Exhibit 99.1
Independent Auditor’s Report (Separate Financial Statements) of Shinhan Bank as of December 31, 2020
SHINHAN BANK
Separate Financial Statements
December 31, 2020 and 2019
(With Independent Auditors’ Report Thereon)
2
SHINHAN BANK
Separate Statements of Financial Position
As of December 31, 2020 and 2019
Contents
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| Page |
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Independent Auditor’s Report |
| 3 |
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Separate Statements of Financial Position |
| 6 |
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Separate Statements of Comprehensive Income |
| 7 |
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Separate Statements of Changes in Equity |
| 9 |
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Separate Statements of Cash Flows |
| 11 |
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Notes to the Separate Financial Statements |
| 13 |
Report of Independent Auditor’s Review of Internal Control over Financial Reporting |
| 174 |
Report on the Effectiveness of the Internal Control over Financial Reporting |
| 176 |
SHINHAN BANK
Separate Statements of Financial Position
As of December 31, 2020 and 2019
Independent Auditor’s Report
(English Translation of a Report Originally Issued in Korean)
To the Shareholders and Board of Directors of Shinhan Bank
(A wholly owned subsidiary of Shinhan Financial Group Inc.)
Opinion
We have audited the accompanying separate financial statements of Shinhan Bank (the “Bank”), which comprise the separate statement of financial position as at December 31, 2020, and the separate statement of comprehensive income, separate statement of changes in equity and separate statement of cash flows for the year then ended, and notes to the separate financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying separate financial statements present fairly, in all material respects, the separate financial position of Shinhan Bank as at December 31, 2020, and its separate financial performance and its separate cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS)
Basis for Opinion
We conducted our audit in accordance with Korean Standards on Auditing. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements of the Republic of Korea that are relevant to our audit of the financial statements and we have fulfilled our other ethical responsibilities in accordance with the ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Emphasis of Matter |
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Without modifying our conclusion, we draw attention to Note 2 of the financial statements. As explained in Note 2, the rapid spread of the COVID-19 epidemic has had a negative impact on the global economy, which can result in an increase in expected credit losses, potential impairment of assets, and negatively affecting the Bank's ability to generate revenue
Other Matters
The separate financial statements of the Bank for the year ended December 31, 2019, were audited by Samjong KPMG auditor who expressed an unqualified opinion on those statements on March 4, 2020.
SHINHAN BANK
Separate Statements of Financial Position
As of December 31, 2020 and 2019
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the separate financial statements in accordance with Korean IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Bank or to cease operations.
Those charged with governance are responsible for overseeing the Bank’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Korean Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Korean Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• | Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. |
• | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. |
• | Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. |
• | Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. |
• | Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. |
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
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SHINHAN BANK
Separate Statements of Financial Position
As of December 31, 2020 and 2019
/s/ Samil PricewaterhouseCoopers
March 3, 2021
Seoul, Korea
This report is effective as of March 3, 2021, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying separate financial statements and notes thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any. |
SHINHAN BANK
Separate Statements of Financial Position
As of December 31, 2020 and 2019
(In millions of won) |
| Notes |
| 2020 |
| 2019 |
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Assets |
|
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Cash and due from banks |
| 3,5,8,39,40 |
| 22,800,031 |
| 19,639,860 |
Securities at fair value through profit or loss |
| 3,6,40 |
| 19,723,740 |
| 16,660,083 |
Derivative assets |
| 3,7,40 |
| 4,581,535 |
| 2,107,875 |
Loans at amortized cost |
| 3,8,40 |
| 274,657,638 |
| 247,186,759 |
Loans at fair value through profit or loss |
| 3,8 |
| 844,469 |
| 868,991 |
Securities at fair value through other comprehensive income |
| 3,9,17 |
| 38,267,012 |
| 39,457,965 |
Securities at amortized cost |
| 3,9,17 |
| 19,062,390 |
| 19,323,185 |
Property and equipment |
| 10,11,16,17 |
| 2,266,513 |
| 2,302,208 |
Intangible assets |
| 12 |
| 441,913 |
| 545,409 |
Investments in subsidiaries and associates |
| 13 |
| 2,255,443 |
| 2,427,125 |
Investment properties |
| 14 |
| 610,085 |
| 635,361 |
Defined benefit assets |
| 22 |
| 14,750 |
| - |
Current tax assets |
| 36 |
| 2,363 |
| 1,656 |
Deferred tax assets |
| 36 |
| 169,622 |
| 168,333 |
Other assets |
| 3,8,15,40,41 |
| 10,986,218 |
| 13,416,838 |
Non-current assets held for sale |
| 16 |
| 32,988 |
| 2,693 |
Total assets |
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| 396,716,710 |
| 364,744,341 |
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Liabilities |
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Deposits |
| 3,18,40 |
| 291,132,556 |
| 263,732,746 |
Financial liabilities at fair value through profit or loss |
| 3,19 |
| 539,564 |
| 508,081 |
Derivative liabilities |
| 3,7,40 |
| 4,188,763 |
| 1,889,700 |
Borrowings |
| 3,20,39,40 |
| 20,393,392 |
| 17,311,859 |
Debt securities issued |
| 3,21,39 |
| 32,170,986 |
| 35,575,365 |
Defined benefit liabilities |
| 22 |
| - |
| 49,596 |
Provisions |
| 23,38,40 |
| 371,745 |
| 276,035 |
Current tax liabilities |
| 36 |
| 232,282 |
| 367,582 |
Other liabilities |
| 3,11,24,40,41 |
| 21,162,376 |
| 19,958,771 |
Total liabilities |
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| 370,191,664 |
| 339,669,735 |
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Equity |
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Capital stock |
| 25 |
| 7,928,078 |
| 7,928,078 |
Hybrid bonds |
| 25 |
| 1,586,662 |
| 997,987 |
Capital surplus |
| 25 |
| 398,080 |
| 398,080 |
Capital adjustments |
| 25,36 |
| 8,148 |
| 1,469 |
Accumulated other comprehensive loss |
| 25,36 |
| (278,057) |
| (269,328) |
Retained earnings |
| 25,26 |
| 16,882,135 |
| 16,018,320 |
(Reserve for loan loss) |
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| (2,195,634) |
| (1,961,499) |
(Required amount of loan loss transfer) |
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| (80,578) |
| (234,135) |
(Expected amount of loan loss transfer) |
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| (80,578) |
| (234,135) |
Total equity |
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| 26,525,046 |
| 25,074,606 |
Total liabilities and equity |
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| 396,716,710 |
| 364,744,341 |
See accompanying notes to the separate financial statements.
6
SHINHAN BANK
Separate Statements of Comprehensive Income (Continued)
For the years ended December 31, 2020 and 2019
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(In millions of won) |
| Notes |
| 2020 |
| 2019 |
| |
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Interest income |
|
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| 8,591,079 |
| 9,629,355 |
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Financial assets at fair value through profit or loss |
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| 206,948 |
| 234,404 |
| |
Financial assets at fair value through other comprehensive income and amortized cost |
|
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| 8,384,131 |
| 9,394,951 |
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Interest expense |
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| 3,356,520 |
| 4,378,977 |
| |
Net interest income |
| 3,27,35,40 |
| 5,234,559 |
| 5,250,378 |
| |
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Fees and commission income |
|
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| 1,204,710 |
| 1,308,753 |
| |
Fees and commission expense |
|
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| 242,614 |
| 214,210 |
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Net fees and commission income |
| 3,28,35,40 |
| 962,096 |
| 1,094,543 |
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Dividend income |
| 29,35 |
| 16,967 |
| 13,599 |
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Net gain on financial instruments at fair value through profit or loss |
| 30,35,40 |
| 192,876 |
| 208,457 |
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Net foreign currencies transaction gain |
| 35 |
| 378,970 |
| 249,415 |
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Net gain on disposal of financial asset at fair value through other comprehensive income |
| 9,35 |
| 192,607 |
| 95,842 |
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Provision for credit loss allowance |
| 3,8,40 |
| 591,798 |
| 309,558 |
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General and administrative expenses |
| 31,40 |
| 2,864,472 |
| 2,802,837 |
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Net other operating expenses |
| 33,35,40 |
| (896,745) |
| (868,130) |
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Operating income |
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| 2,625,060 |
| 2,931,709 |
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Net non-operating expenses |
| 34 |
| (163,629) |
| (182,429) |
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Profit before income tax |
|
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| 2,461,431 |
| 2,749,280 |
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Income tax expense |
| 36 |
| 635,261 |
| 678,045 |
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Profit for the year |
| 26 |
| 1,826,170 |
| 2,071,235 |
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(Adjusted profit after reflection of reserve for loan loss |
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For the year ended December 31, 2020: |
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1,745,592 million won |
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For the year ended December 31, 2019: |
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1,837,100 million won |
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7
SHINHAN BANK
Separate Statements of Comprehensive Income (Continued)
For the years ended December 31, 2020 and 2019
(In millions of won, except for earnings per share) | Notes |
| 2020 |
| 2019 |
| |
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Other comprehensive income (loss) for the year: Items that are or may be reclassified subsequently to profit or loss |
| 3,25,36
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Foreign currency translation differences for foreign operations |
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| (24,294) |
| 9,729 |
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Unrealized net change in fair value of financial assets at fair value through other comprehensive income |
|
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| (25,584) |
| 69,156 |
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| (49,878) |
| 78,885 |
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Items that will not be reclassified to profit or loss |
|
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Remeasurements of defined benefit plans |
|
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| 15,347 |
| (27,792) |
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Unrealized net change in fair value of financial assets at fair value through other comprehensive income |
|
|
| (2,024) |
| 7,985 |
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|
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| 13,323 |
| (19,807) |
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Other comprehensive income (loss) for the year, net of income tax |
|
|
| (36,555) |
| 59,078 |
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Total comprehensive income for the year |
|
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| 1,789,615 |
| 2,130,313 |
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Earnings per share: |
| 37 |
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Basic and diluted earnings per share in won |
|
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| 1,124 |
| 1,285 |
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See accompanying notes to the separate financial statements.
8
SHINHAN BANK
Separate Statements of Changes in Equity
For the year ended December 31, 2019
(In millions of won) |
| Capital stock |
| Hybrid bonds |
| Capital surplus |
| Capital adjustments |
| Accumulated other comprehensive income (loss) |
| Retained earnings |
| Total |
Balance at January 1, 2019 |
| 7,928,078 |
| 698,660 |
| 398,080 |
| 4,596 |
| (334,064) |
| 14,876,033 |
| 23,571,383 |
Total comprehensive income (loss), net of income tax |
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|
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Profit for the year |
| - |
| - |
| - |
| - |
| - |
| 2,071,235 |
| 2,071,235 |
Foreign currency translation differences for foreign operations |
| - |
| - |
| - |
| - |
| 9,729 |
| - |
| 9,729 |
Unrealized net changes in fair values of financial assets at fair value through other comprehensive income |
| - |
| - |
| - |
| - |
| 82,799 |
| (5,658) |
| 77,141 |
Remeasurements of defined benefit plans |
| - |
| - |
| - |
| - |
| (27,792) |
| - |
| (27,792) |
Total comprehensive income for the year |
| - |
| - |
| - |
| - |
| 64,736 |
| 2,065,577 |
| 2,130,313 |
Transactions with owners, recognized directly in equity |
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Annual dividends to equity holder |
| - |
| - |
| - |
| - |
| - |
| (890,000) |
| (890,000) |
Dividends to hybrid bond holders |
| - |
| - |
| - |
| - |
| - |
| (33,115) |
| (33,115) |
Issuance of hybrid bonds |
| - |
| 299,327 |
| - |
| - |
| - |
| - |
| 299,327 |
Share-based payment transactions |
| - |
| - |
| - |
| (3,302) |
| - |
| - |
| (3,302) |
Others |
| - |
| - |
| - |
| 175 |
| - |
| (175) |
| - |
Total transactions with owners |
| - |
| 299,327 |
| - |
| (3,127) |
| - |
| (923,290) |
| (627,090) |
Balance at December 31, 2019 |
| 7,928,078 |
| 997,987 |
| 398,080 |
| 1,469 |
| (269,328) |
| 16,018,320 |
| 25,074,606 |
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9
SHINHAN BANK
Separate Statements of Changes in Equity (Continued)
For the year ended December 31, 2020
(In millions of won) |
| Capital stock |
| Hybrid bonds |
| Capital surplus |
| Capital adjustments |
| Accumulated other comprehensive income (loss) |
| Retained earnings |
| Total |
Balance at January 1, 2020 |
| 7,928,078 |
| 997,987 |
| 398,080 |
| 1,469 |
| (269,328) |
| 16,018,320 |
| 25,074,606 |
Total comprehensive income (loss), net of income tax |
|
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|
|
|
|
|
|
|
|
|
|
|
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Profit for the year |
| - |
| - |
| - |
| - |
| - |
| 1,826,170 |
| 1,826,170 |
Foreign currency translation differences for foreign operations |
| - |
| - |
| - |
| - |
| (24,294) |
| - |
| (24,294) |
Unrealized net changes in fair values of financial assets at fair value through other comprehensive income |
| - |
| - |
| - |
| - |
| 218 |
| (27,826) |
| (27,608) |
Remeasurements of defined benefit plans |
| - |
| - |
| - |
| - |
| 15,347 |
| - |
| 15,347 |
Total comprehensive income for the year |
| - |
| - |
| - |
| - |
| (8,729) |
| 1,798,344 |
| 1,789,615 |
Transactions with owners, recognized directly in equity |
|
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|
|
|
|
|
|
|
|
|
|
|
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Annual dividends to equity holder |
| - |
| - |
| - |
| - |
| - |
| (890,000) |
| (890,000) |
Dividends to hybrid bond holders |
| - |
| - |
| - |
| - |
| - |
| (44,529) |
| (44,529) |
Issuance of hybrid bonds |
| - |
| 588,675 |
| - |
| - |
| - |
| - |
| 588,675 |
Share-based payment transactions |
| - |
| - |
| - |
| 6,679 |
| - |
| - |
| 6,679 |
Total transactions with owners |
| - |
| 588,675 |
| - |
| 6,679 |
| - |
| (934,529) |
| (339,175) |
Balance at December 31, 2020 |
| 7,928,078 |
| 1,586,662 |
| 398,080 |
| 8,148 |
| (278,057) |
| 16,882,135 |
| 26,525,046 |
|
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See accompanying notes to the separate financial statements.
10
SHINHAN BANK
Separate Statements of Cash Flows
For the years ended December 31, 2020 and 2019
(In millions of won) |
| 2020 |
| 2019 |
|
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|
|
Cash flows from operating activities |
|
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|
|
Profit before income tax |
| 2,461,431 |
| 2,749,280 |
Adjustments for: |
|
|
|
|
Interest income |
| (8,591,079) |
| (9,629,355) |
Interest expense |
| 3,356,520 |
| 4,378,977 |
Dividend income |
| (16,967) |
| (13,599) |
Net gain on financial assets at fair value through profit or loss |
| (38,473) |
| (80,008) |
Net non-cash foreign currencies transaction loss (gain) |
| (156,434) |
| 28,404 |
Net gain on sale of financial assets at fair value through other comprehensive income |
| (192,607) |
| (95,842) |
Provision for credit loss allowance |
| 591,798 |
| 309,558 |
Non-cash employee benefits |
| 143,726 |
| 137,329 |
Depreciation and amortization |
| 349,858 |
| 344,704 |
Net non-cash other operating expenses |
| 125,720 |
| 201,564 |
Net non-cash non-operating expenses |
| 30,088 |
| 142,720 |
|
| (4,397,850) |
| (4,275,548) |
Changes in assets and liabilities: |
|
|
|
|
Due from banks |
| (4,889,767) |
| (10,256,485) |
Securities at fair value through profit or loss |
| (1,938,743) |
| (3,139,750) |
Derivative assets |
| 1,813,334 |
| 1,480,122 |
Loans at amortized cost |
| (28,339,000) |
| (14,421,664) |
Loans at fair value through profit or loss |
| 29,435 |
| (222,565) |
Other assets |
| 2,416,864 |
| 691,200 |
Deposits |
| 28,259,660 |
| 26,466,634 |
Financial liabilities at fair value through profit or loss |
| (42,481) |
| (59,064) |
Derivative liabilities |
| (1,784,155) |
| (1,533,658) |
Defined benefit liabilities |
| (180,803) |
| (180,289) |
Provisions |
| 60,791 |
| (2,893) |
Other liabilities |
| 2,075,617 |
| 4,229,605 |
|
| (2,519,248) |
| 3,051,193 |
|
|
|
|
|
Income tax paid |
| (761,227) |
| (603,407) |
Interest received |
| 8,892,625 |
| 9,808,651 |
Interest paid |
| (3,729,826) |
| (4,157,677) |
Dividends received |
| 29,998 |
| 14,290 |
Net cash inflow from operating activities |
| (24,097) |
| 6,586,782 |
11
SHINHAN BANK
Separate Statements of Cash Flows (Continued)
For the years ended December 31, 2020 and 2019
(In millions of won) |
| 2020 |
| 2019 |
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
Net cash flows of derivative instruments for hedging |
| (20,921) |
| - |
Proceeds from sale of securities at fair value through profit or loss |
| 1,289,230 |
| 756,399 |
Acquisition of securities at fair value through profit or loss |
| (2,257,474) |
| (1,391,004) |
Proceeds from sale of securities at fair value through other comprehensive income |
| 42,789,450 |
| 29,796,642 |
Acquisition of securities at fair value through other comprehensive income |
| (42,464,120) |
| (38,423,370) |
Proceeds from sale of securities at amortized cost |
| 5,496,408 |
| 6,318,080 |
Acquisition of securities at amortized cost |
| (5,410,966) |
| (9,280,277) |
Proceeds from sale of property and equipment |
| 28,459 |
| 7,844 |
Acquisition of property and equipment |
| (151,363) |
| (178,116) |
Proceeds from sale of intangible assets |
| - |
| 10,518 |
Acquisition of intangible assets |
| (225,905) |
| (215,932) |
Proceeds from sale of investments in associates |
| 130,506 |
| 5,082 |
Acquisition of investments in associates |
| (10,600) |
| (74,207) |
Proceeds from sale of investment properties |
| 148 |
| - |
Acquisition of investment properties |
| (4,262) |
| (2,771) |
Proceeds from sale of non-current assets held for sale |
| 2,048 |
| 137 |
Proceeds from sale of other assets |
| 705,459 |
| 793,935 |
Acquisition of other assets |
| (670,876) |
| (787,462) |
Net cash outflow from investing activities |
| (774,779) |
| (12,664,502) |
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
Net cash flows of derivative instruments for hedging |
| 359 |
| - |
Proceeds from borrowings, net |
| 3,080,918 |
| 1,171,938 |
Proceeds from issuance of debt securities |
| 8,698,965 |
| 17,697,533 |
Repayment of debt securities |
| (12,140,539) |
| (12,047,639) |
Dividends paid |
| (934,529) |
| (925,712) |
Issuance of hybrid bonds |
| 588,675 |
| 299,327 |
Acquisition of other liabilities |
| 727,330 |
| 142,537 |
Proceeds from sale of other liabilities |
| (932,667) |
| (311,359) |
Net cash inflow (outflow) from financing activities |
| (911,488) |
| 6,026,625 |
|
|
|
|
|
Effect of exchange rate fluctuations on cash and cash equivalents held |
| 25,640 |
| 19,587 |
Net decrease in cash and cash equivalents |
| (1,684,724) |
| (31,508) |
|
|
|
|
|
Cash and cash equivalents at beginning of the year (Note 39) |
| 4,430,809 |
| 4,462,317 |
Cash and cash equivalents at end of the year (Note 39) |
| 2,746,085 |
| 4,430,809 |
|
|
|
|
|
See accompanying notes to the separate financial statements.
12
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
1. | Reporting entity |
|
Shinhan Bank (the “Bank”) is established on October 1, 1943 under the name of Chohung Bank, through the merger of Hanseung Bank and Dongil Bank, which are established on February 19, 1897 and August 8, 1906, respectively, to engage in commercial banking and trust operations. The Bank has its headquarters at 20, Sejong-daero 9-gil, Jung-gu, Seoul, Republic of Korea.
The Bank acquired Chungbuk Bank and Kangwon Bank in 1999 and the former Shinhan Bank on April 1, 2006, and subsequently changed its name to Shinhan Bank. As of December 31, 2020, the Bank has 1,585,615,506 outstanding common shares with par value of W7,928,078 million which Shinhan Financial Group Co., Ltd. (“Shinhan Financial Group”) owns 100% of those. As of December 31, 2020, the Bank operates through 723 domestic branches, 136 depositary offices, 29 premises and 14 overseas branches.
2. Significant accounting policies
The significant accounting policies adopted by the Bank are as follows.
(a) Basis of financial statements preparation
The separate financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”), as prescribed in the Act on External Audit of Stock Companies.
These financial statements are separate financial statements prepared in accordance with K-IFRS No.1027, ‘Separate Financial Statements’ presented by a parent, an investor with joint control of, or significant influence over, an investee, in which the investments are accounted for at cost.
The Bank’s separate financial statements have been prepared in accordance with the accounting policies stated below.
13
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
2. Significant accounting policies (continued)
(b) Basis of measurement
The separate financial statements have been prepared on the historical cost basis except for the following material items in the separate statements of financial position:
| • | derivative financial instruments are measured at fair value |
|
| • | financial instruments at fair value through profit or loss (“FVTPL”) are measured at fair value |
|
| • | financial instruments at fair value through other comprehensive income (“FVOCI”) are measured at fair value |
|
| • | share-based payment arrangements are initially measured at fair value on grant date |
|
| • | changes in fair value attributable to the risk being hedged for financial instruments designated as hedged items in qualifying fair value hedge relationships are recognized in profit or loss |
|
| • | liabilities for defined benefit plans are recognized as net of the total present value of defined benefit obligations less the fair value of plan assets |
|
(c) Functional and presentation currency
The separate financial statements of the Bank are prepared in functional currency of the respective operation. These separate financial statements are presented in Korean won, which is the Bank’s functional currency and the currency of the primary economic environment in which the Bank operates.
(d) Use of estimates and judgements
The preparation of the separate financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the significant effect on the amount recognized in the separate financial statements is described in Note 4.
The Bank recognizes credit loss allowance for expected credit losses on debt instruments, loans and receivables that are measured at amortized cost or at FVOCI, loan commitments and financial guarantee contracts upon adoption of K-IFRS No.1109, ‘Financial Instruments’. The measurement of such allowance is determined by techniques, assumptions and input variables used by the Bank to measure expected future cash flows of individual financial instruments and to measure expected credit losses in a collective manner. The details of techniques, assumptions and input variables used to measure the credit loss allowance for expected credit losses as of December 31, 2020 are described in Note 3.
The rapid spread of the COVID-19 epidemic is having a negative impact on the global economy. The Bank uses forward-looking information to estimate expected credit loss in accordance with K-IFRS No. 1109 'Financial Instruments'. For the year ended December 31, 2020, there have been significant changes on the forward-looking information due to the spread of the COVID-19. Accordingly, the economic recession is expected to be more severe than the previous forecast, and the default rate forecast as of December 31, 2020 is re-estimated using the updated forward-looking information on the economic growth rate, private consumption growth rate, KOSPI, and facility investment growth rate, which are major macroeconomic variables for calculating the default rate forecast. The Bank will continue to monitor the economic effects of the COVID-19.
14
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
2. Significant accounting policies (continued)
e) Changes in accounting policies
The Bank has applied the following new accounting standards and interpretations for the first time for their annual reporting period commencing January 1, 2020.
i) Amendments to K-IFRS No.1001 ‘Presentation of financial statements’ and K-IFRS No.1008 ‘Accounting policies, changes in accounting estimates and errors’ – Definition of materiality
The 'definition of materiality' has been clarified, and the Bank amended the financial statements according to the clarified definition of K-IFRS No.1001 and K-IFRS No.1008. In the determination of the materiality, the Bank decided to consider the characteristics of the information users when deciding the information to be disclosed and the effect of the non-material information as well as the omission or distortion of material information. The amendments do not have a significant impact on the financial statements.
ii) Amendments to K-IFRS No. 1103 'Business combination' – Definition of business
In the amended business definition, in order to determine the set of acquired activities and assets as a business, it is necessary to include inputs and practical processes with the ability to significantly contribute to the creation of outputs, excluding economic benefits due to cost reduction. In addition, if the fair value of most of the total assets acquired is concentrated on a single identifiable asset or set of assets, an optional test has been added in which the acquired activity and set of assets can be determined as an asset or set of assets rather than as a business. The amendments do not have a significant impact on the financial statements.
iii) Amendment to K-IFRS No. 1116 'Lease'-A practical simplified method for exemption, discount, and suspension of rent related to COVID-19
As a practical simplified method, the lessee may not evaluate whether the rent concession, such as the rent discount directly resulting from COVID-19, constitutes a change in the lease. The lessee who makes this choice must account for changes in lease payments due to rental discount, etc., consistent with the method prescribed by this Standard, unless such changes are lease changes. The Bank changed its accounting policies in accordance with the amendment of K-IFRS No.1116. The revised accounting policy is retroactively applied in accordance with the transitional provisions of K-IFRS No.1116. Due to the retrospective application of the accounting policy, there is no cumulative effect from the initial application to be reflected in the initial retained earnings on January 1, 2020, and the comparative financial statements for the previous period have not been restated. The effect of the amendment to the lease Standard is illustrated in Note 11.
The following new accounting standards and interpretations have been published that are not mandatory for December 31, 2020 reporting periods and have not been early adopted by the Bank.
i) K-IFRS No.1109, ‘Financial Instruments’ and K-IFRS No.1039, ‘Financial Instruments: Recognition and Measurement’ and K-IFRS No.1107, ‘Financial Instruments: Disclosures’ Revision’ and K-IFRS No.1104, ‘Insurance Contracts’ K-IFRS No.1116, ‘Leases’ amended – Interest rate indicator reform
The effective interest rate, not the carrying amount, is adjusted when replacing the interest rate index of a financial instrument measured at amortized cost in relation to the reform of the interest rate index. It includes exceptions, such as allowing hedge accounting to continue uninterrupted even if an interest rate indicator replacement occurs in a hedging relationship. This amendments will take effect for annual periods beginning after January 1, 2021 and are permitted for early application. The Bank is determining whether there will be any impacts on the financial statements due to the amendments.
15
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
2. Significant accounting policies (continued)
(f) Approval of consolidated financial statements
The separate financial statements are approved for issue by the Board of Directors on February 4, 2021, which will be submitted for approval to the shareholders’ meeting on March 24, 2021.
(g) Investments in subsidiaries and associates
The accompanying separate financial statements have been prepared on a stand-alone basis in accordance with K-IFRS No.1027, ‘Separate Financial Statements’. The Bank’s investments in subsidiaries and associates are recorded at cost in accordance with K-IFRS No.1027. However, the investments in subsidiaries and associates subject to K-IFRS No.1101, ‘First-time Adoption of K-IFRS’ are recorded at previous GAAP carrying amount at the date of transition to K-IFRS. Dividend received from its subsidiaries and associates is recognized in profit or loss when the Bank is entitled to receive the dividend.
(h) Foreign currencies
i) Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of the Bank at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the the end of the reporting period are retranslated to the functional currency using the exchange rate at the end of the reporting period. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the reporting period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value is determined.
Foreign currency differences arising on retranslation are recognized in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments, a financial liability designated as a hedging instrument of the net investment in a foreign operation, or a qualifying cash flow hedge, which are recognized in other comprehensive income. Translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognized in profit or loss and translation differences on non-monetary assets such as equities held at fair value through other comprehensive income are recognized in other comprehensive income.
ii) Foreign operations
If the presentation currency of the Bank is different from a foreign operation’s functional currency, the financial statements of the foreign operation are translated into the presentation currency using the following methods:
The assets and liabilities of foreign operations, whose functional currency is not the currency of a hyperinflationary economy, are translated to presentation currency at exchange rates at the end of the reporting period. The income and expenses of foreign operations are translated to functional currency at exchange rates at the dates of the transactions. Foreign currency differences are recognized in other comprehensive income.
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation are treated as assets and liabilities of the foreign operation and are translated using the exchange rate at the end of the reporting period.
When a foreign operation is disposed of, the relevant amount in the translation is transferred to profit or loss as part of the profit or loss on disposal.
16
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
2. Significant accounting policies (continued)
(h) Foreign currencies (continued)
iii) Net investment in a foreign operation
If the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, then foreign currency differences arising on the item form part of the net investment in the foreign operation and are recognized in other comprehensive income and reclassified from equity to profit or loss on disposal of the net investment.
(i) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value, and are used by the Bank in the management of its short-term commitments. Equity instruments are excluded from cash equivalents unless they are, in substance, cash equivalents, for example in the case of preferred shares acquired within a short period of their maturity and with a specified redemption date. However, the Bank’s account overdraft is included in borrowings.
(j) Non-derivative financial assets
Financial assets are recognized when the Bank becomes a party to the contractual provisions of the instrument. In addition, a regular way purchase or sale (a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the market concerned) is recognized on the trade date. A financial asset is measured initially at its fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition of the financial asset. Transaction costs on the financial assets at FVTPL that are directly attributable to the acquisition are recognized in profit or loss as incurred.
i) Financial assets designated at FVTPL
Financial assets can be irrevocably designated as measured at FVTPL despite of classification standards stated below, if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise from measuring assets or liabilities or recognizing the gains or losses on them on different bases.
ii) Equity instruments
For the equity instruments that are not held for trading, at initial recognition, the Bank may make an irrevocable election to present subsequent changes in fair value in other comprehensive income. Equity instruments that are not classified as financial assets at FVOCI are classified as financial assets at FVTPL. The Bank subsequently measures all equity investments at fair value. Valuation gains or losses of the equity instruments that are classified as financial assets at FVOCI previously recognized as other comprehensive income is not reclassified as profit or loss on derecognition. The Bank recognizes dividends in profit or loss when the Bank’s right to receive payments of the dividend is established. Valuation gains or losses due to changes in fair value of the financial assets at FVTPL are recognized as gains or losses on financial assets at FVTPL. Impairment loss (reversal) on equity instruments at FVOCI is not recognized separately.
iii) Debt instruments
Subsequent measurement of debt instruments depends on the Bank’s business model in which the asset is managed and the contractual cash flow characteristics of the asset. Debt instruments are classified as financial assets at amortized cost, at FVOCI, or at FVTPL. Debt instruments are reclassified only when the Bank’s business model changes.
17
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
2. Significant accounting policies (continued)
(j) Non-derivative financial assets (continued)
iii) Debt instruments (continued)
a. Financial assets at amortized cost
Assets that are held within a business model whose objective is to hold assets to collect contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. Impairment losses, and gains or losses on derecognition of the financial assets at amortized cost are recognized in profit or loss. Interest income on the effective interest method is included in the ‘Interest income’ in the separate statement of comprehensive income.
b. Financial assets at FVOCI
Assets that are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Other than impairment losses, interest income amortized using effective interest method and foreign exchange differences, gains or losses of the financial assets at FVOCI are recognized as other comprehensive income in equity. On derecognition, gains or losses accumulated in other comprehensive income are reclassified to profit or loss. The interest income on the effective interest method is included in the ‘Interest income’ in the separate statement of comprehensive income. Foreign exchange differences and impairment losses are included in the ‘Net foreign currency transaction gain’ and ‘Provision for credit loss allowance’ in the separate statement of comprehensive income, respectively.
c. Financial assets at FVTPL
Debt securities other than financial assets at amortized costs or FVOCI are classified at FVTPL. Unless hedge accounting is applied, gains or losses from financial assets at FVTPL are recognized as profit or loss and are included in ‘Net gain on financial assets at fair value through profit or loss’ in the separate statement of comprehensive income.
iv) Embedded derivatives
Financial assets with embedded derivatives are classified regarding the entire hybrid contract, and the embedded derivatives are not separately recognized. The entire hybrid contract is considered when it is determined whether the contractual cash flows represent solely payments of principal and interest.
v) Derecognition of financial assets
The Bank derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Bank is recognized as a separate asset or liability.
If the Bank retains substantially all the risks and rewards of ownership of the transferred financial assets, the Bank continues to recognize the transferred financial assets and recognizes financial liabilities for the consideration received.
vi) Offsetting
Financial assets and financial liabilities are offset and the net amount is presented in the separate statement of financial position only when the Bank currently has a legally enforceable right to set off the recognized amounts, and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
18
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
2. Significant accounting policies (continued)
(k) Expected credit loss on financial assets
As for financial assets at amortized cost and financial assets at FVOCI, the expected credit loss is evaluated at the end of each period and recognized as loss allowances.
Since initial recognition, a loss allowance shall be measured by the three stages in the table below depending on the extent of significant increase in credit risk.
Stage |
| Category |
| Description |
Stage 1 |
| Credit risk has not increased significantly since initial recognition |
| 12 month expected credit losses: Expected credit loss resulting from potential default of financial instruments occurring over 12 months from the end of reporting period
|
Stage 2 |
| Credit risk has increased significantly since initial recognition
|
| Lifetime expected credit losses: Expected credit loss resulting from all potential default of financial instruments occurring over the expected life
|
Stage 3 |
| Credit-impaired financial assets |
|
However, as for the financial assets whose credit is impaired at the initial recognition, only the cumulative change in the lifetime expected credit loss is recognized as the loss allowance.
The ‘lifetime’ refers to the expected life to the contractual maturity of the financial asset.
i) Forward looking information
The Bank determines a material increase on credit risk and estimates the expected credit loss on a forward looking basis.
The measuring factors of the expected credit loss are assumed to have certain relationship with the economic cycle. Through relationship analysis between the macroeconomic variables and the credit risk measuring factors, the forward looking information is reflected in the expected credit loss estimation.
ii) Financial assets at amortized cost
The expected credit loss on the financial assets at amortized cost is recognized as the difference between the present value of the contractual cash flow and the present value of the expected cash flow. The expected cash flow is estimated separately for the individually material financial assets.
For the financial assets which are not individually material, they are included in a group of assets with a similar credit risk and expected credit loss is estimated collectively.
19
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
2. Significant accounting policies (continued)
(k) Expected credit loss on financial assets (continued)
The expected credit losses of financial assets measured as amortized cost are presented net of loss allowance, and the allowance is derecognized together with the asset when it is determined to be unrecoverable. When the loan previously written-off is subsequently collected, it is recognized as an increase in loss allowance. At the end of the reporting period, the Bank recognizes in profit or loss the amount of the change in lifetime expected credit losses.
iii) Financial assets at FVOCI
The expected credit loss on the financial assets at FVOCI is calculated using the same method as that on the financial assets at amortized cost, however the changes in loss allowance are recognized as other comprehensive income. As for disposal and repayment, the loss allowance is reclassified from other comprehensive income to profit or loss.
(l) Derivative financial instruments
Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value at the end of every reporting period, and changes therein are accounted for as described below.
i) Hedge accounting
The Bank holds forward exchange contracts, interest rate swaps, currency swaps and other derivative contracts to manage interest rate risk and foreign exchange risk. The Bank designated derivatives as hedging instruments to hedge the risk of changes in the fair value of assets, liabilities or firm commitments (a fair value hedge) and foreign currency risk of highly probable forecasted transactions or firm commitments (a cash flow hedge), and foreign currency risk of net investment in foreign operation (net investment hedges).
On initial designation of the hedge, the Bank formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship.
(1) Fair value hedges
Changes in the fair value of a derivative hedging instrument designated as a fair value hedge are recognized in profit or loss. The gain or loss from remeasuring the hedging instrument at fair value and the gain or loss on the hedged item attributable to the hedged risk are recognized in profit or loss in the same line item of the separate statement of comprehensive income.
The Bank discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, or if the hedge no longer meets the criteria for hedge accounting. Any adjustment arising from gain or loss on the hedged item attributable to the hedged risk is amortized to profit or loss from the date the hedge accounting is discontinued.
20
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
2. Significant accounting policies (continued)
(l) Derivative financial instruments (continued)
(2) Cash flow hedges
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecasted transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and presented in the hedging reserve in equity. The amount recognized in other comprehensive income is removed and included in profit or loss in the same period as the hedged cash flows affect profit or loss under the same line item in the separate statements of comprehensive income as the hedged item. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss.
Once hedge accounting is discontinued, any cumulative gain or loss existing in equity at that time and is recognized over the period the forecast transaction occurs as profit or loss. However, when a forecast transaction is no longer expected to occur, the cumulative gain or loss recognized in equity is immediately recognized in the profit or loss.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognized in other comprehensive income and presented in the hedging reserve in equity remains there until the forecasted transaction affects profit or loss. When the hedged item is a non-financial asset, the amount recognized in other comprehensive income is transferred to the carrying amount of the asset when the asset is recognized. If the forecasted transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss. In other cases the amount recognized in other comprehensive income is transferred to profit or loss in the same period that the hedged item affects profit or loss.
(3) Hedge of net investment
Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in a foreign operation are recognized in other comprehensive income to the extent that the hedge is effective. To the extent that the hedge is ineffective, such differences are recognized in profit or loss. When the hedged part of a net investment is disposed of, the relevant amount in the accumulated other comprehensive income is transferred to profit or loss as part of the profit or loss on disposal in accordance with K-IFRS No.1021, ‘The Effects of Changes in Foreign Exchange Rates’.
ii) Embedded derivatives
If a hybrid contract contains a host that is not a financial asset, embedded derivatives are separated from the host contract and accounted for separately only if the economic characteristics and risks of the host contract and the embedded derivative are not closely related; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the combined instrument is not designated at FVTPL. Changes in the fair value of separable embedded derivatives are recognized immediately in profit or loss.
iii) Derivative financial instruments held for trading
Changes in the fair value of derivative financial instruments not designated as a hedging instrument are recognized immediately in profit or loss.
21
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
2. Significant accounting policies (continued)
(l) Derivative financial instruments (continued)
iv) Day one profit or loss
If the Bank uses a valuation technique that incorporates data not obtained from observable markets for the fair value at initial recognition of financial instruments, there may be a difference between the transaction price and the amount determined using that valuation technique. As for these circumstances, the difference between the fair value at the initial recognition and the transaction price is not recognized as profit or loss but deferred. The deferred difference is amortized by using straight line method over the life of the financial instruments.
(m) Property and equipment
Property and equipment are initially measured at cost and after initial recognition. The cost of property and equipment includes expenditures arising directly from the construction or acquisition of the asset, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.
Property and equipment are carried at cost less accumulated depreciation and accumulated impairment losses. Certain land and buildings are measured at fair value at the date of transition to K-IFRS, which is deemed cost, in accordance with K-IFRS No.1101, ‘First-time Adoption of K-IFRS’. Dividend from relevant revaluation surplus is prohibited in accordance with the resolution of the board of directors.
The Bank recognizes in the carrying amount of an item of property and equipment the cost of replacing part of property and equipment when that cost is incurred if it is probable that future economic benefits associated with the item will flow to the Bank and the cost of the item can be measured reliably. The carrying amount of those parts that are replaced is derecognized. The costs of the day-to-day servicing of property and equipment are recognized in profit or loss as incurred.
Land is not depreciated. Other property and equipment are depreciated on a straight-line basis over the estimated useful lives, which most closely reflect the expected pattern of consumption of the future economic benefits embodied in the asset. Leased assets under finance leases are depreciated over the shorter of the lease term and their useful lives. The estimated useful lives for the current and comparative periods are as follows:
Descriptions |
| Useful lives |
Buildings |
| 40 years |
Other properties |
| 4~5 years |
The gain or loss arising from the derecognition of an item of property and equipment, which is included in profit or loss, is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.
Depreciation methods, useful lives and residual values are reassessed at each fiscal year-end and any adjustment is accounted for as a change in accounting estimate.
22
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
2. Significant accounting policies (continued)
(n) Intangible assets
Intangible assets are measured initially at cost and, subsequently, are carried at cost less accumulated amortization and accumulated impairment losses.
Amortization of intangible assets except for goodwill and membership rights is calculated on a straight-line basis over the estimated useful lives of intangible assets as below from the date that they are available for use. The residual value of intangible assets is zero. However, as there are no foreseeable limits to the periods over which club memberships are expected to be available for use, this intangible asset is determined as having indefinite useful lives and not amortized.
Descriptions |
| Useful lives |
Software |
| 5 years |
Capitalized development cost |
| 5 years |
Other intangible assets |
| 5 years or contract periods |
Amortization periods and the amortization methods for intangible assets with finite useful lives are reviewed at the end of each reporting period. The useful lives of intangible assets that are not being amortized are reviewed at the end of each reporting period to determine whether events and circumstances continue to support indefinite useful life assessments for those assets. Changes are accounted for as changes in accounting estimates.
Expenditures on research activities, undertaken with the prospect of gaining new technical knowledge and understanding, are recognized in profit or loss as incurred. Development expenditures are capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Bank intends to and has sufficient resources to complete development and to use or sell the asset. Other development expenditures are recognized in profit or loss as incurred.
(o) Investment properties
Investment property is property held either to earn rental income or for capital appreciation or both. An investment property is initially recognized at cost including any directly attributable expenditure. Subsequent to initial recognition, the asset is measured at cost less accumulated depreciation and accumulated impairment losses, if any.
The depreciation method and the estimated useful lives for the current and comparative periods are as follows:
Descriptions |
| Depreciation method |
| Useful lives |
Buildings |
| Straight-line |
| 40 years |
Subsequent costs are recognized in the carrying amount of investment property at cost or, if appropriate, as separate items if it is probable that future economic benefits associated with the item will flow to the Bank and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing are recognized in profit or loss as incurred.
Depreciation methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted, if appropriate. The change is accounted for as changes in accounting estimates.
23
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
2. Significant accounting policies (continued)
(p) Leases
The Bank leases various tangible assets, such as real estate and vehicles, and the terms of the leases are negotiated individually and include a variety of terms and conditions. There are no other restrictions imposed by the lease contracts, except that the lease assets cannot be provided as collaterals for borrowings. At the commencement date of the lease, the Bank recognizes a right-of-use asset and a lease liability. The payment of each lease is allocated to the repayment of the liability and finance costs. The Bank recognizes in profit or loss the amount calculated to produce a constant periodic rate of interest on the lease liability balance for each period as finance costs. Right-of-use assets are depreciated using a straight-line method from the inception of the lease over the lease term of the right-of-use assets. Lease liabilities are measured at present value of the lease payments that are not paid at the commencement date of the lease agreement and included in other liabilities. Lease payments included in the measurement of the lease liabilities consist of the following:
- Fixed lease payments (including in-substance fixed payments, less any lease incentives receivable)
- Variable lease payments depending on an index or a rate
- Amounts expected to be paid by the lessee under a residual value guarantee
- The exercise price under a purchase option that the lessee is reasonably certain to exercise
- Payments of penalties for early terminating a lease unless the lessee is reasonably certain not to terminate early
If the implicit interest rate in the lease can be readily determined, the lease payments shall be discounted using that rate, and if that rate cannot be readily determined, the lessee shall use the lessee’s incremental borrowing rate.
The right-of-use asset is initially at cost, which comprises:
- The amount of the initial measurement of the lease liability
- Any lease payments made at or before the commencement date, less any lease incentives received
- Any initial direct costs incurred by the lessee
- An estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease
The Bank includes right-of-use assets within the same line item as that within which the corresponding underlying assets would be presented if they are owned.
Any right-of-use asset that meets the definition of investment property is presented as investment property.
Lease payments associated with short-term leases or leases of low-value assets are recognized as an expense on a straight line basis over the lease term.
Additional considerations for the Bank's accounting as a lessee include:
- Extension options and termination options are generally included in multiple real estate lease contracts.
- When estimating the lease term, the Bank considers all relevant facts and circumstances that create an economic incentive to exercise the option to extend the lease, or not to exercise the option to terminate the lease.
- Period covered by an extension option (or period covered by termination option) is included in lease term only if the lessee is reasonably certain to exercise (or not to exercise) the option.
- If the lessee and the lessor have the right to terminate without the consent of the other parties, the termination period shall be determined in consideration of the economic disadvantages incurred in terminating the contract.
- When significant events occur or there are significant changes in circumstances that have affected the lessee's control and the lease term before, the parties reassess whether they are quite certain to exercise the option of extension (or not).
24
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
2. Significant accounting policies (continued)
(q) Non-current assets held for sale
Assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale rather than through continuing use, are classified as held for sale. In order to be classified as held for sale, the asset (or disposal group) must be available for immediate sale in its present condition and its sale must be highly probable. The assets or disposal group that are classified as assets held for sale are measured at the lower of their carrying amount and fair value less cost to sell.
The Bank recognizes an impairment loss for any initial or subsequent write-down of an asset (or disposal group) to fair value less costs to sell, and a gain for any subsequent increase in fair value less costs to sell, up to the cumulative impairment loss previously recognized.
An asset that is classified as held for sale or part of a disposal group classified as held for sale is not depreciated (or amortized).
(r) Impairment of non-financial assets
The carrying amounts of the Bank’s non-financial assets, other than assets arising from employee benefits, deferred tax assets and non-current assets held for sale, are reviewed at the end of the reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, irrespective of whether there is any indication of impairment, are tested for impairment annually by comparing their recoverable amount to their carrying amount.
The Bank estimates the recoverable amount of an individual asset, if it is impossible to measure the individual recoverable amount of an asset, then the Bank estimates the recoverable amount of cash-generating unit (“CGU”). A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets. The recoverable amount of an asset or a CGU is the greater of its value in use and its fair value less costs to sell. The value in use is estimated by applying a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or the CGU for which estimated future cash flows have not been adjusted, to the estimated future cash flows expected to be generated by the asset or the CGU.
An impairment loss is recognized if the carrying amount of an asset or a CGU exceeds its recoverable amount. Impairment losses are recognized in profit or loss.
Goodwill acquired in a business combination is allocated to each CGU that is expected to benefit from the synergies arising from the goodwill acquired. Any impairment identified at the CGU level will first reduce the carrying value of goodwill and then be used to reduce the carrying amount of the other assets in the CGU on a pro rata basis. Except for impairment losses in respect of goodwill which are never reversed, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
25
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
2. Significant accounting policies (continued)
(s) Non-derivative financial liabilities
The Bank recognizes financial liabilities in the separate statement of financial position when the Bank becomes a party to the contractual provisions of the financial liability in accordance with the substance of the contractual arrangement and the definitions of financial liabilities.
Transaction costs on the financial liabilities at FVTPL are recognized in profit or loss as incurred.
i) Financial liabilities designated at FVTPL
Financial liabilities can be irrevocably designated as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases, or a group of financial instruments is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy. The amount of change in the fair value of the financial liabilities designated at FVTPL that is attributable to changes in the credit risk of that liabilities shall be presented in other comprehensive income.
ii) Financial liabilities at FVTPL
Since initial recognition, financial liabilities at FVTPL is measured at fair value, and changes in the fair value are recognized as profit or loss.
iii) Other financial liabilities
Non-derivative financial liabilities other than financial liabilities at fair value through profit or loss are classified as other financial liabilities and other financial liabilities include deposit, borrowing, debentures, etc. At the date of initial recognition, other financial liabilities are measured at fair value minus transaction costs that are directly attributable to the acquisition. Subsequent to initial recognition, other financial liabilities are measured at amortized cost using the effective interest method.
The Bank derecognizes a financial liability from the separate statement of financial position when it is extinguished (i.e. when the obligation specified in the contract is discharged, cancelled or expires).
(t) Equity capital
i) Capital stock
Capital stock is classified as equity. Incremental costs directly attributable to the transaction of stock are deducted from equity, net of any tax effects.
26
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
2. Significant accounting policies (continued)
(t) Equity capital (continued)
ii) Hybrid bonds
The Bank classifies an issued financial instrument, or its component parts, as a financial liability or an equity instrument depending on the substance of the contractual arrangement of such financial instrument. Hybrid bonds where the Bank has an unconditional right to avoid delivering cash or another financial asset to settle a contractual obligation are classified as an equity instrument and presented in equity.
(u) Employee benefits
i) Short-term employee benefits
Short-term employee benefits are employee benefits that are due to be settled within 12 months after the end of the period in which the employees render the related service. When an employee has rendered service to the Bank during an accounting period, the Bank recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service.
ii) Other long-term employee benefits
The Bank’s net obligation in respect of other long-term employee benefits that are not expected to be settled wholly before 12 months after the end of the annual reporting period, in which the employees render the related service, is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Remeasurements are recognized in profit or loss in the period in which they arise.
iii) Retirement benefits: defined benefit plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Bank’s net obligation in respect of defined benefit plans is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of plan assets is deducted. The calculation is performed annually by an independent actuary using the projected unit credit method.
The discount rate is the yield at the end of the reporting period on high-quality corporate bonds that have maturity dates approximating the terms of the Bank’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The Bank recognizes service cost and net interest on the net defined benefit liability (asset) in profit or loss and remeasurements of the net defined benefit liability (asset) in other comprehensive income.
iv) Retirement benefits: defined contribution plans
The Bank recognizes the contribution expense as an account of severance payments in profit or loss in the period according to the defined contribution plans.
ⅴ) Termination benefits
Termination benefits are expensed at the earlier of when the Bank can no longer withdraw the offer of those benefits and when the Bank recognizes costs for a restructuring. If benefits are not expected to be wholly settled within 12 months of the end of the reporting period, then they are discounted.
27
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
2. Significant accounting policies (continued)
(v) Share-based payment transactions
The grant date fair value of share-based payment awards granted to employees is recognized as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.
The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognized as an expense with a corresponding increase in liabilities, over the period that the employees unconditionally become entitled to payment. The liability is remeasured at the end of each reporting period and at settlement date. Any changes in the fair value of the liability are recognized as personnel expense in profit or loss.
The Bank has granted share-based payment based on Shinhan Financial Group’s share to the employees. In accordance with a repayment arrangement with Shinhan Financial Group, the Bank is required to pay Shinhan Financial Group for the provision of the share-based payments. The Bank recognizes the costs as expenses and accrued expenses in liabilities for the service period. When vesting conditions are not satisfied because of death, retirement or dismissal of employees during the specified service period, no amount is recognized for goods or services received on a cumulative basis. Share-based payment arrangements in which the Bank has no obligation to settle the share-based payment transaction are accounted for as equity-settled share-based payment transactions, regardless of the repayment arrangement with Shinhan Financial Group. The share-based compensation agreement that the Bank has given to its executives and employees is measured in cash-settled.
(w) Provisions
Provisions are recognized when the Bank has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of a provision. Where the effect of the time value of money is material, provisions are determined at the present value of the expected future cash flows.
Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.
Provisions shall be used only for expenditures for which the provisions are originally recognized.
28
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
2. Significant accounting policies (continued)
(x) Financial guarantee contract
A financial guarantee contract is a contract that requires the Bank to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. Financial guarantee contracts are recognized initially at their fair value, and the initial fair value is amortized over the life of the financial guarantee contract. The financial guarantee liability is subsequently measured at the higher of the amount of the best estimate of the expenditure required to settle the present obligation at the end of reporting period; and the amount initially recognized less, cumulative amortization recognized on a straight-line basis over the guarantee period. Financial guarantee liabilities are included within payment guarantee provision.
After initial recognition, financial guarantee contracts are measured at the higher of:
- Loss allowance in accordance with K-IFRS No.1109, ‘Financial Instruments’
- The amount initially recognized less, when appropriate, the cumulative amount of income recognized in accordance with the principles of K-IFRS No.1115, ‘Revenue from Contracts with Customers’
(y) Recognition of revenues and expenses
The Bank’s revenues are recognized using five-step revenue recognition model as follows: (1) ‘Identifying the contract’ → (2) ‘Identifying performance obligations’ → (3) ‘Determining the transaction price’ → (4) ‘Allocating the transaction price to performance obligations’ → (5) ‘Recognizing the revenue by satisfying performance obligations’.
i) Interest income and expense
Interest income and expense are recognized in profit or loss using the effective interest method. The effective interest rate is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or liability or, where appropriate, a shorter period to the net carrying amount of the financial asset or liability. When calculating the effective interest rate, the Bank estimates cash flows considering all contractual terms of the financial instrument, but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, and all other premiums or discounts. When it is not possible to estimate reliably the cash flows or the expected life of a financial instrument, the Bank uses the contractual cash flows over the full contractual term of the financial instrument.
Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is thereafter recognized using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.
ii) Fees and commission
The recognition of revenue for financial service fees depends on the purposes for which the fees are assessed and the basis of accounting for any associated financial instrument.
29
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
2. Significant accounting policies (continued)
(y) Recognition of revenues and expenses (continued)
a. Fees that are an integral part of the effective interest rate of a financial instrument.
Such fees are generally treated as an adjustment to the effective interest rate. Such fees may include compensation for activities such as evaluating the borrower’s financial condition, evaluating and recording guarantees, collateral and other security arrangements, preparing and processing documents, closing the transaction and the origination fees received on issuing financial liabilities. However, when the financial instrument is measured at fair value with the change in fair value recognized in profit or loss, the fees are recognized as revenue when the instrument is initially recognized.
b. Fees earned as services are provided
Fees and commission income, including investment management fees, sales commission, and account servicing fees, are recognized as revenue when the related service as a performance obligation is provided.
c. Fees that are earned on the execution of a significant act
The fees that are earned on the execution of a significant act including commission on the allotment of shares or other securities to a client, placement fee for arranging a loan between a borrower and an investor and sales commission, are recognized as revenue when the significant act as a performance obligation has been completed.
iii) Dividends
Dividends income is recognized when the shareholder’s right to receive payment is established. Usually this is the ex-dividend date for equity securities.
(z) Income tax
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.
Shinhan Financial Group, the parent company, files its national income tax return with the Korean tax authorities under the consolidated corporate tax system, which allows it to make national income tax payments based on the consolidated profits or losses of the Shinhan Financial Group and its wholly owned domestic subsidiaries including the Bank. Deferred taxes are measured based on the future tax benefits expected to be realized in consideration of the expected profits or losses of eligible companies in accordance with the consolidated corporate tax system. Consolidated corporate tax amounts, once determined, are allocated to each of the subsidiaries and are used as a basis for the income taxes to be recorded in their stand-alone financial statements.
The Bank recognizes deferred tax liabilities for all taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint ventures, except to the extent that the Bank is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The Bank recognizes deferred tax assets for all deductible temporary differences arising from investments in subsidiaries and associates, to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Bank expects, at the end of the reporting period to recover or settle the carrying amount of its assets and liabilities.
30
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
2. Significant accounting policies (continued)
(z) Income tax (continued)
The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and reduced the carrying amount to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilized.
Deferred tax assets and liabilities are offset only if there is a legally enforceable right to offset the related current tax liabilities and assets, and they relate to income taxes levied by the same tax authority and they intend to settle current tax liabilities and assets on a net basis.
If any additional income tax expense exists by payment of dividends, the Bank recognizes it when the liability relating to the payment is recognized.
Because of the tax positions taken by the Bank, tax uncertainties arise from the complexity of transactions and differences in tax law interpretation. Also, uncertainty arises from a tax refund suit, tax investigation, or a refund suit against the tax authorities' assessed tax amount. For the tax amount paid to the tax authorities, in accordance with K-IFRS No.2123, it will be recognized as the corporate tax assets if a refund in the future is probable. In addition, the amount expected to be paid as a result of the tax investigation is recognized as the tax liability.
(aa) Accounting for trust accounts
The Bank accounts for trust accounts separately from its bank accounts under the Financial Investment Services and Capital Markets Act and thus the trust accounts are not included in the accompanying separate financial statements. Borrowings from trust accounts are included in other liabilities. Trust fees and commissions in relation to the service provided to trust accounts by the Bank are recognized as fees and commission income.
(ab) Earnings per share
The Bank presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to the ordinary shareholder of the Bank by the weighted average number of common shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees.
31
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
3. Financial risk management
3-1. Credit risk
Credit risk is the risk of financial loss of the Bank if a customer or counterparty fails to meet its contractual obligation. Credit risk is classified as the most important risk to be managed for the Bank's business activities, and management carefully manages the maximum credit risk exposure. Credit exposure arises principally from due from banks, the lending process related to loans, investment activities in debt securities and off balance sheet items including loan commitments, etc.
(a) Credit risk management
Bank's basic policy on credit risk management is determined by the Risk Policy Committee. The Risk Policy Committee consists of the Chief Risk Officer (CRO) as the chairman, the Chief Credit Officer (CCO), the head of the business group, and the head of the risk management department, and decides the credit risk management plan and the direction of the loan policy for the entire bank. Apart from the Risk Policy Committee, the Credit Review Committee is established to separate credit monitoring, such as large loans and limit approval, and the CCO is composed of the chairman, the head of the group in charge of the credit-related business group, the head of the credit planning department, and the senior examination team to enhance the soundness of the loan and profitability of operation.
The risk management of the asset is primarily carried out by all operating units that hold and manage the asset subject to credit risk, and the credit risk management department, such as the risk management department and the credit planning department, is in charge of the credit risk management of the Bank as a whole. The risk management department and the risk engineering department manage the credit portfolio by managing credit risk limits set by the Risk Policy Committee and credit maximum exposure limits for the same parties, affiliates, industries, and countries. The Bank also measures and manages risk components such as Probability of Default (PD), LGD (Loss Given Default), and EAD (Exposure at Default) through the operation of the credit rating system and collateral management system. As an organization for supporting and checking loan decisions, the Credit Planning Department manages the credit policy and system of the entire bank, and the Credit Review Department conducts independent credit rating and loan decision making. Also, the Credit Supervision Department conducts individual credit supervision on large loans.
Each of the Bank’s borrowers is assigned a credit rating, which is based on a comprehensive internal credit evaluation system that considers a variety of criteria. For retail borrowers, the credit rating takes into account the borrower’s individual information, past dealings with the Bank and external credit rating information. For corporate borrowers, the credit rating takes into account financial indicators as well as non-financial indicators such as industry risk, operational risk and management risk, among others. The credit rating, once assigned, serves as the fundamental instrument in the Bank’s credit risk management, and is applied in a wide range of credit risk management processes, including credit approval, credit limit management, loan pricing and computation of allowance for credit loss.
The Bank's credit rating system reflects the requirements of Basel III, ACE (Automatic Credit Evaluation), retail SOHO credit rating system with a maximum exposure of 500 million or less, and Advanced Internal Rating System (AIRS).
The credit decision for companies is based on a collective decision-making system, making objective and prudent decisions. In the case of a general credit, the credit is approved by agreement between the branch's RM (Relationship Manager) and each business division's headquarter. In the case of a large or important credit, the credit is approved by a screening body. In particular, the Credit review Committee, which is the highest decision-making body of loans, examines important loans, such as large loans that exceed the limit. The individual credit is evaluated by the individual credit evaluation system based on objective statistical methods and an automated credit scoring system (CSS) based on the Bank's credit policy.
32
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
3. Financial risk management (continued)
3-1. Credit risk (continued)
(a) Credit risk management (continued)
The Bank operates a regular monitoring system for the regular management of individual loans. The review team and RM are required to conduct Loan Reviews by automatically searching for non-performing companies among the corporate loan clients, and the credit supervision department, which is independent of the business group, determines the adequacy of Loan Review results and requests credit rating adjustment of the company as necessary. In accordance with these procedures, a company is classified as an early warning company, an observer company, and a normal company, and discriminatory management is carried out in accordance with the management guidelines for each risk stage to prevent the insolvency of the loans at an early stage. The financial analysis support system affiliated with a professional credit rating agency supports credit screening and management, and the credit planning department calculates and manages industrial grades and analyzes and provides industry trends and company information.
(b) Risk management and risk mitigation policy
In order to control the credit risk of the Bank at an appropriate level, the following risk management system is established and operated.
- Credit risk limits are set and managed by business sector, customer, product, industry, etc. based on credit VaR (Value at Risk) and maximum exposure amount.
- The Risk Management Department establishes and manages limits for credit VaR, and maximum exposure limits. The Credit Planning Department and the credit assessment department conduct maximum exposure limits.
- The Risk Management Department and Risk Engineering Department establishes a credit risk limit operation plan for the entire bank at least once a year, and commits it to the risk policy committee.
- Each business unit monitors and adheres to credit risk limits assigned to each business unit
- Specify and manage limits for identified credit risk by individual, corporate customers, industry and nationality.
- Establishes acceptable risk limits for individual borrowers or groups of borrowers and geographical sectors.
- The risk is assessed on an annual basis or reassessed within a period when it is deemed necessary, and the limits of risks by product, industry and country are approved by The Board of Directors on a quarterly basis.
- The maximum exposure for each borrower, including institutions, is managed by low level limits that are individually set for accounts in the financial statements and off-balance sheet accounts, and risk limits for daily transactions related to commodity trading including foreign currency forward trading, are also determined.
- Actual maximum exposure limits is managed on a daily basis.
- Maximum credit risk exposure is managed in the process of analyzing the interest and principal repayment ability of the borrower, and if necessary, changes the loan limit in the process.
Other risk management measures are as follows:
i) Collateral
The Bank has adopted policies and procedures to mitigate credit risk. In connection with credit risk, collateral is generally used, and the Bank has adopted a policy for pledging certain types of assets. The main types of collateral are as follows:
- Mortgage
- Real estate, inventories, accounts receivable, etc.
- Financial instruments such as debt securities and equity securities
33
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
3. Financial risk management (continued)
3-1. Credit risk (continued)
(b) Risk management and risk mitigation policy (continued)
Long-term loans are generally collateralized. On the other hand, revolving personal loans are generally unsecured. In addition, in order to minimize losses due to credit risk, the Bank establishes additional collateral for the counterparty in the event of an indication of impairment of the asset.
Collateral for financial assets other than loans is subject to the nature of the products. Except for special cases such as Asset Backed Securities (ABS), unsecured securities are common in the case of debt securities.
ii) Derivative financial instruments
The Bank maintains a credit limit on the amount and duration of derivative financial instruments that are in between the disposal agreements after purchase.
iii) Collective offsetting contracts
The Bank limits its maximum exposure to credit losses by engaging in collective offsetting contracts with counterparties in executing significant number of transactions.
Collective offsetting contracts generally do not result from offsetting assets and liabilities in the separate financial statements, as transactions are usually set at a gross amount basis. However, when all amounts to the counterparty are set on a net basis, the credit risk associated with a favorable contract is reduced by collective offsetting contracts if losses are incurred.
The Bank's overall maximum exposure to credit risk that is part of a collective offsetting contract can vary substantially within a short period of time because it is affected by each transaction.
iv) Credit related contracts
Guarantees and credit enhancements have credit risks similar to credit. Credit (which guarantees credit on behalf of the customer by issuing a note to a third party for the amount requested under specific terms and conditions) is secured by the underlying commodities associated with them, it involves less risk. The credit enhancement arrangements represent the unused portion of the credit limit in the form of a credit, guarantee or letter of credit. In relation to the credit risk of a credit enhancement arrangement, the Bank is potentially exposed to the same amount as the total unused arrangements. Long-term contracts generally have a greater degree of credit risk than short-term, and the Bank monitors the maturity of credit arrangements.
34
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
3. Financial risk management (continued)
3-1. Credit risk (continued)
(c) Techniques, assumptions and input variables used to measure impairment (Expected credit loss model)
i) Determining significant increases in credit risk since initial recognition
At the end of each reporting period, the Bank assesses whether the credit risk on a financial instrument has increased significantly since initial recognition. When making the assessment, the Bank uses the change in the risk of a default occurring over the expected life of the financial instrument instead of the change in the amount of expected credit losses. To make that assessment, the Bank compares the risk of a default occurring on the financial instrument at the end of the reporting period with the risk of a default occurring on the financial instrument as at the date of initial recognition and consider reasonable and supportable information, that is available without undue cost or effort, that is indicative of significant increases in credit risk since initial recognition. The supportable information also includes historical default data held by the Bank and the analysis by internal credit risk rating specialists.
a. Measuring the risk of default
The Bank assigns an internal credit risk rating to each individual exposure based on observable data and historical experiences that have been found to have a reasonable correlation with the risk of default. The internal credit risk rating is determined by considering both qualitative and quantitative factors that indicate the risk of default, which may vary depending on the nature of the exposure and the type of borrower.
The internal credit risk rating based on the borrower’s information related to each individual exposures on initial recognition, may change depending on the results of continuing monitoring and reviews.
b. Measuring term structure of probability of default
The Bank accumulates information after analyzing the information regarding exposure to credit risk and default information by the type of product and borrower and results of internal credit risk assessment. For some portfolios, the Bank uses information obtained from external credit rating agencies when performing these analyses.
The Bank applies statistical techniques to estimate the probability of default for the remaining life of the exposure from the accumulated data and to estimate changes in the estimated probability of default over time.
c. Significant increases in credit risk
The Bank uses the indicators defined as per portfolio to determine the significant increase in credit risk and such indicators generally consist of changes in the risk of default estimated from changes in the internal credit risk rating, qualitative factors, days of delinquency, and others. The method used to determine whether credit risk of financial instruments has significantly increased after the initial recognitions is summarized as follows:
35
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
3. Financial risk management (continued)
3-1. Credit risk (continued)
(c) Techniques, assumptions and input variables used to measure impairment (Expected credit loss model) (continued)
c. Significant increases in credit risk (continued)
Corporate exposures |
| Retail exposures |
Significant change in credit ratings |
| Significant change in credit ratings |
Continued past due more than 30 days |
| Continued past due more than 30 days |
Loan classification of precautionary and below |
| Loan classification of precautionary and below |
Borrower with early warning signals |
| Borrower with early warning signals |
Negative net assets |
| Specific pool segment |
Adverse audit opinion or disclaimer of opinion |
| Collective loans for housing for which the constructors are insolvent |
Interest coverage ratio below 1 for a consecutive period of three years or negative cash flows from operating activities for a consecutive period of two years |
| Loans with identified indicators for significant increases in other credit risk |
Loans with identified indicators for significant increases in other credit risk |
|
|
The Bank considers the credit risk of financial instrument has been significantly increased since initial recognition if a specific exposure is past due more than 30 days. The Bank counts the number of days past due from the earliest date on which the Bank has not received the contractual payments in full from the borrower and does not consider the grace period granted to the borrower.
The Bank regularly reviews the criteria for determining if there have been significant increases in credit risk from the following perspective.
- A significant increase in credit risk shall be identified prior to the occurrence of default.
- The criteria established to judge the significant increase in credit risk shall have more power of preemptive prediction than the criteria for days of delinquency.
- As a result of applying the judgment criteria, financial instruments shall not move too frequently between the 12-months expected credit losses measurement and the lifetime expected credit losses measurement.
36
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
3. Financial risk management (continued)
3-1. Credit risk (continued)
(c) Techniques, assumptions and input variables used to measure impairment (Expected credit loss model) (continued)
ii) Modified financial assets
If the contractual cash flows on a financial asset have been renegotiated or modified and the financial asset is not derecognized, the Bank assesses whether there has been a significant increase in the credit risk of the financial instrument by comparing the risk of a default occurring at initial recognition based on the original, unmodified contractual terms and the risk of a default occurring at the end of the reporting period based on the modified contractual terms.
The Bank may adjust the contractual cash flows of loans to customers who are in financial difficulties in order to manage the risk of default and enhance the collectability (hereinafter referred to as ‘debt restructuring’). These adjustments generally involve extension of maturity, changes in interest payment schedule, and changes in other contractual terms.
Debt restructuring is a qualitative indicator of a significant increase in credit risk and the Bank recognizes lifetime expected credit losses for the exposure expected to be the subject of such adjustments. If a borrower faithfully makes payments of contractual cash flows that are modified in accordance with the debt restructuring or if the borrower's internal credit rating has recovered to the level prior to the recognition of the lifetime expected credit losses, the Bank recognizes the 12-months expected credit losses for that exposure again.
iii) Risk of default
The Bank considers a financial asset to be in default if it meets one or more of the following conditions:
- if a borrower is more than 90 days past due on its contractual payments,
- if the Bank judges that it is not possible to recover principal and interest without enforcing the collateral on a financial asset
The Bank uses the following indicators when determining whether a borrower is in default:
- qualitative factors (e.g. breach of contract terms),
- quantitative factors (e.g. if the same borrower does not perform more than one payment obligations to the Bank, the number of days past due per payment obligation. However, in the case of a specific portfolio, the Bank uses the number of days past due for each financial instrument.)
- internal data and external data
The definition of default applied by the Bank generally conforms to the definition of default defined for regulatory capital management purposes; however, depending on the situations, the information used to determine whether a default has incurred and the extent thereof may vary.
iv) Reflection of forward-looking information
The Bank reflects forward-looking information presented by internal experts based on a variety of sources when measuring expected credit losses. For the purpose of estimating these forward-looking information, the Bank utilizes the economic outlook published by domestic and overseas research institutes or government and public agencies.
37
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
3.Financial risk management (continued)
3-1.Credit risk (continued)
(c) Techniques, assumptions and input variables used to measure impairment (Expected credit loss model) (continued)
iv) Reflection of forward-looking information (continued)
The bank reflects forward-looking information presented by a group of internal experts based on various information when measuring expected credit losses. The Bank utilizes economic forecasts disclosed by domestic and foreign research institutes, governments, and public institutions to forecast forward-looking information.
The Bank reflects future macroeconomic conditions anticipated from a neutral standpoint that is free from bias in measuring expected credit losses. Expected credit losses in this respect reflect conditions that are most likely to occur and are based on the same assumptions that the Bank used in its business plan and management strategy.
The Bank analyzed the data experienced in the past, derived correlations between major macroeconomic variables and credit risks required for predicting credit risk and credit loss for each portfolio, and then reflected forward-looking information through regression estimation. To reflect the COVID-19 economic situation, the Bank has reviewed the three scenarios "base", "upside" and "downside" to reflect the final forward-looking information.
(1) Upside scenario
Major variables(*1) |
| Correlation |
| 2020.4Q(*2)(*3) |
| 2021 | ||||||
|
|
| 1Q |
| 2Q |
| 3Q |
| 4Q | |||
GDP growth rate (YoY %) |
| (-) |
| (2.8) |
| - |
| 3.9 |
| 3.0 |
| 4.3 |
Private consumption index (YoY %) |
| (-) |
| (4.8) |
| 3.0 |
| 2.3 |
| 3.5 |
| 4.1 |
Facility investment growth rate (YoY %) |
| (-) |
| 3.5 |
| 5.5 |
| 6.5 |
| 1.5 |
| 5.0 |
Consumer price index growth rate (%) |
| (-) |
| 0.3 |
| 0.6 |
| 0.9 |
| 0.8 |
| 0.9 |
Balance on current account (billion dollars) |
| (-) |
| 170.0 |
| 130.0 |
| 160.0 |
| 190.0 |
| 180.0 |
Government bond 3y yields (%) |
| - |
| 0.90 |
| 1.00 |
| 1.00 |
| 1.10 |
| 1.1 |
(2) Central scenario
Major variables(*1) |
| Correlation |
| 2020.4Q(*2)(*3) |
| 2021 | ||||||
|
|
| 1Q |
| 2Q |
| 3Q |
| 4Q | |||
GDP growth rate (YoY %) |
| (-) |
| (2.8) |
| (0.7) |
| 3.6 |
| 2.5 |
| 3.7 |
Private consumption index (YoY %) |
| (-) |
| (4.8) |
| 2.6 |
| 2.1 |
| 3.0 |
| 3.5 |
Facility investment growth rate (YoY %) |
| (-) |
| 3.5 |
| 5.0 |
| 6.0 |
| 0.8 |
| 4.5 |
Consumer price index growth rate (%) |
| (-) |
| 0.3 |
| 0.5 |
| 0.9 |
| 0.7 |
| 0.8 |
Balance on current account (billion dollars) |
| (-) |
| 170.0 |
| 120.0 |
| 150.0 |
| 180.0 |
| 170.0 |
Government bond 3y yields (%) |
| - |
| 0.90 |
| 1.00 |
| 1.00 |
| 1.00 |
| 1.00 |
38
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
3.Financial risk management (continued)
3-1.Credit risk (continued)
(c) Techniques, assumptions and input variables used to measure impairment (Expected credit loss model) (continued)
iv) Reflection of forward-looking information (continued)
(3) Downside scenario
Major variables(*1) |
| Correlation |
| 2020.4Q(*2)(*3) |
| 2021 | ||||||
|
|
| 1Q |
| 2Q |
| 3Q |
| 4Q | |||
GDP growth rate (YoY %) |
| (-) |
| (2.8) |
| (1.5) |
| 2.3 |
| 1.7 |
| 3.0 |
Private consumption index (YoY %) |
| (-) |
| (4.8) |
| 1.9 |
| 1.1 |
| 2.6 |
| 3.4 |
Facility investment growth rate (YoY %) |
| (-) |
| 3.5 |
| 3.5 |
| 4.5 |
| (1.0) |
| 3.0 |
Consumer price index growth rate (%) |
| (-) |
| 0.3 |
| 0.4 |
| 0.8 |
| 0.6 |
| 0.7 |
Balance on current account (billion dollars) |
| (-) |
| 170.0 |
| 110.0 |
| 140.0 |
| 170.0 |
| 160.0 |
Government bond 3y yields (%) |
| - |
| 0.90 |
| 1.10 |
| 1.10 |
| 1.10 |
| 1.10 |
(*1) As a result of reviewing the correlation of each variable, the private consumption index and facility investment growth rate were applied among the major variables to reflect the final forward-looking information. The Bank additionally selected the KOSPI forecast in addition to the table above.
(*2) Considering the default forecast period, the Bank reflected the future economic outlook.
(*3) The macroeconomic outlook figures are estimated by the Bank for the purpose of calculating expected credit losses based on information from domestic and foreign research institutes. Therefore, it could be different from other institutions' estimates.
The predicted correlations between the macroeconomic variables and the risk of default, used by the Bank, are derived based on long-term data over the past ten years.
The recent historical default rate is an important reference when estimating the default rate in consideration of the future economic outlook. Economic indicators have worsened in 2020 due to the economic contraction caused by the COVID-19. However, the historical default rate of the Bank's has remained stable because of various government support in response to the COVID-19. The Bank manages the credit risk through classifying borrowers in interest and principal payment holiday that is one of the financial relief programs into Stage2 to reflect the impact of potential insolvency.
As of December 31, 2020, the effect of increasing provisions due to classification of exposure and STAGE2 for the borrowers who applied for moratorium of interest payments and moratorium of repayment in installments is as follows:
|
| Exposure |
| Provision before change |
| Provision after change |
| Amount of increasing |
Moratorium of interest payments |
| 242,794 |
| 18,824 |
| 18,874 |
| 50 |
Moratorium of repayment in installments |
| 1,067,502 |
| 19,262 |
| 20,660 |
| 1,398 |
Moratorium of interest payments and moratorium of repayment in installments |
| 80,581 |
| 2,123 |
| 2,166 |
| 43 |
|
| 1,390,877 |
| 40,209 |
| 41,700 |
| 1,491 |
39
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-1.Credit risk (continued)
(c) Techniques, assumptions and input variables used to measure impairment (Expected credit loss model) (continued)
iv) Reflection of forward-looking information (continued)
The Bank has considered multiple economic scenarios in applying forward-looking information to measure expected credit losses. The sensitivity analysis of the impact on the Bank's expected credit loss allowance if the weights of the upside or downside scenarios is assumed to be 100% while holding all other assumptions constant is as follows:
Scenario |
| Assumption for 100% |
| Differ from carrying amount |
UPSIDE |
| 1,664,306 |
| (2,775) |
DOWNSIDE |
| 1,691,862 |
| 24,781 |
v) Measurement of expected credit losses
Key variables used in measuring expected credit losses are as follows:
- Probability of default (PD)
- Loss given default (LGD)
- Exposure at default (EAD)
These variables have been estimated from historical experience data by using the statistical techniques developed internally by the Bank and have been adjusted to reflect forward-looking information.
Estimates of PD over a specified period are estimated by reflecting characteristics of counterparties and their exposure, based on a statistical model at a specific point of time. The Bank uses its own information to develop a statistical credit assessment model used for the estimation, and additional information observed in the market is considered for some portfolios such as a group of large corporates. When a counterparty or exposure is concentrated in specific grades, the method of measuring PD for those grades would be adjusted, and the PD by grade is estimated by considering contract expiration of the exposure.
40
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
3.Financial risk management (continued)
3-1.Credit risk (continued)
(c) Techniques, assumptions and input variables used to measure impairment (Expected credit loss model) (continued)
v) Measurement of expected credit losses (continued)
LGD refers to the expected loss if a borrower defaults. The Bank calculates LGD based on the experience recovery rate measured from past default exposures. The model for measuring LGD is developed to reflect type of collateral, seniority of collateral, type of borrower, and cost of recovery. In particular, LGD for retail loan products uses loan to value (LTV) as a key variable. The recovery rate reflected in the LGD calculation is based on the present value of recovery amount, discounted at the effective interest rate.
EAD refers to the expected exposure at the time of default. The Bank derives EAD reflecting a rate at which the current exposure is expected to be used additionally up to the point of default within the contractual limit. EAD of financial assets is equal to the total carrying amount of the asset, and EAD of loan commitments or financial guarantee contracts is calculated as the sum of the amount expected to be used in the future.
When measuring expected credit losses on financial assets, the Bank reflects a period of expected credit loss measurement based on a contractual maturity. The Bank takes into consideration of the extension rights held by a borrower when deciding the contractual maturity.
Risk factors such as PD, LGD and EAD are collectively estimated according to the following criteria:
- Type of products
- Internal credit risk rating
- Type of collateral
- Loan to value (LTV)
- Industry that the borrower belongs to
- Location of the borrower or collateral
- Days of delinquency
The criteria for classification of groups are periodically reviewed to maintain homogeneity of the group and adjusted if necessary. The Bank uses external benchmark information to supplement internal information for a particular portfolio that did not have sufficient internal data accumulated from the past experience.
vi) Write-off of financial assets
The Bank writes off a portion of or entire loan or debt security that is not expected to receive its principal and interest. In general, the Bank conducts write-off when it is deemed that the borrower has no sufficient resources or income to repay the principal and interest. Such determination on write-off is carried out in accordance with the internal rules of the Bank and is carried out with the approval of an external institution, if necessary. Apart from write-off, the Bank may continue to exercise its right of collection under its own recovery policy even after the write-off of financial assets.
41
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-1.Credit risk (continued)
(d) Maximum exposure to credit risk
The Bank’s maximum exposure to credit risk without taking into account of any collateral held or other credit enhancements as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Due from banks (*1)(*2): |
|
|
|
|
Banks |
| 2,006,450 |
| 2,716,306 |
Governments |
| 19,157,885 |
| 14,493,528 |
|
| 21,164,335 |
| 17,209,834 |
Loans at amortized cost (*1)(*2): |
|
|
|
|
Banks |
| 7,234,785 |
| 4,180,510 |
Retail: |
|
|
|
|
Mortgage lending |
| 45,321,075 |
| 46,633,770 |
Others |
| 101,211,943 |
| 84,635,066 |
|
| 146,533,018 |
| 131,268,836 |
|
|
|
|
|
Governments |
| 2,380,348 |
| 2,425,213 |
Corporate: |
|
|
|
|
Large enterprises |
| 25,552,003 |
| 25,043,965 |
Small and medium-sized enterprises |
| 85,983,082 |
| 78,243,337 |
Special finance |
| 6,973,592 |
| 6,024,424 |
Others |
| 810 |
| 474 |
|
| 118,509,487 |
| 109,312,200 |
|
| 274,657,638 |
| 247,186,759 |
Loans at fair value through profit or loss: |
|
|
|
|
Banks |
| 29,996 |
| - |
Corporate: |
|
|
|
|
Large enterprises |
| 699,827 |
| 714,946 |
Small and medium-sized enterprises |
| 114,646 |
| 154,045 |
|
| 814,473 |
| 868,991 |
|
| 844,469 |
| 868,991 |
Securities at FVTPL: |
|
|
|
|
Debt securities |
| 19,386,313 |
| 16,485,641 |
Gold/silver deposits |
| 188,339 |
| 111,715 |
|
| 19,574,652 |
| 16,597,356 |
Securities at FVOCI (*1) |
| 37,637,403 |
| 38,866,832 |
Securities at amortized cost (*1) |
| 19,062,390 |
| 19,323,185 |
Derivative assets |
| 4,581,535 |
| 2,107,875 |
Other financial assets (*1)(*3) |
| 10,829,613 |
| 13,279,832 |
Off-balance sheet items: |
|
|
|
|
Financial guarantee contracts |
| 8,857,606 |
| 9,116,456 |
Loan commitments and other liabilities for credit |
| 97,162,880 |
| 92,735,650 |
|
| 106,020,486 |
| 101,852,106 |
|
| 494,372,521 |
| 457,292,770 |
(*1) The maximum exposure amounts for due from banks, loans, securities and other financial assets are measured as the amount net of allowances.
(*2) Due from banks and loans are classified as similar credit risk group to be with consistent calculating capital adequacy ratio under New Basel Capital Accord (Basel III).
42
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
(*3) Other financial assets comprise accounts receivable, accrued income, guarantee deposits, domestic exchange settlements receivables, suspense receivables, etc.
43
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-1.Credit risk (continued)
(e) Credit risk exposure by credit risk grade
i) The maximum exposure of financial instruments to credit risk by credit risk grade as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | ||||||||||||||||
|
| 12-month expected loss |
| Life time expected loss |
| Total |
| Allowances |
| Net |
| Mitigation of credit risk due to collateral | ||||||
Grade 1 |
| Grade 2 |
| Grade 1 |
| Grade 2 |
| Impaired | ||||||||||
Due from banks: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks |
| 1,949,695 |
| 59,169 |
| - |
| 312 |
| - |
| 2,009,176 |
| (2,726) |
| 2,006,450 |
| - |
Governments |
| 19,076,804 |
| 80,495 |
| - |
| 1,748 |
| - |
| 19,159,047 |
| (1,162) |
| 19,157,885 |
| - |
|
| 21,026,499 |
| 139,664 |
| - |
| 2,060 |
| - |
| 21,168,223 |
| (3,888) |
| 21,164,335 |
| - |
Loans at amortized cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks |
| 4,829,321 |
| 2,316,840 |
| 87,085 |
| 9,623 |
| - |
| 7,242,869 |
| (8,084) |
| 7,234,785 |
| 25,520 |
Retail |
| 131,651,648 |
| 5,538,082 |
| 5,872,853 |
| 3,407,194 |
| 412,237 |
| 146,882,014 |
| (348,996) |
| 146,533,018 |
| 77,251,307 |
Residential real estate mortgage loan |
| 42,263,535 |
| 313,134 |
| 1,792,577 |
| 877,066 |
| 82,743 |
| 45,329,055 |
| (7,980) |
| 45,321,075 |
| 40,277,946 |
Etc |
| 89,388,113 |
| 5,224,948 |
| 4,080,276 |
| 2,530,128 |
| 329,494 |
| 101,552,959 |
| (341,016) |
| 101,211,943 |
| 36,973,361 |
Governments |
| 2,133,389 |
| 247,541 |
| - |
| - |
| - |
| 2,380,930 |
| (582) |
| 2,380,348 |
| - |
Corporate |
| 78,143,505 |
| 20,939,203 |
| 9,922,531 |
| 9,934,985 |
| 641,861 |
| 119,582,085 |
| (1,072,598) |
| 118,509,487 |
| 74,206,613 |
Major company |
| 17,204,288 |
| 4,667,392 |
| 2,001,089 |
| 1,797,262 |
| 147,447 |
| 25,817,478 |
| (265,475) |
| 25,552,003 |
| 6,963,996 |
Small business |
| 58,016,906 |
| 12,267,376 |
| 7,919,456 |
| 8,063,308 |
| 494,414 |
| 86,761,460 |
| (778,378) |
| 85,983,082 |
| 66,551,952 |
Special finance |
| 2,922,311 |
| 4,003,724 |
| 1,986 |
| 74,275 |
| - |
| 7,002,296 |
| (28,704) |
| 6,973,592 |
| 690,665 |
Etc |
| - |
| 711 |
| - |
| 140 |
| - |
| 851 |
| (41) |
| 810 |
| - |
|
| 216,757,863 |
| 29,041,666 |
| 15,882,469 |
| 13,351,802 |
| 1,054,098 |
| 276,087,898 |
| (1,430,260) |
| 274,657,638 |
| 151,483,440 |
Securities at FVOCI (*) |
| 32,197,368 |
| 5,189,454 |
| - |
| 250,581 |
| - |
| 37,637,403 |
| - |
| 37,637,403 |
| - |
Securities at amortized cost |
| 18,794,256 |
| 271,142 |
| - |
| - |
| - |
| 19,065,398 |
| (3,008) |
| 19,062,390 |
| - |
|
| 288,775,986 |
| 34,641,926 |
| 15,882,469 |
| 13,604,443 |
| 1,054,098 |
| 353,958,922 |
| (1,437,156) |
| 352,521,766 |
| 151,483,440 |
(*) Credit loss allowance recognized in other comprehensive income on securities at FVOCI is W15,889 million.
44
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-1.Credit risk (continued)
(e) Credit risk exposure by credit risk grade (continued)
i) The maximum exposure of financial instruments to credit risk by credit risk grade as of December 31, 2020 and December 31, 2019 are as follows (continued):
|
| December 31, 2019 | ||||||||||||||||
|
| 12-month expected loss |
| Life time expected loss |
| Total |
| Allowances |
| Net |
| Mitigation of credit risk due to collateral | ||||||
Grade 1 |
| Grade 2 |
| Grade 1 |
| Grade 2 |
| Impaired | ||||||||||
Due from banks: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks |
| 2,717,753 |
| - |
| 1,341 |
| - |
| - |
| 2,719,094 |
| (2,788) |
| 2,716,306 |
| - |
Governments |
| 14,493,591 |
| - |
| 592 |
| - |
| - |
| 14,494,183 |
| (655) |
| 14,493,528 |
| - |
|
| 17,211,344 |
| - |
| 1,933 |
| - |
| - |
| 17,213,277 |
| (3,443) |
| 17,209,834 |
| - |
Loans at amortized cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks |
| 2,261,173 |
| 1,814,256 |
| 73,769 |
| 38,854 |
| - |
| 4,188,052 |
| (7,542) |
| 4,180,510 |
| 43,732 |
Retail |
| 117,531,674 |
| 4,881,644 |
| 5,476,794 |
| 3,335,176 |
| 382,642 |
| 131,607,930 |
| (339,094) |
| 131,268,836 |
| 73,919,716 |
Residential real estate mortgage loan |
| 43,715,801 |
| 535,894 |
| 1,271,132 |
| 1,033,363 |
| 86,648 |
| 46,642,838 |
| (9,068) |
| 46,633,770 |
| 41,754,605 |
Etc |
| 73,815,873 |
| 4,345,750 |
| 4,205,662 |
| 2,301,813 |
| 295,994 |
| 84,965,092 |
| (330,026) |
| 84,635,066 |
| 32,165,111 |
Governments |
| 2,314,523 |
| 111,987 |
| - |
| - |
| - |
| 2,426,510 |
| (1,297) |
| 2,425,213 |
| - |
Corporate |
| 70,100,298 |
| 19,847,088 |
| 9,086,482 |
| 10,492,950 |
| 738,453 |
| 110,265,271 |
| (953,071) |
| 109,312,200 |
| 67,611,243 |
Major company |
| 16,379,810 |
| 5,087,242 |
| 1,807,408 |
| 1,763,475 |
| 274,639 |
| 25,312,574 |
| (268,609) |
| 25,043,965 |
| 6,836,353 |
Small business |
| 51,234,997 |
| 11,290,551 |
| 7,278,262 |
| 8,634,500 |
| 463,814 |
| 78,902,124 |
| (658,787) |
| 78,243,337 |
| 59,978,101 |
Special finance |
| 2,485,491 |
| 3,468,924 |
| 812 |
| 94,837 |
| - |
| 6,050,064 |
| (25,640) |
| 6,024,424 |
| 796,789 |
Etc |
| - |
| 371 |
| - |
| 138 |
| - |
| 509 |
| (35) |
| 474 |
| - |
|
| 192,207,668 |
| 26,654,975 |
| 14,637,045 |
| 13,866,980 |
| 1,121,095 |
| 248,487,763 |
| (1,301,004) |
| 247,186,759 |
| 141,574,691 |
Securities at FVOCI (*) |
| 32,400,748 |
| 6,244,737 |
| - |
| 221,347 |
| - |
| 38,866,832 |
| - |
| 38,866,832 |
| - |
Securities at amortized cost |
| 18,988,990 |
| 337,328 |
| - |
| - |
| - |
| 19,326,318 |
| (3,133) |
| 19,323,185 |
| - |
|
| 260,808,750 | �� | 33,237,040 |
| 14,638,978 |
| 14,088,327 |
| 1,121,095 |
| 323,894,190 |
| (1,307,580) |
| 322,586,610 |
| 141,574,691 |
(*) Credit loss allowance recognized in other comprehensive income on securities at FVOCI is W19,646 million.
45
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-1.Credit risk (continued)
(e) Credit risk exposure by credit risk grade (continued)
ii) Credit risk exposure per credit grade of off-balance sheet items as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | ||||||
|
| 12-month expected credit loss |
| Life time expected credit loss |
| Impaired |
| Total |
Financial guarantee: |
|
|
|
|
|
|
|
|
Grade 1 |
| 4,630,421 |
| 643,178 |
| - |
| 5,273,599 |
Grade 2 |
| 3,411,436 |
| 166,203 |
| - |
| 3,577,639 |
Impaired |
| - |
| - |
| 6,368 |
| 6,368 |
|
| 8,041,857 |
| 809,381 |
| 6,368 |
| 8,857,606 |
Loan commitment and |
|
|
|
|
|
|
|
|
Grade 1 |
| 78,100,738 |
| 3,171,907 |
| - |
| 81,272,645 |
Grade 2 |
| 14,914,990 |
| 975,245 |
| - |
| 15,890,235 |
Impaired |
| - |
| - |
| - |
| - |
|
| 93,015,728 |
| 4,147,152 |
| - |
| 97,162,880 |
|
| 101,057,585 |
| 4,956,533 |
| 6,368 |
| 106,020,486 |
|
| December 31, 2019 | ||||||
|
| 12-month expected credit loss |
| Life time expected credit loss |
| Impaired |
| Total |
Financial guarantee: |
|
|
|
|
|
|
|
|
Grade 1 |
| 4,379,407 |
| 412,825 |
| - |
| 4,792,232 |
Grade 2 |
| 4,197,314 |
| 119,729 |
| - |
| 4,317,043 |
Impaired |
| - |
| - |
| 7,181 |
| 7,181 |
|
| 8,576,721 |
| 532,554 |
| 7,181 |
| 9,116,456 |
Loan commitment and |
|
|
|
|
|
|
|
|
Grade 1 |
| 72,678,035 |
| 4,385,864 |
| - |
| 77,063,899 |
Grade 2 |
| 14,611,269 |
| 1,059,771 |
| - |
| 15,671,040 |
Impaired |
| - |
| - |
| 711 |
| 711 |
|
| 87,289,304 |
| 5,445,635 |
| 711 |
| 92,735,650 |
|
| 95,866,025 |
| 5,978,189 |
| 7,892 |
| 101,852,106 |
46
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-1.Credit risk (continued)
(e) Credit risk exposure by credit risk grade (continued)
iii) Credit risk exposure per collateral of financial instruments as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | ||||||
|
| 12-month expected credit loss |
| Life time expected credit loss |
| Impaired |
| Total |
Guarantees |
| 34,419,319 |
| 5,763,336 |
| 176,985 |
| 40,359,640 |
Deposits and savings |
| 459,492 |
| 223,357 |
| 208 |
| 683,057 |
Property and equipment |
| 1,292,265 |
| 317,218 |
| 12,341 |
| 1,621,824 |
Real estate |
| 97,406,635 |
| 12,808,456 |
| 241,485 |
| 110,456,576 |
|
| 133,577,711 |
| 19,112,367 |
| 431,019 |
| 153,121,097 |
|
| December 31, 2019 | ||||||
|
| 12-month expected credit loss |
| Life time expected credit loss |
| Impaired |
| Total |
Guarantees |
| 10,407,151 |
| 3,639,810 |
| 57,032 |
| 14,103,993 |
Deposits and savings |
| 439,764 |
| 181,532 |
| 1,029 |
| 622,325 |
Property and equipment |
| 1,013,561 |
| 307,502 |
| 12,511 |
| 1,333,574 |
Real estate |
| 116,697,154 |
| 14,009,256 |
| 317,027 |
| 131,023,437 |
|
| 128,557,630 |
| 18,138,100 |
| 387,599 |
| 147,083,329 |
iv) Credit risk exposure per LTV of mortgage loans as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| Total | ||||||||
|
| 40% or less |
| Above 40% ~ 60% |
| Above 60% ~ 80% |
| Above 80% ~ 100% |
| Other |
| |
Loans at amortized cost |
| 16,607,848 |
| 13,039,356 |
| 12,126,830 |
| 1,850,819 |
| 1,704,202 |
| 45,329,055 |
Less: allowance |
| (450) |
| (1,216) |
| (4,072) |
| (1,500) |
| (742) |
| (7,980) |
|
| 16,607,398 |
| 13,038,140 |
| 12,122,758 |
| 1,849,319 |
| 1,703,460 |
| 45,321,075 |
|
| December 31, 2019 |
| Total | ||||||||
|
| 40% or less |
| Above 40% ~ 60% |
| Above 60% ~ 80% |
| Above 80% ~ 100% |
| Other |
| |
Loans at amortized cost |
| 17,727,902 |
| 14,823,997 |
| 12,631,594 |
| 541,438 |
| 917,907 |
| 46,642,838 |
Less: allowance |
| (1,100) |
| (1,875) |
| (4,715) |
| (916) |
| (462) |
| (9,068) |
|
| 17,726,802 |
| 14,822,122 |
| 12,626,879 |
| 540,522 |
| 917,445 |
| 46,633,770 |
47
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-1.Credit risk (continued)
(e) Credit risk exposure by credit risk grade (continued)
v) Credit qualities are classified based on the internal credit rating as follows:
Type of Borrower |
| Grade 1 |
| Grade 2 |
Retail |
| Pool of retail loans with probability of default of less than 2.25%
|
| Pool of retail loans with probability of default of 2.25% or more |
Governments |
| OECD sovereign credit rating of 6 or above |
| OECD sovereign credit rating of below 6 |
Banks and Corporations |
| Internal credit rating of BBB+ or above |
| Internal credit rating of below BBB+ |
(f) Nature and effect of modification in contractual cash flows
i) For the financial assets for which the loss allowances have been measured at amounts equal to the lifetime credit losses, and the contractual cash flows are modified for the years ended December 31, 2020 and 2019, the amortized costs before modification amounted to W39,562 million and W51,227 million, respectively, and the net losses resulting from the modification amounted to W8,289 million and W8,875 million, respectively.
ii) As of December 31, 2020 and 2019, the book value of financial asset, for which contractual cash flows have been modified while the loss allowance is measured at an amount equal to lifetime expected credit losses at initial recognition, and the loss allowance reverted to being measured at an amount equal to 12-month expected credit losses for the years ended December 31, 2020 and 2019 are W600 million and W3,782 million.
(g) The contractual amounts outstanding on financial assets that are written-off but are still subject to enforcement activity as of December 31, 2020 and 2019, are W6,093,146 million and W5,945,254million, respectively.
(h) As of December 31, 2020 and 2019, there are no assets acquired by the execution of collateral.
48
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-1.Credit risk (continued)
(g) Concentration by geographic location
An analysis of concentration by geographic location for financial assets excluding equity securities, net of allowance, as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | |||||||||||||||||
Division(*) |
| Korea |
| U.S.A |
| U.K |
| Japan |
| Germany |
| Vietnam |
| China |
| Other |
| Total | |
Due from banks: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Banks |
| 79,874 |
| 359,509 |
| 101,952 |
| 414,266 |
| 126,666 |
| 302 |
| 709,668 |
| 214,213 |
| 2,006,450 | |
Governments |
| 18,309,888 |
| 753,730 |
| - |
| - |
| - |
| - |
| - |
| 94,267 |
| 19,157,885 | |
|
| 18,389,762 |
| 1,113,239 |
| 101,952 |
| 414,266 |
| 126,666 |
| 302 |
| 709,668 |
| 308,480 |
| 21,164,335 | |
Loans at amortized cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Banks |
| 1,763,815 |
| - |
| - |
| 271,796 |
| 205,333 |
| 819,156 |
| 523,818 |
| 3,650,867 |
| 7,234,785 | |
Retail |
| 145,235,883 |
| 196,327 |
| 4,157 |
| 6,219 |
| 2,122 |
| 4,279 |
| 716,190 |
| 367,841 |
| 146,533,018 | |
Residential real estate mortgage loan |
| 44,493,555 |
| 88,279 |
| 1,847 |
| 2,247 |
| 785 |
| 1,679 |
| 488,380 |
| 244,303 |
| 45,321,075 | |
Etc |
| 100,742,328 |
| 108,048 |
| 2,310 |
| 3,972 |
| 1,337 |
| 2,600 |
| 227,810 |
| 123,538 |
| 101,211,943 | |
Governments |
| 2,132,972 |
| - |
| - |
| - |
| - |
| - |
| - |
| 247,376 |
| 2,380,348 | |
Corporate |
| 111,470,981 |
| 1,704,179 |
| 103,197 |
| 627 |
| 16,778 |
| 694,145 |
| 536,166 |
| 3,983,414 |
| 118,509,487 | |
Major company |
| 23,226,169 |
| 403,634 |
| 38,028 |
| - |
| 3,560 |
| 205,683 |
| 209,736 |
| 1,465,193 |
| 25,552,003 | |
Small business |
| 83,003,413 |
| 594,770 |
| 41,500 |
| 627 |
| 13,218 |
| 402,881 |
| 326,430 |
| 1,600,243 |
| 85,983,082 | |
Special finance |
| 5,240,836 |
| 705,764 |
| 23,669 |
| - |
| - |
| 85,581 |
| - |
| 917,742 |
| 6,973,592 | |
Etc |
| 563 |
| 11 |
| - |
| - |
| - |
| - |
| - |
| 236 |
| 810 | |
|
| 260,603,651 |
| 1,900,506 |
| 107,354 |
| 278,642 |
| 224,233 |
| 1,517,580 |
| 1,776,174 |
| 8,249,498 |
| 274,657,638 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Loans at FVTPL |
| 844,469 |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 844,469 | |
Banks |
| 29,996 |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 29,996 | |
Corporate |
| 814,473 |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 814,473 | |
Major company |
| 699,827 |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 699,827 | |
Small business |
| 114,646 |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 114,646 | |
Securities at FVTPL |
| 18,771,346 |
| 202,001 |
| 193,454 |
| 19,040 |
| 4,486 |
| - |
| 151,988 |
| 232,337 |
| 19,574,652 | |
Debt securities |
| 18,771,346 |
| 202,001 |
| 5,115 |
| 19,040 |
| 4,486 |
| - |
| 151,988 |
| 232,337 |
| 19,386,313 | |
Gold/silver deposits |
| - |
| - |
| 188,339 |
| - |
| - |
| - |
| - |
| - |
| 188,339 | |
Securities at FVOCI |
| 35,663,375 |
| 801,006 |
| 51,422 |
| 120,044 |
| 36,412 |
| - |
| 373,438 |
| 591,706 |
| 37,637,403 | |
Securities at amortized cost |
| 18,858,335 |
| 2,175 |
| - |
| - |
| - |
| - |
| - |
| 201,880 |
| 19,062,390 | |
|
| 353,130,938 |
| 4,018,927 |
| 454,182 |
| 831,992 |
| 391,797 |
| 1,517,882 |
| 3,011,268 |
| 9,583,901 |
| 372,940,887 |
(*) Geographical breakdown is the book value, net of unamortized balances and allowance for doubtful accounts.
49
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-1.Credit risk (continued)
(g) Concentration by geographic location (continued)
An analysis of concentration by geographic location for financial assets excluding equity securities, net of allowance, as of December 31, 2020 and December 31, 2019 are as follows(continued):
|
| December 31, 2019 | ||||||||||||||||
Division(*) |
| Korea |
| U.S.A |
| U.K |
| Japan |
| Germany |
| Vietnam |
| China |
| Other |
| Total |
Due from banks: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks |
| 111,931 |
| 1,071,407 |
| 376,214 |
| 85,562 |
| 8,436 |
| 119 |
| 801,474 |
| 261,163 |
| 2,716,306 |
Governments |
| 14,081,010 |
| 325,392 |
| - |
| - |
| - |
| - |
| - |
| 87,126 |
| 14,493,528 |
|
| 14,192,941 |
| 1,396,799 |
| 376,214 |
| 85,562 |
| 8,436 |
| 119 |
| 801,474 |
| 348,289 |
| 17,209,834 |
Loans at amortized cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks |
| 608,548 |
| - |
| 11,565 |
| 166,744 |
| 216,786 |
| 844,228 |
| 532,880 |
| 1,799,759 |
| 4,180,510 |
Retail |
| 130,050,104 |
| 200,909 |
| 2,880 |
| 10,730 |
| 1,509 |
| 3,527 |
| 657,233 |
| 341,944 |
| 131,268,836 |
Residential real estate mortgage loan |
| 45,824,958 |
| 100,458 |
| 1,474 |
| 2,059 |
| 119 |
| 1,673 |
| 470,341 |
| 232,688 |
| 46,633,770 |
Etc |
| 84,225,146 |
| 100,451 |
| 1,406 |
| 8,671 |
| 1,390 |
| 1,854 |
| 186,892 |
| 109,256 |
| 84,635,066 |
Governments |
| 2,313,311 |
| - |
| - |
| - |
| - |
| - |
| - |
| 111,902 |
| 2,425,213 |
Corporate |
| 102,292,424 |
| 1,619,701 |
| 42,803 |
| 24,254 |
| 13,040 |
| 709,546 |
| 484,923 |
| 4,125,509 |
| 109,312,200 |
Major company |
| 22,599,639 |
| 428,386 |
| 1,128 |
| 23,120 |
| - |
| 228,301 |
| 168,104 |
| 1,595,287 |
| 25,043,965 |
Small business |
| 75,209,729 |
| 542,159 |
| 27,588 |
| 1,134 |
| 13,040 |
| 409,812 |
| 316,819 |
| 1,723,056 |
| 78,243,337 |
Special finance |
| 4,482,711 |
| 649,154 |
| 14,087 |
| - |
| - |
| 71,433 |
| - |
| 807,039 |
| 6,024,424 |
Etc |
| 345 |
| 2 |
| - |
| - |
| - |
| - |
| - |
| 127 |
| 474 |
|
| 235,264,387 |
| 1,820,610 |
| 57,248 |
| 201,728 |
| 231,335 |
| 1,557,301 |
| 1,675,036 |
| 6,379,114 |
| 247,186,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans at FVTPL |
| 868,991 |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 868,991 |
Corporate |
| 868,991 |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 868,991 |
Major company |
| 714,946 |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 714,946 |
Small business |
| 154,045 |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 154,045 |
Securities at FVTPL |
| 15,878,158 |
| 163,598 |
| 125,499 |
| 18,732 |
| 5,064 |
| 111 |
| 158,380 |
| 247,814 |
| 16,597,356 |
Debt securities |
| 15,878,158 |
| 163,598 |
| 13,784 |
| 18,732 |
| 5,064 |
| 111 |
| 158,380 |
| 247,814 |
| 16,485,641 |
Gold/silver deposits |
| - |
| - |
| 111,715 |
| - |
| - |
| - |
| - |
| - |
| 111,715 |
Securities at FVOCI |
| 36,090,913 |
| 1,449,323 |
| 97,710 |
| 179,082 |
| 93,769 |
| - |
| 287,501 |
| 668,534 |
| 38,866,832 |
Securities at amortized cost |
| 19,060,305 |
| 2,314 |
| - |
| - |
| - |
| - |
| - |
| 260,566 |
| 19,323,185 |
|
| 321,355,695 |
| 4,832,644 |
| 656,671 |
| 485,104 |
| 338,604 |
| 1,557,531 |
| 2,922,391 |
| 7,904,317 |
| 340,052,957 |
(*) Geographical breakdown is the book value, net of unamortized balances and allowance for doubtful accounts.
50
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-1.Credit risk (continued)
(h) Concentration by industry sector
i) An analysis of concentration by industry sector for financial instruments excluding equity securities, net of allowance, as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | |||||||||||||||||
Division(*) |
| Finance and insurance |
| Manu- facturing |
| Retail and wholesale |
| Real estate and service |
| Construction |
| Lodging and resaurant |
| Others |
| Retail customers |
| Total | |
Due from banks: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Banks |
| 2,006,450 |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 2,006,450 | |
Governments |
| 19,157,885 |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 19,157,885 | |
|
| 21,164,335 |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 21,164,335 | |
Loans at amortized cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Banks |
| 6,960,316 |
| - |
| - |
| - |
| - |
| - |
| 274,469 |
| - |
| 7,234,785 | |
Retail |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 146,533,018 |
| 146,533,018 | |
Residential real estate mortgage loan |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 45,321,075 |
| 45,321,075 | |
Etc |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 101,211,943 |
| 101,211,943 | |
Governments |
| 2,380,348 |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 2,380,348 | |
Corporate |
| 4,686,468 |
| 43,259,083 |
| 16,039,953 |
| 26,426,802 |
| 2,358,977 |
| 5,343,246 |
| 20,394,958 |
| - |
| 118,509,487 | |
Major company |
| 1,707,700 |
| 14,417,467 |
| 2,847,257 |
| 1,530,090 |
| 422,074 |
| 281,562 |
| 4,345,853 |
| - |
| 25,552,003 | |
Small business |
| 898,280 |
| 28,812,551 |
| 13,153,458 |
| 22,658,255 |
| 1,582,222 |
| 4,973,522 |
| 13,904,794 |
| - |
| 85,983,082 | |
Special finance |
| 2,080,488 |
| 28,956 |
| 38,931 |
| 2,238,455 |
| 354,681 |
| 88,162 |
| 2,143,919 |
| - |
| 6,973,592 | |
Etc |
| - |
| 109 |
| 307 |
| 2 |
| - |
| - |
| 392 |
| - |
| 810 | |
|
| 14,027,132 |
| 43,259,083 |
| 16,039,953 |
| 26,426,802 |
| 2,358,977 |
| 5,343,246 |
| 20,669,427 |
| 146,533,018 |
| 274,657,638 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Loans at FVTPL |
| 29,921 |
| 629,419 |
| 19,210 |
| 31,996 |
| 3,000 |
| - |
| 130,923 |
| - |
| 844,469 | |
Banks |
| - |
| - |
| - |
| 29,996 |
| - |
| - |
| - |
| - |
| 29,996 | |
Corporate |
| 29,921 |
| 629,419 |
| 19,210 |
| 2,000 |
| 3,000 |
| - |
| 130,923 |
| - |
| 814,473 | |
Major company |
| 29,921 |
| 558,463 |
| 3,500 |
| - |
| 2,000 |
| - |
| 105,943 |
| - |
| 699,827 | |
Small business |
| - |
| 70,956 |
| 15,710 |
| 2,000 |
| 1,000 |
| - |
| 24,980 |
| - |
| 114,646 | |
Securities at FVTPL |
| 13,148,641 |
| 1,641,547 |
| 1,017,087 |
| 124,004 |
| 118,119 |
| 45,169 |
| 3,480,085 |
| - |
| 19,574,652 | |
Debt securities |
| 12,960,302 |
| 1,641,547 |
| 1,017,087 |
| 124,004 |
| 118,119 |
| 45,169 |
| 3,480,085 |
| - |
| 19,386,313 | |
Gold/silver deposits |
| 188,339 |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 188,339 | |
Securities at FVOCI |
| 21,255,813 |
| 1,983,401 |
| 289,113 |
| 504,983 |
| 638,096 |
| 2,611 |
| 12,963,386 |
| - |
| 37,637,403 | |
Securities at amortized cost |
| 6,387,081 |
| 21,750 |
| - |
| 105,310 |
| 120,284 |
| - |
| 12,427,965 |
| - |
| 19,062,390 | |
|
| 76,012,923 |
| 47,535,200 |
| 17,365,363 |
| 27,193,095 |
| 3,238,476 |
| 5,391,026 |
| 49,671,786 |
| 146,533,018 |
| 372,940,887 |
51
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
(*) Industrial breakdown is the book value, net of unamortized balances and allowance for doubtful accounts.
52
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-1.Credit risk (continued)
(h) Concentration by industry sector (continued)
i) An analysis of concentration by industry sector for financial instruments excluding equity securities, net of allowance, as of December 31, 2020 and 2019 are as follows (continued):
|
| December 31, 2019 | |||||||||||||||||
Division(*) |
| Finance and insurance |
| Manu- facturing |
| Retail and wholesale |
| Real estate and service |
| Construction |
| Lodging and resaurant |
| Others |
| Retail customers |
| Total | |
Due from banks: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Banks |
| 2,716,306 |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 2,716,306 | |
Governments |
| 14,493,528 |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 14,493,528 | |
|
| 17,209,834 |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 17,209,834 | |
Loans at amortized cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Banks |
| 3,792,399 |
| - |
| - |
| - |
| - |
| - |
| 388,111 |
| - |
| 4,180,510 | |
Retail |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 131,268,836 |
| 131,268,836 | |
Residential real estate mortgage loan |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 46,633,770 |
| 46,633,770 | |
Etc |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 84,635,066 |
| 84,635,066 | |
Governments |
| 2,425,213 |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 2,425,213 | |
Corporate |
| 4,055,898 |
| 39,893,191 |
| 14,781,203 |
| 23,634,382 |
| 2,591,540 |
| 5,016,068 |
| 19,339,918 |
| - |
| 109,312,200 | |
Major company |
| 1,797,676 |
| 13,815,142 |
| 2,912,514 |
| 1,186,827 |
| 782,208 |
| 131,574 |
| 4,418,024 |
| - |
| 25,043,965 | |
Small business |
| 480,489 |
| 26,045,745 |
| 11,798,405 |
| 20,803,811 |
| 1,447,559 |
| 4,792,082 |
| 12,875,246 |
| - |
| 78,243,337 | |
Special finance |
| 1,777,733 |
| 32,123 |
| 70,256 |
| 1,643,743 |
| 361,773 |
| 92,412 |
| 2,046,384 |
| - |
| 6,024,424 | |
Etc |
| - |
| 181 |
| 28 |
| 1 |
| - |
| - |
| 264 |
| - |
| 474 | |
|
| 10,273,510 |
| 39,893,191 |
| 14,781,203 |
| 23,634,382 |
| 2,591,540 |
| 5,016,068 |
| 19,728,029 |
| 131,268,836 |
| 247,186,759 | |
Loans at FVTPL |
| 130,129 |
| 478,130 |
| 120,432 |
| - |
| 3,500 |
| 900 |
| 135,900 |
| - |
| 868,991 | |
Corporate |
| 130,129 |
| 478,130 |
| 120,432 |
| - |
| 3,500 |
| 900 |
| 135,900 |
| - |
| 868,991 | |
Major company |
| 130,129 |
| 375,875 |
| 103,522 |
| - |
| 2,000 |
| - |
| 103,420 |
| - |
| 714,946 | |
Small business |
| - |
| 102,255 |
| 16,910 |
| - |
| 1,500 |
| 900 |
| 32,480 |
| - |
| 154,045 | |
Securities at FVTPL |
| 11,301,811 |
| 1,354,529 |
| 819,381 |
| 139,124 |
| 169,548 |
| 55,096 |
| 2,757,867 |
| - |
| 16,597,356 | |
Debt securities |
| 11,190,096 |
| 1,354,529 |
| 819,381 |
| 139,124 |
| 169,548 |
| 55,096 |
| 2,757,867 |
| - |
| 16,485.641 | |
Gold/silver deposits |
| 111,715 |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| 111,715 | |
Securities at FVOCI |
| 22,531,919 |
| 2,116,718 |
| 319,380 |
| 555,859 |
| 695,380 |
| 2,779 |
| 12,644,797 |
| - |
| 38,866,832 | |
Securities at amortized cost |
| 6,640,469 |
| 26,616 |
| - |
| 108,112 |
| 120,492 |
| - |
| 12,427,496 |
| - |
| 19,323,185 | |
|
| 68,087,672 |
| 43,869,184 |
| 16,040,396 |
| 24,437,477 |
| 3,580,460 |
| 5,074,843 |
| 47,694,089 |
| 131,268,836 |
| 340,052,957 |
(*) Industrial breakdown is the book value, net of unamortized balances and allowance for doubtful accounts.
53
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3. Financial risk management (continued)
3-1. Credit risk (continued)
(h) Concentration by industry sector (continued)
ii) As of December 31, 2020, the concentration by industry sector for corporate loans that could be affected by the spread of COVID-19 among the financial instruments is as follows:
|
| December 31, 2020 | ||||||||||||||
|
| Airlift passenger |
| Lodging |
| Oil/petroleum refinery |
| Art-related |
| Movie theater |
| Clothing manufacturing |
| Travel |
| Total |
Loans at amortized cost |
| 108,143 |
| 3,114,805 |
| 679,529 |
| 216,492 |
| 91,084 |
| 1,422,627 |
| 70,701 |
| 5,703,381 |
Securities at FVTPL |
| - |
| - |
| 3,088 |
| - |
| - |
| 3,060 |
| - |
| 6,148 |
Securities at FVTOCI |
| 52,878 |
| 2,611 |
| 224,894 |
| - |
| 6,539 |
| 9,797 |
| - |
| 296,719 |
Off-balance accounts |
| 377,254 |
| 278,522 |
| 3,056,795 |
| 8,523 |
| 111,070 |
| 764,400 |
| 58,622 |
| 4,655,186 |
|
| 538,275 |
| 3,395,938 |
| 3,964,306 |
| 225,015 |
| 208,693 |
| 2,199,884 |
| 129,323 |
| 10,661,434 |
iii) In the case of borrowers classified as Grade 2 and impaired among individual loans subject to lifetime expected credit losses as disclosed in Note 3-1. (e), the effect of COVID-19 may be relatively large. The impact is subject to change, depending on the future economic situation.
54
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-2.Market risk
Market risk is the risk that changes in market price such as interest rates, equity prices, and foreign exchange rates, etc. will affect the Bank’s income. Trading position is exposed to the risk such as interest rates, equity prices, foreign exchange rates, etc., and non-trading position is mainly exposed to interest rates. The Bank separates and manages its exposure to market risk between trading and non-trading position.
The Bank carries out decision-making functions such as policy establishment and setting limits on market risk management by the Risk Policy Committee, and the Risk Engineering Department provides comprehensive market risk management, market risk system management, and Middle Office functions for all operating departments and desks.
The basis of market risk management is limit management to keep the maximum possible loss due to market risk within a certain level. The Risk Policy Committee sets and operates the VaR limit, loss limit, sensitivity limit, investment limit and position limit, and stress loss limit for each operating department and desk. The Risk Engineering department monitors the operation status independently from the operating department. The Bank regularly reports to the Risk Policy Committee and Risk Management Committee. In addition, the Fair Value Assurance Council and the Risk Engineering Department conduct a review of the fair value evaluation method and risk assessment before the launch (or transactions) of new products in each business unit. The Risk Review Council for derivatives and structured products supports rational decision-making such as checking risk factors and reviewing investment limits, so that objective analysis and review of risk factors can be conducted in advance.
(a) Market risk management of trading positions
Trading data for foreign exchange, stocks, bonds, and derivatives, which are subject to the measurement of market risks of trading positions, are managed by entering transactions in the front system, and are automatically interfaced with the market risk management system (Risk Watch) to perform daily risk measurement and limit management. In addition, in order to supplement the risk measurement by statistical method and to manage the impact and loss scale of rapid changes in the economic environment, stress testing is regularly conducted in parallel, and through this, the scale of loss in a crisis situation is within a certain range.
i) Measurement method on market risk arising from trading positions
The Bank applies historical simulation VaR methodology to each market risk, such as interest rates, stock prices, and exchange rates exposed to trading positions to calculate market risk in a 99% confidence level. VaR is based on a statistical assessment of potential losses to current positions from an adverse market movement. This represents the maximum amount of losses that can be incurred at the level of 99% confidence. Therefore, there is a statistical probability (1.0%) that the actual loss may be greater than the VaR measurement.
The VaR model measures expected losses assuming that the daily position at the measurement point remains and that market movements for the past 10 days from each measurement point will continue in the future.
Limits for each type of market risk are the limits set on market risk within the Bank's total risk limit. It is calculated by multiplying the average 10 days VaR and Stressed VaR for the previous 60 days by the regulatory multiplier and used as a market risk management tool. The Bank's VaR limit is set annually by the Risk Management Committee or the Risk Policy Committee, and compliance of each type of limit is monitored on a daily basis. In addition, when the set limit is exceeded, the manager of the operation department reports the excess details, reasons for the excess, and solutions to the group head in charge, and manages the set limit to be reduced to the limit within the next business day.
The quality of the VaR model is continuously monitored by post verification of VaR results, and all post verification results are reported to the Board of Directors.
55
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-2.Market risk (continued)
(a) Market risk management of trading positions (continued)
ii) VaR of trading positions
The Bank manages VaR for trading portfolio based on financial statements. The minimum, maximum, average VaR and the VaR for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | ||||||
|
| Average |
| Maximum |
| Minimum |
| Year-end |
Interest rate risk |
| 41,165 |
| 56,950 |
| 28,322 |
| 42,867 |
Equity risk |
| 27,077 |
| 66,254 |
| 7,545 |
| 7,893 |
Foreign currency risk (*) |
| 65,309 |
| 83,335 |
| 27,668 |
| 69,024 |
Volatility risk |
| 305 |
| 1,073 |
| 114 |
| 138 |
Commodity risk |
| 13 |
| 170 |
| - |
| 1 |
Covariance |
| (27,839) |
| (53,295) |
| (14,163) |
| (25,310) |
|
| 106,030 |
| 154,487 |
| 49,486 |
| 94,613 |
(*) The Bank measured foreign currency risk arising from trading positions and non-trading positions.
|
| December 31, 2019 | ||||||
|
| Average |
| Maximum |
| Minimum |
| Year-end |
Interest rate risk |
| 21,208 |
| 32,430 |
| 12,709 |
| 28,313 |
Equity risk |
| 18,136 |
| 49,424 |
| 8,171 |
| 15,386 |
Foreign currency risk (*) |
| 24,727 |
| 29,085 |
| 22,259 |
| 25,910 |
Volatility risk |
| 161 |
| 325 |
| 60 |
| 212 |
Commodity risk |
| 15 |
| 104 |
| - |
| 10 |
Covariance |
| (16,322) |
| (29,815) |
| (11,717) |
| (21,879) |
|
| 47,925 |
| 81,553 |
| 31,482 |
| 47,952 |
(*) The Bank measured foreign currency risk arising from trading positions and non-trading positions.
56
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-2.Market risk (continued)
(b) Market risk management of non-trading positions
The most critical market risk that arises from non-trading position is the interest rate risk. Accordingly, the Bank measures and manages market risk for non-trading position by taking into account effects of interest rate changes on both its net asset value and income.
The Bank carries out decision-making functions such as establishing policies and setting detailed limits on interest rate risk management by the Risk Policy Committee, and within these principles and limits, management departments by account, such as overseas branches, subsidiaries, and finance departments, trust headquarters, and general finance departments, primarily recognize and manage interest rate risk. The Risk Management Department and the Risk Engineering Department support the Risk Policy Committee's decision on interest rate risk, monitor whether the interest rate risk limit is exceeded, and evaluate and manage the overall interest rate risk.
The Bank measures and manages interest rate risk using various analysis methods such as interest rate gap, duration gap, and scenario-based NII (Net Interest Income) simulation through the Asset Liability Management (ALM) system. Interest rate VaR and interest rate EaR (Earnings at Risk) and interest rate gap ratios are set and monitored monthly. In addition, stress testing evaluates the impact on interest rate risk in various crisis situations.
i) Measurement method on market risk arising from non-trading positions
The Bank calculates and manages the amount of change in economic value of equity (interest rate VaR) and the maximum expected interest loss (interest rate EaR) over the next year on the application of the IRRBB Standard Method interest rate scenario provided by the Bank for International Settlements (“BIS”). It also manages the risk of interest rate market risk by reflecting the customer behaviour ratio based on IRRBB standard method.
In order to calculate the interest rate risk, the Bank uses the six scenarios defined by the Basel Committee, 1) Parallel shock increases, 2) Parallel shock decreases, 3) Shock stiffener, 4) Shock plattner, 5) short-term interest rate increses, and 6) short-term interest rate decreases. Based on the six scenarios, the changes in economic value of equity are measured to calculate the maximum loss (VaR: Value at Risk) and the changes in net interes income are measured to calculate the maximum expected changes of profit or loss (EaR: Earning at Risk) based on the two scenarios (parallel shock increases and decreases).
ii) Interest rate VaR and EaR for non-trading positions
Interest rate VaR (maximum expected loss among △EVE) and EaR (maximum expected changes in profit of loss among △ NII) for non-trading positions which are measured by the IRRBB standard methodology provided by BIS as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Interest rate VaR |
| 517,783 |
| 468,214 |
Interest rate EaR |
| 236,760 |
| 217,250 |
57
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-2.Market risk (continued)
(c) Foreign exchange risk
The Bank manages foreign currency risk based on general positions which includes all spot and future foreign currency positions, etc. The Risk Policy Committee oversees the Bank’s foreign exchange exposure for both trading and non-trading activities by establishing limits for the net foreign currencies open position. The Bank’s foreign exchange position is centralized at the FX & Derivatives Department. Dealers in the FX & Derivatives Department manage the Bank’s overall position within the set limits through spot trading, forward contracts, currency options, futures and swaps and foreign exchange swaps. The Bank’s foreign exchange transactions are mainly conducted in the U.S. dollar (USD), Japanese yen (JPY), Euro (EUR) and Chinese yuan (CNY). Other foreign currencies are limitedly traded.
Assets and liabilities denominated in foreign currencies as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | ||||||||||
|
| USD |
| JPY |
| EUR |
| CNY |
| Others |
| Total |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
| 3,165,925 |
| 271,545 |
| 88,823 |
| 46,382 |
| 358,854 |
| 3,931,529 |
Securities at FVTPL |
| 751,502 |
| - |
| 145,273 |
| - |
| 240,169 |
| 1,136,944 |
Derivative assets |
| 380,160 |
| 4 |
| 6,406 |
| - |
| 56,688 |
| 443,258 |
Loans at amortized cost |
| 19,352,482 |
| 503,246 |
| 806,714 |
| 21,562 |
| 3,515,608 |
| 24,199,612 |
Securities at FVOCI |
| 3,021,270 |
| - |
| - |
| - |
| 384,936 |
| 3,406,206 |
Securities at amortized cost |
| 93,801 |
| - |
| - |
| - |
| 191,493 |
| 285,294 |
Other financial assets |
| 1,713,320 |
| 207,349 |
| 137,259 |
| 192,134 |
| 342,709 |
| 2,592,771 |
|
| 28,478,460 |
| 982,144 |
| 1,184,475 |
| 260,078 |
| 5,090,457 |
| 35,995,614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
| 14,942,876 |
| 784,028 |
| 535,618 |
| 215,036 |
| 2,083,635 |
| 18,561,193 |
Financial liabilities at FVTPL |
| - |
| - |
| - |
| - |
| 539,564 |
| 539,564 |
Derivative liabilities |
| 230,488 |
| - |
| 7,673 |
| - |
| 5,556 |
| 243,717 |
Borrowings |
| 7,111,325 |
| 320,714 |
| 219,944 |
| 8,442 |
| 139,576 |
| 7,800,001 |
Debt securities issued |
| 4,744,568 |
| 87,504 |
| 669,120 |
| - |
| 1,205,976 |
| 6,707,168 |
Other financial liabilities |
| 2,916,551 |
| 59,683 |
| 250,113 |
| 185,121 |
| 587,632 |
| 3,999,100 |
|
| 29,945,808 |
| 1,251,929 |
| 1,682,468 |
| 408,599 |
| 4,561,939 |
| 37,850,743 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets (liabilities) |
| (1,467,348) |
| (269,785) |
| (497,993) |
| (148,521) |
| 528,518 |
| (1,855,129) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Off-balance sheet items |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative exposures |
| 1,194,430 |
| (71,556) |
| 417,055 |
| 29,817 |
| (206,023) |
| 1,363,723 |
Net position |
| (272,918) |
| (341,341) |
| (80,938) |
| (118,704) |
| 322,495 |
| (491,406) |
58
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-2.Market risk (continued)
(c) Foreign exchange risk (continued)
Assets and liabilities denominated in foreign currencies as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2019 | ||||||||||
|
| USD |
| JPY |
| EUR |
| CNY |
| Others |
| Total |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
| 3,123,591 |
| 158,893 |
| 155,425 |
| 172,306 |
| 485,581 |
| 4,095,796 |
Securities at FVTPL |
| 910,503 |
| 14,205 |
| 115,969 |
| - |
| 231,441 |
| 1,272,118 |
Derivative assets |
| 186,787 |
| 4 |
| 5,947 |
| - |
| 38,718 |
| 231,456 |
Loans at amortized cost |
| 16,427,272 |
| 539,364 |
| 523,890 |
| 27,277 |
| 3,284,001 |
| 20,801,804 |
Securities at FVOCI |
| 3,956,583 |
| 1,120 |
| 49,447 |
| - |
| 300,907 |
| 4,308,057 |
Securities at amortized cost |
| 114,357 |
| - |
| - |
| - |
| 249,716 |
| 364,073 |
Other financial assets |
| 2,600,554 |
| 62,870 |
| 169,471 |
| 262,503 |
| 351,964 |
| 3,447,362 |
|
| 27,319,647 |
| 776,456 |
| 1,020,149 |
| 462,086 |
| 4,942,328 |
| 34,520,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
| 12,534,520 |
| 667,303 |
| 449,172 |
| 178,402 |
| 1,768,329 |
| 15,597,726 |
Financial liabilities at FVTPL |
| - |
| - |
| - |
| - |
| 467,761 |
| 467,761 |
Derivative liabilities |
| 144,447 |
| - |
| 10,272 |
| - |
| 3,368 |
| 158,087 |
Borrowings |
| 8,567,610 |
| 135,102 |
| 73,101 |
| 14,909 |
| 22,460 |
| 8,813,182 |
Debt securities issued |
| 4,918,347 |
| 319,041 |
| 704,504 |
| - |
| 895,196 |
| 6,837,088 |
Other financial liabilities |
| 3,785,666 |
| 81,305 |
| 122,143 |
| 271,990 |
| 847,676 |
| 5,108,780 |
|
| 29,950,590 |
| 1,202,751 |
| 1,359,192 |
| 465,301 |
| 4,004,790 |
| 36,982,624 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets (liabilities) |
| (2,630,943) |
| (426,295) |
| (339,043) |
| (3,215) |
| 937,538 |
| (2,461,958) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Off balance sheet items |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative exposures |
| 2,332,013 |
| 17,455 |
| 370,460 |
| (112,270) |
| (653,500) |
| 1,954,158 |
Net position |
| (298,930) |
| (408,840) |
| 31,417 |
| (115,485) |
| 284,038 |
| (507,800) |
(d) Interest rate risk management
The Bank closely is monitoring the output and market of various industrial working groups that manage the transition to new interest rate indicators. It includes announcements made by IBOR regulators.
Regulators have made it clear that they will not persuade or force banks to submit IBOR by the end of 2021. In response to this announcement, the Bank has established an IBOR-related response plan consisting of job flows such as risk management, accounting, tax, law, computerization, and customer management. The plan is dedicated to the Chief Financial Officer (CFO) and important matters are reported to the Board of Directors. The purpose of the plan is to identify the impact and risks associated with reforming interest rate indicators within the business, and prepare and implement action plans to facilitate the transition to alternative indicator interest rates. The Bank aims to close its response plan by 2021.
59
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
3.Financial risk management (continued)
3-3.Liquidity risk
Liquidity risk is the risk that the Bank will encounter difficulty in meeting obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Risk Policy Committee is responsible for establishing policies and setting the limits related to liquidity risk management. The Risk Management Department evaluates and manages the Bank’s overall liquidity risk and monitors compliance of all operating subsidiaries and foreign branches with limits on a daily basis.
The Bank applies the following basic principles for liquidity risk management:
-raise funding in sufficient amounts at the optimal time and reasonable costs;
-maintain risk at appropriate levels and preemptively manage them through a prescribed risk limit system and an early warning signal detection system;
-secure stable sources of revenue and minimize actual losses by implementing an effective asset-liability management system based on diversified sources of funding with varying maturities;
-monitor and manage daily and intra-daily liquidity positions and risk exposures as to timely payment and settlement of financial obligations due under both normal and crisis situations;
-conduct periodic contingency analysis in anticipation of any potential liquidity crisis and establish and implement emergency plans in case of a crisis actually happening; and
-consider liquidity-related costs, benefits and risks in determining the price of products and services, employee performance evaluations and approval of launching new products and services.
The Bank uses various analysis methods such as liquidity gap, liquidity ratio, loan-deposit ratio, and real liquidity gap reflecting the customer behaviour model through the ALM system, while managing its liquidity risks on won and foreign currency through various indices including risk limits, early warning index, and monitoring index. Demand deposits, in analysing the maturity structures of assets and liabilities, can be classified as short-term because they can be withdrawn whenever a customer requests; however, considering customers’ behaviours that usually maintain an average balance of a certain percentage, non-core deposits are classified to be short-term.
60
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-3. | Liquidity risk (continued) |
|
(a) | Contractual maturities for financial instruments |
|
Contractual maturities for financial assets and financial liabilities as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | ||||||||||||
|
| 1 month or less |
| 1 month ~ 3 months or less |
| 3 months ~ 6 months or less |
| 6 months ~ 1 year or less |
| 1 year ~ 5 years or less |
| More than 5 years |
| Total |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
| 22,202,628 |
| 269,243 |
| 315,845 |
| 18,107 |
| - |
| - |
| 22,805,823 |
Securities at FVTPL |
| 18,150,554 |
| 1,047,295 |
| 40,079 |
| 489,995 |
| - |
| - |
| 19,727,923 |
Derivative assets |
| 4,274,780 |
| 21,546 |
| 27,666 |
| 44,331 |
| 223,557 |
| 104,837 |
| 4,696,717 |
Loans at amortized cost |
| 16,982,762 |
| 27,704,484 |
| 41,366,752 |
| 69,058,172 |
| 89,451,833 |
| 55,218,597 |
| 299,782,600 |
Loans at FVTPL |
| 30,172 |
| 679,683 |
| 9,113 |
| 44,836 |
| 86,158 |
| - |
| 849,962 |
Securities at FVOCI |
| 35,324,722 |
| - |
| - |
| - |
| - |
| 6,002,299 |
| 41,327,021 |
Securities at amortized cost |
| 314,684 |
| 1,892,686 |
| 983,877 |
| 1,639,344 |
| 15,040,157 |
| 417,987 |
| 20,288,735 |
Other financial assets |
| 8,787,848 |
| - |
| - |
| 158,940 |
| - |
| 1,142,535 |
| 10,089,323 |
|
| 106,068,150 |
| 31,614,937 |
| 42,743,332 |
| 71,453,725 |
| 104,801,705 |
| 62,886,255 |
| 419,568,104 |
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
| 172,089,101 |
| 25,392,800 |
| 33,059,197 |
| 53,644,122 |
| 8,595,490 |
| 418,600 |
| 293,199,310 |
Financial liabilities at FVTPL |
| 510,073 |
| 794 |
| 7,042 |
| 2,785 |
| 18,870 |
| - |
| 539,564 |
Derivative liabilities |
| 4,068,271 |
| 375 |
| 556 |
| 1,155 |
| 5,737 |
| 3,734 |
| 4,079,828 |
Borrowings |
| 7,446,502 |
| 2,763,861 |
| 1,892,730 |
| 3,502,237 |
| 3,880,664 |
| 1,101,073 |
| 20,587,067 |
Debt securities issued |
| 1,322,755 |
| 3,405,239 |
| 2,343,877 |
| 7,247,687 |
| 16,173,050 |
| 3,341,220 |
| 33,833,828 |
Other financial liabilities |
| 19,053,268 |
| 26,421 |
| 35,132 |
| 130,877 |
| 163,662 |
| 14,261 |
| 19,423,621 |
|
| 204,489,970 |
| 31,589,490 |
| 37,338,534 |
| 64,528,863 |
| 28,837,473 |
| 4,878,888 |
| 371,663,218 |
These amounts include cash flows of principal and interest on financial assets and financial liabilities. The undiscounted cash flows are classified based on the earliest dates for obligated repayment. Financial instruments at FVTPL that can be disposed of immediately and financial instruments at FVOCI except for assets restricted for sale for certain periods are included in 1 month or less.
61
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-3. | Liquidity risk (continued) |
|
(a) | Contractual maturities for financial instruments (continued) |
|
Contractual maturities for financial assets and financial liabilities as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2019 | ||||||||||||
|
| 1 month or less |
| 1 month ~ 3 months or less |
| 3 months ~ 6 months or less |
| 6 months ~ 1 year or less |
| 1 year ~ 5 years or less |
| More than 5 years |
| Total |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
| 19,220,857 |
| 370,211 |
| 44,167 |
| 11,737 |
| - |
| - |
| 19,646,972 |
Securities at FVTPL |
| 14,743,178 |
| 1,610,661 |
| 69,860 |
| 217,286 |
| 20,113 |
| - |
| 16,661,098 |
Derivative assets |
| 1,980,697 |
| 48,668 |
| 62,652 |
| 108,511 |
| 605,246 |
| 468,125 |
| 3,273,899 |
Loans at amortized cost |
| 15,837,191 |
| 27,017,038 |
| 37,175,127 |
| 63,049,560 |
| 75,319,678 |
| 56,277,160 |
| 274,675,754 |
Loans at FVTPL |
| 238 |
| 659,252 |
| 9,758 |
| 55,527 |
| 156,642 |
| - |
| 881,417 |
Securities at FVOCI |
| 37,666,762 |
| - |
| - |
| - |
| - |
| 1,899,268 |
| 39,566,030 |
Securities at amortized cost |
| 1,109,057 |
| 1,832,829 |
| 1,423,783 |
| 1,757,082 |
| 14,133,055 |
| 372,016 |
| 20,627,822 |
Other financial assets |
| 10,792,909 |
| - |
| 1,168 |
| 148,905 |
| 6,375 |
| 2,381,850 |
| 13,331,207 |
|
| 101,350,889 |
| 31,538,659 |
| 38,786,515 |
| 65,348,608 |
| 90,241,109 |
| 61,398,419 |
| 388,664,199 |
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
| 137,669,480 |
| 28,679,009 |
| 35,393,493 |
| 56,583,403 |
| 7,492,413 |
| 986,932 |
| 266,804,730 |
Financial liabilities at FVTPL |
| 437,324 |
| 1,096 |
| 12,095 |
| 10,455 |
| 48,609 |
| - |
| 509,579 |
Derivative liabilities |
| 1,883,833 |
| 35,095 |
| 45,477 |
| 84,498 |
| 485,866 |
| 321,736 |
| 2,856,505 |
Borrowings |
| 4,040,319 |
| 2,836,630 |
| 2,522,273 |
| 3,316,213 |
| 3,713,152 |
| 1,158,444 |
| 17,587,031 |
Debt securities issued |
| 961,430 |
| 2,218,141 |
| 3,756,325 |
| 6,398,548 |
| 20,457,735 |
| 3,987,936 |
| 37,780,115 |
Other financial liabilities |
| 17,582,007 |
| 26,239 |
| 37,000 |
| 138,792 |
| 221,594 |
| 2,186,718 |
| 20,192,350 |
|
| 162,574,393 |
| 33,796,210 |
| 41,766,663 |
| 66,531,909 |
| 32,419,369 |
| 8,641,766 |
| 345,730,310 |
These amounts include cash flows of principal and interest on financial assets and financial liabilities. The undiscounted cash flows are classified based on the earliest dates for obligated repayment. Financial instruments at FVTPL that can be disposed of immediately and financial assets at FVOCI except for assets restricted for sale for certain periods are included in 1 month or less.
(b) Contractual maturities for off balance sheet items
Financial guarantees such as financial guarantee contracts, loan commitments and others provided by the Bank are classified based on the earliest date at which the Bank should fulfill the obligation under the guarantee when the counterparty requests for the payment.
Off-balance sheet items as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Financial guarantee contracts |
| 8,857,606 |
| 9,116,456 |
Loan commitments and others |
| 97,162,880 |
| 92,735,650 |
|
| 106,020,486 |
| 101,852,106 |
62
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2020 and 2019
3.Financial risk management (continued)
3-4.Measurement of fair value
The fair value which the Bank primarily uses for measurement of financial instruments are the published price quotations in an active market which are based on the market prices or the dealer price quotations of financial instruments traded in an active market where available, which is the best evidence of fair value.
If the market for a financial instrument is not active, fair value is established either by using a valuation technique or independent third-party valuation service.
The Bank uses diverse valuation techniques under reasonable assumptions which are based on the inputs observable in markets at the end of each reporting period.
Valuation techniques include using the recent arm’s length market transactions between knowledgeable, willing parties, if available, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models. For example, the fair value for interest swaps is the present value of estimated future cash flows, and fair value for foreign exchange forwards contracts is measured by using the published forward exchange rate at the end of each reporting period.
The Bank classifies and discloses fair value of the financial instruments into the following three-level hierarchy:
(i) Level 1: Financial instruments measured at quoted prices from active markets are classified as level 1.
(ii) Level 2: Financial instruments measured using valuation techniques where all significant inputs are observable market data are classified as level 2.
(iii) Level 3: Financial instruments measured using valuation techniques where one or more significant inputs are not based on observable market data are classified as level 3.
63
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-4.Measurement of fair value (continued)
(a) Financial instruments measured at fair value
i) The table below analyzes financial instruments measured at the fair value as of December 31, 2020 and 2019 by the level in the fair value hierarchy into which the fair value measurement is categorized:
|
| December 31, 2020 | ||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
Financial assets |
|
|
|
|
|
|
|
|
Loans at FVTPL: |
|
|
|
|
|
|
|
|
Loans |
| - |
| 708,111 |
| 136,358 |
| 844,469 |
Securities at FVTPL: |
|
|
|
|
|
|
|
|
Debt securities |
| 276,258 |
| 16,927,522 |
| 2,182,532 |
| 19,386,312 |
Equity securities |
| 44,747 |
| - |
| 104,342 |
| 149,089 |
Gold/silver deposits |
| 188,339 |
| - |
| - |
| 188,339 |
|
| 509,344 |
| 16,927,522 |
| 2,286,874 |
| 19,723,740 |
Derivative assets: |
|
|
|
|
|
|
|
|
Trading |
| 5 |
| 4,260,009 |
| 2,228 |
| 4,262,242 |
Hedging |
| - |
| 318,499 |
| 794 |
| 319,293 |
|
| 5 |
| 4,578,508 |
| 3,022 |
| 4,581,535 |
Securities at FVOCI: |
|
|
|
|
|
|
|
|
Debt securities |
| 9,110,092 |
| 28,527,310 |
| - |
| 37,637,402 |
Equity securities |
| 171,614 |
| - |
| 457,996 |
| 629,610 |
|
| 9,281,706 |
| 28,527,310 |
| 457,996 |
| 38,267,012 |
|
| 9,791,055 |
| 50,741,451 |
| 2,884,250 |
| 63,416,756 |
Financial liabilities |
|
|
|
|
|
|
|
|
Financial liabilities at FVTPL: |
|
|
|
|
|
|
|
|
Gold/silver deposits |
| 539,564 |
| - |
| - |
| 539,564 |
Derivative liabilities: |
|
|
|
|
|
|
|
|
Trading |
| - |
| 4,063,948 |
| 4,087 |
| 4,068,035 |
Hedging |
| - |
| 17,909 |
| 102,819 |
| 120,728 |
|
| - |
| 4,081,857 |
| 106,906 |
| 4,188,763 |
|
| 539,564 |
| 4,081,857 |
| 106,906 |
| 4,728,327 |
64
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-4.Measurement of fair value (continued)
(a) Financial instruments measured at fair value (continued)
i) The table below analyzes financial instruments measured at the fair value as of December 31, 2020 and 2019 by the level in the fair value hierarchy into which the fair value measurement is categorized (continued):
|
| December 31, 2019 | ||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
Financial assets |
|
|
|
|
|
|
|
|
Loans at FVTPL: |
|
|
|
|
|
|
|
|
Loans |
| - |
| 686,446 |
| 182,545 |
| 868,991 |
Securities at FVTPL: |
|
|
|
|
|
|
|
|
Debt securities |
| 823,666 |
| 14,111,811 |
| 1,550,164 |
| 16,485,641 |
Equity securities |
| 11,760 |
| - |
| 50,967 |
| 62,727 |
Gold/silver deposits |
| 111,715 |
| - |
| - |
| 111,715 |
|
| 947,141 |
| 14,111,811 |
| 1,601,131 |
| 16,660,083 |
Derivative assets: |
|
|
|
|
|
|
|
|
Trading |
| - |
| 1,948,832 |
| 4,457 |
| 1,953,289 |
Hedging |
| - |
| 151,810 |
| 2,776 |
| 154,586 |
|
| - |
| 2,100,642 |
| 7,233 |
| 2,107,875 |
Securities at FVOCI: |
|
|
|
|
|
|
|
|
Debt securities |
| 9,394,007 |
| 29,472,824 |
| - |
| 38,866,831 |
Equity securities |
| 183,078 |
| - |
| 408,056 |
| 591,134 |
|
| 9,577,085 |
| 29,472,824 |
| 408,056 |
| 39,457,965 |
|
| 10,524,226 |
| 46,371,723 |
| 2,198,965 |
| 59,094,914 |
Financial liabilities |
|
|
|
|
|
|
|
|
Financial liabilities at FVTPL: |
|
|
|
|
|
|
|
|
Securities sold |
| 40,320 |
| - |
| - |
| 40,320 |
Gold/silver deposits |
| 467,761 |
| - |
| - |
| 467,761 |
|
| 508,081 |
| - |
| - |
| 508,081 |
Derivative liabilities: |
|
|
|
|
|
|
|
|
Trading |
| 197 |
| 1,675,184 |
| 4,240 |
| 1,679,621 |
Hedging |
| - |
| 20,329 |
| 189,750 |
| 210,079 |
|
| 197 |
| 1,695,513 |
| 193,990 |
| 1,889,700 |
|
| 508,278 |
| 1,695,513 |
| 193,990 |
| 2,397,781 |
65
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-4. | Measurement of fair value (continued) |
|
(a)Financial instruments measured at fair value (continued)
|
|
ii) There is no transfer between level 1 and level 2 for the years ended December 31, 2020 and 2019.
iii) Changes in level 3 of the fair value hierarchy
Changes in level 3 of the fair value hierarchy for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | ||||||||
|
| Loans at FVTPL |
| Securities at FVTPL |
| Securities at FVOCI |
| Net derivative instruments |
| Total |
Beginning balance |
| 182,545 |
| 1,601,132 |
| 408,056 |
| (186,757) |
| 2,004,976 |
Total gain or loss: |
|
|
|
|
|
|
|
|
|
|
Recognized in profit or loss (*1) |
| 2,303 |
| 81,321 |
| - |
| 82,201 |
| 165,825 |
Recognized in other comprehensive income |
| - |
| - |
| (10,584) |
| - |
| (10,584) |
Purchases/issues |
| - |
| 769,905 |
| 60,538 |
| (68) |
| 830,375 |
Settlements |
| (48,490) |
| (165,484) |
| (14) |
| 94 |
| (213,894) |
Transfers into level 3 (*3) |
| - |
| - |
| - |
| 625 |
| 625 |
Transfers from level 3 (*3) |
| - |
| - |
| - |
| 21 |
| 21 |
Ending balance |
| 136,358 |
| 2,286,874 |
| 457,996 |
| (103,884) |
| 2,777,344 |
|
| December 31, 2019 | ||||||||
|
| Loans at FVTPL |
| Securities at FVTPL |
| Securities at FVOCI |
| Net derivative instruments |
| Total |
Beginning balance |
| 237,241 |
| 1,123,429 |
| 301,991 |
| (356,517) |
| 1,306,144 |
Total gain or loss: |
|
|
|
|
|
|
|
|
|
|
Recognized in profit or loss (*1) |
| 38 |
| 33,549 |
| - |
| 106,279 |
| 139,866 |
Recognized in other comprehensive income |
| - |
| - |
| 20,490 |
| - |
| 20,490 |
Purchases/issues |
| 96,171 |
| 592,265 |
| 92,861 |
| (561) |
| 780,736 |
Settlements |
| (150,905) |
| (156,758) |
| - |
| 63,828 |
| (243,835) |
Others (*2) |
| - |
| - |
| (7,286) |
| - |
| (7,286) |
Transfers into level 3 (*3) |
| - |
| 11,906 |
| - |
| 248 |
| 12,154 |
Transfers from level 3 (*3) |
| - |
| (3,260) |
| - |
| (34) |
| (3,294) |
Ending balance |
| 182,545 |
| 1,601,131 |
| 408,056 |
| (186,757) |
| 2,004,975 |
66
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-4.Measurement of fair value (continued)
(a) | Financial instruments measured at fair value (continued) |
|
iii) Changes in level 3 of the fair value hierarchy (continued)
Changes in level 3 of the fair value hierarchy for the years ended December 31, 2020 and 2019 are as follows (continued):
(*1) Gains or losses among the changes in level 3 of the fair value hierarchy and gains or losses related to financial instruments that the Bank held as of December 31, 2020 and 2019 are presented in the statements of comprehensive income as follows:
|
| December 31, 2020 |
| December 31, 2019 | ||||
|
| Gains or losses recognized in profit or loss |
| Gains or losses recognized in profit or loss for financial instrument held at the end of the period |
| Gains or losses recognized in profit or loss |
| Gains or losses recognized in profit or loss for financial instrument held at the end of the year |
Net gain on financial assets at FVTPL |
| 80,876 |
| 81,078 |
| 34,055 |
| 33,363 |
Net other operating expenses |
| 84,949 |
| 19,065 |
| 105,811 |
| 105,811 |
|
| 165,825 |
| 100,143 |
| 139,866 |
| 139,174 |
(*2) Reclassified to investments in associates.
(*3) These financial instruments are transferred into or out of level 3 as the availability of observable market data has changed. The Bank recognized transfers between levels of the fair value hierarchy at the end of the reporting period during which the event or the change in circumstances that caused the transfer has occurred.
67
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-4. | Measurement of fair value (continued) |
|
(a) | Financial instruments measured at fair value (continued) |
|
iv) Valuation techniques and inputs used in measuring fair value of financial instruments
a. Valuation techniques and inputs used in measuring fair value of financial instruments classified as level 2 as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | ||||||||
|
| Type of financial instruments |
|
| Book value |
| Valuation techniques |
| Inputs | |
Financial assets | ||||||||||
Loans at FVTPL |
|
| 708,111 |
| Discounted cash flow |
| Discount rate | |||
Securities at FVTPL |
| Debt securities |
|
| 16,927,522 |
| Discounted cash flow, Net asset value |
| Discount rate, price of underlying assets; such as securities and bonds | |
Derivative assets |
| Trading |
|
| 4,260,009 |
| Option model, Discounted cash flow |
| Discount rate, foreign exchange rate, volatility, stock price, commodity index, etc. | |
| Hedging |
|
| 318,499 |
|
| ||||
|
|
|
| 4,578,508 |
|
|
|
| ||
Securities at FVOCI |
| Debt securities |
|
| 28,527,310 |
| Discounted cash flow |
| Discount rate | |
|
|
|
|
| 50,741,451 |
|
|
|
| |
Financial liabilities | ||||||||||
Derivative liabilities |
| Trading |
|
| 4,063,948 |
| Option model, Discounted cash flow |
| Discount rate, foreign exchange rate, volatility, stock price, commodity index, etc. | |
| Hedging |
|
| 17,909 |
|
| ||||
|
|
|
| 4,081,857 |
|
|
|
|
68
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-4. | Measurement of fair value (continued) |
|
(a) | Financial instruments measured at fair value (continued) |
|
iv) Valuation techniques and inputs used in measuring fair value of financial instruments
a. Valuation techniques and inputs used in measuring fair value of financial instruments classified as level 2 as of December 31, 2020 and 2019 are as follows (continued):
|
| December 31, 2019 | ||||||||
|
| Type of financial instruments |
|
| Book value |
| Valuation techniques |
| Inputs | |
Financial assets | ||||||||||
Loans at FVTPL |
|
| 686,446 |
| Discounted cash flow |
| Discount rate | |||
Securities at FVTPL |
| Debt securities |
|
| 14,111,811 |
| Discounted cash flow, Net asset value |
| Discount rate, price of underlying assets; such as securities and bonds | |
Derivative assets |
| Trading |
|
| 1,948,832 |
| Option model, Discounted cash flow |
| Discount rate, foreign exchange rate, volatility, stock price, commodity index, etc. | |
| Hedging |
|
| 151,810 |
|
| ||||
|
|
|
| 2,100,642 |
|
|
|
| ||
Securities at FVOCI |
| Debt securities |
|
| 29,472,824 |
| Discounted cash flow |
| Discount rate | |
|
|
|
|
| 46,371,723 |
|
|
|
| |
Financial liabilities | ||||||||||
Derivative liabilities |
| Trading |
|
| 1,675,184 |
| Option model, Discounted cash flow |
| Discount rate, foreign exchange rate, volatility, stock price, commodity index, etc. | |
| Hedging |
|
| 20,329 |
|
| ||||
|
|
|
| 1,695,513 |
|
|
|
|
69
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-4. Measurement of fair value (continued)
(a) | Financial instruments measured at fair value (continued) |
|
iv) Valuation techniques and inputs used in measuring fair value of financial instruments (continued)
b. The Bank uses the valuation values of external independent and qualified evaluators or internal evaluation models to determine the fair value of group assets at the end of each reporting period. As of December 31, 2020 and 2019, the valuation technique and significant but not observable input variables used to measure the fair value of financial instruments classified as fair value level 3 are as follows:
December 31, 2020 | |||||||||||||
|
| Valuation technique |
| Type of financial instrument |
|
| Book value | Input | Significant unobservable input |
| Range of input |
| Relationship of unobservable inputs to fair value |
|
|
|
|
|
| ||||||||
|
|
|
|
|
| ||||||||
Financial assets | |||||||||||||
Loans at FVTPL |
| Option model (*1) |
| Loans |
|
| 136,358 | Volatility of underlying assets, Discount rate | Volatility of underlying assets
|
| 17.61%~45,68% |
| The higher the volatility, the higher the fair value |
Securities at FVTPL |
| Net asset value method, option model (*1) |
| Debt securities |
|
| 2,182,532 | Volatility of underlying assets, Discount rate | Volatility of underlying assets
|
| 18.99%~26.45% |
| The higher the volatility, the higher the fair value |
| Discounted cash flow |
| Equity securities |
|
| 104,342 | Volatility of underlying assets, Terminal growth rate, Stock price | Discount rate, Terminal growth rate |
| 5.83%~16.87% 1.00% |
| Fair value increases as discount rate decreases, Fair value increases as growth rate increases | |
|
|
|
|
|
|
| 2,286,874 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets |
| Option model (*2) |
| Equity and foreign exchange related |
|
| 1,144 | Volatility of underlying assets, exchange rate | Volatility of underlying assets |
| 4.30%~8.46% |
| The higher the volatility, the higher the fair value |
|
| Option model (*2) |
| Interest rates related |
|
| 1,878 | Volatility of underlying assets, Regression coefficient, Correlation coefficient, Interest rate | Volatility of underlying assets, Regression coefficient, Correlation coefficient |
| 0.47%~0.62% 0.30%~0.58% 47.82%~90.34% |
| The higher the volatility, the higher the fair value, The effects of trading instruments and market conditions increase or decrease fair value with changes in regression and correlation coefficients |
|
|
|
|
|
| ||||||||
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
| 3,022 |
|
|
|
|
|
|
Securities at FVOCI |
| Net asset value method, discounted cash flow, option model (*1), Similar companies comparison method
|
| Equity securities |
|
| 457,996 | Volatility of underlying assets, Discount rate Terminal growth rate, Stock price | Volatility of underlying assets, Discount rate, Terminal growth rate, Stock price |
| 22.11% 8.94%~19.05% 1.00% |
| The higher the volatility, the higher the fair value, Fair value increases as discount rate decreases, Fair value increases as growth rate increases |
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
| 2,884,250 |
|
|
|
|
|
|
70
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-4. Measurement of fair value (continued)
(a) Financial instruments measured at fair value (continued)
iv) Valuation techniques and inputs used in measuring fair value of financial instruments (continued)
b. The Group uses the valuation values of external independent and qualified evaluators or internal evaluation models to determine the fair value of group assets at the end of each reporting period. As of December 31, 2020 and 2019, the valuation technique and significant but not observable input variables used to measure the fair value of financial instruments classified as fair value level 3 are as follows (continued):
December 31, 2020 | ||||||||||||||
|
| Valuation technique |
| Type of financial instrument |
|
| Book value | Input | Significant unobservable input |
| Range of input |
| Relationship of unobservable inputs to fair value | |
Financial liabilities |
| |||||||||||||
Derivative assets |
| Option model (*2) |
| Equity and foreign exchange related |
|
| 4,087 | Volatility of underlying assets, exchange rate | Volatility of underlying assets |
| 4.30%~29.32% |
| The higher the volatility, the higher the fair value | |
|
| Option model (*2) |
| Interest rates related |
|
| 102,819 | Volatility of underlying assets Regression coefficient, Correlation coefficient, Interest rate | Volatility of underlying assets Regression coefficient, Correlation coefficient |
| 0.47%~0.62% 0.30%~0.63% 20.13%~90.34% |
| The higher the volatility, the higher the fair value, The effects of trading instruments and market conditions increase or decrease fair value with changes in regression and correlation coefficients | |
|
|
|
|
|
|
| 106,906 |
|
|
|
|
|
|
(*1) The Bank uses binomial tree and LSMC option model.
(*2) Option models that the Group uses in derivative valuation include Black-Scholes model, Hull-White model, Monte Carlo simulation, etc.
71
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-4. Measurement of fair value (continued)
(a) | Financial instruments measured at fair value (continued) |
|
iv) Valuation techniques and inputs used in measuring fair value of financial instruments (continued)
b. The Bank uses the valuation values of external independent and qualified evaluators or internal evaluation models to determine the fair value of group assets at the end of each reporting period. As of December 31, 2020 and 2019, the valuation technique and significant but not observable input variables used to measure the fair value of financial instruments classified as fair value level 3 are as follows:
December 31, 2019 | |||||||||||||
|
| Valuation technique |
| Type of financial instrument |
|
| Book value | Input | Significant unobservable input |
| Range of input |
| Relationship of unobservable inputs to fair value |
|
|
|
|
|
| ||||||||
|
|
|
|
|
| ||||||||
Financial assets | |||||||||||||
Loans at FVTPL |
| Option model (*1) |
| Loans |
|
| 182,545 | Volatility of underlying assets, Discount rate | Volatility of underlying assets
|
| 13.21%~46.36% |
| The higher the volatility, the higher the fair value |
Securities at FVTPL |
| Net asset value method |
| Debt securities |
|
| 1,550,164 | Volatility of underlying assets, Discount rate | Volatility of underlying assets
|
| 19.99%~23.41% |
| The higher the volatility, the higher the fair value |
| Discounted cash flow, Similar companies comparison method
|
| Equity securities |
|
| 50,967 | Discount rate, Terminal growth rate, Stock price | Discount rate, Terminal growth rate |
| 5.06%~15.42% 0.00% |
| The higher the volatility, the higher the fair value, Fair value increases as discount rate decreases, Fair value increases as growth rate increases | |
|
|
|
|
|
|
| 1,601,131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets |
| Option model (*2) |
| Equity and foreign exchange related |
|
| 2,844 | Volatility of underlying assets, exchange rate | Volatility of underlying assets |
| 1.51%~22.24% |
| The higher the volatility, the higher the fair value |
|
| Option model (*2) |
| Interest rates related |
|
| 4,389 | Volatility of underlying assets Regression coefficient, Correlation coefficient, Interest rate | Volatility of underlying assets Regression coefficient, Correlation coefficient |
| 0.50%~0.67% 1.30%~1.57% 59.53% |
| The higher the volatility, the higher the fair value, The effects of trading instruments and market conditions increase or decrease fair value with changes in regression and correlation coefficients |
|
|
|
|
|
| ||||||||
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
| 7,233 |
|
|
|
|
|
|
Securities at FVOCI |
| Net asset value method, discounted cash flow, option model (*1), Similar companies comparison method
|
| Equity securities |
|
| 408,056 | Discount rate Terminal growth rate, Stock price | Discount rate Terminal growth rate, Stock price |
| 7.78%~19.21% 0.00% |
| Fair value increases as discount rate decreases, Fair value increases as growth rate increases |
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
| 2,198,965 |
|
|
|
|
|
|
72
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-4. Measurement of fair value (continued)
(a) Financial instruments measured at fair value (continued)
iv) Valuation techniques and inputs used in measuring fair value of financial instruments (continued)
b. The Group uses the valuation values of external independent and qualified evaluators or internal evaluation models to determine the fair value of group assets at the end of each reporting period. As of December 31, 2020 and 2019, the valuation technique and significant but not observable input variables used to measure the fair value of financial instruments classified as fair value level 3 are as follows (continued):
December 31, 2019 | |||||||||||||
|
| Valuation technique |
| Type of financial instrument |
|
| Book value | Input | Significant unobservable input |
| Range of input |
| Relationship of unobservable inputs to fair value |
Financial liabilities | |||||||||||||
Derivative assets |
| Option model (*2) |
| Equity and foreign exchange related |
|
| 3,141 | Volatility of underlying assets, exchange rate | Volatility of underlying assets |
| 1.51%~22.24% |
| The higher the volatility, the higher the fair value |
|
| Option model (*2) |
| Interest rates related |
|
| 190,849 | Volatility of underlying assets Regression coefficient, Correlation coefficient, Interest rate | Volatility of underlying assets Regression coefficient, Correlation coefficient |
| 0.50%~0.67% 1.30%~2.77% 45.06%~90.34% |
| The higher the volatility, the higher the fair value, The effects of trading instruments and market conditions increase or decrease fair value with changes in regression and correlation coefficients |
|
|
|
|
|
|
| 193,990 |
|
|
|
|
|
|
(*1) The Bank uses binomial tree and LSMC option model.
(*2) Option models that the Bank uses in derivative valuation include Black-Scholes model, Hull-White model, Monte Carlo simulation, etc.
73
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-4. Measurement of fair value (continued)
(a) Financial instruments measured at fair value (continued)
v) Sensitivity to changes in unobservable inputs
For level 3 fair value measurement, changing one or more of the unobservable inputs used to reasonably possible alternative assumptions would have the following effect on profit (loss), and other comprehensive income (loss) as of December 31, 2020 and 2019 are as follows:
|
|
| December 31, 2020 | |||||||
Type of financial instrument(*1) |
| Profit (loss) for the year |
| Other comprehensive income (loss) for the year | ||||||
| Favorable change |
| Unfavorable change |
| Favorable change |
| Unfavorable change | |||
Loans at FVTPL (*2) |
| 3,567 |
| (2,764) |
| - |
| - | ||
Securities at FVTPL | Debt securities (*2) |
| 139 |
| (108) |
| - |
| - | |
Equity securities(*3) |
| 5,717 |
| (3,991) |
| - |
| - | ||
Derivative assets (*2) | Equity and foreign exchange related |
| 78 |
| (75) |
| - |
| - | |
Interest rates related |
| 18 |
| (33) |
| - |
|
| ||
Securities at FVOCI (*3) | Equity securities |
| - |
| - |
| 11,043 |
| (7,460) | |
|
|
| 9,519 |
| (6,971) |
| 11,043 |
| (7,460) | |
Derivative liabilities (*2) | Equity and foreign exchange related |
| 75 |
| (78) |
| - |
| - | |
| Interest rates related |
| 3,841 |
| (5,163) |
| - |
|
| |
|
| 3,916 |
| (5,241) |
| - |
| - |
(*1) W2,606,781million of financial instruments classified as level 3 are excluded from sensitivity analysis since calculation of sensitivity according to the fluctuation of input variables is impracticable
(*2) Based on 10% of increase or decrease in volatility of underlying assets or correlation coefficients.
(*3) Based on changes in growth rate (0%~1%) and discount rate (-1%p~1%p).
74
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-4. Measurement of fair value (continued)
(a) Financial instruments measured at fair value (continued)
v) Sensitivity to changes in unobservable inputs (continued)
For level 3 fair value measurement, changing one or more of the unobservable inputs used to reasonably possible alternative assumptions would have the following effect on profit (loss), and other comprehensive income (loss) as of December 31, 2020 and 2019 are as follows (continued):
|
|
| December 31, 2019 | ||||||||
Type of financial instrument(*1) |
| Profit (loss) for the year |
| Other comprehensive income (loss) for the year | |||||||
| Favorable change |
| Unfavorable change |
| Favorable change |
| Unfavorable change | ||||
Loans at FVTPL (*2) |
| 9,925 |
| (3,431) |
| - |
| - |
| ||
Securities at FVTPL | Debt securities (*2) |
| 790 |
| (534) |
| - |
| - | ||
Equity securities(*3) |
| 10,096 |
| (2,485) |
| - |
| - | |||
Derivative assets (*2) | Equity and foreign exchange related |
| 9 |
| (9) |
| - |
| - | ||
Interest rates related |
| 543 |
| (1,151) |
| - |
| - | |||
Securities at FVOCI (*3) | Equity securities |
| - |
| - |
| 16,228 |
| (7,943) | ||
|
|
| 21,363 |
| (7,610) |
| 16,228 |
| (7,943) | ||
Derivative liabilities (*2) | Equity and foreign exchange related |
| 16 |
| (21) |
| - |
| - | ||
| Interest rates related |
| 7,119 |
| (10,597) |
| - |
| - | ||
|
| 7,135 |
| (10,618) |
| - |
| - |
(*1) W1,550,164 million of financial instruments classified as level 3 are excluded from sensitivity analysis since calculation of sensitivity according to the fluctuation of input variables is impracticable.
(*2) Based on 10% of increase or decrease in volatility of underlying assets or correlation coefficients.
(*3) Based on changes in growth rate (0%~1%) and discount rate (-1%p~1%p).
75
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2020 and 2019
3.Financial risk management (continued)
3-4. Measurement of fair value (continued)
(b) Financial instruments measured at amortized cost
i) The method of measuring the fair value of financial instruments measured at amortized cost is as follows:
Type |
| Measurement methods of fair value |
Cash and due from banks
|
| The book value and the fair value for cash are identical and most of deposits are floating interest rate deposits or next day deposits of a short-term instrument. Therefore, the book value for deposits approximates fair value. |
Loans at amortized cost |
| The fair value of loans at amortized cost is measured by discounting the expected cash flows anticipated to be received at the market interest rate, credit risk of a borrower, etc. |
Securities at amortized cost |
| An external professional evaluation agency is used to calculate the valuation amount using the market information. The agency calculates the fair value based on active market prices, and DCF model is used to calculate the fair value if there is no quoted price. |
Deposits and borrowings
|
| The book amount and the fair value for demand deposits, cash management account deposits, call money and bonds sold under repurchase agreements as short-term instruments are identical. The fair value of others is measured by discounting the contractual cash flows at the market interest rate that takes into account the residual risk. |
Debt securities issued |
| An external professional evaluation agency is used to calculate the valuation amount using the market information, and the fair value is calculated using DCF model. |
Other financial assets and financial liabilities |
| The book value is used as a fair value for short-term and transitional accounts such as spot exchange, unpaid/uncollected domestic exchange settlements, and the fair value, the present value of the contractual cash flow discounted at the market interest rate taking the residual risk into account, is calculated for the rest of other financial assets and liabilities. |
76
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-4. Measurement of fair value (continued)
(b) Financial instruments measured at amortized cost (continued)
ii) The book value and the fair value of financial instruments measured at amortized cost as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | ||||||||
|
| Book value |
|
| ||||||
|
| Balance |
| Unamortized balance |
| Allowance |
| Total |
| Fair value |
Assets |
|
|
|
|
|
|
|
|
|
|
Cash and due from banks: |
|
|
|
|
|
|
|
|
|
|
Cash |
| 1,635,696 |
| - |
| - |
| 1,635,696 |
| 1,635,696 |
Due from banks |
| 21,168,223 |
| - |
| (3,888) |
| 21,164,335 |
| 21,164,335 |
Loans at amortized cost: |
|
|
|
|
|
|
|
|
|
|
Household loans |
| 126,456,195 |
| 406,780 |
| (276,041) |
| 126,586,934 |
| 126,610,343 |
Corporate loans |
| 139,953,385 |
| 93,179 |
| (1,125,317) |
| 138,921,247 |
| 139,974,326 |
Public and other loans |
| 3,594,089 |
| 2,188 |
| (22,450) |
| 3,573,827 |
| 3,599,911 |
Loans to bank |
| 5,582,082 |
| - |
| (6,452) |
| 5,575,630 |
| 5,586,932 |
Securities at amortized cost: |
|
|
|
|
|
|
|
|
|
|
Government bonds |
| 12,207,719 |
| - |
| (386) |
| 12,207,333 |
| 12,523,176 |
Financial institutions bonds |
| 2,133,123 |
| - |
| (489) |
| 2,132,634 |
| 2,142,158 |
Corporate bonds and others |
| 4,724,556 |
| - |
| (2,133) |
| 4,722,423 |
| 4,783,110 |
Other financial assets |
| 10,876,637 |
| (26,668) |
| (20,356) |
| 10,829,613 |
| 10,850,089 |
|
| 328,331,705 |
| 475,479 |
| (1,457,512) |
| 327,349,672 |
| 328,870,076 |
Liabilities |
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
Demand deposits |
| 141,428,780 |
| - |
| - |
| 141,428,780 |
| 141,428,780 |
Time deposits |
| 134,582,244 |
| - |
| - |
| 134,582,244 |
| 134,624,201 |
Negotiable certificates of deposits |
| 4,869,513 |
| - |
| - |
| 4,869,513 |
| 4,886,255 |
Note discount deposits |
| 6,226,937 |
| - |
| - |
| 6,226,937 |
| 6,226,855 |
CMA |
| 4,006,319 |
| - |
| - |
| 4,006,319 |
| 4,006,318 |
Others |
| 18,763 |
| - |
| - |
| 18,763 |
| 18,765 |
Borrowings: |
|
|
|
|
|
|
|
|
|
|
Call money |
| 1,393,820 |
| - |
| - |
| 1,393,820 |
| 1,393,820 |
Bill sold |
| 10,706 |
| - |
| - |
| 10,706 |
| 10,696 |
Bonds sold under repurchase agreements |
| 159,432 |
| - |
| - |
| 159,432 |
| 159,432 |
Borrowings |
| 18,829,738 |
| (304) |
| - |
| 18,829,434 |
| 18,873,465 |
Debt securities issued: |
|
|
|
|
|
|
|
|
|
|
Debt securities issued in Korean won |
| 25,507,363 |
| (14,599) |
| - |
| 25,492,764 |
| 25,744,972 |
Debt securities issued in foreign currencies |
| 6,707,168 |
| (28,946) |
| - |
| 6,678,222 |
| 6,812,327 |
Other financial liabilities |
| 21,068,865 |
| (13,513) |
| - |
| 21,055,352 |
| 21,057,551 |
|
| 364,809,648 |
| (57,362) |
| - |
| 364,752,286 |
| 365,243,437 |
77
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-4. | Measurement of fair value (continued) |
|
(b) Financial instruments measured at amortized cost (continued)
ii) The book value and the fair value of financial instruments measured at amortized cost as of December 31, 2020 and 2019 are as follows (continued):
|
| December 31, 2019 | ||||||||
|
| Book value |
|
| ||||||
|
| Balance |
| Unamortized balance |
| Allowance |
| Total |
| Fair value |
Assets |
|
|
|
|
|
|
|
|
|
|
Cash and due from banks: |
|
|
|
|
|
|
|
|
|
|
Cash |
| 2,430,026 |
| - |
| - |
| 2,430,026 |
| 2,430,026 |
Due from banks |
| 17,213,277 |
| - |
| (3,443) |
| 17,209,834 |
| 17,209,834 |
Loans at amortized cost: |
|
|
|
|
|
|
|
|
|
|
Household loans |
| 116,047,478 |
| 415,113 |
| (273,063) |
| 116,189,528 |
| 116,592,611 |
Corporate loans |
| 125,541,959 |
| 81,819 |
| (1,007,746) |
| 124,616,032 |
| 125,557,893 |
Public and other loans |
| 3,189,535 |
| 1,847 |
| (13,980) |
| 3,177,402 |
| 3,195,896 |
Loans to bank |
| 3,210,012 |
| - |
| (6,215) |
| 3,203,797 |
| 3,216,550 |
Securities at amortized cost: |
|
|
|
|
|
|
|
|
|
|
Government bonds |
| 12,201,742 |
| - |
| (578) |
| 12,201,164 |
| 12,450,504 |
Financial institutions bonds |
| 3,063,779 |
| - |
| (427) |
| 3,063,352 |
| 3,070,664 |
Corporate bonds and others |
| 4,060,797 |
| - |
| (2,128) |
| 4,058,669 |
| 4,112,624 |
Other financial assets |
| 13,331,206 |
| (35,113) |
| (16,262) |
| 13,279,831 |
| 13,296,287 |
|
| 300,289,811 |
| 463,666 |
| (1,323,842) |
| 299,429,635 |
| 301,132,889 |
Liabilities |
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
Demand deposits |
| 109,483,607 |
| - |
| - |
| 109,483,607 |
| 109,483,607 |
Time deposits |
| 136,891,495 |
| - |
| - |
| 136,891,495 |
| 136,897,778 |
Negotiable certificates of deposits |
| 8,602,208 |
| - |
| - |
| 8,602,208 |
| 8,607,267 |
Note discount deposits |
| 4,747,587 |
| - |
| - |
| 4,747,587 |
| 4,747,425 |
CMA |
| 3,987,372 |
| - |
| - |
| 3,987,372 |
| 3,987,372 |
Others |
| 20,477 |
| - |
| - |
| 20,477 |
| 20,477 |
Borrowings: |
|
|
|
|
|
|
|
|
|
|
Call money |
| 671,910 |
| - |
| - |
| 671,910 |
| 671,910 |
Bill sold |
| 19,070 |
| - |
| - |
| 19,070 |
| 19,035 |
Bonds sold under repurchase agreements |
| 103,489 |
| - |
| - |
| 103,489 |
| 103,489 |
Borrowings |
| 16,518,309 |
| (919) |
| - |
| 16,517,390 |
| 16,554,299 |
Debt securities issued: |
|
|
|
|
|
|
|
|
|
|
Debt securities issued in Korean won |
| 28,813,343 |
| (40,736) |
| - |
| 28,772,607 |
| 29,062,431 |
Debt securities issued in foreign currencies |
| 6,837,089 |
| (34,331) |
| - |
| 6,802,758 |
| 6,900,373 |
Other financial liabilities |
| 20,210,818 |
| (24,568) |
| - |
| 20,186,250 |
| 20,195,106 |
|
| 336,906,774 |
| (100,554) |
| - |
| 336,806,220 |
| 337,250,569 |
78
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-4. | Measurement of fair value (continued) |
|
(b) Financial instruments measured at amortized cost (continued)
iii) The fair value hierarchy of financial instruments which are not measured at fair value in the separate statement of financial position as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | ||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
Assets |
|
|
|
|
|
|
|
|
Cash and due from banks: |
|
|
|
|
|
|
|
|
Cash |
| 1,635,696 |
| - |
| - |
| 1,635,696 |
Due from banks |
| - |
| 21,164,335 |
| - |
| 21,164,335 |
Loans at amortized cost: |
|
|
|
|
|
|
|
|
Household loans |
| - |
| - |
| 126,610,343 |
| 126,610,343 |
Corporate loans |
| - |
| - |
| 139,974,326 |
| 139,974,326 |
Public and other loans |
| - |
| - |
| 3,599,911 |
| 3,599,911 |
Loans to bank |
| - |
| 1,397,540 |
| 4,189,392 |
| 5,586,932 |
Securities at amortized cost: |
|
|
|
|
|
|
|
|
Government bonds |
| 1,794,939 |
| 10,728,237 |
| - |
| 12,523,176 |
Financial institutions bonds |
| 1,070,220 |
| 1,071,938 |
| - |
| 2,142,158 |
Corporate bonds and others |
| - |
| 4,783,110 |
| - |
| 4,783,110 |
Other financial assets |
| - |
| 8,236,819 |
| 2,613,270 |
| 10,850,089 |
|
| 4,500,855 |
| 47,381,979 |
| 276,987,242 |
| 328,870,076 |
Liabilities |
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
Demand deposits |
| - |
| 141,428,780 |
| - |
| 141,428,780 |
Time deposits |
| - |
| - |
| 134,624,201 |
| 134,624,201 |
Negotiable certificates of deposits |
| - |
| - |
| 4,886,255 |
| 4,886,255 |
Note discount deposits |
| - |
| - |
| 6,226,855 |
| 6,226,855 |
CMA |
| - |
| 4,006,318 |
| - |
| 4,006,318 |
Others |
| - |
| - |
| 18,765 |
| 18,765 |
Borrowings: |
|
|
|
|
|
|
|
|
Call money |
| - |
| 1,393,820 |
| - |
| 1,393,820 |
Bill sold |
| - |
| - |
| 10,696 |
| 10,696 |
Bonds sold under repurchase agreements |
| - |
| - |
| 159,432 |
| 159,432 |
Borrowings |
| - |
| - |
| 18,873,465 |
| 18,873,465 |
Debt securities issued: |
|
|
|
|
|
|
|
|
Debt securities issued in Korean won |
| - |
| 24,199,090 |
| 1,545,882 |
| 25,744,972 |
Debt securities issued in foreign currencies |
| - |
| 6,812,327 |
| - |
| 6,812,327 |
Other financial liabilities |
| - |
| 9,927,096 |
| 11,130,455 |
| 21,057,551 |
|
| - |
| 187,767,431 |
| 177,476,006 |
| 365,243,437 |
79
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-4. | Measurement of fair value (continued) |
|
(b) Financial instruments measured at amortized cost (continued)
iii) The fair value hierarchy of financial instruments which are not measured at fair value in the separate statement of financial position as of December 31, 2020 and 2019 are as follows (continued):
|
| December 31, 2019 | ||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
Assets |
|
|
|
|
|
|
|
|
Cash and due from banks: |
|
|
|
|
|
|
|
|
Cash |
| 2,430,026 |
| - |
| - |
| 2,430,026 |
Due from banks |
| - |
| 17,209,834 |
| - |
| 17,209,834 |
Loans at amortized cost: |
|
|
|
|
|
|
|
|
Household loans |
| - |
| - |
| 116,592,611 |
| 116,592,611 |
Corporate loans |
| - |
| - |
| 125,557,893 |
| 125,557,893 |
Public and other loans |
| - |
| - |
| 3,195,896 |
| 3,195,896 |
Loans to bank |
| - |
| 519,200 |
| 2,697,350 |
| 3,216,550 |
Securities at amortized cost: |
|
|
|
|
|
|
|
|
Government bonds |
| 1,234,229 |
| 11,216,275 |
| - |
| 12,450,504 |
Financial institutions bonds |
| 2,252,484 |
| 818,180 |
| - |
| 3,070,664 |
Corporate bonds and others |
| - |
| 4,112,624 |
| - |
| 4,112,624 |
Other financial assets |
| - |
| 10,697,218 |
| 2,599,069 |
| 13,296,287 |
|
| 5,916,739 |
| 44,573,331 |
| 250,642,819 |
| 301,132,889 |
Liabilities |
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
Demand deposits |
| - |
| 109,483,607 |
| - |
| 109,483,607 |
Time deposits |
| - |
| - |
| 136,897,778 |
| 136,897,778 |
Negotiable certificates of deposits |
| - |
| - |
| 8,607,267 |
| 8,607,267 |
Note discount deposits |
| - |
| - |
| 4,747,425 |
| 4,747,425 |
CMA |
| - |
| 3,987,372 |
| - |
| 3,987,372 |
Others |
| - |
| - |
| 20,477 |
| 20,477 |
Borrowings: |
|
|
|
|
|
|
|
|
Call money |
| - |
| 671,910 |
| - |
| 671,910 |
Bill sold |
| - |
| - |
| 19,035 |
| 19,035 |
Bonds sold under repurchase agreements |
| - |
| - |
| 103,489 |
| 103,489 |
Borrowings |
| - |
| - |
| 16,554,299 |
| 16,554,299 |
Debt securities issued: |
|
|
|
|
|
|
|
|
Debt securities issued in Korean won |
| - |
| 27,005,137 |
| 2,057,294 |
| 29,062,431 |
Debt securities issued in foreign currencies |
| - |
| 6,900,373 |
| - |
| 6,900,373 |
Other financial liabilities |
| - |
| 7,822,152 |
| 12,372,954 |
| 20,195,106 |
|
| - |
| 155,870,551 |
| 181,380,018 |
| 337,250,569 |
80
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-4.Measurement of fair value (continued)
(b) Financial instruments measured at amortized cost (continued)
iv) Valuation techniques and inputs used in measuring fair value of financial instruments classified as level 2 or level 3 as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | ||||||
Level |
| Type of financial instrument |
| Fair value (*) |
| Valuation technique |
| Inputs |
Level 2 |
| Securities at amortized cost |
| 16,583,285 |
| Discounted cash flow |
| Discount rate |
Level 3 |
| Loans at amortized cost |
| 274,373,972 |
|
| Discount rate, Credit spread, Prepayment rate | |
| Other financial assets |
| 2,613,270 |
|
| Discount rate | ||
|
|
|
| 293,570,527 |
|
|
|
|
Level 2 |
| Debt securities issued |
| 31,011,417 |
| Discounted cash flow |
| Discount rate |
Level 3 |
| Deposits(*) |
| 145,688,332 |
|
| Discount rate | |
| Borrowings(*) |
| 11,343,735 |
|
| Discount rate | ||
| Debt securities issued |
| 1,545,882 |
|
| Discount rate, Regression coefficient, Correlation coefficient | ||
| Other financial liabilities |
| 11,130,455 |
|
| Discount rate | ||
|
|
|
| 200,719,821 |
|
|
|
|
(*) The amounts, which are not evaluated by the valuation technique, are not included and disclosed because the carrying amount is the reasonable approximation of fair value.
81
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-4. Measurement of fair value (continued)
(b) Financial instruments measured at amortized cost (continued)
iv) Valuation techniques and inputs used in measuring fair value of financial instruments classified as level 2 or level 3 as of December 31, 2020 and 2019 are as follows (continued):
|
| December 31, 2019 | ||||||
Level |
| Type of financial instrument |
| Fair value (*) |
| Valuation technique |
| Inputs |
Level 2 |
| Securities at amortized cost |
| 16,147,079 |
| Discounted cash flow |
| Discount rate |
Level 3 |
| Loans at amortized cost |
| 248,043,750 |
|
| Discount rate, Credit spread, Prepayment rate | |
| Other financial assets |
| 2,599,069 |
|
| Discount rate | ||
|
|
|
| 266,789,898 |
|
|
|
|
Level 2 |
| Debt securities issued |
| 33,905,510 |
| Discounted cash flow |
| Discount rate |
Level 3 |
| Deposits(*) |
| 150,227,116 |
|
| Discount rate | |
| Borrowings(*) |
| 11,623,276 |
|
| Discount rate | ||
| Debt securities issued |
| 2,057,294 |
|
| Discount rate, Regression coefficient, Correlation coefficient | ||
| Other financial liabilities |
| 12,372,954 |
|
| Discount rate | ||
|
|
|
| 210,186,150 |
|
|
|
|
(*) The amounts, which are not evaluated by the valuation technique, are not included and disclosed because the carrying amount is the reasonable approximation of fair value.
(c) Deferred day one gain or loss
Deferred day one gain or loss for the years ended December 31, 2020 and 2019 is as follows:
|
| December 31, 2020 | ||||||
|
| Beginning balance |
| New transaction |
| Profit and loss recognition |
| Ending balance |
Loans at FVTPL |
| (5,753) |
| - |
| 3,500 |
| (2,253) |
Equity options |
| 88 |
| - |
| (52) |
| 36 |
|
| (5,665) |
| - |
| 3,448 |
| (2,217) |
|
| December 31, 2019 | ||||||
|
| Beginning balance |
| New transaction |
| Profit and loss recognition |
| Ending balance |
Loans at FVTPL |
| (4,510) |
| (3,825) |
| 2,582 |
| (5,753) |
Securities at FVTPL |
| 4 |
| 2 |
| (6) |
| - |
Equity options |
| - |
| 101 |
| (13) |
| 88 |
|
| (4,506) |
| (3,722) |
| 2,563 |
| (5,665) |
82
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-4. | Measurement of fair value (continued) |
|
(d) Classification by category of financial instruments
Financial assets and liabilities are measured at fair value or amortized cost. The carrying amounts of each category of financial instruments as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | |||||||||||
|
| Financial assets at FVTPL |
| Financial assets at FVOCI |
| Financial assets designated at FVOCI |
| Financial assets at amortized cost |
| Derivatives held for hedging |
| Total | |
Assets |
|
|
|
|
|
|
|
|
|
|
|
| |
Due from banks |
| - |
| - |
| - |
| 21,164,335 |
| - |
| 21,164,335 | |
Securities at FVTPL |
| 19,723,740 |
| - |
| - |
| - |
| - |
| 19,723,740 | |
Derivative assets |
| 4,262,242 |
| - |
| - |
| - |
| 319,293 |
| 4,581,535 | |
Loans at FVTPL |
| 844,469 |
| - |
| - |
| - |
| - |
| 844,469 | |
Loans at amortized cost |
| - |
| - |
| - |
| 274,657,638 |
| - |
| 274,657,638 | |
Securities at FVOCI |
| - |
| 37,637,403 |
| 629,609 |
| - |
| - |
| 38,267,012 | |
Securities at amortized cost |
| - |
| - |
| - |
| 19,062,390 |
| - |
| 19,062,390 | |
Other financial assets |
| - |
| - |
| - |
| 10,829,613 |
| - |
| 10,829,613 | |
|
| 24,830,451 |
| 37,637,403 |
| 629,609 |
| 325,713,976 |
| 319,293 |
| 389,130,732 |
|
| Financial liabilities at FVTPL |
| Financial liabilities at amortized cost |
| Derivatives held for hedging |
| Total |
Liabilities |
|
|
|
|
|
|
|
|
Deposits |
| - |
| 291,132,556 |
| - |
| 291,132,556 |
Financial liabilities at FVTPL |
| 539,564 |
| - |
| - |
| 539,564 |
Derivative liabilities |
| 4,068,035 |
| - |
| 120,728 |
| 4,188,763 |
Borrowings |
| - |
| 20,393,392 |
| - |
| 20,393,392 |
Debt securities issued |
| - |
| 32,170,986 |
| - |
| 32,170,986 |
Other financial liabilities |
| - |
| 21,055,352 |
| - |
| 21,055,280 |
|
| 4,607,599 |
| 364,752,286 |
| 120,728 |
| 369,480,541 |
83
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-4. | Measurement of fair value (continued) |
|
(d) Classification by category of financial instruments (continued)
Financial assets and liabilities are measured at fair value or amortized cost. The carrying amounts of each category of financial instruments as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2019 | |||||||||||
|
| Financial assets at FVTPL |
| Financial assets at FVOCI |
| Financial assets designated at FVOCI |
| Financial assets at amortized cost |
| Derivatives held for hedging |
| Total | |
Assets |
|
|
|
|
|
|
|
|
|
|
|
| |
Due from banks |
| - |
| - |
| - |
| 17,209,834 |
| - |
| 17,209,834 | |
Securities at FVTPL |
| 16,660,083 |
| - |
| - |
| - |
| - |
| 16,660,083 | |
Derivative assets |
| 1,953,289 |
| - |
| - |
| - |
| 154,586 |
| 2,107,875 | |
Loans at FVTPL |
| 868,991 |
| - |
| - |
| - |
| - |
| 868,991 | |
Loans at amortized cost |
| - |
| - |
| - |
| 247,186,759 |
| - |
| 247,186,759 | |
Securities at FVOCI |
| - |
| 38,866,831 |
| 591,134 |
| - |
| - |
| 39,457,965 | |
Securities at amortized cost |
| - |
| - |
| - |
| 19,323,185 |
| - |
| 19,323,185 | |
Other financial assets |
| - |
| - |
| - |
| 13,279,831 |
| - |
| 13,279,831 | |
|
| 19,482,363 |
| 38,866,831 |
| 591,134 |
| 296,999,609 |
| 154,586 |
| 356,094,523 |
|
| Financial liabilities at FVTPL |
| Financial liabilities at amortized cost |
| Derivatives held for hedging |
| Total |
Liabilities |
|
|
|
|
|
|
|
|
Deposits |
| - |
| 263,732,746 |
| - |
| 263,732,746 |
Financial liabilities at FVTPL |
| 508,081 |
| - |
| - |
| 508,081 |
Derivative liabilities |
| 1,679,621 |
| - |
| 210,079 |
| 1,889,700 |
Borrowings |
| - |
| 17,311,859 |
| - |
| 17,311,859 |
Debt securities issued |
| - |
| 35,575,365 |
| - |
| 35,575,365 |
Other financial liabilities |
| - |
| 20,186,250 |
| - |
| 20,186,250 |
|
| 2,187,702 |
| 336,806,220 |
| 210,079 |
| 339,204,001 |
There are no financial assets and financial liabilities that are reclassified between financial instruments as of December 31, 2020 and 2019.
84
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-4. | Measurement of fair value (continued) |
|
(e) Financial instruments income and costs
Financial instruments income and costs by category for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | ||||||||||
|
| Interest income (expense) |
| Fees and commission income (expense) |
| Reversal of (provision for) credit loss allowance |
| Others |
| Total |
| Other comprehensive income (loss) |
Deposits |
| 33,297 |
| - |
| (750) |
| - |
| 32,547 |
| - |
Securities at FVTPL |
| 197,508 |
| 7,630 |
| - |
| 179,623 |
| 384,761 |
| - |
Securities at FVOCI |
| 555,424 |
| - |
| (4,185) |
| 228,782 |
| 780,021 |
| 301 |
Securities at amortized cost |
| 396,717 |
| - |
| (38) |
| - |
| 396,679 |
| - |
Loans at FVTPL |
| 9,440 |
| - |
| - |
| 14,027 |
| 23,467 |
| - |
Loans at amortized cost |
| 7,346,883 |
| 73,180 |
| (565,793) |
| (3,787) |
| 6,850,483 |
| - |
Other financial assets |
| 51,810 |
| 126,145 |
| 862 |
| - |
| 178,817 |
| - |
Financial liabilities at FVTPL |
| - |
| 523 |
| - |
| - |
| 523 |
| - |
Financial liabilities measured at amortized cost |
| (3,356,520) |
| (86) |
| - |
| (248,248) |
| (3,604,854) |
| 31,239 |
Net derivatives held for hedging |
| - |
| - |
| - |
| 233,008 |
| 233,008 |
| - |
Allowance for off-balance sheet items |
| - |
| - |
| (21,894) |
| - |
| (21,894) |
| - |
|
| 5,234,559 |
| 207,392 |
| (591,798) |
| 403,405 |
| 5,253,558 |
| 31,540 |
|
| December 31, 2019 | ||||||||||
|
| Interest income (expense) |
| Fees and commission income (expense) |
| Reversal of (provision for) credit loss allowance |
| Others |
| Total |
| Other comprehensive income (loss) |
Deposits |
| 81,438 |
| - |
| 4,189 |
| - |
| 85,627 |
| - |
Securities at FVTPL |
| 218,150 |
| 10,327 |
| - |
| 196,844 |
| 425,321 |
|
|
Securities at FVOCI |
| 669,707 |
| - |
| (4,853) |
| 117,484 |
| 782,338 |
| 114,205 |
Securities at amortized cost |
| 421,000 |
| - |
| 507 |
| - |
| 421,507 |
| - |
Loans at FVTPL |
| 16,254 |
| - |
| - |
| 13,213 |
| 29,467 |
| - |
Loans at amortized cost |
| 8,156,271 |
| 54,166 |
| (308,140) |
| (18,817) |
| 7,883,480 |
| - |
Other financial assets |
| 66,535 |
| 152,656 |
| (766) |
| - |
| 218,425 |
| - |
Financial liabilities at FVTPL |
| - |
| (52) |
| - |
| - |
| (52) |
| - |
Financial liabilities measured at amortized cost |
| (4,378,977) |
| (76) |
| - |
| (378,451) |
| (4,757,504) |
| (23,701) |
Net derivatives held for hedging |
| - |
| - |
| - |
| 377,121 |
| 377,121 |
| - |
Allowance for off-balance sheet items |
| - |
| - |
| (495) |
| - |
| (495) |
| - |
|
| 5,250,378 |
| 217,021 |
| (309,558) |
| 307,394 |
| 5,465,235 |
| 90,504 |
85
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3.Financial risk management (continued)
3-5.Capital risk management
In response to the increased risk of financial institutions following financial deregulation in the 1980s, Capital regulations applicable to banks are adopted in 1988, which focused primarily on capital adequacy and asset soundness as a measure of risk. Building upon the initial Basel Capital Accord of 1988, capital regulations are developed to reflect additional risks as well. For the purpose of improving risk management and increasing capital adequacy of banks, capital adequacy standards based on the new Basel Capital Accord (Basel III) is implemented by the Financial Services Commission regulations beginning on December 1, 2013. Under these regulations, all domestic banks including the Bank are required to maintain a capital adequacy ratio and report whether the Bank meet the capital adequacy ratio to the Financial Services Commission according to ‘Banking-related Legislation’.
Under the Banking Act, the capital of a bank is divided into two categories.
(a) Tier 1 capital (Common equity Tier 1 capital + Additional Tier 1 capital)
i) Common equity Tier 1 capital: Common equity Tier 1 capital consists of capital stock, capital surplus, retained earnings (excluding regulatory reserve for loan loss), accumulated other comprehensive income, other disclosed reserves, and non-controlling interests that meet certain criteria.
ii) Additional Tier 1 capital: Additional Tier 1 capital consists of equity instrument that meet certain criteria for perpetual nature of the equity instrument, any related capital surplus, instruments issued by consolidated subsidiaries of the Bank and held by third parties that meet certain criteria.
(b) Tier 2 capital (Supplementary capital)
The Bank includes capital securities that meet the recognition requirements to compensate for the Bank's losses upon liquidation. This includes some of the associated capital surplus and the amount of external investors' holdings of supplementary capital issued by subsidiaries. Also, it includes the provisions that meet Basel III requirements.
The Bank calculates the ratio of equity capital by dividing the equity capital (the amount deducted from the sum of the above basic capital and supplementary capital) into risk-weighted assets. Risk weighted assets are calculated by applying higher weights to reflect the actual risk of the Bank. It comprises the sum of credit risk weighted assets, operational risk weighted assets, market risk weighted assets and additional risk assets.
The Bank evaluates and manages the capital adequacy ratio pursuant to internally developed standards. It means that the Bank assesses whether the level on ratio of available capital to economic capital is sufficient, or not. The Bank manages the economic adequacy by the amount of each risk type including credit, market, operation, interest rate, liquidity, concentration, and foreign currency settlement risk, as well as the total amounts of all of those risk types.
86
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3. Financial risk management (continued)
3-5. Capital risk management (continued)
Details of capital categories and the capital adequacy ratio of the Bank as of December 31, 2020 and 2019 are as follows:
Category |
| December 31, 2020 |
| December 31, 2019 |
Capital: |
|
|
|
|
Common equity Tier 1 capital |
| 24,662,421 |
| 23,159,278 |
Additional Tier 1 capital |
| 1,586,662 |
| 997,987 |
Tier 1 capital |
| 26,249,083 |
| 24,157,265 |
Tier 2 capital |
| 4,275,688 |
| 4,747,850 |
|
| 30,524,771 |
| 28,905,115 |
|
|
|
|
|
Risk-weighted assets |
|
|
|
|
Credit risk-weighted assets |
| 144,789,436 |
| 163,937,574 |
Market risk-weighted assets |
| 10,216,942 |
| 7,663,130 |
Operating risk-weighted assets |
| 10,257,610 |
| 10,036,197 |
|
| 165,263,988 |
| 181,636,901 |
|
|
|
|
|
Capital adequacy ratio: |
|
|
|
|
Common equity Tier 1 capital ratio |
| 14.92% |
| 12.75% |
Tier 1 capital ratio |
| 15.88% |
| 13.30% |
Tier 2 capital ratio |
| 2.59% |
| 2.61% |
Total capital ratio |
| 18.47% |
| 15.91% |
(*) The additional risk weighted assets resulting from the insufficient capital under capital floor is included in credit
risk-weighted assets.
The criteria for capital adequacy to be complied with by the Bank are 8.0% or more of the total equity capital ratio, 6.0% or higher of the basic capital ratio, and 4.5% or more of the common stock capital ratio. In addition, the minimum regulatory BIS capital ratio required to be observed by 2019 has been raised to up to 14% as the capital regulation based on the Basel III standard is enforced from 2016. This is based on the addition of capital conservation capital (2.5%p) and domestic system-critical banks (D-SIB) capital (1.0%p) and economic response capital (2.5%p) to the existing lowest common equity capital ratio, the capital conservation capital and D-SIB capital will be raised by 25% each year by applying the transitional criteria by 2019, and economic response capital can be charged up to 2.5%p during credit expansion period. As of December 31, 2020, the minimum regulatory BIS capital ratio to be observed is 11.5%, which is the standard for applying capital conservation capital (2.5%p), D-SIB capital (1.0%p), and economic response capital (0%p).
87
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3. Financial risk management (continued)
3-6. Transaction as a transfer of financial instrument
(a) Transfers financial assets that are not derecognized
i) Bonds sold under repurchase agreements at a fixed price as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Transferred assets: |
|
|
|
|
Securities at FVOCI |
| 98,873 |
| 124,801 |
Securities at amortized cost |
| 205,639 |
| 126,144 |
|
| 304,512 |
| 250,945 |
Associated liabilities: |
|
|
|
|
Bonds sold under repurchase agreements |
| 159,432 |
| 103,489 |
ii) When the Bank's securities are transferred, the Bank transfers the ownership of the securities, but upon the termination, the Bank will have to return the securities. As a result, securities loaned as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
| Lender |
Securities at FVOCI: |
|
|
|
|
|
|
Government bonds |
| 518,592 |
| 1,115,115 |
| Korea Securities Finance Corp., Korea Securities Depository |
Financial institutions bonds |
| 220,324 |
| 349,987 |
| Korea Securities Finance Corp., Korea Securities Depository |
Securities at amortized cost: |
|
|
|
|
|
|
Government bonds |
| 158,601 |
| 114,969 |
| Korea Securities Finance Corp., Korea Securities Depository |
Financial institutions bonds |
| - |
| 110,065 |
| Korea Securities Finance Corp., Korea Securities Depository |
|
| 897,517 |
| 1,690,136 |
|
|
(b) Financial instruments that are qualified for derecognition but under continuing involvement.
There is no financial instrument that meets the conditions of derecognition and in which the Bank has continuing involvement as of December 31, 2020 and 2019.
88
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
3. Financial risk management (continued)
3-7. Offsetting financial assets and financial liabilities
Details of financial assets and financial liabilities subject to offsetting, enforceable master netting agreements and similar agreements as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | ||||||||||
|
| Gross amounts of recognized financial assets and liabilities |
| Gross amounts of recognized financial assets and liabilities set off in the statement of financial position |
| Net amounts of financial assets and liabilities presented in the statement of financial position |
| Related amounts not set off in the statement of financial position |
|
| ||
|
|
|
| Financial instruments |
| Cash collateral received |
| Net amount | ||||
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets (*1) |
| 4,422,312 |
| - |
| 4,422,312 |
| 4,056,648 |
| 66,997 |
| 5,152,485 |
Other financial assets (*1) |
| 4,853,818 |
| - |
| 4,853,818 |
|
|
| |||
Bonds sold under repurchase agreements related collateral of securities (*2) |
| 304,512 |
| - |
| 304,512 |
| 159,432 |
| - |
| 145,080 |
Bonds purchased under resale agreement (Loans) (*2) |
| 2,532,900 |
| - |
| 2,532,900 |
| 2,532,900 |
| - |
| - |
Securities lent (*2) |
| 897,518 |
| - |
| 897,518 |
| 897,518 |
| - |
| - |
Domestic exchange settlements receivables (*3) |
| 29,621,752 |
| 25,651,994 |
| 3,969,758 |
| - |
| - |
| 3,969,758 |
Receivable from disposal of securities, etc. (*4) |
| 29,341 |
| 3,140 |
| 26,201 |
| - |
| - |
| 26,201 |
|
| 42,662,153 |
| 25,655,134 |
| 17,007,019 |
| 7,646,498 |
| 66,997 |
| 9,293,524 |
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities (*1) |
| 3,949,804 |
| - |
| 3,949,804 |
| 3,921,244 |
| - |
| 4,127,642 |
Other financial liabilities (*1) |
| 4,099,082 |
| - |
| 4,099,082 |
|
|
| |||
Bonds sold under repurchase agreements (Borrowings) (*2) |
| 159,432 |
| - |
| 159,432 |
| 159,432 |
| - |
| - |
Domestic exchange settlement payables (*3) |
| 31,328,744 |
| 25,651,994 |
| 5,676,750 |
| 4,024,777 |
| - |
| 1,651,973 |
Payable from purchase of securities, etc. (*4) |
| 3,148 |
| 3,140 |
| 8 |
| 8 |
| - |
| - |
|
| 39,540,210 |
| 25,655,134 |
| 13,885,076 |
| 8,105,461 |
| - |
| 5,779,615 |
(*1) The Bank has certain derivative transactions subject to the ISDA (International Swaps and Derivatives Association) agreement. According to the ISDA agreement, when credit events (e.g. default) of counterparties occur, the net amount after offsetting the amounts obligated by each party is settled.
(*2) Resale and repurchase agreement, securities borrowing and lending agreement are also similar to ISDA agreement with respect to enforceable netting agreements.
(*3) The Bank has legally enforceable right to set off and settles financial assets and liabilities on a net basis. Therefore, domestic exchanges settlement receivables (payables) are recorded on a net basis in the separate statements of financial position.
(*4) Receivables and payables related to settlement of purchase and disposition of enlisted securities are offset and the net amount is presented in the separate statement of financial position because the Bank currently has a legally enforceable right to set off the recognized amounts and intends to settle on a net basis. The effect of offsetting due to the establishment of ‘Central Counter Party (“CCP”)’ system is included in the amount.
89
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
3. Financial risk management (continued)
3-7. Offsetting financial assets and financial liabilities (continued)
Details of financial assets and financial liabilities subject to offsetting, enforceable master netting agreements and similar agreements as of December 31, 2020 and 2019 are as follows: (continued)
|
| December 31, 2019 | ||||||||||
|
| Gross amounts of recognized financial assets and liabilities |
| Gross amounts of recognized financial assets and liabilities set off in the statement of financial position |
| Net amounts of financial assets and liabilities presented in the statement of financial position |
| Related amounts not set off in the statement of financial position |
|
| ||
|
|
|
| Financial instruments |
| Cash collateral received |
| Net amount | ||||
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets (*1) |
| 2,103,064 |
| - |
| 2,103,064 |
| 7,857,555 |
| 11,252 |
| 1,369,314 |
Other financial assets (*1) |
| 7,135,057 |
| - |
| 7,135,057 |
|
|
| |||
Bonds sold under repurchase agreements related collateral of securities (*2) |
| 250,945 |
| - |
| 250,945 |
| 103,489 |
| - |
| 147,456 |
Bonds purchased under resale agreement (Loans) (*2) |
| 1,771,033 |
| - |
| 1,771,033 |
| 1,770,855 |
| - |
| 178 |
Securities lent (*2) |
| 1,690,136 |
| - |
| 1,690,136 |
| 1,690,136 |
| - |
| - |
Domestic exchange settlements receivables (*3) |
| 31,027,416 |
| 26,820,045 |
| 4,207,371 |
| - |
| - |
| 4,207,371 |
Receivable from disposal of securities, etc. (*4) |
| 25,807 |
| 1,133 |
| 24,674 |
| - |
| - |
| 24,674 |
|
| 44,003,458 |
| 26,821,178 |
| 17,182,280 |
| 11,422,035 |
| 11,252 |
| 5,748,993 |
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities (*1) |
| 1,849,496 |
| - |
| 1,849,496 |
| 7,630,938 |
| - |
| 344,841 |
Other financial liabilities (*1) |
| 6,126,283 |
| - |
| 6,126,283 |
|
|
| |||
Bonds sold under repurchase agreements (Borrowings) (*2) |
| 103,489 |
| - |
| 103,489 |
| 103,489 |
| - |
| - |
Securities sold |
| 40,321 |
| - |
| 40,321 |
| 40,321 |
| - |
| - |
Domestic exchange settlement payables (*3) |
| 28,152,623 |
| 26,820,045 |
| 1,332,578 |
| 1,332,578 |
| - |
| - |
Payable from purchase of securities, etc. (*4) |
| 1,606 |
| 1,133 |
| 473 |
| 473 |
| - |
| - |
|
| 36,273,818 |
| 26,821,178 |
| 9,452,640 |
| 9,107,799 |
| - |
| 344,841 |
(*1) The Bank has certain derivative transactions subject to the ISDA (International Swaps and Derivatives Association) agreement. According to the ISDA agreement, when credit events (e.g. default) of counterparties occur, the net amount after offsetting the amounts obligated by each party is settled.
(*2) Resale and repurchase agreement, securities borrowing and lending agreement are also similar to ISDA agreement with respect to enforceable netting agreements.
(*3) The Bank has legally enforceable right to set off and settles financial assets and liabilities on a net basis. Therefore, domestic exchanges settlement receivables (payables) are recorded on a net basis in the separate statements of financial position.
(*4) Receivables and payables related to settlement of purchase and disposition of enlisted securities are offset and the net amount is presented in the separate statement of financial position because the Bank currently has a legally enforceable right to set off the recognized amounts and intends to settle on a net basis. The effect of offsetting due to the establishment of ‘Central Counter Party (“CCP”)’ system is included in the amount.
90
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
4. | Significant estimates and judgments |
|
The preparation of separate financial statements requires the application of certain critical estimates and judgments relative to the future. Management’s estimated outcomes may differ from actual outcomes. The change in an accounting estimate is recognized prospectively in profit or loss in the period of the change, if the change affects that period only, or the period of the change and future periods, if the change affects both.
(a) Income taxes
The Bank is subject to tax laws from various countries. In the normal course of business, there are various types of transactions and different accounting methods that may add uncertainties to the decision of the final income taxes. The Bank has recognized current and deferred taxes that reflect tax consequences based on the best estimates in which the Bank expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. However, actual income taxes in the future may not be identical to the recognized deferred tax assets and liabilities, and this difference can affect current and deferred tax at the period when the final tax effect is determined.
(b) Fair value of financial instruments
The fair values of financial instruments which are not actively traded in the market are determined by using valuation techniques. The Bank determines valuation techniques and assumptions based on significant market conditions at the end of each reporting period. Diverse valuation techniques are used to determine the fair value of financial instruments, from generic valuation techniques to internally developed valuation models that incorporate various types of assumptions and variables.
(c) Allowances for loan losses, guarantees and unused loan commitments
The Bank determines and recognizes allowances for losses on debt securities, loans and other receivables measured at amortized cost or FVOCI, and recognizes provisions for guarantees and unused loan commitments through impairment testing. The accuracy of allowances for credit losses is determined by the estimation of expected cash flows for individually assessed allowances, and methodology and assumptions used for collectively assessed allowances and provisions for groups of loans, guarantees and unused loan commitments.
(d) Defined benefit obligation
The present value of a defined benefit obligation that is measured by actuarial valuation methods uses various assumptions which can change according to various elements. The rate used to discount post-employment benefit obligations is determined by reference to market yields at the end of the reporting period on high quality corporate bonds. The currency and term of the corporate bonds are consistent with the currency and estimated term of the post-employment benefit obligations. Actuarial gains and losses including experience adjustments and the effects of changes in actuarial assumptions are recognized in other comprehensive income. Other significant assumptions related to defined benefit obligations are based on current market situations.
91
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
5. | Cash and due from banks |
|
(a) Cash and due from banks as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Cash |
| 1,635,696 |
| 2,430,026 |
Deposits in Korean won: |
|
|
|
|
Reserve deposits |
| 16,711,286 |
| 13,555,978 |
Others |
| 880,996 |
| 250 |
|
| 17,592,282 |
| 13,556,228 |
Deposits in foreign currencies: |
|
|
|
|
Deposits |
| 2,471,065 |
| 2,847,489 |
Time deposits |
| 934,176 |
| 711,990 |
Others |
| 170,700 |
| 97,570 |
|
| 3,575,941 |
| 3,657,049 |
|
|
|
|
|
Allowance for impairment |
| (3,888) |
| (3,443) |
|
| 22,800,031 |
| 19,639,860 |
(b) Restricted due from banks
Restricted due from banks as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
| The laws of evidence, etc. |
Deposits in Korean won: |
|
|
|
|
|
|
Reserve deposits |
| 16,711,286 |
| 13,555,978 |
| Article 55 of the Bank of Korea Act |
Others |
| 880,250 |
| 250 |
| Articles 28 and 70 of the Bank of Korea Act |
|
| 17,591,536 |
| 13,556,228 |
|
|
Deposits in foreign currencies: |
|
|
|
|
|
|
Deposits |
| 1,553,317 |
| 935,507 |
| Bank of Korea Act, etc. |
Time deposits |
| 32,640 |
| 23,156 |
| New York State Banking Law, etc |
Others |
| 19,976 |
| 8,768 |
| Derivative contract |
|
| 1,605,933 |
| 967,431 |
|
|
|
| 19,197,469 |
| 14,523,659 |
|
|
92
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
6. Securities at fair value through profit or loss
Securities at FVTPL as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Debt securities: |
|
|
|
|
Government bonds |
| 181,330 |
| 413,709 |
Financial institution bonds |
| 2,777,402 |
| 2,900,355 |
Corporate bonds |
| 1,119,802 |
| 1,411,378 |
Bills bought |
| 6,256,139 |
| 4,393,562 |
CMA |
| 3,143,694 |
| 3,897,182 |
Beneficiary Certificate |
| 4,984,121 |
| 2,808,933 |
Others |
| 923,824 |
| 660,521 |
|
| 19,386,312 |
| 16,485,640 |
Equity securities: |
|
|
|
|
Stocks |
| 149,089 |
| 62,728 |
Other: |
|
|
|
|
Gold/silver deposits |
| 188,339 |
| 111,715 |
|
| 19,723,740 |
| 16,660,083 |
|
|
|
|
|
93
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
7. | Derivatives |
|
(a) The notional amounts of derivatives
The notional amounts of derivatives as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Foreign currency related |
|
|
|
|
Over the counter: |
|
|
|
|
Currency forwards |
| 106,454,956 |
| 119,251,384 |
Currency swaps |
| 31,409,822 |
| 38,592,870 |
Currency options |
| 2,498,719 |
| 2,743,171 |
|
|
|
|
|
Exchange traded: |
|
|
|
|
Currency futures |
| 32,640 |
| 34,734 |
|
| 140,396,137 |
| 160,622,159 |
Interest rates related |
|
|
|
|
Over the counter: |
|
|
|
|
Interest rate swaps |
| 33,887,202 |
| 36,166,876 |
Interest rate options |
| 106,119 |
| 80,000 |
|
|
|
|
|
Exchange traded: |
|
|
|
|
Interest rate futures |
| 279,209 |
| 292,063 |
Interest rate swaps (*) |
| 36,336,900 |
| 41,330,340 |
|
| 70,609,430 |
| 77,869,279 |
Equity related |
|
|
|
|
Over the counter: |
|
|
|
|
Equity options |
| 223,472 |
| 276,441 |
Exchange traded: |
|
|
|
|
Equity futures |
| 55,012 |
| 14,926 |
Equity options |
| 8,625 |
| 58,863 |
|
| 287,109 |
| 350,230 |
Commodity related |
|
|
|
|
Over the counter: |
|
|
|
|
Commodity swap and forwards |
| - |
| 175,453 |
Hedge |
|
|
|
|
Fair value hedge: |
|
|
|
|
Interest rate swaps |
| 6,965,492 |
| 9,371,632 |
|
| 218,258,168 |
| 248,388,753 |
(*) The notional amount of derivatives which is settled in the ‘Central Counter Party (“CCP”)’ system.
94
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
7. | Derivatives (continued) |
|
(b) Fair values of derivative instruments
Fair values of derivative instruments as of December 31, 2020 and 2019 are as follows:
|
|
|
| December 31, 2020 |
| December 31, 2019 | |||||
|
| Assets |
| Liabilities |
| Assets |
| Liabilities | |
Foreign currency related |
|
|
|
|
|
|
|
| |
Over the counter: |
|
|
|
|
|
|
|
| |
Currency forwards |
| 2,820,012 |
| 2,826,370 |
| 1,228,684 |
| 943,232 | |
Currency swaps |
| 1,124,540 |
| 923,893 |
| 467,172 |
| 516,580 | |
Currency options |
| 33,248 |
| 31,864 |
| 8,870 |
| 9,430 | |
|
| 3,977,800 |
| 3,782,127 |
| 1,704,726 |
| 1,469,242 | |
Interest rates related |
|
|
|
|
|
|
|
| |
Over the counter: |
|
|
|
|
|
|
|
| |
Interest rate swaps |
| 282,321 |
| 281,823 |
| 239,836 |
| 204,678 | |
Interest rate options |
| 1,012 |
| - |
| 835 |
| - | |
|
| 283,333 |
| 281,823 |
| 240,671 |
| 204,678 | |
Equity related |
|
|
|
|
|
|
|
| |
Over the counter: |
|
|
|
|
|
|
|
| |
Equity options |
| 1,104 |
| 3,756 |
| 2,804 |
| 5,504 | |
Exchange traded: |
|
|
|
|
|
|
|
| |
Equity options and futures |
| 5 |
| 329 |
| - |
| 197 | |
|
| 1,109 |
| 4,085 |
| 2,804 |
| 5,701 | |
Commodity related |
|
|
|
|
|
|
|
| |
Over the counter: |
|
|
|
|
|
|
|
| |
Commodity swap and forwards |
| - |
| - |
| 5,089 |
| - | |
|
|
|
|
|
|
|
|
| |
Hedge |
|
|
|
|
|
|
|
| |
Fair value hedge: |
|
|
|
|
|
|
|
| |
Interest rate swaps |
| 319,293 |
| 120,728 |
| 154,585 |
| 210,079 | |
|
| 4,581,535 |
| 4,188,763 |
| 2,107,875 |
| 1,889,700 |
95
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
7. | Derivatives (continued) |
|
(c) Gain or loss on valuation of derivatives
Gain or loss on valuation of derivatives for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 | ||||
|
| Gain |
| Loss |
| Gain |
| Loss |
Foreign currency related |
|
|
|
|
|
|
|
|
Over the counter: |
|
|
|
|
|
|
|
|
Currency forwards |
| 2,710,938 |
| 2,934,554 |
| 1,111,663 |
| 957,799 |
Currency swaps |
| 1,153,513 |
| 923,165 |
| 475,909 |
| 499,295 |
Currency options |
| 33,402 |
| 28,570 |
| 9,409 |
| 5,529 |
|
| 3,897,853 |
| 3,886,289 |
| 1,596,981 |
| 1,462,623 |
Interest rates related |
|
|
|
|
|
|
|
|
Over the counter: |
|
|
|
|
|
|
|
|
Interest rate swaps |
| 132,733 |
| 167,717 |
| 153,241 |
| 164,397 |
Inteerest rate options |
| 43 |
| 123 |
| 299 |
| - |
|
|
|
|
|
|
|
|
|
Exchange traded: |
|
|
|
|
|
|
|
|
Interest rate futures |
| - |
| - |
| 550 |
| - |
|
| 132,776 |
| 167,840 |
| 154,090 |
| 164,397 |
Equity related |
|
|
|
|
|
|
|
|
Over the counter: |
|
|
|
|
|
|
|
|
Equity options |
| 1,337 |
| 1,445 |
| 3,001 |
| 2,919 |
|
|
|
|
|
|
|
|
|
Exchange traded: |
|
|
|
|
|
|
|
|
Equity options |
| - |
| 375 |
| 313 |
| - |
|
| 1,337 |
| 1,820 |
| 3,314 |
| 2,919 |
Commodity related |
|
|
|
|
|
|
|
|
Over the counter: |
|
|
|
|
|
|
|
|
Commodity forwards |
| - |
| - |
| 5,089 |
| - |
Hedge |
|
|
|
|
|
|
|
|
Fair value hedge: |
|
|
|
|
|
|
|
|
Interest rate swaps |
| 214,270 |
| 33,119 |
| 338,168 |
| 23,402 |
|
| 4,246,236 |
| 4,089,068 |
| 2,097,642 |
| 1,653,341 |
96
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
7. | Derivatives (continued) |
|
(d) Hedge accounting
i) Purpose of risk hedge and strategy
The Bank transacts with derivative financial instruments to hedge its interest rate risk and currency risk arising from the assets and liabilities of the Bank. The Bank applies fair value hedge accounting that uses interest rate swaps to hedge fair value movements risk arising from changes in the market interest rates of the Korean won structured notes, foreign currency issued financial debentures, structured deposits in foreign currencies, foreign currency structured deposits and foreign currency investment bonds. In order to hedge the foreign exchange risk of the net investment from the overseas, the Bank applies the net investment hedge accounting for foreign operations using non-derivative financial instruments.
ii) Nominal amounts and average hedge ratios for hedging instruments as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | ||||||||||||
|
| 1 year or less |
| 1 year ~ 2 years or less |
| 2 years ~ 3 years or less |
| 3 years ~ 4 years or less |
| 4 years ~ 5 years or less |
| More than 5 years |
| Total |
Fair value hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
| 657,656 |
| 590,992 |
| 558,688 |
| 286,688 |
| 247,244 |
| 4,624,224 |
| 6,965,492 |
Average price conditions (*1) |
| 1.12% |
| 0.80% |
| 0.89% |
| 0.98% |
| 0.67% |
| 0.38% |
| 0.56% |
Average hedge ratio |
| 100% |
| 100% |
| 100% |
| 100% |
| 100% |
| 100% |
| 100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedge of net investments in foreign operations (*2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities issued in foreign currencies |
| 33,462 |
| 141,440 |
| 267,360 |
| - |
| - |
| - |
| 442,262 |
Average hedge ratio |
| 100% |
| 100% |
| 100% |
| - |
| - |
| - |
| 100% |
(*1) The underlying interest rate for interest rate swaps is 3M CD, 3M USD Libor, and 3M AUD Bond.
(*2) The average exchange rates of net investment hedge instruments are USD/KRW1,165.80 and AUD/KRW 829.45.
|
| December 31, 2019 | ||||||||||||
|
| 1 year or less |
| 1 year ~ 2 years or less |
| 2 years ~ 3 years or less |
| 3 years ~ 4 years or less |
| 4 years ~ 5 years or less |
| More than 5 years |
| Total |
Fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
| 700,469 |
| 704,985 |
| 667,948 |
| 608,424 |
| 575.481 |
| 6,114,325 |
| 9,371,632 |
Average price conditions (*1) |
| 0.81% |
| 0.93% |
| 0.76% |
| 0.99% |
| 0.86% |
| 0.52% |
| 0.64% |
Average hedge ratio |
| 100% |
| 100% |
| 100% |
| 100% |
| 100% |
| 100% |
| 100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedge of net investments in foreign operations: (*2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities issued in foreign currencies |
| - |
| 32,414 |
| 150,514 |
| 165,565 |
| - |
| - |
| 348,493 |
Average hedge ratio |
| - |
| 100% |
| 100% |
| 100% |
| - |
| - |
| 100% |
(*1) The underlying interest rate for interest rate swaps is 3M CD, 3M USD Libor, 3M Euribor, 6M Euribor, and 3M AUD Bond.
(*2) The average exchange rates of net investment hedge instruments are USD/KRW 1,100.57 and AUD/KRW 829.45.
97
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
7. Derivatives (continued)
(e) Impact of hedge accounting on the separate financial statements
i) Impact of hedging instruments in the separate statement of financial position as of December 31, 2020 and 2019, and separate statement of comprehensive income and separate statement of changes in equity for the years ended are as follows:
| December 31, 2020 | ||||||||||||||
| Notional amounts |
| Separate statement of financial position |
| Separate statement of comprehensive income |
|
| ||||||||
| Derivative assets |
| Derivative liabilities |
| Debt securities |
| Other comprehensive income for the period |
| Changes in fair value for the period | ||||||
Fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
| |||
Interest rate risk | Interest rate swaps |
| 6,965,492 |
| 319,293 |
| 120,728 |
| - |
| - |
| 181,151 | ||
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Hedge of net investments in foreign operations: |
|
|
|
|
|
|
|
|
|
|
|
| |||
Foreign exchange risk | Debt securities issued in foreign currencies |
| 442,262 |
| - |
| - |
| 440,375 |
| 31,239 |
| 31,239 | ||
|
| 7,407,754 |
| 319,293 |
| 120,728 |
| 440,375 |
| 31,239 |
| 212,390 |
98
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
7. Derivatives (continued)
(e) Impact of hedge accounting on the separate financial statements
i) Impact of hedging instruments in the separate statement of financial position as of December 31, 2020 and 2019, and separate statement of comprehensive income and separate statement of changes in equity for the years ended are as follows: (continued)
| December 31, 2019 | ||||||||||||||
| Notional amounts |
| Separate statement of financial position |
| Separate statement of comprehensive income |
|
| ||||||||
| Derivative assets |
| Derivative liabilities |
| Debt securities |
| Other comprehensive income for the period |
| Changes in fair value for the period | ||||||
Fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
| |||
Interest rate risk | Interest rate swaps |
| 9,371,632 |
| 154,585 |
| 210,079 |
| - |
| - |
| 314,766 | ||
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Hedge of net investments in foreign operations: |
|
|
|
|
|
|
|
|
|
|
|
| |||
Foreign exchange risk | Debt securities issued in foreign currencies |
| 348,493 |
| - |
| - |
| 346,549 |
| (11,739) |
| (11,739) | ||
|
| 9,720,125 |
| 154,585 |
| 210,079 |
| 346,549 |
| (11,739) |
| 303,027 |
99
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
7. | Derivatives (continued) |
|
(e) Impact of hedge accounting on the separate financial statements (continued)
ii) Impact of hedged items in the separate statement of financial position as of December 31, 2020 and 2019, and separate statement of comprehensive income and separate statement of changes in equity for the years ended are as follows:
|
|
|
| December 31, 2020 | |||||||||||||
|
| Hedging instruments |
| Separate statement of financial position |
| Separate statement of comprehensive income |
|
|
| Changes in fair value for the year |
| Reserve of exchange differences on translation | |||||
Securities at FVOCI |
| Deposits |
| Debt securities issued | Other comprehensive income for the year |
| Fair value hedges Adjusted accumulated amount | ||||||||||
Fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Interest rate risk |
| Debt securities issued |
| - |
| - |
| 5,816,989 |
| - |
| 240,393 |
| (165,416) |
| - | |
| Investment bonds |
| 143,496 |
| - |
| - |
| - |
| 6,563 |
| 3,894 |
| - | ||
| Time deposits |
| - |
| 933,940 |
| - |
| - |
| (46,940) |
| (13,848) |
| - | ||
Hedge of net investments in foreign operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Foreign exchange risk |
| Net investments in foreign operations |
| - |
| - |
| - |
| (31,239) |
| - |
| (31,239) |
| (20,617) | |
|
|
|
| 143,496 |
| 933,940 |
| 5,816,989 |
| (31,239) |
| 200,016 |
| (206,609) |
| (20,617) |
|
|
|
| December 31, 2019 | |||||||||||||
|
| Hedging instruments |
| Separate statement of financial position |
| Separate statement of comprehensive income |
|
|
| Changes in fair value for the year |
| Reserve of exchange differences on translation | |||||
Securities at FVOCI |
| Deposits |
| Debt securities issued | Other comprehensive income for the year |
| Fair value hedges Adjusted accumulated amount | ||||||||||
Fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Interest rate risk |
| Debt securities issued |
| - |
| - |
| 7,072,596 |
| - |
| 46,201 |
| (250,446) |
| - | |
| Investment bonds |
| 432,172 |
| - |
| - |
| - |
| 4,846 |
| 1,399 |
| - | ||
| Time deposits |
| - |
| 1,786,425 |
| - |
| - |
| (102,493) |
| (59,416) |
| - | ||
Hedge of net investments in foreign operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Foreign exchange risk |
| Net investments in foreign operations |
| - |
| - |
| - |
| 11,739 |
| - |
| (11,739) |
| 10,622 | |
|
|
|
| 432,172 |
| 1,786,425 |
| 7,072,596 |
| 11,739 |
| (51,446) |
| (320,202) |
| 10,622 |
|
100
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
7. | Derivatives (continued) |
|
(e) Impact of hedge accounting on the separate financial statements (continued)
iii) Gains (losses) on fair value hedged items and hedging instruments attributable to the hedged risk for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | ||||
|
| Gains (losses) on fair value hedges (hedged items) |
| Gains (losses) on fair value hedges (hedging instruments) |
| Hedge ineffectiveness recognized in profit or loss (*) |
Fair value hedges: |
|
|
|
|
|
|
Interest rate swaps |
| (228,266) |
| 233,008 |
| 4,742 |
|
|
|
|
|
|
|
Hedge of net investments in foreign operations: |
|
|
|
|
|
|
Foreign exchange risk |
| (31,239) |
| 31,239 |
| - |
|
| (259,505) |
| 264,247 |
| 4,742 |
(*) Recognized hedge ineffectiveness is included in other operating income and expenses in the separate statement of comprehensive income
|
| December 31, 2019 | ||||
|
| Gains (losses) on fair value hedges (hedged items) |
| Gains (losses) on fair value hedges (hedging instruments) |
| Hedge ineffectiveness recognized in profit or loss (*) |
Fair value hedges: |
|
|
|
|
|
|
Interest rate swaps |
| (370,787) |
| 377,121 |
| 6,334 |
|
|
|
|
|
|
|
Hedge of net investments in foreign operations: |
|
|
|
|
|
|
Foreign exchange risk |
| 11,739 |
| (11,739) |
| - |
|
| (359,048) |
| 365,382 |
| 6,334 |
(*) Recognized hedge ineffectiveness is included in other operating income and expenses in the separate statement of comprehensive income.
(f) The effects of quantifying the credit risk of derivatives mitigated by collateral held as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Deposits, securities, etc. |
| 1,389,763 |
| 900,282 |
101
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
7. Derivatives (continued)
(g) Hedge relationships affected by an interest rate index reform
The revised Standard requires that exceptions be applied when analysing future information in relation to the application of risk hedge accounting, while uncertainties arising from the interest rate indicator reform movement exist. The exception assumes that when assessing whether the expected cash flows that comply with existing interest rate indicators are highly probable, whether there is an economic relationship between the hedged item and the hedging instrument, and whether there is a high hedge effectiveness between the hedged item and the hedging instrument, the interest rate indicators that are based on the hedged item do not change due to the effect of the interest rate index reform.
As of December 31, 2020, the nominal amounts of risk aversion measures related to interest rate indicators that have been exposed to risk aversion by interest rate indicator reform are as follows:
From 2022, the USD LIBOR interest rate will be replaced by a Secured Overnight Financing Rate (SOFR) based on actual transactions. The Bank has assumed that in this hedging relationship, the spread changed on the basis of SOFR in 2022 would be similar to the spread included in the interest rate swap and interest rate lead used as the hedging instrument. The Bank does not assume any changes in other conditions.
Interest rate index |
| Nominal amount of hedging instruments (*) |
| Carrying amount of hedged assets |
| Carrying amount of hedged liabilities |
KRW 3M CD |
| 2,580,000 |
| - |
| 2,470,000 |
USD 3M LIBOR |
| 3,030,080 |
| 136,000 |
| 2,894,080 |
EUR 3M LIBOR |
| 267,648 |
| - |
| 267,648 |
(*)It is included a nominal amount before the end of 2022 when LIBOR interest rate calculation is discontinued.
102
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
8. Loans
(a) Details of loans as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 | ||||
|
| Loans at amortized cost |
| Loans at FVTPL |
| Loans at amortized cost |
| Loans at FVTPL |
Household loans |
| 126,456,195 |
| - |
| 116,047,478 |
| - |
Corporate loans |
| 139,953,385 |
| 844,469 |
| 125,541,959 |
| 868,991 |
Public and other loans |
| 3,594,089 |
| - |
| 3,189,535 |
| - |
Loans to banks |
| 5,582,082 |
| - |
| 3,210,012 |
| - |
|
| 275,585,751 |
| 844,469 |
| 247,988,984 |
| 868,991 |
Deferred loan origination costs and fees |
| 502,147 |
| - |
| 498,779 |
| - |
|
| 276,087,898 |
| 844,469 |
| 248,487,763 |
| 868,991 |
Less: Allowance for impairment |
| (1,430,260) |
| - |
| (1,301,004) |
| - |
|
| 274,657,638 |
| 844,469 |
| 247,186,759 |
| 868,991 |
103
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
8. | Loans (continued) |
|
(b) Changes in allowance for impairment and book value
i) Changes in allowance for impairment for the years ended December 31, 2020 and 2019 are as follows:
| December 31, 2020 | |||||||||||||||||||||||||||||||
|
| Due from banks |
| Loans at amortized cost |
| Other assets |
| Total | ||||||||||||||||||||||||
|
|
| Household |
| Corporate |
| Others |
| ||||||||||||||||||||||||
|
| 12-month expected credit losses |
| Lifetime expected credit losses |
| 12-month expected credit losses |
| Lifetime expected credit losses |
| 12-month expected credit losses |
| Lifetime expected credit losses |
| 12-month expected credit losses |
| Lifetime expected credit losses |
| 12-month expected credit losses |
| Lifetime expected credit losses |
| |||||||||||
|
|
| Not impaired |
| Impaired |
|
| Not impaired |
| Impaired |
|
| Not impaired |
| Impaired |
|
| Not impaired |
| Impaired |
|
| Not impaired |
| Impaired |
| ||||||
Beginning balance |
| 3,162 |
| 281 |
| - |
| 77,024 |
| 72,556 |
| 123,483 |
| 261,831 |
| 403,292 |
| 342,623 |
| 10,322 |
| 7,722 |
| 2,151 |
| 14,145 |
| 1,426 |
| 691 |
| 1,320,709 |
Transfer to 12 month expected credit losses |
| 63 |
| (63) |
| - |
| 18,029 |
| (17,709) |
| (320) |
| 45,891 |
| (45,362) |
| (529) |
| 164 |
| (164) |
| - |
| 146 |
| (146) |
| - |
| - |
Transfer to lifetime expected credit losses |
| (1) |
| 1 |
| - |
| (7,765) |
| 17,151 |
| (9,386) |
| (28,062) |
| 32,702 |
| (4,640) |
| (242) |
| 242 |
| - |
| (90) |
| 92 |
| (2) |
| - |
Transfer to credit- impaired financial assets |
| - |
| - |
| - |
| (1,668) |
| (7,238) |
| 8,906 |
| (1,362) |
| (16,289) |
| 17,651 |
| (13) |
| (9) |
| 22 |
| (11) |
| (102) |
| 113 |
| - |
Provision for (reversal of) allowance (*1) |
| 377 |
| 373 |
| - |
| (6,014) |
| 2,243 |
| 151,906 |
| 84,000 |
| 115,816 |
| 206,215 |
| 2,977 |
| 1,826 |
| 6,823 |
| (2,285) |
| 1,075 |
| 348 |
| 565,680 |
Write-offs |
| - |
| - |
| - |
| - |
| - |
| (205,737) |
| - |
| - |
| (248,877) |
| - |
| - |
| (2,531) |
| - |
| - |
| (213) |
| (457,358) |
Effect of discounting |
| - |
| - |
| - |
| - |
| - |
| (5,235) |
| - |
| - |
| (13,935) |
| - |
| - |
| - |
| - |
| - |
| - |
| (19,170) |
Disposal of loans |
| - |
| - |
| - |
| - |
| (8) |
| (1,630) |
| - |
| - |
| (23,585) |
| - |
| - |
| (182) |
| - |
| - |
| (32) |
| (25,437) |
Recoveries |
| - |
| - |
| - |
| - |
| - |
| 67,617 |
| - |
| - |
| 43,223 |
| - |
| - |
| 134 |
| - |
| - |
| 533 |
| 111,507 |
Others (*2) |
| (263) |
| (42) |
| - |
| (152) |
| (7) |
| (4) |
| (2,571) |
| (5,191) |
| (37,525) |
| (323) |
| (17) |
| - |
| 4,668 |
| - |
| - |
| (41,427) |
Ending balance |
| 3,338 |
| 550 |
| - |
| 79,454 |
| 66,988 |
| 129,600 |
| 359,727 |
| 484,968 |
| 280,621 |
| 12,885 |
| 9,600 |
| 6,417 |
| 16,573 |
| 2,345 |
| 1,438 |
| 1,454,504 |
(*1) Additional provision for credit loan allowance is recognized for the year ended December 31, 2020 to cope with the economic recession caused by the spread of the COVID-19. As of December 31, 2020, the Group has set aside an additional provision of W 128,658million (including provisions for debt securities, provisions for off-balance accounts, etc.) through the re-estimation of the default rate forecast that reflected the updated forward-looking information, and an additional provision of W 130,173 million through the additional selection and adjustment of cash flows for loans subject to individual assessment. In addition, additional provision of W 1,491 million is recognized by adding Stage2 indicators.
(*2) Other changes are due to debt restructuring, debt-equity swap and foreign exchange rate, etc.
104
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
8. | Loans (continued) |
|
(b) Changes in allowance for impairment and book value (continued)
i) Changes in allowance for impairment for the years ended December 31, 2020 and 2019 are as follows: (continued)
| December 31, 2019 | |||||||||||||||||||||||||||||||
|
| Due from banks |
| Loans at amortized cost |
| Other assets |
| Total | ||||||||||||||||||||||||
|
|
| Household |
| Corporate |
| Others |
| ||||||||||||||||||||||||
|
| 12-month expected credit losses |
| Lifetime expected credit losses |
| 12-month expected credit losses |
| Lifetime expected credit losses |
| 12-month expected credit losses |
| Lifetime expected credit losses |
| 12-month expected credit losses |
| Lifetime expected credit losses |
| 12-month expected credit losses |
| Lifetime expected credit losses |
| |||||||||||
|
|
| Not impaired |
| Impaired |
|
| Not impaired |
| Impaired |
|
| Not impaired |
| Impaired |
|
| Not impaired |
| Impaired |
|
| Not impaired |
| Impaired |
| ||||||
Beginning balance |
| 7,104 |
| 244 |
| - |
| 78,672 |
| 77,556 |
| 124,235 |
| 295,239 |
| 465,585 |
| 419,006 |
| 9,856 |
| 10,416 |
| 9,906 |
| 22,393 |
| 1,999 |
| 628 |
| 1,522,839 |
Transfer to 12 month expected credit losses |
| 27 |
| (27) |
| - |
| 16,650 |
| (16,449) |
| (201) |
| 33,399 |
| (31,699) |
| (1,700) |
| 757 |
| (757) |
| - |
| 131 |
| (131) |
| - |
| - |
Transfer to lifetime expected credit losses |
| (5) |
| 5 |
| - |
| (8,397) |
| 16,144 |
| (7,747) |
| (25,627) |
| 108,004 |
| (82,377) |
| (159) |
| 289 |
| (130) |
| (87) |
| 92 |
| (5) |
| - |
Transfer to credit- impaired financial assets |
| - |
| - |
| - |
| (92) |
| (2,733) |
| 2,825 |
| (300) |
| (6,616) |
| 6,916 |
| - |
| - |
| - |
| (1) |
| (62) |
| 63 |
| - |
Provision for (reversal of) allowance |
| (4,239) |
| 50 |
| - |
| (9,810) |
| (1,721) |
| 171,859 |
| (42,658) |
| (45,584) |
| 238,717 |
| (312) |
| (2,386) |
| 37 |
| 1,615 |
| (472) |
| (377) |
| 304,719 |
Write-offs |
| - |
| - |
| - |
| - |
| - |
| (222,982) |
| - |
| - |
| (214,589) |
| - |
| - |
| (8,718) |
| - |
| - |
| (133) |
| (446,422) |
Effect of discounting |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| (17,560) |
| - |
| - |
| - |
| - |
| - |
| - |
| (17,560) |
Disposal of loans |
| - |
| - |
| - |
| - |
| (241) |
| (1,424) |
| - |
| (245) |
| (30,429) |
| - |
| - |
| (820) |
| - |
| - |
| - |
| (33,159) |
Recoveries |
| - |
| - |
| - |
| - |
| - |
| 56,918 |
| - |
| - |
| 42,345 |
| - |
| - |
| 1,876 |
| - |
| - |
| 515 |
| 101,654 |
Others (*) |
| 275 |
| 9 |
| - |
| 1 |
| - |
| - |
| 1,778 |
| (86,153) |
| (17,706) |
| 180 |
| 160 |
| - |
| (9,906) |
| - |
| - |
| (111,362) |
Ending balance |
| 3,162 |
| 281 |
| - |
| 77,024 |
| 72,556 |
| 123,483 |
| 261,831 |
| 403,292 |
| 342,623 |
| 10,322 |
| 7,722 |
| 2,151 |
| 14,145 |
| 1,426 |
| 691 |
| 1,320,709 |
(*) Other changes are due to debt restructuring, debt-equity swap and foreign exchange rate, etc.
105
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
8. | Loans (continued) |
|
(b) Changes in allowance for impairment and book value (continued)
ii) Changes in book value of due from banks, loans at amortized costs and other assets for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | ||||||||||||||||||||||||||||||
|
| Due from banks |
| Loans at amortized cost |
| Other assets |
| Total | ||||||||||||||||||||||||
|
|
| Household |
| Corporate |
| Others | |||||||||||||||||||||||||
|
| 12-month expected credit losses |
| Lifetime expected credit losses |
| 12-month expected credit losses |
| Lifetime expected credit losses |
| 12-month expected credit losses |
| Lifetime expected credit losses |
| 12-month expected credit losses |
| Lifetime expected credit losses |
| 12-month expected credit losses |
| Lifetime expected credit losses |
| |||||||||||
|
|
| Not impaired |
| Impaired |
|
| Not impaired |
| Impaired |
|
| Not impaired |
| Impaired |
|
| Not impaired |
| Impaired |
|
| Not impaired |
| Impaired |
| ||||||
Beginning balance |
| 17,211,344 |
| 1,933 |
| - |
| 108,100,285 |
| 7,628,676 |
| 318,517 |
| 104,560,039 |
| 20,198,205 |
| 783,715 |
| 5,758,503 |
| 624,944 |
| 16,100 |
| 13,243,265 |
| 51,377 |
| 1,452 |
| 278,498,355 |
Transfer to 12 month expected credit losses |
| 712 |
| (712) |
| - |
| 2,812,563 |
| (2,808,877) |
| (3,686) |
| 4,787,609 |
| (4,785,249) |
| (2,360) |
| 15,949 |
| (15,949) |
| - |
| 12,569 |
| (12,569) |
| - |
| - |
Transfer to lifetime expected credit losses |
| (64) |
| 64 |
| - |
| (3,756,454) |
| 3,782,636 |
| (26,182) |
| (7,066,648) |
| 7,075,807 |
| (9,159) |
| (85,226) |
| 85,226 |
| - |
| (16,546) |
| 16,550 |
| (4) |
| - |
Transfer to credit- impaired financial assets |
| - |
| - |
| - |
| (103,831) |
| (139,295) |
| 243,126 |
| (154,146) |
| (231,116) |
| 385,262 |
| (3,958) |
| (26) |
| 3,984 |
| (571) |
| (992) |
| 1,563 |
| - |
Origination, recoveries, and others |
| 3,954,171 |
| 775 |
| - |
| 11,139,255 |
| (541,280) |
| 85,305 |
| 16,539,611 |
| (1,661,588) |
| 46,304 |
| 2,807,985 |
| (29,320) |
| 2,401 |
| (2,438,184) |
| (7,249) |
| 431 |
| 29,898,617 |
Write-offs |
| - |
| - |
| - |
| - |
| - |
| (205,737) |
| - |
| - |
| (248,877) |
| - |
| - |
| (2,531) |
| - |
| - |
| (213) |
| (457,358) |
Disposal of loans |
| - |
| - |
| - |
| - |
| (897) |
| (67,929) |
| - |
| - |
| (264,024) |
| - |
| - |
| (1,911) |
| - |
| - |
| (910) |
| (335,671) |
Ending balance |
| 21,166,163 |
| 2,060 |
| - |
| 118,191,818 |
| 7,920,963 |
| 343,414 |
| 118,666,465 |
| 20,596,059 |
| 690,861 |
| 8,493,253 |
| 664,875 |
| 18,043 |
| 10,800,533 |
| 47,117 |
| 2,319 |
| 307,603,943 |
106
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
8. | Loans (continued) |
|
(b) Changes in allowance for impairment and book value (continued)
ii) Changes in book value of due from banks, loans at amortized costs and other assets for the years ended December 31, 2020 and 2019 are as follows: (continued)
|
| December 31, 2019 | ||||||||||||||||||||||||||||||
|
| Due from banks |
| Loans at amortized cost |
| Other assets |
| Total | ||||||||||||||||||||||||
|
|
| Household |
| Corporate |
| Others | |||||||||||||||||||||||||
|
| 12-month expected credit losses |
| Lifetime expected credit losses |
| 12-month expected credit losses |
| Lifetime expected credit losses |
| 12-month expected credit losses |
| Lifetime expected credit losses |
| 12-month expected credit losses |
| Lifetime expected credit losses |
| 12-month expected credit losses |
| Lifetime expected credit losses |
| |||||||||||
|
|
| Not impaired |
| Impaired |
|
| Not impaired |
| Impaired |
|
| Not impaired |
| Impaired |
|
| Not impaired |
| Impaired |
|
| Not impaired |
| Impaired |
| ||||||
Beginning balance |
| 6,944,053 |
| 2,060 |
| - |
| 99,510,838 |
| 6,615,715 |
| 275,133 |
| 102,024,084 |
| 18,482,975 |
| 770,252 |
| 5,942,418 |
| 602,224 |
| 15,593 |
| 13,906,328 |
| 49,041 |
| 1,548 |
| 255,142,262 |
Transfer to 12 month expected credit losses |
| 113 |
| (113) |
| - |
| 2,559,557 |
| (2,556,405) |
| (3,152) |
| 3,508,771 |
| (3,504,723) |
| (4,048) |
| 37,402 |
| (37,402) |
| - |
| 10,336 |
| (10,334) |
| (2) |
| - |
Transfer to lifetime expected credit losses |
| (53,153) |
| 53,153 |
| - |
| (5,241,125) |
| 5,260,372 |
| (19,247) |
| (13,779,081) |
| 13,891,251 |
| (112,170) |
| (249,374) |
| 249,546 |
| (172) |
| (36,910) |
| 36,927 |
| (17) |
| - |
Transfer to credit- impaired financial assets |
| - |
| - |
| - |
| (547,011) |
| (32,723) |
| 579,734 |
| (979,801) |
| (47,143) |
| 1,026,944 |
| (45,049) |
| - |
| 45,049 |
| (2,520) |
| (268) |
| 2,788 |
| - |
Origination |
| 18,230,848 |
| - |
| - |
| 36,232,175 |
| - |
| - |
| 60,342,984 |
| - |
| - |
| 4,394,870 |
| - |
| - |
| 8,018,849 |
| - |
| - |
| 127,219,726 |
Recoveries |
| (8,055,274) |
| (53,239) |
|
|
| (24,414,128) |
| (1,653,161) |
| (203,849) |
| (47,065,406) |
| (8,505,720) |
| (348,411) |
| (4,429,437) |
| (190,317) |
| (17,254) |
| (8,652,818) |
| (23,986) |
| (1,670) |
| (103,614,670) |
Write-offs |
| - |
| - |
| - |
| - |
| - |
| (222,982) |
| - |
| - |
| (214,589) |
| - |
| - |
| (8,718) |
| - |
| - |
| (133) |
| (446,422) |
Disposal of loans |
| - |
| - |
| - |
| - |
| (5,122) |
| (87,120) |
| - |
| (3,806) |
| (283,726) |
| - |
| - |
| (18,398) |
| - |
| (3) |
| (1,062) |
| (399,237) |
Others(*) |
| 144,757 |
| 72 |
|
|
| (21) |
| - |
| - |
| 508,488 |
| (114,629) |
| (50,537) |
| 107,673 |
| 893 |
| - |
| - |
| - |
| - |
| 596,696 |
Ending balance |
| 17,211,344 |
| 1,933 |
| - |
| 108,100,285 |
| 7,628,676 |
| 318,517 |
| 104,560,039 |
| 20,198,205 |
| 783,715 |
| 5,758,503 |
| 624,944 |
| 16,100 |
| 13,243,265 |
| 51,377 |
| 1,452 |
| 278,498,355 |
(*) Other changes are due to debt restructuring, debt-equity swap and foreign exchange rate, etc.
107
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
8. | Loans (continued) |
|
c) Changes in deferred loan origination costs for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Beginning balance |
| 498,779 |
| 497,515 |
Loan origination |
| 286,837 |
| 242,257 |
Amortization |
| (283,469) |
| (240,993) |
Ending balance |
| 502,147 |
| 498,779 |
9.Securities at fair value through other comprehensive income and Securities at amortized cost
| (a) | Details of securities at FVOCI and securities at amortized cost |
Details of securities at FVOCI and securities at amortized cost as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Securities at FVOCI: |
|
|
|
|
Debt securities: |
|
|
|
|
Government bonds |
| 10,753,692 |
| 10,041,129 |
Financial institutions bonds |
| 16,957,309 |
| 17,657,321 |
Corporate bonds |
| 9,926,402 |
| 11,168,382 |
|
| 37,637,403 |
| 38,866,832 |
Equity securities: |
|
|
|
|
Stocks |
| 562,083 |
| 518,195 |
Equity investments |
| 1,576 |
| 1,980 |
Others |
| 65,950 |
| 70,958 |
|
| 629,609 |
| 591,133 |
|
| 38,267,012 |
| 39,457,965 |
Securities at amortized cost: |
|
|
|
|
Debt securities: |
|
|
|
|
Government bonds |
| 12,207,719 |
| 12,201,742 |
Financial institutions bonds |
| 2,133,123 |
| 3,063,779 |
Corporate bonds |
| 4,724,556 |
| 4,060,796 |
|
| 19,065,398 |
| 19,326,317 |
Allowance for impairment |
| (3,008) |
| (3,132) |
|
| 19,062,390 |
| 19,323,185 |
108
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
9.Securities at fair value through other comprehensive income and Securities at amortized cost
(a) | Details of securities at FVOCI and securities at amortized cost as of December 31, 2020 and 2019 are as follows: (continued) |
Details of equity instruments designated at FVOCI as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Marketable securities |
| 171,613 |
| 183,078 |
Non-marketable securities |
| 390,469 |
| 335,117 |
Others |
| 67,527 |
| 72,938 |
|
| 629,609 |
| 591,133 |
Above equity securities are equity securities designated as FVOCI, and for the retention required by the policy, the option of measuring FVOCI is exercised.
Cumulative net losses reclassified in equity upon disposition of equity securities for the years ended December 31, 2020 and 2019 are (-)W38,379 million and (-)W10,563 million, respectively and cumulated net gains replaced by the reclassification of the account for the year ended December 31, 2019 were W2,759 million.
(b) | Gains and losses on sale of securities at FVOCI |
Gains and losses on sale of securities at FVOCI for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Gain on sale of securities at FVOCI |
| 202,943 |
| 98,024 |
Loss on sale of securities at FVOCI |
| (10,336) |
| (2,182) |
|
| 192,607 |
| 95,842 |
The Bank disposed equity instruments that are measured at FVOCI for debt-equity swap, etc. At the time of disposal, fair value of equity instruments for the years ended December 31, 2020 and 2019 are W69,968 million and W39,273 million, and cumulative net losses for the years ended December 31, 2020 and 2019 are W(-)38,379 million and W(-)10,563 million, respectively.
| (c) | Gains and losses on sale of securities at amortized cost |
There is no disposal of securities at amortized cost for the years ended December 31, 2020 and 2019.
109
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
9.Securities at fair value through other comprehensive income and Securities at amortized cost
(d) Changes in allowance for credit loss and total carrying amount of securities at FVOCI and securities at amortized cost
i) Changes in allowance for credit loss of securities at FVOCI and securities at amortized cost for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | ||||||||||||||
|
| Securities at FVOCI | Securities at amortized cost | |||||||||||||
|
|
|
| Lifetime expected credit losses |
|
|
|
|
| Lifetime expected credit losses |
|
| ||||
|
| 12-month expected credit losses |
| Lifetime expected credit losses |
| Credit-impaired financial assets |
| Total |
| 12-month expected credit losses |
| Lifetime expected credit losses |
| Credit-impaired financial assets |
| Total |
Beginning balance |
| 19,052 |
| 594 |
| - |
| 19,646 |
| 3,132 |
| - |
| - |
| 3,132 |
Transfer to 12-month expected credit losses |
| 22 |
| (22) |
| - |
| - |
| - |
| - |
| - |
| - |
Transfer to lifetime expected credit losses |
| (193) |
| 193 |
| - |
| - |
| - |
| - |
| - |
| - |
Transfer to impaired financial assets |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Provision |
| 3,821 |
| 364 |
| - |
| 4,185 |
| 38 |
| - |
| - |
| 38 |
Disposals |
| (8,841) |
| (487) |
| - |
| (9,328) |
| - |
| - |
| - |
| - |
Others (*) |
| 1,394 |
| (8) |
| - |
| 1,386 |
| (162) |
| - |
| - |
| (162) |
Ending balance |
| 15,255 |
| 634 |
| - |
| 15,889 |
| 3,008 |
| - |
| - |
| 3,008 |
(*) Other changes are due to foreign exchange rate changes, etc.
|
| December 31, 2019 | ||||||||||||||
|
| Securities at FVOCI | Securities at amortized cost | |||||||||||||
|
|
|
| Lifetime expected credit losses |
|
|
|
|
| Lifetime expected credit losses |
|
| ||||
|
| 12-month expected credit losses |
| Lifetime expected credit losses |
| Credit-impaired financial assets |
| Total |
| 12-month expected credit losses |
| Lifetime expected credit losses |
| Credit-impaired financial assets |
| Total |
Beginning balance |
| 18,131 |
| 96 |
| - |
| 18,227 |
| 3,600 |
| - |
| - |
| 3,600 |
Transfer to 12-month expected credit losses |
| 33 |
| (33) |
| - |
| - |
| - |
| - |
| - |
| - |
Transfer to lifetime expected credit losses |
| (48) |
| 48 |
| - |
| - |
| - |
| - |
| - |
| - |
Transfer to impaired financial assets |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Provision (reversal) |
| 4,333 |
| 520 |
| - |
| 4,853 |
| (507) |
| - |
| - |
| (507) |
Disposals |
| (5,224) |
| (40) |
| - |
| (5,264) |
| - |
| - |
| - |
| - |
Others (*) |
| 1,827 |
| 3 |
| - |
| 1,830 |
| 39 |
| - |
| - |
| 39 |
Ending balance |
| 19,052 |
| 594 |
| - |
| 19,646 |
| 3,132 |
| - |
| - |
| 3,132 |
(*) Other changes are due to foreign exchange rate changes, etc.
110
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
9.Securities at fair value through other comprehensive income and Securities at amortized cost
(d) Changes in allowance for credit loss and total carrying amount of securities at FVOCI and securities at amortized cost (continued)
ii) Changes in book value of securities at FVOCI and securities at amortized cost for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | ||||||||||||||
|
| Securities at FVOCI |
| Securities at amortized cost | ||||||||||||
|
| 12-month expected credit losses |
| Lifetime expected credit losses |
| Credit-impaired financial assets |
|
Total |
| 12-month expected credit losses |
| Lifetime expected credit losses |
| Credit-impaired financial assets |
| Total |
Beginning balance |
| 38,645,485 |
| 221,347 |
| - |
| 38,866,832 |
| 19,326,317 |
| - |
| - |
| 19,326,317 |
Transfer to 12-month expected credit losses |
| 30,233 |
| (30,233) |
| - |
| - |
| - |
| - |
| - |
| - |
Transfer to lifetime expected credit losses |
| (83,132) |
| 83,132 |
| - |
| - |
| - |
| - |
| - |
| - |
Transfer to impaired financial asset |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Acquisitions |
| 42,336,510 |
| 19,675 |
| - |
| 42,356,185 |
| 5,410,966 |
| - |
| - |
| 5,410,966 |
Disposals |
| (27,804,444) |
| (20,054) |
| - |
| (27,824,498) |
| - |
| - |
| - |
| - |
Redemption |
| (14,766,262) |
| (12) |
| - |
| (14,766,274) |
| (5,496,408) |
| - |
| - |
| (5,496,408) |
Others (*) |
| (971,568) |
| (23,274) |
| - |
| (994,842) |
| (175,477) |
| - |
| - |
| (175,477) |
Ending balance |
| 37,386,822 |
| 250,581 |
| - |
| 37,637,403 |
| 19,065,398 |
| - |
| - |
| 19,065,398 |
(*) Other changes are due to foreign exchange rate changes, etc.
|
| December 31, 2019 | ||||||||||||||
|
| Securities at FVOCI |
| Securities at amortized cost | ||||||||||||
|
| 12-month expected credit losses |
| Lifetime expected credit losses |
| Credit-impaired financial assets |
|
Total |
| 12-month expected credit losses |
| Lifetime expected credit losses |
| Credit-impaired financial assets |
| Total |
Beginning balance |
| 30,190,833 |
| 102,642 |
| - |
| 30,293,475 |
| 16,234,564 |
| - |
| - |
| 16,234,564 |
Transfer to 12-month expected credit losses |
| 34,555 |
| (34,555) |
| - |
| - |
| - |
| - |
| - |
| - |
Transfer to lifetime expected credit losses |
| (48,091) |
| 48,091 |
| - |
| - |
| - |
| - |
| - |
| - |
Transfer to impaired financial asset |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Acquisitions |
| 38,290,320 |
| 61,410 |
| - |
| 38,351,730 |
| 9,280,277 |
| - |
| - |
| 9,280,277 |
Disposals |
| (10,563,153) |
| (10,184) |
| - |
| (10,573,337) |
| - |
| - |
| - |
| - |
Redemption |
| (19,184,084) |
| - |
| - |
| (19,184,084) |
| (6,318,080) |
| - |
| - |
| (6,318,080) |
Others (*) |
| (74,895) |
| 53,943 |
| - |
| (20,952) |
| 129,556 |
| - |
| - |
| 129,556 |
Ending balance |
| 38,645,485 |
| 221,347 |
| - |
| 38,866,832 |
| 19,326,317 |
| - |
| - |
| 19,326,317 |
(*) Other changes are due to foreign exchange rate changes, etc. |
111
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
10.Property and equipment
(a) Details of property and equipment as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | ||||
|
| Acquisition cost |
| Accumulated depreciation |
| Book value |
Land |
| 1,283,316 |
| - |
| 1,283,316 |
Buildings (*) |
| 862,747 |
| (369,497) |
| 493,250 |
Right-to-use asset |
| 671,241 |
| (342,213) |
| 329,028 |
Others |
| 1,285,380 |
| (1,124,461) |
| 160,919 |
|
| 4,102,684 |
| (1,836,171) |
| 2,266,513 |
(*) W341million of government subsidy is deducted from book value.
|
| December 31, 2019 | ||||
|
| Acquisition cost |
| Accumulated depreciation |
| Book value |
Land |
| 1,225,631 |
| - |
| 1,225,631 |
Buildings (*) |
| 845,212 |
| (325,010) |
| 520,202 |
Right-to-use asset |
| 568,684 |
| (181,358) |
| 387,326 |
Others |
| 1,246,248 |
| (1,077,199) |
| 169,049 |
|
| 3,885,775 |
| (1,583,567) |
| 2,302,208 |
(*) W572million of government subsidy is deducted from book value.
112
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
10. Property and equipment (continued)
(b) Changes in property and equipment for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | |||||||||
|
| Land |
| Buildings |
| Right- of-use assets |
| Others |
| Total | |
Beginning balance |
| 1,225,631 |
| 520,202 |
| 387,326 |
| 169,049 |
| 2,302,208 | |
Acquisitions (*1)(*2) |
| 58,231 |
| 38,309 |
| 141,093 |
| 56,789 |
| 294,422 | |
Disposals and write-offs (*3) |
| (2,368) |
| (61) |
| (3,539) |
| (445) |
| (6,413) | |
Depreciation |
| - |
| (48,823) |
| (194,645) |
| (64,223) |
| (307,691) | |
Amounts transferred to investment properties |
| 33,444 |
| (16,296) |
| - |
| - |
| 17,148 | |
Amounts transferred to non-current assets held for sale |
| (31,622) |
| (11) |
| - |
| - |
| (31,633) | |
Effects of foreign currency movements |
| - |
| (70) |
| (1,207) |
| (251) |
| (1,528) | |
Ending balance |
| 1,283,316 |
| 493,250 |
| 329,028 |
| 160,919 |
| 2,266,513 |
(*1) W56,575 million transferred from construction-in progress is included.
(*2) W1,371 million of provision for the asset retirement related to newly acquired assets is included.
(*3) W482 million of loss on write-off is included.
|
| December 31, 2019 | |||||||||
|
| Land |
| Buildings |
| Right-of-use assets |
| Others |
| Total | |
Beginning balance (*1) |
| 1,229,200 |
| 557,218 |
| 408,328 |
| 149,639 |
| 2,344,385 | |
Acquisitions (*2)(*3) |
| 69,046 |
| 14,286 |
| 177,782 |
| 97,064 |
| 358,178 | |
Disposals and write-offs (*4) |
| (32) |
| (48) |
| (2,527) |
| (14,955) |
| (17,562) | |
Depreciation |
| - |
| (48,516) |
| (197,149) |
| (63,500) |
| (309,165) | |
Amounts transferred to investment properties |
| (72,173) |
| (2,693) |
| - |
| - |
| (74,866) | |
Amounts transferred to non-current assets held for sale |
| (410) |
| (45) |
| - |
| - |
| (455) | |
Effects of foreign currency movements |
| - |
| - |
| 892 |
| 801 |
| 1,693 | |
Ending balance |
| 1,225,631 |
| 520,202 |
| 387,326 |
| 169,049 |
| 2,302,208 |
(*1) The beginning balance is restated in accordance with K-IFRS No.1116.
(*2) W76,004 million transferred from construction-in progress is included.
(*3) W2,280 million of provision for the asset retirement related to newly acquired assets is included.
(*4) W8,945 million of loss on write-off is included.
113
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
10. Property and equipment (continued)
(c) Insured assets and liability insurances as of December 31, 2020 are as follows:
Type of insurance |
| Insured assets |
| Amount covered |
| Insurance company |
Comprehensive insurance for financial institutions |
| Cash & securities |
| 20,000 |
| Samsung Fire & Marine Insurance Co., Ltd. and 4 other insurance companies |
Property insurance |
| Real estate & movable properties for business purpose |
| 825,800 |
| Samsung Fire & Marine Insurance Co., Ltd., etc. and 4 other insurance companies |
Burglary insurance |
| Cash & securities |
| 60,000 |
| Samsung Fire & Marine Insurance Co., Ltd., etc. and 3 other companies |
Compensation liability insurance for officers |
| - |
| 50,000 |
| Meritz Fire & Marine Insurance Co., Ltd., etc. and 6 other companies |
Compensation liability insurance for gas accident |
| Real estate |
| 500 |
| Meritz Fire & Marine Insurance Co., Ltd. |
Compensation liability insurance for personal information protection |
| - |
| 10,000 |
| DB Insurance Co., Ltd. |
Compensation liability insurance for electronic financial transaction |
| - |
| 2,000 |
| Lotte Insurance Co., Ltd., etc. |
Compensation liability insurance for casualty |
| Real estate |
| 1,000 |
| Samsung Fire & Marine Insurance Co., Ltd. |
Compaensation liability insurance for elevator accidents |
| - |
| 80 |
| Samsung Fire & Marine Insurance Co., Ltd. |
|
|
|
| 969,380 |
|
|
Besides the insurances listed above, the Bank also has automobile liability insurance, medical insurance for employees, and casualty insurance for protecting property and employees.
114
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
11. | Leases |
(a) Details of lease right-to-use assets by class of underlying asset of the lessee as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | ||||
|
| Acquisition cost |
| Accumulated depreciation |
| Book value |
Real property |
| 613,717 |
| (311,844) |
| 301,873 |
Vehicle |
| 32,036 |
| (17,684) |
| 14,352 |
Others |
| 25,488 |
| (12,685) |
| 12,803 |
|
| 671,241 |
| (342,213) |
| 329,028 |
|
| December 31, 2019 | ||||
|
| Acquisition cost |
| Accumulated depreciation |
| Book value |
Real property |
| 523,368 |
| (165,821) |
| 357,547 |
Vehicle |
| 26,233 |
| (8,557) |
| 17,676 |
Others |
| 19,083 |
| (6,980) |
| 12,103 |
|
| 568,684 |
| (181,358) |
| 387,326 |
(b) Details of lease right-to-use assets increase (decrease) for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | ||||||
|
| Real property |
| Vehicle |
| Others |
| Total |
Beginning balance |
| 357,547 |
| 17,676 |
| 12,103 |
| 387,326 |
Acquisitions |
| 128,297 |
| 6,375 |
| 6,421 |
| 141,093 |
Disposals |
| (3,234) |
| (290) |
| (15) |
| (3,539) |
Depreciation |
| (179,532) |
| (9,407) |
| (5,706) |
| (194,645) |
Effects of foreign currency movements |
| (1,205) |
| (2) |
| - |
| (1,207) |
Ending balance |
| 301,873 |
| 14,352 |
| 12,803 |
| 329,028 |
|
| December 31, 2019 | ||||||
|
| Real property |
| Vehicle |
| Others |
| Total |
Beginning balance |
| 380,207 |
| 15,964 |
| 12,157 |
| 408,328 |
Acquisitions |
| 160,225 |
| 10,532 |
| 7,025 |
| 177,782 |
Disposals |
| (2,206) |
| (225) |
| (96) |
| (2,527) |
Depreciation |
| (181,570) |
| (8,596) |
| (6,983) |
| (197,149) |
Effects of foreign currency movements |
| 891 |
| 1 |
| - |
| 892 |
Ending balance |
| 357,547 |
| 17,676 |
| 12,103 |
| 387,326 |
115
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
11. | Leases (continued) |
(c) Details of maturity of lease liabilities as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | ||||||||||||
|
| 1 month or less |
| 1 month~ 3 months or less |
| 3 months~ 6 months or less |
| 6 months~ 1 year or less |
| 1 year~ 5 years or less |
| More than 5 years |
| Total |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real property |
| 15,314 |
| 24,183 |
| 32,164 |
| 57,157 |
| 146,943 |
| 14,260 |
| 290,021 |
Vehicle |
| 4,664 |
| 1,466 |
| 1,813 |
| 3,429 |
| 7,807 |
| - |
| 19,179 |
Others |
| 503 |
| 772 |
| 1,155 |
| 1,937 |
| 8,913 |
| - |
| 13,280 |
|
| 20,481 |
| 26,421 |
| 35,132 |
| 62,523 |
| 163,663 |
| 14,260 |
| 322,480 |
|
| December 31, 2019 | ||||||||||||
|
| 1 month or less |
| 1 month~ 3 months or less |
| 3 months~ 6 months or less |
| 6 months~ 1 year or less |
| 1 year~ 5 years or less |
| More than 5 years |
| Total |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real property |
| 15,068 |
| 23,897 |
| 32,549 |
| 57,769 |
| 197,272 |
| 11,951 |
| 338,506 |
Vehicle |
| 2,041 |
| 1,417 |
| 2,110 |
| 4,078 |
| 10,161 |
| - |
| 19,807 |
Others |
| 924 |
| 925 |
| 1,183 |
| 1,986 |
| 7,794 |
| - |
| 12,812 |
|
| 18,033 |
| 26,239 |
| 35,842 |
| 63,833 |
| 215,227 |
| 11,951 |
| 371,125 |
The abovementioned amounts have been classified as the earliest due dates on which the Bank’s payment obligation arises based on undiscounted cash flows.
(d) For the years ended December 31, 2020 and 2019, the lease payment for low value assets is W 4,011 million and W 3,201 million, respectively.
(e) The Bank applied a practical simplified method that does not evaluate whether it is a lease change for real estate rental fee discounts that have occurred as a direct result of the COVID-19. For the year ended December 31, 2020, the amount recognized in profit or loss to reflect changes in lease payments arising from the rent discount is W 24,921 million.
116
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
12. | Intangible assets |
(a) Details of intangible assets as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Software |
| 67,323 |
| 62,346 |
Development cost |
| 60,000 |
| 43,963 |
Memberships |
| 47,123 |
| 47,129 |
Others |
| 267,467 |
| 391,971 |
|
| 441,913 |
| 545,409 |
(b) Changes in intangible assets for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | ||||||||
|
| Software |
| Development cost |
| Memberships |
| Others |
| Total |
Beginning balance |
| 62,346 |
| 43,963 |
| 47,129 |
| 391,971 |
| 545,409 |
Acquisitions (*1) |
| 26,596 |
| 36,226 |
| 13 |
| 25,621 |
| 88,456 |
Disposals |
| - |
| - |
| - |
| - |
| - |
Impairment (*2) |
| - |
| - |
| - |
| (27,133) |
| (27,133) |
Amortization (*3) |
| (21,618) |
| (20,189) |
| - |
| (122,989) |
| (164,796) |
Effects of foreign currency movements |
| (1) |
| - |
| (19) |
| (3) |
| (23) |
Ending balance(*4) |
| 67,323 |
| 60,000 |
| 47,123 |
| 267,467 |
| 441,913 |
(*1) Included intangible assets related to the rights to be the depository bank of municipal and provincial governments.
(*2) The Bank assessed the recoverable value of intangible assets related to the rights to be the depository bank of municipal and provincial governments due to the performance below forecast and future prospects. As a result of the assessment, the Bank recognized impairment loss amounting to W27,133 million for the year ended December 31, 2020. The impairment loss is included in non-operating expenses in the statement of comprehensive income.
(*3) W122,629 million among amortization cost of other intangible assets is included in other operating expenses.
(*4) W298,901 million of other intangible assets is accounted for as accounts payable.
|
| December 31, 2019 | ||||||||
|
| Software |
| Development cost |
| Memberships |
| Others |
| Total |
Beginning balance |
| 48,563 |
| 46,500 |
| 47,476 |
| 61,769 |
| 204,308 |
Acquisitions (*1) |
| 31,765 |
| 19,382 |
| 51 |
| 650,823 |
| 702,021 |
Disposals |
| (1,042) |
| (3,696) |
| (413) |
| (25) |
| (5,176) |
Impairment (*2) |
| - |
| - |
| - |
| (151,523) |
| (151,523) |
Amortization (*3) |
| (16,942) |
| (18,223) |
| - |
| (169,110) |
| (204,275) |
Effects of foreign currency movements |
| 2 |
| - |
| 15 |
| 37 |
| 54 |
Ending balance(*4) |
| 62,346 |
| 43,963 |
| 47,129 |
| 391,971 |
| 545,409 |
(*1) Included intangible assets related to the rights to be the depository bank of municipal and provincial governments.
(*2) The Bank assessed the recoverable value of intangible assets related to the rights to be the depository bank of municipal and provincial governments due to the performance below forecast and future prospects. As a result of the assessment, the Bank recognized impairment loss amounted to W151,523 million for the year ended December 31, 2019. The impairment loss is included in non-operating expenses in the statement of comprehensive income.
(*3) W168,736 million among amortization cost of other intangible assets is included in other operating expenses.
(*4) W436,376 million of other intangible assets is accounted for as accounts payable.
117
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
118
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2020 and 2019
(In millions of won)
13.Investments in subsidiaries and associates
(a) Investments in subsidiaries and associates as of December 31, 2020 and December 31, 2019 are as follows:
Investees |
| Location |
| Closing month |
| Industry sector |
Shinhan Asia Ltd.(*1) |
| Hong Kong |
| December 31 |
| Banking |
Shinhan Bank America |
| U.S.A |
| December 31 |
| Banking |
Shinhan Bank Europe GmbH |
| Germany |
| December 31 |
| Banking |
Shinhan Bank Cambodia |
| Cambodia |
| December 31 |
| Banking |
Shinhan Kazakhstan Bank Limited (*2) |
| Kazakhstan |
| December 31 |
| Banking |
Shinhan Bank Canada |
| Canada |
| December 31 |
| Banking |
Shinhan Bank China Limited |
| China |
| December 31 |
| Banking |
Shinhan Bank Japan (*3) |
| Japan |
| March 31 |
| Banking |
Shinhan Bank Vietnam Ltd. |
| Vietnam |
| December 31 |
| Banking |
Shinhan Bank Mexico |
| Mexico |
| December 31 |
| Banking |
PT Bank Shinhan Indonesia (*2) |
| Indonesia |
| December 31 |
| Banking |
Shinhan-Daesung Contents Fund |
| Korea |
| December 31 |
| Investment |
BNP Paribas Cardif Life Insurance Co., Ltd. (*4) |
| Korea |
| December 31 |
| Insurance |
KOREA FINANCE SECURITY (*6) |
| Korea |
| December 31 |
| Other |
Daegy Electrical Construction Co., Ltd. (*5) |
| Korea |
| December 31 |
| Construction |
DOODOO LOGITECH (*5) |
| Korea |
| December 31 |
| Other |
One Shinhan Future's Fund 1 (*7) |
| Korea |
| December 31 |
| Investment |
KST-Shinhan Fund 1 (*7) |
| Korea |
| December 31 |
| Investment |
One Shinhan Future's Fund 2 (*7) |
| Korea |
| December 31 |
| Investment |
Neoplux Technology Valuation Investment Fund |
| Korea |
| December 31 |
| Investment |
Partners 4th Growth Investment Fund |
| Korea |
| December 31 |
| Investment |
KTB Newlake Global Healthcare PEF |
| Korea |
| December 31 |
| Investment |
DAEKWANG SEMICONDUCTOR Co., Ltd. (*5) |
| Korea |
| December 31 |
| Manufacturing |
Songrim Co., Ltd. (*5) |
| Korea |
| December 31 |
| Retail |
Multimedia Tech Co., Ltd. (*5) |
| Korea |
| December 31 |
| Other |
Hyungje Art Printing (*5) |
| Korea |
| December 31 |
| Other |
MIEL Co., Ltd. (*5) |
| Korea |
| December 31 |
| Other |
COSPEC BIM tech (*5) |
| Korea |
| December 31 |
| Other |
WON JIN HOME PLAN CO.,LTD (*5) |
| Korea |
| December 31 |
| Other |
IL GU FARM CO.,LTD (*8) |
| Korea |
| December 31 |
| Other |
Korea Credit Bureau (*6) |
| Korea |
| December 31 |
| Credit information |
Goduck Gangil1 PFV Co., Ltd (*6) |
| Korea |
| December 31 |
| Real estate |
Goduck Gangil10 PFV Co., Ltd (*6)(*7) |
| Korea |
| December 31 |
| Real estate |
SBC PFV Co., Ltd (*6)(*9) |
| Korea |
| December 31 |
| Real estate |
GMG Development Co,. Ltd (*8) |
| Korea |
| December 31 |
| Real estate service |
ICSF (The Korea’s Information Center for Savings & Finance) |
| Korea |
| December 31 |
| Service |
Shinhan-Albatross Technology Investment Fund |
| Korea |
| December 31 |
| Investment |
Miraeequity-Incus Venture Business Fund No.4 (*8) |
| Korea |
| December 31 |
| Investment |
Shinhan-Neoplux Energy Newbiz Fund |
| Korea |
| December 31 |
| Investment |
Stassets-DA Value Healthcare Fund I |
| Korea |
| December 31 |
| Investment |
119
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
13.Investments in subsidiaries and associates (continued)
(b) Ownership percentage and book value of investments in subsidiaries and associates as of December 31, 2020 and December 31, 2019 are as follows:
|
| Ownership (%) |
| Book value | |||||
Investees |
| December 31, 2020 |
| December 31, 2019 |
| December 31, 2020 |
| December 31, 2019 | |
Shinhan Asia Ltd.(*1) |
| - |
| 99.99 |
| - |
| 114,185 | |
Shinhan Bank America |
| 100.00 |
| 100.00 |
| 193,049 |
| 193,049 | |
Shinhan Bank Europe GmbH |
| 100.00 |
| 100.00 |
| 78,606 |
| 78,606 | |
Shinhan Bank Cambodia |
| 97.50 |
| 97.50 |
| 84,351 |
| 84,351 | |
Shinhan Kazakhstan Bank Limited (*2) |
| 100.00 |
| 100.00 |
| 40,532 |
| 77,913 | |
Shinhan Bank Canada |
| 100.00 |
| 100.00 |
| 79,695 |
| 79,695 | |
Shinhan Bank China Limited |
| 100.00 |
| 100.00 |
| 355,443 |
| 355,443 | |
Shinhan Bank Japan (*3) |
| 100.00 |
| 100.00 |
| 410,485 |
| 410,485 | |
Shinhan Bank Vietnam Ltd. |
| 100.00 |
| 100.00 |
| 389,608 |
| 389,608 | |
Shinhan Bank Mexico |
| 99.99 |
| 99.99 |
| 97,467 |
| 97,467 | |
PT Bank Shinhan Indonesia (*2) |
| 99.00 |
| 99.00 |
| 405,868 |
| 425,277 | |
Shinhan-Daesung Contents Fund |
| 71.43 |
| 71.43 |
| 5,000 |
| 5,000 | |
BNP Paribas Cardif Life Insurance Co., Ltd. (*4) |
| 14.99 |
| 14.99 |
| 42,204 |
| 42,204 | |
KOREA FINANCE SECURITY (*6) |
| 14.91 |
| 14.91 |
| 3,448 |
| 3,448 | |
Daegy Electrical Construction Co., Ltd. (*5) |
| 27.45 |
| 27.45 |
| - |
| - | |
DOODOO LOGITECH (*5) |
| 27.96 |
| 27.96 |
| - |
| - | |
One Shinhan Future's Fund 1 (*7) |
| 27.78 |
| - |
| 3,000 |
| - | |
KST-Shinhan Fund 1 (*7) |
| 20.00 |
| - |
| 1,000 |
| - | |
One Shinhan Future's Fund 2 (*7) |
| 29.70 |
| - |
| 1,800 |
| - | |
Neoplux Technology Valuation Investment Fund |
| 33.33 |
| 33.33 |
| 10,102 |
| 17,406 | |
Partners 4th Growth Investment Fund |
| 25.00 |
| 25.00 |
| 13,554 |
| 15,478 | |
KTB Newlake Global Healthcare PEF |
| 20.00 |
| 20.00 |
| 6,770 |
| 8,036 | |
DAEKWANG SEMICONDUCTOR Co., Ltd. (*5) |
| 20.94 |
| 20.94 |
| - |
| - | |
Songrim Co., Ltd. (*5) |
| 35.34 |
| 35.34 |
| - |
| - | |
Multimedia Tech Co., Ltd. (*5) |
| 21.06 |
| 21.06 |
| - |
| - | |
Hyungje Art Printing (*5) |
| 31.54 |
| 31.54 |
| - |
| - | |
MIEL Co., Ltd. (*5) |
| 28.77 |
| 28.77 |
| - |
| - | |
COSPEC BIM tech (*5) |
| 40.92 |
| - |
| - |
| - | |
WON JIN HOME PLAN CO.,LTD (*5) |
| 31.69 |
| 31.69 |
| - |
| - | |
IL GU FARM CO.,LTD (*8) |
| - |
| 28.47 |
| - |
| - | |
Korea Credit Bureau (*6) |
| 4.50 |
| 4.50 |
| 2,250 |
| 2,250 | |
Goduck Gangil1 PFV Co., Ltd (*6) |
| 1.04 |
| 1.04 |
| 50 |
| 50 | |
Goduck Gangil10 PFV Co., Ltd (*6)(*7) |
| 14.00 |
| - |
| 700 |
| - | |
SBC PFV Co., Ltd (*6)(*9) |
| 12.50 |
| 12.50 |
| 10,000 |
| 10,000 | |
GMG Development Co,. Ltd (*8) |
| - |
| 5.00 |
| - |
| 3 | |
ICSF (The Korea’s Information Center for Savings & Finance) |
| 32.26 |
| 32.26 |
| 156 |
| 156 | |
Shinhan-Albatross Technology Investment Fund |
| 33.33 |
| 33.33 |
| 9,100 |
| 6,000 | |
Miraeequity-Incus Venture Business Fund No.4 (*8) |
| - |
| 23.53 |
| - |
| 2,000 | |
Shinhan-Neoplux Energy Newbiz Fund |
| 23.33 |
| 23.33 |
| 10,590 |
| 8,400 | |
Stassets-DA Value Healthcare Fund I |
| 24.10 |
| 24.10 |
| 615 |
| 615 | |
|
|
|
|
|
| 2,255,443 |
| 2,427,125 |
120
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
13.Investments in subsidiaries and associates (continued)
(b) Ownership percentage and book value of investments in subsidiaries and associates as of December 31, 2020 and December 31, 2019 are as follows: (continued)
(*1) As of December 31, 2020, liquidation procedures are completed. The Bank received the remaining property on February 26, 2020.
(*2) Shinhan Kazakhstan Bank Limited recognized W 37,381 million and PT Bank Shinhan Indonesia W 19,408 million in impairment losses due to the drop in currency value and performance decline.
(*3) SBJ DNX, a subsidiary company, is established for the year ended December 31, 2020, and the investment capital is JPY 50 million at the time of establishment.
(*4) It is reported as an investment in associates because significant influence can be exercised through important business transactions with the Bank.
(*5) The shares of the investees are acquired by debt-equity swap. The Bank reclassified financial assets at fair value through other comprehensive income to investments in associates as the reorganization procedures are completed and now the Bank can normally exercise its voting rights to the investees.
(*6) Although it holds less than 20% of shares, the equity method is applied for evaluation since it has significant impact on the investee, such as participation in their decision making.
(*7) It is newly acquired or newly incorporated as investments in associates for the year ended December 31, 2020.
(*8) Excluded from associates because of disposal for the year December 31, 2020.
(*9) Voting rights is 4.65%.
14.Investment properties
(a) Investment properties as of December 31, 2020 and 2019 are as follows:
|
|
| December 31, 2020 | ||||
|
| Acquisition cost |
| Accumulated depreciation |
| Book value |
Land |
| 454,486 |
| - |
| 454,486 |
Buildings |
| 246,982 |
| (91,383) |
| 155,599 |
|
| 701,468 |
| (91,383) |
| 610,085 |
|
|
|
|
|
|
|
|
| December 31, 2019 | ||||
|
| Acquisition cost |
| Accumulated depreciation |
| Book value |
Land |
| 488,845 |
| - |
| 488,845 |
Buildings |
| 226,214 |
| (79,698) |
| 146,516 |
|
| 715,059 |
| (79,698) |
| 635,361 |
(b) Fair value of investment properties as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Investment properties (*) |
| 659,314 |
| 635,406 |
|
|
|
|
|
(*) Fair value of investment properties is estimated based on the recent market transactions and certain significant unobservable inputs. Accordingly fair value of investment properties is classified as level 3.
121
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
(c) Income and expenses on investment properties for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Rental income |
| 27,460 |
| 27,846 |
Direct operating expenses for investment properties that generate rental income |
| 5,026 |
| 5,604 |
122
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
15. Other assets
Other assets as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 | |
Accounts receivable |
| 4,568,854 |
| 6,741,927 | |
Domestic exchange settlement receivable |
| 3,969,758 |
| 4,207,371 | |
Guarantee deposits |
| 963,467 |
| 997,393 | |
Accrued income |
| 1,195,518 |
| 1,316,360 | |
Prepaid expense |
| 73,013 |
| 68,949 | |
Suspense payments |
| 161,337 |
| 47,978 | |
Sundry assets |
| 85,875 |
| 83,621 | |
Others |
| 15,420 |
| 4,614 | |
Present value discount |
| (26,668) |
| (35,113) | |
Allowance for impairment |
| (20,356) |
| (16,262) | |
|
| 10,986,218 |
| 13,416,838 |
16. | Non-current assets held for sale |
(a) Non-current assets held for sale as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Property and equipment |
| 32,988 |
| 2,693 |
The Bank classified property and equipment which are highly expected to be sold within one year from December 31, 2020, as non-current assets held for sale.
(b) The cumulative income or loss recognized in other comprehensive income
There are no cumulative income or loss recognized in other comprehensive income relating to non-current assets held for sale as of December 31, 2020 and 2019.
123
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
17. | Pledged assets |
|
(a) Assets pledged as collateral as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
| Reasons for collateral |
Securities(*1) |
|
|
|
|
|
|
Securities at FVOCI |
| 2,315,115 |
| 457,227 |
| Borrowings, Settlement security for Bank of Korea, Borrowing securities, etc |
Securities at amortized cost |
| 14,712,202 |
| 12,598,566 |
| Borrowings, Settlement security for Bank of Korea, Customer RP, etc |
|
| 17,027,317 |
| 13,055,793 |
|
|
|
|
|
|
|
|
|
Property and Equipment(*2) |
| 4,041 |
| 5,030 |
| Set for near mortgage, etc |
|
| 17,031,358 |
| 13,060,823 |
|
|
(*1) The carrying amounts of assets pledged as collateral that the transferees had the right to sell or repledge regardless of the Bank’s default as of December 31, 2020 and 2019 are W 703,124million and W 455,865 million, respectively.
(*2) The amounts are based on the notification amount of pledge.
(b) The fair value of collateral held that the Bank has the right to sell or repledge regardless of pledger’s default as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 | ||||
|
| Collateral held |
| Collateral sold or repledged |
| Collateral held |
| Collateral sold or repledged |
Securities |
| 2,871,910 |
| - |
| 2,007,036 |
| - |
18. | Deposits |
|
Deposits as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Demand deposits: |
|
|
|
|
Korean won |
| 131,223,458 |
| 101,700,012 |
Foreign currencies |
| 10,205,322 |
| 7,783,595 |
|
| 141,428,780 |
| 109,483,607 |
Time deposits: |
|
|
|
|
Korean won |
| 129,017,001 |
| 131,371,259 |
Foreign currencies |
| 5,612,183 |
| 5,622,729 |
Gain on fair value hedge |
| (46,940) |
| (102,493) |
|
| 134,582,244 |
| 136,891,495 |
Negotiable certificates of deposits |
| 4,869,513 |
| 8,602,208 |
Note discount deposits |
| 6,226,937 |
| 4,747,587 |
CMA |
| 4,006,319 |
| 3,987,372 |
Others |
| 18,763 |
| 20,477 |
|
| 291,132,556 |
| 263,732,746 |
124
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
19. | Financial liabilities at fair value through profit or loss |
|
(a) Financial liabilities at FVTPL as of December 31, 2020 and trading liabilities as of December 31, 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 | ||||
|
| Interest rate (%) |
| Amount |
| Interest rate (%) |
| Amount |
Securities sold: |
|
|
|
|
|
|
|
|
Debt securities |
| - |
| - |
| 1.25 |
| 39,909 |
Equity securities |
| - |
| - |
| - |
| 411 |
Gold/silver deposits |
| - |
| 539,564 |
| - |
| 467,761 |
|
|
|
| 539,564 |
|
|
| 508,081 |
(b) Net gain (loss) on financial liabilities at FVTPL for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Securities sold: |
|
|
|
|
Gain on sale |
| 470 |
| 285 |
Loss on sale |
| (119) |
| (202) |
Loss on valuation |
| - |
| (77) |
|
| 351 |
| 6 |
Gold/silver deposits: |
|
|
|
|
Gain on sale |
| 10,700 |
| 4,644 |
Loss on sale |
| (2,389) |
| (475) |
Loss on valuation |
| (83,316) |
| (91,025) |
|
| (75,005) |
| (86,856) |
|
| (74,654) |
| (86,850) |
125
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
20. | Borrowings |
|
Borrowings as of December 31, 2020 and 2019 are as follows:
| December 31, 2020 |
| December 31, 2019 | ||||
| Interest rate (%) |
| Amount |
| Interest rate (%) |
| Amount |
Call money: |
|
|
|
|
|
|
|
Korean won | 0.35~ 0.45 |
| 620,000 |
| - |
| - |
Foreign currencies | 0.00~ 0.32 |
| 773,820 |
| 0.00~ 2.30 |
| 671,910 |
|
|
| 1,393,820 |
|
|
| 671,910 |
Bill sold | 0.00~ 1.10 |
| 10,706 |
| 0.80~ 1.60 |
| 19,070 |
|
|
|
|
|
|
|
|
Bonds sold under repurchase agreements: |
|
|
|
|
|
|
|
Korean won | 0.00~0.57 |
| 552 |
| 1.31 |
| 958 |
Foreign currencies | 0.59~ 5.15 |
| 158,880 |
| 2.28~ 5.40 |
| 102,531 |
|
|
| 159,432 |
|
|
| 103,489 |
Borrowings in Korean won: |
|
|
|
|
|
|
|
Borrowings from Bank of Korea | 0.25 |
| 5,207,892 |
| 0.50~0.75 |
| 2,386,939 |
Others | 0.00~4.25 |
| 6,754,546 |
| 0.00~4.30 |
| 6,092,628 |
|
|
| 11,962,438 |
|
|
| 8,479,567 |
Borrowings in foreign currencies: |
|
|
|
|
|
|
|
Overdraft due to banks | 0.00 |
| 72,590 |
| 0.00 |
| 86,648 |
Borrowings from banks | 0.00~7.50 |
| 5,247,144 |
| 0.00~7.50 |
| 6,257,995 |
Sub-lease | 0.00 |
| 8,976 |
| 0.00 |
| 9,856 |
Others | 0.23~0.49 |
| 1,538,590 |
| 1.94~ 2.67 |
| 1,684,243 |
|
|
| 6,867,300 |
|
|
| 8,038,742 |
Deferred origination fees |
|
| (304) |
|
|
| (919) |
|
|
| 20,393,392 |
|
|
| 17,311,859 |
21. | Debt securities issued |
|
Debt securities issued as of December 31, 2020 and 2019 are as follows:
| December 31, 2020 |
| December 31, 2019 | ||||
| Interest |
| Amount |
| Interest |
| Amount |
Debt securities issued in Korean won: |
|
|
|
|
|
|
|
Debt securities issued | 0.67~8.00 |
| 22,370,890 |
| 0.71~8.00 |
| 25,700,890 |
Subordinated debt securities issued | 2.20~4.60 |
| 3,200,125 |
| 2.20~4.60 |
| 3,200,145 |
Gain on fair value hedges |
|
| (63,652) |
|
|
| (87,692) |
Discount on debt securities issued |
|
| (14,599) |
|
|
| (40,736) |
|
|
| 25,492,764 |
|
|
| 28,772,607 |
Debt securities issued in foreign currencies: Currency: |
|
|
|
|
|
|
|
Debt securities issued | 0.25~3.88 |
| 3,723,464 |
| 0.01~4.01 |
| 3,882,419 |
Subordinated debt securities issued | 3.75~5.00 |
| 2,673,824 |
| 3.75~5.00 |
| 2,813,406 |
Gain on fair value hedges |
|
| 309,880 |
|
|
| 141,264 |
Discount on debt securities issued |
|
| (28,946) |
|
|
| (34,331) |
|
|
| 6,678,222 |
|
|
| 6,802,758 |
|
|
| 32,170,986 |
|
|
| 35,575,365 |
126
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
22. | Defined benefit liabilities (assets) |
|
|
|
The Bank operates a defined benefit pension system based on employees’ length of service. The Bank also trusts plan assets in trust companies, fund companies and other similar companies.
(a) Defined benefit plan assets and liabilities
Defined benefit plan assets and liabilities as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Present value of defined benefit obligations |
| 1,576,227 |
| 1,495,581 |
Fair value of plan assets |
| (1,590,977) |
| (1,445,985) |
Net defined benefit assets |
| (14,750) |
| 49,596 |
(b) Changes in the present value of defined benefit obligations
Changes in the present value of defined benefit obligations for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Beginning balance | | 1,495,581 |
| 1,364,974 |
Current service cost |
| 128,226 |
| 125,483 |
Interest expense |
| 41,904 |
| 41,925 |
Remeasurements (*1)(*2) |
| (36,779) |
| 21,717 |
Benefits paid by the plan |
| (67,233) |
| (59,730) |
Others |
| 5,277 |
| 1,212 |
Past service cost |
| 9,251 |
| - |
Ending balance | | 1,576,227 |
| 1,495,581 |
(*1) Remeasurements for year ended December 31, 2020 consist of W39,143 million of actuarial gain arising from changes in financial assumptions, W2,364 million of actuarial loss arising from changes in experience adjustments.
(*2) Remeasurements for the year ended December 31, 2019 consist of W16,048million of actuarial gain arising from changes in demographic assumptions, W41,061 million of actuarial loss arising from changes in financial assumptions and W3,296million of actuarial gain arising from changes in experience adjustments, respectively.
(c) Changes in the fair value of plan assets
Changes in the fair value of plan assets for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Beginning balance |
| 1,445,985 |
| 1,299,502 |
Interest income |
| 41,769 |
| 41,324 |
Remeasurements |
| (15,611) |
| (16,618) |
Contributions paid into the plan |
| 179,000 |
| 180,000 |
Benefits paid by the plan |
| (60,166) |
| (58,223) |
Ending balance |
| 1,590,977 |
| 1,445,985 |
(d) The amount of major categories of the fair value of plan assets as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Deposits |
| 1,527,464 |
| 1,406,932 |
Others |
| 63,513 |
| 39,053 |
|
| 1,590,977 |
| 1,445,985 |
127
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
22. Defined benefit liabilities (continued)
(e) Actuarial assumptions as of December 31, 2020 and 2019 are as follows:
| December 31, 2020 |
| December 31, 2019 |
| Descriptions |
Discount rate | 2.98% |
| 2.92% |
| AA0 Corporate bond yields |
Future salary increasing rate | 2.21% + Promotion rate |
| 2.33% + Promotion rate |
| Average for 5 years |
(f) Sensitivity analysis
Sensitivity analysis of the present value fluctuations of defined benefit obligations as of December 31, 2020 and 2019 are as follows:
| December 31, 2020 | |||
|
| Change in present value when the factor rises by 100 basis points |
| Change in present value when the factor falls by 100 basis points |
Discount rate |
| (152,394) |
| 177,769 |
Future salary increasing rate |
| 177,341 |
| (154,854) |
| December 31, 2019 | |||
|
| Change in present value when the factor rises by 100 basis points |
| Change in present value when the factor falls by 100 basis points |
Discount rate |
| (149,250) |
| 174,740 |
Future salary increasing rate |
| 173,992 |
| (150,908) |
(g) The maturity analysis of undiscounted retirement benefit payments for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | ||||||||||
|
| 1 year or less |
| 1 year~ 2 years or less |
| 2 years~ 5 years or less |
| 5 years~ 10 years or less |
| More than 10 years |
| Total |
Salary payment amount |
| 32,091 |
| 62,323 |
| 246,950 |
| 481,175 |
| 1,399,960 |
| 2,222,499 |
|
| December 31, 2019 | ||||||||||
|
| 1 year or less |
| 1 year~ 2 years or less |
| 2 years~ 5 years or less |
| 5 years~ 10 years or less |
| More than 10 years |
| Total |
Salary payment amount |
| 29,566 |
| 62,556 |
| 207,182 |
| 428,673 |
| 1,388,651 |
| 2,116,628 |
(h) The weighted-average duration of defined benefit obligations applied as of December 31, 2020 and 2019 are 10.7 years and 11.1 years, respectively.
(i) The Bank's estimated contribution will be W 188,055 million as of December 31, 2021
128
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
23. | Provisions |
|
(a) Changes in provision for unused credit commitments and financial guarantee contracts issued for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | |||||||||||||
|
| Loan commitments and other liabilities for credit |
| Financial guarantee contracts |
| Total | |||||||||
|
| 12-month expected credit losses |
| Lifetime expected credit losses |
| 12-month expected credit losses |
| Lifetime expected credit losses |
| ||||||
|
|
| Credit-unimpaired financial asset |
| Credit-impaired financial asset |
|
| Credit-unimpaired financial asset |
| Credit-impaired financial asset |
| ||||
Beginning balance |
| 49,104 |
| 11,677 |
| 6 |
| 95,845 |
| 5,032 |
| 1,857 |
| 163,521 | |
Transfer to 12-month expected credit losses |
| 3,593 |
| (3,593) |
| - |
| 1,026 |
| (1,026) |
| - |
| - | |
Transfer to lifetime expected credit losses |
| (1,980) |
| 1,980 |
| - |
| (2,222) |
| 2,222 |
| - |
| - | |
Transfer to impaired financial asset |
| (54) |
| (104) |
| 158 |
| - |
| - |
| - |
| - | |
Provision (reversal) |
| 15,115 |
| 3,293 |
| (164) |
| 3,003 |
| 1,026 |
| (378) |
| 21,895 | |
Foreign exchange movements |
| (916) |
| (128) |
| - |
| (1,282) |
| (229) |
| (112) |
| (2,667) | |
Others (*) |
| - |
| - |
| - |
| 11,099 |
| (246) |
| 81 |
| 10,934 | |
Ending balance |
| 64,862 |
| 13,125 |
| - |
| 107,469 |
| 6,779 |
| 1,448 |
| 193,683 |
(*) Other changes are mainly due to newly issued financial guarantee contracts recognized at their fair values, termination, effect of discount rate changes, etc.
129
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
23. | Provisions (continued) |
|
(a) Changes in provision for unused credit commitments and financial guarantee contracts issued for the years ended December 31, 2020 and 2019 are as follows: (continued)
|
| December 31, 2019 | |||||||||||||
|
| Loan commitments and other liabilities for credit |
| Financial guarantee contracts |
| Total | |||||||||
|
| 12-month expected credit losses |
| Lifetime expected credit losses |
| 12-month expected credit losses |
| Lifetime expected credit losses |
| ||||||
|
|
| Credit-unimpaired financial asset |
| Credit-impaired financial asset |
|
| Credit-unimpaired financial asset |
| Credit-impaired financial asset |
| ||||
Beginning balance |
| 47,171 |
| 11,524 |
| - |
| 87,670 |
| 4,133 |
| 2,876 |
| 153,374 | |
Transfer to 12-month expected credit losses |
| 1,935 |
| (1,935) |
| - |
| 1,248 |
| (1,248) |
| - |
| - | |
Transfer to lifetime expected credit losses |
| (1,951) |
| 1,951 |
| - |
| (611) |
| 611 |
| - |
| - | |
Transfer to impaired financial asset |
| (2) |
| - |
| 2 |
| (12) |
| - |
| 12 |
| - | |
Provision (reversal) |
| 1,609 |
| 131 |
| 4 |
| (1,051) |
| 819 |
| (1,016) |
| 496 | |
Foreign exchange movements |
| 342 |
| 6 |
| - |
| 995 |
| 112 |
| 102 |
| 1,557 | |
Others (*) |
| - |
| - |
| - |
| 7,606 |
| 605 |
| (117) |
| 8,094 | |
Ending balance |
| 49,104 |
| 11,677 |
| 6 |
| 95,845 |
| 5,032 |
| 1,857 |
| 163,521 |
(*) Other changes are mainly due to newly issued financial guarantee contracts recognized at their fair values, termination, effect of discount rate changes, etc.
130
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
23. | Provisions (continued) |
|
(b) Changes in other provisions for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | |||||||||
|
| Asset retirement |
| Litigation |
| Non-financial guarantee contracts |
| Others |
| Total | |
Beginning balance |
| 39,089 |
| 5,895 |
| 24,240 |
| 43,290 |
| 112,514 | |
Provision (reversal) |
| 1,344 |
| 3,046 |
| (2,425) |
| 64,598 |
| 66,563 | |
Provision used |
| (920) |
| (49) |
| - |
| (3,023) |
| (3,992) | |
Foreign exchange movements |
| - |
| - |
| (989) |
| 682 |
| (307) | |
Others (*) |
| 1,371 |
| - |
| (9) |
| 1,922 |
| 3,284 | |
Ending balance |
| 40,884 |
| 8,892 |
| 20,817 |
| 107,469 |
| 178,062 |
(*) This is the effect of changing the discount rate.
| December 31, 2019 | ||||||||||
|
| Asset retirement |
| Litigation |
| Non-financial guarantee contracts |
| Others |
| Total | |
Beginning balance |
| 36,770 |
| 5,773 |
| 41,296 |
| 52,098 |
| 135,937 | |
Provision (reversal) |
| 777 |
| 122 |
| (18,385) |
| (6,870) |
| (24,356) | |
Provision used |
| (739) |
| - |
| - |
| (4,742) |
| (5,481) | |
Foreign exchange movements |
| - |
| - |
| 1,330 |
| 309 |
| 1,639 | |
Others (*) |
| 2,281 |
| - |
| (1) |
| 2,495 |
| 4,775 | |
Ending balance |
| 39,089 |
| 5,895 |
| 24,240 |
| 43,290 |
| 112,514 |
(*) This is the effect of changing the discount rate.
(c) Asset retirement obligation liabilities
Asset retirement obligation liabilities represent the estimated cost to restore the existing leased properties which are discounted to the present value using the appropriate discount rate at the end of the reporting period. Disbursements of such costs are expected to incur at the end of the lease contract. Such costs are reasonably estimated using the average lease period and the average restoration expenses. The average lease period is calculated based on the past ten-year historical data of the expired leases. The average restoration expense is calculated based on the actual costs incurred for the past three years using the three-year average inflation rate.
131
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
24. | Other liabilities |
Other liabilities as of December 31, 2020 and December 31, 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Accounts payable |
| 4,912,083 |
| 7,173,939 |
Borrowing from trust account |
| 5,370,765 |
| 5,785,141 |
Accrued expenses |
| 1,782,829 |
| 2,221,371 |
Liability incurred by agency relationship |
| 1,239,226 |
| 1,609,675 |
Domestic exchange settlement payable |
| 5,676,750 |
| 1,332,578 |
Lease liabilities (*) |
| 322,480 |
| 371,125 |
Agency business income |
| 780,505 |
| 733,218 |
Guarantee deposits received |
| 447,793 |
| 230,152 |
Foreign exchange settlement payables |
| 258,818 |
| 242,168 |
Suspense payable |
| 38,821 |
| 35,179 |
Unearned income |
| 62,778 |
| 75,014 |
Withholding value-added tax and other taxes |
| 121,046 |
| 118,660 |
Sundry liabilities |
| 161,995 |
| 55,118 |
Present value discount |
| (13,513) |
| (24,567) |
|
| 21,162,376 |
| 19,958,771 |
(*)For the year ended December 31, 2020, expenses for the variable lease payments that are not included in the measurement of lease liabilities amount to W 114 million, the cash outflows from lease liabilities amount to W 175,281 million, and interest expense on lease liabilities amount to W 5,919 million. Expenses for variable lease payments not included in the measurement of lease liabilities for the year ended December 31, 2019 amount to W 189 million, cash outflows from lease liabilities amount to W 171,378 million, and interest expense on lease liability amounts to W 7,581 million.
132
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
25. | Equity |
|
(a) Equity as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Capital stock: |
|
|
|
|
Common stock |
| 7,928,078 |
| 7,928,078 |
Other equity instruments: |
|
|
|
|
Hybrid bonds |
| 1,586,662 |
| 997,987 |
Capital surplus: |
|
|
|
|
Share premium |
| 398,080 |
| 398,080 |
Capital adjustments: |
|
|
|
|
Stock options |
| 7,745 |
| 788 |
Others |
| 403 |
| 681 |
|
| 8,148 |
| 1,469 |
Accumulated other comprehensive income (loss): |
|
|
|
|
Net change in fair value of financial instruments at FVOCI |
| 83,023 |
| 82,805 |
Foreign currency translation differences for foreign operations |
| (70,921) |
| (46,627) |
Remeasurements of defined benefit plans |
| (290,159) |
| (305,506) |
|
| (278,057) |
| (269,328) |
Retained earnings: |
|
|
|
|
Legal reserve (*1) |
| 2,254,638 |
| 2,047,515 |
Voluntary reserve (*2) |
| 12,738,659 |
| 11,815,146 |
Other reserve (*3) |
| 135,023 |
| 123,197 |
Unappropriated retained earnings (*4) |
| 1,753,815 |
| 2,032,462 |
|
| 16,882,135 |
| 16,018,320 |
|
| 26,525,046 |
| 25,074,606 |
(*1) According to the Article 40 of the Banking Act, the Bank is required to appropriate an amount equal to a minimum of 10% of cash dividends paid for each accounting period as a legal reserve, until such reserve equals 100% of issued capital. The legal reserve is only available to be used to reduce accumulated deficit or transfer to capital stock.
(*2) The amounts include a regulatory reserve for loan loss of W2,195,634 million and W1,961,499 million as of December 31, 2020 and 2019, respectively. The amounts also include asset revaluation surplus of W355,898 million as of both December 31, 2020 and 2019.
(*3) Other reserve is established according to the laws applicable to some oversea branches and it may be used only to reduce their deficit.
(*4) The amounts include the expected provision for regulatory reserve of loan loss of W80,578 million and W234,135 million as of December 31, 2020 and 2019, respectively.
133
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won, except for share data)
25. | Equity (continued) |
|
(b) Capital stock
Capital stock as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Number of authorized shares |
| 2,000,000,000 shares |
| 2,000,000,000 shares |
Par value per share in won |
|
|
|
|
Number of issued shares outstanding |
| 1,585,615,506 shares |
| 1,585,615,506 shares |
(c) Hybrid bonds
Hybrid bonds as of December 31, 2020 and 2019 are as follows:
|
|
|
| Book value |
|
| ||
Date of issuance |
| Date of maturity |
| December 31, 2020 |
| December 31, 2019 |
| Interest rate (%) |
Hybrid bonds issued in Korean won: |
|
|
|
|
|
|
|
|
June 7, 2013 |
| June 7, 2043 |
| 299,568 |
| 299,568 |
| 4.63 |
June 29, 2017 |
| Perpetual bond |
| 129,701 |
| 129,701 |
| 3.33 |
June 29, 2017 |
| Perpetual bond |
| 69,844 |
| 69,844 |
| 3.81 |
October 15, 2018 |
| Perpetual bond |
| 199,547 |
| 199,547 |
| 3.70 |
February 25, 2019 |
| Perpetual bond |
| 299,327 |
| 299,327 |
| 3.30 |
February 25, 2020 |
| Perpetual bond |
| 239,459 |
| - |
| 2.88 |
February 25, 2020 |
| Perpetual bond |
| 49,888 |
| - |
| 3.08 |
November 5, 2020 |
| Perpetual bond |
| 299,328 |
| - |
| 2.87 |
|
|
|
| 1,586,662 |
| 997,987 |
|
|
Dividends on hybrid bond holders |
| 44,529 |
| 33,115 |
|
| ||
Weighted average interest rate (%) |
| 3.44 |
| 3.73 |
|
|
The above hybrid bonds are subject to early redemption option after five years or ten years from the date of issuance, and the maturity can be extended under the same condition at the maturity date.
134
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
25. | Equity (continued) |
|
(d) Changes in accumulated other comprehensive income (loss)
Changes in accumulated other comprehensive income (loss) for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | ||||||||
|
| Items that are or may be reclassified to profit or loss |
| Items that will not be reclassified to profit or loss |
| |||||
|
| Net change in fair value of financial assets at FVOCI |
| Foreign currency translation differences for foreign operations |
| Net change in fair value of financial assets at FVOCI |
| Remeasur-ements of the defined benefit plans |
| Total |
Beginning balance |
| 97,050 |
| (46,627) |
| (14,245) |
| (305,506) |
| (269,328) |
Change due to fair value measurement |
| 39,102 |
| - |
| (3,514) |
| - |
| 35,588 |
Change due to impairment |
| (3,757) |
| - |
| - |
| - |
| (3,757) |
Change due to disposal |
| (66,238) |
| - |
| - |
| - |
| (66,238) |
Effect of hedge accounting |
| (4,394) |
| 31,239 |
| - |
| - |
| 26,845 |
Effect of foreign currency movements |
| - |
| (64,748) |
| 723 |
| - |
| (64,025) |
Remeasurements of defined benefit obligations |
| - |
| - |
| - |
| 21,168 |
| 21,168 |
Amounts transferred from retained earnings |
| - |
| - |
| 38,379 |
| - |
| 38,379 |
Effect of tax |
| 9,704 |
| 9,215 |
| (9,787) |
| (5,821) |
| 3,311 |
Ending balance |
| 71,467 |
| (70,921) |
| 11,556 |
| (290,159) |
| (278,057) |
|
| December 31, 2019 | ||||||||
|
| Items that are or may be reclassified to profit or loss |
| Items that will not be reclassified to profit or loss |
| |||||
|
| Net change in fair value of financial assets at FVOCI |
| Foreign currency translation differences for foreign operations |
| Net change in fair value of financial assets at FVOCI |
| Remeasur-ements of the defined benefit plans |
| Total |
Beginning balance |
| 28,108 |
| (56,356) |
| (28,102) |
| (277,714) |
| (334,064) |
Change due to fair value measurement |
| 112,959 |
| - |
| 26,622 |
| - |
| 139,581 |
Change due to impairment |
| 1,419 |
| - |
| - |
| - |
| 1,419 |
Change due to disposal |
| (18,553) |
| - |
| - |
| - |
| (18,553) |
Effect of hedge accounting |
| (731) |
| (11,739) |
| - |
| - |
| (12,470) |
Effect of foreign currency movements |
| - |
| 25,158 |
| 293 |
| - |
| 25,451 |
Remeasurements of defined benefit obligations |
| - |
| - |
| - |
| (38,334) |
| (38,334) |
Amounts transferred from retained earnings |
| - |
| - |
| (7,804) |
| - |
| (7,804) |
Effect of tax |
| (26,152) |
| (3,690) |
| (5,254) |
| 10,542 |
| (24,554) |
Ending balance |
| 97,050 |
| (46,627) |
| (14,245) |
| (305,506) |
| (269,328) |
135
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won, except for par value per share, dividend per share and earnings per share)
25. | Equity (continued) |
|
(e) The appropriation of retained earnings for the year ended December 31, 2020, is expected to be appropriated at the shareholders’ meeting on March 24, 2021. The appropriation date for the year ended December 31, 2019, was March 25, 2020.
Separate statements of appropriation of retained earnings for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Unappropriated retained earnings: |
|
|
|
|
Balance at beginning of year |
| - |
| - |
Transfer from other comprehensive income through the sale of securities at FVOCI |
| (27,826) |
| (5,658) |
Interest on hybrid bond |
| (44,529) |
| (33,115) |
Profit for the year |
| 1,826,170 |
| 2,071,235 |
|
| 1,753,815 |
| 2,032,462 |
Transfer from reserves: |
|
|
|
|
Voluntary reserve |
| 9,908,273 |
| 9,218,897 |
|
| 11,662,088 |
| 11,251,359 |
Appropriation of retained earnings: |
|
|
|
|
Legal reserve |
| 182,617 |
| 207,124 |
Regulatory reserve for loan loss |
| 80,578 |
| 234,135 |
Other reserve |
| 21,304 |
| 11,827 |
Voluntary reserves |
| 10,607,589 |
| 9,908,273 |
Dividends on common stock |
| 770,000 |
| 890,000 |
(Dividend per share in won: 2020: 2019: |
|
|
|
|
|
| 11,662,088 |
| 11,251,359 |
Unappropriated retained earnings to be carried over to subsequent year |
| - |
| - |
(f) Dividends
Dividends of common stock for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Number of issued shares outstanding |
| 1,585,615,506 |
| 1,585,615,506 |
Par value per share in won |
| 5,000 |
| 5,000 |
Dividend rate per share |
| 9.71% |
| 11.23% |
Dividend per share in won |
| 485.62 |
| 561.30 |
g) Dividends payout ratio
Dividends payout ratio for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Dividends |
| 770,000 |
| 890,000 |
Profit for the year |
| 1,826,170 |
| 2,071,235 |
Dividends payout ratio to profit for the year |
| 42.16% |
| 42.97% |
Profit for the year adjusted for regulatory reserve for loan loss |
| 1,745,592 |
| 1,837,100 |
Dividends payout ratio to profit for the year adjusted for regulatory reserve for loan loss |
| 44.11% |
| 48.45% |
136
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won, except for par value per share, dividend per share and earnings per share)
137
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won, except for par value per share, dividend per share and earnings per share)
26. | Regulatory reserve for loan loss |
|
The Bank should calculate and disclose regulatory reserve for loan loss, in accordance with the Article 29-1 and 29-2 of Regulation on Supervision of Banking Business.
(a) | The regulatory reserve for loan loss for the years ended December 31, 2020 and 2019 are as follows: |
|
|
| December 31, 2020 |
| December 31, 2019 |
Regulatory reserve for loan loss |
| 2,195,634 |
| 1,961,499 |
Provision for regulatory reserve for loan loss |
| 80,578 |
| 234,135 |
|
| 2,276,212 |
| 2,195,634 |
(b) Provision for regulatory reserve for loan loss and adjusted profit after reflecting regulatory reserve for loan loss
Provision for regulatory reserve for loan loss and adjusted profit after reflecting regulatory reserve for loan loss for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Provision for regulatory reserve for loan loss |
| 80,578 |
| 234,135 |
Adjusted profit after reflecting regulatory reserve for loan loss(*) |
| 1,745,592 |
| 1,837,100 |
Adjusted earnings per share after reflecting regulatory reserve for loan loss in won |
| 1,073 |
| 1,138 |
(*) The adjusted reserve which reflects abovementioned loan loss is not based on K-IFRS and is calculated by assuming that the provisions of loan loss before income tax effects are reflected in profit for the year.
138
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
27. | Net interest income |
|
(a) Net interest income for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Interest income: |
|
|
|
|
Cash and due from banks |
| 33,297 |
| 81,438 |
Securities at FVTPL |
| 197,508 |
| 218,150 |
Securities at FVOCI |
| 555,424 |
| 669,707 |
Securities at amortized cost |
| 396,717 |
| 421,001 |
Loans |
| 7,356,323 |
| 8,172,525 |
Others |
| 51,810 |
| 66,534 |
|
| 8,591,079 |
| 9,629,355 |
Interest income from impaired financial assets |
| 19,170 |
| 17,560 |
|
|
|
|
|
Interest expense: (*) |
|
|
|
|
Deposits |
| 2,465,749 |
| 3,212,574 |
Borrowings |
| 206,379 |
| 292,899 |
Debt securities issued |
| 645,268 |
| 789,859 |
Others |
| 39,124 |
| 83,645 |
|
| 3,356,520 |
| 4,378,977 |
Net interest income |
| 5,234,559 |
| 5,250,358 |
|
|
|
|
|
(*) Included interest income from loans at FVTPL of W9,440 million and W16,254million, respectively for the years ended December 31, 2020 and 2019.
139
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
28. Net fees and commission income
Net fees and commission income for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Fees and commission income: |
|
|
|
|
Credit placement fees |
| 83,462 |
| 60,131 |
Commission received as electronic charge receipt |
| 143,074 |
| 151,032 |
Brokerage fees |
| 88,534 |
| 109,307 |
Commission received as agency |
| 297,449 |
| 306,033 |
Investment banking fees |
| 106,478 |
| 124,541 |
Commission received in foreign exchange activities |
| 110,504 |
| 122,831 |
Asset management fees from trust accounts |
| 187,221 |
| 258,103 |
Guarantee fees |
| 76,239 |
| 72,585 |
Others |
| 111,749 |
| 104,190 |
|
| 1,204,710 |
| 1,308,753 |
Fees and commission expense: |
|
|
|
|
Credit-related fees |
| 43,475 |
| 37,959 |
Brand-related fees |
| 42,279 |
| 35,530 |
Service-related fees |
| 45,162 |
| 32,632 |
Trading and brokerage fees |
| 8,274 |
| 9,566 |
Commission paid in foreign exchange activities |
| 21,646 |
| 27,609 |
Others |
| 81,778 |
| 70,914 |
|
| 242,614 |
| 214,210 |
Net fees and commission income |
| 962,096 |
| 1,094,543 |
29. | Dividend income |
|
Dividend income for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
|
|
|
|
|
Securities at FVTPL |
| 774 |
| 1,600 |
Securities at FVOCI (*) |
| 16,193 |
| 11,999 |
|
| 16,967 |
| 13,599 |
(*) Dividend income for stocks disposed for the year ended December 31, 2020 is W 1,529 million
140
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
30. | Gain and loss on financial instruments at fair value through profit or loss |
|
Gain and loss on financial instruments at FVTPL for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Financial instruments at FVTPL |
|
|
|
|
Debt: |
|
|
|
|
Gain on valuation of debt securities |
| 144,039 |
| 62,158 |
Gain on sale of debt securities |
| 72,680 |
| 61,730 |
Loss on valuation of debt securities |
| (31,262) |
| (44,029) |
Loss on sale of debt securities |
| (46,178) |
| (40,648) |
Others |
| 98,897 |
| 104,453 |
|
| 238,176 |
| 143,664 |
Equity: |
|
|
|
|
Gain on valuation of equity securities |
| 4,146 |
| 3,245 |
Gain on sale of equity securities |
| 5,736 |
| 2,486 |
Loss on valuation of equity securities |
| (5,968) |
| (5,952) |
Loss on sale of equity securities |
| (635) |
| (268) |
|
| 3,279 |
| (489) |
Gold/silver: |
|
|
|
|
Gain on valuation of gold/silver deposits |
| 22,690 |
| 28,803 |
Gain on sale of gold/silver deposits |
| 10,701 |
| 4,644 |
Loss on valuation of gold/silver deposits |
| (83,316) |
| (91,025) |
Loss on sale of gold/silver deposits |
| (2,389) |
| (475) |
|
| (52,314) |
| (58,053) |
Loans at FVTPL: |
|
|
|
|
Gain on valuation of loans |
| 7,818 |
| 4,046 |
Gain on sale of loans |
| 11,792 |
| 14,508 |
Loss on valuation of loans |
| (2,905) |
| (2,856) |
Loss on sale of loans |
| (2,678) |
| (2,484) |
|
| 14,027 |
| 13,214 |
|
| 203,168 |
| 98,336 |
|
|
|
|
|
Derivatives |
|
|
|
|
Foreign currency related: |
|
|
|
|
Gain on valuation and transaction |
| 10,240,087 |
| 7,806,897 |
Loss on valuation and transaction |
| (10,190,905) |
| (7,707,005) |
|
| 49,182 |
| 99,892 |
Interest rates related: |
|
|
|
|
Gain on valuation and transaction |
| 542,604 |
| 536,265 |
Loss on valuation and transaction |
| (612,139) |
| (550,001) |
|
| (69,535) |
| (13,736) |
Equity related: |
|
|
|
|
Gain on valuation and transaction |
| 24,995 |
| 15,692 |
Loss on valuation and transaction |
| (36,155) |
| (14,724) |
|
| (11,160) |
| 968 |
Commodity related: |
|
|
|
|
Gain on valuation and transaction |
| 27,864 |
| 34,557 |
Loss on valuation and transaction |
| (6,643) |
| (11,560) |
|
| 21,221 |
| 22,997 |
|
| (10,292) |
| 110,121 |
Net gain on financial instruments at FVTPL |
| 192,876 |
| 208,457 |
|
141
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
31. | General and administrative expenses |
|
General and administrative expenses for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Employee benefits: |
|
|
|
|
Short and long term employee benefits |
| 1,658,946 |
| 1,599,397 |
Post-employee defined benefits |
| 137,649 |
| 126,083 |
Post-employee defined contributions |
| 261 |
| 293 |
Termination benefits |
| 77,716 |
| 93,640 |
|
| 1,874,572 |
| 1,819,413 |
Amortization: |
|
|
|
|
Depreciation |
| 113,046 |
| 112,016 |
Amortization of intangible assets |
| 42,167 |
| 35,539 |
Depreciation of right-of-use assets |
| 194,645 |
| 197,149 |
|
| 349,858 |
| 344,704 |
Other general and administrative expenses: |
|
|
|
|
Rent |
| 46,021 |
| 47,476 |
Service contract expenses |
| 234,518 |
| 224,680 |
Taxes and dues |
| 84,626 |
| 87,889 |
Advertising |
| 76,041 |
| 76,137 |
Electronic data processing expenses |
| 48,242 |
| 43,629 |
Others |
| 150,594 |
| 158,909 |
|
| 640,042 |
| 638,720 |
|
| 2,864,472 |
| 2,802,837 |
142
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
32. Share-based payments |
|
(a) Stock options granted as of December 31, 2020 are as follows:
|
| 6th grant |
| 7th grant |
Grant date |
| March 20, 2007 |
| March 19, 2008 |
Exercise price in won |
|
|
|
|
Number of shares granted |
| 715,500 |
| 332,850 |
Contractual exercise Period |
| 2017.05.18 ~ 2020.08.19 |
| 2017.05.18 ~ 2021.05.17 2017.09.18 ~ 2021.09.17 |
Changes in number of shares granted: |
|
|
|
|
Outstanding at December 31, 2019 |
| 50,513 |
| 21,474 |
Exercised |
| 50,513 |
| - |
Outstanding at December 31, 2020 |
| - |
| 21,474 |
|
|
|
|
|
Fair value in won |
|
|
| Expiration date 2021.05.17 : Expiration date 2021.09.17 : |
(*) As of December 31, 2020, the granted shares are fully vested, and the weighted-average exercise price of 21,747 outstanding options is W49,053.
(b) Equity-settled share-based payments
i) Equity-settled share-based payments as of December 31, 2020 are as follows:
|
| Contents |
Type |
| Equity-settled share-based payment(*) |
Service period |
| Upon appointment and promotion since January 1, 2014 (Within 1 year from grant date) |
Performance conditions |
| Linked to relative stock price (20.0%) and management index for 4 years (80.0%) |
(*) The Bank granted shares of Shinhan Financial Group. According to the commitment, the amount that the Group pays to the Shinhan Financial Group is recognized as liabilities, and the difference between the amount recognized as liabilities and the compensation cost based on equity-settled share-based payments is recognized in equity.
143
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
32. Share-based payments (continued)
(b) Equity-settled share-based payments (continued)
ii) Granted shares and the fair value of grant date as of December 31, 2020 are as follows:
Grant date |
| Grant shares |
| Fair value (*1) (in won) |
| Estimated shares (*2) |
March 18, 2015 |
| 16,800 |
| 42,650 |
| 13,300 |
May 22, 2015 |
| 5,300 |
| 42,800 |
| 3,251 |
January 1, 2016 |
| 206,300 |
| 39,000 |
| 25,600 |
January 1, 2017 |
| 217,300 |
| 45,300 |
| 187,912 |
January 23, 2017 |
| 2,700 |
| 45,600 |
| 2,494 |
March 7, 2017 |
| 17,400 |
| 46,950 |
| 14,026 |
March 24, 2017 |
| 8,100 |
| 49,000 |
| 6,150 |
June 1, 2017 |
| 2,700 |
| 49,250 |
| 1,543 |
July 5, 2017 |
| 2,700 |
| 49,550 |
| 1,294 |
July 6, 2017 |
| 4,500 |
| 49,200 |
| 2,100 |
January 1, 2018 |
| 225,070 |
| 49,400 |
| 211,141 |
January 24, 2018 |
| 1,275 |
| 52,700 |
| 1,064 |
January 1, 2019 |
| 296,226 |
| 39,600 |
| 251,882 |
March 26, 2019 |
| 23,410 |
| 42,750 |
| 16,514 |
April 1, 2019 |
| 3,696 |
| 43,750 |
| 2,550 |
June 1, 2019 |
| 2,839 |
| 44,450 |
| 1,514 |
July 4, 2019 |
| 7,392 |
| 44,450 |
| 3,360 |
July 8, 2019 |
| 3,696 |
| 43,650 |
| 1,643 |
|
| 1,047,403 |
|
|
| 747,338 |
(*1) The fair value per share is evaluated based on the closing price of Shinhan Financial Group at each grant date. As of December 31, 2020, the fair value per share data evaluated by Shinhan Financial Group amounted to W32,050.
(*2) Grant shares at grant date were adjusted pursuant to increase rate of stock price (20.0%) and achievement of target ROE (80.0%) based on standard quantity applicable to the days of service among specified period of service, which allows the determination of acquired quantity at the end of the operation period.
144
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
32. Share-based payments (continued)
(c) Details of performance-based stock compensation as of December 31, 2020 are as follows:
|
| Expired |
| Not expired |
|
|
| ||
Type |
| Cash-settled share-based payment | ||
|
|
| ||
Performance conditions |
| Relative stock price linked (20.0%), management index (60.0%), and prudential index (20.0%) | ||
|
|
| ||
Exercising period |
| 4 years from the commencement date of the year to which the grant date belongs | ||
|
|
| ||
Grant shares |
| 260,777 | ||
|
|
|
|
|
Estimated number of shares vested at December 31, 2020 |
| - |
| 220,574 |
|
|
|
|
|
Fair value per share in Korean won |
| 32,050 |
(*) Based on performance-based stock compensation, the reference stock price (the arithmetic average of the weighted average share price of transaction volume for the past two month, the previous one month, and the past one week) of four years after the commencement of the grant year is paid in cash, and the fair value of the reference stock to be paid in the future is assessed as the closing price of the settlement.
(d) Stock compensation costs calculated for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Compensation costs recorded for the year |
| 6,077 |
| 11,245 |
(e) Accrued expenses of the stock compensation costs and residual compensation costs as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Accrued expenses |
| 40,171 |
| 39,747 |
145
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
33. Net other operating income (expenses)
Net other operating expenses for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Other operating income |
|
|
|
|
Gain on sale of assets: |
|
|
|
|
Loans at amortized cost |
| 2,296 |
| 6,602 |
Written-off loans |
| 11,920 |
| 1,429 |
|
| 14,216 |
| 8,031 |
Others: |
|
|
|
|
Gain on hedge activity from hedged items |
| 50,805 |
| 29,722 |
Gain on hedge activity from hedging instruments |
| 284,814 |
| 410,091 |
Reversal of allowance for acceptances and guarantee |
| 2,425 |
| 18,386 |
Reversal of other allowance |
| - |
| 5,971 |
Others |
| 25,811 |
| 934 |
|
| 363,855 |
| 465,104 |
|
| 378,071 |
| 473,135 |
Other operating expense |
|
|
|
|
Loss on sale of assets: |
|
|
|
|
Loans at amortized cost |
| 18,003 |
| 26,848 |
Others: |
|
|
|
|
Loss on hedge activity from hedged items |
| 279,071 |
| 400,509 |
Loss on hedge activity from hedging instruments |
| 51,805 |
| 32,969 |
Provision for other allowance |
| 6,678 |
| - |
Contribution to fund |
| 358,956 |
| 302,712 |
Deposit insurance fee |
| 328,628 |
| 286,504 |
Others |
| 231,675 |
| 291,723 |
|
| 1,256,813 |
| 1,314,417 |
|
| 1,274,816 |
| 1,341,265 |
Net other operating expenses |
| (896,745) |
| (868,130) |
146
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
34. Net non-operating income (expenses)
Net non-operating income (expenses) for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Non-operating income |
|
|
|
|
Gain on sale of assets: |
|
|
|
|
Property and equipment |
| 25,599 |
| 1,435 |
Intangible assets |
| - |
| 5,347 |
Non-current assets held for sale |
| 1,013 |
| 57 |
|
| 26,612 |
| 6,839 |
Investments in associates: |
|
|
|
|
Dividend income |
| 13,031 |
| 691 |
Gain from disposition |
| 915 |
| - |
|
| 13,946 |
| 691 |
Others: |
|
|
|
|
Rental income on investment property |
| 27,460 |
| 27,846 |
Others |
| 26,748 |
| 48,141 |
|
| 54,208 |
| 75,987 |
|
| 94,766 |
| 83,517 |
Non-operating expenses |
|
|
|
|
Loss on sale of assets: |
|
|
|
|
Property and equipment |
| 3 |
| 12 |
Intangible assets |
| - |
| 5 |
|
| 3 |
| 17 |
Investments in associates: |
|
|
|
|
Impairment loss |
| 56,789 |
| - |
Others: |
|
|
|
|
Investment properties depreciation |
| 11,546 |
| 10,997 |
Donations |
| 64,493 |
| 71,516 |
Impairment loss on intangible assets |
| 27,133 |
| 151,523 |
Others |
| 98,431 |
| 31,893 |
|
| 201,603 |
| 265,929 |
|
| 258,395 |
| 265,946 |
Net non-operating income (expenses) |
| (163,629) |
| (182,429) |
147
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
35. Operating revenue
Operating revenue for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Interest income |
| 8,591,079 |
| 9,629,355 |
Fees and commission income |
| 1,204,710 |
| 1,308,753 |
Dividend income |
| 16,967 |
| 13,599 |
Net gain on financial instruments at FVTPL |
| 11,214,049 |
| 8,679,485 |
Foreign currencies transaction gain |
| 2,198,348 |
| 1,706,276 |
Net gain on financial instruments at FVOCI |
| 202,943 |
| 98,024 |
Reversal of provisions for acceptances and guarantees |
| 2,425 |
| 1,248 |
Other operating income |
| 375,646 |
| 473,135 |
|
| 23,806,167 |
| 21,909,875 |
36. Income tax expense
(a) The components of income tax expense for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Current income tax expense |
| 635,878 |
| 694,818 |
Deferred taxes arising from changes in temporary differences |
| (35,108) |
| (39,392) |
Deferred taxes arising from utilization of expired unused tax losses |
| 33,819 |
| 45,633 |
Tax adjustment charged or credited directly to equity |
| 672 |
| (23,014) |
Income tax expense |
| 635,261 |
| 678,045 |
(b) Income tax expense calculated by applying statutory tax rates to the Bank’s taxable income differs from the actual tax expense in the separate statements of comprehensive income for the years ended December 31, 2020 and 2019 for the following reasons:
|
| December 31, 2020 |
| December 31, 2019 |
Profit before income tax |
| 2,461,431 |
| 2,749,280 |
Statutory tax rate |
| 27.50% |
| 27.50% |
Income tax expense at statutory tax rates |
| 666,532 |
| 745,690 |
Adjustments: |
|
|
|
|
Non-taxable income |
| (579) |
| (2,889) |
Non-deductible expense |
| 7,603 |
| 7,093 |
Decrease resulting from consolidated corporate tax system |
| (46,567) |
| (62,401) |
Income tax paid (refund) |
| (1,284) |
| (17,763) |
Others (impact of tax rate change, etc.) |
| 9,556 |
| 8,315 |
Income tax expense |
| 635,261 |
| 678,045 |
Effective tax rate |
| 25.81% |
| 24.66% |
148
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
36. Income tax expense (continued)
(c) Changes in temporary differences and deferred tax assets (liabilities) for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | ||||||||
|
| Beginning balance |
| Decreases |
| Increases |
| Ending balance |
| Deferred tax assets (liabilities) |
|
|
|
|
|
|
|
|
|
|
|
Accrued income |
| (607,919) |
| (617,984) |
| (618,245) |
| (608,180) |
| (167,249) |
Accounts receivable |
| (96,013) |
| (96,013) |
| (106,028) |
| (106,028) |
| (29,158) |
Securities at FVTPL |
| 525,210 |
| 165,869 |
| 139,878 |
| 499,218 |
| 137,285 |
Investments in subsidiaries and associates |
| 98,842 |
| 4,263 |
| 54,030 |
| 148,609 |
| 40,867 |
Deferred loan origination costs and fees |
| (498,779) |
| (498,779) |
| (502,147) |
| (502,147) |
| (138,091) |
Revaluation and depreciation on property and equipment |
| (404,675) |
| 20,590 |
| 14,220 |
| (411,045) |
| (113,038) |
Derivative assets (liabilities) |
| (246,737) |
| (244,476) |
| (97,654) |
| (99,915) |
| (27,476) |
Deposits |
| 111,423 |
| 94,249 |
| 83,306 |
| 100,480 |
| 27,632 |
Accrued expenses |
| 218,092 |
| 219,637 |
| 210,830 |
| 209,285 |
| 57,554 |
Defined benefit obligations |
| 1,380,360 |
| 60,166 |
| 143,304 |
| 1,463,498 |
| 402,461 |
Plan assets |
| (1,430,220) |
| (60,166) |
| (192,121) |
| (1,562,175) |
| (429,598) |
Other provisions |
| 149,060 |
| 149,060 |
| 235,231 |
| 235,231 |
| 64,689 |
Allowance for guarantees and acceptance |
| 126,974 |
| 126,975 |
| 136,514 |
| 136,513 |
| 37,541 |
Allowance for advanced depreciation |
| (177,137) |
| - |
| 2 |
| (177,135) |
| (48,712) |
Allowance for expensing depreciation |
| (1,459) |
| (232) |
| - |
| (1,227) |
| (337) |
Net change in fair value of securities at FVOCI |
| (114,214) |
| (114,214) |
| (114,514) |
| (114,514) |
| (31,491) |
Donation payables |
| 133,494 |
| 133,495 |
| 60,227 |
| 60,226 |
| 16,562 |
Allowance and bad debt |
| (5,662) |
| 1 |
| - |
| (5,663) |
| (1,557) |
Compensation expenses associated with stock option |
| 109 |
| 31 |
| 1 |
| 79 |
| 22 |
Fictitious dividends |
| 4,425 |
| 77 |
| 54,443 |
| 58,791 |
| 16,168 |
Others |
| 387,694 |
| 1,949,273 |
| 1,975,058 |
| 413,422 |
| 113,706 |
|
| (447,132) |
| 1,291,822 |
| 1,476,335 |
| (262,677) |
| (72,220) |
Expired unused tax losses | ||||||||||
Appropriation by extinctive prescription of deposit |
| 1,089,836 |
| 122,978 |
| - |
| 966,858 |
| 265,886 |
|
|
|
|
|
|
|
|
|
|
|
Temporary differences not qualified for deferred tax assets or liabilities | ||||||||||
Investments in subsidiaries and associates |
| 30,644 |
| - |
| 56,789 |
| 87,433 |
| 24,044 |
|
| 612,060 |
| 1,414,800 |
| 1,419,546 |
| 616,806 |
| 169,622 |
(*) The effect of corporate tax by equity method evaluation is reasonably estimated by each investment company of the associates considering the applicable amount and feasibility of deferred tax.
149
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
36. Income tax expense (continued)
(c) Changes in temporary differences and deferred tax assets (liabilities) for the years ended December 31, 2020 and 2019 are as follows: (continued)
|
| December 31, 2019 | ||||||||
|
| Beginning balance |
| Decreases |
| Increases |
| Ending balance |
| Deferred tax assets (liabilities) |
|
|
|
|
|
|
|
|
|
|
|
Accrued income |
| (589,687) |
| (596,918) |
| (615,150) |
| (607,919) |
| (167,178) |
Accounts receivable |
| (88,065) |
| (88,065) |
| (96,013) |
| (96,013) |
| (26,404) |
Securities at FVTPL |
| 98,295 |
| 76,525 |
| 79,262 |
| 101,032 |
| 27,784 |
Securities at FVOCI |
| 262,661 |
| (38,197) |
| 123,320 |
| 424,178 |
| 116,649 |
Investments in subsidiaries and associates |
| 104,597 |
| - |
| (5,755) |
| 98,842 |
| 27,181 |
Deferred loan origination costs and fees |
| (497,515) |
| (497,515) |
| (498,779) |
| (498,779) |
| (137,164) |
Revaluation and depreciation on property and equipment |
| (422,788) |
| 1,649 |
| 19,762 |
| (404,675) |
| (111,286) |
Derivative liabilities |
| (177,396) |
| (172,909) |
| (242,250) |
| (246,737) |
| (67,852) |
Deposits |
| 101,950 |
| 53,077 |
| 62,550 |
| 111,423 |
| 30,641 |
Accrued expenses |
| 226,076 |
| 235,495 |
| 227,511 |
| 218,092 |
| 59,975 |
Defined benefit obligations |
| 1,249,459 |
| 58,223 |
| 189,124 |
| 1,380,360 |
| 379,599 |
Plan assets |
| (1,267,931) |
| (58,223) |
| (220,512) |
| (1,430,220) |
| (393,310) |
Other provisions |
| 153,335 |
| 153,335 |
| 149,060 |
| 149,060 |
| 40,991 |
Allowance for guarantees and acceptance |
| 135,976 |
| 135,977 |
| 126,975 |
| 126,974 |
| 34,918 |
Allowance for advanced depreciation |
| (177,137) |
| - |
| - |
| (177,137) |
| (48,713) |
Allowance for expensing depreciation |
| (1,691) |
| (232) |
| - |
| (1,459) |
| (401) |
Net change in fair value of securities at FVOCI |
| 16,297 |
| (8) |
| (130,519) |
| (114,214) |
| (31,409) |
Donation payables |
| 78,750 |
| 133,915 |
| 188,659 |
| 133,494 |
| 36,711 |
Allowance and bad debt |
| 44,211 |
| 7,974 |
| (41,899) |
| (5,662) |
| (1,557) |
Compensation expenses associated with stock option |
| 178 |
| 61 |
| (8) |
| 109 |
| 30 |
Fictitious dividends |
| 4,059 |
| - |
| 366 |
| 4,425 |
| 1,217 |
Others |
| 103,241 |
| 415,587 |
| 700,040 |
| 387,694 |
| 106,633 |
|
| (643,125) |
| (180,249) |
| 15,744 |
| (447,132) |
| (122,945) |
Expired unused tax losses | ||||||||||
Appropriation by extinctive prescription of deposit |
| 1,255,777 |
| 165,941 |
| - |
| 1,089,836 |
| 299,706 |
|
|
|
|
|
|
|
|
|
|
|
Temporary differences not qualified for deferred tax assets or liabilities | ||||||||||
Investments in subsidiaries and associates |
| (22,219) |
| - |
| 52,863 |
| 30,644 |
| 8,428 |
|
| 634,871 |
| (14,308) |
| (37,119) |
| 612,060 |
| 168,333 |
(*) The effect of corporate tax by equity method evaluation is reasonably estimated by each investment company of the associates considering the applicability amount and feasibility of deferred tax.
150
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
36. Income tax expense (continued)
(d) Changes in tax effects that are directly charged or credited to equity for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
| Changes in tax effects | ||||
|
| Amount before tax |
| Tax effects |
| Amount before tax |
| Tax effects |
| |
Net change in fair value of securities at FVOCI |
| 114,514 |
| (31,491) |
| 114,214 |
| (31,409) |
| (82) |
Foreign currency translation differences for foreign operations |
| (97,822) |
| 26,901 |
| (64,313) |
| 17,686 |
| 9,215 |
Remeasurements of defined benefit plans |
| (400,219) |
| 110,060 |
| (421,387) |
| 115,882 |
| (5,822) |
Other (stock option) |
| 10,683 |
| (2,938) |
| 1,088 |
| (299) |
| (2,639) |
|
| (372,844) |
| 102,532 |
| (370,398) |
| 101,860 |
| 672 |
|
| December 31, 2019 |
| December 31, 2018 |
| Changes in tax effects | ||||
|
| Amount before tax |
| Tax effects |
| Amount before tax |
| Tax effects |
| |
Net change in fair value of securities at FVOCI |
| 114,214 |
| (31,409) |
| 8 |
| (2) |
| (31,407) |
Foreign currency translation differences for foreign operations |
| (64,313) |
| 17,686 |
| (77,732) |
| 21,376 |
| (3,690) |
Remeasurements of defined benefit plans |
| (421,388) |
| 115,882 |
| (383,053) |
| 105,339 |
| 10,543 |
Other (stock option) |
| 1,088 |
| (300) |
| 6,690 |
| (1,840) |
| 1,540 |
|
| (370,399) |
| 101,859 |
| (454,087) |
| 124,873 |
| (23,014) |
151
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won, except for earnings per share)
36. Income tax expense (continued)
(e) The current tax assets and liabilities as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Current tax assets: |
|
|
|
|
Prepaid income taxes |
| 2,363 |
| 1,656 |
|
|
|
|
|
Current tax liabilities: |
|
|
|
|
Payable due to consolidated tax system |
| 216,423 |
| 353,674 |
Income taxes payables |
| 15,859 |
| 13,908 |
|
| 232,282 |
| 367,582 |
(f) The deferred tax assets / liabilities and current tax assets / liabilities presented on a gross basis prior to any offsetting as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Deferred tax assets |
| 2,508,233 |
| 1,829,764 |
Deferred tax liabilities |
| 2,338,611 |
| 1,661,431 |
Current tax assets |
| 364,382 |
| 371,096 |
Current tax liabilities |
| 594,301 |
| 737,022 |
37. | Earnings per share |
|
(a) Earnings per share
Earnings per share for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Profit for the year |
| 1,826,170 |
| 2,071,235 |
Less: dividends on hybrid bonds |
| (44,529) |
| (33,115) |
Profit available for common stock |
| 1,781,641 |
| 2,038,120 |
Weighted average number of common shares outstanding |
| 1,585,615,506 shares |
| 1,585,615,506 shares |
Basic and diluted earnings per share in won |
| 1,124 |
| 1,285 |
Considering that the Bank had no dilutive potential common shares and that stock options are not included in the calculation of diluted earnings per share because they are anti-dilutive for the reporting periods presented, diluted earnings per share equal to basic earnings per share for the years ended December 31, 2020 and 2019.
(b) Weighted average number of common shares outstanding
Weighted average number of common shares outstanding for the nine-month periods ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Number of common shares outstanding |
| 1,585,615,506 shares |
| 1,585,615,506 shares |
Weight |
| 366/366 |
| 365/365 |
Weighted average number of common shares outstanding |
| 1,585,615,506 shares |
| 1,585,615,506 shares |
152
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
38. | Commitments and contingencies |
|
(a) Guarantees, acceptances and credit commitments as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Guarantees: |
|
|
|
|
Guarantee outstanding |
| 10,698,475 |
| 9,777,154 |
Contingent guarantees |
| 3,296,043 |
| 3,481,139 |
|
| 13,994,518 |
| 13,258,293 |
Commitments to extend credit: |
|
|
|
|
Loan commitments in Korean won |
| 79,073,862 |
| 71,929,990 |
Loan commitments in foreign currencies |
| 15,118,470 |
| 18,230,089 |
ABS and ABCP purchase commitments |
| 5,432,808 |
| 5,769,665 |
Others |
| 2,970,548 |
| 2,574,184 |
|
| 102,595,688 |
| 98,503,928 |
Endorsed bills: |
|
|
|
|
Secured endorsed bills |
| 1,650 |
| 11,287 |
Unsecured endorsed bills |
| 7,324,559 |
| 6,737,097 |
|
| 7,326,209 |
| 6,748,384 |
Loans sold with repurchase agreement |
| - |
| 1,387 |
|
| 123,916,415 |
| 118,511,992 |
(b) Provision for acceptances and guarantees
Allowance for acceptances and guarantees, as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Guarantees outstanding |
| 10,698,475 |
| 9,777,154 |
Contingent guarantees |
| 3,296,043 |
| 3,481,139 |
ABS and ABCP purchase commitments |
| 5,432,808 |
| 5,769,665 |
Secured endorsed bills |
| 1,650 |
| 11,287 |
|
| 19,428,976 |
| 19,039,245 |
Allowance for acceptances and guarantees |
| 136,513 |
| 126,975 |
Ratio (%) |
| 0.70 |
| 0.67 |
153
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
38. | Commitments and contingencies (continued) |
|
(c) Legal contingencies
Pending litigations in which the Bank is involved as a defendant as of December 31, 2020 are as follows:
Case |
| Number of claim |
| Claim amount |
| Description |
| Status |
Deposit return |
| 1 |
| 4,606 |
| The plaintiff alleges that the Bank has canceled the money received in his account without his consent, and requested the Bank to pay the deposit equivalent to the amount. |
| The Bank won the first and second order and the third order is ongoing as of December 31, 2020. |
Claim for the payment to execute the assignment order.
|
| 1 |
| 7,099 |
| For the deposits at the Bank owned by one of the debtor, the plaintiff has received a provisional seizure order, bond seizure and an assignment order that assigned the Bank as a third party debtor. Accordingly, the plaintiff filed a claim against the Bank for the debt payment to execute the assignment order. |
| In progress for the first order. |
Others |
| 157 |
| 82,348 |
| It includes various cases, such as compensation for loss claim. | ||
|
| 159 |
| 94,053 |
|
|
|
As of December 31, 2020, the Bank recorded a provision of W 8,892 million for litigation for certain of the above lawsuits. Additional losses may be incurred from these legal actions besides the current provision established by the Bank, but the amount of loss is not expected to have a material adverse effect on the Bank’s consolidated financial statements.
(d) Principal guaranteed trusts or principal and interest guaranteed trusts
Book value of trusts with guarantee commitments of payments of principal or principal and interest as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Principal guarantee commitments: |
|
|
|
|
Market evaluation form |
| 2,879,836 |
| 2,877,856 |
Book value evaluation form |
| 1,586,308 |
| 1,608,599 |
|
| 4,466,144 |
| 4,486,455 |
Principal and interest guarantee commitments: |
|
|
|
|
Book value evaluation form |
| 1,763 |
| 1,737 |
|
| 4,467,907 |
| 4,488,192 |
Principal in the money trusts |
| 4,067,591 |
| 4,068,341 |
Accrued trust income |
| 400,316 |
| 419,851 |
There may occur additional losses depending on the operating results of trust agreements. As of December 31, 2020 and 2019, no additional payments are required as per the operating results of trust agreements.
154
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
38. Commitments and contingencies (continued)
(d) Others
Regarding the currency option contracts, the Bank has received the dispute arbitration request from the Financial Dispute Arbitration Committee on December 19, 2019; It is expected to be processed through a deliberation by the Board of Directors after consultation through the banking council to discuss future countermeasures.The Bank's management anticipates that the result of the arbitration will not have a significant impact on the Group's financial position.
In addition, some of the private equity funds sold by the Bank and managed by Lime Asset management are being inspected by the supervisory authority for whether any mis-selling has been involved. In this regard, the amount and timing of the cash outflow that may occur are uncertain, and the outcome of the dispute settlement cannot be predicted at this time; therefore, no provision has been recognized. The Group decided to supply liquidity of W 135.6 billion out of the total sales of the repurchase deferral fund of Lime Asset Management, W 271.3 billion and executed W 128.8 billion as of December 31, 2020.
155
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
39. | Statements of cash flows |
|
(a) Cash and cash equivalents reported in the accompanying separate statements of cash flows as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Cash |
| 1,635,696 |
| 2,430,026 |
Reserve deposits |
| 16,711,286 |
| 13,555,978 |
Other deposits |
| 4,453,049 |
| 3,653,856 |
Cash and due from banks |
| 22,800,031 |
| 19,639,860 |
Less: Restricted due from banks |
| (19,196,541) |
| (14,520,217) |
Less: Due with original maturities of more than three months |
| (857,405) |
| (688,834) |
|
| 2,746,085 |
| 4,430,809 |
(b) Significant non-cash activities for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Debt-equity swap |
| 58,528 |
| 224,093 |
Accounts payable for purchase of property and equipment |
| 2,258 |
| - |
Accounts payable for purchase of intangible assets |
| (137,475) |
| 424,039 |
Recognition of right-of-use assets |
| 141,093 |
| 586,110 |
Recognition of lease liabilities |
| 127,110 |
| 540,636 |
(c) Changes in liabilities resulting from financing activities for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | ||||||||
|
| Derivative assets |
| Borrowings |
| Debentures |
| Lease liabilities |
| Total |
Beginning balance |
| (54,234) |
| 17,311,859 |
| 35,575,365 |
| 371,126 |
| 53,204,116 |
Changes in cash flows |
| 359 |
| 3,080,918 |
| (3,441,574) |
| (170,755) |
| (531,052) |
Amortization |
| - |
| 615 |
| 31,522 |
| 5,919 |
| 38,056 |
Net foreign currencies transaction loss |
| - |
| - |
| (187,003) |
| (1,462) |
| (188,465) |
Changes in fair value of hedged items |
| - |
| - |
| 192,676 |
| - |
| 192,676 |
Others |
| (198,312) |
| - |
| - |
| 117,652 |
| (80,660) |
Ending balance |
| (252,187) |
| 20,393,392 |
| 32,170,986 |
| 322,480 |
| 52,634,671 |
|
| December 31, 2019 | |||||
|
| Borrowings |
|
| Debt securities issued |
| Total |
Beginning balance |
| 15,876,442 |
|
| 29,294,584 |
| 45,171,026 |
Changes in cash flows |
| 1,171,938 |
|
| 5,649,894 |
| 6,821,832 |
Amortization |
| 786 |
|
| 102,212 |
| 102,998 |
Net foreign currencies transaction loss |
| 262,693 |
|
| 212,864 |
| 475,557 |
Changes in fair value of hedged items |
| - |
|
| 315,811 |
| 315,811 |
Ending balance |
| 17,311,859 |
|
| 35,575,365 |
| 52,887,224 |
156
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
40. | Related party transactions |
|
(a) Significant balances with the related parties as of December 31, 2020 and December 31, 2019 are as follows:
Related party |
| Account |
| December 31, 2020 |
| December 31, 2019 |
Subsidiaries |
|
|
|
|
|
|
Shinhan Asia Ltd. |
| Deposits |
| - |
| 118,947 |
Shinhan Bank Europe GmbH |
| Cash and due from banks |
| 16,461 |
| 4,113 |
|
| Loans |
| 205,791 |
| 182,612 |
|
| Allowance for loan loss |
| (452) |
| (608) |
|
| Other assets |
| 93 |
| 1,272 |
|
| Deposits |
| 98 |
| 142 |
|
| Borrowings |
| 106,301 |
| 84,137 |
Shinhan Bank Cambodia |
| Cash and due from banks |
| 20 |
| 40 |
|
| Loans |
| 306,816 |
| 195,668 |
|
| Allowance for loan loss |
| (911) |
| (1,528) |
|
| Other assets |
| 1,248 |
| 1,929 |
|
| Provisions |
| 2 |
| 4 |
Shinhan Kazakhstan Bank |
| Cash and due from banks |
| 279 |
| 464 |
Limited |
| Allowance for loan loss |
| (2) |
| (4) |
|
| Other assets |
| 312 |
| - |
|
| Provisions |
| 367 |
| 195 |
Shinhan Bank Canada |
| Cash and due from banks |
| 543 |
| 84 |
|
| Loans |
| 81,064 |
| 110,820 |
|
| Allowance for loan loss |
| (166) |
| (363) |
|
| Other assets |
| 70 |
| 1,205 |
|
| Deposits |
| 195 |
| 191 |
|
| Borrowings |
| 5,533 |
| 7,421 |
Shinhan Bank China Limited |
| Cash and due from banks |
| 18,486 |
| - |
|
| Loans |
| 87,766 |
| 205,832 |
|
| Allowance for loan loss |
| (148) |
| (323) |
|
| Other assets |
| 84 |
| 309 |
|
| Deposits |
| 3,763 |
| 4,159 |
|
| Borrowings |
| 18,632 |
| 12,320 |
|
| Provisions |
| 93 |
| 104 |
|
| Other liabilities |
| - |
| 1 |
157
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
40. | Related party transactions (continued) |
|
(a) Significant balances with the related parties as of December 31, 2020 and December 31, 2019 are as follows: (continued)
Related party |
| Account |
| December 31, 2020 |
| December 31, 2019 |
Subsidiaries (continued)
Shinhan Bank Japan |
| Cash and due from banks |
| 88 |
| 27,024 |
|
| Loans |
| 43,520 |
| 115,780 |
|
| Allowance for loan loss |
| (29) |
| (156) |
|
| Other assets |
| 7 |
| 558 |
|
| Deposits |
| 5,104 |
| 9,636 |
|
| Derivative liabilities |
| - |
| 128 |
|
| Borrowings |
| 71,732 |
| 95,385 |
|
| Provisions |
| 14 |
| 46 |
Shinhan Bank Vietnam Ltd. |
| Cash and due from banks |
| 302 |
| 120 |
|
| Derivative assets |
| 99 |
| 54 |
|
| Loans |
| 37,975 |
| 108,907 |
|
| Allowance for loan loss |
| (8) |
| (76) |
|
| Other assets |
| 292 |
| - |
|
| Deposits |
| 43,395 |
| 65,638 |
|
| Derivative liabilities |
| - |
| 6 |
|
| Borrowings |
| 429,443 |
| 361,234 |
|
| Provisions |
| 340 |
| 570 |
PT Bank Shinhan Indonesia |
| Cash and due from banks |
| 57 |
| 96 |
|
| Derivative assets |
| 743 |
| - |
|
| Loans |
| 342,284 |
| 387,936 |
|
| Allowance for loan loss |
| (696) |
| (880) |
|
| Other assets |
| 491 |
| 3,004 |
|
| Deposits |
| 1,059 |
| - |
|
| Provisions |
| 2 |
| 4 |
Shinhan Bank Mexico |
| Loans |
| 112,717 |
| 95,055 |
|
| Allowance for loan loss |
| (969) |
| (755) |
|
| Other assets |
| 197 |
| 1,241 |
|
| Provisions |
| 10 |
| - |
Trust accounts |
| Other liabilities |
| 288,108 |
| 441,882 |
Structured entities |
| Financial assets at FVTPL |
| 1,671,107 |
| 1,445,946 |
|
| Derivative assets |
| 11,102 |
| 11,062 |
|
| Loans |
| 14,393 |
| 17,485 |
|
| Allowance for loan loss |
| (18) |
| (39) |
|
| Other assets |
| 56,657 |
| 35,421 |
|
| Deposits |
| 9,343 |
| 8,208 |
|
| Derivative liabilities |
| 1,392 |
| 2,917 |
|
| Provisions |
| 59,168 |
| 36,369 |
|
| Other liabilities |
| 2,157 |
| 966 |
158
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
40. | Related party transactions (continued) |
|
(a) Significant balances with the related parties as of December 31, 2020 and December 31, 2019 are as follows: (continued)
Related party |
| Account |
| December 31, 2020 |
| December 31, 2019 | ||||||
The parent company |
|
|
|
|
|
| ||||||
Shinhan Financial Group |
| Current tax assets |
| 81 |
| 59 | ||||||
|
| Deposits |
| 3 |
| 167 | ||||||
|
| Current tax liabilities |
| 216,423 |
| 353,674 | ||||||
|
| Other liabilities |
| 42,339 |
| 52,595 | ||||||
Entities under common control |
|
|
|
| ||||||||
Shinhan Card Co., Ltd. |
| Derivative assets |
| 27,672 |
| 12,066 | ||||||
|
| Loans |
| 39,255 |
| 28,864 | ||||||
|
| Allowance for loan loss |
| (18) |
| (172) | ||||||
|
| Other assets (*) |
| 6,359 |
| 13,575 | ||||||
|
| Deposits |
| 81,186 |
| 35,260 | ||||||
|
| Derivative liabilities |
| - |
| 516 | ||||||
|
| Provisions |
| 123 |
| 63 | ||||||
|
| Other liabilities |
| 25,029 |
| 31,891 | ||||||
Shinhan Investment Corp. |
| Cash and due from banks |
| 14,967 |
| 6,202 | ||||||
|
| Derivative assets |
| 12,187 |
| 11,814 | ||||||
|
| Loans |
| 5,440 |
| - | ||||||
|
| Allowance for loan loss |
| (11) |
| (5) | ||||||
|
| Other assets (*) |
| 24,437 |
| 19,473 | ||||||
|
| Deposits |
| 830,888 |
| 565,972 | ||||||
|
| Derivative liabilities |
| 1,651 |
| 6,749 | ||||||
|
| Provisions |
| 536 |
| 532 | ||||||
|
| Other liabilities |
| 44,137 |
| 42,312 | ||||||
Shinhan Life Insurance Co., Ltd. |
| Derivative assets |
| 12,177 |
| 20,542 | ||||||
|
| Other assets |
| 6 |
| 9 | ||||||
|
| Deposits |
| 47,877 |
| 14,724 | ||||||
|
| Derivative liabilities |
| 31,288 |
| 12,771 | ||||||
|
| Provisions |
| 10 |
| 5 | ||||||
|
| Other liabilities |
| 10,618 |
| 11,940 | ||||||
Shinhan Capital Co., Ltd. |
| Deposits |
| 1,997 |
| 904 | ||||||
|
| Provisions |
| 23 |
| 26 | ||||||
|
| Other liabilities |
| 13,575 |
| 13,575 | ||||||
Jeju Bank |
| Loans |
| 8,885 |
| 4,573 | ||||||
|
| Allowance for loan loss |
| (6) |
| (3) | ||||||
|
| Other assets |
| 1 |
| 2 | ||||||
|
| Deposits |
| 3,118 |
| 1,881 | ||||||
|
| Other liabilities |
| 2,139 |
| 2,139 | ||||||
Shinhan Credit Information |
| Deposits |
| 5,510 |
| 4,842 | ||||||
Co., Ltd. |
| Other liabilities |
| 2,267 |
| 2,195 | ||||||
Shinhan Alternative Investment |
| Deposits |
| 6,853 |
| 8,288 | ||||||
Management Inc. |
| Other liabilities |
| - |
| 9 | ||||||
Shinhan BNP Paribas AMC |
| Deposits |
| 89,087 |
| 57,986 | ||||||
|
| Other liabilities |
| 766 |
| 642 | ||||||
Shinhan DS |
| Other assets |
| 9,028 |
| 1,443 | ||||||
|
| Deposits |
| 560 |
| 4,961 | ||||||
|
| Other liabilities |
| 9,998 |
| 9,069 | ||||||
Shinhan Savings Bank |
| Other liabilities |
| 8,987 |
| 8,987 | ||||||
Shinhan Aitas |
| Deposits |
| 31,131 |
| 24,079 | ||||||
|
| Other liabilities |
| 11 |
| 20 |
(*) Includes right-of-use assets
159
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
40. | Related party transactions (continued) |
|
(a) Significant balances with the related parties as of December 31, 2020 and December 31, 2019 are as follows:
(continued)
Related party |
| Account |
| December 31, 2020 |
| December 31, 2019 |
Entities under common control (continued) | ||||||
Shinhan AI |
| Deposits |
| 160 |
| 1 |
|
| Other liabilities |
| 1,992 |
| 1,929 |
Shinhan REITs Management |
| Deposits |
| 301 |
| - |
Orange Life Insurance Co., Ltd. |
| Derivative assets |
| 505 |
| - |
|
| Deposits |
| 6,033 |
| 2,402 |
|
| Derivative liabilities |
| 4,483 |
| 446 |
|
| Other liabilities |
| 161 |
| - |
Asia Trust Co., Ltd. |
| Loans |
| 1,929 |
| - |
|
| Deposits |
| 184,260 |
| - |
|
| Other liabilities |
| 148 |
| - |
Investments in associates and associates of entities under common control |
|
| ||||
BNP Paribas Cardif Life Insurance Co., Ltd. |
| Deposits |
| 13,941 |
| 402 |
BNP Paribas Cardif General Insurance |
| Deposits |
| 41 |
| 17 |
Dream High Fund III |
| Deposits |
| 4 |
| 5 |
Partners 4th Growth Investment Fund |
| Deposits |
| 2,802 |
| 1,443 |
Credian Health Care Private Equity Fund II |
| Deposits |
| 2 |
| 4 |
Snowball Venture Fund II |
| Deposits |
| 1,739 |
| 233 |
YIUM The 3rd Private Investment Joint Stock Company |
| Deposits |
| 20 |
| 353 |
ICSF (The Korea’s Information Center for Savings & Finance) |
| Deposits |
| 7 |
| 6 |
Multimedia Tech Co., Ltd. |
| Deposits |
| - |
| 3 |
KOREA FINANCE SECURITY |
| Deposits |
| 568 |
| 362 |
Hermes Private Investment Equity Fund |
| Deposits |
| 352 |
| 275 |
Korea Credit Bureau |
| Deposits |
| 2,088 |
| 80 |
Goduck Gangil1 PFV Co., Ltd |
| Loans |
| 24,000 |
| 24,000 |
|
| Allowance for loan loss |
| (71) |
| (78) |
SBC PFV Co., Ltd |
| Deposits |
| 8,011 |
| 5,142 |
Sprott Global Renewable Private Equity Fund I |
| Deposits |
| 258 |
| 342 |
IMM Global Private Equity Fund |
| Loans |
| 800 |
| 800 |
|
| Allowance for loan loss |
| (2) |
| (3) |
|
| Deposits |
| 10,820 |
| 7,598 |
Goduck Gangil10 PFV Co., Ltd |
| Loans |
| 9,400 |
| - |
|
| Allowance for loan loss |
| (19) |
| - |
|
| Deposits |
| 2,718 |
| - |
(*) Includes right-of-use assets
160
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
40. | Related party transactions (continued) |
|
(a) Significant balances with the related parties as of December 31, 2020 and December 31, 2019 are as follows:
(continued)
Related party |
| Account |
| December 31, 2020 |
| December 31, 2019 |
Investments in associates and associates of entities under common control (continued) |
|
| ||||
Shinhan Global Healthcare Fund 1I |
| Deposits |
| 1 |
| - |
COSPEC BIM tech |
| Loans |
| 151 |
| - |
|
| Allowance for loan loss |
| (95) |
| - |
|
| Deposits |
| 1 |
| - |
IMM Special Situation Private Equity Fund(the number two of one) |
| Deposits |
| 117 |
| - |
NV Station Private Equity Fund |
| Deposits |
| 100 |
| - |
Key management personnel |
|
|
|
|
|
|
|
| Loans |
| 5,146 |
| 4,426 |
|
| Allowance for loan loss |
| (2) |
| (3) |
|
| Provisions |
| 1 |
| 1 |
(*) Includes right-of-use assets
161
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
40. | Related party transactions (continued) |
|
(b) Significant transactions with the related parties for the nine-month periods ended December 31, 2020 and 2019 are as follows:
Related party |
| Account |
| December 31, 2020 |
| December 31, 2019 |
Subsidiaries |
|
|
|
|
|
|
Shinhan Asia Ltd. |
| Fees and commission income |
| - |
| 186 |
Shinhan Bank Europe |
| Interest income |
| 1,618 |
| 4,840 |
GmbH |
| Fees and commission income |
| 166 |
| 142 |
|
| Reversal of (provision for) allowance |
| 156 |
| 281 |
|
| Interest expense |
| (60) |
| (218) |
Shinhan Bank Cambodia |
| Interest income |
| 4,441 |
| 3,404 |
|
| Fees and commission income |
| 167 |
| 162 |
|
| Other operating income |
| 3 |
| - |
|
| Reversal of (provision for) allowance |
| 617 |
| (1,383) |
|
| Other operating expense |
| - |
| (3) |
Shinhan Kazakhstan Bank |
| Interest income |
| - |
| 2 |
Limited |
| Fees and commission income |
| 262 |
| 142 |
|
| Other operating income |
| - |
| 104 |
|
| Reversal of (provision for) allowance |
| 1 |
| 5 |
|
| Other operating expense |
| (172) |
| - |
Shinhan Bank Canada |
| Interest income |
| 1,652 |
| 3,080 |
|
| Fees and commission income |
| 182 |
| 170 |
|
| Reversal of (provision for) allowance |
| 197 |
| (26) |
|
| Other operating expense |
| (2) |
| (1) |
Shinhan Bank China |
| Interest income |
| 2,635 |
| 6,127 |
Limited |
| Fees and commission income |
| 431 |
| 335 |
|
| Other operating income |
| 11 |
| 27 |
|
| Reversal of allowance |
| 175 |
| 190 |
|
| Interest expense |
| (4) |
| (11) |
Shinhan Bank Japan |
| Interest income |
| 1,164 |
| 4,279 |
|
| Fees and commission income |
| 1,077 |
| 719 |
|
| Reversal of (provision for) allowance |
| 127 |
| 112 |
|
| Interest expense |
| (2) |
| (18) |
|
| Loss related to derivatives |
| - |
| (129) |
|
| Other operating expense |
| (32) |
| (17) |
Shinhan Bank Vietnam Ltd. |
| Interest income |
| 35 |
| 117 |
|
| Fees and commission income |
| 3,137 |
| 1,575 |
|
| Gain related to derivatives |
| 58 |
| 54 |
|
| Other operating income |
| 229 |
| - |
|
| Reversal of (provision for) allowance |
| 68 |
| (60) |
|
| Interest expense |
| (8,831) |
| (4,773) |
|
| Loss related to derivatives |
| - |
| (6) |
|
| Other operating expense |
| - |
| (124) |
Shinhan Indonesia |
| Interest income |
| 7,268 |
| 9,349 |
|
| Fees and commission income |
| 734 |
| 460 |
|
| Gain related to derivatives |
| 352 |
| - |
|
| Other operating income |
| 2 |
| - |
|
| Reversal of (provision for) allowance |
| 184 |
| (99) |
|
| Other operating expense |
| - |
| (4) |
Shinhan Bank America |
| Fees and commission income |
| 172 |
| 243 |
|
| Provision for allowance |
| - |
| 32 |
162
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
40. | Related party transactions (continued) |
|
(b) Significant transactions with the related parties for the nine-month periods ended December 31, 2020 and 2019 are as follows: (continued)
Related party |
| Account |
| December 31, 2020 |
| December 31, 2019 |
Subsidiaries (continued) |
|
|
|
|
|
|
Shinhan Bank Mexico |
| Interest income |
| 1,806 |
| 1,979 |
|
| Fees and commission income |
| 135 |
| 194 |
|
| Reversal of (provision for) allowance |
| (214) |
| 3,789 |
|
| Other operating expense |
| (10) |
| - |
Trust Accounts |
| Fees and commission income |
| 20,261 |
| 19,858 |
|
| Interest expense |
| (2,185) |
| (3,670) |
Structured entities |
| Interest income |
| 18,854 |
| 16,798 |
|
| Fees and commission income |
| 14,552 |
| 18,356 |
|
| Gain related to derivatives |
| 23,694 |
| 11,859 |
|
| Other operating income |
| 114 |
| 103 |
|
| Provision for allowance |
| 21 |
| 11 |
|
| Interest expense |
| (8) |
| (6) |
|
| Loss related to derivatives |
| (5,010) |
| (5,150) |
|
| Other operating expense |
| (22,798) |
| - |
|
|
|
|
|
|
|
The parent company |
|
|
|
|
|
|
Shinhan Financial Group |
| Other operating income |
| 1,244 |
| 1,259 |
|
| Interest expense |
| (194) |
| (258) |
|
| Fees and commission expense |
| (38,435) |
| (32,300) |
|
|
|
|
|
|
|
Entities under common control |
|
|
|
| ||
Shinhan Card Co., Ltd. |
| Interest income |
| 2,064 |
| 1,188 |
|
| Fees and commission income |
| 181,160 |
| 182,787 |
|
| Gain related to derivatives |
| 27,483 |
| 15,598 |
|
| Other operating income |
| 5,711 |
| 1,841 |
|
| Interest expense |
| (188) |
| (701) |
|
| Fees and commission expense |
| (303) |
| (441) |
|
| Loss related to derivatives |
| (5,547) |
| (4,066) |
|
| Reversal of (provision for) allowance |
| 155 |
| (153) |
|
| Other operating expense |
| (2,157) |
| (2,584) |
Shinhan Investment Corp. |
| Interest income |
| 546 |
| 1,610 |
|
| Fees and commission income |
| 5,383 |
| 5,984 |
|
| Gain related to derivatives |
| 58,069 |
| 38,807 |
|
| Other operating income |
| 8,524 |
| 2,621 |
|
| Interest expense |
| (1,762) |
| (2,165) |
|
| Loss related to derivatives |
| (34,980) |
| (34,770) |
|
| Provision for allowance |
| (6) |
| 2 |
|
| Other operating expense |
| (1,300) |
| (157) |
|
163
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
40. | Related party transactions (continued) |
|
(b) Significant transactions with the related parties for the nine-month periods ended December 31, 2020 and 2019 are as follows: (continued)
Related party |
| Account |
| December 31, 2020 |
| December 31, 2019 |
Entities under common control (continued) |
|
|
|
| ||
Shinhan Life Insurance |
| Interest income |
| 53 |
| 49 |
Co., Ltd. |
| Fees and commission income |
| 8,105 |
| 10,295 |
|
| Gain related to derivatives |
| 50,423 |
| 62,337 |
|
| Other operating income |
| 2,297 |
| 650 |
|
| Interest expense |
| (189) |
| (244) |
|
| Fees and commission expense |
| - |
| (269) |
|
| Loss related to derivatives |
| (31,776) |
| (11,301) |
|
| Other operating expense |
| (5) |
| (399) |
Shinhan Capital Co., Ltd. |
| Other operating income |
| - |
| 1 |
|
| Other operating income |
| 918 |
| 320 |
|
| Interest expense |
| (195) |
| (255) |
|
| Fees and commission expense |
| - |
| (12) |
Jeju Bank |
| Interest income |
| 6 |
| 6 |
|
| Other operating income |
| 598 |
| 227 |
|
| Interest expense |
| (30) |
| (41) |
|
| Provision for allowance |
| (6) |
| (3) |
Shinhan Credit Information |
| Fees and commission income |
| 3 |
| 4 |
Co., Ltd. |
| Other operating income |
| 315 |
| 53 |
|
| Interest expense |
| (60) |
| (77) |
|
| Fees and commission expense |
| (6,739) |
| (6,332) |
Shinhan Alternative |
| Other operating income |
| 2 |
| - |
Investment Management Inc. |
| Interest expense |
| (29) |
| (74) |
Shinhan BNP Paribas AMC |
| Fees and commission income |
| 47 |
| 38 |
|
| Other operating income |
| 143 |
| 68 |
|
| Interest expense |
| (689) |
| (1,220) |
|
| Fees and commission expense |
| (2,087) |
| (2,099) |
Shinhan DS |
| Other operating income |
| 858 |
| 201 |
|
| Interest expense |
| (135) |
| (199) |
|
| Other operating expense |
| (44,845) |
| (44,548) |
Shinhan Savings Bank |
| Fees and commission income |
| 1,048 |
| 966 |
|
| Other operating income |
| 706 |
| 215 |
|
| Interest expense |
| (116) |
| (163) |
Shinhan Aitas |
| Fees and commission income |
| 33 |
| 45 |
|
| Other operating income |
| 167 |
| 56 |
|
| Interest expense |
| (175) |
| (36) |
|
| Fees and commission expense |
| - |
| (29) |
Shinhan AI |
| Other operating income |
| 106 |
| 5,953 |
|
| Fees and commission expense |
| (6,462) |
| (1,929) |
Orange Life Insurance Co., |
| Fees and commission income |
| 2,607 |
| 1,576 |
Ltd. |
| Gain related to derivatives |
| 3,692 |
| 604 |
|
| Other operating income |
| 151 |
| - |
|
| Interest expense |
| (66) |
| (37) |
|
| Fees and commission expense |
| (626) |
| - |
|
| Loss related to derivatives |
| (4,695) |
| (446) |
Asia Trust Co., Ltd. |
| Interest income |
| (454) |
| - |
|
| Fees and commission income |
| 6 |
| - |
|
| Other operating income |
| - |
| 14 |
|
| Interest expense |
| (368) |
| - |
|
| Fees and commission expense |
| (198) |
| - |
Shinhan BNPP Investment Trust No. 1 in Special Private Equity Investment for Future Energy
|
| Fees and commission income |
| 2 |
| - |
|
164
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
40. | Related party transactions (continued) |
|
(b) Significant transactions with the related parties for the nine-month periods ended December 31, 2020 and 2019 are as follows: (continued)
Related party |
| Account |
| December 31, 2020 |
| December 31, 2019 |
Investments in associates and associates of entities under common control |
|
| ||||
BNP Paribas Cardif Life Insurance Co., Ltd. |
| Fees and commission income |
| 2,359 |
| 3,028 |
|
| Interest expense |
| (5) |
| - |
|
| Other operating expense |
| - |
| (1) |
BNP Paribas Cardif General Insurance |
| Fees and commission income |
| 8 |
| 9 |
Midas Dong-A Snowball Venture Fund |
| Interest expense |
| (2) |
| - |
Partners 4th Growth Investment Fund |
| Interest expense |
| (4) |
| (7) |
KOREA FINANCE SECURITY |
| Fees and commission income |
| 10 |
| 10 |
|
| Interest expense |
| (1) |
| - |
Korea Credit Bureau |
| Fees and commission income |
| 13 |
| 13 |
|
| Interest expense |
| (12) |
| (5) |
Goduck Gangil1 PFV Co., Ltd |
| Interest income |
| 915 |
| 328 |
|
| Fees and commission income |
| - |
| 1,120 |
|
| Provision for allowance |
| 7 |
| (78) |
SBC PFV Co., Ltd |
| Fees and commission income |
| 732 |
| - |
|
| Interest expense |
| (5) |
| (3) |
IMM Global Private Equity Fund |
| Interest income |
| 25 |
| 28 |
|
| Fees and commission income |
| (13) |
| (25) |
|
| Interest expense |
| - |
| (3) |
Goduck Gangil10 PFV Co., Ltd |
| Interest income |
| 299 |
| - |
|
| Fees and commission income |
| 643 |
| - |
|
| Interest expense |
| (4) |
| - |
|
| Provision for allowance |
| (19) |
| - |
COSPEC BIM tech |
| Provision for allowance |
| (95) |
| - |
Credian T&F 2020 Corporate Financial Stability Private Equity |
| Interest expense |
| (1) |
| - |
Shinhan Western T&D Consignment Management Real Estate Investment Co., Ltd |
| Fees and commission income |
| 300 |
| - |
Key management personnel |
|
|
|
|
|
|
|
| Interest income |
| 126 |
| 161 |
(*) Excluded from associates under common control for the year ended December 31, 2020
165
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
40. | Related party transactions (continued) |
|
(c) Details of transactions with key management for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Short and long term employee benefits |
| 10,194 |
| 10,506 |
Post-employment benefits |
| 287 |
| 355 |
Share-based payment transactions |
| 3,204 |
| 5,167 |
|
| 13,685 |
| 16,028 |
(d) The guarantees provided between the related parties
The guarantees provided between the related parties as of December 31, 2020 and December 31, 2019 are as follows:
|
| Amount of guarantees |
|
| ||
Guaranteed party |
| December 31, 2020 |
| December 31, 2019 |
| Account |
Shinhan Bank China Limited |
| 66,881 |
| 66,338 |
| Financial guarantee (payment guarantee method) |
Shinhan Bank Europe GmbH |
| 57,516 |
| - |
| Risk Participation Agreement |
Shinhan Bank Cambodia |
| 544 |
| 579 |
| Financial guarantee (payment guarantee method) |
Shinhan Kazakhstan Bank Limited |
| 28,248 |
| 20,563 |
| Financial guarantee (payment guarantee method) |
|
| 3,596 |
| - |
| Payment guarantee |
Shinhan Bank Vietnam Ltd. |
| 247,079 |
| 346,161 |
| Financial guarantee (payment guarantee method) |
|
| 3,663 |
| 3,898 |
| Performance guarantees |
Shinhan Bank Mexico |
| 4,352 |
| 11,578 |
| Unused credit limit |
Shinhan Bank Indonesia |
| 782 |
| 1,709 |
| Financial guarantee (payment guarantee method) |
Shinhan Bank Japan |
| 21,085 |
| 42,539 |
| Financial guarantee (payment guarantee method) |
Structured entities (*1) |
| 3,243,747 |
| 3,107,652 |
| ABCP purchase commitments(*1) |
|
| 674,257 |
| 560,959 |
| Unused credit limit |
|
| 26,119 |
| - |
| Financial guarantee (payment guarantee method) |
|
| 18,610 |
| - |
| Financial guarantee (letter of credit method) |
|
| 156 |
| - |
| Payment guarantee |
|
| 241,998 |
| 184,329 |
| Security underwriting commitment(*2) |
Shinhan Investment Corp. |
| 19,000 |
| - |
| Note purchase agreement |
|
| 230,960 |
| 258,890 |
| Unused credit limit |
166
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
40. | Related party transactions (continued) |
|
(d) The guarantees provided between the related parties (continued)
The guarantees provided between the related parties as of December 31, 2020 and December 31, 2019 are as follows (continued):
|
| Amount of guarantees |
|
| ||
Guaranteed party |
| December 31, 2020 |
| December 31, 2019 |
| Account |
|
|
|
|
|
|
|
Shinhan Card Co., Ltd. |
| 500,819 |
| 503,681 |
| Unused credit limit |
| 13,600 |
| 14,473 |
| Financial guarantee (letter of credit method) | |
Shinhan Life Insurance Co., Ltd |
| 50,000 |
| 50,000 |
| Unused credit limit |
Shinhan Capital Co., Ltd. |
| 70,000 |
| 70,000 |
| Unused credit limit |
Shinhan BNP Paribas AMC |
| 10,000 |
| 10,000 |
| Unused credit limit |
|
| 5,533,012 |
| 5,253,349 |
|
|
(*1) The deposit amount of the ABCP purchase contract for a structured entity is the total ABCP purchase contract amount, less the balance of the ABCP held as of December 31, 2020
(*2) The amount is for subsidiaries and associates, which are structured entities, under common control.
167
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
40. | Related party transactions (continued) |
|
(e) Collaterals provided to related parties
i) Details of collaterals provided to the related parties as of December 31, 2020 and 2019 are as follows:
|
|
|
|
|
| December 31, 2020 |
| December 31, 2019 | ||||
|
| Related party |
| Pledged assets |
| Carrying amounts |
| Amounts collateralized |
| Carrying amounts |
| Amounts collateralized |
Subsidiary |
| Shinhan Bank Japan |
| Securities |
| 388,454 |
| 388,454 |
| 100,149 |
| 100,149 |
Entities under common control |
| Shinhan Life Insurance Co., Ltd |
| Securities |
| 10,146 |
| 10,146 |
| 10,189 |
| 10,189 |
|
| Orange Life Insurance Co., Ltd |
| Securities |
| 39,791 |
| 3,208 |
| 10,243 |
| 516 |
|
|
|
|
|
| 438,391 |
| 401,808 |
| 120,581 |
| 110,854 |
168
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
40. | Related party transactions (continued) |
|
(e) Collaterals provided to related parties
ii) Details of collaterals provided by the related parties as of December 31, 2020 and 2019 are as follows:
|
| Related party |
| Pledged assets |
| December 31, 2020 |
| December 31, 2019 |
Subsidiaries |
| S-redefine 4th Co., Ltd. |
| Trust |
| - |
| 318,000 |
|
| Tiger Eyes 1st Co., Ltd |
| Real estate |
| 60,000 |
| 60,000 |
|
| S-solution 9th Co., Ltd. |
| Real estate |
| - |
| 18,000 |
|
| Sunny Russell 4th L.L.C |
| Other movables |
| - |
| 12,000 |
|
| Redefine Unjung Co., Ltd. |
| Trust |
| 66,000 |
| 66,000 |
|
|
|
| Stocks |
| 66,000 |
| 66,000 |
|
| GIB DM Co., Ltd. |
| Stocks |
| 14,160 |
| 14,160 |
|
| Maestro ER Co., Ltd. |
| Real estate |
| 42,000 |
| 42,000 |
|
| Maestrogongdeok Co.,LTD |
| Real estate |
| 48,600 |
| 48,600 |
|
| MAESTROST CO.,LTD |
| Trust and real estate |
| 48,000 |
| 48,000 |
|
| GIBDAEMYUNG 1st Co., Ltd |
| Trust |
| 84,000 |
| 84,000 |
|
| MAESTRO S.A Co., Ltd |
| Real estate |
| 45,600 |
| 45,600 |
|
| MaestroDcube Co.,Ltd. |
| Real estate |
| 60,000 |
| - |
|
| Richgate 13th Corp. |
| Deposits |
| 36,300 |
| - |
|
| RICHGATE YEONSEUNG |
| Real estate |
| 13,200 |
| - |
|
| GIBYOUNGSAN 1st CO.,LTD |
| Trust |
| 31,000 |
| 31,000 |
|
|
|
| Stocks |
| 197,600 |
| 197,600 |
|
| GIBYOUNGSAN 2nd CO.,LTD |
| Trust |
| 31,200 |
| 31,200 |
|
|
|
| Stocks |
| 78,000 |
| 78,000 |
|
| MAESTRO DS Co., Ltd |
| Trust |
| 318,000 |
| - |
|
| GIB st Co., Ltd. |
| Trust |
| 59,400 |
| - |
|
| GIB JDT CO.,LTD |
| Trust |
| 36,000 |
| - |
|
|
|
| Deposit Return Bond |
| 36,000 |
| - |
|
|
|
| Stocks |
| 36,000 |
| - |
|
| GIB Gaps CO.,LTD |
| Stocks |
| 144,000 |
| - |
|
| Shinhan Airforce |
| Real estate |
| 60,000 |
| - |
|
| GIB YB CO.,LTD |
| Real estate |
| 23,520 |
| - |
|
| GIB. Portfolio A 3rd CO.,LTD |
| Real estate |
| 264,000 |
| - |
|
| Rich gate Songpa corp. |
| Real estate |
| 31,200 |
| - |
Entities under |
| Shinhan Investment Corp. |
| Deposits |
| 135,700 |
| 135,700 |
common control |
|
|
| Real estate |
| 91,974 |
| 91,974 |
|
| Jeju Bank |
| Government bonds |
| 20,000 |
| 20,000 |
|
| Shinhan Life Insurance Co., Ltd. |
| Government bonds |
| 6,000 |
| 6,000 |
|
| Shinhan Credit Information Co., Ltd. |
| Deposits |
| 180 |
| 180 |
Investments in associates |
| BNP Paribas Cardif Life Insurance Co., Ltd. |
| Public bonds |
| 12,000 |
| 12,000 |
|
| Hyungje art printing |
| Machinery |
| 120 |
| 120 |
|
| Goduck Gangil1 PFV Co., Ltd |
| Trust |
| 28,800 |
| 28,800 |
|
| Goduck Gangil10 PFV Co., Ltd |
| Trust |
| 13,000 |
| - |
|
|
|
|
|
| 2,237,554 |
| 1,454,934 |
169
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
40. | Related party transactions (continued) |
|
(f) Transactions with related parties
i) Loan transactions with related parties for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 | |||||||||
|
| Related party |
|
| Beginning balance (*1) |
| Rental(*2) |
| Recovery (*2)(*3) |
| Ending balance (*1) |
Subsidiaries |
| Shinhan Bank Vietnam Ltd. |
|
| 108,907 |
| 107,051 |
| (177,983) |
| 37,975 |
|
| Shinhan Bank Cambodia |
|
| 195,668 |
| 399,921 |
| (288,773) |
| 306,816 |
|
| Shinhan Bank China Limited |
|
| 205,832 |
| 104,586 |
| (222,652) |
| 87,766 |
|
| Shinhan Bank Canada |
|
| 110,820 |
| 96,510 |
| (126,266) |
| 81,064 |
|
| Shinhan Bank Mexico |
|
| 95,055 |
| 125,516 |
| (107,854) |
| 112,717 |
|
| Shinhan Bank Indonesia |
|
| 387,936 |
| 446,140 |
| (491,792) |
| 342,284 |
|
| Shinhan Bank Europe GmbH |
|
| 182,612 |
| 645,009 |
| (621,830) |
| 205,791 |
|
| Shinhan Bank Japan |
|
| 115,780 |
| 432,183 |
| (504,443) |
| 43,520 |
|
| Structured entities |
|
| 17,485 |
| 52,569 |
| (55,661) |
| 14,393 |
Entities under common control |
| Shinhan Card Co., Ltd. |
|
| 28,864 |
| 31,420 |
| (21,029) |
| 39,255 |
|
| Jeju Bank |
|
| 4,573 |
| 18,530 |
| (14,218) |
| 8,885 |
|
| Shinhan Investment Corp. |
|
| - |
| 36,447 |
| (31,007) |
| 5,440 |
Investment in associates |
| Goduck Gangil1 PFV Co., Ltd |
|
| 24,000 |
| - |
| - |
| 24,000 |
|
| Goduck Gangil10 PFV Co., Ltd |
|
| - |
| 28,200 |
| (18,800) |
| 9,400 |
|
| IMM Global Private Equity Fund |
|
| 800 |
| - |
| - |
| 800 |
|
| COSPEC BIM tech(*4) |
|
| - |
| - |
| 151 |
| 151 |
|
|
|
|
| 1,478,332 |
| 2,524,082 |
| (2,682,157) |
| 1,320,257 |
(*1) The amount is before deducting allowance.
(*2) Some of the limit loans are shown in net amount.
(*3) It includes gains and losses of foreign exchange regarding overseas subsidiaries.
(*4) As a company that is incorporated as a related party for the year ended December 31, 2020, the balance as of December 31, 2020 is reported in collections, etc.
|
170
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
40. | Related party transactions (continued) |
|
(f) Transactions with related parties (continued)
i) Loan transactions with related parties for the years ended December 31, 2020 and 2019 are as follows: (continued)
|
| December 31, 2019 | |||||||||
|
| Related party |
|
| Beginning balance (*1) |
| Rental(*2) |
| Recovery (*2)(*3) |
| Ending balance (*1) |
Subsidiaries |
| Shinhan Bank Vietnam Ltd. |
|
| 66,474 |
| 165,130 |
| (122,697) |
| 108,907 |
|
| PT Bank Shinhan Indonesia |
|
| 272,816 |
| 590,581 |
| (475,461) |
| 387,936 |
|
| Structured entities |
|
| 13,692 |
| 36,443 |
| (32,650) |
| 17,485 |
|
| Shinhan Bank Canada |
|
| 117,827 |
| 177,820 |
| (184,827) |
| 110,820 |
|
| Shinhan Bank China Limited |
|
| 226,943 |
| 245,558 |
| (266,669) |
| 205,832 |
|
| Shinhan Bank Mexico |
|
| 25,157 |
| 114,178 |
| (44,280) |
| 95,055 |
|
| Shinhan Bank Europe GmbH |
|
| 310,947 |
| 489,643 |
| (617,978) |
| 182,612 |
|
| Shinhan Bank Cambodia |
|
| 71,558 |
| 237,071 |
| (112,961) |
| 195,668 |
|
| Shinhan Bank Japan |
|
| 167,715 |
| 246,541 |
| (298,476) |
| 115,780 |
|
| Shinhan Kazakhstan |
|
| 3,354 |
| - |
| (3,354) |
| - |
Entities under common control |
| Shinhan Card Co., Ltd. |
|
| 8,782 |
| 25,233 |
| (5,151) |
| 28,864 |
| Jeju Bank |
|
| 1,621 |
| 9,189 |
| (6,237) |
| 4,573 | |
|
| Shinhan Investment Corp. |
|
| 19,588 |
| 26,300 |
| (45,888) |
| - |
Investment in associates |
| Goduck Gangil1 PFV Co., Ltd |
|
| - |
| 24,000 |
| - |
| 24,000 |
|
| IMM Global Private Equity Fund |
|
| - |
| 800 |
| - |
| 800 |
|
|
|
|
| 1,306,474 |
| 2,388,487 |
| (2,216,629) |
| 1,478,332 |
(*1) The amount is before deducting allowance.
(*2) Some of the limit loans are shown in net amount.
(*3) It includes gains and losses of foreign exchange regarding overseas subsidiaries.
171
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
40. | Related party transactions (continued) |
|
(f) Transactions with related parties (continued)
ii) Details of significant redemption and borrowings of related parties for the years ended December 31, 2020 and 2019 are as follows:
|
|
|
|
| December 31, 2020 | ||||||
| Related party |
| Account |
| Beginning balance |
| Rental |
| Recovery (*1) |
| Ending balance |
Subsidiaries | Shinhan Bank Europe GmbH |
| Borrowing |
| 84,137 |
| 411,353 |
| (389,189) |
| 106,301 |
| Shinhan Bank Japan |
| Borrowing |
| 95,385 |
| 302,260 |
| (325,913) |
| 71,732 |
| Shinhan Bank Canada |
| Borrowing |
| 7,421 |
| 19,156 |
| (21,044) |
| 5,533 |
| Shinhan Bank China Limited |
| Borrowing |
| 12,320 |
| 77,935 |
| (71,623) |
| 18,632 |
| Shinhan Bank Vietnam Ltd. |
| Borrowing |
| 361,234 |
| 1,617,693 |
| (1,549,484) |
| 429,443 |
Entities under common control | Shinhan Investment Corp. |
| Deposit (*2) |
| 44,123 |
| 131,790 |
| (37,279) |
| 138,634 |
| Shinhan Credit Information Co., Ltd. |
| Deposit (*2) |
| 2,390 |
| - |
| - |
| 2,390 |
| Shinhan Card Co., Ltd. |
| Deposit (*2) |
| 5 |
| 5 |
| (5) |
| 5 |
| Shinhan Capital Co., Ltd. |
| Deposit (*2) |
| - |
| 1,031 |
| (1,031) |
| - |
| Shinhan Alternative Investment Management, Inc. |
| Deposit (*2) |
| 1,800 |
| - |
| (1,800) |
| - |
| Shinhan BNP Paribas AMC |
| Deposit (*2) |
| 44,197 |
| 44,029 |
| (17,853) |
| 70,373 |
| Shinhan Aitas |
| Deposit (*2) |
| 10,000 |
| - |
| - |
| 10,000 |
| Asia Trust Co., Ltd. |
| Deposit (*2) |
| - |
| 150,000 |
| - |
| 150,000 |
|
|
|
|
| 663,012 |
| 2,755,252 |
| (2,415,221) |
| 1,003,043 |
(*1) It includes gains and losses of foreign exchange regarding overseas subsidiaries.
(*2) The details of settlements among related parties, such as depository liabilities that can be deposited and withdrawn on demand, are excluded.
172
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
40. | Related party transactions (continued) |
|
(f) Transactions with related parties (continued)
ii) Details of significant redemption and borrowings of related parties for the years ended December 31, 2020 and 2019 are as follows: (continued)
|
|
|
|
| December 31, 2019 | ||||||
| Related party |
| Account |
| Beginning balance |
| Rental |
| Recovery (*1) |
| Ending balance |
Subsidiaries | Shinhan Bank Japan |
| Borrowing |
| 52,954 |
| 283,089 |
| (240,658) |
| 95,385 |
| Shinhan Bank Europe GmbH |
| Borrowing |
| 129,914 |
| 286,940 |
| (332,717) |
| 84,137 |
| Shinhan Bank Canada |
| Borrowing |
| 10,866 |
| 24,946 |
| (28,391) |
| 7,421 |
| Shinhan Bank China Limited |
| Borrowing |
| 7,441 |
| 24,583 |
| (19,704) |
| 12,320 |
| Shinhan Bank Vietnam Ltd. |
| Borrowing |
| 72,677 |
| 1,065,898 |
| (777,341) |
| 361,234 |
Entities under common control | Shinhan Investment Corp. |
| Deposit (*2) |
| 44,287 |
| 5,904 |
| (6,068) |
| 44,123 |
| Shinhan Credit Information Co., Ltd. |
| Deposit (*2) |
| 2,390 |
| - |
| - |
| 2,390 |
| Shinhan Card Co., Ltd. |
| Deposit (*2) |
| 50 |
| - |
| (45) |
| 5 |
| Shinhan Alternative Investment Management Inc. |
| Deposit (*2) |
| 4,600 |
| 1,000 |
| (3,800) |
| 1,800 |
| Shinhan BNP Paribas AMC |
| Deposit (*2) |
| 105,713 |
| 15,143 |
| (76,659) |
| 44,197 |
| Shinhan Aitas |
| Deposit (*2) |
| 4,000 |
| 10,000 |
| (4,000) |
| 10,000 |
| Shinhan DS |
| Deposit (*2) |
| 513 |
| - |
| (513) |
| - |
Investments in associates and entities under common control | Midas Dong-A Snowball Venture Fund |
| Deposit (*2) |
| 158 |
| - |
| (158) |
| - |
|
|
|
|
| 435,563 |
| 1,717,503 |
| (1,490,054) |
| 663,012 |
(*1) It includes gains and losses of foreign exchange regarding overseas subsidiaries.
(*2) The details of settlements among related parties, such as depository liabilities that can be deposited and withdrawn on demand, are excluded.
173
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
40. | Related party transactions (continued) |
|
(g) Major commitments related to derivatives
As of December 31 2020 and December 31, 2019, the significant commitments related to derivative assets and liabilities with related parties are as follows:
|
| Related party |
| December 31, 2020 |
| December 31, 2019 |
Entities under common control
|
| Shinhan Life Insurance |
| 666,972 |
| 1,089,724 |
| Shinhan Card Co., Ltd. |
| 1,326,680 |
| 1,206,640 | |
| Shinhan Investment Corp. |
| 481,218 |
| 1,379,975 | |
| Orange Life Insurance Co., Ltd. |
| 69,511 |
| 25,949 | |
Subsidiaries |
| Shinhan Bank Vietnam Ltd. |
| 65,369 |
| 20,026 |
|
| PT Bank Shinhan Indonesia |
| 90,253 |
| - |
Investments in associates and entities under common control |
| MPC Yulchon Green 1st |
| 6,600 |
| 8,700 |
| MPC Yulchon 2nd |
| - |
| 2,200 | |
| MPC Yulchon 1st |
| 80,400 |
| 15,000 | |
| Shinhan-S-Russell Co., Ltd. |
| 45,000 |
| 56,250 | |
| Sunny Financial 10th Co., Ltd. |
| 30,000 |
| 20,000 | |
| Sunny Dream 7th Co., Ltd. |
| - |
| 96,500 | |
| Sunny Russell 4th Co., Ltd |
| - |
| 200 | |
| Sunny Russell 5th Co., Ltd |
| - |
| 30,000 | |
| S-smart 9th Co., Ltd. |
| - |
| 28,500 | |
| Sunny Smart 2nd Co., Ltd. |
| - |
| 10,000 | |
| SH inno 1st Co., Ltd. |
| 70,000 |
| 70,000 | |
| Tiger Eyes 1st Co., Ltd. |
| 35,000 |
| 35,000 | |
| Sunny Smart 5th Co., Ltd. |
| - |
| 20,000 | |
| S-solution 2nd Co., Ltd. |
| - |
| 8,000 | |
| S-solution 3rd Co., Ltd. |
| - |
| 150,000 | |
| Shinhan display 1st Co., Ltd. |
| - |
| 200,000 | |
| S-solution 9th Co., Ltd. |
| - |
| 15,000 | |
| Sunny solution 2nd Co., Ltd. |
| 15,000 |
| 15,000 | |
| Sunny solution 3rd Co., Ltd. |
| - |
| 50,000 | |
| Redefine Unjung Co., Ltd. |
| - |
| 30,000 | |
| Shinhan display 2nd Co., Ltd. |
| 200,000 |
| 200,000 | |
| Sunny solution 9th Co., Ltd. |
| - |
| 10,000 | |
| Sunny solution 10th Co., Ltd. |
| 13,000 |
| 13,000 | |
| S-Tiger 2nd Co., Ltd. |
| 90,000 |
| 90,000 | |
| S-redefine 3rd Co., Ltd. |
| - |
| 20,000 | |
| GIB harim Co., Ltd. |
| - |
| 5,000 | |
| Grand bene Co., Ltd. |
| 134,000 |
| 217,000 | |
| Richgate 1st corp. |
| - |
| 20,000 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
174
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
40. | Related party transactions (continued) |
|
(g) Major commitments related to derivatives (continued)
As of December 31 2020 and December 31, 2019, the significant commitments related to derivative assets and liabilities with related parties are as follows (continued):
|
| Related party |
| December 31, 2020 |
| December 31, 2019 |
Investments in associates and entities under common control |
| S redefine 7th Co., Ltd. |
| - |
| 19,000 |
| Rich gate 8th corp. |
| 30,000 |
| 20,000 | |
| G.I.B.han 1st corp. |
| - |
| 16,000 | |
| Rich gate 9th corp. |
| 15,000 |
| 15,000 | |
| Rich gate 11th corp. |
| 25,000 |
| 25,000 | |
| GIB sol 1st corp. |
| 20,000 |
| 20,000 | |
| Richgate 12th corp. |
| 40,000 |
| 40,000 | |
| Maestro ER Co., Ltd. |
| 35,000 |
| 35,000 | |
| Rich gate 13th corp. |
| 33,000 |
| 33,000 | |
| GIB CSI Co., Ltd. |
| 20,000 |
| 20,000 | |
| Richgate 14th corp. |
| 11,500 |
| 11,500 | |
| MAESTROST CO.,LTD |
| 80,000 |
| 40,000 | |
| Maestro mirae Co., Ltd. |
| 10,000 |
| 10,000 | |
| MAESTROSP CO.,LTD |
| 21,000 |
| 16,000 | |
| S-TIGER 5th CO.,LTD |
| 52,000 |
| 52,000 | |
| GIB time 1st |
| 30,000 |
| 30,000 | |
| Maestrogongdeok Co.,LTD |
| 40,000 |
| 40,000 | |
| S-redefine 10th Co., Ltd. |
| 40,000 |
| 40,000 | |
| MAESTRO BIZON CO.,LTD |
| 250,000 |
| 250,000 | |
| MAESTRO S.I CO.,LTD |
| 25,000 |
| 25,000 | |
| GIB AIR CO.,LTD |
| 10,000 |
| 10,000 | |
| S-Tiger 6th Co., Ltd. |
| 30,000 |
| 30,000 | |
| GIB Palace CO.,LTD |
| 24,140 |
| 25,580 | |
| GIB LAB 2nd Co., Ltd. |
| 65,000 |
| - | |
| MaestroLEC Co.,LTD |
| 30,000 |
| 30,000 | |
| GIBDAEMYUNG 1st co.ltd |
| - |
| 70,000 | |
| S-Tiger 8th Co., Ltd. |
| 50,000 |
| 50,000 | |
| MAESTRO S.A co.ltd |
| 38,000 |
| 38,000 | |
| GIBYOUNGSAN 1st CO.,LTD |
| 147,000 |
| 147,000 | |
| GIB Palace 2nd CO.,LTD |
| 50,300 |
| - | |
| GIB Porter 1st Co., Ltd. |
| 55,119 |
| - | |
| SHINHAN DISPLAY 3RD CO.,LTD |
| 100,000 |
| - | |
| MAESTRO H CO.,LTD |
| 50,000 |
| - | |
| MaestroDcube Co.,Ltd. |
| 50,000 |
| - | |
| RICHGATE YEONSEUNG Co.,Ltd. |
| 11,000 |
| - | |
| MAESTRO landmark Co.,LTD |
| 170,000 |
| - | |
| SH ROAD No.1 Co., Ltd. |
| 38,610 |
| - | |
| MAESTRO H 2nd CO.,LTD |
| 20,000 |
| - | |
| GIB st CO.,LTD |
| 50,600 |
| - | |
| Airforce 1st CO.,LTD |
| 18,000 |
| - | |
| GIB. Portfolio A 3rd CO.,LTD |
| 30,000 |
| - | |
| Rich gate Songpa corp. |
| 26,000 |
| - | |
| MAESTRO byeolnae CO.,LTD |
| 8,000 |
| - | |
| S-Tiger 10th Co., Ltd. |
| 200,000 |
| - | |
|
|
| 5,468,272 |
| 6,315,744 |
175
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
40. | Related party transactions (continued) |
|
(h) Major investment and collection transactions
Major investments and collection transactions with related parties for the year ended December 31, 2020 are as follows:
|
| Related party |
| Investment |
| Collection |
Subsidiaries |
| Shinhan Asia Ltd. |
| - |
| 114,185 |
Investments in |
| Shinhan-Albatross Technology Investment Fund |
| 4,000 |
| 900 |
associates |
| Shinhan-Neoplux Energy Newbiz Fund |
| 4,200 |
| 2,010 |
|
| Goduck Gangil10 PFV Co., Ltd |
| 700 |
| - |
|
| KTB Newlake Global Healthcare PEF |
| - |
| 1,266 |
|
| Neoplux Technology Valuation Investment Fund |
| - |
| 7,304 |
|
| One Shinhan Global Fund 2 |
| 1,200 |
| - |
|
| KST-SH Laboratory Investment Fund No.1 |
| 500 |
| - |
|
| Partners 4th Growth Investment Fund |
| - |
| 1,925 |
Entities under common control and entities under common control |
| SHBNPP Konkuk University Dormitory Private Speical Asset Fund 1 |
| - |
| 1,574 |
| SHBNPP Corporate Professional Investment Type Private Security Investment Trust No.3 |
| 10,000 |
| - | |
|
| SHBNPP Future Energy Professional Investment Type Private Special Asset Investment Trust No.1 |
| - |
| 368 |
|
| SHBNPP Mokpo New Port Professional Investment Type Private Special Asset Investment Trust |
| - |
| 933 |
|
| SHBNPP Real Estate Loan Professional Investment Type Private Real Estate Investment Trust No.1 |
| 7,500 |
| 3,128 |
|
| SHBNPP Venture Professional Investment Type Private Investment Trust No.1 |
| 12,000 |
| - |
|
| Shinhan AIM Social Enterprise Investment Fund I |
| 600 |
| - |
|
| SHINHAN NPS RENEWABLE FUND NO.1 |
| 4,717 |
| 441 |
|
| One Shinhan Future's Fund 1 |
| 4,000 |
| 2,983 |
|
| SHBNPP Venture Professional Investment Type Private Investment Trust No.2 |
| 28,000 |
| - |
|
| SHBNPP Korea Equity Long-Short Professional Investment Type Private Mixed Asset Investment Trust No.1 |
| - |
| 2,000 |
|
| SHBNPP Lifetime Income TIF Mixed Asset Investment Trust[FoFs] |
| - |
| 1,003 |
|
| Shinhan AIM Social Enterprise Investment Fund II |
| 2,312 |
| - |
|
| Truston Global Infra Qualified Investment Type Private Investment Trust III |
| 2,486 |
| - |
|
| Shinhan BNPP Global NextG EMP Securities Investment Trust |
| 870,400 |
| - |
|
| SHBNPP WTE(Iste To Energy) Professional Investment Type Private Special Asset Investment Trust No.1 |
| 8,677 |
| - |
|
| Shinhan AIM FoF Fund 6 |
| 8 |
| - |
|
| SHBNPP Venture Professional Investment Type Private Investment Trust No.3 |
| 21,000 |
| - |
|
| SHBNPP Ongoing Peace TDF 2030 Security Investment Trust(H)[Equity Balanced-FoF] |
| 2,000 |
| - |
|
| SHBNPP Ongoing Peace TDF 2035 Security Investment Trust(H)[Equity Balanced-FoF] |
| 2,000 |
| - |
|
| SHBNPP Ongoing Peace TDF 2040 Security Investment Trust(H)[Equity Balanced-FoF] |
| 2,000 |
| - |
|
| GVA KONEX High Yield IPO-I Professional Investors Private Placement Investment Trust |
| 5,000 |
| - |
|
| SHBNPP Corporate Professional Investment Type Private Security Investment Trust No.13 |
| 50,000 |
| - |
|
| SH BNPP Startup Venture Alpha Specialized Investment Private Equity Mixed Asset Trust No.1 |
| 1,575 |
| - |
176
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
40. | Related party transactions (continued) |
(h) Major investment and collection transactions (continued)
Major investments and collection transactions with related parties for the year ended December 31, 2020 are as follows (continued):
|
| Related party |
| Investment |
| Collection |
Entities under common control |
| Shinhan AIM Investment Finance Specialized Investment Trust No. 1 |
| 880 |
| - |
and investments in associates under |
| Soo Delivery Platform Gross Investment Association |
| - |
| 2,671 |
common control |
| GX Shinhan Intervest 1st Private Equity Fund |
| - |
| 4,661 |
|
| Aone Mezzanine Opportunity Professional Private |
| 5,000 |
| - |
|
| Gyeonggi-Neoflux Superman Investment Association |
| 680 |
| 58 |
|
| Axis Global Growth New Technology Investment Association |
| - |
| 1,276 |
|
| Soo Commerce Platform Gross Investment Association |
| - |
| 1,769 |
|
| Genesis No.1 Private Equity Fund |
| 226 |
| - |
|
| SHBNPP MAIN Professional Investment Type Private Mixed Asset Investment Trust No.3 |
| 8,350 |
| 15,993 |
|
| DB Epic Convertiblebond Private Trust No.2 |
| 200 |
| - |
|
| SHBNPP Senior Loan Professional Investment Type Private Mixed Asset Investment Trust No.3 |
| 25,760 |
| 17,418 |
|
| SHBNPP Senior Loan Professional Investment Type Private Mixed Asset Investment Trust No.2 |
| - |
| 20,353 |
|
| DS Solid.II Specialized Private Investment Trust C-I |
| - |
| 2,876 |
|
| KIWOOM PRIVATE EQUITY GIANT PRIVATE EQUITY FUND |
| - |
| 24 |
|
| Hana Semiconductor New Technology Investment Association |
| - |
| 586 |
|
| Macquarie Korea Opportunities Joint Investment & Private Investment Corporation No. 1 |
| 28,000 |
| - |
|
| SHBNPP Japan Photovoltaic Private Special Asset Investment Trust No.1 [Loan-Derivative] |
| 403 |
| - |
|
| SHBNPP Sangju YC Expressway Professional Investment Type Private Special Asset Investment Trust |
| 9 |
| - |
|
| SHBNPP Jigae Namsan BTO professional Investment Type Private Special Asset Investment Trust [Infra business] |
| 8,155 |
| - |
|
| SHBNPP Japan Photovoltaic Private Special Asset Investment Trust No.2 [Loan-Derivative] |
| 1,357 |
| - |
|
| Shinhan BNPP Global Infrastructure Private Investment Trust |
| - |
| 3,276 |
|
| Mastern Opportunity Seeking Real Estate Fund II |
| 9,762 |
| - |
|
| T&F2020SS Start-up Venture Specialized Private Equity Investment Corporation |
| 2,250 |
| - |
|
| CSQUARE SNIPER PROFESSIONAL PRIVATE 10 |
| 1,875 |
| - |
|
| Igis G.L. IP Specialized Investment & Investment Trust No. 1-1 |
| 4 |
| - |
|
| Igis G.L. IP Specialized Investment & Investment Trust No. 1-2 |
| 4 |
| - |
|
| Shinhan-Neo Component Equipment Investment Association |
| 580 |
| - |
|
| Simone Mezzanine Specialized Private Investment Trust No. 3 |
| 2,000 |
| - |
|
| Kiwoom Private Equity Ant-Man Startup Venture Specialized Private Equity Fund |
| 1,000 |
| - |
|
|
|
| 2,011,770 |
| 210,981 |
177
SHINHAN BANK
Notes to the Separate Financial Statements
December 31, 2020 and 2019
(In millions of won)
40. | Related party transactions (continued) |
(i) For the years ended December 31, 2020 and 2019, the Bank purchased bonds through Shinhan Investment Corp. at W 5,825,578 million and W 6,639,051 million, respectively, while the amount sold is W 5,895,833 million and W 2,827,708 million respectively.
(j) As of December 31, 2020, the plan assets deposited in the DB type retirement pension managed by Shinhan Life Insurance are W 138,811million.
(k) As of December 31, 2020, the limitation contract amount is provided by Shinhan Card, a related party, is W 68,438 million.
41. Information of trust business
(a) Total assets with trust business as of December 31, 2020 and 2019 and operating revenue for the years ended December 31, 2020 and 2019 are as follows:
|
| Total assets |
| Operating revenue | ||||
|
| December 31, 2020 |
| December 31, 2019 |
| December 31, 2020 |
| December 31, 2019 |
Consolidated |
| 4,580,986 |
| 4,602,965 |
| 119,765 |
| 150,825 |
Unconsolidated |
| 91,688,453 |
| 88,524,148 |
| 1,243,126 |
| 1,584,508 |
|
| 96,269,439 |
| 93,127,113 |
| 1,362,891 |
| 1,735,333 |
(b) Significant balances with trust business as of December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Borrowings from trust accounts |
| 5,370,765 |
| 5,785,141 |
Deposit |
| 18,543 |
| 46,331 |
Accrued revenues from asset management fee from trust accounts |
| 34,796 |
| 34,796 |
Accrued interest expenses |
| 1,342 |
| 1,342 |
(c) Significant transactions with trust business for the years ended December 31, 2020 and 2019 are as follows:
|
| December 31, 2020 |
| December 31, 2019 |
Asset management fee from trust accounts |
| 187,221 |
| 258,103 |
Termination fee |
| 7,135 |
| 7,824 |
Interest expenses on deposits |
| 470 |
| 6,275 |
Interest on borrowings from trust accounts |
| 24,835 |
| 64,504 |
178
Report on Independent Auditor’s
Review of Internal Control over Financial Reporting
(English Translation of a Report Originally Issued in Korean)
To the President of
Shinhan Bank
We have reviewed the accompanying management’s report on the effectiveness of the Internal Control over Financial Reporting (“ICFR”) of Shinhan Bank (the “Bank”) as of December 31, 2020. The Bank’s management is responsible for designing and operating ICFR and for its assessment of the effectiveness of ICFR. Our responsibility is to review the management’s report on the effectiveness of the ICFR and issue a report based on our review. The management’s report on the effectiveness of the ICFR of the Bank states that “Based on the assessment results, Chief Executive Officer and ICFR Officer believe that no material weakness has been identified as at December 31, 200x, in all material respects, in conformity with the Conceptual Framework for Designing and Operating Internal Control over Financial Reporting.”
Our review was conducted in accordance with the ICFR review standards established by the Korean Institute of Certified Public Accountants. Those standards require that we plan and perform, in all material respects, the review of management’s report on the effectiveness of the ICFR to obtain a lower level of assurance than an audit. A review is to obtain an understanding of a company’s ICFR and consists principally of inquiries of management and, when deemed necessary, a limited inspection of underlying documents, which is substantially less in scope than an audit.
A Bank’s ICFR is a system to monitor and operate those policies and procedures designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards as adopted by the Republic of Korea. Because of its inherent limitations, ICFR may not prevent or detect a material misstatement of the financial statements. Also, projections 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.
Based on our review, nothing has come to our attention that causes us to believe that management’s report on the effectiveness of the ICFR, referred to above, is not presented fairly, in all material respects, in accordance with Conceptual Framework for Designing and Operating Internal Control over Financial Reporting.
Our review is based on the Bank’s ICFR as of December 31, 2020, and we did not review management’s assessment of its ICFR subsequent to December 31, 2020. This report has been prepared pursuant to the Acts on External Audit for Stock Companies, etc. in Korea and may not be appropriate for other purposes or for other users.
Samil PricewaterhouseCoopers
March 3, 2021
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