Division e)

The Netherlandscommits to a number of detailed provisions as regards the carve-out and divestment of WUH/Interadvies:

• Reference is made to the review request/business case proposal (Van Gogh) of the Netherlandsof 4 November 2011 and later updates submitted to the Commission, in particular the business case update of 11 July 2012. The Van Gogh commitments are listed below.

• ING will create a new company for divestment in the Netherlands, which will be carved out from its current Dutch retail banking business. The key financial projections of that business will be as follows^f1:

  Client balances & funding projections NN-bank

  (millions)
  	Start	2013	2014	2015	2016	2017
  Client balances
  Mortgages	EUR 2 600	[…]	[…]	[…]	[…]	[…]
  Consumer Finance	EUR 188	[…]	[…]	[…]	[…]	[…]
  Customer Deposits	EUR 2 940	[…]	[…]	[…]	[…]	[…]
  Wholesale Funding
  ING Bank funding	[…]	[…]	[…]	[…]	[…]	[…]
  Capital Markets	[…]	[…]	[…]	[…]	[…]	[…]

• The result has to be that the new company is a viable and competitive business, which stands alone and is separate from the businesses retained by ING. That new company will comprise parts of the business of the already carved out and stand alone Westland Utrecht/Interadvies banking division (“Westland Utrecht Bank”) and the current (limited) activities of the recently established banking Division of Nationale Nederlanden (NN Bank).

• The Divestment Business will be placed under ING Insurance/IM Europe which has a long-term strategic commitment to the Dutch retail market and will operate under the "Nationale Nederlanden" brand (as “NN Bank”), with its own funding capabilities and a broad distribution network. As a result, NN Bank will be divested as part of ING Insurance/IM Europe no later than 31 December 2015. That divestment will most likely take place through an initial public offering (IPO).

• NN Bank will offer a broad and coherent product line, with mortgages, savings, bank annuities, investments and consumer credit products, combined with core retail insurance products of NN Life and P&C insurance companies^f2. NN Bank will reach customers through an integrated multi-channel distribution model, employing independent financial advisors and tied agents with nationwide coverage for advice on complex financial situations and products, and increasingly internet and call centers for sales and service. All these distribution channels together provide access to over 2,5 million NN customers.

• NN Bank will be largely self-funded through retail savings and excess funding from insurance business, complemented by external funding as needed. NN has access to funding and capital to enable growth and production of mortgages, which is a competitive advantage in current market conditions.

• By executing the business case proposal, part of the existing mortgages portfolio of Westland Utrecht Bank will be retained by ING. The balance sheet of NN Bank will be modest at the start, to provide adequate matching of assets and liabilities and grow quickly to a mid-sized player. The capitalisation will be sufficient to execute its long-term growth plan: ING will transfer economic benefits of the ING-retained portfolio (EUR 350 million based on the net present value of the (economic) profits of that portfolio) as an upfront capital injection, and will provide additional capital (up to EUR 120 million) if and when needed but ultimately just before divestment (if Basel III leverage ratio becomes mandatory, and when NN Bank needs capital to execute the business plan). This will ensure growth to about 2016, after which NN Bank will be able to fund its growth by itself. Hence, ING will bear all expenses and risks of the retained mortgages portfolio (until maturity) and will transfer the profits to NN Bank.

• NN Bank will have the following targets with respect to mortgages and consumer lending:

  • Mortgages

    In mortgages, NN Bank will have an average annual new production, including renewals from the ING Bank-owned (NN branded) portfolio, of at least EUR [1,5-6] billion annually and [2-9] % of the total mortgage production on the Dutch market with a maximum of EUR [2-8]billion annually over the years 2013 (measured from go-live date NN Bank^f3) to 2015. If those criteria are not met, ING will commit cumulatively to:

    • transfer individual client relationships through a transfer of mortgages to NN Bank (based on individual offers to mortgage clients of ING Bank^f4) (size depending on need to come to abovementioned market share; selection of ING’s portfolio with PD’s and LGD’s^f5 in line with the business case);

    • transfer of ownership of those mortgages at no additional charge for the client or charge for NN Bank;

    • allow NN Bank to use the ING Bank distribution channels to offer NN Bank mortgages to ING Bank clients to achieve the targets.

  • Consumer Lending

    In consumer lending, NN Bank will have an annual new production of at least EUR [10-100] million and at least [0,5-4] % of the total consumer lending production on the Dutch market by 31 December 2013^f6. NN Bank will have an annual new production of at least EUR [40-140] million annually and at least [0,5-5] % to be measured as of 31 December 2015 with a maximum of EUR [100-200] million. If those criteria are not met, ING commits to:

    • transfer individual client relationships through a transfer of a consumer lending client portfolio of ING Bank Netherlands (being an ING Bank-owned portfolio) to NN Bank (size depending on need to come to abovementioned market share; selection of ING’s portfolio with PD’s and LGD’s in line with the business case);

    • transfer of ownership of those consumer loans at no additional charge for the client or charge for NN Bank.

• ING commits that by 31 December 2015 or upon divestment of more than 50 % of ING Insurance/IM Europe casu quo. NN Bank the minimum targeted Tier-one level of NN Bank will be 12 %, which is well above the regulatory minimum requirement.

• ING commits to include a payments facility to NN Bank in the form of a NN-branded credit-card at a cost to the consumer not higher than that of a debit card. With regard to the NN-branded credit-card holders, ING will provide access free of charge to its ATMs for three years after the launch of the product and ultimately until 31 December 2015.

• ING will send a marketing mailing with regard to NN Bank to 350 000 of its clients in accordance with Dutch privacy law. ING will be allowed to explain to its clients that the mailing is being made in order for ING to comply with the State aid rules.

• ING Bank will cap its new mortgage production. ING commits that ING Bank’s yearly mortgage production (excluding renewals) is not higher than [2-4] times of the new production of NN Bank. On a quarterly basis ING’s new production cannot exceed [2,5-5] times NN Bank’s new production in the same quarter and [2,25-4,5] times NN Bank’s new production on a half-year basis. If NN Bank’s new production on yearly basis exceeds EUR [2-8] billion there are no restrictions on new production for ING Bank, meaning that if over one semester (half year) the new production of NN Bank exceeds EUR [1-4] billion, ING will not be constrained in the volume of its new production in the consecutive semester.

  NN-Bank needs to provide new production data (new proposals, accepted proposals) and forecasts on a monthly basis to ING without any undue delay. Compliance with the cap will be measured on the basis of the production numbers published by the Kadaster.

  That above-mentioned restriction applies from 1 January 2013 until 31 December 2015. In the transitional period up to the launch of van Gogh, ING commits to a maximum new production (excluding renewals) of [2-4] times EUR [1,5-6] billion (EUR [3-24] billion) on a yearly basis. Progress reporting will be on a quarterly basis.

• NN Bank needs to self‐fund its balance sheet. NN Bank’s funding profile will be in line with the projections of the balance sheet as proposed in the business case. This means that ING will not increase its funding of NN Bank in absolute amounts beyond the amounts in the business plan for each year and the maximum funding provided by ING in 2015 will be EUR 2,7 billion.

  Funding provided by ING at the end of 2015 with a maximum amount of EUR 2,7 billion has to take form of marketable securities, where ING can buy at market prices unsecured or secured notes like covered bonds or RMBS. The notes can be bought also by investors other than ING. 100 % of the notes should have a tenor at issuance of five years or more, 66 % a tenor equal or longer than seven years and 33 % a tenor equal or longer than ten years. The determination of an ‘arm's length’ pricing will be either decided by the pricing of the security itself or if ING is the only buyer of the security by secondary market prices of comparable peers proposed by the Monitoring Trustee.

  The funding amount of NN Bank (total deposits and wholesale funding)^f7 will amount to at least 75 % in the first year, 80 % in the second year and 85 % in the third year (with a maximum wholesale funding of EUR [1-4] billion) versus the base case projections.

  If, due to material changes to the regulatory environment and/or market circumstances, the actual funding is below those ranges, as a result of which the balance sheet projections need to be updated, ING will report that fact to the Monitoring Trustee and the Commission. The Monitoring Trustee in consultation with the Commission will propose which measures should be taken in order to safeguard the viability of NN Bank to be approved by Commission.

  ING’s level of funding will be reviewed on an annual basis starting from the launch of NN Bank (Van Gogh) until 31 December 2015.

  If the funding projections of the business case are not met by the end of each year, ING will take the following corrective measures:

  • After the first year, ING will send a marketing mailing with regard to NN Bank to an additional 50 000 ING clients if actual funding is under 80 % and an additional 100 000 ING clients if actual funding is under 75 % of the base case projection of the first year. After the second year, ING will send a marketing mailing with regard to NN Bank to an additional 100 000 ING clients if actual funding is under 85 % and 150 000 additional ING clients if actual funding is under 80 % of the base case projection of the second year. Mailings will be done in accordance with Dutch privacy law. ING will be allowed to explain to its clients that the mailing is required in order for ING to comply with the State aid rules.

  • After the first year, ING will provide an additional marketing budget to NN Bank of EUR 1 million if actual funding is under 80 % and EUR 2 million if actual funding is under 75 % of the base case projection of the first year. After the second year, ING will provide an additional marketing budget to NN Bank of EUR 2 million if actual funding is under 85 % and EUR 4 million if actual funding is under 80 % of the base case projection of the second year. After the third year, ING will provide an additional marketing budget to NN Bank of EUR 5 million if actual funding is under 85 % and EUR 6 million if actual funding is under 80 % of the base case projection of the third year. NN Bank will use those marketing budgets for new direct sales marketing (mainly promotional […] and […] incentives, and to a lesser extent other marketing methods etc. If the measures do not consist mainly of promotional […] or […] incentives, they need to be approved by the Monitoring Trustee and can be rejected by the Commission)

  If the actual funding of 2015 is under 85 % of the base case projection of 2015, ING will take in addition to the above the following corrective measure:

  • Provide a two-year extension of free access to the ING ATMs for NN-branded credit-card holders (i.e. until 31 December 2017).

• The Commission will assess the above-mentioned commitments upon the divestment of more than 50 % of ING Insurance/IM Europe casu quo NN Bank or by 31 December 2015, whichever date comes earlier. The commitments will end on the date of the divestment of more than 50 % of ING Insurance/IM Europe casu quo NN Bank, unless specified otherwise.

• The creation of NN Bank will be carried out under the supervision of the currently appointed Monitoring Trustee. ING will ringfence NN Bank up to the divestment of more than 50 % of ING Insurance/IM Europe, to be monitored by the Monitoring Trustee. For the implementation of the ringfencing, a leading design principle will be that it will allow NN Bank and NN Insurance to adequately execute an integrated commercial strategy between retail insurance and retail banking products & services.

• ING will refrain for an interim period up to and until 12 months after the divestment of NN Bank (i.e. divestment of more than 50 % of ING Insurance/IM Europe and NN Bank) from actively soliciting customers of NN Bank for products that NN Bank is supplying to those customers on the date of the adoption of the Commission’s Decision.