Shinhan Financial Group Introduces Internal Rating System at Jeju Bank... Financial Supervisory Service Approval Completed

First Domestic Financial Group to Complete Introduction of Three Subsidiaries

[Asia Economy Reporter Kwangho Lee] Shinhan Financial Group announced on the 13th that its subsidiary Jeju Bank has received approval from the Financial Supervisory Service (FSS) to adopt the Internal Ratings-Based (IRB) approach.

With this, Shinhan Financial Group has become the first domestic financial group to complete the adoption of the IRB approach for three subsidiaries: Shinhan Bank, Shinhan Card, and Jeju Bank.

The IRB approach refers to a method of calculating risk-weighted assets for credit risk by utilizing risk measurement factors (probability of default, loss given default, exposure at default) derived from an internal credit rating system. Typically, adopting the IRB approach leads to an increase in the BIS capital adequacy ratio and the Common Equity Tier 1 (CET1) ratio.

Shinhan Financial Group has been promoting the adoption of the IRB approach to strengthen Jeju Bank’s internal risk capabilities. Starting with the project to prepare for the phased application of the IRB approach at Jeju Bank in October 2018, and through on-site inspections by the FSS, approval was obtained after about three years.

This approval for Jeju Bank’s adoption of the IRB approach is an achievement realized through about three years of collaboration among the risk-related departments of Shinhan Bank, Shinhan Card, and Jeju Bank, led by Shinhan Financial Group’s risk management team.

In particular, Jeju Bank made significant advancements in its overall risk management system by extensively reinforcing risk personnel, infrastructure, and risk measurement capabilities during the preparation process for approval. Shinhan Financial Group plans to continuously strengthen Jeju Bank’s risk management personnel and expertise based on this IRB adoption.

A Shinhan Financial Group official stated, "Based on the improved capital ratios through this IRB adoption, we will take the lead in revitalizing the regional economy by further supporting small business owners and SMEs in the Jeju area who are facing difficulties due to COVID-19."

This content was produced with the assistance of AI translation services.