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Shinhan Financial Group Co (SHG) Risk Analysis
Risk Overview Q4, 2023
Source: the company's latest filing for the period ended Dec 31, 2023, filed Apr 18, 2024
Risk Change Over Time
- Accounting & Financial Operations - Risk 1The implementation of IFRS 17 beginning on January 1, 2023 renders certain of our historical financial information as of December 31, 2021 and for the year ended December 31, 2021, included in this annual report, not directly comparable with our financial information as of December 31, 2022 and 2023 and for the years ended December 31, 2022 and 2023 included in this annual report.
In response to a lack of comparability in the global insurance industry stemming from variations in accounting policies being applied, in May 2017, the International Accounting Standard Board issued IFRS 17 ‘Insurance Contracts', a new IFRS accounting standard for insurance contracts effective for annual reporting periods beginning on or after January 1, 2023. In April 2021, the Korea Accounting Standard Board adopted IFRS 17 ‘Insurance Contracts', effective for annual periods beginning on or after January 1, 2023. Under IFRS 17, insurance contract liabilities will be calculated in terms of market value (as the present value of future insurance cash flows with a provision for risk) instead of book value. As the discount rate will reflect current interest rates rather than book yields, we may have a significantly higher debt balance under IFRS 17 due to higher insurance liabilities, thereby resulting in a decrease in our risk-based capital. Beginning January 1, 2023, IFRS 17 ‘Insurance Contracts' has replaced in its entirety existing guidance in IFRS 4. Therefore, we have applied IFRS 17 to insurance contracts in preparing our financial statements as of December 31, 2023 and for the year ended December 31, 2023, and in preparing such financial statements we have retrospectively applied IFRS 17 to insurance contracts to restate the comparative financial information as of December 31, 2022 and for the year ended December 31, 2022 included therein, in each case, in accordance with IFRS 17. Unless stated otherwise, our financial information as of December 31, 2022 and 2023 and for the years ended December 31, 2022 and 2023 included in this annual report are shown based on IFRS 17 whereas our financial information as of December 31, 2021 and for the year ended December 31, 2021 included in this annual report are shown based on IFRS 4 and have not been restated based on IFRS 17. Accordingly, certain of our financial information as of December 31, 2022 and 2023 and for the years ended December 31, 2022 and 2023 included in this annual report may not be directly comparable against our historical financial information as of December 31, 2021 and for the year ended December 31, 2021, included in this annual report. Investors must therefore exercise caution when making comparisons of any financial figures in the Annual Report on Form 20-F against our financial figures included in this annual report and when evaluating our financial condition, results of operations and results. For further information regarding the implementation of IFRS 17, see "- Risks Related to Our Other Businesses - Prolonged periods of declining or low interest rates or changes in related accounting standards may reduce or turn negative our investment margin on savings insurance products and result in an increase in the valuation of our liabilities associated with these products." in this annual report and Note 3 and Note 52 of the notes to the audited consolidated annual financial statements included in this annual report.
Risk Highlights Q4, 2023
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 46
- Share Price & Shareholder Rights - Risk 1There are restrictions on withdrawal and deposit of common shares under the depositary facility.
Under the deposit agreement, holders of shares of our common stock may deposit those shares with the depositary bank's custodian in Korea and obtain American depositary shares, and holders of American depositary shares may surrender American depositary shares to the depositary bank and receive shares of our common stock. However, under current Korean laws and regulations, the depositary bank is required to obtain our prior consent for the number of shares to be deposited in any given proposed deposit which exceeds the difference between (1) the aggregate number of shares deposited by us for the issuance of American depositary shares (including deposits in connection with the initial and all subsequent offerings of American depositary shares and stock dividends or other distributions related to these American depositary shares) and (2) the number of shares on deposit with the depositary bank at the time of such proposed deposit. We have consented to the deposit of outstanding shares of common stock as long as the number of American depositary shares outstanding at any time does not exceed 40,432,628. As a result, if you surrender American depositary shares and withdraw shares of common stock, you may not be able to deposit the shares again to obtain American depositary shares.
- Share Price & Shareholder Rights - Risk 2Ownership of our shares is restricted under Korean law.
Under the Financial Holding Companies Act, any single shareholder (together with certain persons in a special relationship with such shareholder) may acquire beneficial ownership of up to 10% of the total issued and outstanding shares with voting rights of a bank holding company controlling national banks such as us. In addition, any person, except for a "non-financial business group company" (as defined below), may acquire in excess of 10% of the total voting shares issued and outstanding of a financial holding company which controls a national bank, provided that a prior approval from the Financial Services Commission is obtained each time such person's aggregate holdings exceed 10% (or 15% in the case of a financial holding company controlling regional banks only), 25% or 33% of the total voting shares issued and outstanding of such financial holding company. The Government and the Korea Deposit Insurance Corporation are exempt from this limit. Furthermore, certain non-financial business group companies (i.e., (i) any same shareholder group with aggregate net assets of all non-financial business companies belonging to such group of not less than 25% of the aggregate net assets of all members of such group; (ii) any same shareholder group with aggregate assets of all non-financial business companies belonging to such group of not less than W2 trillion; (iii) any mutual fund in which the same shareholder group identified in (i) or (ii) above owns more than 4% of the total shares issued and outstanding of such mutual fund; (iv) any private equity fund (a) where a person falling under any of items (i) through (ii) above is a limited partner holding not less than 10% of the total amount of contributions to the private equity fund, or (b) where a person falling under any of items (i) through (iii) above is a general partner, or (c) where the total equity of the private equity fund acquired by each affiliate belonging to several enterprise groups subject to the limitation on mutual investment is 30% or more of the total amount of contributions to the private equity fund; or (v) the investment purpose company concerned, where a private equity fund falling under item (iv) above acquires or holds stocks in excess of 4% of the shares or equity of such company or exercises de facto control over significant managerial matters of such company through appointment or dismissal of executives or in any other manner)) may not acquire beneficial ownership in us in excess of 4% of our outstanding voting shares, provided that such non-financial business group companies may acquire beneficial ownership of up to 10% of our outstanding voting shares with the approval of the Financial Services Commission under the condition that such non-financial business group companies will not exercise voting rights in respect of such shares in excess of the 4% limit. See "Item 4.B. Business Overview - Supervision and Regulation - Principal Regulations Applicable to Financial Holding Companies - Restrictions on Financial Holding Company Ownership." To the extent that the total number of shares of our common stock that you and your affiliates own together exceeds these limits, you will not be entitled to exercise the voting rights for the excess shares, and the Financial Services Commission may order you to dispose of the excess shares within a period of up to six months. Failure to comply with such an order would result in a fine of up to W100 million, plus an additional charge of up to 0.03% of the book value of such shares per day until the date of disposal.
- Share Price & Shareholder Rights - Risk 3Holders of our ADSs will not be able to exercise dissent and appraisal rights unless they have withdrawn the underlying shares of our common stock and become our direct stockholders.
Under Korean law, in some limited circumstances, including the transfer of the whole or any significant part of our business and the merger or consolidation of us with another company, dissenting stockholders have the right to require us to purchase their shares under Korean law. However, under our deposit agreement, holders of our American depositary shares do not have, and may not instruct the depositary as to the exercise of, any dissenter's rights provided to the holders of our common shares under Korean law. Therefore, if holders of our American depositary shares wish to exercise dissenting rights, they must withdraw the underlying common stock from the American depositary shares facility (and incur charges relating to that withdrawal) and become our direct stockholders prior to the record date of the shareholders' meeting at which the relevant transaction is to be approved, in order to exercise dissent and appraisal rights.
See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.