Introduction We are one of the leading financial institutions in Korea in terms of total assets, revenues, profitability and capital adequacy, among others. Incorporated on September 1, 2001, we are the first privately-held financial holding company to be established in Korea. Since inception, we have developed and introduced a wide range of financial products and services in Korea. We seek to deliver comprehensive financial solutions to our customers through a convenient one-portal online network and mobile application. As of December 31, 2025, we have 15 direct and 32 indirect subsidiaries offering a wide range of financial products and services, including commercial banking, corporate banking, private banking, credit card, asset management, brokerage and insurance services. We believe that such breadth of services will help us to meet the diversified needs of our present and potential clients. We currently serve approximately 21 million active customers, which we believe is one of the largest customer bases in Korea, through approximately 29,620 employees at approximately 1,344 network branches group-wide. While over 80% of our revenues have been historically derived from Korea, we aim to serve the needs of our customers through a global network of 242 offices in the United States, Canada, the United Kingdom, Japan, the People’s Republic of China, Germany, India, Australia, Hong Kong, Vietnam, Cambodia, Kazakhstan, Singapore, Mexico, Uzbekistan, Myanmar, Poland, Indonesia, the Philippines and the United Arab Emirates. Our legal and commercial name is Shinhan Financial Group Co., Ltd. Our registered office and corporate headquarters are located at 20, Sejong-daero 9-gil, Jung-gu, Seoul, Korea 04513 and our telephone number is +822 6360 3000. The address of our English website is https://www.shinhangroup.com/en. The U.S. Securities and Exchange Commission maintains a website (http://www.sec.gov), which contains reports, proxy and information statements and other information regarding issuers that file electronically with the U.S. Securities and Exchange Commission. Our History and Development On September 1, 2001, we were formed as a financial holding company under the Financial Holding Companies Act, as a result of acquiring all of the issued shares of the following four entities from their former 38 Table of Contents shareholders in exchange for shares of our common stock: (i) Shinhan Bank, a nationwide commercial bank listed on the Korea Exchange, (ii) Shinhan Securities, a securities brokerage company listed on the Korea Exchange, (iii) Shinhan Capital Co., Ltd. (“Shinhan Capital”), a leasing company listed on the Korea Exchange Korean Securities Dealers Automated Quotations (“KRX KOSDAQ”), and (iv) Shinhan Investment Trust Management Co., Ltd., a privately held investment trust management company. On September 10, 2001, the common stock of our holding company was listed on what is currently the KRX KOSPI Market. Since our inception, we have substantially expanded our operations, including by engaging in strategic acquisitions and establishing subsidiaries and joint ventures. Our significant acquisitions, capital contributions and joint ventures include the following: Date of Acquisition Entity(1) Principal Activities Method of Establishment April 2002 Jeju Bank Regional banking Acquisition from Korea Deposit Insurance Corporation July 2002 Goodmorning Securities Co., Ltd.(2) Securities and investment Acquisition from shareholders of Ssangyong Securities Co., Ltd. August 2002 Shinhan BNP Paribas Investment Trust Management Co., Ltd.(3) Investment advisory Joint venture with BNP Paribas August 2003 Chohung Bank(4) Commercial banking Acquisition from creditors December 2005 Shinhan Life Insurance Life insurance services Acquisition from shareholders March 2007 LG Card Co., Ltd. (“LG Card”)(5) Credit card services Acquisition from creditors of LG Card January 2012 Tomato Mutual Savings Bank(6) Savings bank Purchase and assumption of assets and liabilities from creditors January 2013 Yehanbyoul Savings Bank(7) Savings bank Acquisition from Korea Deposit Insurance Corporation October 2017 Shinhan REITs Management Co., Ltd. Real estate asset management Newly established February 2019, January 2020 Orange Life Insurance(8) Life insurance services Acquisition from majority shareholders and subsequent comprehensive stock exchange May 2019 Asia Trust Co. Ltd.(9) Real estate trust business Acquisition from majority shareholders August 2019 Shinhan AI. Co., Ltd.(10) Investment advisory Incorporated and joined as a wholly-owned subsidiary 39 Table of Contents Date of Acquisition Entity(1) Principal Activities Method of Establishment September 2020, December 2020 Neoplux Co., Ltd.(11) Venture capital Acquisition from majority shareholders and subsequent comprehensive stock exchange January 2021 Shinhan BNP Paribas Asset Management(12) Asset management services Acquisition of remaining interests from BNP Paribas Asset Management Holding June 2022 BNP Paribas Cardif General Insurance(13) General insurance services Acquisition of BNP Paribas Cardif General Insurance Notes: (1) Entity name represents the name of the acquired entity at the time of the relevant acquisition. (2) Renamed from Goodmorning Securities Co., Ltd. to Goodmorning Shinhan Securities Co., Ltd. in August 2002, and subsequently renamed to Shinhan Investment Corp. in August 2009 and to Shinhan Securities in October 2022. (3) In January 2009, SH Asset Management Co., Ltd. and Shinhan BNP Paribas Investment Trust Management merged to form Shinhan BNP Paribas Asset Management. (4) In April 2006, Shinhan Bank merged with and into Chohung Bank, and the surviving entity was renamed Shinhan Bank. (5) Renamed from LG Card to Shinhan Card in October 2007. (6) Shinhan Hope Co., Ltd. was established in December 2011 to purchase and assume certain assets and liabilities of Tomato Mutual Savings Bank. Later in the same month, Shinhan Hope Co., Ltd. obtained a savings bank license, changed its name to Shinhan Savings Bank and became our direct subsidiary. (7) In April 2013, Shinhan Savings Bank and Yehanbyoul Savings Bank merged into a single entity, with Yehanbyoul Savings Bank being the surviving entity and the newly merged bank being named Shinhan Savings Bank. (8) In February 2019, we acquired a 59.15% ownership interest in Orange Life Insurance, the former Korean unit of ING Life Insurance. In January 2020, we acquired the remaining outstanding ownership interest in Orange Life Insurance by effecting a comprehensive stock exchange under Article 360-2 of the Korean Commercial Code whereby holders (other than us) of Orange Life Insurance’s common stock transferred all of their shares to us and in return received shares of our common stock. Orange Life Insurance subsequently merged with and into Shinhan Life Insurance in July 2021. (9) Renamed from Asia Trust Co. Ltd. to Shinhan Asset Trust Co., Ltd. in May 2022. (10) In July 2024, we announced the liquidation and dissolution of Shinhan AI. Co., Ltd., and such entity is no longer our subsidiary. (11) In September 2020, we acquired a 96.8% ownership interest in Neoplux, a venture capital company formerly under the Doosan Group. In December 2020, we acquired the remaining outstanding ownership interest in Neoplux by effecting a small-scale stock exchange under Article 360-10 of the Korean Commercial Code. In January 2021, Neoplux changed its legal name to Shinhan Venture Investment Co., Ltd. (12) In January 2021, we acquired the remaining 35% ownership interest in Shinhan BNP Paribas Asset Management from BNP Paribas Asset Management Holding and changed its legal name to Shinhan Asset Management. (13) In June 2022, we acquired a 94.54% ownership interest in BNP Paribas Cardif General Insurance, which then changed its name to Shinhan EZ General Insurance, Ltd. Subsequently in November 2022, Shinhan EZ General Insurance, Ltd. conducted a paid-in capital increase and our ownership interest decreased to 85.1%. 40 Table of Contents ITEM 4.B. Business Overview Unless otherwise specifically mentioned, the following business overview is presented on a consolidated basis under IFRS. Our Strategy We have maintained a vision of becoming a “customer-centered, top-tier Shinhan” recognized by our clients as well as the broader community. In line with this vision, we have identified three core agendas as foundational principles to guide our overall strategic direction: (i) “Scandal Zero,” (ii) enhanced customer experience and convenience, and (iii) sustainable revenue generation. We are committed to maintaining and enhancing our position as a leading financial institution in Korea and globally. To this end, we have identified four key strategic initiatives for 2026 as outlined below. 1. Establishing Effective Internal Controls We aim to elevate our robust internal control systems into a core differentiating competitive advantage, establishing and strengthening the trust we have gained from our customers and other participants in the industry. To this end, we have introduced responsibility maps delineating roles and responsibilities with appropriate checks and balances at the holding company as well as subsidiary levels, and we plan to further strengthen our infrastructure with respect to internal controls. We also seek to further refine our credit evaluation system to align incentives among stakeholders and utilize advanced technologies, including AI, to strengthen our fraud detection and internal controls monitoring systems. We also aim to expand and strengthen ethics training programs for our officers and employees to further our professional responsibility and ethics initiatives. 2. Creating Differentiated Customer Value We plan to continue our pursuit of unique value propositions for customers through three specific initiatives: (i) enhancing customer experience and convenience, (ii) expanding the adoption of digital and AI-driven innovations, and (iii) strengthening our presence in the senior and wealth management markets. We plan to evaluate customer touchpoints to refine our products and services, with a particular emphasis on streamlining processes and improving the speed and efficiency of customer transactions in order to enhance customers’ overall user experience. We are also seeking to provide more customized and tailored financial services to our customers by integrating AI technology into key interfaces. In light of evolving demographic trends, particularly the growing senior segment, we plan to devote more resources and increase our expertise in wealth management, aiming to provide comprehensive solutions that adapt to our customers’ diverse financial needs. 3. Enhancing Corporate Citizenship As a responsible corporate citizen, we are committed to proactively addressing social and environmental challenges. Our efforts include expanding green and transition financing to support climate change mitigation initiatives and reducing our carbon footprint. We also plan to continue support programs to address social issues such as low birth rate and support challenged families in need of financial assistance. We also focus on our human resources capabilities to ensure fairness within our organization and promote “self-leadership” among our employees, thereby strengthening our workforce and long-term competitiveness. 4. Enhancing Corporate Value We plan to continue our efforts to deliver enhanced value to our customers as well as shareholders through prudent management of our capital ratios and strengthening our financials and credibility in the market. In addition, in order to preemptively respond to increased volatility in the economy and financial markets, and the resulting uncertainty in our operating environment, we intend to strengthen our portfolio management 41 Table of Contents capabilities and continue to enhance our corporate structure in order to achieve sustainable growth. At the same time, we intend to enhance our overall risk management infrastructure through the adoption of AI- and digital-based technologies, thereby strengthening our ability to identify, measure and respond to risks, as well as fuelling our pursuit of stable medium- to long-term growth opportunities amidst changing market conditions. Our Principal Activities We provide comprehensive financial services, principally consisting of the following: • commercial banking services provided through the following four business sub-segments: • channel division segment, primarily focused on retail banking services and corporate banking services, which include providing loans to and receiving deposits from individuals, corporations (other than large corporations) and wealth management customers; • capital market division segment, primarily focused on corporate banking services for large corporations as well as securities investing and trading, derivatives trading and investment banking services within other banking services; • international group segment, primarily focused on international business including management of overseas subsidiaries and branch operations and other international businesses; and • others segment, consisting of treasury business within other banking services, including internal asset and liability management activities, as well as various other business support functions. • credit card services; • securities services; • insurance (including life insurance and non-life insurance) services; • credit services; and • other services, including asset management services, savings banking services, real estate trust services, financial system development and supply services, collective investment administrative services, real estate investment services, and trust and collective investment services. In addition to the above-mentioned business activities, we, at the holding company level, have the following business departments and planning offices, the primary functions of which are to support cross-divisional management with respect to these specific business areas: group & global investment banking business department, global market & securities planning office, global business planning office, wealth management planning office and retirement pension planning office. Our principal business activities are not subject to any material seasonal trends. Although we have a number of overseas branches and subsidiaries, a substantial majority of our assets are located, and a substantial majority of our revenues are generated, in Korea. Deposit-Taking Activities Principally through Shinhan Bank, we offer many deposit products that target different customer segments with features tailored to each segment’s financial and other profiles. Our deposit products consist principally of the following: • Demand deposits. Demand deposits do not accrue interest or accrue interest at a lower rate than time deposits and allow the customer to deposit and withdraw funds at any time. Interest on interest-bearing demand deposits is accrued at a fixed or variable rate depending on the period and the amount of deposit. Demand deposits constituted 17.0%, 16.1% and 16.7% of our total deposits as of December 31, 2023, 2024 and 2025, respectively. Demand deposits paid average interest of 1.00%, 1.04% and 0.98% for 2023, 2024 and 2025, respectively. 42 Table of Contents • Time and savings deposits. Time deposits generally require the customer to maintain a deposit for a fixed term during which the deposit accrues interest at a fixed rate or a variable rate based on certain financial indexes, including the “cost of funds index,” or COFIX, published by the Korean Federation of Banks. If the deposit is withdrawn prior to the end of the fixed term, the customer is paid a lower interest rate than that originally offered. The term typically ranges from one month to five years. Time deposits constituted 53.8%, 56.7% and 54.4% of our total deposits as of December 31, 2023, 2024 and 2025, respectively, and paid average interest of 3.83%, 3.66% and 3.08% for 2023, 2024 and 2025, respectively. Savings deposits allow the customer to deposit and withdraw funds at any time and accrue interest at an adjustable interest rate, which is typically lower than the rate applicable to time deposits. Savings deposits constituted 26.0%, 24.7% and 25.1% of our total deposits as of December 31, 2023, 2024 and 2025, respectively, and paid average interest of 0.85%, 0.84% and 0.70% for 2023, 2024 and 2025, respectively. • Other deposits. Other deposits consist mainly of certificates of deposit. Certificates of deposit typically have maturities from 30 days to two years. Interest rates on certificates of deposit are determined based on the length of the deposit and prevailing market interest rates. Certificates of deposit are sold at a discount to their face value, reflecting the interest payable on the certificates of deposit. Certificates of deposit constituted 3.2%, 2.5% and 3.8% of our total deposits as of December 31, 2023, 2024 and 2025, respectively, and paid average interest of 3.80%, 4.02% and 3.30% for 2023, 2024 and 2025, respectively. We also offer deposits via general housing subscription savings accounts, which provide the customer with preferential rights to housing subscriptions under the Housing Law and Rules on Housing Supply and eligibility for mortgage and home equity loans. The contribution period is from the subscription date to the date on which the account holder is selected as the purchaser of a house, and the required monthly contribution amount (subject to certain exceptions) is from a minimum of W20,000 to a maximum of W500,000. The interests accrued on these accounts are paid in lump sum upon termination of the account, and are calculated at the interest rate determined and announced by the Ministry of Land, Infrastructure and Transport. Those who have a general housing subscription savings account and meet certain other criteria are granted a preferential subscription right for the purchase of a house. In the case of privately funded houses, the aggregate amount of contributions made to the account must be at least the applicable deposit threshold amount for the location and area of the relevant house (from W2 million up to W15 million). Only one account per person is generally allowed, and customers are typically not allowed to transfer accounts between one another. For information on our deposits in Korean Won based on the principal types of deposit products we offer, see “— Description of Assets and Liabilities — Funding — Deposits.” The rate of interest payable on our deposit products may vary significantly, depending on average funding costs, the rate of return on our interest-earning assets, prevailing market interest rates among financial institutions and other major financial indicators. We also offer court deposit services for litigants in Korean courts, which involve providing effectively an escrow service for litigants involved in certain types of legal or other proceedings. Chohung Bank historically was a dominant provider of such services since 1958, and following our acquisition of Chohung Bank, we continue to hold a dominant market share in these services. Such deposits typically carry interest rates lower than the market rates (by approximately 0.35% per annum) and amounted to W6,421 billion, W6,975 billion and W7,057 billion as of December 31, 2023, 2024 and 2025, respectively. The Monetary Policy Committee of the Bank of Korea imposes a reserve requirement on Won currency deposits at commercial banks at rates ranging from 0% to 7%, based generally on maturity and the type of deposit instrument. See “— Supervision and Regulation — Principal Regulations Applicable to Banks — Liquidity.” The Depositor Protection Act provides for a deposit insurance system where the Korea Deposit Insurance Corporation guarantees to depositors the repayment of their eligible bank deposits. The deposit insurance system 43 Table of Contents insures up to a total of W100 million per depositor per bank, which limit increased from W50 million through an amendment to the Presidential Decree to the Depositor Protection Act of Korea that became effective in September 2025. See “— Supervision and Regulation — Principal Regulations Applicable to Banks — Deposit Insurance System.” Retail Banking Services Overview We provide retail banking services primarily through Shinhan Bank, and, to a significantly lesser extent, through Jeju Bank, a regional bank. Our retail loans, before allowance for credit losses on loans and deferred loan origination costs and fees and excluding credit card receivables, amounted to W173,570 billion as of December 31, 2025. Retail banking services include retail lending and deposit-taking activities as well as checking account services, electronic banking and automatic teller machines (“ATM”) services, bill paying services, payroll and check-cashing services, currency exchange and wire fund transfer. We believe that providing modern and efficient retail banking services is important to maintaining our public profile and as a source of fee-based income. Accordingly, we believe that our retail banking services and products will become increasingly important in the coming years as the domestic banking sector further develops and becomes more complex. Retail banking has been and will continue to remain one of our core businesses. Our strategy in retail banking is to provide prompt and comprehensive services to retail customers through increased automation and improved customer service, as well as a streamlined branch network focused on sales. The retail segment places an emphasis on targeting high net-worth individuals. Retail Lending Activities We offer various retail loan products, consisting principally of loans to individuals and households. Our retail loan products target different segments of the population with features tailored to each segment’s financial profile and other characteristics, including customer’s occupation, age, loan purpose, collateral requirements and the duration of the customer’s relationship with Shinhan Bank. Our retail loans consist principally of the following: • Mortgage and home equity loans, which mostly comprise mortgage loans that are used to finance home purchases and are generally secured by the housing unit being purchased; and • Other retail loans, which are loans made to customers for any purpose other than mortgage and home equity loans and the terms of which vary based primarily on the characteristics of the borrower and which are either unsecured or secured, or guaranteed by deposits or by a third party. Other retail loans also include advance loans extended on an unsecured basis to retail borrowers the use of proceeds for which is restricted to financing of home purchases prior to the completion of the construction. As of December 31, 2025, our mortgage and home equity loans and other retail loans accounted for 62.4% and 37.6% of our total retail loans, respectively. For secured loans, our policy is to lend up to 40% to 100% of the appraisal value of the collateral, after taking into account the value of any lien or other security interest that has priority over our security interest (other than petty claims). For mortgage and home equity loans, our general policy is to lend up to 40% to 85% of the appraisal value of the collateral, but subject to the maximum loan-to-value ratio, debt-to-income ratio and debt service ratio requirements for mortgage loans implemented by the Government. The loan-to-value ratio of secured loans, including mortgage and home equity loans, is updated on a monthly basis using the most recent appraisal value of the collateral, and maximum loan-to-value ratios are further adjusted based on factors such as the location of the secured property, nature and purpose of the loans and level of competition in the market. Since 44 Table of Contents January 11, 2019, maximum loan-to-value ratios are determined and may be adjusted in increments of 1% (as opposed to increments of 5%, which was the case prior to January 11, 2019), allowing us to set more precise and tailored maximum loan-to-value ratios for secured loans. As of December 31, 2025, the loan-to-value ratio of mortgage and home equity loans of Shinhan Bank was 51.2%. As of December 31, 2025, substantially all of its mortgage and home equity loans were secured by residential property. Under the Regulation on the Supervision of the Banking Business and the Detailed Regulation on the Supervision of the Banking Business, when extending mortgage and home equity loans, our banking subsidiaries are subject to a maximum loan-to-value ratio of 70% (subject to certain exceptions, including certain regulated areas) and a maximum debt-to-income ratio of 60% (only in respect of housing units located in the greater Seoul metropolitan area, subject to certain exceptions). Korean regulations on mortgage and home equity loans are susceptible to changes in housing market cycles and have been revised from time to time. In recent years, such regulatory changes included measures that seek to promote stability in the real estate market, modernize credit review methods and stabilize the management of household debt, help prevent excessive household debt, protect the victims of lease fraud and ensure housing stability. For a detailed description of the current regulations applicable to our mortgage and home equity loans, see “— Supervision and Regulation — Principal Regulations Applicable to Banks — Recent Regulations Relating to Retail Household Loans” and “Item 3.D. Risk Factors — Risks Relating to Law, Regulation and Government Policy — The level and scope of government oversight of our retail lending business, particularly regarding mortgage and home equity loans, may change depending on the economic or political climate.” Our banking subsidiaries extend mortgage and home equity loans in compliance with the applicable regulations and administrative instructions by the relevant supervising authorities. The following table sets forth a breakdown of our retail loans. As of December 31, 2023 2024 2025 (In billions of Won, except percentages) Retail loans(1) Mortgage and home equity loans W 87,305 W 101,078 W 108,268 Other retail loans 67,799 65,062 65,302 Percentage of retail loans to total gross loans 37.2 % 36.5 % 36.9 % Note: (1) Before allowance for credit losses on loans and deferred loan origination costs and fees and excludes credit card receivables. Our total mortgage and home equity loans amounted to W108,268 billion as of December 31, 2025, which consisted of amortizing loans (the principal portion of which is repaid by part of the installment payments) in the amount of W75,109 billion and non-amortizing loans in the amount of W33,159 billion. In addition, as of December 31, 2025, we also provided lines of credit in the aggregate outstanding amount of W158 billion as part of our non-amortizing loans. Pricing The interest rates payable on Shinhan Bank’s retail loans are either periodically adjusted floating rates (based on a base rate determined for three-month, six-month or twelve-month periods derived using an internal transfer price system, which reflects the market cost of funding, as adjusted to account for expenses related to lending and the profit margin of the relevant loan products) or fixed rates that reflect the market cost of funding, as adjusted to account for expenses related to lending and the profit margin. Fixed rate loans are offered only on 45 Table of Contents a limited basis and usually at a premium to floating rate loans. For unsecured loans, which Shinhan Bank provides on a floating or fixed rate basis, interest rates thereon reflect a margin based on, among other things, the borrower’s credit score as determined during its loan approval process. For secured loans, the credit limit is based on the type of collateral, priority with respect to the collateral and the loan-to-value ratio. Shinhan Bank may adjust the pricing of these loans to reflect the borrower’s current and/or expected future contribution to Shinhan Bank’s profitability. The interest rate on Shinhan Bank’s loan products may be adjusted at the time the loan is extended. If a loan is repaid within three years following the date of the loan, the borrower is required to pay an early repayment fee, which is typically 0.03% to 0.85% (depending on types of loans and applicable interest rates) of the outstanding principal amount of and accrued and unpaid interest on the loan, multiplied by a fraction the numerator of which is the number of the remaining days on the loan until maturity and the denominator of which is the number of days comprising the term of the loan or three years, whichever is greater. As of December 31, 2025, Shinhan Bank’s three-month, six-month and twelve-month base rates were 2.87%, 2.84% and 2.81%, respectively. As of December 31, 2025, Shinhan Bank’s lending rates for mortgage and home equity loans that remained fixed for a period of five years before being recalculated ranged from 4.15% to 5.56%, while those that remained fixed for a period of six months before being recalculated ranged from 3.94% to 5.34%. Shinhan Bank’s fixed rates for other retail loans with a maturity of one year ranged from 3.61% to 14.00%, depending on the credit scores of its customers. As of December 31, 2025, 89.2% of Shinhan Bank’s total retail loans were floating rate loans and 10.8% were fixed rate loans. As of the same date, 88.5% of Shinhan Bank’s retail loans with maturity of more than one year were floating rate loans and 11.5% were fixed rate loans. The interest rate charged to customers by our banking subsidiaries is based, in part, on the “cost of funds index”, or COFIX, which is published by the Korean Federation of Banks. COFIX is computed based on the weighted average interest rate of select funding products (including time deposits, housing and other installment savings deposits, repos, discounted bills and senior non-convertible financial debentures) of eight major Korean banks (Shinhan Bank, Kookmin Bank, Woori Bank, KEB Hana Bank, Nonghyup Bank, Industrial Bank of Korea, Citibank Korea Inc. and Standard Chartered Bank Korea Limited). Each bank then independently determines the interest rate applicable to its respective customers by adding a spread to the COFIX based on the difference between the COFIX and such bank’s general funding costs, administration fees, the customer’s credit score, the maturity of the loan and other customer-specific premiums and discounts based on the customer relationship with such bank. These interest rates are typically adjusted on a monthly basis. Private Banking We have historically focused on customers with high net worth. Our retail banking services include providing private banking services to high net-worth customers who seek personal advice on complex financial matters. Our aim in private banking is to help enhance wealth accumulation by, and increase the financial sophistication of, our high net-worth clients by offering them customized wealth management solutions and comprehensive financial services including asset portfolio and fund management, tax consulting, real estate management and family office services, among others. In order to preemptively respond to evolving customer needs and promote asset growth by inducing greater synergy between commercial banking and investment advisory services offered by Shinhan Securities, Shinhan Bank operates private wealth management centers which combine certain branches of Shinhan Bank with those of Shinhan Securities located in the same area. We provide premier private banking services to meet the increasing demand from ultra-high-net-worth individuals. In December 2019, we launched the Private Investment and Banking Center, which integrates investment banking and private banking services. In 2022, we established a family office center aimed at managing family assets to ensure continuity across generations. Our offerings include exclusive membership services tailored for a select clientele, along with advisory services provided by specialized teams from Shinhan Bank and Shinhan Securities. 46 Table of Contents As of December 31, 2025, Shinhan Bank operated 25 private wealth management centers nationwide, including 17 in Seoul, four in the Gyeonggi province and four in other regions in Korea. As of December 31, 2025, Shinhan Bank had approximately 22,724 private banking customers, who typically are required to have W500 million or more in deposits with Shinhan Bank to qualify for its private banking services. Corporate Banking Services Overview We provide corporate banking services, primarily through Shinhan Bank, to small- and medium-sized enterprises, including SOHOs, which are small enterprises operated by individuals or households, and, to a lesser extent, to large corporations, including corporations that are affiliated with chaebols. We also lend to government-controlled enterprises. The following table sets forth the balances and percentage of our total loans (before allowance for credit losses on loans and deferred loan origination costs and fees) attributable to each category of our corporate lending business as of the dates indicated. As of December 31, 2023 2024 2025 (In billions of Won, except percentages) Small- and medium-sized enterprises loans(1) W 134,271 32.2 % W 145,327 31.9 % W 150,048 31.9 % Large corporate loans 54,765 13.1 68,461 15.0 70,535 15.0 Others(2) 45,115 10.8 46,303 10.2 46,961 10.0 Total corporate loans W 234,151 56.1 % W 260,091 57.1 % W 267,544 56.9 % Notes: (1) Represents the principal amount of loans extended to corporations meeting the definition of small- and medium-sized enterprises under the Framework Act on Small- and Medium-sized Enterprises and its Presidential Decree. (2) Includes loans to governmental agencies, loans to banks and other corporate loans, including loans originated by subsidiaries other than Shinhan Bank which are classified as corporate loans for purposes of financial reporting. Small- and Medium-sized Enterprises Banking Under the Framework Act on Small and Medium Enterprises (the “SME Framework Act”), and the related Presidential Decree, in order to qualify as a small- and medium-sized enterprise, (i) the enterprise’s total assets at the end of the immediately preceding fiscal year must be less than W500 billion, (ii) the enterprise must meet the standards prescribed by the Presidential Decree in relation to the average and total annual sales revenues applicable to the type of its main business, and (iii) the enterprise must meet the standards of management independence from ownership as prescribed by the Presidential Decree, including non-membership in a conglomerate as defined in the Monopoly Regulation and Fair Trade Act. An enterprise cannot qualify as a small- or medium-sized enterprise if it is incorporated into, or is deemed to be incorporated into a business group subject to disclosure under the Monopoly Regulation and Fair Trade Act. Non-profit enterprises that satisfy certain requirements prescribed by the SME Framework Act and its Presidential Decree may qualify as a small- and medium-sized enterprise. Furthermore, cooperatives and federations of cooperatives as prescribed by the Presidential Decree are deemed as small- and medium-sized enterprises, effective from April 15, 2014. As of December 31, 2025, Shinhan Bank had loans to 416,602 small- and medium-sized enterprises in an aggregate amount of W150,048 billion (before allowance for credit losses on loans and deferred loan origination costs and fees). 47 Table of Contents We believe that Shinhan Bank, which has traditionally focused on small- and medium-sized enterprise lending, is well-positioned to succeed in the small- and medium-sized enterprises market in light of its marketing capabilities (which we believe have provided Shinhan Bank with significant customer loyalty) and its prudent risk management practices, including conservative credit rating systems for credit approval. To maintain or increase its market share of small- and medium-sized enterprises lending, Shinhan Bank: • has accumulated a market-leading expertise and familiarity as to customers and products. We believe Shinhan Bank has an in-depth understanding of the credit risks embedded in this market segment, allowing Shinhan Bank to develop loan and other products specifically tailored to the needs of this market segment; • operates a relationship management system to provide customer services that are tailored to small- and medium-sized enterprises. Shinhan Bank currently has relationship management teams in 184 banking branches, of which 7 are corporate banking branches and 177 are hybrid banking branches designed to serve both retail customers and, to a limited extent, corporate customers. These relationship management teams market products, and review and approve smaller loans with less credit risks; and • continues to focus on cross-selling loan products with other products. For example, when Shinhan Bank lends to small- and medium-sized enterprises, it also explores opportunities to cross-sell retail loans or deposit products to the employees of these enterprises or to provide financial advisory services. Large Corporate Banking Large corporate customers consist primarily of member companies of chaebols and financial institutions. Our large corporate loans amounted to W70,535 billion (before allowance for credit losses on loans and deferred loan origination costs and fees) as of December 31, 2025. Large corporate customers tend to have better credit profiles than small- and medium-sized enterprises, and accordingly, Shinhan Bank has been focusing on these customers as part of its risk management policy. Shinhan Bank seeks to serve as a one-stop financial solution provider that also partners with its large corporate clients in their corporate expansion and growth endeavors. To that end, Shinhan Bank provides a wide range of corporate banking services, including investment banking, real estate financing, overseas real estate project financing, large development project financing, infrastructure financing, structured financing, equity investments/venture investments, mergers and acquisitions consulting, securitization and derivatives services, including securities and derivative products and foreign exchange trading. Shinhan Bank also arranges financing for, and offers consulting services to, Korean companies expanding their business overseas, particularly in Asia. Corporate Lending Activities Our principal loan products for corporate customers are working capital loans and facilities loans. Working capital loans, which include discounted notes and trade financing, are generally loans used for general working capital purposes. Facilities loans are provided to finance the purchase of equipment and construction of manufacturing plants. As of December 31, 2025, Shinhan Bank’s working capital loans and facilities loans amounted to W80,195 billion and W112,038 billion, respectively, representing 41.1% and 57.5% of Shinhan Bank’s total Won-denominated corporate loans. Working capital loans generally have a maturity of one year, which may be extended on an annual basis for an aggregate term of three years in the case of unsecured loans and five to ten years in the case of secured loans. Facilities loans have a maximum maturity of 15 years, which are typically repaid in semiannual installments and may be entitled to a grace period not exceeding one-third of the loan term with respect to the first repayment. Facilities loans with a term of three years or less may be paid in full at maturity. Loans to corporations may be unsecured or secured by real estate, deposits or guaranty certificates. As of December 31, 2025, Shinhan Bank’s secured loans and guaranteed loans (including loans secured by guaranty 48 Table of Contents certificates issued by credit guarantee insurance funds) accounted for 67.5% and 8.1%, respectively, of Shinhan Bank’s Won-denominated corporate loans. As of December 31, 2025, 51.5% of the corporate loans of Shinhan Bank were secured by real estate. When evaluating whether to extend loans to corporate customers, Shinhan Bank reviews their creditworthiness and credit score, the value of collateral and/or third party guarantees, if any. The value of collateral is computed using a formula that takes into account the appraised value of the collateral, any prior liens or other claims against the collateral and an adjustment factor based on a number of considerations including, with respect to property, the average value of any nearby property sold in a court-supervised auction during the previous year. Shinhan Bank revalues collateral when a secured loan is renewed or if a trigger event occurs with respect to the loan in question. Pricing Shinhan Bank determines the price for its corporate loan products based principally on their respective cost of funding and the expected loss rate based on the borrower’s credit risk. As of December 31, 2025, 71.8% of Shinhan Bank’s corporate loans with outstanding maturities of one year or more had variable interest rates as determined by the applicable market rates. More specifically, interest rates on Shinhan Bank’s corporate loans are generally determined using the following formula: Interest rate = (Shinhan Bank’s periodic market floating rate or reference rate) plus transaction cost plus credit spread plus risk premium plus or minus discretionary adjustment. Depending on market conditions and the agreement with the borrower, Shinhan Bank may use either its periodic market floating rate or the reference rate as the base rate in determining the interest rate for the borrower. As of December 31, 2025, Shinhan Bank’s periodic market floating rates (which are based on a base rate determined for a three-month, six-month, one-year, two-year, three-year or five-year period, as applicable, as derived from Shinhan Bank’s market rate system) were 2.87% for three months, 2.84% for six months, 2.81% for one year, 2.98% for two years, 3.21% for three years and 3.50% for five years. As of the same date, Shinhan Bank’s reference rate was 4.00%. The reference rate refers to the base lending rate used by Shinhan Bank and is determined annually by Shinhan Bank’s Asset & Liability Management Committee based on, among others, Shinhan Bank’s funding costs, cost efficiency ratio and discretionary margin. Transaction cost reflects the standardized transaction cost assigned to each loan product and other miscellaneous costs, including contributions to the Credit Guarantee Fund, and education taxes. The Credit Guarantee Fund is a statutorily created entity that provides credit guarantees to loans made by commercial banks and is funded by mandatory contributions from commercial banks in the amount of approximately 0.41% of all loans (excluding certain loans such as facilities loans) made by them. The credit spread is added to the periodic floating rate to reflect the expected loss based on the borrower’s credit rating and the value of any collateral or payment guarantee. In addition, Shinhan Bank adds a risk premium which takes into account the potential of unexpected loss that may exceed the expected loss from the credit rating assigned to a particular borrower. A discretionary adjustment rate is added or subtracted to reflect the borrower’s current and/or future contribution to Shinhan Bank’s profitability. If additional credit is provided by way of a guarantee, the adjustment rate is subtracted to reflect such change in the credit spread. In addition, depending on the price and other terms set by competing banks for similar borrowers, Shinhan Bank may reduce the interest rate to compete more effectively with other banks. 49 Table of Contents International Business Shinhan Bank also engages in treasury and investment activities in international capital markets, principally including foreign currency-denominated securities trading, foreign exchange trading and services, trade-related financial services, international factoring services and foreign banking operations through its overseas branches and subsidiaries. Shinhan Bank aims to become a leading bank in Asia and expand its international business by focusing on further bolstering its overseas network, localizing its overseas operations and diversifying its product offerings, particularly in terms of asset management, in order to meet the various financing needs of its current and potential customers overseas. Other Banking Services Other banking businesses conducted by Shinhan Bank include its treasury business (including internal asset and liability management and other non-deposit funding activities); its trading of, and investments in, debt securities and, to lesser extents, equity securities for its own accounts; and its derivative trading activities. Treasury Shinhan Bank’s treasury division provides funds to all of Shinhan Bank’s business operations and ensures the liquidity of its operations. To secure stable long-term funds, Shinhan Bank uses fixed and floating rate notes, debentures, structured financing and other advanced funding methods. As for overseas funding, Shinhan Bank closely monitors the feasibility of raising funds in currencies other than the U.S. Dollar, such as the Japanese Yen and Euro. In addition, Shinhan Bank makes call loans and borrows call money in the short-term money market. Call loans are short-term lending among banks and financial institutions in either Korean Won or foreign currencies with a minimum transaction amount of W100 million and maturities of typically one day. Securities Investment and Trading Shinhan Bank invests in and trades securities for its own accounts in order to maintain adequate sources of liquidity and to generate interest income, dividend income and capital gains. Shinhan Bank’s trading and investment portfolio consists primarily of Korean and international treasury securities and debt securities issued by Government agencies, local governments or certain government-invested enterprises, debt securities issued by financial institutions and equity securities listed on the KRX KOSPI Market and KRX KOSDAQ Market of the Korea Exchange. For a detailed description of our securities investment portfolio, see “— Description of Assets and Liabilities — Investment Portfolio.” Derivatives Trading Shinhan Bank provides to its customers, and to a limited extent, trades for its proprietary accounts, a broad range of derivatives products, which include: • interest rate swaps, options, and futures relating to interest rate risks; • cross-currency swaps, largely for the Korean Won against the U.S. Dollar, Japanese Yen and Euro; • equity and equity-linked options; • foreign currency forwards, options and swaps; • credit derivatives; and • KOSPI 200 indexed equity options. Shinhan Bank’s outstanding derivatives commitments in terms of notional amount were W251,507 billion, W321,240 billion and W394,922 billion in 2023, 2024 and 2025, respectively. Such derivative operations 50 Table of Contents generally focus on addressing the needs of Shinhan Bank’s corporate clients to enter into derivatives contracts to hedge their risk exposure and entering into back-to-back derivatives to hedge Shinhan Bank’s risk exposure that results from such client contracts. Shinhan Bank also enters into derivative contracts to hedge the interest rate and foreign currency risk exposures that arise from its own assets and liabilities. In addition, to a limited extent, Shinhan Bank engages in the proprietary trading of derivatives within its regulated open position limits. See “— Description of Assets and Liabilities — Derivatives.” Trust Account Management Services Overview Shinhan Bank’s trust account management services involve management of trust accounts, primarily in the form of money trusts. Trust account customers are typically individuals seeking higher rates of return than those offered by bank account deposits. Because deposit reserve requirements do not apply to deposits held in trust accounts as opposed to deposits held in bank accounts, and regulations governing trust accounts tend to be less strict, Shinhan Bank is generally able to offer higher rates of return on trust account products than on bank deposit products. Trust account products generally require higher minimum deposit amounts than those required by comparable bank account deposit products. Unlike bank deposit products, deposits in trust accounts are invested primarily in securities (consisting principally of debt securities and beneficiary certificate for real estate financing) and, to a lesser extent, in loans, as the relative shortage of funding sources requires that trust accounts be invested in a higher percentage of liquid assets. Under the Banking Act, the Financial Investment Services and Capital Markets Act and the Trust Act, assets in trust accounts are required to be segregated from other assets of the trustee bank and are unavailable to satisfy the claims of the depositors or other creditors of such bank. Accordingly, trust accounts that are not guaranteed as to principal (or as to both principal and interest) are accounted for and reported separately from the bank accounts. See “— Supervision and Regulation.” Trust accounts are regulated by the Trust Act and the Financial Investment Services and Capital Markets Act, and most national commercial banks offer similar trust account products. Shinhan Bank earns income from trust account management services, which is recorded as net trust management fees. As of December 31, 2023, 2024 and 2025, Shinhan Bank had total trust assets of W125,906 billion, W123,704 billion and W121,361 billion, respectively, comprised principally of securities investments of W21,913 billion, W20,521 billion and W26,631 billion, respectively; real property investments of W9,022 billion, W8,327 billion and W7,871 billion, respectively; and loans with an aggregate principal amount of W409 billion, W355 billion and W307 billion, respectively. Securities investments consisted of corporate bonds, government-related bonds and other securities, primarily commercial paper. As of December 31, 2023, 2024 and 2025, debt securities accounted for 17.0%, 16.3% and 21.7%, respectively, and equity securities constituted 0.4%, 0.3% and 0.2%, respectively, of Shinhan Bank’s total trust assets. Loans made by trust accounts are similar in type to those made by bank accounts, except that they are made only in Korean Won. As of December 31, 2023, 2024 and 2025, 83.6%, 83.2% and 82.5%, respectively, of the amount of loans from the trust accounts were collateralized or guaranteed. In making investment from funds received for each trust account, each trust product maintains investment guidelines applicable to each such product which set forth, among other things, company-, industry- and security-specific limitations. Trust Products In Korea, trust products typically take the form of money trusts, which are discretionary trusts over which (except in the case of a specified money trust) the trustees have investment discretion subject to applicable law 51 Table of Contents and is commingled and managed jointly for each type of trust account. The specified money trusts are established on behalf of customers who give specific directions as to how their trust assets should be invested. Money trusts managed by Shinhan Bank’s trust account business amounted to W69,292 billion, W72,181 billion and W81,131 billion as of December 31, 2023, 2024 and 2025, respectively. Shinhan Bank offers variable rate trust products through its retail branch network. As of December 31, 2023, 2024 and 2025, Shinhan Bank’s non-principal guaranteed variable rate trust accounts amounted to W66,083 billion, W69,242 billion and W78,516 billion, respectively, and principal guaranteed variable rate trust accounts amounted to W3,208 billion, W2,938 billion and W2,615 billion, respectively. Variable rate trust accounts offer their holders variable rates of return on the principal amount of the deposits in the trust accounts and do not offer a guaranteed return on the principal of deposits, except in the limited cases of principal guaranteed variable rate trust accounts, for which payment of the principal amount is guaranteed. Shinhan Bank charges a lump sum or a fixed percentage of the assets held in such trusts as a management fee, and, depending on the trust products, is also entitled to additional fees in the event of early termination of the trusts by the customer. Korean banks, including Shinhan Bank, are currently allowed to guarantee the principal of the following types of variable rate trust account products: (i) existing individual pension trusts, (ii) new individual pension trusts, (iii) existing retirement pension trusts, (iv) new retirement pension trusts, (v) pension trusts and (vi) employee retirement benefit trusts. Credit Card Services Core Products and Services We currently provide our credit card services principally through our credit card subsidiary, Shinhan Card, and to a limited extent, Jeju Bank. Shinhan Card’s credit card and related services principally consist of the following: • credit card services, which involve providing cardholders with credit up to a preset limit to purchase products and services. Repayment for credit card purchases may be made either (i) on a lump-sum basis, namely, in full at the end of a monthly billing cycle or (ii) on a revolving basis subject to a minimum monthly payment. Currently, the outstanding credit card balance subject to the revolving basis payments generally accrues interest at the effective annual rates of approximately 5.4% to 19.9%. • cash advances, which enable the cardholders to withdraw cash subject to a preset limit from an ATM or a bank branch. Repayments for cash advances may be made either on a lump-sum basis or, in the case of credit cards issued before December 30, 2014, on a revolving basis. Currently, the lump-sum cash advances generally accrue interest at the effective annual rates of approximately 6.4% to 19.9% and the revolving cash advances generally accrue interest at a minimum rate of 6.4% to 19.9% of the outstanding balance (depending on the cardholder’s credit). • installment purchases, which provide customers with an option to purchase products and services from select merchants on an installment basis for which repayments must be made in equal amounts over a fixed term generally ranging from two to 36 months, and for certain limited types of cards, up to 30 months. Currently, the outstanding installment purchase balances generally accrue interest at the effective annual rates of approximately 9.5% to 19.9%. • card loans, which enable cardholders to receive, up to a preset limit, a loan which is generally unsecured. Repayment of card loans is made generally by (i) repaying principal and interest in equal amounts on an installment basis over a fixed term of two to 60 months, (ii) repaying the principal and interest amounts in full at maturity, or (iii) making interest-only payments during the initial grace period of six months and repaying the principal and interest amounts on a monthly installment basis over the remaining period of typically two to 30 months. Currently, the outstanding card loan balances 52 Table of Contents generally accrue interest at the effective annual rates of approximately 5.2% to 19.9%. Delinquent credit card receivables can also be restructured into loans, which we classify as card loans, and these loans generally accrue interest at the effective annual rates of approximately 11.9% to 19.5% over a fixed term whose maximum is 72 months. Shinhan Card offers a wide range of credit card products that are tailored to credit cardholders’ lifestyles and responsive to their preferences and needs. Credit card products offered by Shinhan Card include: • cards that provide additional benefits such as frequent flyer miles and reward program points that can be redeemed by the customer for complementary services, prices or cash; • platinum cards and other preferred membership cards, which have higher credit limits and provide additional services in return for higher annual membership fees; • cards with additional features for preferred customers, such as revolving credit cards, travel services and insurance; • cards with fraud detection and security systems to prevent the misuse of credit cards and to encourage the use of credit cards over the Internet; • corporate and “affinity” cards that are issued to employees or members of particular companies or organizations; and • mobile phone cards allowing customers to conduct wireless credit card transactions through their mobile phones. Shinhan Card derives revenues from annual membership fees paid by credit cardholders, interest charged on credit card balances, fees and interest charged on cash advances and card loans, interest charged on late and deferred payments and merchant fees paid by retail and service establishments. Merchant fees and interest on cash advances constitute the largest source of our revenues. The annual membership fees for credit cards vary depending on the type of credit card and the benefits offered thereunder. For standard credit cards and most of its affinity and co-branded cards, Shinhan Card charges an annual membership fee ranging from W1,000 to W2,000,000 per credit card, depending on the type of the card and the cardholder profile. Certain government affinity cards have no annual membership fee. If Shinhan Card’s customers make cash advances using ATMs of a financial institution other than Shinhan Card, Shinhan Card also charges a usage fee for such cash advances in an amount equivalent to the fees charged by such financial institution for the use of its ATM plus costs to cover Shinhan Card’s related administration expenses. Any accounts that are unpaid when due are deemed to be delinquent accounts. Shinhan Card currently imposes a late charge equal to 3% per annum added to the delinquent accountholder’s interest rate that applied prior to the default. Merchant discount fees, which are processing fees Shinhan Card charges to merchants, can be up to the regulatory limit of 2.3% of the purchased amount depending on the merchant used, with the average charge for credit cards being 1.38% in 2025. For small- and medium-sized merchants, the applicable regulations impose reduced fee rates of 0.4% (in the case of merchants with annual sales of W300 million or less) and 1.0% (in the case of merchants with annual sales of more than W300 million and up to W500 million) of the purchased amount. Such fee rates became effective in February 2025 and reflect the periodic recalculation of eligible costs in accordance with applicable regulations, resulting in reduced fee rates for certain small- and medium-sized preferential merchants, while remaining unchanged for most general merchants. Although the recalculation cycle for eligible costs has been extended from three years to six years, a separate committee comprised of representatives from relevant authorities and industry experts may review the need for recalculation every three years if deemed necessary. We intend to pursue strategic fee negotiations and management for general merchants, while also diversifying our revenue base by expanding installment payment, revolving credit and annual fee income in order to reduce our reliance on merchant fee revenue. 53 Table of Contents Although making payments on a revolving basis is more common in many other countries, this payment method is still in its early stages of development in Korea. Cardholders in Korea are generally required to repay their purchases within approximately 14 to 44 days of the purchase depending on their payment cycle, except in the case of installment purchases where the repayment term is typically three to six months. Accounts that remain unpaid after this period are deemed to be delinquent, and Shinhan Card levies late charges on, and closely monitors, such accounts. For purchases made on an installment basis, Shinhan Card charges interest on unpaid amounts at rates that vary according to the terms of repayment. Cardholders are required to settle their outstanding balances in accordance with the terms of the credit cards they hold. Cardholders are required to select the monthly settlement date when they open the credit card account and may subsequently change the settlement date but no more than once every 60 days. Settlement dates at or around the end of each month are the most popular since salaries are typically paid at the end of the month. In addition to credit card services, Shinhan Card also offers check cards, which are similar to debit cards in the United States and many other countries, to retail and corporate customers. A check card can be used at any of the merchants that accept credit cards issued by Shinhan Card and the amount charged to a check card is directly debited from the cardholder’s designated bank account. Check cards have a low risk of default and involve minimal funding costs. Although Shinhan Card does not charge annual membership fees on a majority of its check card products, merchants are charged fees on the amount purchased using check cards at a rate between 0.15% and 2.50%, depending on the type of business, which is lower than the corresponding fee charged for credit card use. Recently, the Financial Services Commission has permitted certain financial institutions, including Shinhan Card, to test innovative financial services. Shinhan Card obtained approval from the Financial Services Commission to conduct pilot programs for a number of such services, including, among others, the issuance of family cards for underage children. Following the completion of these pilot programs, Shinhan Card has transitioned successful programs into official services, including its rental brokerage platform and credit card-based rent payment system. The payments market in Korea has experienced intensified competition as Internet-only banks and non-financial companies, including retail and technology companies, have steadily expanded their presence and influence in the market. In addition, regulatory developments relating to data utilization and financial platform services, including open banking and MyData, have accelerated competition beyond payment services across the broader financial services sector. As customers are increasingly able to access and use integrated financial services through a single platform, financial institutions and technology companies are focusing on digital platforms as core distribution channels to expand their customer bases. Accordingly, Shinhan Card is continuing to expand the user base of its payment platform “Shinhan SOL Pay” by leveraging “Shinhan Super SOL,” the group-wide integrated financial platform, while continuing to improve customer convenience by enhancing the quality of its services. Other Products and Services Shinhan Card seeks to diversify its revenue base and strengthen its long-term growth by expanding its data business and commission-based business, leveraging its big data capabilities and digital platforms. Shinhan Card’s data business is built on its long-standing investment in big data capabilities. In 2019, Shinhan Card launched a “Super Personalization Service” utilizing a platform based on big data analysis to provide tailored services to individual customers. After obtaining a license from the Financial Services Commission as a MyData service provider, Shinhan Card has been able to utilize additional external data to further refine and enhance its personalized services. Shinhan Card has since leveraged its big data capabilities to expand its revenue-generating businesses, including MyData-based loan brokerage, big data sales, credit bureau services for small businesses and commercial real estate analysis. Shinhan Card also provides data products and 54 Table of Contents solutions tailored to the needs of corporate and individual customers through platforms such as “GranData,” an open data collaboration platform, and “DataBada,” a data marketplace that offers data products including market trend and consumer analytics. Shinhan Card seeks to enhance the profitability and competitiveness of its data business by integrating diverse data sources, expanding data sales through affiliations with third parties and identifying new business opportunities, developing alternative credit bureau services, introducing advertising technology–related services and incorporating AI-driven technologies, as well as expanding MyData-based solutions to support its core operations, including loan brokerage. In addition, Shinhan Card promotes internal and external data exchange and integration through initiatives such as Shinhan One Data and GranData, with the goal of strengthening the group-wide digital ecosystem and enhancing its data capabilities. Shinhan Card has also expanded its commission-based business by brokering and selling fee-based products and insurance products through internal and external distribution channels, contributing to the diversification of its revenue sources. Customers and Merchants The following table sets forth the number of customers of Shinhan Card and the number of merchants where Shinhan Card can be used for payment as of the dates indicated. As of December 31, 2023 2024 2025 (In thousands, except percentages) Shinhan Card: Number of credit card holders(1) 13,211 13,035 13,159 Personal accounts 13,047 12,873 12,987 Corporate accounts 164 162 172 Active ratio(2) 97.46 % 97.54 % 97.38 % Number of merchants 3,121 3,182 3,243 Notes: (1) Represents the number of cardholders whose card use is not subject to suspension or termination as of the relevant date. (2) Represents the ratio of the number of accounts used at least once during the last six months to the number of total accounts as of year-end. Installment Finance Shinhan Card provides installment finance services to customers to facilitate purchases of durable consumer goods such as new and used cars, appliances, computers and other home electronics products. Revenues from installment finance operations accounted for 4.68% of Shinhan Card’s total operating revenue in 2025. Shinhan Card pays the merchants when Shinhan Card’s customers purchase such goods, and the customers remit monthly installment payments to Shinhan Card over a number of months, generally up to 36 months (and, in the case of installment financings for automobile purchases, up to 72 months), as agreed with the customers. Shinhan Card has installment financing arrangements with over 13,000 merchants in Korea, including major car dealers, manufacturers and large retailers with nationwide networks, such as electronics goods stores. Shinhan Card promptly processes installment financing applications and, based on the extensive credit information it possesses or can access, it is able to offer flexible installment payment terms tailored to individual needs of the customers. Shinhan Card also devotes significant efforts to developing and maintaining its relationships with merchants, which are the most important source of referrals for installment finance customers. Shinhan Card makes prompt payments to merchants for goods purchased by the installment finance customers. 55 Table of Contents Auto Lease Shinhan Card provides auto leasing financing to retail customers and corporations. Revenues from auto lease operations accounted for 12.77%, 12.06% and 12.78% of Shinhan Card’s total operating revenue in 2023, 2024 and 2025, respectively. Securities Services Overview Through Shinhan Securities, we provide a wide range of financial investment services to our diversified customer base, including corporations, institutional investors, governments and individuals. Financial investment services offered by Shinhan Securities range from securities services, investment advice and financial planning services, and investment banking services, such as underwriting and mergers and acquisitions advisory services. Subject to market conditions, Shinhan Securities also engages in equity- and stock index-linked derivatives sales and brokerage, proprietary trading and brokerage services for futures involving interest rates, currency and commodities as well as foreign exchange margin trading. As of December 31, 2025, according to internal data, Shinhan Securities’ annual market share of Korean equity brokerage market was 8.44% (consisting of 2.52% in the retail segment, 0.22% in the institutional segment and 5.69% in the international segment) in terms of total brokerage volume. As of the same date, according to internal data, Shinhan Securities’ annual market shares of Korean options and futures brokerage market were 13.30% and 19.65%, respectively, in terms of total brokerage volume with respect to these products. Products and Services Shinhan Securities provides principally the following services: • retail client services. These services include equity and bond brokerage, investment advisory and financial planning services to retail customers, with a focus on high net-worth individuals. The fees generated include brokerage commissions for the purchase and sale of securities, asset management fees, interest income from credit extensions (including in the form of stock subscription loans), margin transaction loans and loans secured by deposited securities. • institutional client services: • brokerage services. These services include brokerage of stocks, corporate bonds, futures and options provided to Shinhan Securities’ institutional and international customers and sale of institutional financial products. These services are currently supported by a team of approximately 52 research analysts that specialize in equity, bonds and derivatives research. • investment banking services. These services include a wide array of investment banking services to Shinhan Securities’ corporate customers, such as domestic and international initial public offerings, mergers and acquisitions advisory services, bond issuances, underwriting, capital increase, asset-backed securitizations, issuance of convertible bonds and bonds with warrants, structured financing, issuance of asset-backed commercial papers and project financings involving infrastructure, real estate and shipbuilding. Shinhan Securities also engages, to a limited extent, in proprietary trading in equity and debt securities, derivative products and over-the-counter market products. With respect to brokerage services, in light of intense competition in the domestic brokerage industry, Shinhan Securities primarily focuses on strengthening profitability through service differentiation and efficient management of its distribution network rather than enlarging its market share indiscriminately through lowering fees and commissions. Shinhan Securities’ efforts to differentiate its services include offering its customers 56 Table of Contents opportunities to purchase stocks in a wide range of countries (currently more than 26 countries), leveraging synergy opportunities afforded by affiliation with other Shinhan entities, such as offering brokerage accounts maintained at Shinhan Bank and Shinhan Capital. With respect to investment banking services, Shinhan Securities concentrates on equity capital markets, debt capital markets, project finance and mergers and acquisitions. To a limited extent, Shinhan Securities also engages in private equity investments through formation of private equity funds by soliciting investors on a private placement basis. To better serve its international customers, Shinhan Securities operates four overseas service centers in Hong Kong, New York, Vietnam and Indonesia. Over the past decade, Shinhan Securities has made concerted efforts to increase the scale of its presence in these regions, including through acquisitions of local securities companies and additional injection of capital into our local subsidiaries. In July 2015, we acquired a 100% stake in Nam An Securities (subsequently launched as Shinhan Securities Vietnam Co., Ltd.), a Vietnamese securities services firm that provides investment banking and asset management services. In addition, in order to capitalize on the rapid growth opportunity and as part of its expansion efforts in Indonesia, Shinhan Securities acquired a 99% stake in PT Makinta Securities, an Indonesian investment banking firm, in July 2016 and subsequently launched it as an overseas subsidiary offering investment banking and brokerage services under the name PT Shinhan Sekuritas Indonesia in December 2016. To further expand and stabilize our global businesses, we made further capital investments totaling US$62 million in December 2017 in our subsidiaries located in Hong Kong, New York, Vietnam and Indonesia. Life Insurance Services Overview We provide life insurance products and services primarily through Shinhan Life Insurance. Shinhan Life Insurance provides services through its diversified distribution channels, including financial planners, telemarketers, agency marketers and bancassurance specialists. Shinhan Life Insurance had total assets of W58,641 billion, W59,843 billion and W59,662 billion as of December 31, 2023, 2024 and 2025, respectively, and net profit of W472 billion, W528 billion and W508 billion for the years ended December 31, 2023, 2024 and 2025, respectively. Since the merger with Orange Life Insurance in July 2021, Shinhan Life Insurance has strived to establish itself as a top-tier life insurance company, focusing on its core life insurance business, sustainable growth drivers, and excellent financial soundness, based on the vision of “NewLife, adding new values to life.” Products and Services Shinhan Life Insurance provides principally the following services: • Life insurance. Shinhan Life Insurance develops products that are marketed to customers in various age groups through tailored marketing strategies and in-depth analysis of customer databases. For example, Shinhan Life Insurance provides optimized products to meet the diverse needs of customers, including whole life and term insurance, health insurance, pension insurance, and variable life insurance. • Sales channels. Shinhan Life Insurance has a variety of online and offline sales channels, including industry-leading financial consultants, telemarketers, general agents, bancassurance and digital insurance. As part of its efforts to expand its presence in Asia, Shinhan Life Insurance established Shinhan Life Insurance Vietnam Co., Ltd. in Vietnam, which began its business operations in January 2021 and also launched a financial consultant sales channel in Vietnam in February 2024. 57 Table of Contents In response to the implementation of IFRS 17 in 2023, Shinhan Life Insurance has updated its management strategies, financial closing and reporting processes and internal control systems. In addition, Shinhan Life Insurance has upgraded its insurance risk measurement system in anticipation of the K-ICS, a new regulatory solvency regime for insurance companies, which also became effective in 2023. See “Item 3.D. Risk Factors — 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.” Non-Life Insurance Services In June 2022, we acquired BNP Paribas Cardif General Insurance and changed its name to Shinhan EZ General Insurance. See “Item 4.A. History and Development of the Company — Our History and Development.” General, or non-life, insurance products offered by Shinhan EZ General Insurance include collateral protection insurance, motor insurance, SMART repair and extend warranty. Shinhan EZ General Insurance, which has been seeking to transition its business model to become a digital insurance company with limited offline operations, also offers innovative insurance products suitable for collaboration with third party businesses with advanced digital channels, such as health, injury, travel and leisure insurance products. Credit Services We provide leasing and equipment financing services to our corporate customers mainly through Shinhan Capital. Shinhan Capital provides customers with leasing, installment financing, new technology financing, equipment leasing, and corporate credit financing services. Shinhan Capital’s strength has traditionally been in leasing of ships, automobiles and other specialty items, but it also offers other leasing and financing services, such as corporate restructuring services for financially troubled companies, project financing for real estate and infrastructure development, corporate leasing and equipment financing. Other Services Through our other subsidiaries, we also provide asset management, savings banking, loan collection and credit reporting, collective investment administration and financial system development services, among others. Through Shinhan Asset Management (in addition to Shinhan Securities), which merged with Shinhan Alternative Investment Management in January 2022, we also engage in alternative investments through formation of private equity funds by soliciting investors on a private placement basis. Asset Management Services In addition to personalized wealth management services provided as part of our private banking and securities services, we also provide asset management services through Shinhan Asset Management, our wholly owned subsidiary. As of December 31, 2025, Shinhan Asset Management had assets under management amounting to W133,643 billion, which was the fourth largest among all asset managers in Korea as of such date. Shinhan Asset Management provides a wide range of investment products, including traditional equity and fixed income funds as well as alternative investment products, to retail and institutional clients. To a limited extent, Shinhan Securities also provides asset management services for discretionary accounts. See “— Securities Services.” Savings Banking Through Shinhan Savings Bank, we provide savings banking services in accordance with the Mutual Savings Bank Act to customers that generally would not, due to their credit profile, qualify for our commercial banking services, or who seek higher returns on their deposits than those offered by our commercial banking subsidiaries. Established in December 2011, Shinhan Savings Bank offers savings and other deposit products 58 Table of Contents with relatively higher interest rates and loans (usually in relatively small amounts and on customer-tailored terms and including loans for which we receive credit support from the Government) primarily to small- to medium-sized enterprises and low income households who would not generally qualify for our commercial banking services. We closely monitor the business activities and product offerings of Shinhan Savings Bank to ensure its financial soundness. Loan Collection and Credit Reporting We centralize credit collection and credit reporting operations for our subsidiaries through Shinhan Credit Information Co., Ltd. (“Shinhan Credit Information”), which also provides similar services to third party customers. Shinhan Credit Information’s services include debt collection, credit inquiries, credit reporting, civil application and petition services and process agent services, among others. Shinhan Credit Information also manages participants in credit recovery programs and provides support to the Kookmin Happy Fund, which is a Government-established fund that supports retail borrowers with low credit scores by purchasing defaulted loans from creditors or providing credit guarantees to enable such borrowers to refinance their loans at lower rates. Collective Investment Administration Services We provide integrated collective investment administration services through Shinhan Fund Partners Co., Ltd. (“Shinhan Fund Partners”), which provides general management service, asset management systems, accounting systems and trading systems to asset management companies and institutional investors. The target customers for these collective investment administration services are asset managers, investment advisors and institutional investors, and Shinhan Fund Partners seeks to provide a comprehensive service package including the computation of the reference value for funds, evaluation of fund performance, provision of trading systems and fund-related legal administrative services. Alternative Investments To a limited extent, through Shinhan Asset Management, which merged with Shinhan Alternative Investment Management in January 2022, we also engage in private equity investments through formation of private equity funds. The private equity funds receive funding from investors on a private placement basis, which funds are then invested in alternative assets and equity securities in companies for a variety of reasons, including management control, business turnaround or corporate governance improvements. Financial System Development Services We provide financial system development services through Shinhan DS, which offers system integration, system management, IT outsourcing, business process outsourcing and IT consulting services. Real Estate Investment Trust (REIT) Asset Management Through our wholly owned subsidiary, Shinhan REITs Management Co., Ltd., we provide real estate investment and management services to real estate investment trusts. Real Estate Trust Services Shinhan Asset Trust Co., Ltd. is a comprehensive real estate trust service provider, providing land development trust, management trust, proxy and agency businesses and consulting services, among others. Venture Capital Investment Shinhan Venture Investment Co., Ltd. is an alternative investment management firm specializing in identifying and investing in start-up companies as well as small- to medium-sized companies and also promoting the formation and operation of early stage investment funds and private equity investment funds. 59 Table of Contents Our Distribution Network We offer a wide range of financial services to retail and corporate customers through a variety of distribution networks and channels established by our subsidiaries. The following table presents the geographical distribution of our distribution network based on the branch offices and other distribution channels of our principal subsidiaries, as of December 31, 2025. Shinhan Bank Jeju Bank Shinhan Card Shinhan Securities Shinhan Life Insurance Total Distribution Channels in Korea(1) Seoul Metropolitan Area 251 1 15 31 143 441 Gyeonggi Province 144 — 7 9 24 184 Other Major Cities: 127 1 19 12 47 206 Incheon 49 — 2 2 5 58 Busan 27 1 4 3 14 49 Gwangju 11 — 4 2 8 25 Daegu 17 — 4 2 9 32 Ulsan 10 — 1 1 3 15 Daejeon 13 — 4 2 8 27 Sub-total 522 2 41 52 214 831 Others 128 27 18 8 24 205 Total 650 29 59 60 238 1,036 Note: (1) Includes our main office and those of our subsidiaries. Banking Service Channels Our banking services are primarily provided through an extensive branch network, specializing in retail and corporate banking services, as complemented by self-service terminals and electronic banking, as well as an overseas services network. As of December 31, 2025, Shinhan Bank’s branch network in Korea comprised 650 service centers, consisting of 453 retail banking service centers (including 25 private wealth management centers and 113 retail offices), 13 large corporate banking service centers, 7 corporate banking services centers and 177 hybrid banking branches. In 2025, Shinhan Bank consolidated the majority of its corporate banking service centers with retail banking service centers as part of its strategic consolidation efforts to increase efficiency and enhance synergy between its corporate and retail services. Shinhan Bank’s banking branches are designed to provide one-stop banking services tailored to their respective target customers. In recent years, Shinhan Bank has been actively adopting digital technology to improve the operational efficiency of its banking service channels. For example, Shinhan Bank introduced digital kiosks to banking branches, established “Paperless Banking” by replacing paper applications with electronic documents, implemented a “robotic process automation system” for the automation of certain tasks and processes and increased the volume of client communications through non-face-to-face platforms. Retail Banking Channels In Korea, retail transactions are generally conducted with credit cards and “check cards,” which are similar to debit cards except that “check cards” are accepted by all merchants that accept credit cards and charge merchants commissions. The use of cash has declined significantly in recent years, and conventional checking accounts are generally not offered or used as widely as in other countries such as the United States. An extensive retail branch network has traditionally played an important role as the main platform for a wide range of banking 60 Table of Contents transactions. However, a growing number of customers now predominantly use other service channels to meet their banking needs, such as Internet banking, mobile banking and other forms of non-face-to-face platforms. In response to such changes, Shinhan Bank has been focusing on reorganizing its retail branch network, including through the relocation, consolidation or closure of branches that are considered to be redundant. In recent years, Shinhan Bank has increased its focus on targeting high net-worth individuals through private banking. Our private banking services are provided principally through private banking relationship managers who assist their clients with developing individual investment strategies. We believe that such relationship managers help us foster enduring relationships with our high-net worth clients. Private banking customers also have access to Shinhan Bank’s retail branch network and other general banking products Shinhan Bank offers through its retail banking operations. Corporate Banking Channels Shinhan Bank mainly provides its corporate banking services through corporate banking service centers primarily designed to serve large corporate customers and hybrid banking branches designed to serve retail as well as small-business corporate customers. Small- and medium-sized enterprises have traditionally been Shinhan Bank’s core corporate customer segment and we plan to continue to strengthen Shinhan Bank’s position vis-à-vis these customers. Self-Service Terminals In order to complement its banking branch network, Shinhan Bank maintains an extensive network of automated banking machines, which are located in branches and in unmanned outlets. These automated banking machines consist of ATMs, cash dispensers and passbook printers. In late 2020 and early 2021, Shinhan Bank introduced digital kiosks, including smart kiosks, digital desks and card kiosks, which together represent a new generation of automated self-service machines featuring biometric authentication technology and the ability to perform a wide range of services that were not available through traditional ATMs, such as opening new accounts, issuance of debit and check cards, foreign currency exchange and overseas remittance of foreign currency. As of December 31, 2025, Shinhan Bank had 3,919 ATMs, 237 digital desks, 307 smart kiosks, and 23 card kiosks. Shinhan Bank has actively promoted the use of these distribution outlets in order to provide convenient service to customers, as well as to maximize the marketing and sales functions at the branch level, reduce employee costs and improve profitability. In 2025, automated self-service machine transactions accounted for a substantial portion of total deposit and withdrawal transactions of Shinhan Bank in terms of the number of transactions and fee revenue generated, respectively. Digital Banking Shinhan Bank provides comprehensive digital banking services for both retail and corporate customers through fully integrated online and mobile platforms. Its digital channels, which were initially introduced to improve cost efficiency, have since evolved into core platform channels that drive revenue generation and enhance customer value and Shinhan Bank continues to enhance these digital channel capabilities as part of its broader strategy to strengthen its long-term competitiveness. As of December 31, 2025, Shinhan Bank had 27,907,109 subscribers to its Internet banking services and 24,656,695 users of its smart banking applications, representing an increase of 5.2% and 13.6%, respectively, compared to December 31, 2024. Shinhan Bank continues to experience a rise in the number of online and mobile banking users, as its digital channels provide customers with more convenient and straightforward access to banking services without time or location constraints, while also delivering tailored, customized services for each customer. Through its flagship mobile application, “Shinhan SOL Bank,” Shinhan Bank offers a broad range of retail banking services that extend beyond traditional branch capabilities, including 24-hour account balance updates, real-time fund transfers, overseas remittances, and digital loan applications. The platform is integrated into our 61 Table of Contents group-wide mobile application “Shinhan Super SOL,” which consolidates the core financial services of our subsidiaries into a single unified digital interface. Shinhan SOL Bank incorporates open banking functionality, enabling customers to view and manage assets held across multiple financial institutions within a single interface, including securities, insurance, pension, real estate and automobile assets. The application also features AI-based product recommendation tools that deliver personalized financial solutions tailored to individual customer lifestyles and investment preferences through automated analysis of digital customer data. Shinhan Bank has also advanced digital innovation at select offline branches to create a seamless integration between its physical and digital channels. These digitally enhanced branches feature AI concierges and smart kiosks that enable customers to independently conduct a wide range of transactions, supported by digital customer support tools including live video consultations with service representatives. As an extension of these digital enhancements, Shinhan Bank opened several “AI Branches” at select locations in 2024, integrating AI technologies, including chatbots, voice recognition and automated decision-making services, into its digital finance services. The AI Branch features digital desks and kiosks designed to support non-face-to-face services, offering 24/7 financial consultations and facilitating core banking transactions. Through an AI clerk, customers can open deposit accounts, subscribe to savings and installment deposit products, issue check cards, exchange foreign currencies, and request official documents. Additionally, in 2024, Shinhan Bank enhanced its Shinhan SOL Bank platform by integrating AI-based product recommendation features, which deliver personalized financial solutions tailored to individual customer lifestyles and investment preferences through automated analysis of digital customer data. Shinhan Bank launched an AI-based virtual assistant and “R-Secretary,” an AI-driven robotic process automation assistant that Shinhan Bank’s employees can utilize to streamline internal processes and enhance internal controls and risk management. For corporate customers, Shinhan Bank provides an integrated digital banking ecosystem centered on its web-based cash management platform, “Shinhan Bizbank,” and its mobile and online platform, “Shinhan SOL Biz.” These platforms support a comprehensive range of enterprise banking services, including transaction history inquiries, fund transfers, letters of credit and other trade finance services, payment and collection management, sales and acquisition settlement services, business-to-business settlement services, sweeping and pooling arrangements, enterprise resource planning interface services, host-to-host banking solutions, SWIFT SCORE services and global cash and liquidity management. Furthermore, through its “Inside Bank” program, Shinhan Bank integrates Internet banking, capital management services and enterprise resource planning systems to deliver customized financial solutions tailored to the comprehensive needs of corporate customers ranging from large conglomerates to small enterprises in various industries, with the goal of enhancing convenience to our corporate customers in accessing our financial services as well as helping them strategically manage their funds. Shinhan Bank continues to enhance non-face-to-face service capabilities by offering virtual corporate fund management tools, digital funds transfer services and mobile payment solutions. In addition, expanded open banking functionality enables corporate clients to access and manage multiple corporate bank accounts held across financial institutions through a single online platform, supporting more efficient liquidity oversight and strategic fund management. 62 Table of Contents Overseas Distribution Network The table below sets forth Shinhan Bank’s overseas banking subsidiaries and branches as of December 31, 2025. Business Unit Location Year Established or Acquired Subsidiaries Shinhan Bank Europe GmbH(1) Frankfurt, Germany 1994 Shinhan Bank America New York, USA 1990 Shinhan Bank (China) Limited Beijing, China 2008 Shinhan Bank (Cambodia) PLC Phnom Penh, Cambodia 2007 Shinhan Bank Kazakhstan Limited Almaty, Kazakhstan 2008 Shinhan Bank Canada Toronto, Canada 2009 Shinhan Bank Japan(2) Tokyo, Japan 2009 Shinhan Bank Vietnam Ltd.(3) Ho Chi Minh City, Vietnam 2011 Banco Shinhan de Mexico(4) Mexico City, Mexico 2015 PT Bank Shinhan Indonesia(5) Jakarta, Indonesia 2016 Branches New York USA 1989 Singapore Singapore 1990 London United Kingdom 1991 Mumbai India 1996 Hong Kong China 2006 New Delhi India 2006 Poonamallee India 2010 Pune India 2014 Manila Philippines 2015 Dubai United Arab Emirates 2015 Sydney Australia 2016 Yangon Myanmar 2016 Ahmedabad India 2016 Ranga Reddy India 2016 Representative Offices(6) Uzbekistan Tashkent, Uzbekistan 2009 Poland(1) Wroclaw, Poland 2014 Hungary(7) Budapest, Hungary 2021 Georgia(8) Georgia, USA 2024 Notes: (1) Shinhan Bank Europe GmbH established a representative office in Poland in 2014. (2) Prior to the establishment of the subsidiary in Japan in 2009, Shinhan Bank provided banking services in Japan through a branch since 1986. (3) Prior to the establishment of the subsidiary in Vietnam in 2011, Shinhan Bank provided banking services in Vietnam through a branch since 1995. (4) Banco Shinhan de Mexico commenced operations in March 2018. (5) Shinhan Bank acquired a 98.01% stake in Bank Metro Express and a 100% stake in Centratama Nasional Bank, two banks in Indonesia, in November 2015 and December 2016, respectively. On March 3, 2016, Bank Metro Express obtained a license to conduct business activities in the name of PT Bank Shinhan Indonesia. Centratama Nasional Bank was merged with PT Bank Shinhan Indonesia on December 6, 2016. (6) Shinhan Bank’s representative office in Mexico City was closed as of July 8, 2024. (7) Shinhan Bank’s representative office in Hungary commenced operations on October 19, 2021. (8) Shinhan Bank’s representative office in Georgia, USA commenced operations on November 1, 2024. 63 Table of Contents Our overseas banking subsidiaries and branches primarily engage in trade financing and local currency funding for Korean companies and Korean nationals in the overseas markets, as well as providing foreign exchange services in conjunction with Shinhan Bank’s headquarters. These overseas subsidiaries and branches also engage in investment and trading of securities of foreign issuers. As part of our globalization efforts, we are expanding our coverage of local customers in the overseas markets by providing a wider range of services in retail and corporate banking, and to that end, we have increasingly established subsidiaries in lieu of branches in select markets and in 2011 merged two of our banking subsidiaries in Vietnam in order to enhance our presence in the region and enable greater flexibility in our service offerings in these markets. We plan to continue to focus on organic growth, although we may selectively pursue acquisitions in markets where it is difficult to obtain local banking licenses through greenfield entry. In furtherance of this objective, Shinhan Bank acquired a 98.01% stake in Bank Metro Express and a 100% stake in Centratama Nasional Bank, two banks in Indonesia, in November 2015 and December 2016, respectively. Shinhan Bank completed the merger of the two banks in December 2016. Shinhan Bank also opened additional branches in Australia, Myanmar and India in the second half of 2016. In April 2017, Shinhan Bank Vietnam Co., Ltd. acquired ANZ Bank (Vietnam) Limited’s retail division. In 2017, Shinhan Bank became the first Korean Bank to obtain a license to set up a local subsidiary in Mexico and started local business in Mexico in March 2018. In October 2021, Shinhan Bank opened an office in Hungary, expanding Shinhan Bank’s operations in Eastern Europe. In November 2024, Shinhan Bank opened an office in Georgia, USA, further expanding Shinhan Bank’s operations in the United States. We plan to continue our efforts to expand our overseas banking service network and global operations. Credit Card Distribution Channels Shinhan Card primarily uses three distribution channels to attract new credit card customers: (i) its branch network and our other subsidiaries’ branch networks, (ii) sales agents and (iii) business partnerships and affiliations with vendors. In addition, Shinhan Card offers various services through its “Shinhan SOL Pay” platform, including an AI chatbot, open banking, recurring payment services and dedicated services for teenagers, and continues to strengthen the competitiveness of this platform as a customer acquisition and distribution channel. As of December 31, 2025, the branch network for our credit card operations consisted of 650 branches of Shinhan Bank and 41 card sales branches of Shinhan Card. The use of the established distribution network of Shinhan Bank is part of the group-wide cross-selling efforts of selling credit card products to existing banking customers. In 2025, the number of new cardholders acquired through our banking distribution network accounted for approximately 23.6% of the total number of new cardholders. We believe that the banking distribution network will continue to provide a stable and low-cost venue for acquiring high-quality credit cardholders. Sales agents represented the most significant source of Shinhan Card’s new cardholders in 2025, and the number of new cardholders acquired through sales agents accounted for approximately 17.6% of the total number of Shinhan Card’s new cardholders in 2025. As of December 31, 2025, Shinhan Card had 775 sales agents, who were independent contractors. These sales agents assist prospective customers with the application process and customer service. Compensation of these sales agents is generally tied to their performance results, which is measured by the number of customers introduced by them as well as the transaction volume of such customers, and we believe this system helps to enhance profitability. As a way of acquiring new cardholders, Shinhan Card also has business partnership and affiliation arrangements with a number of vendors, including gas stations, major retailers, airlines and telecommunication and Internet service providers. Shinhan Card plans to continue to leverage its alliances with such vendors to attract new cardholders. As part of a group-wide initiative to streamline our operations and create a digital-friendly business platform, Shinhan Card has strategically expanded its digital platforms. In October 2021, Shinhan Card launched “Shinhan SOL Pay”, a mobile platform providing consolidated financial and non-financial services. In addition 64 Table of Contents to providing traditional financial services such as payment, open banking and asset management as well as services provided through traditional customer service means such as call centers and website applications, Shinhan SOL Pay also offers a variety of non-financial content including entertainment, shopping, personal certificates and memberships in order to better provide customized financial services aimed at meeting the comprehensive needs of customers. In addition to providing traditional payment services, Shinhan SOL Pay utilizes digital technology such as AI and big data to provide personalized services tailored to individual users and integrated access across services provided by various merchants and affiliates. Since establishing its first overseas subsidiary in Kazakhstan in November 2014, Shinhan Card has further expanded its presence in the overseas credit financing market through acquisitions of financing companies in Indonesia in 2015 and Vietnam in 2018, as well as the establishment of a local subsidiary in Myanmar in 2016. Such local subsidiaries have grown significantly since their inception or acquisition by us, and Shinhan Card intends to continue to pursue their stable growth and improvements in financial performance through the introduction of new financing products as well as partnerships with local businesses and our other subsidiaries, including Shinhan Bank and Shinhan Securities. Securities Brokerage Distribution Channels Our securities services are conducted principally through Shinhan Securities. As of December 31, 2025, Shinhan Securities had 60 service centers nationwide, and four overseas subsidiaries based in Hong Kong, New York, Vietnam and Indonesia to service our corporate customers. Approximately 71% of our brokerage branches are located in the Seoul metropolitan area with a focus on attracting high net-worth individual customers as well as enhancing synergy with our retail and corporate banking branch network. We plan to continue to explore new business opportunities, particularly in the corporate customer segment, through further cooperation between Shinhan Securities and Shinhan Bank. Insurance Sales and Distribution Channels We sell and provide our insurance services primarily through Shinhan Life Insurance. In addition to distributing bancassurance products through our bank branches, Shinhan Life Insurance also distributes a wide range of life insurance products through its own branch network, agency network of financial planners and telemarketers, as well as through the Internet and mobile channels. As of December 31, 2025, Shinhan Life Insurance operated 237 branches and one customer support center. These branches are staffed by financial planners, telemarketers, agent marketers and bancassurance agents to meet the various needs of our insurance and lending customers. Our group-wide customer support centers arrange for policy loans (namely loans secured by the cash surrender value of the underlying insurance policy) for our insurance customers and, to a limited extent, other loans to other customers, and also handle insurance payments. Information Technology We dedicate substantial resources to maintaining a sophisticated information technology system to support our operations management and provide high quality customer service. Our information and technology system is operated at a group-wide level based on comprehensive group-wide information collection and processing. We also operate a single group-wide enterprise information technology system known as “enterprise data warehouse” for customer relations management capabilities, risk management systems and data processing. We continually upgrade our group-wide information technology system in order to apply the best-in-class technology to our risk management systems to reflect the changes in our business environment as well as enhance differentiation from our competitors. We operate two data centers that are responsible for the comprehensive management of information technology systems for our subsidiaries on a group-wide basis. The information technology systems and data of 65 Table of Contents the subsidiaries are backed up on a real-time basis in both data centers, reducing the probability of losing data or experiencing material disruption of our financial services even if an issue were to occur in one of these locations. Since 2023, Shinhan Data Center has implemented an AI-based cyber threat detection system that utilizes big data to identify abnormities and help us promptly respond to cyber attacks. In order to enhance the security and reliability of our financial services, we have continually strengthened our information security systems to better protect our customers’ financial assets. We believe that such improvements have enabled our fraud detection systems to prevent a substantial volume of voice phishing and other fraudulent activities. In addition, we respond to cyber intrusions on a real-time basis through our group-wide security monitoring operations. See “Item 16K. Cybersecurity.” At the subsidiary level, we continue to increase investment in information and communication technologies (“ICT”) to improve the quality of customer service in line with evolving market trends. Accordingly, we have expanded the services offered on our digital platforms to better meet customer needs. For example, in October 2022, Shinhan Bank revamped its “Shinhan SOL Bank” mobile application to enhance overall usability, significantly improving processing speed and introducing features such as a customizable home screen and user-editable transaction records. Shinhan Card’s “Shinhan SOL Pay” improved its in-app customer support and increased the range of payment options available to its users by launching the open pay service, which enables users to register and make payments with credit cards issued by other credit card companies, and Shinhan Securities’ “Shinhan SOL Securities” also implemented a more customer-friendly user experience. Shinhan Life also launched “Shinhan SOL Life,” an all-in-one insurance service platform. In December 2023, in order to further improve customer experience and convenience, we launched Super SOL, an integrated Group-wide mobile application that provides a wide range of integrated services currently offered by members of Shinhan Financial Group. Additionally, as part of our ICT modernization strategy, we plan on continuing to strengthen our ICT capabilities based on utilization of public cloud and AI technology. Competition Competition in the Korean financial services industry is, and is likely to remain, intense, including as a result of subdued domestic economic growth, the growing maturation and saturation of the industry as a whole, the entry of new market participants and regulatory changes, among others. In the banking sector, Shinhan Bank competes principally with other national commercial banks in Korea, but also faces competition from a number of additional banking institutions, including branches and subsidiaries of foreign banks operating in Korea, regional banks, Internet-only banks, government-owned development banks and Korea’s specialized banks, as well as various other types of financial service providers, including savings institutions (such as mutual savings and finance companies, credit unions and credit cooperatives), investment companies (such as securities brokerage firms, merchant banking corporations and asset management companies) and life insurance companies. As of December 31, 2025, Korea had seven major nationwide domestic commercial banks, five regional banks, three Internet-only banks and a number of branches and subsidiaries of foreign banks. Foreign financial institutions, many of which have greater experiences and resources than we do, may continue to enter the Korean market and compete with us in providing financial products and services either by themselves or in partnership with existing Korean financial institutions. In the small- and medium-sized enterprise and retail banking segments, which have been Shinhan Bank’s traditional core businesses, competition is expected to increase further. In recent years, Korean banks, including Shinhan Bank, have increasingly focused on stable asset growth based on quality credit, such as corporate borrowers with high credit ratings, loans to SOHOs with high levels of collateralization, and mortgage and home equity loans within the limits of the prescribed loan-to-value ratios and debt-to-income ratios. This common shift in focus toward stable growth based on lower-risk assets has intensified competition as banks compete for the same limited pool of quality credit by engaging in price competition or by other means. In addition, such competition may result in lower net interest margin and reduced overall profitability. Even if interest rates were 66 Table of Contents to increase, the effect on Shinhan Bank’s results of operations may not be as beneficial as expected, or at all, due to factors such as increased volatility of market interest rates and tighter regulations regarding SOHO loans. For additional details on the impact changes in interest rates have on our business, see “— Changes in interest rates, foreign exchange rates, bond and equity prices, and other market factors have affected and will continue to affect our business, results of operations and financial condition.” Furthermore, if competing financial institutions seek to expand market share by lowering their lending rates, Shinhan Bank may suffer customer loss, especially among customers who select their lenders principally on the basis of lending rates. In response thereto or for other strategic reasons, Shinhan Bank may lower its lending rates to stay competitive, which could lead to a further decrease in its net interest margins and outweigh any potential positive impact on the net interest margin from a general rise in market interest rates. Any future decline in Shinhan Bank’s customer base or its net interest margins could have an adverse effect on our results of operations and financial condition. In the credit card sector, Shinhan Card competes principally with existing “monoline” credit card companies, the credit card divisions of commercial banks, consumer finance companies, other financial institutions and, recently, credit card service providers allied with mobile telecommunications service providers in Korea. Competition has been historically intense in this sector, and the market has shown signs of saturation as existing and new credit card service providers make significant investments and engage in aggressive marketing campaigns and promotions to acquire new customers and target customers with high credit quality. Despite stricter government regulations such as curbs on excessive marketing expenses, competition remains intense, and credit card issuers may continue to compete with Shinhan Card for customers by offering lower interest rates and fees, higher credit limits, more attractive promotions and incentives and alternative products such as credit card reward points, gift cards and low-interest consumer loan products. As a result, Shinhan Card may lose customers or service opportunities to competing credit card issuers and/or incur higher marketing expenses. Competition in the credit card sector is partially constrained by regulatory developments, including the reduction of the maximum interest rate on loans from 24% to 20% in 2021 and restrictions on debt collection activities under the Debtor Rehabilitation and Bankruptcy Act implemented in 2024, which have increased pressure on the profitability and operations of credit card companies, including Shinhan Card. These measures have contributed to challenges in collection activities, which may lead to higher delinquencies and increased operating costs. In addition, enhanced consumer protection and personal data protection guidelines introduced by the Government may result in additional compliance costs. Fee and interest rate pressure, customer attrition, higher marketing expenses, and potential deterioration in customer credit quality, together with broader social, economic and regulatory developments in Korea, could adversely affect Shinhan Card’s ability to compete effectively and put downward pressure on its growth, market share, profitability and asset quality. Similar competitive pressures exist across other financial services sectors in which our subsidiaries operate. Consolidation among our competitors and the Government’s privatization efforts may also add competition in the markets in which we and our subsidiaries conduct business. In January 2019, Woori Financial Group was established pursuant to a comprehensive stock transfer under the Korean Commercial Code whereby holders of the common stock of Woori Bank and certain of its subsidiaries transferred all of their shares to Woori Financial Group (the new financial holding company) and in return received shares of Woori Financial Group. As a result, Woori Bank and certain of its former wholly-owned subsidiaries became direct and wholly-owned subsidiaries of Woori Financial Group. The Korea Deposit Insurance Corp., which in 2021 owned 17.25% of the outstanding common stock of Woori Financial Group, has since sold all of its remaining shares and, as of the date of this annual report, holds no ownership interest in Woori Financial Group. In the asset management business sector, Woori Financial Group acquired two asset management companies, Tongyang Asset Management and ABL Global Asset Management (former Allianz Global Investors) in 2019. In the life insurance sector, KB Financial Group completed the acquisition of Prudential Life Insurance, the former Korean unit of Prudential Financial Inc., in August 2021, and Woori Financial Group acquired 75.3% of the shares of TONGYANG Life Insurance Co., Ltd. and 100.0% of the shares of ABL Life Insurance Co., Ltd. in July 2025. Any of these developments may place us at a competitive disadvantage and outweigh any potential benefit to us in the form of opportunities to attract new customers dissatisfied with the level of services at the newly reorganized entities or to provide 67 Table of Contents credit facilities to corporate customers who wish to maintain relationships with a wide range of banks in order to diversify their sources of funding. We expect consolidation and other structural changes in the financial industry to continue, which may intensify competition as larger and more diversified institutions exert increased pricing pressure, potentially reducing margins and adversely affecting our future profitability. In addition, online service providers and technology companies with large-scale user networks, such as Kakao Corp., NAVER and Samsung Electronics, have recently made significant inroads in providing virtual payment services through a system based on a growing convergence of financial services and technology commonly referred to as “fintech,” which has intensified competition for online customers among online and mobile payment service providers. Moreover, the introduction of Internet-only banks in Korea has led to an increase in competition in the Korean banking industry. For example, KT consortium’s Kbank, Kakao consortium’s Kakao Bank and Viva Republica consortium’s Toss Bank have been operating Internet-only banks since April 2017, July 2017 and October 2021, respectively. Internet-only banks have certain advantages over traditional banks as the former can pass savings in labor and overhead costs to their customers by offering higher interest rates on deposit accounts, lower loan costs and reduced service fees. Accordingly, commercial banks are facing increasing pressure to upgrade their service platforms to attract and maintain online users, which represents a growing customer base compared to traditional customers who have primarily conducted banking in-person at physical banking branches. Regulatory reforms and the general modernization of business practices in Korea have also led to increased competition among financial institutions in Korea. Since 2019, commercial banks, including Shinhan Bank, as well as fintech companies, have offered open banking services that allow customers to access, and transact through, accounts held at multiple financial institutions, reducing customer reliance on any single bank. In addition, the MyData service, which was launched in 2020, allows financial institutions that have been approved by the Financial Service Commission as MyData service providers to collect, aggregate and manage (upon the customers’ request and subject to compliance requirements) customers’ personal, credit and transaction data so that customers can easily access such data in one place. Shinhan Bank and Shinhan Card have each obtained a license from the Financial Services Commission to operate as a MyData service provider. Shinhan Bank launched its MyData business in January 2021, followed by Shinhan Card in December 2021. As of December 31, 2025, the Financial Services Commission has granted licenses to 60 companies to operate as MyData service providers, 19 of which are fintech or IT firms. In May 2023, the Government launched a platform where consumers can compare loan products from various financial institutions and apply for debt consolidation on a single platform, which was expanded in January 2024 to include mortgage and long-term deposit-based rental loans. Further expansion to additional loan products may further intensify competition among commercial banks in Korea. In recent years, the Financial Services Commission announced various measures designed to encourage competition within the banking industry, including its intention to issue more banking licenses (including those for Internet-only banks) and actively permitting the conversion of existing regional or savings banks into nationwide commercial banks. For example, in May 2024, the Financial Services Commission approved DGB Daegu Bank’s application to convert from a regional bank into a nationwide commercial bank. DGB Daegu Bank subsequently became Korea’s seventh commercial bank and rebranded itself as iM Bank in June 2024. Since the global financial crisis, the Government has subjected Korean financial institutions to stricter regulatory requirements and guidelines in areas of asset quality, capital adequacy, liquidity and residential and other lending practices. For further details of such capital adequacy requirements, see “— We and our subsidiaries need to maintain our capital ratios above minimum required levels, and failure to so maintain could result in the suspension of some or all of our operations.” There is no assurance that these measures will have the effect of curbing competition or that the Government will not reverse or reduce such measures or introduce other measures, which may further intensify competition in the Korean financial services industry. For further details on the capital requirements applicable to us, see “Item 4.B. Business Overview — Supervision and Regulation — Principal Regulations Applicable to Financial Holding Companies — Capital Adequacy.” 68 Table of Contents Description of Assets and Liabilities Loans As of December 31, 2025, our total gross loan portfolio was W469,768 billion, which represented an increase of 3.2% from W455,125 billion as of December 31, 2024. The increase in our portfolio primarily reflected a 2.9% increase in corporate loans and a 4.5% increase in retail loans, which increases were offset in part by a 0.8% decrease in credit card loans. Asset Quality Ratios As of December 31, 2023 2024 2025 (In billions of Won, except percentages) Total gross loans W 417,346 W 455,125 W 469,768 Total allowance for credit losses on loans W 4,330 W 4,566 W 4,281 Allowance for credit losses on loans as a percentage of total loans 1.04 % 1.00 % 0.91 % Impaired loans(1) W 3,013 W 3,722 W 3,826 Impaired loans as a percentage of total loans 0.72 % 0.82 % 0.81 % Allowance as a percentage of impaired loans 143.73 % 122.66 % 111.89 % Total non-performing loans(2) W 2,216 W 2,641 W 2,681 Non-performing loans as a percentage of total loans 0.53 % 0.58 % 0.57 % Allowance as a percentage of total assets 0.63 % 0.62 % 0.54 % Notes: (1) Impaired loans include (i) loans for which the borrower has defaulted under Basel standards applicable during the relevant period and (ii) loans that have been subject to debt restructuring due to the borrower’s financial difficulties during the relevant period. (2) Non-performing loans are defined as loans, whether corporate or retail, that are past due by more than 90 days. Loan Types The following table presents our loans by type as of the dates indicated. Except where specified otherwise, all loan amounts stated below are before deduction of allowance for credit losses on loans and deferred loan origination costs and fees. Total loans reflect our loan portfolio, including past due amounts. As of December 31, 2023(1) 2024(1) 2025(1) (In billions of Won) Domestic: Corporate Corporate loans(2) W 202,153 W 220,956 W 225,674 Public and other(3) 4,635 5,352 4,955 Loans to banks(4) 961 885 771 Lease financing 196 371 557 Total — Corporate 207,945 227,564 231,957 Retail Mortgages and home equity 86,532 100,332 107,435 Other retail(5) 55,607 50,805 49,942 Total — Retail 142,139 151,137 157,377 Credit cards 27,798 28,607 28,406 Total domestic 377,882 407,308 417,740 69 Table of Contents As of December 31, 2023(1) 2024(1) 2025(1) (In billions of Won) Foreign: Corporate Corporate loans(2) 24,033 31,241 34,385 Public and other(3) — — — Loans to banks(4) 2,088 1,062 920 Lease financing 85 224 282 Total — Corporate 26,206 32,527 35,587 Retail Mortgages and home equity 774 746 833 Other retail(5) 12,191 14,257 15,360 Total — Retail 12,965 15,003 16,193 Credit cards 293 287 248 Total foreign 39,464 47,817 52,028 Total loans(6) W 417,346 W 455,125 W 469,768 Notes: (1) Loan amounts include loans at amortized cost and loans at fair value classified in accordance with IFRS 9. Corporate loans include loans at fair value in the amount of W1,759 billion, W1,880 billion and W1,415 billion as of December 31, 2023, 2024 and 2025, respectively. (2) Consists primarily of working capital loans, general purpose loans, bills purchased and trade-related notes and excludes loans to public institutions and commercial banks. (3) Consists of working capital loans and loan facilities to public institutions and non-profit organizations. (4) Consists of interbank loans and call loans. (5) Consists of general unsecured loans and loans secured by collateral other than housing to retail customers. (6) As of December 31, 2023, 2024 and 2025, 87.2%, 86.5% and 86.2% of our total gross loans, respectively, were Won-denominated. Loan Portfolio The total exposure of us or our banking subsidiaries to any single borrower and exposure to any single group of companies belonging to the same conglomerate is limited by law to 25% of the Net Total Equity Capital (as defined in “— Supervision and Regulation”). 70 Table of Contents Loan Concentration by Industry The following table shows the aggregate balance of our corporate loans by industry as of December 31, 2025. As of December 31, 2025 Industry Aggregate Loan Balance Percentage of Total Corporate Loan Balance (In billions of Won) (Percentages) Manufacturing W 67,884 25.4 % Real estate, leasing and service 58,388 21.8 Retail and wholesale 31,508 11.8 Finance and insurance 24,105 9.0 Hotel and leisure 11,912 4.5 Transportation, storage and communication 6,707 2.5 Construction 6,617 2.5 Other service(1) 31,735 11.9 Other(2) 28,688 10.6 Total W 267,544 100.0 % Notes: (1) Includes other service industries such as publication, media and education. (2) Includes other industries such as agriculture, forestry, mining, electricity and gas. Maturity Analysis The following table sets out the scheduled maturities (presented in terms of time remaining until maturity) of our loan portfolio as of December 31, 2025. The amounts below are before allowance for credit losses on loans and deferred loan origination costs and fees. In the case of installment payment loans, maturities have been adjusted to take into account the timing of installment payments. As of December 31, 2025 1 Year or Less(1) Over 1 Year but Not More Than 5 Years Over 5 Years but Not More Than 15 Years Over 15 Years Total (In billions of Won) Corporate: Corporate loans W 171,277 W 80,265 W 7,434 W 1,083 W 260,059 Public and other 2,931 1,535 433 56 4,955 Loans to banks 1,208 435 48 — 1,691 Lease financing 240 598 1 — 839 Total corporate W 175,656 W 82,833 W 7,916 W 1,139 W 267,544 Retail: Mortgage and home equity W 17,267 W 23,897 W 22,341 W 44,763 W 108,268 Other retail 35,709 18,472 5,645 5,476 65,302 Total retail W 52,976 W 42,369 W 27,986 W 50,239 W 173,570 Credit cards W 24,166 W 4,326 W 162 W — W 28,654 Total loans W 252,798 W 129,528 W 36,064 W 51,378 W 469,768 Note: (1) Includes overdue loans. 71 Table of Contents We may roll over our corporate loans (primarily consisting of working capital loans and facilities loans) and retail loans (to the extent not payable in installments) after conducting our standard loan reviews in accordance with our loan review procedures. Working capital loans may generally be extended on an annual basis for an aggregate term of up to five years. Facilities loans, which are generally secured, may generally be extended on an annual basis for a maximum of 15 years from the initial loan date. Retail loans may be extended for additional terms of up to 12 months for an aggregate term of 10 years from the initial loan date for both unsecured loans and secured loans, except that mortgage and home equity loans can be extended for up to 30 years in the aggregate. Interest Rate Sensitivity The following table presents a breakdown of our loans in terms of interest rate sensitivity as of December 31, 2025. As of December 31, 2025 Due Within 1 Year(1) Due After 1 Year Total (In billions of Won) Fixed rate loans(2) Corporate: Corporate loans W 48,107 W 30,726 W 78,833 Public and other 666 144 810 Loans to banks 1,104 483 1,587 Lease financing 10 10 20 Total corporate 49,887 31,363 81,250 Retail: Mortgage and home equity 289 10,572 10,861 Other retail 6,783 4,666 11,449 Total retail 7,072 15,238 22,310 Credit cards 231 1 232 Total fixed rate loans 57,190 46,602 103,792 Variable rate loans(3) Corporate: Corporate loans 123,170 58,056 181,226 Public and other 2,265 1,880 4,145 Loans to banks 104 — 104 Lease financing 230 589 819 Total corporate 125,769 60,525 186,294 Retail: Mortgage and home equity 16,978 80,429 97,407 Other retail 28,926 24,927 53,853 Total retail 45,904 105,356 151,260 Credit cards 23,935 4,487 28,422 Total variable rate loans 195,608 170,368 365,976 Total loans W 252,798 W 216,970 W 469,768 Notes: (1) Includes overdue loans. (2) Fixed rate loans are loans for which the interest rate is fixed for the entire term of the loan. (3) Variable or adjustable rate loans are for which the interest rate is not fixed for the entire term of the loan. 72 Table of Contents For additional information regarding our management of interest rate risk, see “Risk Management.” Credit Exposures to Companies in Workout and Recovery Proceedings Our credit exposures to restructuring are monitored and managed by our Corporate Credit Support Department. As of December 31, 2025, 0.02% of our total loans, or W116 billion (of which W106 billion was classified as nonaccrual and W10 billion was classified as accruing), was under restructuring. As of such date, the total amount under restructuring consisted of W19 billion related to workouts, W87 billion related to recovery proceedings, and W10 billion related to others, principally consisting of credit rehabilitation programs subject to corporate turnaround or reorganization, which is based on voluntary agreements between the relevant parties (excluding workout and recovery proceedings). Loans in the process of workout, recovery proceedings or the like are reported as nonaccrual loans on Shinhan Bank’s statements of financial position since generally, they are past due by more than 90 days and interest does not accrue on such loans. Restructured loans are reported as either loans or securities on Shinhan Bank’s statements of financial position depending on the type of instrument it receives as a result of the restructuring. Workout The Corporate Restructuring Promotion Act (the “CRPA”), which was most recently implemented on December 26, 2023 (scheduled to expire on December 25, 2026), governs creditor-led corporate restructuring procedures. If the “main Creditor Financial Institution,” which is defined under the CRPA as the principal creditor bank (or if there is no principal creditor bank, the bank that has provided the largest amount of credit), of a Failing Company (as defined below) provides notice convening a meeting of the Creditor Committee (as defined below) on or before December 25, 2026, any proceedings commenced by such committee would remain subject to the CRPA after December 25, 2026 until such proceedings are completed or discontinued. The CRPA applies to financial creditors (each, a “Financial Creditor”) that have financial claims against a debtor company arising from the provision of credit, either directly or indirectly, which includes any transaction designated by the Financial Services Commission as falling within certain specified categories. A “Failing Company” under the CRPA means a debtor company deemed by its main Creditor Financial Institution to have difficulty repaying its financial obligations without external financial support or additional loans (excluding loans obtained in the ordinary course of business). Once a debtor company is notified by its main Creditor Financial Institution that it has been classified as a Failing Company, it may submit a business restructuring plan and a list of Financial Creditors and apply for the commencement of a management procedure to be conducted by either a committee of Financial Creditors (the “Creditor Committee”) or the main Creditor Financial Institution. If the main Creditor Financial Institution of a Failing Company determines that the Failing Company may be rehabilitated, it must either convene the first meeting of the Creditor Committee to determine whether the committee will manage the company or assume management of the company directly. If the first meeting of the Creditor Committee is convened, Financial Creditors may be required to grant a moratorium on the enforcement of claims until the end of the meeting and may approve an additional moratorium for a limited period following commencement of the management procedure. Upon commencement of the management procedure, the main Creditor Financial Institution must prepare a corporate restructuring plan based on an investigation of the Failing Company’s financial condition and submit such plan to the Creditor Committee for approval. If the plan is not approved before the moratorium expires, the Creditor Committee’s management of the Failing Company is deemed to have terminated. Resolutions of the Creditor Committee are generally adopted by an approval of the Financial Creditors representing at least 75% of the outstanding credit of the Financial Creditors who constitute the Creditor 73 Table of Contents Committee; provided that if a single Financial Creditor holds at least 75% of the outstanding credit, the resolution shall be passed by an approval of not less than 40% of the total number of the Financial Creditors who constitute the Creditor Committee, including such single Financial Creditor. An additional approval of the Financial Creditors holding interests in 75% or more of the total amount of the secured claims owned by the Financial Creditors constituting the Creditor Committee against the Failing Company is required with respect to the debt rescheduling of the Failing Company. A Financial Creditor that opposes certain resolutions may require the approving Financial Creditors to purchase its outstanding claims, with the purchase price and terms determined by agreement or, if no agreement is reached, through a coordination committee established under the CRPA. Recovery Proceedings Under the Debtor Rehabilitation and Bankruptcy Act, which took effect in April 2006, court receiverships have been replaced with recovery proceedings. In a recovery proceeding, unlike court receivership proceedings where the management of the debtor company was vested in a court-appointed receiver, the existing chief executive officer of the debtor company may continue to manage the debtor company, provided that (i) there was no fraudulent conveyance or concealment of assets, (ii) the financial failure of the debtor company was not due to gross negligence of such chief executive officer, and (iii) no creditors’ meeting was convened to request, based on reasonable cause, a court-appointed receiver to replace such chief executive officer. A recovery proceeding may be commenced by any insolvent debtor. Furthermore, in an effort to meet global standards, international bankruptcy procedures have been introduced in Korea, where a receiver of a foreign bankruptcy proceeding may, upon receiving Korean court approval of the ongoing foreign bankruptcy proceeding, apply for or participate in a Korean bankruptcy proceeding. Similarly, a receiver in a domestic recovery proceeding or a bankruptcy trustee is allowed to perform its duties in a foreign jurisdiction where the debtor’s assets are located, subject to applicable foreign law. Credit Rehabilitation Programs for Delinquent Consumer and Small- and Medium-sized Enterprise Borrowers In light of the gradual increase in delinquencies in credit card and other consumer credit, the Government has implemented a number of measures intended to support the rehabilitation of delinquent borrowers. These measures may affect the amount and timing of our collections and recoveries on our delinquent consumer credits. The Credit Counseling and Recovery Service offers two programs for individual debtors: the pre-workout program and the individual workout program, both of which are available to individuals with total debt amounts of W1.5 billion or less (secured debt amount of W1 billion or less and unsecured debt amount of W500 million or less). The pre-workout program is offered to individuals whose delinquency period is between 31 days and 89 days, and the individual workout program is offered to individuals whose delinquency period is 90 days or more. In addition, in April 2023, a temporary special debt adjustment scheme was implemented for individuals with an annual income not exceeding W45 million and total debt not exceeding W1.5 billion. This scheme applies to individual debtors who submitted applications by December 31, 2025, and specifically targets individuals at risk of default or those who have been delinquent for 30 days or less. Furthermore, the scope of the liquidation-type debt adjustment program was expanded in January 2026 to provide additional relief to financially vulnerable debtors. Under this program, the remaining debt of certain vulnerable individuals, including basic livelihood security recipients, persons with severe disabilities and senior citizens aged 70 or older, may be discharged if the debtor has (i) diligently made repayments for at least three years following the finalization of the Credit Recovery Committee’s debt adjustment and (ii) repaid at least 50% of the adjusted debt amount. The maximum eligible debt amount under this program also increased from W15 million to W50 million. When an individual debtor applies for the temporary special debt adjustment scheme, the pre-workout or individual workout program, the Credit Counseling and Recovery Service reviews and resolves on a debt restructuring plan. Once the creditor financial institutions that are parties to a credit recovery support agreement with the Credit Counseling and Recovery Service and that hold a majority of the unsecured and secured claims against the relevant individual debtor agree to the plan, such plan becomes effective, and debt 74 Table of Contents restructuring measures, such as extension of maturities, adjustments of interest rates or reductions of the debt amount, are implemented in accordance with the applicable program. Under the Debtor Rehabilitation and Bankruptcy Act, a qualified individual debtor with outstanding debts in an aggregate amount not exceeding threshold amounts of W1 billion of unsecured debt and/or W1.5 billion of secured debt may restructure his or her debts through a court-supervised debt restructuring that is binding on creditors. Once a borrower is deemed to be eligible to participate in the pre-workout program, we promptly sell the collateral underlying such borrower’s secured loans to mitigate our losses, and we may restructure such borrower’s unsecured loans (regardless of their type) as follows: • Extension of maturity: Based on considerations of the type of loan, the total loan amount, the repayment amount and the probability of repayment, the maturity of unsecured loans may be extended by up to 10 years and the maturity of secured loans may be extended by up to 20 years with a grace period not exceeding three years. • Interest rate adjustment: The interest rate of unsecured loans may be adjusted to 30% to 70% of the original interest rate within the range of the highest interest rate of 8% per annum and the lowest interest rate of 3.25% per annum; provided that if the original interest rate is less than 3.25% per annum, no adjustment would apply. The adjusted interest rate applies to the principal amount following any adjustment thereto as part of the pre-workout program, and no interest would accrue on the interest already accrued or fees payable. • Debt forgiveness: Debt forgiveness under the pre-workout program is limited to the default interest. • Deferral: If the foregoing three measures are deemed to be insufficient in terms of providing meaningful assistance to a qualifying borrower due to layoff, unemployment, business closure, disaster or loss of earnings, loan repayment may be deferred for a maximum of three years, provided that the pre-workout committee may extend such deferral period every six months, for a period not exceeding six months, upon the borrower’s application. The deferral period is not counted toward the repayment period, and interest accrues at 2% per annum during the deferral period. In 2025, the aggregate amount of our retail credit (including credit card receivables) which became subject to the pre-workout program was W473 billion. We believe that our participation in such pre-workout program has not had a material impact on the overall asset quality of our retail loans and credit card portfolio or on our results of operations and financial condition to date. Provisioning Policy Loans We conduct periodic, systematic and detailed reviews of our loan portfolios to identify credit risks and to establish the overall allowance for credit losses on loans. Our management believes that the allowance for credit losses on loans provides an accurate estimate of the expected credit losses (“ECL”) as of the date of each statement of financial position. On each reporting date, we assess whether the credit risk of a financial instrument has increased significantly since the initial recognition. When making such assessment, we use the change in the risk of a default occurring over the expected lifetime of the financial instrument instead of the change in the amount of 75 Table of Contents ECL. Upon assessment, each asset is classified as being in one of the following three stages, which is used as the basis of calculating the loss allowances at the 12-month ECL or the lifetime ECL, depending on the stage. Category Provision for credit loss allowance Stage 1 When credit risk has not increased significantly since the initial recognition 12-months ECL: The ECL associated with the probability of default events occurring within the next 12 months Stage 2 When credit risk has increased significantly since the initial recognition Lifetime ECL: A lifetime ECL associated with the probability of default events occurring over the remaining lifetime Stage 3 When assets are impaired To make that assessment, we compare the risk of default of the financial instrument as at the reporting date with such risk of default as at the date of initial recognition, taking into account reasonable supporting information that is available without undue cost or effort and is indicative of significant increases in credit risk since the initial recognition. Supporting information also includes historical default data held by us and analysis conducted by internal credit risk rating specialists. We assign 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. We accumulate information after analyzing the information regarding exposure to credit risk and default information by the type of product and borrower as well as results of internal credit risk assessment. For some portfolios, we use information obtained from external credit rating agencies when performing these analyses. We apply statistical techniques to estimate (i) the probability of default for the remaining lifetime of the exposure from the accumulated data and (ii) changes in the estimated probability of default over time. We determine whether a significant increase in credit risk has occurred by applying portfolio-specific indicators, which generally include changes in the estimated risk of default based on movements in internal credit ratings, qualitative factors and days past due, among other factors. We consider a financial asset to be in default if it meets one or more of the following conditions: • if a borrower is overdue 90 days or more from the contractual payment date; or • if we determine that it is not possible to recover the principal and interest amounts without enforcing the collateral on a financial asset. We use the following indicators when determining whether a borrower is in default: • qualitative factors, such as breaches of contractual terms; • quantitative factors, including a borrower’s failure to perform one or more payment obligations, the number of days past due for each obligation, and, for certain portfolios, the number of days past due for each financial instrument; and • internal and external data. The definition of default applied by us generally conforms to the definition of default defined for regulatory capital management purposes. However, depending on the situation, the information used to determine whether default has occurred and the extent thereof may vary. 76 Table of Contents We measure ECL on a forward-looking basis, and ECL reflects information presented by internal experts based on a variety of sources. For purposes of estimating such forward-looking information, we utilize economic outlook and projections published by domestic and overseas research institutes or government and public agencies. In measuring ECLs, we incorporate forward-looking macroeconomic conditions based on unbiased and neutral assumptions. Our ECL estimates reflect the most likely economic scenarios and are based on the same assumptions used in our business plan and management strategy. Key variables used in measuring ECLs are as follows: • Probability of default (“PD”); • Loss given default (“LGD”); and • Exposure at default (“EAD”) These variables are estimated using historical data and internally developed statistical techniques, and are adjusted to incorporate forward-looking information. In measuring ECLs on financial assets, Shinhan Bank applies an ECL measurement period based on the contractual maturity of the relevant instruments, taking into account any extension rights held by the borrower when determining such 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 ratio; • Industry of the borrower; • Location of the borrower or collateral; and • Days of delinquency. The criteria for grouping are periodically reviewed to ensure group homogeneity and are adjusted as necessary. Where internal historical data for a particular portfolio are insufficient, we supplement such information with relevant external benchmark data. Credit Cards Prior to 2017, we established an allowance for our credit card portfolio using a roll-rate model. In December 2016, the Financial Supervisory Service granted Shinhan Card final approval to use the internal model approach. In 2017, Shinhan Card completed the establishment of the IFRS loan loss calculation system, and transitioned from a roll-rate model to the internal model approach to calculate its loan losses. The internal model approach calculates default rates and LGD separately for different customers segements, based on both customer characteristics and product features. The internal model approach disaggregates customers into more than twice as many segments as does the roll-rate model. Whereas the roll-rate model does not differentiate between customers with higher and lower risks of default when calculating roll rates, the internal model approach allows for a more sophisticated calculation of loan loss that reflects the customers’ credit ratings. Our general policy is to be proactive in our collection procedures by emphasizing collections at early stages of delinquency, while progressively intensifying collection efforts as the delinquency period increases. Efforts to collect from cardholders whose account balances are up to 30 days past due are generally made by our credit support centers at Shinhan Card. 77 Table of Contents For credit card accounts that are more than 30 days past due, we generally assign collection to collection companies such as Shinhan Credit Information, a subsidiary of ours, and Mirae Credit Information. For credit card accounts that are charged off, we outsource collection to collection companies such as Shinhan Credit Information, Mirae Credit Information Services Corp. and Koryo Credit Information. These collection companies contact cardholders for payment via email, phone and in-person visits, and if necessary, offer payment support programs, including refinancing and loan reduction. They may also conduct legal procedures to locate the accountholder’s sources of income and real estate assets in preparation for compulsory execution proceedings. Loan Aging Schedule The following table shows our loan aging schedule (excluding accrued interest) for all of our loans as of the dates indicated. Current Past Due Up to 3 Months Past Due 3-6 Months Past Due For More Than 6 Months Total As of December 31, Amount % Amount % Amount % Amount % Amount (In billions of Won, except percentages) 2023 W 412,710 98.89 W 2,420 0.58 W 1,093 0.26 W 1,123 0.27 W 417,346 2024 449,680 98.80 2,804 0.62 1,305 0.29 1,336 0.29 455,125 2025 464,673 98.92 2,414 0.51 1,083 0.23 1,598 0.34 469,768 Non-Performing Loans Non-performing loans are defined as loans past due by more than 90 days. The following table shows, as of the dates indicated, the amount of our total non-performing loans and the percentage of such loans to our total loans. As of December 31, 2023 2024 2025 (In billions of Won, except percentages) Total non-performing loans W 2,216 W 2,641 W 2,681 As a percentage of total loans 0.53 % 0.58 % 0.57 % 78 Table of Contents Analysis of Non-Performing Loans The following table sets forth, for the periods indicated, the total non-performing loans by borrower type. As of December 31, 2023 2024 2025 Total Loans Non- Performing Loans(1) Ratio of Non- Performing Loans Total Loans Non- Performing Loans(1) Ratio of Non- Performing Loans Total Loans Non- Performing Loans(1) Ratio of Non- Performing Loans (In billions of Won, except percentages) Domestic: Corporate Corporate loans W 202,153 W 564 0.28 % W 220,956 W 1,136 0.51 % W 225,674 W 1,325 0.59 % Public and other 4,635 9 0.19 5,352 13 0.24 4,955 11 0.22 Loans to banks 961 — — 885 — — 771 — — Lease financing 196 10 5.10 371 34 9.16 557 18 3.23 Total corporate 207,945 583 0.28 227,564 1,183 0.52 231,957 1,354 0.58 Retail Mortgage and home equity 86,532 140 0.16 100,332 156 0.16 107,435 167 0.16 Other retail 55,607 388 0.70 50,805 461 0.91 49,942 503 1.01 Total retail 142,139 528 0.37 151,137 617 0.41 157,377 670 0.43 Credit cards 27,798 612 2.20 28,607 636 2.22 28,406 478 1.68 Total domestic 377,882 1,723 0.46 407,308 2,436 0.60 417,740 2,502 0.60 Foreign: 39,464 493 1.25 47,817 205 0.43 52,028 179 0.34 Total W 417,346 W 2,216 0.53 % W 455,125 W 2,641 0.58 % W 469,768 W 2,681 0.57 % Notes: (1) Includes loans past due by more than 90 days. 79 Table of Contents Non-Performing Loans by Industry The following table sets forth a breakdown of our non-performing corporate loans by industry as of December 31, 2025. Industry Aggregate Non- Performing Corporate Loan Balance Percentage of Total Non-Performing Corporate Loan Balance (In billions of Won) (Percentages) Construction W 677 47.37 % Manufacturing 129 9.03 Real estate, leasing and service 246 17.21 Retail and wholesale 117 8.19 Finance and insurance 11 0.77 Hotel and leisure 56 3.92 Transportation, storage and communication 12 0.84 Other service(1) 158 11.06 Other(2) 23 1.61 Total W 1,429 100.00 % Notes: (1) Includes other service industries such as publication, media and education. (2) Includes other industries such as agriculture, forestry, mining, electricity and gas. Top 20 Non-Performing Loans As of December 31, 2025, our 20 largest non-performing loans accounted for 21.7% of our total non-performing loan portfolio. The following table shows, at the date indicated, certain information regarding our 20 largest non-performing loans. As of December 31, 2025 Industry Gross Principal Outstanding Allowance for credit losses on loans (In billions of Won) 1 Borrower A Construction W 52 W 30 2 Borrower B Construction 51 16 3 Borrower C Construction 48 14 4 Borrower D Construction 48 31 5 Borrower E Construction 44 3 6 Borrower F Construction 38 16 7 Borrower G Construction 32 15 8 Borrower H Construction 30 30 9 Borrower I Construction 25 22 10 Borrower J Construction 23 23 11 Borrower K Construction 23 8 12 Borrower L Other service 23 1 13 Borrower M Construction 21 2 14 Borrower N Construction 21 13 15 Borrower O Construction 20 18 16 Borrower P Construction 18 12 17 Borrower Q Construction 17 2 80 Table of Contents As of December 31, 2025 Industry Gross Principal Outstanding Allowance for credit losses on loans (In billions of Won) 18 Borrower R Real estate, leasing and service 17 3 19 Borrower S Construction 16 3 20 Borrower T Construction 16 11 W 583 W 273 Non-Performing Loan Strategy One of our primary objectives is to prevent our loans from becoming non-performing. Through our corporate credit rating system, which is designed to prevent our loan officers from extending new loans to borrowers with high credit risks based on the borrower’s credit rating, we seek to reduce credit risk related to future non-performing loans. Our early warning system is designed to bring any sudden increase in a borrower’s credit risk to the attention of our loan officers, who then closely monitor such loans. If a loan becomes non-performing notwithstanding such preventive mechanism, an officer at the branch level responsible for monitoring non-performing loans will commence due diligence on the borrower’s assets, send a notice demanding payment or a notice that we would take or prepare for legal action. Simultaneously, we also initiate our non-performing loan management process, which consists of the following: • identifying loans subject to a proposed sale by assessing the estimated losses from such sale based on the estimated recovery value of collateral, if any, for such non-performing loans; • identifying loans subject to charge-off based on the estimated recovery value of collateral, if any, for such non-performing loans and the estimated rate of recovery of unsecured loans; and • to a limited extent, identifying commercial loans subject to normalization efforts based on the cash-flows of the borrower. Once the details of a non-performing loan are identified, we take early action for recovery. Actual recovery efforts for non-performing loans are handled by the relevant department, depending on the nature of such loans and the borrower, among others. The officers or agents of the responsible departments and units use a variety of methods to collect non-performing loans, including: • making phone calls and paying visits to the borrower to request payment; • continuing to assess and evaluate assets of our borrowers; and • if necessary, initiating legal action, including foreclosures, attachment and litigation. In order to promote speedy recovery of loans subject to foreclosures and litigation, the branch responsible for handling these loans may transfer them to the relevant unit at our headquarters. Our policy is to commence legal action within one month after default on promissory notes and four months after delinquency of payment on our other types of loans. For loans to insolvent or bankrupt borrowers or when we conclude that it is not possible to recover through normal procedures, we take prompt legal action regardless of the grace period. In addition to making efforts to collect on our non-performing loans, we take other measures to reduce the level of our non-performing loans, including: • selling non-performing loans to third parties, including the Korea Asset Management Corporation; 81 Table of Contents • entering into asset-backed securitization transactions with respect to our non-performing loans; • managing retail loans that are past due by three months or more through Shinhan Credit Information under an agency agreement; and • using third-party collection agencies such as credit information companies to collect on our non-performing loans. In 2025, we sold non-performing loans in the amount of W255 billion to third parties, including W85 billion transferred to UAMCO, Ltd., an investment management company. Loans transferred to third parties meet the criteria of true sale and are derecognized accordingly. The following table presents a roll-forward of our non-performing loans in 2025. (In billions of Won) Non-performing loans as of December 31, 2024 W 2,641 Additional non-performing loans due to delinquency 1,625 Loans sold (255 ) Loans charged off (810 ) Other adjustments(1) (520 ) Non-performing loans as of December 31, 2025 W 2,681 Note: (1) Represents loans paid down or paid off and loans returned to performing. We do not separately collect or analyze data relating to non-performing loans other than those that were sold or charged off. Loan Charge-offs Our gross charge-offs, including amortization of discount and disposal, increased by 31.1% from W1,996 billion in 2024 to W2,616 billion in 2025, primarily due to an increase in the amount of charge-offs for corporate loans and credit card loans in 2025 compared to 2024. The increase in the amount of charge-offs for corporate loans in 2025 was primarily attributable to write-offs related to credit exposures, including real estate project financing exposures, as part of Shinhan Investment & Securities’ efforts to proactively manage its asset quality, while the increase in the amount of charge-offs for credit card loans in 2025 was mainly driven by Shinhan Card’s continued adherence to a policy of proactively writing off non-performing loans. Our gross charge-offs, including amortization of discount and disposal, increased by 12.3% from W1,777 billion in 2023 to W1,996 billion in 2024, primarily due to an increase in the amount of charge-offs for corporate loans and credit card loans in 2024 compared to 2023. The increase in the amount of charge-offs for corporate loans in 2024 was primarily due to write-offs for real estate-related corporate loans resulting from the deterioration of project financing loans as a measure taken by Shinhan Capital to manage financial soundness, while the increase in the amount of charge-offs for credit card loans in 2024 was mainly driven by Shinhan Card’s continued adherence to a policy of proactively writing off non-performing loans. In 2025, the charge-off on restructured loans amounted to W36 billion. With respect to a loan that we consider to be uncollectible regardless of any modification of terms, we convert a portion of such loan into equity securities following negotiation with the borrower and charge off the remainder of such loan. The equity securities so converted are recorded at fair value, based on the market value of such securities if available or the appraisal value of such securities by an outside appraiser if a market value is unavailable. In 2025, we did not restructure any loans into equity securities. We strive to minimize loans to be charged off by practicing a robust credit approval process based on credit risk analysis prior to extending loans and a systematic management of outstanding loans. 82 Table of Contents Loans to be Charged-off Loans are charged off if they are deemed to be uncollectible by falling under any of the following categories: • loans for which collection is not foreseeable due to insolvency or bankruptcy, dissolution or the termination of the debtor’s business; • loans for which collection is not foreseeable due to the death or disappearance of the debtor; • loans for which collection expenses exceed the collectible amount; • loans for which collection is not possible through legal or any other means; • payments in arrears in respect of credit cards that are overdue for more than six months; • payments outstanding on unsecured retail loans that are overdue for more than 12 months; • payments in arrears in respect of leases that are overdue for more than 12 months; • the portion of loans classified as “estimated loss,” net of any recovery from collateral, which is deemed to be uncollectible; or • domestic loans that are required by the Financial Supervisory Service to be charged off, or loans held by our foreign subsidiaries or branches for which a charge-off or special provisioning is required by the relevant regulatory authority. Timeline for Charge-off Shinhan Bank’s loans to be charged off must be charged off within one year of the month they are deemed to be uncollectible. If such loans are not charged off within one year, the reason for the delay must be reported to Shinhan Bank’s Audit Department. Procedure for Charge-off Approval An application for Shinhan Bank’s loans to be charged-off is submitted by the relevant branch or department to the Credit Collection Department. The Credit Collection Department refers the application to the Audit Department for its review to ensure compliance with Shinhan Bank’s internal procedures for charge-offs. The Credit Collection Department, after reviewing the application to confirm that it meets relevant requirements, seeks approval from the Financial Supervisory Service for the charge-offs, which is typically granted. Once the Financial Supervisory Service provides its approval (except for household loans with estimated losses of W10 million or less, whose charge-off is considered automatically approved by the Financial Supervisory Service), loans are charged off upon approval by the President of Shinhan Bank. As for Shinhan Card, it generally charges off receivables that are 180 days past due following an internal review. Treatment of Loans Charged-off Once loans are charged off, they are derecognized from our statements of financial position and are classified as charged-off loans. We continue collection efforts in respect of these loans through third-party collection agencies, including the Korea Asset Management Corporation, and Shinhan Credit Information, one of our subsidiaries. The General Manager of the Credit Collection Department must report to the Financial Supervisory Service the amounts of loans permanently written off or recovered during each reporting period. Treatment of Collateral When we determine that a loan collateralized by real estate cannot be recovered through normal collection channels, we generally petition a court to foreclose and sell the collateral through a court-supervised auction 83 Table of Contents within one month after default and insolvency and within four months after delinquency. However, this procedure does not apply to companies undergoing restructuring, recovery proceedings, workout or other court proceedings where there are restrictions on such auction procedures. Filing of such petition with the court generally encourages the debtor to repay the overdue loan. If a debtor ultimately fails to repay and the court grants its approval for foreclosure, we sell the collateral and recover the principal amount and interest accrued up to the sales price, net of expenses incurred from the auction. Foreclosure proceedings under Korean laws and regulations typically take seven months to one year from initiation to collection depending on the nature of the collateral. Financial Statement Presentation Our financial statements generally report as charge-offs all unsecured retail loans that are overdue for more than 12 months. Leases are charged off when past due for more than 12 months. For collateral-dependent loans, we charge off the excess of the book value of the subject loan over the amount received or to be received from the sale of the underlying collateral when the collateral is sold as part of a foreclosure proceeding and its sale price becomes known through court publication as part of such proceeding. Net Charge-offs The following table sets forth, for the periods indicated, our net charge-offs. For the years ended December 31, 2023 2024 2025 Average Loan(1) Net Charge- Offs Ratio Average Loan(1) Net Charge- Offs Ratio Average Loan(1) Net Charge- Offs Ratio (In billions of Won, except percentages) Domestic: Corporate Corporate loans W 192,757 W 327 0.17 % W 211,753 W 490 0.23 % W 219,782 W 878 0.40 % Public and other 4,128 2 0.05 4,874 7 0.14 4,937 14 0.28 Loans to banks 4,322 — — 1,957 — — 2,471 — — Lease financing 363 21 5.79 167 22 13.17 475 6 1.26 Total corporate 201,570 350 0.17 218,751 519 0.24 227,665 898 0.39 Retail: Mortgage and home equity 83,392 2 N/M 95,050 3 N/M 105,105 3 N/M Other retail 58,904 408 0.69 52,553 224 0.43 50,080 151 0.30 Total retail 142,296 410 0.29 147,603 227 0.15 155,185 154 0.10 Credit cards 27,673 607 2.19 27,688 749 2.71 28,260 1,074 3.80 Total domestic 371,539 1,367 0.37 394,042 1,495 0.38 411,110 2,126 0.52 Foreign: 40,880 52 0.13 43,751 140 0.32 48,542 147 0.30 Total W 412,419 W 1,419 0.34 % W 437,793 W 1,635 0.37 % W 459,652 W 2,273 0.49 % Note: (1) Average loan balances, which relate to loans measured at amortized cost, are based on (a) monthly balances for Shinhan Bank and (b) quarterly balances for other subsidiaries. N/M = not meaningful 84 Table of Contents Investment Portfolio Investment Policy We invest in and trade Won-denominated and, to a lesser extent, foreign currency-denominated securities for our own account in order to: • maintain the stability and diversification of our assets; • maintain adequate sources of back-up liquidity to meet our funding requirements; and • supplement income from our core lending activities. When making an investment decision with respect to particular securities, we consider macroeconomic trends, industry analysis and credit evaluation, among others. Our securities investment activities are subject to a number of regulatory guidelines, including limitations prescribed under the Financial Holding Companies Act and the Banking Act. Generally, a financial holding company is prohibited from acquiring more than 5% of the total issued and outstanding shares of another finance-related company (other than its direct and indirect subsidiaries). Furthermore, under these regulations, Shinhan Bank must limit its investments in shares and securities with a maturity in excess of three years (other than monetary stabilization bonds issued by the Bank of Korea and national government bonds) to 100.0% of the sum of Tier I and Tier II capital (less any deductions) of Shinhan Bank. Generally, Shinhan Bank is also prohibited from acquiring more than 15.0% of the shares with voting rights issued by any other corporation (other than for the purpose of establishing or acquiring a subsidiary). Further information on the regulatory environment governing our investment activities is set forth in “— Supervision and Regulation — Principal Regulations Applicable to Banks — Restrictions on Investments in Property,” “— Principal Regulations Applicable to Banks — Restrictions on Shareholdings in Other Companies,” “— Principal Regulations Applicable to Financial Holding Companies — Liquidity” and “— Principal Regulations Applicable to Financial Holding Companies — Restrictions on Shareholdings in Other Companies.” Maturity Analysis The following table categorizes our securities at amortized cost by maturity and weighted average yield as of December 31, 2025. As of December 31, 2025 1 Year or Less Over 1 Year but within 5 Years Over 5 Years but within 10 Years Over 10 Years Total Carrying Amount Weighted Average Yield(1) Carrying Amount Weighted Average Yield(1) Carrying Amount Weighted Average Yield(1) Carrying Amount Weighted Average Yield(1) Carrying Amount Weighted Average Yield(1) (In billions of Won, except percentages) Korean treasury and governmental agencies W 2,821 2.99 % W 14,993 3.34 % W 1,664 2.80 % W 2,030 1.93 % W 21,508 3.12 % Debt securities issued by financial institutions 1,042 4.22 838 3.73 42 6.25 25 4.09 1,947 4.05 Corporate debt securities 202 3.13 2,191 3.38 314 2.82 458 3.55 3,165 3.33 Debt securities issued by foreign governments 403 3.76 620 2.23 173 4.49 75 3.50 1,271 3.10 Mortgage-backed securities and asset-backed securities 479 2.13 2,470 3.38 1,084 3.27 20 3.05 4,053 3.20 Total W 4,947 3.23 % W 21,112 3.33 % W 3,277 3.09 % W 2,608 2.29 % W 31,944 3.20 % Note: (1) The weighted average yield for the portfolio represents the yield to maturity for each individual security, weighted using its amortized cost. 85 Table of Contents Credit-Related Commitments and Guarantees In the normal course of our operations, we make various commitments and guarantees to meet the financing and other business needs of our customers. Commitments and guarantees are usually in the form of, among others, commitments to extend credit, commercial letters of credit, standby letters of credit and performance guarantees. The contractual amount of these financial instruments represents the maximum possible loss amount if the counterparty draws down the commitment or we should fulfill our obligation under the guarantee and the counterparty fails to perform under the contract. The following table sets forth our credit-related commitments and guarantees as of the dates indicated. As of December 31, 2023 2024 2025 (In billions of Won) Commitments to extend credit W 115,884 W 121,678 W 120,602 Commercial letters of credit 2,934 3,353 3,379 Others(1) 122,155 128,397 133,119 Total W 240,973 W 253,428 W 257,100 Note: (1) Consists of financial guarantees, performance guarantees, liquidity facilities to special purpose entities, acceptances, endorsed bills and unused credit limits on credit cards, among others. We have credit-related commitments that are not reflected in our statements of financial position, which primarily consist of commitments to extend credit and commercial letters of credit. Commitments to extend credit, including credit lines, represent unfunded portions of authorizations to extend credit in the form of loans. These commitments expire on fixed dates and a customer is required to comply with predetermined conditions to draw funds under the commitments. Commercial letters of credit are undertakings on behalf of customers authorizing third parties to make drawdowns up to a stipulated amount under specific terms and conditions. They are generally short-term and collateralized by the underlying shipments of goods to which they relate. We also have guarantees that are recorded on our statements of financial position at their fair value at inception which are amortized over the life of the guarantees. Such guarantees generally include standby letters of credit, other financial and performance guarantees and liquidity facilities to special purpose entities. Standby letters of credit are irrevocable obligations to pay third-party beneficiaries when our customers fail to repay loans or debt instruments, which are generally in foreign currencies. A substantial portion of these standby letters of credit is secured by collateral, including trade-related documents. Other financial and performance guarantees are irrevocable assurances that we will pay beneficiaries if our customers fail to perform their obligations under certain contracts. Liquidity facilities to special purpose entities are irrevocable commitments to provide contingent liquidity credit lines to special purpose entities established by our customers in the event that a triggering event such as a shortage of cash occurs. These commitments and guarantees do not necessarily represent our exposure since they often expire unused. Derivatives As discussed under “— Our Principal Activities — Other Banking Services — Derivatives Trading” above, we engage in derivatives trading activities primarily on behalf of our customers so that they may hedge their risks and also enter into back-to-back derivatives transactions with other financial institutions to cover exposures arising from such transactions. In addition, we enter into derivatives transactions to hedge against risk exposures arising from our own assets and liabilities, some of which are non-trading derivatives that do not qualify for hedge accounting treatment. 86 Table of Contents The following table shows, as of December 31, 2025, the gross notional or contractual amounts of derivatives held or issued for (i) trading and (ii) non-trading that qualify for hedge accounting. As of December 31, 2025 Underlying Notional Amount(1) Estimated Fair Value Assets Estimated Fair Value Liabilities (In billions of Won) Trading: Foreign exchange derivatives: Future and forward contracts W 188,536 W 3,385 W 2,219 Swaps 68,522 1,703 2,626 Options 3,410 9 18 Sub-total 260,468 5,097 4,863 Interest rate derivatives: Future contracts 3,962 2 1 Swaps and forward contracts 241,441 817 755 Options 926 — 29 Sub-total 246,329 819 785 Credit derivatives: Swaps 5,922 499 14 Equity derivatives: Swaps and forward contracts 2,811 43 49 Options 2,776 50 41 Future contracts 1,358 10 1 Sub-total 6,945 103 91 Commodity derivatives: Swaps and forward contracts 1,698 11 111 Future contracts 249 8 9 Sub-total 1,947 19 120 Total W 521,611 W 6,537 W 5,873 Non-trading (Hedge accounting): Foreign exchange derivatives: Swaps W 9,059 W 521 W 345 Forward contracts 3,714 19 176 Sub-total 12,773 540 521 Equity derivatives: Options — — — Interest rate derivatives: Swaps and forward contracts 13,613 77 627 Total W 26,386 W 617 W 1,148 Note: (1) Notional amounts in foreign currencies were converted into Won at prevailing exchange rates as announced by the Seoul Money Brokerage Services, Ltd. on December 31, 2025. 87 Table of Contents Funding We obtain funding from a variety of sources, both domestic and foreign. Our principal source of funding is customer deposits obtained from our banking operations, and we from time to time issue equity and debt securities, including preferred shares. In addition, our subsidiaries acquire funding through call money, borrowings from the Bank of Korea, other short-term borrowings, corporate debentures and other long-term debt, including debt and equity securities issuances, asset-backed securitizations and repurchase transactions, to complement, or if necessary, replace funding through customer deposits. For further details relating to funding by us and our subsidiaries, see “Item 5.B. Liquidity and Capital Resources.” Deposits Although the majority of our bank deposits are short-term, the majority of our depositors have historically rolled over their deposits at maturity, providing us with a stable source of funding. The following table shows the average balances of our deposits and the average rates paid on our deposits for the periods indicated, and the outstanding balances of uninsured deposits as of the ends of the periods indicated. For the year ended December 31, 2023 2024 2025 Average Balance(1) Average Rate Paid Average Balance(1) Average Rate Paid Average Balance(1) Average Rate Paid (In billions of Won, except percentages) Non-interest-bearing deposits: W 4,557 W 4,250 W 4,572 Interest-bearing deposits: Domestic Demand deposits W 54,072 1.08 % W 54,926 1.10 % W 56,828 1.02 % Savings deposits 96,305 0.83 97,744 0.82 104,039 0.68 Time deposits 184,472 3.90 200,499 3.70 212,439 3.07 Other deposits 8,896 3.92 7,961 3.91 7,822 2.88 Sub-total W 343,745 2.60 % W 361,130 2.53 % W 381,128 2.11 % Foreign Demand deposits W 8,372 0.53 % W 8,295 0.68 % W 8,945 0.72 % Savings deposits 877 3.10 875 3.14 1,000 2.70 Time deposits 20,271 3.16 25,087 3.35 28,124 3.20 Other deposits 4,347 3.57 3,873 4.25 4,548 4.01 Sub-total W 33,867 2.56 % W 38,130 2.86 % W 42,617 2.76 % Total interest-bearing deposits W 377,612 2.59 % W 399,260 2.56 % W 423,745 2.17 % As of December 31, 2023 2024 2025 (In billions of Won) Uninsured deposits W287,330 W324,782 W325,787 Note: (1) Average balances are based on (a) monthly balances for Shinhan Bank and (b) quarterly balances for other subsidiaries. For a breakdown of our deposit products, see “— Our Principal Activities — Deposit-taking Activities,” except that cover bills sold are recorded as short-term borrowings and securities sold under repurchase agreements are recorded as secured borrowings. 88 Table of Contents Uninsured Time Deposits The following table shows the amount of time deposits that exceed the insurance limit as of December 31, 2025, and the amount of time deposits that are otherwise uninsured, divided by remaining maturity as of December 31, 2025. As of December 31, 2025 (In billions of Won) Portion of time deposits in excess of insurance limit: W 118,025 Time deposits otherwise uninsured with a maturity of: Maturing within three months W 24,303 After three but within six months 11,831 After six but within 12 months 20,021 After 12 months 11,678 Total W 67,833 89 Table of Contents Risk Management Overview As a financial services provider, we are exposed to various risks relating to our lending, credit card, insurance, securities investment, trading and leasing businesses, our deposit-taking and borrowing activities and our operating environment. The principal risks to which we are exposed include credit risk, market risk, interest rate risk, liquidity risk and operational risk. These risks are recognized, measured and reported in accordance with risk management guidelines established at our holding company level and implemented at the subsidiary level through a structured checks-and-balances system. We believe that our risk management system has contributed to our ability to manage risks effectively and respond to adverse external conditions. For example, during the global financial crisis of 2008 and 2009, our risk management processes provided early warning indicators that enabled us to adjust our asset portfolio and reduce exposure to certain higher-risk assets, which we believe helped mitigate potential credit losses during that period, and we continue to review, upgrade and refine our risk management system in response to current and potential economic difficulties at global, regional and domestic levels. Our group-wide risk management philosophy is to foster a culture of effective risk management and awareness at all levels of our organization and seek an appropriate balance between risk and return in our business activities in order to achieve sustainable growth. In particular, our group-wide risk management is guided by the following core principles: • carrying out all business activities within prescribed risk tolerance levels and prudently balancing profitability and risk management; • standardizing the risk management process and monitoring compliance at a group-wide level; • operating a prudent risk management decision-making system through active participation by the management; • creating and operating a risk management organization independent of business activities; • operating a performance management system that enhances timely identification of risks when making business decisions; • pursuing preemptive and practical risk management strategies; and • prudent preparation for known and unknown contingencies. We take the following steps to implement the foregoing risk management principles: • risk capital management — Risk capital refers to capital necessary to compensate for losses in case of a potential risk being realized, and risk capital management refers to the process of asset management based on considerations of risk exposure and risk appetite for our total assets so that we can maintain an appropriate level of risk capital. As part of our risk capital management, we and our subsidiaries maintain various risk planning processes and reflect such risk planning in our business and financial planning. We also maintain a risk limit management system to ensure that risks in our business do not exceed prescribed limits. • risk monitoring — We regularly review risks that may impact our overall operations, including through a multidimensional risk monitoring system. Each of our subsidiaries is required to report to the holding company any factors that could have a material impact on group-wide risk management, and the holding company reports to our chief risk officer and other members of our senior management the results of risk monitoring weekly, monthly and on an ad hoc basis as needed. In addition, we perform preemptive risk management through a “risk dashboard system” under which we closely monitor any increase in asset size, risk levels and sensitivity to external factors with respect to the major asset 90 Table of Contents portfolios of each of our subsidiaries, and to the extent such monitoring yields any warning signals, we promptly analyze the causes and, if necessary, formulate and implement actions in response thereto. • risk review — Prior to entering into any new business, offering any new products or changing any major policies, we review any relevant risk factors based on a prescribed risk management checklist and, in the case of changes for which assessment of risk factors is difficult, perform reasonable decision-making in order to avoid taking any actions that exceed our risk tolerance levels. The risk management departments of all our subsidiaries are required to review all new businesses, products and services prior to their launch and closely monitor the development of any related risks following their launch, and in the case of any action that involves more than one subsidiary, the relevant risk management departments are required to consult with the risk management team at the holding company level prior to making any independent risk reviews. • crisis management — We maintain a group-wide risk management system to detect the early warning signals of any crisis and, in the event of a crisis actually happening, to respond on a timely, efficient and flexible basis so as to ensure our survival as a going concern. Each of our subsidiaries maintains crisis planning for four levels of contingencies, namely, “warning,” “alert,” “imminent crisis” and “crisis,” determination of which is made based on quantitative and qualitative monitoring and consequence analysis, and upon the occurrence of any such contingency, is required to respond according to a prescribed contingency plan. At the holding company level, we maintain and install a crisis detection and response system which is applied consistently group-wide, and in the event of two or more subsidiaries experiencing contingencies, we directly take charge of the situation at the holding company level so that we can respond effectively on a concerted group-wide basis. Organization Our risk management system is organized along the following hierarchy (from top to bottom): at the holding company level, the Group Risk Management Committee, the Group Risk Management Council, the Group Chief Risk Officer and the Group Risk Management Team, and at the subsidiary level, the Risk Management Committee, the Chief Risk Officer and the Risk Management Team of the relevant subsidiary. The Group Risk Management Committee, which operates under the supervision of our holding company’s board of directors, establishes the basic group-wide risk management policies and strategies. Our Group Chief Risk Officer reports to the Group Risk Management Committee, and the Group Risk Management Council coordinates the risk management policies and strategies at the group level as well as at the subsidiary level. Each of our subsidiaries also has a separate Risk Management Committee, Risk Management Working Committee and Risk Management Team, whose tasks are to implement the group-wide risk management policies and strategies at the subsidiary level as well as to establish risk management policies and strategies specific to such subsidiary in line with the group-wide guidelines. We also have the Group Risk Management Team, which supports our Chief Risk Officer in his or her risk management and supervisory role. In order to maintain the group-wide risk at an appropriate level, we use a hierarchical risk limit system under which the Group Risk Management Committee assigns reasonable risk limits for the entire group and each of our subsidiaries, and the Risk Management Committee and the Risk Management Working Committee of each of our subsidiaries manage the subsidiary-specific risks by establishing and managing risk limits in more detail by type of risk and type of product for each department and division within such subsidiary. More specifically: At the holding company level: • Group Risk Management Committee — The Group Risk Management Committee consists of three outside directors of our holding company. The Group Risk Management Committee convenes at least quarterly and on an ad hoc basis as needed. Specifically, the Group Risk Management Committee is responsible for: (i) establishing overall risk management policies consistent with management strategies, (ii) setting reasonable risk limits for the entire group and each of our subsidiaries, (iii) approving appropriate investment limits or permissible loss limits, (iv) enacting and amending the 91 Table of Contents Group Risk Management Regulations and the Group Risk Council Regulations, and (v) deciding other risk management-related issues the board of directors or the Group Risk Management Committee deems appropriate. The results of the Group Risk Management Committee meetings are reported to the board of directors of our holding company. The Group Risk Management Committee makes decisions through affirmative votes by a majority of the committee members. • Group Risk Management Council — The Group Risk Management Council consists of the Group Chief Risk Officer and Chief Risk Officers of our major subsidiaries. The Group Risk Management Council provides a forum for risk management executives from each subsidiary to discuss group-wide risk management guidelines and strategies in order to maintain consistency across group-wide risk policies and strategies. • Group Chief Risk Officer — The Group Chief Risk Officer supports the Group Risk Management Committee by implementing risk policies and strategies as well as ensuring consistency in the risk management systems of our subsidiaries. The Group Chief Risk Officer also evaluates the Chief Risk Officers of our subsidiaries and monitors the risk management practices of each subsidiary. • Group Risk Management Team — The Group Risk Management Team provides support and assistance to the Group Chief Risk Officer in carrying out his/her responsibilities. At the subsidiary level: • Risk Management Committee — Each subsidiary’s Risk Management Committee establishes its own risk management policies and strategies in more detail, in accordance with the group risk management policies and strategies. The relevant risk management department is responsible for implementing these policies and strategies. • Risk Management Team — The Risk Management Team of each subsidiary, operating independently from its business units, monitors, assesses, manages and controls the overall risk of the subsidiary’s operations and reports material risk-related issues to the Group Risk Management Team at the holding company level, which in turn reports to the Group Chief Risk Officer. The following is a flowchart of our risk management system at the holding company level and the subsidiary level. Credit Risk Management Credit risk, which is the risk of loss from default by borrowers, other obligors or other counterparties to the transactions that we have entered into, represents a critical component of our overall risk profile. Our credit risk 92 Table of Contents management encompasses all areas of credit that may result in potential economic loss, including both transactions that are recorded on our balance sheets and off-balance sheet transactions such as guarantees, loan commitments and derivatives transactions. A substantial majority of our credit risk relates to the operations of Shinhan Bank and Shinhan Card. Credit Risk Management of Shinhan Bank Shinhan Bank’s credit risk management is guided by the following principles: • achieve a profit level corresponding to the level of risks involved; • improve asset quality and achieve an optimal mix of asset portfolios; • avoid excessive loan concentration in a particular borrower or sector; and • closely monitor the borrower’s ability to repay its debt. Major policies for Shinhan Bank’s credit risk management, including Shinhan Bank’s overall credit risk management plan and credit policy guidelines, are determined by the Risk Policy Committee of Shinhan Bank, the executive decision-making body for managing credit risk. The Risk Policy Committee is headed by the Chief Risk Officer, and includes the Chief Credit Officer and the heads of each business unit. In order to separate the loan approval functions from credit policy decision-making, Shinhan Bank maintains a Credit Review Committee that performs credit review evaluations with a focus on improving its asset quality and loan profitability and operates separately from the Risk Policy Committee. Both the Risk Policy Committee and the Credit Review Committee make decisions by a vote of two-thirds or more of the attending members of the respective committees, which must constitute at least two-thirds of the respective committee members to satisfy the respective quorum. Shinhan Bank complies with credit risk management procedures pursuant to internal guidelines and regulations and periodically monitors and improves these guidelines and regulations. Its credit risk management procedures include: • credit evaluation and approval; • credit review and monitoring; and • credit risk assessment and control. Credit Evaluation and Approval All loan applicants and guarantors are subject to credit evaluation before the approval of any loans. Credit evaluation of loan applicants is carried out by senior officers of Shinhan Bank specifically charged with granting loan approvals. Loan evaluation is carried out by a group rather than by an individual reviewer through an objective and deliberative process. Credit ratings of loan applicants and guarantors influence loan interest rates, the level of internal approval required, credit exposure limits, calculation of potential losses and estimated cost of capital, and therefore are determined objectively and independently by the relevant business unit. Shinhan Bank uses a credit scoring system for retail loans and a credit-risk rating system for corporate loans. Each of Shinhan 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 biographic details, past dealings with Shinhan Bank and external credit rating information, among others. 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 primary instrument for Shinhan Bank’s credit risk management, and is applied to a wide range of credit risk management processes, including credit approval, credit limit management, loan pricing and computation of allowance for credit losses on loans. Shinhan Bank has separate credit evaluation 93 Table of Contents systems for retail customers, SOHO customers and corporate customers, which are further segmented and refined to meet Basel II requirements, which requirements have not changed under Basel III. Retail Loans Loan applications for retail loans are reviewed in accordance with Shinhan Bank’s credit scoring system and the objective statistical models for secured and unsecured loans maintained and operated by Shinhan Bank’s Retail Banking Division. Shinhan Bank’s credit scoring system is an automated credit approval system used to evaluate loan applications and determine the appropriate pricing for the loan, and takes into account factors such as a borrower’s personal information, transaction history with Shinhan Bank and other financial institutions and other relevant credit information. The applicant is assigned a score, which is used to determine (i) whether to approve the applicant’s loan, (ii) the amount of loan to be granted, and (iii) the interest rates thereon. The applicant’s score also determines whether the applicant is “approved for credit,” “conditionally approved,” “subject to further assessment,” or “denied.” If the applicant becomes “subject to further assessment,” the appropriate discretionary body, either at the branch level or at the headquarters level, conducts a reassessment based on qualitative as well as quantitative factors, such as credit history, occupation and past relationship with Shinhan Bank. For mortgage and home equity loans and loans secured by real estate, Shinhan Bank evaluates the value of the real estate offered as collateral using a proprietary database, which contains information about real estate values throughout Korea. In addition, Shinhan Bank uses up-to-date information provided by third parties regarding the real estate market and property values in Korea. While Shinhan Bank uses internal staff from the processing centers to appraise the value of the real estate collateral, Shinhan Bank also hires certified appraisers to review and co-sign the appraisal value of real estate collateral that has an appraisal value exceeding W3 billion, as initially determined by the processing centers. Shinhan Bank also reevaluates internally, on a summary basis, the appraisal value of collateral at least annually. For loans secured by securities, deposits or assets other than real estate, Shinhan Bank requires borrowers to satisfy specified collateral ratios in respect of secured obligations. Corporate Loans Shinhan Bank rates all of its corporate borrowers using internally developed credit evaluation systems, which consider a variety of criteria, including quantitative, qualitative, financial and non-financial factors. Quantitative considerations include the borrower’s financial and other data, while qualitative considerations are based on the judgment of Shinhan Bank’s credit officers as to the borrower’s ability to repay its loans. Financial considerations include financial variables and ratios based on the borrower’s financial statements, such as return on assets and cash flow to total debt ratios, and non-financial considerations include, among other things, the industry to which the borrower’s businesses belong, the borrower’s competitive position in the industry, its operating and funding capabilities, the quality of its management and controlling stockholders (based in part on interviews with its officers and employees), technological capabilities and labor relations. In addition, in order to enhance the accuracy of its internal credit reviews, Shinhan Bank also considers reports prepared by external credit rating services, such as Nice Information Service and Korea Rating & Data (KoDATA), and monitors and improves the effectiveness of the credit risk-rating systems using a database that it updates continually with actual default records. Based on the scores calculated under the credit rating system, which takes into account the evaluation criteria described above and the probability of default, Shinhan Bank assigns the borrower one of 23 grades (from the highest of AAA to the lowest of D3). Grades AA through B are further broken down into “+”, “0” or “-.” Grades AAA through B- are classified as “normal,” grade CCC is classified as “precautionary,” and grades CC through D3 are classified as “non-performing.” The credit risk-rating model also takes into account the size of the corporate borrower and the type of credit facilities. 94 Table of Contents Loan Approval Process Loans are generally approved after evaluations and approvals by the relationship manager at the branch level as well as the committee of the applicable business unit at Shinhan Bank. The approval limit for retail loans is determined based on Shinhan Bank’s automated credit scoring system. In the case of large corporate loans, approval limits are also reviewed and approved by a Credit Officer at the headquarters level. Depending on the size and importance of the loan, the approval process is further reviewed by the Credit Officer Committee, the Master Credit Officer Committee, or the Loan Management Committee. If the loan is considered significant or the amount exceeds the discretion limit of the Master Credit Officer Committee and the Loan Management Committee, further evaluation is made by the Credit Review Committee, which is Shinhan Bank’s highest decision-making body in relation to credit approval. The Credit Review Committee’s evaluation and approval of loan limits vary depending on the borrower’s credit ratings as determined by Shinhan Bank’s internal credit rating system and the borrower’s size of business. The Credit Review Committee holds at least two meetings a week to approve applications for large-sized loans whose principal amounts exceed certain prescribed levels. The diagram below summarizes credit approval process as part of our banking operations. The Master Credit Officer and the Head of Business Division do not make individual decisions on loan approval, but are part of the decision-making process at the group level. The reviewer at each level of the review process may in its discretion approve loans up to a maximum amount per loan assigned to such level. The discretionary loan approval limit for each level of the loan approval process takes into account the total amount of loans to be extended to the borrower, the credit level of the borrower based on credit review, the existence and value of collateral, the size of the borrower’s business and the level of credit risk established by the credit rating system. The discretionary loan amount approval limit ranges from W50 million for secured retail loans with a credit rating of B-, which are subject to approvals by the retail branch manager, to W120 billion for secured loans with a credit rating of AAA, which are subject to approvals by the Master Credit Officer Committee. Any loans exceeding the maximum discretionary loan amount approval limit must be approved by the Credit Review Committee or the Loan Management Committee. For example, loans that exceed the maximum discretionary approval limit set by the Master Credit Officer Committee are evaluated and approved by the Loan Management Committee, which is composed of department heads specializing in loans at Shinhan Bank and has the authority to approve loans of up to W50 billion for large corporations and up to W30 billion for other enterprises. Any loans exceeding this approval limit must be approved by the Credit Review Committee. For SOHO borrowers with a credit rating of B-, the Credit Review Committee evaluates and approves unsecured loans in excess of W40 billion and secured loans in excess of W45 billion, whereas for large corporate borrowers with a credit rating of AAA, the Credit Review Committee evaluates and approves unsecured loans in excess of W110 billion and secured loans in excess of W170 billion. Credit Review and Monitoring Shinhan Bank periodically reviews and monitors credit risks primarily with respect to borrowers. In particular, Shinhan Bank’s automated early warning system conducts daily examinations of borrowers using 95 Table of Contents financial and non-financial factors, and the branch manager and the credit officer must conduct periodic loan monitoring and report to an independent Credit Review Department which analyzes the results in detail and adjusts monitoring grades and credit ratings accordingly. Based on these reviews, Shinhan Bank adjusts a borrower’s credit rating, credit limit and credit policies. In addition, the group credit ratings of the main debtor groups, if applicable, may be adjusted following a periodic review of the main debtor groups, as identified by the Governor of the Financial Supervisory Service based on their outstanding credit exposures. Shinhan Bank also periodically reviews other factors, such as industry-specific conditions for the borrower’s business and its domestic and overseas asset base and operations, in order to ensure that the assigned ratings are appropriate. The Credit Review Department provides credit review reports, independent of underwriting, to the Chief Risk Officer on a monthly basis. The early warning system performs automatic daily checks for borrowers to whom Shinhan Bank has credit exposure (which represents the total outstanding amount due from a borrower, net of collateral for deposit, installment savings, guarantees and import guarantee money). When the early warning systems detect warning signals, such signals and other findings from the loan monitoring are reviewed by the Credit Review Department. In addition, Shinhan Bank carries out credit review in a timely manner on each borrower in accordance with changes in credit risk factors based on changes in the economic environment. The results of such credit review are periodically reported to the Chief Risk Officer of Shinhan Bank. Depending on the nature of the signals detected by the early warning system, a borrower may be classified as “worsening credit” and become subject to evaluation for a possible downgrade in credit rating, or may be initially classified as “showing early warning signs” or become reinstated to the “normal borrower” status. For borrowers classified as “showing early warning signs,” the relevant branch manager gathers information and conducts a review of the borrower to determine whether the borrower should be classified as “worsening credit” or whether to impose management improvement warnings or implement joint creditors’ management. If the borrower becomes non-performing, Shinhan Bank’s collection department manages such borrower’s account in order to maximize recovery rate, and conducts auctions, court proceedings, sale of assets or corporate restructuring as deemed appropriate. Pursuant to the foregoing credit review and monitoring procedures and in order to promptly prevent deterioration of loan quality, Shinhan Bank classifies potentially problematic borrowers into (i) borrowers that show early warning signals, (ii) borrowers that require precaution, (iii) borrowers that require observation and (iv) normal borrowers, and treats them accordingly. In order to minimize the likelihood of delinquency among its corporate customers, Shinhan Bank primarily takes the following measures: (i) systematic monitoring of borrowers with outstanding loans and (ii) heightened monitoring of borrowers with bad credit history and/or borrowers that belong to troubled industries, as further described below. Systematic monitoring of borrowers with outstanding loans. Shinhan Bank currently applies a heightened monitoring system to corporate borrowers with outstanding loans (other than guaranteed loans and loans secured by specified types of collateral such as deposits with us or letters of credit). Under this monitoring system, each borrower is assigned to one of the following ratings: • “Normal Company” — a borrower who is determined to have a low probability of insolvency with a credit rating above CCC; • “Observation Company” — a borrower that carries some risk of affecting the corporate insolvency in the future and is subject to constant observation to detect any change in such risk, with a credit rating above CCC; • “Precaution Company” — a borrower with a possibility of insolvency due to an increased risk of default, thus requiring a close inspection of the credit quality of such borrower and precaution in extending any further loans; 96 Table of Contents • “Early Warning Company” — a borrower with a high possibility of insolvency; or • “Problematic Reorganized Company” — a borrower currently undergoing rehabilitation procedures, such as management improvement plans, workout or corporate recovery, or that shows no signs of recovery. Shinhan Bank conducts systematic monitoring of the foregoing borrowers at intervals depending on the borrower’s monitoring grade determined by the early warning system (for example, every three or six months for an “Observation Company”, every three months for borrowers with a monitoring grade below “Precaution Company” or borrowers with a credit rating below CCC, and no regular monitoring for a “Normal Company”). In addition, the Credit Review Officer may request more frequent monitoring if the borrower is showing signs of deteriorating credit quality. For borrowers with outstanding loan amounts of W2 billion or more, Shinhan Bank also monitors the revenues and earnings of such borrower on a quarterly basis within five to seven weeks following the end of each quarter depending on the borrower’s credit profile. Heightened monitoring of borrowers with bad credit history and/or borrowers that belong to troubled industries. In addition to the systematic monitoring discussed above, Shinhan Bank also carries out additional monitoring for borrowers that, among others, (i) are rated as “requiring observation,” “requiring precaution” or “with early warning signs” as noted above, (ii) have a history of delinquency or restructuring or (iii) have borrowings that are classified as substandard or below. Based on the heightened monitoring of these borrowers, Shinhan Bank adjusts contingency planning as to how the overall asset quality of a specific industry should be managed for each phase of the business cycle, how Shinhan Bank should limit or reduce its credit exposure to such borrowers, and how our group-wide delinquency and non-performing ratios may be affected, among other things. Credit Risk Assessment and Control In order to assess credit risk in a systematic manner, Shinhan Bank has developed and upgraded systems designed to quantify credit risk based on selection and monitoring of various statistics, including delinquency rates, non-performing loan ratios, expected loan losses and weighted average risk rating. Shinhan Bank controls loan concentration by monitoring and managing loans at two levels: portfolio level and individual loan account level. In order to maintain portfolio-level credit risk at an appropriate level, Shinhan Bank manages its loans using value-at-risk (“VaR”) limits for the entire bank as well as for each of its business units. In order to prevent concentration of risk in a particular borrower or borrower class, Shinhan Bank also manages credit risk by borrower, industry, country and other detailed categories. Shinhan Bank measures credit risk using internally accumulated data. Shinhan Bank measures expected and unexpected losses with respect to total assets monthly, which Shinhan Bank refers to when setting risk limits for, and allocating capital to, its business groups. Expected loss is calculated based on PD, LGD and EAD, and the past bankruptcy rate and recovery rate, and Shinhan Bank provides allowance for credit losses accordingly. Shinhan Bank makes provisioning at a level which is the higher of the Financial Supervisory Service requirement or Shinhan Bank’s internal calculation. Unexpected loss is predicted based on VaR, which is used to determine compliance with the aggregate credit risk limit for Shinhan Bank as well as the credit risk limit for the relevant department within Shinhan Bank. Shinhan Bank uses the Advanced Internal Ratings-Based (“AIRB”) method as proposed by the Basel Committee to compute VaR at the account-specific level as well as to measure risk adjusted performance. Credit Risk Management of Shinhan Card Major policies for Shinhan Card’s credit risk management are determined by Shinhan Card’s Risk Management Council, and Shinhan Card’s Risk Management Committee is responsible for approving them. Shinhan Card’s Risk Management Council is headed by the Chief Risk Officer, and also comprises the heads of 97 Table of Contents each business unit, supporting unit and relevant department at Shinhan Card. Shinhan Card’s Risk Management Council convenes at least once every month and may also convene on an ad hoc basis as needed. Shinhan Card’s Risk Management Committee consists of at least two directors, with the majority of the committee members being outside directors. Shinhan Card’s Risk Management Committee convenes at least once every quarter and may also convene on an ad hoc basis as needed. The risk of loss from default by the cardholders or credit card loan borrowers is Shinhan Card’s most significant credit risk. Shinhan Card manages its credit risk based on the following principles: • profit at a level corresponding to the level of risks involved; • improve asset quality and achieve an optimal mix of asset portfolios; and • closely monitor borrower’s ability to repay the debt. Credit Card Approval Process Shinhan Card uses an automated credit scoring system to approve credit card applications or credit card authorizations. The credit scoring system is divided into two sub-systems: the behavior scoring system and the application scoring system. The behavior scoring system is based largely on the credit history of the cardholder or borrower, while the application scoring system is based largely on the personal credit information of the applicant. For credit card applicants with whom we have an existing relationship, Shinhan Card’s credit scoring system considers internally gathered information such as the ability to repay, total assets, the length of the existing relationship and the applicant’s contribution to Shinhan Card’s profitability. The credit scoring system also automatically conducts credit checks on all credit card applicants. Shinhan Card gathers information about the applicant’s transaction history with financial institutions, including banks and credit card companies, from a number of third party credit reporting agencies including, among others, National Information & Credit Evaluation Inc. and Korea Credit Bureau. These credit checks reveal a list of delinquent customers across all credit card issuers in Korea. If a credit score assigned to an applicant is above the minimum threshold, the application is approved unless overridden based on other considerations such as delinquencies at other credit card companies. For a credit card application by a long-standing customer with a good credit history, Shinhan Card may, on a discretionary basis, approve the application notwithstanding the assigned credit score unless overridden by other considerations. All of these factors also serve as the basis for setting a credit limit for approved applications. The following describes the process by which Shinhan Card sets credit limits for credit cards, cash advances and card loans: • Credit purchase and cash advance limits — These limits are set based on the applicant’s request and Shinhan Card’s credit screening criteria. Unless a cardholder requests a reduction in the credit purchase and/or cash advance limit, Shinhan Card is required to provide prior notice to the cardholder of any reduction in such cardholder’s limit. However, if the account holder defaults or the cardholder’s credit limit is reduced pursuant to the terms of the credit card agreement, Shinhan Card may lower the credit limit before notifying the account holder. • Card loan limit — This limit is set on a monthly basis by Shinhan Card based on the cardholder’s credit rating and transaction history. The card loan limit can be adjusted monthly based on the cardholder’s credit standing without prior notification to the cardholder. Monitoring Shinhan Card continually monitors all cardholders and their accounts using a behavior scoring system. The behavior scoring system predicts a cardholder’s payment pattern by evaluating the cardholder’s credit history, card usage and amounts, payment status and other relevant data. The behavior score is recalculated each month 98 Table of Contents and is used to manage the accounts and approval of additional loans and other products for the cardholder. Shinhan Card also uses the scoring system to monitor its overall risk exposure and to modify its credit risk management strategy. Loan Application Review and Ongoing Credit Review When reviewing new applications and conducting an ongoing credit review for retail loans, installment purchase loans and personal leases, Shinhan Card uses criteria substantially similar to those used in the credit underwriting system and the credit review system for cardholders. For retail loans, installment purchase loans and personal leases extended to existing cardholders, Shinhan Card reviews their card usage history in addition to other factors such as their income, occupation and assets. Fraud Loss Prevention Shinhan Card seeks to minimize losses from the fraudulent use of credit cards issued by it. Shinhan Card focuses on preventing fraudulent uses and, following the occurrence of a fraudulent use, makes investigations in order to make the responsible party bear the losses. Misuses of lost credit cards account for a substantial majority of Shinhan Card’s fraud-related losses. Through its fraud loss prevention system, Shinhan Card seeks to detect, on a real-time basis, transactions that are unusual or inconsistent with prior usage history and contacts are initiated with the relevant cardholders to confirm their purchases. A team at Shinhan Card dedicated to investigating fraud losses also examines whether the cardholder was at fault by, for example, not reporting a lost card or failing to endorse the card, or whether the relevant merchant was negligent in checking the identity of the user. Fault may also lie with delivery companies that fail to deliver credit cards to the relevant applicant. In such instances, Shinhan Card attempts to recover fraud losses from the responsible party. To prevent the misuse of a card as well as to manage credit risk, Shinhan Card’s information technology system automatically suspends the use of a card (i) when, as a result of ongoing monitoring, fraudulent use or loss of the card is suspected based on the cardholder’s credit score, or (ii) at the request of the cardholder. Approximately 94% of Shinhan Card’s cardholders consent to Shinhan Card’s access to their travel records to detect any misuse of credit cards while traveling abroad. Shinhan Card also offers cardholders additional fraud protection through a fee-based texting service, which allows customers to quickly and easily identify any fraudulent use of their credit cards. Credit Risk Management of Shinhan Securities In accordance with the guidelines of the Financial Supervisory Service, Shinhan Securities assesses its credit risks (including through VaR analyses) and allocates the maximum limit for the credit amount at risk by department. Shinhan Securities also assesses counterparty risks in all credit-related transactions, such as loans, acquisition financings and derivative transactions, and takes corresponding risk management measures in response. In assessing the credit risk of a corporate counterparty, Shinhan Securities considers such counterparty’s corporate credit rating obtained from the Shinhan Group Corporate Credit Rating System. Through its risk management system, Shinhan Securities also closely monitors credit risk exposures by counterparty, industry, conglomerates, credit ratings and country. Shinhan Securities conducts credit risk stress tests on a daily basis based on probability of default and also conducts more advanced stress tests from time to time, the results of which are then reported to its management as well as the Group Chief Risk Officer to support group-wide credit risk management. Credit Risk Management of Shinhan Life Insurance Shinhan Life Insurance also assesses credit risks for all of its credit-related transactions, including the provision of loans and acquisitions of financial instruments. Shinhan Life Insurance conducts additional risk reviews for new types of investments and financial instruments, such as those denominated in currencies in which it has not previously transacted. In assessing the credit risk of corporate customers, Shinhan Life Insurance 99 Table of Contents considers factors such as the corporation’s credit rating obtained from the Shinhan Group Corporate Credit Rating System. Through its risk management system, Shinhan Life Insurance conducts credit risk monitoring based on the credit history of debtors. To closely monitor its credit risk, Shinhan Life Insurance’s loan review department performs periodic reviews of its loan assets and conducts on-site inspections where deemed necessary. Furthermore, in the retail business, Shinhan Life Insurance operates its own credit-scoring system to assess credit risk and update customers’ behavior scores. Market Risk Management Market risk is the risk of loss generated by fluctuations in market prices such as interest rates, foreign exchange rates and equity prices. The principal market risks to which we are exposed are interest rate risk and, to a lesser extent, foreign exchange and equity price risk. These risks stem from our trading and non-trading activities relating to financial instruments such as loans, deposits, securities and financial derivatives. We divide market risk into risks arising from trading activities and risks arising from non-trading activities. Our market risks arise primarily from Shinhan Bank, and to a lesser extent, Shinhan Securities, our securities trading and brokerage subsidiary, which faces market risk relating to its trading activities. Shinhan Bank’s Risk Management Committee establishes overall market risk management principles for both the trading and non-trading activities of Shinhan Bank. Based on these principles, the Risk Policy Committee acts as the executive decision-making body in relation to Shinhan Bank’s market risks in terms of setting its risk management policies and risk limits in relation to market risks and assets and controlling market risks arising from trading and non-trading activities of Shinhan Bank. The Risk Policy Committee consists of deputy presidents in charge of Shinhan Bank’s seven business groups, including Shinhan Bank’s Chief Risk Officer and the Chief Financial Officer. At least on a monthly basis, the Risk Policy Committee reviews and approves reports relating to, among others, the position and market risk capital requirement with respect to Shinhan Bank’s trading activities and the position and market value analysis and net interest income simulation with respect to its non-trading activities. In addition, Shinhan Bank’s Risk Engineering Department comprehensively manages market risks on an independent basis from Shinhan Bank’s operating departments, and functions as the middle office of Shinhan Bank. Shinhan Bank measures market risk with respect to all assets and liabilities in its bank accounts and trust accounts in accordance with the regulations promulgated by the Financial Services Commission. Shinhan Securities manages its market risk based on its overall risk limit established by its risk management committee as well as the risk limits and detailed risk management guidelines for each product and department established by its Risk Management Working Committee, which is the executive decision-making body for managing market risks related to Shinhan Securities that determines, among others, Shinhan Securities’ overall market risk management policies and strategies, and assesses and approves its trading activities and limits. In addition, Shinhan Securities’ Risk Management Department manages various market risk limits and monitors operating conditions on an independent basis from Shinhan Securities’ operating departments. Shinhan Securities assesses the adequacy of these limits at least annually. In addition, Shinhan Securities assesses the market risks of its trading assets. The assessment procedure is based on the standard procedures set by the Financial Supervisory Service as well as an internally developed model. Shinhan Securities assesses the risk amount and VaR, and manages the risk by setting a risk limit per sector as well as a VaR limit. Shinhan Life Insurance manages its market risk based on its overall risk limit established by its risk management committee. Shinhan Life Insurance manages market risk with regard to assets that are subject to trading activities and foreign exchange positions. Shinhan Life Insurance assesses the market risk amount and the 10-day VaR, a procedure based on the delta-normal method, and manages market risk by setting a 10-day VaR limit. Shinhan Life Insurance assesses the adequacy of these limits at least annually. Shinhan Card does not have any assets with significant exposure to market risks and, therefore, does not maintain a risk management policy regarding market risks. Shinhan Card manages its market risk based on its internal risk management regulations. 100 Table of Contents We use financial information prepared on a separate basis according to IFRS for the market risk management of our subsidiaries and, unless otherwise specified herein, financial information in this annual report presented for quantitative market risk disclosure relating to our subsidiaries have been prepared in accordance with IFRS on a separate basis. Market Risk Exposure from Trading Activities Shinhan Bank’s trading activities principally consist of: • trading activities to realize short-term profits from trading in the equity and debt securities markets and the foreign currency exchange markets based on Shinhan Bank’s short-term forecast of changes in market situation and customer demand, for its own account as well as for the trust accounts of Shinhan Bank’s customers; and • trading activities to realize profits from arbitrage transactions involving derivatives such as swaps, forwards, futures and options, and, to a lesser extent, to sell derivative products to Shinhan Bank’s customers and to cover market risk associated with those trading activities. Shinhan Securities’ trading activities principally consist of trading for customers and for proprietary accounts in equity and debt securities and derivatives based on stock prices, stock indexes, interest rates, foreign currency exchange rates and commodity prices. As a result of these trading activities, Shinhan Bank is exposed principally to interest rate risk, foreign currency exchange rate risk and equity risk, and Shinhan Securities is exposed principally to equity risk and interest rate risk. Interest Rate Risk Shinhan Bank’s exposure to interest rate risk arises primarily from Won-denominated debt securities, directly held or indirectly held through beneficiary certificates, and, to a lesser extent, interest rate derivatives. Shinhan Bank’s exposure to interest rate risk arising from foreign currency-denominated trading debt securities is minimal since its net position in those securities is not significant. As Shinhan Bank’s trading accounts are marked-to-market daily, it manages the interest rate risk related to its trading accounts using the standardised approach capital requirement. Shinhan Securities’ interest rate risk arises primarily from management of its interest rate-sensitive asset portfolio, which mainly consists of debt securities, interest rate swaps and government bond futures, and the level of such risk exposure depends largely on the variance between the interest rate movement assumptions built into the asset portfolio and the actual interest rate movements and the spread between a derivative product and its underlying assets. Shinhan Securities quantifies and manages the interest rate-related exposure by conducting VaR and stress tests on a marked-to-market basis every day. Foreign Currency Exchange Rate Risk Shinhan Bank’s exposure to foreign currency exchange rate risk mainly relates to its assets and liabilities, including derivatives such as foreign currency forwards and futures and currency swaps, which are denominated in currencies other than the Won. Shinhan Bank manages foreign currency exchange rate risk, including the corresponding risks faced by its overseas branches, on a consolidated basis by covering all of its foreign exchange spot and forward positions in both trading and non-trading accounts. Shinhan Bank’s net foreign currency open position represents the difference between its foreign currency assets and liabilities as offset against forward foreign currency positions, and is Shinhan Bank’s principal exposure to foreign currency exchange rate risk. The Risk Policy Committee oversees Shinhan Bank’s foreign currency exposure for both trading and non-trading activities by establishing limits for the net foreign currency 101 Table of Contents open position, loss limits and market risk limits. Shinhan Bank centrally monitors and manages its foreign exchange positions through its Sales & Trading Center (“S&T Center”). Dealers in the S&T Center manage Shinhan Bank’s consolidated position within preset limits through spot trading, forward contracts, currency options, futures and swaps and foreign currency swaps. Shinhan Securities faces foreign currency exchange rate risk in relation to the following product offerings: currency forwards, currency swaps and currency futures. Shinhan Securities centrally monitors and manages transactions involving such products through its Fixed Income, Currency & Commodities Departments. Shinhan Securities’ Risk Management Working Committee, which is delegated with the authority to approve foreign currency-related transactions and limits on the related open positions, manages the related foreign exchange risk by setting nominal limits on the amounts of foreign exchange-related products and monitoring compliance with such limits on a daily basis. As of December 31, 2025, Shinhan Securities’ net open position related to foreign currency-related products was US$533 million, and its open positions related to the sale of Won-U.S. Dollar forwards and Won-U.S. Dollar futures were US$723 million and US$187 million, respectively. Shinhan Capital manages its foreign exchange risk resulting from the difference in its foreign currency assets and liabilities through derivative transactions such as forwards or swaps and maintains its net exposure at US$6.1 million as of December 31, 2025. The net open foreign currency positions held by our other subsidiaries are insignificant. The following table shows Shinhan Bank’s net foreign currency open positions as of December 31, 2023, 2024 and 2025. Positive amounts represent long exposures and negative amounts represent short exposures. As of December 31, Currency 2023 2024 2025 (In millions of US$) U.S. Dollars $ 663.7 $ (21.4 ) $ 256.8 Japanese Yen 494.7 73.2 181.8 Euro 7.8 55.4 50.6 Others 2,344.2 2,637.2 2,414.3 Total $ 3,510.3 $ 2,744.4 $ 2,903.5 Equity Risk Shinhan Bank’s equity risk related to trading activities mainly involves trading equity portfolios of Korean companies and Korea Stock Price Index futures and options. The trading equity portfolio consists of stocks listed on the KRX KOSPI Market or the KRX KOSDAQ Market of the Korea Exchange and nearest-month or second nearest-month futures contracts under strict limits on diversification as well as limits on positions. Shinhan Bank strictly scrutinizes these activities in light of the volatility in the Korean stock market and closely monitors the loss limits and the observance thereof. As of December 31, 2023, 2024 and 2025, Shinhan Bank held W109.1 billion, W105.5 billion and W114.5 billion, respectively, of equity securities in its trading accounts (including trust accounts). Shinhan Securities’ equity risk related to trading activities also mainly involves the trading of equity portfolio of Korean companies and Korea Stock Price Index futures and options. As of December 31, 2023, 2024 and 2025, the total amount of equity securities at risk held by Shinhan Securities was W33.9 billion, W28.4 billion and W28.9 billion, respectively. Equity positions held by our other subsidiaries are insignificant. 102 Table of Contents Management of Market Risk from Trading Activities The following tables present an overview of market risk for Shinhan Bank and Shinhan Securities as of and for the year ended December 31, 2025. Market risk from trading activities of Shinhan Bank is measured by the standardized approach capital requirement, while market risk for Shinhan Securities is measured using the risk valuation criteria (VaR). For market risk management purposes, Shinhan Bank includes in the computation of total regulatory capital requirement its trading portfolio in bank accounts and assets in trust accounts, in each case, for which it guarantees principal or fixed return in accordance with regulations of the Financial Services Commission. Trading Portfolio Risk for the Year 2025(1) Average Minimum Maximum As of December 31, 2025 (in billions of Won) Shinhan Bank: Sensitivities-based method risk General interest rate risk W 131.27 W 103.56 W 152.58 W 126.38 Credit spread risk: non-securitisations 133.78 112.96 159.20 148.18 Credit spread risk: securitisations (non-correlation trading portfolio) 30.09 23.16 37.69 25.29 Credit spread risk: securitisations (correlation trading portfolio) 0.00 0.00 0.00 0.00 Equity 32.58 25.04 37.45 25.68 Foreign exchange 482.55 378.84 533.07 454.81 Commodity 0.39 0.15 1.01 0.29 Total 810.66 643.70 921.00 780.63 Default risk Non-securitisation 105.27 92.12 122.14 111.85 Securitisation (non-correlation trading portfolio) 58.99 55.38 63.68 58.28 Securitisation (correlation trading portfolio) 0.00 0.00 0.00 0.00 Total 164.26 147.50 185.82 170.13 The residual risk 3.78 3.28 4.32 4.58 Total(1) W 978.70 W 794.48 W 1,111.14 W 955.34 Notes: (1) Includes trading portfolios in Shinhan Bank’s bank accounts and assets in trust accounts, in each case, for which it guarantees principal or fixed return. 103 Table of Contents Trading Portfolio VaR for the Year 2025 Average Minimum Maximum As of December 31, 2025 (In billions of Won) Shinhan Securities:(1) Interest rate W 28.28 W 6.36 W 54.91 W 14.06 Equity 17.28 4.77 66.06 33.18 Foreign exchange(2) 16.00 7.79 26.83 23.85 Option volatility(3) 17.20 6.63 45.21 9.38 Less: portfolio diversification(4) (39.27 ) (4.57 ) (118.22 ) (36.97 ) Total VaR W 39.48 W 20.98 W 74.78 W 43.50 Notes: (1) Shinhan Securities’ 10-day VaR is based on a 99.9% confidence level. (2) Includes both trading and non-trading accounts as Shinhan Securities manages foreign exchange risk on a total position basis. (3) Volatility implied from the option price using the Black-Scholes or a similar model. (4) Calculation of portfolio diversification effects is conducted on different days’ scenarios for different risk components. Total VaRs are less than the simple sum of the risk component VaRs due to offsets resulting from portfolio diversification. Shinhan Bank generally manages its market risk from the trading activities of its portfolios on an aggregated basis. To control its trading portfolio market risk, Shinhan Bank uses position limits, market risk capital requirement limits, stop loss limits, Greek limits and stressed loss limits. In addition, it establishes separate limits for investment securities. Shinhan Bank maintains risk control and management guidelines for derivative trading based on the regulations and guidelines promulgated by the Financial Services Commission, and measures market risk from trading activities to monitor and control the risk of its operating divisions and teams that perform trading activities. Shinhan Bank manages capital requirement measurements and limits on a daily basis based on automatic interfacing of its trading positions into its market risk measurement system. In addition, Shinhan Bank presets limits on loss, sensitivity, investment and stress for its trading departments and desks, and monitors such limits and observance thereof on a daily basis. The Basel III Standardised Approach Capital Requirement. Since 2023, Shinhan Bank replaced the use of VaR with the standardised approach for calculating market risk pursuant to the Basel III capital requirements. The standardised approach capital requirement is the simple sum of three components: the capital requirement under the sensitivities-based method, the default risk capital (“DRC”) requirement and the residual risk add-on (“RRAO”). The capital requirement under the sensitivities-based method must be calculated by aggregating three risk measures – delta, vega and curvature. Delta is a risk measure based on sensitivities of an instrument to regulatory delta risk factors. Vega is a risk measure based on sensitivities to regulatory vega risk factors. Curvature is a risk measure which captures the incremental risk not captured by the delta risk measure for price changes in an option. Curvature risk is based on two stress scenarios involving an upward shock and a downward shock for each regulatory risk factor. The DRC requirement captures the jump-to-default risk for instruments subject to credit risk. However, since not all market risks can be captured in the standardised approach, an RRAO, the sum of gross notional amounts of the instruments bearing residual risks, multiplied by a risk weight, is calculated in addition to other capital requirements within the standardised approach to ensure sufficient coverage of market risks. VaR Analysis. Shinhan Securities currently uses a 10-day 99.9% confidence level-based historical VaR for purposes of calculating its “economic” capital used for internal management purposes, although such model is not subject to regulatory review or reporting requirements. A 10-day VaR is the statistically estimated maximum amount of loss that is not expected to be exceeded over a 10-day period under normal market conditions. If VaR 104 Table of Contents is measured using a 99.9% confidence level, actual losses are expected to exceed the VaR estimate, on average, once out of every 1,000 business days. Shinhan Securities applies this VaR as a risk limit for the entire company as well as individual departments and products, and the adequacy of such VaR is reviewed by way of daily back-testing. When computing VaR, Shinhan Securities does not assume any particular probability distribution and calculates it through a simulation of the “full valuation” method based on changes of market variables such as stock prices, interest rates and foreign exchange rates in the past one year. For Shinhan Securities, the number of times its losses (either actual or virtual) exceeded the one-day 99.9% confidence level-based VaR amount was zero in each of 2023, 2024 and 2025. VaR is a commonly used market risk management technique. However, VaR models have the following shortcomings: • VaR estimates possible losses over a certain period at a particular confidence level using past market movement data. Past market movement, however, is not necessarily a reliable indicator of future events, particularly those that are extreme in nature; • VaR may underestimate the probability of extreme market movements; • The 99.9% confidence level does not take into account or provide indication of any losses that might occur beyond this confidence level; and • VaR does not capture all complex effects of various risk factors on the value of positions and portfolios and could underestimate potential losses. Currently, Shinhan Securities conducts back-testing of VaR results against actual outcomes on a daily basis. Shinhan Life Insurance also measures market risks based on a VaR analysis. Stress test. In addition to the Basel III standardised approach, Shinhan Bank also performs stress tests to measure market risk. As the standardised approach assumes normal market situations, Shinhan Bank assesses its market risk exposure to unlikely abnormal market fluctuations through the stress test. Stress tests are valuable supplements to the standardised approach since capital requirements do not cover potential loss if the market moves in a manner outside of normal expectations. Stress tests project the anticipated change in value of holding positions under certain scenarios assuming that no action is taken during a stress event to change the risk profile of a portfolio. Shinhan Bank applies 16 scenarios for stress testing that take into account four key market risk components: foreign currency exchange rates, stock prices, Won-denominated and U.S. Dollar-denominated interest rate curves and the volatility of each component. For the worst case scenario, Shinhan Bank assumes instantaneous and simultaneous movements in four market risk components, including a 20% appreciation of the Won, a 30% decline in the KRX KOSPI, a 75-basis-point increase or decrease in Won-denominated and U.S. Dollar-denominated interest rate and a 35% volatility shock for each component. Under this worst-case scenario, the market value of Shinhan Bank’s trading portfolio would have declined by W1,165 billion as of December 31, 2025. Shinhan Bank performs stress tests on a daily basis and reports the results to its Risk Policy Committee on a monthly basis and its Risk Management Committee on a quarterly basis. Shinhan Securities applies nine scenarios for stress testing that take into account four key market risk components: stock prices (both in terms of stock market indices and ß-based individual stock prices), interest rates for Won-denominated loans, foreign currency exchange rates and historical volatility. As of December 31, 2025, under the worst case scenario assuming a 1% point increase in interest rates applied to the interest rate-sensitive (non-equity) portion of the trading portfolio, the market value of Shinhan Securities’ trading portfolio would have fluctuated by W79 billion over a one-day period. Shinhan Bank sets limits on stress testing for its overall operations. Shinhan Securities sets limits on stress testing for its overall operations as well as at its department level. In the case of Shinhan Bank and Shinhan 105 Table of Contents Securities, if the potential impact is significant, their respective head of Risk Management would report such impact and may request a portfolio restructuring or other appropriate action. Hedging and Derivative Market Risk The principal objective of our group-wide hedging strategy is to manage market risk within established limits. We use derivative instruments to hedge our market risk as well as to make profits by trading derivative products within preset risk limits. Our derivative trading includes interest rate and cross-currency swaps, foreign currency forwards and futures, stock index and interest rate futures, and stock index and currency options. While we use derivatives for hedging purposes, derivative transactions by nature involve market risk since we take trading positions for the purpose of making profits. These activities consist primarily of the following: • arbitrage transactions to profit from short-term discrepancies between the spot and derivative markets or within the derivative markets; • sales of tailor-made derivative products that meet various needs of our corporate customers, principally of Shinhan Bank and Shinhan Securities, and related transactions to reduce their exposure resulting from those sales; • taking positions in limited cases when we expect short-swing profits based on our market forecasts; and • trading to hedge our interest rate and foreign currency risk exposure as described above. In accordance with accounting requirements under IFRS 9, “Financial Instruments,” which has replaced IAS 39, “Financial Instruments: Recognition and Measurement” since January 1, 2018, we have implemented internal processes which include a number of key controls designed to ensure that fair value is measured appropriately, particularly where a fair value model is internally developed and used to price a significant product. Shinhan Bank assesses the adequacy of the fair market value of a new product derived from its internal model prior to the launch of such product. The assessment involves the following processes: • computation of an internal dealing system market value (based on assessment by the quantitative analysis team of the adequacy of the formula and the model used to compute the market value as derived from the dealing system); • computation of the market value as obtained from an outside credit evaluation company; and • following comparison of the market value derived from an internal dealing system to that obtained from outside credit evaluation companies, determination as to whether to use the internally developed market value based on inter-departmental consensus. The dealing system market value, which is used officially by Shinhan Bank after conducting the assessment above, does not undergo a sampling process that confirms the value based on review of individual transactions, but is subject to an additional assessment procedure of comparing such value against the profits derived from the dealing systems based on the deal portfolio sensitivity. Shinhan Securities follows an internal policy as set by its Fair Value Evaluation Committee for computing and assessing the adequacy of fair value of all of its over-the-counter derivative products. Shinhan Securities computes the fair value based on an internal model and internal risk management systems and assesses the adequacy of the fair value through cross-departmental checks as well as comparison against fair values obtained from outside credit evaluation companies. 106 Table of Contents Market risk from derivatives is not significant since derivative trading activities of Shinhan Bank and Shinhan Securities are primarily driven by arbitrage and customer deals with highly limited open trading positions. Market risk from derivatives is also not significant for Shinhan Life Insurance as its derivative trading activities are limited to those within preset risk limits and are subject to heavy regulations imposed on the insurance industry. Market risk from derivatives is not significant for our other subsidiaries since the amount of such positions by our other subsidiaries is insignificant. Market Risk Management for Non-trading Activities Interest Rate Risk Interest rate risk represents Shinhan Bank’s principal market risk from non-trading activities. Interest rate risk is the risk of loss resulting from interest rate fluctuations that adversely affect the financial condition and results of operations of Shinhan Bank. Shinhan Bank’s interest rate risk primarily relates to the differences between the timing of rate changes for interest-earning assets and that for interest-bearing liabilities. Interest rate risk affects Shinhan Bank’s earnings and the economic value of Shinhan Bank’s net assets as follows: • Earnings: interest rate fluctuations have an effect on Shinhan Bank’s net interest income by affecting its interest-sensitive operating income and expenses. • Economic value of net assets: interest rate fluctuations influence Shinhan Bank’s net worth by affecting the present value of cash flows from the assets, liabilities and other transactions of Shinhan Bank. Accordingly, Shinhan Bank measures and manages interest rate risk for non-trading activities by taking into account the effects of interest rate changes on both its income and net asset value. Shinhan Bank measures and manages interest rate risk on a daily and monthly basis with respect to all interest-earning assets and interest-bearing liabilities in Shinhan Bank’s bank accounts (including derivatives denominated in Won which are principally interest rate swaps entered into for the purpose of hedging) and trust accounts, except that Shinhan Bank measures VaRs on a monthly basis. Most of Shinhan Bank’s interest-earning assets and interest-bearing liabilities are denominated in Won. Interest Rate Risk Management The principal objectives of Shinhan Bank’s interest rate risk management are to generate stable net interest income and to protect Shinhan Bank’s net asset value against interest rate fluctuations. Through its asset and liability management system, Shinhan Bank monitors and manages its interest rate risk based on various analytical measures such as interest rate gap, duration gap and net present value and net interest income simulations, and monitors on a monthly basis its interest rate VaR limits, interest rate earnings at risk (“EaR”) limits and interest rate gap ratio limits. Shinhan Bank measures its interest rate VaR and interest rate EaR based on interest rate risk in the banking book standardized approach presented by the Bank for International Settlements (the “IRRBB standardized approach”). IRRBB, which is part of the Basel capital framework’s Pillar 2 and subject to the Committee’s guidance set out in the 2004 revised principles for the management and supervision of interest rate risk, refers to current or prospective risk to a bank’s capital and earnings arising from adverse movements in interest rates that affect the bank’s banking book position. Interest rate risk is managed by reflecting possible future interest rate environments and customer behavior based on the IRRBB standardized approach. Interest rate VaR is measured by the change in economic value of equity under six types of scenarios (parallel up, parallel down, stiffener, flattener, short-term interest rate-up and short-term interest rate-down). Interest rate EaR is measured by the largest loss amount based on two types of scenarios (parallel up and parallel down). The Risk Policy Committee sets the interest rate risk limits for Shinhan Bank’s Won-denominated and foreign currency-denominated non-trading accounts and trust accounts, and the Risk Management Committee sets Shinhan Bank’s overall interest rate risk limit, in both cases, at least annually. The Risk Management Department monitors Shinhan Bank’s compliance with these limits and reports the monitoring results to the Risk Policy Committee on a monthly basis and the Risk Management Committee on a quarterly basis. Shinhan Bank uses interest rate swaps to control its interest rate exposure limits. 107 Table of Contents Interest rate VaR represents the maximum anticipated loss in a net present value calculation (computed as the present value of interest-earning assets minus the present value of interest-bearing liabilities), whereas interest rate EaR represents the maximum anticipated loss in a net earnings calculation (computed as interest income minus interest expenses) for the immediately following one-year period, in each case, as a result of negative movements in interest rates. Therefore, interest rate VaR is a more expansive concept than interest rate EaR in that the former covers all interest-earning assets and all interest-bearing liabilities, whereas the latter covers only those interest-earning assets and interest-bearing liabilities that are exposed to interest rate volatility for a one-year period. Therefore, for interest rate VaRs, the duration gap (namely, the weighted average duration of all interest-earning assets minus the weighted average duration of all interest-bearing liabilities) can be a more critical factor than the relative sizes of the relevant assets and liabilities in influencing interest rate VaRs. In comparison, for interest rate EaRs, the relative sizes of the relevant assets and liabilities in the form of the “one year or less interest rate” gap (namely, the volume of interest-earning assets with maturities of less than one year minus the volume of interest-bearing liabilities with maturities of less than one year) are the most critical factor in influencing the interest rate EaRs. On a monthly basis, we monitor whether the non-trading positions for interest rate VaR and EaR exceed their respective limits as described above. Interest rate VaR cannot be meaningfully compared to the 10-day 99% confidence level based VaR (“market risk VaR”) for managing trading risk principally because (i) the underlying assets are different (namely, non-trading interest-bearing assets as well as liabilities in the case of the interest rate VaR, compared to trading assets only in the case of the market risk VaR), and (ii) interest rate VaR is sensitive to interest rate movements only while the market risk VaR is sensitive to interest rate movements as well as other factors such as foreign currency exchange rates, stock market prices and option volatility. Even if comparison were to be made between the interest rate VaR and the interest rate portion only of the market risk VaR, we do not believe such comparison would be meaningful since the interest rate VaR examines the impact of interest rate movements on both assets and liabilities (which will likely have offsetting effects), whereas the interest rate portion of the market VaR examines the impact of interest rate movements on assets only. Shinhan Bank uses various analytical methodologies to measure and manage its interest rate risk for non-trading activities on a daily and monthly basis, including the following analyses: • Interest rate gap analysis; • Duration gap analysis; • Market value analysis; and • Net interest income simulation analysis. Interest Rate Gap Analysis Shinhan Bank performs interest gap analyses to measure the difference between the amount of interest-earning assets and that of interest-bearing liabilities at each maturity and re-pricing date for specific time intervals by preparing interest rate gap tables in which Shinhan Bank’s interest-earning assets and interest-bearing liabilities are allocated to the applicable time intervals based on the expected cash flows and re-pricing dates. On a daily basis, Shinhan Bank performs interest rate gap analysis for Won- and foreign currency-denominated assets and liabilities in its bank and trust accounts. Shinhan Bank’s gap analysis includes 108 Table of Contents Won-denominated derivatives (which are interest rate swaps for purposes of hedging) and foreign currency-denominated derivatives (which are currency swaps for purposes of hedging), which are managed centrally at the S&T Center. Through the interest rate gap analysis that measures interest rate sensitivity gaps, cumulative gaps and gap ratios, Shinhan Bank assesses its exposure to future interest risk fluctuations. For interest rate gap analysis, Shinhan Bank assumes and uses the following maturities for different types of assets and liabilities: • With respect to the maturities and re-pricing dates of Shinhan Bank’s assets, Shinhan Bank assumes that the maturity of Shinhan Bank’s prime rate-linked loans is the same as that of its fixed-rate loans. Shinhan Bank excludes equity securities from interest-earning assets. • With respect to the maturities and re-pricing of Shinhan Bank’s liabilities, Shinhan Bank assumes that money market deposit accounts and “non-core” demand deposits under the Financial Services Commission guidelines have a maturity of one month or less for both Won-denominated accounts and foreign currency-denominated accounts. • With respect to “core” demand deposits under the Financial Services Commission guidelines, Shinhan Bank assumes that they have maturities of eight different intervals ranging from one month to five years. The following tables show Shinhan Bank’s interest rate gaps as of December 31, 2025 for (i) Won-denominated non-trading bank accounts, including derivatives entered into for purposes of hedging and (ii) foreign currency-denominated non-trading bank accounts, including derivatives entered into for purposes of hedging. Won-denominated non-trading bank accounts(1) As of December 31, 2025 0-3 Months 3-6 Months 6-12 Months 1-2 Years 2-3 Years Over 3 Years Total (in billions of Won, except percentages) Interest-earning assets 181,309 78,968 33,352 39,084 32,159 51,221 416,092 Fixed rate 28,893 11,999 17,156 30,633 23,795 17,881 130,356 Floating rate 152,005 66,209 15,266 8,261 8,364 33,340 283,446 Interest rate swaps 410 760 930 190 0 0 2,290 Interest-bearing liabilities 183,016 65,226 92,267 31,439 23,010 31,251 426,208 Fixed rate 94,027 48,993 76,300 16,537 8,503 2,285 246,644 Floating rate 86,699 16,233 15,967 14,901 14,507 28,966 177,274 Interest rate swaps 2,290 0 0 0 0 0 2,290 Sensitivity gap (1,707 ) 13,742 (58,915 ) 7,646 9,149 19,970 (10,116 ) Cumulative gap (1,707 ) 12,034 (46,881 ) (39,235 ) (30,087 ) (10,116 ) (10,116 ) % of total assets (0.41 )% 2.89 % (11.27 )% (9.43 )% (7.23 )% (2.43 )% (2.43 )% Foreign currency-denominated non-trading bank accounts(1) As of December 31, 2025 0-3 Months 3-6 Months 6-12 Months 1-3 Years Over 3 Years Total (in millions of U.S. Dollars, except percentages) Interest-earning assets 35,001 7,997 4,422 9,031 5,831 62,282 Interest-bearing liabilities 39,871 6,889 9,404 9,343 6,434 71,941 Sensitivity gap (4,870 ) 1,109 (4,982 ) (312 ) (603 ) (9,659 ) Cumulative gap (4,870 ) (3,762 ) (8,744 ) (9,056 ) (9,659 ) (9,659 ) % of total assets (7.82 )% (6.04 )% (14.04 )% (14.54 )% (15.51 )% (15.51 )% Note: (1) Includes merchant banking accounts. 109 Table of Contents Duration Gap Analysis Shinhan Bank performs duration gap analyses to measure the differential effects of interest rate risk on the market value of its assets and liabilities by examining the difference between the durations of Shinhan Bank’s interest-earning assets and those of its interest-bearing liabilities, which durations represent their respective weighted average maturities calculated based on their respective discounted cash flows using applicable yield curves. These measurements are performed on a daily basis and, for each operating department, account, product and currency, calculate the respective durations of interest-earning assets and interest-bearing liabilities. The following tables show duration gaps and market values of Shinhan Bank’s Won-denominated interest-earning assets and interest-bearing liabilities in its non-trading accounts as of December 31, 2025 and changes in these market values when interest rate increases by one percentage point. Duration as of December 31, 2025 (for non-trading Won-denominated bank accounts(1)) Duration as of December 31, 2025 (In months) Interest-earning assets 12.30 Interest-bearing liabilities 9.76 Gap 2.53 Note: (1) Includes merchant banking accounts and derivatives for purposes of hedging. Market Value Analysis Shinhan Bank performs market value analyses to measure changes in the market value of Shinhan Bank’s interest-earning assets compared to that of its interest-bearing liabilities based on the assumption of parallel shifts in interest rates. These measurements are performed on a monthly basis. Market Value as of December 31, 2025 (for non-trading Won-denominated bank accounts(1)) Market Value as of December 31, 2025 Actual 1% Point Increase Changes (In billions of Won) Interest-earning assets 454,077 437,695 (16,382 ) Interest-bearing liabilities 447,063 433,737 (13,326 ) Gap 7,014 3,958 (3,056 ) Note: (1) Includes merchant banking accounts and derivatives for purposes of hedging. Net Interest Income Simulation Shinhan Bank performs net interest income simulations to measure the effects of changes in interest rates on its results of operations. Such simulations use the deterministic analysis methodology to measure the estimated changes in Shinhan Bank’s annual net interest income (interest income less interest expenses) under the current maturity structure, using different scenarios for interest rates (assuming parallel shifts) and funding requirements. For simulations involving interest rate changes, based on the assumption that there is no change in funding requirements, Shinhan Bank applies three scenarios of parallel shifts in interest rates: (1) no change, (2) a 1% point increase in interest rates and (3) a 1% point decrease in interest rates. 110 Table of Contents The following table illustrates the simulated changes in Shinhan Bank’s annual net interest income for 2025 with respect to Won-denominated interest-earning assets and interest-bearing liabilities, using Shinhan Bank’s net interest income simulation model, assuming (a) the maturity structure and funding requirement of Shinhan Bank as of December 31, 2025 and (b) the same interest rates as of December 31, 2025 and a 1% point increase or decrease in interest rates. Simulated Net Interest Income for 2025 (For Non-Trading Won-Denominated Bank Accounts(1)) Assumed Interest Rates Change in Net Interest Income Change in Net Interest Income No Change 1% Point Increase 1% Point Decrease Amount (1% Point Increase) % Change (1% Point Increase) Amount (1% Point Decrease) % Change (1% Point Decrease) (In billions of Won, except percentages) Simulated interest income 16,301 18,461 14,141 2,160 13.25 % (2,160 ) (13.25 )% Simulated interest expense 8,781 10,535 7,027 1,754 19.97 % (1,754 ) (19.97 )% Net interest income 7,520 7,926 7,114 406 5.40 % (406 ) (5.40 )% Note: (1) Includes merchant banking accounts and derivatives entered into for purposes of hedging. Shinhan Bank’s Won-denominated interest-earning assets and interest-bearing liabilities in non-trading accounts have a maturity structure that benefits from an increase in interest rates, because the re-pricing periods for interest-earning assets in Shinhan Bank’s non-trading accounts are, on average, shorter than those of interest-bearing liabilities in these accounts. Shinhan Bank’s net interest income tends to decrease during times of a decrease in market interest rates while the opposite is generally true during times of an increase in market interest rates. Interest Rate VaRs for Non-trading Assets and Liabilities Shinhan Bank measures VaRs for interest rate risk from non-trading activities on a monthly basis. The following table shows, as of and for the year ended December 31, 2025, the VaRs of interest rate mismatch risk for other assets and liabilities, which arises from mismatches between the re-pricing dates for Shinhan Bank’s non-trading interest-earning assets (including available-for-sale investment securities) and those for its interest-bearing liabilities. Under the regulations of the Financial Services Commission, Shinhan Bank includes in the calculation of these VaRs interest-earning assets and interest-bearing liabilities in its bank accounts and its merchant banking accounts. VaR for the Year 2025(1) Average Minimum Maximum As of December 31, 2025 (In billions of Won) Interest rate mismatch — non-trading assets and liabilities 1,924 1,399 2,422 1,399 Note: (1) One-year VaR results computed based on the interest rate risk in the banking book standardized approach presented by the Bank for International Settlements. See “— Interest Rate Risk Management.” Interest Rate Risk for Other Subsidiaries Shinhan Card monitors and manages its interest rate risk for all of its interest-bearing assets and liabilities (including off-balance sheet items) in terms of the impact on its earnings and net asset value from changes in interest rates. Shinhan Card primarily uses interest rate VaR and EaR analyses to measure its interest rate risk. 111 Table of Contents The interest rate VaR analysis used by Shinhan Card principally focuses on the maximum impact on its net asset value from adverse movements in interest rates and consists of (i) historical interest rate VaR analysis and (ii) interest rate gap analysis. The historical interest rate VaR analysis is made through simulation of net asset value based on the interest rate volatility over a fixed past period to produce expected future interest rate scenarios and computes the maximum VaR at a 99.9% confidence level by analyzing the net present value distribution under each such scenario. As for interest rate gap analysis, Shinhan Card computes the VaR based on the duration proxies and interest rate shocks for each time interval as recommended under the Basel Accord. The interest rate EaR analysis used by Shinhan Card computes the maximum loss in net interest income for a one-year period following adverse movements in interest rates, based on an interest rate gap analysis using the time intervals and the “middle of time band” as recommended under the Basel Accord. Shinhan Securities measures its interest rate VaR and interest rate EaR based on the IRRBB standardized approach. Interest rate risk is managed by reflecting possible future interest rate environments and customer behavior based on the IRRBB standardized approach. Interest rate VaR is measured by the change in economic value of equity in six types of scenarios – parallel up, parallel down, stiffener, flattener, short-term interest rate-up and short-term interest rate-down. Interest rate EaR is measured by the largest loss amount in two types of scenarios – parallel up and parallel down. Shinhan Life Insurance monitors and manages its interest rate risk for its interest-bearing assets and liabilities based on simulations of its asset-liability management system. At the 99.5% confidence level, interest rate-setting liabilities and assets are evaluated under the deterministic interest rate scenario, and interest rate-linked liabilities are evaluated under 1,000 stochastic interest rate scenarios. Interest rate risk for our other subsidiaries is insignificant. Equity Risk Substantially all of Shinhan Bank’s equity risk relates to its portfolio of investments in common stock of Korean companies. As of December 31, 2025, Shinhan Bank held an aggregate amount of W656.8 billion of equity interest in unlisted foreign companies. The equity securities in Won held in Shinhan Bank’s investment portfolio consist of stocks listed on the KRX KOSPI Market or the KRX KOSDAQ Market of the Korea Exchange and certain non-listed stocks. Shinhan Bank sets exposure limits for most of these equity securities to manage their related risk. As of December 31, 2025, Shinhan Bank held equity securities in an aggregate amount of W1,894.4 billion in its non-trading accounts, including equity securities in the amount of W373.9 billion that it held, among other reasons, for management control purposes and as a result of debt-to-equity conversion as a part of reorganization proceedings of the companies to which it had extended loans. As of December 31, 2025, Shinhan Bank did not hold any Won-denominated convertible bonds, Won-denominated exchangeable bonds or Won-denominated bonds with warrants in its non-trading accounts. Shinhan Bank does not measure equity risk with respect to convertible bonds, exchangeable bonds or bonds with warrants, and the interest rate risk of these equity-linked securities are measured together with the other debt securities. As such, Shinhan Bank measures interest rate risk VaRs but not equity risk VaRs for these equity-linked securities. Liquidity Risk Management Liquidity risk is the risk of insolvency, default or loss due to disparity between inflow and outflow of funds, including the risk of having to obtain funds at a high price or to dispose of securities at an unfavorable price due to a lack of available funds. Each of our subsidiaries seeks to minimize liquidity risk through early detection of risks related to the sourcing and managing of funds that may cause volatility in liquidity and by ensuring that it maintains an appropriate level of liquidity through systematic management. At the group-wide level, we manage 112 Table of Contents our liquidity risk by conducting monthly stress tests that compare liquidity requirements under normal situations against those under three types of stress situations, namely, our group-specific internal crisis, crisis in the external market and a combination of internal and external crisis. In addition, in order to preemptively and comprehensively manage liquidity risk, we measure and monitor liquidity risk using various indices, including the “limit management index,” “early warning index” and “monitoring index.” Shinhan Bank applies the following basic principles for liquidity risk management: • raise funds in sufficient amounts, at the optimal time at reasonable costs; • maintain liquidity risk at appropriate levels and preemptively manage such risk through a prescribed risk limit system and an early warning signal detection system; • secure stable sources of funding 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 for timely payment and settlement of financial obligations due under both normal and crisis situations; • conduct periodic liquidity stress tests in anticipation of any potential liquidity crisis and establish and implement contingency funding plans in case of an actual crisis; and • consider liquidity-related costs, benefits of and risks in determining the pricing of our products and services, performance evaluations and approval of launches of new products and services. Each of our subsidiaries manages its liquidity risk in accordance with the risk limits and guidelines established internally and by the relevant regulatory authorities. Pursuant to principal regulations applicable to financial holding companies and banks as promulgated by the Financial Services Commission, we, at the holding company level, are required to maintain a liquidity coverage ratio and a foreign currency liquidity coverage ratio. These ratios require us to maintain the relevant ratios above certain minimum levels. Shinhan Bank manages its liquidity risk within the limits set on Won and foreign currency accounts in accordance with the regulations of the Financial Services Commission. The Financial Services Commission requires a minimum liquidity coverage ratio of 100.0% for Korean banks, including Shinhan Bank. The Financial Services Commission defines liquidity coverage ratio as the ratio of HQLA that can be immediately converted into cash with little or no loss in value to the net amount of cash outflows for the next 30-day period, under the stress level established according to the liquidity coverage ratio, in accordance with the Regulation on the Supervision of the Banking Business. In addition to the liquidity coverage ratio, the Financial Services Commission also requires Korean banks, including Shinhan Bank, to maintain a net stable funding ratio of at least 100%, which measures liquidity over the next one-year period and is calculated as the ratio of available stable funding to required stable funding. A bank’s available stable funding is the portion of its capital and liabilities that are expected to remain with the bank for more than one year, while a bank’s required stable funding is the amount of stable funding that it is required to hold given the liquidity characteristics and residual maturities of its assets and the contingent liquidity risk arising from its off-balance sheet exposures. With respect to foreign currency liquidity coverage ratio, the Regulation on the Supervision of the Banking Business requires that financial institutions dealing with foreign exchange affairs (i.e., banks) whose foreign-currency denominated liabilities are equal to or greater than US$500 million or 5% of their total liabilities, as of the end of the immediately preceding half-year period, maintain a foreign currency liquidity coverage ratio of 80% or higher. The term “foreign currency liquidity coverage ratio” means the ratio of HQLA to the net cash outflows in respect of foreign-currency denominated assets and liabilities for the next 30 days. Shinhan Bank’s Treasury Department is in charge of liquidity risk management with respect to Shinhan Bank’s Won and foreign currency funds. The Treasury Department submits Shinhan Bank’s monthly funding and 113 Table of Contents asset management plans to Shinhan Bank’s Asset and Liability Committee for approval, based on the analysis of various factors, including macroeconomic indices, interest rate and foreign exchange movements and maturity structures of Shinhan Bank’s assets and liabilities. Shinhan Bank’s Risk Engineering Department measures Shinhan Bank’s liquidity coverage ratio on a daily basis and net stable funding ratio on a monthly basis and reports on whether they are in compliance with the respective limits to Shinhan Bank’s Risk Policy Committee, which sets and monitors Shinhan Bank’s liquidity coverage ratio and net stable funding ratio on a monthly basis. The following tables show Shinhan Bank’s (i) average liquidity coverage ratio, (ii) average foreign currency liquidity coverage ratio, and (iii) net stable funding ratio, each for the month of December 2025 in accordance with the regulations of the Financial Services Commission. Shinhan Bank’s Average Liquidity Coverage Ratio for the Month of December 2025 For the Month of December 2025 (in billions of Won, except percentages) HQLA (A) W 100,788 Net cash outflows over the next 30 days (B) 95,665 Cash outflow 131,871 Cash inflow 36,206 Liquidity coverage ratio (A/B) 105.35 % Shinhan Bank’s Average Foreign Currency Liquidity Coverage Ratio for the Month of December 2025 For the Month of December 2025 (in millions of US$, except percentages) HQLA (A) $ 9,449 Net cash outflows over the next 30 days (B) 4,870 Cash outflow 18,450 Cash inflow 13,581 Liquidity coverage ratio (A/B) 194.04 % Shinhan Bank’s Net Stable Funding Ratio for the Month of December 2025 For the Month of December 2025 (in billions of Won, except percentages) Available stable funding (A) W 343,554 Required stable funding (B) 311,302 Net stable funding ratio (A/B) 110.36 % Shinhan Bank maintains diverse sources of liquidity to remain flexible in meeting its funding requirements. Shinhan Bank funds its operations principally by accepting deposits from retail and corporate depositors, accessing the call loan market (a short-term market for loans with maturities of 90 days or less), issuing debentures and borrowing from the Bank of Korea. Shinhan Bank uses the funds primarily to extend loans or purchase securities. Generally, deposits are of shorter average maturity than loans or investments. Shinhan Card manages its liquidity risk according to the following principles: (i) provide a sufficient volume of necessary funding in a timely manner at a reasonable cost, (ii) establish an overall liquidity risk management strategy, including in respect of liquidity management targets, policies and internal control systems, and (iii) manage its liquidity risk in conjunction with other risks based on a comprehensive understanding of the interaction among various risks. As for any potential liquidity shortage at or near the end of each month, Shinhan Card maintains liquidity at a level sufficient to withstand credit shortage for three months. 114 Table of Contents In addition, Shinhan Card manages liquidity risk by setting and complying with specific guidelines for various measures of liquidity, including the breakdown of contractual payment obligations by maturity, overseas funding, the ratio of asset-backed securitized borrowings to total borrowings, the ratio of requisite liquidity to reserve liquidity, and the ratio of fixed interest rate borrowings to floating interest rate borrowings. Furthermore, Shinhan Card closely monitors various indicators of a potential liquidity crisis, such as the actual liquidity gap ratio (in relation to the different maturities for assets as compared to liabilities) and liquidity buffer ratio. Shinhan Card also has contingency plans in place in case of any emergency or crisis. In managing its liquidity risk, Shinhan Card focuses on a prompt response system based on periodic monitoring of the relevant early signals, stress testing and establishment of contingency plans. Shinhan Card identifies its funding needs on a daily, monthly, quarterly and annual basis based on the maturity schedule of its liabilities as well as short-term liquidity needs, based on which it formulates its funding plans using diverse sources such as corporate debentures, commercial papers, asset-backed securitizations and credit line facilities. When entering into asset-backed securitizations, Shinhan Card provides sufficient credit enhancements to avoid triggering early amortization events. In addition, prior to entering into any funding transaction and related derivative transaction, Shinhan Card conducts pre-transaction risk analyses, including in respect of counterparty credit risk and its total exposure limit by country and by financial institution. Shinhan Card also manages its liquidity risk within the limits set on Won accounts in accordance with the regulations of the Financial Services Commission. Under the Specialized Credit Financial Business Act and the regulations thereunder, credit card companies in Korea are required to maintain a Won liquidity ratio of at least 100.0%. The following tables show Shinhan Card’s liquidity status and limits for Won-denominated accounts as of December 31, 2025 in accordance with the regulations of the Financial Services Commission. Shinhan Card’s Won-denominated accounts As of December 31, 2025 Won-Denominated Accounts 7 Days or Less 1 Month or Less 3 Months or Less 6 Months or Less 1 Year or Less 2 Years or Less Over 2 Years Total (In billions of Won, except percentages) Assets W 2,196 W 14,828 W 21,507 W 25,419 W 30,338 W 35,674 W 6,780 W 42,454 Liabilities 160 4,865 6,787 8,491 10,990 16,336 13,128 29,464 Liquidity ratio 316.9% Shinhan Securities manages its liquidity risk for the sum of its Won-denominated and foreign currency-denominated accounts by setting a limit of W300 billion on each of its seven-day, one-month and three-month liquidity gap, a limit of 119% on its one-month and three-months liquidity ratios and a limit of W30 billion on its liquidity VaR. As for its foreign currency-denominated accounts, Shinhan Securities manages its liquidity risk on a monthly basis in compliance with the guidelines of the Financial Supervisory Service, which requires the seven-day and one-month maturity mismatch ratios to be 0% and -10% or higher, respectively, and the three-months liquidity ratio to be 80% or higher. Our other subsidiaries fund their operations primarily through call money, bank loans, commercial paper, corporate debentures and asset-backed securities. Our holding company acts as a funding vehicle for long-term financing of our subsidiaries whose credit ratings are lower than the holding company, including Shinhan Card and Shinhan Capital, to lower the overall funding costs within regulatory limitations. Under the Monopoly Regulation and Fair Trade Act, however, a financial holding company is prohibited from borrowing funds in excess of 200% of its total stockholders’ equity. In addition to liquidity risk management under normal market situations, we have contingency plans to effectively cope with possible liquidity crises. Liquidity crisis arises when we would not be able to effectively 115 Table of Contents manage the situations with our normal liquidity management measures due to, among other reasons, inability to access our normal sources of funds or epidemic withdrawals of deposits as a result of various external or internal factors, including a collapse in the financial markets or abrupt deterioration of our credit. We have contingency plans in place corresponding to different stages of a liquidity crisis: namely, “alert stage,” “imminent-crisis stage” and “crisis stage,” based on the following liquidity indices: • indices that reflect market movements such as interest rates and stock prices; • indices that reflect financial market sentiments, such as the size of money market funds; and • indices that reflect our internal liquidity condition. Operational Risk Management The Basel Committee defines operational risk as the risk of loss resulting from inadequate or failed internal processes, people and systems or from other external events. These include risks arising from system failure, human error, non-adherence to policy and procedures, fraud, inadequate internal controls and procedures or environmental changes that result in financial and non-financial losses. We monitor and assess operational risks related to our business operations, including administrative risk, information technology risk (including cybersecurity risk), managerial risk and legal risk, with a view to minimizing such losses. To effectively manage our operational risk, we have established group-wide operational risk management policies and standardized management criteria. Each of our subsidiaries develops and maintains an operational risk management system, taking into account the size and complexity of each subsidiary. To ensure an appropriate level of operational risk management, we set operational risk limits for each subsidiary and regularly report the status of limit utilization to our Risk Management Committee. Additionally, we have established and are currently implementing the following procedures for identifying and reporting operational risks: (a) Recognition and Measurement: We proactively identify and manage the operational risks inherent in our business, taking into account factors such as scale and complexity. (b) Monitoring and Control: To effectively manage operational risks within appropriate levels, we conduct regular monitoring. Our management identifies, monitors and controls the operational risks associated with individual business units through risk management meetings led by our holding company. (c) Reporting: In accordance with regulations and guidelines pertaining to operational risks, we report our operational risk management activities periodically, as well as when any significant operational risk management activities arise, to the Group Risk Management Committee. We have established a three-tier control system which we refer to as the three lines of defense: (a) Business Units: Responsibilities are assigned to identify, evaluate and manage the operational risks inherent in products, sales activities, operations and systems to ensure effective overall operational risk management. (b) Operational Risk Management Division: This division is responsible for developing strategies to identify, assess, control and mitigate operational risks. (c) Internal Audit: An independent review is conducted to ensure that the operational risk management activities of the business units and the operational risk management division are carried out effectively. In accordance with our operational risk management policy, our subsidiaries periodically report to our management and board of directors the status of operational risk management, including self-assessments of risk controls, key risk indicators, operational risk loss events, ICT risks and third-party outsourcing risks, reflecting the unique characteristics and risk levels of each subsidiary. Additionally, we have calculated operational risk- 116 Table of Contents weighted assets using the Basel III standardized method, based on operational risk loss data for incidents with net losses exceeding W25 million that have occurred during the past ten years. An independent verification department conducts an annual review of the appropriateness of such loss data. Every six months, based on our assessment of the risk profile considering the scale and complexity of our subsidiaries, we designate significant operational risks identified as “Top Operational Risks.” In order to improve our risk management capabilities and mitigate these operational risks, we develop and implement various measures aimed at effectively assessing key risk indicators and risk control measures. Additionally, we have implemented strategies to mitigate certain operational risks by subscribing to various insurance policies, such as comprehensive financial institution insurance and electronic financial transaction liability insurance. We monitor the effectiveness of our operational risk mitigation efforts through regular reports to our management and board of directors. Furthermore, in the event of significant operational risk loss incidents, we identify improvement measures through Top Operational Risk assessments to enhance and strengthen our operational risk management system. We set internal capital limits for operational risks taking into account our risk appetite to ensure that internal capital is being managed within appropriate limits. We also conduct periodic stress tests to ensure that we maintain sufficient capital to withstand potential volatility in, and changes to, economic forecasts. Upgrades to Risk Management Systems Our recent material upgrades in relation to risk management systems are as follows: Shinhan Financial Group In May 2015, we developed and implemented a credit review system to unify our corporate credit review and risk measurements, allowing us and our subsidiaries to utilize a uniform and consistent credit review system with respect to each borrower. In addition, to comply with the Basel III requirements relating to liquidity coverage ratios for bank holding companies and to enhance our liquidity risk management capabilities, we have implemented a Basel III liquidity coverage ratio risk management system by which we calculate our liquidity coverage ratio each month. Shinhan Bank To strengthen the risk management of its overseas subsidiaries and comply with local and domestic regulations, Shinhan Bank has been developing a global risk management system network to aggregate risk data from its overseas subsidiaries. The system has been implemented for several subsidiaries, including those in Japan, China and Vietnam, and Shinhan Bank plans to continue expanding the system to additional overseas subsidiaries. Shinhan Bank also seeks to leverage this system to support overseas expansion and the stable growth of its existing overseas operations. Shinhan Bank has developed a system to calculate Basel III market risk capital requirements, which was approved by the Financial Supervisory Service and implemented in 2023. In addition, Shinhan Bank has also continually upgraded its credit risk management systems, including enhancements to LGD data processing, credit evaluation models for small- and medium-sized enterprises, SOHOs and retail exposures, and internal evaluation models approved by the Financial Supervisory Service under the Basel II and AIRB frameworks, most recently in 2023. Moreover, Shinhan Bank upgraded its asset and liability management system to comply with Basel III and IFRS requirements and enhanced its liquidity risk management systems to support daily calculation of the liquidity coverage ratio and net stable funding ratio. Following the adoption of Basel III operational risk standards and the Principles for the Sound Management of Operational Risk, Shinhan Bank has also 117 Table of Contents re-established its operational risk management system to further strengthen its operational risk management capabilities. Shinhan Card In 2012, Shinhan Card upgraded its credit risk measurement system in satisfaction of Basel II standards, as well as other regulatory requirements and internal needs in order to address the ongoing volatility in the economic and regulatory environment. In December 2016, Shinhan Card obtained approval from the Financial Supervisory Service to use a new internal evaluation model with respect to Basel III credit risks related to its retail and SOHO exposures. In 2022, Shinhan Card implemented an operational risk management system in accordance with Basel III standards, incorporating loss data collection, Key Risk Indicator management, and Risk and Control Self-Assessment processes. To comply with heightened regulatory requirements for operational risk management, the Shinhan Card established a Business Continuity Planning management framework in 2024. Furthermore, in 2025, Shinhan Card enhanced its operational risk management capabilities through the implementation of a third-party risk assessment system. Shinhan Securities In 2016, Shinhan Securities established a Risk Engineering Team and updated its market risk management system to increase its value assessment capabilities for over-the-counter derivatives, strengthen its VaR analysis capabilities and improve various simulation functions. Beginning in 2017, the Risk Engineering Team has conducted value assessments and reviews of over-the-counter derivatives directly using various enhanced simulation functions such as updated stress tests in order to stabilize financial accounting prices and enhance the risk management of over-the-counter derivatives. In January 2019, the Risk Engineering Team was elevated to a department and became the Risk Engineering Department, further expanding the scope of products reviewed by the department and strengthening its simulation analysis capabilities. In 2024, Shinhan Securities upgraded its Basel III market risk and net capital ratio measurement systems to strengthen its market risk management framework and enhance the overall accuracy and performance of such systems. Shinhan Life Insurance In 2017, Shinhan Life Insurance updated its interest rate risk measurement system, called the ALM system, in anticipation of IFRS 17 and the K-ICS. In 2018, the new asset liability management system implemented an interest rate risk management system based on the Europe Solvency II standard. The asset liability management system can measure both asset and liability based on mark-to-market valuation. Shinhan Life Insurance also updated its interest rate risk management system to control net income margin volatility resulting from market interest rate changes and has tailored its business scheme to this system in order to better manage risk and profits and match the duration of its assets and liabilities. In 2019, Shinhan Life Insurance further upgraded its insurance risk measurement system in anticipation of K-ICS, which allowed for a more elaborate measurement of insurance risk associated with mortality, longevity, morbidity, disability, lapse and expenses. In addition, in 2023, Shinhan Life Insurance implemented a project to enhance the existing system in order to improve the speed, accuracy and efficiency of K-ICS calculations following the system upgrade. 118 Table of Contents Supervision and Regulation Principal Regulations Applicable to Financial Holding Companies General The Korean financial holding companies and their subsidiaries are regulated by the Financial Holding Companies Act. In addition, Korean financial holding companies and their subsidiaries are subject to the regulations and supervision of the Financial Services Commission and the Financial Supervisory Service. Pursuant to the Financial Holding Companies Act, the Financial Services Commission regulates various activities of financial holding companies. For instance, it approves the application for setting up a new financial holding company and promulgates regulations on the capital adequacy of financial holding companies and their subsidiaries and other regulations relating to the supervision of financial holding companies. The Financial Supervisory Service is subject to the instructions and directives of the Financial Services Commission and carries out supervision and examination of financial holding companies and their subsidiaries. In particular, the Financial Supervisory Service sets forth liquidity and capital adequacy requirements for financial holding companies and reporting requirements pursuant to the authority delegated to the Financial Supervisory Service under the Financial Services Commission regulations, pursuant to which financial holding companies are required to submit quarterly reports on business performance, financial status and other matters prescribed in the Presidential Decree of the Financial Holding Companies Act. Under the Financial Holding Companies Act, the establishment of a financial holding company must be approved by the Financial Services Commission. A financial holding company is required to be mainly engaged in controlling its subsidiaries by holding the shares or equities of the subsidiaries in the amount of not less than 50% of aggregate amount of such financial holding company’s assets based on the latest balance sheet. A financial holding company is prohibited from engaging in any profit-making businesses other than controlling the management of its subsidiaries and certain ancillary businesses as prescribed in the Presidential Decree of the Financial Holding Companies Act which includes the following businesses: • financially supporting its subsidiaries and the subsidiaries of its subsidiaries (the “direct and indirect subsidiaries”), including lending properties with economic values such as monies and securities, guaranteeing obligation performance and other direct or indirect transactions involving transactional credit risk; • raising capital necessary for the investment in subsidiaries or providing financial support to its direct and indirect subsidiaries; • supporting the business of its direct and indirect subsidiaries for the joint development and marketing of new products; • supporting the operations of its direct and indirect subsidiaries by providing access to data processing, legal and accounting resources; and • pursuing any other activities exempted from authorization, permission or approval under the applicable laws and regulations. The Financial Holding Companies Act requires every financial holding company (other than any financial holding company that is controlled by any other financial holding company) or its subsidiaries to obtain the prior approval from the Financial Services Commission before acquiring control of another company or to file with the Financial Services Commission a report within thirty days after acquiring such control. Permission to liquidate or to merge with any other company must be obtained in advance from the Financial Services Commission. A financial holding company must report to the Financial Services Commission regarding certain events including: • when there is a change of its largest shareholder; • when there is a change of principal shareholders of a bank holding company; 119 Table of Contents • when the shareholding of the largest shareholder or a principal shareholder as prescribed under the Financial Holding Companies Act or a person who is in a special relationship with such largest or principal shareholder (as defined under the Presidential Decree of the Financial Holding Companies Act) changes by 1% or more of the total issued and outstanding voting shares of the financial holding company; • when there is a change of its name; • when there is a cause for dissolution; and • when it or its subsidiary ceases to control any of its respective direct and indirect subsidiaries by disposing of the shares of such direct and indirect subsidiaries. Capital Adequacy The Financial Holding Companies Act does not provide for a minimum paid-in capital of financial holding companies. All financial holding companies, however, are required to maintain a specified level of solvency. In addition, in its allocation of the net profit earned in a fiscal term, a financial holding company is required to set aside in its legal reserve an amount equal to at least 10% of the net income after tax each time it pays dividends on its net profits earned until its legal reserve reaches at least the aggregate amount of its paid-in capital. A financial holding company controlling banks or other financial institutions conducting banking business as prescribed in the Financial Holding Company Act (hereinafter, the “bank holding company”) is required to maintain a minimum consolidated equity capital ratio of 12.5%. “Consolidated equity capital ratio” is defined as the ratio of equity capital as a percentage of risk-weighted assets on a consolidated basis, determined in accordance with the Financial Services Commission requirements that have been formulated based on the Bank of International Settlements standards. “Equity capital,” as applicable to bank holding companies, is defined as the sum of Tier I capital and Tier II capital less any deductible items, each as defined under the Regulation on the Supervision of Financial Holding Companies. “Risk-weighted assets” is defined as the sum of credit risk-weighted assets and market risk-weighted assets. For regulatory reporting purposes, we maintain allowances for credit losses on the following loan classifications that classify corporate and retail loans as required by the Financial Services Commission. In making these classifications, we take into account a number of factors, including the financial position, profitability and transaction history of the borrower, the value of any collateral or guarantee taken as security for the extension of credit, probability of default and loss amount in the event of default. This classification method, and our related provisioning policy, is intended to reflect the borrower’s capacity to repay. To the extent there is any conflict between the Financial Services Commission guidelines and our internal analysis in such classifications, we adopt whichever is more conservative. 120 Table of Contents The following table sets forth loan classifications according to the guidelines of the Financial Services Commission. Loan Classification Loan Characteristics Normal Loans extended to customers that, based on our consideration of their business, financial position and future cash flows, do not raise concerns regarding their ability to repay the loans. Precautionary Loans extended to customers that (i) based on our consideration of their business, financial position and future cash flows, show potential risks with respect to their ability to repay the loans, although showing no immediate default risk or (ii) are in arrears for one month or more but less than three months. Substandard (i) Loans extended to customers that, based on our consideration of their business, financial position and future cash flows, are judged to have incurred considerable default risks as their ability to repay has deteriorated; or (ii) the portion that we expect to collect of total loans (a) extended to customers that have been in arrears for three months or more, (b) extended to customers that have incurred serious default risks due to the occurrence of, among other things, final refusal to pay their debt instruments, entry into liquidation or bankruptcy proceedings or closure of their businesses, or (c) extended to customers who have outstanding loans that are classified as “doubtful” or “estimated loss.” Doubtful The portion of total loans to customers that exceeds the amount we expect to collect and that: (i) based on our consideration of their business, financial position and future cash flows, have incurred serious default risks due to noticeable deterioration in their ability to repay; or (ii) have been in arrears for three months or more but less than 12 months. Estimated loss The portion of total loans to customers that exceeds the amount we expect to collect and that: (i) based on our consideration of their business, financial position and future cash flows, are judged to be accounted as a loss because the inability to repay became certain due to serious deterioration in their ability to repay; (ii) have been in arrears for 12 months or more; or (iii) have incurred serious risks of default in repayment due to the occurrence of, among other things, final refusal to pay their debt instruments, liquidation or bankruptcy proceedings or closure of their business. In accordance with the Regulations for the Supervision of Financial Institutions, we establish regulatory reserve for loan loss in the amount of the difference between allowance for credit losses as calculated pursuant to our provisioning policy in accordance with IFRS and allowance for credit losses based on the loan classifications set forth above as required by the Financial Services Commission. In determining consolidated equity capital ratio, we deduct regulatory reserve for loan loss from equity capital. 121 Table of Contents Liquidity All financial holding companies are required to match the maturities of their assets to those of liabilities in accordance with the Financial Holding Companies Act in order to ensure liquidity. Financial holding companies are required to submit quarterly reports regarding their liquidity to the Financial Supervisory Service and must: • maintain a Won liquidity ratio (defined as Won assets due within one month, including marketable securities, divided by Won liabilities due within one month) of not less than 100%; • maintain a foreign currency liquidity ratio (defined as foreign currency liquid assets due within three months divided by foreign currency liabilities due within three months) of not less than 80% except for financial holding companies with a foreign currency liability to total assets ratio of less than 1%; • maintain a ratio of foreign currency liquid assets due within seven days less foreign currency liabilities due within seven days divided by total foreign currency assets of not less than 0%, except for financial holding companies with a foreign currency liability to total assets ratio of less than 1%; and • maintain a ratio of foreign currency liquid assets due within a month less foreign currency liabilities due within a month divided by total foreign currency assets of not less than negative 10% except for financial holding companies with a foreign currency liability to total assets ratio of less than 1%. Financial Exposure to Any Single Customer and Major Shareholders Subject to certain exceptions, the total sum of credit (as defined in the Presidential Decree of the Financial Holding Companies Act, the Bank Act, the Presidential Decree of the Financial Investment Services and Capital Markets Act, the Insurance Act, the Mutual Savings Bank Act and the Specialized Credit Financial Business Act, respectively) of a financial holding company and its direct and indirect subsidiaries which are banks, merchant banks or securities companies (“Financial Holding Company Total Credit”) extended to a single group of companies that belong to the same conglomerate as defined in the Monopoly Regulation and Fair Trade Act will not be permitted to exceed 25% of the Net Total Equity Capital. “Net Total Equity Capital” for the purpose of the calculation of financial exposure to any single customer and Major Shareholder (as defined below) as applicable to us and our subsidiaries is defined under the Presidential Decree of the Financial Holding Companies Act as (a) the sum of: (i) in the case of a financial holding company, the shareholders’ equity as defined under Article 24-3, Section 7(2) of the Presidential Decree of the Financial Holding Companies Act, which represents the difference between the total assets less total liabilities on the balance sheet as of the end of the most recent quarter; (ii) in the case of a bank, the shareholders’ equity as defined under Article 2, Section 1(5) of the Bank Act, which represents the sum of Tier I and Tier II capital amounts determined according to the standards set by the BIS; (iii) in the case of a merchant bank, the capital amount as defined in Article 342, Section (1) of the Financial Investment Services and Capital Markets Act; (iv) in the case of a financial investment company, the shareholders’ equity as defined under Article 37, Section 3 of the Presidential Decree of the Financial Investment Services and Capital Markets Act, which represents the total shareholders’ equity as adjusted as determined by the Financial Services Commission, such as the amount of increase or decrease in paid-in capital after the end of the most recent fiscal year; (v) in the case of an insurance company, the shareholders’ equity as defined under Article 2, Section 15 of the Insurance Act, which represents the sum of items designated by the Presidential Decree, such as paid-in-capital, capital surplus, earned surplus and any equivalent items, less the value of good will and other equivalent items; 122 Table of Contents (vi) in the case of a mutual savings bank, the shareholders’ equity as defined under Article 2, Section 4 of the Mutual Savings Bank Act, which represents the sum of Tier I and Tier II capital amounts determined in accordance with the standards set by the Bank for International Settlements; and (vii) in the case of a credit card company or a specialty credit provider, the shareholders’ equity as defined under Article 2, Section 19 of the Specialized Credit Financial Business Act, which represents the sum of the items designated by the Presidential Decree, such as paid-in-capital, capital surplus, earned surplus and any equivalent items; (b) less the sum of: (i) the amount of shares in direct and indirect subsidiaries held by the financial holding company; (ii) the amount of shares in the direct and indirect subsidiaries that are cross-held by such subsidiaries; and (iii) the amount of shares in the financial holding company held by its direct and indirect subsidiaries. The Financial Holding Company Total Credit to a single individual or legal entity may not exceed 20% of the Net Total Equity Capital. Furthermore, the total sum of credits (as defined under the Financial Holding Companies Act, the Banking Act and the Financial Investment Services and Capital Markets Act, respectively) of a bank holding company and its direct and indirect subsidiaries (“Bank Holding Company Total Credit”) extended to a “Major Shareholder” (together with the persons who have special relationship with such Major Shareholder) (as defined below) generally may not exceed the smaller of (x) 25% of the Net Total Equity Capital and (y) the amount of the equity capital of the financial holding company multiplied by the shareholding ratio of such Major Shareholder, subject to certain exceptions. “Major Shareholder” is defined under the Financial Holding Companies Act as follows: (a) a shareholder holding (together with persons who have a special relationship with such shareholder as defined in the Presidential Decree of the Financial Holding Companies Act) in excess of 10% (or in the case of a financial holding company controlling regional banks only, 15%) in the aggregate of the financial holding company’s total issued and outstanding voting shares; or (b) a shareholder holding (together with persons who have a special relationship with such shareholder as defined in the Presidential Decree of the Financial Holding Companies Act) more than 4% in the aggregate of the total issued and outstanding voting shares of the financial holding company controlling national banks (other than a financial holding company controlling regional banks only), excluding shares related to the shareholding restrictions on non-financial business group companies as described below, where such shareholder is the largest shareholder or has actual control over the major business affairs of the financial holding company through, for example, appointment and dismissal of the officers pursuant to the Presidential Decree of the Financial Holding Companies Act. In addition, the total sum of the Bank Holding Company Total Credit extended to all of a bank holding company’s Major Shareholder may not exceed 25% of the Net Total Equity Capital. Furthermore, the bank holding company and its direct and indirect subsidiaries that intend to extend the Bank Holding Company Total Credit to the bank holding company’s Major Shareholder not less than the lesser of (i) the amount equivalent to 0.1% of the Net Total Equity Capital or (ii) W5 billion, with respect to a single transaction, must obtain prior unanimous board resolutions and then, immediately after the completion of the transaction, must file a report with the Financial Services Commission and publicly disclose the filing of such report (for example, through a website). 123 Table of Contents Restrictions on Transactions among Direct and Indirect Subsidiaries and Financial Holding Company Generally, a direct or indirect subsidiary of a financial holding company may not extend credit to the financial holding company which directly or indirectly controls such subsidiary. In addition, a direct or indirect subsidiary of a financial holding company may not extend credit to any other single direct or indirect subsidiary of the financial holding company in excess of 10% of its stockholders’ equity and to any other direct and indirect subsidiaries of the financial holding company in excess of 20% of its stockholders’ equity in the aggregate. The direct or indirect subsidiaries of a financial holding company must obtain an appropriate level of collateral for the credits extended to the other direct and indirect subsidiaries unless otherwise approved by the Financial Services Commission. The appropriate level of collateral for each type of such collateral is as follows: (i) For deposits and installment savings, obligations of the Government or the Bank of Korea, obligations guaranteed by the Government or the Bank of Korea, obligations secured by securities issued or guaranteed by the Government or the Bank of Korea: 100% of the amount of the credit extended; (ii) (a) For obligations of local governments under the Local Autonomy Act, local public enterprises under the Local Public Enterprises Act, and investment institutions and other quasi-investment institutions under the Basic Act on the Management of Government-Invested Institution (hereinafter, the “public institutions and others”); (b) obligations guaranteed by the public institutions and others; and (c) obligations secured by the securities issued or guaranteed by public institutions and others: 110% of the amount of the credit extended; and (iii) For any property other than those set forth in the above (i) and (ii): 130% of the amount of the credit extended. Subject to certain exceptions, a direct or indirect subsidiary of a financial holding company is prohibited from owning the shares of any other direct or indirect subsidiaries (other than those directly controlled by the direct and indirect subsidiaries in question) in common control by the financial holding company. However, a direct or indirect subsidiary of a financial holding company may invest as a limited partner in a private equity fund that is a direct or indirect subsidiary of the same financial holding company. The transfer of certain assets subject to or below the precautionary criteria between the financial holding company and its direct or indirect subsidiary or between the direct and indirect subsidiaries of a financial holding company is prohibited except for (i) the transfer to an asset-backed securitization company, typically a special purpose entity, or the entrustment with a trust company, under the Asset-Backed Securitization Act, (ii) the transfer to a mortgage-backed securitization company under the Mortgage-Backed Securitization Company Act, (iii) the transfer or in-kind contribution to a corporate restructuring vehicle under the Corporate Restructuring Investment Company Act or (iv) the acquisition by a corporate restructuring company under the Industrial Development Act. Disclosure of Management Performance For the purpose of protecting the depositors and investors in the direct or indirect subsidiaries of the financial holding companies, the Financial Services Commission requires financial holding companies to disclose certain material matters including (i) financial condition and profit and loss of the financial holding company and its direct and indirect subsidiaries, (ii) how capital was raised by the financial holding company and its direct and indirect subsidiaries and how such capital was used, (iii) any sanctions levied on the financial holding company and its direct and indirect subsidiaries under the Financial Holding Companies Act or any corrective measures or sanctions under the Law on Improvement of Structure of Financial Industry or (iv) occurrence of any non-performing assets or financial incident which may have a material adverse effect. Restrictions on Shareholdings in Other Companies Subject to certain exceptions, a bank holding company may not own more than 5% of the total issued and outstanding shares of another company (other than its direct and indirect subsidiaries). If the financial holding company owns shares of another company (other than its direct and indirect subsidiaries) which is not a finance- 124 Table of Contents related company, the financial holding company is required to exercise its voting rights in the same manner and same proportion as the other shareholders of the company exercise their voting rights in favor of or against any resolutions under consideration at the shareholders’ meeting of the company. Restrictions on Shareholdings by Direct and Indirect Subsidiaries Generally, a direct subsidiary of a financial holding company is prohibited from controlling any other company; provided that a direct subsidiary of a financial holding company may control (as an indirect subsidiary of the financial holding company): (i) subsidiaries in foreign jurisdictions related to the business of the subsidiary that are engaged in a financial business, (ii) certain financial institutions related to the business of the subsidiary which are engaged in the business that the direct subsidiary may conduct without any licenses or permits, (iii) certain financial institutions whose business is related to the business of the direct subsidiary as prescribed under the Presidential Decree of the Financial Holding Companies Act (for example, the companies which a bank subsidiary may control are limited to credit information companies, credit card companies, trust business companies, securities investment management companies, investment advisory companies, futures business companies, and asset management companies), (iv) certain financial institutions whose business is related to financial business as prescribed by the Ordinance of the Prime Minister, and (v) certain companies which are not financial institutions but whose business is related to the financial business of the financial holding company as prescribed by the Presidential Decree of the Financial Holding Companies Act (e.g. finance-related research company, finance-related information technology company, etc.). Acquisition by the direct subsidiaries of such indirect subsidiaries requires a prior permission from the Financial Services Commission or a report to be submitted to the Financial Services Commission, depending on the types of the indirect subsidiaries and the amount of total assets of the indirect subsidiaries. An indirect subsidiary of a financial holding company is prohibited from controlling any other company, provided, however, that in the case where a company held control over another company at the time such company initially became an indirect subsidiary of a financial holding company, such indirect subsidiary shall be required to dispose of its interest in such other company within two years after becoming an indirect subsidiary of a financial holding company. A subsidiary of a financial holding company may invest in a special purpose company as its largest shareholder for purposes of making investments under the Act on Private Investment in Social Infrastructure without being deemed as controlling such special purpose company. In addition, a private equity fund established in accordance with the Financial Investment Services and Capital Markets Act is not considered to be a subsidiary of a financial holding company even if the financial holding company is the largest investor in the private equity fund unless the financial holding company is the asset management company for the private equity fund. Restrictions on Transactions Between a Financial Holding Company and its Major Shareholder A bank holding company and its direct and indirect subsidiaries are prohibited from acquiring (including acquisition by a trust account of its subsidiary bank) shares issued by such bank holding company’s Major Shareholder in excess of 1% of the Net Total Equity Capital. In addition, the financial holding company and its direct and indirect subsidiaries which intend to acquire shares issued by such Major Shareholder not less than the lesser of (i) the amount equivalent to 0.1% of the Net Total Equity Capital or (ii) W5 billion, with respect to a single transaction, must obtain prior unanimous board resolutions and then, immediately after the acquisition, must file a report with the Financial Services Commission and publicly disclose the filing of such report (for example, through a website). Restrictions on Financial Holding Company Ownership Under the Financial Holding Companies Act, foreign financial institutions are permitted to establish financial holding companies in Korea. Pursuant to the Presidential Decree of the Financial Holding Companies 125 Table of Contents Act, a foreign financial institution can control a financial holding company if, subject to satisfying certain other conditions, it, together with its specially-related persons, holds 100% of the total shares in the financial holding company. In addition, any single shareholder and persons who stand in a special relationship with such shareholder (as defined under the Presidential Decree to the Financial Holding Companies Act) may acquire beneficial ownership of up to 10% of the total issued and outstanding shares with voting rights of a financial holding company controlling national banks (or 15% in the case of a financial holding company controlling regional banks only). The Government and the Korea Deposit Insurance Corporation are not subject to such a ceiling. However, “non-financial business group companies” (as defined below) may not acquire beneficial ownership of shares of a bank holding company in excess of 4% of such financial holding company’s outstanding voting shares, provided that such non-financial business group companies may acquire beneficial ownership of up to 10% of such financial holding company’s 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. In addition, any person (whether a Korean national or a foreigner), other than the non-financial business group companies described above, may also acquire more than 10% of the total voting shares issued and outstanding of a financial holding company that controls a national bank, provided that approval from the Financial Services Commission is obtained each time such person’s ownership reaches or exceeds 10% (or 15% in the case of a financial holding company controlling regional banks only), 25% or 33% of the total issued and outstanding voting shares of such bank holding company. “Non-financial business group companies” are defined under the Financial Holding Companies Act as companies, which include: (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 item (i) or (ii) above holds more than 4% of the total shares issued and outstanding of such mutual fund; (iv) any private equity fund (x) which has a partner with limited liability that falls under item (i), (ii) or (iii) above and holds equity equivalent to 10% or greater of the total amount invested by the private equity fund, (y) which has a partner with unlimited liability that falls under item (i), (ii) or (iii) above or (z) whose affiliates belonging to an enterprise group subject to limitation on mutual investment hold in aggregate equity equivalent to 30% or greater of the total amount invested by such private equity fund; or (v) any investment purpose company in which a private equity fund that falls under item (iv) above acquires and holds no less than 4% of such company’s shares or equity or exercises de-facto influence on such company’s significant managerial matters. Sharing of Customer Information among Financial Holding Companies and their Subsidiaries Under the Act on Use and Protection of Credit Information, any individual customer’s credit information may only be disclosed or otherwise used by financial institutions to determine, establish or maintain existing commercial transactions with them and only after obtaining written consent to use information. In addition, under the Act on Real Name Financial Transactions and Confidentiality, an individual working at a financial institution may not provide or reveal information or data concerning the contents of financial transactions to other persons unless such individual receives a request or consent in writing from the holder of a title deed, except under 126 Table of Contents certain exceptions stipulated in the Act. Under the Financial Holding Company Act, a financial holding company and its direct and indirect subsidiaries, however, may share certain credit information of individual customers among themselves for internal management purposes outlined in the Enforcement Decree of the Financial Holding Company Act (such as credit risk management, internal control and customer analysis) without the customers’ written consent, provided they adhere to the methods and procedures for provision of such information set forth therein. A financial investment company subsidiary of a financial holding company with a dealing and/or brokerage license may provide the financial holding company and its other direct and indirect subsidiaries information relating to the aggregate amount of cash or securities that a customer of the financial investment company has deposited for internal management purposes outlined in the Enforcement Decree of the Financial Holding Company Act, provided they adhere to the methods and procedures for provision of such information set forth therein. The Financial Holding Company Act limits the scope of credit information that may be shared without the customers’ prior consent and require certain procedures for provision of customer information as prescribed by the Financial Services Commission. Notice must be given to customers at least once a year regarding (i) the provider of customer information, (ii) the recipient of customer information, (iii) the purpose of providing the information and (iv) the categories of the information provided. The Act on Corporate Governance of Financial Companies The Act on Corporate Governance of Financial Companies was enacted to address calls for strengthened regulations on corporate governance of financial companies and to serve as a uniform regulation on corporate governance matters applicable to all financial companies in place of the separate regulations for each sector that existed. The Act contains several key measures, including, but not limited, to (i) condition of eligibility of officers of financial companies and standards for determining whether financial companies’ officers may hold concurrent positions in other companies, (ii) standards for composition and operation of board of directors, (iii) standards for establishment, composition and operation of committees of the board of directors, (iv) internal control, risk management and responsibilities map (v) requirements and procedures for the approval of a change of major shareholders and (vi) special regulations for rights of minority shareholders of financial companies. Financial Investment Services and Capital Markets Act General The Financial Investment Services and Capital Markets Act categorizes capital markets-related business into six different functions, as follows: • dealing (trading and underwriting of “financial investment products” (as defined below)); • brokerage (brokerage of financial investment products); • collective investment (establishment of collective investment schemes and the management thereof); • investment advice; • discretionary investment management; and • trusts (together with the five businesses set forth above, the “Financial Investment Businesses”). Accordingly, all financial businesses relating to financial investment products are reclassified as one or more of the Financial Investment Businesses described above, and financial institutions are subject to the regulations applicable to their relevant Financial Investment Businesses, irrespective of the type of the financial institution it is. For example, under the Financial Investment Services and Capital Markets Act, derivative businesses conducted by securities companies and future companies will be subject to the same regulations under the Financial Investment Services and Capital Markets Act, at least in principle. The banking business and insurance business are not subject to the Financial Investment Services and Capital Markets Act and will continue to be regulated under separate laws; provided, however, that they may 127 Table of Contents become subject to the Financial Investment Services and Capital Markets Act if their activities involve any financial investment businesses requiring a license based on the Financial Investment Services and Capital Markets Act. Comprehensive Definition of Financial Investment Products In an effort to encompass the various types of securities and derivative products available in the capital markets, the Financial Investment Services and Capital Markets Act sets forth a comprehensive term “financial investment products,” defined to mean all financial products with a risk of loss in the invested amount (in contrast to “deposits,” which are not financial investment products for which the invested amount is protected or preserved). Financial investment products are classified into two major categories: (i) “securities” (relating to financial investment products where the risk of loss is limited to the invested amount) and (ii) “derivatives” (relating to financial investment products where the risk of loss may exceed the invested amount). As a result of the general and open-ended manner in which financial investment products are defined, any future financial product could potentially fall under the definition of financial investment products, which would enable Financial Investment Companies (as defined below) to handle a broader range of financial products. Under the Financial Investment Services and Capital Markets Act, securities companies, asset management companies, futures companies and other entities engaging in any Financial Investment Business are classified as “Financial Investment Companies.” License System Financial Investment Companies are able to choose what Financial Investment Business to engage in (through the “check the box” method set forth in the relevant license application), by specifying the desired (i) Financial Investment Business, (ii) financial investment product and (iii) target customers to which financial investment products may be sold (namely, general investors or professional investors). Licenses will be issued under the specific business sub-categories described above. For example, it would be possible for a Financial Investment Company to obtain a license to engage in the Financial Investment Business of (i) dealing (ii) over-the-counter derivatives products (iii) only with professional investors. Expanded Business Scope of Financial Investment Companies Under the Financial Investment Services and Capital Markets Act, a licensed Financial Investment Company is permitted to engage in all types of Financial Investment Businesses, subject to compliance with the relevant regulations, for example, maintaining an adequate “Ethical Screens,” to the extent required. As to incidental businesses (i.e., a financial related business which is not a Financial Investment Business), the Financial Investment Services and Capital Markets Act generally allows a Financial Investment Company to freely engage in such incidental businesses by shifting away from the previous system of permitting only the listed activities towards a more comprehensive system. In addition, a Financial Investment Company is permitted (i) to outsource marketing activities by contracting with “introducing brokers” that are individuals but not employees of the Financial Investment Company, (ii) to engage in foreign exchange business related to their Financial Investment Business and (iii) to participate in the settlement network, pursuant to an agreement among the settlement network participants. Improvement in Investor Protection Mechanism While the Financial Investment Services and Capital Markets Act broadens the scope of financial businesses in which financial institutions are permitted to engage, a more rigorous investor-protection mechanism is imposed upon Financial Investment Companies dealing in financial investment products. The Financial Investment Services and Capital Markets Act makes a distinction between general investors and sophisticated investors and provides new or enhanced protections to general investors. For instance, the Financial Investment Services and Capital Markets Act expressly provides for strict know-your-customer rules for general investors 128 Table of Contents and imposes an obligation on Financial Investment Companies that they should market financial investment products suitable to each general investor considering his or her personal attributes, including investment objective, net worth, and investment experience. Under the Financial Investment Services and Capital Markets Act, a Financial Investment Company can be held liable if a general investor proves (i) damages or losses relating to such general investor’s investment in financial investment products solicited by such Financial Investment Company and (ii) absence of explanation, false explanation, or omission of material fact (without having to prove fault or causation). In case there are any conflicts of interest between the Financial Investment Companies and investors, the Financial Investment Services and Capital Markets Act expressly requires (i) disclosure of any conflict of interest to investors and (ii) mitigation of conflicts of interest to a comfortable level or abstention from the relevant transaction. Other Regulatory Changes Related to Securities and Investments Under the Financial Investment Services and Capital Markets Act, investors are subject to enhanced reporting obligations with respect to significant shareholdings. With respect to the 5% reporting obligation, an investor must update its report not only upon a change in shareholding of 1% or more or a change in the purpose of shareholding (such as an intention to influence management), but also upon the occurrence of other prescribed events, including changes in the type of holding or any material term of a relevant contract. With respect to the 10% reporting obligation, an initial report must be filed within five business days of the triggering event, and any subsequent changes must likewise be reported within five business days of such changes. With respect to collective investment schemes, the Financial Investment Services and Capital Markets Act provides a flexible legal framework under which various forms of legal entities, including trusts, corporations, limited liability companies, and partnerships, may be used as vehicles for collective investments. The formation of fund complexes is permitted, and investment funds may invest in a broad range of assets and investment instruments. Amendments to the Korean Commercial Code In 2025 and 2026, the National Assembly of Korea enacted a series of amendments to the Korean Commercial Code to strengthen shareholder protection and enhance corporate governance standards for listed companies. In July 2025, the first round of amendments expanded the scope of a director’s fiduciary duty to include “the total body of shareholders,” renamed the term “Outside Directors” to “Independent Directors,” and extended the 3% cap on voting rights for major shareholders and their related parties to the election of all audit committee members, regardless of their status as an independent director. For large-scale listed companies like us, the amendments also mandated electronic shareholder meetings to strengthen minority shareholder protection. In September 2025, a second round of amendments further mandated the use of cumulative voting for large-scale listed companies and increased the minimum number of audit committee members elected separately from one to two. In March 2026, a third round of amendments mandated the cancellation of treasury shares within one year of acquisition. As an exception, a company may continue holding or disposing of its treasury shares if its board of directors formulates a holding or disposal plan and obtains approval from the general meeting of shareholders, which approval must be re-obtained for each fiscal year. Principal Regulations Applicable to Banks General The banking system in Korea is governed by the Banking Act and the Bank of Korea Act of 1950, as amended (the “Bank of Korea Act”). In addition, Korean banks are subject to the regulations and supervision of the Bank of Korea, the Bank of Korea’s Monetary Policy Committee, the Financial Services Commission and its executive body, the Financial Supervisory Service. The Bank of Korea, established in June 1950 under the Bank of Korea Act, performs the customary functions of a central bank. It seeks to contribute to the sound development of the national economy by price 129 Table of Contents stabilization through establishing and implementing efficient monetary and credit policies. The Bank of Korea acts under instructions of the Monetary Policy Committee, the supreme policy-making body of the Bank of Korea. Under the Bank of Korea Act, the Monetary Policy Committee’s primary responsibilities are to formulate monetary and credit policies and to determine the operations, management and administration of the Bank of Korea. The Financial Services Commission regulates commercial banks pursuant to the Banking Act, including establishing guidelines on capital adequacy of commercial banks, and promulgates regulations relating to supervision of banks. The Financial Supervisory Service is subject to the instructions and directives of the Financial Services Commission and carries out supervision and examination of commercial banks. In particular, the Financial Supervisory Service sets requirements both for the prudent control of liquidity and for capital adequacy and establishes reporting requirements pursuant to the authority delegated to it under the Financial Services Commission regulations, pursuant to which banks are required to submit annual reports on financial performance and shareholdings, regular reports on management strategy and non-performing loans, including write-offs, and management of problem companies and plans for the settlement of bad loans. Under the Banking Act, approval to commence a commercial banking business or a long-term financing business must be obtained from the Financial Services Commission. Commercial banking business is defined as the lending of funds acquired predominantly from the acceptance of deposits for a period not exceeding one year or, subject to the limitation established by the Financial Services Commission, for a period between one year and three years. Long-term financing business is defined as the lending, for periods in excess of one year, of funds acquired predominantly from paid-in capital, reserves or other retained earnings, the acceptance of deposits with maturities of at least one year, or the issuance of bonds or other securities. A bank wishing to enter any business other than commercial banking and long-term financing businesses, such as the trust business, must also obtain approval from the Financial Services Commission. In addition, approval to merge with any other banking institution, to liquidate, to close a banking business or to transfer all or a part of a business must also be obtained from the Financial Services Commission. If the Financial Services Commission deems a bank’s financial condition to be unsound or if a bank fails to meet the applicable capital adequacy ratio set forth under Korean law, the Financial Services Commission may order, among others: • capital increases or reductions; • suspension of officers’ performance of their duties and appointment of custodians; • stock cancellations or consolidations; • transfers of a part or all of business; • sale of assets and bar on acquisition of high-risk assets; • closures or downsizing of branch offices or workforce; • mergers or becoming a subsidiary under the Financial Holding Companies Act of a financial holding company; • acquisition of a bank by a third party; • suspensions of a part or all of business operation (not more than six months in the case of suspension of all business operations); or • assignments of contractual rights and obligations relating to financial transactions. 130 Table of Contents Capital Adequacy The Banking Act requires nationwide banks to maintain a minimum paid-in capital of W100 billion and regional banks to maintain a minimum paid-in capital of W25 billion. In addition to minimum capital requirements, all banks including foreign bank branches in Korea are required to maintain a prescribed solvency position. A bank must also set aside as its legal reserve an amount equal to at least 10% of its net profits after tax each time it pays dividends on net profits earned until such time when the reserve equals the amount of its total paid-in capital. Under the Banking Act, the capital of a bank is divided into two categories: Tier I and Tier II capital. Tier I capital (typically referred to as “Core Capital”) consists of (i) the capital that can absorb losses incurred by a bank such as capital, capital surplus and earned surplus generated from the issuance of common shares (collectively, “Common Stock Capital”), and (ii) the capital that can absorb the losses of a bank after depletion of the Common Stock Capital such as capital and capital surplus generated from the issuance of Tier I capital instruments satisfying the requirements designated by the Financial Supervisory Service (collectively, “Other Core Capital”). Tier II capital (typically referred to as “Supplementary Capital”) represents the capital which is equivalent to, but not included in, the Core Capital and can absorb losses incurred upon the liquidation of a bank such as capital and capital surplus generated from the issuance of Tier II capital instruments satisfying the requirements designated by the Financial Supervisory Service and allowance for bad debts set aside for loans classified as “normal” or “precautionary.” Under the Detailed Regulations on the Supervision of the Banking Business, Tier I capital instruments must satisfy, among others, the following requirements in order to be recognized as Other Core Capital: (i) the price for such instruments shall have been fully paid through the procedure for issuance, and the instruments shall be in a perpetual form with no cause triggering a step-up or redemption; (ii) such instruments shall be bound by a special agreement on being subordinate to depositors, general creditors and subordinated debt of the bank (referring to a special agreement under which subordinated creditors’ right to claim payment shall take effect only after unsubordinated creditors’ claims are fully paid, when bankruptcy or any similar incident occurs; hereinafter the same shall apply) but shall not fall within liabilities exceeding assets at the time when bankruptcy is declared under the Debtor Rehabilitation and Bankruptcy Act; (iii) the payment of dividends or interests shall be suspended from the date when the bank is designated as a “insolvent financial institution” under the Act on Structural Improvement of the Financial Industry of Korea or under the Depositor Protection act of Korea as applicable, or the Financial Supervisory Service takes measures under the Regulations on the Supervision of the Banking Business such as the managerial improvement recommendation, the managerial improvement request, the managerial improvement order and the emergency measures against the bank to the date when the above-mentioned event is removed; (iv) the payment of dividends or interests shall not be determined in connection with the credit rating of the bank; (v) the dividends may only be paid out of distributable income; (vi) the bank shall be able to revoke in its sole discretion the payment of dividends or interests at any time; (vii) the revocation of the payment of dividends must not impose restrictions on the bank except in relation to dividends to common stockholders; (viii) the revocation of the payment of dividends or interests shall not be deemed as an event of default, and the bank shall be able to use in its sole discretion the amount which was revoked to pay as dividends or interests to redeem any other debts of the bank then due and payable; 131 Table of Contents (ix) such instruments shall not be redeemed within five years from the issuance date and the bank shall be able to determine in its sole discretion whether it redeems such instruments even after five years from the issuance date, and the instruments shall not be subject to any condition that arouses an investor’s expectation to have the instruments redeemed or any condition that imposes a burden of redemption upon the issuing bank in fact; (x) the requirements prescribed in Appendix 3-5 (Trigger Events for Contingent Capital Securities) of the Detailed Enforcement Rules of Regulation on Supervision of Banking Business shall be satisfied; (xi) the bank or the person who has de facto control over the bank shall not purchase capital instruments or provide a purchaser of such securities with funds for the purchase by providing any collateral or guarantee for payment or by providing a loan, shall not raise the priority of its claims, legally or economically, for the price paid for the securities, and shall not provide any collateral or guarantee to the purchasers of the securities directly or via a related company; and (xii) such capital instruments shall have no condition that hinders the issuing bank’s procurement or expansion of capital in the future. Under the Detailed Regulations on the Supervision of the Banking Business, Tier II capital instruments must satisfy, among others, the following requirements in order to be recognized as Supplementary Capital: (i) the procedure for issuance shall have been completed, the price for such capital instruments shall have been fully paid, and the capital instruments shall be bound by a special agreement of subordination to deposits and ordinary debts; (ii) the maturity shall not be less than five years from the issuance date, and Tier II capital instruments shall not be redeemed within five years from the issuance date; (iii) there is no condition to promote the bank to redeem such capital instruments such as a step-up provision, and the bank shall be able to determine in its sole discretion whether to redeem such instruments prior to the maturity date, and the instruments shall not be subject to any condition that arouses an investor’s expectation to have the instruments redeemed or any condition that imposes a burden of redemption upon the issuing bank in fact; (iv) other than the case where the bank is subject to the bankruptcy or liquidation, the holder of Tier II capital instruments shall not have the right to require bank to pay the principal or interests of such instruments earlier than the original due date thereof; (v) the payment of dividends or interests shall not be determined in connection with the credit rating of the bank; (vi) the requirements prescribed in Appendix 3-5 (Trigger Events for Contingent Capital Securities) of the Detailed Enforcement Rules of Regulation on Supervision of Banking Business shall be satisfied; (vii) the bank or any person or entity over which the bank exercises substantial control shall not purchase the capital instruments issued by such bank nor provide, directly or indirectly, the funds to acquire the capital instruments by providing any collateral or guarantee or loan in favor of the person or entity which tries to acquire such instruments; and (viii) the bank shall not enhance, legally or economically, the payment priority of the capital instruments, nor provide, directly or indirectly through its affiliated company, any collateral or guarantee in favor of the person or entity which acquires such instruments. All banks must meet standards regarding minimum ratios of Tier I and Tier II capital (less any capital deductions) to risk-weighted assets, determined in accordance with the Financial Services Commission requirements that have been formulated based on the BIS Standards which were adopted and became effective in 1996. Under these regulations, all domestic banks and foreign bank branches are required to meet the minimum ratio of Tier I and Tier II capital (less any capital deductions) to risk-weighted assets of 8%. 132 Table of Contents Furthermore, as Basel III was adopted and is being implemented in stages in Korea since December 1, 2013, all banks in Korea are required to meet minimum ratios of common stock capital (less any capital deductions) and core capital (less any capital deductions) to risk-weighted assets as set out in the Regulation on the Supervision of the Banking Business. The required minimum ratio of common stock capital (less any capital deductions) to risk-weighted assets is 4.5%, and the required minimum ratio of core capital (less any capital deductions) to risk-weighted assets is 6.0%. Capital conservation buffer requirements have also been phased in from January 1, 2016, and accordingly, since January 1, 2019, commercial banks in Korea have been required to maintain a capital conservation buffer of 2.5%. Under the Regulation on the Supervision of the Banking Business and the Detailed Regulations promulgated thereunder, Korean banks apply the following risk-weight ratios in respect of their home mortgage loans: (i) for those banks adopting a standardized approach for calculating credit risk-weighted assets, the risk-weight ratio of between 20% and 150% for home equity loans, depending on the loan-to-value ratio and risk profile of the loan; and (ii) for those banks adopting an internal ratings-based approach for calculating credit risk-weighted assets, a risk-weight ratio calculated with reference to the PD, LGD and EAD, each as defined in the Detailed Regulations on the Supervision of the Banking Business. In Korea, Basel II, a convention entered into by the Basel Committee in June 2004 for the purpose of improving risk management and increasing capital adequacy of banks, was implemented in January 2008. Pursuant to Basel II, operational risk, such as inadequate procedure, loss risk by employees, internal system, occurrence of unexpected event, as well as credit risk and market risk, is taken into account in calculating the risk-weighted assets, in addition to maintaining the capital adequacy ratio of 8% for banks. Under Basel II, the capital requirements for credit risk can be calculated by the internal rating based (IRB) approach or the standardized approach. Under the Regulation on the Supervision of the Banking Business, banks shall set aside allowances for bad debts for each class of soundness in accordance with IFRS as adopted by Korea. If the amount for each class of soundness calculated in accordance with the following criteria exceeds the allowances for bad debts set aside, the excess amount shall, at the time of each settlement of accounts, be set aside as regulatory reserve for credit losses. • 0.85% of normal credits (or 0.9% in the case of normal credits comprising loans to certain industries including construction, retail and wholesale sales, accommodations, restaurant, real estate and lease, 1.0% in the case of normal credits comprising loans to individuals and households, 2.5% in the case of normal credits comprising credit card loans and 1.1% in the case of normal credits comprising other credit card receivables); • 7% of precautionary credits (or 10% in the case of precautionary credits comprising loans to individuals and households, 50% in the case of precautionary credits comprising credit card loans and 40% in the case of precautionary credits comprising other credit card receivables); • 20% of substandard credits (or 10% in the case of substandard credits comprising assets for which the bank has the right to receive payment in priority pursuant to the Corporate Restructuring Promotion Act of Korea or Paragraph 180, Subparagraph 2 of the Debtor Rehabilitation and Bankruptcy Act of Korea (the “Priority Assets”), 20% in the case of normal credits comprising loans to individuals and households, 65% in the case of substandard credits comprising credit card loans and 60% in the case of substandard credits comprising other credit card receivables); • 50% of doubtful credits (or 25% in the case of doubtful credits comprising Priority Assets, 55% in the case of doubtful credits comprising loans to individuals and households and 75% in the case of doubtful credits comprising credit card loans and other credit card receivables); and 133 Table of Contents • 100% of estimated loss credits (or 50% in the case of estimated loss credits comprising of Priority Assets). Furthermore, under the Regulation on the Supervision of the Banking Business, banks must maintain allowances for bad debts and regulatory reserve for credit losses in respect of their confirmed guarantees (including confirmed acceptances) and outstanding non-used credit lines in an aggregate amount calculated at the same rates applicable to normal, precautionary, substandard, doubtful and estimated loss credits comprising their outstanding loans and other credits as set forth above. Pursuant to the Regulation on the Supervision of the Banking Business and the Detailed Regulation on the Supervision of the Banking Business, the Financial Services Commission may designate banks with significant influence (based on size and connectivity with other financial institutions) on the domestic financial system as a domestic systemically important bank and require the accumulation of additional capital in accordance with the highest of: (i) ratio of common equity capital to risk-weighted assets, ranging from 0.0% to 2.0%, depending on the systematic importance evaluation score, (ii) if the bank’s holding company is a domestic systemically important bank holding company, the capital ratio corresponding to the additional capital required for the bank holding company under the Financial Holding Company Supervision Regulations, or (iii) if the bank is also a global systemically important bank, as defined by the Basel Committee, the capital ratio as required by the Basel Committee. Since January 1, 2019, the Financial Services Commission has required domestic systemically important banks to maintain an additional capital buffer of 1.00%, and we and Shinhan Bank have each been designated by the Financial Services Commission since July 2021 as a domestic systemically important bank holding company and domestic systemically important bank, respectively. Accordingly, we and Shinhan Bank are subject to this additional capital buffer of 1.00%. The Financial Services Commission may also, upon quarterly review, determine and require banks to accumulate a level of counter-cyclical capital buffer within the range of 0% to 2.5% of risk-weighted assets, taking into account factors such as the degree of increase in credit relative to the gross domestic product. As announced by the Financial Services Commission in May 2023, banks and their holding companies, including us and Shinhan Bank, have been required to accumulate a counter-cyclical capital buffer of 1.00% since May 1, 2024. The Financial Services Commission also announced in September 2024 the introduction of a stress buffer capital regulation, which may require banks and their holding companies to accumulate up to 2.5% of additional capital (in addition to, and separate from, the aforementioned minimum capital ratios) depending on the results of stress testing and evaluation of risk management status by the Financial Supervisory Service. In December 2024, the Financial Services Commission initially announced that the introduction of the stress buffer capital regulation would be delayed until at least the second half of 2025, with the timing and other details to be determined in 2025. In December 2025, the Financial Services Commission announced further delays, stating that the stress buffer capital regulation would be implemented in June 2026 or later, with the specific timing and other implementation details to be determined in 2026. Liquidity All banks are required to match the maturities of their assets and liabilities in accordance with the Banking Act in order to ensure adequate liquidity. Banks may not invest in excess of an amount exceeding 100% of their Tier I and Tier II capital (less any capital deductions) in stocks and other securities with a period remaining to maturity of over three years. However, this restriction does not apply to government bonds or to Monetary Stabilization Bonds issued by the Bank of Korea. The Financial Services Commission requires Korean banks to maintain a liquidity coverage ratio of at least 100.0% as of January 1, 2019. The Financial Services Commission defines liquidity coverage ratio as HQLA that can be immediately converted into cash with little or no loss in value, as divided by the net amount of cash outflow for the next 30 day period, under the stress level established according to the liquidity coverage ratio, pursuant to the Regulation on the Supervision of the Banking Business, which was amended in June 2016 to implement the liquidity coverage ratio requirements under Basel III. With respect to foreign currency liquidity coverage ratio, the Regulation on the Supervision of the Banking Business requires that financial institutions dealing with foreign exchange affairs (i.e., banks) whose foreign- 134 Table of Contents currency denominated liabilities are equal to or greater than US$500 million or 5% of its total liabilities, as of the end of the immediately preceding half-year period, maintain a foreign currency liquidity coverage ratio of 80% or higher beginning January 1, 2019. The term “foreign currency liquidity coverage ratio” means the ratio of high-liquidity assets to the net cash outflow in respect of foreign-currency denominated assets and liabilities for the next 30 days. Although the liquidity coverage ratio requirement was temporarily lowered during the COVID-19 pandemic, the liquidity coverage ratio requirement has been restored to 100% since January 1, 2025. The Monetary Policy Committee of the Bank of Korea is authorized to fix and alter minimum reserve requirements that banks must maintain against their deposit liabilities. The current minimum reserve ratio is 7.0% of average balances for Won-denominated demand deposits outstanding, 0.0% of average balances for Won-denominated long-term housing savings deposits and employee asset establishment savings deposits outstanding and 2.0% of average balances for Won-denominated time and savings deposits, mutual installments, housing installments and certificates of deposit outstanding. For foreign currency deposit liabilities, a 2.0% minimum reserve ratio is applied to time deposits with a maturity of one month or longer, certificates of deposit with a maturity of 30 days or longer, and savings deposits with a maturity of six months or longer and a 7.0% minimum reserve ratio is applied to other deposits, while a 1.0% minimum reserve ratio is applied for offshore accounts, immigrant accounts and resident accounts opened by financial institutions (excluding bank holding companies) and the Export-Import Bank of Korea as well as foreign currency certificates of deposit held by account holders of such offshore accounts, immigrant accounts and resident accounts opened by financial institutions (excluding bank holding companies) and the Export-Import Bank of Korea. Loan-to-Deposit Ratio In December 2009, the Financial Supervisory Service announced that it would introduce a new set of regulations on the loan-to-deposit ratio by amending the Regulation on the Supervision of the Banking Business upon its determination that the overall liquidity of banks in Korea had become unstable due to the ongoing increase in the loan-to-deposit ratio resulting from banks expanding their asset size too competitively by granting mortgages on houses and loans to small- and medium-sized enterprises over the last couple of years. The Regulation on the Supervision of the Banking Business requires banks with Won-denominated loans of not less than W4 trillion in value as of the last month of the immediately preceding quarter to maintain a ratio of Won-denominated loans (excluding certain types of loans using funds borrowed from Korea Development Bank or the Government or loans made under certain operational rules of Korea Federation of Banks) to Won-denominated deposits (excluding certificates of deposit) and the balance of the covered bonds under the Act on Issuance of Covered Bonds, the maturity of which is not less than five years (only in case when such financing from the issuance of covered bonds is used in Won currency and up to 1% of Won-denominated deposits) of no more than 100%. Since January 1, 2020, in calculating such loan to deposit ratio, retail loans and corporate loans have been subject to differential weighting, with retail loans weighted at 115% and corporate loans (excluding loans to SOHOs) weighted at 85%, thereby increasing the impact of retail loans and reducing the impact of corporate loans in calculating such ratio. In addition, effective April 1, 2026, the Financial Services Commission further lowered the risk weight applied to corporate loans to enterprises located in non-metropolitan areas (i.e., areas other than Seoul, Incheon and Gyeonggi Province), from 85% to 80%, while maintaining the risk weight for retail loans at 115%. Shinhan Bank’s loan-to-deposit ratio as of December 31, 2025 was 96.0%, based on monthly average balances. Financial Exposure to Any Single Customer and Major Shareholders Under the Banking Act, the sum of material credit exposures by a bank, namely, the total sum of its credits to single individuals, legal entities or persons sharing credit risk with such individuals or legal entities such as companies belonging to the same enterprise groups as defined under the Monopoly Regulation and Fair Trade Act that exceed 10% of the sum of Tier I and Tier II capital (less any capital deductions), must not exceed five times the sum of Tier I and Tier II capital (less any capital deductions), subject to certain exceptions. Subject to certain exceptions, no bank is permitted to extend credit (including loans, guarantees, purchases of securities 135 Table of Contents (only in the nature of a credit) and such other transactions which directly or indirectly create credit risk) in excess of 20% of the sum of Tier I and Tier II capital (less any capital deductions) to an individual or a legal entity, and no bank may grant credit in excess of 25% of the sum of Tier I and Tier II capital (less any capital deductions) to individuals, legal entities and companies that belong to the same enterprise group as defined in the Monopoly Regulation and Fair Trade Act. Under the Banking Act, certain restrictions apply to extending credits to a major shareholder. The definition of a “major shareholder” is as follows: • a shareholder holding (together with persons who have a special relationship with such shareholder as defined in the Presidential Decree of the Banking Act) in excess of 10% (or in the case of regional banks, 15%) in the aggregate of the bank’s total issued and outstanding voting shares; or • a shareholder holding (together with persons who have a special relationship with such shareholder as defined in the Presidential Decree of the Banking Act) more than 4% in the aggregate of the total issued and outstanding voting shares of a bank (other than a regional bank), where such shareholder is the largest shareholder or is able to actually control the major business affairs of the bank, for example, through appointment and dismissal of the chief executive officer or of the majority of the executives. Under the Banking Act, banks are prohibited from extending credits in the amount greater than the lesser of (1) 25% of the sum of such bank’s Tier I and Tier II capital (less any capital deductions) and (2) the relevant major shareholder’s shareholding ratio multiplied by the sum of the bank’s Tier I and Tier II capital (less any capital deductions) to a major shareholder (together with persons who have special relationship with such major shareholder as defined in the Presidential Decree of the Banking Act). Also, no bank is allowed to grant credit to its major shareholders in the aggregate in excess of 25% of its Tier I and Tier II capital (less any capital deductions). When managing the credit risk of banks, among the methods for providing credit support by banks, a loan agreement, a purchase agreement for asset-backed commercial papers, purchase of subordinate beneficiary certificates, and assumption of liability by providing warranty against default under asset-backed securitization are examples of creating financial exposure to banks. Interest Rates Korean banks remain dependent on the acceptance of deposits as their primary source of funds. Currently, there are no legal controls on interest rates on bank loans in Korea, except for the cap of 20.0% per annum on interest rates on loans to individuals or small corporations, as defined under the SME Framework Act under the Act on Registration of Credit Business, Etc. and Protection of Finance Users. Lending to Small- and Medium-sized Enterprises When commercial banks (including Shinhan Bank) make Won-denominated loans to certain startup, venture, innovative and other strategic small- and medium-sized enterprises specially designated by the Bank of Korea as “priority borrowers,” the Bank of Korea generally provides the underlying funding to these banks at concessionary rates for up to 50% of all such loans made to the priority borrowers subject to a monthly-adjusted limit prescribed by the Bank of Korea provided that if such loans to priority borrowers made by all commercial banks exceed the prescribed limit for a given month, the concessionary funding for the following month will be allocated to each commercial bank in proportion to such bank’s lending to priority borrowers two months prior to the time of such allocation, which has the effect that, if a particular bank lags other banks in making loans to priority borrowers, the amount of funding such bank can receive from the Bank of Korea at concessionary rates will be proportionately reduced. 136 Table of Contents Disclosure of Management Performance For the purpose of enforcing mandatory disclosure of management performance so that the general public, especially depositors and stockholders, will be in a better position to monitor banks, the Financial Services Commission requires commercial banks to disclose certain matters as follows: • loans bearing no profit made to a single business group in an amount exceeding 10% of the sum of the bank’s Tier I and Tier II capital (less any capital deductions) as of the end of the previous month (where the loan exposure to such borrower is calculated pursuant to the criteria under the Detailed Regulations promulgated under the Regulation on the Supervision of the Banking Business), except where the loan exposure to a single business group is not more than W4 billion; and • any loss due to court judgments or similar decisions in civil proceedings in an amount exceeding 1% of the sum of the bank’s Tier I and Tier II capital (less any capital deductions) as of the end of the previous month, except where the loss is not more than W1 billion. Restrictions on Lending According to the Banking Act, commercial banks are prohibited from making any of the following categories of loans: • loans made directly or indirectly on the pledge of a bank’s own shares; • loans made directly or indirectly to enable a natural or a legal person to buy the bank’s own shares; • loans made to any of the bank’s officers or employees other than de minimis loans of up to (1) W20 million in the case of a general loan, (2) W50 million in the case of a general loan plus a housing loan, or (3) W60 million in the aggregate for general loans, housing loans and loans to pay damages arising from wrongful acts of employees in financial transactions; • credit (including loans) secured by a pledge of shares of a subsidiary corporation of the bank or to enable a natural or juridical person to buy shares of a subsidiary corporation of the bank; and • loans to any officers or employees of a subsidiary corporation of the bank, other than general loans of up to W20 million or general and housing loans of up to W50 million in the aggregate. Recent Regulations Relating to Retail Household Loans The Financial Services Commission has implemented a number of changes in recent years, most recently in October 2025, to the regulations relating to retail household lending by banks. Under the currently applicable regulations: • as to any new loans secured by houses (including apartments) located nationwide, the loan-to-value ratio (the aggregate principal amount of loans secured by such collateral over the appraised value of the collateral) shall not exceed 70%; • as to any new loans secured by houses (including apartments) located in “speculative areas”, “overheated speculative areas” or “adjustment targeted areas”, in each case, as designated by the Government (collectively, “Regulated Areas”), the loan-to-value ratio should not exceed 40%, except that such maximum loan-to-value ratio is 70% for (x) low-income households that (i) have a combined (in case of married couples) annual income of no more than W90 million, (ii) do not currently own any housing and (iii) are using the loan to purchase low-price housing valued at W900 million or less (W800 million or less in the case of houses located in “adjustment targeted areas”) and (y) first-time homebuyers with a maximum residential mortgage loan amount of W600 million or less; provided that, regardless of the loan-to-value ratio, the maximum loan amount for housing in Regulated Areas shall be: (i) W600 million for housing valued at W1.5 billion or less, (ii) W400 million for housing valued between W1.5 billion and W2.5 billion and (iii) W200 million for housing valued above W2.5 billion; 137 Table of Contents • as to any new loans secured by houses (including apartments) located nationwide to be extended to a household that already owns one or more houses, the maximum loan-to-value ratio must be adjusted to 10% lower than the applicable loan-to-value ratio described above; • no new loans secured by housing (including apartments) located in Regulated Areas may be extended to households that already own one or more houses (except for households that own one house but intend to sell such house within six months); • as to any new loans secured by houses (including apartments) located in Regulated Areas, the borrower’s debt-to-income ratio (calculated as (1) the aggregate annual total payment amount of (x) the principal of and interest on loans secured by such housing and existing mortgage and home equity loans and (y) the interest on other debts of the borrower over (2) the borrower’s annual income) should not exceed 40% (50% for those that are located in “adjustment targeted areas”), except that such maximum debt-to-income ratio is 60% for (a) low-income households that (i) have a combined (in case of married couple) annual income of less than W90 million, (ii) do not currently own any housing and (iii) are using the loan to purchase low-price housing valued at W900 million or less (W800 million or less in case of houses located in “adjustment targeted areas”) and (b) first-time homebuyers; and • as to any new loans extended to a household that already has an aggregate loan amount exceeding W100 million (including the loan application amount and the revolving amount in case of a revolving loan), such household’s debt-service-ratio (calculated as (1) the aggregate annual total payment amount of the principal of and interest on financial liabilities, including the loans secured by such high-priced housing and any interest on jeonse loans, subject to certain adjustments relating to stress buffers, divided by (2) the household’s annual income) should not exceed 40% unless otherwise specified by the applicable regulations. In December 2023, as a measure to help prevent excessive household debt, the Financial Services Commission introduced the “stress debt service ratio” system for floating rate loans, mixed rate loans (loans where a fixed interest rate shifts to a floating interest rate after a certain period of time), and periodic loans (loans where a fixed interest rate is adjusted periodically). The “stress debt service ratio” system imposes a certain level of interest rate spread (a stress rate) when calculating the debt service ratio, taking into consideration the possibility that a borrower of a floating rate loan may be subject to an increased burden when repaying principal and interest if the interest rate were to increase during the loan period. The “stress debt service ratio” system was initially implemented in February 2024 and applied to mortgage loans in the banking sector. In September 2024, the scope of such system was expanded to apply to mortgage loans across all financial institutions as well as credit facilities in the banking sector, and in July 2025, it was further expanded to apply to mortgage loans, credit facilities with outstanding balances exceeding W100 million and other household loans across all financial institutions. Restrictions on Investments in Property A bank may possess real estate property only to the extent necessary for conducting its business; provided that the aggregate value of such real estate property must not exceed 60% of the sum of its Tier I and Tier II capital (less any capital deductions). Any property acquired by a bank (1) through the exercise of its rights as a secured party or (2) the acquisition of which is prohibited by the Banking Act must be disposed of within three years, unless otherwise provided by the regulations thereunder. Restrictions on Shareholdings in Other Companies Under the Banking Act, a bank may not own more than 15% of shares outstanding with voting rights of another company, except where, among other reasons: • the company issuing such shares is engaged in a business that falls under the category of financial businesses set forth by the Financial Services Commission (including companies which business purpose is to own equity interests in private equity funds); or 138 Table of Contents • the acquisition of shares by the bank is necessary for corporate restructuring of such company and is approved by the Financial Services Commission. In the above cases, a bank must satisfy either of the following requirements: • the total investment in companies in which the bank owns more than 15% of the outstanding shares with voting rights does not exceed 20% of the sum of Tier I and Tier II capital (less any capital deductions); or • the total investment in companies in which the bank owns more than 15% of the outstanding shares with voting rights does not exceed 30% of the sum of Tier I and Tier II capital (less any capital deductions) where the acquisition satisfies the requirements determined by the Financial Services Commission. The Banking Act provides that a bank using its bank accounts and its trust accounts is not permitted to acquire the shares issued by the Major Shareholder of such bank in excess of an amount equal to 1% of the sum of Tier I and Tier II capital (less any capital deductions). Restrictions on Bank Ownership Under the Banking Act, subject to certain exceptions, a single shareholder and persons who stand in a special relationship with such shareholder (as described in the Presidential Decree to the Banking Act) may acquire beneficial ownership of up to 10% of a national bank’s total issued and outstanding shares with voting rights and up to 15% of a regional bank’s total issued and outstanding shares with voting rights. The Government, the Korea Deposit Insurance Corporation and financial holding companies qualifying under the Financial Holding Companies Act are not subject to such ceilings. However, non-financial business group companies — namely, (1) any same shareholder group with an aggregate net assets of all non-financial companies belonging to such group of not less than 25% of the aggregate net assets of all corporations that are members of such group; (2) any group with aggregate assets of all non-financial companies belonging to such group of not less than W2 trillion; (3) any mutual fund in which the same shareholder group, as described in items (1) and (2) above, owns more than 4% of the total shares issued and outstanding; (4) a private equity fund (under the Financial Investment Services and Capital Markets Act) where (i) the general partner of such private equity fund, (ii) the limited partner whose equity holding ratio in such private equity fund is 10% or more, or (iii) the limited partners, being member companies of a single group of companies that belong to the same conglomerate as defined in the Monopoly Regulation and Fair Trade Act, whose aggregate equity holding ratio in such private equity fund is 30% or more falls under either of item (1) to (3) above; or (5) a special purpose company of a private equity fund where a private equity fund, as described in item (4) above, owns 4% or more of the special purpose company’s issued and outstanding shares or has actual control over the major business affairs of the special purpose company through, for example, appointment and dismissal of the officers – may not acquire beneficial ownership of shares of a national bank in excess of 4% of such bank’s outstanding voting shares, provided that such non-financial business group companies may acquire beneficial ownership of: • up to 10% of a national bank’s outstanding voting shares with the approval of the Financial Services Commission under the condition that such non-financial group companies will not exercise voting rights in respect of such shares in excess of the 4% limit; and • in the event that a foreigner, as defined in the Foreign Investment Promotion Act, owns not less than 10% of a national bank’s outstanding voting shares, up to 10% of such bank’s outstanding voting shares without the approval of the Financial Services Commission, and in excess of 10%, 25% or 33% of such bank’s outstanding voting shares, with the approval of the Financial Services Commission, up to the number of shares owned by such foreigner. In addition, any person (whether a Korean national or a foreigner), with the exception of non-financial business group companies described above, may also acquire in excess of 10% of a national bank’s total voting 139 Table of Contents shares issued and outstanding, provided that an approval from the Financial Services Commission is obtained in instances where the total holding exceeds 10% (or 15% in the case of regional banks), 25% or 33% of the bank’s total voting shares issued and outstanding. Deposit Insurance System The Depositor Protection Act provides, through a deposit insurance system, insurance for certain deposits of banks in Korea. Under the Depositor Protection Act, all banks governed by the Banking Act, including Shinhan Bank and Jeju Bank, are required to pay to the Korea Deposit Insurance Corporation an insurance premium on a quarterly basis at such rate as determined by the Presidential Decree to the Depositor Protection Act, which shall not exceed 0.5% of the bank’s insurable deposits in any given year. The current insurance premium is 0.02% of insurable deposits for each quarter. If the Korea Deposit Insurance Corporation pays the insured amount, it will acquire the claims of the depositors within the payment amount. The Korea Deposit Insurance Corporation insures up to a total of W100 million per depositor per bank, which limit increased from W50 million through an amendment to the Presidential Decree to the Depositor Protection Act of Korea that became effective in September 2025. The Financial Consumer Protection Act The FCP Act, which became effective in March 2021, unifies the systems for the protection of consumers of financial products, which had been dispersed across various laws, while tightening the existing consumer protection systems to strengthen the rights afforded to consumers of financial products. Banks under the Banking Act are financial instrument distributors subject to the FCP Act, and deposit and loan products under the Banking Act are financial instruments subject to the FCP Act. Under the FCP Act, a financial instrument distributor who intends to sell financial instruments shall comply with the following requirements: (i) confirmation of suitability and adequacy of financial instruments, (ii) compliance with the duty to explain, (iii) prohibition of unfair sales activities, (iv) prohibition of undue solicitation, and (v) prohibition of false or exaggerated advertising, etc. (collectively, the “Sales Principles”). If a financial instrument distributor breaches any of the Sales Principles, consumers may request the termination of such financial instrument within a period to be prescribed by a Presidential Decree and are entitled to unilaterally terminate the contract if the financial instrument distributor fails to present a justifiable reason for not accepting the consumer’s request. Consumers who purchased a loan product, in particular, shall be entitled to withdraw from the contract within 14 days from the later of (i) the date of receipt of the proceeds pursuant to the contract and (ii) the execution date of the contract (or the date of receipt of the documents necessary for execution of the contract (if required under the FCP Act), regardless of whether the financial instrument distributor breached any of the Sales Principles. When a consumer files a lawsuit for damages against a financial instrument distributor for breach of the duty to explain, the financial instrument distributor (and not the consumer) shall bear the burden of proof to prove that no willful conduct or negligence was involved in the breach of such duty to explain. In the event of a dispute with a financial instrument distributor, consumers may apply for mediation to the Dispute Mediation Committee of the Financial Services Commission. If a financial instrument distributor files a lawsuit with a court while such mediation is in progress, the court may suspend the litigation proceedings. For certain small-sum cases, a financial instrument distributor may not file a lawsuit with a court until the completion of such mediation. Financial instrument distributors must accept requests from its consumers to access information for purposes of litigation or mediation. In the event the Financial Services Commission determines that there is a clear risk that a financial product may cause significant damage to the properties of customers, the Financial Services Commission may prohibit or restrict the solicitation of, and execution of a contract for, such financial product. Trust Business A bank that intends to enter into the trust business must obtain the approval of the Financial Services Commission. Trust activities of banks are governed by the Financial Investment Services and Capital Markets 140 Table of Contents Act. Banks engaged in the banking business and trust business are subject to certain legal and accounting procedures requirements, including the following: • under the Banking Act, the Financial Investment Services and Capital Markets Act and the Trust Act, assets accepted in trust by a bank in Korea must be segregated from its other assets in the accounts of such bank; accordingly, banks engaged in the banking and trust businesses must maintain two separate accounts, the “banking accounts” and the “trust accounts,” and two separate sets of records which provide details of their banking and trust businesses, respectively; and • assets comprising the trust accounts are not available to depositors or other general creditors of such bank in the event the trustee is liquidated or is wound up. In the event that a bank qualifies and operates as a collective investment business entity, a trustee, a custodian or a general office administrator under the Financial Investment Services and Capital Markets Act, it is required to establish relevant operation and management systems to prevent potential conflicts of interest among the banking business, the collective investment business, the trustee or custodian business and general office administration. These measures include: • prohibitions against officers, directors and employees of one particular business operation from serving as an officer, director and employee in another business operation, except where an officer or a director (1) serving in two or more business operations with no significant conflict of interest in accordance with the Presidential Decree on the Financial Investment Services and Capital Markets Act or (2) serving in a trustee business or a custodian business and simultaneously serving in a general office administrator business in accordance with the Financial Investment Services and Capital Markets Act; • prohibitions against the joint use or sharing of computer equipment or office equipment; and • prohibitions against the sharing of information by and among officers, directors and employees engaged in the different business operations. A bank which qualifies and operates as a collective investment business entity may engage in the sale of beneficiary certificates of investment trusts which are managed by such bank. However, such bank is prohibited from engaging in the following activities: • acting as trustee of an investment trust managed by such bank; • purchasing with such bank’s own funds beneficiary certificates of an investment trust managed by such bank; • using in its sales activities of other collective investment securities information relating to the trust property of an investment trust managed by such bank; • selling through other banks established under the Banking Act beneficiary certificates of an investment trust managed by such bank; • establishing a short-term financial collective investment vehicle; and • establishing a mutual fund. Laws and Regulations Governing Other Business Activities To enter the foreign exchange business, a bank must register with the Minister of the Ministry of Finance and Economy. The foreign exchange business is governed by the Foreign Exchange Transaction Law. To enter the securities business, a bank must obtain the approval of the Financial Services Commission. The securities business is governed by regulations under the Financial Investment Services and Capital Markets Act. Pursuant to the above-mentioned laws, banks are permitted to engage in the foreign exchange business and the underwriting business for government and other public bonds. 141 Table of Contents Principal Regulations Applicable to Credit Card Companies General Any person, including a bank, wishing to engage in the credit card business must obtain a license from the Financial Services Commission. In addition, in order to enter the credit card business, a bank must obtain a license from the Financial Services Commission (hereinafter, a bank which obtains such license is defined as “licensed bank engaged in the credit card business”). The credit card business is regulated and governed by the Specialized Credit Financial Business Act. Under the Specialized Credit Financial Business Act and regulations thereunder, a company in the same conglomerate group (as defined in the Monopoly Regulation and Fair Trade Act) may engage in the credit card business even though another company in the same conglomerate group is already engaged in such business, which was previously not permitted. The Specialized Credit Financial Business Act establishes guidelines on capital adequacy and provides for other regulations relating to the supervision of credit card companies. The Specialized Credit Financial Business Act delegates regulatory authority over credit card companies to the Financial Services Commission and its executive body, the Financial Supervisory Service. A licensed bank engaging in the credit card business is regulated by the Financial Services Commission and the Financial Supervisory Service. The Financial Services Commission regulates credit card companies and licensed banks engaged in the credit card business by establishing guidelines or regulations on management of such companies. Moreover if the Financial Services Commission deems the financial condition of a credit card company or a licensed bank engaged in the credit card business to be unsound or such companies fail to satisfy the guidelines or regulations, the Financial Services Commission may take certain measures to improve the financial condition of such companies. Restrictions on Scope of Business Under the Specialized Credit Financial Business Act, a credit card company may conduct only the following types of business: (i) credit card business as licensed or other specialized credit finance businesses as registered pursuant to the Specialized Credit Financial Business Act; (ii) the businesses ancillary to the credit card business, (for example, providing cash advance loans to existing credit card holders, issuing and settling of debit cards and issuing, selling and settling of pre-paid cards); (iii) provision of unsecured or secured loans; (iv) provision of discount on notes; (v) purchase, management and collection of account receivables originated by companies in the course of providing goods and services; (vi) provision of payment guarantee; (vii) asset management business under the Asset Backed Securitization Act; (viii) credit investigation; and (ix) other incidental businesses related to the foregoing. Under the Specialized Credit Financial Business Act, a credit card company’s scope of business includes “businesses that utilize existing manpower, assets or facilities in a credit card company, as designated by the Financial Services Commission.” Under the current regulation established by the Financial Services Commission, a credit card company may engage in various types of business including, but not limited to, e-commerce, operation of insurance agency, delegation of card issuance, supply of payment settlement system, loan brokerage and brokerage of collective investment securities. A credit card company’s average balance of claim amounts arising from the advance of loans to credit card holders (excluding such claims arising from the re-advance of loans to credit card holders following a change in the maturity or interest rate of such loans as part of a debt restructuring) as of the end of each quarter may not exceed the sum of the following amounts: • Average balance of claims during a quarter arising from the purchase of goods or services by credit card holders with credit cards; and • Amount of debit card usage during a quarter by debit card members. 142 Table of Contents Capital Adequacy The Specialized Credit Financial Business Act provides for a minimum paid-in capital amount of: (i) W20 billion in the case of a specialized credit financial business company which wishes to engage in no more than two kinds of core businesses (i.e., credit card, installment finance, leasing and new technology business) and (ii) W40 billion in the case of an specialized credit financial business company, which wishes to engage in three or more kinds of core businesses. Under the Specialized Credit Financial Business Act and regulations thereof, a credit card company must maintain a “capital adequacy ratio,” defined as the ratio of adjusted equity capital to adjusted total asset, of 8% or more and a “delinquent claim ratio,” defined as the ratio of delinquent claims to total claims as set forth under the regulations relating to the Specialized Credit Financial Business Act, of less than 10%. Under the Specialized Credit Financial Business Act and regulations thereof, the minimum ratio of allowances for losses on loans, leased assets (except assets subject to an operating lease) and suspense receivables as of the date of accounting settlement (including semiannual preliminary accounts settlement) would be 0.5% of normal assets, 1% of precautionary assets and 20% of substandard assets, 75% of doubtful assets and 100% of estimated loss assets, and the minimum ratio of allowances for losses on card assets would be 1.1% (or 2.5%, in the case of card loan assets and revolving assets) of normal assets, 40% (or 50%, in the case of card loan assets and revolving assets) of precautionary assets, 60% (or 65%, in the case of card loan assets and revolving assets) of substandard assets, 75% of doubtful assets and 100% of estimated loss assets. In addition, a credit card company has to reserve a certain amount calculated according to relevant regulations as loss allowances for unused credit limits. Liquidity Under the Specialized Credit Financial Business Act and regulations thereunder, a credit card company must maintain a Won liquidity ratio (Won-denominated current assets/Won-denominated current liabilities) of 100% or more. In addition, once a credit card company is registered as a foreign exchange business institution with the Minister of the Ministry of Finance and Economy, such credit card company is required to (1) maintain a foreign-currency liquidity ratio within three months (defined as foreign-currency liquid assets due within three months divided by foreign-currency liabilities due within three months) of not less than 80%, (2) maintain a ratio of foreign-currency liquid assets due within seven days (defined as foreign-currency liquid assets due within seven days less foreign-currency liabilities due within seven days, divided by total foreign-currency assets) of not less than 0% and (3) maintain a ratio of foreign-currency liquid assets due within a month (defined as foreign-currency liquid assets due within a month less foreign-currency liabilities due within a month, divided by total foreign-currency assets) of not less than negative 10%. The Financial Services Commission requires a credit card company to submit quarterly reports with respect to the maintenance of these ratios. Restrictions on Funding Under the Specialized Credit Financial Business Act, a credit card company may raise funds using only the following methods: (i) borrowing from financial institutions, (ii) issuing corporate debentures or notes, (iii) selling securities held by the credit card company, (iv) transferring claims held by the credit card company, (v) borrowing and issuing foreign currency securities after registering itself as a foreign exchange business institutions under the Foreign Exchange Transactions Law, (vi) transferring claims held by the credit card company in connection with its businesses, (vii) issuing securities backed by the claims held by the credit card company relating to its businesses, or (viii) issuing securities backed by the claims held by the credit card company relating to its ancillary businesses determined by the Financial Services Commission. Furthermore, a credit card company may borrow funds from offshore or issue foreign currency denominated securities once it is registered as a foreign exchange business institution with the Minister of the Ministry of Finance and Economy. 143 Table of Contents A credit card company must ensure that its total assets do not exceed eight times the amount of its equity capital. However, if the credit card company cannot comply with such limit due to the occurrence of unavoidable events such as drastic changes in the domestic and global financial markets, such limit of its total assets compared to the equity capital may be adjusted by a resolution of the Financial Services Commission. A non-credit card company must ensure that its total asset does not exceed eight times the amount of its equity capital. Restrictions on Loans to Affiliate Companies Under the Specialized Credit Financial Business Act and regulations thereof, a credit card company may not provide loans exceeding 50% of its equity capital, in the aggregate, to its specially related persons (as defined under the relevant laws) including, but not limited to, its affiliates. Restrictions on Assistance to Other Companies Under the Specialized Credit Financial Business Act, a credit card company may not engage in any of the following acts in conjunction with other financial institutions or companies: (i) holding voting shares under cross shareholding or providing credit for the purpose of avoiding the restrictions on loans to affiliate companies; (ii) acquiring shares under cross shareholding for the purpose of avoiding the limitation on purchase of its treasury shares under the Korean Commercial Code or the Financial Investment Services and Capital Markets Act; or (iii) other acts which are likely to have a material adverse effect on the interests of transaction parties as stipulated by the Presidential Decree to the Specialized Credit Financial Business Act, which are not yet provided. A credit card company also may not extend credit for enabling another person to purchase the shares of such credit card company or to arrange financing for the purpose of avoiding the restrictions on loans to affiliate companies. Restrictions on Investment in Real Estate Under the Specialized Credit Financial Business Act and the regulations thereof, a credit card company may possess real estate only to the extent that such business conduct is designated by such laws and regulations, with certain exceptions such as for the purposes of factoring or leasing or as a result of enforcing its security rights, provided that the Financial Services Commission may limit the maximum amount a credit card company may invest in real estate investments for business purposes up to a percentage equal to or in excess of 100% of its equity capital. Restrictions on Shareholding in Other Companies Under the Specialized Credit Financial Business Act and the Act on the Structural Improvement of the Financial Industry, a credit card company and its affiliate financial institutions (together a “group”) are required to obtain prior approval of the Financial Services Commission if such credit card company, together with its affiliate financial institutions, (i) owns 20% or more of outstanding voting shares of a target company or (ii) owns 5% or more of outstanding voting shares of a target company, and shall be deemed to have control of the target company, including being the largest shareholder of such target company or otherwise. Disclosure and Reports Pursuant to the Specialized Credit Financial Business Act and the regulations thereof, a credit card company must disclose any material matters relating to management performance, profits and losses, corporate governance, competence of the employees or risk management within three months from the end of each fiscal year and within two months from the end of the first half of the fiscal year. In addition, a credit card company is 144 Table of Contents required to disclose on an ongoing basis certain matters such as the occurrence of non-performing loans, a financial incident or losses exceeding certain amounts. In addition, under the regulations issued by the Financial Services Commission, a credit card company or a licensed bank engaging in the credit card business must submit such report as required by the Governor of the Financial Supervisory Service, with certain important matters being reported as frequently as each month. In addition, all companies engaged in the specialized credit financial business under the Specialized Credit Financial Business Act, including, without limitation, credit card companies, must file a report to the Financial Supervisory Service regarding the result of settlement of accounts within one month after the end of its fiscal year. Also, these companies are required to conduct a provisional settlement of accounts for each quarter and file a report to the Financial Supervisory Service within one month after the end of such quarter. Risk of Loss Due to Lost, Stolen, Forged or Altered Credit Cards Under the Specialized Credit Financial Business Act, upon notice from the holder of a credit card or a debit card of its loss or theft, a credit card company or a licensed bank engaged in the credit card business, as the case may be, is liable for any loss arising from the unauthorized use of credit cards or debit cards thereafter as well as any loss from unauthorized transactions made within 60 days prior to such notice. However, a credit card company or a licensed bank engaged in the credit card business, as the case may be, may transfer to the cardholder all or part of the risks of loss associated with unauthorized transactions made within 60 days prior to such notice, in accordance with the standard terms and conditions agreed between the credit card company or the licensed bank engaged in the credit card business, as the case may be, and the cardholder, provided that the loss or theft must be due to the cardholder’s willful misconduct or negligence. Disclosure of a cardholder’s password under duress or threat to the cardholder’s or his/her family’s life or health will not be deemed as the cardholder’s willful misconduct or negligence. Moreover, a credit card company or a licensed bank engaged in the credit card business, as the case may be, is also responsible for any losses resulting from the use of forged or altered credit cards, debit cards and pre-paid cards. However, a credit card company or a licensed bank engaged in the credit card business, as the case may be, may transfer all or part of this risk of loss to holders of credit cards in the event of willful misconduct or gross negligence by holders of such cards if the terms and conditions of the written agreement entered between the credit card company or a licensed bank engaged in the credit card business, as the case may be, and holders of such cards specifically provide for such transfer. For these purposes, disclosure of a customer’s password that is made intentionally or through gross negligence, or the transfer of or giving as collateral of the credit card or debit card, is considered willful misconduct or gross negligence. In addition, the Specialized Credit Financial Business Act prohibits a credit card company from transferring to merchants the risk of loss arising from lost, stolen, forged or altered credit cards, debit cards or pre-paid cards; provided, however, that a credit card company may enter into an agreement with a merchant under which the merchant agrees to be responsible for such loss if caused by the merchant’s gross negligence or willful misconduct. Each credit card company or a licensed bank engaged in the credit card business must institute appropriate measures such as establishing reserves, purchasing insurance or joining a cooperative association in order to fulfill its obligations related to the risk of loss arising from unauthorized use due to lost, stolen, forged or altered credit cards, debit cards or pre-paid cards. Under the Specialized Credit Financial Business Act, the Financial Services Commission may take necessary measures to maintain credit order and protect consumers by establishing standards to be complied with by credit card companies relating to: • maximum limits for cash advances on credit cards; • restrictions on debit cards with respect to per day or per transaction usage; 145 Table of Contents • aggregate issuance limits and maximum limits on the amount per card on pre-paid cards; • calculation and determination of credit limits; • determination of the amount limit of credit cards; • provisions included in credit card agreements; • management of credit card merchants; • collection on claims; or • classification of credit card holders for purposes of determining the fees applicable to such holders. Lending Ratio in Ancillary Business Pursuant to the Presidential Decree of the Specialized Credit Financial Business Act, as amended in January 2020, a credit card company must maintain a quarterly average balance of receivables arising from cash advances to credit card holders (excluding cash advances incurred by re-lending to a credit card holder after modifying the terms and conditions, such as maturity or interest rate, of the original cash advance for debt rescheduling purposes) no greater than its aggregate quarterly average balance of receivables arising from credit card holders’ purchase of goods and services (excluding the amount of receivables arising from the purchase of goods and services using an exclusive use card for business purposes) plus its aggregate quarterly amount of payments made by members using their debit cards. Issuance of New Cards and Solicitation of New Card Holders The Presidential Decree of the Specialized Credit Financial Business Act establishes the conditions under which a credit card company or a licensed bank engaged in the credit card business may issue new cards and solicit new members. Specifically, new credit cards may be issued only to the following persons that meet all of the following criteria: (i) age of 19 years or more as defined in the Korean Civil Code, or age of 18 years or more with evidence of employment as of the date of the credit card application; (ii) satisfaction of a minimum credit score as publicly announced by the Financial Services Commission, provided that the minimum personal credit score requirement will not apply in the case where (a) the credit card company can confirm through objective evidence that an applicant is sufficiently capable of paying for his or her credit card use or such applicant can provide objective evidence therefor, or (b) a credit card function is added to an existing debit card for added convenience to the card holder and the credit card function is subject to limits determined by the Financial Services Commission; (iii) satisfaction of the application scoring system for the relevant credit; and (iv) verification of personal identity. Credit card companies and licensed banks engaged in the credit card business are subject to restrictions on credit card solicitation methods under the Specialized Credit Finance Business Act and its subordinate regulations, including restrictions on providing excessive economic benefits in connection with card issuance, as well as street solicitation, unsolicited visits, pyramid sales and certain forms of solicitation via the Internet. In addition, a credit card company or a licensed bank engaged in the credit card business is required to check whether the credit card applicant has any delinquent debt owed to any other credit card company or other financial institutions which the applicant is unable to repay, and also require, in principle, with respect to solicitations made through the Internet, the certified electronic signature of the applicant. Moreover, persons who intend to engage in solicitation of credit card applicants must register with the Financial Services Commission, unless the solicitation is made by officers or employees of a credit card company or a company in business alliance with such credit card company. 146 Table of Contents Principal Regulations Applicable to Financial Investment Companies General The securities business is regulated and governed by the Financial Investment Services and Capital Markets Act. Financial investment companies are under the regulation and supervision of the Financial Services Commission, the Financial Supervisory Service and the Securities and Futures Commission. Under the Financial Investment Services and Capital Markets Act, a financial investment company may engage in dealing, brokerage, collective investment, investment advice, discretionary investment management or trust businesses if it has obtained relevant licenses from the Financial Services Commission. A financial investment company may also engage in certain businesses ancillary to the primary business or certain other additional businesses by submitting a report to the Financial Services Commission within two weeks from the commencement of the business without obtaining any separate license. Approval to merge with any other entity or to transfer all or substantially all of a business must also be obtained from the Financial Services Commission. Under the Act on the Structural Improvement of the Financial Industry, if the Government deems a financial investment company’s financial condition to be unsound or if a financial investment company fails to meet the applicable Net Operating Equity Ratio (as defined below), the Government may order certain sanctions, including among others, sanctions against a financial investment company or its officers or employees, capital increase or reduction and a suspension or assignment of a part or all of business operation. Regulations on Financial Soundness — Capital Adequacy The Financial Investment Services and Capital Markets Act sets forth various types of brokerage and/or dealing business licenses based on (i) the scope of products and services that may be provided by each type of the brokerage and/or dealing licensee and (ii) the type of customers to which such products and services may be provided. For example, a financial investment company engaged in the brokerage, dealing and underwriting businesses with retail investors as well as professional investors in connection with all types of securities is required to have a minimum paid-in capital of W53 billion in order to obtain a license for such brokerage, dealing and underwriting businesses. Under the Financial Investment Service Regulations, as amended and effective as of January 31, 2019, the soundness requirement of financial investment companies changed from the previous net operating equity ratio requirement to a net equity ratio requirement. The net equity ratio is calculated according to the following formula: Net Equity Ratio = (Net Operating Equity – Total Risk) / Equity Capital Maintenance Requirement for Each Service Unit The terms “Net Operating Equity” and “Total Risk” for the purpose of the above-stated formula are defined and elaborated in the regulations of the Financial Services Commission. Generally, the Net Operating Equity, the Total Risk and the Equity Capital Maintenance Requirement for Each Service Unit are to be calculated according to the following formula: Net Operating Equity = Net assets (total assets - total liabilities) - the total of items that may be deducted + the total of items that may be added; Total Risk = market risk + counterparty risk + management risk; and Equity Capital Maintenance Requirement for Each Service Unit = Mandatory Equity Capital to be Required for Each Licensed Service Unit × 70% 147 Table of Contents The regulations of the Financial Services Commission require, among other things, financial investment companies to maintain the net equity ratio at a level equal to or higher than 100% at the end of each quarter of the fiscal year. In addition, all Korean companies, including financial investment companies, are required to set aside, as a legal reserve, 10% of the cash portion of the annual dividend or interim dividend in each fiscal year until the reserve reaches 50% of the stated capital. Under the Financial Investment Services and Capital Markets Act and regulations thereunder, the minimum ratio of allowances for losses on loans and suspense receivables specified under such regulations is 0.5% of normal assets, 2% of precautionary assets, 20% of substandard assets, 75% of doubtful assets and 100% of estimated loss assets. Other Provisions on Financial Soundness The Financial Investment Services and Capital Markets Act, the Presidential Decree of the Financial Investment Services and Capital Markets Act and the regulations of the Financial Services Commission also include certain provisions which are designed to regulate certain types of activities relating to the management of the assets of a securities company, subject to certain exceptions. Such provisions include: • restrictions on the holdings by a securities company of securities issued by another company which is the largest shareholder or the major shareholder (each as defined under the Financial Investment Services and Capital Markets Act) of such securities company; and • restrictions on providing money or credit to the largest shareholder (including specially-related persons of such shareholder), major shareholders, officers and specially-related persons of the securities company. Principal Regulations Applicable to Insurance Companies General Insurance companies are regulated and governed by the Insurance Business Act (the “Insurance Business Act”). In addition, insurance companies in Korea are under the regulation and supervision of the Financial Services Commission and its governing entity, the Financial Supervisory Service. Under the Insurance Business Act, approval to commence an insurance business must be obtained from the Financial Services Commission based on the type of insurance businesses, which are classified as life insurance business, non-life insurance business and third type insurance business. Life insurance business means an insurance business which deals with life insurance policies or pension insurance policies (including retirement insurance policies). Non-life insurance business means an insurance business which deals with fire insurance policies, marine insurance policies, car insurance policies, guaranty insurance policies, reinsurance policies, liability insurance policies or other insurance policies prescribed under the Presidential Decree of the Insurance Business Act. Third type insurance business means an insurance business which deals with injury insurance policies, health insurance policies or nursing care insurance policies. Under the Insurance Business Act, insurance companies are not allowed to engage in both a life insurance business and a non-life insurance business, subject to certain exceptions. If the Government deems an insurance company’s financial condition to be unsound or if an insurance company fails to properly manage the business as set forth under relevant Korean law, the Government may order certain sanctions including, among others, sanctions against an insurance company or its officers or employees, capital increase or reduction and a suspension or assignment of a part or all of business operation. 148 Table of Contents Capital Adequacy The Insurance Business Act requires a minimum paid-in capital of W30 billion for an insurance company; provided, that, an insurance company which intends to engage in only certain types of insurance policies may have a lower paid-in capital pursuant to the Presidential Decree of the Insurance Business Act. In addition to the minimum capital requirement, an insurance company is required to maintain a Solvency Margin Ratio of 100% or more. “Solvency Margin Ratio” is the ratio of the Solvency Margin to the Standard Amount of the Solvency Margin. Solvency Margin is the aggregate amount of net assets and amounts that are liabilities in the balance sheet but are usable to cover loss risk (e.g., the amount of subordinated liabilities), less the amount that the Governor of the Financial Supervisory Service deems unusable to compensate for losses incurred by unexpected risks of an insurance company, among assets or capital in the balance sheet, such as stock discounts and treasury stocks. The Standard Amount of Solvency Margin for life insurance companies is defined under the regulation of the Financial Services Commission. On January 1, 2023, the Financial Supervisory Service introduced the K-ICS, a new regulatory solvency regime for insurance companies, based on the International Capital Standard developed by the International Association of Insurance Supervisors, which is similar in substance to the Solvency II Directive of the European Union. Under the K-ICS, at the time of computation of the Solvency Margin, insurance contract liabilities are expected to be measured based on market value, rather than book value, and at the time of computation of the Standard Amount of the Solvency Margin, risks associated with termination, business expenses, longevity, catastrophes and asset concentration risks are added, which would require a number of insurance companies in Korea with a large portfolio of high guaranteed rate of return products to obtain additional capital to meet their capital adequacy requirements. However, the Financial Supervisory Service has allowed for deduction from available capital on a gradual basis and for gradual recognition of risks in relation to required capital for up to 10 years. Even if the Solvency Margin Ratio under the K-ICS is less than 100%, corrective measures will be withheld in case the Solvency Margin Ratio under the prior risk-based capital regime exceeds 100% for up to five years, to ease the burden on insurance companies. Under the Insurance Business Act, the Presidential Decree and other regulations thereunder, for each accounting period, insurance companies are required to appropriate policy reserve that is earmarked for future payments of insurance money, refund and dividends to policyholders (hereinafter collectively referred to as “Insurance Money”) for each insurance contract. However, if an insurance company has reinsured a portion of its insurance contracts with a creditworthy reinsurance company in order to lower its overall risk, in principle, the insurance company is not required to appropriate policy reserve for the reinsured contracts. Instead, the reinsurance company is required to appropriate such policy reserve for the reinsured contracts. The Insurance Business Act was amended on January 24, 2011 to classify the insurance products into two categories: (i) reportable insurance products and (ii) voluntary insurance products. Under this amendment, only the changes to the terms and conditions of the reportable insurance products require a prior report and approval from the Financial Supervisory Service and the voluntary insurance products can be sold without prior approval from the Financial Supervisory Service. The policy reserve needs to be appropriated in accordance with the policy reserve calculation method for each insurance product as stipulated in amended Insurance Business Act. The policy reserve amount consists of the following: (i) insurance contract liabilities (the sum of (a) the amount reserved by applying current estimates of future cash flow in order to pay the insurance proceeds, etc. for which an event of payment under the insurance policy has occurred as of the end of each fiscal year and (b) the amount reserved by applying current estimates of future cash flow in order to pay the insurance proceeds, etc. in the future although an event of payment under the insurance policy has not occurred as of the end of each fiscal year), (ii) investment contract liabilities (amounts reserved by insurance companies for the payment of insurance proceeds, etc. in the future for insurance contracts classified as investment contracts among insurance contracts) and (iii) amounts reserved by applying current estimates on future cash flows in the manner prescribed by the Financial Services Commission. 149 Table of Contents Pursuant to the regulations established by the Financial Services Commission, insurance companies are required to maintain allowances for outstanding loans, accounts receivables and other credits (including accrued income, payment on account, and bills receivables or dishonored) in an aggregate amount covering not less than 0.5% of normal credits, 2% of precautionary credits, 20% of substandard credits, 50% of doubtful credits and 100% of estimated loss credits, provided that the minimum ratio of allowances for certain type of outstanding loans by insurance companies to individuals and households (including, retail loans, housing loans, and other forms of retail loans extended to individuals not registered for business), is increased to 1% of normal credits, 10% of precautionary credits and 55% of doubtful credits. Furthermore, the regulations on insurance companies became more stringent in September 2010 by adding a requirement that insurance companies maintain allowance for bad debts in connection with real estate project financing loans in excess of 0.9% of normal credits and 7% of precautionary credits. Variable Insurance and Bancassurance Agents Variable insurance is regulated pursuant to the Insurance Business Act and the Financial Investment Services and Capital Markets Act. In order for an insurance company to sell variable insurance to a policyholder and operate such variable insurance, the insurance company must obtain a license with respect to collective investment business from the Financial Services Commission and register as a selling company with the Financial Services Commission. In this case, according to the Financial Investment Services and Capital Markets Act, an insurance company will be regulated as an investment trust and assets acquired in connection with variable insurance must be held by a trust company that is registered with the Financial Services Commission pursuant to the Financial Investment Services and Capital Markets Act. According to the Financial Investment Services and Capital Markets Act, insurance companies may operate variable insurance through (i) mandating all of the management and the management instruction business to another asset management company, (ii) operating by way of discretionary investment all of the assets constituting the investment advisory assets out of the investment trust assets, or (iii) operating all of the investment trust assets into other collective investment securities, thereby allowing all of the particular variable insurance assets to be outsourced. The Insurance Business Act permits banks, securities companies, credit card companies and other financial institutions to register as insurance agents or insurance brokers and engage in the insurance business (the “Bancassurance Agents”), who are currently permitted to sell all types of life and non-life insurance products, except for protection type insurance products, such as whole life insurance, critical illness insurance and automobile insurance. Restrictions on Investment of Assets According to the Insurance Business Act, insurance companies are prohibited from making any of the following investment of assets: • owning any real estate (excluding any real estate owned as a result of enforcing their own security interest) other than real estate for conducting its business as designated by the Presidential Decree. In any case, the total amount of real estate owned by an insurance company must not exceed 25% of its Total Assets, provided that investment in real estate for a separate account is limited to 15% of the assets of such separate account; • loans made for the purpose of speculation in commodities or securities; • loans made directly or indirectly to enable a natural or legal person to buy their own shares; • loans made directly or indirectly to finance political campaigns and other similar activities; and • loans made to any of the insurance company’s officers or employees other than loans based on insurance policy or de minimis loans of up to (1) W20 million in the case of a general loan, 150 Table of Contents (2) W50 million in the case of a general loan plus a housing loan, or (3) W60 million in the aggregate for general loans and housing loans. In addition, insurance companies are not allowed to exceed 50% of its Total Assets with respect to holding foreign currency under the Foreign Exchange Transaction Act or owning offshore real estate. Regulations on Class Actions Regarding Securities The Law on Class Actions Regarding Securities was enacted as of January 20, 2004 and last amended on May 28, 2013. The Law on Class Actions Regarding Securities governs class actions suits instituted by one or more representative plaintiff(s) on behalf of 50 or more persons who claim to have been damaged in a capital markets transaction involving securities issued by a listed company in Korea. Applicable causes of action with respect to such suits include: • claims for damages caused by misleading information contained in a securities statement; • claims for damages caused by the filing of a misleading business report, semi-annual report, or quarterly report; • claims for damages caused by insider trading or market manipulation; and • claims instituted against auditors for damages caused by accounting irregularities. Any such class action may be instituted upon approval from the presiding court and the outcome of such class action will have a binding effect on all potential plaintiffs who have not joined the action, with the exception of those who have filed an opt out notice with such court. 151 Table of Contents ITEM 4.C. Organizational Structure We currently have 15 direct and 34 indirect significant subsidiaries. The following diagram provides an overview of our organizational structure, including our significant subsidiaries and our ownership of such subsidiaries as of the date of this annual report: 152 Table of Contents All of our subsidiaries are incorporated in Korea, except for the following: • Shinhan Bank America (incorporated in the United States); • Shinhan Bank Canada (incorporated in Canada); • Shinhan Bank (China) Limited (incorporated in the People’s Republic of China); • Shinhan Bank Europe GmbH (incorporated in Germany); • Shinhan Bank Kazakhstan Limited (incorporated in Kazakhstan); • Shinhan Bank Japan (incorporated in Japan); • Shinhan Bank (Cambodia) PLC (incorporated in Cambodia); • Shinhan Bank Vietnam Ltd. (incorporated in Vietnam); • PT Bank Shinhan Indonesia (incorporated in Indonesia); • Banco Shinhan de Mexico (incorporated in Mexico); • LLP MFO Shinhan Finance (incorporated in Kazakhstan); • PT Shinhan Indo Finance (incorporated in Indonesia); • Shinhan Microfinance Co., Ltd. (incorporated in Myanmar); • Shinhan Vietnam Finance Company Ltd. (incorporated in Vietnam); • Shinhan Securities America Inc. (incorporated in the United States); • Shinhan Securities Asia Limited (incorporated in Hong Kong); • Shinhan Securities Vietnam Co., Ltd. (incorporated in Vietnam); • PT Shinhan Sekuritas Indonesia (incorporated in Indonesia); • Shinhan Life Insurance Vietnam LLC (incorporated in Vietnam); • Shinhan DS Vietnam Co. Limited (incorporated in Vietnam); and • SBJ DNX Co., Ltd. (incorporated in Japan). ITEM 4.D. Properties The following table provides information regarding certain of our properties in Korea. Area (In square meters) Type of Facility Location Building Site (If Different) Registered office and corporate headquarters 20, Sejong-daero 9-gil, Jung-gu, Seoul, Korea 04513 59,519 5,418 Shinhan Card headquarters 100, Eulji-ro, Jung-gu, Seoul, Korea 04551 65,774 4,634 Shinhan Centennial Building 29, Namdaemun-ro 10-gil, Jung-gu, Seoul, Korea 04540 19,697 1,389 Shinhan Bank Gwanggyo Branch 54, Cheonggyecheon-ro, Jung-gu, Seoul, Korea 04540 16,727 6,783 Shinhan Myongdong Branch 43, Myeongdong-gil, Jung-gu, Seoul, Korea 04534 8,936 1,017 153 Table of Contents Area (In square meters) Type of Facility Location Building Site (If Different) Shinhan Youngdungpo Branch 27, Yeongjung-ro, Yeoungdeungpo-gu, Seoul, Korea 07301 6,171 1,983 Shinhan Back Office Support Center 1311, Jungang-ro, Ilsandong-gu, Goyang-si, Gyeonggi-do, Korea 10401 25,238 5,856 Shinhan Bank Back Office and Call Center 251, Yeoksam-ro, Gangnam-gu, Seoul, Korea 06225 40,806 7,964 Shinhan Bank Back Office and Storage Center 1221, 1sunwhan-ro, Sangdang-gu, Cheongju-Si, Chungcheongbuk-do, Korea 28777 6,019 5,376 Shinhan Card Yoksam-Dong Building 176, Yeoksam-ro, Gangnam-gu, Seoul, Korea 06248 7,348 1,185 Shinhan Data Center 67, Digital Valley-ro, Suji-gu, Yongin-si, Gyeonggi-do, Korea 16878 45,277 9,114 Our subsidiaries own or lease various land and buildings for their branches and sales offices. As of December 31, 2025, Shinhan Bank had a countrywide network of 650 branches. Approximately 20% of these facilities were housed in buildings owned by us, while the remaining branches were leased properties. Lease terms are generally between two to three years and generally do not exceed five years. As of December 31, 2025, Jeju Bank had 29 branches of which we own 12 of the buildings in which the facilities are located, representing 41.4% of its total branches. Lease terms are generally between one to two years and seldom exceed five years. As of December 31, 2025, Shinhan Card had 42 branches, including its headquarters, all but three of which were leased. Lease terms are generally between one to two years. As of December 31, 2025, Shinhan Securities had a nationwide network of 60 branches of which we own one of the buildings. As of December 31, 2025, Shinhan Life Insurance had 238 branches, which we lease for a term of generally one to two years. The net book value of all the properties owned by us on December 31, 2025 was W2,865 billion. We do not own any material properties outside of Korea.