9a. BNG Annual Report BNG 2024.pdf

35

Progress in circular waste treatment Waste company Omrin is expanding with a fourth fermentation installation. This was necessary because more and more municipalities are being served by Omrin (currently there are 36 municipalities that are shareholders). This, in turn, contributes to higher separation results for the company. The new installation provides an additional 5 million m³ of biogas annually and works with an innovative dry fermentation system. This system produces biogas more efficiently, with less wastewater and a higher energy yield. Together with another financial institution, we provided the funding for this. With this, BNG is committing to more renewable energy from residual waste. In addition, Omrin’s existing credit facilities have been restructured and extended by eight years. This will allow Omrin to make other important investments, such as in the construction of a new office, the purchase of bunker cranes and measures to limit odour and noise pollution. These developments will reinforce Omrin’s role as the most circular waste processor in the Netherlands.

36

3.2 Financial results Results and return During the 2024 reporting year, BNG recorded a net profit of EUR 294 million. This is

adjustments, the ineffective portion of hedge accounting and revaluations of the credit component of financial products.

EUR 40 million more than in 2023. This performance was also reflected in a higher return

The consolidated operating expenses of BNG amounted to EUR 152 million on balance. These

lendingportfolio and higher liquidity spreads for governments and public sector entities

external personnel. The hiring of external employees is aimed, among other things, at

on equity of 6.4%, compared with last year’s return on equity (5.5%). The growth of the have contributed to this result.

The presentation of the financial results in the consolidated income statement was

amended in 2024 with respect to derivatives. This is to provide a better understanding of

the factors underlying the result from financial transactions. The comparative figures have been adjusted for this.

BNG achieved a net interest result of EUR 536 million. This result is EUR 19 million higher than the result for 2023. The growth of the lendingportfolio has contibuted to the increase in

interest result. Furthermore, higher interest rates in 2024 more than offset the less attractive conditions for short-term transactions.

In 2024, compared to last year, the commission result increased by EUR 4 million to

increased by EUR 10 million compared to 2023. This is due to the addition of temporary implementing new legislation and regulations and improving the strengthening of the

current IT infrastructure. On the other hand, the Resolution Fund did not call for additional contributions. In 2023, it was EUR 14 million.

The result from the special impairments on financial assets in 2024 is EUR 35 million positive (2023: EUR 8 million positive). The bank's total provisions for expected loans and advances losses decreased by EUR 32 million to EUR 53 million, mainly due to the settlement of a number of loans and advances (together EUR 39 million).

The effective tax burden for 2024 was 27.0%, at a nominal corporate income tax rate of

25.8%. The bank levy amounted to EUR 31 million in 2024, EUR 9 million higher than in 2023. This increase is primarliy caused by the tax rate being raised by more than 30%.

EUR 30 million. The increase is mainly attributable to commissions related to treasury

The balance sheet total of BNG in 2024 was EUR 128 billion, which is EUR 12 billion higher

to clients.

result, the balance sheet item Debt securities increased by EUR 10.4 billion. Of this amount,

activities. Commission income also consists of preparation and payment fees invoiced

The result on financial transactions amounted to EUR 15 million negative. Last year, this was EUR 32 million negative and was strongly influenced by the termination of the ECB easing

policy. The cessation of massive bond purchases in the market led to a substantial increase in bond liquidity spreads in 2023. These spreads remained high in 2024.

than in 2023. This is, among other things, the result of attracting more new funding. As a EUR 5.5 billion is long-term funding. This funding was used to finance the growth of the loan portfolio and the remainder was included in the balance sheet item ‘Cash held

at the central bank’. Furthermore, risk-weighted assets increased from EUR 9.6 billion to

EUR 10.3 billion. The increase is mainly due to an adjustment of the solvency weighting of drinking water companies and network companies.

The realised sales results of EUR 18 million negative were the largest contributors to the result

The size of the long-term loan portfolio is EUR 93 billion, of which EUR 7.6 billion is subject to

and losses on financial transactions of EUR 3 million are net of unrealised market value

of 2023 is completely free of solvency requirements. In 2024, EUR 11.7 billion in new long-term

for financial transactions this year. Last year, it was 23 million negative. Unrealised gains

solvency requirements. The increase of the portfolio by EUR 3.9 billion compared to the end

37

loans and advances were granted, EUR 0.4 billion more than last year. The increase in

the portfolio is particularly due to high demand in the housing sector. The portfolio in the housing sector increased by EUR 4.0 billion to EUR 50.9 billion in 2024.

BNG maintains a target of 90% solvency-free exposures in the total loan portfolio. The

target was achieved at 91.8% in 2024. In addition, the bank aims for a success rate of at

least 60% on solvency-free long-term lending to local authorities, housing associations and healthcare institutions. In 2024, 61% of loan applications were granted by the bank and the 60% target was met.

Liquidity ratios remain strong, with a net stable funding ratio of 139% in 2024 (119% in 2023) and a liquidity coverage ratio of 217% (143% in 2023). These ratios are also well above the minimum levels and reflect the bank’s prudent risk management.

At year-end 2024, BNG’s equity stood at EUR 4.8 billion. Of this amount, EUR 0.3 billion is

additional Tier 1 capital. The Bank’s solvency ratios remain strong. The Common Equity Tier 1 ratio is 40% and the Tier 1 ratio is 43%. In 2023, these figures were 43% and 46%, respectively. At the end of 2024, the leverage ratio was 12%, which is 1% lower than the 13% at year-end

2023. The CET1, Tier 1 and leverage ratios are well above the minimum values imposed by the regulator.

Dividend A dividend of EUR 140 million for 2024 will be proposed at the Annual General Meeting

(EUR 120 million in 2023). In line with our policy, this is 50% of the net profit, adjusted for the payout on the additional Tier 1 capital.

BNG recorded a net

profit of € 294 million. This is € 40 million more than in 2023

38

Financial Results

Lending 2024

Long-term

loans 2024

€ 11.7 billion

AAA

Net profit 2024

2023

€ 11.3

€ 294

€ 254

Return on equity

2024

billion

External ratings by

Moody’s, S&P and Fitch

Share of

of the Dutch State.

in portfolio.

are in line with the ratings

million

promotional loans

million

Return on equity is above return

6.4%

5.6%

2023

benchmark of the Ministry of Finance

At least 90% of the long-term loans on the balance sheet should qualify

2024

2023

40%

50%

43%

50%

35%

50%

Factors that influence net profit:

2024

94%

Target 90%

Higher interest results 536

Scoring percentage for lending

Leverage ratio 2024

Net profit increased in 2024

of 1,7%

Common equity Tier 1 ratio

2022

2023

Higher result financial transactions

Changes in allowance for credit losses

517

volume exceeds 60% 12%

Increase in operational expenses

152

15%

142 3

2023

2022

13%

13%

15%

15%

2024

61%

-15

Target ≥60%

2024

2023

(in EUR million)

2024

-27

-32 2023

(in EUR million)

2024

2023

(in EUR million)

2024

2023

(in EUR million)

39

3.3 Financial outlook As in previous years, BNG’s funding policy will continue to be focused on ensuring

permanent access to the money and capital markets at the terms and volumes required

and at the lowest possible rates. BNG expects to raise approximately EUR 19 billion in funding in 2025. Over the next year, the bank again intends to raise a substantial part of its longterm funding from ESG bonds.

BNG does not expect to pay a contribution to the Single Resolution Fund in 2025. The fund

has been fully paid up since 2023 and requests for it to be supplemented are only made in the event of a bankruptcy of a European bank.

BNG is expected to remain financially strong in 2025, as well. Strong capitalisation, healthy profitability combined with a high market share and good funding conditions are also providing a solid financial foundation for the future.

The total amount of net profit is subject to uncertainty because the bank cannot forecast the development of unrealised market value adjustments. The bank is unable to reliably estimate net profit for 2025 for that reason.

40

4. CO2e emissions

4 41

Although BNG clients are mainly active in the social field, they also have a role to play in the field of the environment and energy transition. The climate crisis, stricter EU legislation on sustainability and increasing pressure on the public domain call for substantial investments and innovative solutions to climate issues. This underlines the urgent need for financial institutions to deal effectively using the resources available. Our impact-driven strategy responds to this. We aim to achieve net-zero CO2e emissions

Responsible financing for a sustainable society Climate change entails significant risks, such as physical damage from extreme weather conditions and transition risks from the transition to a sustainable economy. An example of this is the depreciation of buildings that do not meet the sustainability requirements.

Through strategic cooperation, we are supporting our clients in their transition to a more sustainable economy, while also working actively to limit risks.

within our value chain by 2050. In doing so, we are focusing primarily on making our lending

Although we only have an indirect influence on our clients’ emissions, we encourage

taking measures within our own operations, such as the use of renewable energy and the

encourage sustainability. Examples of this are the financing of heating networks and

more sustainable, with specific reduction targets for 2025 and 2030. In addition, we are also renovation of our office.

sustainability by means of targeted financing, strategic discussions and conditions that sustainability projects for housing associations and municipalities.

We are actively contributing to the energy transition by financing renewable energy, such as wind and solar energy , energy-efficient buildings, electric mobility and CO2e storage infrastructure. Network operators play a crucial role in this, which is why we also support investments in expanding and strengthening the energy network.

Financed emissions We have been measuring the CO2e emissions caused by our financing since 2018, based

on the method developed by the PCAF (Partnership for Carbon Accounting Financials). The

outcome of this measurement and the methodology and data used are described in detail

in our report “Greenhouse Gas Emissions of BNG's Loan Portfolio”, which can be found on our

website. In the 2024 report, we provide an update of the financed emissions associated with the outstanding loans as at 31 December 2023. In paragraph 9.1 of this Annual Report, the key elements of the methodology and data are explained.

In our Going Green climate plan, we have set targets for our financed emissions. Every year, we report on the progress made on these targets in our Climate Progress Report, which we publish as a separate document at the same time as this Annual Report.

42

The absolute financed issues from our loan portfolio will increase from 1,770 ktCO2e in 2022 to 2,4451 ktCO2e in 2023. This increase is attributable to the expansion of loans in scope

and the growth of the portfolio in our emissions measurement. The coverage ratio of

our measurement increased from 89.8% in 2022 to 99.6% in 2023. The loan portfolio also grew by 1.3% from €86.7 billion in 2022 to €87.8 billion in 2023. This resulted in 28.2 tCO2e

per financed million euros, an increase of 24% compared to the previous year (2022: 22.7 tCO2e/€m). The increase is mainly due to the expansion of the emission measurement

of the Public Infrastructure and energy sector. This is a diverse sector with more emissionintensive client groups. In our Climate Progress Report, we look more closely at the client

groups that we finance within this sector. If we limit ourselves to the sectors we measure from 20182, these will generate 20.4 tCO2e per financed million euros, a decrease of 5%

compared to the previous year. For the calculation of the KPI on the percentage decrease of absolute scope 1 and 2 emissions, only the sectors that we have been measuring

since 2018 are included. These sectors are Housing Corporations, Municipalities, Provinces,

Water Boards, Healthcare, Education, and Drinking Water Companies. The absolute emission measurement for scope 1 and 2 for these sectors was 911 ktCO2e in 2023 and 937 ktCO2e in 2022. This is a decrease of 3%.

For the first time this year, we have mapped out the financed emissions for our bond portfolio. These are bonds that we have purchased from sovereigns, supranationals,

multilateral development banks, municipalities and companies in the Public Infrastructure sector. Emissions were able to be measured for 48% of this portfolio in 2023. These results are explained in more detail in the Climate Progress Report.

1 This differs from what we presented in our Annual Report 2023. The methodology for calculating the scope 3 emissions of municipalities has been refined. We have also applied this change retroactively to the 2022 emissions. 2 Housing Associations, Municipalities, Provinces, Water Boards, Healthcare, Education and Drinking water Companies

43

CO2e emissions associated with loan portfolio

Avoided emissions

Social Housing

Public Sector

Healthcare Institutes

Education

Public Infrastructure

Other

Energy

Emissions

(tCO2e/€ mln)

9.9

38.4

30.2

464

1,058 464

200

2.1

3.8

100%

100%

714.3

13.2

149.8

14

686

3.2

3.4

3.5

5.0

3.0

100%

100%

99%

100%

62%

80.7

Total 2,445 kton CO2e

Emissions attributed to credit loans by BNG

23

380

PCAF data quality

score (range 1 to

5, with 1 being the highest score)

% portfolio included  in measurement

More details are included in the tables in section 9.1 of this Annual Report.

44

Development in CO2e emissions associated with the loan portfolio

Social Housing

Public Sector

Healthcare Institutes

Education

-7%

-33%

% change in CO2 emissions measured in tCO2e/€ mln

2023 compared to 2022

-14% +11%

38.4

Development of CO2 e  missions

of selected client sectors (in tCO2e/€ mln)

9.9

2023

11.5

2022

46.3

42.6 34.6

30.2

32.3

30.0 19.7

17.3

2018

13.2

2023

2022

2018

2023

2022

2018

2023

2022

2018

The Public Infrastructure and Other sectors are not included in this visual as the 2023 figures are not easily comparable with those of 2022.

45

Internal operations and sustainability In addition to our external impact, we aim to achieve CO2e neutrality and the responsible

use of materials within our own operations. We report our scope 1, 2 and 3 emissions

annually in accordance with the Greenhouse Gas Protocol (GHG). This year, we expanded our measurement to include emissions caused by our employees’ commuting, other

Emissions CO2e (in tonnes) 2024

2023

416

Total

business travel (in addition to air travel) and emissions resulting from our waste.

2022

268

Total

(0.9 per fte)

191

Total

(0.6 per fte)

(0.5 per fte)

In 2023, we started renovating our office building on Koninginnegracht. The building will

be preserved further and will meet the highest energy efficiency standards after delivery

(energy label A++). During the renovation period, we are using temporary accommodation

194

176

that runs partly on gas, which has led to a temporary increase in scope 3 emissions. Nevertheless, the electricity supply remains completely green. We will return to our

107

renovated and more sustainable office building in 2026.

We tightened our lease policy in 2024. We can now only opt for electric lease cars. As a

result, we will have a fully electric fleet from 2029. Our policy on business travel has also

been tightened: the train is the standard choice within Europe and within a radius of 750 kilometres around The Hague.

94 67

47

81

65

45

0.4

0.1

0.4

0.2

0.2

0.1

0.2

0.2

0.11

Scope 1

Scope 2

Scope 3

Scope 1

Scope 2

Scope 3

Scope 1

Scope 2

Scope 3

(in tonnes)

Absolute

(in tonnes)

(in tonnes)

Per fte

Energy and heat consumption 2024

732 1.5

2023

1,275

2.7

2,211

2,151

212

0.4

Electricity Natural gas Heat consumption consumption consumption (in MWh) (in GJ) (in GJ) Absolute

2022

1,091

1,014

2.3

2.1

1,049 4.5

Electricity Natural gas Heat consumption consumption consumption (in MWh) (in GJ) (in GJ)

2.7

5.6

Electricity Natural gas Heat consumption consumption consumption (in MWh) (in GJ) (in GJ)

Per fte

Note: Our scope 1 emissions have increased since 2023 due to the use of gas in our temporary office building for heating the building.

46

5. Internal business operations

2 47

5.1 Employees Our people: the heart of the bank Our employees make a difference and are the beating heart of BNG. This awareness is firmly anchored in our strategy, in which we emphasise: ‘We are a bank with a heart, focused on personal growth and cooperation.’

Strategic priorities In 2024, we continued to shape this strategic ambition with initiatives that fit in with our

new core values: professional, binding and optimistic. These values were introduced during the ‘BNG Boost’ meeting, at which the entire bank was present, in the first quarter. This

meeting provided us with the opportunity to flesh out our core values and the associated culture together.

Strengthening our strategy includes concrete and measurable goals in the areas of

Human resources policy Our human resources policy focuses on creating an inclusive, sustainable and fair working environment. This policy is based on our human rights policy, which applies to lending,

liquidity management and procurement. It promotes equal opportunities and fair pay, regardless of gender, race, religion or employment relationship.

In 2024, we implemented important policy updates to strengthen our human resources strategy. One of the most important initiatives was the introduction of a new job centre

in collaboration with the Works Council. The job centre consists of seventeen job families and promotes internal flow. Employees are given more clarity about the knowledge,

skills and competences they need to make progress within or outside a job family. This

transparency contributes to the involvement and development of our employees and helps our management in the implementation of the strategic human resources planning.

diversity, inclusion, involvement, development and cooperation. Each quarter, we reported

We have also developed and adopted our policy for external hiring. This policy provides a

way to show successes and take further steps.

laws and regulations. It helps us to deal strategically and consciously with personnel needs

on progress and impact through identified KPIs. These quarterly reports are an important

In the fourth quarter of 2024, we developed the ambitions for our strategic objective further

clear direction for our recruitment strategy and complies with applicable labour relations and strengthens our position as an attractive employer.

in program plans for 2025 and targets through to 2026. As a result, ‘a bank with a heart’

We have also updated our privacy policy in 2024. We have developed new data

growth. The KPIs for this objective are now also anchored in the Performance Management

Compliance and the Works Council. The Data Protection Officer (DPO) was involved in this.

remains not only an ambition, but a lasting driver that is visible in our culture, results and

System, by which joint results targets for management will be integrated across the bank by 2025.

and communication monitoring arrangements in close collaboration with IT Security,

This update ensures compliance with laws and regulations and protects the privacy of our employees.

48

Personal growth

At the same time, the so-called Employer Net Promoter Score has still not reached the

In 2024, we once again invested heavily in the development of our employees. We

will not recommend BNG as an employer (25%) is higher than the percentage that will

stimulated more internal mobility and saw a growing use of our learning and development platform, which is a part of the ‘Unlimited Learning’ concept. This concept reflects our

ambitions to continuously support employees in their personal and professional growth. In 2024, the platform offered a mix of mandatory e-learning modules and customised

level desired in 2024. The score is -1 (2023: -7). This score means that the percentage that recommend BNG as an employer (24%). This is an important signal that has been translated into concrete actions for management.

learning tracks for specific topics, such as onboarding.

Recruitment, selection and onboarding

Each employee sets themselves personal development goals for the coming year through

We optimised our recruitment and selection activities in 2024. We reinforced our presence

started a Personal Leadership Programme in 2024. This program builds on previous

programme. 16 new employees have been recruited via the referral programme. The

our Performance Management system. In order to strengthen talent development, we leadership initiatives and includes forty employees selected based on development

potential as defined in the Strategic Human Resources Planning. The programme consists of two two-day modules, followed by peer-review meetings, and is accessible to employees of all ages.

Diversity and inclusion Diversity and inclusion took centre stage in 2024. In January, we signed the SER Charter on

Diversity and submitted a plan of approach to the SER, confirming our commitment to these

on social media and deployed our employees as ambassadors through the referral time needed to fill vacancies (time to hire) increased in the first half of 2024, but

decreased in the second half. We have increasingly filled vacancies through internal

flow, recommendations and our own recruitment efforts. As a result, the share of external agencies in our recruitment activities continued to decrease.

We improved our onboarding programs in 2024 to integrate new employees more quickly,

regardless of their employment relationship. These programs help them feel connected to our organisational culture. These programmes contribute to a smooth start and reinforce the sense of involvement in BNG as an attractive employer.

themes. As part of this plan, we established an ambassador group that actively works to promote diversity and inclusion within the organisation. These efforts were supported by

events, such as the BNG Boost meeting and the initiatives during Diversity Day. These events contributed to raising awareness and engagement among employees.

The results of our Pulse Surveys in the first and last quarter of 2024 provided important

insights into social safety, collaboration, engagement and familiarity with our strategy.

We shared the team results across all teams and discussed actions and improvements

together. In addition, we have identified a number of bank-wide topics that we will work with on a structural basis in 2025.

The report figures for 2024 were 7.3, 8.3 and 7.6 on the topics of enthusiasm, inclusion and social security (2023: 7.4, 7.9 and 7.5). And we take pride in this.

49

Sustainable employability and green employment conditions Sustainability is an essential aspect of our human resources policy. We are inspired by the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for

Multinational Enterprises. This is reflected in sustainable employment relationships and

‘green employment conditions’. To promote the sustainable employability of employees,

we offer facilities such as a sports budget, bicycle plan and vitality leave. These contribute to the vitality and long-term commitment of our employees.

Absenteeism is 4.0% in 2024, which is higher than in 2023 (3.3%). This higher rate of

Key figures HR

478

323

58

31

155

colleagues

absenteeism is mainly due to higher absenteeism in the fourth quarter. Long-term

3 instances of illness or more during the past 12 months. In the event of frequent sickness absence, managers will speak directly with employees.

We made our mobility and leasing policy more sustainable in 2024.

54

left the organization

commenced employment

46

is the average age

100

21 68

is the youngest employee

is the eldest employee

male

changed position internally

46 432

jaar

number of employees

absenteeism is largely medically related. The standard for frequent absenteeism is set at

female

male female

75

50

work full-time > 36 uur

97

92

74 60 52 37

25

-

work part-time < 32 uur

35

31

20%

22%

≤34

35-44

age

31%

27%

45-54

≥55

50

Remuneration Policy

The SB oversees the bank's remuneration policy. The general principles of the remuneration

BNG is a member of the Employers' Association of Banks (WVB) and applies the Banks'

on the implementation of the remuneration policy and reviews whether the remuneration

Collective Labor Agreement (CAO Banken). 94% of BNG employees fall under the Banks' Collective Labor Agreement.

Based on the agreements in this collective labor agreement, salaries and salary scales were increased by 4% on January 1, 2024. In addition to many other arrangements, the

collective labor agreement also includes a parental leave arrangement that can be further detailed at the organizational level.

BNG has a parental leave arrangement where the first 4 weeks of parental leave (a total

of 9 weeks possible) are supplemented to 100% of the salary. In 2024, 18 employees (9 men and 9 women) made use of this arrangement. All employees whose parental leave has ended, have returned to their position.

policy for the ExCo and employees are approved by the SB. Annually, the SB is reported

policy meets the principles for a controlled remuneration policy. For this purpose, the Risk Management department conducts a risk analysis for various parts of the remuneration policy. There is also an annual report and consultation with the Works Council on remuneration ratios within the bank.

The determination of the remuneration policy for the statutory members of the ExCo and

the determination of the remuneration scheme of the SB is done by the General Meeting of Shareholders (AVA). The salary of the highest-earning member of the ExCo was 3.87 times

the median salary of BNG employees in 2024 (4.07 in 2023). The average salary (wage bill)

increased by 13.7% compared to 2023. The remuneration policy and the remuneration report are published on the website. The remuneration of the members of the ExCo and the SB in 2024 is reported in the Financial Statements.

The Banks' Collective Labor Agreement also includes a vitality arrangement. Employees can take two months of leave based on certain criteria while retaining part of their

salary. In 2024, 11 employees made use of this arrangement. Additionally, the vitality

arrangement includes a so-called 80-80-100 arrangement where the employee works 80% for 80% salary but retains 100% pension accrual. Four employees within BNG participated in this arrangement.

All employees participate in the pension scheme of the ABP. BNG contributes 70% to the

pension as an employer, and the employee contributes 30%. All mentioned figures are as of the end of 2024.

BNG strives for a controlled remuneration policy, in line with our identity and strategy.

We want the remuneration policy to discourage taking more risk than acceptable. The

remuneration policy should also not lead to incentives for non-integrity behavior. Therefore, employees and members of the ExCo and the Supervisory Board (SB) do not receive

variable remuneration. In situations of exceptional performance, employees may receive a one-time bonus or token of appreciation.

51

5.2 Compliance We act with integrity. This starts with compliance with relevant laws and regulations. In addition, we follow strict rules for integrity within our organisation and for our employees. These rules also apply to clients, partners, suppliers and any other third parties involved.

Compliance cycle Governance & compliance universe (Charter, Regulatory Compliance 

Governance The integrity and regulatory compliance risks are BNG’s compliance risks. All departments within the bank are responsible for managing these. A second-line independent

Riskmanagement)

Risk identification  & assessment

Reporting

compliance function supports this. This function advises, monitors and reports on integrity

Driven by: Corporate values Company code

and compliance risks. We describe the purpose and tasks of the compliance function in the Compliance Charter. The compliance cycle forms the basis for these activities.

Compliance policies & procedures

Monitoring

Advise & support

Training & awareness

In this cycle, we identify and analyse risks. In addition to the monitoring activities, the

Risk Control Self-Assessment, the policy for Regulatory Compliance Risk Management and the Systematic Integrity Risk Analysis (SIRA) are all important instruments. We map our integrity risks annually via the SIRA. In 2024, we focused mainly on refining the risks of

financial-economic crime (FEC) and the bank-wide themes of organisational integrity and duty of care.

52

Developments in 2024

Financial and economic crime

In 2024, our focus was on two areas: strengthening existing activities and addressing

We renewed our client integrity policy in 2024. This policy forms the basis for the due

specific compliance risks.

On the one hand, we have focused on consolidating our existing activities and increasing their effectiveness and efficiency. This included the SIRA and the process by which we monitor the compliance risks of existing and new regulations.

On the other hand, the emphasis was on compliance risks, for which the basis was not

yet strong enough. We implemented improvements to ensure that we continue to operate within our risk appetite.

Risk Appetite

diligence process. This allows us to assess counterparts in the international money and

capital markets, clients in the Dutch public domain and other relationships. In addition, we

use this policy as a foundation for our transaction monitoring programme, which allows us to detect suspicious transactions.

An important part of the due diligence process is to assess corruption risks and the

associated risks, such as country risk. We also assess corruption risks in the SIRA. We look

at both commercial processes and our own internal processes. We estimate the inherent risks to be limited. Our policy and code of conduct further limit these risks. That is why we have not offered specific anti-corruption training. We also did not register any incidents of corruption.

In 2024, we found that we were not fully operating within our risk appetite for compliance

Conduct risk

and the necessary governance and resources to address privacy risks. Preparing for

Our updated code of conduct remained the starting point for the standards we apply in

provisions on time, while implementing temporary measures for other provisions.

parties and to provide honourable products and services, we have developed this code of

risks. This included the execution of our gatekeeper role, the technical support for this,

future regulations also posed challenges. We had to make choices to comply with critical

In 2024, we took steps to operate within our risk appetite. Where necessary, these efforts will continue to be a high priority in 2025. Although we did not fully operate within our own risk

2024. In order to ensure the integrity of our employees, clients, counterparts and other third conduct in additional policies where necessary. We evaluate and update this policy at least once every two years.

appetite, this did not lead to serious integrity incidents.

New employees (internal and external) are informed about this code of conduct and the

In 2024, we found that the privacy team had insufficient capacity to implement the desired

and complete several in-depth training courses. The policy has been published internally

improvements in the privacy framework. Therefore, we decided to establish a privacy office within Compliance in mid-2024. Employees of this privacy office work on improvements in the protection of personal data. Incidents involving sensitive personal information had no

significant impact. Two data breaches were reported to the Data Protection Authority as a precaution. We have not received any complaints about privacy breaches.

related policy at the start of their work. During their onboarding, they take the banker's oath and is accessible to existing employees. Managers, HR and Compliance are ready to provide consultancy or answer questions about this policy.

Together, managers, HR and Compliance have the responsibility to check whether

employees are aware of the desired behaviour. In addition to regular contact moments, where signals can be discussed in this regard, we offer a range of options for reporting potential irregularities. We have a reporting scheme and a complaints scheme for

employees. There is a complaints procedure for external stakeholders, which can be found 53

on our website. Compliance monitors the effectiveness of these schemes and found in 2024 that there were no reports with a significant impact.

We did not identify any internal fraud cases in 2024 and did not conduct any internal fraud investigations. However, one incident was reported, which showed that a control measure against internal fraud was not fully effective. The team in question has introduced an

additional measure in this regard. We did not receive any signals of external fraud cases caused by BNG.

Regulatory compliance risk Demonstrable compliance with all of our obligations requires constant effort. Not only because of the extent of the obligations and the continuous flow of changes in the

regulations, but also because of the interpretation of obligations and the standards that are often in flux.

The new regulatory compliance risk management policy for 2023 provides insight into

how to identify and report on compliance risks. We continued to build on this in 2024. We

detect and identify material compliance risks through analytics and monitoring within the compliance cycle. In addition, we use information from first-line monitoring, audit reports and discussions with regulators.

A range of activities contributed to managing the regulatory compliance risk in 2024. For example, improvements in tackling financial-economic crime have led to better

compliance with the Anti-Money Laundering and Anti-Terrorist Financing Act. Improvements in the management of IT risks and credit risks have also strengthened our compliance with

regulations in these areas. In addition, we have prepared ourselves for new regulations that will come into force in 2025.

We are focusing on timely compliance with provisions from the new Capital Requirements Regulation, the Corporate Sustainability Reporting Directive, the Digital Operational

Resilience Act and the Instant Payments Regulation. For less urgent provisions, we make

choices to implement these in phases, take temporary measures or accept risks within our decision-making processes.

We maintain close contact with regulators about regulatory compliance risks. We did not

receive any fines or penalties in 2024 and were not involved in any legal proceedings due to non-compliance. There were also no outstanding fines or sanctions from previous years.

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5.3 Risk Management Risk management focuses on managing and controlling risks in order to keep the bank's risk profile safe. Identifying, accepting and managing risks is an essential part of our business. In doing so, we must accept certain risks in a controlled manner and manage them effectively. Every year, we evaluate our risk appetite and adjust it, if necessary. This means that, we are

in line with current developments and strategic objectives. We use the principles to arrive at risk appetite: •

Risk appetite: BNG wants to provide stakeholders and clients with the best possible

service now and in the future. The risk that we are prepared to take on this must fit within the strategic principles. The return required by the shareholders is based on a long-term responsible risk profile. This means that the return required will not lead the bank to take risks that could jeopardise its credit rating or funding position.

•

Competitive terms: Offering financing on competitive terms is an important starting point for BNG. In addition to the inherent risks of lending, the bank accepts risks selectively to support lending to clients.

•

Restriction on activities subject to solvency requirements: The majority of lending is

directed at the public sector or guaranteed by government guarantees and by the

guarantee funds WSW (Social Housing) and Wfz (Care). As a result, these exposures have a very low credit risk. We have opted for the ‘National Promotional Bank’ status, which means that we only provide limited (max. 10%) remaining loans without direct government involvement (subject to solvency requirements).

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Risk Management Framework

Internal Governance

Charters Executive Committee and Supervisory Board

Three Lines of Responsibility

Risk Framework

Assessment

Risk policies

Other Policies

Risk Definitions

Risk Appetite Statement

Integrated Risk Management

Risk Management Charter

Financial Risk Management

Compliance Cycle

Non Financial Risk Management

(Strategic) Risk Materiality Analysis

ICAAP

ILAAP

Recovery & Resolution

Risk Control Self Assessment processes, projects, applications, outsourcing partners

Business Contingency Planning

Credit Risk Policies

Market Risk Policy

Liquidity & Funding Risk Policy

Operational Risk Management Policy

Product Approval Policy

Capital Management Policy

Stress Testing  Policy

Outsourcing  Policy

Disclosure Policy

Model Governance Policy

Model Validation Policy

ICT Risk  Management P  olicy

Security Policy

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Risk Management Framework

Risk related governing bodies

The Risk Management Framework (RMF) is the set of policy documents that outline the

risk management principles at BNG. The framework brings together a range of elements that play a role in our bank's risk management. We consider Environmental, Social and

Supervision

Governance (ESG) to be a risk factor for the above traditional risk categories and, therefore,

Supervisory Board (all risks)

it is an integral part of the RMF.

Risk Committee (all risks)

The ExCo determines the risk management frameworks and, within these frameworks, the

Asset & Liability Committee (ALCO), Credit Committee (CC), Credit Policy Committee (CPC), Credit Committee treasury (CCT), Sustainability Banking Committee (SBC), Non-Financial Risk Committee (NFRC), Integral Portfolio Committee (IPC) and Client Acceptance and

Policies and decision making

Review Policy Committee (CARPC) decisions on the risks of the bank. The Supervisory Board

Executive Committee

(SB) and, in particular, the Risk Committee (RC) of the SB, evaluate the risk management.

(all risks)

This is an important part of its supervisory role.

See the overview of risk-related committees beside:

Operational ALCO (market risk, liquidity risk, capital)

Credit Committee STMP (credit risk)

Credit Policy Committee STMP (credit risk)

Credit Committee Treasury (credit risk)

Sustainable Banking Committee (ESG)

Non Financial Risk Committee (operational, compliance, security risks)

Integral Portfolio Committee (IT, change risk)

Client Acceptance and review policy Committee

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The purpose and powers of the Risk Management and Compliance departments are laid down in the Risk Management and Compliance Charters respectively. Risk Management

A summary of the roles of the Exco committees per risk manager type is set out in the table:

and Compliance are represented in the risk-oriented ExCo committees and takes part in

meetings held by the SB’s Risk Committee. The head of each department reports to the CRO and the Executive Committee and has a reporting line to the Supervisory Board. Committee

Responsible for risk type limits/objectives

2nd line reporting

Executive Committee

Strategic Risk and monitoring of all risks

Integrated Risk report

ALCO

Liquidity risk and market risk

Market risk dashboard

Capital limits (covering multiple risks)

Liquidity risk dashboard Share capital dashboard

CC/CPC STMP

Credit risk for legally defined market parties

STMP Credit Risk Monitoring Report

CC Treasury

Credit risk of financial counterparties, Treasury portfolios

Treasury credit risk monitoring report

NFRC

Operational Risk, security risk and compliance risk

Operational risk report, Compliance report, Security report

SBC

Overarching ESG risk. Coordinating ESG-related activities and analysing the potential effects of strategic ESG risks.1

ESG risk dashboard

IPC

Supervision of (IT) change risks, prioritisation while taking into account business perspectives and risk reduction

Opinion business cases (corporate control)

CARPC

Integrity risk related to financial-economic crime

Monitoring results and consultancy

1 ESG risks that fall specifically in a traditional risk category are subject to the same risk governance. For example, ESG risks related to credit risks are handled by the sub-committee of the Executive Committee that monitors credit risks.

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Three Lines of Responsibility model

Supervisory Board/Committees

• Audit Committee • Risk Committee • Remuneration Committee • HR Committee

Executive Committee

Risk Control

Risk Assurance

1st line of responsibility

2nd line of responsibility

3rd line of responsibility

Core Business

Suporting functions

Risk Management

Commercial • Relationship banking • Lending • Client Services & Payments • Business Strategy & Control • Restructuring & Recovery

Board Secretary

• • •

Treasury • Funding • Portfolio Management Back Office

Strategy & Sustainability IT • • • • •

Architecture & Data Cloud & Infrastructure Delivery Security Control & Support

Integrated Risk Management Financial Risk Management Non-Financial Risk Management

Compliance Corporate Control

Internal Audit

External audit

Risk Ownership

Regulators/Supervisors- ECB/DNB/AFM

• ALCO • Credit Committee Clients • Credit Policy Committee Clients • Credit Committee Treasury • Sustainable Banking Committee • Non Financial Risk Committee • Integral Portfolio committee • Client Acceptance and Review Policy Committee

Finance-reporting Human Resources Legal & Tax affairs Communication

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Three Lines of Responsibility

BNG uses the 3LoR methodology to shape internal governance. The figure shows the division

•

of the departments across the three lines within the bank.

– Asset Liability Management (ALM): The ALM department is responsible for market and

liquidity risk and carries out the coordination of the ICAAP and ILAAP, the recovery plan

The 3LoR methodology has three lines, each of which has its own tasks and roles within risk

and coordinates the bank-wide stress testing.

management. Within BNG, the three lines are divided as follows: Lines

Roles

Responsibilities

1st line

Risk Ownership

Business departments. Responsibility for identifying, assessing, measuring, limiting and monitoring risks and developing, implementing and carrying out effective audit measures to control these risks.

2nd line

3rd line

Risk Control

Risk Assurance

Risk Management departments, Compliance, Corporate Control. Responsible for advising, facilitating and supporting, monitoring and challenging the first line. The first line remains responsible for the risk, together with management. These second line departments support the Executive Committee in implementing BNG’s risk management policy. Internal Audit. The IAD periodically conducts operational audits to evaluate the design and operating effectiveness of the bank’s risk management systems and to assess whether the currently applicable laws and regulations are properly complied with.

The second line of Risk Management activities is carried out by three Risk Departments and Compliance, which function independently of the first line. •

Integrated Risk Management (IRM). The newly created department is responsible for

managing bank-wide risks, including strategic and reputational risk. The IRM department focuses its attention on: drawing up the Risk Appetite Statement (RAS) in line with new

Financial Risk Management (FRM) subdivided into four sub-departments:

– Credit Risk Management (KRM) KRM is responsible for credit risk at portfolio and client

level from the second line. The tasks include providing a second-line challenge and an opinion on credit proposals and reviews of individual clients, financial counterparties and investments.

– Model Risk Management (MRM) is responsible for model risk as a subcategory of

operational risk and carries out the model management, including model governance and validation of the bank's models.

These departments carry out daily assessments to ensure that the risk positions fall

within the limits set by the RAS Cascading. FRM prepares reports, which the ALCO and Treasury use as guidance. •

Non-Financial Risk Management (NFRM): the NFRM department is responsible for

operational and security risks from the 2nd line, supports the identification, qualification and quantification of operational risks and reports quarterly to the NFRC and, where necessary, to the Executive Committee or risk committee of the Supervisory Board. •

Compliance; responsible for compliance risks. The Compliance department monitors compliance with rules, laws and internal standards and promotes the integrity of the

organisation, its clients, its employees and the markets in which BNG operates. The head of the department reports to the Executive Committee and has a reporting line to the

Supervisory Board. This is documented in the Compliance Charter. See 5.2 Compliance for further details.

taxonomy, cascading of the RAS into Key Risk Indicators (KRIs), drawing up the risk

Risk Appetite Statement

various Risk Frameworks and taxonomies to be used, further developing and drawing up

The Risk Appetite Statement (RAS) describes the risk appetite that we accept to achieve

policy and managing the Risk Management Framework (RMF), the 3LoR policy and the

the Integrated Quarterly Risk Report, coordinating Pillar 3 reporting and monitoring and advising on prudential laws and regulations.

our strategic objectives. It sets the principles for risk management within the bank and sets

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limits for different types of risk, such as credit, market, liquidity and operational risk. We apply quantitative risk limits and measures, including: • • • • •

Risk definitions

Capital targets above legal requirements

The various risk definitions are also part of the RMF. These describe risk management within

Volatility of net interest income

risks and reputational risks. Where applicable, main risks (level 1) and sub-risks (level 2) have

Different liquidity ratios and survival periods

Risk concentrations per internal or external rating Expected loss ratios

The ExCo, after discussion and approval by the Supervisory Board, approves the RAS and

ensures that our operational activities remain within the risk parameters identified with the support of the risk departments.

In 2024, we remained within the risk appetite for financial risks. With regard to credit risk,

BNG. A distinction is made between financial risks, non-financial risks, strategic risks, ESG

been defined within these categories. Only risk types that are relevant to us as a bank are included in this. The diagram below shows the relevant risk types, without indicating the

scale of the risk for each type. The overview shows that ESG risk and strategic risk are spread across financial and non-financial risks and that reputational risk is always the result of not managing other risks correctly.

The bank’s risk taxonomy is shown as follows in the chart below.

we closely monitor a range of client sectors, paying particular attention to the effects of

cost increases due to inflation and high interest rates. A strong general increase in markups was observed within market and liquidity risk, which had a negative impact on the

revaluation reserve. BNG had to pass on the higher financing spreads in the market in loans to clients. We remain adequately capitalised and maintain a prudent liquidity position, in line with our desired level for external credit ratings.

Improving the operational risk profile is a multi-year project that was a strategic priority for the ExCo again in 2024.

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Our Risk Taxonomy Financial risk

Non financial risk

Credit risk

Market risk

Liquidity risk

Non-Financial Risk Management

Compliance risk

Counterparty risk

Interest rate risk

Funding capacity risk

Financial economic crime risk

Concentration risk

Spread risk

Funding spread risk

Process risk

Settlement risk

Foreign exchange risk

Short-term liquidity risk

Volatility risk

Conduct risk

Model risk

Fraud risk

People risk

Regulatory compliance risk

Data management risk* Technology risk* Third party risk Legal risk Business continuity risk (incl. external events) Statutory reporting & tax risk Information security risk (incl. cyber)* Physical security risk

ESG risk Strategic risk Strategic positioning risk

Strategic execution risk

Reputational risk

Strategic consequence risk

Traditional risks impacted by ESG, based on the ESG materiality assessment * Data management risk + Technology risk + Information security risk (incl. Cyber) = ICT risk (art. 4 (52c) CRR)

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We are working continuously to improve our understanding and management of risks.

be characterised as a bank that reacts counter-cyclically to, for example, geopolitical

alignment with international standards and taxonomies for operational risks. In line with this,

financing remains possible.

Recent laws and regulations, such as the Digital Operational Resilience Act (DORA), require we have decided to implement the ORX taxonomy in 2025.

Strategic risk

Strategic risks are defined as risks that affect or are created by the bank’s business strategy and strategic objectives. Within strategic risk, a distinction is made between strategic positioning risk, strategic execution risk and strategic consequence risk.

The Executive Committee and the Supervisory Board have formulated a number of strategic preconditions within which we must operate in order to be of added value to our clients, shareholders and other stakeholders. Organisational structure

Integrated Risk Management (IRM) deals with strategic risks from the second line. Strategic risks are inherent in the bank’s strategic plans and may also be influenced by external

developments and tensions. In times of turmoil, BNG is one of the most stable banks, where

Environmental, Social and Governance (ESG) risk

ESG stands for Environmental, Social and Governance. These are the three pillars by which organisations are assessed for their sustainability and social impact. ESG risks are the potential negative ESG impacts that an organisation may experience.

The definition of ESG risk (from the CRR3) is the risk of negative financial effects on

an institution arising from the actual or foreseeable effects of environmental, social or

governance (ESG) factors on the counterparties of that institution or the assets in which it is invested. ESG risks are reflected in the traditional risk categories. We have chosen to follow the CRR3 definition.

The ESG factors include a wide range of criteria including: •

factors. These strategic risks are usually closely linked to other risk types. The manner

management; waste management and recycling; use of natural resources; biodiversity

in which we deal with strategic risks is incorporated into the annual plan and the

and ecological impact;

management plans of the separate departments. These risks matter are also addressed

•

the mandatory internal capital adequacy assessment process (ICAAP)).

•

in the stress test programme and are covered in the Capital Management Plan (as part of

The identification of strategic risks is part of the strategic decision-making process. The

monitoring of measures and actions to mitigate strategic risks is part of the planning and budget cycle. Reporting on strategic risks is part of the risk management cycle. Developments in 2024

The volume of newly granted long-term loans and advances was in line with the target for

2024. The volume was lower in the Local Authorities market segment, but this was offset by a

E: Climate change and CO2 emissions; energy consumption and efficiency; water

S: Working conditions and employee rights; health and safety in the workplace; diversity and inclusion;

G: Ethical business conduct and integrity; transparency and reporting; risk management and internal audits.

ESG risks can have a negative impact on our bank’s strategic objectives, capital position

and/or profits. For the time being, we are focusing on climate change and environmental risks. Social and governance factors (the ‘S’ and ‘G’ in ESG) are considered to be less

material risks for us. This is because BNG’s exposure is mainly located within the Netherlands and the Netherlands has good institutions and governance practices.

higher volume in the Public Housing segment.

Our business model is so solid that an increase in competition can be accommodated. An important reason for this is our moderate return requirement. Furthermore, we can

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Identification, assessment and management of ESG Risks •

Risk materiality analyses (RMAs): To identify material ESG risks, we prepare so-called Risk Materiality Analyses (RMAS) for the short, medium and long term. These analyses, which are based on scientific insights and sector analyses, have been prepared for all of the

focus is on emissions and energy consumption KPIs (Key Performance Indicator), where we focus on the (committed) CO2 reduction targets.

We mainly use independent emissions data sources for this purpose. In this way, it

These analyses focus on climate and environmental risks, including climate

emissions related to the building. Divergent values are identified within the ESG risk

environmental policies, technological developments, changes in consumer behaviour and market sentiment.

The RMA analyses assess how ESG risks affect traditional risks, such as credit risk, market risk or operational risk. By identifying the material ESG risks, we ensure the integration of ESG risk into our existing risk management.

ESG ratings: The ESG factors that are assessed as material in the sector analyses form the basis for the assessment of ESG-related credit risks at the individual client level.

We use an ESG rating to measure ESG risk at the client level. This includes the ESG risk drivers established by the RMAs.

The ESG rating, together with the regular credit rating, forms part of the individual credit

assessment process and, thus, contributes to the risk appetite. It also provides input into the ICAAP process and into climate-related stress tests and scenario analyses. •

KPIs and Reporting: To measure the performance of our clients on sustainability, our

sectors in which we operate.

change, biodiversity loss, extreme weather conditions, changes in climate and

•

•

ESG assessment and management: The risk assessment based on the ESG rating forms the basis for the client view of ESG risks. In case of critical ESG outcomes, additional

areas of concern can be imposed with sustainable performance targets. These targets may, for example, be linked to the reduction of energy consumption or CO2 emissions.

is possible to compare clients according to factors relevant to the sector, including reports, after which they are discussed with the client based on the regular periodic credit assessment process. Future Developments

We are continuing to refine our ESG risk management framework, while anticipating new

regulations such as the CRR3/CRD6 VI Directive. Our focus is on improving our data quality

further, expanding our scenario analyses and strengthening our commitment with clients to jointly mitigate ESG risks. In addition, the bank is working on expanding its understanding of

the physical risks and their further integration into the risk management framework. Through this holistic approach to ESG risk management, we aim to enhance our resilience, protect our stakeholders and contribute to a sustainable future.

The focus of ESG risk on climate and environmental risks will be developed further by the CRR3/CRD6 and EBA Directives for the social and governance components. Organisational structure

The tasks for ESG risk management are set out within the three lines of responsibility policy. Proposals for amending the bank’s purpose, ambition, strategy, sustainability policy and

objectives are prepared by the Strategy and Sustainability department (S&S). Positioning sustainability within the S&S department makes it clear that this issue affects the entire bank and is an integral part of our strategy.

In an extreme case, when the ESG risks are assessed as being too high, this may lead

FRM focuses on the impact of ESG factors on the bank arising from lending to clients,

approach ensures that climate and environmental risks are taken into account fully in

implemented an ESG risk framework into our existing risk management. Decisions regarding

to rejection of the credit application or a transfer to high risk for credit reviews. This

our credit policy, which contributes to a responsible and future-proof loan portfolio.

assets within the portfolios and positions with financial counterparties. To this end, we have

ESG risks are taken at ExCo level and within the existing committees, including the CPC, ALCO and NFRC.

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The ExCo has assigned decision-making regarding the sustainability policy to the SBC. The

The instruments used to manage reputational risk include engaging in dialogue with

policy. This includes both our long-term environmental and social contribution and the

the bank supplies to clients support their role in the Dutch public sector. To an important

task of the SBC is to determine, implement and report on our integrated sustainability

identification of material ESG risks that may negatively impact our performance. To help it

implement the strategic sustainability objectives, the SBC is supported by two other bodies. The Sustainability Task Force (STF) consists of representatives from the most relevant

interested parties to align expectations. It is essential that the products and services that extent, the product offering is tailored to the wishes of the client. We exercise restraint when it is not sufficiently clear whether a particular product is in the best interest of the client.

departments within the bank. The ESG Regulatory Change Framework (RCF) Task Force

The product offering is subject to the our Product Approval and Review Process (PARP).

ESG Developments

Credit risk

risks. We working constantly on quantifying ESG risks. This includes creating new models

its contractual obligations (on time). Credit risk is further subdivided into the following sub-

identifies upcoming ESG legislation and its impact on the bank.

We monitor ESG developments closely and ensure that we are protected against these and calculating the impact of negative ESG scenarios and shocks. The aim of these developments is to make ESG risk assessments for each individual client and at the

Credit risk is defined as the risk that a borrower or a financial counterparty will fail to meet risks: •

portfolio level.

arising from a financial transaction at the time these payments are due.

•

Reputation risk

Reputation risk is the risk that BNG’s market position could deteriorate due to a negative reputation among stakeholders: •

Concentration risk: the risk of credit losses resulting from exposure to a group of borrowers/counterparties with common characteristics.

•

Settlement risk: The risk of loss resulting from the failure of a party to comply with the

terms of a contract (or group of contracts) with another party at the time of settlement.

Internally caused reputational risk: the risk that BNG’s reputation could be negatively

ESG risks are an integral part of credit risk. The way in which a counterparty deals with

Externally caused reputational risk: the risk that BNG’s reputation could be negatively

impact on its creditworthiness. A higher ESG risk score may lead to a lower credit rating,