Company: SHG
Filing Date: 2025-04-23
Form Type: 20-F
Source: 0001193125-25-089950
Chunk: 174

Company: SHINHAN FINANCIAL GROUP CO LTD
Filing Date: 2025-04-23
Form: 20-F
Chunk 174
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 risk factors. Vega is a risk measure based on sensitivities to regulatory vega risk factors. Curvature is a risk measure which captures the incremental risk not captured by the delta risk measure for price changes in an option. Curvature risk is based on two stress scenarios involving an upward shock and a downward shock for each regulatory risk factor. The DRC requirement captures the jump-to-defaultrisk for instruments subject to credit risk. However, since not all market risks can be captured in the standardised approach, an RRAO, the sum of gross notional amounts of the instruments bearing residual risks, multiplied by a risk weight is calculated in addition to other capital requirements within the standardised approach to ensure sufficient coverage of market risks. Shinhan Securities currently uses the same 10-day99.9% confidence level-based historical VaR for purposes of calculating its “economic” capital used for internal management purposes, although such model is not subject to regulatory review or reporting requirements. In addition, Shinhan Securities applies this VaR as a risk limit for the entire company as well as individual departments and products, and the adequacy of such VaR is reviewed by way of daily back-testing. When computing VaR,Shinhan Securities does not assume any particular probability distribution and calculates it through a simulation of the “full valuation” methodbased on 121

changes of market variables such as stock prices, interest rates and foreign exchange rates in the past one year. For Shinhan Securities, the amount of losses (either actual or virtual) exceeded the one-day99.9% confidence level-based VaR amount zero times in 2022, 2023 and 2024. Value-at-riskis a commonly used market risk management technique. However, VaR models have the following shortcomings:

| • |     | VaR estimates possible losses over a certain period at a particular confidence level using past market movement data. Past market movement, however, is not necessarily a reliable indicator of future events, particularly those that are extreme in nature; |

| • |     | VaR may underestimate the probability of extreme market movements; |

| • |     | The 99.9% confidence level does not take into account or provide indication of any losses that might occur beyond this confidence level; and |

| • |     | VaR does not capture all complex effects of various risk factors on the value of positions and portfolios and could underestimate potential losses. |

Currently, Shinhan Securities conduct back-testing of VaR results against actual outcomes on a daily basis. Shin