Document

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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

“$”, “US$” 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.

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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.

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

CAUTIONARY STATEMENT

WITH RESPECT TO

FORWARD

-LOOKING

STATEMENTS

Certain

the

statements

contained

herein

are

not

historical

facts,

including,

without

limitation,

certain

statements

made

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

general

economic

conditions,

particular

economic

conditions

ING’s

core

markets;

●

changes affecting interest rate levels;

●

changes in performance of financial markets,

including developing markets;

●

changes

the

fiscal position

and

the

future

economic

performance

the

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

our

principal

markets;

changes

conditions

the

credit

and

capital

markets

generally,

including

changes

borrower

and

counterparty

creditworthiness;

●

changes

laws

and

regulations,

including

those

governing

financial services

financial

institutions, and the interpretation and application thereof;

●

changes in compliance obligations;

●

geopolitical

risks,

political

instability

and

policies

and

actions

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

business,

natural

disasters

outbreaks

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

issued securities and credit market exposure;

●

changes in investor and customer behavior;

●

changes

the

availability

of,

and

costs

associated

with,

sources

liquidity

such

interbank funding;

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

●

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

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.

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

PART

Item

Identity

of Directors,

Senior

Management

And Advisors

Not Applicable.

Item

Offer

Statistics

and Expected

Timetable

Not Applicable.

Item

Key Information

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

2018

2017

2016

2015

In millions except amounts per share

US$

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

441

–76

Net result attributable to Non-controlling

interests

107

108

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

3,891.7

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.

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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

2018

2017

2016

2015

In billions except amounts per share or otherwise

indicated

US$

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

3,890.6

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

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.

Capitalization and indebtedness

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

Reasons for the offer

and use of proceeds

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

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

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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

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

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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Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

◾

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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2019 ING Group Annual Report on Form 20-F

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

(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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2019 ING Group Annual Report on Form 20-F

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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2019 ING Group Annual Report on Form 20-F

◾

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

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

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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2019 ING Group Annual Report on Form 20-F

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

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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2019 ING Group Annual Report on Form 20-F

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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2019 ING Group Annual Report on Form 20-F

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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2019 ING Group Annual Report on Form 20-F

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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2019 ING Group Annual Report on Form 20-F

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

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

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,

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

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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2019 ING Group Annual Report on Form 20-F

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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2019 ING Group Annual Report on Form 20-F

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

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

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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Financial Statements

2019 ING Group Annual Report on Form 20-F

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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2019 ING Group Annual Report on Form 20-F

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

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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2019 ING Group Annual Report on Form 20-F

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

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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2019 ING Group Annual Report on Form 20-F

Item

Information

on the

Company

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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2019 ING Group Annual Report on Form 20-F

Our strategy

and how we create

value

ING’s

Think

Forward

strategy

continued

guide

during

2019.

was

a year

rapid

transformation

the

competitive

landscape,

regu

lation,

customer

preferences

and

the

economic

context.

was

marked

well

the

growing

threat

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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2019 ING Group Annual Report on Form 20-F

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

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.

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.

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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2019 ING Group Annual Report on Form 20-F

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

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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2019 ING Group Annual Report on Form 20-F

3. Increase the pace of innovatio

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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2019 ING Group Annual Report on Form 20-F

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.

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.

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

achieved

good

results

2019

with

solid

profitability

and

healthy

growth

both

lending

and

deposits.

Net

core

lending

grew

€17.2

billion

over

the

year,

with

net

inflow

customer

deposit

growing

€23.4

billion.

added

than

830,000

primary

customers,

which

shows

that

our

customer

experience

continues

differentiating

and

drives

growth.

With

digital

disruption

changing

customer

expectations

we’re

looking

for

new

ways

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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Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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 -

check their balances or to make transfers between accounts

◾

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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Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

◾

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.

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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Financial Statements

2019 ING Group Annual Report on Form 20-F

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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2019 ING Group Annual Report on Form 20-F

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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Financial Statements

2019 ING Group Annual Report on Form 20-F

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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2019 ING Group Annual Report on Form 20-F

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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Financial Statements

2019 ING Group Annual Report on Form 20-F

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

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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2019 ING Group Annual Report on Form 20-F

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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2019 ING Group Annual Report on Form 20-F

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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2019 ING Group Annual Report on Form 20-F

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

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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2019 ING Group Annual Report on Form 20-F

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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2019 ING Group Annual Report on Form 20-F

The report’s centrepiece, the Climate Alignment Dashboard (CAD), discloses quantitative results

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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2019 ING Group Annual Report on Form 20-F

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.

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

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

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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2019 ING Group Annual Report on Form 20-F

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.

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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2019 ING Group Annual Report on Form 20-F

◾

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

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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2019 ING Group Annual Report on Form 20-F

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.

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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2019 ING Group Annual Report on Form 20-F

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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2019 ING Group Annual Report on Form 20-F

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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2019 ING Group Annual Report on Form 20-F

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

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

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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2019 ING Group Annual Report on Form 20-F

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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2019 ING Group Annual Report on Form 20-F

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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2019 ING Group Annual Report on Form 20-F

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

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

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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2019 ING Group Annual Report on Form 20-F

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

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

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

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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2019 ING Group Annual Report on Form 20-F

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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2019 ING Group Annual Report on Form 20-F

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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Financial Statements

2019 ING Group Annual Report on Form 20-F

◾

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

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.

will start a dialogue in

2020 to dive into the outcomes and root causes of the behavioural patterns

observed.

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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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Financial Statements

2019 ING Group Annual Report on Form 20-F

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.”

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

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.

Contents

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Financial Statements

2019 ING Group Annual Report on Form 20-F

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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Financial Statements

2019 ING Group Annual Report on Form 20-F

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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Financial Statements

2019 ING Group Annual Report on Form 20-F

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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Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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

108

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

-775

-/- Adjustment of the EU 'IAS 39 carve-out'

-878

559

-/- Insurance Other

-52

Underlying net result

4,781

5,389

4,957

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Financial Statements

2019 ING Group Annual Report on Form 20-F

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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2019 ING Group Annual Report on Form 20-F

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.

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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

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

186

-53

364

532

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

Underlying net result

1,646

455

627

619

1,352

4,781

Special items

Adjustment of the EU 'IAS 39 carve-out'

-878

Net result Banking

1,646

455

627

619

474

3,903

Net result Insurance

Other

Net result from continuing operations

3,903

Net result IFRS-IASB

3,903

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

1 January to 31 December 2018

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

3,749

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

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

2,028

Non-controlling interests

108

Underlying net result

1,942

390

646

652

1,877

–119

5,389

Special items

–775

Adjustment of the EU 'IAS 39 carve-out'

Net result Banking

1,942

390

646

652

1,935

–894

4,672

Net result Insurance

Other

Net result from continuing operations

4,761

Net result IFRS-IASB

4,761

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

104

–10

284

282

676

Total underlying

expenditure

2,275

1,688

1,022

2,203

3,026

291

10,505

Underlying result before taxatio

2,455

785

869

825

2,634

–369

7,199

Taxation

615

296

241

188

832

–13

2,160

Non-controlling interests

–2

Underlying net result

1,839

491

625

569

1,788

–356

4,957

Special items

Adjustment of the EU 'IAS 39 carve-out'

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

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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

approximately 25 basis points, compared with 11 basis points of average customer lending in 2018.

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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.

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

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.

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

RETAIL NETHERLANDS

Amounts in millions of euros

2019

2018

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

–41

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

Underlying net result

1,646

1,942

1,839

Net result

1,646

1,942

1,839

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

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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

–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

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.

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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

–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

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

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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

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

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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

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.

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

WHOLESALE BANKING

Amounts in millions of euros

2019

2018

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

Underlying net result

1,352

1,877

1,788

Adjustment of the EU 'IAS 39 carve-out'

–878

559

Net result

474

1,935

2,347

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.

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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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Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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.

Liquidity

and capital

resource

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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Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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

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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Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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:

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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

4.25%

2017

23 June 2032

146

1.15%

2017

14 June 2029

1.10%

2017

31 May 2027

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

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

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

3.920%

2019

23 January 2029

2.125%

2019

10 January 2026

1018

3.399%

2018

28 December 2030

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

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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

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

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

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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”.

Research

and development,

patents

and licenses,

etc.

Not applicable.

Trend

information

For information regarding

trend information, see Item 5.A of this Form 20-F.

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”.

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.

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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

1,780

14,396

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

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.

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

Item 6. Directors, Senior Management and Employees

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

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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

and 12

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

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.

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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.

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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.,

ounder and consultant of

Strategic Vitality Ltd and non-executive

chairman of Athla Capital Management Ltd.

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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.

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

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

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

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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Financial Statements

2019 ING Group Annual Report on Form 20-F

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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2019 ING Group Annual Report on Form 20-F

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

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.

(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.

The fourth EU Capital Requirements

Directive 2013/36/EU

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2019 ING Group Annual Report on Form 20-F

100

Compensation

Remuneration

report

Our view

on remuneration

FOR INFORMATION

ONLY

ING’s

remuneration

approach

designed

attract,

motivate

and

retain

leaders

and

qualified

staff

who

have

the

skills,

abilities,

values

and

behaviours

needed

achieve

our

strategy.

aims

ensure

offer

well

-balanced

remuneration

within

our

risk

appetite,

promoting

effective

risk

management.

the

same

time,

take

into

account

our

responsibility

our

customers,

society

and

other

stakeholders,

whose

trust

– quite

simply

– is

our

licence

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

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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2019 ING Group Annual Report on Form 20-F

101

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.

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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102

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

103

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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104

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.

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.

The higher ratios compared to 2018,

is due to fact that no variable remuneration was granted over

performance year 2018.

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).

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.

Total direct

compensation comprises fixed base

salary and variable remuneration, excluding benefits such as pension

arrangements, and allowances.

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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2019 ING Group Annual Report on Form 20-F

107

FY 2019

FY 2019 vs FY 2018

FY 2018 vs FY 2017

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)

Hans Wijers

202

9.2%

340.5%

Hermann-Josef Lamberti

141

1.4%

-1.4%

-5.4%

34.2%

37%

Jan-Peter Balkenende

200%

Henk Breukink

-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

1.9%

-7%

23.9%

73.6%

Margarate Haase

55.6%

Mike Rees

Robert Reibestein

136

-1.4%

1.5%

-1.4%

50%

-2.1%

Herna Verhagen

Company’s performance

5, 6

Retail primary relationships (in mln)

13.3

10%

14%

Profit before Tax

ING Group (continuing operations) (in mln)

6,834

-6%

23%

-4%

66%

Underlying Return on Equity

9.4%

-2%

Average employee remuneration

Average

fixed and annual variable remuneration

-1.1%

The remuneration of the Executive Board consist of base salary and variable remuneration (total direct compensation).

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.

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.

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.

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.

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.

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

108

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)

hurdle for variable pay

◾

Underlying cost/income ratio

◾

Common Equity Tier 1 ratio (SREP)

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.

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

109

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:

Contents

Additional Information

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

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

from top management, more FTEs working in

Contents

Additional Information

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

Amount

Number of

Amount

Number of

Ralph Hamers (CEO)

Base salary

1,750,000

1,713,000

Variable remuneration

(fully in shares)¹

266,000

25,726

293,000

18,547

Tanate

Phutrakul (CFO)

Base salary

831,100

Variable remuneration

(fully in shares)¹

141,400

13,675

Koos Timmermans (CFO)

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

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

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.

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.

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.

Contents

Additional Information

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)

2019

2018

2017

Ralph Hamers

23,000

26,000

30,000

Tanate

Phutrakul

16,000

–

Koos Timmermans

15,000

26,000

19,000

Steven van Rijswijk

23,000

26,000

19,000

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).

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.

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

2018

2017

Ralph Hamers

521,000

561,000

624,000

Tanate

Phutrakul

235,000

–

Koos Timmermans

231,000

408,000

290,000

Steven van Rijswijk

367,000

369,000

274,000

The 2019 emoluments reflect the partial

year as an Executive Board member for Tanate

Phutrakul.

The 2017 emoluments for Koos Timmermans and Steven van Rijswijk reflect the partial

year as an Executive Board

member.

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.

Contents

Additional Information

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

Koos

Timmermans

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

50,000

15,000

26,000

46,000

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.

The 2019 emoluments reflect the partial

year as an Executive Board member for Tanate

Phutrakul.

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.

Contents

Additional Information

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

2.90

19 March 2009

19 March 2012

19 March 2019

22,124

7.35

17 March 2010

17 March 2013

17 March 2020

Tanate

Phutrakul

4,163

2.90

19 March 2009

19 March 2012

19 March 2019

11,062

7.35

17 March 2010

17 March 2013

17 March 2020

Steven van Rijswijk

1,688

2.90

19 March 2009

19 March 2012

18 March 2019

11,658

2.90

19 March 2009

19 March 2012

18 March 2019

2,318

7.35

17 March 2010

17 March 2013

16 March 2020

10,694

7.35

17 March 2010

17 March 2013

17 March 2020

Contents

Additional Information

Financial Statements

Shares vested for Executive Board members during 2019

2019 ING Group Annual Report on Form 20-F

115

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

Grant date

Vesting date

End date of

retention period

No. of shares

granted

No. of shares

vested

Vesting price in

euros

No. of unvested

shares remaining

Ralph Hamers

LSPP

11 May 2016

11 May 2019

11 May 2021

28,404

5,682

10.44

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

LSPP Units

27 March 2015

27 March 2019

N/A

6,915

922

10.55

LSPP Units

25 March 2016

27 March 2019

N/A

7,987

1,065

10.55

1,065

LSPP Units

27 March 2017

27 March 2019

N/A

6,032

482

10.55

1,931

LSPP Units

27 March 2018

27 March 2019

N/A

4,972

2,983

10.55

1,989

LSPP

27 March 2019

27 March 2020

2,837

1,702

10.55

1,135

Koos Timmermans

LSPP

11 May 2016

11 May 2019

11 May 2021

18,278

LSPP

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

LSPP

25 March 2016

27 March 2019

27 March 2020

19,362

3,227

10.55

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

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.

All current Executive Board members participate in ING Group Long

Term Sustainable Performance Plan (LSPP) under which plan rules they receive their shares.

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.

The (partial) holdback (3,657 and 1,702) of the outstanding deferred variable remuneration, is effectuated on these grants.

Number of shares granted includes both deferred and upfront part awarded at the granting date.

The balance of unvested shares post holdback, where applicable.

Contents

Additional Information

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

Share price in

euros

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

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%

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

Contents

Additional Information

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.

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.

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

Additional Information

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

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

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.

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.

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

Eric Boyer de la Giroday

47,565

Margarete Haase

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

2020 Remuneration

Supervisory Board

The Supervisory Board decided not to change the metrics for 2020.

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2019 ING Group Annual Report on Form 20-F

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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

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

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

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.

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.

For more information on the peer group composition in 2020, we refer to the additional information on the next page.

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2019 ING Group Annual Report on Form 20-F

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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.

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

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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Board

practices

For information regardin

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

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.

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

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

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

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

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”.

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

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”.

Plan

of distribution

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

Markets

For information regarding

markets, see Item 9.A of this Form 20-F.

Selling

shareholders

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

Dilution

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

capital

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

Memorandu

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.

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.

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.

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

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:

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;

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:

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

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

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:

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

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

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

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

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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2019 ING Group Annual Report on Form 20-F

138

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.

Dividends

and paying

agents

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

Statement

by experts

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

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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139

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).

Subsidiary

information

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

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140

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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141

Item 12. Description of Securities Other Than Equity

Securities

Debt

securities

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

Warrants

and rights

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

Other

securities

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

American

depositary

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

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

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

dividend or free distribution consisting

of Ordinary Shares, or U.S

dollars

resulting from sales of Ordinary

received in a distribution.

Instruments representing rights to

acquire additional ADRs as a result

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

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

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

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

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

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

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

‘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:

Amended and Restated Articles of Association of ING Groep N.V.,

1.1

dated 26 July 2016 (incorporated by reference

to ING Groep N.V.’s

furnished on 6 January 2017)

Description of Securities Registered under Section 12 of the

2.1

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

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

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.

Branch, as trustee, dated 16

April 2015, in respect of 6.000% Perpetual Additional Tier 1

Contingent Convertible Capital Securities (incorporated

to Exhibit 4.2 of ING Groep N.V.’s

Second Supplemental Indenture between ING Groep N.V.

filed on 16 April 2015)

Exhibit

2.7

Branch, as trustee, dated 16

April 2015, in respect of 6.500% Perpetual Additional Tier 1

Contingent Convertible Capital Securities (incorporated

to Exhibit 4.3 of ING Groep N.V.’s

Senior Debt Securities Indenture between ING Groep N.V.

filed on 16 April 2015)

Exhibit

2.8

March 2017 (incorporated by reference

Branch, as Trustee,

dated 29

to Exhibit 4.1 of ING Groep

N.V.’s

Report on Form 6-K filed on 29 March 2017)

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First Supplemental Indenture between ING Groep N.V.

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Exhibit

2.9

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

Report on Form 6-K filed on 29 March

4.2 of ING Groep N.V.’s

2017)

Exhibit

2.10

Third Supplemental Indenture between ING Groep

N.V.

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

to Exhibit 4.1 of ING Groep N.V's

Third Supplemental Indenture between ING

filed on 9 April 2019)

Exhibit

2.11

Groep N.V.

Branch, as trustee, dated 10

September 2019, in respect of 5.750% Perpetual Additional Tier 1

Contingent Convertible Capital Securities (incorporated

to Exhibit 4.1 of ING Groep N.V's

filed on 10 September 2019)

Exhibit 8

List of Subsidiaries of ING Groep N.V.

Certification of the Registrant’s Chief Executive Officer

12.1

Section 302 of the Sarbanes Oxley Act

of 2002

Certification of the Registrant’s Chief Financial Officer

12.2

Section 302 of the Sarbanes-Oxley Act of 2002

Certification of the Registrant’s Chief Executive Officer

13.1

18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

Certification of the Registrant’s Chief Financial Officer

13.2

18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

Consent of KPMG Accountants

15.1

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

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

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.

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

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

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

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

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

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.

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

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

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

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

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:

◾

monitor the risks we undertake.

◾

be compliant with our internal and external obligations; and

◾

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

957

191,950

204,162

14-16 (B)

22,929

18,462

15,845

16,447

14,755

12,098

53,528

47,020

17 (CCC)

1,081

1,648

2,223

2,324

933

764

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

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

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

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

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

Contents

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Financial Statements

2019 ING Group Annual Report on Form 20-F

182

Belgium

33,936

36,546

82,368

79,362

572

671

116,894

116,595

Germany

18,067

15,832

485

476

99,966

96,278

118,561

112,630

Poland

15,713

14,377

20,377

17,801

36,156

32,244

Spain

8,849

10,957

21,838

19,092

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

27,827

23,540

France

13,914

13,736

519

6,267

4,605

20,703

18,865

Rest of Europe

65,432

65,324

406

400

22,816

23,962

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

38,416

35,524

47,066

42,308

Africa

2,671

2,867

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

Based on credit risk measurement contained in lending, pre-settlement, money market and investment activities.

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.

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.

Contents

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Financial Statements

2019 ING Group Annual Report on Form 20-F

183

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).

Contents

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Financial Statements

2019 ING Group Annual Report on Form 20-F

184

Outstandings by economic sectors and geographical area

(*)

Region

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

331,758

320,637

Central Banks

21,635

16,651

7,573

211

370

1,867

5,048

796

6,454

4,951

200

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

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

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

24,802

22,923

Services

4,683

9,272

574

822

162

774

646

711

1,109

2,264

604

426

22,046

23,363

General Industries

4,096

3,301

1,143

2,295

274

382

437

144

3,504

2,628

1,423

19,632

21,535

Lower Public Administration

522

5,949

5,798

727

728

471

536

958

1,686

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

257

524

2,812

2,286

474

205

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

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

484

464

347

265

5,555

5,558

NPL grade

2,983

2,867

705

806

270

148

1,541

1,100

154

686

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

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

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

185

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.

Contents

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Financial Statements

2019 ING Group Annual Report on Form 20-F

186

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

133

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

50,672

Total

Bank

853,930

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

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

51,665

Total

Bank

832,130

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).

Contents

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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.

Contents

Additional Information

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)

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%

0.3%

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

121

720

0.2%

0.7%

2.3%

9.6%

87.1%

Residential Mortgages

(SME)

147

240

–

0.2%

0.3%

0.8%

2.9%

6.0%

89.8%

Other Consumer Lending

956

94.0%

0.4%

0.2%

0.4%

0.5%

4.6%

Total

Non-performing

3,579

4,052

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%

Consists mainly of residential mortgages to small one man business clients

Contents

Additional Information

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

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)

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%

0.5%

14.3%

Total

Performing

315,297

544,039

3,492

25,591

38,757

6.4%

0.1%

0.9%

6.8%

85.7%

Non-performing

Residential Mortgages (Private Individuals)

2,490

3,568

152

607

0.5%

0.2%

0.8%

2.9%

13.6%

82.0%

Residential Mortgages

(SME)

134

218

0.4%

0.7%

2.4%

8.9%

87.7%

Other Consumer Lending

884

95.4%

0.5%

0.1%

0.2%

0.6%

3.2%

Total

Non-performing

3,508

3,793

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%

1.0%

6.9%

85.4%

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

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.

Contents

Additional Information

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

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

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%

‘Others’ comprises industries with outstandings lower than EUR 10 billion.

Contents

Additional Information

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

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

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%

‘Others’ comprises industries with outstandings lower than EUR 10 billion.

Contents

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

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

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

1,640

1,867

37.3%

9.6%

1.5%

3.0%

5.5%

43.1%

Africa

2,638

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

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

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

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

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

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

194

Credit

risk categories

(*)

Regular

Watch List

Restructurin

Non-

performing

Possible ratings

1–19

11–20

20-22

Typical ratings

1–14

15–17

18–20

20-22

Deterioration in risk

Not

significant

Significant

Significant intervention

Not required

Required

Includes impairments

Yes

Account Ownership

Front Office

Credit Risk Management

Regular

Credit

Restructurin

Credit

Restructurin

Primary Manager

Front Office

Credit

Restructurin

Credit

Restructurin

Accounting provisioning

Stage 1/2

Stage 2/3

Stage 3

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

7,747

Consumer lending past due but performing (1–90 days)

3,367

4,440

Non-performing

11,477

11,102

Total

853,930

832,130

For 2018, the business lending amount past due but performing could not be isolated.

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

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

Aging analysis (past due but performing): Consumer lending portfolio, outstandings

(*)

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

Based on consumer lending. The amount of past due but performing

financial assets in respect of non-lending

activities was

not significant.

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

195

Aging analysis (past due but performing): Consumer lending portfolio by geographic area,

outstandings

(*)

2019

2018

Region

Residential

Mortgages

Other retail

Total

Europe

Netherlands

829

840

934

Belgium

733

166

899

1,870

Germany

372

104

476

606

Poland

145

236

215

Luxemburg

Spain

France

United Kingdom

Rest of Europe

195

290

484

515

America

Asia

Australia

310

328

178

Africa

Total

2,619

749

3,367

4,440

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:

for corporates:

more than 90 days; and

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:

The borrower (or third

party) has started insolvency proceedings.

A group company/co

-borrower has NPL status.

Significant fraud (affecting

the company’s ability to service its debt).

There is doubt as to the borrower’s ability to generate

stable and sufficient

cash flows to

service its debt.

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

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

196

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

Africa

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.

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

197

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

(*)

Wholesale

Banking

Retail Benelux

Retail Challengers

& Growth

Markets

Corporate Line

Total

Industry

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

Private Individuals

–

2,173

2,163

1,573

1,535

3,746

3,698

Natural Resources

1,108

925

1,196

1,022

Food, Beverages

Personal Care

599

372

351

294

168

109

1,119

775

Transportation

Logistics

651

599

177

787

804

Services

320

260

357

265

737

563

Builders & Contractors

265

405

258

332

168

152

691

889

Real Estate

312

823

311

333

631

1,159

General Industries

248

373

204

186

153

135

605

693

Non-Bank Financial

Institutions

426

462

Retail

172

134

325

258

Other

467

507

326

274

110

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

Based on Lending and Investment outstandings.

Economic sectors not specified

in above overview are grouped in Other.

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

198

Non-performing Loans: outstandings by economic sectors and geographical area

(*)

Region

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

411

261

3,746

3,698

Natural Resources

254

533

111

1,196

1,022

Food, Beverages

& Personal

Care

315

153

117

109

254

1,119

775

Transportation

& Logistics

432

787

804

Services

224

377

737

563

Builders & Contractors

226

103

230

691

889

Real Estate

219

225

631

1,159

General Industries

176

148

127

605

693

Non-Bank Financial Institutions

107

264

462

Retail

147

325

258

Other

464

239

130

173

1,178

1,187

Total

2,968

2,864

705

805

270

144

1,534

1,099

154

686

11,477

11,102

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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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

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

(*)

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%

Undrawn commitments

are excluded.

Summary Forborne portfolio by forbearance type

(*)

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%

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

(*)

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

131

102

Germany

246

182

127

United Kingdom

332

251

287

246

Italy

197

115

388

113

275

Ukraine

169

297

108

189

Norway

151

124

258

236

Poland

134

103

190

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

Australia

214

129

104

Africa

192

122

148

Total

4,632

2,699

1,932

5,081

3,088

1,994

Undrawn commitments are excluded.

Wholesale Banking: Forborne portfolio by economic sector

(*)

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

Real Estate

374

207

167

998

601

397

Chemicals, Health & Pharmaceuticals

212

209

189

171

Builders & Contractors

195

116

145

109

Utilities

188

133

181

152

Services

129

Retail

114

118

Automotive

108

134

131

Other

248

134

114

233

220

Total

4,632

2,699

1,932

5,081

3,088

1,994

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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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

(*)

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

Poland

209

101

109

216

115

101

Romania

101

Italy

Spain

Rest of Europe

America

Asia

Australia

354

201

153

381

225

156

Africa

Total

4,861

2,686

2,175

5,012

2,862

2,151

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

2-4 (AA)

82,992

83,020

5-7 (A)

131,931

273

132,204

8-10 (BBB)

295,449

4,905

300,354

Non-Investment grade

11-13 (BB)

194,643

209

7,925

202,568

263

14-16 (B)

36,683

202

18,416

367

55,099

569

17 (CCC)

405

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

-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

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

-19,686

Changes in models/risk parameters

-8

Increase in loan loss provisions

-9

-39

1,147

1,099

Write-offs

-1

-2

-1,027

-1,028

-1,030

-1,031

Recoveries of amounts previously

written off

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.

Changes in loan loss provisions

(*)

2018

Stage 1

Stage 2

Stage 3

Total

Provisions

Opening balance

438

955

3,923

5,316

Transfer

into 12-month ECL (Stage 1)

-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

-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

599

688

Write-offs

-1,043

-1,044

Recoveries of amounts previously

written off

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)

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

3.3

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

Downside scenario

Real GDP

-0.4

-0.2

1.0

411

20%

Unemployment

7.5

8.4

HPI

1.5

2.6

2.4

United States

Upside scenario

Real GDP

2.6

4.1

3.8

20%

144

Unemployment

2.6

1.7

1.5

HPI

5.0

8.0

8.1

Baseline Scenario

Real GDP

1.8

1.9

127

60%

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Unemployment

3.7

3.8

HPI

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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209

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.

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

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

parallel

▼

parallel

▲

parallel

▼

parallel

▲

By business

Wholesale Banking

–12

–204

239

Retail Banking Benelux

–91

–49

Retail Challengers & Growth Markets

–3

165

–186

Corporate Line Banking

–30

Total

–136

–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

parallel

▼

parallel

▲

parallel

▼

parallel

▲

By currency

Euro

-134

–81

US Dollar

-24

–20

Other

-27

–57

Total

-136

–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

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

–38

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

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

(*)

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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2019 ING Group Annual Report on Form 20-F

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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

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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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

Equity and commodity

Foreign exchange

Credit spread

Diversification

-6

–8

-6

–13

Total

VaR

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.

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

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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

2 Average

value

3 Minimum value

4 Period end

Stressed VaR (10 day 99%)

5 Maximum value

126

139

6 Average

value

7 Minimum value

8 Period end

124

Incremental Risk Charge (99.9%)

9 Maximum value

169

107

10 Average

value

11 Minimum value

12 Period end

Comprehensive Risk capital charge

(99.9%)

13 Maximum value

n/a

14 Average

value

n/a

15 Minimum value

n/a

16 Period end

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

RWA

Capital

requirement

Outright products

1 Interest rate risk (general

and specific)

2 Equity risk (general and specific)

3 Foreign exchange risk

1,131

4 Commodity risk

Options

5 Simplified approach

6 Delta-plus method

7 Scenario approach

8 Securitization (specific risk)

Total

1,131

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

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

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

RWA

Capital

requirement

VaR (higher of values a

and b)

1,261

101

1,394

112

(a) Previous day's VaR

(Article 365(1) (VaRt-1))

404

529

(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

SVaR (higher of values

a and b)

3,011

241

3,217

257

(a) Latest SVaR

(Article 365(2) (sVaRt-1))

902

1,486

119

(b) Average

of the SVaR (Article 365(2) during the preceding

sixty business days (sVaRavg)

multiplication factor (ms) (Article 366)

3,011

241

3,217

257

Incremental risk charge -IRC (higher of values a and

1,278

102

767

(a) Most recent IRC value (incremental

default and migration

risks section 3 calculated in

accordance with Section 3 articles 370/371)

799

727

(b) Average

of the IRC number over the preceding 12 weeks

1,278

102

767

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

on most recent risk

number for the correlation

trading portfolio (Article 338(4))

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

US Dollar

116

US Dollar

–957

Chinese Yuan Renminbi

-21

Chinese Yuan Renminbi

–18

South Korean Won

Swiss Franc

–14

Brazilian Real

-15

Polish Zloty

Japanese Yen

-10

South Korean Won

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Most important interest rate and credit spread sensitivities at year-end (*)

amounts in EUR thousands

2019

2018

Interest Rate (BPV)

Euro

-740

Euro

–214

US Dollar

-325

US Dollar

189

Russian Ruble

-105

Great-Britain Pound

–112

Great-Britain Pound

-68

Taiwan

New Dollar

Australian Dollar

-31

Polish Zloty

Credit Spread (CSO1)

United States

360

Germany

345

Germany

163

United States

330

France

117

Russian Federation

177

Russian Federation

Netherlands

164

United Kingdom

France

151

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.

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)

Risk classes

1 (AAA)

-1

–6

2–4 (AA)

-15

-63

–24

5–7 (A)

143

117

8–10 (BBB)

273

245

–2

11–13 (BB)

148

14–16 (B)

17–22 (CCC and NPL)

Not rated

Total

626

-21

500

161

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

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

(*)

2019

2018

Funding type

Customer deposits (retail)

51%

50%

Customer deposits (corporate)

21%

Interbank

Lending/repurchase

agreement

CD/CP

Long-term debt

11%

Subordinated debt

Total

100%

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

(*)

2020

2021

2022

2023

2024

2025

Beyond

2025

Total

Currency

EUR

USD

Other

Total

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

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

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

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.

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.

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%

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)

Time deposits with banks

domestic

8,213

1.2

3,395

1.2

16,234

0.6

foreign

34,583

912

2.6

40,970

1,016

2.5

39,807

536

1.4

Loans and advances

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

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

0.2

36,898

0.1

22,526

0.1

foreign

24,978

0.3

30,224

0.3

30,215

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)

Time deposits from banks

domestic

17,673

0.2

17,805

0.1

17,219

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

0.0

95,977

0.0

83,878

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

0.5

6,958

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

4.3

4.1

150

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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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)

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)

Interest-earning assets

Time deposits to banks

domestic

–4

–71

–48

foreign

–158

–103

462

478

Loans and advances

domestic

–311

–214

–504

289

–216

foreign

520

–85

435

818

442

1,259

Interest-earning securities

Domestic

–73

–65

foreign

–11

–127

–138

–227

–59

–286

Other interest-earning assets

domestic

–6

–5

foreign

–14

–1

–15

–

Interest income

domestic

154

–280

–126

–552

233

–319

foreign

336

–157

179

606

850

1,457

Total

490

–437

1,083

1,138

Other interest income

–19

–17,007

Total

interest income

–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

Net interest margin

Domestic

1.0

1.2

Foreign

2.3

2.2

Total

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)

Interest-bearing liabilities

Time deposits from banks

domestic

–0

–5

–4

foreign

–14

–9

–26

–24

Demand deposits

domestic

180

209

122

126

foreign

–1

Time deposits

domestic

–139

–55

–42

193

151

foreign

–9

–19

Savings deposits

domestic

–10

–8

–1

–124

–125

foreign

–11

–234

–245

Short term debt

domestic

–27

foreign

–238

–148

203

292

Long term debt

domestic

469

–294

175

–146

150

foreign

–64

–28

–50

–40

–90

Subordinated liabilities

domestic

–50

–8

–58

–5

331

326

foreign

–0

–3

–0

–3

Other interest-bearing liabilities

domestic

–64

110

–79

–6

foreign

–72

–52

–565

–564

Interest expense

domestic

269

131

400

–191

712

521

foreign

–268

118

–150

–554

–67

–622

Total

249

250

–745

645

–100

Other interest expense

–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

–925

Net interest result

–149

314

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(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

65,747

Debt securities held to maturity

n/a

9,343

Shares and convertible debentures

2,464

3,438

3,983

Land and buildings

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

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

7,053

German government

n/a

10,682

Belgian government

n/a

4,892

Other governments

n/a

19,804

Central banks

n/a

1,216

Banks and financial institutions

n/a

15,356

Other corporate debt securities

n/a

1,493

U.S. Treasury

and other U.S. Government agencies

n/a

3,034

Other debt securities

n/a

2,217

Total

debt securities available for sale

n/a

65,747

Debt securities held to maturity

Dutch government

n/a

1,087

German government

n/a

238

Belgian government

n/a

628

Other governments

n/a

2,240

Central banks

n/a

310

Banks and financial institutions

n/a

908

Other corporate debt securities

n/a

209

U.S. Treasury

and other U.S. Government agencies

n/a

3,507

Other debt securities

n/a

216

Total

debt securities held to maturity

n/a

9,343

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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

1,400

416

–0

1,831

German government

1,973

801

2,836

Belgian government

202

1,165

630

1,997

Other governments

685

6,620

6,410

13,729

Central banks

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

229

2,133

810

3,190

Other debt securities

659

455

1,206

Fair value through other comprehensive

income

1,537

14,528

13,139

1,280

30,483

Yield

(1)

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

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

236

305

U.S. Treasury

and other U.S. Government

agencies

3,391

1,551

1,445

6,419

Other debt securities

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

Contents

Additional Information

Financial Statements

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

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

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”

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

247

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

Foreign

946

779

330

277

376

Total

troubled debt restructurings

1,815

1,451

1,005

602

462

Contents

Additional Information

Financial Statements

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%.

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

249

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

Interest income recognized

in the profit and loss account

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

(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

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

1,322

12,343

1,119

14,783

795

Cayman Islands

10,657

645

143

11,445

479

China

4,924

1,180

4,563

10,721

331

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

250

Year ended 31 December 2018

Government

& official

institutions

Banks &

other

financial

institutions

Commercial

& industrial

Other

Total

Cross-

border

Commitmen

(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

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

(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

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

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

Contents

Additional Information

Financial Statements

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

–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

Other private lending

Other corporate lending

–5

Foreign:

Loans secured

by mortgages

Other private lending

Other corporate lending

–8

Total

recoveries

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

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

252

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

public

authorities

Loans secured

by mortgages

472

421

347

550

819

Loans to or guaranteed

by credit

institutions

Other private lending

119

118

122

177

Other corporate lending

657

959

1,268

1,738

1,904

Total

domestic

1,207

1,504

1,735

2,412

2,900

Foreign:

Loans guaranteed

by public

authorities

Loans secured

by mortgages

599

700

526

638

717

Loans to or guaranteed

by credit

institutions

Other private lending

820

763

746

620

712

Mortgage backed securities

Other corporate lending

1,992

1,563

1,602

1,617

1,438

Total

foreign

3,418

3,041

2,893

2,896

2,886

Total

4,625

100

4,545

100

4,628

100

5,308

100

5,786

100

LLP financial assets at FVOCI

LLP Securities at AC

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

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

253

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%

1.02%

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%

Contents

Consolidated statement of profit or loss

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

F - 1

Contents

Consolidated statement of financial position

F – 4

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

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

F - 2

Report of independent registered

public accounting firm

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

Contents

Additional Information

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

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

Contents

Additional Information

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

2018

2019

2018

Assets

Liabilities

Cash and balances with central banks

53,202

49,987

Deposits from banks

34,826

37,330

Loans and advances to banks

35,136

30,422

Customer deposits

574,355

555,729

Financial assets at fair value through profit or loss

Financial liabilities at fair value through profit or loss

– 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

34,468

31,223

Deferred tax liabilities

322

180

Securities at amortised cost

46,108

47,276

Provisions

688

1,011

Loans and advances to customers

608,029

589,653

Other liabilities

12,829

13,510

Investments in associates and joint ventures

1,790

1,203

Debt securities in issue

118,528

119,751

Property and equipment

3,172

1,659

Subordinated loans

16,588

13,724

Intangible assets

1,916

1,839

Total

liabilities

836,631

834,751

Current tax assets

251

202

Deferred tax assets

1,242

958

Equity

Other assets

7,018

8,433

Share capital and share premium

17,117

17,088

Assets held for Sale

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

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.

Contents

Additional Information

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

2018

2017

2019

2018

2017

Continuing operations

Interest income using effective interest rate

method

25,056

25,249

n/a

Addition to loan loss provisions

1,120

656

676

Other interest income

3,107

2,880

n/a

Staff expenses

5,755

5,420

5,202

Total

interest income

28,163

28,129

43,996

Other operating expenses

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

1,652

2,116

2,539

Net interest income

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

108

Net fee and commission income

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

–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

188

183

192

Share of result from

associates and joint ventures

143

178

Result on disposal of group companies

117

–123

Other income

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.

Contents

Additional Information

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

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

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

0.69

0.68

0.67

References relate

to the accompanying notes. These are an integral part of the Consolidated

financial statements.

Contents

Additional Information

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

2018

2017

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

Remeasurement of the net defined benefit asset/liability

–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

–283

Realised gains/losses on AFS investments reclassified to the statement of

profit or loss

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

–

–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’.

Contents

Additional Information

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

capital and

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

139

Net change in fair value of debt instruments at fair value through

other comprehensive income

–43

–42

Realised gains/losses on debt instruments at fair value through other comprehensive

income reclassified to the statement of profit or loss

–33

–1

–34

Changes in cash flow hedge reserve

604

640

Realised and unrealised revaluations

property in own use

–0

Remeasurement of the net defined benefit asset/liability

–

Exchange rate differences and

other

–36

–29

Share of other comprehensive income of associates

and joint ventures and other income

–69

–

Change in fair value of own credit

risk of financial liabilities at fair value through profit or loss

–123

–116

–

–116

Total

amount recognised directly in other comprehensive

income net of tax

–

211

418

629

673

Net result

–

180

3,723

3,903

4,001

Total

comprehensive income net of tax

–

391

4,141

4,532

142

4,674

Dividends

–

–2,650

–29

–2,679

Changes in treasury shares

–

Employee stock option and share plans

–

Changes in the composition of the group and other changes

–

–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’.

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

F - 9

Consolidated

statement of changes in equity - continued

in EUR million

capital and

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

–461

Net change in fair value of debt instruments at fair value through

other comprehensive income

–177

Realised gains/losses on debt instruments at fair value through other comprehensive

income reclassified to the statement of profit or loss

–54

–2

–56

Changes in cash flow hedge reserve

342

–

342

382

Realised and unrealised revaluations

property in own use

–2

–0

Remeasurement of the net defined benefit asset/liability

–

Exchange rate differences and

other

–380

–16

–396

Share of other comprehensive income of associates

and joint ventures and other income

283

–270

Change in fair value of own credit

risk of financial liabilities at fair value through profit or loss

199

Total

amount recognised directly in other comprehensive

income net of tax

–301

–211

–512

–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

–2,607

–61

–2,668

Changes in treasury shares

Employee stock option and share plans

Changes in the composition of the group and other changes

–96

–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.

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

F - 10

Consolidated

statement of changes in equity - continued

in EUR million

capital and

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

–283

Realised gains/losses transferred

to the statement of profit or loss

–90

–2

–92

Changes in cash flow hedge reserve

–514

–11

–525

Unrealised revaluations

property in own use

Remeasurement of the net defined benefit asset/liability

–29

Exchange rate differences

–894

–864

Share of other comprehensive income of associates

and joint ventures and other income

138

–143

–5

Total

amount recognised directly in other comprehensive

income

–

–1,682

–117

–1,799

–1,772

Net result from continuing and

discontinued operations

153

5,311

5,464

5,546

Total

comprehensive income net of tax

–1,529

5,194

3,665

109

3,774

Dividends

–2,564

Changes in treasury shares

–6

Employee stock option and share plans

Balance as at 31 December 2017

17,045

4,362

27,022

48,429

715

49,144

Contents

Additional Information

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

2018

2017

2019

2018

2017

Cash flows from operating activities

Disposals and redemptions:

– Associates and joint ventures

116

245

Result before tax

5,653

6,986

8,085

– Available-for-sale investments

n/a

32,788

Adjusted for:

– Depreciation and amortisation

789

520

– Held-to-maturity investments

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

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

–

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

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

–271

n/a

– Available-for-sale investments

n/a

–21,601

Purchase/sale of treasury

– Held-to-maturity investments

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

- 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

47,529

18,977

16,164

Effect of exchange rate changes on cash and cash equivalents

204

260

Cash and cash equivalents at end of year

54,031

47,529

18,977

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

F - 12

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.

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

2018

2017

Interest received

28,957

28,722

45,014

Interest paid

–14,550

–14,948

–31,032

14,407

13,774

13,982

Dividend received

219

183

206

Dividend paid

–2,679

–2,607

–2,564

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’.

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.

Contents

Additional Information

Financial Statements

2019 ING Group Annual Report on Form 20-F

F - 13

Notes to the Consolidated

financial

statements

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

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

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

303

–90

–258

Effect of adjustment after tax

–878

559

In accordance with IFRS-IASB (attributable to the equityholders of the parent)

3,903

4,761

5,464

Non-controlling interests

108

In accordance with IFRS-IASB Total

net result

4,001

4,869

5,546

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

F - 15

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.

Contents

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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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2019 ING Group Annual Report on Form 20-F

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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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2019 ING Group Annual Report on Form 20-F

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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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2019 ING Group Annual Report on Form 20-F

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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

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

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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.

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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2019 ING Group Annual Report on Form 20-F

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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

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.

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);

◾

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

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.

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

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

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

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

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,

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

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

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

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.

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

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

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

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

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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