Company: SHG
Filing Date: 2025-04-23
Form Type: 20-F
Source: 0001193125-25-089950
Chunk: 175

Company: SHINHAN FINANCIAL GROUP CO LTD
Filing Date: 2025-04-23
Form: 20-F
Chunk 175
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han Bank operates an integrated market risk management system which manages Shinhan Bank’s Won-denominatedand foreign-denominated accounts. This system uses historical simulation to measure both linear risks arising from products such as equity and debt securities and nonlinear risks arising from other products including options. We believe that this system enables Shinhan Bank to generate elaborate and consistent VaR information and to perform sensitivity analysis and back testing in order to check the validity of the models on a daily basis. Shinhan Life Insurance also measures market risks based on a VaR analysis. Stress test.In addition to the standardised approach capital requirement, Shinhan Bank performs stress tests to measure market risk. As the standardised approach capital requirement assumes normal market situations, Shinhan Bank assesses its market risk exposure to unlikely abnormal market fluctuations through the stress test. Stress test is a valuable supplement to regulatory capital requirement since capital requirement does not cover potential loss if the market moves in a manner which is outside Shinhan Bank’s normal expectations. Stress test projects the anticipated change in value of holding positions under certain scenarios assuming that no action is taken during a stress event to change the risk profile of a portfolio. Shinhan Bank uses 16 relatively simple but fundamental scenarios for stress testing by taking into account four market risk components: foreign currency exchange rates, stock prices, Won-denominatedand U.S. dollar-denominated interest rates, and volatility of each component. For the worst case scenario, Shinhan Bank assumes instantaneous and simultaneous movements in four market risk components: appreciation of the Won by 20%, a decrease in Korea Exchange Composite Index by 30%, an increase or a decrease in Won-denominatedor U.S. dollar-denominated interest rates by 75 basis points each, respectively, and volatility rate of each component of 35%. Under this worst-case scenario, the market value of Shinhan Bank’s trading portfolio would have declined by W943 billion as of December 31, 2024. Shinhan Bank performs stress test on a daily basis and reports the results to its Risk Policy Committee on a monthly basis and its Risk Management Committee on a quarterly basis. Shinhan Securities uses nine scenarios for stress tests by taking into account four market risk components: stock prices (both in terms of stock market indices and ß-based individual stock prices), interest rates for Won-denominatedloans, foreign currency exchange rates and historical volatility. As of December 31, 2024, under the worst case scenario assuming a 1% point increase in the three-year government bond yield, the market value of Shinhan Securities’