Risk management

Strong balance sheet with solid credit quality

• Focus on selected, controlled growth in higher-return, lower-risk areas such as highly collateralised lending with a low cost of risk

• Build on our leading position in the Dutch retail market and on our expertise in corporate lending and Wealth management in Northwest Europe.

• Maintain client deposits as our primary source of funding, complemented by a well-diversified wholesale funding mix (long-term debt and equity).

• Keep a strategic focus to limit Loan-to-Deposit (LtD) ratio

• Maintain limited market and trading risk exposures

Diversification and focus within the portfolios and our sources of income

• Align loan portfolios and revenues streams with our strategic priorities

• Maintain a diversified business model with focus on Dutch mortgages and corporate lending in the Netherlands and Northwest Europe.

• Limit excessive concentrations by keeping a sufficiently diversified credit risk portfolio with maximum levels per sectors, clients and countries.

• Diversify our sources of income through Markets and growth in Clearing.

• Monitor concentration developments closely through regular reporting and analysis

Sound capital and liquidity management

• Optimise our risk-weighted assets (RWA) through active portfolio management, including Significant Risk Transfers, model simplification and data quality improvements.

• Optimise our capital allocation through disciplined Client Selection Framework and the reduction of non-strategic activities.

• Centrally manage the balance between available and required capital.

• Maintain capital and liquidity indicators comfortably above current regulatory requirements and aligned with our risk framework.

• Aim for a prudent liquidity profile through a smooth long-term maturity profile, managing dependence on wholesale funding and holding a solid liquidity buffer in key currencies.

• Allocate liquidity buffer costs to the client units to ensure appropriate pricing incentives

• Use stress testing exercises to actively manage capital & liquidity

Strengthening resilience to emerging risks

• Closely monitor geopolitical uncertainties to adjust and limit their impact in our operations

• Continue investing in our cyber-security capabilities to protect our critical IT infrastructure

• Enhance our risk management framework to support innovation through AI

• Proactively implement the EUs Digital Operational Resilience Act (DORA) requirements to increase our digital resilience.

• Focus on a prudential ESG risk management

Simple and structured approach on risk intake and monitoring

• Simplify processes to improve efficiency while taking selective, controlled risks that support our strategy

• Streamline our risk governance model (which is based on the ‘three lines of defence’) to keep sharper focus on the most important risks, enhance accountability and generate time savings.

• Monitor and control operational risk by setting thresholds on potential losses

• Maintain relatively low market risk compared to the size of the bank

• Continuously monitor business risk to ensure effective and timely responses in the face of expected and unexpected internal and/or external developments.

• Foster a culture of accountability, performance and innovation in a constantly changing banking landscape

• Keep abreast of all relevant laws and regulations affecting the banking sector

Move from broad ambition to impactful delivery

• Further integrate sustainability within the business to deliver greater impact

• Fund Europe’s competitiveness with focus on transition sectors

• Aim to create long-term, sustainable value for all our stakeholders, with clients and investors centre stage.

• Develop a Transition Finance Framework to make our emissions pathway to support an orderly and sustainable transition towards net-zero emissions credible and achievable

• Use financial expertise to guide clients towards a more sustainable future.

• Reduce the environmental footprint of our own operations.

The risk appetite determines the level and nature of risk that the bank is willing to take in order to pursue its strategy, taking all relevant risks and stakeholders into consideration. The Strategic Risk Appetite Statement entails three focus areas, each of which is substantiated by a qualitative statement and concrete strategic risk indicators (SRIs): (i) Financial soundness, (ii) Sound operating environment and (iii) Sustainable business model & value creation.

The Group Risk Committee (GRC) is mandated by the Executive Board to monitor, assess and manage the bank’s risk profile within the approved risk appetite framework. In this framework, all types of risk, cross-risk types and overarching risks are identified to provide one integrated view on the risk profile for the bank as a whole and on the risk profile of each individual client unit.

The status of adherence to the risk appetite and the outlook are discussed every month by the Executive Board, and every quarter by the Supervisory Board, based on the CRO memo. Our risk appetite framework is reviewed at least annually and is subject to the approval of the Managing Board.

We classify risks into types of risk to which the bank is, or could be, exposed to. This is referred to as our ‘risk taxonomy’. We review and update it once a year to ensure that all material risks are identified, defined and considered in the risk governance framework. The taxonomy considers materiality of risks based on an assessment of financial and non-financial impact in combination with likelihood.