Company: SHG
Filing Date: 2025-04-23
Form Type: 20-F
Source: 0001193125-25-089950
Chunk: 176

Company: SHINHAN FINANCIAL GROUP CO LTD
Filing Date: 2025-04-23
Form: 20-F
Chunk 176
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 trading portfolio would have fluctuated by W191 billion for one day. Shinhan Bank sets limits on stress testing for its overall operations. Shinhan Securities sets limits on stress testing for its overall operations as well as at its department level. Although Shinhan Life Insurance does not set 122

any limits on stress testing, it monitors the impact of market turmoil or other abnormalities. In the case of Shinhan Bank, Shinhan Securities and Shinhan Life Insurance, if the potential impact is large, their respective head of Risk Management will notify such impact and may request a portfolio restructuring or other proper action. Hedging and Derivative Market Risk The principal objective of our group-wide hedging strategy is to manage market risk within established limits. We use derivative instruments to hedge our market risk as well as to make profits by trading derivative products within preset risk limits. Our derivative trading includes interest rate and cross-currency swaps, foreign currency forwards and futures, stock index and interest rate futures, and stock index and currency options. While we use derivatives for hedging purposes, derivative transactions by nature involve market risk since we take trading positions for the purpose of making profits. These activities consist primarily of the following:

| • |     | arbitrage transactions to make profits from short-term discrepancies between the spot and derivative markets or within the derivative markets; |

| • |     | sales of tailor-made derivative products that meet various needs of our corporate customers, principally of Shinhan Bank and Shinhan Securities, and related transactions to reduce their exposure resulting from those sales; |

| • |     | taking positions in limited cases when we expect short-swing profits based on our market forecasts; and |

| • |     | trading to hedge our interest rate and foreign currency risk exposure as described above. |

In accordance with accounting requirements under IFRS 9, “Financial Instruments”, which has replaced IAS 39, “ Financial Instruments: Recognition and Measurement” since January 1, 2018, we have implemented internal processes which include a number of key controls designed to ensure that fair value is measured appropriately, particularly where a fair value model is internally developed and used to price a significant product. Shinhan Bank assesses the adequacy of the fair market value of a new product derived from its internal model prior to the launch of such product. The assessment process involves the following:

| • |     | computation of an internal dealing system market value (based on assessment by the quantitative analysis team of the adequacy of the formula and the model used to compute the market value as derived