ING AND CORPORATE GOVERNANCE

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ING AND CORPORATE GOVERNANCE

• Erik Dralans,
• CEO, ING Belgium

GUBERNA 29 January 2008
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Content

• I. ING Group at a glance
• II. ING Belgium at a glance
• III. ING Group and Corporate Governance
• IV. ING Belgium and Corporate Governance

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I. ING Group at a glance
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ING Group

• ING is a global financial services company with a
  wide array of banking, insurance and asset
  management services in over 50 countries.
• ING serves a broad customer base, which
  includesindividuals, families, small and
  medium-sized businesses, large corporations,
  institutions and governments.
• ING has more than 75 million customers around the
  world.

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A well-positioned global financial services
company
Banking - Insurance - Asset Management
Global rankings The worlds largest direct
bank The worlds biggest portfolio of real estate
investments 81 on Interbrand top-100
About 120,000 employees in over 50 countries
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The biggest banks in the world
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Legal structure of ING Group
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but organised across six business lines
Koos Timmermans
John Hele
ING Group
Michel Tilmant - Chairman
Finance
Risk
Insurance Europe
Insurance Americas
Insurance Asia/Pacific
Wholesale Banking
Retail Banking
ING Direct
Dick Harryvan
Tom McInerney
Eric Boyer
Eli Leenaars
Hans van der Noordaa
Jacques de Vaucleroy
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II. ING Belgium at a glance
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ING in Belgium

• ING Belgium
• Retail private banking
• Wholesale banking
• Ops IT
• Business support
• ING Investment Management Belgium
• Record Group
• ING Insurance ING Life / ING Non Life
• ING Lease Belgium
• ING Car Lease Belgium
• ING Commercial Finance Belux

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Consolidated balance sheet

• (31/12/2006)
• Total assets 173 304 mln
• Total deposits 140 366 mln
• Total credits 163 516 mln
• Net worth 7 995 mln
• Net profit 1 001 mln
• Employment
• (number of contracts) 14 909

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Banking Insurance within ING Group
Bank
Insurance
2.8
(2.7)
ING Belgium 85 (69)
ING Belgium 479 (614)
17.7
(22.1)
Total
Total 3,048 (2,521)
9.8
Total 2,713 (2,774)
(12.9)
ING Belgium 564 (683)
Total 5,760 (5,295)
Profit before tax, excluding divestments in EUR
millions, ( ) 6/2006
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Banking within ING Bank Holding
Wholesale
Retail
ING Belgium 210 (258)
ING Belgium 269 (356)
19.2
19.2
(24.5)
(25.2)
Total 1,094 (1,022)
Total 1,404 (1,452)
Total banking
ING Directother
17.7
ING Belgium 479 (614)
(22.1)
ING Direct Total 336 (345)
Other Total -122 (-45)
Total 2,713 (2,774)
Banking profit before tax, excluding divestments
in EUR millions, ( ) 6/2006
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III. ING Group and Corporate Governance
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INGs Corporate Governance model

• Structure ING Group
• A two-tier Board structure consisting of the
  Executive Board (Raad van Bestuur) and the
  Supervisory Board (Raad van Commissarissen)
• Executive Board responsible for day-to-day
  management of the business and long-term strategy
• Supervisory Board responsible for supervising
  management performance and advising the Executive
  Board

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INGs Corporate Governance model

• Shareholder influence
• One share, one vote
• Only ING prefs have multiple voting rights but
  these cannot be withdrawn unilaterally
• Proxy voting
• Voting at a distance
• New legislation allows for electronic voting in
  2008 ING will start pilot in 2008 depending on
  technical feasibility
• Proxy solicitation larger shareholders are
  actively approached by ING to vote on the AGM to
  create basis for support
• Appointment Supervisory Board and Executive
  Board(on nomination by Supervisory Board)
• Approve Annual Accounts

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INGs Corporate Governance model

• Trust Offices
• ING Trust Office
• ING has issued depositary receipts for its shares
• Depositary receipts entitled to dividend and full
  voting rights in all circumstances (even if
  hostile bid)
• Trust Office votes at AGM on behalf of the absent
  depositary receipt holders to avoid that small
  minority at AGM has a decisive vote
• Trust Office has full autonomy and an independent
  board

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INGs Corporate Governance model

• Trust Offices
• ING Continuity Foundation
• To temporarily maintain the status quo in case of
  an attempt to acquire an overriding interest in
  ING so that the Executive Board and the
  Supervisory Board can investigate other
  alternatives
• Can exercise call option right for as many
  cumulative preference shares as are necessary in
  order to hold one third of the issued share
  capital
• Full autonomy and an independent board

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Trends affecting Corporate Governance

• Societys changing views on Corporate Governance,
  reflected in increasing regulation (SOX,
  Tabaksblat (NL), NYSE CorporateGovernance
  Requirements, Basle Committee CorporateGovernance
  Guidance, Lippens Code (B), )
• Increasing shareholder activism (private
  equity/hedge funds)
• Accelerating internationalisation/globalisation
  of companies

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Experience with different governance systems

• Netherlands
• Belgium
• Luxembourg
• France
• Germany
• United Kingdom

• One-tier / two-tier
• Shareholder influence
• Management influence
• Employee influence
• Stakeholder influence
• Formal / informal rules

• There is not just one good model
• Models depend on historical and cultural
  evolution
• Respecting local values and practices is essential

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The ultimate goal of Corporate Governance
To contribute to sustained growth and
profitability of a healthy company

• Foster and facilitate performance
• Provide checks and balances at all levels of the
  company
• Choose, nurture, compensate competitively top
  management
• Contribute to the success of the brand and
  reputation

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IV. ING Belgium and Corporate Governance
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Corporate Governance in Belgium

• Code Lippens
• Banks protocol on the autonomy of banking
  institutions
• (under review)

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ING Belgium and Corporate Governance

• ING Belgium
• Unlisted
• 100 held by ING Group
• But licensed Belgian financial institution

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ING Belgium continues to meet requirements of
listed companies, e.g. corporate governance

• We adapt to Code Lippens
• Remuneration Committee transformed into
  Remuneration and Appointment Committee
• Charter of the Remuneration and Appointment
  Committee
• Charter of the Executive Committee
• Charter of all main committees reporting to the
  Executive Committee
• Charter of the Audit Committee

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ING B diverges from Code Lippens

• New internal governance charter to replace
  Protocol on the Autonomy of Banking Institutions
  now being discussed with CBFA
• Mandates to the Board of Directors fixed at 6
  years instead of 4 years
• Only overall figures for remuneration of
  Executive Committee
• comply or explain

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Governance structure at ING Belgium

• Board of Directors
• Delegation of operational management to the
  Executive Committee

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Board of Directors

• Minimum 12 members
• Mandate of 6 years
• Members
• Members of Executive Board
• Majority of non-executive Directors
• representatives of ING Group
• independent Directors
• Decisions by majority
• Selection
• no formal exclusion criteria apart from art. 19
  of the banking law
• general selection criteria such as competence,
  integrity, professional experience, etc.
• Reporting to Board of Directors Audit Committee
  and Remuneration and Appointment Committee

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Executive committee

• 5 Members
• Erik Dralans, CEO and wholesale
• Guy Beniada, CFO
• Michael Jonker, CRO
• Jan Op de Beeck, retail
• André Vanden Camp, operations IT
• Decisions by majority, but consensus in practice
• Specialised committees
• Assets and Liabilities Management Committee
  (ALMAC)
• Financial Markets Committee
• Human Resources Management Committee
• Domestic Board
• Security and Operational Risk Steering Committee

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Examples

• Domestic Transformation Plan
• Operations IT Strategy
• Credit policies processes
• Compliance

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Functional hierarchical Governance

• Role of functions
• Set strategy and priorities
• Establish guidelines policies
• Hire Fire, Appraisal, Remunerate management
  (initiative of functional line, implementation by
  local hierarchy)
• Role of Hierarchy ( Geography)
• Give input on strategy setting
• Implement guidelines, policies
• Check coherence with local rules/regulations
• Advice on management issues
• ?Communication/Dialogue

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Conclusions

• Degree of autonomy
• Potential conflicts Group and Belgium
• Potential conflicts functional and legal structure

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• Questions answers