Company: SHG
Filing Date: 2025-04-23
Form Type: 20-F
Source: 0001193125-25-089950
Chunk: 397

Company: SHINHAN FINANCIAL GROUP CO LTD
Filing Date: 2025-04-23
Form: 20-F
Chunk 397
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 of multiple economic forecast scenarios used to reflect forward-looking information. Specific to corporate loans, the assessment also included the credit risk-rating model and the credit officer’s judgment assumption used in determining the internal credit risk rating. The following are the primary audit procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Group’s measurement of the collective ACL, including controls over the (i) continued use and appropriateness of the collective ACL methodology and models; (ii) selection of the macroeconomic variables; (iii) determination of multiple economic forecast scenarios; and (iv) evaluation of the credit officer’s judgment in determining the internal credit risk rating. We evaluated the Group’s process to develop the collective ACL estimate by testing certain sources of data, factors, and assumptions that the Group used, and considered the relevance and reliability of such data, factors, and assumptions. For a selection of corporate loans, we assessed the internal credit risk rating assigned by the Group and the credit officer’s judgment by evaluating the financial performance of the borrower, sources of repayment, and any relevant guarantees or underlying collateral. In addition, we involved credit risk professionals with specialized skills and knowledge who assisted in the (i) evaluation of the Group’s collective ACL methodology for compliance with IFRS as issued by the IASB; (ii) assessment of the conceptual soundness and performance of the PD, LGD, FLI, and credit risk-rating models by inspecting the model documentation to determine whether the models are suitable for their intended use, and (iii) evaluation of the selection of the macroeconomic variables and determination of the multiple economic forecast scenarios by applying statistical methods to analyze the historic correlation between the macroeconomic variables selected by management and measurement factors. (ii) Fair value of Level 3 derivatives and derivative-combined securities As discussed in Notes 4.(c) and 5.(e) to the consolidated financial statements, as of December 31, 2024 the Group, through its subsidiary Shinhan Securities Co. Ltd, has KRW 718,788 million and KRW 535,162 million of Level 3 derivative assets and liabilities, respectively, and KRW 86,279 million and KRW 7,146,909 million of Level 3 derivative-combined securities held and issued, respectively, a portion of which related to Level 3 fair values measured using internally developed valuation models (internally measured Level 3 derivatives and derivative-combined securities). Level 3