Company: SHG
Filing Date: 2025-04-23
Form Type: 20-F
Source: 0001193125-25-089950
Chunk: 396

Company: SHINHAN FINANCIAL GROUP CO LTD
Filing Date: 2025-04-23
Form: 20-F
Chunk 396
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 of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. (i) Assessment of allowance for credit losses for loans calculated on a collective basis As discussed in Notes 3.(h), 5.(b), and 13 to the consolidated financial statements, the Group has KRW 4,565,931 million of allowance for credit losses (ACL) for loans at amortized cost as of December 31, 2024, a portion of which is calculated on a collective basis (collective ACL). The collective ACL is measured on a collective basis using models to estimate probability of default (PD), the loss given default (LGD) and the exposure at default (EAD) as well as the impact of forward-looking information (FLI). The Group has considered multiple economic scenarios in applying FLI which is estimated through modeling between macroeconomic variables and measurement factors. For corporate loans, one of the relevant inputs for determining PD is the internal credit risk rating of the borrower. The internal credit risk rating of the borrower is defined by the Group using quantitative and qualitative factors that indicate risk of default. The credit risk-rating model’s quantitative considerations include the borrower’s financial and other data, while the qualitative considerations are based on the judgment of the Group’s credit officers as to the borrower’s ability to repay. We identified the assessment of the collective ACL as a critical audit matter. A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment due to significant measurement uncertainty. The assessment encompassed the evaluation of the collective ACL methodology, including the methods and models used to estimate the PD, LGD, and FLI and F-3 their significant assumptions in the collective ACL. Such significant assumptions included the selection of macroeconomic variables and the determination