Glossary
The following glossary includes definitions of words and expressions that are commonly found in ING Commercial Banking's (financial) press releases, annual reports and web sites. The glossary is offered to enhance your understanding of ING Commercial Banking's business and results, but is by no means complete. If you can't find a certain definition, please feel free to contact us.
- American Depositary Receipts Level I (ADRs)
A security that enables investors in the United States who are only allowed to invest in dollar funds to invest in foreign securities.
- Asset and Liability Committee
A committee that has been established to manage the balance sheet of ING, especially with regard to the structural interest rate exposures, the liquidity, the solvency and the currency exchange-rate fluctuations.
- Asset Based Finance
Provides finance for Shipping, Containers, Aircraft, Rail as well as Structured Leases for a wide variety of assets including Real Estate.
- Audit Committee
A committee from the Supervisory Board that is especially involved in supervising the financial reporting process of the company and the procedures and auditing systems that are used.
- Basel II
Basel II - short for the new Basel Capital Accord - lays down new guidelines for determining the minimum solvency requirements for banks. The main change in these guidelines is a new system for weighting the risks run by banks in their loans to retail and corporate customers. The objective of Basel II is to improve the soundness of the financial system.
- BIC
BIC (Bank Identifier Code, also known as SWIFT address).
- BIS ratio
BIS is the abbreviation of Bank of International Settlements. The BIS ratio gives an indication of the solvency of a bank. It gives the ratio between the risk-bearing capital and the risk-weighted assets.
- Capital base
Capital plus minority interests plus subordinated loans.
- Capital coverage ratio
Available capital divided by required capital.
- Click-call-face
ING's distribution strategy. ING wants to market its products and services via the distribution channel of the customer's choice: the internet (click), a call centre (call) or a professional advisor (face).
- Client Coverage Model
At ING Commercial Banking every client has a dedicated relationship manager who manages your banking services with the help of a full team of industry and product specialists. This consistent client coverage model enables us to offer our clients the financial solutions they need for success.
Multinational clients are assigned a team consisting of a number of local relationship managers – one for each major region in which they operate – reporting to one senior banker who manages and coordinates their activities.
For clients with particularly extensive and complex banking needs, we offer a dedicated corporate relationship team comprised of our most senior bankers. This means our clients’ most challenging banking needs in the areas of capital markets, credit products and advisory are met by our most knowledgeable bankers from across the business globally.
For the largest clients in terms of their banking needs we also assign a board-level banker working alongside the team of senior relationship managers.
- Clients
ING Commercial Banking serves mid-size and large corporates and financial institutions. Our Corporate Clients unit serves large international companies, while our Mid Corporates unit is ideally placed to serve medium-to-large corporations. We also provide a range of services for local and global financial institutions: Commercial banks, central banks, supranational and development banks, investment banks, asset management firms, pension funds and insurance companies.
- Combined ratio
The sum of the claims ratio and the cost ratio for a non-life insurance company or a reinsurance company. A combined ratio of more than 100% does not necessarily mean that there is a loss on non-life insurance policies, because the result also includes the allocated investment income.
- Commercial Finance
Our Commercial Finance division helps companies raise working capital by financing their receivables, inventory and purchase orders. Known as factoring, this form of financing is ideal for companies in the wholesale, services or transport sectors. It is also suited to fast-growing companies with a need for working capital and to low-solvency businesses with less access to other forms of banking finance. In addition, it also helps companies ease their way through major periods of transition, such as restructuring, and to cope with the irregularities of highly seasonal industries, such as clothing and textiles.
- Commercial paper
Negotiable short-term debt certificate in bearer form, issued by companies.
- Commercial Banking
ING Commercial Banking offers a full range of products to corporates and institutions in the home markets in the Benelux countries and elsewhere it operates a more selective and focused client and product approach. We work via five divisions: Clients, Network, Products, Corporate Finance and Equity Markets, and Financial Markets.
Commercial Banking offers core banking services such as lending, payments and cash management and treasury services. We also offer a range of high added-value banking solutions such as providing you with access to debt capital and financial markets, advising on mergers and acquisitions, structured finance and syndicated loans.
- Corporate Finance and Equity Markets
Our Corporate Finance and Equity Markets divisions advise businesses on important corporate transactions, including mergers and acquisitions, initial public offerings, secondary offerings, share backs and taking a public company private.
- Corporate governance
The way in which a company is governed and how it deals with the various interests of its customers, shareholders, employees and society at large.
- Corporate Investments
Our Corporate Investments division provides solutions to clients in the Dutch and Belgian mid-sized corporate segment to support packaged lending deals, especially in the area of credit-driven mezzanine products.
- Country risk
The risk that a foreign government will not fulfil its obligations or obstructs the remittance of funds by debtors, either for financial reasons (transfer risk) or for other reasons (political risk).
- Credit risk
The risk that borrowers will not be able to pay their debts.
- Crediting rate
That part of the investment income on certain insurance products that is paid to policyholders.
- CSR
Stands for Corporate Social Responsibility. ING defines corporate social responsibility as open and transparent business practices based on ethical values and respect for its stakeholders.
- Cumulative preference shares
Shares that entitle the holder to a fixed annual dividend. In case of profit distribution, these shares take precedence over ordinary shares. If profits are insufficient to cover the dividend payment, the amount of unpaid dividend is carried forward to future years until the unpaid amount is settled.
- Currency risk
The risk that changes in a currency's value may affect the value of financial instruments or other business assets or liabilities.
- Debt/equity ratio
Debt divided by the capital base plus debt. In ING's case, only core debt is taken into account.
- Depositary receipt for share
Securities issued by a trust office as opposed to the original values (for instance shares) that are owned by the trust office. There are three types of depositary receipts for Dutch shares:
- Convertible depositary receipts for shares. If so desired, these can be exchanged into ordinary shares.
- Non-convertible depositary receipts for shares. These cannot be exchanged into ordinary shares.
- Depositary receipts with limited convertibility. These can only be exchanged into ordinary shares on certain conditions.
ING only has convertible depositary receipts for shares.
- Derivatives
Derivatives are financial instruments, such as forwards, futures, options and swaps, whose value is based on an underlying asset, index or reference rate.
- Discount rate
A rate used to place a current value on future cash flows. It is needed to reflect the fact that money has a time value. In the embedded value calculated for ING's insurance operations, the discount rate is equal to the weighted cost of capital after taxation of the insurance operations.
- Divestment
Sale of an asset.
- Economic capital
Economic capital is an internally prescribed amount of capital. It is the amount of capital a bank or insurer should have to support the risks it faces.
- Efficiency ratio
A ratio that expresses the total operating expenses as a percentage of total income of the banking operations. A 68% ratio implies that a company has to spend 68 cents to earn a revenue of one Euro.
- Embedded value
Is the present value of all future cash flows from existing business.
- Employee Benefits
Through its subsidiary Mandema & Partners, ING Commercial Banking provides a full range of pension services and employee benefits. Mandema & Partners is a leading pension and employee benefits consultant, serving mid-size and large corporate clients. Established in 1956, Mandema & Partners has vast experience in providing tailor-made employee benefit packages and corporate consultancy in the area of pensions, health care, sick leave and more.
- Equity Markets
Our Equity Markets division is a market leader in equity issues in Europe, Middle East and Africa, providing origination, sales, trading and research services.
- European Business Desks
Our Mid-sized corporate clients based in Western Europe also receive the support of our European Business Desks, a specialist banking service that helps European companies with their banking needs as they expand internationally to 21 countries around the world.
- Event Finance
Working closely with specialists in banking and capital markets, we provide corporate and institutional clients with innovative and effective solutions for all their finance needs. For the most complex and transactions, involving a high degree of business transformation, our Event Finance team offers the highest-level of expertise. Clients can benefit from working with a team that brings together ING's leading experts in completing these high-end transactions. The Event Finance team also draws on skills and resources from throughout Commercial Banking, across all disciplines.
- Ex-dividend
On the day a fund is quoted “ex-dividend”, the right to the dividend made available by the company is no longer included in the share (price) as traded on the stock exchange. The share price is therefore adjusted accordingly.
- Final dividend
The final dividend is the total dividend for the year as approved by the shareholders in the Annual General Meeting less any interim dividend paid during the year.
- Financial Engineering
Our Financial Engineering department creates incremental economic benefits or value to our customers through the use of customised structures based on cross border tax and/or accounting arbitrage opportunities.
- Financial Institutions
Our clients include commercial banks, central banks, supranational and development banks, investment banks, asset management firms, pension funds and insurance companies. All our institutional clients have dedicated relationship managers supervising the expert execution of every project and ensuring they benefit from a seamless service across the entire ING Group.
Our services span payments and cash management, securities products, loans and trade finance services.
- Financial Markets
Our Financial Markets division provides institutional and corporate clients access to the major financial markets in developed and emerging countries. With specialists in debt origination and syndication, market trading, sales and research, we can assist with credit and equity derivatives, treasury products, interest rate derivatives, foreign exchange, structured products and securities financing.
- IAS
International Accounting Standards.
- IBAN
IBAN stands for International Bank Account Number and is a unique international account number to identify the holder of a bank account in a country. It consists of a couple of digits referring to: country code + check digit + bank code + account number. For cross-border payments or receivables you have to mention the IBAN and the BIC (Bank Identifier Code, also known as SWIFT address) of the beneficiary: only the beneficiary can provide you with this information.
- IFRS
International Financial Reporting Standards. As from 2005, all European listed companies must report in accordance with IFRS (previously known as IAS). This implies that a large number of assets and liabilities have to be valued and classified differently.
- Industry focus
At ING Commercial Banking we know every industry is different, with its own needs, trends and opportunities. That’s why we always work to ensure we have in-depth knowledge of the industries in which our clients work, enabling us to provide tailored solutions that meet our clients’ specific needs. Some of the key sectors in which ING has dedicated team expertise include:
- Consumer goods
- IT services
- Natural resources
- Telecoms
- Transport & logistics
- Utilities & Power
- Insurance and Risk Consultancy
Our Insurance and Risk Consultancy division provides tailored and integrated solutions to help your business minimise risk and maximise continuity. We offer a wide range of products, including insurance brokerage, risk consultancy and risk management for mid-size and large corporates in the Netherlands. Our integrated approach consists of performing risk analysis, developing a risk profile and tailoring a solution to fit client needs. Product lines are Credit Management, Liability, Marine & Cargo, Property and Business Interruption.
- Interest risk
The risk of interest fluctuations with regard to guaranteed interest rates and the reasonable expectations of policyholders regarding profit sharing.
- IRR
Internal Rate of Return: Interest rate that discounts future cash flows to zero. It represents the amount that we expect to earn on our investment over the life of the business.
- Issued capital
The share capital issued by a public limited company or a private limited company; contrary to authorised capital, which indicates the maximum amount of capital that can be issued.
- ITEF
Stands for International Trade & Export Finance. Combines trade and commodity related relationship management activities with structured export finance expertise into one platform for financing the flows of commodities and capital goods.
- Joint venture
A business venture undertaken by two or more parties who jointly control the venture and split the risks and rewards in accordance with the legal agreement establishing the venture.
- Leasing
ING Lease offers tailor-made financial and operational leases for a broad spectrum of assets. We specialise in assets in transport and logistics, real estate, equipment and IT. We offer direct leasing services and a broad range of domestic and international vendor lease arrangements.
- Leveraged Finance
Leveraged Finance offers innovative financing solutions to those companies involved in acquisitions, providing underwriting of leverage loans, bridge loans and senior debt.
- Liquidity
The extent to which a company can meet its immediate payment obligations.
- Liquidity Management
Through our subsidiary Bank Mendes Gans, ING can unlock the value of cash in your corporate treasury. Together, we provide a full range of overlay services including cash balancing, pooling and netting. Depending on your needs, we can create a liquidity management structure - cross border, in several currencies or even link to other banking partners. Since Bank Mendes Gans is headquartered in the Netherlands, you benefit from favourable tax treaties.
- Managing for Value
Managing for Value brings the financial market perspective into strategic and operational management decision processes within ING. In doing so, ING Group aims to realise the financial objective of creating higher returns for our shareholders than the average of our peers.
- Market risk
Risk of loss due to unfavourable price changes on the financial markets.
- Net profit
Profit after taxation and third party interests.
- Nominal value of share
Dutch shares have a nominal value, it is mentioned on all share certificates that are issued. Shares must be issued against at least the nominal value. The nominal value remains fixed, as opposed to the market value, which fluctuates.
- Operating expenses
Total expenses excluding non-operating items. The non-operating items can vary depending on the reporting year.
- Operating income
Total income excluding non-operating items. In ING's case, an example of a non-operating item is realised profit on the sale of equities meant to finance new acquisitions.
- Operating net profit
Net profit excluding realised capital gains on shares and excluding non-operating gains.
- Operational activities
Activities performed in connection with normal daily business.
- Operational risk
The risk of direct and indirect damage resulting from mistakes made by employees or from failing or inadequate processes or systems.
- Organic change
Changes or developments that exclude exchange rate differences and acquisitions/divestments.
- Organic growth
Growth excluding the impact of exchange-rate differences and acquisitions or divestments.
- Payments and Cash Management
Our Payments and Cash Management division provides mid-sized and large corporations and financial institutions with flexible and complete control over their cash management, domestic and foreign payments, foreign trade, electronic banking services and treasury. We can also ensure you are well-prepared for initiatives with far-reaching implications for your business, such as SEPA (Single Euro Payments Area).
- Payout ratio
Percentage of distributable net profit that is paid out as dividend.
- Preference share
A preference share is similar to an ordinary share but carries certain preferential rights. These preferential rights imply that preference shares take precedence over ordinary shares at profit distribution and/or the distribution of the balance left after liquidation. The dividend and the distribution upon liquidation on preference shares is determined beforehand. The dividend is usually a fixed amount and can be cumulative (see cumulative preference shares).
- Premium income
The amount paid by the purchaser of an insurance contract less any commission or brokerage fees payable to an insurance agent. This represents the gross income of an insurance company.
- RAROC
Risk-Adjusted Return On Capital is a key figure for measuring the risk/return ratio of banking operations. The risk-adjusted result, i.e. net earnings minus standard risk/costs is related to necessary or allocated risk capital. Risk capital requirements arise separately from the credit, market and operative risks associated with the respective business operation.
- Return
Total income or revenues over a certain period of time, in relation to the invested capital.
- Revaluation reserve
Part of the shareholders' equity that arises from changes in the current value of the fixed assets.
- Risk-weighted assets (RWAs)
The assets of a financial institution multiplied by a weighting established by the regulatory authorities representing the relative risk of these assets. Based on the amount of risk-weighted assets, the amount of minimum capital required by the institution may be calculated.
- Sector Based Structured Finance
Provides cash-flow based financing for project developments in specified sectors such as: Natural Resources, Telecom and Media, Utilities-Power and Infrastructure as well as structured financing for specific asset types and industries.
- Securities Services
Our Securities Services division offers custody and securities products to institutional investors, financial institutions and corporate clients. Our services include: custody and post-trading in 10 domestic markets in Europe, integrated reporting, cash management and risk management. We are also a principal paying, listing, ADR transfer and exchange agent for listed companies and financial institutions.
- SEPA
SEPA stands for Single Euro Payments Area. SEPA is an EC mandated program to create a single transparent payment market for cross-border and domestic Euro transactions. For more information, please visit our separate SEPA website.http://www.ingsepa.com
- Shareholders' equity
Capital invested by the shareholders in the company, increased by the reserves.
- Solvency
The ability of a company to meet all its obligations.
- Stakeholder dialogue
Maintaining a regular dialogue with the company's stakeholders. ING's main stakeholders are its customers, employees, shareholders and society at large. A regular dialogue helps ING to balance the interests of its stakeholders in its day-to-day business while taking into account environmental and social risks.
- Structured Finance
Structured Finance is the specialised lending arm of ING Commercial Banking providing clients with creative multi-product solutions through a broad range of structured finance products.
Our advisors working in the area of financial engineering are able to create real economic benefits by tailoring structures that take full advantage of legal cross-border tax, accounting and arbitrate facilities. Likewise, our international trade and export finance experts help you manage flows of commodities and capital across borders in the most economically advantageous manner.
Our award-winning and market-leading asset-based finance team is especially strong in transport, providing funding for shipping, containers, aircraft, and rail and can also arrange structured leases for a variety of other assets including real estate.
Our sector based Structured Finance team encompasses project finance in a wide range of industries including natural resources, telecom and media, utilities and power and infrastructure.
Our Structured Finance syndications unit is one of the leading providers of primary and secondary market distribution of loans, which are generated via our client relationships and has a strong track record in syndicating deals successfully.
- Syndications
Primary and secondary market distribution of loans, which are generated via our client relationships.
- Target surplus (or Tied Surplus)
The amount of capital that must remain in a life company in order to support the business already on the books. Target surplus is an amount held over and above the reserves and is needed due to the uncertain nature of the level and timing of future insurance claims. This capital may not be used for dividend payouts to shareholders.
- Tier 1 Capital
The core capital of a bank comprising paid-up share capital excluding cumulative preference shares, reserves, retained earnings and third-party interests.
- Total shareholder return (TSR)
The return on shares in the form of capital gains and reinvested dividends.
- Trade Finance Services (TFS)
Trade Finance Services (TFS) delivers extended product and service capabilities, including improved facilitation of transactions across different localities, streamlined systems and dedicated product specialists.
- Transfer risk
The risk of an entity being unable to settle either temporarily or permanently amounts due to a cross-boarder creditor as a result of actions by the government or other regulatory authority of the country where the entity is resident.
- Treasury
Managing the cash flows within a company.
- Trust office
A trust office is a body that represents the interests and rights on behalf of a certain group of people. At ING, this term is used to refer to the ING Trust Office. This body represents the interest of ING's depositary-receipt holders.
- Warrant
A financial instrument that gives the holder the right to purchase ordinary shares.