closely align when assessing the

presence of an economic relationship. ING Group

evaluates whether the cash flows of the hedged

item and the hedging instrument respond similarly to the hedged risk, such as the benchmark

interest rate of foreign

currency. In addition (for macro FX hedging relationships) a regression

analysis is performed to assess whether the hedging instrument is expected

to be and has been

highly effective in offsetting

changes in the fair value of the hedged item.

ING Group uses the following derivative financial instruments in a cash flow

hedge accounting

relationship:

Gross carrying value of derivatives used for cash flow hedge accounting

Assets

Liabilities

Assets

Liabilities

2019

2019

2018

2018

As at 31 December 2019

Hedging instrument on interest rate

risk

– Interest rate swaps

2,615

2,848

5,757

3,664

Hedging instrument on combined interest and FX rate

risk

– Cross currency interest

rate derivatives

358

158

204

154

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F - 109

The derivatives used for cash flow hedge accounting are included in the statement of financial

position line-item ‘Financial assets at fair value through profit or loss – Non-trading derivatives’ EUR

677 million (2018: EUR

1,012 million) respectively ‘Financial liabilities at fair value through profit or

loss – Non-trading derivatives’ EUR

339 million (2018: EUR

458 million). The remaining derivatives

are offset with other derivatives and collaterals paid or received.

For the main currencies the average

fixed rate for interest rate swaps used in cash flow hedge

accounting are 0.54% (2018: 1.21%)for EUR, 2.38% (2018: 2.53%)for PLN, 2.51% (2018: 2.49%) for

USD and 1.50% (2018: 1.97%) for AUD. The average currency exchange

rates for cross currency

swaps used in cash flow hedge accounting is for EUR/USD

1.11 (2018: 1.14) and for EUR/AUD 1.55

(2018: 1.52).

The following table shows the net notional amount of derivatives designated in cash flow hedging

split into the maturity of the instruments. The net notional amounts presented in the table are a

combination of payer (+) and receiver (-) swaps.

Maturity derivatives designated in cash flow hedging

As at 31 December 2019

Less than

1

month

1 to 3

months

3 to 12

months

1 to 2

year

2 to 3

years

3 to

4

years

4 to 5

years

>5 years

Total

Hedging instrument on

interest rate risk

– Interest rate swaps

–401

580

–2,591

–6,512

–5,541

–5,788

–5,364

–23,009

–48,627

Hedging instrument on

combined interest and FX

rate risk

– Cross currency interest

rate derivatives

–1,098

–2,068

–5,044

–2,509

–1,473

3

104

–12,086

As at 31 December 2018

Hedging instrument on

interest rate risk

– Interest rate swaps

–107

–2,546

–7,107

–5,591

–9,883

–7,928

–8,980

–29,629

–71,771

Hedging instrument on

combined interest and FX

rate risk

– Cross currency interest

rate derivatives

5

48

–601

–4,461

–5,622

–2,647

–793

–239

–14,311

The following table shows the cash flow hedge accounting impact on profit

or loss and

comprehensive income:

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Cash flow hedging – impact of hedging instruments on

the statement of profit or loss and other comprehensive income

Change in value used

for calculating hedge

ineffectiveness for the

period

Carrying amount

cash flow hedge

reserve at the end of

the reporting period

Amount reclassified

from CFH reserve to

profit or loss

Cash flow is no

longer expected

to occur

Change in value of

hedging instrument

recognised in OCI

Hedge ineffectiveness

recognised in the

statement of profit or

loss, gain (+) / loss (-)

As at 31 December 2019

Interest rate risk on;

– Floating rate lending

–940

1,395

357

– Floating rate borrowing

133

–198

–201

– Other

–211

169

53

– Discontinued hedges

316

–112

Total

interest rate risk

–1,018

1,682

97

851

44

Combined interest and FX rate

risk on;

– Floating rate lending

–22

–42

–498

– Floating rate borrowing

12

15

–12

–1

– Other

1

–1

–4

– Discontinued hedges

–3

Total

combined interest and Fx

–10

–28

–517

–1

475

3

Total

cash flow hedge

–1,028

1,654

–420

–1

1,326

47

As at 31 December 2018

Interest rate risk on;

– Floating rate lending

–540

730

280

–2

– Floating rate borrowing

51

5

–47

– Financial assets at FVOCI

– Highly probable forecast

transaction

– Other

–72

101

34

– Discontinued hedges

–25

2

Total

interest rate risk

–561

836

242

–1

231

–18

Combined interest and FX rate

risk on;

– Floating rate lending

53

–60

–377

– Floating rate borrowing

–35

47

–1

– Financial assets at FVOCI

– Highly probable forecast

transaction

– Other

–0

–1

– Discontinued hedges

Total

combined interest and Fx

18

–13

–378

347

–1

Total

cash flow hedge

–543

823

–137

–1

578

–19

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2019 ING Group Annual Report on Form 20-F

F - 111

The main sources of ineffectiveness for cash flow hedges are:

◾

differences in timing of cash flows of the hedged item(s) and hedging instrument(s);

◾

mismatches in reset frequency between hedged item and hedging instrument.

As a result of interest rate

developments in 2019 ING Group de-designated cash flow hedge

accounting portfolios with a total notional value of approximately EUR 25 billion.

Hedges of net investments in foreign

operations

A foreign currency exposure

arises from a net investment in subsidiaries that have a different

functional currency from

that of ING Group. The risk arises from the fluctuation in spot exchange

rates between the functional currency of the subsidiaries and ING Group’s functional currency,

which causes the amount of the net investment to vary in the consolidated financial statements

of

ING Group. This risk may have a significant impact on ING Group’s financial

statements. ING Group’s

policy is to hedge these exposures only when not doing so be expected to have a significant

impact

on the regulatory capital ratios of ING Group

and its subsidiaries.

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. When the hedging instrument is foreign currency denominated debt, ING Group assesses

effectiveness by comparing past changes in the carrying amount of the

debt that are attributable

to a change in the spot rate with past changes in the investment in the foreign operation due to

movement in the spot rate (the offset method).

Gains and losses on the effective portions

of derivatives designated under net investment hedge

accounting are recognised in Other Comprehensive

Income.

The balance in equity is recognised in

the statement of profit or loss when the related foreign subsidiary is disposed. The gains and losses

on ineffective portions are recognised immediately in the statement of profit or loss.

ING Group has the following derivative financial instruments used for net investment hedging;

Gross carrying value of derivatives used for net investment hedging

Assets

Liabilities

Assets

Liabilities

2019

2019

2018

2018

As at 31 December

– FX forwards and futures

23

51

41

16

– Other FX derivatives

0

-

0

0

The derivatives used for net investment hedge accounting are included in the statement of

financial position line-item

‘Financial assets at fair value through profit or loss – Non-trading

derivatives’ EUR 23 million (2018: EUR 41 million) respectively ‘Financial liabilities at fair value

through profit or loss

– Non trading derivatives’ EUR 51 million (2018: EUR 17 million). The

remaining derivatives are

offset with other derivatives and collaterals paid or received.

For ING Group’s main currencies

the average exchange rates used in net investment

hedge

accounting for 2018 are EUR/USD 1.12 (2018: 1.18), EUR/PLN 4.30 (2018: 4.26), EUR/AUD 1.61 (2018:

1.58) and EUR/THB 34.79 (2018: 38.15).

The following table shows the notional amount of derivatives designated in net investment hedging

split into the maturity of the instruments:

Maturity derivatives designated in net investment hedging

As at 31 December 2019

Less

than 1

month

1 to 3

months

3 to 12

months

1 to 2

year

2 to 3

years

3 to

4

years

4 to 5

years

>5 years

Total

– FX forwards and futures

–3,179

–999

–54

–4,232

– Other FX derivatives

As at 31 December 2018

1

– FX forwards and futures

–3,444

–853

–54

–4,351

– Other FX derivatives

–0

–0

1

The prior period has been updated to improve consistency and comparability.

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2019 ING Group Annual Report on Form 20-F

F - 112

The effect of the net investment hedge accounting in the statement of profit

or loss and other

comprehensive income is as follows:

Net investment hedge accounting – Impact on statement of profit or loss and other

comprehensive income

As at 31 December 2019

Change in value

used for

calculating

hedge

ineffectiveness

for the period

Carrying

amount net

investment

hedge reserve

at the end of

the reporting

period

Hedged item

affected

statement of

profit or loss

Change in value

of hedging

instrument

recognised in

OCI

Hedge

ineffectiveness

recognised in

the statement

of profit or loss,

gain(+) / Loss(-)

Investment in foreign

operations

134

440

44

–134

0

Discontinued hedges

–210

As at 31 December 2018

Investment in foreign

operations

–71

540

-

71

2

Discontinued hedges

0

-210

-

0

0

40 Assets

by contractual

maturity

Amounts presented in these tables by contractual maturity are the amounts as presented in the

statement of financial

position and are discounted cash flows. Reference is made to ‘Risk

Management – Funding and liquidity risk’.

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Assets by contractual maturity

2019

Less then 1 month

1

1-3 months

3-12 months

1-5 years

Over 5 years

Maturity not applicable

Total

Cash and balances with central banks

53,202

53,202

Loans and advances to banks

22,820

3,100

5,090

3,729

397

35,136

Financial assets at fair value through profit or loss

–

Trading

assets

12,754

6,589

8,469

8,240

13,203

49,254

–

Non-trading derivatives

110

161

215

998

773

2,257

–

Mandatorily at fair value through profit or loss

22,645

13,784

2,357

1,010

1,645

159

41,600

–

Designated as at fair value through profit or loss

259

126

1,004

442

1,245

3,076

Financial assets at fair value through

other comprehensive income

–

Equity securities

2,306

2,306

–

Debt securities

216

175

1,146

14,528

14,419

30,483

–

Loans and advances

26

36

202

627

788

1,680

Securities at amortised cost

1,005

916

5,930

24,556

13,701

46,108

Loans and advances to customers

55,138

18,586

45,871

180,972

307,462

608,029

Intangible assets

127

506

1,283

1,916

Other assets

2

4,618

369

1,049

1,177

1,251

46

8,511

Remaining assets (for which maturities are not applicable)

3

4,962

4,962

Total

assets

172,793

43,842

71,460

236,784

354,885

8,756

888,520

1

Includes assets on demand.

2

Includes Other assets, Assets held for sale, and Current and Deferred tax assets as presented in the Consolidated statement of financial

position.

3

Included in remaining assets for which maturities are not applicable are property and equipment, and investments in associates and joint ventures. Due to their nature remaining assets consist mainly of assets expected to be recovered after more than 12

months.

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Assets by contractual maturity

2018

Less then 1 month

1

1-3 months

3-12 months

1-5 years

Over 5 years

Maturity not applicable

Total

Cash and balances with central banks

49,987

49,987

Loans and advances to banks

15,864

3,693

4,830

5,599

437

30,422

Financial assets at fair value through profit or loss

–

Trading

assets

15,815

6,032

8,123

9,276

10,906

50,152

–

Non-trading derivatives

274

323

173

1,059

835

2,664

• Mandatorily at fair value through profit or loss

48,240

9,047

5,325

1,238

723

210

64,783

• Designated at fair value through profit or loss

265

208

784

635

994

2,887

Financial assets at fair value through other comprehensive

income

• Equity securities

3,228

3,228

• Debt securities

272

234

1,597

13,409

10,103

25,616

• Loans and advances

42

97

254

1,023

962

2,379

Securities at amortised cost

1,126

2,537

2,737

22,169

18,708

47,276

Loans and advances to customers

55,736

17,689

39,213

176,448

300,567

589,653

Intangible assets

120

481

1,238

1,839

Other assets

2

6,894

165

2,447

637

497

214

10,854

Remaining assets (for which maturities are not applicable)

3

2,861

2,861

Total

assets

194,516

40,024

65,604

231,974

344,732

7,751

884,603

1

Includes assets on demand.

2

Includes Other assets, Assets held for sale, and Current and Deferred tax assets as presented in the Consolidated statement of financial

position.

3

Included in remaining assets for which maturities are not applicable are property and equipment, and investments in associates and joint ventures. Due to their nature remaining assets consist mainly of assets expected to be recovered after more than 12

months.

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41 Liabilities

by maturity

The tables below include all financial

liabilities by maturity based on contractual, undiscounted cash flows.

Perpetual liabilities are included in column ‘Maturity not applicable’. 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 amounts per the statement of financial position,

by expected maturity. Reference is made to the liquidity risk paragraph in ‘Risk

Management – Funding and liquidity risk’ for a description on how liquidity risk is managed.

Liabilities by maturity

2019

Less than 1 month

1

1–3 months

3–12 months

1–5 years

Over 5 years

Maturity not applicable

Adjustment

2

Total

Deposits from banks

9,903

847

12,011

10,280

1,965

–180

34,826

Customer deposits

540,544

13,892

13,784

3,646

2,381

108

574,355

Financial liabilities at fair value through profit or loss

–

Other trading liabilities

4,666

646

436

568

333

68

6,717

–

Trading

derivatives

1,589

1,492

3,312

7,771

7,011

151

21,325

–

Non-trading derivatives

379

91

152

616

440

539

2,215

–

Designated at fair value through profit or loss

27,048

10,467

1,885

2,938

5,089

7

251

47,684

Debt securities in issue

2,616

13,278

35,915

36,895

26,592

3,231

118,528

Subordinated loans

1,780

7,455

6,941

411

16,588

Lease liabilities

16

39

161

668

643

–

–21

1,507

Financial liabilities

586,762

40,753

67,656

65,160

51,909

6,948

4,557

823,745

Other liabilities

3

7,916

820

2,361

728

1,061

12,886

Non-financial liabilities

7,916

820

2,361

728

1,061

-

-

12,886

Total

liabilities

594,677

41,573

70,017

65,888

52,970

6,948

4,557

836,631

Coupon interest due on financial liabilities

574

692

1,482

5,790

4,355

379

13,271

1

Includes liabilities on demand.

2

This column reconciles the contractual undiscounted cash flows on financial

liabilities to the statement of financial

position 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).

3

Includes Other liabilities, Current and deferred tax liabilities, and Provisions as presented in the Consolidated statement of financial position.

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Liabilities by maturity

2018

Less than 1 month

1

1–3 month

3–12 months

1–5 years

Over 5 years

Maturity not applicable

Adjustment

2

Total

Deposits from banks

10,506

1,068

1,940

21,571

2,242

2

37,330

Customer deposits

4

515,094

17,354

16,086

4,695

2,500

555,729

Financial liabilities at fair value through profit or loss

–

Other trading liabilities

4,075

1,318

1,465

888

1,655

286

9,687

–

Trading

derivatives

1,711

1,873

3,680

6,855

6,035

1,374

21,528

–

Non-trading derivatives

458

312

252

988

866

–577

2,299

–

Designated at fair value through profit or loss

34,914

11,753

4,115

3,519

4,921

–43

59,179

Debt securities in issue

4,066

20,961

30,282

41,068

21,413

1,961

119,751

Subordinated loans

0

1,713

6,497

5,339

176

13,724

Lease liabilities

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

Financial liabilities

570,824

54,639

57,820

81,297

46,129

5,339

3,180

819,228

Other liabilities

3

10,560

899

2,455

1,044

566

15,524

Non-financial liabilities

10,560

899

2,455

1,044

566

-

-

15,524

Total

liabilities

581,384

55,538

60,275

82,341

46,695

5,339

3,180

834,751

Coupon interest due on financial liabilities

4

842

659

1,719

5,626

3,839

287

12,971

1

Includes liabilities on demand.

2

This column reconciles the contractual undiscounted cash flows on financial

liabilities to the statement of financial

position 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).

3

Includes Other liabilities, Current and deferred tax liabilities, and Provisions as presented in the Consolidated statement of financial position

4

Prior period amounts for coupon interest have been updated to improve consistency and comparability.

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2019 ING Group Annual Report on Form 20-F

F - 117

42 Assets

not freely

disposable

The assets not freely disposable consist primarily of Loans and advances to customers pledged to

secure Debt securities in issue, deposits from the Dutch Central

Bank and other banks. They serve

to secure margin accounts and are

used for other purposes required by law.

The assets not freely

disposable are as follows:

Assets not freely disposable

2019

2018

Banks

–

Cash and balances with central

banks

1,382

1,471

–

Loans and advances to banks

6,337

4,373

Financial assets at fair value through profit or loss

614

449

1

Financial assets at fair value through OCI

240

253

1

Securities at amortised cost

189

627

1

Loans and advances to customers

75,755

74,352

Other assets

908

734

85,425

82,258

1

The prior period amounts have been updated to improve consistency and comparability.

In addition, in some jurisdictions ING Bank N.V.

has an obligation to maintain a reserve with central

banks. As at 31 December 2019, the minimum mandatory reserve deposits with various central

banks amount to EUR 9,975 million (2018: EUR 9,359 million).

Loans and advances to customers that have been pledged as collateral

for Debt securities in issue

and for liquidity purposes, amount in The Netherlands to EUR 45,530 million (2018: EUR

46,320

million), in Germany to EUR 13,222 million (2018: EUR 12,143 million), in Belgium EUR 11,298

million

(2018: EUR 11,894 million), in Australia to EUR 4,150 million (2018: EUR 2,638 million) and in the

United States to EUR 1,010 million (2018: EUR 1,183 million).

The table does not include assets relating to securities lending as well as sale and repurchase

transactions. Reference is made to Note 43 ‘Transfer

of financial

assets’.

43 Transfer

of financial

assets

The majority of ING's financial

assets that have been transferred, but do not qualify for

derecognition are debt instruments used in securities lending or sale and repurchase transactions.

Transfer

of financial assets not qualifying for derecognition

Securities lending

Sale and repurchase

Equity

Debt

Equity

Debt

2019

2018

2019

2018

2019

2018

2019

2018

Transferred

assets at carrying amount

Financial assets at fair value through

profit or loss

2,542

2,962

1,974

1,170

1,682

2,396

9,538

7,134

2

Financial assets at fair value through

other comprehensive income

193

168

6

325

Loans and advances to customers

Securities at amortised cost

195

142

734

910

Associated liabilities at carrying

amount

1

Deposits from banks

n/a

n/a

n/a

n/a

Customer deposits

n/a

n/a

n/a

n/a

Financial liabilities at fair value through

profit or loss

n/a

n/a

n/a

n/a

1,619

2,373

3,805

2,225

1

The table includes the associated liabilities which are reported after offsetting,

compared to the gross positions of the

encumbered assets.

2

The prior period amount has been updated to improve consistency and comparability.

Included in the table above, are the carrying amounts of transferred

assets under repurchase

agreements, and securities lending that do not qualify for derecognition.

The table above does not include assets transferred to consolidated securitisation entities as the

related assets remain recognised in

the consolidated statement of financial

position.

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44 Offsetting

financial

assets

and liabilities

The following tables include information about rights to offset and the related arrangements. The

amounts included consist of all recognised financial instruments

that are presented net in the

statement of financial

position under the IFRS offsetting requirements (legal right to offset and

intention to net settle) and amounts presented gross in the statement of financial position but

subject to enforceable master netting arrangements or similar arrangement.

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Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements

2019

Gross amounts of

recognised financial assets

Gross amounts of recognised

financial liabilities offset in the

statement of financial

position

Net amounts of financial assets

presented in the statement of

financial

position

Related amounts not offset

in the statement of financial position

Net amount

Financial instruments

Cash and financial instru-ments

received as collateral

Statement of financial position

line item

Financial instrument

Loans and advances to banks

Reverse repurchase,

securities

borrowing and similar agreements

868

868

21

738

109

868

–

868

21

738

109

Financial assets at fair value

through profit or loss

Trading

assets

Derivatives

19,766

–3,851

15,914

13,725

3

2,186

Trading

and Non-trading

Reverse repurchase,

securities

borrowing and similar agreements

57,328

–20,545

36,783

50

36,553

181

77,094

–24,396

52,698

13,774

36,556

2,368

Non-trading derivatives

Derivatives

54,689

–53,321

1,368

1,167

–

201

54,689

–53,321

1,368

1,167

–

201

Loans and advances to customers

Debit balances on customer accounts

169,313

–166,624

2,689

1,422

813

454

169,313

–166,624

2,689

1,422

813

454

Other items where offsetting is applied

in the statement of financial position

9,787

–9,423

364

15

349

Impact of enforceable master netting

arrangements or similar arrangements

1

Derivatives

–4,380

3,965

415

Other

–3

3

–4,383

3,965

418

Total financial assets

311,750

–253,764

57,986

12,016

42,072

3,898

1

The line ‘Impact of enforceable master netting agreements or similar arrangements’ contains derivative positions under the same master netting arrangements being presented in different statement of financial

position line items.

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Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements

2018

Gross amounts of

recognised financial assets

Gross amounts of recognised

financial liabilities offset in the

statement of financial

position

Net amounts of financial assets

presented in the statement of

financial

position

Related amounts not offset

in the statement of financial position

Net amount

Financial instruments

Cash and financial instru-

ments received as collateral

Statement of financial position line item

Financial instrument

Loans and advances to banks

Reverse repurchase,

securities

borrowing and similar agreements

1,947

1,947

1,838

109

Other

0

–0

0

0

1,947

–0

1,947

1,838

109

Financial assets at fair value through

profit or loss

Trading

assets

Derivatives

17,181

–1,012

16,168

14,664

2

1,502

Trading

and non-trading

Reverse repurchase,

securities

borrowing and similar agreements

76,983

–18,337

58,647

1,102

57,304

240

94,164

–19,349

74,815

15,766

57,307

1,742

Non-trading derivatives

Derivatives

41,263

–39,648

1,615

1,520

–0

96

Loans and advances to customers

Reverse repurchase,

securities

borrowing

and similar agreements

223

–223

Debit balances on customer accounts

161,730

–159,596

2,134

1,166

605

363

161,953

–159,819

2,134

1,166

605

363

Other items where offsetting is applied in the

statement of financial position

5,705

–5,193

512

1

510

Impact of enforceable master netting arrangements

or

similar arrangements

1

Derivatives

–5,041

3,518

1,523

Other

–0

0

–5,041

3,518

1,523

Total financial assets

305,032

–224,008

81,023

13,412

63,267

4,344

1

The line ‘Impact of enforceable master netting agreements or similar arrangements’ contains derivative positions under the same master netting arrangements being

presented in different statement of financial

position line items.

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Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements

Related amounts not offset in the statement

of financial position

2019

Gross amounts of

recognised financial

liabilities

Gross amounts of recognised

financial assets offset

in the

statement of financial position

Net amounts of financial

liabilities

presented in the statement of

financial position

Financial instruments

Cash and financial instruments

pledged as collateral

Net amount

Statement of financial position line

item

Financial instrument

Deposits from banks

Repurchase, securities lending and

similar agreements

26

26

26

21

–21

26

26

26

21

–21

Customer deposits

Repurchase, securities lending and

similar agreements

Corporate deposits

5,783

–5,432

351

351

Credit balances on customer

accounts

175,490

–161,193

14,297

1,419

12,878

181,273

–166,624

14,649

1,419

13,230

Financial liabilities at fair value through profit or loss

Trading liabilities

Derivatives

20,935

–3,842

17,093

16,073

6

1,014

Trading and Non-trading

Repurchase, securities lending and

similar agreements

56,818

–20,545

36,273

50

35,787

436

77,752

–24,386

53,366

16,123

35,793

1,450

Non-trading derivatives

Derivatives

55,194

–53,823

1,371

1,177

191

3

Other items where offsetting is applied in the

statement of

financial position

9,200

–8,930

269

11

258

Impact of enforceable master netting arrangements or

similar arrangements

1

Derivatives

–6,731

7,620

–889

Other

–8

8

–6,739

7,620

–881

Total financial liabilities

323,445

–253,764

69,681

12,016

43,625

14,040

1

The line ‘Impact of enforceable master netting agreements or similar arrangements’ contains derivative positions under the same master netting arrangements being presented in different statement of financial

position line items.

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Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements

Related amounts not offset in the statement of financial position

2018

Gross amounts

of

recognised

financial liabilities

Gross amounts of recognised

financial assets offset in the

statement of financial position

Net amounts of financial

liabilities presented in the

statement of financial position

Financial instruments

Cash and financial instruments

pledged as collateral

Net amount

Statement of financial position line item

Financial instrument

Deposits from banks

Repurchase, securities lending and

similar agreements

36

–36

–0

–0

Other

0

–

0

0

–

37

–36

0

0

–0

Customer deposits

Repurchase, securities lending and

similar agreements

224

–186

37

37

Corporate deposits

9,567

–9,078

489

489

Credit balances on customer

accounts

161,552

–150,518

11,034

1,166

4

9,864

171,343

–159,782

11,561

1,166

42

10,353

Financial liabilities at fair value through

profit or loss

Trading

liabilities

Derivatives

17,105

–1,021

16,084

15,301

2

781

Repurchase, securities lending and

similar agreements

64,324

–18,337

45,987

1,102

44,801

85

Other

81,429

–19,357

62,071

16,403

44,803

866

Non-trading derivatives

Derivatives

42,675

–41,198

1,477

1,312

178

–13

Other items where offsetting is applied in the statement

of

financial position

4,353

–3,634

718

–4

723

Impact of enforceable master netting arrangements

or similar

arrangements

1

Derivatives

–5,464

5,773

–309

Other

–0

0

–5,464

5,773

–309

Total financial liabilities

299,836

–224,008

75,827

13,412

50,796

11,619

1

The line ‘Impact of enforceable master netting agreements or similar arrangements’ contains derivative positions under the same master netting arrangements being presented in different statement of financial

position line items.

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45 Contingent

liabilities

and commitments

In the normal course of business, ING Group is party to activities where risks are not reflected in

whole or in 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

month

1–3 months

3–12 months

1–5 years

Over 5 years

Maturity not applicable

Total

2019

2018

2019

2018

2019

2018

2

2019

2018

2019

2018

2019

2018

2019

2018

2

Contingent liabilities in respect of

–

Guarantees

1

11,441

12,644

1,187

891

3,373

3,475

6,355

3,536

5,146

5,710

27,502

26,256

–

Irrevocable letters

of credit

9,770

10,346

4,987

4,499

1,259

998

322

374

3

3

16,340

16,220

–

other

57

53

75

115

131

168

21,268

23,043

6,174

5,389

4,631

4,473

6,752

4,026

5,149

5,713

43,974

42,644

Guarantees issued by ING Groep N.V.

319

364

319

364

Irrevocable facilities

64,036

63,499

2,289

2,699

16,766

13,731

30,152

32,717

6,760

6,876

120,002

119,522

85,304

86,541

8,462

8,088

21,397

18,204

36,905

36,743

12,228

12,954

164,296

162,530

1

The prior period has been updated to improve consistency and comparability of the amounts per maturity of guarantees.

2

ING in the Netherlands offers credit facilities to clients, linked to ING current accounts. After a review of the product

conditions in 2019, it has been concluded that these facilities are irrevocable and therefore reported as such above.

The

prior period has been updated to improve consistency and comparability.

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 operations of the Real

Estate business including obligations under development and construction contracts. Furthermore

other contingent liabilities include a contingent liability in connection with

a possible Dutch tax

obligation that relates to the deduction from Dutch taxable profit for losses incurred by ING Bank in

the United Kingdom in previous years. The existence of this obligation will be confirmed only by

the

occurrence of future profits in the United Kingdom.

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ING Group has issued certain guarantees as participant in collective arrangements of national

banking funds and as a participant in required collective guarantee schemes. For example,

ING

Bank N.V.

provided a guarantee to the German Deposit Guarantee Fund

(‘Einlagensicherungsfonds’

or ESF) under section 5 (10) of the by-laws of this fund, where ING Bank N.V.

indemnifies the

Association of German Banks Berlin against any losses it might incur as result of actions taken with

respect to ING Germany. The ESF is a voluntary collective guarantee scheme for retail savings and

deposits in excess of EUR 100,000.

As at 31 December 2019, ING Groep N.V.

guarantees various US dollar debentures (that mature

between 2023 and 2036) which were issued by a subsidiary of Voya

Financial Inc. In the

Shareholder’s agreement between ING Groep

N.V.

and Voya Financial Inc. it is agreed

that the

aggregate outstanding principal amount of the debentures will be reduced to nil as at 31 December

2019 (2018: EUR 87 million).

Per the Shareholder’s agreement, the decrease

in the aggregate outstanding principal shall be

deemed to have been reduced to the extent of collateral deposited by Voya

Financial Inc. As at 31

December 2019, EUR

331 million (2018: EUR

233 million) was pledged to ING Groep N.V.

as

collateral.

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 partly 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.

46 Legal

proceedings

ING Group and its consolidated subsidiaries are involved

in governmental, regulatory, arbitration

and legal proceedings and investigations in the Netherlands and in a number of foreign

jurisdictions, including the U.S., involving claims by and against them which arise in the ordinary

course of their businesses, including in connection with their activities

as lenders, broker-dealers,

underwriters, issuers of securities and investors and their position as employers 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 governmental, regulatory, arbitration

and legal proceedings and

investigations, ING is of the opinion that some of the proceedings and investigations set out below

may have or have in the recent past had a significant effect on

the financial

position, profitability or

reputation of ING and/or ING and its consolidated subsidiaries.

Settlement Agreement:

On 4 September 2018, ING announced that it had entered into a

settlement agreement with the Dutch Public Prosecution Service relating to previously

disclosed

investigations regarding various

requirements for client on-board

ing and the prevention of money

laundering and corrupt practices. Under the terms of the settlement agreement ING paid a fine

of

€675 million and €100 million for disgorgement. In connection with the investigations, ING had also

received information reques

ts from the US Securities and Exchange Commission (SEC). As ING

announced on 5 September 2018, ING has received a formal notification from the SEC that it has

concluded its investigation. In the letter dated 4 September 2018 the Division of Enforcement

states that, based on information as of the date thereof, it does not intend to recommend an SEC

enforcement action against ING. Following the entry into the settlement agreement, ING has

experienced heightened scrutiny from authorities in various countries. ING is also aware, including

as a result of media reports, that other parties may, among other things, seek to commence legal

proceedings against ING in connection with the subject matter of the settlement, have filed

or may

file requests to reconsider the prosecutor’s decision to enter into the settlement agreement with

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ING and not to prosecute ING or (former) ING employees in court, or have filed

or may file requests

for disciplinary proceedings against ING employees based on the Dutch “Banker’s oath.

Findings regarding AML processes:

As previously disclosed, after its September 2018 settlement

with Dutch authorities concerning Anti-Money Laundering matters, and in the context of

significantly increased attention on the prevention of financial economic

crime, ING has

experienced heightened scrutiny by authorities in various countries. The interactions with such

regulatory and judicial authorities have included, and can be expected to continue to include,

onsite visits, information requests, investigations and other enquiries. Such interactions, as well as

ING’s internal assessments in connection with its global enhancement programme, have in some

cases resulted in satisfactory outcomes, and also have resulted in, and may continue to result

in,

findings, or other

conclusions which may require appropriate remedial

actions by ING, or may have

other consequences. ING intends to continue to work in close cooperation with authorities as it

seeks to improve its management of non-financial risks in terms of policies,

tooling, monitoring,

governance, knowledge and behaviour.

Also as previously disclosed in March 2019, ING Italy was informed by the Banca d’Italia of their

report containing their conclusions regarding shortcomings in AML processes at ING Italy, which

was prepared based on an inspection conducted from October 2018 until January 2019. ING Italy

has been engaged in discussions with Banca d’Italia and Italian judiciary authorities. In February

2020 the Italian court confirmed

and approved a plea bargain agreement with the Italian judiciary

authorities. As a consequence, ING Italy has paid an administrative fine and disgorgement of profit.

In addition, in February 2020 the Banca d’Italia imposed an administrative fine on ING Italy. Both

amounts were already provisioned

for in 2019.

In line with the enhancement programme announced in 2018, ING Italy is taking steps intended to

improve processes

and management of compliance risks as required by the Banca d’Italia. In

consultation and in agreement with the Banca d’Italia, ING Italy has agreed that it will refrain

from

taking on new customers during further discussions on the enhancement plans

with the Banca

d’Italia. ING Italy will continue to fully serve existing clients in Italy and is working hard to address

the shortcomings

and resolve the issues identified.

ING announced steps in September 2018 to enhance its management of compliance risks and

embed stronger awareness across

the whole organisation. This programme started in 2017 and

includes enhancing KYC files and working on various structural improvements in compliance

policies, tooling, monitoring, governance, knowledge and behaviour.

Tax

cases:

Because of the geographic spread of its business, ING may be subject to tax audits,

investigations and procedures 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,

investigations and procedures may result

in liabilities which are different from the amounts

recognised. ING has also identified issues in connection

with its U.S. tax information reporting and

withholding obligations in respect of prior periods. ING has agreed with the US Internal Revenue

Service (“IRS”) to resolve these issues by paying the tax owed. ING has made the payment out of

the provision it had already recognised.

Litigation regarding products of a former subsidiary in Mexico:

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. A provision

has been taken in the

past.

SIBOR – SOR litigation:

In July 2016, investors in derivatives tied to the Singapore Interbank Offer

Rate (“SIBOR”) filed a U.S. class action complaint in the New York District Court alleging that several

banks, including ING, conspired to rig the prices of derivatives tied to SIBOR and the Singapore Swap

Offer Rate (“SOR”). The lawsuit refers to investigations by the Monetary Authority of Singapore

(“MAS”) and other regulators, including the U.S. Commodity Futures

Trading

Commission (“CFTC”),

in relation to rigging prices of SIBOR-

and SOR based derivatives. In October 2018, the New York

District Court issued a decision dismissing all claims against ING Group and ING Capital Markets LLC,

but leaving ING Bank, together with several other banks, in the case, and directing plaintiffs to file

an amended complaint consistent with the Court's rulings. In October 2018, plaintiffs

filed such

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amended complaint, which asserts claims against a number of defendants

but none against ING

Bank (or any other ING entity), effectively dismissing ING

Bank from the case. In December 2018,

plaintiffs sought permission from the Court to file

a further amended complaint that names ING

Bank as a defendant. In July 2019, the New York District Court granted the defendants’ motion to

dismiss and denied leave to further amend the complaint, effectively

dismissing all remaining

claims against ING Bank. In November 2019, plaintiffs filed

an appeal against this judgment.

Claims regarding accounts with predecessors

of ING Bank Turkey: ING Bank Turkey

has received

numerous claims from (former) customers of legal predecessors of ING Bank Turkey.

The claims are

based on offshore accounts held with these banks, which banks were seized by the Savings Deposit

Insurance Fund

(SDIF) prior to the acquisition of ING Bank Turkey in 2007 from OYAK.

SDIF has also

filed various lawsuits against ING

Bank Turkey to claim compensation from ING Bank Turkey,

with

respect to amounts paid out to offshore account holders so far.

At this moment it is not possible to

assess the outcome of these procedures nor to provide

an estimate of the (potential) financial

effect of these claims.

Interest rate derivatives

claims:

ING is involved in several

legal proceedings in the Netherlands

with respect to interest rate

derivatives that were sold to clients in connection with floating interest

rate loans in order to hedge the interest

rate risk of the loans. These proceedings are based on

several legal grounds, depending on the facts and circumstances of each specific case, inter alia

alleged breach of duty of care, insufficient information provided to the clients on the product and

its risks and other elements related to the interest rate derivatives

that were sold to clients. In some

cases, the court has ruled in favour of the claimants and awarded damages, annulled the interest

rate derivative or ordered

repayment of certain amounts to the claimants. The total amounts that

need to be repaid or compensated in some cases still need to be determined. ING may decide to

appeal against adverse rulings. Although the outcome of the pending litigation and similar cases

that may be brought in the future is uncertain, it is possible that the courts may ultimately rule in

favour of the claimants in some or all of such cases. Where appropriate a provision

has been taken.

The aggregate financial impact of the

current and future litigation could become material.

As requested by the AFM, ING has reviewed

a significant

part of the files

of clients who bought

interest rate derivatives.

In December 2015, the AFM concluded that Dutch banks may have to re-

assess certain client files,

potentially including certain derivative contracts that were terminated

prior to April 2014 or other client files.

As advised by the AFM, the Minister of Finance appointed a

Committee of independent experts (the “Committee”) which has established a uniform recovery

framework for Dutch SME clients with interest rate

derivatives. ING has adopted this recovery

framework and has reassessed individual files against this framework. ING has taken an additional

provision for the financial consequences of the recovery framework. In 2017, ING has informed the

majority of the relevant clients whether they are in scope of the recovery

framework, and thus

eligible for compensation, or not. Because implementation by ING of the uniform recovery

framework encountered

delay, ING has previously offered advance payments to customers out of

the existing provision. As of December 2018, all customers in scope of the uniform recovery

framework have received

an offer of compensation from ING (including offers of no compensation).

As of 1 July 2019, the required process

under the uniform recovery

framework had been completed

for approximately 99% of all customers in scope.

ING is awaiting feedback from the independent dispute committee on one file for which the

relevant client opted for a 'binding advice' procedure.

Hearings with the independent dispute

committee took place in November and December 2019. It is not clear when the committee will

present its verdict.

Interest surcharges claims:

ING received complaints and was involved in

litigation with natural

persons (natuurlijke personen) in the Netherlands regarding increases in interest surcharges

with

respect to several credit

products, including but not limited to commercial property (commercieel

verhuurd onroerend

goed). ING has reviewed the relevant

product portfolio. The provision

previously taken has been reversed

for certain of these complaints. All claims are dealt with

individually. Thus far, the courts have ruled in favour of ING in each case, ruling that ING was

allowed to increase the interest surcharged

based upon the essential obligations in the contract.

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Criminal proceedings regarding cash company financing:

In June 2017, a Belgian criminal Court

ruled that ING Luxembourg

assisted third parties in 2000 to commit a tax fraud in the context of

the purchase of the shares of a cash company. The Court convicted ING Luxembourg,

among

others, and ordered ING to pay a penal fine of EUR 120,000 (suspended for half of the total

amount). The court also ordered ING Luxembourg

jointly and severally with other parties, to pay

EUR 31.48 million (together with any interest payable under applicable law) to the bankruptcy

trustee of the cash company. In July 2017, ING Luxembourg filed an appeal against this judgment.

A settlement with all the civil parties involved was reached in mid-2018. However, this settlement

does not apply to the criminal conviction of ING Luxembourg. In January 2020, the Court of Appeal

of Antwerp reformed the first judgment: ING Luxemburg benefitted from an "opschorting van de

uitspraak/suspension du prononcé" which means that the conviction has been upheld, but no penal

sanction has been pronounced (penalties suspended). ING Luxembourg is analyzing the judgement.

Mortgage expenses claims:

ING Spain has received claims and is involved in procedures

with

customers regarding reimbursement

of expenses associated with the formalisation of mortgages.

In most court proceedings in first instance the expense clause of the relevant mortgage contract

has been declared null and ING Spain has been ordered to reimburse

all or part of the applicable

expenses. The courts in first

instance have applied in their rulings different criteria regarding the

reimbursement of expenses. ING Spain has filed

an appeal against a number of these court

decisions. ING Spain has also been included, together with

other Spanish banks, in two class actions

filed by customer

associations. The outcome of the pending litigation and similar cases that may

be brought in the future is uncertain. A provision has been taken. However,

the aggregate financial

impact of the current and future litigation could change. In February 2018, the Spanish Supreme

Court ruled that Stamp Duty (Impuesto de Actos Jurídicos Documentados) expenses are

chargeable to the customer, while in October 2018 it ruled that Stamp Duty is chargeable to the

banks. In November 2018, the Spanish Supreme Court clarified the issue regarding Stamp Duty by

stating that this tax should be borne by the customer.

As for the remaining types of the expenses,

in January 2019, the Spanish Supreme Court issued several decisions that stated that the client and

the bank each have to bear half of the notary and management company costs and that registry

costs have to be borne in full by the bank. Allocation of valuation costs between the bank and the

customer were not addressed by the Spanish Supreme Court decisions and remain uncertain.

Imtech claim:

In January 2018, ING Bank received a claim from Stichting ImtechClaim.nl and

Imtech Shareholders Action Group B.V.

on behalf of certain (former) shareholders of Imtech N.V.

(“Imtech”). Furthermore,

on 28 March 2018, ING Bank received another claim on the same subject

matter from the Dutch Association of Stockholders (Vereniging

van Effectenbezitters, “VEB”). Each

of the claimants allege inter alia that shareholders were misled by the prospectus of the rights

issues of Imtech in July 2013 and October 2014. ING Bank, being one of the underwriters of

the

rights issues, is held liable by the claimants for the damages that investors in Imtech would have

suffered. ING Bank responded to the claimants denying any and all responsibility in relation to the

allegations made in the relevant letters. In September 2018, the trustees in the bankruptcy of

Imtech claimed from various financing parties, including

ING, payment of what the security agent

has collected following bankruptcy or intends to collect, repayment of all that was repaid to the

financing parties,

as well as compensation for the repayment of the bridge financing. At this

moment it is not possible to assess the outcome of these claims nor to provide an estimate of the

(potential) effect of these claims.

Mexican Government Bond litigation:

A class action complaint was filed

adding ING Bank N.V.,

ING

Groep N.V.,

ING Bank Mexico S.A. and ING Financial Markets LLC (“ING”) as defendants to a

complaint that had previously been filed against multiple other financial

institutions. The complaint

alleges that the defendants conspired to fix the prices of Mexican Government Bonds. ING is

defending itself against the allegations. Currently, it is not possible to provide an estimate of the

(potential) financial

effect of this claim. On 30 September 2019, the relevant court dismissed the

antitrust complaint, finding

that the plaintiffs had failed to identify any facts

that links each

defendant to the alleged conspiracy. On 9 December 2019, the plaintiffs filed

an amended

complaint removing all ING entities as defendants on the condition that the ING entities enter into

a tolling agreement for the duration of two

years. The relevant ING entities subsequently entered

into a tolling agreement, which provides that the statute of limitations will not be tolled for the two

year duration of the agreement. Should the plaintiffs discover any evidence of potential

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involvement by ING in the activities alleged in the complaint, ING could be brought back into the

litigation.

47 Consolidated

companies

and businesses

acquired

and divested

Acquisitions

In May 2019 ING acquired 80% of the shares of Intersoftware Group

B.V.,

Findata Access B.V.

and

Unitrust B.V.

(ISW Group) for a total consideration of EUR 18 million. The acquisition of ISW Group

resulted in the recognition of goodwill of EUR 17 million.

In 2018 ING Bank obtained control over Payvision Holding B.V.

(Payvision) by acquiring 75% of its

shares. The share purchase agreement

included a put option exercisable by the original

shareholders and a call option exercisable by ING for the remaining

25% shares. The put and call

option led to the recognition of a financial liability with initial recognition through shareholders’

equity of EUR 87 million. In November 2019 ING Bank agreed to purchase the remaining 25%

shares in three tranches

between November 2019 and April 2020 for a total consideration of EUR

90 million. This resulted in the remeasurement

of the financial

liability to EUR 90 million. A stake of

23% was purchased in 2019 which reduced the outstanding financial liability. As at 31 December

2019 the ownership interest of ING Bank was 98% with an outstanding financial liability of EUR

7

million to acquire the remaining shares. Given

that ING Bank already had control over Payvision,

the acquisition of the shares in 2019 represents a shareholder

transaction and resulted in a transfer

between Non-controlling interest

and Shareholders equity of EUR 24 million.

The purchase price of Payvision in 2018 included contingent consideration in the form of future

milestone payments. A total of EUR 16 million was paid in 2019.

Divestments

In July 2019 ING completed the sale of part of the ING Lease Italy business. The settlement price

amounted to EUR 1.162 million, consisted of a EUR 368 million cash settlement, a EUR 20 million

Deferred Purchase Price and a EUR 774 million Senior Loan

facility for the portfolio of lease

receivables. The deferred purchase

price is linked to the performance of the sold portfolio and is

reported under the financial assets mandatorily

measured at fair value through profit and loss. The

additional loss in 2019 amounted EUR -2 million (2018: EUR -123 million).

The Italian lease business

was reported as Assets Held for Sale as at 31 December 2018 and previously included in the

business line segment Wholesale Banking and geographical segment Other Challengers.

Reference is made to Note 12 ‘Assets and liabilities held for sale’ and Note 25 ‘Result on the

disposal of group companies’.

48 Principal

subsidiaries,

investments

in associates

and joint

ventures

For the majority of ING’s principal subsidiaries, ING Groep N.V.

has control because it either directly

or indirectly owns more than half of the voting power.

For subsidiaries in which the interest held is

below 50%, control exists based on the combination of ING’s financial interest and its rights from

other contractual arrangements which result in control

over the operating and financial policies of

the entity.

For each of the subsidiaries listed, the voting rights held equal the proportion of ownership interest

and consolidation by ING is based on the majority of ownership.

For the principal investments in associates and joint ventures

ING 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 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;

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◾

Participation in the policymaking process; and

◾

Interchange of managerial personnel.

The principal subsidiaries, investments in associates and joint ventures of ING Groep N.V.

and their

statutory place of incorporation or primary place of business are as follows:

Principal subsidiaries, investments in associates and joint ventures

Proportion of ownership

and interest held

by the group

2019

2018

Subsidiary

Statutory place of Incorporation

Country of operation

ING Bank N.V.

Amsterdam

the Netherlands

100%

100%

Bank Mendes Gans N.V.

Amsterdam

the Netherlands

100%

100%

ING Belgium S.A./N.V.

Brussels

Belgium

100%

100%

ING Luxembourg

S.A.

Luxembourg

City

Luxembourg

100%

100%

ING-DiBa AG

Frankfurt am Main

Germany

100%

100%

ING Bank Slaski S.A.

1

Katowice

Poland

75%

75%

ING Financial Holdings Corporation

Delaware

United States of America

100%

100%

ING Bank A.S.

Istanbul

Turkey

100%

100%

ING Bank (Australia) Ltd

Sydney

Australia

100%

100%

ING Commercial Finance B.V.

Amsterdam

the Netherlands

100%

100%

ING Groenbank N.V.

Amsterdam

the Netherlands

100%

100%

Investments in associates and joint ventures

TMB Bank Public Company Ltd

2

Bangkok

Thailand

23%

30%

1 The shares of the non-controlling interest stake of 25% are listed on the Warsaw Stock Exchange, for summarised financial

information we refer to ‘Note 35 ‘Information on geographical areas.

2 Reference is made to Note 8 Investments in Associates and Joint Ventures.

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49 Structured

entities

ING Group’s activities involve transactions with various structured entities (SE) in the normal course

of its business. A structured entity is an entity that has been designed so that voting or similar

rights are not the dominant factor in deciding who controls the entity, such as when any voting

rights relate to administrative tasks only and the relevant

activities are directed by means of

contractual arrangements. ING Group’s involvement

in these entities varies and includes both debt

financing and

equity financing

of these entities as well as other relationships. Based on its

accounting policies, as disclosed in the section Principles of valuation and determination of results

of these financial

statements, ING establishes whether these involvements result in no significant

influence, significant

influence, joint control or control over the structured entity.

The structured entities over which ING can exercise control

are consolidated. ING may provide

support to these consolidated structured entities as and when appropriate. However, this is fully

reflected in the consolidated financial

statements of ING Group as all assets and liabilities of these

entities are included and off-balance sheet commitments are disclosed.

ING’s activities involving structured entities are explained below in the following categories:

1.

Consolidated ING originated securitisation programmes;

2.

Consolidated ING originated Covered

bond programme (CBC);

3.

Consolidated ING sponsored Securitisation programme (Mont Blanc);

4.

Unconsolidated Securitisation programme; and

5.

Other structured entities.

1. Consolidated ING originated

securitisation programmes

ING Group enters into liquidity management securitisation programmes in order to obtain funding

and improve liquidity. Within the programme

ING Group sells ING originated assets to a structured

entity. The underlying exposures include residential mortgages in the Netherlands, Belgium, Spain,

Italy and Australia and SME Loans in Belgium.

The structured entity issues securitised notes (traditional securitisations) which are eligible

collateral for central

bank liquidity purposes. In most programmes ING Group acts as investor of the

securitised notes. ING Group continues to consolidate these structured entities if it is deemed to

control the entities.

The structured entity issues securitisation notes in two or more tranches, of which the senior

tranche obtains a high rating (AAA or AA) by a rating agency. The tranche

can subsequently be

used by ING Group as collateral in the money market for secured borrowings.

ING Group originated various securitisations, as at 31 December 2019, these consisted of

approximately EUR 57 billion (2018: EUR 66 billion) of senior and subordinated notes, of which

approximately EUR 4 billion (2018: EUR 5 billion) were issued externally. The underlying exposures

are residential mortgages and SME loans. Apart from the third party funding, these securitisations

did not impact ING Group’s Consolidated statement of financial position and profit

or loss.

In 2019, there are no non-controlling

interests as part of the securitisation structured entities that

are significant to ING Group. ING Group for the majority of the securitisation vehicles provides the

funding for the entity except for EUR 4 billion (2018: EUR 5 billion).

In addition ING Group originated various securitisations for liquidity management optimisation

purposes. As at 31 December 2019, these consisted of approximately EUR 3 billion (2018: EUR 4

billion) of senior secured portfolio loans, which have been issued to ING subsidiaries in Germany.

The underlying exposures are senior loans to large corporations

and financial

institutions, and real

estate finance loans, mainly

in the Netherlands. These securitisations did not impact ING

Group’s

consolidated statement of financial position

and profit or loss.

2. Consolidated ING originated

Covered

bond programme (CBC)

ING Group has entered into a covered

bond programme. Under the covered

bond programme ING

issues bonds. The payment of interest and principal is guaranteed by the ING administered

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structured entities, ING Covered

Bond Company B.V.,

and ING SB Covered Bond Company

B.V.

In

order for these entities to fulfil their guarantee, ING legally transfers mainly Dutch mortgage loans

originated by ING. Furthermore ING offers protection against deterioration of the mortgage loans.

The entities are consolidated by ING Group.

Covered

bond programme

Fair value pledged

mortgage loans

2019

2018

Dutch Covered

Bond Companies

24,297

24,336

24,297

24,336

In addition, subsidiaries of ING in Germany, Belgium and Australia also issued covered bonds with

pledged mortgages loans of approximately EUR 16 billion (2018: EUR 14 billion) in total.

In general, the third-party investors in securities issued by the structured entity have recourse only

to the assets of the entity and not to the assets of ING Group.

3. Consolidated ING sponsored

Securitisation programme

(Mont Blanc)

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 a Special Purpose Vehicle (SPV). The senior positions in these transactions may be funded

by the ING administered multi seller Asset Backed Commercial Paper (ABCP) conduit Mont Blanc

Capital Corp. (rated

A-1/P-1). Mont Blanc Capital Corp. funds itself externally

in the ABCP markets.

In its role as administrative agent, ING Group

facilitates these transactions by acting as

administrative agent, swap counterparty and liquidity provider to Mont Blanc Capital Corp.

ING

Group also provides support facilities (i.e.

liquidity) backing the transactions funded by the conduit.

The types of asset currently in the Mont Blanc conduit include trade receivables, consumer finance

receivables, car leases and residential mortgages.

ING Group supports the commercial paper programmes

by providing Mont Blanc Capital Corp.

with

short-term liquidity facilities. Once drawn these facilities bear normal credit risk.

The liquidity facilities, provided to Mont Blanc are EUR 1,631 million (2018: EUR 1,173 million). The

drawn liquidity amount is nil as at 31 December 2019 (2018: nil).

The standby liquidity facilities are reported under irrevocable

facilities. All facilities, which vary in

risk profile, are granted to the Mont Blanc Capital Corp. 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.

4. Unconsolidated Securitisation programme

In 2013 ING transferred financial assets (mortgage loans) for an amount of approximately EUR 2

billion to a newly established special purpose vehicle (SPV). The transaction resulted in full

derecognition of the financial assets from ING’s statement of financial

position. The derecognition

did not have a significant impact

on net result. Following

this transfer ING continues to have two

types of on-going involvement in the transferred

assets: as counterparty to the SPE of a non-

standard interest rate

swap and as servicer of the transferred assets. ING has an option to unwind

the transaction by redeeming all notes at their principal outstanding amount, in the unlikely event

of changes in accounting and/or regulatory

requirements that significantly impact the transaction.

The fair value of the swap held by ING at 31 December 2019 amounted to EUR

(45) million (2018:

EUR

(33) million); fair value changes on this swap recognised in the statement of profit or loss in

2019 were EUR 12 million (2018: EUR 8 million). Service fee income recognised, for the role as

administrative agent, in the statement of profit or loss in 2019 amounted to EUR 2 million (2018:

EUR 2 million). The cumulative income recognised in profit or loss since derecognition amounts to

EUR 15 million.

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5. Other structured entities

In the normal course of business, ING Group enters into transactions with structured entities as

counterparty. Predominantly in its structured finance operations, ING can be instrumental in

facilitating the creation of these structured entity counterparties. These entities are generally not

included in the consolidated financial

statements of ING Group, as ING facilitates these transactions

as administrative agent by providing structuring, accounting, funding, lending, and operation

services.

ING Group offers various investment fund products to its clients. ING Group does not invest in these

investment funds for its own account nor acts as the fund manager.

50 Related

parties

In the normal course of business, ING Group enters into various transactions with related parties.

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. Related parties of ING

Group include, among others, its subsidiaries, associates, joint ventures, key management

personnel, and various defined

benefit and

contribution plans. For post-employment benefit plans,

reference

is made to Note 36 ‘Pension and other postemployment benefits’.

Transactions

between

related parties include rendering or receiving of services, leases, transfers

under finance

arrangements and provisions of guarantees

or collateral. All transactions with related parties took

place at conditions customary in the market. There are no significant provisions for doubtful debts

or individually significant bad

debt expenses recognised on outstanding balances with related

parties.

Subsidiaries

Transactions with ING Groep N.V.'s

main subsidiaries

2019

2018

Assets

44,242

34,902

Liabilities

163

140

Income received

1,103

629

Expenses paid

9

26

Transactions

between ING Groep N.V.

and its subsidiaries are eliminated on consolidation.

Reference is made to Note 48 ‘Principal subsidiaries’ for a list of principal subsidiaries and their

statutory place of incorporation.

Assets from ING’s subsidiaries mainly comprise long-term funding. Liabilities to ING’s subsidiaries

mainly comprise short-term deposits.

Associates and joint ventures

Transactions with ING Group’s main associates and joint ventures

Associates

Joint ventures

2019

2018

2019

2018

Assets

96

54

–0

Liabilities

97

98

6

1

Off-balance sheet commitments

29

120

–

Income received

11

2

Assets, liabilities, commitments, and income related to Associates and joint ventures result from

transactions which are executed as part of the normal Banking business.

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Key management personnel compensation

Transactions

with key management personnel (Executive Board, Management Board Banking and

Supervisory Board) are transactions with related parties.

In 2019 and 2018, three members of the Executive Board of ING Groep

N.V.

were also members of

the Management Board Banking. The members of the Management Board Banking are considered

to be key management personnel and their compensation is therefore included in the tables below.

Key management personnel compensation (Executive Board and Management Board Banking)

Executive

Board of ING

Groep N.V.

3

Management

Board

Banking

1,4

Total

2019

in EUR thousands

Fixed Compensation

–

Base salary

4,587

3,847

8,434

–

Collective fixed allowances

2

1,167

937

2,104

–

Pension costs

78

94

172

–

Severance benefits

Variable compensation

–

Upfront cash

361

361

–

Upfront shares

247

378

625

–

Deferred cash

541

541

–

Deferred shares

371

566

937

–

Other

Total

compensation

6,450

6,724

13,174

1

Excluding members that are also members of the Executive Board of ING Groep N.V.

One Management Board Banking

member was appointed to the Executive Board during the year .

2

The collective fixed allowances consist of two savings allowances applicable to employees in the Netherlands; an individual

savings allowance of 3.5% and a collective savings allowance to compensate for loss of pension benefits

with respect to

salary in excess of EUR 107,539.

3

In 2019 one member of the Executive Board left and one member joined. The table includes

their compensation earned in

the capacity as board member and in addition an advisor fee for the period in which the activities

were transferred

to the

successor.

4

One member left ING during the year. The table includes compensation earned in the capacity as board member..

In addition to above remuneration the members of the Executive

Board and Management Board

Banking receive other emoluments, such as Company Car, Travel

and Accident Insurance,

personnel discount on financial

products, of EUR 0.4 million in total (2018: EUR 0.3 million).

Key management personnel compensation (Executive Board and Management Board Banking)

Executive

Board of ING

Groep N.V.

Management

Board

Banking

1

Total

2018

in EUR thousands

Fixed Compensation

–

Base salary

4,157

3,672

7,829

–

Collective fixed allowances

2

1,191

990

2,181

–

Pension costs

78

103

181

–

Severance benefits

3

602

602

Variable compensation

4

–

Upfront cash

–

Upfront shares

–

Deferred cash

–

Deferred shares

–

Other

Total

compensation

6,028

4,765

10,793

1

Excluding members that are also members of the Executive Board of ING Groep N.V

2

The collective fixed allowances consist of two savings allowances applicable to employees in the Netherlands; an

individual

savings allowance of 3.5% and a collective savings allowance to compensate for loss of pension benefits

with respect to

salary in excess of EUR 105,075.

3

Following the settlement agreement and in consultation with the Supervisory Board, the CFO stepped down from his

position as member of the Executive Board of ING Group on 7 February 2019. In line with applicable regulations a severance

payment was granted. The Supervisory Board has set the severance pay at a level of 50% of fixed annual pay.

4

No variable remuneration for 2018, as the members of the Executive Board and Management Board Banking volunteered to

forfeit their entitlement to variable remuneration immediately, following the settlement agreement with the Dutch Public

Prosecution Service as announced by ING on 4 September 2018.

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Key management personnel compensation (Supervisory Board)

in EUR thousands

2019

2018

Total

compensation

1,045

1,032

The table above shows the fixed remuneration, expense allowances and attendance fees for the

Supervisory Board for 2019 and 2018.

Loans and advances to key management personnel

Amount outstanding

31 December

Weighted average

interest rate

Repayments

in EUR thousands

2019

2018

2019

2018

2019

2018

Executive Board members

2,402

2,681

1.4%

1.8%

97

Management Board Banking

350

550

2.6%

2.3%

Supervisory Board members

Total

2,752

3,231

97

Number of ING Groep N.V.

shares and stock options to key management personnel

ING Groep N.V.

shares

Stock options on

ING Groep N.V.

shares

in numbers

2019

2018

2019

2018

Executive Board members

172,523

226,639

46,198

68,467

Management Board Banking

147,713

159,393

–

27,240

Supervisory Board members

54,065

54,065

–

Total

number of shares and stock options

374,301

440,097

46,198

95,707

Key management personnel compensation is generally included in Staff expenses in the statement

of profit or loss. The total remuneration of the Executive Board and Management Board Banking is

disclosed in the table above. Under IFRS, certain components of variable remuneration are

not

recognised in the statement of profit or loss directly, but are allocated over the vesting period of

the award. The comparable amount recogni

sed in Staff expenses in 2019 and included

in Total

expenses in 2019, relating to the fixed expenses of 2019 and the vesting of variable remuneration

of earlier performance years, is EUR 11 million in 2019 (2018: EUR 12 million).

51 Subsequent

events

There are no subsequent events to report.

52 Capital

management

Objectives

Group Treasury

(“GT”) Capital Management, part of Balance Sheet & Capital Management, is

responsible for maintaining the adequate capitalisation of ING Group and ING Bank entities, to

manage the risk associated with ING’s business activities. This involves not only managing, planning

and allocating capital within ING Group, ING Bank and its various entities, but also helping to

execute necessary capital market transactions, term (capital) funding and risk management

transactions. ING takes an integrated approach to assess the adequacy of its capital position in

relation to its risk profile and operating environment. This means GT Capital Management takes into

account both regulatory and internal, economic based metrics and requirements as well as the

interests of key stakeholders such as shareholders and rating agencies.

ING applies the following main capital definitions:

◾

Common Equity Tier 1 capital (CET1) - is defined as shareholders’ equity less regulatory

adjustments. CET1 capital divided by risk-weighted assets equals the CET1 ratio.

◾

Tier 1 capital – is defined as CET1 capital including Additional

Tier 1 (hybrid) securities and other

regulatory adjustments. Tier 1 capital divided by risk-weighted assets equals the Tier 1 capital

ratio.

◾

Total

capital – is Tier 1 capital including subordinated Tier 2 liabilities and regulatory

adjustments. Total capital

divided by risk-weighted assets equals the Total capital ratio.

◾

Common Equity Tier 1 ratio ambition –is built on potential impact of a standardised and pre-

determined 1-in-10-year stress event (i.e.

at a 90% confidence level with a 1-year horizon).

◾

Leverage

ratio – is defined as Tier 1 capital divided by the total exposure amount.

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Capital Developments

The capital position remained robust in 2019 reflecting strong profitability with a lower risk weight

and complemented with the optimisation of the capital structure. At both the consolidated and

entity level, ING has sufficient

buffers to withstand certain adverse scenarios without breaching

currently

applicable and likely future requirements.

The CET1 ratio at the end of the year improved as risk-weighted assets increased due to volume

growth and model impacts, effects that were offset by profit

retention and positive risk migration.

ING continues to maintain a strong and high quality capital level. ING Groep N.V.

has a Common

Equity Tier 1 ratio of 14.6% as at 31 December 2019 versus a current CRR/CRD IV solvency

requirement of 11.83%.

The Group’s Tier 1 ratio (including grandfathered

securities) increased to 16.7%, as of 31 December

2019. Compared with previous

year, the Total

capital ratio (including grandfathered

securities)

increased from 18.4% to 19.1%.

ING Bank N.V.

has a CET1 ratio of 13.1%, thereby complying with CRR/CRD IV solvency

requirements. ING Bank N.V.

paid EUR 2,819 million of dividend to ING Group in 2019. The Tier 1

ratio (including grandfathered

securities) increased from 14.5% to 15.1%, primarily reflecting

developments in ING Bank’s CET1 ratio. The Banks’s total capital ratio

(including grandfathered

securities) increased from 17.2% to 17.9%.

ING Group capital position according to CRR/CRD IV

2019

2018

Shareholders’ equity

4

53,769

50,932

Interim profit not included in CET1 capital

1

–1,754

–1,712

Other adjustments

–4,464

–3,776

Regulatory adjustments

–6,217

–5,489

Available common equity Tier 1 capital

47,552

45,443

Additional Tier 1 securities

2

6,916

5,339

Regulatory adjustments additional Tier 1

51

48

Available Tier 1 capital

54,519

50,831

Supplementary capital Tier 2 bonds

3

8,943

8,248

Regulatory adjustments Tier

–1,158

–1,136

Available Total

capital

62,303

57,943

Risk weighted assets

326,414

314,149

Common equity Tier 1 ratio

14.57%

14.47%

Tier 1 ratio

16.70%

16.18%

Total

capital ratio

19.09%

18.44%

1) The interim profit not included in CET1 capital as

per 31 December 2019 (EUR 1,754 million) includes EUR 42 million for 4Q

2019.(Full Year

2019: EUR 2,689 million).

2) Including EUR 5,312 million which is CRR/CRD IV-compliant (2018: EUR

2,833 million) and EUR 1,604 million to be replaced as

capital recognition is subject to CRR/CRD IV grandfathering rules (2018: EUR 2,506 million).

3) Including EUR 8,789 million which is CRR/CRD IV-compliant (2018: EUR

8,079 million), and EUR 153 million to be replaced as

capital recognition is subject to CRR/CRD IV grandfathering rules (2018: EUR 168 million).

4) Shareholders' equity is determined in accordance with IFRS-EU.

In accordance with the applicable regulation, credit

and operational risk models used in the capital

ratios calculations are not audited.

Contents

|

Part

I

|

Part

II

|

Part

III

|

Additional Information

|

Financial Statements

2019 ING Group Annual Report on Form

20-F

F - 136

Dividend

ING Group’s dividend policy aims to pay a progressive

dividend that will reflect

considerations

including expected future capital requirements, growth

opportunities available to the Group, net

earnings, and regulatory developments. The Executive Board

proposes to pay a total cash dividend

of EUR 2,689 million, or EUR 0.69 per ordinary share, over the financial year 2019. This is subject

to

the approval of shareholders

at the Annual General Meeting in April 2020.

Taking

into account the interim dividend of EUR 0.24 per ordinary share paid in August 2019, the

final dividend

will amount to EUR 0.45 per ordinary share and will be paid fully in cash. The total

amount of EUR 1,754 million is completely covered by the remaining balance of ”interim profits not

included in CET1 capital” at year-end 2019.

Processes for

managing capital

Besides assessing capital adequacy, ING also ensures the availability of sufficient

capital above the

set targets and limits for ING Group and ING Bank. Additionally, GT Capital Management ensures

adherence to the set limits and targets by planning and executing capital management

transactions. The ongoing assessment and monitoring of capital adequacy is embedded

in the

capital planning process within the ICAAP framework. As part of the dynamic business planning

process, ING prepares

a capital and funding plan on a regular basis for all its material businesses

and assesses continuously the timing, need and feasibility for capital management actions in

scope of its execution strategy. Sufficient financial

flexibility should be preserved to meet important

financial objectives.

ING’s risk appetite statements set targets and are at the foundation of the

capital plan. These limits are cascaded to the different businesses in line with our risk management

framework.

Adverse planning and stress testing are integral components of ING’s risk and capital management

framework. It allows us to (i) identify and assess potential vulnerabilities in our businesses, business

model, portfolios or operating environment; (ii) understand the sensitivities of the core assumptions

used in our strategic and capital plans; and (iii) improve

decision-making and business steering

through balancing risk and return following a foresighted

and prudent management approach. In

addition to internal stress test scenarios reflecting the outcomes of the annual risk assessment, ING

also participates in regulatory stress test exercises. ING participated in the 2018 EU-wide stress test

conducted by EBA.

Regulatory requireme

nts

Capital adequacy and the use of required regulatory

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 (Dutch Central

Bank until 3 November 2014,

the ECB thereafter) for supervisory purposes. In 2010, the Basel Committee issued new solvency

and liquidity requirements that superseded Basel II. The minimum requirements, excluding buffers,

for the CET 1 ratio is 4.5%, the minimum Tier 1 requirement is 6% and the Total

capital ratio is 8%

of risk-weighted assets.

The CET1 requirement for ING Group

at a consolidated level was set at 11.83% in 2019. This

requirement is the sum of a 4.5% Pillar I requirement,

a 1.75% Pillar II requirement, a 2.5% Capital

Conservation Buffer (CCB), a 0.08% Countercyclical Buffer (based on December 2019 positions) and

the 3.0% Systemic Risk Buffer (SRB) that are set separately for Dutch systemic banks by the Dutch

Central Bank (De Nederlandsche Bank). Due to changes in the Countercyclical Buffer setting in

some jurisdictions, ING expects an increase to 0.24% in 2020 (based on 4Q

2019 positions). This

requirement excludes the Pillar II capital guidance, which is not disclosed.

The Maximum Distributable Amount (MDA) trigger level stood at 11.83% in 2019, based on stable

Pillar II capital requirements. In the event that ING Group

breaches the MDA level, ING may face

restrictions on dividend payments, AT1 instruments coupons and bonus payments.

Contents

|

Part

I

|

Part

II

|

Part

III

|

Additional Information

|

Financial Statements

2019 ING Group Annual Report on Form

20-F

F - 137

Ratings

Main credit ratings of ING at 31 December 2019

Standard & Poor’s

Moody’s

Fitch

Rating

Outlook

Rating

Outlook

Rating

Outlook

ING Groep N.V.

Long-term

A-

Stable

Baa1

Stable

A+

Stable

ING Bank N.V.

Long-term

A+

Stable

Aa3

Stable

AA-

Stable

Short-term

A-1

P-1

F1+

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 other ratings. 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.

Document

2019 ING Group Annual Report on Form 20-F

1

DESCRIPTION OF SECURITIES

REGISTERED UNDER SECTION 12 OF THE EXCHANGE

ACT

As of 31 December 2019 ING Groep N.V.

(“

ING

,” the “

Company

,” “

we

,” “

us

,” and “

our

”) had the following series of securities registered pursuant

to Section 12(b) of

the Act:

Title of each class

Trading symbols

Name of each exchange on which registered

American Depositary Shares

ING

New York Stock Exchange

Ordinary shares

New York Stock Exchange

(i)

6.125% ING Perpetual Debt Securities

ISG

New York Stock Exchange

3.150% Fixed Rate Senior Notes

due 2022

ING22

New York Stock Exchange

3.950% Fixed Rate Senior Notes

due 2027

ING27

New York Stock Exchange

Floating Rate Senior Notes due 2022

ING22A

New York Stock Exchange

Floating Rate Senior Notes due 2023

ING23A

New York Stock Exchange

4.100% Fixed Rate Senior Notes

due 2023

ING23

New York Stock Exchange

4.550% Fixed Rate Senior Notes

due 2028

ING28

New York Stock Exchange

3.550% Fixed Rate Senior Notes

due 2024

ING24

New York Stock Exchange

4.050% Fixed Rate Senior Notes

due 2029

ING29

New York Stock Exchange

(i)

Not for trading,

but only in connection with

the registration

of American Depositary Shares

representing such ordinary

shares, pursuant to

the requirements of

the Securities and Exchange Commission.

Capitalized terms used but not defined herein

have the meanings given to

them in ING’s annual report

on Form 20-F for the fiscal year ended 31 December 2019.

ORDINARY SHARES

The general meeting of shareholders of ING is referred to as the “

General Meeting

,” which term refers to both the body consisting of shareholders and other persons

entitled to vote as well as the meeting of shareholders and other persons

entitled to attend meetings. This section summarizes

all the material terms of our ordinary

shares, including summaries of certain provisions of our articles of association

and applicable Dutch law in effect on the date

hereof. They do not, however,

describe

every aspect

of the ordinary

shares, the

articles of association

or Dutch law.

References

to provisions

of our articles

of association

are qualified in

their entirety

by

reference

to the

full articles

of association,

an English

translation

of which

has been

filed as

an exhibit

to our

annual report

on

Form 20-F

for the

year ended

31

December, 2019,

as Exhibit 1.1 (incorporated by

reference to ING’s

Report on Form 6-K furnished on 6 January 2017).

General

As at 31

December,

2019, our authorized

share capital

was divided

into 14,729,000,000

ordinary shares,

with a nominal

value of

EUR 0.01 per

ordinary share,

and

4,571,000,000 cumulative preference

shares with a nominal value

of EUR 0.01 per cumulative preference

share. The ordinary shares and

the cumulative preference

shares are each in registered form. The outstanding

ordinary shares are fully paid and non-assessable. As at 31 December,

2019, 3,896,734,271 ordinary shares were

issued and outstanding. In addition, as at 31 December,

2019, no cumulative preference

shares were issued and outstanding.

Articles of Association

ING is a holding

company organised

under the laws

of the Netherlands.

Its object and purpose,

as set forth

in article 3 of its

Articles of Association,

is to participate

in, manage,

finance, furnish

personal or

real security

for the

obligations

of and

provide services

to other

enterprises and

institutions of

any kind,

but in

particular

enterprises and

institutions which

are active

in the field

of lending, the

financial markets,

investment

and/or other

financial services,

and to

engage in

any activity

which may

be related

or conducive

to the

foregoing. ING

is registered

under file

number 33231073

with the

Trade

Register of

the Chamber

of Commerce

and the

Articles of Association are available there

and on ING’s website.

Certain Powers of Directors

The Supervisory

Board

determines

the

compensation

of

the

members

of the

Executive

Board

within

the

framework

of the

remuneration

policy

adopted

by

the

General Meeting

and the compensation

of members

of the Supervisory

Board is

determined by the

General Meeting.

Without prejudice

to their voting

rights they

may have if they are a shareholder of ING , neither members of the

Executive Board nor members of the Supervisory Board will vote on compensation for themselves

or any other member of their body.

During the term of their office,

members of the Supervisory Board

are not allowed to borrow

or to accept guarantees

from ING or any

of its subsidiaries. Loans that

already exist upon

appointment as a member of

the Supervisory Board however,

may be continued.

Subsidiaries of ING however,

may in the normal

course of their

business and

on terms

that are

customary

in the

sector,

provide other

banking and

insurance

services to

members of

the Supervisory

Board. These

services may

include services in which

the granting of

credit is of a

subordinate nature,

e.g. credit cards

and overdrafts

in current accounts.

Members of the

Executive Board

are

empowered to

exercise

all the powers

of ING to

borrow money

on behalf of

ING, subject

to regulatory

restrictions (if

any) and,

in the case

of the issuance

of debt

securities, to the approval of the Supervisory Board.

Members of

the Supervisory

Board and

members of

the Executive

Board with

a conflict

of interest

may not

participate in

the decision-making

with respect

to the

matter or transaction to

which the conflict of interest relates,

and the votes of such members shall not be taken

into account.

The Articles of Association do

not contain any age limits for retirement of

the members of the Executive Board and

members of the Supervisory Board.

The retirement

age for members of the Executive

Board under the (Dutch) pension plan is the first

day of the month that the individual reaches the age of 67.

Members of the Executive Board

are appointed by the General Meeting for

a term of four years and

may be reappointed.

Supervisory Board members

shall be nominated for

appointment for

a maximum of four

years and may

be reappointed once

for another four

-year period. Without

prejudice to any

current term

of appointment which

commenced before

1 January 2017,

Supervisory Board members

may be nominated

for reappointment

for an

additional period of two years, which period may subsequently be extended by at most two years.

In the event of a reappointment after having served for two terms

of four years

or more, reasons

must be given in

the report of the Supervisory

Board. The Supervisory Board

may deviate from

the above in special

circumstances at

its discretion.

Both

members

of the

Executive

Board

and

members

of the

Supervisory

Board

are

appointed

from

a

binding

nomination

by

the Supervisory

Board.

The General

Meeting may declare the

nomination non-binding

by a resolution passed

by an absolute majority

of the votes cast,

which majority represents more

than half of the

issued share capital. Members of the Executive

Board and the Supervisory Board are not required

to hold any shares of ING to qualify

as such.

Restrictions on share ownership

As of

31 December

2019 there

were no

limitations under

Dutch law

or the

Articles of

Association on

the right

to own

Ordinary Shares,

including the

right of

non-

Dutch nationals or residents rights to

hold or exercise voting rights.

General Meeting

Frequency, notice and agenda

of General Meetings

ING’s General Meeting is normally held each year in April or May to discuss the course of business in the preceding financial year on the

basis of the reports prepared

by the Executive Board and

the Supervisory Board, and to decide on:

• The distribution of dividends or other distributions;

• The appointment and/or reappointment

of members of the Executive Board

and the Supervisory Board;

• Any other items requiring shareholder approval

pursuant to Dutch law; and

• Any other matters proposed

by the Supervisory Board, the Executive Board

or shareholders in accordance with the Articles

of Association.

General Meetings are convened

by public notice via the ING website (www.ing.com)

at least 42 days before

the day of the General Meeting.

2019 ING Group Annual Report on Form 20-F

2

As provided

for in

the Dutch

Civil Code,

implementing the

Bank Recovery

and Resolution

Directive (“

BRRD

”), ING’s

Articles of

Association permit

this convocation

period to be shortened to 10 days if (i) ING meets the criteria for early intervention

measures; (ii) resolution can be avoided by means of a capital

increase; and (iii) a

General Meeting would be required

to enable

ING to issue the required number of shares.

As of the

date of convening a General Meeting,

all information relevant for shareholders is made

available via the ING

website and through its head

office. Information

relevant for shareholders includes the notice of the General Meeting,

the agenda with instructions on how

to participate in the meeting (either

in person or by proxy),

the place and time of the meeting, the address of the website of ING, the explanatory notes to the agenda including the verbatim text of the proposals, as well as the

reports of the Executive Board and

the Supervisory Board.

Proposals by shareholders

Proposals to include items

on the agenda for

a General Meeting that

have been adequately

substantiated

under applicable Dutch law

can be made by shareholders

representing together at least

one per cent of the issued share capital, subject

to a 60 days’ notice period.

Record date

Pursuant to

Dutch law,

the record

date for

attending a

General Meeting and

voting on the

proposals at

that General Meeting

is the 28th

day before

the day of

the

General

Meeting.

Only those

who hold

shares

at

the record

date

are

entitled

to

attend

the General

Meeting

and to

exercise

other

rights

related

to

the General

Meeting in question on the basis of their holding

at the record date,

notwithstanding any subsequent

sale or purchase of shares. The record

date is published in the

notice for the

General Meeting.

If the shortened

convocation

of 10 days

is applicable (see

above, paragraph:

‘Frequency,

notice and agenda

of General Meetings’),

the record date is two days

after the convocation date.

In accordance with US requirements, the

depositary sets a record date for

the ADRs, which date determines which ADRs

are entitled to give voting instructions.

This

record date

can differ from the record

date set by ING for shareholders.

Attending General Meetings

Shareholders may

attend a

General Meeting in

person, or may

grant a proxy

in writing to a

third party to

attend the meeting

and to vote

on their behalf.

Prior to a

General Meeting, ING will make proxy

forms available on its website.

For logistical reasons,

attendance at the

General Meeting by

holders of ING’s

ordinary shares, either in

person or by proxy,

is subject to the requirement

that ING is

notified in advance. Instructions to that

effect are included in the notice for

the General Meeting.

General Meetings are webcast

via ING’s website

www.ing.com, so

that shareholders who do not

attend the General

Meeting in person may

nevertheless follow the

meeting online.

Voting rights on shares

Each share entitles

the holder to cast

one vote at the

General Meeting. The

Articles of Association

do not restrict the

voting rights on

any class of shares.

ING is not

aware of any agreement pursuant

to which voting rights on any class of its shares

are restricted.

Proxy voting facilities

ING provides proxy voting

facilities to its investors

via its website and solicits proxies from

its ADR holders in line with common practice in the US.

Proxy voting

forms for shareholders

are made available

on the website

of ING (www.ing.com).

By returning the

form, shareholders

give a proxy

to an independent

proxy holder (a public notary registered

in the Netherlands) who will vote according

to the instructions expressly

given on the proxy form.

The submission of these forms is subject to additional

conditions specified on such forms.

To encourage participation at the General Meeting, ING provides the EVO (e-voting) platform, an online facility through which shareholders can register for a

meeting

or appoint a proxy.

Main powers of the General Meeting

The main powers of the General Meeting are

to decide on:

●

the appointment of

members of the

Executive Board

and members

of the Supervisory

Board, subject to

a binding nomination

of the Supervisory

Board as

set forth in the Articles of Association;

●

the suspension and dismissal of members of the Executive

Board and members of the Supervisory Board;

●

the adoption of the financial statements;

●

the declaration of dividends,

subject to the

power of the Executive Board

to allocate part or

all of the

profits to the reserves -

with approval of the

Supervisory

Board - and the declaration of other distributions,

subject to a proposal by the Executive

Board and approved by the Supervisory Boar

d.

●

the appointment of the external auditor;

●

an amendment of the Articles of Association, a legal merger or division of ING, and winding-up of ING, all subject to a proposal made by the Executive Board

with approval by the Supervisory Board;

●

the issuance of shares or rights to subscribe for shares, the restriction

or exclusion of pre-emptive rights of shareholders,

and delegation of these powers to

the Executive Board, subject to a proposal

by the Executive Board that

has been approved by the Supervisory Board;

●

the authorisation

of a

repurchase

of outstanding

shares and/or

a cancellation

of shares.

In addition,

the approval

of the

General Meeting

is required

for

Executive Board decisions that would

be expected to have a material

effect on the identity or nature

of ING or its enterprise.

Reporting

Resolutions adopted at a General Meeting are

generally published on the website of ING (www.ing.com)

within one week following the meeting. In accordance

with

the Dutch Corporate Governance

Code, the draft minutes of the General

Meeting are made available to

shareholders on the website

of ING (www.ing.com) no

later

than three months

after the meeting.

Shareholders may

react to the

draft minutes

in the following

three months,

after which the

final minutes are

adopted by

the

chairman of the

meeting in question

and by a

shareholder appointed

by that meeting.

The final minutes

are made available

on the website

of ING (www.ing.com).

By exception to

the provisions of the Dutch

Corporate Governance Code,

shareholders will not have

the opportunity to react to

the minutes of a General Meeting

if

a notarial report of the meeting is made, as this would

be in conflict with laws applicable to such

notarial report.

Capital and shares

Capital structure

The authorised capital of ING

consists of ordinary shares

and cumulative preference

shares. Currently,

only ordinary shares are issued,

while a call option to acquire

cumulative

preference

shares

has

been

granted

to

the

ING

Continuity

Foundation

(

Stichting

Continuïteit

ING

).

The

acquisition

of

cumulative

preference

shares

pursuant

to

the

call

option

is

subject

to

the

restriction

that,

immediately

after

the

issuance

of

cumulative

preference

shares,

the

total

amount

of

cumulative

preference

shares

outstanding

may not

exceed

one third

of the

total

issued share

capital

of ING.

The purpose

of this

call option

is to

protect

the independence,

continuity and

identity of

ING against

influences that

are contrary

to the

interests of

ING, its

enterprise and

the enterprises

of its subsidiaries

and all stakeholders

(including, but not limited to, hostile takeovers).

However,

the ordinary shares are not used for protective

purposes.

The board of

the ING Continuity

Foundation is

comprised of three

members who are

independent of

ING. Under the

terms of the

articles of association

of the ING

Continuity Foundation, the following persons

may not be appointed to the board of the ING Continuity Foundation:

(i) a current or former Executive Board

member,

(ii) a current

or former

Supervisory Board

member,

(iii) a spouse

or relative

by blood

or marriage

up to

the fourth

remove of

a member

of the

Executive

Board or

Supervisory Board of

ING and/or its

subsidiaries, (iv) a

current or former

ING employee, (v)

a current permanent

adviser to ING,

(vi) a former permanent

adviser to

ING during

the first

three years

after the

termination

of his

engagement

as an

adviser,

or (vii)

a director

or employee

of a

bank with

which ING

has a

lasting and

significant relationship.

The board

of the

ING Continuity

Foundation appoints

its own

members, after

consultation

with the

Supervisory Board

of ING, but

without

any requirement for approval

by ING.

ING’s authorised

capital is the maximum

amount of capital

allowed to be issued

under the terms of the

Articles of Association.

New shares in excess

of this amount

can only be issued if the Articles of Association are amended. For reasons of flexibility

and to meet the requirement as set forth in the Bank Resolution

and Recovery

Directive (‘BRRD’)

that the

amount of

authorised share

capital should

at all times

be sufficient

to permit

the issuance

of as many

ordinary shares

as required

for a

potential future

bail-in, ING

seeks to

set the

authorised capital

in the

Articles of

Association at

the highest

level permitted

by law,

which is

five times

the actually

issued share capital.

Issuance of shares

2019 ING Group Annual Report on Form 20-F

3

Share issuances are decided

by the General

Meeting, which may

also delegate its authority. Each year, a proposal is

made to the

General Meeting to delegate

authority

to the

Executive

Board to

issue new

ordinary shares

or to

grant

rights to

subscribe to

new ordinary

shares, both

with and

without pre-emptive

rights for

existing

shareholders.

The set-up and content

of the currently applicable

share issue authorisation have

been discussed with many

investors, proxy

advisors and other stakeholders

in the

context of

the corporate

governance review

of 2016

and in

the general

meetings of

2016 and

subsequent years;

their feedback

has been

taken

into account.

The

current share issue authorisation

enables the Executive Board

to issue new ordinary shares (including

the granting of rights to

subscribe for ordinary shares,

such as

warrants or in connection with convertible debt instruments) for

a period of 18

months, ending on 23

October 2020 (or when

the authorisation is renewed, whichever

is earlier) subject to the following conditions

and limits:

●

No more than 40 percent of the issued share capital in

connection with a rights issue, being a

share offering to all shareholders in proportion to their existing

holdings of ordinary shares as nearly as may be practical. However,

the Executive Board and Supervisory Board may

exclude certain shareholders

from such

a share offering for practical or legal reasons such as record dates, fractional

entitlements, treasury shares, applicable legal restrictions on share offerings

or

in the context of a syndicated

rights issue; plus

●

No more than 10 percent of the issued share

capital, with or without pre-emptive rights

of existing shareholders.

Specific approval by the General Meeting

is required for any

share issuance exceeding these limits.

The purpose

of this

share

issue authorisation

is to

delegate

the

power

to

issue

new

ordinary

shares

to

the

Executive

Board.

Accordingly,

the

Executive

Board

is

authorised

to

issue

new

ordinary

shares

without

first

having

to

obtain

the

consent

of

the

General

Meeting,

which

in

the

Netherlands

is

subject

to

a

statutory

convocation period of at least 42 days. This authorisation

gives ING flexibility in managing its capital resources, including regulatory

capital, while taking into account

shareholders’

interests

to

prevent

dilution

of

their

shares.

It

particularly

enables

ING

to

respond

promptly

to

developments

in

the

financial

markets,

should

circumstances so require. The

Executive Board and the Supervisory Board

consider it in the best interest of ING

to have the flexibility this authorisation

provides.

This authorisation may be used for any

purpose, including but not limited to strengthening

capital, financing, mergers or acquisitions.

However,

the authorisation to

issue ordinary

shares by

way of

rights issue

cannot be

used for

mergers

or acquisitions

on a

stock-for-stock

basis as

this is

incompatible

with the

concept of

pre-

emptive rights for existing shareholders.

Shareholders who are

not allowed to,

do not elect to,

or are unable to

subscribe to a rights

offering, are entitled

to sell their rights

in the market

or receive any

net

financial benefit upon completion of a rump offering

after the exercise

period has ended.

Transfer of shares and transfer restrictions

Shares not

included in

the Securities

Giro

Transfer

Act system

(‘

Wet

Giraal Effectenverkeer

’ system)

are transferred

by means

of a

deed of

transfer

between the

transferor and the transferee.

To become effective,

ING has to acknowledge the transfer,

unless ING itself is a party to the transfer. The Articles of Association do not

restrict the transfer

of ordinary shares, whereas the transfer

of cumulative preference

shares is subject to prior approval

of the Executive Board. ING is

not aware of

the existence of any agreement

pursuant to which the transfer

of ordinary shares or American depositary

receipts for such shares is restricted.

Shares that are included

in the Securities

Giro Transfer system are transferred pursuant to the Securities Giro Transfer Act (

Wet Giraal Effectenverkeer

). A shareholder,

who wishes to transfer such

shares, must instruct the securities intermediary

where his shares are administered

accordingly.

Repurchase of shares

ING may repurchase issued shares. Although

the power to repurchase shares is vested

in the Executive Board subject to the approval

of the Supervisory Board, prior

authorisation from the General

Meeting is required for

these repurchases. Under Dutch

law, this

authorisation lapses after a

maximum of 18 months. For

ING, each

year,

a proposal is made to the General Meeting to authorise

the repurchase of shares by the Executive

Board subject to the approval of the Supervisory

Board for a

period of 18 months (or until the authorisation

is renewed, whichever is earlier).

Pursuant to the authorisation currently in force,

until 23 October 2020 (or until the authorisation is renewed, whichever

is earlier), no more than 10 percent of ING’s

issued share capital

may be held as

treasury shares. When repurchasing

shares, the Executive

Board must observe

the price ranges

prescribed in the authorisation.

For the ordinary shares, the authorisation currently in force stipulates

a minimum price of one eurocent and a maximum price equal to the highest stock price on the

Amsterdam stock exchange

on the date on which the purchase agreement

is concluded or on the preceding day of stock

market trading.

Special rights of control

No special rights

of control referred

to in Article

10 of the directive

of the European

Parliament and

the Council on takeove

r

bids (2004/25/EC) are

attached to

any

share.

Obligations of shareholders to disclose holdings

Pursuant to Section 5.3 of the Dutch

Financial Supervision Act (“

Major Holdings Rules

”), any person who,

directly or indirectly,

acquires or disposes of an interest

in

the voting rights and/or the capital

of (in short) a public limited company incorporated

under the laws of the Netherlands with an

official listing on a stock exchange

within the

European Economic

Area, as

a result

of which

acquisition or

disposal the

percentage of

voting rights

or capital

interest,

whether through

ownership of

ordinary shares, American depositary receipts (“

ADRs

”) or any other financial instrument, whether stock-settled or cash-settled, such as call or

put options, warrants,

swaps or any other similar contract,

reaches, exceeds or falls

below 3%, 5%, 10%, 15%, 20%, 25%, 30%, 40%, 50%,

60%, 75% or 95%. With respect to ING, the

Major

Holdings Rules would require any

person whose interest in the

voting rights and/or capital of

ING reached, exceeded or fell

below those percentage interests, whether

through ownership

of ordinary shares,

ADSs or any

other financial instrument

whether stock

settled or cash

settled, such as

call or put

options, warrants,

swaps or

any

other similar

contract,

to

notify in

writing the

Dutch

Authority

for

the Financial

Markets

(

Autoriteit

Financiële

Markten

) immediately

after

the

acquisition

or

disposal of the triggering interest in ING’s

share capital.

A notification requirement

also applies if a

person’s

capital interest

or voting rights reaches,

exceeds or falls

below the above-mentioned

thresholds as a

result of a

change in

ING’s

total

issued share

capital

or voting

rights.

Such notification

must be

made no

later than

the fourth

trading

day

after the

Dutch Authority

for the

Financial Markets has published ING’s

notification of the change in its issued share capital.

The notification will be recorded in a register

that is held by the Dutch Authority for

the Financial Markets and published on

its website.

Non-compliance with the obligations

of the Major Holdings Rules can lead to criminal prosecution

or administrative law sanctions.

In addition, a civil court can issue

orders

against

any

person

who fails

to

notify or

incorrectly

notifies the

Dutch

Authority

for

the Financial

Markets,

in

accordance

with the

Major

Holdings

Rules,

including suspension of the voting right in respect of such person’s

ordinary shares.

ING is not aware of

any investors (or potential shareholders) with an interest of three

percent or more in ING

other than those shown

in Item 7.

A ‘Major shareholders’

in ING’s annual

report on Form 20-F for the fiscal year ended 31 December

2019 as per year-end 2019.

Each person holding a

gross short position

in relation to the

issued share capital of

ING that reaches,

exceeds or falls below

any one of

the above-mentioned thresholds

must immediately give written notice to the AFM. If a person’s gross short position reaches, exceeds or falls below one of the

above-mentioned thresholds as a result

of a

change in

ING’s

issued share

capital, such

person must

make a

notification not

later than

the fourth

trading day

after the

AFM has

published the

Company’s

notification in the public register of the AFM.

In addition, pursuant

to Regulation

(EU) no. 236/2012

of the European

Parliament and

the Council on short

-selling and certain

aspects of credit

default swaps,

any

person who

acquires or

disposes of a

net short

position relating

to the issued

share capital

of ING, whether

by a transaction

in shares

or ADRs, or

by a transaction

creating or relating to any financial instrument

where the effect or one of the effects of the transaction

is to confer a financial advantage on the person entering

into

that transaction in

the event of a change

in the price of such

shares or ADRs, is

required to notify

the Dutch Authority for

the Financial Markets,

in accordance with

the provisions of the above-mentioned regulation if,

as a result of such acquisition or disposal the person’s

net short position reaches, exceeds or falls below 0.2% of

the issued

share

capital

of ING

and each

0.1% above

that. Each

reported

net short

position equal

to 0.5%

of the

issued share

capital

of ING

and any

subsequent

increase of that position by 0.1% will be made public via the short

selling register on the website of the Dutch

Authority for the Financial Markets.

Change of control provisions

Legal provisions

Pursuant to

the terms of

the Dutch

Financial Supervision

Act, a declaration

of no objection

from the ECB

must be obtained

by anyone

wishing to

acquire or hold

a

participating interest of at least 10 percent in ING and to exercise control attached to such a participating interest.

Similarly, on the basis of indirect change of control

statutes in the

various jurisdictions where subsidiaries

of ING are operating, permission

from, or notification to,

local regulatory authorities

may be required for

the

acquisition of a substantial interest

in ING.

Amendment of the Articles of Association

2019 ING Group Annual Report on Form 20-F

4

The General Meeting

may resolve

to amend the

Articles of Association

of ING, provided

that the resolution

is adopted based

on a proposal

of the Executive

Board,

which has been approved by the Supervisory Board.

An amendment of the Articles of Association is required

to be executed by notarial

deed.

2019 ING Group Annual Report on Form 20-F

5

DEBT SECURITIES

Each series

of notes listed

on the New

York

Stock Exchange

and set forth

on the cover

page to ING’s

annual report

on Form 20-F

for the

year ended

December 31,

2019 has

been issued

by ING.

Each

of these

series of

notes

was issued

pursuant

to an

effective

registration

statement

and a

related

prospectus

and prospectus

supplement setting forth the terms

of the relevant series of notes.

The following

table sets

forth the

dates of

the registration

statements,

dates of

the base

prospectuses and

dates of

issuance for

each relevant

series of notes

(the

“

Notes

”).

Series

Registration

Statement

Date of Base

Prospectus

Date of Issuance

6.125% ING Perpetual Debt

Securities

333-84226

September 14, 2005

September 26, 2005

3.150% Fixed Rate Senior Notes

due

2022

333-202880

March 21, 2017

March 29, 2017

3.950% Fixed Rate Senior Notes

due

2027

333-202880

March 21, 2017

March 29, 2017

Floating Rate Senior Notes due

2022

333-202880

March 21, 2017

March 29, 2017

Floating Rate Senior Notes due

2023

333-22739

September 18, 2018

October 2, 2018

4.100% Fixed Rate Senior Notes

due

2023

333-22739

September 18, 2018

October 2, 2018

4.550% Fixed Rate Senior Notes

due

2028

333-22739

September 18, 2018

October 2, 2018

3.550% Fixed Rate Senior Notes

due

2024

333-22739

September 18, 2018

April 9, 2019

4.050% Fixed Rate Senior Notes

due

2029

333-22739

September 18, 2018

April 9, 2019

The following description of our Notes

is a summary and does not purport to be complete and

is qualified in its entirety by the full terms of the Notes.

Description of the Fixed Rate Notes

The 3.150% Fixed

Rate Senior

Notes due

2022 (the “

2022 notes

”), the 3.950%

Fixed Rate

Senior Notes

due 2027 (the

“

2027 notes

”), the 4.100%

Fixed Rate

Senior

notes

due 2023

(the “

2023 notes

”), the

4.550% Fixed

Rate

Senior Notes

due 2028

(the

“

2028 notes

”), the

3.550% Fixed

Rate

Senior Notes

due 2024

(the “

2024

notes

”) and the 4.050% Fixed

Rate Senior Notes

due 2029 (the “

2029 notes

”) (together,

the “

fixed rate

notes

”) were issued in

the aggregate principal

amount, and

unless previously redeemed and cancelled will mature

on the Maturity Date and will bear interest

at the rate per annum, set forth

in the table below:

Aggregate Principal

Amount

Maturity Date

Fixed Interest

Rate

2022 notes ..........................................................

$1,500,000,000

March 29, 2022

3.150%

2027 notes ..........................................................

$1,500,000,000

March 29, 2027

3.950%

2023 notes ..........................................................

$1,500,000,000

October 2, 2023

4.100%

2028 notes ..........................................................

$1,250,000,000

October 2, 2028

4.550%

2024 notes ..........................................................

$1,000,000,000

April 9, 2024

3.550%

2029 notes ..........................................................

$1,000,000,000

April 9, 2029

4.050%

Interest on the fixed rate notes

will be payable semi-annually

in arrear on

the Fixed Rate Interest Payment Dates, commencing

on the First Fixed

Rate Interest Payment

Date, set forth in the table below:

Fixed Rate Interest

Payment Dates

First Fixed Rate

Interest Payment

Date

2022 notes ..........................................................

March

29

and

September

29 of each year

September 29, 2017

2027 notes ..........................................................

March

29

and

September

29 of each year

September 29, 2017

2023 notes ..........................................................

April

2

and

October

2

of

each year

April 2, 2019

2028 notes ..........................................................

April

2

and

October

2

of

each year

April 2, 2019

2024 notes ..........................................................

April

9

and

October

9

of

each year

October 9, 2019

2029 notes ..........................................................

April

9

and

October

9

of

each year

October 9, 2019

The regular record

dates for

the fixed

rate notes

will be the

Business Day

immediately preceding

each Fixed

Rate Interest

Payment

Date (or,

if the fixed

rate notes

are held in definitive form, the 15th Business

Day preceding each Fixed Rate Interest

Payment

Date).

If any scheduled Fixed Rate

Interest Payment

Date is not a Business Day,

we will pay interest on the

next succeeding Business Day,

but interest on that payment

will

not accrue

during

the period

from and

after

the scheduled

Fixed

Rate

Interest

Payment

Date.

If the

Maturity

Date

or date

of redemption

or repayment

is not

a

Business

Day,

we may

pay

interest

and principal

and/or

any

amount payable

upon redemption

of the

fixed

rate

notes

on the

next

succeeding Business

Day,

but

interest on

that payment

will not accrue during

the period from and

after such Maturity

Date or date

of redemption or

repayment. Interest

on the fixed

rate notes

will be computed on the basis of a 360-day year

of twelve 30-day months.

Description of the Floating Rate Notes

2019 ING Group Annual Report on Form 20-F

6

The Floating Rate Senior Notes due 2022 (the “

2022 floating rate notes

”) and the Floating Rate Senior Notes due 2023 (the “

2023 floating rate notes

” and, together

with the 2022 floating rate notes, the “

floating rate notes

”) were issued in an aggregate principal amount, and unless previously redeemed and cancelled will

mature

on the Maturity Date, and will bear interest

at the rate per annum, set forth

in the table below:

Aggregate

Principal

Amount

Maturity Date

Floating Interest Rate

2022 floating rate notes.................

$1,000,000,000

March 29, 2022

LIBOR

plus

1.15%

per

annum

2023 floating rate notes.................

$500,000,000

October 2, 2023

LIBOR plus

1.000% per

annum

Interest on

the floating rate

notes will be

payable quarterly

-annually in

arrear on the

Floating Rate

Interest Payment

Dates, commencing

on the First

Floating Rate

Interest Payment

Date, set forth in the table

below:

Floating Rate Interest

Payment Dates

First Floating Rate

Interest Payment

Date

2022 floating rate notes................................

.....

March 29, June 29,

September 29 and

December 29 of each year

June 29, 2017

2023 floating rate notes................................

.....

January 2, April 2, July 2

and October 2 of each

year

January 2, 2019

The regular record dates for

the floating rate notes

will be the Business Day immediately preceding

each Floating Rate Interest

Payment Date (or,

if the floating rate

notes are held in definitive form,

the 15th Business Day preceding each Floating Rate

Interest Payment

Date).

If any Floating Rate

Interest Payment

Date, other than the Maturity

Date for the floating

rate notes, would

fall on a day that

is not a Business Day,

the Floating Rate

Interest

Payment

Date

will be

postponed

to

the next

succeeding Business

Day,

except

that

if that

Business Day

falls in

the ne

xt succeeding

calendar

month,

the

Floating Rate Interest Payment

Date will be the immediately preceding Business Day.

If the Maturity Date or date of redemption or repayment

is not a Business Day,

we may pay interest

and principal and/or any amount

payable upon redemption of the

floating rate notes on

the next succeeding Business Day,

but interest on that

payment will not accrue during the period from and after

such Maturity Date or date of redemption

or repayment.

Each interest period on the floating rate

notes will begin on (and include) a Floating Rate Interest Payment

Date and end on (but exclude) the following Floating Rate

Interest Payment

Date (each,

an “

Interest Period

”); provided that

(i) with respect to

the 2022 floating

rate notes,

the first

Interest Period

will begin on

and include

March 29,

2017 and

will end

on, but

exclude, June

29, 2017

and (ii) with

respect to

the 2023

floating rate

notes, the

first Interest

Period will

begin on

and include

October 2, 2018 and will

end on, but exclude,

January 2, 2019.

The interest determination

date (“

Interest Determination

Date

”) for the first

Interest Period

will be

the second

London banking

day preceding

the Issue

Date and

the Interest

Determination

Date for

each succeeding

Interest

Period

will be

on the

second London

banking

day

preceding

the

applicable

Interest

Reset

Date.

“

London

banking

day

”

means

any

day

on which

dealings

in

U.S.

dollars

are

transacted

in

the

London

interbank

market.

The initial Floating Interest Rate on

the 2022 floating rate notes will be equal to

LIBOR, as determined on March 27, 2017, plus 1.15% per annum,

and thereafter the

rate of

interest

on the

2022 floating

rate notes

will be reset

quarterly on

March

29, June

29, September

29 and

December 29 in

each year

(each, a “

2022 Interest

Reset

Date

”), provided

that the

interest

rate

in effect

from (and

including) March

29, 2017

to (but

excluding)

the first

2022 Interest

Reset

Date will

be the

initial

Floating Interest Rate.

The initial Floating Interest Rate on the 2023 floating

rate notes will be equal to LIBOR, as

determined on September 28, 2018, plus 1.000% per

annum, and thereafter

the rate of interest on the 2023 floating rate notes will be reset quarterl

y

on January 2, April 2, July 2 and October 2 in each year (each, a “

2023 Interest Reset Date

”,

and together

with each 2022

Interest Reset

Date, each

an “

Interest

Reset Date

”), provided

that the

interest rate

in effect

from (and

including) October

2, 2018 to

(but excluding) the first 2023 Interest

Reset Date will be the initial Floating Interest

Rate.

If any Interest

Reset Date would

fall on a day

that is not a

Business Day,

the Interest Reset

Date will be postponed

to the next succeeding

Business Day,

except that

if that Business Day falls in the next succeeding calendar

month, the Interest Reset

Date will be the immediately preceding

Business Day.

Interest on the floating rate

notes will be computed on the basis of the actual

number of days in each Interest

Period and a 360-day year.

The Calculation

Agent for

the floating

rate

notes is

The Bank

of New

York

Mellon acting

through its

London branch,

or its

successor appointed

by the

Issuer.

The

Calculation

Agent

will

determine

the

Floating

Interest

Rate

for

each

Interest

Period

for

the

floating

rate

notes

by

reference

to

LIBOR

on

the

applicable

Interest

Determination Date. Promptly upon such determination, the Calculation Agent will notify the Issuer and the trustee (if the Calculation Agent is not the trustee) of the

new interest

rate for

the floating

rate notes.

Upon the request

of the holder

of any

floating rate

note, the

Calculation Agent

will provide

the Floating

Interest Rate

then in effect and, if determined, the

Floating Interest Rate

that will become effective on

the next Interest Reset Date.

LIBOR will be determined by the Calculation Agent

in accordance with the following provisions:

(1)

with respect to any Interest

Determination Date, LIBOR will be the rate

(expressed as a percentage per annum) for

deposits in U.S. dollars having a

maturity of three months commencing on the related

Interest Reset Date that

appears on Reuters Page LIBOR01 as of 11:00 a.m.,

London time, on

that Interest Determination

Date; and

(2)

with respect to an Interest Determination Date

on which no rate appears on Reuters

Page LIBOR01, the Calculation Agent will request the principal

London offices of each of four major reference banks in the London interbank market (which may include affiliates of the underwriters), as selected

and identified

by the

Issuer,

to provide

its offered

quotation (expressed

as a percentage

per annum)

for deposits

in U.S.

dollars for

the period

of

three months, commencing on the related Interest Reset Date, to prime

banks in the London interbank market at approximately 11:00 a.m.,

London

time, on that

Interest Determination

Date and in

a principal amount that

is representative

for a single

transaction in U.S.

dollars in that

market at

that time. If at

least two quotations are provided, then LIBOR on that

Interest Determination Date will be the arithmetic mean (rounded if

necessary

to the fourth

decimal place with

0.00005 being rounded

upwards) of

those quotations.

If fewer than

two quotations

are provided,

then LIBOR on

the Interest

Determination Date

will be the arithmetic

mean of the

rates at

which the reference

banks were offered

at approximately

11:00 a.m.,

London time, on the Interest

Determination Date deposits

in U.S. dollars for

the period of three months,

commencing on the related

Interest Rest

Date and

in a

principal amount

that is

representative

for a

single transaction

in U.S.

dollars in

that market

at that

time, by

leading banks

in the

London inter-bank market. If at

least two such rates are

so provided, LIBOR

on the Interest Determination Date

will be the

arithmetic mean (rounded

if necessary to the fourth decimal place with 0.00005 being rounded upwards)

of such rates. If fewer than two such rates

are provided, then LIBOR

on the Interest

Determination date

will be the offered

rate for

deposits in U.S. dollars

for the period of three

months, commencing on

the related

Interest

Payment

Date

and

in

a

principal

amount

that

is

representative

for

a

single

transaction

in

U.S.

dollars

in

that

market

at

that

time

(or

arithmetic mean of such rates, rounded as provided above,

if more than one rate is provided), at which, at approximately

11:00 a.m., London time,

on the Interest

Determination Date,

any one

or more banks

(which bank or

banks is

or are in

the opinion of

the Issuer suitable

for such

purpose)

informs the Calculation Agent it is quoting to leading banks in the London inter-bank market. If LIBOR cannot be determined in accordance with the

foregoing provisions of this paragraph,

LIBOR on the Interest Determination Date

will be LIBOR in effect with respect to the immediately preceding

Interest Determination

Date.

“

Reuters Page

LIBOR01

” means the

display that appears

on Reuters

Page LIBOR01 or

any page

as may replace

such page on such

service (or any

successor service)

for the purpose of displaying London interbank

offered rates of major banks

for U.S. dollars.

All percentages

resulting from

any calculation

of any

Floating Interest

Rate will

be rounded,

if necessary,

to the

nearest one

hundred thousandth

of a

percentage

point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or

0.09876545) would be rounded to 9.87655% (or 0.0987655)), and

all dollar

amounts would be rounded to the nearest

cent, with one-half cent being rounded upward.

All calculations made by the Calculation Agent for the purposes of calculating interest

on the floating rate notes shall be conclusive and

binding on the holders of the

floating rate notes, the Issuer and

the trustee, absent manifest error.

2019 ING Group Annual Report on Form 20-F

7

For any interest period, if LIBOR is negative,

then it would reduce the Floating Interest Rate payable

for such interest period below the specified margin. Accordingly,

holders may receive a Floating

Interest Rate that is

lower than the specified margin.

LIBOR Discontinuation

Notwithstanding the provisions described under “— Description of the Floating Rate Notes”

above, if, with respect to the 2023 floating rate

notes only,

a Benchmark

Event occurs when any Floating

Interest Rate (or any component part

thereof) remains to

be determined by reference to LIBOR,

then the Issuer

shall use its

reasonable

endeavors

to appoint

and consult

with an

Independent Adviser,

as soon

as reasonably

practicable,

with a

view to

the Issuer

determining a

Successor Rate,

failing

which an Alternative Rate and, in either case,

an Adjustment Spread, if any,

and Benchmark Amendments, if any.

If the Issuer,

following consultation with the Independent

Adviser,

to the extent practicable, and acting

in good faith, determines:

(1)

that there is a Successor Rate, then such

Successor Rate shall (subject to adjustment

as provided below) subsequently be used in place of LIBOR to

determine the Floating

Interest Rate

(or the relevant

component part thereof)

for all future

payments of interest

on the 2023 floating

rate notes;

or

(2)

that there

is no

Successor Rate

but that

there is

an Alternative

Rate, then

such Alternative

Rate shall

(subject to

adjustment as

provided below)

subsequently be used in place of LIBOR to determine the Floating Interest Rate

(or the relevant component part thereof) for all future payments

of

interest on the 2023 floating rate

notes.

If the Issuer determines any Successor

Rate or Alternative Rate

in accordance with this section “—

LIBOR Discontinuation” fewer

than five (5) Business Days

prior to

the relevant Interest Determination

Date, then the Floating Interest Rate on such Interest

Determination Date will be calculated using LIBOR in effect

with respect to

the immediately

preceding Interest

Determination Date.

For subsequent

Interest

Periods, the

Floating Interest

Rate will

be calculated

using the

Successor Rate

or

Alternative Rate (subject to adjustment

as provided below).

If the

Issuer,

following consultation

with the

Independent Adviser,

to the

extent practicable,

and acting

in good

faith, dete

rmines (i)

that an

Adjustment Spread

is

required to be applied to the Successor Rate or the Alternative Rate

(as the case may be) and (ii) the quantum of, or a formula

or methodology for determining, such

Adjustment

Spread,

then

such

Adjustment

Spread

shall

be applied

to

the

Successor

Rate

or

the

Alternative

Rate

(as

the

case

may

be). If

the

Issuer

is

unable

to

determine

the

quantum

of,

or

a

formula

or

methodology

for

determining,

such

Adjustment

Spread,

then

such

Successor

Rate

or

Alternative

Reference

Rate,

as

applicable, will apply without an Adjustment Spread.

If any

Successor

Rate,

Alternative

Rate

or Adjustment

Spread is

determined

in accordance

with this

section

“—

LIBOR Discontinuation”

and the

Issuer,

following

consultation with

the Independent Adviser,

to the extent

practicable, and

acting in good

faith, determines

(i) that amendments

to any

terms and conditions

of the

2023 floating rate

notes, including the

Successor Rate

or Alternative

Rate, as applicable,

or,

in each case,

the Adjustment

Spread, as well

as the day

count fraction,

business day convention,

the definitions of Business Day,

London banking day,

Interest Determination

Date, Interest

Period or Floating

Rate Interest

Payment Date,

and any

related provisions

and definitions, are

necessary to ensure

the proper operation

of such Successor

Rate, Alternative

Rate and/or

Adjustment Spread

(such

amendments, the “

Benchmark Amendments

”) and (ii) the terms and conditions of such Benchmark Amendments, then the Issuer may, without any

requirement for

the consent or approval

of holders of the 2023 floating rate

notes, amend the terms and conditions

of the 2023 floating rate notes

to give effect to such

Benchmark

Amendments with effect from the

date specified in a notice given in to the Trustee.

Upon receipt of satisfactory documentation,

the Trustee and

the Calculation Agent shall, at the direction and

expense of the Issuer,

effect such amendments as may

be required in order

to give effect to this

section “— LIBOR

Discontinuation” pursuant to a supplemental indenture or

an amendment to the

Indenture, or amendment

to the Calculation

Agency Agreement,

or issuances

and authentication

of new global

or definitive

notes in

respect of

the 2023 floating

rate notes,

and the Trustee

shall not

be liable

to any

party for

any consequences

thereof,

save

as provided

in the

Indenture and

the 2023

floating rate

notes. No

consent of

holders of

2023

floating rate notes will be solicited

or required in connection with effecting

the Successor Rate, Alternative Rate,

Adjustment Spread or Benchmark Amendments,

as

applicable, including for the execution

of any documents, amendments to the Indenture,

Calculation Agency Agreement or floating

rates notes or other steps by the

Issuer,

the Trustee, the Calculation

Agent or any paying agent

(if required).

The Issuer will, promptly following the determination of any the Successor Rate, Alternative Rate, Adjustment Spread or Benchmark Amendments, as applicable, give

notice thereof, which shall specify the effective

date(s) for such Successor Rate, Alternative

Rate, Adjustment Spread or Benchmark Amendments,

as applicable, and

of any changes to the terms and conditions of the 2023 floating rate notes to the Trustee, the Calculation Agent, any paying agent and DTC or the holders of the 2023

floating

rate

notes,

as

applicable;

provided

that

failure

to

provide

such

notice

will

have

no

impact

on

the

effectiveness

of,

or

otherwise

invalidate,

any

such

determination; and provided

further that the determination

of any Successor Rate,

Alternative Rate,

Adjustment Spread or

Benchmark Amendments, as applicable,

and any

other related

changes

to

the 2023

floating

rate

notes,

shall be

made in

accordance

with the

Capital

Regulations

applicable

to

the Group

in force

at

the

relevant

time. In

effecting

any

consequential

amendments

to

the terms

of the

2023 floating

rate

notes as

may

be directed

by

the Issuer

in accordance

with this

section “

—

LIBOR Discontinuation”,

neither the Trustee

nor the Calculation Agent shall

be required to effect

any amendments that

affects its respective

own rights,

duties or immunities in their respective capacities as Trustee

or Calculation Agent under the Indenture,

the Calculation Agency Agreement or otherwise.

By its

acquisition of

2023 floating

rate

notes, each

holder and

beneficial owner

of the

2023 floating

rate

notes and

each subsequent

holder and

beneficial owner

acknowledges, accepts, agrees to be bound by, and consents to, the Issuer’s determination of the Successor Rate, Alternative Rate, Adjustment Spread or Benchmark

Amendments, as

applicable, as

contemplated

by this

section “—

LIBOR Discontinuation”,

and to

any amendment

or alteration

of the

terms and

conditions of

the

2023 floating rate

notes, including

an amendment of

the amount

of interest

due on the

2023 floating rate

notes, as

may be

required in

order to

give effect

to this

section “

—

LIBOR Discontinuation”. The Trustee shall be entitled to rely on this deemed

consent in connection with any supplemental indenture or

amendment which

may be necessary to effect the Successo

r

Rate, the Alternative Rate

the Adjustment Spread or the Benchmark Amendments,

as applicable.

By its acquisition of 2023 floating

rate notes, each

holder and beneficial owner of 2023 floating

rate notes and each

subsequent holder and beneficial

owner waives

any

and all

claims in

law and/or

equity against

the Trustee,

the Calculation

Agent

and any

paying

agent

for,

agrees not

to

initiate

a suit

against

the Trustee,

the

Calculation Agent and any paying agent in respect of,

and agrees that neither the Trustee,

the Calculation Agent or any paying agent will be liable for,

any action that

the Trustee,

the Calculation

Agent or

any paying

agent, as

the case

may be,

takes,

or abstains

from taking,

in each

case in

accordance

with this

section “

—

LIBOR

Discontinuation” or any losses suffered

in connection therewith.

By its acquisition of 2023

floating rate notes,

each holder and beneficial owner of

2023 floating rate

notes and each subsequent

holder and beneficial owner agrees

that neither

the Trustee,

the Calculation Agent

or any

paying agent

will have

any obligation

to determine any

Successor Rate,

Alternative Rate,

Adjustment Spread

or Benchmark Amendments, as

applicable, including in the

event of any

failure by the Issuer

to determine any

Successor Rate, Alternative

Rate, Adjustment

Spread

or Benchmark Amendments, as applicable.

An Independent Adviser appointed pursuant

to this section “

—

LIBOR Discontinuation” will act in good

faith as an expert and (in the

absence of fraud) shall have

no

liability whatsoever to the Issuer,

the Trustee, the Calculation

Agent, any paying agent or the holders of 2023 floating

rate notes for any determination

made by it or

for any advice given to the Issuer in

connection with any determination made by

the Issuer pursuant to this section “

—

LIBOR Discontinuation”.

Notwithstanding any

other provision of this

section “

—

LIBOR Discontinuation”,

the Issuer may decide

that no Successor Rate,

Alternative Rate,

Adjustment Spread

or Benchmark Amendments, as

applicable, will be

adopted if and to

the extent that, in

the determination of the

Issuer, such adoption or amendment could reasonably

be expected

to result

in the exclusion

of the 2023

floating rate

notes (in

whole or in

part) from the

Issuer’s and/or

the Regulatory

Group’s

minimum requirements

for (A) own funds and

eligible liabilities and/or (B)

loss absorbing capacity instruments, in

each case as such

minimum requirements are applicable to the

Issuer and/or

the Regulatory Group and as determined

in accordance with, and pursuant

to, the relevant Loss

Absorption Regulations.

“

Adjustment Spread

” means either a

spread (which may

be positive or

negative), or

the formula or

methodology for

calculating a spread,

in either case,

which the

Issuer, following

consultation with the Independent Adviser,

to the extent practicable, and acting in good faith, determines is required

to be applied to the Successor

Rate or the Alternative Rate (as the case may be) to reduce

or eliminate, to the extent reasonably practicable in the circumstances, any economic prejudice or benefit

(as the case may

be) to holders

of 2023 floating rate

notes as a result

of the replacement of

LIBOR with the Successor

Rate or the Alternative

Rate (as the

case may

be) and is the spread, formula or methodology which:

(i)

in

the

case

of

a

Successor

Rate,

is

formally

recommended

in

relation

to

the

replacement

of

LIBOR

with

the

Successor

Rate

by

any

Relevant

Nominating Body;

(ii)

in the case of a Successor

Rate, if no such

recommendation has been

made, or in the case of

an Alternative Rate,

the Issuer determines, following

consultation with the Independent Adviser,

to the extent practicable, and acting in good faith,

is recognized or acknowledged as being the industry

standard

for

over-the-counter

derivative

transactions

which

reference

LIBOR,

where

such

rate

has

been

replaced

by

the

Successor

Rate

or

the

Alternative Rate (as the case may

be); or

(iii)

if the Issuer determines that

no such industry standard

is recognized or acknowledged,

the Issuer,

in its discretion, following

consultation with the

Independent Adviser,

to the extent practicable, and

acting in good faith, determines to be appropriate.

“

Alternative

Rate

”

means

an

alternative

benchmark

or

screen

rate

which

the

Issuer

determines

in

accordance

with

this

section

“

—

LIBOR

Discontinuation”

has

replaced LIBOR

in customary

market usage

in the

international

debt capital

markets for

the purposes

of determining

rates

of interest

(or the

relevant

component

part thereof) for the same interest period

and in U.S. dollars.

2019 ING Group Annual Report on Form 20-F

8

“

Benchmark Event

” means:

(i)

LIBOR ceasing to be published for a period of at least

five (5) Business Days or ceasing to exist;

(ii)

a public statement

by the administrator

of LIBOR that

it will, by

a specified date

within the following

six (6) months,

cease LIBOR permanently

or

indefinitely (in circumstances where

no successor administrator

has been appointed that will continue publication

of LIBOR);

(iii)

a public

statement

by

the supervisor

of the

administrator

of LIBOR

that

LIBOR has

been

or will,

by

a specified

date

within the

following

six (6)

months, be permanently or indefinitely discontinued;

(iv)

a public statement by the supervisor of the administrator

LIBOR that means LIBOR will be prohibited from being used

or that its use will be subject

to restrictions or adverse

consequences, in each case within the following six (6) months;

or

(v)

it has become unlawful for

any paying agent,

Calculation Agent, the Issuer

or other party to calculate

any payments

due to be made to any

holder

of 2023 floating rate notes using

LIBOR.

“

Independent Adviser

” means an independent financial institution of international repute

or an independent financial adviser with appropriate expertise

appointed

by the Issuer.

“

Relevant Nominating Body

” means, in respect of a benchmark or screen rate

(as applicable):

(i)

the central

bank for

the U.S.

dollar,

or any

central

bank or

other supervisory

authority which

is responsible

for supervising

the administrator

of

LIBOR; or

(ii)

any working group or committee sponsored

by, chaired

or co-chaired by or constituted at the request of (a) the central

bank for the U.S. dollar,

(b)

any central bank

or other supervisory authority which is

responsible for supervising

the administrator of

LIBOR, (c) a group of

the aforementioned

central banks or other supervisory authorities or (d) the Financial Stability

Board or any part thereof.

“

Successor Rate

” means a successor to or replacement of LIBOR which is formally

recommended by any Relevant

Nominating Body.

Terms Applicable

to the 2024 and 2029 Notes

Agreement and Acknowledgement with Respect

to the Exercise of Dutch Bail-in Power

With a view to Article 55 of the Directive 2014/59/EU of the

European Parliament and of the Council (the “

Bank Recovery and Resolution

Directive

” or “

BRRD

”),

the Issuer has included the following two paragraphs

in the terms of the notes:

(a)

By acquiring any notes, each holder and beneficial

owner of a note or any interest

therein acknowledges, agrees to be bound

by, and consents

to

the exercise of,

any Dutch Bail-in Power by

the relevant resolution authority

that may result in the cancellation of all, or

a portion, of the principal

amount of, or interest

on, the notes and/or the conversion

of all, or a portion, of the principal amount of,

or interest on, the notes into

shares or

other securities or other obligations of the Issuer or another person,

including by means of a variation to the terms

of the notes or any

expropriation of the notes, in each case,

to give effect to the exercise

by the relevant resolution

authority of such Dutch Bail-in Power (whether

at

the point of non-viability or as taken

together with a resolution action). Each

holder and beneficial owner of a note or any interest

therein further

acknowledges and agrees that the rights of the

holders and beneficial owners of the notes

are subject to, and will be varied, if necessary,

so as to

give effect to, the exercise

of any Dutch Bail-in Power by

the relevant resolution authority.

In addition, by acquiring any notes, each holder and

beneficial owner of a note or any interest

therein further acknowledges, agrees to be bound

by, and consents

to the exercise by the relevant

resolution authority of,

any power to suspend any payment

in respect of the notes for a temporary

period.

(b)

For these purposes, a “

Dutch Bail-in Power

” is any statutory write-down

and/or conversion

power existing from time to time under any

laws,

regulations, rules or requirements

relating to the resolution of banks,

banking group companies, credit institutions

and/or investment firms

incorporated in The Netherlands

in effect and applicable in The Netherlands to

the Issuer or other members of the Group, including

but not

limited to any such laws, regulations,

rules or requirements that are implemented,

adopted or enacted within the context

of a European Union

directive or regulation of the European

Parliament and of the Council establishing

a framework for the recovery

and resolution of credit

institutions and investment firms

(including but not limited to the BRRD and Regulation

(EU) No 806/2014 of the European Parliament and

of the

Council (the “

SRM Regulation

”)) and/or within the context of a Dutch

resolution regime under the Dutch Intervention

Act and any amendments

thereto, or otherwise, pursuant

to which obligations of a bank, banking group

company,

credit institution or investment

firm or any of its affiliates

can be reduced, cancelled and/or converted

into shares or other securities or obligations

of the obligor or any other person (whether at

the point

of non-viability or as taken

together with a resolution action) or may be expropriated

(and a reference to the “

relevant resolution authority

” is to

any authority with the ability to exercise

a Dutch Bail-in Power).

The Dutch Bail-in Power may be imposed

without any prior notice by the relevant

resolution authority of its decision to exercise

such power.

No principal of, or

interest on, the notes shall become due

and payable after the exercise

of any Dutch Bail-in Power by

the relevant resolution authority

except as permitted under

the laws and regulations of The Netherlands

and the European Union applicable to the Issuer.

In addition, the exercise of any

Dutch Bail-In Power may require

interests in the notes and/or

other actions implementing any Dutch Bail-In

Power to be held or

taken, as the case may

be, through clearing systems,

intermediaries or persons other than DTC.

See also “Risk Factors — Under the terms of the

notes, you have agreed

to be bound by the exercise of any

Dutch Bail-in Power by the relevant

resolution

authority” in the applicable prospectus supplement.

By acquiring any notes, each holder and beneficial

owner of a note or any interest

therein, to the extent permitted

by the Trust

Indenture Act, shall be deemed to

waive any and all claims against

the trustee for,

and to agree not to initiate a suit against

the trustee in respect of,

and to agree that the trustee

shall not be liable

for,

any action that the trustee takes,

or abstains from taking, in either case in accordance

with the exercise of the Dutch

Bail-in Power by the relevant

resolution

authority with respect to the notes.

The Issuer shall provide a written notice directly

to DTC as soon as practicable

of any exercise of the Dutch

Bail-in Power with respect to the notes

by the relevant

resolution authority for purposes of notifying holders

of such occurrence, including the amount of any cancellation

of all, or

a portion, of the principal amount of,

or

interest on, such capital

securities. The Issuer shall also deliver a copy of such notice to the

trustee for information

purposes. Failure to provide

such notices will not

have any impact on the effectiveness

of, or otherwise invali

date, any such exercise

of the Dutch Bail-in Power.

By acquiring any notes, each holder of the notes

acknowledges and agrees that the exercise

of the Dutch Bail-in Power by the

relevant resolution authority with

respect to the notes shall not give rise to

a default for purposes of Section 315(b) (Notice

of Defaults) and Section 315(c) (Duties of the Trustee

in Case of Default)

of the Trust Indenture

Act.

By acquiring any notes, each holder and beneficial

owner of a note or any interest

therein acknowledges and agrees that,

upon the exercise of any Dutch

Bail-in

Power by the relevant resolution

authority, (a)

the trustee shall not be required to take

any further directions from holders of

the notes under Section 5.15 (

Control

by Holders

) of the Indenture and (b) the Indenture

shall impose no duties upon the trustee whatsoever with respect

to the exercise of any

Dutch Bail-in Power by

the relevant resolution authority.

If holders or beneficial owners of the notes

have given a direction to the trustee

pursuant to Section 5.15 of the Indenture

prior

to the exercise of any Dutch

Bail-in Power by the relevant

resolution authority,

such direction shall cease to be of further effect

upon such exercise of any

Dutch

Bail-in Power and shall become null and void

at such time. Notwithstanding the foregoing,

if, following the completion

of the exercise of the Dutch Bail

-in Power by

the relevant resolution authority,

the notes remain outstanding (for

example, if the exercise

of the Dutch Bail-in Power results

in only a partial

write-down of the

principal of the notes), then the trustee’s

duties under the Indenture shall remain applicable

with respect to the notes following

such completion to the extent that

the Issuer and the trustee shall agree.

By acquiring any of the notes, each holder of the notes

shall be deemed to have (a) consented

to the exercise of any Dutch

Bail-in Power as it may be imposed

without any prior notice by the relevant

resolution authority of its decision to exercise

such power with respect to the relevant

notes and (b) authorized, directed

and requested DTC and any

direct participant in DTC or other intermediary

through which it holds the relevant

notes to take any

and all necessary action, if

required, to implement the exercise

of any Dutch Bail-in Power

with respect to the relevant

notes as it may be imposed, without any

further action or direction on

the part of such holder or the trustee.

Under the terms of the 2024 and 2029 notes, the exercise

of the Dutch Bail-in Power by the relevant

resolution authority with respect to the relevant

notes will not

be an Event of Default (as

defined in the Indenture).

Terms Applicable

to the 2023 Notes, the 2028 Notes and the 2023 Floating

Rate Notes

2019 ING Group Annual Report on Form 20-F

9

Agreement and Acknowledgement with Respect

to the Exercise of Dutch Bail-in Power

With a view to Article 55 of the Directive 2014/59/EU of the

European Parliament and of the Council (the “

Bank Recovery and Resolution

Directive

” or “

BRRD

”),

the Issuer has included the following two paragraphs

in the terms of the notes:

(a)

By acquiring any notes, each holder and beneficial

owner of a note or any interest

therein acknowledges, agrees to be bound

by, and consents

to

the exercise of,

any Dutch Bail-in Power by

the relevant resolution authority

that may result in the cancellation of all, or

a portion, of the principal

amount of, or interest

on, the notes and/or the conversion

of all, or a portion, of the principal amount of,

or interest on, the notes

into shares or

other securities or other obligations of the Issuer or another person,

including by means of a variation to the terms

of the notes or any

expropriation of the notes, in each case,

to give effect to the exercise

by the relevant resolution

authority of such Dutch Bail-in Power (whether

at

the point of non-viability or as taken

together with a resolution action). Each

holder and beneficial owner of a note or any interest

therein further

acknowledges and agrees that the rights of the

holders and beneficial owners of the notes

are subject to, and will be varied, if necessary,

so as to

give effect to, the exercise

of any Dutch Bail-in Power by

the relevant resolution authority.

In addition, by acquiring any notes, each holder and

beneficial owner of a note or any interest

therein further acknowledges, agrees to be bound

by, and consents

to the exercise by the relevant

resolution authority of,

any power to suspend any payment

in respect of the notes for a temporary

period.

(b)

For these purposes, a “

Dutch Bail-in Power

” is any statutory write-down

and/or conversion

power existing from time to time under any

laws,

regulations, rules or requirements

relating to the resolution of banks,

banking group companies, credit institutions

and/or investment firms

incorporated in The Netherlands

in effect and applicable in The Netherlands

to the Issuer or other members of the Group,

including but not limited

to any such laws, regulations,

rules or requirements that are implemented,

adopted or enacted within the context

of a European Union directive or

regulation of the European Parliament

and of the Council establishing a framework

for the recovery and resolution

of credit institutions and

investment firms (including but not

limited to the BRRD and Regulation (EU) No 806/2014 of the European

Parliament and of the Council (the

“

SRM Regulation

”)) and/or within the context

of a Dutch resolution regime under the Dutch

Intervention Act and any amendments

thereto, or

otherwise, pursuant to which obligations

of a bank, banking group company,

credit institution or investment

firm or any of its affiliates can be

reduced, cancelled and/or converted

into shares or other securities or obligations

of the obligor or any other person or may

be expropriated (and a

reference to the “

relevant resolution authority

” is to any authority with the ability to exercise

a Dutch Bail-in Power).

The Dutch Bail-in Power may be imposed

without any prior notice by the relevant

resolution authority of its decision to exercise

such power.

No principal of, or

interest on, the notes shall become due

and payable after the exercise

of any Dutch Bail-in Power by

the relevant resolution authority

except as permitted under

the laws and regulations of The Netherlands

and the European Union applicable to the Issuer.

In addition, the exercise of any

Dutch Bail-In Power may require

interests in the notes and/or

other actions implementing any Dutch Bail-In

Power to be held or

taken, as the case may

be, through clearing systems,

intermediaries or persons other than DTC.

See also “Risk Factors — Under the terms of the

notes, you have agreed

to be bound by the exercise of any

Dutch Bail-in Power by the relevant

resolution

authority” in the applicable prospectus supplement.

By acquiring any notes, each holder and beneficial

owner of a note or any interest

therein, to the extent permitted

by the Trust

Indenture Act, shall be deemed to

waive any and all claims against

the trustee for,

and to agree not to initiate a suit against

the trustee in respect of,

and to agree that the trustee

shall not be liable

for,

any action that the trustee takes,

or abstains from taking, in either case in accordance

with the exercise of the Dutch

Bail-in Power by the relevant

resolution

authority with respect to the notes.

The Issuer shall provide a written notice directly

to DTC as soon as practicable

of any exercise of the Dutch

Bail-in Power with respect to the notes

by the relevant

resolution authority for purposes of notifying holders

of such occurrence, including the amount of any cancellation

of all, or a portion, of the principal amount of,

or

interest on, such capital

securities. The Issuer shall also deliver a copy of such notice to the

trustee for information

purposes. Failure to provide

such notices will not

have any impact on the effect

iveness of, or otherwise invalidate,

any such exercise of the

Dutch Bail-in Power.

By acquiring any notes, each holder of the notes

acknowledges and agrees that the exercise

of the Dutch Bail-in Power by the

relevant resolution authority with

respect to the notes shall not give rise to

a default for purposes of Section 315(b) (Notice

of Defaults) and Section 315(c) (Duties of the Trustee

in Case of Default)

of the Trust Indenture

Act.

By acquiring any notes, each holder and beneficial

owner of a note or any interest

therein acknowledges and agrees that, upon

the exercise of any Dutch

Bail-in

Power by the relevant resolution

authority, (a)

the trustee shall not be required to take

any further directions from holders of the

notes under Section 5.15 (

Control

by Holders

) of the Indenture and (b) the Indenture

shall impose no duties upon the trustee whatsoever with respect

to the exercise of any

Dutch Bail-in Power by

the relevant resolution authority.

If holders or beneficial owners of the notes

have given a direction to the trustee

pursuant to Section 5.15 of the Indenture

prior

to the exercise of any Dutch

Bail-in Power by the relevant

resolution authority,

such direction shall cease to be of further effect

upon such exercise of any

Dutch

Bail-in Power and shall become null and void

at such time. Notwithstanding the foregoing,

if, following the completion

of the exercise of the Dutch

Bail-in Power by

the relevant resolution authority,

the notes remain outstanding (for

example, if the exercise

of the Dutch Bail-in Power results

in only a partial write-down of the

principal of the notes), then the trustee’s

duties under the Indenture shall remain applicable

with respect to the notes following

such completion to the extent that

the Issuer and the trustee shall agree.

By acquiring any of the notes, each holder of the notes

shall be deemed to have (a) consented

to the exercise of any Dutch

Bail-in Power as it may be imposed

without any prior notice by the relevant

resolution authority of its decision to exercise

such power with respect to the relevant

notes and (b) authorized, directed

and requested DTC and any

direct participant in DTC or other intermediary

through which it holds the relevant

notes to take any

and all necessary action, if

required, to implement the exercise

of any Dutch Bail-in Power

with respect to the relevant

notes as it may be imposed, without any

further action or direction on

the part of such holder or the trustee.

Under the terms of each of the 2023 notes, the 2028 notes

and the 2023 floating rate notes,

the exercise of the Dutch Bail-in Power

by the relevant resolution

authority with respect to the relevant

notes will not be an Event of Default

(as defined in the Indenture).

Terms applicable

to the 2022 Notes, the 2027 Notes and the 2022 Floating

Rate Notes

Agreement and Acknowledgement with Respect

to the Exercise of Dutch Bail-in Power

With a view to Article 55 of the Directive 2014/59/EU of the

European Parliament and of the Council (the “

Bank Recovery and Resolution

Directive

” or “

BRRD

”),

the Issuer has included the following two paragraphs

in the terms of the notes:

(a)

By acquiring any notes, each holder and beneficial

owner of a note or any interest

therein acknowledges, agrees to be bound

by, and consents

to

the exercise of,

any Dutch Bail-in Power by

the relevant resolution authority

that may result in the cancellation of all, or

a portion, of the principal

amount of, or interest

on, the notes and/or the conversion

of all, or a portion, of the principal amount of,

or interest on, the notes

into shares or

other securities or other obligations of the Issuer or another person,

including by means of a variation to the terms

of the notes or any

expropriation of the notes, in each case,

to give effect to the exercise

by the relevant resolution

authority of such Dutch Bail-in Power.

Each

holder and beneficial owner of a note or any interest

therein further acknowledges and agrees that the rights

of the holders and beneficial

owners of the notes are subject to,

and will be varied, if necessary,

so as to give effect to, the

exercise of any Dutch

Bail-in Power by the relevant

resolution authority.

In addition, by acquiring any notes, each holder and beneficial

owner of a note or any interest

therein further acknowledges,

agrees to be bound by,

and consents to the exercise by

the relevant resolution authority

of, any power to

suspend any payment in respect of the

notes for a temporary period..

(b)

For these purposes, a “

Dutch Bail-in Power

” is any statutory write-down

and/or conversion

power existing from time to time under any

laws,

regulations, rules or requirements

relating to the resolution of banks,

banking group companies, credit institutions

and/or investment firms

incorporated in The Netherlands

in effect and applicable in The Netherlands

to the Issuer or other members of the Group,

including but not

limited to any such laws, regulations,

rules or requirements that are implemented,

adopted or enacted within the context

of a European Union

directive or regulation of the European

Parliament and of the Council establishing

a framework for the recovery

and resolution of credit

institutions and investment firms

(including but not limited to the BRRD and Regulation

(EU) No 806/2014 of the European Parliament and

of the

Council (the “

SRM Regulation

”)) and/or within the context of a Dutch

resolution regime under the Dutch Intervention

Act and any amendments

thereto, or otherwise, pursuant

to which obligations of a bank, banking group

company,

credit institution or investment

firm or any of its affiliates

can be reduced, cancelled and/or converted

into shares or other securities or obligations

of the obligor or any other person

or may be

expropriated (and a reference

to the “

relevant resolution authority

” is to any authority with the ability to exercis

e

a Dutch Bail-in Power).

The Dutch Bail-in Power may be imposed

without any prior notice by the relevant

resolution authority of its decision to exercise

such power.

No principal of, or

interest on, the notes shall become due

and payable after the exerci

se of any Dutch Bail-in Power by

the relevant resolution authority

except as permitted under

the laws and regulations of The Netherlands

and the European Union applicable to the Issuer.

In addition, the exercise of any

Dutch Bail-In Power may require

interests in the notes and/or

other actions implementing any Dutch Bail-In

Power to be held or

taken, as the case may

be, through clearing systems,

intermediaries or persons other than DTC.

See also “Risk Factors — Under the terms of the

notes, you have agre

ed to be bound by the exercise of any

Dutch Bail-in Power by the relevant

resolution

authority” in the applicable prospectus supplement.

2019 ING Group Annual Report on Form 20-F

10

By acquiring any notes, each holder and beneficial

owner of a note or any interest

therein, to the extent permitted

by the Trust

Indenture Act, shall be deemed to

waive any and all claims against

the trustee for,

and to agree not to initiate a suit against

the trustee in respect of,

and to agree that the trustee

shall not be liable

for,

any action that the trustee takes,

or abstains from taking, in either case in accordance

with the exercise of the Dutch

Bail-in Power by the relevant

resolution

authority with respect to the notes.

The Issuer shall provide a written notice directly

to DTC as soon as practicable

of any exercise of the Dutch

Bail-in Power with respect to the notes

by the relevant

resolution authority for purposes of notifying holders

of such occurrence. The Issuer shall also deliver a copy of such

notice to the trustee for information

purposes.

By acquiring any notes, each holder of the notes

acknowledges and agrees that the exercise

of the Dutch Bail-in Power by the

relevant resolution authority with

respect to the notes shall not give rise to

a default for purposes of Section 315(b) (Notice

of Defaults) and Section 315(c) (Duties of the Trustee

in Case of Default)

of the Trust Indenture

Act.

By acquiring any notes, each holder and beneficial

owner of a note or any interest

therein acknowledges and agrees that, upon

the exercise of any Dutch

Bail-in

Power by the relevant

resolution authority,

(a) the trustee shall not be required to take

any further directions from holders of the

notes under Section 5.15 (

Control

by Holders

) of the Indenture and (b) the Indenture

shall impose no duties upon the trustee whatsoever

with respect to the exercise

of any Dutch Bail-in Power by

the relevant resolution authority.

If holders or beneficial owners of the notes

have given a direction to the trustee

pursuant to Section 5.15 of the Indenture

prior

to the exercise of any Dutch

Bail-in Power by the relevant

resolution authority,

such direction shall cease to be of further effect

upon such exercise of any

Dutch

Bail-in Power and shall become null and void

at such time. Notwithstanding the foregoing,

if, following the completio

n

of the exercise of the Dutch Bail

-in Power by

the relevant resolution authority,

the notes remain outstanding (for

example, if the exercise

of the Dutch Bail-in Power results

in only a partial write-down of the

principal of the notes), then the trustee’s

duties under the Indenture shall remain applicable

with respect to the notes following

such completion to the extent that

the Issuer and the trustee shall agree.

By acquiring any of the notes, each holder of the notes

shall be deemed to have (a) consente

d

to the exercise of any Dutch

Bail-in Power as it may be imposed

without any prior notice by the relevant

resolution authority of its decision to exercise

such power with respect to the relevant

notes and (b) authorized, directed

and requested DTC and any

direct participant in DTC or other intermediary

through which it holds the relevant

notes to take any

and all necessary action, if

required, to implement the exercise

of any Dutch Bail-in Power

with respect to the relevant

notes as it may be imposed, without any

further action or direction on

the part of such holder or the trustee.

Under the terms of each of the 2022 notes, the 2027 notes

and the 2022 floating rate notes, the

exercise of the Dutch Bail-in Power

by the relevant resolution

authority with respect to the relevant

notes will not be an Event of Default

(as defined in the Indenture).

Terms Applicable

to All Senior Notes

The fixed rate notes and

floating rate notes (together,

the “

senior notes

”) were issued pursuant to the Senior Debt Securities

Indenture, dated as of March 29, 2017

(the “

Indenture

”), between ING and

The Bank of New

York

Mellon, London Branch,

as trustee. References

to “indenture” or

“senior debt indenture”

in this section

shall

mean the Indenture

as defined above

and references

to “trustee”

shall mean the

Bank of New

York

Mellon, London

Branch, One

Canada Square, London

E14

5AL, United Kingdom. References

to “notes” or “debt

securities” in this section shall mean the senior notes, as defined above.

The currency in which the payment of the principal of or any

premium or interest of the senior notes

shall be payable is US dollars.

Condition to Redemption or Repurchase

Notwithstanding any other provision,

and unless otherwise indicated in your prospectus

supplement, we may redeem or purchase

our debt securities (and give

notice thereof to the holders of such debt

securities in the case of redemption) only if we have

obtained the prior permission

of the relevant resolution authority

and/or competent authority,

as appropriate, at the time of redemption

or purchase, if such permission is at the relevant

time and in the relevant circumstances

required, and subject to applicable law or regulation

(including without limitation under Directive

2013/36/EU (CRD IV), Regulation (EU) No 575/2013

(CRR

including articles 77 and 78 thereof), Commission Delegated

Regulation (EU) No 241/2014 and Regulation

(EU) No 806/2014 (SRMR), as may be amended or

replaced from time to time, and any

delegated or implementing acts,

laws, regulations, regulatory technical

standards, rules or guidelines once in effect

in The

Netherlands and as then in effect).

Unless the relevant prospectus

supplement provides otherwise, we or our affiliates

may,

whether in the context of market

making or otherwise, purchase debt

securities, either in the open market at prevailing

prices or in private transactions

at negotiated prices, in each case subject to prior

permission of the relevant

resolution authority and/or competent

authority,

as appropriate, at the time of redemption

or purchase, if such permission is then required by

applicable law or

regulation including without limitation under

Directive 2013/36/EU (CRD IV), Regulation (EU)

No 575/2013 (CRR including articles 77 and 78 thereof), Commission

Delegated Regulation (EU) No

241/2014 and Regulation (EU) No 806/2014 (SRMR), as may

be amended or replaced from time to time, and any

delegated or

implementing acts, laws, regulations,

regulatory technical standards,

rules or guidelines once in effect in The Netherlands

and as then in effect). Debt securities that

we or they purchase may,

at our discretion, be held, resold or canceled.

As at the date of this Prospectus, the relevant

resolution authority is the Single Resolution Board

and the competent authority is the European

Central Bank.

Our Relationship with the Trustee

The Bank of New York Mellon, London Branch, One Canada Square, London E14 5AL, United Kingdom,

is initially serving as the trustee for all series of debt securities

to be issued under

each indenture. The Bank

of New York

Mellon has provided

commercial banking and

other services for us and

our related companies

in the past

and may continue to do so in the future. Among other things,

The Bank of New York Mellon serves

as, or may serve as, trustee or agent with regard

to certain of our

other outstanding debt obligations.

Consequently,

if an actual or potential event of default occurs

with respect to any of these securities, trust agreements

or subordinated guarantees,

the trustee may

be considered to have a conflicting interest

for purposes of the Trust Indenture

Act of 1939, as amended, or the Trust Indenture

Act. In that case, the trustee may be

required to resign under one or more of the indentures,

trust agreements or subordinated

guarantees and we would be required to

appoint a successor trustee. For

this purpose, a “potential event of default” means an event that would be an event of

default if the requirements for giving us default notice or for the default having

to exist for a specific period of time were

disregarded.

Ranking

The notes shall constitute the Issuer’s

unsecured and unsubordinated obligations,

ranking

pari passu

without any preference

among themselves and equally with all

of the Issuer’s other unsecured

and unsubordinated obligations

from time to time outstanding, save

as otherwise provided by law.

Paying Agent

The Bank of New

York Mellon,

London Branch, One

Canada Square, London

E14 5AL, United Kingdom

is designated as

the principal paying agent.

The Issuer may at

any time designate additional paying

agents or rescind the designation of paying

agents or approve a change in the office thr

ough which any paying agent acts.

Notice of Redemption

The Issuer shall give notice

of any redemption

of the notes not less

than 30 days or more

than 60 days prior

to the redemption date

to the holders of the

notes and

to the trustee at least 30 business days prior to such date, unless a shorter notice

period shall be satisfactory to the trustee. The redemption notice shall state: (1) the

redemption date, (2) the

redemption price, (3) that,

on the redemption date, each

note will be redeemed and

that, subject to certain exceptions,

interest will cease

to accrue after that date, (4) the place or

places where the notes are to be

surrendered for payment of the redemption price and (5) the CUSIP, Common Code and/or

ISIN number or numbers, if any,

with respect to the notes being redeemed.

The Issuer shall deliver to

the trustee an opinion from

a recognized law

or tax firm of international

standing, chosen by the Issuer,

prior to delivering any

notice of a

redemption upon the occurrence of certain tax

events, confirming that the Issuer

is entitled to exercise its right

of redemption as a result of such tax

events.

A notice

of

redemption

shall

be irrevocable,

except

that

the

exercise

of

the

Dutch

Bail-In

Power

by

the

relevant

resolution

authority

prior

to

the

date

fixed

for

redemption shall automatically revoke

such notice and no notes shall be redeemed and no payment

in respect of the notes shall be due and payable.

If the

Issuer has

elected to

redeem the

notes but

prior to

the payment

of the

redemption price

with respect

to such

redemption the

relevant

resolution authority

exercises its

Dutch Bail-in Power with

respect to the Issuer,

the relevant redemption

notice shall be automatically

rescinded and shall be of

no force and effect,

and

no payment of the redemption price will be due and

payable.

2019 ING Group Annual Report on Form 20-F

11

Redemption and Repayment

Unless otherwise

indicated in

your prospectus

supplement, your

debt security

will not

be entitled

to the

benefit of

any sinki

ng fund

— that

is, we

will not

deposit

money on a regular basis

into any separate

custodial account

to repay your

debt securities. In addition,

we will not be entitled

to redeem your

debt security before

its stated maturity,

if any, unless your

prospectus supplement specifies a redemption date.

You will not be entitled

to require us to buy your

debt security from you,

before its stated

maturity, if any,

unless your prospectus supplement specifies one or more

repayment dates.

Optional Tax and Regulatory

Redemption

Unless otherwise indicated

in your prospectus

supplement, we may

redeem each series

of debt securities

in whole, but

not in part,

at our option

at any time

upon

not more than 60 nor less than 30 days’

notice to the holders of such debt securities, at

a redemption price equal to the principal amount

of such debt securities (or

if the debt

securities are

original issue

discount securities,

such amount

as determined pursuant

to the formula

set forth

in the applicable

prospectus supplement)

plus any additional amounts due as a result

of any withheld tax, if:

●

we would

be required

to pay

additional amounts,

as explained in

the base prospectus

under “— Payment

of Additional

Amounts with

Respect to

the

Debt Securities,” as a result of any

change in or amendment to the tax laws (or any regulations

or rulings promulgated thereunder) of The Netherlands,

or of a jurisdiction in which a successor of ING is organized,

which becomes effective on or

after the date of issuance of that series;

●

a person located

outside The Netherlands, or

a jurisdiction in which a successor

of ING is organized,

to which we have

conveyed, transferred

or leased

property,

would

be required

to

pay

additional

amounts.

We

are

not required,

however,

to

use reasonable

measures

to

avoid

the obligation

to

pay

additional amounts in the event of such merger,

conveyance, transfer

or lease;

●

in the

case of

senior debt

securities only,

as a

result of

any amendment

to,

or change

in, any

Loss Absorption

Regulation

(as defined

below), or

any

change in the application

or official interpretation

of any Loss Absorption

Regulation, in any such

case becoming effective

on or after the original

issue

date of the series of

debt securities affected

(in each case other than

an Excluded Change, as

defined below), the debt

securities are or (in our

opinion

or that

of the

competent

authority

and/or

resolution

authority,

as appropriate)

are

likely

to

be fully

or

(if so

specified

in the

applicable

prospectus

supplement)

partially

excluded

from

our

and/or

the

Regulatory

Group’s

(as

defined

below)

minimum

requirements

for

(A)

own

funds

and

eligible

liabilities and/or (B) loss absorbing capacity instruments,

in each case as such minimum requirements are applicable to us and/or

the Regulatory Group

and

determined

in

accordance

with,

and

pursuant

to,

the relevant

Loss

Absorption

Regulations;

unless

the

exclusion

of the

relevant

series

of debt

securities from

the relevant

minimum requirement(s)

is due to

the remaining maturity

of the debt

securities being less

than any

period prescribed

by

any applicable eligibility criteria for such minimum requirements under the relevant Loss Absorption Regulations effective

with respect to us and/or the

Regulatory Group on the original issue

date of the series of debt securities affected;

or

If we redeem your debt security,

we will do so at the specified redemption price, together

with interest accrued to the redemption

date.

Our ability

to redeem

certain series

of debt

securities in

these circumstances

will be

subject to

obtaining the

prior permission

of the

relevant

resolution authority

and/or competent

authority,

as described

“Condition to

Redemption

or Repurchase”

below.

Unless otherwise

specified

in the

applicable prospectus

supplement,

such permission may be granted in the context of a redemption of debt securities for tax reasons only if there is a change

in the applicable tax treatment of such debt

securities which we demonstrate to the

satisfaction of the relevant resolution authority and/or competent authority, as applicable, is

material and was not reasonably

foreseeable at the time of the issuance

of the debt securities.

“

Excluded Change

” means

any amendment

to, or

change in,

the Loss

Absorption Regulations

to implement

the proposals

in the form

originally announced

by the

European Commission on

November 23, 2016 in order

to further strengthen

the resilience of EU banks

(the “Proposals”) or,

if the Proposals have

been amended as

at the original issue date of the relevant

series of debt securities, in the form as so amended as

at such date.

“

Loss Absorption Regulations

” means, at any

time, the laws, regulations,

requirements, guidelines, rules,

standards and policies

relating to minimum requirements

for own

funds and

eligible liabilities

and/or

loss absorbing

capacity instruments

of the

Netherlands,

the European

Central

Bank, the

Dutch

Central

Bank or

other

competent authority,

the resolution authority, the Financial Stability Board and/or of the European Parliament

or of the Council of the European Union then in effect

in the Netherlands and applicable to us and/or

the Regulatory Group including, without limitation

to the generality of the foregoing,

any delegated or implementing

acts

(such

as

regulatory

technical

standards)

adopted

by

the

European

Commission

and

any

regulations,

requirements,

guidelines,

rules,

standards

and

policies

relating to minimum

requirements for

own funds and

eligible liabilities and/or

loss absorbing capacity

instruments adopted

by the competent

authority and/or

the

resolution authority from time to time (whether or not

such regulations, requirements,

guidelines, rules, standards or policies are applied

generally or specifically to

us or to the Regulatory Group).

“

Regulatory

Group

” means

ING, its

subsidiary undertakings,

participations, participating

interests

and any

subsidiary undertakings,

participations or

participating

interests held (directly or indirectly)

by any of its subsidiary undertakings

from time to time and any other undertakings

from time to time consolidated

with ING for

regulatory purposes, in each case in accorda

nce with the rules and guidance of the competent authority

then in effect.

Mergers and Similar Transactions

We are generally permitted

to merge or consolidate with or into

another company.

We are also permitted to sell substantially

all our assets to another company.

With regard to any

series of debt securities, however,

we may not take

any of these actions unless all the following conditions

are met:

●

If we are not the successor entity,

the successor entity must expressly agree to

be legally responsible for the debt

securities of that series and the

indenture with respect to that series

and must be organized as

a corporation, partnership, trust,

limited liability company or similar entity.

The successor

entity may be organized

under the laws of any jurisdiction.

●

The merger,

sale of assets or other transaction must

not cause an event of default on the debt securities

or any event which, after notice or lapse

of time

or both, would become an event of default

If the conditions described above are satisfied

with respect to the debt securities of any

series, we will not need to obtain the approval

of the holders of those debt

securities in order to merge or consolidate

or to sell our assets. Also, these conditions

will apply only if we wish to merge or consolidate

with another entity or sell

our assets substantially as an entirety

to another entity.

We will not need to satisfy these conditions

if we enter into other types of transactions,

including any

transaction in which we acquire the stock

or assets of another entity,

any transaction that involves

a change of control of ING but in which we do not

merge or

consolidate,

and any transaction in which we sell less than

substantially all our assets.

Subject to applicable law and regulation (including

our obtaining the prior permission of the Single Resolution

Board (as resolution authority) and/or

the European

Central Bank (as competent authority),

or any successor relevant resolution

authority and/or competent authority,

as appropriate, if such permission is required),

any of our wholly owned subsidiaries may assume

our obligations under the debt securities of any

series without the consent of any holder.

We, however,

must

irrevocably guarantee

(on a subordinated basis in substantially

the manner described under “—

Debt Securities May Be Senior or Subordinated

— Subordination

Provisions” above, in the case of subordinated

debt securities) the obligations of the subsidiary under

the debt securities of that series. If we do, all of our direct

obligations under the debt securities of the series and

the applicable indenture shall immediately

be discharged. Unless the relevant

prospectus supplement

provides otherwise, any additional amounts

under the debt securities of the series will, to the extent provided

as described in the base prospectus under “—

Payment of Additional Amounts

with Respect to the Debt Securities”,

be payable in respect of any

taxes imposed by the jurisdiction

in which the successor entity is

organized, rather

than taxes imposed by The Netherlands,

subject to exceptions equivalent

to those that apply to any obligation

to pay additional amounts in

respect of taxes imposed by The Netherlands.

However,

if we make payment under

this guarantee, we shall also be required

to pay additional amounts related

to

taxes (subject to the exceptions

set forth in “— Payment

of Additional Amounts with Respect to the Debt Securities”

in the base prospectus) imposed by The

Netherlands due to this guarantee payment.

A subsidiary that assumes our obligations

will also be entitled to redeem the debt securities of the relevant

series in

the circumstances described under “—

Redemption and Repayment” above

with respect to any change or amendment

to, or change in the official application

of

the laws or regulations of the assuming corporation’s

jurisdiction of incorporation as long as the change

or amendment occurs after the date

of the subsidiary’s

assumption of our obligations.

Tax authorities,

including the U.S. Internal Revenue

Service, might deem an assumption of our obligations

as described above to be an exchange

of the existing

debt securities for new debt securities, resulting

in a recognition of taxable

gain or loss and possibly other adverse

tax consequences. Investors

should consult their

tax advisors regarding

the tax consequences of such an assumption. If we

merge, consolidate or sell our assets

substantially in their entirety,

neither we nor any

successor would have any obligation

to compensate you for any

resulting adverse tax consequences

relating to your debt securities.

Events of Default and Remedies

Events of Default and Acceleration

of Principal

Unless otherwise specified

in your prospectus supplement, an “event

of default”

with respect to any series of debt securities will result

only if:

●

we are declared bankrupt by a court

of competent jurisdiction in The Netherlands (or such other

jurisdiction in which we may be organi

zed); or

●

an order is made or

an effective resolution is passed for our winding-up or

liquidation, unless this is done

in connection with a merger, consolidation

or other form

of combination

with another company

and (a) we

are permitted

to enter

into such

merger,

consolidation or

combination pursuant

2019 ING Group Annual Report on Form 20-F

12

the provisions

described under “— Mergers

and Similar Transactions”

above or (b) the

requisite majority

of holders of

the relevant

series of debt

securities,

as

described

under

“Modifications

of

the

Indentures—Changes

Requiring

Majority

Approval”,

has

waived

the

requirement

that

we

comply with the covenant contained

in “— Mergers and Similar Transactions”

above.

Upon

the

occurrence

of

an

event

of

default,

and

only

in

such

instance,

the

entire

principal

amount

of

each

series

of

our

debt

securities

will

be

automatically

accelerated,

without any

action by

the trustee

or any

holder,

and will become

immediately due

and payable

together with

accrued but

unpaid interest,

subject to

obtaining the approvals described under “—Condition to Redemption

or Repurchase” above. The payment of principal of our debt securities will be accelerated

only

in the

event

of an

event

of default

(but not

the bankruptcy,

insolvency

or reorganization

of any

of our

subsidiaries). There

will be

no right

of acceleration

of the

payment of principal of our debt securities if we fail

to pay any principal, interest

or any other amount (including upon redemption) on

such debt securities or in the

performance of

any of

our covenants

or agreements

contained

in such

debt securities.

No such

payment default

or performance

default will

result in

an event

of

default under our debt securities

or permit any holders to

take action to enforce the debt

securities, except as described under “—Limited

Remedies for Non-Payment

and Breach of Obligations; Trust Indenture Act Remedies”

below. Moreover,

the exercise of any Dutch Bail-in Power by the relevant resolution authority, as described

under “— Agreement and Acknowledgment with Respect

to the Exercise of Dutch Bail

-in Power”

above, will not be an event of default.

Limited Remedies for Non-Payment

and Breach of Obligations; Trust Indenture

Act Remedies

The sole

remedies of

the holders

of our debt

securities and

the trustee

for our

breach of

any obligation

under the

debt securities

or the senior

debt indenture,

as

applicable, shall

be (1) to

demand payment

of any

principal or interest

that we

fail to

pay when

it has become

due and

payable and,

in the case

of interest,

where

such failure

continues for

at least

30 days

(provided that

the trustee

has provided

us with notice

of such failure

to pay

interest at

least 15 days

prior to the

end of

such 30-day period), (2) to seek enforcement

of any of our other obligations under any

debt security, the senior debt

indenture (other than any payment obligation)

or damages for our failure to satisfy any such obligation,

(3) to exercise the remedies described under “—Events

of Default” above and (4) to claim in any proceeding

relating to our liquidation (upon

dissolution (

ontbinding

) or otherwise),

moratorium of payments (

surseance van betaling

) or bankruptcy (

faillissement

). The foregoing

shall not prevent holders of our debt

securities or the trustee from instituting proceedings

for our bankruptcy.

Notwithstanding the foregoing,

(1) the trustee shall have such

powers as are required

to be authorized to it under

the Trust

Indenture Act in respect of the

rights of

the holders of our debt securities under the provisions of the senior debt indenture

and (2) nothing shall impair the right of a holder of our debt securities under the

Trust Indenture

Act, absent such holder’s consent, to

sue for any payment due but unpaid

with respect to its debt securities.

No Other Remedies

Other than

the limited

remedies specified

herein under

“Limited Remedies

for Non-Payment

and Breach

of Obligations;

Trust

Indenture Act

Remedies” above,

no

remedy against us will be available to the trustee (acting

on behalf of the holders of our debt securities) or holders of our debt securities whether for the recovery

of

amounts owing in respect of such debt securities or under the senior debt indenture or in respect of any breach by us

of any of our obligations under or in respect of

the terms of our debt securities or the senior debt indenture in relation thereto;

provided, however,

that such limitation shall not apply to our obligations to

pay the

fees and expenses of,

and to indemnify, the trustee

(including fees and expenses of trustee’s

counsel).

Trustee’s

Duties

In case of a default under any series

of our debt securities, the trustee shall exercise

such of the rights and powers

vested in it by the senior debt indenture,

and use

the same degree

of care and

skill in their

exercise, as

a prudent person

would exercise

or use under

the circumstances

in the conduct

of his or her

own affairs.

For

these purposes, a

“default” shall

occur upon (i) the

occurrence of

an event of

default, (ii) failure

by us to

pay any

principal or interest

when it has become

due and

payable

and, in the

case of

interest, where

such failure

continues for

at least

30 days

(provided that

the trustee

has provided

us with

notice of

such failure

to pay

interest

at least

15 days

prior to

the end

of such

30-day

period) or

(iii) breach

by us

of any

term, obligation

or commitment

(other than

any payment

obligation)

binding on us

under the relevant

series of debt

securities or the

senior debt

indenture. Holders

of a majority

of the aggregate

principal amount

of the outstanding

debt securities of a series may waive any past default specified

in clause (iii) in the preceding sentence but may not waive any past

default specified in clauses (i) and

(ii) in

the

preceding

sentence.

For

the

avoidance

of doubt,

the

exercise

of any

Dutch

Bail-in

Power

by

the

relevant

resolution

authority,

as described

under

“—

Agreement and Acknowledgment with Respect

to the Exercise of Dutch Bail-in

Power” above, will not be a default for these

purposes.

If a

default occurs

and is

continuing with

respect to

any series

of our

debt securities,

the trustee

will have

no obligation

to take

any action

at the

direction of

any

holders of such

series of the debt

securities, unless they

have offered

the trustee security

or indemnity satisfactory

to the trustee

in its sole discretion.

The holders

of a majority in aggregate princi

pal amount of the outstanding debt

securities of a series shall have the right

to direct the time, method and place of conducting

any

proceeding in

the name of

and on the

behalf of the

trustee for

any remedy

available to

the trustee

or exercising

any trust

or power conferred

on the

trustee with

respect to such

series of the

debt securities. However,

this direction

(a) must not

be in conflict

with any rule

of law or

the senior debt

indenture, as

applicable and

(b) must not be unjustly prejudicial to

the holder(s) of such series of the debt securities

not taking part in the direction, in the case

of either (a) or (b) as determined

by the trustee in its sole discretion. The trustee

may also take any

other action, not inconsistent with the direction,

that it deems proper.

The trustee

is required

to,

within 90

days

of a

default

with respect

to the

debt securities

of any

series, give

to each

affected

holder of

the debt

securities of

the

affected series notice of any default

known to a responsible officer of the trustee, unless the default

has been cured or waived. However,

the trustee will be entitled

to withhold notice if a trust committee of responsible

officers of the trustee determine in

good faith that withholding of notice is in

the interest of the holders.

The trustee makes no representations,

and shall not be liable with respect to, any information

set forth in this prospectus.

Limitation on Suits

Before you bypass

the trustee and bring your

own lawsuit or other formal

legal action or take

other steps to enforce

your rights or protect

your interests

relating to

the debt securities, all of the following must occur:

●

the holder must give the trustee a written

notice that a default has occurred and remains

uncured;

●

the holders

of 25%

in outstanding

principal amount

of the

debt securities

must make

a written

request

that the

trustee

take

action because

of the

default;

●

such holder must offer indemnity satisfactory

to the trustee in its sole discretion against

the cost and other liabilities of taking that

action;

●

the trustee must not have

taken action for 60 days

after receipt of the above notice and offer

of security or indemnity; and

●

the trustee must not have

received an inconsistent direction

from the majority in principal amount of the debt securities dur

ing that period.

Notwithstanding any contrary provisions, nothing shall impair the right of a holder of the debt securities

under the Trust Indenture Act, absent such holder’s consent,

to sue for any payments

due but unpaid with respect to the debt securities.

Modifications of the Indentures

There are four types of changes we can

make to a particular indenture

and the debt securities issued thereunder.

Changes Requiring Each Holder’s Approval

First, there are changes that

we or the

trustee cannot make without the

approval of each holder

of a debt

security affected by the change

under a particular

indenture.

We cannot:

●

change the stated maturity,

if any,

for any principal or interest

payment on a debt security;

●

reduce the principal amount, the amount payable on acceleration

of the maturity after an event of default, the interest

rate or the redemption price or

any premium for a debt security;

●

change our obligation to pay

additional amounts in respect of a debt security;

●

permit redemption of a debt security if not previously

permitted;

●

modify the provisions of the indenture with respect

to the subordination of the debt securities in

a manner adverse to holders;

●

impair any right a holder may have

to require repayment or

conversion of its debt security;

●

change the currency of any payment

on a debt security other than as permitted by the debt

security;

●

change the place of payment on a debt security,

if it is in non-global form;

2019 ING Group Annual Report on Form 20-F

13

●

impair a holder’s right to sue for payment

of any amount due on its debt security;

●

reduce the percentage in principal amount of the debt securities and any other affected series of debt securities, taken together,

the approval of whose

holders is needed to change the indenture

or the debt securities;

●

reduce the percentage

in principal amount

of the debt securities

and any other

affected series

of debt securities,

taken separately

or together,

as the

case may be, the consent of whose holders

is needed to waive our compliance with the applicable

indenture or to waive defaults;

and

●

change the provisions of the applicable

indenture dealing with modification and waiver in any other

respect, except to increase any required percentage

referred to above

or to add to the provisions that

cannot be changed or waived without approval

of the holder of each affected debt security.

Changes Not Requiring Approval

The second type

of change does

not require

any approval

by holders

of the debt

securities. These changes

are limited

to clarifications

and changes that

would not

adversely affect the debt securities in any material respect. Nor do we need any

approval to make any change that affects

only debt securities to be issued under the

applicable indenture after the changes

take effect.

We may

also make changes

or obtain waivers

that do not adversely

affect a particular

debt security,

even if they

affect other

debt securities. In

those cases, we

do

not need to

obtain the approval

of the holder of

that debt security;

we need only obtain

any required

approvals from

the holders of

the affected

debt securities or

other debt securities.

Changes Requiring Majority Approval

Any other change to either indenture

and the debt securities issued under that indenture

would require the following

approval:

●

if the

change affects

only one

series of

debt securities,

it must

be approved

by the

holders of

a majority

in principal

amount of

the relevant

series of

debt securities; or

●

if the

change affects

more than

one series of

debt securities

issued under

an indenture,

it must

be approved

by the

holders of

a majority

in principal

amount of the series affected

by the change, with all

affected series voting

together as one class

for this purpose (and of any

series that by its terms

is

entitled to vote separat

ely as a series, as described below).

In each case, the required approval

must be given by written consent.

The same majority

approval would

be required

for us to

obtain a waiver

of any of

our covenants

in either indenture.

Our covenants

include the promises

we make

about merging which we describe above under “— Mergers and

Similar Transactions.”

If the holders agree to waive a covenant, we will not have

to comply with it. A

majority of

holders, however,

cannot approve

a waiver

of any

provision in

a particular

debt security,

or in the

applicable indenture

as it

affects that

debt security,

that we

cannot change

without the approval

of each holder

of that debt

security as

described above

in “—

Changes Requiring

Each Holder’s

Approval” unless

that

holder approves the waiver.

Book-entry

and other

indirect owners

should consult

their banks

or brokers

for information

on how

approval

may be

granted

or denied

if we

seek to

change the

applicable indenture or the debt securities or request

a waiver.

Description of the 6.125% ING Perpetual Debt

Securities

The

6.125%

ING

Perpetual

Debt

Securities

(the

“

ING

Perpetual

Debt

Securities

”),

in

an

aggregate

principal

amount

of

$700,000,000,

were

issued

under

our

subordinated debt indenture, dated

as of July 18, 2002, between us and The Bank of New York,

101 Barclay Street, New York,

New York 10286, as trustee,

which we

refer

to as

the Subordinated

Indenture,

and a

fourth

supplemental

indenture,

to be

dated

as of

September

26, 2005,

between us

and The

Bank of

New York,

as

trustee, which

we refer

to as

the Supplemental

Indenture.

We refer

to the

Subordinated

Indenture and

the Supplemental

Indenture collectively

as the

Indenture.

The ING Perpetual Debt Securities are treated

as a separate series of our subordinated

debt securities.

Form and Denomination

We issued

the ING Perpetual

Debt Securities only

in fully registered

form, without coupons,

in the form

of beneficial interests

in one or more

global securities. The

ING Perpetual

Debt Securities

will be

issued in

denominations

of US$25

and integral

multiples thereof.

We

will issue

the ING

Perpetual

Debt Securities

as global

securities registered in the name of Cede & Co., as

nominee for DTC.

Interest

Subject to our right

to defer interest

payments as described

under “— Deferral

of Interest

Payments,”

interest on the

ING Perpetual Debt Securities

will be payable

quarterly in

arrears in

equal payments

for any

full Interest

Period on

January 15,

April 15, July

15 and

October 15

of each

year,

at a

fixed rate

per annum

on their

outstanding principal

amount equal to

6.125%, commencing on

January 15, 2006 (calculated

on a 30/360 day

basis). We refer

to such rate

as the Interest

Rate and

each such date as an interest payment date. If any interest payment date is not a business day,

interest will be payable on the next business day (without any interest

or other payment in respect of the delay).

The regular record dates

for each interest payment

date shall be January 1, April 1, July 1 and October 1, respectively.

Each

of

the

periods,

commencing

on

(and

including)

the

issue

date

and

ending

on

(but

excluding)

the

first

interest

payment

date,

and

each

successive

period

commencing on (and including) an

interest

payment date and ending on (but

excluding) the next succeeding interest payment date is referred to herein as

an Interest

Period.

Payments

Method of Payment

Payments of any amounts

in respect of any ING Perpetual Debt Securities represented

by global securities will be made by the trustee to DTC.

Any such payments of

interest and

certain other

payments on

or in respect

of the

ING Perpetual

Debt Securities

will be in

U.S. dollars

and will be

calculated by

the trustee

or such other

agent as we may appoint.

Except in a

bankruptcy,

all payments on

the ING Perpetual

Debt Securities will be

conditional upon

our being solvent

at the time of

payment, and we

will not make

any payment unless we will be solvent

immediately afterwards.

We refer to this

condition as the Required Deferral

Condition. For this purpose, we are

solvent if we

meet the following “solvency

conditions”:

●

we are able to make payments

on our Senior Debt as they become due, and

●

our assets exceed the sum of our liabilities (excluding

liabilities not considered Senior Debt).

Payments Subject to Fiscal Laws

All payments

made in respect

of the ING

Perpetual Debt

Securities will

be subject, in

all cases,

to any

fiscal or other

laws and

regulations applicable

thereto in

the

place of payment, but such laws or regulations

will not affect our obligation

to pay Additional Amounts.

Deferral of Interest Payments

Interest payments

and any other payments with respect to

the ING Perpetual Debt Securities will be subject to deferral

in the following circumstances.

Required Deferral of Payments

Except in the case of

a Mandatory Payment Event or a Mandatory Partial Payment Event, if the Required Deferral Condition is met on the 20th

business day preceding

the date on which any payment would, in the absence of deferral,

be due and payable, we must defer

any such payment. In such case, we will deliver a notice to the

trustee, the holders and the Calculation Agent,

not less than 16 business days prior to such date.

We refer to such

notice as a Deferral Notice.

Except in the case

of a Mandatory Payment

Event or a Mandatory

Partial Payment

Event, if,

after we defer a

payment as a result

of the Required Deferral

Condition

being met,

the Required

Deferral

Condition is

no longer

met on

the 20th

business day

preceding any

subsequent interest

payment

date, then

we will

satisfy such

payment on

the relevant

Deferred Interest

Satisfaction Date

by giving notice,

not less than

16 business days

prior to the Deferred

Interest Satisfaction

Date, to the

trustee, the holders and the Calculation Agent

that we will satisfy such payment

on such date.

We will not satisfy such payment

on the relevant Deferred

Interest Satisfaction

Date referred to

above, if:

2019 ING Group Annual Report on Form 20-F

14

●

we have

previously elected

to satisfy

such payment

earlier (provided

that, at

the time of

satisfying such

payment, the

Required Deferral

Condition fails

to

be met) by

delivering a

notice to

the trustee,

the holders

and the Calculation

Agent not

less than

16 business

days prior

to the

relevant

Deferred

Interest

Satisfaction Date that we will

satisfy such payment on such date;

or

●

we validly

elect to

use our

right to

optionally

defer

any

such payment

which would

otherwise have

been required

to

be paid

on such

Deferred

Interest

Satisfaction Date.

Any payment that we defer due to the Required Deferral

Condition will not accrue interest, except under the circumstances

we describe below under “— Alternative

Interest Satisfaction

Mechanism.”

Unless we obtain

permission from our

relevant regulator,

we are permitted

to satisfy

our obligation

to pay the

Deferred Interest

Payment

only in accordance with the Alternative Interest

Satisfaction Mechanism. See “— Alternative

Interest Satisfaction

Mechanism” below.

Optional Deferral of Payments

We may

defer all

or part of

any payment

that is due

and payable

by giving

a Deferral

Notice to

the trustee,

the Calculation

Agent and

the holders

not less than

16

business days

prior to

the relevant

due date.

We refer

to this

right to

defer as

an Elective

Deferral

Interest

Payment.

Except

in the

case of

a Mandatory

Payment

Event or a Mandatory Partial Payment

Event, we may satisfy any such payment

at any time, but, unless we obtain the prior consent of the relevant regulator,

only by

using the Alternative

Interest Satisfaction

Mechanism. When we use the

Alternative Interest

Satisfaction Mechanism,

we will deliver a notice

to the trustee

and the

Calculation Agent, not less than 16 business days prior

to the relevant Deferred

Interest Satisfaction

Date, informing them of our election to so satisfy

such payment

and specifying the relevant Deferred

Interest Satisfaction

Date.

Elective Deferral

Interest Payments

will bear interest

at a rate

equal to 6.125%

from (and

including) the date

on which, but

for such deferral,

the Deferred

Interest

Payment would otherwise have

been due to be made to (but excluding) the

relevant Deferred

Interest Satisfaction

Date.

Dividend Stopper; Mandatory Interest

Payment

We will give a Deferral Notice in the case of a Required

Deferral Condition and we may give a Deferral

Notice, in our sole discretion and for any reason, in the case of

an Elective

Deferral

Interest

Payment,

except

that a

Deferral

Notice as

to a

payment

required

to be

paid pursuant

to a

Mandatory

Payment

Event

or Mandatory

Partial Payment Event

will have no force or effect.

Dividend Stopper

We agree in the

Indenture that, beginning on the

day we give a

Deferral Notice until all Deferred Interest Payments are paid or

satisfied in full,

we will not recommend

to

our shareholders,

and to

the fullest

extent

permitted

by

applicable

law,

we will

otherwise act

to

prevent

a Mandatory

Payment

Event

or a

Mandatory

Partial

Payment Event

from occurring. Subject to

the occurrence of a Regulatory

Notification as described under

“—

Alteration of Terms

upon a Regulatory Notification”,

a

Mandatory Payment Event

occurs if:

●

we declare, pay or distribute a dividend or make

a payment (other than a dividend in the form of Ordinary Shares) on any

of our Junior Securities or make a

payment on a Junior Guarantee;

●

any of

our subsidiaries

or any

entity in

which we

have a

direct or

indirect financial,

commercial

or contractual

majority interest,

which we

refer

to as

an

Undertaking, declares,

pays

or distributes

a dividend

on any

security issued

by it

benefitting

from a

Junior Guarantee

or makes

a payment

(other than

a

dividend in the form of ordinary shares)

on any security issued by it benefitting from a Junior

Guarantee;

●

we or any of our subsidiaries or Undertakings

redeems, purchases or otherwise acquires

for any consideration

any of our Junior Securities, Parity

Securities

or securities issued by any of our subsidiaries or Undertakings

benefitting from a Junior Guarantee

or Parity Guarantee, other than:

o

by conversion into

or in exchange for our Ordinary

Shares

o

in connection with

transactions effected

by or for

the account

of our customers

or customers

of any of

our subsidiaries

or in connection

with the

distribution, trading or market

-making activities in respect of those securities

o

as a result of a reclassification of us or any

of our subsidiaries or the exchange or conversion

of one class or series of capital stock for

another class

or series of capital stock; or

o

the

purchase

of

fractional

interests

in

shares

of

our

capital

stock

or

the

capital

stock

of

any

of

our

subsidiaries

pursuant

to

the

conversion

or

exchange provisions

of that capital stock (or the security being converted

or exchanged); or

●

any moneys

are paid

to or made

available for

a sinking fund

or for

redemption of

any Junior

Securities, Parity

Securities or

any securities

issued by any

of

our subsidiaries or Undertakings

benefitting from a Junior Guarantee

or Parity Guarantee.

Subject to the occurrence of a Regulatory

Notification as described under “— Alteration

of Terms upon

a Regulatory Notification”,

a Mandatory Partial Payment

Event occurs if:

●

we declare, pay or distribute a

dividend or make a payment on

any of our Parity Securities or make any

payment on any of our Parity

Guarantees; or

●

any of our subsidiaries or Undertakings declares,

pays or distributes a dividend on any

security issued by it benefitting from a Parity

Guarantee or makes

a

payment on any security issued by

it benefitting from a Parity Guarantee.

Mandatory Interest Payment

If a Mandatory Payment Event

occurs, then:

●

all Deferred Interest

Payments will become mandatorily

due and payable in full on the date of the Mandatory

Payment Event,

notwithstanding any further

Deferral Notice or an occurrence

or continuance of the Required Deferral

Condition. Unless we obtain the prior consent

of our relevant regulator,

we may

only satisfy our obligations to pay

such Deferred Interest

Payments in accordance

with the Alternative Interest

Satisfaction Mechanism; and

●

the interest payments

payable on the next four consecutive

interest payment dates,

the next two consecutive interest

payment dates or the next interest

payment date, as the case may

be, after the occurrence of such Mandatory

Payment Event,

depending on whether the Junior Securities, Parity Securities,

or the security benefitting from the Junior Guarantee

or the Parity Guarantee pay

dividends or income distributions on an annual basis, a semiannual

basis

or a quarterly basis, respectively,

will be mandatorily due and payable

in full on each such next interest payment

date, notwithstanding any

Deferral Notice

as to such interest payments

or the occurrence or continuance of any Required

Deferral Condition. We

are permitted, but shall not be required,

to satisfy

our obligation to make the

interest payments

payable on such interest

payment date, other than Deferred

Interest Payments,

in accordance with the

Alternative Interest Satisfaction

Mechanism.

If a Mandatory Partial Payment

Event occurs, then:

●

all Deferred Interest

Payments will become mandatorily

due and payable in full on the date of the Mandatory

Partial Payment Event,

notwithstanding any

further Deferral Notice or an occurrence

or continuance of the Required Deferral

Condition. Unless we obtain the prior consent

of our relevant regulator,

we may only satisfy our obligations

to pay such Deferred Interest

Payments in accordance

with the Alternative Interest

Satisfaction Mechanism; and

●

Mandatory Partial Payments

in respect of each ING Perpetual Debt Security will be mandatorily

due and payable on the next four

consecutive interest

payment dates, the next two

consecutive interest payment

dates or the next interest

payment date, as the case may

be, after the occurrence of such

Mandatory Partial Payment

Event, depending on whether the Parity

Securities or the security benefitting from the Parity

Guarantee pay dividends

or

income distributions on an annual basis, a semiannual basis or

a quarterly basis, respectively,

notwithstanding any Deferral

Notice or an occurrence of the

Required Deferral

Condition. We are permitted,

but shall not be required, to satisfy

our obligation to pay any

Mandatory Partial Payments

in accordance

with the Alternative Interest

Satisfaction Mechanism.

Alternative Interest Satisfaction Mechanism

General

We are permitted to

satisfy our obligation to pay

you through the issuance of our Ordinary Shares

which, when sold, will provide a cash amount sufficient

for us to

make payments due to you

in respect of the relevant payment.

We refer to this

procedure as the Alternative Interest

Satisfaction Mechanism. Subject to

the

absence of a Required Deferra

l

Condition, we may elect to use the Alternative

Interest Satisfaction

Mechanism in order to satisfy our obligation

to make any

interest payment, including

any Mandatory Interest

Payment, by giving not less than 16 business

days’ notice to the trustee.

Our obligation to pay in accordance

with the Alternative Interest

Satisfaction Mechanism will be satisfied

as follows:

●

we will give at least 16 business days’

notice of the relevant interest

payment date to the trustee,

the Calculation Agent and

holders of the ING Perpetual

Debt Securities;

●

by the close of business on or before the seventh

business day prior to the relevant

interest payment date

or Deferred Interest

Satisfaction Date, we will

have authorized for

issuance such number of Ordinary Shares as, in the determination

of the Calculation Agent, have a market

value (after conversion

from euros into U.S. dollars)

of not less than 110% of the relevant payment

to be satisfied on such interest

payment date (each such Ordinary

Share is a

Payment Ordinary Share)

plus the claims for the costs and expenses

to be borne by us in connection with using the Alternative

Interest Satisfaction

Mechanism (including, without limitation, the fees and

expenses of the Calculation Agent);

2019 ING Group Annual Report on Form 20-F

15

●

the Calculation Agent will procure purchasers

for such Ordinary Shares as soon thereafter

as reasonably practicable, but not later

than the fourth business

day prior to the relevant Interest

Payment Date;

●

we will sell such Ordinary Shares in the open market

as instructed by the Calculation Agent

and collect any sales proceeds;

●

we will immediately transfer

the sales proceeds (or such amount of sales proceeds

as is necessary (after conversion from

euros into U.S. dollars)

to make

the relevant payment) to

the trustee on the business day preceding the payment

date for payment by

the trustee, on the payment date,

towards

applicable Interest Payments

to be satisfied;

●

if, after the operation

of the above procedures, there

would, in the opinion of the Calculation Agent, be a shortfall

on the date on which the relevant

payment is due, we will issue further Ordinary Shares

in accordance with the provisions of the Indenture

to ensure that a sum at least equal

to the relevant

payment is available to

make the payment in full on the relevant

due date. If, despite

these provisions, such a shortfall still exists

on the relevant due date

we may, in

accordance with the provisions of the

Indenture, either pay an amount equal to

such shortfall as soon as practicable to

the trustee or continue

to issue Ordinary Shares

until the trustee has received funds equal

to the full amount of such shortfall; and

●

if, pursuant

to the Alternative Interest

Satisfaction Mechanism, proceeds

are raised in excess

of the amount required to pay

the applicable payments plus

the claims for the fees, costs and

expenses to be borne by us in connection with using

the Alternative Interest Satisfaction

Mechanism, we will retain such

excess proceeds.

If we elect to make any payment

in accordance with the Alternative Interest

Satisfaction Mechanism, the receipt

of cash proceeds on the sale of our Ordinary

Shares issued to the trustee or its agent

will satisfy the relevant payment

or the relevant part of such payment.

The proceeds from the sale of Ordinary

Shares

pursuant to the Alternative

Interest Satisfaction Mechanism

will be paid to you by the trustee in respect

of the relevant payment.

Insufficiency of Payment Ordinary Shares

If we are to satisfy a payment

pursuant to the Alternative

Interest Satisfaction Mechanism

and we do not, on the date when the number of Payment

Ordinary

Shares required to be issued is determined,

have a sufficient number of Ordinary

Shares available for issue,

then we shall notify the trustee, the Calculation Agent

and the holders that all or part, as the case may

be, of the relevant payment cannot

be satisfied due to not having a sufficient number of

authorized Ordinary

Shares. In this case the payment or part

thereof shall be satisfied following the date

of our next annual general meeting or extraordinary

general meeting of our

shareholders at which a resolution is

passed authorizing a sufficient number of Ordinary Shares

available to satisfy all or such

part of the relevant payment. If,

however,

the number of Ordinary Shares authorized

to be issued at any such meeting is insufficient

to satisfy all or such part of the relevant

payment then those

Ordinary Shares so issued will be applied by us in partial satisfaction

of all or such part of the relevant payment.

Following the passage of a resolution which

authorizes us to issue additional Ordinary

Shares for this purpose, we will provide not less

than 16 business days’ notice to the trustee,

the Calculation Agent and

the holders of the date upon which the relevant

payment or,

as the case may be, the part thereof,

is to be made. The relevant payment

or, as

the case may be, the

part thereof, which is not

so satisfied will, unless it is a required Deferred

Interest Payment

and has not been subsequently either satisfied or

deferred pursuant

to

an Elective Deferral Interest

payment, continue to

accrue interest at a rate

of 6.125% from (and including) the date on which payment

would otherwise have been

due to (but excluding) the date

on which such payment or part thereof is satisfied

or, in the event

of a Market Disruption Ev

ent, the date on which such payment or

part thereof would, but for the occurrence

of such Market Disruption Event,

have been satisfied from which date

interest (if any)

will accrue on such payment as

provided in “— Market Disruption

Event” below.

If we do not have a sufficient number of Ordinary

Shares and do not hold an annual general meeting

within six months of giving the notice first mentioned

above,

at which a resolution to make

a sufficient number of Ordinary Shares available

is proposed, the trustee will by notice require

us to convene an extraordinary

general meeting at which such a resolution

will be proposed on a date falling within 10 weeks

of such notice from the trustee.

In the event that any such resolution

proposed at any such annual general

meeting or extraordinary general

meeting is rejected, the resolution

will be proposed at

each annual general meeting or any

extraordinary general meeting

thereafter until the resolution has

been passed by our shareholders.

At the date of this prospectus supplement,

we have a sufficient number of authorized

but unissued Ordinary Shares, and our Executive

Board has the necessary

authority to make the interest

payments required to be made in

respect of the ING Perpetual Debt Securities during

the next 12-month period, assuming the

Alternative Interest Satisfaction

Mechanism is used for each interest

payment during such 12-month period.

We will undertake in the Indenture

to keep available for

issue a sufficient number of authorized,

but unissued Ordinary Shares as we reasonably

consider would be

required to be issued as Payment

Ordinary Shares in connection with the next

four interest payments.

Should we fail to keep available

such unissued Ordinary

Shares, no damages will be payable in

connection with such failure. The trustee

may, however,

require that we, as soon as practicable,

hold an extraordinary

general meeting of our shareholders

at which a resolution will be passed to remedy such

failure.

The trustee is not obligated to

monitor whether we have a sufficient

number of unissued Ordinary Shares available

for issuance as Payment

Ordinary Shares and

the trustee is entitled to assume, unless it has

actual knowledge to the contrary,

that we are complying with our obligations

to do so.

Market Disruption Event

If, in our opinion, a Market

Disruption Event exists

on or after the 15th business day preceding any

date upon which a payment or part

thereof is due to be made or

satisfied pursuant to the Alte

rnative Interest Satisfaction

Mechanism, then we may give notice to the trustee,

the Calculation Agent and the holders

as soon as

possible after the Market Disruption

Event has arisen or occurred, whereupon

the relevant payment

will be deferred until such

time as, in our opinion, the Market

Disruption Event no longer exists.

Any such deferred payment

or part thereof will be satisfied as soon as practicable

after the Market Disruption Event

no longer exists. Except as

provided in the next

sentence, interest will not accrue

on such deferred payment

or part thereof, however,

during a Market Disruption Event.

If we do not make the relevant

payment

or part thereof for a period of 14 days

or more after its due date, even if the Market

Disruption Event is continuing,

interest shall accrue on such deferred

payment

or part thereof from (and including) the date

on which the relevant payment

or part thereof was due to be made to (but

excluding) the date on which such

payment or part thereof is made. Any

such interest shall accrue at the Interest

Rate and shall be satisfied only in accordance

with the Alternative Interest

Satisfaction Mechanism and as soon as

reasonably practicable after the relevant

deferred payment

is made. No liability shall attach to

the trustee or its agents if,

as

a result of a Market Disruption Event

or any other event outside the control

of the trustee or any such agent,

the trustee or any such agent is unable

to comply with

its duties in connection with any payment

made pursuant to the Alternative

Interest Satisfaction

Mechanism.

Alteration of Terms

upon a Regulatory Notification

Upon the occurrence of a Regulatory Notification,

the terms of the ING Perpetual Debt Securities will be automatically

altered, without any action by holders,

so

that a Mandatory Payment

Event, or a Mandatory Partial

Payment Event, as

applicable, will be deemed to occur only if we declare, pay

or distribute a dividend or

make a payment (other than a dividend

in the form of Ordinary Shares) on our Ordinary Shares

and/or other instruments which are

classified as equity under IFRS.

After the alteration, the ING Perpetual

Debt Securities will be considered capital securities

which, for purposes of IFRS, are classified as

equity applying IFRS

standards.

“Regulatory Notification” means,

after we become subject to capital adequacy

regulations, the relevant regulator

shall have notified us to the effect

that on any

date on which a payment on the ING Perpetual

Debt Securities would otherwise have been

due, our capital ratio would

after such payment be less than the

minimum capital adequacy requirements

as enforced by the relevant

regulator.

Subordination

The ING Perpetual Debt Securities constitute

our direct, unsecured, subordinated

securities and rank

pari passu

without any preference among

themselves.

The rights and claims of the holders of the ING Perpetual

Debt Securities are subordinated

to Senior Debt in that rights regarding

payments and the issuance of

Ordinary Shares (as described under “Alternative

Interest Satisfaction

Mechanism”) will be subject to the solvency conditions.

Upon our liquidation, moratorium of

payments or bankruptcy,

the holders of the ING Perpetual Debt Securities will rank,

effectively from a financial point

of view, in priority

to all holders of Junior

Securities and equally with the holders of our existing

most senior preference shares

and any other Parity Securities and Parity

Guarantees then outstanding.

Upon

our liquidation, moratorium of payments

or bankruptcy,

any payments on the ING Perpetual

Debt Securities will be subordinate to,

and subject in right of payment

to the prior payment in full of,

all Senior Debt.

For the purposes of the ING Perpetual Debt Securities,

our Senior Debt means:

●

all claims of our unsubordinated creditors;

●

all claims of creditors whose claims are, or are

expressed to be, subordinated

(whether only in the event of our insolvency or otherwise) only

to the claims

of our unsubordinated creditors;

and

●

all claims of all of our other creditors, except

those whose claims are, or are expressed

to rank,

pari passu

with, or junior to, the claims of holders of ING

Perpetual Debt Securities.

As of 31 December 2019, we had approximately

EUR 143.4 billion of Senior Debt outstanding.

2019 ING Group Annual Report on Form 20-F

16

The definition of Senior Debt described in the accompanying

prospectus under “Description of Debt Securities We

May Offer — The Senior Debt Indenture

and the

Subordinated Debt Indenture

—Subordination Provisions” does not

apply to the ING Perpetual Debt Securities. For

the purposes of the Indenture and the

description thereof in the accompanying

prospectus, all references to

Senior Debt shall be deemed to be references

to Senior Debt as described above.

We will agree in the Indenture

that, so long as any of the ING Perpetual Debt

Securities remain outstanding,

we will not issue any preference

shares (or other

securities which are akin to preference

shares as regards distributions

on a return of assets upon our liquidation or in respect

of distribution or payment of

dividends and/or any other amounts

thereunder by us) or give any guarantee

or contractual support arrangement

in respect of any of our preference

shares or

such other securities or in respect of any other entity

if such preference shares,

preferred securities, guarantees

or contractual support arrangements

would rank

(as regards distributions

on a return of assets upon our liquidation or in respect

of distribution or payment of dividends and/or

any other amounts thereunder by

us) senior to the ING Perpetual Debt Securities,

unless we alter the terms of the ING Perpetual

Debt Securities such that the ING Perpetual Debt Securities

rank

pari

passu

effectively from a financial

point of view with any such preference

shares, such other securities akin to preference

shares or such guarantee or support

undertaking.

Winding Up

If any action causes our liquidation (except

solely for the purpose of our reconstruction,

amalgamation or the substitution of a successor

in business for us, as

defined in the Indenture, the terms of which have

previously been approved

in writing by the trustee or by not less than a majority of the holders),

with respect to

each ING Perpetual Debt Security you

own, we will pay you (in lieu of any other payment)

an amount as if on and after the day immediately

before the liquidation

began, any holder of those ING Perpetual

Debt Securities had been the holder of our most senior class

of preference shares which

we refer to as the Notional

Preference Shares,

which have a preferential

right to a return of assets upon liquidation

over and so rank ahead of the holders

of all other classes of our issued

shares for the time being in our capital,

but ranking junior to the claims of Senior Debt. Any

such payment shall be made on the assumption

that the amount that

you were entitled to receive

in respect of each Notional Preference

Share on a return of assets upon liquidation

was an amount equal to the principal amount of

$25 of the relevant ING Perpetual

Debt Security and any other Outstanding

Payments together with, to

the extent not otherwise included within the foregoing,

the

pro rata share of any

Winding-Up Claims attributable to the ING Perpetual

Debt Security.

As a consequence of the subordination provisions,

the holders of the ING Perpetual Debt Securities may

recover less than the holders

of our unsubordinated

liabilities and the holders of certain of our subordinated

liabilities, including the holders of other subordinated

debt securities as described in the accompanying

prospectus under the heading “Description of Debt Securities

We May Offer.”

If, upon liquidation

the amount payable on any

ING Perpetual Debt Securities and

any claims ranking

pari passu

with the ING Perpetual Debt Securities are not paid in

full, the ING Perpetual Debt Securities and other claims

ranking equally will

share ratably in any

distribution of our assets upon liquidation in proportion

to the respective amounts to which they

are entitled. If any holder is entitled to any

recovery with respect to the ING Perpetual

Debt Securities upon liquidation, the holder might

not be entitled to a recovery in U.S.

dollars and might be entitled only

to a recovery in euros. In addition,

under current Dutch law,

our liability to holders of the ING Perpetual Debt

Securities would be converted

into euros at a date

close to the commencement of insolvency

proceedings against us and holders

of the ING Perpetual Debt Securities would be exposed

to currency fluctuations

between that date and the date

they receive proceeds pursuant

to such proceedings, if any.

Defaults; Limitation of Remedies

Payment Defaults

It is a Payment Default

with respect to the ING Perpetual Debt Securities if

we fail to pay or set aside

for payment the amount due

to satisfy any payment on the

ING Perpetual Debt Securities when due, and such

failure continues for 14 days;

provided, however

, that if we fail to make any

Mandatory Interest Payment

as a

result of failure to satisfy

the solvency conditions, or due to a deferral

of an interest payment

as permitted under the terms of the Indenture,

that payment will

constitute an Outstanding

Payment and will accumulate with

any other Outstanding Payments

until paid but will not be a Payment

Default.

Limitation of Remedies

If any Payment Default

occurs and continues regarding

the ING Perpetual Debt Securities, the trustee

may pursue all legal remedies available

to it, including

commencing a judicial proceeding for the collection

of the sums due and unpaid or a bankruptcy proceeding

in The Netherlands (but not elsewhere), but

the

trustee may not declare the principal amount

of any outstanding ING Perpetual

Debt Security to be due and payable. If we fail

to make payment and

the solvency

conditions are not satisfied at the end of the 14-day

period described under “— Payment Defaults,”

such failure does not constitute

a Payment Default but

instead

constitutes a Payment

Event. On a Payment

Event, the trustee may institute

bankruptcy proceedings exclusively

in The Netherlands, but may not pursue

any other

legal remedy,

including a judicial proceeding for the collection

of the sums due and unpaid.

Notwithstanding the foregoing, holders

of the ING Perpetual Debt Securities have the

absolute and unconditional right to institute

suit for the enforcement of any

payment when due and such right may

not be impaired without the consent of the

holder.

General

By purchasing ING Perpetual Debt Securities,

you and the trustee will be deemed to have

waived any right of set-off,

counterclaim or combination

of accounts with

respect to the ING Perpetual Debt Securities

or the Indenture (or between our obligations

regarding the ING Perpetual

Debt Securities and any liability owed by a

holder or the trustee to us) that they might

otherwise have against us.

Subject to the provisions of the Indenture relating

to the duties of the trustee, if a Payment

Default occurs and continues with respect

to the ING Perpetual Debt

Securities, the trustee will be under no obligation

to any holder of the ING Perpetual Debt

Securities, unless they have offe

red reasonable indemnity to the

trustee.

Subject to the Indenture provisions

for the indemnification of the trustee, the holders

of a majority in aggregate principal amount

of the outstanding ING Perpetual

Debt Securities have the right to direct

the time, method and place of conducting any proceeding

for any remedy available

to the trustee or exercising

any trust or

power conferred on the trustee

with respect to the series, if the direction is not in

conflict with any rule of law or with the Indenture

and the trustee does not

determine that the action would be unjustly

prejudicial to the holder or holders of any

ING Perpetual Debt Securities not taking part

in that direction. The trustee

may take any

other action that it deems proper that is not inconsistent

with that direction.

The Indenture provides that the trustee

will, within 90 days after the occurrence of a Payment

Default with respect to the ING Perpetual

Debt Securities, give to

each holder of the ING Perpetual Debt Securities notice of the Payment

Default known to it, unless the Payment

Default has been cured or waived.

The trustee will

be protected in withholding notice, however,

if it determines in good faith that

withholding notice is in the interest of the holders.

We are required to furnish

to the trustee, on an annual basis a statement

as to our compliance with all conditions and covenants

under the Indenture.

Optional Redemption and Redemption upon

Certain Events

Optional Redemption

The ING Perpetual Debt Securities are perpetual debt

securities and have no fixed

maturity or mandatory redemption date.

The ING Perpetual Debt Securities are

not redeemable at the option of the holder of an ING Perpetual

Debt Security at any time and are not redeemable at

our option prior to January 15, 2011, except

in

certain limited circumstances.

See “— Redemption upon Certain Events”

below.

We may redeem the ING Perpetual

Debt Securities in whole (but not in part) at our option, on

January 15, 2011, or on any interest

payment date thereafter at

their

aggregate principal amount toge

ther with Outstanding Payments

due through the date of redemption, which

sum we refer to as the Base Redemption

Price.

We may purchase on the

open market at any time ING Perpetual

Debt Securities in any manner and at any

price.

Cancellation of any ING Perpetual

Debt Securities so redeemed by us will be effected

by reducing the principal amount of the global ING Perpetual

Debt Securities,

and any ING Perpetual Debt Securities so cancelled

may not be reissued or resold and

our obligations in respect of any such cancelled

ING Perpetual Debt Securities

will be discharged. ING Perpetual Debt

Securities purchased by us may be held, reissued,

resold or,

at our option, be cancelled by decreasing in an equal

amount

the principal amount of ING Perpetual Debt Securit

ies represented by the Global Security.

Redemption Upon Certain Events

Tax Event.

Upon the occurrence of a Tax

Event with respect to

the ING Perpetual Debt Securities, we may,

by giving notice of redemption, redeem in

whole (but

not in part) the ING Perpetual Debt Securities at

their Base Redemption Price.

“Tax Event” means we determine

that immediately prior to the giving of the

notice referred to below,

on the next interest pay

ment date:

●

we would, for reasons outside our

control, be unable to make such

payment without being required to

pay Additional Amounts and we cannot

avoid the

requirement or circumstance

by taking measures as we (acting in good faith)

deem appropriate;

●

payments of amounts in respect of interest

on the ING Perpetual Debt Securities, including, for

the avoidance of doubt, the issue of Ordinary

Shares

pursuant to the Alternative

Interest Satisfaction Mechanism,

may be treated as “distributions”

within the meaning of Section II of the Dividend

Withholding Tax

Act 1965 (

Wet op de dividendbelasting

1965

; or such other provision as may from time

to time supersede or replace Section II of the

2019 ING Group Annual Report on Form 20-F

17

Dividend Withholding Tax

Act 1965 for the purposes of such definition) and we cannot

avoid the requirement or circumstance

by taking such measures as

we (acting in good faith) deem appropriate;

or

●

as a result of any proposed change or amendment

to the laws of The Netherlands, or any

proposed change in the application of official

or generally

published interpretation

of such laws, or any interpretation

or pronouncement by any relevant

tax authority that provides for

a position with respect to

such law or regulations that differs

from the previously generally accepted

position in relation to similar transactions

or which differs from any

specific

written confirmation given by

a tax authority in respect of the ING Perpetual

Debt Securities, which change or amendment becomes,

or would become,

effective, or in the case of a change

or proposed change in law if such change is enacted

(or,

in the case of a proposed change, is expected

to be enacted)

by Act of Parliament or made by Statutory

Instrument on or after September 16, 2005, there

is more than an insubstantial risk

that we will not obtain

substantially full relief for the

purposes of Dutch corporation tax

for any payment of interest

including, for the avoidance of doubt, where the

payment of

interest is to be satisfied

by the issue of Ordinary Shares pursuant

to the Alternative Interest

Satisfaction Mechanism and we cannot

avoid this risk by

taking such measures as we (acting in good faith)

deem appropriate.

In the case of redemption upon the occurrence of a Tax

Event, we are required,

before we give a notice of redemption,

to deliver to the trustee a written

legal

opinion of independent Netherlands counsel

of recognized standing, selected

by us, in a form satisfactory

to the trustee confirming that we

are entitled to exercise

our right of redemption.

Regulatory Event.

Upon the occurrence of a Regulatory Event

with respect to the ING Perpetual Debt Securities,

we may by giving notice of redemption,

at

any time redeem the ING Perpetual

Debt Securities in whole (but not in part) at their Base Redemption

Price.

“Regulatory Event” means any

time after we become subject to capital

adequacy regulations, the relevant

regulator makes a determination

that securities of the

nature of the ING Perpetual Debt Securities can

no longer qualify as Tier 1 Capital (or instruments

of a similar nature which qualify as core

capital) for purposes of

such capital adequacy regulations.

Notice of Redemption

We must give 30 to 60 days’

notice of redemption to the holders of the ING Perpetual

Debt Securities. Any notice of redemption

is irrevocable and must be given

as

described in the accompanying prospectus.

If the redemption price in respect of any ING Perpetual

Debt Securities is improperly withheld or refused

and is not paid

by us, interest on the ING Perpetual

Debt Securities will continue to be payable

until the redemption price is actually paid.

Calculation Agent

So long as any of the ING Perpetual Debt Securities

are outstanding, we will ensure that

there will always be a Calculation

Agent. If the Calculation Agent is unable

or unwilling to act as such, or if it fails to make

a determination, calculation or otherwise

fails to perform its duties under the Indenture

or the Calculation Agency

Agreement, we will appoint an independent

investment bank acceptable to

the trustee to act as such in its place. Subject to certain

limited exceptions,

neither the

termination of the Calculation Agent’s

appointment nor the Calculation Agent’s

resignation will be effective

without a successor having been appointed.

All calculations and determinations made by

the Calculation Agent with respect to the ING Perpetual

Debt Securities (except in the

case of manifest error) are final

and binding on us, the trustee and the holders.

Neither we nor the trustee have any

responsibility to anyone for any

errors or omissions in any calculation

by the Calculation

Agent.

Modifications of the Indentures

There are four types of changes we can

make to a particular indenture

and the debt securities issued thereunder.

Changes Requiring Each Holder’s Approval

First, there are changes that

we or the trustee cannot make

without the approval of each holder of a debt

security affected by

the change. We cannot:

●

change the stated maturity,

if any,

for any principal or interest

payment on a debt security

●

reduce the principal amount, the amount payable

on acceleration of the maturity after a default,

the interest rate or

the redemption price for a debt

security;

●

permit redemption of a debt security if not previously

permitted;

●

impair any right a holder may have

to require repayment of

its debt security;

●

change the currency of any payment

on a debt security other than as permitted by the debt

security;

●

change the place of payment on a debt security,

if it is in non-global form;

●

impair a holder’s right to sue for payment

of any amount due on its debt security;

●

reduce the percentage in principal amount

of the debt securities and any other affected

series of debt securities, taken toge

ther, the approval

of whose

holders is needed to change the indenture

or the debt securities;

●

reduce the percentage in principal amount

of the debt securities and any other affected

series of debt securities, taken separately

or together,

as the case

may be, the consent of whose holders

is needed to waive our compliance with the applicable

indenture or to waive defaults;

and

●

change the provisions of the applicable indenture

dealing with modification and waiver in any

other respect, except to increase

any required percentage

referred to above

or to add to the provisions that

cannot be changed or waived without approval.

Changes Not Requiring Approval

The second type of change does not require any

approval by holders of the debt securities.

This type is limited to clarifications and changes

that would not

adversely affect the debt securities

in any material

respect. Nor do we need any approval

to make any change that

affects only debt securities to be issued

under each indenture after the changes take

effect.

We may also make

changes or obtain waivers

that do not adversely affect a particular

debt security,

even if they affect other debt securities.

In those cases, we do

not need to obtain the approval of the

holder of that debt security; we need only obtain any

required approvals from

the holders of the affected debt

securities or

other debt securities.

Changes Requiring Majority Approval

Any other change to either indenture

and the debt securities would require the following

approval:

●

if the change affects only one series of debt securities,

it must be approved by the holders

of a majority in principal amount of the relevant

series of debt

securities; or

●

if the change affects more than

one series of debt securities issued under an indenture, it must

be approved by the holders of a majority in principal

amount of the series affected

by the change, with all affected

series voting together as one class for this

purpose.

In each case, the required approval

must be given by written consent.

The same majority approval would

be required for us to obtain

a waiver of any of our covenants

in either indenture. Our covenants

include the promises we make

about merging which we describe above under

“— Mergers and Similar Transactions.”

If the holders agree to waive a covenant,

we will not have to comply with it.

Modification of Subordination Provisions

We may not amend the subordinated

debt indenture to alter the subordination

of any outstanding subordinated

debt securities without the written consent

of

each holder of senior indebtedness then outstanding

who would be adversely affected.

In addition, we may not modify the subordination

provisions of the

subordinated debt indenture

in a manner that would adversely affect

the outstanding subordinated

debt securities of any one or more series in any

material

respect, without the consent of the holders

of a majority in aggregate principal amount

of all affected series, voting

together as one class.

Paying Agent

We may appoint one or more

financial institutions to act as our paying

agents, at whose designated offices debt securities

in non-global form may be surrendered

for payment at their maturity.

We call each of those offices a paying

agent. We may add, replace

or terminate paying agents

from time to time. We

may also

choose to act as our own paying agent. Initially,

we have appointed the trustee,

at its corporate trust

office in New York

City, as the paying

agent. We must notify

you of changes in the paying agents.

Mergers and Similar Transactions

2019 ING Group Annual Report on Form 20-F

18

We are generally permitted

to merge or consolidate with or into

another company.

We are also permitted to sell substantially

all our assets to another company.

With regard to any

series of debt securities, however,

we may not take

any of these actions unless all the following conditio

ns are met:

●

if we are not the successor company,

the successor company must expressly

agree to be legally responsible for

the debt securities of that series and must

be organized as a corporation,

partnership, trust, limited liability company

or similar entity,

but may be organized

under the

laws of any jurisdiction; and

●

the merger,

sale of assets or other transaction must not cause

a default on the debt securities, and we must not

already be in default, unless the merger or

other transaction would cure the default.

For purposes of this no-default test,

a default would include an event of default

that has occurred and not been

cured, as described below under “Default Remedies

and Waiver of Default

— Events of Default.”

A default for this purpose would

also include any event

that would be an event of default

if the requirements for giving

us default notice or our default having

to exist for a specific period of time were

disregarded.

If the conditions described above are satisfied

with respect to the debt securities of any

series, we will not need to obtain the approval

of the holders of those debt

securities in order to merge or consolidate

or to sell our assets. Also, these conditions

will apply only if we wish to merge or consolidate

with another entity or sell

our assets substantially as an entirety

to another entity.

We will not need to satisfy these conditions

if we enter into other types of transactions,

including any

transaction in which we acquire the stock

or assets of another entity,

any transaction that involves

a change of control of ING but in which we do not

merge or

consolidate, and any transaction

in which we sell less than substantially all our

assets.

Also, if we merge, consolidate

or sell our assets substantially as an entirety,

neither we nor any successor would have

any obligation to

compensate you for any

resulting adverse tax consequences

relating to your debt securities.

Glossary

Certain defined terms that are used in

this section are defined in the following glossary.

Terms used

in the description of our ING Perpetual Debt Securities

which

are not defined herein are defined

in the accompanying prospectus or

in the Indenture.

“Accrued Interest

Payment”

means interest that shall continue

to accrue after an interest

payment date in respect of an Elective

Deferral Interest

Payment, the

failure to make a payme

nt when due on a date of redemption,

certain payments which cannot be made due

to insufficient Ordinary Shares to

satisfy the

Alternative Interest Satisfaction

Mechanism and failure to make

a payment more than 14 days

after its due date due to a Marke

t

Disruption Event.

“Additional Amounts”

has the meaning set forth under “Description

of the ING Perpetual Debt Securities — Additional Amounts.”

“Alternative Interest

Satisfaction Mechanism”

has the meaning set forth under “Description

of the ING Perpetual Debt Securities — Alternative

Interest

Satisfaction Mechanism.”

“assets”

means our non-consolidated gross assets

as shown by our most recent published audited

balance sheet but adjusted for contingencies

and for subsequent

events and to such extent

as the directors or,

as the case may be, the liquidator may

determine to be appropriate.

“Calculation Agency Agreement”

means the calculation agency agreement to

be dated as of September 26, 2005, between

us and the Calculation Agent, relating

to the ING Perpetual Debt Securities under

which the Calculation Agent agrees to perform

the duties required of it under the terms of the Indenture.

“Calculation Agent”

means ING Financial Markets LLC, as calculation

agent in relation to the ING Perpetual

Debt Securities, or its successor or successors

for the

time being appointed under the Calculation Agency Agreement.

“Deferred Interest Payment”

means

●

any payment, or part thereof,

which we have deferred as

described under “Required Deferral

of Payments” and which has not

subsequently been either (i)

satisfied or (ii) deferred as described

under “Optional Deferral

of Payments”; or

●

any payment, or part thereof,

which we have elected to defer

in accordance with the Elective Deferral

Interest Payment

and which has not been satisfied.

Deferred Interest Satisfaction Date”

means:

●

the Interest Payment

Date following the 19th business day

after the Required Deferral

Condition fails to be met;

●

if other than an Interest Payment

Date, the date on which we resolve

to satisfy a Deferred

Interest Payment,

as notified by us to the trustee, the holders

and the Calculation Agent; or

●

the date on which we are required

to satisfy all Deferred Interest

Payments as a result

of the occurrence of a Mandatory Payment

Event or a Mandatory

Partial Payment Event.

“Deferral Period”

means the period commencing on (and including) the date we gave

a Deferral Notice and ending

on (and including) the date upon which all

Deferred Interest

Payments are paid or satisfied

in

“ING Perpetual Debt Securities”

means the 6.125% ING Perpetual Debt Securities and such

expression shall include, unless the context

otherwise requires, any

further ING Perpetual Debt Securities which we are

permitted to issue and which will form

a single series with the ING Perpetual Debt Securities.

“interest”

shall, where appropriate, include Interest

Amounts, Deferred Interest

Payments and Accrued Interest

Payments.

“Interest Amount”

means:

●

in respect of an interest payment,

the amount of interest payable

on an ING Perpetual Debt Security for the relevant

Interest Period; and

●

in the event of redemption due to a Tax

Event or Regulatory

Event, any interest

accrued from (and including) the preceding interest

payment date (or,

if

none, the issue date of the ING Perpetual Debt

Securities) to (but excluding) the due date

for redemption, if not an interest

payment date, as calculated

using the 30/360 day basis

“interest payment”

means, in respect of an interest payment

date, the aggregate Interest

Amounts for the Interest

Period ending on such interest

payment date.

“Interest Period”

means the period commencing on (and including) the issue date

and ending on (but excluding) the first

interest payment date

and each

successive period commencing on (and including) an interest

payment date and

ending on (but excluding) the next succeeding interest

payment date.

“Junior Guarantee”

means any guarantee, indemnity

or other contractual support arrangement

entered into by us in respect

of securities (regardless of name or

designation) issued by one of our subsidiaries or Undertakings

and ranking, upon liquidation or in respect of distributions

or payment of dividends or any other

payment thereon, after the ING Perpetual

Debt Securities.

“Junior Securities”

means our Ordinary Shares or any other securities

which rank, as regards

distributions on a return of assets upon liquidation

or in respect of

distributions or payment of dividends or any

other payments thereon, after the ING Perpetual

Debt Securities.

“liabilities”

means our non-consolidated gross

liabilities as shown by our most recent published audited

balance sheet, but adjusted for contingencies

and for

subsequent events and to such extent

as the directors, the auditors

or, as the case

may be, the liquidator may determine.

“Mandatory Partial Payment”

payable on any interest

payment date means a payment

in respect of each ING Perpetual Debt Security in an amount

that results in

payment of a proportion of a full interest

payment on the ING Perpetual Debt Security

on such interest payment

date equal to the proportion

of a full dividend on

the relevant Parity Securities

and/or payment on the relevant

Parity Guarantee paid on

the dividend or payment date in respect

of the relevant Parity Securities

and/or Parity Guarantee

immediately preceding such

interest payment

date.

“Market Disruption Event”

means:

●

the occurrence or existence of any

suspension of or limitation imposed on trading

by reason of movements in price exceeding

limits permitted by Euronext

Amsterdam N.V.

or on settlement procedures

for transactions in the Ordinary Shares

on Euronext Amsterdam N.V.

if, in any such

case, that suspension or

limitation is, in the determination of the

Calculation Agent, material in the context

of the sale of the Ordinary Shares;

●

in our opinion, there has been a substantial

deterioration in the price and/or value

of the Ordinary Shares; or circumstances

are such as to prevent or to

a

material extent restrict the

issue or delivery of the Ordinary Shares; or

●

where, pursuant to the terms

of the Indenture, monies are required

to be converted from

one currency into another currency in respect

of any payment,

the occurrence of any event that

makes it impracticable to effect

such conversion.

“Ordinary Shares”

means our ordinary shares or depository receipts

issued in respect of such Ordinary Shares, as the

context may require.

“Outstanding Payment”

means:

2019 ING Group Annual Report on Form 20-F

19

●

in relation to any interest

payment, Deferred Interest

Payment or Interest

Amount not falling within the definition of interest

payment, that such payment

(a) has either become due and payable or

would have become due and payable

except for the non-satisfaction

on the relevant date due to an

insolvency

condition or the deferral, postponement

or suspension of such payment, due to

a Required Deferral Condition,

an Elective Deferral Interest

Payment,

insufficient Ordinary Shares available

to satisfy the Alternative Interest

Satisfaction Mechanism, or failure

to make a payment more

than 14 days after its

due date due to a Market Disruption

Event; and (b) in any such case has

not been satisfied; and

●

in relation to any Accrued Interest

Payment, any amount

thereof which has not been satisfied whether or not payment

has become

due.

“Parity Guarantees”

means any guarantees, indemnities

or other contractual support arrangements

we enter into with respect to

securities issued by any of our

subsidiaries or Undertakings which effectively

from a financial point of view

●

are similar to the most senior class of our preference

shares:

o

with respect to distributions on a return

of assets upon our liquidation; or

o

with respect to dividends or distribution of payments

or other amounts thereunder; and

●

rank

pari passu

with the ING Perpetual Debt Securities with respect to

such distributions or payments.

For the avoidance of doubt, included in Parity

Guarantee are our guarantees

of obligations relating to the 8.439% Noncumulative

Guaranteed Trust

Preferred

Securities issued by ING Capital Funding Trust

III.

Parity Securities”

means our most senior class of preference

shares or any of our other securities which effectively

from a financial point of view

●

are similar to the most senior class of our preference

shares:

o

with respect to distributions on a return

of assets upon our liquidation; or

o

with respect to dividends or distribution of payments

or other amounts thereunder; and

●

rank

pari passu

with the ING Perpetual Debt Securities with respect to

such distributions or payments.

For avoidance of doubt, included in Parity

Securities are our 6.50% ING Perpetual Debt Securities issued

on September 27, 2001, 7.05% ING Perpetual Debt

Securities issued on July 18, 2002, 7.20% ING Perpetual Debt

Securities issued on December 6, 2002, Variable Rate

ING Perpetual Securities issued on June 20,

2003, 6.20% ING Perpetual Debt Securities issued on

October 17, 2003, Variable Rate

ING Perpetual Securities issued on June 14, 2004 and

4.176% ING Perpetual

Debt Securities issued on June 7, 2005.

“payment”

means any interest payment,

Deferred Interest

Payment, Accrued Interest

Payment or Interest

Amount not falling within the definition of interest

payment.

Payment Event”

has the meaning set forth under “Description of the ING Perpetual

Debt Securities —

“Relevant Date”

means:

●

in respect of any payment other than

a Winding-Up Claim, the date on which such payment

first becomes due and payable but,

if the full amount of the

monies payable on such date has

not been received by the trustee on or prior to

such date, the “Relevant Date”

means the date on which such monies

shall have been so received and notice to

that effect shall have

been given to the holders in accordance

with the terms of the Indenture; and

●

in respect of a Winding-Up Claim, the date which is one day

prior to the commencement of the winding up.

The

“Required Deferral Condition”

will be met if, in our determination,

on the relevant date, we do

not satisfy the solvency conditions, or making of the relevant

payment will result in us not satisfying

the solvency conditions.

“Undertaking”

means a corporate body,

partnership, limited partnership, cooperative

or an incorporated association carrying

on a trade or business with or

without a view to profit in which the Issuer has direct

or indirect financial, commercial or contractual

majority interest.

Winding-Up Claim”

means amounts in respect of principal or payments

in respect of which the solvency conditions are not satisfied

on the date upon which the

same would otherwise be due and payable by

us in our liquidation (upon dissolution or otherwise) and on any redemption

as described under “Description of the

ING Perpetual Debt Securities — Optional Redemption

and Redemption upon Certain Events.”

2019 ING Group Annual Report on Form 20-F

20

AMERICAN DEPOSITARY

SHARES

This section will summarize all of the material provisions

of the Amended and Restated Deposit

Agreement, dated as of October 4, 2018, pursuant

to which the

American depositary receipts (which we refer

to as ADRs) are to be issued among ING, JPMorgan

Chase Bank, N.A., as depositary,

and the holders from time to

time of ADRs. We refer to

this agreement as the “deposit

agreement.” We

do not, however,

describe every aspect of the deposit agreement, which

has been filed

as an exhibit to ING’s

registration statement

on Form F-6, filed on 4 October 2018. You

should read the deposit agreement for

a more detailed description of the

terms of the ADRs. Additional copies of the deposit agreement

are available for inspection at

the principal office of the depositary in New York,

which is presently

located at 383 Madison Avenue,

Floor 11, New York,

New York, 10179.

American Depositary Receipts

The depositary will issue ADRs evidencing American depositary

shares (which we refer to as

ADSs) pursuant to the deposit agreement.

Each ADS will represent one

ordinary share. Only persons in whose names

ADRs are registered on the books

of the depositary will be treated by the depositary

and us as holders of ADRs.

Unless certificated ADRs are specifically requested

by you, all ADSs will be issued on the books of our

depositary in book-entry form and

periodic statements will be

mailed to you which reflect your ownership

interest in such ADSs. In our description,

references to American depositary

receipts or ADRs shall include the

statements you will receive

which reflect your ownership

of ADSs.

You may hold

ADSs either directly or indirectly through your

broker or other financial institution.

If you hold ADSs directly,

by having an ADS registered in your

name on the books of the depositary,

you are an ADR holder.

This description assumes you hold your ADSs directly.

If you hold the ADSs through your broker

or

financial institution nominee, you must rely

on the procedures of such broker

or financial institution to assert the rights of an ADR holder

described in this section.

You should consult

with your broker or financial institution

to find out what those procedures are.

Pursuant to the terms of the deposit agreement,

registered holders of ADRs and

all persons holding any interest

in ADRs and/or

ADSs will be subject to any

applicable disclosure requirements

regarding acquisition and ownership

of ordinary shares as are applicable pursuant

to the terms of our articles of association

or

other provisions of or governing the ordinary

shares. See “Ordinary Shares — Obligations

of shareholders to disclose holdings” above

for a description of such

disclosure requirements applicable

to ordinary shares and the consequences of noncompliance

as of the date of this prospectus. In order

to enforce such disclosure

requirements, we reserve the right

to instruct ADR holders to deliver their ADSs for

cancellation and withdrawal

of the deposited securities so as to permit us to

deal directly with the holder thereof as a holder of ordinary

shares, and, by being a holder of an ADR, ADR holders are

contractually agreeing to comply

with such

instructions.

The depositary has agreed, subject to the terms and conditions

of the deposit agreement, to cooperate

with ING in its efforts to inform

ADR holders

of any exercise by us

of our rights to instruct ADR holders to deliver their

ADSs for cancellation, and to consult

with and provide us with reasonable assistance

without risk, liability or expense on the part of the depositary,

on the manner or manners in which we may enforce

such rights

with respect to any ADR holder.

The depositary will keep, at its transfer

office, (i) a register for the registration,

registration of transfer,

combination and split-up of ADRs, which at all reasonable

times will be open for inspection by holders

of ADRs and us for the purpose of communicating

with holders in the interest of our

business or a matter relating to

the deposit agreement and (ii) facilities for

the delivery and receipt of ADRs.

Deposit, Transfer

and Withdrawal

The depositary has agreed that upon delivery

of our ordinary shares (or rights to receive our

ordinary shares from us or any registrar,

transfer agent, clearing

agency or other entity recording

ordinary share ownership or transactions

for us) to their custodian, which is currently

ING Bank N.V.,

and in accordance with the

procedures set forth in the deposit

agreement, the depositary will issue ADRs for delivery

at its designated transfer

office.

Upon surrender at the office of the depositary

of an ADR for the purpose of withdrawal of the deposited

securities represented by the ADSs

evidenced by such

ADR, and upon payment of the fees, governmental

charges and taxes

provided in the deposit agreement, and subject to

the terms and conditions of the deposit

agreement, the holder of such ADR will be entitled to

delivery to such holder or upon such holder’s order,

as permitted by applicable law,

of the amount of

deposited securities at the time represented

by the ADS evidenced by such ADR. The custodian

will ordinarily deliver such deposited securities

at or from its office.

The forwarding of deposited securities for

delivery at any other place specified by the

holder will be at the risk and expense

of the holder.

Dividends, Other Distributions and Rights

To the extent

practicable, the depositary will distribute

to you, in proportion to the number of ADSs you

hold, any U.S. dollars available

to the depositary resulting

from a cash dividend or other cash distribution

or the net proceeds of sales of any other distribution

that it receives in respect of the deposited securities.

Such a

distribution will be subject to (i) appropriate

adjustments for taxes

withheld, (ii) the impermissibility or impracticability

of such distribution with respect to certain

holders and (iii) the deduction of the depositary and/or

its agents’ fees and expenses in (1) converting

any foreign currency

to U.S. dollars by sale or in such other

manner as the depositary may determine, to the extent

that it determines that such conversion

may be made on a reasonable basis, (2) transferring

foreign

currency or U.S. dollars to the United

States by such means as the depositary

may determine, to the extent that

it determines that such transfer

may be made on a

reasonable basis, (3) obtaining any

approval or license of any governmental

authority required for such

conversion or transfer,

which is obtainable at a reasonable

cost and within a reasonable time and (4) making any

sale by public or private means in any

commercially reasonable manner.

To the extent

that the depositary

determines in its discretion that any

distribution under the terms of the deposit agreement is

not practicable with respect to any

holder, the depositary

may make

such distribution as it so deems practicable, including

the distribution of foreign currency,

securities or property (or appropriate

documents evidencing the right to

receive foreign currency,

securities or property) or the retention

thereof as deposited securities with respect to such

holder’s ADRs (without liability for interest

thereon or the investment thereof). For

a description of our dividend policies, see “ Description of Ordinary

Shares — Dividends” above.

If any distribution on deposited securities consists

of a dividend in, or free distribution of,

ordinary shares, the depositary will, to the extent

practicable, distribute

to you, in proportion to the number of ADSs you

hold, additional ADRs evidencing an aggregate number of

ADSs that represents the amount

of ordinary shares

received as such dividend or free distribution.

In lieu of delivering ADRs for fractional ADSs

in the event of any such dividend or free distribution,

the depositary

shall sell the number of ordinary shares represented

by the aggregate of such fractions and

distribute the net proceeds to ho

lders entitled thereto.

If we offer or cause to be offered

to holders of deposited securities any

rights to subscribe for additional shares

or rights of any nature, the depositary

will to the

extent practicable distribute

warrants or other instruments,

in its discretion, representing

rights to acquire additional ADRs in respect

of any rights that have been

made available to the depositary as

a result of a distribution on deposited securities, to

the extent that we timely furnish to

the depositary evidence satisfactory

to

the depositary that the depositary may lawfully

distribute the same. We have

no obligation to furnish such evidence,

and to the extent that we do not furnish such

evidence and the sales of rights are practicable,

the depositary will distribute any U.S.

dollars available to the depositary

from the net proceeds of sales of rights, as

in the case of cash, or,

to the extent that we do not furnish such

evidence and such sales cannot practicably

be accomplished by reason of the non-transferability

of

the rights, limited markets therefor,

their short duration, or otherwise, the depositary

will distribute nothing (and any rights

may lapse).

The depositary will not offer rights to

holders having an address in the U.S. unless

both the rights and the securities to which such rights relate

are either exempt

from registration under

the Securities Act with respect to a distribution

to all holders or are registered

under the provisions of the Securities Act. Notwithstanding

any terms of the deposit agreement to

the contrary,

we shall have no obligation to

prepare and file a registration

statement in respect of any

such rights.

Whenever the depositary shall receive any

distribution other than cash, ordinary shares

or rights in respect of the deposited securities, the depositary

will to the

extent practicable distribute

securities or property available to

the depositary resulting from such distribution

to the holders entitled thereto by

any means that the

depositary may deem equitable and practicable,

or, to

the extent that the depositary deems distribution

of such securities or property to not be equitable and

practicable, any U.S. dollars

available to the depositary from the net proceeds

of sales of such securities or property,

as in the case of cash.

Whenever we intend to distribute

a dividend payable at the election of the holders

of ordinary shares in cash or in additional shares,

we shall give notice thereof to

the depositary at least 30 days prior to

the proposed distribution stating

whether or not we wish such elective distribution

to be made available to ADR holders.

Upon receipt of notice indicating that we wish

such elective distribution to be made available

to ADR holders, the depositary shall consult

with us to determine, and

we shall assist the depositary in its determination,

whether it is lawful and reasonably practicable

to make such elective distribution

available to the ADR holders.

The depositary shall make such elective distribution

available to ADR holders only if (i) we shall

have timely requested that

the elective distribution is available to

ADR holders, (ii) the depositary shall have

determined that such distribution is reasonably

practicable and (iii) the depositary shall

have received satisfactory

documentation within the terms of the deposit

agreement including, without limitation, any

legal opinions of counsel in any applicable

jurisdiction that the

depositary in its reasonable discretion may

request, at our expense.

If the above conditions are not satisfied,

the depositary shall, to the extent permitted

by law,

distribute to the ADR holders, on the basis

of the same determination as is made in the local market

in respect of the ordinary shares for

which no election is made,

either (x) cash or (y) additional ADSs representing such

additional ordinary shares.

If the above conditions are satisfied, the

depositary shall establish a record

date

and establish procedures to

enable ADR holders to elect the receipt of the proposed

dividend in cash or in additional ADSs.

We shall assist the depositary

in

establishing such procedures

to the extent necessary.

Nothing herein shall obligate the depositary

to make available to

ADR holders a method to receive the

elective dividend in ordinary shares (rather

than ADSs).

There can be no assurance that ADR holders

generally,

or any holder in particular,

will be given the

opportunity to receive elective distributions

on the same terms and conditions as the holders of ordinary

shares.

If the depositary determines that any

distribution of property other than cash (including ordinary

shares or rights) on deposited securities is subject

to any tax

which the depositary or the custodian is obligated

to withhold, the depositary may dispose of all or a portion

of such property in such amounts and in such manner

as the depositary deems necessary and practicable

to pay such taxes, by

public or private sale, and the depositary will distribute

the net proceeds of any such sale

or the balance of any such property after

deduction of such taxes to

the holders entitled thereto.

2019 ING Group Annual Report on Form 20-F

21

Changes Affecting Deposited Securities

Pursuant to the terms of the deposit agreement,

the depositary may,

in its discretion, and will if we so reasonably request,

amend the ADRs or distribute additional

or amended ADRs (with or without calling for the exchange

of any ADRs) or cash, securities or property

on the record date set by the depositary

therefor to reflect

any change in par value, split-up, consolidation,

cancellation or other reclassification of deposited

securities, any share distribution

or any distribution other than

cash, ordinary shares or rights, which in each case

is not distributed to holders or

any cash, securities or property available

to the depositary in respect of the

deposited securities from (and the depositary

is authorized to surrender any deposited

securities to any person and, irrespective

of whether such deposited

securities are surrendered or otherwise cancelled by

operation of law,

rule, regulation or otherwise, to sell by public or private

sale any property received in

connection with) any recapitalization,

reorganization,

merger,

consolidation, liquidation, receivership,

bankruptcy or sale of all or substantially

all of our assets, and

to the extent that the depositary does

not so amend the ADRs or make a distribution

to holders to reflect any of the foregoin

g, or the net proceeds thereof,

whatever cash, securities or property

results from any of the foregoing

shall constitute deposited securities and

each ADS evidenced by an ADR shall automatically

represent its pro rata

interest in the deposited securities as then

constituted.

Promptly upon the occurrence of any of the aforementioned

changes affecting

deposited securities, we shall notify the

depositary in writing of such occurrence and as soon as practicable

after receipt of such notice, may

instruct the depositary

to give notice thereof,

at our expense, to holders in accordance

with the provisions of the deposit agreement. Upon

receipt of such instruction, the depositary

shall

give notice to the holders in accordance

with the terms of the deposit agreement, as soon

as reasonably practicable.

Record Dates

The depositary may,

after consultation with us if practicable,

fix a record date (which, to the extent

applicable, shall be as near as practicable

to any corresponding

record date set by us)

for the determination of the holders

who shall be responsible for the fee assessed

by the depositary for administration

of the ADR program

and for any expenses provided

in the deposit agreement as well as for the determination

of the holders who shall be entitled to receive

any distribution on or in

respect of deposited securities, to give instructions

for the exercise of any

voting rights, to receive any

notice or to act in respect of other matters

and only such

holders shall be so entitled or obligated.

Voting of Deposited Securities

Subject to the following sentence, as

soon as practicable after receipt of notice

of any meetings at which the holders

of ordinary shares are entitled to

vote, or of

solicitation of consents or proxies

from holders of ordinary shares

or other deposited securities, the depositary shall fix the ADS record

date in accordance with the

deposit agreement in respect of such meeting or solicitation

of consent or proxy.

The depositary shall, if we request in writing in a timely manner (the

depositary

having no obligation to take

any further action if the request shall not have

been received by the depositary at least

thirty (30) days’ prior to the date of such

vote

or meeting) and at our expense and provided

no legal prohibitions exist, distribute

to holders a notice stating:

(i)

such information as is contained

in such notice and any solicitation materials;

(ii)

that each holder on the record date

set by the depositary therefor will, subject

to any applicable provisions

of Dutch law,

be entitled to instruct

the depositary as to the exercise

of the voting rights, if any,

pertaining to the deposited securities represented

by the ADSs evidenced by such

holder’s ADRs; and

(iii)

the manner in which such instructions may be given,

including instructions to give a discretionary proxy

to a person designated by us.

Upon actual receipt by the ADR department of the depositary

of instructions of a holder on such record

date in the manner and on or before

the time established

by the depositary for such purpose, the depositary

shall endeavor,

insofar as practicable and permitted

under the provisions of,

or governing, deposited securities,

to vote or cause to be voted

the deposited securities represented by

such holder’s ADRs in accordance with such

instructions. The depositary will not itself exercise

any voting discretion in respect

of any deposited securities. There is no guarantee

that holders generally or any

holder in particular will receive the notice described

above with sufficient time to enable such holder

to return any voting instructions

to the depositary in a timely manner.

Notwithstanding anything contained

in the deposit agreement or any ADR, the depositary

may, to

the extent not prohibited by law

or regulations, or by the

requirements of the stock exchange

on which the ADSs are listed, in lieu of distribution

of the materials provided to the depositary

in connection with any meeting

of, or solicitation

of consents or proxies from, holders

of deposited securities, distribute to holders

of ADRs a notice that provides such holders

with, or otherwise

publicizes to such holders, instructions

on how to retrieve such materials or receive

such materials upon request

(

i.e

., by reference to a website

containing the

materials for retrieval

or a contact for requesting

copies of the materials).

ADR holders are strongly encouraged

to forward their voting instructions

as soon as possible.

Voting instructions will not be

deemed received until such time as

the ADR department responsible for proxies

and voting has received such instructions

notwithstanding that such instructions may

have been physically received

by

the depositary prior to such time.

Reports and Other Communications

We have delivered to

the depositary,

the custodian and any transfer

office a copy of all provisions of or governing

the ordinary shares and any other deposited

securities issued by us or any of our affiliates

and, promptly upon any change

thereto, we will deliver to the depositary,

the

custodian and any transfer

office, a

copy (in English or with an English translation)

of such provisions as so changed.

Amendment and Termination

of the Deposit Agreement

Subject to the provisions of the deposit agreement,

the ADRs and the deposit agreement may

at any time be amended by us and the depositary

without your

consent;

provided

that any amendment that imposes or increases

any fees or charges (other than

stock transfer or other taxes

and other governmental charges,

transfer or registration

fees, SWIFT,

cable, telex or facsimile transmission

costs, delivery costs or other such expenses),

or which otherwise prejudices any

substantial existing right

of yours, will take effect

30 days after notice of any such

amendment has been given to ADR holders. Every

holder of an ADR at the time

any amendment to the deposit agreement

so becomes effective will be deemed

by continuing to hold such ADRs to

consent and agree to such amendment and to

be bound by the deposit agreement as amended thereby.

In no event may any

amendment impair the right of any holder of ADRs to surrender

such ADRs and

receive the deposited securities represented

thereby,

except in order to

comply with mandatory provisions of applicable law.

Any amendments or supplements which (i) are reasonably

necessary (as agreed by us and the depositary) in order

for (a) the ADSs to be registered under

the

Securities Act or (b) the ADSs or our ordinary shares to be traded

solely in electronic book-entry form and (ii) do not

in either such case impose or increase any fees

or charges to be borne by holders of ADRs,

shall be deemed not to prejudice any substantial

rights of such holders. Notwithstanding

the foregoing, if any

governmental body or regulatory

body should adopt new laws, rules or regulations

which would require amendment or supplement

of the deposit agreement or

the form of ADR to ensure compliance therewith,

we and the depositary may amend or supplement

the deposit agreement and the form of ADR

at any time in

accordance with such changed laws, rules

or regulations. Such amendment or supplement to

the deposit agreement in such circumstances

may become effective

before a notice of such amendment or supplement

is given to holders of ADRs or within any

other period of time as required for

compliance. Notice of any

amendment to the deposit agreement or form of

ADR shall not need to describe in detail the specific amendments

effectuated thereby,

and failure to describe the

specific amendments in any such notice shall not render

such notice invalid,

provided, however,

that, in each such case, the notice given to the holders

identifies a

means for holders to retrieve

or receive the text of such amendment (

i.e

., upon retrieval from the SEC’s,

the depositary’s or our website

or upon request from the

depositary).

The depositary may,

and shall at our written direction, terminate

the deposit agreement and the ADRs by mailing notice of such

termination to the ADR holders at

least 30 days prior to the date

fixed in such notice for such termination; provided,

however,

if the depositary shall have (i) resigned as depositary,

notice of such

termination by the depositary shall not be provided

to ADR holders unless a successor depositary shall

not be operating under the deposit agreement

within 60

days of the date of such resignation,

or (ii) been removed as depositary,

notice of such termination by the depositary shall not

be provided to ADR holders unless

a

successor depositary shall not be operating

under the deposit agreement on the 60

th

day after our notice of removal

was first provided

to the depositary. After the

date so fixed for termination,

the depositary and its agents will perform no further

acts under the deposit agreement and the ADRs,

except to receive and hold

(or

sell) distributions on deposited securities and deliver

deposited securities being withdrawn.

As soon as practicable after the expiration

of 6 months from the date

so fixed for termination,

the depositary shall sell the deposited securities and shall thereafter

(as long as it may lawfully do so) hold in a segregated

or unsegregated

account the net proceeds of such sales,

together with any other cash then held by

it under the deposit agreement, without liability for interest,

in trust for the pro

rata benefit of the holders of

ADRs not theretofore surrendered.

After making such sale, the depositary shall be discharged

from all obligations in respect

of the

deposit agreement and the ADRs, except

to account for such net proceeds

and other cash.

After the date so fixed for terminat

ion, we shall be discharged from all

obligations under the deposit agreement

except for our obligations

to the depositary and its agents.

In the event that the depositary resigns,

is removed or is otherwise substituted, and

a successor thereto is appointed, the s

uccessor depositary will promptly mail

you notice of such appointment.

Liability of Holder for Taxes

If any tax or other governmental

charges (including any penalties and/or

interest) become payable

by the custodian or the depositary with respect

to any ADR, any

deposited securities represented

by the ADSs evidenced thereby or any distribution

thereon, such tax or other governmental

charge will be paid by the holder

thereof to the depositary and by holding or

having held an ADR the holder and all prior holders, jointly

and severally,

agree to indemnify,

defend and hold harmless

each of the depositary and its agents in respect thereof.

The depositary may refuse to

effect any registration,

registration of transfer

or any split-up or combination

2019 ING Group Annual Report on Form 20-F

22

of such ADR or any withdrawal of deposited

securities underlying such ADR until such payment is

made. The depositary may also deduct from

any dividends or

other distributions or may sell by public or

private sale for your account

any part or all of the deposited securities underlying

such ADR and may apply such

dividends, distributions or the proceeds of any

such sale to pay any such tax

or other governmental charges, and

the holder of such ADR shall remain liable for any

deficiency, and

the depositary shall reduce the number of ADSs evidenced thereby

to reflect any such sales of shares.

In connection with any distribution to

holders, we will remit to the appropriate

governmental authority or agency all

amounts (if any) required to be withheld

and owing to such authority or agency by

us; and the depositary and the custodian will remit to

the appropriate governmental

authority or agency all amounts (if any) required

to be withheld and owing to

such authority or agency by the depositary or the custodian.

If the depositary determines that any

distribution in property other than cash (including

shares or

rights) on deposited securities is subject to any

tax that the depositary or the custodian

is obligated to withhold, the depositary

may dispose of all or a portion of

such property in such

amounts and in such manner as the depositary deems necessary and practicable

to pay such taxes,

by public or private sale, and the

depositary shall distribute the net proceeds

of any such sale or the balance of any such property

after deduction of such taxes

to the holders entitled thereto. Each

holder of an ADR or an interest therein

agrees to indemnify the depositary,

us, the custodian and any of their respective officers,

directors, employees, agents

and

affiliates against, and

hold each of them harmless from, any claims by any

governmental authority with respect

to taxes, additions to tax,

penalties or interest

arising out of any refund of taxes,

reduced rate of withholding at

source or other tax benefit obtained, which

obligations shall survive any

transfer or surrender of

ADSs or the termination of the deposit agreement.

Transfer

of American Depositary Receipts

The ADRs are transferable

on the books of the depositary,

provided

that the depositary may close the transfer

books or any portion thereof at any

time or from

time to time when deemed expedient by it, and

may also close the issuance book portion of the transfer

books when reasonably requested

by us solely in order to

enable us to comply with applicable law.

As a condition precedent to the issue,

registration, registration

of transfer,

split-up or combination of any

ADR, the

delivery of any distribution thereon, or withdrawal

of any deposited securities, the depositary,

we or the custodian may require

(i) payment of a sum sufficient to

reimburse it for any tax

or other governmental charge and

any stock transfer

or registration fee with respect

thereto (including any

such tax or charge and fee with

respect to ordinary shares being deposited

or withdrawn) and payment of any

applicable fees payable by the holders

of ADRs under the deposit agreement,

(ii)

proof of the identity of any signatory

and genuineness of any signature,

(iii) information as to citizenship

or residence, exchange control

approval, beneficial

ownership of any securities, compliance with

applicable law,

regulations, provisions of or governing

the deposited securities and terms of the deposit agreement

and the ADR or other information as it may

deem necessary or proper,

and (iv) compliance with such regulations as the depositary

may establish consistent

with

the deposit agreement. The issuance, transfer,

combination or split-up of ADRs or the withdrawal

of deposited securities may be suspended, generally

or in

particular instances, during any period when the

transfer books of the depositary

or the books of ING or its agent for the registration

and transfer of ordinary

shares are closed or if any such action is

deemed advisable by the depositary.

Limitations on Liability

Neither the depositary nor we nor any of our respective

directors, officers, employees,

agents or affiliates will be liable to

you if by reason of any provision

of any

present or future law,

rule, regulation, fiat, order or decree

of the United States, The Netherlands

or any other country or jurisdiction, or of any

other governmental

or regulatory authority or securities exchange

or market or automated

quotation system,

or by reason of any provision of or governing

any deposited securities or

any provision of our charter,

or by reason of any act of God, war,

terrorism, nationalization,

expropriation, currency restrictions,

work stoppage, strike, civil unrest,

revolutions, rebellions, explosions,

computer failure or circumstance

beyond any such party’s

direct and immediate control, the depositary,

we or any of our

respective directors, employees,

agents or affiliates shall be prevented

or delayed in performing, or shall be subject

to any civil or criminal penalty in connection

with, any act which by the terms of the deposit agreement

or the ADRs it is provided shall be done or performed by

it or them (including, without limitation, voting

pursuant to the terms of the ADRs); nor will the depositary,

we or any of our respective directors,

employees, agents or affiliates

incur any liability to you by reason

of any exercise of,

or failure to exercise,

any discretion provided

for under the deposit agreement or any

ADR (including, without limitation, any

failure to

determine that any distribution or

action may be lawful or reasonably practicable),

or for any action or inaction by it in reliance upon

the advice of or information

from legal counsel, accountants,

any person presenting ordinary

shares for deposit, any ADR holder,

or any other person believed by

it to be competent to give

such advice or information.

Neither we nor the depositary nor any of our respective

directors, officers, employees,

agents or affiliates assume any

obligation or be subject to any

liability

except to perform its obligations

to the extent they are specifically provided

under the deposit agreement or the ADRs without gross

negligence or willful

misconduct. We, the depositary

and its agents and may rely and shall be protected

in acting upon any written notice, request,

direction, instruction or document

believed to be genuine and to have

been signed, presented or given by the

proper party or parties.

The depositary and its agents have no

obligation to appear in, prosecute

or defend any action, suit or other proceeding

in respect of any deposited securities or the

ADRs, and we and our agents have no

obligation to appear in, prosecute

or defend any action, suit or other proceeding

in respect of any deposited securities or the

ADRs, which in our opinion may involve

us in expense or liability,

unless indemnity satisfactory to us

against all expense (including fees and

disbursements of

counsel) and liability is furnished as often as may be required.

The depositary shall not be liable for the acts or omissions made by,

or the insolvency of, any

securities depository,

clearing agency or settlement system,

and shall

not have any liability for the

price received in connection with any sale of securities,

the timing thereof or any delay in action

or omission to act, nor shall it be

responsible for any error

or delay in action, omission to act, default

or negligence on the part of the party so retained in connection

with any such sale or proposed

sale.

The depositary shall be under no obligation to

inform registered holders

of ADRs or any other holders of an interest

in any ADSs about the requirements of

the laws, rules or regulations or any

changes therein or thereto of any country

or jurisdiction or of any governmental

or regulatory authority or any

securities

exchange or market

or automated quotation system.

The depositary and its agents will not be responsible

for any failure to carry out

any instructions to vote any

of

the Deposited Securities, for the manner in which any

such vote is cast or for the effect

of any such vote. The depositary

may rely upon instructions from us

or our

counsel in respect of any approval

or license required for any currency

conversion, transfer

or distribution. The depositary and its agents

may own and deal in any

class of our securities and securities or our affiliates

and in ADRs. Notwithstanding anything to

the contrary set forth in the deposit

agreement or an ADR, the

depositary and its agents may fully respond

to any and all demands or requests for

information maintained by or

on its behalf in connection with the deposit

agreement, any ADR holder or holders,

any ADR or ADRs or otherwise related thereto

to the extent such information

is requested or required

by or pursuant to any

lawful authority,

including without limitation laws, rules, regulations,

administrative or judicial process,

banking, securities or other regulators.

None of us, the depositary or the custodian shall be liable for

the failure by any registered

holder or beneficial owner of ADRs to obtain the benefits

of credits or

refunds of non-U.S. tax paid against

such holder's or beneficial owner's income tax liability.

Neither we nor the depositary shall incur any liability

for any tax or tax

consequences that may be incurred by

registered holders or beneficial owners

of ADRs on account of their ownership

or disposition

of the ADRs or ADSs.

The depositary shall not incur any liability for

the content of any information

submitted to it by or on our behalf for distribution

to the ADR holders or for any

inaccuracy of any translation

thereof, for any

investment risk associated

with acquiring an interest in the deposited

securities, for the validity or worth of the

deposited securities, for the credit-worthiness

of any third party,

for allowing any rights to lapse upon

the terms of the deposit agreement or for the failure

or

timeliness of any notice from us.

The depositary shall not be liable for any acts or omissions

made by a successor depositary whether in connection with a

previous

act or omission of the depositary or in connection with any

matter arising wholly after the removal

or resignation of the depositary,

unless a liability is directly

caused by the previous gross negligence

or willful misconduct of the depositary or its directors,

officers, employees, agents

or affiliates acting in their capacities as

such under the deposit agreement.

Neither we nor the depositary nor any of our respective

agents shall be liable to registered

holders of ADRs or beneficial owners of interests

in ADSs for any

indirect, special, punitive or consequential

damages (including, without limitation, legal fees

and expenses) or lost profits, in each

case of any form incurred by any

person or entity,

whether or not foreseeable and regardless

of the type of action in which such a claim may be brought.

The depositary shall not be responsible for,

and shall incur no liability in connection with or arising from any

act or omission to act on the part of the custodian

except to the extent that

(i) such custodian was not us or one of our affiliates

when such act or omission occurred and (ii) a holder has

incurred liability directly as a

result of the custodian having (a) committed

fraud or willful misconduct in the provision

of custodial services to the depositary or (b) failed

to use reasonable care

in the provision of custodial services to the depositary

as determined in accordance with the standards

prevailing in the jurisdiction in which the custodian

is

located. As long as we or one of our affiliates

is serving as the custodian with respect to the deposit

agreement we shall be solely liable for each

and any act or

failure to act on the part of the custodian.

No disclaimer of liability under the Securities Act of 1933 or the Securities Exchange

Act of 1934, to the extent applicable,

is intended by any provision of the

Deposit Agreement.

Governing Law,

Submission to Jurisdiction and Waiver

of Right to Trial by Jury

The deposit agreement is governed by and

construed in accordance with the laws of the

State of New York.

We have irrevocably

agreed that any legal suit, action

or proceeding against us brought

by the depositary or any holder,

arising out of or based upon the deposit

agreement or the transactions contemplated

thereby,

may be instituted in any state

or federal court in New York,

New York, an

d

irrevocably waive any

objection

which we may now or hereafter have

to the laying of venue of any such

proceeding, and irrevocably submit to

the non-exclusive jurisdiction of such

courts in any

such suit, action or proceeding. We have

also irrevocably agreed that any

legal suit, action or proceeding against

the depositary brought by us, arising out of or

based upon the deposit agreement or the transactions

contemplated thereby,

may only be instituted in a state

or federal court in New York,

New York.

Each holder or beneficial owner of ADSs and each holder of

interests therein, has irrevocably

agreed that any legal suit, action

or proceeding against or involving

us

or the depositary,

arising out of or based on the deposit agreement, the ADSs, or the transactions

contemplated thereby,

may only be instituted in a state

or

2019 ING Group Annual Report on Form 20-F

23

federal court in New York,

New York, and

each such party has irrevocably waived

any objection which it may now or hereafter

have to the laying of venue

of any

such proceeding, and irrevocably submits

to the exclusive jurisdiction of such

courts in any such suit, action or proceeding.

Each party to the deposit agreement, including

each holder and beneficial owner and/or holder

of interests in ADRs, irrevocably

waives, to the fullest extent

permitted by applicable law,

any right it may have

to a trial by jury in any suit, action or proceeding against

the depositary and/or us directly or indirectly

arising out

of or relating to the ordinary shares or

other deposited securities, the ADSs or the ADRs, the deposit agreement

or any transaction contemplated

therein, or the

breach thereof, whether

based on contract, tort, common law

or any other theory.

Appointment

In the deposit agreement, each registered

holder of ADRs and each person holding an interest

in ADSs, upon acceptance of any ADSs (or any

interest therein)

issued in accordance with the terms and conditions

of the deposit agreement shall be deemed for all purposes

to:

(a) be a party to and bound by the terms of the deposit agreement

and the applicable ADR(s), and

(b) appoint the depositary its attorney

-in-fact, with full power to delegate,

to act on its behalf and to take

any and all actions contemplated in

the deposit

agreement and the applicable ADR(s), to adopt

any and all procedures necessary to comply

with applicable law and to take

such action as the depositary in its sole

discretion may deem necessary or appropriate

to carry out the purposes of the deposit agreement and the applicable

ADR(s), the taking of such actions to be the

conclusive determinant of the necessity

and appropriateness thereof.

Document

2019 ING Group Annual Report on Form 20-F

1

Exhibit 8

Principal subsidiaries

The principal subsidiaries of ING Groep N.V.

and their statutory place of incorporation and primary country of

operation are as follows:

Principal subsidiaries

Proportion of ownership and

interest held

by the Group

2019

2018

Subsidiary

Statutory place of Incorporation

Country of operation

ING Bank N.V.

Amsterdam

the Netherlands

100%

100%

Bank Mendes Gans N.V.

Amsterdam

the Netherlands

100%

100%

ING Belgium S.A./N.V.

Brussels

Belgium

100%

100%

ING Luxembourg S.A.

Luxembourg City

Luxembourg

100%

100%

ING-DiBa AG

Frankfurt am Main

Germany

100%

100%

ING Bank Slaski S.A.

1

Katowice

Poland

75%

75%

ING Financial Holdings Corporation

Delaware

United States of America

100%

100%

ING Bank A.S.

Istanbul

Turkey

100%

100%

ING Bank (Australia) Ltd

Sydney

Australia

100%

100%

ING Commercial Finance B.V.

Amsterdam

the Netherlands

100%

100%

ING Groenbank N.V.

Amsterdam

the Netherlands

100%

100%

1 The shares of the non-controlling interest stake of 25% are listed on the Warsaw

Stock Exchange, for summarised financial information we refer

to ‘Note 35

‘Information on geographical areas’.

Document

2019 ING Group Annual Report on Form 20-F

1

Exhibit 12.1

CERTIFICATION

I, Ralph Hamers, certify that:

1.

I have reviewed this Annual Report on Form 20-F of ING Groep N.V.;

2.

Based on my knowledge, this report does not contain any untrue statement

of a material fact or omit to state

a material fact necessary to make the statements

made, in light of the circumstances under which such

statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report,

fairly present in all material respects the financial condition, results of operations and cash flows of the

company as of,

and for,

the periods presented in this report;

4.

The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure

controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over

financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be

designed under our supervision, to ensure that material information relating to the company,

including its

consolidated subsidiaries, is made known to us by others within those entities, particularly during the period

in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting

to be designed under our supervision, 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;

(c)

Evaluated the effectiveness

of the company’s disclosure controls and procedures

and presented in this report

our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period

covered by this report based on such evaluation;

(d)

Disclosed in this report any change in the company’s internal control over

financial reporting that occurred

during the period covered by the annual report that has materially affected, or is reasonably likely to

materially affect, the company’s

internal control over financial reporting; and

5.

The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal

control over financial reporting, to the company’s auditors

and the audit committee of the company’s board

of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial

reporting which are reasonably likely to adversely affect

the company’s ability to record, process, summarize

and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role

in the company’s internal control

over financial reporting.

Date:

March 2, 2020

/s/ Ralph Hamers

Ralph Hamers

Chief Executive Officer

Document

2019 ING Group Annual Report on Form 20-F

1

Exhibit 12.2

CERTIFICATION

I, Tanate

Phutrakul, certify that:

1.

I have reviewed this Annual Report on Form 20-F of ING Groep N.V.;

2.

Based on my knowledge, this report does not contain any untrue statement

of a material fact or omit to state

a material fact necessary to make the statements

made, in light of the circumstances under which such

statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report,

fairly present in all material respects the financial condition, results of operations and cash flows of the

company as of,

and for,

the periods presented in this report;

4.

The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure

controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over

financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be

designed under our supervision, to ensure that material information relating to the company,

including its

consolidated subsidiaries, is made known to us by others within those entities, particularly during the period

in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting

to be designed under our supervision, 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;

(c)

Evaluated the effectiveness

of the company’s disclosure controls and procedures

and presented in this report

our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period

covered by this report based on such evaluation;

(d)

Disclosed in this report any change in the company’s internal control over

financial reporting that occurred

during the period covered by the annual report that has materially affected, or is reasonably likely to

materially affect, the company’s

internal control over financial reporting; and

5.

The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal

control over financial reporting, to the company’s auditors

and the audit committee of the company’s board

of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial

reporting which are reasonably likely to adversely affect

the company’s ability to record, process, summarize

and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role

in the company’s internal control

over financial reporting.

Date:

March 2, 2020

/s/ Tanate

Phutrakul

Tanate

Phutrakul

Chief Financial Officer

Document

2019 ING Group Annual Report on Form 20-F

1

Exhibit 13.1

Certification

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350,

Chapter 63 of Title 18, United States Code)

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350,

chapter 63 of title 18, United States Code), the undersigned officer of ING Groep N.V.,

a public limited company

incorporated under the laws of the Netherlands (the “Company”), hereby certifies, to such officer’s knowledge, that:

The Annual Report on Form 20-F for the year ended December 31, 2019 (the “Report”) of the Company

fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information

contained in the Report fairly presents, in all material respects, the financial condition and results of operations of

the Company.

Dated:

March 2, 2020

/s/ Ralph Hamers

………………………………

Name:

Ralph Hamers

Title:

Chairman of the Executive Board

(Principal Executive Officer)

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of

2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part

of the Report or as a separate disclosure document.

A signed original of this written statement required by Section 906 has been provided to ING Groep N.V.

and will be retained by ING Groep N.V.

and furnished to the Securities and Exchange Commissions or its staff upon

request.

Document

2019 ING Group Annual Report on Form 20-F

1

Exhibit 13.2

Certification

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350,

chapter 63 of title 18, United States Code), the undersigned officer of ING Groep N.V.,

a public limited company

incorporated under the laws of the Netherlands (the “Company”), hereby certifies, to such officer’s knowledge, that:

The Annual Report on Form 20-F for the year ended December 31, 2019 (the “Report”) of the Company

fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information

contained in the Report fairly presents, in all material respects, the financial condition and results of operations of

the Company.

Dated:

March 2, 2020

/s/ Tanate

Phutrakul

_________________________

Name:

Tanate

Phutrakul

Title:

Chief Financial Officer

(Principal Financial Officer)

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of

2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part

of the Report or as a separate disclosure document.

A signed original of this written statement required by Section 906 has been provided to ING Groep N.V.

and will be retained by ING Groep N.V.

and furnished to the Securities and Exchange Commissions or its staff upon

request.

Document

2019 ING Group Annual Report on Form 20-F

1

Exhibit 15.1

Consent of Independent Registered Public Accounting Firm

The Supervisory Board

ING Groep N.V.:

We consent to the incorporation by

reference in the registration

statements (Nos. 333-92220, 333-81564, 333-

108833, 333-125075, 333-137354, 333-149631, 333-158154,

333-158155, 333-165591, 333-168020, 333-172919,

333-172920, 333-172921 and 333-215535) on Form S-8 and in the registration statement (No. 333-227391) on Form

F-3 of ING Groep N.V.

of our reports dated March 2, 2020, with respect to the consolidated statements of financial

position of ING Groep N.V.

as of December 31, 2019 and 2018, the related consolidated statements of profit or loss,

comprehensive income, changes in equity and cash flows for each of the years in the three-year period ended

December 31, 2019, and the related notes and specific disclosures described in Note 1 of the consolidated financial

statements as being part of the consolidated financial statements, and the effectiveness

of internal control over

financial reporting as of December 31, 2019, which reports appear in the December 31,

2019 annual report on Form

20-F of ING Groep N.V.

Our report on the consolidated financial statements refers

to changes in accounting principles due to: the adoption

of International Financial Reporting Standard 16, ‘

Leases

’ in 2019, the early adoption of the amendments to IAS 39

‘

Financial Instruments: Recognition and Measurement

’ and IFRS 7 ‘

Financial Instruments: Disclosures

’ in relation to

the Interest Rate Benchmark Reform

in 2019, and the adoption of International Financial Reporting Standard 9,

‘

Financial Instruments

’ in 2018.

/s/ KPMG Accountants N.V.

Amstelveen, the Netherlands

March 6, 2020